er expenses incurred in scheduling or paring aircraft or aircraft operational sonnel for flight assignment. Such enses shall be included in function Maintenance, or function 6400 Airft and Traffic Servicing.

0 Maintenance.

a) This function shall include all exses, both direct and indirect, incurred he repair and upkeep of property and Ipment as may be required to meet rating and safety standards; in pecting or checking property and ipment in accordance with prescribed rational standards; and in polishing cleaning property and equipment en such polishing or cleaning is not ncidental routine in connection with normal productive use of property equipment.

b) This function shall include the of direct labor, materials, and outservices and maintenance overhead other costs associated with maintece operations regardless of the loon at which incurred.

This function shall not include is incurred in the construction, imvement, or modification of property equipment even when necessitated meet new or changed operating or ety standards. Such costs shall be rged to appropriate property and ipment accounts.

d) Costs incurred by aircraft hanig personnel in visual inspection, or check and servicing of aircraft, le in line service, shall not be inled in this function when performed an incidental routine during the mal productive use of aircraft but ll be included in function 6400 Airit and Traffic Servicing.

e) Both Group II air carriers and up III air carriers shall maintain the owing subfunctions:

) Direct Maintenance.

This subfunction shall include the is of labor, materials and outside services sumed directly in periodic maintenance rations and the maintenance and repair property and equipment of all types and ses, regardless of the location at which irred, exclusive of property and equipit carried in balance sheet accounts 1634 intenance and Engineering Equipment

1640.1 Maintenance Buildings and Imvements, which shall be included in subction 5300 Maintenance Burden.

The cost of direct labor, materials and plies, as well as outside repairs, used in maintenance and repair of property and

89-132 069- -14

equipment shall be recorded on running job orders or tickets covering repairs and periodic inspections except servicing. Where a number of like items are maintained on a group basis, it will be necessary to maintain only one job order for each group.

c. When supervisory personnel such as crew chiefs, inspectors and foremen are engaged in direct labor in connection with equipment maintenance, a proportionate part of their salaries and wages shall be charged to the appropriate direct labor accounts. The cost of transporting property to and from shops for repair and maintenance shall be included as a part of the cost of the materials and supplies used in the repair or maintenance of such property and equipment. Transportation charges, customs and duties, etc., shall be included in the cost of repairs and maintenance operations when made by outside parties.

5300 Maintenance Burden.

a. This subfunction shall include all overhead or general expenses used directly in the activities involved in periodic maintenance operations and the maintenance and repair of property and equipment of all types and classes, including the cost of direct labor, materials and outside services used in the maintenance and repair of property and equipment carried in balance sheet accounts 1634 Maintenance and Engineering Equipment, and 1640.1 Maintenance Buildings and Improvements. It shall include expenses related to the administration of maintenance stocks and stores, the keeping of pertinent maintenance operations records, and the scheduling, controlling, planning and supervision of maintenance operations.

b. This subfunction shall not include expenses related to financial accounting, purchasing or other overhead activities which are of general applicability to all operating functions. Such expenses shall be included in function 6800 General and Administrative.

c. This subfunction shall include only those expenses attributable to the current air transport operations of the air carrier. Maintenance burden associated with capital projects of the air carrier, other than overhauls of airframes and aircraft engines, shall be allocated thereto in accordance with the provisions of section 2-9(b). Maintenance burden incurred in common with services to other companies and operating entities shall be allocated thereto on a pro rata basis unless such services are so infrequent in performance or small in volume as to result in no appreciable demands upon the air carrier's maintenance facilities. When overhauls of airframes or aircraft engines are as a consistent practice accounted for on an accrual basis instead of expensed directly, maintenance burden shall be allocated thereto on a pro rata basis. Standard burden rates may be employed for quarterly allocations of maintenance burden provided

