In somewhat expected, but equally sad news Virgin Atlantic has posted its first loss in 4 years. Despite an increase of 20% in US customers, due to a weaker valued pound, and heavy relationship with Delta, the company reversed last years £24million profit, dipping back into the red. The airline blamed much of the loss on 787 Trent engine issues:

Virgin Atlantic has made its first loss in four years after the UK airline founded by Sir Richard Branson was hit by problems with the Rolls-Royce engines that power its Boeing 787 Dreamliners and a weak pound that hurt UK demand.

Source: https://www.ft.com/content/a81e071a-284 ... 62a39d57a0

It's clear to me that the 789 RR Trent issues, the subsequent costs of obtaining those 4 ex-AB A332's and the resurrection of a stored A346 would affect VS's bottom line this year. I'm also sure that when RR pay VS compensation, which they surely must do, then that'll go towards next year's figures and the airline will have positive numbers to report again.

The 787 issues and subsequent costs to get alternate capacity is certainly a challenge, but did that really cause a £52M swing?

JamesCousins wrote:

In somewhat expected, but equally sad news Virgin Atlantic has posted its first loss in 4 years. Despite an increase of 20% in US customers, due to a weaker valued pound, and heavy relationship with Delta, the company reversed last years £24million profit, dipping back into the red. The airline blamed much of the loss on 787 Trent engine issues:

Virgin Atlantic has made its first loss in four years after the UK airline founded by Sir Richard Branson was hit by problems with the Rolls-Royce engines that power its Boeing 787 Dreamliners and a weak pound that hurt UK demand.

Source: https://www.ft.com/content/a81e071a-284 ... 62a39d57a0

So you are blaming DL for the loss?

PlanesNTrains wrote:

The 787 issues and subsequent costs to get alternate capacity is certainly a challenge, but did that really cause a £52M swing?

The 787 groundings (10% of their fleet grounded at any one time) is one thing, but the weak pound is a double whammy - firstly hitting demand (the cost of US & Caribbean holidays became more expensive for Brits - thus less passengers went) and secondly it put up costs (2/3 of their expenses are in USD). I'd have thought their Delta JV to a degree counter balances the revenue impact (by attracting more US passengers for whom the UK is now cheaper to visit), but only on US routes.

Ryanair01 wrote:

PlanesNTrains wrote:

The 787 issues and subsequent costs to get alternate capacity is certainly a challenge, but did that really cause a £52M swing?

The 787 groundings (10% of their fleet grounded at any one time) is one thing, but the weak pound is a double whammy - firstly hitting demand (the cost of US & Caribbean holidays became more expensive for Brits - thus less passengers went) and secondly it put up costs (2/3 of their expenses are in USD). I'd have thought their Delta JV to a degree counter balances the revenue impact (by attracting more US passengers for whom the UK is now cheaper to visit), but only on US routes.

Agreed. I went on holiday this year to Cancun with Virgin Holidays & Virgin Atlantic. We booked the holiday well in advanced, and as soon as the currency tanked prices went up almost 20/30% overnight. That's gotta hurt the bottom line...

I believe the loss was predicted to be around 60M at the beginning of the year - before the bulk of the trent issues were impacting. Surely RR will be paying some compensation for this and that may reflect the better than predicted loss.

VS will continue to find it difficult especially at LGW... Norwegian keep expanding and BA's densification program is currently underway with their 777's to carry many more Y and Y+ seats than before... both of these will be putting pressure on VS in 2018.

I still do wonder how long term they will survive at least in the current form.

brian415 wrote:

Can they recover some of the losses via a legal remedy from RR?

Maybe RR won't have the means to pay now, but perhaps they can give VS some absurdly good deals or free services in the future.

VS will be perusing compensation from RR, although VS won't disclose figures (for obvious reasons). Whether VS will get more favorable terms on their 12 A35K order (which of course are RR Trent exclusives) is yet to be seen, but surely a possibility...

Can they recover some of the losses via a legal remedy from RR?

Maybe RR won't have the means to pay now, but perhaps they can give VS some absurdly good deals or free services in the future.

Delta makes billions a year net profit. This is even less than spare change.

And overall in the bigger scheme of the Delta and VA cooperation, the extra profis that Delta makes off VA customers might be even bigger or almost equal to this loss, or not, who knows. Its hard to exactly see how they guide the money.

TC957 wrote:

. I'm also sure that when RR pay VS compensation, which they surely must do, then that'll go towards next year's figures and the airline will have positive numbers to report again.

