Understanding Airfares

     

    • Last week you paid $258 to fly from Ottawa to Toronto and back. This week it could cost you as much as $646 or as little as $139: three drastically different fares for what appears to be exactly the same product. Why?
    • Your travel agent quotes you $646 for a return flight on Air Canada while an identical flight on Canadian Airlines is quoted at $275. This, in spite of the fact that the two airlines have established exactly the same fares for the same route - to the penny. So why the difference in the quotes?
    • Why is there no simple answer to a question such as "How much is a round-trip plane ticket between Ottawa and Toronto?"

    The mystery of airfares revealed! Read on…


    Introduction

    We at TrailFinders have been providing travel services to corporations, government, non-governmental organizations, small business, groups and individuals for over twenty-two years and we understand airfares very well. Every day we spend much time explaining to our clients the mysteries of restricted tickets, change fees, refundability, advance purchase and so on. However, the subject is complex and despite our best efforts, many of our clients remain confused by the airlines' fare rules and they often seek a deeper understanding than we can give them in short conversations on the telephone.

    Because of the frustrations voiced by our clients we created this article. We sincerely hope you will take the time to read it, absorb it and pass it on to others.

    Airfares, Airlines and Choices

    Most domestic travellers would suggest that there are two airlines in Canada which provide domestic air service and to get the best fare they simply need to call each of them in turn and pick the cheapest. They fail to recognise that:

  • Besides Air Canada and Canadian, there are other choices including Westjet and several other Regional Carriers as well as charter airlines such as Canada 3000, Royal Airways and Air Transat who sell their seats through travel agents.
  • Air Canada and Canadian Airlines set up their fares to ensure that they match each other to the penny, so in general most airfare quotes should be identical;
  • When they are not the same, the difference generally arises from the fact that the fare is based on the price of the vacant seats remaining on a specific flight (described in detail later in this article) and therefore varies according to the number of people who have booked before you - the cheapest seats are sold first;
  • Each airline can only see the availability of seats on its own aircraft and therefore cannot tell you (and of course wouldn't tell you) if the competitor has cheaper seats on the day you wish to travel.

    An international traveller would find much the same situation, however the complexity increases.

  • Besides Air Canada, Canadian and the charter companies, scores of other airlines are available to choose from;
  • While domestic tickets cannot generally be discounted, US and international ones can be, and the traveller will often be able to obtain discounted tickets through travel agents who deal with "wholesalers";
  • Wholesalers, also known as consolidators, do not deal directly with the public. They have agreements with the airlines (including Air Canada and Canadian) to re-sell their tickets through travel agents at a discount - generally cheaper than they would sell these tickets themselves;
  • Because the wholesalers can often be allocated seats for resale, an airline often may not be able to see the total seat availability on its own aircraft and the public can be led to believe that all reasonably-priced seats may be gone. This may not be the case.

    The conclusion is simple: You cannot get the "best fare" by dealing directly with an airline, even if you take the time to call them all. The only way to get the best airfare is to call a reputable travel agent who can see all products, can deal with all suppliers (including charter companies and wholesalers) and who is working for you.

    Standard Published Fares, Classes and Fare Types

    We are all familiar with the major three classes in air travel: First class; Business class; and, Economy class.

    Within these broad categories however, there are many different fare types and correspondingly, many different fares. For example, within each category there may be regular or full-fares, discount excursion fares, weekend fares and seat-sale fares. There may also be "premium" fares or even special fares for seniors and groups. 

    'Getting the best fare' requires an understanding of the rules associated with these fares, however, in general, the more 'airline restrictions' a passenger can live with, the cheaper will be his flight. Specific rules govern items such as the minimum and maximum length of stay, whether the passenger has a Saturday night in his itinerary, whether the ticket is purchased seven or more days in advance and so on.

     For example, full-fare tickets have few restrictions. They have no advance booking requirements, no minimum or maximum stay, no cancellation penalties and no additional costs for making changes to the ticket. The tickets are generally fully refundable and endorsable (can be used on other airlines). Prices are quoted on a one-way basis and are added together to get the total fare. These fares can apply to all classes. Obviously, these tickets are the most expensive and are used where the traveller requires the flexibility of a full-fare ticket. Small discounts from full-fare are often available for seniors or children. As with full-fare tickets, the fare is quoted on a one-way basis and the tickets are fully refundable. These fares also apply to all classes.

