Minimising taxes and fees when choosing between Velocity or KrisFlyer long-haul redemptions

If you’ve ever redeemed points for a flight before you’ll know that unfortunately there will always be taxes and surcharges to pay in addition to the points cost.

These charges can vary greatly depending on the frequent flyer program and airline flying your route in question – ranging from $5 to $500, sometimes more. The cost will depend on…well a lot of things.

Prompted by Velocity’s revision of its award chart in early June 2016, we’ve revisited this guide to how to get the best deal for your points and the lowest taxes with either Singapore Airlines KrisFlyer or Virgin Australia’s Velocity, given you can transfer points from one program to the other.

So even if all your points are with one frequent flyer program, it doesn’t necessarily mean that you shouldn’t be looking to the other for a better deal on the same flight.

Whether you use one program or another will depend on the specific Singapore Airlines redemption you have in mind – and you’ll need to compare the costs in both Velocity and KrisFlyer to calculate. This guides will try and show you how.

Singapore Virgin Australia

Getting your head around the taxes on a paid or points ticket is no simple feat.

Singapore Airlines provides a 10 page document with a list of over 500 different taxes, fees, charges and surcharges! These range from the expected ‘Fuel and Insurance Surcharge’ to the unexpected ‘Noise Isolation Charge’, and, ‘Value Added Tax’, the UK’s version of GST.

Route Comparisons

To work out which airline is best for redeeming your points we’ve compared the points and taxes payable on one-way Singapore-operated flights from Sydney and Melbourne to three destinations: London, Singapore and Tokyo.

Singapore Airlines 777-300 Business Class Cabin - SQ211 Business Class

An example of what we’re aiming for – the best value way to travel in Singapore Airlines Business Class, here one of their regional Boeing 777s

The points needed for each destination are the same from Melbourne and Sydney, but the taxes payable do change depending on where you depart from.

The results can be seen in these tables, but there are several other factors that you should also consider.

Note: all KrisFlyer points costs are quoted including the 15% online booking discount. If you book over the phone, prices will be higher.

To London

ProgramClassPoints required for redemptionPoints required if transferredTaxes from MELTaxes from SYD
Velocity (VA)Economy 75,000 VA101,250 KF$78$85
Business139,000 VA187,650 KF$78$85
KrisFlyer (KF)Economy 40,375 KF54,506 VA$465$470
Business80,750 KF109,012 VA$496$500

To Singapore

ProgramClassPoints required for redemption Points required if transferredTaxes from MELTaxes from SYD
Velocity (VA)Economy 35,000 VA47,250 KF$79$83
Business65,000 VA87,750 KF$79$83
KrisFlyer (KF)Economy 21,250 KF28,687 VA$265$265
Business46,750 KF63,112 VA$282$282

To Tokyo

ProgramClassPoints required for redemption Points required if transferredTaxes from MELTaxes from SYD
Velocity (VA)Economy 56,000 VA75,600 KF$77$77
Business104,000 VA140,400 KF$77$77
KrisFlyer (KF)Economy 31,875 KF43,031 VA$316$321
Business65,875 KF88,931 VA$334$339

So the taxes on KrisFlyer redemptions are significantly higher on all routes, but the points needed to redeem with KrisFlyer are lower than with Velocity, sometimes with significant differences and others not so much.

This leaves some calculations to be made on whether the extra points are worth paying to avoid the taxes.

Whether or not it’s worth shelling out the extra points to save on taxes really depends on how many points you have and how much you value them. Velocity now often come out ahead after you’ve considered the additional fees KrisFlyer imposes, but in some cases they don’t.

Let’s focus on a comparison for those with Velocity balances

I’d imagine that most of us have faster growing balances with Velocity than we do with KrisFlyer, given the breadth of Velocity points earn opportunities in Australia in and beyond Velocity credit card partners.

So, let’s take the examples above, and look at the cash differential between redeeming Velocity points, or transferring those same points to KrisFlyer to redeem for the same Singapore Airlines flight.

First, Sydney – London:

  • If booked through Velocity, Sydney to London in Business Class would cost 139,000 Velocity points plus $85 in taxes
  • If booked through KrisFlyer, the same flight would require 109,012 Velocity Points transferred over to KrisFlyer for 80,750 KrisFlyer miles, plus $500 in taxes
  • The difference in points is 29,988, while the difference between the taxes and surcharges is $415, yielding a redemption value of 1.4c if you chose to pay the additional points and save on taxes by booking through Velocity
  • We’ve valued Velocity points around 1.4-1.5c in the past, so this is a break-even decision.

