Source: Dr Mazlina Mahdzar (2007). Computerised Fares and Ticketing, OUM, UNITEM Sdn. Bhd.

TOPIC 6 TYPES OF FARES

INTRODUCTION

Hello and welcome to Topic 6 – Types of Fares. You have just learnt how to construct fares
within the previous topic. Well, other than being able to do fare calculation, it is also important
to know the different types of fares, their characteristics and their purpose. These concepts
are important so that you can explain and clarify your clients’ doubts. This topic introduces
you to the many different types of airfares that are available in Malaysia, their rules and
restrictions and their identification codes. In addition, you will also be introduced to taxes and
surcharges imposed by the governments for travellers. You will also learn the basic principles
on how to read automated price displays required to complete airline tickets for your clients.

LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. summarise airline deregulation and its effect on fares;
2. describe three principles to follow when calculating domestic airfares;
3. explain two types of fares;
4. describe four types of restricted fares rules for domestic travel in Malaysia;
5. recognise two types of taxes and surcharges imposed by the Malaysian government;
and
6. interpret automated fare display.
TOPIC OVERVIEW

6.1 AIRFARES AND DEREGULATION

Air Traffic Conference (ATC), had regulated the airline industry. What did they regulate? The
ATC regulated practically every aspect of commercial aviation, from establishing new routes
to introducing new airfares.

The airlines soon learned that a strictly regulated industry squashes competition. The airlines
could do little to compete for more productive routes and discounted fares to win passengers.
Then, the Deregulation Act of 1978 changed all that. Deregulation - have you ever heard
about it? What does it mean?
Today, the federal government still oversees aircraft safety, maintenance and other related
issues under the aegis or guidance of the Federal Aviation Administration (FAA). However, in
practically all other matters, airlines can now effectively compete for more passengers.

You can visit the official website of Federal Aviation Administration (FAA) to
know more about this agency at:
http://www.faa.gov/

6.1.1 Increase Competition, Lower Airfares

What happens when competition among the airline systems increased and airfares become
lower? Well, in most cases, airline passengers have benefited from deregulation because of
the greater number of discounted fares available. Lower airfares have resulted in a dramatic
increase in air travellers.

However, not all passengers benefit. Airfares have remained high on non-competitive routes
that are serviced by only one or two carriers. This discrepancy usually occurs over short
routes of 400 miles or less. It is not economically feasible for the major airlines to operate
large aircraft over these short routes. As a result, only small independent commuter airlines
share these markets. In Malaysia, the situation is slightly different. There is no small
independent airline established to operate flights over these short routes. The national
carrier (Malaysia Airlines) is the individual company that provides services to most of
the outskirt areas. Nevertheless, same phenomena occur where there is not enough
competition over providing services over these short routes.

Because of the lack of competition on selected air routes, airfares between certain cities
remain high compared with other heavily travelled routes over the same distance. In fact,
distance has very little to do with how much you pay for an airline ticket.

Even in view of these discrepancies, the air passenger today has a much greater choice of
special deals and discounted fares. Some of these discounted fares represent savings of
more than 50% over the regular fare on some routes and during certain times of the year.

The old saying like the left cartoon certainly applies to the airline
industry. What the discount fares all have in common are the
number of rules and restrictions of travel that must be met to
qualify. When you fly on discounted fares, you usually have to
pay for your ticket in advance, you must stay over a number of
nights at the destination and there are penalties if you change
and/or cancel your ticket.
A good rule of thumb is:

Next, we will look at fare calculation terms and its three principles to follow when calculating
domestic airfares.

6.2 FARE CALCULATION TERMS

How do we calculate domestic airfares?

There are three principles to follow when calculating domestic airfares as listed in Figure 6.1
below. Next we will look at these three principles one by one.

Figure 6.1: Three principles of domestic airfares calculation

6.2.1 Point-to-point Fares

First, we start with point-to-point fares. What should we know about them?

For example, a passenger is flying on this one-way trip:

Kota Kinabalu on the routing is a stopover (more than six hours). Because of this, you must
charge a point-to-point fare to each stopover point. This itinerary contains two fare segments:
Fare segment 1: Malaysia Airlines from Kuala Lumpur to Kota Kinabalu
Fare segment 2: Malaysia Airlines from Kota Kinabalu to Kuching

6.2.2 Through Fare

Now we come to learn about through fare. What is a through fare?

A fare is not charged to or from a connecting city.

