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Chapter 8 United States airfares and other charges.

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 GDS 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.

* understand taxes for travel within Canada.

KEY TERMS

Alaskan tax

Alaska/Hawaii International Travel Facilities Tax

back-to-back excursion fares

booking code

breaking the fare

fare basis code (FBC)

fare based

fuel surcharge

Hawaiian tax

inventory control

mileage based

Passenger Facility Charge (PFC)

point-to-point fares

restricted inventory

security fee

segment fee

sister fares

splitting and combining excursion fares

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, GDS fare displays appear 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 and in most markets are also the least expensive.

A fare priced for round-trip is called an excursion fare. Excursion fares, when they exist, 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 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 8-1) 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 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 gone to the airline's Web site only to learn 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 chart below, 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.

FARE BASIS CODES AND BOOKING CLASSES

During the days of federal airline regulation (before 1978), there may have been as few as five or six basic fare types between any given city pair. These consisted of one-way, round-trip, Super Saver, senior citizen, child, and military.

Today, there may be 100 or more different fares for that same city pair, each with its own set of rules and regulations. If this sounds like a jungle of confusion to you, you are quite right, it is. But, by learning about booking classes and fare basis codes, the jungle becomes a bit more civilized.

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 8-2 illustrates some of the features found in typical fare basis codes.
FIGURE 8-2 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/Change Penalty

        NR = nonrefundable
        N = nonrefundable
        R50 = change penalty of $50

      Advance purchase

        IP = instant purchase
        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 8-2 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.

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 GDS, the differing feature is explained. Figure 8-3 demonstrates sister fares.

By studying Figure 8-3, 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 8-3, 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.
FIGURE 8-3 Examples of sister fares.

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

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)

AA VD67NR V = discounted coach, D67 = Saturday and Sunday only,
NR = nonrefundable. $255 one-way, $510 round-trip.
AA 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.


FARE CONSTRUCTION

Obtaining the best fare is fairly straightforward in most circumstances. The travel counselor makes a GDS 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 GDS and the agency, finding the lowest applicable fare can be simpler still.

Each GDS 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 GDS: 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? Absolutelyfor two very important reasons!

1. These functions are not usually part of the basic GDS 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 has the fewest restrictions and limitations. The travel counselor can request that normal fares be shown in the GDS 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, is it possible to be creative with the fares to save money? Perhaps.
FIGURE 8-4 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


Suppose the client is traveling from Detroit Metro to Ft. Lauderdale and does not mind changing planes en route. 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 GDS from DTW to the connection point and another fare display from the connection point to FLL and adds them together. Figure 8-4 shows an example of this technique, which is called breaking the fare.

As you can see in Figure 8-4, 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 7.

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 not confuse this pricing technique with the unethical practice of back-to-back ticketing described in Chapter 7. 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 8-5 compares a regular round-trip price to back-to-back excursions.

Because the special GDS 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 8-5, using this technique saves the client $40.
FIGURE 8-5 Regular excursion fare compared to back-to-back
excursions.

Pricing as a simple round trip$398

1. CLT-STL 15JUN
2. STL-PSP 15JUN
3. PSP-STL 22JUN
4. STL-CLT 22JUN

Pricing using back-to-back excursions

1. CLT-STL 15JUN
2. STL-PSP 15JUN}         }
3. PSP-STL 22JUN}   $239 +} $119 = $358
4. STL-CLT 22JUN

Savings by using back-to-back excursions: $40

FIGURE 8-6 Using normal fares on an open-jaw trip.

Pricing by using two normal fares:

MSP/PHX normal fare     $335
TUS/MSP normal fare   + $350

          rip total     $685


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 8-6).

If this same client's priority is obtaining the lowest fare, the counselor may need to approach 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 8-7 demonstrates an example of both tests for the MSP/PHX, TUS/MSP itinerary.

[FIGURE 8-7 OMITTED]
FIGURE 8-8 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 can see in Figure 8-7, 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 8-8 demonstrates splitting and combining excursion fares.

As you see in Figure 8-6, the price using normal fares was $685. By splitting and combining excursion fares, the travel counselor has created a fare of $208a 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 destinationsno more, no less.
FIGURE 8-9 Using normal fares on a circle trip compared to
splitting and combining excursion fares.

