JANUARY 24, 2021 BY TALEARNING

Basics on Fare Construction 1

Through this article, we try to explain the basics of fare construction.
This article introduces the world of airfare construction. Some of the
points covered below can be of great value to students pursuing travel
studies or IATA Foundation course.

COC – COC stands for Country of commencement. It is the point or city

from where the itinerary will commence. If you were calculating fare
between LON-NYC, then the country of commencement would be the
United Kingdom. Determining COC is vital since it is the first step and
will decide the final fare that needs to be determined in local currency.

NUC – NUC stands for the Neutral unit of construction. NUC is a unit
used to build fares between two cities. NUC is a common unit, which is
used globally for constructing mileage-based fares by all airlines. All
international fares are quoted in NUC and later converted to local
Currency of respective countries this creates uniformity in fare
construction globally. NUC is equivalent to the US dollar and has been
designated by IATA as the sole unit of constructing a fare between two
cities. Even though Local currency exchange rates may vary from
country to country NUC level remains constant.

Below is a fare generated for an itinerary from Dubai to London and

Back. You can see that even though the Fare is in AED 6160 (Emirates
Dirham) the fare constructed is in NUC. Taxes, on the other hand, will
always be quoted in local currency.
Fare Quote Display
MPM – MPM stands for Maximum Permitted Mileage. The maximum
mileage is permitted for an itinerary between two cities. MPM is
determined by IATA and it remains constant. However, different global
indicators have varying MPM and fares can be constructed accordingly.
Below is an extract from IATA’s PAT (Passenger Air Tariff book) which
shows MPM from Balikpapan Indonesia to a List of other cities.
If you see the above chart, you will notice some cities appear twice in
this chart. This is because any itinerary constructed from Balikpapan to
any of these cities has more than one Global indicator hence MPM for
varying Global Indicators is published.

Below is an example of an itinerary from Balikpapan to Venice Italy. If

you notice Venice which is highlighted above in MPM table has 3
MPM’s as per global indicators EH-Eastern Hemisphere, AP – Atlantic
pacific and TS – Trans Siberian. Since the traveler here wants to travel
to japan en-route the Global indicator that will be applied for this
itinerary is TS and the MPM against this Global indicator will be the
maximum permitted mileage.

The itinerary that is constructed above has 3 stopovers i.e.:- in Jakarta,

Tokyo and Rome. The cumulative flown mileage of this routing is
10749 miles and since we are taking a route via Tokyo Japan we can
apply Trans-Siberian as Global indicator for this itinerary which has
MPM of 10832 miles which is just within the total mileage permitted
for constructing this itinerary. EH is another global indicator that we
could have used in case the traveler did not want to take a stopover in
Tokyo.

Using global indicators in coordination with the above chart and a

strong acumen of world geography will help you to construct good
itineraries. Hence understanding the concept of MPM is vital in your
study of Fare construction.

TPM – TPM stands for ticketed point mileage. It is the actual number of
miles that are used for constructing an Itinerary between two points or
cities. TPM can be greater, less or equal to MPM since TPM is the actual
miles that are used for constructing a particular itinerary.

EMA – EMA stands for Extra Mileage Allowance. Extra mileage

allowance is a grace allowance in mileage, which is permitted when
traveling via a certain city (point).

EMA applied
For e.g.:- In the Above example, the travel is from Balikpapan
Indonesia to Mumbai via Jakarta, Manila, and Bangkok. The Maximum
permitted mileage between Balikpapan to Mumbai is set at 4011 miles
and if the TPM goes beyond this surcharge would be charged. In the
above scenario, the TPM for the above itinerary would be 4087, which
is higher than the MPM, and hence a surcharge should be applied,
however, if you notice in below EMA table you will see that this routing
is permitted to avail EMA. The Area 3 EMA paragraph specifies any
travel within Area commencing or via Mumbai, New Delhi, Karachi and
Islamabad will qualify for Extra mileage allowance of 700. This EMA
will be added to MPM and hence the total becomes 4711, which is
more than MPM 4087 hence surcharge will not be applied for this
itinerary because of Extra mileage allowance.
EMA Table 1
EMA table 2