For example, a passenger is flying on this one-way itinerary:

The flight from Kuala Lumpur to Kota Kinabalu is on a Malaysia Airline connection through
Labuan. Because Labuan is only a connecting city (stay is less than six hours), no fare is
charged to or from connecting city. The through fare is charged from Kuala Lumpur to Kota
Kinabalu. There is only one segment for this itinerary:

Fare segment 1: Malaysia Airlines from Kuala Lumpur to Kota Kinabalu connecting through
Labuan.

6.2.3 Joint Fare

Now we come to the last principles of domestic airfares calculation which is joint fare. How
do we charge a joint fare?

Here is something interesting for you to remember: sometimes a joint fare is the same as a
through fare. Other times it may be more expensive.

However, due to hub cities that generate online connections, joint fares on offline connections
are rare.

For example, a passenger is flying on this one-way trip:

The passenger is on an offline connection (from Singapore Airlines to Qantas) from Kuala
Lumpur to Sydney, connecting through Singapore. Because the passenger is on an offline
connection, the joint fare is charged between Singapore Airlines and Qantas from
Kuala Lumpur to Sydney.

Despite the age of deregulation, why do airfares remain high on short and
outskirt routes?

6.3 TYPES OF FARES

Do you know that there are hundreds of different types of airfares on the market? Well, it is
true that there a lot of them. However we will concentrate on two general categories of fares:
unrestricted and restricted.

6.3.1 Unrestricted

What should we know about unrestricted fares? Well, first you should know that unrestricted
fares are also called normal fares. Let’s look at some important points about this fares.

Unrestricted Fares:
• usually do not have any restrictions of travel such as advance purchase
or length of stay.
• do not have any charge or cancellation penalties; you can change your
reservation at any time or even cancel the ticket at the last minute and
receive a full refund of the ticket price.
• when you change a normal fare, the airline ticket is valid for up to one
year from the date of departure.

Normal fares are usually booked in the three standard classes of service:
6.3.2 Restricted

How about restricted fares? What should you know about it? Well, you should know that
restricted fares are also called discounted fares. These fares will have any number of
travel restrictions attached to them. Some discounted fares can be sold one way while others
must be sold round-trip. Most discounted fares are based on travel in coach class and are
sold on a controlled-inventory basis. This means the airline sets aside a certain number of
seats in coach class to be sold at the discounted price.

There are hundreds of different types of discounted fares. To simplify, we can group them into
three general categories:
(i) discounted one-way fares;
(ii) standard excursions; and
(iii) non-refundable.

You can refer to Table 6.1 which shows you the descriptions of these fares.

Table 6.1: Three General Categories of Discounted Fares

Category Description
Discounted • can be sold one way or round-trip.
One Way • since these fares are published one way, you can simply double them for
round trips.
• the types of restrictions vary depending on the routing and airline, but many
one-way fares are sold on a controlled-inventory basis, must be purchased
so many days before departure and are valid only during certain times of the
year.
• in addition, many airlines charge a penalty if the ticket is changed or cancelled.
• any fare that must be purchased round-trip is called an excursion.
Standard • have restrictions similar to those for discounted one ways – they are sold on
Excursion a controlled-inventory basis and must be purchased in advanced, with a penalty
charged for changes or cancellation.
• however, they also have a minimum and/or maximum stay limitation.
• purchasing a round-trip excursion fare is usually less expensive than
purchasing two one-way discounted fares on the same route.
• the least expensive type of discounted fare and it is loaded with travel
Non- restrictions and penalties.
refundable/ • no refund if the passenger cancels the ticket any time after purchase.
Instant • strict penalties also apply for any changes made to the reservation.
Purchase • non-refundable fares are considered excursions because they are based on
round-trip travel.
• many non-refundable fares are also called instant-purchase fares because
the passenger must purchase the ticket immediately after the reservation is
made, usually only one or two days after the booking.
6.4 FARE RULES FOR RESTRICTED FARES
Do you know that you have to check the passengers whether they qualified or not for the
lowest airfare? Well, part of qualifying clients is to make sure that they are fulfilling all
the conditions of travel. Some fares have more restrictions than others. Each published fare
has
a fare rule. To qualify for a particular airfare, the traveller must meet all conditions of travel. In
this section we will look at some restricted fares for domestic travel in Malaysia and
their complete rules and regulations. Rules and regulations changes slightly overtime, but all
these rules are accurate at the time this manual is printed.

6.4.1 Night Tourist Fare (YN, CN and FN)

This restricted fare is available on first (FN), business (CN) and economy class (YN). Night
tourist fares are available on one-way and round trip for the following journey:
Here are some of the rules and regulations pertaining to night tourist fare.