[ILLUSTRATION OMITTED]

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


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 8-9 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.

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!

Fare Construction--Open-Jaw with Side Trip

All features of open-jaw pricing hold true when working with an open-jaw with a side trip. Splitting and combining excursion fares must be verified in each fare rule for mileage or fare tests and for all other restrictions. The difference in this trip is the side trip.
FIGURE 8-10 Open-jaw with side trip fare construction.

Pricing by splitting and combining excursion on the open-jaw
portion:

DEN/BDL $318 excursion / 2 =    $159
BDL/LGA normal fare =         + $ 69
LGA/PHL surface segment
PHL/DEN $278 excursion / 2 =  + $139

                   Trip total   $367


For example, a client wants to fly from Denver to Hartford, BDL to New York LaGuardia, surface to Philadelphia, and PHL back to DEN (see Figure 8-10). The travel counselor could use three point-to-point normal fares on this itinerary, but that would be very expensive. For pricing purposes only, let's look at this itinerary in a different way: one open-jaw trip, and one one-way (side trip).

If you look only at the DEN/BDL and PHL/DEN portion of this trip, you can easily see an open-jaw. This portion, as long as all restrictions and limitations are met, can be priced using excursion fares (splitting and combining). The remainder of the itinerary is the BDL/LGA portion. For this leg, the travel counselor finds and uses the least expensive normal fare.

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 GDS and combinability is always listed in the rule. Figure 8-11 is a fare rule displayed in the Worldspan GDS.

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 GDS. 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 GDS 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 GDS would be guilty of bias. Figure 8-12 is a Worldspan fare display from Indianapolis to Ft. Lauderdale.

By looking at Figure 8-12, 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 GDS 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 GDS 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 the client 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 GDS fare display. Because GDS 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 8-13). The 7.5 percent tax is shown in one of the ticket tax boxes with the code US.

Fare amounts shown in the GDS 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 en route stop point, a segment fee of $3.20 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.
FIGURE 8-13 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 = .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


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, $4.00, 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.

A fuel surcharge applies at many board point airports and the amounts range from $10.00 to $20.00. Fuel surcharges are the result of fuel shortages or escalating fuel prices. Shown in a GDS 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.

After the terrorist attacks of September 11, 2001, the U.S. government initiated a new security fee to help cover the cost of added security for all travelers boarding flights in the United States. This fee is $2.50 per embarkation up to a maximum of $5.00 for one-way trips and $10.00 for round-trips. The security service fee is shown on tickets with the code AY and is not taxable.

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 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 $6.90 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 8-14 illustrates a variety of Alaskan and Hawaiian tax calculations.

Alaskan, Hawaiian, and U.S. departure taxes are included in the amounts shown in a GDS fare display. Additionally, segment fees, PFCs, security fees, and fuel surcharges may also apply.
FIGURE 8-14 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.


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 $7 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 12 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 $3.10 Animal Plant and Health Inspection Service (APHIS) Fee, code XA, and a $7 U.S. Immigration Fee are also charged.

Fare amounts shown in a GDS 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 includes sections dealing with tax principles for travel to the buffer zone.

Within Canada or Within Mexico

Itineraries that are totally within Canada are taxed at 7 percent. This tax is called the Goods and Services Tax (GST) and is shown in one of the ticket tax boxes with the code XG. Flights from a city in the province of Quebec to other Canadian cities are subject to the Quebec Sales Tax, which is currently 7.5 percent. The Quebec Sales Tax is shown in one of the ticket tax boxes with the code XQ. As mentioned earlier, any flight departing the Calgary Airport is subject to the $12 CAD Calgary Airport Improvement Fee.

For travel sold in the United States for itineraries that begin in Canada, the GST applies. GST is shown in one of the ticket tax boxes with the code XG. The GST does not apply when travel originates in the provinces of Nova Scotia, New Brunswick, or Newfoundland. Travel originating in these areas is subject to the 15 percent Harmonized Sales Tax (HST). The HST is shown with the code RC in one of the ticket tax boxes.

