to the charterer, or his duly authorized agent, in the United States, any and all sums of money which may be due and owing to the charterer by the chartered air carrier under the terms and conditions of the charter contract if, and when, the latter shall default thereon by refusing to honor promptly a request for such payments.

(2) Terms and conditions of coverage. The obligations of the surety company pursuant to such a surety bond shall not be subject to cancellation or suspension, by either party, on less than 30 days' notice by registered mail to both the other party to the surety contract and the Board.

Such surety

(3) Source of coverage. bond shall be issued by a reputable and financially responsible surety company which is legally authorized to issue bonds. of that type in any state, territory, or possession of the United States.

(e) Conditions on special orders and amendments to interim operating certificates. It is the policy of the Board to incorporate the following express conditions in each special order or amendment to interim operating certificate issued under Parts 207 and 295 of this chapter:

(1) The air carrier agrees to provide substitute transportation and pay incidental expenses;

(2) Each contract for a transatlantic charter operated pursuant to seasonal authorization shall incorporate the provisions of this policy statement defining the scope of the air carrier's obligation to provide substitute transportation and pay incidental expenses; and

(3) The tariffs of the air carrier on file with the Board shall not, insofar as they pertain to transatlantic charter trips operated thereunder, contain any provision which is inconsistent with the standard of insurance coverage specified in paragraph (b) of this section; or with the obligations assumed in accordance with paragraph (c) of this section; or with the obligation, surety bond, or other arrangement assumed, procured or entered into in accordance with paragraph (d) of this section.

(f) Limitation on special orders and amendments to interim operating certificates. It is the policy of the Board to limit the effectiveness of special orders and amendments to interim operating certificates under Parts 207 and 295 of this chapter so that each such order or amendment shall be effective only with

respect to transatlantic charter flights as to which:

(1) There is in full force and effect, to the extent specified in paragraphs (b), (c) and (d) of this section and in any special order or Board order granting an amendment to interim operating certificate, insurance coverage, a surety bond or equivalent arrangement and an obligation to provide substitute air transportation and cover the costs of incidental expenses; and

(2) The air carrier has fully complied with each and every condition specified in paragraph (e) of this section and any pertinent provisions of a special order or amendment to interim operating

certificate.

§ 399.18 Maximum duration of fixedterm route authorization granted by exemption; renewal of such authority.

It is the policy of the Board to limit the duration of exemptions which authorize fixed-term route service to a maximum period of two years, and to entertain requests for renewal of such authority only when incorporated in a duly filed application for substantially equivalent certificate authority under section 401 of the Act. (See § 302.909 of this chapter (Procedural Regulations) and § 377.10 (c) of this chapter (Special Regulations).)

§ 399.19 Wet leases to foreign air carriers.

7

(a) This policy statment sets forth the major factors which the Board will consider in acting upon applications for authorization of long-term "wet-leases" (i.e., leases in which the lessor provides both the aircraft and the crew) by a United States air carrier to the holder of a foreign air carrier permit. The wet lease need not involve the exclusive use of an aircraft by the foreign air carrierlessee for the entire period of the lease, but may involve use on an intermittent basis such as on certain days of the week.

(b) A wet lease of the type described in paragraph (a) of this section will be deemed to be in the public interest only if it meets the following criteria:

7 The expression "long-term wet lease" refers to a wet lease which is to be performed over a period of more than sixty days or to a wet lease which is one of a series of wet leases amounting to a continuing arrangement to be performed over a period of more than sixty days.

(1) The operations under the wet lease must not have a significant adverse competitive impact on any United States carrier. In making this determination, the Board will consider such factors as: The relative size and financial strength of the United States carriers and the foreign carriers operating on the route; whether the proposed operation will require any United States carrier to reduce its level of frequency on the route; and whether the proposed operation will render uneconomic any United States carrier's operations over the route.

(2) The United States air carrierlessor must have an urgent need for additional utilization of its equipment, or have a compelling need to supplement operating revenue. In making this determination the Board will consider such factors as the size and financial strength of the lessor carrier relative to other United States carriers, and the need for strengthening of such carrier in terms of sustaining and promoting a healthy competitive system.

(3) The wet lease must not involve revenue or profit sharing by the United States air carrier-lessor.

(4) The wet lease arrangement must not impair the United States air carrierlessor's ability to fulfill its certificate obligations.

(5) The United States air carrierlessor must not be placing undue reliance on wet leasing as a source of revenue. In this regard the Board will consider the extent to which an applicant has acquired equipment which can be adequately utilized only if it can be wetleased. If the applicant is a supplemental carrier, the Board will also consider the extent to which the wet lease will interfere with the applicant's ability to promote and perform civil charters. If the applicant is a combination or allcargo carrier, the Board will consider the extent to which the wet lease will interfere with the applicant's ability to promote and perform on-route operations.

(c) Approval by the Board of a wet lease of the type described in paragraph (a) of this section will be subject to the following conditions:

(1) Where the foreign air carrierlessee is an established international air service and possesses substantial equipment of its own, wet leasing arrangements with a single United States carrier may be approved for an initial period of one year. Approvals may be granted for

additional periods extending up to a maximum of two years from the beginning of the wet lease arrangement. No wet lease will be approved unless the conditions set forth in paragraph (b) (1) through (5) of this section are met.