NIGHT TOURIST FARE RULES AND REGULATIONS:

(i) Ticket must be purchase and payment made before commencement of
travel.
(ii) Reservation booking designators for first class, business class and
economy class are F, C and Y respectively.
(iii) Fare basis code for first class night tourist is FN.
(iv) Fare basis code for business class night tourist is CN.
(v) Fare basis code for economy class night tourist is YN.
(vi) Accepted form of payment includes cash, cheque, credit card and MCO.
(vii) When night tourist fare is used in combination with other domestic fares,
all fare components must be shown separately in the fare calculation
column of the ticket.
(viii) Stopovers are not permitted within the itinerary.
(ix) No add-on segment is permitted within the itinerary. Passenger must
never include another segment of journey before or after arriving at the
destination.
(x) End-on and side trip combination legal with normal fares within Malaysia.
However combination is only legal with normal fares within Malaysia.
(xi) Sales of the ticket must be made in Malaysia or Brunei only. In Brunei,
tickets must be issued by Malaysia Airlines offices only.
(xii) Domestic cancellation fee procedure shall apply where the 25 percent
shall be based on the night tourist fare paid.
(xiii) Children discounts and infant discounts are not permitted.

6.4.2 One-way Excursion Fare (YOX)

What should we know about one-way excursion fare (YOX)? Well, one-way excursion fare
(YOX) is one of the highly utilise standard excursion fare in Malaysia. This type of excursion
fare is available on one-way trip for the following sectors:
Let’s look at some of the rules and regulations pertaining to one-way excursion fare (YOX).

ONE-WAY EXCURSION FARE (YOX) RULES AND REGULATIONS:

(i) Reservation, ticketing and full payment must be made not less than 7
days up to and include the day of departure.
(ii) Reservation booking designator for one-way excursion fare YOX is ‘Y’.
Agent must use booking code ‘Y’ when making reservation through CRS.
(iii) Accepted form of payment includes cash, cheque, credit card and MCO.
(iv) Minimum stay and maximum stay are not applicable for this fare.
(v) Combination of itinerary with other fare is not permitted.
(vi) Sales of the ticket must be made in Malaysia or Brunei only. In Brunei,
tickets must be issued by Malaysia Airlines offices only.
(vii) No retroactive refunds shall be permitted once travel has commenced.
(viii) Full refund will be given for changes that are made before the 7 days
advance purchase period.
(ix) A fee of 25 percent of the YOX fare up to a maximum of RM50 per ticket
fare shall be charged as penalty for any change of confirmed reservation
made within the 7 days advance purchase period.
(x) Children discount is 50 percent of applicable adult fare.
(xi) Infant discount is 10 percent of applicable adult fare.

6.4.3 Round-trip Excursion Fare (YEE30)

Now we come to learn about round-trip excursion fare. Do you know that there are many
types of round-trip excursion fare? Some of the well known round trip excursion fare includes
YEE3M, YEE6M, YEE60 and YEE30. However, round trip excursion fare YEE30 is the
one mostly utilised for domestic fares in Malaysia. The excursion fare is available on round
trip for the following sectors:
Let’s look at some of the rules and regulations pertaining to YEE30 excursion fare.

YEE30 EXCURSION FARE RULES AND REGULATIONS:

(i) Applicable on non-stop or direct flight only include direct flight via SIN/
BWN.
(ii) Travel on night tourist flights is permitted. However, no refund will be
given.
(iii) Reservation, ticketing and full payment may be made anytime before
departure.
(iv) Any change of confirmed reservations made within 24 hours of scheduled
time of departure shall attract a penalty of 25 percent of the normal one
way fare of sector concerned up to a maximum of RM50 per ticket.
(v) Reservation booking designator for round trip excursion fare YEE30 is
‘Y’. Agent must use booking code ‘Y’ when making reservation through
CRS.
(vi) Accepted form of payment includes cash, cheque, credit card and MCO.
(vii) Minimum stay at the destination city is three days.
(viii) Maximum stay at the destination city is thirty days.
(ix) No stopover is ever permitted for this fare.
(x) No add-on segment is permitted within the itinerary. Passenger must
never include another segment of journey before or after arriving at the
destination.
(xi) End-on and side trip combination permitted with normal fares within
Malaysia. However combination is only permitted with normal fares within
Malaysia.
(xii) Sales of the ticket must be made in Malaysia or Brunei only. In Brunei,
tickets must be issued by Malaysia Airlines offices only.
(xiii) No retroactive refunds shall be permitted once travel has commenced.
(xiv) Full refund shall be given for cancellation made more than 24 hours prior
to the departure.
(xv) Children discount is 50 percent of applicable adult fare.
(xvi) Infant discount is 10 percent of applicable adult fare.