EMA table 3
If you see the above tables, Extra mileage allowance is applicable for
routings throughout the globe via certain points hence it is essential to
always check for EMA table before applying a surcharge for the
itinerary.
EMS – EMS stands for Excess mileage surcharge. Excess mileage
surcharge is calculated when TPM or the total number of miles flown
exceed MPM or Maximum permitted miles. In a scenario where TPM
exceeds MPM, a surcharge is added to the fare based upon a
calculation, however, EMA or Extra mileage allowance should always be
considered before calculating surcharge. In the scenario discussed in
the previous example although TPM was greater than MPM after
adding EMA, the chance for surcharge was negated. However, such
situations do not occur frequently and at times even after considering
EMA the surcharge applies. In certain scenarios, the EMA plus MPM
does not cover the TPM or total miles flown and the surcharge has to
be applied. The formula to calculate the surcharge is very simple. TPM
(total miles flown) divided by MPM (Maximum permitted mileage) and
the output or result that you will get after this division decides the
surcharge you will apply for the itinerary as per below table.

If the output of TPM divided by MPM is greater than 1 but less than
1.05 your surcharge applicable would be 5%. If it is greater than 1.05
but less than 1.10 then you will apply surcharge as 10% and so and so
forth as per the table above.

Below is an example where TPM Exceeds MPM.

TPM for this itinerary is 5439
MPM for Balikpapan to Mumbai = 4011

TPM For below itinerary = 5439

TPM exceeds MPM so surcharge will apply.

However, as per EMA Table 700, extra mileage allowance will apply.

Calculation

MPM -4011

+ EMA 700

Total = 4711 (MPM + EMA)

TPM – 5439

TPM/MPM – 5439/4711 = 1.1545

As per the EMS table since the output is between 1.15 and 1.20 the
surcharge applicable for this itinerary will be 20%. This surcharge will
be added to the fare calculation.

We hope the above article has been informative and will help you in
clearing your doubts and for IATA exam preparations. In case, if you
have, any queries do write to us at admin@talearnings.com and if you
like what you see please support us by hitting like on our Facebook
page.

Take a small quiz to test your knowledge.

Welcome to your EMS Quiz

Calculate Excess mileage allowance as per above table.

**Please note EMA is not considered for this quiz. **

Mr. Lopez a US citizen decides to go on holiday to Spain and UK. He travels from
Baltimore to Bilbao and has a stopover in London the total miles that he flew for
this itinerary (TPM) is 5544 and MPM permitted between Baltimore to Bilbao Spain
is 4759.Can you determine if surcharge will apply and how much ?
Yes, 5% surcharge will apply to fare
Yes, 20% surcharge will apply to fare
Yes, 25% surcharge will apply to fare
Mr. Odumbe a businessperson from Mali will be visiting the US for a business
visit, would be travelling to New York, Denver, and will end his journey in
Houston. The total miles flown for the journey will be 8714 as the flight goes via
Paris. The Maximum permitted mileage for Bamako to Houston is 7054.Can you
determine if surcharge will apply and how much.
Yes, 20% Surcharge will apply to fare.
Yes, 25% Surcharge will apply to fare.
Yes 15%, Surcharge will apply to fare.
The Taslim family from Balikpapan Indonesia will be going on a tour of India they
will be visiting Mumbai, Delhi and finally Udaipur in Rajasthan. Their itinerary
looks like this BPN-CGK-SIN-BOM-DEL-UDR, the total miles flown for this
itinerary (TPM) is 4838 however the Maximum permitted miles is 4477. Can you
determine if Surcharge will apply and how much.
Yes, 5% surcharge will apply to fare
Yes, 15% surcharge will apply to fare
Yes, 10% surcharge will apply to fare
Mr. Smith a small textile businessperson from Baltimore is travelling to
Manchester, UK for business. He wanted to buy a relatively cheap ticket so he
booked a flight to Manchester via Frankfurt on Lufthansa. The total miles flown
from Baltimore to Manchester via UK would be 4549 and MPM permitted between
two cities is 4218. Can you determine if Surcharge will apply for this itinerary and
how much?
Yes, 10% surcharge will be added to fare.
Yes, 5% surcharge will be added to fare.
Yes, 15% surcharge will be added to fare.
Mr. Van Vuren a south African diamond merchant is on a trip to Mali and
Nigeria.He travels from Bamako to Cape town with stopover in Lagos and Abuja(
BKO-LOS-ABV-JNB-CPT), the total miles flown for this itinerary is 4803 and
Maximum permitted miles from Bamako to cape town is 4723. Can you determine
if there will be a surcharge and how much?
Yes, 25% surcharge will be added to fare.
 Yes, 15% surcharge will be added to fare.
Yes, 5% surcharge will be added to fare.

