Airlines Ticketing and Fare Construction

IATA and ICAO Comparison

• IATA (International Air Transport Association): Founded in 1945 in Havana, Cuba; executive headquarters in Montreal, Canada (with main clearing house in Geneva, Switzerland). It is the global trade association representing commercial scheduled passenger and cargo airlines.
• ICAO (International Civil Aviation Organization): Founded in 1944 under the Chicago Convention; specialized agency of the United Nations headquartered in Montreal, Canada. It establishes international standards and recommended practices (SARPs) for global civil aviation safety, navigation, and environmental protection.

The Three IATA Traffic Conference Areas

1. TC1 (Traffic Conference Area 1 - The Americas): Encompasses North America, Central America, South America, Bermuda, Greenland, and adjacent islands (e.g., Caribbean, Hawaiian Islands).
2. TC2 (Traffic Conference Area 2 - Europe, Africa, Middle East): Encompasses Europe (up to the Ural mountains), Africa and adjacent islands, and the Middle East (including Iran).
3. TC3 (Traffic Conference Area 3 - Asia-Pacific): Encompasses Asia (east of Iran, including South Asia, Southeast Asia, East Asia), Australia, New Zealand, and the Pacific Islands.

Concept of PNR & The 5 Mandatory Elements (PRINT)

A Passenger Name Record (PNR) is a computer file stored in a Computer Reservation System / GDS containing the complete booking itinerary and personal details of a traveler.

Mandatory PRINT Elements:

• P - Phone / Contact: Agency telephone, passenger mobile number, or email.
• R - Received From: Identity of the person requesting the booking.
• I - Itinerary: At least one flight segment or auxiliary car/hotel segment.
• N - Name: Full surname and given name of passenger(s) matching passport.
• T - Ticketing Time Limit: Mandatory ticketing date/time deadline.

MPM vs. TPM in Air Tariff Construction

• TPM (Ticketed Point Mileage): The actual, non-stop physical nautical air distance between two specific ticketed city airports, published in the official IATA mileage table.
• MPM (Maximum Permitted Mileage): The maximum distance allowance established by IATA between an origin and destination that a passenger is permitted to fly (including indirect intermediate stops) at the direct published fare without paying an extra mileage surcharge.

NUC and ROE in Air Fare Construction

• NUC (Neutral Unit of Construction): A fictitious, standardized international currency unit established by IATA (historically tied to the US Dollar) used by global airlines to calculate, combine, and compare international air tariffs consistently across different country currencies.
• ROE (Rate of Exchange): The official conversion exchange rate published quarterly by IATA used to convert the final calculated fare from NUC into the local currency of the country of commencement of travel.

Chicago Convention (1944) vs. Warsaw Convention (1929)

1. The Chicago Convention (1944):

• Established the foundational principles of international public air law: recognized that every sovereign state has complete and exclusive sovereignty over the airspace above its territory.
• Created the International Civil Aviation Organization (ICAO) to formulate technical standards (SARPs) governing air safety, aircraft registration, pilot licensing, and airport operations, and codified the Freedoms of the Air.

2. The Warsaw Convention (1929):

• Governs private international air law and airline legal liability for commercial passengers and international cargo.
• Established standardized international passenger tickets, baggage checks, and set uniform financial liability limits for carriers in the event of passenger injury, accidental death, or baggage loss during international flights (later updated by the Montreal Convention 1999).

