Fare Calculation

International Fares and Ticketing

Prepared by: Arthur Digman II, MIHM

Content
Fare calculation
• a. Fare construction
• b. Taxes and fees
• c. Surcharges
• d. NUCs
• e. ROE
• f. Fare discounts
• g. Routing system
• h. Types of Tickets
 Fare Construction
The process of determining the cost of a flight ticket is known as
fare construction. Airlines use complex algorithms to calculate
fares based on a variety of factors, such as the distance traveled,
the class of service, the time of travel, and demand.

For example, if you are traveling from New York to Los Angeles,
the fare may be higher during peak travel periods, such as holidays
or weekends.
Similarly, if you are booking a business class ticket, the fare will
likely be higher than if you were booking an economy class ticket.
Fare construction can also involve the use of discounts and
promotions to encourage travelers to book with a particular airline.
 Taxes and Fees
Taxes and fees are additional costs that are added to the base fare. These costs can include
government-imposed taxes, such as airport taxes or departure taxes, as well as airline-imposed fees,
such as baggage fees or fuel surcharges.

For example, if you are booking a flight from New York to London, you may be charged a passenger
facility charge by the airport, a security fee by the Transportation Security Administration (TSA), and
a fuel surcharge by the airline. These taxes and fees can vary depending on the destination, the airline,
and the type of ticket.
Taxes and Fees
In the Philippines, there are various taxes and fees that are added to the cost of airline tickets. These taxes and fees can vary
depending on the destination and the type of ticket being purchased.
• The following are some of the common taxes and fees that are added to the cost of airline tickets in the Philippines:
1. Passenger Service Charge (PSC): This fee, also known as the Terminal Fee, is charged by airports for the use of their facilities.
The PSC fee varies depending on the airport and is typically included in the price of the airline ticket.
Domestic flights: PhP 300.00
International flights: PhP 750.00

