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Chapter 5: United States airfares and other charges.

SUMMARY

Working with airfares is perhaps one of the most complicated tasks that a travel professional faces. Each airline has its own fare structure and each fare has its own set of rules and regulations. Although the travel counselor cannot memorize each and every fare he has to contend with, he must understand how and where to obtain this information. Regardless of the amount of additional service the travel professional provides, a client will go elsewhere if he feels that the counselor is not pricing the itinerary in the best way.

In addition to the myriad of airfares, travel counselors must also contend with and understand the various taxes, fees, and surcharges that apply to air travel. The applicable taxes and fees depend on the client's destination, and in some cases, his origin city as well. Understanding which taxes and fees are to be added to the client's airfare is important for the accurate quotation of the client's trip.

OBJECTIVES

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

* understand the difference between normal and excursion fares.

* understand the inventory control principle.

* understand fare basis codes and booking classes.

* know how to use fare construction concepts.

* understand a CRS rule and fare display.

* calculate fares, taxes, PFCs, segment fees, security fees, and fuel surcharges.

* understand Alaskan and Hawaiian tax principles.

* understand tax features of the Buffer Zone.

KEY TERMS

Alaskan tax

back-to-back excursion fares

booking code

breaking the fare

fare basis code (FBC)

fare-based open-jaw

fuel surcharge

Hawaiian tax

inventory control

mileage-based open-jaw

Passenger Facility Charge (PFC)

point-to-point fare

restricted inventory

security fees

segment fee

sister fares

split and combine excursion fares

U.S. Departure Tax

U.S. Transportation Tax

unrestricted inventory

For a travel counselor selling air travel, the task of coping with the myriad of airfares is probably the most difficult. From the air traveler's point of view, understanding fare construction is perhaps the most important skill the counselor can possess. The first question asked by most clients is, "What is the cheapest fare to ...?" or "Do you have any specials to ...?" At first glance, a CRS fare display or the fare information in the OAG appears incomprehensible. Fortunately, it is not quite as bad as it seems.

NORMAL AND EXCURSION FARES

As you learned in the last chapter, all airfares fall into one of two categories: normal or excursion. A normal fare is priced one-way and if it is to be used on a round-trip, the amount is doubled. Normal fares are usually the least restrictive but most expensive type of fare. It is very common for a normal fare to be more expensive than a fare that is priced for round-trip.

A fare priced for round-trip is called an excursion fare. Excursion fares are generally the least expensive type of fare as well as the most restrictive. Excursion fares can never be sold on a one-way basis for half the cost. Typical restrictions or limitations of excursion fares include the following.

* The same airline must be used on all segments.

* Reservations must be made and travel purchased in advance.

* There is a minimum stay requirement.

* There is a maximum stay limitation.

* Travel is nonrefundable and there is a penalty for making changes.

* All flight segments must be confirmed (no wait-listing or open returns).

Inventory Control

Between any given city pair, each airline may have 10, 20, 30, or more fares, each with its own set of rules. The airline principle of inventory control (see Figure 5-1) is the allocation of a specific number of seats per flight that can be sold at each of the fare amounts. Each inventory is either unrestricted or restricted to a particular number of seats that can be sold at a given fare.

To avoid confusion, the term restricted inventory means that the number of seats that can be sold at that price has been limited, or restricted to a specific number. It has nothing to do with the restrictions or limitations of the fare, such as advance purchase or minimum stay. Along the same lines, the term unrestricted inventory means that the number of seats that can be sold at that price has not been limited to a specific number.
   Unrestricted Inventory includes: supersonic (R), first class (F or
   P), business class (C or J), and coach class (Y, S, or W).

   Restricted Inventory includes: discounted first class (A),
   discounted business class (D or Z), and discounted coach classes
   (B, Q, M, K, V, L, H, T, N, etc.).


Have you ever seen an advertisement in the newspaper or on television that says "Fly to Orlando for $200?" You may have called the airline and given the reservationist your travel dates only to be told that that fare is sold out, but there is a fare for $350 available. This is inventory control in action. If we use the example in the previous chart, we see that only 10 seats can be sold at $200 and of course, they will be sold out before the higher fares. Once that inventory has been sold, the next higher, available fare is offered.

All travel counselors know that travel at the lower fares during peak times (holidays, spring break, major events) sells out months in advance. The airlines know this as well but it is common to see advertisements for low fares just before these popular travel times. It is no wonder that many people feel cheated when they attempt to purchase travel at the advertised price. As long as the airline publishes that fare, regardless of whether seats are available on all flights, the airline can advertise the fare.