The Freedoms of the Air (ICAO)

Commercial traffic rights granted by one sovereign country to another:

1. First Freedom: Right to fly over a foreign territory without landing (e.g., Nepal Airlines flying through Indian airspace en route to Dubai).
2. Second Freedom: Right to land in a foreign country for non-traffic/technical purposes only (refueling, mechanical maintenance) without taking on or discharging passengers.
3. Third Freedom: Right to carry commercial traffic (passengers, cargo) from the home country to a foreign country (e.g., Nepal Airlines flying passengers from Kathmandu to Tokyo Narita).
4. Fourth Freedom: Right to carry commercial traffic from a foreign country back to the home country (e.g., Nepal Airlines carrying passengers from Tokyo Narita back to Kathmandu).
5. Fifth Freedom: Right of an airline to carry revenue traffic between two foreign countries on a flight originating or terminating in the airline"s home country (e.g., Emirates flying Dubai ──> Bangkok ──> Hong Kong, picking up and dropping passengers on the Bangkok-Hong Kong sector).
6. Sixth to Ninth Freedoms: Encompass Sixth (via home hub), Seventh (standalone foreign routes), Eighth (consecutive domestic cabotage), and Ninth (pure stand-alone domestic cabotage in a foreign country).

Step-by-Step IATA Mileage System Calculation

1. Determine Routing & Ticketed Points: Identify origin, destination, and all intermediate connection points.
2. Sum Total Ticketed Point Mileage (TPM): Extract individual TPMs for each sector from IATA mileage tables and sum them up ($\sum \text{TPM}$).
3. Deduct Extra Mileage Allowance (EMA): If the routing traverses designated geographical corridors qualifying for an official mileage discount (EMA), subtract EMA from total TPM to obtain Adjusted TPM.
4. Compare Adjusted TPM with Maximum Permitted Mileage (MPM):
   • Condition 1: If Adjusted TPM $\le$ MPM, the direct published base fare applies without any surcharge.
   • Condition 2: If Adjusted TPM $>$ MPM, compute the ratio: $M = \frac{\text{Adjusted TPM}}{\text{MPM}}$.
5. Determine Extra Mileage Surcharge (EMS):
   • If $1.0000 < M \le 1.0500 \rightarrow$ 5% Surcharge (5M)
   • If $1.0500 < M \le 1.1000 \rightarrow$ 10% Surcharge (10M)
   • If $1.1000 < M \le 1.1500 \rightarrow$ 15% Surcharge (15M)
   • If $1.1500 < M \le 1.2000 \rightarrow$ 20% Surcharge (20M)
   • If $1.2000 < M \le 1.2500 \rightarrow$ 25% Surcharge (25M)
   • If $M > 1.2500 \rightarrow$ Must split the journey into separate ticketed sectors.

Higher Intermediate Point (HIP) Check Rule

• The Rule: In an indirect passenger journey between an origin and destination, if the direct published fare from the origin to any intermediate stop, or from any intermediate stop to the destination, is higher than the direct fare between origin and destination, the highest intermediate fare must replace the base fare.
• Why Airlines Enforce HIP: Prevents “hidden city ticketing” and revenue loss. For example, if a direct flight KTM to London (LHR) costs NUC 800, but an intermediate business hub sector KTM to Dubai (DXB) costs NUC 950 due to high local corporate demand, the airline will not permit a passenger to buy the cheaper KTM-LHR ticket and stop over in Dubai without paying the higher NUC 950 intermediate fare.

IATA Billing and Settlement Plan (BSP)

The IATA BSP is a centralized global financial clearinghouse system that simplifies the selling, reporting, and remitting procedures between IATA-accredited passenger travel agents and participating airlines:

1. One Master Contract: Instead of travel agents holding individual financial relationships and separate ticket stocks for 100+ airlines, agents access standard electronic ticket stocks via GDS under a single universal IATA Sales Agency Agreement.
2. Consolidated Financial Remittance: At the end of each reporting period (typically semi-monthly), the travel agency makes one single consolidated remittance payment to the local IATA clearing bank.
3. Automated Distribution: The BSP bank clearing system automatically distributes the net funds owed to each individual airline, issuing electronic Agency Debit Memos (ADMs) or Agency Credit Memos (ACMs) for any discrepancies.