2. Philippine Travel Tax: The Philippine Travel Tax is a tax that is imposed on Philippine citizens and foreigners who are leaving
the country. The tax rate varies depending on the duration of stay and the class of travel.
3. Value Added Tax (VAT): The VAT is a tax that is added to the cost of goods and services in the Philippines. The VAT rate is
currently 12% and is applicable to domestic airline tickets.
4. Fuel Surcharge: Airlines may impose a fuel surcharge on tickets to cover the fluctuating cost of fuel. The fuel surcharge is
typically included in the cost of the airline ticket.
5. Airport Security Fee: This fee is charged by airports to cover the cost of security measures. The fee is typically included in the
cost of the airline ticket.
6. Aviation Security Fee: The Aviation Security Fee is a fee that is imposed by the Civil Aviation Authority of the Philippines
(CAAP) to cover the cost of aviation security measures. The fee is typically included in the cost of the airline ticket.
 Surcharges
Surcharges are additional fees that are added to the base fare. Surcharges can be imposed for a variety
of reasons, such as fuel costs, security costs, or airline-specific fees. For example, if you are booking a
flight with a low-cost carrier, you may be charged a fee for choosing your seat or for printing your
boarding pass at the airport. Similarly, if you are booking a flight to a remote destination, you may be
charged a surcharge to cover the cost of operating flights to that destination.
 Surcharges
In the Philippines, surcharges are common fees that are added to the base fare of airline tickets. These
surcharges can vary depending on the airline and the specific circumstances of the flight. Here are some
examples:
1. Baggage surcharge: Some airlines in the Philippines charge a fee for checked baggage or for carry-on
baggage that exceeds a certain size or weight limit.
2. Fuel surcharge: Airlines may impose a fuel surcharge to cover the cost of fluctuating fuel prices. This
surcharge is typically included in the cost of the airline ticket.
3. Convenience fee: Some airlines may charge a convenience fee for booking tickets online or over the
phone. This fee is typically charged per transaction.
4. Seat selection surcharge: Some low-cost carriers in the Philippines charge a fee for choosing a specific
seat or for reserving a seat in advance.
5. Credit card surcharge: Some airlines may charge a surcharge for using a credit card to purchase a ticket.
This fee is typically a percentage of the total cost of the ticket.
6. Remote location surcharge: Some airlines may charge a surcharge for flights to remote destinations in the
Philippines. This fee is designed to cover the additional costs of operating flights to these areas.
Neutral Unit of Construction
Are a standard currency used in the airline industry to simplify the calculation of fares. Airlines use
NUCs to convert fares into a standardized currency that can be easily understood by travelers.
For example, if you are booking a flight from London to Tokyo, the fare may be quoted in NUCs,
which are then converted into your local currency at the prevailing exchange rate.
Neutral Unit of Construction (NUCs) are used by airlines as a standard currency to simplify the
calculation of fares. NUCs are a fixed value that is used to convert fares into a standardized currency
that can be easily understood by travelers.
Neutral Unit of Construction (NUC) is a standard currency used in the airline industry to simplify the
calculation of fares. The value of NUC is established by the International Air Transport Association
(IATA), which is a trade association that represents airlines around the world. The value of NUC is
determined by taking into account various factors such as prevailing exchange rates, fuel prices,
taxes, and other fees that affect the airline industry.
Neutral Unit of Construction
Here are some examples of how NUCs are used in the airline industry:
1. International flights: When booking international flights, fares are often quoted in NUCs. This
helps to simplify the calculation of fares across different currencies and makes it easier for travelers
to compare prices.
2. Fare rules: NUCs are also used in the fare rules of airline tickets. These rules specify the conditions
under which a ticket can be used or refunded. By using NUCs, airlines can ensure that their fare
rules are consistent across different currencies.
3. Ticket pricing: NUCs are used by airlines to determine the price of a ticket. The fare construction
process involves converting the fare into NUCs and then converting it back into the local currency
at the prevailing exchange rate. This ensures that the fare is consistent across different currencies
and markets.
4. Industry standards: NUCs are an industry standard that is recognized by airlines and travel
agencies around the world. By using NUCs, airlines can ensure that their fares are consistent with
industry standards and can be easily understood by travelers.
Rate of Exchange
ROE, or the Rate of Exchange, is a measure of the value of one currency relative to another. ROE is
used in the airline industry to determine the value of fares in different currencies.
For example, if you are booking a flight from New York to Paris and paying in US dollars, the airline
will use the ROE to determine the value of your fare in euros, which is the currency used in France.
The ROE is determined by the prevailing exchange rate between two currencies. Exchange rates can
fluctuate daily or even hourly, so airlines must keep track of the latest exchange rates to ensure that
fares are priced correctly. The ROE can also be affected by economic conditions, such as inflation or
political events that can impact exchange rates.
When travelers book a flight in a currency other than their own, the airline will convert the fare into
the traveler's local currency using the prevailing ROE.
For example, if a traveler from the United States books a flight from London to Paris and pays
in British pounds, the airline will use the ROE to determine the value of the fare in US dollars.
Fare Discounts
Airlines offer discounts on fares for a variety of reasons, such as
promotions, seasonal travel, or loyalty programs. These discounts
can be based on a percentage off the base fare, a fixed amount off
the fare, or a combination of both.
For example, an airline may offer a 10% discount on all fares
booked during a specific period, or a $50 discount on round-trip
fares to a particular destination.
 TYPES OF FARE DISCOUNTS
Promotional discounts: Airlines often offer promotional discounts to