To confound the situation of inventory control even further, each airline may alter the number of seats allocated to each fare inventory. Each flight is monitored to see how sales are going. As the date of the flight nears, seats may be taken from coach class and added to the discounted coach inventories as a means of boosting sales. The theory is that it is better to sell all of the seats at a discount than to take off with the aircraft less than full.

On the other hand, if a flight is selling out quickly, the airline may take a portion of the lower-fare inventory and add it to the inventory of a higher fare. The purpose of this is to generate as much revenue from the flight as possible.

Should the travel counselor suggest that the client wait to see if more inventory is added to a lower-fare category? Most travel counselors agree that this is not wise. If the airline added inventory, the counselor would have to check flights for this client repeatedly throughout the day, every day. The possibility of the counselor finding a seat in the lower-priced inventory as seats are added and before they sell out is very slim. Also, remember that none of the lower-priced fares allow for wait-listing.

It is important to note that when a traveler purchases a restricted inventory type of fare, he can be seated anywhere within the applicable passenger cabin. For example, a traveler buying a $250 fare with a K booking class can sit anywhere within the coach class cabin. In fact, it is very common for a $250 K class passenger to be seated next to a $600 Y class passenger. How could this happen?

Perhaps the $250 passenger could comply with all of the restrictions and limitations of the fare but the $600 passenger could not. Or, it may be that the $250 passenger purchased travel months in advance and by the time the $600 traveler made reservations, all of the lower-priced inventories had been exhausted. It is easy to see why the best airfare advice travel counselors can give their clients is to make their reservations and purchase travel as soon as their plans are firm.
inventory control

An airline policy that
divides the total number of
seats on a flight into price
categories.

unrestricted inventory

A number of seats on a
flight that has not been
limited to a lower number.

restricted inventory

A limited number


FARE BASIS CODES AND BOOKING CLASSES

Every fare has been assigned a fare basis code (FBC); either a single letter or a combination of letters or numbers. The first letter, or in some cases the only letter, of the FBC is the booking code, also called booking class or primary code. The booking code identifies the inventory that must be sold in order to obtain the desired fare. Any additional letters or numbers in an FBC may or may not represent particular features of the fare. Figure 5-2 illustrates some of the features found in typical fare basis codes.
FIGURE 5-2 Examples of features found in U.S. fare basis codes

* FBC first position: booking code
    R = supersonic (international only)
    P or F = first class
    A = discounted first class
    J or C = business class
    D or Z = discounted business class
    Y, S, or W = coach class
    B, H, K, L, M, N, Q, T, V, etc. = discounted coach class
* FBC other positions:
    Day of the week
    W = weekend
    X = weekday
    X67 = except Saturday and Sunday
    D67 = Saturday and Sunday only
    Z23 = Tuesday and Wednesday only
    O = off-peak travel days
    P = peak travel days
Time of the day
    O = off-peak travel times
    P = peak travel times
    N = night, usually before 6 A.M. and after 9 P.M.
Season (varies by destination)
   H = high season
   L = low season
   O = shoulder season
Type of trip
   R = round-trip
   E = excursion
Refundability
  NR = nonrefundable
  N = nonrefundable
Advance purchase
  IP = instant purchase, nonrefundable
  7 = 7-day advance purchase
  14 = 14-day advance purchase
  21 = 21-day advance purchase
Minimum stay
  1 = 1-day minimum stay


By looking at Figure 5-2 you can see some logic in the meanings of each feature. Other restrictions may not be indicated in the FBC. An additional complication is that the meaning of letters and numbers in an FBC can be quite different for international fares and they can vary from one airline to another. Experienced travel counselors can frequently interpret a portion of an FBC, but they never rely on memory or make assumptions; they check the fare rule in the CRS.

Sister Fares

Sister fares are two fares offered by the same airline for the same city pair and the restrictions are identical but for one feature. This one feature can be the day of the week, time of day, or season (usually international only) in which the fare can be used. By reading each fare's rule in the CRS, the differing feature is explained. Figure 5-3 demonstrates sister fares.
FIGURE 5-3 Examples of sister fares