     Excursion fares, which apply only to round-trip economy class travel, are those chosen by most travellers. They are the least expensive and are used by those who are not inconvenienced by the many restrictions imposed by the airlines. All excursion tickets require some form of advance booking, generally 21, 14 or 7 days prior to departure. A minimum and maximum stay is required, usually over a Saturday night, and the number of seats in this category on each aircraft is limited. The excursion fare is determined at the time of booking by considering the departure and return dates at the same time. Therefore, if the traveller makes changes to these tickets after they have been purchased, a whole new fare calculation is required and the resulting fare can often be significantly higher than it was at time of booking. As well, these tickets are often totally non-refundable. Penalties, over and above any fare increase, are applied for any changes to the itinerary. It is the airline that imposes these fees, not the travel agent.

     To remain competitive, an airline must react quickly to changes in the overall fares charged by its competition. Therefore, excursion fares can change at any time and travel agents and the travelling public are not usually advised ahead of time. In the case of fare reductions, such as seat sales and special promotions, if an excursion ticket had been purchased prior to the seat sale at a specific fare, the airlines will not allow the traveller to trade in the ticket for one at the new, lower fare.

     Airline excursion fares can also rise at any time. It is important to note that a fare quote is only guaranteed upon full payment of the ticket. In certain circumstances, a fare quote could have been obtained on a certain day and be invalid a day later if the ticket was not purchased prior to the fare change.

    Ticketing Deadlines

    One way in which airlines can partially make up for the loss of revenue due to the relatively inexpensive excursion fares is to insist that the traveller pay for the tickets at the time of booking or relatively soon afterward. Many travellers are annoyed to be told that they must pay quickly or lose the booking, and it is the travel agent who is usually blamed for creating these rules. In reality, these rules are imposed by the airlines.

     There are several types of ticketing deadlines on excursion fares. Some require that a ticket be purchased within 24 hours of booking. In this case, if a traveller makes a booking on October 10 for travel the following March, the ticket must be paid for by October 11. If not, the reservation is automatically cancelled, the previous airfare quote is invalid and a new one must be obtained. The traveller may then have to pay more for the same ticket.

    Also, as mentioned previously, excursion fares are generally subject to advance purchase, such as a minimum of 14 days prior to commencement of travel. Consequently, a traveller making a booking just two weeks before travel may have to pay for the ticket immediately.

    While it is difficult to forecast the exact airfare that a traveller will pay for a specific type of excursion fare on a specific route on a specific date, in general, the cheapest fares are obtained by booking early rather than by waiting. Many travellers continue to believe in the "last minute airfare bargain" - the premise being that the longer they wait to book and pay for their ticket, the greater the likelihood that they will get the cheapest fare. Nothing could be farther from the truth.

    The Concept of Fare Classes

    In order to understand how airfares work it is essential to examine the concept of "fare class" or class of service.

    If we were to interview individual travellers sitting in the economy class section of an aircraft on any specific flight and we were to ask each of them how much they paid for their ticket, we would find a wide variance. For example, on a flight between Ottawa and Vancouver some may have paid $349 and some as much as $2942 for what is essentially the same thing - a seat in the economy section of the aircraft.

    If you take a look at their air tickets you would find that the fare they paid is dependent on the "fare class" they are booked in as shown on their tickets. The broad category of fare class is indicated on the ticket by a single letter printed beside the flight number in a column headed 'CL'. In economy class the letter will generally be one of Y,B,H,K,M,N,Q,L,T or V. In Business class you may see fare classes such as J,C or D, and in first class you might see P,F or A. Within these broad fare classes there can often be many sub-categories; for example in 'M' you may see the actual fare basis shown on the ticket as 'MHABO'. Every individual fare basis has its own rules and its own fare. There are literally hundreds of these.

    In general, economy fares become cheaper as you move from fare class 'Y' (full-fare economy) toward fare classes such as 'L', 'T' or 'V'. At the same time, rules become more restrictive as you move down the list from 'Y'. Therefore, the concept is, if you need more flexibility, less restrictions and less rules, you move up in fare class and pay more. The person paying the high cost 'Y' class fare sits in the same section of the aircraft as everyone else, gets the same service as everyone else, eats the same food as everyone else, but was allowed to book his flight the same day he travelled, is allowed to change his reservation at any time without charge, is able to use his ticket on a competitive airline if he wishes and is allowed to cancel part or all of his trip and obtain a refund. His travelling companions with tickets in cheaper fare classes will not be so fortunate.

     So fare classes have little to do with where you sit on board or the service you receive. They have everything to do with flexibility. The fare you pay is determined in large part by how much flexibility you need.

