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Chapter 17: International airfares and taxes.

SUMMARY

There are many terms associated with international airfares, some of which are very complex. The typical travel counselor usually handles fairly routine international itineraries, and seldom comes in contact with the more difficult terms. Travel counselors who specialize in business travel or focus only on international air travel use these terms almost daily.

It is easy to see why a fare obtained from a CRS display should not be quoted to the client. There are several taxes and other fees that must be added on first. Depending on the client's origin and destination cities, taxes and fees for other countries may also apply, increasing the airfare even more.

Understanding the way in which international airfares can be used to the client's benefit is an important part of a travel professional's job. Becoming comfortable with fare techniques requires practice and the knowledge of how to find up-to-the-minute data on fares, taxes, and other fees that might apply.

OBJECTIVES

At the conclusion of this chapter, you should be able to:

* define and identify IATA trip classifications.

* define the terms associated with international airfares.

* understand booking classes and fare basis codes.

* understand the taxes and other fees associated with international air travel.

KEY TERMS

airline rate desk

Animal Plant and Health Inspection Service (APHIS) fee

Advance Purchase Excursion (APEX) fare

around-the-world fare

backhaul

budget fare

circle-trip minimum

double open-jaw

global indicator

higher intermediate point (HIP)

logical geographical order

maximum permitted miles (MPM)

neutral unit of construction (NUC)

primary code

security surcharge

Sold Inside, Ticketed/e-tkted Inside (SITI)

Sold Inside, Ticketed/e-tkted Outside (SITO)

Sold Outside, Ticketed/e-tkted Inside (SOTI)

Sold Outside, Ticketed/e-tkted Outside (SOTO)

stand-by fare

turnaround point

U.S. Arrival Tax

U.S. Customs Fee

U.S. Immigration Fee

youth fare

**********

Many travel counselors find that basic international fares are less complicated and are fewer in number than domestic airfares. This may be due to the fact that domestically, airlines can set fares at any amount and change them as often as they wish. Internationally, the airlines work together with governments and the International Air Transport Association (IATA) to establish fares. Therefore, international fares are more likely to remain the same, at least for a while.

IATA TRIP CLASSIFICATIONS

One of IATA's requirements for every international trip is that it must be classified, based on where travel is purchased and issued in relationship to where travel begins. Letters indicating this information identify each classification.

Sold Inside and Ticketed/e-tkted Inside (SITI) the country where travel originates is by far the most common type of trip. For example, your Boston agency collects money for and issues a ticket/e-tkt from Boston to Athens. As you can see, travel originates in the United States and the ticket/e-tkt is being sold and issued within the same country, hence the IATA classification of SITI.

Sold Outside and Ticketed/e-tkted Outside (SOTO) the country where travel originates is the second most common type of trip classification. For example, your Boston agency collects money for and issues a ticket/e-tkt from Athens to Boston. Now, the classification is based on the fact that travel originates in Greece. As you can see, travel is sold and the ticket/e-tkt is issued outside of Greece, hence the SOTO classification.
Important Industry Web Sites

Airlines Around the World: http://www.quickaid.com/links/airlines.cgi
Currency Converter: http://www.oanda.com
International Airlines Travel Agents Network: http://www.iatan.com
International Air Transport Association: http://www.iata.org
Mapblast: http://www.mapblast.com
Time Zone Converter: http://sandbox.xerox.com/stewart/tzconvert.cg/
Weather Worldwide: http://www.intellicast.com
Worldclock: http://www.timeanddate.com/worldclock
World Tourism Offices: http://www.towd.com


The other two IATA classifications, Sold Outside, Ticketed/e-tkted Inside (SOTI) the country where travel originates and Sold Inside, Ticketed/e-tkted Outside (SITO) the country where travel originates are quite rare.