In this case, it will come down to whether you are points-rich and are looking to save money (if so book through Velocity), or want to save your Velocity points for another redemption in future (if so book through KrisFlyer).

Let’s look at Melbourne – Singapore next:

  • If booked through Velocity, Melbourne to Singapore in Business Class would cost 65,000 Velocity points plus $79 in taxes
  • If booked through KrisFlyer, the same flight would require 63,012 Velocity Points transferred over to KrisFlyer for 46,750 KrisFlyer miles, plus $282 in taxes
  • The difference in points is very small, at 1,988, while the difference between the taxes and surcharges is proportionally much larger at $203, yielding a per point cost of 10.2c, which is phenomenal value for Velocity points

This means it would be well-worth you forgoing ~2,000 Velocity points to save ~$200 in taxes and fees!

The Melbourne – Tokyo example yields a value of 1.7c per point, so as it is close to the general valuation of Velocity points at 1.5c, it is up to you and your points balances.

Aside: if you have to book any non-saver redemptions, opt for KrisFlyer

If you have a heap of points and want to, or more likely need to, redeem points for a more expensive Standard KrisFlyer award (not the cheaper Saver) or an Any Seat Award with Velocity then this comparison won’t be much help to you. These comparisons are done on the most basic Economy and Business fares.

If this is the case, one thing we noticed was that the taxes on KrisFlyer redemptions don’t change if you opt for one of the pricier, more available, redemption options. However they generally do increase on more expensive Velocity redemptions up to the point where the most flexible fares will generally have the same amount of taxes as the same KrisFlyer flight.

In these cases, it’s almost always better to redeem with KrisFlyer since they will have a lower points cost and the same amount of taxes as Velocity.

What about Perth?

The taxes applicable to flights from Perth seem to always be lower than other airports. Even if you depart from Melbourne or Sydney, making a stopover in Perth will lower the taxes on your overall journey, as you aren’t paying Sydney or Melbourne International’s airports more expensive international departure fees.

However, it’s usually not worth making a stop in Perth just to save on taxes because the extra stop will almost always mean the points cost of your ticket is higher. Almost always…

There are some routes where stopping through Perth will give you lower taxes AND a lower points cost. So far we’ve only seen this happen with Velocity redemptions. Melbourne or Sydney to Tokyo is one of those routes and we suspect there are more out there.

But it’s worth noting, and next time you are looking to redeem have a look at whether going through Perth is worthwhile. We’ll cover more options in a separate guide for Perth-ites in the future.

Summing Up

As evidenced by these three case studies, it really does pay to calculate:

(KrisFlyer taxes and fees – Velocity taxes and fees)

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(Velocity points if used directly – Velocity points if transferred to KrisFlyer)

Some general rules follow. Your own points values may vary! We’d suggest that if the result is:

  • less than 1.2c per point value of Velocity points > you should transfer the points to KrisFlyer and pay the higher taxes
  • 1.2-1.8c (as in the case of Sydney – London) > depends on your respective points balances
  • above 1.8c (as in the case of Melbourne-Singapore) > use your Velocity points directly to offset the higher taxes.

Footnote: for redemptions to Europe, you can also fly Etihad, but it will cost you $$$

Unfortunately, with Velocity’s award chart changes in June 2016 and the moving of Etihad from the cheaper Table 1 to the dearer Table 2 (where Singapore Airlines is), plus the introduction of a new ‘Etihad Airways Reward Seat Carrier Charge’ of $205 USD in Business per flight sector, the same great-value redemptions Velocity members could previously enjoy on Etihad flights are now not as stark.

Etihad redemptions are now at a premium.

Let’s look at an example:

For a flight from Sydney to London in Business Class on Etihad (via Abu Dhabi) or Singapore Airlines (via Singapore), you would use the same amount of Velocity points: 139,000.

The taxes are very similar at $90 and $85 respectively, but your flight with Etihad would cost you an extra $410 USD due to the Etihad redemption charge on the two flight sectors (Sydney-Abu Dhabi-London).

Flying Singapore really wins out in this case, unless you are really set on flying Etihad and value that at $410 USD.

Etihad does fly to 21 European destinations compared to Singapore’s 14, but both have world-renowed Business cabins.