the rates are reviewed at the close of each fiscal year, at least. When the actual burden rate for the year differs materially from the standard burden rate applied, adjustment shall be made to reflect the actual costs incurred for the full accounting year. Allocations of maintenance burden to capital projects, and service sales to others shall be effected through the individual maintenance burden objective accounts, except that the air carrier may effect such allocations by credits to profit and loss account 77 Uncleared Expense Credits under circumstances in which the use of that account will not undermine the significance of the individual maintenance burden objective accounts in terms of the expense levels associated with the air carrier's air transport services. Maintenance burden allocated to overhauls shall be credited to profit and loss subaccounts 5372.2 or 5372.7 Airworthiness Reserve Charges. In accordance with the provisions of section 22(d) or 32(d), as applicable, each air carrier shall file with the Civil Aeronautics Board a statement in which procedures followed in allocating maintenance burden between current transport services, overhauls, capital projects and outside services are fully explained.

[ER-327, 26 F.R. 4222, May 16, 1961, as amended by ER-483, 32 F.R. 2811, Feb. 11, 1967]

This function shall include all expenses chargeable directly to activities contributing to the comfort, safety and convenience of passengers while in flight and when flights are interrupted. It shall not include expenses incurred in enplaning or deplaning passengers, or in securing and selling passenger transportation and caring for passengers prior to entering a flight status. Such expenses shall be included in functions 6400 Aircraft and Traffic Servicing and 6700 Promotion and Sales, respectively. 6400 Aircraft and Traffic Servicing.

(a) This function shall include the compensation of ground personnel and other expenses incurred on the ground incident to the protection and control of the in-flight movement of aircraft, scheduling and preparing aircraft operational crews for flight assignment, handling and servicing aircraft while in line operation, servicing and handling traffic on the ground, subsequent to the issuance of documents establishing the air carrier's responsibility to provide air transportation, and in-flight expenses of handling and protecting all nonpassenger traffic including passenger baggage.

(b) This function shall include only those aircraft servicing and cleaning

expenses which are incurred as an dental routine during the normal ductive use of aircraft in line operat It shall not include expenses incurr the repair and maintenance of pro and equipment, or in checking or specting property and equipmen accordance with prescribed operat standards when such activities are an incidental routine during the no productive use of aircraft. Such penses shall be included in function Maintenance.

(c) This function shall not in expenses incurred in securing t arranging aircraft space for t sold or in issuing documents firming traffic sales and establis the air carrier's responsibilities provide air transportation. Such penses

shall be included in 1

tion 6700 Promotion and Sales. ever, for purposes of this syster accounts, expenses attributable to operation of airport traffic offices, ex ing reservation centers, shall be incl in this function. Expenses attribu to the operation of reservation or craft space control centers shall be cluded in function 6700 Promotion Sales regardless of the location at w incurred.

(d) Group III air carriers shall fu subdivide this function as follows: 6100 Aircraft Servicing.

a. This subfunction shall include the pensation of ground personnel and expenses incurred on the ground inc to the protection and control of the inmovement of aircraft; scheduling or paring aircraft operational crews for assignment; landing and parking air visual inspection, routine checking, serv and fueling of aircraft; and other exp incurred on the ground incident to rea for arrival and take-off of aircraft. 6200 Traffic Servicing.

a. This subfunction shall include the pensation of ground personnel and expenses incurred on the ground incide handling traffic of all types and classe the ground subsequent to the issuan documents establishing the air car responsibility to provide air transporta Expenses attributable to the operatio airport traffic offices shall also be includ this subfunction; expenses attributab reservations centers shall be excluded shall include expenses incurred in both planing and deplaning traffic as well a penses incurred in preparation for enp ment and all expenses subsequent deplanement.

This subfunction shall also include incurred in handling and protecting all ■assenger traffic while in flight. It shall Include expenses incurred in contributo the comfort, safety and convenience of engers while in flight or when flights are rupted. Such expenses shall be included anction 5500 Passenger Service.

Servicing Administration.

This subfunction shall include expenses general nature incurred in performing rvisory or administrative activities re■g solely and in common to subfunctions Aircraft Servicing and 6200 Traffic icing.