Flights from cities in the province of Quebec to other Canadian cities are also subject to the Quebec Sales Tax, shown on the ticket with the code XQ. Passengers departing the Calgary Airport (YYC) are subject to the Calgary Airport Improvement Fee of $12, identified by the code SQ. All travelers flying from a Canadian city into the United States are subject to the U.S. Immigration Fee of $7, identified by the code XY.

As mentioned earlier, Mexican airports have a departure tax and the amount varies by airport. The codes for the Mexican airport departure tax are XV and XD. The Mexican International Transportation Tax, code MX, is 2.5 percent to 3.75 percent depending on the origin airport. Again, depending on airport, the Mexican Domestic Transportation Tax ranges from 2.5 to 15 percent, code XO.

As strange as it may seem, the 7.5 percent U.S. ticket tax applies for itineraries from one Canadian buffer zone city to another Canadian city in the buffer zone when travel is purchased in the United States. The same thing is true for Mexican cities that are both in the buffer zone. Even though no U.S. city is part of the itinerary, segment fees apply to cities in the Canadian and Mexican buffer zones.

Too Many Taxes

If after reading the last few sections your head is spinning from all of the taxes and other fees, you are not alone. Most travel counselors cannot imagine facing all of these charges without help from their GDSs. It is no wonder that the traveling public is completely baffled by fares, taxes, fees, and surcharges. To help us get a handle on all of this, Figure 8-15 brings everything into perspective. All items in Figure 8-15 represent a purchase in the United States and no additional stopovers.

With all of these taxes and additional fees, you may be wondering just how many tax boxes are available on tickets. There are only three tax boxes on automated tickets and four on handwritten tickets. So, what happens when more than three or four taxes or other charges apply? The answer is a combined tax item, shown with the code XT. Anytime a combined tax amount appears in one of the ticket tax boxes, each tax is listed separately with its respective code in the fare ladder portion of the ticket.
? What Would You Do?

A traveler calls your agency about a $149 fare he saw in the
newspaper. You check the GDS 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?


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 may choose to go elsewhere if the counselor 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.

For additional Travel and Tourism resources, go to http://www.hospitality-tourism.delmar.com.

EXERCISES

EXERCISE 8-1 Fare Basis Codes and Booking Classes

1. Interpret these fare basis codes.

KEX234IP FXR30 QWE21NR YN VXRIP BED236NR

2. Identify the usual features of normal fares.

3. Identify the booking classes that represent unrestricted inventory.

4. What are sister fares?

5. Identify the typical restrictions and limitations of excursion fares.

6. Do excursion fare restrictions mean the same thing as restricted inventory?

7. What is the difference between a booking class or code and a fare basis code?

8. Explain the airline principle of inventory control.

9. If a client does not qualify for either one of a pair of sister fares because of the client's travel dates, what should you do?

10. Today is Monday, June 10, 2006, and you have obtained the following fare basis codes, amounts, and restrictions or limitations. Reservations and ticketing will take place on June 10, 2006. Calculate the fare for each client based on this information. Write down the airline code(s), fare basis code(s), and amount(s). If you must make any calculations, be sure to write them down as well.
                                  ADV.
A/L   FBC      OW        RT       PUR.

NW    TXE21NR  200.00    21 days  M-F

CO    QEO7IP   200.00    7 days   M-F
CO    QEP7IP   250.00    7 days   Sa &
                                  Su
NW    TWE21NR  250.00    21 days  Sa &
                                  Su
HP    VX67NR   150.00    300.00   none
HP    VD67NR   180.00    360.00   none

               MIN.      MAX.
A/L   DAYS     STAY      STAY

NW    1 Sat.   30 days
      night
CO    1 day    n/a
CO    1 day    n/a

NW    1 Sat.   30 days
      night
HP    M-F      n/a       n/a
HP    Sa &     n/a       n/a
      Su


a. Depart Tuesday, August 13; return Friday, August 16.

b. Depart Sunday, July 21; one-way.

c. Depart Friday, October 11; return Monday, October 21.

d. Depart Sunday, August 25; return Saturday, August 31.

e. Depart Tuesday, November 12; one-way.

f. Depart Wednesday, June 12; return Saturday, June 15.

g. Depart Saturday, August 24; return Tuesday, October 15.

h. Depart Friday, December 13; return Sunday, December 15.