(2) Where the foreign air carrierlessee is at an early stage of development and intends to place sole or primary reliance upon wet lease arrangements to support its international operations, wet leasing arrangements with United States carriers may be approved for a maximum period of two years. No Iwet lease will be approved unless the conditions set forth in paragraph (b) (1) through (5) of this section are met and unless the foreign carrier demonstrates that it will be in a position to establish an independent viable operation by the end of two years from the date it began wet leasing from United States carriers. During the period of approval there may also be periodic Board review to insure that the conditions set forth in paragraph (b) (1) through (5) of this section continue to be met.

(3) Where the sole purpose of the wet lease is to enable the foreign air carrierlessee to replace equipment rendered non-operable by an emergency beyond its control (e.g., by an accident), such a wet lease may be approved for a period not to exceed six months, it being presumed that during this period there will be no significant adverse competitive impact on any United States carrier. Such a wet lease may be approved whether the lessee is a well-established international carrier or at an early stage of development: Provided, The conditions set forth in paragraph (b) (2) through (5) of this section are met.

(Secs. 412 and 416 of the Federal Aviation Act of 1958, 72 Stat. 770, 771; 49 U.S.C. 1382, 1386; sec. 3 of the Administrative Procedure Act, 60 Stat. 238; 5 U.S.C. 1002) [Policy Statement 27, 30 F.R. 5626, Apr. 21, 1965] Subpart C-Policies Relating to Rates and Tariffs

§ 399.30 Temporary subsidy rates.

It is the policy of the Board to fix temporary subsidy rates, when such emergency action is required, at a level designed to provide only such amounts as are deemed necessary for continuation of operations prior to the establishment of a final rate. In most cases, this objective may be attained by providing an amount of subsidy equivalent to the sub

sidy break-even need (i.e., the excess of operating expenses over non-subsidy revenues) plus the carrier's interest charges on long-term debt. Temporary subsidy rates will be established at an amount less than the sum of subsidy break-even need and interest charges in any case where overpayment might otherwise appear likely to result.

§ 399.31 Rate policy applicable to nonsubsidized carriers.

It is the policy of the Board that rate levels should reflect cyclical needs, rather than the needs of any particular year. In examining mail or commercial rate proposals, the Board will consider not only the conditions prevailing at the time the proposals are advanced, but also the future prospects and the abnormal earnings of prior years. Accordingly, if earnings should fall markedly after a period during which they have been at high levels, the carriers will be expected to absorb such losses without resort to mail or commercial rate adjustments, unless it can be demonstrated that such earnings are below the level necessary to provide a fair return over a reasonably extended period which includes the good years as well as the bad. § 399.32 Rate policy applicable to subsidized carriers.

It is the policy of the Board to permit subsidized carriers maximum freedom to experiment, in interstate and overseas air transportation, with commercial rate changes for the purpose of maximizing revenues and thereby minimizing subsidy requirements, provided the resulting rates are not otherwise unreasonable. § 399.33 Domestic coach policy.

It is the policy of the Board to encourage regular coach service by the certificated route air carriers as one means of achieving the maximum development of civil aviation in the United States through placing air travel within the economic reach of the great majority of the traveling public. For the purpose of this policy, coach operations will be divided into two main classes: off-peak services and high density services.

(a) Off-peak services. Off-peak services are reduced-fare services which have as their primary objective the additional utilization of available equipment and facilities with flights departing at such times-particularly during the night

NOTE: Maximum seating density is governed by the Civil Air Regulations.

(c) Food service. No free food service except coffee or similar beverages will be permitted on either off-peak or high density service.

(d) Fare differentials. Both high density and off-peak services will be subject to a fare ceiling of 75 percent of the corresponding first-class fare.

§ 399.34 Free transportation on inaugural flights in overseas and foreign air transportation with “new type" aircraft.

This policy statement prescribes the general standards that will be used in deciding applications, under § 223.8 of this chapter, for permission to furnish free transportation in overseas and foreign air transportation on so-called "inaugural flights" with "new type" aircraft.

(a) Free transportation permissible. Free transportation may be authorized on each type of aircrafe described herein when that type is being introduced for the first time by a carrier on its system of routes or a part thereof as hereinafter set forth. Free transportation on such flights may be authorized even though the type of aircraft involved may have been on the market and in use by other carriers for a number of years. (1) (b) "New type" aircraft. For purposes of this policy, aircraft are classified according to the aircraft type certificate issued by the Administrator of the Federal Aviation Agency pursuant to section 603 (a) of the Act. Variations of a basic model of aircraft covered by a single type certificate are listed together and are considered a single type. Any one of the following certificated aircraft

For equitable reasons, therefore, the Board is establishing three "geographical areas" and will consider a carrier's system having routes in more than one of these areas to be divided into separate parts coincident with such areas.