    The Fare Table

    Let's look at a simple example of airfares available for a hypothetical trip from Ottawa to Vancouver. Here is the type of information a travel agent would see on the computer screen while discussing the options for this trip with a client. Fares are shown in order from lowest to highest. 'R' indicates round-trip. AP is 'Advance Purchase' requirement. L and H indicates high and low season fares, i.e. where the date of travel is near a high/low season change date, both are shown. A good agent will suggest dates which allow travellers to get the low season rate by flying a day or two earlier or later. 'Sa' is a Saturday night stay.

    Airline

    Fare

    Fare Class

    AP (days)

    Min Stay

    Max Stay

    Rules

    AC $349 R L 3 2 3 Depart Saturday, return Monday or Tuesday. Non-refundable, change fee $100
    AC $349 R LX 7 Sa 30 Weekday only, seat-sale fare. Non-ref, chg $100
    AC $379 R LW 7 Sa 30 Weekend, seat sale fare. Non-ref, chg $100
    AC $379 R LL 7 Sa 90 Night fare (dep after 6pm) Non-ref, chg $100
    AC $419 R QX 7 Sa 30 Weekday seat sale fare. Non-ref, chg $100
    AC $439 R QL 7 Sa 90 Night fare. Non-ref, chg $100
    AC $449 R QW 7 Sa 30 Weekend, seat sale fare. Non-ref, chg $100
    AC $449 R L 7 Sa 90 Night fare, special dates only. Non-ref, chg $100
    AC $503 R QL 14 Sa 30 Child fare. Non-ref, chg $100
    AC $519 R LH 7 Sa 90 Night fare. Non-ref, chg $100
    AC $548 R QH 14 Sa 30 Child fare. Non-ref, chg $100
    AC $559 R QL 14 Sa 60 Non-ref, chg $100
    AC $579 R QH 7 Sa 90 Non-ref, chg $100
    AC $609 R QH 14 Sa 60 Non-ref, chg $100
    AC $646 R VL 14 Sa 60 Non-ref, chg $100
    AC $716 R VH 14 Sa 60 Non-ref, chg $100
    AC $740 R HL 7 Sa 90 Non-ref, chg $100
    AC $808 R HH 7 Sa 90 Non-ref, chg $100
    AC $1025 R BL 7 Sa Non-ref, chg $100
    AC $1131 R BH 7 Sa Non-ref, chg $100
    AC $1177 R Q 7 Sa Companion fare. Non-ref, chg $100
    AC $ 750 B USA child fare
    AC $ 1,059 B USA fare
    AC $2185 R B 3 Sa CXL OK $100, chg OK $100
    AC $ 1,324 YCH Child reduced fare
    AC $ 1,471 Y
    AC $ 1,721 J

    Airlines can change their fares at any time (and frequently do!) therefore the fares quoted by your agent on a specific day ( for example, those shown in the table) may be different than they were the day before. Bookings made on any specific day must use the fare tables showing on that day. The fares are established by the airlines and the agent has no choice. 

    We have kept this example simple by showing only one airline, however in reality, the agent would also see the similar fares for every other airline flying this route. Also, the fare classes would be more complex than just QH or QL. There may be scores of different actual fare classes and fares.

    Determining the Fare

    In the example shown above, if a client were booking an Ottawa-Vancouver trip based on this fare table he could pay anywhere from $349 to $3442 for his return ticket.

    How does your agent determine the lowest fare a client can pay? 

    It depends on the client's flexibility. For example, the following questions must be asked.

  • How long will you be staying?
  • Are we now at 7 or 14 days prior to the travel date to get the advance purchase?
  • Can you travel after 5 pm to get the night fare discount?
  • Do you need flexibility in your dates? i.e. are you likely to change your dates or routing?
  • Do you have a Saturday night stay?
  • Do you need a ticket which is refundable?

    The answers to these questions will enable the agent to quote the best fare for the client. As you can see, there is no easy answer to the question "How much is a ticket from Ottawa to Vancouver?"

    Availability

    At this point in our example, the agent has chosen the best fare for the client. The next step is to determine if that fare is available on the dates he wishes to travel. The fare is only available if there are seats on the specific aircraft on the specific day in the fare classes chosen. There are a limited number of seats in each fare class on each aircraft. The exact number is determined by the airlines. Usually once they're gone, they're gone. 

    The agent will look at the seat availability on all flights departing on the date the client has requested at or near the times the client has requested. Here is a simplified example of what the agent might see on the computer screen. 

    AC903 J5 Y7 B2 H1 V1 Q0 L0 YOWYVR 0930 1140
    AC907 J6 Y4 B3 H3 V4 Q1 L0 YOWYVR 1755 2019 

    These are the direct flights showing for the date the client wishes to fly. The screen will also show all connecting flights but, for simplicity, we have not shown them here. 