I doubt their full loss is compensated, and anyway at least part of the compensation, at least if they have made an agreement could potentially be recognized in their 2017 numbers

Amsterdam wrote:

Delta makes billions a year net profit. This is even less than spare change.

And overall in the bigger scheme of the Delta and VA cooperation, the extra profis that Delta makes off VA customers might be even bigger or almost equal to this loss, or not, who knows. Its hard to exactly see how they guide the money.

‘Twas ever thus, only it’s Delta not the Virgin empire they need to be worth more than their losses to these days.
Both airlines are extremely pleased with the JV but how much it’s worth to DL other than ‘a lot’ I doubt we’ll ever know.

I’m as cynical as the next guy regarding the past accounting practices of VS but even with my basic maths I can appreciate that the costs of having 10% of the newest & most efficient fleet grounded, reactivating knackered A340’s and the unplanned entry into service of 3/4 A332’s are going to be prohibitive - especially for a small airline.
That combined with the massive effect of the 2017 GBP/USD exchange rate on both expenditure and pax demand out of the UK I’m surprised their losses weren’t higher - as already alluded to they were forecast to be £60m-£80m.

It makes uncomfortable reading but the company themselves are more upbeat about the long term future than they’ve ever been since...well quite frankly this century.

All that won’t stop people predictably predicting the demise of the company ‘in it’s current form’ or ‘in 5yrs’ when they safely won’t be called out on it.
However posters on this site have been hoping/saying that for the last 15+yrs and they’re still here - and in very different form as well.

Like any airline VS may consolidate, evolve or even disappear entirely but it won’t be because of an entirely understandable £28m loss.

Btw, Virgin Holidays primarily out of LGW made a profit.

Kato79 wrote:

Amsterdam wrote:

All that won’t stop people predictably predicting the demise of the company ‘in it’s current form’ or ‘in 5yrs’ when they safely won’t be called out on it.
However posters on this site have been hoping/saying that for the last 15+yrs and they’re still here - and in very different form as well.

Like any airline VS may consolidate, evolve or even disappear entirely but it won’t be because of an entirely understandable £28m loss.

Btw, Virgin Holidays primarily out of LGW made a profit.

So for the last 10 or so years... they have made /lost

2007 16m profit
2008 10m profit
2009 169m loss
2010 26m profit
2011 92m loss
2012 120m loss
2013 11m loss
2014 14m profit
2015 22.5m profit
2016 23m profit
2017 23m loss


So about -300m down for the last 10 years. It seems like they have some fundamental issues to resolve and even despite all the relentless cost cutting over the past 4 years they are still struggling to turn profit. Why an airline with 38/39 aircraft needs to have 4 fleet types and soon to be 5 is crazy. They could make money when LHR was closed due to Bermuda, but since that opened up they have really struggled. Something needs to change and I don't believe the AF/KL shareholding is anything more than allowing DL to be in full control should they wish to change how things are run.

The £ rate recovering from the $1.25 - $1.28 level of last year to the near-$1.40 region now should help VS too.

Amsterdam wrote:

Delta makes billions a year net profit. This is even less than spare change.

And overall in the bigger scheme of the Delta and VA cooperation, the extra profis that Delta makes off VA customers might be even bigger or almost equal to this loss, or not, who knows. Its hard to exactly see how they guide the money.

Delta knows - but we do not - how much traffic Delta carries beyond the TATL gateway cities. That may be a source of profit that's not reflected in the JV numbers. But they didn't invest $360 million to buy the 49% equity stake just to break even. They certainly run the business with an eye to Return on Invested Capital.

https://s1.q4cdn.com/231238688/files/do ... p1x30z.pdf

Aren’t Rolls Royce compensating grounded customers who have bought aircraft they can no longer fly? VS (not VA, that’s Virgin Australia, please try and get that right! ) are a great company, hard product is still better than BA down the back IMHO. But medium term planning eludes them.
They order A380s and A346s then LHR is opened up to competitors and they end up rolling the A346 out for 10 new A333s which we now know are on exorbitant lease rates. The A333 is sent to MAN to support expansion only for them to decide leased A332s are a better fit, supporting a long traditon of leased in hard or second hand metal at MAN. (See brand new A343 replaced with leased Martinair B763 when MCO was launched, and Air Atlanta 747s taking over much later.) Outside of MAN-ATL, the % Upper Class on the A333 was too high for that market, how come THEY missed that?
Great shame as I love them but they’re not going anywhere in terms of direction. Even Virgin America (unrelated but go with me here) are going away, as did Virgin Nigeria! Has Sir Beardie’s time in the business passed? I hope not.