This subfunction shall not include rvisory or administrative expenses which be charged directly to subfunction 6100 raft Servicing or subfunction 6200 ic Servicing. Nor shall this subfunction ude expenses of a general administrative 'acter and of significant amount regularcontributing to operating functions rally. Such expenses shall be included inction 6800 General and Administrative. The expenses in this subfunction shall ecorded separately for each geographic tion at which incurred.

0 Promotion and sales.

1) This function shall include exses incurred in creating public prefere for the air carrier and its services; ulating the development of the air isport market; and promoting the air rier or developing air transportation erally.

ɔ) It shall also include the compenon of personnel and other expenses dent to documenting sales; expenses dent to controlling and arranging or firming aircraft space for traffic sold; enses incurred in direct sales solicita1 and selling of aircraft space; and enses incurred in developing tariffs 1 schedules for publication.

c) This function shall not include enses incurred in handling traffic sequent to the issuance of documents blishing the air carrier's responsity to provide air transportation which 11 be included in functions 5500 senger Service and 6400 Aircraft and ffic Servicing. However, for purposes this system of accounts, expenses ributable to the operation of airport ffic offices, excluding reservation ters, shall be included in function 0 Aircraft and Traffic Servicing. Exises attributable to the operation of ervation or aircraft space control ters shall be included in function 6700 motion and Sales regardless of the ation at which incurred.

a. This subfunction shall include expenses incurred in creating public preference for the air carrier and its services; stimulating development of the air transport market; and promoting the air carrier or developing air transportation generally.

b. This subfunction shall not include expenses incurred in direct sales solicitation and selling of aircraft space. Such costs shall be included in subfunction 6500 Reservations and Sales.

6800 General and Administrative.

(a) This function shall include expenses of a general corporate nature and expenses incurred in performing activities which contribute to more than a single operating function such as general financial accounting activities, purchasing activities, representation at law, and other general operational administration, which are not directly applicable to a particular function.

(b) This function shall not include expenses incurred directly in promoting traffic or in promoting relations of the air carrier generally with the public which shall be included in function 6700 Promotion and Sales. Nor shall this function include expenses, regularly applicable in large part to a specific function, which contribute only incidentally, or in small amount, to various other functions. Such expenses when of such size as will not distort the function to which predominantly related, shall be included in the specific function to which regularly related. However, expenses of a general administrative character and of significant amount regularly contributing to operating functions generally shall be included in this function. 7000 Depreciation and Amortization.

This function shall include all charges to expense to record losses suffered through current exhaustion of the serv

iceability of property and equipment due to wear and tear from use and the action of time and the elements, which are not replaced by current repairs, as well as losses in serviceability occasioned by obsolescence, supersession, discoveries, change in popular demand or action by public authority. It shall also include charges for the amortization of capitalized developmental and preoperating costs, and other intangible assets applicable to the performance of air transportation. (See section 5-5 and section 6-1830 and 1880.)

00

Section 12-Objective Classification-Operating Revenues

General Instructions.

(a) The objective accounts established in this section are prescribed for all air carrier groups. Each air carrier shall credit the gross revenues accruing from services ordinarily associated with air transportation or its incidental services, to the appropriate account established for each revenue source. Expenses incident to transport services from which revenue is earned shall not be charged to the related revenue account. However, direct costs of forwarding traffic as a result of interrupted trips, and refunds of sales, shall be charged to the applicable revenue account.

(b) Revenues accruing from transactions conducted in foreign currencies shall be credited to the applicable objective accounts at the United States dollar equivalent, at currently realizable, or officially prescribed rates of exchange, of foreign currencies received or due the air carrier from sales. (See section 2-3.)

(c) Expenses directly associated with the performance of incidental services shall be charged to the applicable incidental revenue account. (See section 9-4600.) Except as provided in operating expense objective account 77 Uncleared Expense Credits, all expenses allocated to incidental services shall be cleared by appropriate credits to the applicable operating expense objective accounts.

objective account 19 Other Opera Revenues.

(b) This account shall be subdi as follows by all air carrier groups: 01.1 Passenger-First Class.

Record here revenue from the air t portation of passengers moving at standard fares or premium fares, or a duced fares not predicated upon the u aircraft space specifically separated first class, and for whom standard or mium quality services are provided. 01.2 Passenger-Coach.