    The table shows the flight number, the number of seats available in each of the fare classes, the departure and arrival points and the departure and arrival times. For example there are 5 business class seats (J) available for sale on flight 903 and 11 economy seats. (7 in full fare economy (Y) and 2 in B, 2 in H and 1 in V.) These fare classes correspond to the prices shown in the fare table above. 

    If the client stated that he wanted only direct flights, the best fare available on this day would be in fare class Q on flight 907. If he were to choose flight 903, the best fare would be in V fare class. Consequently it would cost the client more if he were to fly on the early morning direct flight than it would on the evening flight even though the actual seat in the economy cabin of the aircraft might be identical in either case. 

    The longer a client waits to book the flight, the less seats will likely be available in the lower fare classes and the higher will be his fare. For example, if the client had called the agent the day before and asked about the fares, the computer may have shown the following. 

    AC903 J6 Y7 B3 H2 V2 Q2 L0 YOWYVR 0930 1140
    AC907 J7 Y7 B4 H4 V4 Q3 L1 YOWYVR 1755 2019 

    The client could then have booked flight 907 in L class and paid the absolute lowest fare possible, but waiting an extra day resulted in all L class seats being sold out. The decision to wait one day to call the agent could have cost the client $297 (V less L fare). 

    The same procedure is followed by the agent for the return flight back to Ottawa. If the seats in both directions are in the same fare class, the fare in the Fare Table will apply (plus taxes). If the seats are in different fare classes, the fares shown in the fare table are divided by 2 for each class and then added together to get the total fare. 

    You can appreciate that the fares paid by a client for several trips between Ottawa and Vancouver on different dates at different times of the year could vary widely and yet each fare could have been the cheapest fare available at the time of booking - even if the airlines didn't change the fares at any time during the year. 

    When the airlines advertise fares, they show only the cheapest fare in the ads, i.e. the lowest fare class. If a seat sale is announced and if the client does not act quickly, the limited number of seats on each aircraft in this fare class may be sold out when he tries to make the booking. This is frustrating for the client and he may tend to take this out on his travel agent, when in reality, higher fares result from his procrastination.

    Changing your flights after ticketing

    The vast majority of airline tickets sold are "restricted" in one or more ways. For example, most are totally non-refundable. Many carry change fees. Many do not allow changing of the routing and many are non-endorsable (only good on the airline indicated on the ticket). Generally, the only totally unrestricted tickets are Full-Fare Economy and Business Class tickets. 

    When a client purchases a restricted discount ticket, he has made a contract with the airline according to the conditions and rules associated with the fare paid. That is, the airline agrees to sell him his seats at the reduced price in exchange for him agreeing to use the ticket according to the rules. If he changes his ticket, the airline can and usually will assess penalties. (It is indeed the airline which assesses these penalties, not the travel agent.) 

    Here are a few examples of what happens when a client flying on a restricted ticket changes a reservation.

    Cancelling all flights on a ticket

    If, after having purchased a restricted, non-refundable ticket, a client cancels the whole trip, the value of the ticket can usually be used towards future travel for a limited time, generally one year. The change fee would be assessed and sent to the airline. The value of the new ticket would be calculated and the difference would have to be paid by the client. For example, the client cancels an itinerary for which he had a $450 ticket. The client rebooks a trip which prices out at $600. The client would have to pay the change fee (usually about $100) plus the $150 difference.

    Changing the date or time of a flight

    When a client changes the date or time of a flight, but not the departure and destination cities or the airline, the change fee applies plus the client will have to pay the difference in the fare. For example, if the client has a "V" class ticket and changes to a flight the next day on which there are "V" class seats available, the only fee assessed would be the change fee (about $100). If however, there were no "V" class seats available on the new flight, and the client had to take a "Q" class seat, the client would pay the change fee plus the difference between the V and Q class fares.

    Changing the routing (includes not using one part of a ticket)

    This is generally a no-no and could cost the client a significant amount of money. Changing the routing means deviating from the routing shown on the ticket, and could include stopping in a city where no stopover was allowed (see the small 'X" and "O" indicators on the left side of your airline ticket), not taking one or more of the flights on the ticket, and so on. 