Pair #1 (excursion fares)
UA TWE14NR T = discounted coach, W = weekend, E = excursion,
              14 =14-day advance purchase, NR = nonrefundable. $250
              round-trip.
UA TXE14NR T = discounted coach, X = weekday, E = excursion,
               14 = 14-day advance purchase, NR = nonrefundable. $200
               round-trip.
Pair #2 (normal fares)
HP VD67NR V = discounted coach, D67 = Saturday and Sunday only,
              NR = nonrefundable. $255 one-way, $510 round-trip.
HP VX67NR V = discounted coach, X67 = except Saturday and Sunday,
              NR = nonrefundable. $215 one-way, $430 round-trip.
Pair #3 (excursion fares)
CO QEO7IP Q = discounted coach, E = excursion, O = off-peak travel
              times, 7 = 7-day advance purchase, IP = instant
              purchase.
              $300 round-trip.
CO QEP7IP Q = discounted coach, E = excursion, P = peak travel
              times, 7 = 7-day advance purchase, IP = instance
              purchase.
              $350 round-trip.


By studying Figure 5-3, you can see that each pair of sister fares has identical rules but for one item. In the first and second example, the item is the days of the week in which the fare can be used and the third example demonstrates differing times of day.

In what way are sister fares used? Let's say that a client wants to travel from Little Rock to Philadelphia on a Tuesday and return the following Sunday. If we use the first two examples shown in Figure 5-3, we see that neither of the fares by itself applies to this client's trip. If normal fares are to be used, the travel counselor can simply add the two applicable one-way sister fares together. If excursion fares are used, the travel counselor splits and combines the excursion fares to create a customized fare for the client.
fare basis code (FBC)

An airline's identification
for a specific fare. An FBC
can be a single letter
(booking or primary code)
or it can be a combination
of letters and numbers.

booking code

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

sister fares

Airfares with identical rules
except for the day of the
week, season, or time of day
in which they are
applicable.

split and combine
excursion fares

An airfare pricing technique
in which one half of an
excursion fare is used on
the outbound, combined
with one half of a different
excursion fare on the
inbound.


FARE CONSTRUCTION

Obtaining the best fare is fairly straightforward in most circumstances. The travel counselor makes a CRS request for fares, either one-way or round-trip, reads the appropriate rule to check for applicability, checks flight availability, offers choices to the client, and makes the booking. Depending on the CRS and the agency, finding the lowest applicable fare can be simpler still.

Each CRS has developed functions that can search all fares, rules, and flights for the client's dates of travel. One or more itineraries that represent the lowest fare are displayed and the travel counselor selects and books one of the options. These functions go by different names depending on the CRS: Power Shopper, Bargain Finder Plus, Best Buy Quote, or Value Pricer.

With this capability, should the travel counselor still understand fare basis codes and fare construction principles? Absolutely--for two very important reasons!

1. These functions are not usually part of the basic CRS cost to the agency and because of the extra expense, not all agencies can afford this capability.

2. Although these functions are usually accurate, there are times when they fail to produce the lowest fare. Along the same lines, travel counselors can utilize their knowledge of fare construction to price certain trips creatively; something these functions cannot usually do.

Fare Construction--One-Way Travel

The simplest type of fare is a one-way fare. As you have already learned, a one-way fare is usually the most expensive type of fare but has the fewest restrictions and limitations. The travel counselor can request that normal fares be shown in the CRS for a client's city pair, find the least expensive one-way fare, read the appropriate rule to check for applicability, and make the booking. However, given that the client is probably interested in obtaining the least expensive fare, is it possible to be creative with the fares to save money? Perhaps.

Suppose the client is traveling from Detroit Metro to Ft. Lauderdale and does not mind changing planes enroute. The travel counselor knows that possible cities for a connection (hubs) between DTW and FLL include Chicago O'Hare, Atlanta, and Cincinnati. The travel counselor requests normal fares in the CRS from DTW to the connection point and another fare display from the connection point to FLL and adds them together. Figure 5-4 shows an example of this technique, which is called breaking the fare.
FIGURE 5-4 Breaking the fare at the connection point

Pricing from origin to destination:
  DTW to FLL--$275

Breaking the fare at a connection point:
  DTW to CVG                  $49
  CVG to FLL               + $175
  Trip total                 $224

Savings by breaking the fare: $51


As you can see in Figure 5-4, the normal fare from DTW to FLL is $275. But, if the counselor uses a connection in CVG and uses two point-to-point fares added together, the total is $224. In other words, the client saves $51 because the travel counselor knew how and took the time to be creative. Do not confuse this pricing technique with the unethical practice, fictitious return, described in Chapter 4.