An example of a SOTI might be: Your client's son is stationed at a military base near Frankfurt, Germany, and your client wants to bring his son home for the holidays. Your client purchases a Prepaid Ticket Advice (PTA) at your agency in Atlanta. Your client's son has Delta Airlines issue the ticket in Frankfurt.

An example of a SITO might be: Your Boston travel agency collects money for a trip from Boston to Dublin. The client picks up the ticket at a branch agency in London.
Sold Inside, Ticketed/e-tkted
Inside (SITI)

An IATA trip classification
that indicates a trip that is
sold inside and ticketed
inside the country where the
itinerary begins.

Sold Outside, Ticketed/e-tkted
Outside (SOTO)

An IATA trip classification
that indicates a trip that is
sold outside and ticketed
outside the country where
the itinerary begins.


INTERNATIONAL FARE TERMS

At the beginning of their travel careers, most entry-level counselors do not handle complicated international fare calculations. Agency managers know that complex itineraries can be overwhelming to new counselors and, therefore, assign them to more experienced personnel. Even so, there are some new concepts you should become familiar with. Because a few of these terms are very complicated and difficult to understand, the explanations shown here are basic rather than comprehensive. With practice and a little patience, these terms will become clear to you.

A gateway city is the city or airport where an international flight begins or ends. As you might imagine, U.S. hub cities are also gateway cities in most cases. These include: Boston, New York Kennedy, Washington Dulles, Miami, Dallas-Ft. Worth, Houston Bush Intercontinental, Los Angeles, San Francisco, and Chicago O'Hare. Keep in mind that just because an airport has the word international in its name does not mean it is a gateway city.

Most international airlines operate out of gateway cities only. As there are hundreds of non-gateway cities, these airlines often work with local airlines with regard to fare. An airline that transports passengers from an interior city to the gateway city, is called an air addon. For example, Qantas may offer an add-on from Memphis to Los Angeles on American, Delta, and United. Sometimes the air add-on is less expensive than the applicable excursion fare between these cities; other times the excursion fare is best. The travel counselor must know to consider both possibilities.

Many international fares indicate the routing as MPM, or maximum permitted miles. This type of routing means that connections, and possibly stopovers, can be made anywhere, provided that the combined air mileage does not exceed the MPM for the fare. MPM fares are generally more expensive than fares with more limited routings. The fare rule display in all CRSs identifies the MPM for the fare.

All international airfare rules include a global indicator. The global indicator identifies the general route the flight must take in order to use the fare. Common sense tells us that a traveler going from Los Angeles to Sydney would fly transpacific, not transatlantic and fortunately, global indicators follow the same logic. Standard global indicators include: EH = Eastern Hemisphere, MA = Mid Atlantic, AT = North Atlantic, NP = North Pacific, PA = Pacific, and WH = Western Hemisphere.

It is not uncommon for a business client to present the travel counselor with a list of international cities and the length of time he requires in each city, and ask the counselor to arrange an itinerary. The travel counselor must be mindful of logical geographical order when arranging the cities. Itineraries that contain backtracking waste the client's time and usually increase the overall fare.

The farthest destination from the origin is usually called the turnaround point. It is at the turnaround point that the itinerary changes general direction and moves toward home. When establishing logical geographical order, some destinations are usually included on the way to the turnaround point; others may be included on the homeward bound direction. If your client was departing from Pittsburgh and needed to visit Cairo, London, Athens, Stockholm, and Madrid, how would you arrange the cities? Where would the turnaround point be?

Internationally, excursion fares are often referred to as Advance Purchase Excursion (APEX) fares. In today's airfare structure almost all excursion fares have an advance purchase requirement, but when APEX fares were first created, this was not true. Typically, APEX fares have the same restrictions and limitations of any excursion fare: advance purchase, minimum-stay requirement, maximum-stay limitation, same airline must be maintained, and there are penalties for change or cancellation.