6.4.4 Discounted Fare (LAN50 and LAN50 OW)

How about discounted fare (LAN50)? Discounted fare (LAN50) is applicable for economy
class one way, round trip, circle trip and open jaw travel on any sector within Malaysia
except rural air service and journey with Fokker flights. All fares given are 50 percent
discounted from the normal economy fare. Most sales are done in Malaysia at the Malaysia
Airline offices and travel agents. Tickets that are sold from travel agency are
commissionable.
Let’s look at some of the rules and regulation pertaining to discounted fare LAN50.

DISCOUNTED FARE LAN50 RULES AND REGULATION:

(i) Fares are applicable on any Malaysia Airline non-stop or direct flight via
Singapore and Bandar Seri Begawan.
(ii) Ticket must be issued within 24 hours of confirmation or reservations.
(iii) All sectors must have confirmed reservations confirmed before ticket
can be issued. Waitlist and open sectors are not permitted.
(iv) Reservation booking designator for the fare is ‘L’. Agent must use booking
code ‘L’ when making reservation through CRS.
(v) Acceptable form of payment includes cash and credit card only.
(vi) Minimum stay at the destination city is not applicable.
(vii) Maximum stay at the destination city is three months.
(viii) Stopovers and transfers are not permitted.
(ix) Sector combination with other fares is not permitted.
(x) A penalty of 50 percent (of the discounted fare) or RM50 per sector
whichever is lower applied for changes or cancellation made more than
24 hours before departure.
(xi) Changes or cancellation are not permitted within 24 hours before
departure. Tickets are not refundable for changes or cancellation made
within 24 hours before departure or after the commencement of the
journey.
(xii) Ticket must be endorsed with ‘supersaver’ or ‘non-refundable’.
(xiii) Children discounts and infant discounts are not permitted.

6.5 TAXES
Have you ever glanced at an airline ticket to see a variety of additional charges tacked on to
the fare? All airline ticket – domestic or international – has additional amounts in the form of
taxes and surcharges. Travel agents are required to collect, on behalf of airlines, all taxes,
fees and charges imposed by the local government. When completing airline tickets, these
taxes, fees and charges must be clearly shown and identified. That is why each type of tax
and fee has a unique two-character code.

When you see the total selling fare on airline ticket, that is, the price the passenger actually
pays; it is composed of three items:
Looking back at the formula, you can see that it is composed by base fare and tax. What is a
base fare?

Just like the formula, the base fare plus applicable

taxes equal the total selling fare of the airline ticket.
There are also other charges that may be added
directly to the base fare and become part of the base
fare amount on the airline ticket. This normally
consists of airport tax. These additional charges are
called surcharges.

There are different types and amounts of taxes that apply to most airline tickets. In this section
we will acknowledge some of important taxes imposed by the Malaysian government.

Federal Ticket Tax

Generally there are two types of federal taxes imposed by the Malaysian government in regard
to airline ticket. The two types of federal taxes are international departure tax and segment
tax. Both are more commonly known as airport tax. These taxes are collected before trip
departure and added to the base fare of the airline ticket. Both taxes are identified by a two-
letter code ‘MY’. Next we will look at these two fares one by one.

6.5.1 International Departure Tax

What should we know about the international departure tax?

The international departure tax is charged when departing from Malaysia to all
foreign destinations.

This includes tickets to destinations throughout the balance of the world: South
America, North America, the West Indies, Europe, Africa, Asia and the Pacific.

This tax is charge on all tickets issued or reissued for travel involving a departure from any
international airport in Malaysia irrespective of where the tickets are being issued or reissued.
As indicated earlier, the code on an airline ticket that identifies an international departure tax is
‘MY’.

The tax amount for each international departure from Malaysia international airport is RM45.
However the tax figure might differ depending on the destination of the journey. For instance,
an international departure tax of RM20 will be charge for a trip from Kota Kinabalu to Bandar
Seri Begawan.

Nevertheless, there are some situations where passengers are excluded from the tax (see
Figure 6.2).
 Figure 6.2: List of people who are excluded from the tax

6.5.2 Segment Tax

Do you know that the code on an airline ticket that identifies a segment tax is ‘MY’? How do we
apply a segment tax? Segment tax applies to each segment within a domestic journey. Now,
what is a flight segment?