How to Check for HIP in fare construction?

IATA Global Indicators Explained

Fare Display and Focal Point Shopping.

CATEGORIESFARE CONSTRUCTION, TRAVEL,LEARNING,AIR

TRAVEL,TRAVEL INFORMATION,GDS
KNOWLEDGETAGSEMA, EMA IATA, EMS, EMS IATA, EXTRA
MILEAGE ALLOWANCE, EXTRA MILEAGE
SURCHARGE, FARE CONSTRUCTION, HOW TO CALCULATE
EXTRA MILEAGE SURCHARGE IATA, IATA
FOUNDATION, IATA FOUNDATION SUDENTS, IATA
STUDENTS, MPM, MPM IATA, NUC, TPM, TPM IATA, WHAT
IS EMA, WHAT IS MPM, WHAT IS NUC, WHAT IS TPM

How to Check For HIP in Fare

Construction?
In our Last post, we explained to you a few concepts of fare
construction and in this post, we continue on other related topics
about fare construction. HIP check is one of the most common checks
used in fare construction. HIP stands for Higher Intermediate Point.
Higher intermediate point is a check that has to be done for an
itinerary to check if any of the fare for an itinerary from point of
commencement to the destination point should be less than the actual
fare and in case if any of these points have a fare which is more than
the actual fare from point of origin to destination than that fare will be
applied and shall be considered as actual fare for the itinerary. The
point or city due to which the fare has been raised is known as a
Higher Intermediate point. This concept is used in fare construction to
maximize the revenue for an itinerary and this check enables the
same. We understand after reading this many of you may not clearly
understand the concept or logic behind the HIP rule hence below
graphical explanation will make it easier to understand.

Example 1 No HIP:- Mr. Smith will be traveling to Stockholm Sweden.

He will be traveling via Amsterdam and returning via Copenhagen for
his return trip. He has paid GBP 2071 for his flight ticket. We will check
his itinerary below to see if any HIP was applied for his travel itinerary.

Itinerary – ABZ-AMS-STO-CPH-ABZ
 Fare Table From
 Aberdeen 1.1

 Fares for Cities where

travelling 1.2
 If you notice above the chart on left displays fares from Aberdeen to
certain cities in Europe. Chart 1.2 illustrates the cities, which will be
traveled for this itinerary.

Before you learn how to check for HIP, it is important to read the Fare
charts. So first we shall learn briefly how to read the fare chart. This is
important since we have to check fares from point of origin to all other
points to check HIP.

In the above Charts, the YIF is the fare Basis or fare, which will be
applied for the itinerary. The one, which has bold characters, is the
return fare and the light one is one-way fare up to this point. After
Fare basis fares are displayed first in local currency in this case since
the travel originates in UK the fares are quoted in GBP. Next to Local
currency fare, you can see NUC fares, NUC fares are used in fare
construction and this are the fares that would be used for checking the
HIP. Further, right next to Fares you will see Fare rules code (Z002) for
the fare and finally global indicator used between two cities and MPM
between two cities. Now that you know how to read Fares from A fare
chart, you are ready to check for fares between pair of two cities and
identify HIP for an Itinerary.