Some airlines offer a budget fare from gateway cities. The budget fare is unique to international travel and is often less expensive than standard excursion fares because it requires some flexibility on the part of the passenger. When using a budget fare, the passenger selects the week of travel. Approximately one to two weeks before the selected week, the airline selects the actual flight and day of travel. The same procedure takes place for the return trip as well. As you might imagine, most travelers cannot use the budget fare because they cannot be as flexible as the fare requires.

Another type of fare that is unique to international travel is stand-by. With this type of fare, the travel counselor does not make a reservation but does issue a ticket for a specific airline, flight, and date. The booking class for stand-by fares is usually U and the status box on the ticket shows "SA," meaning, space available. Stand-by fares may be the least expensive type of international fare because they require total flexibility from the passenger. The traveler goes to the airport, checks in with the airline, and hopes to be confirmed. Not many clients are willing or able to use stand-by fares.

Some airlines offer youth fares for travelers between the ages of 12 and 26. Generally, flight reservations for youth fares cannot be made any further in advance than 24 hours. A travel agency specializing in college student travel may use youth fares, budget fares, and stand-by fares because these travelers may not be particular about which day they depart. However, for most clients, youth fares are not an option.

Around-the-world fares are just as the name implies: the traveler circumnavigates the globe. This fare can result in substantial savings when multiple destinations exist in both hemispheres. Typically, around-the-world fares are offered by several major airlines with specific prices for first-class, business-class, or coach-class travel. Rules for an around-theworld fare usually require that travel maintain a continuous east or west direction, all reservations must be made in advance, and there are penalties for change or cancellation.

As an example, an airline's around-the-world fare prices and rules might include:

* $7,000 first class, $5,500 business class, $3,200 coach class

* 29,000 maximum miles for the entire trip

* 15 maximum stopovers

* only specified airlines can be used

Around-the-world fares are especially beneficial for first- and business-class travelers. Two or three destinations can easily add up to the around-the-world fare. For coach-class passengers usually five or more destinations are required before the around-the-world fare proves advantageous. Obviously, this type of fare is something all travel counselors should consider when the client has multiple international destinations.

Internationally, a round-trip is the same as domestic. If normal fares are used, different airlines and routings may be used on the outbound and inbound. When excursion fares are used, the typical restrictions and limitations must be met and followed. As with domestic airfares, international excursions can usually be split and combined or an excursion fare can be split and combined with a normal fare. Excursion fares can never be sold on a one-way basis for half of the price.

Open-jaw and circle trips have the same definition internationally as they have domestically. As with round-trips, the airline(s) and routing used do not matter when normal fares are used on open-jaw and circle trips. As always, when excursion fares are to be split and combined, all of the rules must be followed. Internationally, these two types of trips have a new restriction when excursion fares are used: The cities on either end of the surface segment in an open-jaw trip and both destinations in a circle trip must be within Europe, or if outside Europe, be within the same country.

Internationally, there is a new type of trip called a double open-jaw. It is easy to mistake this type of trip as two one-way trips (see Figure 17-1). Doing so, however, results in using normal fares without considering the use of excursion fares.

The CRS fare rule display for each city pair indicates if excursions can be split and combined on a double open-jaw trip. Figure 17-1 shows that using excursion fares is substantially less expensive than pricing the trip with normal fares. As with a single open-jaw, both cities on either end of the surface segments must be within Europe, or, if outside Europe, be within the same country.

Most international first- and business-class fares allow free, unlimited stopovers provided that the MPM is not exceeded. Theoretically, this means that a client could fly from Chicago O'Hare to London Heathrow, spend a few days, then fly to Amsterdam and pay the ORD/AMS fare. However, sometimes the stopover city has a higher fare than the destination. When this is true, the stopover city is called higher intermediate point (HIP) (see Figure 17-2) and the higher fare must be charged.