Fare Construction--Round-Trip Travel

In almost all cases, the least expensive round-trip fare is priced from origin to destination and back to origin. It usually does not matter if a nonstop, direct, or connection service is used or the city in which a connection is made. In a few instances, using the technique called back-to-back excursion fares results in a lower fare. This technique requires that a connection be made in both directions and that the change of planes take place in the same city. Do no confuse this pricing technique with the unethical practice of back-to-back ticketing described in Chapter 4.

The principle of back-to-back excursions means that two excursion fares are used and added together instead of using just one. The first excursion is from the origin to the connection point and back to the origin. The second excursion is from the connection point to the destination and back to the connection point. Figure 5-5 compares a regular round-trip price to back-to-back excursions.

Because the special CRS pricing functions may not have found the back-to-back scenario, it is important that the travel counselor know how to test this possibility. As you can see in Figure 5-5, using this technique saves the client $40.

[FIGURE 5-5 OMITTED]
back-to-back excursion
fares

A pricing technique for
round-trip travel that has a
connection in both
directions. One excursion
fare is calculated from
origin to connection point,
and back to the origin. The
other excursion fare is
calculated from the
connection point to the
destination, and back to the
connection point. Then, the
two excursion fares are
added together.


Fare Construction--Open-Jaw Travel

When normal fares are used, the cities used in an open jaw make no difference in the fare construction. For example, a client is traveling from Minneapolis to Phoenix, spends a few days traveling by car in Arizona, then returns from Tucson back to MSP. The surface segment of this typical open jaw is between PHX and TUS.

Pricing on this trip is simple; the one-way MSP/PHX fare is added to the one-way TUS/MSP fare, resulting in the total fare for this open-jaw trip. This pricing construction is valid providing the client is using first class, business class, coach class, or one-way discounted coach class fares (see Figure 5-6).
FIGURE 5-6 Using normal fares on an open-jaw trip

Pricing by using two normal fares:

MSP/PHX normal fare   $335
TUS/MSP normal fare + $350
Trip total            $685


[FIGURE 5-7 OMITTED]

If this same client's priority is obtaining the lowest fare, the counselor approaches pricing in a completely different fashion. Almost all excursion fare rules allow usage on an open-jaw trip provided that the cities being used pass a simple test. When excursion fares are used on an open-jaw trip, the pricing technique is called splitting and combining excursions. This test is usually mileage based, although it can be fare based.

A mileage-based test requires that the air miles on the surface segment be equal to or less than the air miles on each of the flown segments. The fare-based test requires that the one-way coach fare on the surface segment must be equal to or less than the split excursions on each of the flown segments. Figure 5-7 demonstrates an example of both tests for the MSP/PHX, TUS/MSP itinerary.

As you can see in Figure 5-7, it does not matter which test was stated in the fare rule, the proposed itinerary passes both tests. Because the itinerary passes, the travel counselor can split and combine excursion fares as long as all fare restrictions and limitations are met. Figure 5-8 demonstrates splitting and combining excursion fares.
FIGURE 5-8 Splitting and combining excursion fares on an
open-jaw trip

Pricing by splitting and combining excursion fares:

MSP/PHX $198 excursion / 2 =    $99
TUS/MSP $218 excursion / 2 = + $109

Trip total                     $208

Savings by splitting and combining excursions: $477


As you see in Figure 5-6, the price using normal fares was $685. By splitting and combining excursion fares, the travel counselor has created a fare of $208--a savings to the client of $477!

Fare Construction--Circle Trip

As you learned earlier, a circle trip can consist of any number of destinations when normal fares are used. Almost all fare rules allow excursion fares to be used on a circle trip (splitting and combining); however, the circle trip can have only two destinations--no more, no less.

Anytime excursion fares are used, all restrictions and limitations as detailed in the fare rules must be met. There is, however, a new question we must now ask ourselves. What about the minimum stay requirement that almost all excursion fares have? Must the client satisfy the minimum stay in both of his destinations? The answer is no. Almost all fare rules state that when splitting and combining excursion fares on a circle trip, the minimum stay requirement must be met at the destination that is farthest away from the origin city.