EXERCISE 8-2 Fare Construction

1. Depending on GDS, functions that automatically check fares, rules, and flight availability are called

2. Even though the functions mentioned in question 1 are available, why must travel counselors be well versed in interpreting fare and fare rule displays?

3. Your client is flying from PHL to SMF round-trip with a connection in ORD in both directions. What fare technique might you check in an attempt to lower the fare?

4. Your client is flying from DTW to MIA, driving from MIA to JAX, and flying from JAX to DTW. What fare technique will you attempt to use in order to save money?

5. Based on the itinerary in question 4, what test(s) determines if excursion fares can be used?

6. Your client is flying from DCA to LAS, one-way. Explain what you might check in hopes of saving your client money. --

7. The three excursion fares that you want to use for your client's circle trip have different advance purchase and minimum stay rules. Fare 1 is a 7-day advance purchase and a 7-day minimum stay. Fares 2 and 3 have a 21-day advance purchase and a Saturday night minimum. Which rules apply to your client's trip?

Directions: The remaining questions are based on the following rule display.
FARE BASIS           USD     TAX     TOTAL  PTCFT

WE14SA1N          R  184.19  13.81  198.00  ADTEX
WE14SA1N/INF100   R  00.00   00.00  0.00    INFEX
WE14SA1N/INF50    R  92.09   6.91   99.00   INSEX
WE14SA1N/SD10     R  165.77  12.43  178.20  SRCEX
WE14SA1N/SD10C    R  165.77  12.43  178.20  CMPEX
BOOKING CLASS
FIRST TRAVEL      -20APR02   LAST TRAVEL  -14JUN02
TRAVEL COMPLETE   -14JUN02
SEASONS           -NO RESTRICTION
PENALTIES         -CHANGE--75.00 USD  TKT NON REF
DAY/TIME          -NO RESTRICTION
ADV RES/TKT       -RES REQ 14 DAYS BEFORE DPTR--TKT WITHIN 1 DAY
                   AFTER RESERVATIONS OR AT LEAST 14 DAYS BEFORE
                   DPTR WHICHEVER IS EARLIER
MIN STAY          -RETURN AFTER 1 DAY AFTER DPTR FROM ORIGIN
MAX STAY          -30 DAYS AFTER DEPARTURE FROM ORIGIN
BLACKOUTS         -NO RESTRICTION
SURCHARGES        -NO RESTRICTION
STOPOVERS         -NO RESTRICTION
COMBINABILITY     -MAY BE COMBINED WITH ANY OTHER UA FARE
                   THAT ALLOWS COMBINATION
ROUTING 2
  DTW IAH ORD


8. How much is the adult (ADT) total fare?

9. Can your client use this fare and change planes in Denver?

10. What class must you book in flight availability in order to use this fare?

11. Is this a normal or excursion fare?

12. How much is the penalty to change a ticketed booking?

13. What is the minimum stay requirement?

14. On what days of the week can this fare be used?

15. Are there any blackout dates?

16. By what date must all travel be completed?

17. How much is the total fare for an infant in a seat (INS)?

18. If your clients cannot travel, can they get their money back?

19. Today is March 15 and your client has made reservations for a May 15 departure. By what date must he purchase his ticket/e-tkt?

20. Today is April 10 and your client wants to make a reservation for travel on April 20 using this fare. What will you say?

EXERCISE 8-3 Fare, Tax, and Total Calculation

1. How much is the base fare and tax on a total fare of $347?

2. Your client's round-trip grand total cost on WN is $427, inclusive of $6 PFCs, $6.40 in segment fees, and $5.00 security fees. How much is the base fare and tax?

3. Your client's one-way base fare on HA is $441.86. PFCs are $6, there is $6.40 in segment fees, and $2.50 security fees. What grand total amount will you quote?

4. Your client's total round-trip fare on DL is $350. PFCs are $9, there is $12.80 in segment fees, and $10.00 security fees. The PTA service charge is $75. What grand total do you quote?

5. The round-trip base fare from Brownsville to Anchorage is $714.15. The Alaskan tax factor is .0502. PFCs are $16.00, segment fees are $12.80, and $10.00 security fees. How much is the grand total?

6. The one-way trip base fare from Buffalo to Honolulu is $769.60. The Hawaiian tax factor is .0395. PFCs are $6, segment fees are $6.20, and security fees are $5.00. How much is the grand total?