Steps to Identify HIP

1. Identify the point of origin and Point of Destination.

2. Mark all the cities on the itinerary.
3. Note NUC level fare for Origin to Destination. In this example 3458.09 is the return NUC
for Aberdeen to Stockholm.
4. Make a rough chart as below and note all the NUC from point of origin to subsequent
points.

ABZ-STO 3458.09
 Aberdeen Amsterdam Stockholm Copenhagen

Aberdeen NA 1792.53 3458.09 1211.16

Amsterdam NA NA 1359.61 1089.55

Stockholm NA NA NA 590.55

Copenhagen NA NA NA NA

If you see the above chart, we have compared NUC levels from
Aberdeen to All subsequent cities on itinerary and from all subsequent
cities to other cities is compared to check if any of the subsequent
points or any journey from point of origin has a higher fare. After
comparing the above chart you will notice the highest fare for this
itinerary is NUC 3458.09 which is between Aberdeen to Stockholm, the
origin and destination route itself has the highest fare hence HIP is
actual fare or No HIP is detected for this itinerary.

Example 2 HIP Fare Applies: - Mr. Smith decides to travel to Germany

again. This time he would be visiting Berlin via Amsterdam and on his
return trip, he takes a stopover in Hamburg to come back to Aberdeen.
We will check his itinerary if there is a possibility of the HIP for this
routing.
Itinerary- ABZ-AMS-BER-HAM-ABZ



We follow the same steps to check for HIP as discussed for the above
example. The first step is to ascertain your point of origin and
destination. Then we check for NUC Fare between Point of Origin and
Destination. In This case, it is 1667.23 hence it is the actual fare.

NUC between Origin and Destination – NUC 1677.23

Now we check for all the NUC fares from Subsequent points to check
for a higher fare. It is advisable to make a chart as below, which would
make it easier to compare.

ABZ-BER 1667.23

Aberdeen Amsterdam Berlin Hamburg

Aberdeen NA 1792.53 1667.23 2118.29

Amsterdam NA NA 669.20 1814.55

Berlin NA NA NA 485.70

Hamburg NA NA NA NA

In this example, you will notice that multiple times there are NUC
fares, which are higher than the Actual fare between origin and
destination. We have highlighted those higher fares above.

Fare from Aberdeen to Amsterdam is 1792.53

Fare from Aberdeen to Hamburg is 2118.29

The fare from Amsterdam to Hamburg is 1814.55

In the above itinerary since Aberdeen to Hamburg has the highest
value the same is considered as HIP point and will be considered as
Actual fare.

We hope the above information was useful and will help you in
understanding how to ascertain HIP for a particular itinerary.

How Travel Type Affects Fares

There are several types of simple and complex itineraries that can be booked using
Universal API.

Important! Some suppliers may not support a specific type of itinerary. For example,
many ACH suppliers support only One-Way or Round-Trip itineraries.

Simple Itineraries
There are three types of simple itineraries:

 One-way (OW)
You are flying from somewhere (your origin) to somewhere else (your
destination).

 Return or Round trip (RT)

you are flying from your origin to your destination (which for return fares is also
called the point of turnaround) then back to your origin. Notice that for complex
routings what you consider your destination might not be what the airline
considers your point of turnaround, which is used primarily for fare calculations.

 Open jaw (OJ)

your travel includes a surface sector (traveled other than by air) either at the
origin or the turnaround of the journey. See Open Jaws and Surfaces for details.
Routings
When flying from your origin to your destination, there are two options:

 Non-stop flights flying directly without any touchdown between origin and
destination.

 Flights that touch down.

It is the last option that generates many complications with fares. When you land en
route, the stop can take the following forms:

 Intermediate stop/technical stop

the plane touches down to take on fuel, off-load passengers, or on-load
passengers, and then you continue your journey on the same plane with the
same flight number.

