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European hub stopover fares

Old 10th Nov 2012, 16:55
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European hub stopover fares

As many are aware, UK APD is structured so that the tax depends on one's final destination on the ticket, with any scheduled transfer taking less than 24 hours being deemed just a temporary connection. Spend more than 24 hours en route and the tax depends only on distance from the UK to the capital of that transfer country.

I realise that nonstop flights almost always attract a higher fare than indirect (barring things like tag-ons) and EU laws mean tickets sold in the EU must be available in all EU states without country restrictions.

Therefore, why do the likes of Air France or Lufthansa not sell UK originating long haul tickets to India, East Asia, Southern Africa and Latin America (ie APD Band C, over 4001 miles from London) specifically with a 24+ hr stopover in Paris or Frankfurt ? I doubt they give a damn about offending HMRC. Ticketing restrictions could stipulate no changes to first 2 sectors and coupons must be used in prescribed order, to minimise revenue loss and gain clear market segmentation. I realise this will tend to attract the price sensitive, time insensitive brigade but the upside is to increase long haul sales out of the UK, particularly in offpeak seasons. No need to give all the tax saving to the passengers - either give passengers half the monetary saving or provide a night's accommodation in a suburban 2 star hotel as part of the fare.

Last edited by davidjohnson6; 10th Nov 2012 at 17:17.
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Old 10th Nov 2012, 17:12
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The way I understand it, the APD is waived if your transit of the UK is less than 24 hours.

If you buy a ticket via a third city you pay the APD for the highest rated city on your ticket, regardless of enroute transit times. In other words the APD is the same for LHR-SYD, LHR AMS SIN SYD, LHR DXB SYD, Etc.

Now if you but two tickets via AMS you would pay the short haul APD.

Last edited by ExXB; 10th Nov 2012 at 17:13.
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Old 10th Nov 2012, 20:11
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If you buy a ticket via a third city you pay the APD for the highest rated city on your ticket, regardless of enroute transit times
Transit time does matter - specifically whether or not you spend more than 24 hours at a transit point.

Reading the advice from HMRC, if one flies London-Madrid on 1 December, spends more than a scheduled 24h in Madrid (24h and 1 minute will suffice) and then flies onto Rio de Janeiro in Brazil, then the 2 flights are not treated as connected, and one need pay APD only for the London-Madrid flight, and not the APD for London-Brazil.

HM Revenue & Customs
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Old 10th Nov 2012, 23:20
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Transit time does matter - specifically whether or not you spend more than 24 hours at a transit point.

Reading the advice from HMRC, if one flies London-Madrid on 1 December, spends more than a scheduled 24h in Madrid (24h and 1 minute will suffice) and then flies onto Rio de Janeiro in Brazil, then the 2 flights are not treated as connected, and one need pay APD only for the London-Madrid flight, and not the APD for London-Brazil.
True- something I've tried to use to my advantage a few times (via a multi-destination search) but never quite managed to make work.

I believe that it has something to do with ICAO regulations. Any flight connection where there are less than 24 hours between the scheduled arrival time of the first flight and the scheduled departure time of the second flight is technically classed as a transfer. A connection of over 24 hours is classed as a stopover. A trip which involves a transfer is classed as one journey, made up of two (or more) flights. Where a trip involves a stopover, each flight is treated as an independent journey, even where they are booked on the same itinerary. For example, if I fly MAN-AMS-DXB with a 23hr59min connection in AMS, I can buy duty free in MAN as my final destination is outside of the EU. If the connection between flights is 24hrs01min, I can't. I believe that it is this distinction which underpins HMRC's advice on the issue.

There are two problems when it comes to exploiting this principal to avoid UK APD. First of all, some airlines charge a premium for slotting a stopover into an itinerary, wiping out any savings derived from avoiding UK APD (AF/KLM are particularly bad in this regard; LH and LX are much better).

Secondly, if you're going to spend 24 hours in an intermediate city, you're going to have to pay for food, airport transfers and a hotel. You'll also have to pay the local equivalent of APD upon departure. These additional expenses tend to mitigate any savings which have been gleaned by not paying full APD (and that's before considering whether the added complexity, time and inconvenience make a stopover worthwhile). The only scenario that can think of where it would be worthwhile for financial reasons is where one connects from short haul economy class to long haul business of first.

Last edited by Anansis; 10th Nov 2012 at 23:25.
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Old 11th Nov 2012, 07:54
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OK thanks for that, I didn't understand it that way.