7. Your client's grand total for her round-trip DL ticket is $385, inclusive of $12 in PFCs, $12.80 in segment fees, and $5.00 security fees. How much is the base fare?

8. Your client's grand total for his round-trip UA ticket is $1242, inclusive of $9 in PFCs, $12.80 in segment fees, and $10.00 security fees. How much is the base fare?

CHAPTER 8

Review Questions

Directions: Answer questions 1-10 based on the following fare display.
MIACVG NLX FARES FOR TRVL 20AUG06 AND TKTG 23MAR
US TAXES VARY * SEG/PFC CHARGES MAY APPLY

LN   A/L        F.B.C. USD  OW      RT

1    HP         #HE21NR             232.00
2    NW         QE14QNR             247.00
3    DL         LE14NR              247.00
4    AA         NE14NR              247.00
5    UA         VE14NR              262.00
6    CO         QE14NRIP            277.00
7    CO         V7N         173.00  346.00
8    UA         H7N         185.00  370.00

LN   EFF       LTK          AP      MIN/MAX

1    09May06              ##      SUN/30
2    09May06   27Jun        ##      SUN/30
3    09May06              ##      SUN/-
4    0-May06              ##      SUN/30
5    20Mar06              ##      1/30
6    16Mar06              ##      SUN/45
7    09May06              ##      -/-
8    17Mar06              ##      -/-


1. Explain as much as you can about the advance purchase requirement for American's fare.

2. How much is the least expensive one-way fare?

3. How would you explain HP's minimum stay requirement to your client?

4. What is the maximum stay limitation for the QE14NRIP fare?

5. By what date must Northwest's fare be booked and ticketed?

6. How much is the least expensive round-trip fare?

7. What does the symbol "#" in front of the fare basis code indicate?

8. What is the maximum stay limitation on Delta's fare?

9. What is the minimum stay requirement on the VE14NR fare?

10. This display shows fares between what two cities?

11. Identify these tax and surcharge codes by name and indicate the appropriate amount or percentage for each item.

Q

US

XF

ZP

AY

12. What is the buffer zone?

13. Identify these tax codes by name and indicate the appropriate amount or percentage for each item.

MX

RC

SQ

XA

XD

XG

XO

XQ

XV

XY

14. Your client is traveling from Spokane to Vancouver round-trip. Identify by name the taxes or fees that may or will apply.

15. Your client is traveling from Kona to Honolulu round-trip. Identify by name the taxes or fees that may or will apply.

16. Your client is traveling from Halifax to Toronto round-trip. Identify by name the taxes or fees that may or will apply.

17. Your client is traveling from Montreal to Boston round-trip. Identify by name the taxes or fees that may or will apply.
FIGURE 8-1 Example of inventory control.

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

First Class          F      $800   28         Unrestricted

First Class-         A      $650   10 of 28   Restricted
discounted

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--      Only 10 of the 28 first-class seats can
discounted         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 8-11 Worldspan fare rule display.

INDFLL-DL 5APR06    *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       -9MAR06  LAST TRAVEL--9JUN06
TRAVEL COMPLETE    -9JUN06
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          -18FEB06  27FEB06  21Apr06  30Apr06  26May06  30May
                    05JUL06  01SEP06  05Sep06  21Nov06  26Nov06  22Dec
SURCHARGES         -NO RESTRICTIONS
STOPOVERS          -NO RESTRICTIONS
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      -NO RESTRICTIONS PERMITTED ONLY WITH DL FARES
                    OPEN JAW PERMITTED-MILEAGE BASED
                    CIRCLE TRIP PERMITTED--2 COMPONENTS ONLY
ELIGIBILITY        -NO RESTRICTIONS
ACCOM PSGR         -NO RESTRICTIONS
TVL RESTR          -RETURN By 09JUN06 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 8-12 Partial fare display from Worldspan GDS.

