Discuss the steps of Fare Construction.

Fare construction is a process used in the airline industry to determine the total fare for an air ticket based on various components. These components include base fare, taxes, surcharges, and other fees. The fare construction process is intricate, involving specific steps to calculate the total cost of a ticket. Here is an overview of the key steps in fare construction:

1. Identify the Origin and Destination (O&D): The first step in fare construction is to determine the specific route, including the origin and destination airports. This information is crucial as it forms the basis for calculating the fare.

2. Determine the Class of Service: Different classes of service, such as economy, business, or first class, have distinct fare structures. Fare construction begins by specifying the class of service the passenger intends to book, as each class has its own associated fares.

3. Select the Fare Basis Code: Airlines use alphanumeric codes known as fare basis codes to identify specific fare rules and conditions. These codes are associated with each ticket and provide details such as advance purchase requirements, minimum stay, and refundability. Selecting the appropriate fare basis code is a critical step in fare construction.

4. Apply Seasonality and Day-of-Week Restrictions: Some fares vary based on the time of year or the day of the week. Fare construction takes into account any seasonal adjustments or restrictions, such as higher fares during peak travel periods or lower fares on specific days.

5. Calculate the Base Fare: The base fare is the core cost of the ticket before taxes and surcharges are added. It is determined by factors such as the distance between the origin and destination, the class of service, and the fare basis code. The base fare is a fundamental component in the fare construction process.

6. Add Taxes and Fees: Various taxes and fees are imposed by governments and airports and contribute to the total cost of the ticket. These may include passenger service charges, security fees, airport taxes, and other government-imposed levies. Fare construction involves accurately adding these charges to the base fare.

7. Include Surcharges and Fuel Fees: Airlines may impose surcharges to cover specific costs, such as fuel or currency fluctuations. Fuel surcharges, in particular, are common and can vary based on the airline's policies. Fare construction considers these surcharges as additional components of the overall ticket price.

8. Factor in Currency Exchange Rates: For international travel involving multiple currencies, fare construction takes into account currency exchange rates. The total fare is often converted into the currency of the country where the ticket is purchased.

9. Consider Stopovers and Connecting Flights: If the journey includes stopovers or connecting flights, fare construction accounts for the additional segments. Each segment may have its own fare, and the total cost is calculated based on the combination of all segments.

10. Apply Discounts and Promotions: Airlines may offer discounts or promotions based on factors such as loyalty program membership, corporate agreements, or promotional campaigns. Fare construction involves applying these discounts to determine the final price for the ticket.

11. Verify Fare Rules and Conditions: Fare construction requires adherence to the rules and conditions associated with the selected fare basis code. This includes compliance with advance purchase requirements, minimum stay conditions, and refundability criteria.

In conclusion, fare construction is a meticulous process involving multiple steps to determine the total cost of an air ticket. From identifying the origin and destination to calculating the base fare, adding taxes and fees, considering various restrictions, and applying discounts, each step contributes to the final fare amount. This complex process ensures transparency and accuracy in pricing while accommodating the diverse factors that influence air travel costs.