attract passengers and boost sales. These discounts can be in the form of a
percentage off the base fare, a fixed amount off the fare, or a combination
of both. For example, an airline may offer a 20% discount on all flights
during a specific time period or a $50 discount on a round-trip ticket to a
particular destination.
An airline may offer a 25% discount on all flights booked during a
specific week to celebrate its anniversary.
Another example is a low-cost carrier offering a $50 discount on flights
to a particular destination during the off-season.
 TYPES OF FARE DISCOUNTS
Seasonal discounts: Airlines may offer seasonal discounts during certain times
of the year when demand for air travel is low. These discounts can be based on
the destination, time of travel, or other factors.
For example, an airline may offer discounted fares for flights to a tropical
destination during the winter months.
Airlines may offer seasonal discounts during certain times of the year when
demand for air travel is low. These discounts can be based on the destination,
time of travel, or other factors.
For example, an airline may offer discounted fares for flights to a tropical
destination during the winter months.
 TYPES OF FARE DISCOUNTS
Group discounts: Airlines offer discounts to groups of travelers who are
booking tickets together. The discounts can be based on the number of
passengers or the type of group, such as a school group or a sports team.
Airlines offer discounts to groups of travelers who are booking tickets
together. The discounts can be based on the number of passengers or the type
of group, such as a school group or a sports team.
Airlines may offer discounts to groups of 10 or more passengers who are
traveling together.
For example, an airline may offer a group discount of 10% off the fare for a
school group traveling to a competition or a sports team traveling to a
tournament.
 TYPES OF FARE DISCOUNTS
Loyalty program discounts: Airlines offer discounts to members of their frequent flyer programs. These
discounts can be based on the member's status in the program, such as silver or gold, and can include benefits
such as free upgrades or lounge access.
Airlines offer discounts to members of their frequent flyer programs. These discounts can be based on the
member's status in the program, such as silver or gold, and can include benefits such as free upgrades or
lounge access.
• Delta Air Lines offers discounts to members of its SkyMiles loyalty program. Members can earn miles by
flying with Delta or its partners, and can then redeem those miles for flights, upgrades, or other benefits.
Delta also offers different tiers of membership, such as Silver, Gold, Platinum, and Diamond, based on the
number of miles flown or segments traveled.
• As members move up in the tiers, they receive more benefits, such as bonus miles, priority boarding, free
checked bags, and access to Delta's airport lounges. For example, Gold members may receive a 10%
discount on flights, while Platinum and Diamond members may receive a 20% discount. Members may
also receive other benefits such as free upgrades to first class or Delta's premium Delta One cabin.
• Overall, loyalty program discounts are a way for airlines to reward their frequent flyers and encourage
them to continue traveling with the airline. By offering benefits such as discounts and upgrades, airlines
can increase customer loyalty and retain their most valuable customers.
 ROUTING SYSTEM
• The routing system is a crucial component of the airline industry's fare calculation process. It involves the
selection of the most efficient route for a flight, taking into account a variety of factors such as distance,
time, and fuel costs. The routing system is used to determine the fare for a particular route, based on the
distance traveled and other factors such as demand and competition.
• The routing system uses complex algorithms to select the most efficient route for a flight. It takes into
account factors such as the location of the origin and destination airports, the number of connecting flights
required, and the availability of flights on specific days and times. The routing system can also consider
other factors such as weather conditions and geopolitical risks that could impact the safety and security of a
flight.
• The routing system can also impact the fare for a particular route. Direct flights, which are flights that travel
non-stop between the origin and destination airports, are typically more expensive than connecting flights,
which require one or more stops along the way. The routing system also takes into account competition from
other airlines, which can impact the fare for a particular route.
• The routing system can be complex and constantly changing. Airlines use sophisticated technology to
manage their routing systems, taking into account real-time data and other factors that can impact the
efficiency and safety of a flight. The routing system is also subject to regulatory oversight, with government
agencies responsible for ensuring that airlines comply with safety and security regulations.
 ROUTING SYSTEM
• The routing system plays a crucial role in determining the cost of a flight. The system takes into account a
variety of factors such as the distance traveled, the type of aircraft being used, and the time of day the flight is
departing. The routing system is used to select the most efficient route for a flight, which can help reduce fuel
costs and improve the overall profitability of the airline.
• The routing system is also important for ensuring the safety and security of air travel. Airlines use
sophisticated technology to monitor flight paths and identify potential risks such as weather events or
geopolitical unrest. This information is used to make real-time adjustments to flight paths and ensure that
passengers and crew are safe throughout their journey.
• The routing system is also subject to regulatory oversight. Government agencies such as the Federal Aviation
Administration (FAA) in the United States and the European Aviation Safety Agency (EASA) in Europe are
responsible for ensuring that airlines comply with safety and security regulations. These agencies work closely
with airlines to monitor their operations and make recommendations for improvements to the routing system as
needed.
• The routing system can also impact the passenger experience. For example, direct flights are typically more
convenient for passengers than connecting flights, which require additional time and can be more stressful.
Airlines strive to provide a balance between convenience and cost when selecting routes for their flights.