    For example, assume a client has purchased a restricted discount Vancouver-Ottawa-Vancouver ticket for $349 which includes a direct flight between Vancouver and Ottawa and a return flight from Ottawa to Toronto, a change of planes in Toronto, and a flight from Toronto to Vancouver to complete the journey. The ticket will indicate that a stop is not allowed in Toronto. Assume, as well, that after having purchased the ticket, a friend who is driving from Ottawa to Toronto offers him a ride between the two cities. When the client shows up for the Toronto-Vancouver flight, he may be surprised (and angry) to find out that his Toronto-Vancouver reservation has been cancelled and that his ticket is now unusable. This is because he has changed his routing and a change of routing is not allowed in the "contract" he has with the airline. The airline saw that his outgoing flight between Ottawa and Toronto was not used and it automatically cancelled his Toronto-Vancouver flight. In order to get to Vancouver, the client may now be forced to pay the "one-way" fare between the two cities, which could be close to $1471. Total cost of the trip $355 plus $1471 = $1826 plus taxes. This was an expensive "free" car ride from Ottawa to Toronto! 

    It is important to keep in mind that if a client is flying on a restricted ticket and a segment of a trip is not used, all subsequent segments can be cancelled by the airline and a completely new booking and ticket will be required to complete the trip. 

    A similar problem might result if the same client decided to stay in Ottawa rather than fly back to Vancouver. It is against all airline rules to allow a passenger to purchase a round-trip air ticket if he has no intention of taking the return flight. A one-way ticket between Vancouver and Ottawa would cost $1471 (see fare table) and a round trip ticket could be as cheap as $349. Consequently, if the client paid $349, then stayed in Ottawa and did not use the return ticket, the airline has the option of assessing a penalty of the difference, $1122. Although this is rarely done, it could happen, and the travel agent may be liable for this amount if she is found to have issued a round-trip ticket when she knew the client was flying only one-way.

    Getting Discounted Tickets for US and International Travel

    If you plan to travel to the U.S. or internationally and if you don't need the flexibility that comes with a full-fare ticket, you could possibly obtain a discounted ticket through your travel agent who can get it from wholesale providers of airline tickets called 'consolidators'. The general public does not have direct access to these companies. 

    Consolidators are located in major cities throughout the world, including here in Ottawa, and sell reduced fare airline tickets to retail travel agents. These companies have special arrangements with airlines giving them fares that are generally 18% to 40% lower than fares available from the airlines themselves. These lower fares are based on buying volume and the marketing relationship between the consolidator and the airline. They allow the airlines to compete with charter airline companies in the local marketplace. 

    A consolidator issues an airline ticket to a travel agent at a face value that is the IATA approved world-wide price for that type of ticket considering the booking class, advance purchase requirements and other conditions. By purchasing a ticket which bears the approved world-wide price, the traveller is able to avoid any problems when checking in at distant locations. 

    However, while the ticket itself shows that its value is the agreed-to world-wide price approved by IATA, the final price actually paid for the ticket bears no relationship with this value and is determined by local market conditions in the location where the ticket was purchased.

    An Example of a Consolidated Ticket

    Shown on the next page is an actual one-way ticket from Toronto to Bangkok. 

    The price shown on the ticket is $1280 plus applicable taxes. This is the approved IATA fare for this routing and class. Had the travel agent obtained this ticket directly from an airline, the traveller would have paid $1280 plus tax for the ticket, a total of $1356.18. 

    In order to get the customer the best possible deal, the agent (actually TrailFinders in this example) shopped around and was able to obtain the actual ticket shown above from a local consolidator for $223 less. This entire savings was then passed on to the customer, saving him more than 16% over what he would have had to pay if the ticket were obtained directly from the airline itself. His total cost was $1057 plus tax, or $1133.18. 

    The ticket, in this case 'V and M' class, carries the same class restrictions as a ticket purchased directly from the airline, regardless of the actual price paid for the ticket.

    Obviously, these types of tickets are not always available for the dates and routings that the client may want, however when they are available the savings can be considerable. The effort required by the agent to search out and obtain these tickets is also considerable. It goes without saying that many agents may prefer not to use consolidator tickets and instead, to sell a ticket obtained directly from the airlines. If your agent is doing this, it's time to find a new agent.

    An 'Even Better' Idea

    We believe there is an 'even better' way to get the best international airfare. We have negotiated special fare arrangements directly with our airline partners and consequently we sell 'consolidated' air tickets without the consolidator! No middle man. The savings go directly to you. 

    The Last Word

    While this document is limited in scope, it serves to point out that the pricing of airfares and the steps involved in obtaining the best airfares on any specific route are very complex subjects. Dealing with an airline directly, either in person, on the telephone or on the web, will often result in the client paying a higher fare than is necessary. The best fares can always be obtained through the use of a reputable, experienced, skilled travel agent who makes it his/her business to seek out the best bargains for the customer.

    Have a great trip, but pay attention to the details shown on your airline ticket!