Figure 5-9 demonstrates a circle trip from Buffalo to West Palm Beach, PBI to Milwaukee, and MKE to BUF. Notice the difference in cost when normal fares are used compared to splitting and combining excursion fares.
FIGURE 5-9 Using normal fares on a circle trip compared to
splitting and combining excursion fares

Pricing using normal fares:

BUF/PBI normal fare   $285
PBI/MKE normal fare + $324
MKE/BUF normal fare + $259

Trip total            $868

Pricing by splitting and combining excursion fares:

BUF/PBI $238 excursion / 2 =   $119.00
PBI/MKE $298 excursion / 2 = + $149.00
MKE/BUF $179 excursion / 2 = + $ 89.50

Trip total                     $357.50

Savings by splitting and combining excursions: $510.50


If the travel counselor saw this client's itinerary as three one-way trips and priced it using normal fares, the counselor would quote $868. However, by seeing the circle trip for what it is, the counselor knows that using excursion fares is a possibility. By splitting and combining excursion fares, the client's total is now $357.50; a savings of $510.50!
breaking the fare

A pricing technique used for
one-way travel with a
connection. One fare is
calculated from the origin
to the connection point and
is then added to the fare
from the connection point
to the destination.

point-to-point fare

A type of airfare that is
calculated from origin to the
first stop point, from the
first stop point to the second
stop point, and so on.

mileage-based open-jaw

A test that determines
whether or not excursion
fares can be split and
combined on an open-jaw
trip. The air miles on the
surface segment must be
equal to or less than the
miles on each of the flown
segments.

fare-based open-jaw

A test used to determine if
excursion fares can be split
and combined on an openjaw
trip. For this test, the
one-way coach fare
between the surface
segment cities must be
equal to or less than one
half of the excursion fare
on each of the flown
segments.


COMBINABILITY RULES

Regardless of whether the travel counselor is splitting and combining sister fares or using the technique on an open-jaw or circle trip, certain guidelines must be followed. Every fare rule can be viewed in the CRS and combinability is always listed in the rule. Figure 5-10 is a fare rule displayed in the Worldspan CRS.

Anytime fares are split and combined, the most restrictive fare rules govern the entire trip. For example, combining a 7-day advance purchase fare with a 21-day advance purchase requires that all segments of the itinerary meet the 21-day advance purchase rule. Combining one fare that has a 1-day minimum stay with another fare that has a 7-day minimum stay requirement means that the 7-day minimum governs the trip.

It is important to note that almost all fares can be combined as long as all fare rules are met and the same airline is maintained. A travel counselor can use one half of an excursion fare for the outbound and a normal Y class fare for the inbound. Or, a travel counselor can use one half of a BE21XNR combined with one half of a QE7NR. Why might a travel counselor do this? Primarily, this sort of combination is done because the lowest fare is not available in one direction or the other.

AIRLINE COMPUTER FARE DISPLAY

Nearly all U.S. travel agencies are automated and obtain both domestic and international airfares from the CRS. Although each system's display is slightly different in appearance, the fare information provided is quite similar. For example, a counselor who uses Galileo would probably be able to interpret a display from Sabre, Amadeus, or Worldspan.

Each CRS groups the lowest fares among all airlines and shows them first. It is interesting to note that each time a counselor requests a display for the same city pair and dates, the airline order is different. If this were not true, the CRS would be guilty of bias. Figure 5-11 is a Worldspan fare display from Indianapolis to Ft. Lauderdale.

By looking at Figure 5-11, you can see that the least expensive round-trip fare is $196 and is offered by DL, JI, UA, and NW. The symbol "#" preceding some of the fare basis codes is called an End Item in Worldspan. In this position, the End Item indicates that blackout dates apply. An End Item in the advance purchase column means that the advance purchase rule is too complex to be shown; the counselor must go to the fare rule. Notice that some of the fares do not have a minimum stay requirement and others have a minimum of one day. A minimum stay of "SUN" is somewhat deceptive; it means that the minimum stay is one Saturday night and the return cannot commence until Sunday. If an actual number of days is not specified for the maximum stay limitation, 365 days is assumed.

The fare display header lines provide additional information. "NLX" indicates that normal and excursion fares are shown. Notice the comment about U.S. taxes that is followed by "SEG/PFC CHARGES MAY APPLY." All CRS fare displays for cities in the United States include tax, but as you will learn shortly, there are other charges that must be added to the amounts shown in the display.

TAXES AND OTHER FEES--UNITED STATES, CANADA, AND MEXICO

When it comes to air travel, fares are seldom exactly what they seem. In almost all cases, the fare amounts shown in the CRS must have other items added before the travel counselor can quote a cost. Which taxes and other fees are included depends on where the client is going, and in some cases, where he is originating.