[FIGURE 17-1 OMITTED]

[FIGURE 17-2 OMITTED]

In Figure 17-2, you can see that the one-way business class British Airways fare from Chicago O'Hare to Amsterdam is $2,943. Because the client is stopping over in London, that city pair's fare must be checked as well. The BA fare from ORD to LHR is $3,042. Therefore, LHR is a HIP and the higher fare must be charged for the ORD/LHR/AMS itinerary.

Logic might suggest that travel from ORD to LHR should be less expensive because geographically, LHR is closer to ORD than AMS. Remember that the airline, each country's government, and IATA determine international fares jointly. Factors such as the cost of airport space, fuel, and flight catering are also considered. Just like fares between cities in the United States, the distance between international cities is not the sole determining factor for the fare.

When a HIP fare applies in one direction, the higher fare must be charged in both directions, regardless of the routing. This rule is called circle-trip minimum. In Figure 17-2, the client is charged $3,042 each way because of the LHR stopover on the outbound. Overall, he pays $198 more than the round-trip ORD/AMS fare. The $198 amount is called the backhaul.

When each international airfare is established, it is set in the currency of the country where the flight begins. It is also expressed in a generic amount, known as a neutral unit of construction (NUC). NUCs can be thought of as a world currency, not pertaining to any one country or currency. The purpose of NUCs is to simplify adding multiple currency fares together. All international airline tickets/e-tkts issued by computer show the NUC values in the fare ladder.

To obtain the NUC value, the airline multiplies the new fare by that country's rate of exchange, or ROE, which is set by IATA. Each country's ROE is adjusted for inflation and other factors quarterly. The ROE for the United States is always 1.00; therefore, all fares expressed in USD have identical NUC values. For example, a fare rule from New York to Cairo might show:
NYCCAI-MS
FBC        USD     NUC     PTC  FT  GI
Y          575.00  575.00  ADT  NL  AT


Because other countries' ROEs fluctuate, the fare and NUC amounts may not be equal. For example, a fare rule from Cairo to New York might show:
CAINYC-ML
FBC        EGP      NUC      PTC  FT  GI
Y          4379.00  1273.09  ADT  NL  AT


Using NUCs instead of the actual fares may provide an advantage for travelers beginning their trip in the United States. For example, LAX to AKL, AKL to SYD, SYD to SIN, SIN to NRT, NRT to LAX. Because this itinerary begins in the United States, the travel counselor may use the NUC values for each city pair as the USD fare. This may prove to be less expensive than converting each foreign currency fare into USD and ticketing/e-tkting separately.
maximum permitted miles
(MPM)

An airfare term that limits
the accumulated miles on a
trip.

global indicator

An international fare term
that indicates the general
route a trip must take in
order to use a specific fare.

logical geographical order

The process of arranging a
traveler's destinations in
such a way as to avoid
back-tracking and wide
north-south deviations.

turnaround point

The farthest destination
from the origin on a flight
itinerary.

Advance Purchase

Excursion (APEX) fare
Another name for an
international excursion fare.

budget fare

An international airfare in
which the traveler selects
the week of travel and the
airline determines the actual
day and flight.

stand-by fare

An international airfare in
which the traveler purchases
a ticket but does not have a
reservation. The traveler
waits at the airport in hopes
of being confirmed.

youth fare

An international airfare for
travelers under 26 years old
that cannot be booked more
than 24 hours before
departure.

around-the-world fare

A fare designed for a
circumnavigation of the
globe with multiple
stopovers.

double open-jaw

An international trip that
involves a surface segment
at both the orgin and
destination ends.

higher intermediate point
(HIP)

A nearer stopover city that
has a higher fare than the
destination city.

circle trip minimum

1. When normal fares are
used, a circle trip has more
than one destination. 2.
When excursion fares are
used, a circle trip has two
destinations, no more, no
less. 3. Internationally,
when excursion fares are
used, both destinations
must: a. be within Europe,
or b. be within the same
country.

backhaul

The difference between a
through fare and a HIP fare.

neutral unit of
construction (NUC)

a generic currency used in
calculating international
airfares.


