Basics on Fare Construction 1

Through this article, we try to explain the basics of fare construction. This article provides a brief introduction to 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. Its the point or city from where the itinerary will commence. If you are 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. It is the maximum mileage that 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 eg:- 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 won’t 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 don’t 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 its 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.

But 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.

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23 Replies to “Basics on Fare Construction 1”

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