Within the 48 Contiguous States, Alaska, or Hawaii

All air travel within the 48 contiguous states, completely within Alaska, or completely within Hawaii is taxed; currently the rate of tax is 7.5 percent. The U.S. Transportation Tax, also called the ticket tax, is included in the amounts shown in a CRS fare display. Because CRS fares and fares quoted by an airline include this tax, the travel counselor must know how to break down the fare into base (commissionable) and tax (noncommissionable) amounts before a ticket can be written (see Figure 5-12). The 7.5 percent tax is shown in one of the ticket tax boxes with the code US.
FIGURE 5-12 Tax calculation on air travel within the
48 contiguous states

Total Fare / 1.075 = Base Fare
    For example: $350 total fare / 1.075 = $325.58 base fare
Total Fare-Base Fare = Tax
    For example: $350 total fare ?$325.58 base fare = $24.42 tax
Note: If you begin with a grand total, you must subtract PFCs and
segment fees before you divide by 1.075.

Base Fare x 1.075 = Total Fare
    For example: $325.58 base fare x 1.075 = $350 total fare
Base Fare x .075 = Tax
    For example: $325.58 base fare x .075 = $24.42 tax

Base Fare + Tax = Total Fare
    For example: $325.58 base fare + $24.42 tax = $350 total fare


Fare amounts shown in the CRS are referred to as total fares, even though they include tax but no other charges. The word "total" is a misnomer because, in most cases, other fees must be added before an amount can be quoted to the client. Exercises in this text use the phrase "total fare" to indicate inclusive of tax. We use the term "grand total" to indicate an amount to which all other fees have been added.

At every board point and at every enroute stop point, a segment fee of $3.00 (as of January 1, 2002) applies. Segment fees are combined and the total is shown in one of the ticket tax boxes with the code ZP. Each segment fee is also identified in the fare ladder portion of a ticket. The amount of the segment fee is subject to change by the government at any time.

At many board points, a Passenger Facility Charge (PFC) may apply. Depending on the airport, the PFC can be $1.00, $2.00, $3.00, or $4.50; however, the vast majority of airports charging PFCs charge $3.00 or $4.50. PFCs for the itinerary are combined and the total is shown in one of the ticket tax boxes with the code XF. Like segment fees, PFCs are identified in the fare ladder portion of a ticket.

As a result of the September 11, 2001 tragedy, the U.S. government has implemented a new security fee for travel within the United States. The revenue this fee generates will help our nation's airports with more advanced screening measures and increased security personnel. The security fee is $2.50 at each board point up to a maximum of $5.00 per one-way trip. Applicable to all U.S. departures, the fee is shown with the code "AY" when identified separately on a ticket or as "XT" when combined with other taxes or fees.

A fuel surcharge applies at many board point airports and the amounts range from $2.00 to $20.00. Fuel surcharges are the result of fuel shortages or escalating fuel prices. Shown in a CRS fare rule display as a base amount, fuel surcharges are taxed at 7.5 percent. Fuel surcharges do not appear in a ticket tax box; rather, they are added to the base fare and are shown in the fare box of the ticket. Each fuel surcharge is also listed in the fare ladder portion of a ticket with the code Q.

Because segment fees, security fees, and PFCs are handled as a tax, they are not commissionable. Fuel surcharges, because they are combined with the base fare on tickets, are commissionable.

From the 48 Contiguous States to Alaska and Hawaii

Tax structures for travel from the 48 contiguous states to Alaska are based on the client's origin and destination cities. Each city pair has a unique tax factor. Tax on travel to Hawaii from the 48 contiguous states is based on the client's origin city only; each city has its own tax factor.

In addition to the Alaskan tax or the Hawaiian tax, another tax applies. This tax is called a U.S. departure tax, also known as the Alaska/Hawaii international travel facilities tax. Because a flight from the 48 contiguous states to Alaska or Hawaii leaves U.S. air space and enters international air space, the flight has technically left the United States. On return flights from Alaska or Hawaii back to the 48 contiguous states, the same thing happens. So, on one-way trips, a $6.40 U.S. departure tax is charged once; on round-trips the tax is charged twice. The combination of Alaskan or Hawaiian tax and the U.S. departure tax is shown in one of the ticket tax boxes with the code US. Figure 5-13 illustrates a variety of Alaskan and Hawaiian tax calculations.
FIGURE 5-13 Tax calculation for travel between the 48 contiguous
states and Alaska or Hawaii

If the Alaskan or Hawaiian tax factor is .0329:
   Total Fare / 1.0329 = Base Fare
       For example: $638 total fare / 1.0329 = $617.68 base fare
   Total Fare - Base Fare = Tax
       For example: $638 total fare ?$617.68 base fare = $20.32 tax

Note: If you begin with a grand total, you must subtract PFCs, segment
fees, and the U.S. departure tax before you divide by 1.0329.