BOOKING CLASSES AND FARE BASIS CODES

International booking classes and fare basis codes are much like those used for domestic travel. In fact, the booking classes, also called primary codes, are the same. Figure 17-3 illustrates most of the booking classes used today.
FIGURE 17-3 International booking classes

R = supersonic (international only)

P or F = first class

A = discounted first class

J or C = business class

D, I, or Z = discounted business class

Y, S, or W = coach class

B, H, K, L, M, N, Q, T, V, etc. = discounted coach class

U = air shuttle, reservation not required

E = air shuttle, reservation not allowed


As with domestic fare basis codes (FBCs), the FBC may be just one letter (the booking class), or it may contain other letters and numbers. Either way, the booking class dictates the inventory that must be sold in order to obtain the desired fare.

International airfares are more apt to be designated by season than domestic fares. Typically, there are two or three seasons, each indicated by a letter within the fare basis code: H = high season, L = low season, and K or O = shoulder (between high and low) season.

Each fare rule explains when and how seasonal fares are to be used. Sometimes, the traveler's outbound date determines the applicable season for the entire trip. Other times, each travel date identifies each season, resulting in a splitting and combining of fares. Keep in mind that high season for one destination is not necessarily the same for a different destination.

As with domestic airfares, the day of the week on which the client travels can have a bearing on the applicable fare. Typically, travel on Monday through Thursday is less expensive than flights on Friday, Saturday, and Sunday. Applicable days of travel may not be indicated in the fare basis code. Fare basis code indicators for applicable days of the week include: W = weekend, X = weekday.

International fare basis codes may also include numbers, just like domestic FBCs. Numbers in international fare basis codes usually indicate maximum length of stay, although sometimes the numbers indicate advance purchase. Maximum length of stay indicators include 30 = 30 days, 1M = 1 month, 45 = 45 days, 60 = 60 days. Numbers indicating advance purchase include 1, 3, 7, 14, 21, and 30.

Many international fare basis codes include the letters AP or AN, both of which indicate APEX. The term APEX is used interchangeably with the term excursion. As discussed earlier, APEX fares have basically the same limitations and restrictions of any excursion fare: same airline, advance purchase, minimum-stay requirement, maximum-stay limitation, and penalties for change or cancellation.
primary code

The first, or only, letter of a
fare basis code that
indicates first-class,
business-class, or coach-class
seating as well as the
airfare being purchased.
Also known as a booking
code or booking class.


INTERNATIONAL TAXES AND FEES

When an airline quotes a fare or the travel counselor obtains a CRS fare display, all amounts are expressed as the base; taxes, PFCs, segment fees, fuel surcharges, and other international charges must be added. For most international fares, a minimum of $48.80 in taxes and fees applies.

For every flight that leaves or enters the United States, each passenger is charged a $5 Security Surcharge. So, for a round-trip, the security surcharge is $10 and appears in the fare ladder portion of a ticket/e-tkt with the code Q. Because this amount is then added to the base fare, it, unlike all other taxes and fees except some fuel surcharges, is commissionable.

Every passenger departing the United States is charged a U.S. Departure Tax of $12.80 and all returning travelers are subject to a U.S. Arrival Tax of $12.80. These two taxes are shown in one of the tax boxes of a ticket/e-tkt with the code US.

Most passengers entering the United States from another country are subject to the U.S. Immigration Fee of $6, which appears in a ticket/e-tkt tax box with the code XY. Travelers returning to the United States from Guam, the U.S. Virgin Islands, and Puerto Rico are exempt from paying the U.S. Immigration fee.

The U.S. Customs Fee is $5 and is shown with the code YC in one of the tax boxes of a ticket/e-tkt for most travelers returning to the United States. Passengers arriving in the United States from a U.S. territory, Canada, Mexico, and the Caribbean are exempt from paying the U.S. Customs Fee.

