A currency adjustment factor (CAF) is a charge imposed by an air carrier to compensate for currency fluctuations over time. The CAF is based on the difference between the current exchange rate and the rate in effect when an air transfer ticket was purchased.
The CAF can be either positive or negative.
If the currency has devalued, the CAF will be positive and extra charges will be levied. If the currency has appreciated, the CAF will be negative and a refund will be issued.
The CAF is usually expressed as a percentage of the base fare.
The CAF is added to the freight cost, in addition to the base exchange rate. The average exchange rate in the past three months is used to calculate the CAF.
As the change in exchange rate impacts profits, couriers typically enter all-inclusive contracts. These contracts cover any changes in the exchange rates.