For instance, a passenger is flying from Kuala

Lumpur to Kota Kinabalu on a direct flight (one
flight segment) and returning on a connecting flight
from Kota Kinabalu to Labuan to Kuala Lumpur
(two flight segments). Thus there are three flight
segments involved within the journey and three
segment taxes will be charged to the ticket. The
tax amount for domestic travelling after 1st June
2001 is RM6.00 per segment.

This tax is charged on all tickets issued or reissued for travel involving a departure from any
airport in Malaysia irrespective of where the tickets are being issued or reissued. However,
exception applied is for departures from small rural airports. How do we define a rural airport?
Figure 6.3 lists down some of the considered rural airports in Malaysia. Departure from this
airport will be free of charge. A full list of rural city exceptions is published in the OAG Desktop
Guide and CRS.

Figure 6.3: Rural airports in Malaysia

Besides departing from rural airports, there are some situations where passengers are
exempted from taxes (see Figure 6.4).

Figure 6.4: List of people who are excluded from the tax

6.6 AUTOMATED FARE DISPLAYS

What is your source to quote air fares? Well, the Abacus CRS is the primary source to
quote air fares. Abacus CRS has tens of thousands of fares programmed into its database.
The system is able to display fares for most airlines, both domestic and international. Airfares
are updated and revised on a continual basis to provide agents with the most current fare and
rule information.

Figure 6.5 is an example of automated fare display extracted from the Abacus reservation
system. The fare display lists of published fares between any city pair, with the most
inexpensive fares at the top. The fare display is usually used to answer this typical client
question, “How much does it cost?” even before a trip is booked. Travel agent can request to
see all published fares between the city pair for a specific travel date.

The agent is requesting a fare scan display for travel from Kuala Lumpur to Kuching, with the
travel date 13th May 05. To request fare display within the Abacus system, agent would enter
FD¤KULKCH/15MAY05. The “FD” in this entry as a fare display request, followed by the
city pair code (KULKCH) and the requested date of travel (15MAY05). The fare of the
requested city pair is then displayed on the screen.
 Figure 6.5: Published fare display extracted from Abacus System

6.6.1 Breakdown of Fare Display

Based on Figure 6.5, these are the explanations on the breakdown of fare display:
In your opinion, why are infants exempted from paying tax? Why do
governments impose airport tax? What is the purpose of airport tax?
 Exercise 6.1
1. What is the difference between base fare and total selling fare?
2. What is the two letter-code for airport tax in Malaysia?
3. How much is the tax rate (per segment) for domestic travel?
4. List down at least SIX (6) rural airports located in Malaysia.
5. What will be the entry for displaying fares for journey from Kota Kinabalu
to Tawau on the 23rd November 2005?

SUMMARY

• after the Deregulation Act of 1978, airlines were given more freedom to compete for
more productive routes and discounted fares to win passengers. Local governments
have lost most of its regulatory authority over the airlines. As a result, competition arises
and airline passengers have benefited from deregulation because of the greater
number
of discounted fares available. Nevertheless, all discount fares possess number of rules
and restrictions of travel that must be met to qualify.
• domestic airfares are calculated according to established fare calculation rules or
principles. There are three principles to follow when calculating domestic airfares: point-
to-point fares, through fares and joint fares. Point-to-point fares are fares charged to
each stopover point or city on itinerary routing. A through fare is a published fare between
two cities over an intermediate connecting city. A joint fare is an established fare between
two stopover points using two different carriers through a specific connecting city.
• there are two general categories of fares which are restricted and unrestricted fares.
Unrestricted fares usually do not have any restrictions of travel. Restricted fares have
any number of travel restrictions attached to them. Agents must meet all conditions of
travel in order to qualify for the fare. Restricted fares can be divided into three general
categories. They are discounted one-way fares, standard excursions and non-refundable.
There are four types of the restricted fare rules: night tourist fare (FN, CN and YN), one-
way excursion fare (YOX), round-trip excursion fare (YEE30) and discounted fare (LAN50
and LAN50OW).
• all airline ticket, domestic or international, have additional amounts in the form of taxes
and surcharges. Travel agents are required to collect, on behalf of airlines, all taxes,
fees and charges imposed by the local government. There are two types of taxes imposed
by the Malaysian government: are international departure tax and segment tax. The
international departure tax is charged when departing from Malaysia to all
foreign destinations. Segment tax applies to each segment within a domestic journey.
• the Abacus CRS is the primary source to quote air fares. Abacus CRS has tens of
thousands of fares programmed into its database. The system is able to display fares
for most airlines, both domestic and international. Airfares are updated and revised on a
continual basis to provide agents with the most current fare and rule information.