 Change of equipment/change of gauge

your flight touches down and you change to a different airplane. However, the
flight number stays the same throughout your journey. Notice that a change of
equipment with the same flight number still counts as a direct flight according to
IATA rules.

 Online transfer
you change from one flight to another flight operated by the same carrier.

 Interline transfer
you change from one flight operated by one carrier to a flight operated by
another carrier.

For example, in the routing EDI-BM/M-LHR-QF/Y-SIN-QF/Y-SYD:

 You are flying from Edinburgh (EDI) on a British Midland flight (BM) in M class.

 You are flying to London Heathrow (LHR) where you have an interline transfer to
a Qantas (QF) flight in Y class and continue to Singapore (SIN).

 In Singapore, you have an online transfer to another Qantas flight in Y class,

continuing on to Sydney (SYD). I

 N between your flights from London to Singapore, you have an intermediate stop
in Bangkok (BKK), but as it is not considered a transfer, this stop does not
necessarily display in the routing.
The routing may show only the points traveled and omit the carrier/class designation
(e.g., EDI-LHR-SIN-SYD).

Transits and Stopovers

If your plane touches down and you transfer to another plane (either online or
interline), you have two options:

 Transit
when you continue your journey as soon as possible, normally on the first
scheduled flight onwards, but at least within 24 hours. In Central America, the
rule is within 6 hours rather than 24 hours, and in North America it is within 4
hours.

 Stopover
when you stay more than 24 hours. With a stopover, you can fly from London to
Sydney, but spend a few days en route in Singapore. Stopovers provide a
completely different set of fare rules. In North America, stopovers are any time
spent that is more than 4 hours.

A transit normally displays in the routing with a lower case x (e.g., LHR-xSIN-SYD or
LHR-(x) SIN-SYD).

Open Jaw and Surface Trips

In the Simple Travel section, a return trip was described as flying from your origin to
your destination and back to your origin; your destination could be referred to as your
point of turnaround. There is another type of travel called Open Jaw (OJ) in which you
return to a different airport than where you originated, or you leave from a different
airport than where you arrived. This type of travel is called Open Jaw because your air
routing looks like an open mouth (from the side) if you draw the routing on a map.

For example, you are flying from London Heathrow (LHR) to Paris (CDG) and then flying
from Paris to Manchester (MAN). Your air routing is:
 Outbound:

LHR-CDG

Inbound:

CDG-MAN

In the example above, the open jaw occurs at the origin, which is called an Origin
Open jaw (OOJ). An open jaw at your destination is called a turnaround open
jaw/destination open jaw (TOJ)

The following example is an open jaw that occurs at the destination. For example, you
are traveling from London Heathrow to Sydney, Australia (SYD). You decide to take a
train from Sydney to Brisbane and then return to London. The train trip from Sydney to
Brisbane is referred to as a surface sector, which is any part of your journey in which
the mode of travel is not flying. Surface sector travel can include non-flight options
such as ship or boat. Your routing is:

Outbound:

LHR-SIN-SYD

Inbound:

BNE-SIN-LHR

When you have an open jaw at either the origin or destination, you have a Single
Open Jaw (SOJ). If you have an open jaw at both the origin and destination, you have
a Double Open Jaw (DOJ).

Outbound:

LHR-SIN-SYD

Inbound:

BNE-SIN-MAN
Complex Travel
A special form of return trip is a Circle Trip (CT). A circle trip is a return trip that
usually includes multiple stops along the route of travel before returning to the point of
origin. For example, London to Australia via Asia on the way out and Australia to
London via the United States on way back.

A Round the World (RTW) fare is a fare with no destination or, where the origin and
the destination are the same. You are traveling around the world and as long as you
are within the rules of your ticket, the RTW fare applies. The RTW fare specifies a
number of details; including how many times you can stop and how many miles, you
can fly.

Most airlines have a different fare class for each letter of the alphabet, and this varies by airline:
F is first class, C and J are typically business class, and Y is usually economy,