PArc Updates Branch Ownership Change Procedures; AA & UA Amend AddendumsPremium Advisories - ASTA

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Arc Updates Branch Ownership Change Procedures; AA & UA Amend Addendums

April 16, 2010

The Airlines Reporting Corporation (ARC) has modified its ownership change procedures to ensure a transfer of “full control” occurs with all branch acquisitions. According to the agent Reporting Agreement (ARA), “the corporate structure or ownership of the home office and the branch is absolute and all inclusive as a single entity.” As a result, if an ARC branch location is sold, then the purchasing agency is required to maintain 100% control, including “full legal and financial responsibility for the administration, staff, liability, maintenance and operational expense” of the acquired location. To demonstrate that this transfer of control has taken place, ARC now requires the agent to provide a copy of the lease agreement, GDS transfer agreement, bill of sale, purchase agreement and other related documentation. This change will effectively eliminate ownership changes from occurring in which the acquiring agency buys a branch or branches from another agency, yet the selling agency maintains operational control. ARC has advised ASTA that it has no plans to do a systematic audit of ownership changes that have already occurred.

At the same time, American (AA) and United (UA) have modified their marketing agreements to identify the minimum ownership investment relationship that one agency must have in another agency to be included in its marketing agreements. Both have indicated that at least a fifty-one percent (51%) controlling interest is now required. UA has indicated that it will conduct quarterly audits of all ARC numbers that an agent includes with its agreement. At the same time, UA has noted that it could require the agent to provide, at any time, “substantiating proof of controlling interest ownership…. including but not limited to a shareholder’s agreement or other equivalent evidence.”  Please note that the airlines can also verify ownership relationships through ARC since all ownership investments of 30% or greater that occur after initial ARC approval must be declared through a Type II ownership change.  

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