INDFLL NLX FARES FOR TRVL 15JUN06 AND TKTG 05APR
US TAXES VARY

      * SEG/PFC CHARGES MAY APPLY

LN    A/L          F.B.C. USD  OW     RT

1     DL           #L14SLEXP   98.00  196.00
2     JI           MR14NR             196.00
3     UA           VRA14FN            196.00
4     DL           #LR14M1SN          196.00
5     JI           #MLE14SL           196.00
6     NW           KR14OMN            196.00
7     JI           W7SLEXP     99.00  198.00
8     DL           #L7SALEXP   99.00  198.00

LN    EFF          LTK         AP     MIN/MAX

1     9Mar06                 ##     -/-
2     1-Apr06                ##     1/-
3     23Mar06                ##     -/-
4     22Mar06                ##     1/-
5     12Mar06                ##     SUN/ 30
6     24Mar06                ##     1/-
7     3Apr06       7APR06      ##     -/-
8     27Mar06                  ##     -/-

FIGURE 8-15 Tax and fee chart for the United States, Buffer Zone,
Canada, and Mexico.

                            Cincinnati              Fairbanks
                               to       Honolulu       to
                   Tax      Pittsburgh   to Maui    Anchorage
Tax Name          Code         RT          RT          RT

7.5% U.S.
Ticket Tax         US        [check]     [check]     [check]

$3.20 Segment
Fee                ZP        [check]     [check]     [check]

PFC                XF        [check]     [check]     [check]

Alaskan Tax        US

Hawaiian Tax       US

$3.10 APHIS
Fee                XA

$7
Immigration
Fee                XY

$6.90 U.S.
Departure
Tax                US

7% Goods &
Services Tax       XG

15%
Harmonized
Sales Tax          RC

7.5% Quebec
Sales Tax          XQ

$10 CAD
Calgary
Airport Fee        SQ

170 MXN
Tourist Tax        UK

Mexico
Airport
Departure Tax      XD

Fuel
Surcharge           Q        [check]     [check]     [check]

U.S. Security
Service Fee
$2.50              AY        [check]     [check]     [check]

                   Los
                 Angeles                 Chicago     Boston
                   to       Seattle to     to          to
                Honolulu    Anchorage   Montreal     Toronto
Tax Name           RT          RT          RT          RT

7.5% U.S.
Ticket Tax                               [check]     [check]

$3.20 Segment
Fee              [check]     [check]     [check]     [check]

PFC              [check]     [check]     [check]     [check]

Alaskan Tax                  [check]

Hawaiian Tax     [check]

$3.10 APHIS
Fee

$7
Immigration
Fee                                      [check]     [check]

$6.90 U.S.
Departure
Tax              [check]     [check]

7% Goods &
Services Tax

15%
Harmonized
Sales Tax

7.5% Quebec
Sales Tax

$10 CAD
Calgary
Airport Fee

170 MXN
Tourist Tax

Mexico
Airport
Departure Tax

Fuel
Surcharge        [check]     [check]     [check]     [check]

U.S. Security
Service Fee
$2.50            [check]     [check]     [check]     [check]

                            Montreal     Houston     Halifax
                Toronto to     to          to          to
                Vancouver    Calgary    Monterrey    Toronto
                   RT          RT          RT          RT
Tax Name

7.5% U.S.        [check]     [check]     [check]     [check]
Ticket Tax

$3.20 Segment    [check]     [check]     [check]     [check]
Fee

PFC

Alaskan Tax

Hawaiian Tax

$3.10 APHIS                              [check]
Fee

$7
Immigration                              [check]
Fee

$6.90 U.S.
Departure
Tax

7% Goods &       [check]     [check]
Services Tax

15%
Harmonized                               [check]
Sales Tax

7.5% Quebec                  [check]
Sales Tax

$10 CAD
Calgary                      [check]
Airport Fee

170 MXN                                  [check]
Tourist Tax

Mexico
Airport                                  [check]
Departure Tax

Fuel             [check]     [check]                 [check]
Surcharge

U.S. Security
Service Fee                              [check]
$2.50
COPYRIGHT 2007 Delmar Learning
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Article Details
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Title Annotation:Section III United States Air Travel
Author:Gorham, Ginger; Rice, Susan
Publication:Travel Perspectives, A Guide to Becoming a Travel Professional
Geographic Code:1CANA
Date:Jan 1, 2007
Words:8703
Previous Article:Chapter 7 Planning United States flight itineraries.
Next Article:Chapter 9 Ticketing and reporting.
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