Total Fare + PFCs + segment fees + U.S. departure tax = Grand Total
   For example: $638 total fare + $12 PFCs + $10 segment fees + $6.40
   U.S. departure tax outbound +
   $6.40 U.S. departure tax inbound = $672.80 grand total.


Alaskan, Hawaiian, and U.S. departure taxes are included in the amounts shown in a CRS fare display. Like all taxes, these amounts are not commissionable. Additionally, segment fees, PFCs, and fuel surcharges may also apply.

Both the OAG Flight Guide and the ARC Industry Agents' Handbook include charts for Alaskan and Hawaiian tax percentages as well as information about the U.S. departure tax.

The Buffer Zone

The buffer zone is the area from the U.S. border 225 miles north into Canada and from the U.S. border 225 miles south into Mexico. Travel from the 48 contiguous states into the buffer zone is not considered domestic or international with regard to tax principles. The buffer zone is a unique tax area.

Flights to cities in the Canadian and Mexican buffer zone are taxed at U.S. 7.5 percent and segment fees, PFCs, and fuel surcharges also apply. On itineraries that return to the United States, a $6 U.S. Immigration Fee, code XY, is charged.

Currently there is no Canadian tax applicable for travel from the United States into the buffer zone. If the itinerary includes a departure from Calgary (YYC), the Calgary Airport Improvement Fee is charged. This fee is identified by the code SQ and is 10 Canadian dollars (CAD).

Travelers from the United States to cities in the Mexican buffer zone must pay a Mexican Tourist Tax of 170 new Mexican pesos (MXN), and a Mexican airport departure tax, code XD, that varies by airport. On itineraries that return to the United States, a $3 Animal Plant and Health Inspection Service (APHIS) Fee, code XA, and a $6 U.S. Immigration Fee are also charged.

Fare amounts shown in a CRS display for travel from the 48 contiguous states to a city in the buffer zone are shown as base amounts. The ARC Industry Agents' Handbook and the OAG Flight Guide include sections dealing with tax principles for travel to the buffer zone.
What Would You Do?

A traveler calls your agency about a $149 fare he saw in the
newspaper. You check the CRS fare display and see that the fare
requires "Q" booking class. On checking flight availability, you
see that the noon flight on that airline is sold out in Q class.

1. Would the best option be to offer the best available fare on the
noon flight?

2. Would the best option be to find another flight that has Q class
available?

3. How would you explain this situation to your caller?

U.S. Transportation Tax

A tax charged to all air
passengers traveling within
the 48 contiguous states,
from the 48 contiguous
states to cities in the Buffer
Zone, entirely within
Hawaii, and entirely within
Alaska.

segment fee

A fee that applies to all
passengers for each flight
boarded and all en route
stops.

Passenger Facility Charge
(PFC)

An airport fee of $1, $2, $3,
or $4.50 that applies to all
passengers boarding a flight
at specified airports.

security fee

A charge imposed by the
government to help cover
the cost of airport security
procedures.

fuel surcharge

An extra fee charged to
boarding passengers by an
airline at various airports
because of fuel shortages or
escalating fuel costs.

Alaskan tax

A tax that applies to air
travel from the 48
contiguous states to or from
Alaska. The tax percentage
is based on the traveler's
origin and destination cities.

U.S. Departure Tax

A tax charged to all air
passengers leaving the
United States.
Hawaiian tax
A special tax that applies to
air travel between the
48 contiguous states and
Hawaii; the percentage is
based on the traveler's
origin city.

Using normal sister fares for round-trip travel:

LIT-PHL Tuesday:             VX67NR                   $215
PHL-LIT Sunday:              VD67NR                  +$255

Customized round-trip fare                            $470

Using excursion sister fares for round-trip travel:
LIT-PHL Tuesday:             TXE14NR   $200 / 2 =      100
PHL-LIT Sunday:              TWE14NR   $250 / 2 =    +$125

Customized round-trip fare                            $225

FIGURE 5-1 Example of inventory control

Passenger                 Booking           Total seats   Type of
cabin                     class     Fare    in cabin      inventory

First Class               F         $800    28            Unrestricted

First Class--discounted   A         $650    10 of 28      Restricted

Coach Class               Y         $600    92            Unrestricted

Coach--discounted         Q         400     20 of 92      Restricted

Coach--discounted         V         $350    20 of 92      Restricted

Coach--discounted         M         $300    20 of 92      Restricted

Coach--discounted         K         $250    10 of 92      Restricted

Coach--discounted         L         200     10 of 92      Restricted

Passenger
cabin                     Comments

First Class               All 28 seats can be sold at $800 each

First Class--discounted   Only 10 of the 28 first-class seats can be
                          sold at $650 each