(2) In the case of a carrier having a multi-area system, as above described, inaugural flights may be permitted in each geographical area at the time a new type of aircraft is introduced in service by the carrier in such area. If an inaugural flight is operated over routes of the carrier in two or more geographical areas, such flight will be considered as a separate inaugural flight in each of the geographical areas in which such flight is operated.

(3) A carrier having both overseas and foreign routes in the same area will be permitted inaugural flights in such area to the same extent as a carrier having only overseas, or only foreign, routes in such area.

(4) "Geographical areas" shall be considered to be as follows:

Area 1. The area encompassed by the routes of any given carrier between:

(a) Points in any State of the United States, or the District of Columbia, on the one hand, and points in Puerto Rico, the Virgin Islands, or the Canal Zone, on the other;

(b) Points in one and points in any other of the following territories and possessions: Puerto Rico, Virgin Islands, and the Canal Zone;

(c) Points in any State of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, or the Canal Zone, on the one hand, and any other points outside thereof on the North American and South American continents, Greenland, Bermuda, Cuba, Haiti, Dominican Republic, Jamaica, Netherlands Antilles, Trinidad, Bahamas, Leeward Islands, or Windward Islands, on the other.

Area 2. The area encompassed by the routes of any given carrier between:

Points in any State of the United States, the District of Columbia, or any territory or possession of the United States, on the one hand, and (a) points in Europe, Africa, Iceland, Ascension Island, Azores, Canary Islands, and Madeira, and (b) points beyond Europe or Africa in Asia or Australasia, involving transportation over the Atlantic Ocean, on the other.

or possession thereof, on the other hand, nvolving transportation over the Pacific Ocean; or

(b) Points in any State of the United States, or the District of Columbia, on the ɔne hand, and points in a territory or possession of the United States located in the Pacific Ocean, on the other, which involves ransportation over the Pacific Ocean; or

(c) Points in a territory or possession of he United States, on the one hand, and points in any other territory or possession of the United States located in the Pacific Ocean, on the other, which involves transortation over the Pacific Ocean.

399.35 Free or reduced-rate transpor

tation of persons in foreign air transportation by United States flag air carriers.

It is the policy of the Board to grant applications of United States flag air Carriers, pursuant to section 403(b) of he Act, for free or reduced-rate foreign ir transportation of persons requested y agencies of the United States Govrnment only where such agencies repesent to the Board that considerations f paramount national interest require uch transportation and where the Board finds such considerations to exist. 399.36 Processing of tariff publications filed on notice of 45 days or longer.

When tariffs are filed with the Board 5 days or more in advance of their efective date, and bear a posting date as rovided in § 221.31(a) (10) of this chaper, it is the policy of the Board to issue n order, if any, suspending the tariff nd ordering an investigation at least fteen (15) days before such tariff is to ecome effective. In the event the Board, for any reason, cannot take acon on a tariff within the time specified erein, the Board will notify the filing arrier or his agent of this fact at least fteen (15) days before the effective ate of the tariff. This policy statelent, however, should not be interpreted s limiting the Board's power, under ection 1002 of the Act, to suspend a tarf at any time prior to its effective date. hus, where circumstances warrant, the oard will issue a suspension order alhough it is less than 15 days prior to the riff's effective date.

suant to section 401(d) (1) or (2) of the Federal Aviation Act of 1958 which authorizes the carriage of property only or of property and mail only.

(2) "Blocked space service" means the carriage of property in all-cargo aircraft at wholesale rates pursuant to an effective tariff stating a rate applicable only when the user reserves and agrees to pay for a specified amount of space or lift. on a regularly recurring basis for a period of not less than 60 days.

(3) "Combination carrier" means an air carrier holding a certificate of public convenience and necessity issued pursuant to section 401 (d) (1) or (2) of the Act which authorizes the carriage of persons, property and mail or persons and property only.

(b) It is the policy of the Board to permit all-cargo carriers to provide blocked space service to (1) such combination carriers as may choose to use it to provide service over routes which are certificated to both the combination and the all-cargo carrier involved; (2) air freight forwarders; and (3) large volume individual shippers.

(c) It is the policy of the Board not. to permit combination carriers to provide blocked space service.

(Sec. 416(a), Federal Aviation Act of 1958, 72 Stat. 771; 49 U.S.C. 1386) [Policy Statement 24, 29 F.R. 11590, Aug. 13, 1964]

§ 399.38 Military tariff rates.

In passing upon the lawfulness of tariffs specifying rates and fares for the transportation of individually waybilled military cargo or individually ticketed military passengers in foreign or overseas. air transportation or in air transportation between the 48 contiguous States on the one hand and Hawaii or Alaska on the other hand, the Board will give great weight to the level of rates and fares computed in accordance with § 399.16(e). [PS-30, 31 F.R. 5422, Apr. 6, 1966]

Subpart D-Policies Relating to
Accounts and Reports

§ 399.50 Extensions of time for filing reports.

With respect to the prescribed reporting requirements, the Board will grant.. extensions of time for filing reports only in emergency situations that could not be anticipated and guarded against by the air carrier concerned. Written requests setting forth good reason for such an extension must be submitted suffi