International Travel Documentation & TIMATIC

1. Passport Validity Rule (The 6-Month Rule): Most destination sovereign governments mandate that a visitor"s passport must remain valid for at least 6 months beyond the date of intended departure from the destination, with at least 2 blank visa pages.
2. Visas (Tourist, Transit, On-Arrival): Official entry endorsements granted by destination governments. Failure to hold a transit visa during international hub connections can result in denied boarding.
3. IATA TIMATIC Database: The authoritative, real-time cross-border compliance database used globally by airline check-in agents to verify passport, visa, transit, customs, and health/vaccination (yellow fever, polio) regulations. If an airline boards an ineligible passenger, destination immigration levies severe financial fines on the carrier and mandates free repatriation.

Practical Mileage Fare Calculation (KTM - BKK - NRT)

(a) Summing TPM and Comparing with MPM:

• Total Ticketed Point Mileage ($\sum \text{TPM}$):
  $$\sum \text{TPM} = \text{TPM (KTM-BKK)} + \text{TPM (BKK-NRT)} = 1,375 + 2,879 = 4,254\text{ miles}$$
• Compare with Maximum Permitted Mileage (MPM):
  $$\text{MPM (KTM-NRT)} = 4,120\text{ miles}$$
  $$\text{Total TPM (4,254)} > \text{MPM (4,120)}$$
  Because TPM exceeds MPM, an Extra Mileage Surcharge (EMS) must be evaluated.

(b) Determine Mileage Ratio & EMS Surcharge Tier:

$$\text{Ratio } M = \frac{\text{Total TPM}}{\text{MPM}} = \frac{4,254}{4,120} = 1.0325$$

• Referring to the standard IATA EMS surcharge table:
  • $1.0000 < M \le 1.0500 \rightarrow$ 5% Surcharge (5M) applies ($1.0325$ falls within this band).

(c) Calculate Base Fare in NUC:

$$\text{Base Fare in NUC} = \text{Published NUC} \times 1.05 = 850.00 \times 1.05 = \text{NUC } 892.50$$

(d) Convert to Local Currency (Nepalese Rupee - NPR):

$$\text{Base Fare in NPR} = \text{Fare in NUC} \times \text{ROE} = 892.50 \times 132.85 = \text{NPR } 118,568.625$$

• Applying the standard IATA currency rounding rule for NPR (round up to next whole Rupee):
  $$\text{Final Base Fare in NPR} = \text{NPR } 118,569$$

(Note: Applicable passenger service charges, airport development taxes, and airline fuel surcharges are added onto this base fare to yield total ticket cost).

International Aviation Liability & Passenger Rights (Montreal Convention 1999)

(a) Involuntary Denied Boarding (Commercial Overbooking Bump):

• Volunteers First (Mandatory Protocol): Airlines must first call for volunteers willing to surrender reservations in exchange for negotiated compensation before bumping any passenger involuntarily.
• Statutory Compensation for Involuntary Bumps: If involuntary:
  1. The airline must re-route the passenger to the final destination on the next available flight (even on a competitor airline) or offer a 100% full refund.
  2. Under international consumer laws (e.g., EU Regulation 261/2004 or US DOT rules), mandatory cash compensation is payable immediately (ranging from €250 to €600 depending on flight distance).
  3. Duty of care: Complimentary hotel accommodation, airport transfers, meals, and communications during waiting intervals.

(b) Total Loss / Destruction of Checked Baggage:

• Liability Limit: Under the Montreal Convention (updated 2019 review), airline liability for destroyed, lost, or delayed baggage is strictly capped at 1,288 Special Drawing Rights (SDRs) (approx. USD 1,750 per passenger), irrespective of baggage weight.
• Filing Deadlines: Passenger must file a Property Irregularity Report (PIR) before leaving the customs hall. Written damage claims must be filed within 7 days; lost baggage claims within 21 days after the baggage should have arrived.

(c) Extended Flight Delays (> 5 Hours):

• If an international flight delay exceeds 5 hours, passengers are entitled to choose between: (1) full ticket refund and complimentary return flight to origin, or (2) re-routing under comparable transport conditions, alongside mandatory provision of meals, refreshments, and hotel lodging if an overnight stay is necessitated.