The $3 Animal Plant and Health Inspection Service Fee (APHIS), a division of the U.S. Department of Agriculture, applies to travelers returning to the United States and appears in a ticket/e-tkt tax box with the code CA. Exempt passengers include those returning from Canada and Puerto Rico.

You may remember that there are only three tax boxes on automated tickets/e-tkts and four boxes on the manual version. So, how can all of these taxes and fees appear on tickets/ e-tkts? The answer is that they are combined. On automated tickets, the U.S. Immigration and U.S. Customs fees should be shown separately and all other items are combined in the third tax box. On manual tickets, the APHIS fee should also be shown separately and all other items are combined in the fourth tax box. The code for combined taxes and fees is XT.

PFCs, segment fees, and domestic fuel surcharges are also part of the international air travel total costs. As always, clients departing a U.S. city that has a PFC or fuel surcharge are subject to the fee. Itineraries that include city pairs within the United States or buffer zone must include the applicable segment fees. All of these factors mean that the total of extra taxes and fees for an international ticket/e-tkt typically ranges between $55 and $100. The ARC Industry Agents' Handbook contains a thorough explanation of international taxes and fees. All CRSs include this information as well as complete lists of taxes and fees for each country.
security surcharge

A special fee that is added
to international base
airfares for both outgoing
and incoming passengers.

U.S. Arrival Tax

A tax charged to all air
passengers arriving in the
United States from abroad.

U.S. Immigration Fee

A fee levied against all air
passengers arriving in the
United States from abroad.

U.S. Customs Fee

A charge levied to all air
and cruise passengers
arriving in the United States
from abroad.

Animal Plant and Health

Inspection Service (APHIS)
Fee

A fee charged as part of the
cost of air travel to
passengers arriving in the
United States from abroad.
APHIS is a department of
the U.S. Department of
Agriculture.


AIRLINE RATE DESK

Many travel counselors calculate international fares on rare occasions. The CRSs have become so sophisticated that the computer automatically figures most rates. On complicated itineraries that the CRS cannot price, having an airline rate desk calculate the fare may be a practical alternative. Specialists who are trained in international fare calculation staff each international and major U.S. airline's rate desk.

When an airline rate desk calculates a rate, a rate desk number is given to the travel counselor. This number indicates the rate agent doing the calculation and the date the rate was figured. The rate desk number is the travel counselor's protection against errors. Should an airline dispute a ticket/e-tkt total from a rate desk price, providing the rate desk number puts the responsibility on the rate agent's shoulders.

Many travel agency managers suggest that the travel counselor calculate the rate before calling the airline rate desk. This step serves two purposes. First, it gives the travel counselor excellent practice at rate calculation. Second, the travel counselor may be able to catch an error made by the rate desk.

For example, the travel counselor calculates a rate of $2,500 and the rate desk arrives at a $2,875 figure. The travel counselor should ask the rate agent why the client would not qualify for the $2,500 fare. Perhaps the travel counselor miscalculated and the actual fare should be $2,875, or maybe the rate agent overlooked something that the travel counselor caught. Remember that human beings staff the airline rate desk, and all human beings are capable of errors.
? What Would You Do?

A counselor in your office always calls the airline rate desk every
time a client asks for an international airfare. The rate desk
calculates the fare and the counselor then quotes the amount to the
client.

1. Does calling the airline to obtain international airfares always
result in the best price?

2. What are the disadvantages to this counselor who always uses the
rate desk instead of calculating international airfares himself?

3. In what way(s) might the client's best interests not be served
by relying exclusively on an airline rate desk?

airline rate desk

A department of an airline
that is staffed by employees
who have been trained in
the various details of fare
construction.
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Title Annotation:SECTION V: International Air Travel Basics
Publication:A Guide to Becoming a Travel Professional
Geographic Code:1USA
Date:Jan 1, 2005
Words:4499
Previous Article:Chapter 16: International air travel basics.
Next Article:Chapter 18: International schedules and ticketing.
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