Coach Class               All 92 seats can be sold at $600 each

Coach--discounted         Only 20 of the 92 coach seats can be sold at
                          $400 each

Coach--discounted         Only 20 of the 92 coach seats can be sold at
                          $350 each

Coach--discounted         Only 20 of the 92 coach seats can be sold at
                          $300 each

Coach--discounted         Only 10 of the 92 coach seats can be sold at
                          $250 each

Coach--discounted         Only 10 of the 92 coach seats can be sold at
                          $200 each

FIGURE 5-10 Worldspan fare rule display

INDFLL-DL    5APR01    * RULE DISPLAY *  TARIFF 011   RULE 4040

001-FARE BASIS         USD     TAX       TOTAL        PTC    FT

L14SLEXP               91.16   6.84      98.00        ADT    NL
L14SLEXP/IN00          0.00    0.00      0.00         INF    NL
L14SLEXP/IN50          45.58   3.42      49.00        INS    NL
BOOKING CODE           L
FIRST TRAVEL           --9MAR01 LAST TRAVEL--9JUN01
TRAVEL COMPLETE        --9JUN01
SEASONS                --NO RESTRICTIONS
PENALTIES              --CHANGE--50.00 USD CANCEL--NON REF
DAY/TIME               --NO RESTRICTIONS
ADV RES/TKT            --RES REQ 14 DAYS BEFORE DEPART
                         TKTG WITHIN 1 DAY AFTER RESERVATIONS OR AT
                         LEAST 14 DAYS BEFORE DEPART WHICHEVER IS
                         EARLIER
MIN STAY               --NO RESTRICTIONS
MAX STAY               --NO RESTRICTIONS
BLACKOUTS              --18FEB01 27FEB01 37002 37011 37037 37041
                         05JUL01 01SEP01 37139 37216 37221 37247
SURCHARGES             --NONE
STOPOVERS              --NOT PERMITTED
TRANSFERS              --NO RESTRICTIONS
FLT APPLIC             --DL FLT 2300-2599 DL FLT 9650-9654 DL FLT
                         9425-9444
CHILD DIS              --1ST INF UNDER 2 YRS FREE NO SEAT
                         1ST INF UNDER 2 YRS 50 PCT IN SEAT
COMBINABILITY          --COMBINATIONS PERMITTED ONLY WITH DL FARES
                         OPEN JAW PERMITTED--MILEAGE BASED
                         CIRCLE TRIP PERMITTED--2 COMPONENTS ONLY
ELIGIBILITY            --NO RESTRICTIONS
ACCOM PSGR             --NO RESTRICTION
TVL RESTR              --RETURN BY 09JUN01 MIDNIGHT
                         PTA ALLOWED AND CONSTITUES TKTG
INDUSTRY FARE TYPE     --IP--INSTANT PURCHASE
PFCS MAY VARY BY RTG
ROUTING 2 FROM-TO        IND-DL-ORL-DL-FLL

FIGURE 5-11 Partial fare display from Worldspan CRS

INDFLL NLX FARES FOR TRVL 15JUN01 AND TKTG 05APR
US TAXES VARY

* SEG/PFC CHARGES MAY APPLY

LN   A/L  F.B.C. USD   OW      RT      EFF     LTK    AP  MIN/MAX

1    DL   #L14SLEXP   98.00  196.00  9MAR01     --    ##    -/-
2    JI   MR14NR             196.00  11APR01    --    ##    1/-
3    UA   VRA14FN            196.00  23MAR01    --    ##    -/-
4    DL   #LR14M1SN          196.00  22MAR01    --    ##    1/-
5    JI   #MLE14SL           196.00  12MAR01    --    ##  SUN/30
6    NW   KR14OMN            196.00  24MAR01    --    ##    1/-
7    JI   W7SLEXP     99.00  198.00  3APR01   7APR01  ##    -/-
8    DL   #L7SALEXP   99.00  198.00  27MAR01          ##    -/-
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Title Annotation:SECTION II: United States Air Travel
Publication:A Guide to Becoming a Travel Professional
Geographic Code:1USA
Date:Jan 1, 2005
Words:6584
Previous Article:Chapter 4: Planning United States flight itineraries.
Next Article:Chapter 6: Basic ticketing and prepaids.
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