Record here revenue from the air t portation of passengers moving at s fares reduced from the first class or mium fares which are predicated upon the operation of specifically designated craft space and a reduction in the qu of service regularly and ordinarily pro 02 United States Mail.

(a) Record here revenue from transportation by air of United S mail at service mail rates establishe the Civil Aeronautics Board.

(b) Fines and penalties imposed the United States Government in nection with the carriage of mail not be charged to this account bu profit and loss account 89 Miscellan Nonoperating Debits.

(c) This account shall be subdiv as follows by all air carrier groups: 02.1 Priority.

Record here revenue from mail be postage at rates established specificall air mail service or mail moving at se transportation rates equivalent to established for mail bearing the full air postage.

02.2 Nonpriority.

Record here revenue from mail movi service transportation rates lower than established for mail bearing postage e lished specifically for air mail service. 03 Foreign Mail.

(a) Record here revenue from transportation by air of mail other United States mail.

(b) Fines and penalties imposed foreign governments shall not be cha to this account but to profit and account 89 Miscellaneous Nonopera Debits.

06 Property.

(a) Record here revenue from transportation by air of property inc ing excess passenger baggage.

(b) Revenues resulting from serv incidental to the transportation serv

as collection of shipper's interest rance premiums and charges and for service such as pick-up and dery, assembly and distribution, storage handling, and C.O.D. collection shall be credited to this account but to fit and loss account 17 Air Cargo vices.

e) This account shall be subdivided ollows by all air carrier groups:

Express.

ecord here revenue from the transportaby air of express as defined in tariffs filed the Civil Aeronautics Board.

Freight.

ecord here revenue from the transportaby air of property other than express passenger baggage.

Excess Passenger Baggage.

ecord here revenue from the transportaby air of passenger baggage in excess of free weight.

Charter and Special.

a) Record here the revenue from scheduled air transport services (ext as otherwise required by profit and Account 86 Income from Nontranst Ventures) where the party receiving transportation obtains exclusive use an aircraft at either published tariff other contractual rates and the uneration paid by the party receivtransportation accrues directly to, the responsibility for providing asportation is that of, the accounting carrier. This account shall also inde revenues from air transport servother than inter-airport services, ether scheduled or nonscheduled, ere each passenger or shipment reing transportation is individually umented and does not obtain excluè use of an aircraft.

b) This account shall not include enues or fees received from other air riers for flight facilities furnished or rated by the accounting air carrier ere the remuneration paid by the ty receiving transportation accrues ectly to, and the responsibility for proIng transportation is that of, other air riers. Such revenues and related exses shall be included in profit and account 11 Rents, 13 Interchange es-Associated Companies, 15 Internge Sales-Outside, or 18 Other Eidental Revenues, as appropriate.

(c) This account shall be subdivided as follows by all air carrier groups: 07.1 Passenger.

Record here revenue from the transportation of passengers and their personal baggage at rates set forth in passenger charter tariffs.

07.2 Property.

Record here revenue from the transportation of property at rates set forth in property charter tariffs and revenue from the transportation of passengers and property simultaneously at rates set forth in mixed passenger and property charter tariffs. 08 Section 406 Subsidy.

Record here amounts of compensation fixed pursuant to section 406(b) of the Federal Aviation Act which exceed amounts accruing to the air carrier under service mail rates established by the Civil Aeronautics Board for the carriage of United States mail.

09 Foreign Exchange Fluctuation Adjustments.

Record here gains or losses from transactions involving currency conversions resulting from normal, routine. day-to-day fluctuations in rates of foreign exchange in accordance with provisions of section 2-3. Gains or losses of a nonroutine abnormal character shall not be entered in this account but in profit and loss account 85 Foreign Exchange Adjustments.

10 Hotel, Restaurant and Food Service.

(a) Record here revenues from and expenses related to the operation of hotels and restaurants and similar facilities, and from sales of food. (See section 13-51.)

(b) This account shall be subdivided as follows by all air carrier groups: Gross Revenues.

10.1