As noted, for journeys via a higher rated (I.e. more expensive) point you will be assessed the higher fare. This rule has been on the books for decades, to protect the HIP fare.
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Old 11th Nov 2012, 08:05
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What happens if, for example, I buy in the UK a return to Paris on Air France and arrange to buy, in France, a return to the US from Paris? Then I get stuck for UK APD only on the London Paris sector. The problem could be buying the ticket in Paris on line if you have a credit card with a UK billing address...
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Old 11th Nov 2012, 09:51
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radeng:

There would be no problem with doing that from an APD perspective. However, the cost of purchasing two point-to-point tickets is usually significantly higher than buying one through ticket with a transfer. This is because airlines tend to charge a premium for direct flights.

Air France would not simply add the component costs of each individual flight if you were to travel MAN-CDG-JFK; they would calculate a fare which allows them to extract the maximum yield between MAN and JFK, with one eye on their competitors prices. They can't compete with a direct flight for time and convenience, so they have to compete on price. Therefore, they might 'lose' money on the MAN-CDG sector (filling a seat which would otherwise be empty, the cost of which will have been paid for by a point to point pax) in order to gain maximum revenue on the transatlantic sector. Airlines use complex computer algorithms to calculate maximum yield (the irrational, complex quirks of airline pricing strategies has been the subject of many threads in the past).

There are also the traditional problems associated with two connecting point-to-point connections to consider (e.g, no baggage transfers and no protection if your first sector is delayed).
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Old 11th Nov 2012, 11:32
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The problem could be buying the ticket in Paris on line if you have a credit card with a UK billing address...
I don't believe that is the case any longer (it once was). I regularly purchase tickets on line with departures from Belgium, Germany and the UK with a foreign billing address not belonging to any of those countries.
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Old 12th Nov 2012, 15:26
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Anansis,

Point taken. So depending on traffic demand, it COULD be cheaper to have a return from CDG to JFK, and a separate MAN - CDG return. Of course, as you say, there are potential problems where the tickets are separate, but the saving could make it worthwhile. Or not, as the case may be.

Didn't the algorithms go wrong earlier on this year and have one US airline selling tickets on line at an enormous discount until they discovered the error? I can't remember whether or not the airline honoured the tickets.
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Old 13th Nov 2012, 00:41
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Radeng:

In theory yes. In practice it's difficult, for the reasons I outlined above.

The closest I've come is booking a very cheap (i.e. 'free online checkin') Ryanair flight from the UK to Germany in order to catch a cheap Emirates flight to the Far East (taking advantage of the free 'rail and fly' ticket which was provided by Emirates to travel between airports in Germany). Total saving = around 50 overall, for a LOT of extra effort, but worthwhile as I got to visit friends in Berlin

This scenario however is a departure from the scenario described by davidjohnson6 in his original post; in this instance I booked two independent flights, not a series of related flights on the same ticket with a +24hr connection.

Not sure about the algorithms going wrong for an airline. I can well imagine it happening though. I did hear that Network rail were recently allowing rail users to book local journeys in London via Inverness, meaning that some rail passengers were able to get a return to Scotland for under 5! Apparently they now use similar yield management systems to the airlines...
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Old 13th Nov 2012, 02:53
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Angry

In the UK, football clubs and other stadium events are now also using Yield Management. Whoop-Di-Do. Another triumph of modern commercial life.
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Old 13th Nov 2012, 06:22
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The problem could be buying the ticket in Paris on line if you have a credit card with a UK billing address..
I came across this piece of nonsense the other day on ba.com when trying to buy a ticket ex LHR using a debit card with a Spanish billing address. The 'country' field is preset to United Kingdom, there is no dropdown box and you cannot overwrite it. I fail to understand the logic of this and in fact it may well contravene the EU legislation stating that a ticket available on one EU country must be available in other EU countries. I did think of writing to BA to ask why but I suspect it will be a waste of time and just gives me another reason not to use them.
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Old 13th Nov 2012, 10:17
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Does the same principle applies to the currency the fare is charged? On an ex-London fare I wanted to be charged in Euro but the fare was quoted in GBP? Do I have a right to ask to pay in Euros?

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Old 13th Nov 2012, 14:34
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No, I don't think so. With some notable exceptions fares are priced in the currency of the city of origin. Even a complex itinerary involving multiple fare components will first be calculated in the currency of the country of origin.

But, if you pay on a CC from euroland the GBP amount would be converted to by the CC company at whatever exchange rate they use. This is likely a better rate than the airline is going to give you. So you will pay in euros.
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Old 13th Nov 2012, 18:29
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So you will pay in euros.
And then pay the conversion rate that your CC company pick!!!

In all of this, HMRC know that most folks will either pay the APD - or not go. Those that will avoid it by making a long stopover are very few. For the most part, the extra hassle is only worth it if you have a good reason to stop at the stopover and visit the place or people there.

When I'm booking, I ignore the APD, along with everything else. It's just the bottom line that counts. If I cannot afford the flight that I want, on the routing, the carrier and the aircraft that I want? Then I won't go (unless it's life or death)
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