 ROUTING SYSTEM
Here are some examples of how the routing system can impact air travel:
1. Direct flights: Direct flights are typically more expensive than connecting flights because they are more
convenient for passengers. For example, a direct flight from New York to Los Angeles may cost more than
a connecting flight that requires a layover in another city.
2. Seasonal routes: Airlines may adjust their routing system based on seasonal demand for certain
destinations. For example, an airline may offer direct flights from New York to a Caribbean island during
the winter months when demand for tropical vacations is high.
3. Alternate airports: Airlines may use alternate airports in their routing system to reduce costs. For
example, an airline may use a smaller regional airport instead of a larger hub airport for certain flights.
4. Safety concerns: The routing system can be adjusted in real-time in response to safety concerns such as
weather events or geopolitical risks. For example, an airline may reroute a flight to avoid a region where
there is political unrest or to avoid severe weather.
5. Competition: Airlines may adjust their routing system to compete with other airlines. For example, an
airline may add a new route or increase the frequency of flights on an existing route to compete with a rival
airline.
• Overall, the routing system is a complex and dynamic component of the airline industry that can impact the
cost, convenience, and safety of air travel. By understanding how the routing system works, passengers can
make informed decisions when booking flights and choosing airlines.
 TYPES OF TICKETS
• Electronic Ticket (E-Ticket): E-tickets are the most common type of ticket issued by Amadeus. E-
tickets are paperless and are stored in the airline's reservation system. Passengers can present their
e-ticket confirmation at the airport check-in counter to receive their boarding pass.
• Open Ticket: An open ticket allows passengers to book a flight without specifying a specific travel
date. Passengers can use the ticket for travel at a later date, subject to availability and fare rules.
• Round-Trip Ticket: A round-trip ticket allows passengers to book a flight to their destination and
back to their origin airport. Round-trip tickets can be booked in economy, premium economy,
business, or first class.
• One-Way Ticket: A one-way ticket allows passengers to book a flight from one airport to another
without returning to their origin airport. One-way tickets can be booked in economy, premium
economy, business, or first class.
• Multi-City Ticket: A multi-city ticket allows passengers to book flights to multiple destinations on
a single itinerary. Multi-city tickets can be useful for travelers who are visiting multiple cities during
their trip.
 CONCLUSIONS
To sum up, calculating fares is a difficult procedure that includes a number of variables, including fare
construction, taxes and fees, surcharges, NUCs, and ROE. To meet the needs and interests of various
passengers, airlines provide a variety of ticket kinds, including electronic tickets, flight coupons, open
tickets, round-trip tickets, one-way tickets, and multi-city tickets.
Fare reductions are also frequent and may be provided as part of promotions, seasonal travel, group
bookings, or loyalty initiatives. In order to provide passengers with the most practical and economical
aircraft itineraries, routing systems are crucial.
In general, the airline business is always changing to satisfy the shifting needs of passengers and
boost productivity. The trend is towards electronic ticketing and paperless transactions, however
traditional paper tickets and flight coupons may still be used occasionally. Travelers can make wise
judgements and better plan their trips if they are aware of the many components of fee calculation
and ticketing.
 REFERENCES
• International Air Transport Association (IATA). (n.d.). Home. Retrieved from https://www.iata.org/
• Amadeus. (n.d.). Travel technology for the world's leading travel companies. Retrieved from
https://amadeus.com/en
• U.S. Department of Transportation. (n.d.). Home. Retrieved from https://www.transportation.gov/
• Airline Reporting Corporation (ARC). (n.d.). Home. Retrieved from https://www2.arccorp.com/home/
• International Airfare Calculator. (n.d.). Retrieved from https://www.internationalairfarecalculator.com/
• Travelport. (n.d.). Home. Retrieved from https://www.travelport.com/
• Farelogix. (n.d.). Home. Retrieved from https://www.farelogix.com/
• SITA. (n.d.). Home. Retrieved from https://www.sita.aero/
• Airlines for America (A4A). (n.d.). Home. Retrieved from https://www.airlines.org/
• International Air Transport Association (IATA). (n.d.). Simplifying the Business. Retrieved from
https://www.iata.org/en/programs/simplifying-the-business/
• Title: Fare Calculation Scenarios
ACTIVITY
Objective: To enhance the learner's understanding of fare calculation and ticketing concepts by analyzing different fare scenarios.
• Materials:
Pen or pencil
Paper
Instructions: RATE OF EXCHANGE IS 1 EURO = 1.10 USD, 1 USD = 55.68 PHP, 1 SGD = 41.72 PHP, 1 HKD = 7. 19 PHP, 1 MYR = 11.89 PHP, 1 GBP= 70.80PHP
1. Read the following fare scenarios and answer the questions provided for each scenario. Scenario 1: You are booking a round-trip flight from Los Angeles (LAX) to Paris (CDG) departing
on September 1, 2024, and returning on September 15, 2024. You want to fly business class and your preferred airline is Air France.
• What is the base fare for your round-trip flight?
• What are the taxes and fees for your round-trip flight?
• What is the total fare for your round-trip flight, including all taxes and fees?
2. Scenario 2: You are booking a one-way flight from New York (JFK) to Tokyo (NRT) departing on August 1, 2024. You want to fly economy class and your preferred airline is Cathay
Pacific.
• What is the base fare for your one-way flight?
• What are the taxes and fees for your one-way flight?
• What is the total fare for your one-way flight, including all taxes and fees?
3. Scenario 3: You are booking a multi-city flight from London (LHR) to Sydney (SYD) with a stopover in Singapore (SIN) departing on December 1, 2024. You want to fly first class and
your preferred airline is Malaysia Airlines.
• What is the base fare for your multi-city flight?
• What are the taxes and fees for your multi-city flight?
• What is the total fare for your multi-city flight, including all taxes and fees?

Write down your answers for each question on a separate piece of paper. ALL FARES MUST BE IN PHP.
EXAMPLE
EXAMPLE