anstar wrote:

So for the last 10 or so years... they have made /lost

2007 16m profit
2008 10m profit
2009 169m loss
2010 26m profit
2011 92m loss
2012 120m loss
2013 11m loss
2014 14m profit
2015 22.5m profit
2016 23m profit
2017 23m loss


So about -300m down for the last 10 years. It seems like they have some fundamental issues to resolve and even despite all the relentless cost cutting over the past 4 years they are still struggling to turn profit. Why an airline with 38/39 aircraft needs to have 4 fleet types and soon to be 5 is crazy. They could make money when LHR was closed due to Bermuda, but since that opened up they have really struggled. Something needs to change and I don't believe the AF/KL shareholding is anything more than allowing DL to be in full control should they wish to change how things are run.

Note that half of the losses over the last 10 years were in one year (2009) when around that time many other airlines were also making losses due to the global recession. Strength of the pound, passenger numbers, economic performance in their markets etc. were all down. That was also pre-DL JV days and when Steve Ridgway was still CEO.

As for fleet types, we probably wouldn’t be talking about 5 fleet types had the Trent engine issues not forced their hand in order to keep their flying programme intact and I expect there will be some compensation involved. In any case, two of the fleet types in question (A340-600 and 747-400) are on the way out over the next few years to be replaced by an all-new type (A350-1000).

Perhaps getting overly political and insulting half of your UK customer base has come back to bite Dicky Branson on his wrinkly behind?

Jamie Oliver got overly political and his chain of mediocre restaurants have started to suffer claiming his cost base shot up greatly due to exchange rate pressures despite his restaurants claiming to champion locally sourced produce thus the chain’s exposure to cost increases was marginal as only only wheat was bought in USD and that’s for cheap ingredients such as pasta and pizza based. The expensive produce was still local, still bought in pounds and yet Brexit was blamed. No mention of his directly insulting of people and people generally turned off of the idea.

Perhaps CEOs should aim to be inclusive and representing of their client base and not alienating half of them? I personally won’t have anything to do with VS despite flying them many a time.

It seems Brexit is a convenient excuse for justifying executive bonuses and covering over the cracks for failing businesses that fail to adapt.

Time and time again we are seeing people simply won’t pay a premium for ‘better’ service. With Norwegian putting pressure on yields and offering a bigger route network then times will get tough indeed. Their recent change in economy ticketin doesn’t go far enough. People want cheap so I can see their economy basic being a separate section at the back offering a Norwegian style service.

I can’t quite figure out what would bring the greatest amount of pleasure to a.net. Would it be the failure of Virgin or the failure of Norwegian?

Although profit / loss is an important measure, don't forget to look at cash generation. Thus, loss making company is not necessarily a bad company. P&L is just one of mang factors that must be analysed/considered.

Although, a long term loss making generaly signals problems and questions its going concern ability.

andrej wrote:

Although profit / loss is an important measure, don't forget to look at cash generation. Thus, loss making company is not necessarily a bad company. P&L is just one of mang factors that must be analysed/considered.

Although, a long term loss making generaly signals problems and questions its going concern ability.

They are also relatively asset low... they lease most of their fleet and they have already mortgaged the LHR slots around 18 months ago to generate cash for aircraft financing.

I struggle to see where VS are going, and how they intend to grow, in order to be profitable on a consistent basis. Virgin Holidays seems to be quite successful in terms of filling seats; witness the multiple daily 744s at MCO. But, as we know, the yields on those flights are going to be extremely low! Also, I can't help thinking that the A35K is the wrong aircraft to replace the 744 compared with the A333/339, for example. They need to start thinking of themselves as more like Thomas Cook and less like BA. They don't have a large customer base or loyalty program which feeds frequent business travellers onto their holiday flights, come the school holidays!
Out of LHR, as Delta UK, in the 789 they probably have the right aircraft, but the product and route strategy needs rethinking. The Upper Class product is poor and they have insufficient routes to hold onto customers' loyalty. As such, DL will feed them with connecting traffic which, again, will be lower yielding!

Virgin Holidays seems to be quite successful in terms of filling seats; witness the multiple daily 744s at MCO. But, as we know, the yields on those flights are going to be extremely low!

I doubt the yields are that low.

Virgin holiday packages are usually much higher in price than their TUI/Thomas Cook comparable packages, and air fares are also more than comparable to other US fares for a standard Y seat, and one could argue that with the B744 being in a higher Y capacity, the value of those fares is higher (in that you are going to get more yield for 250 Y seats at £1500 than you are for 200 Y seats at £1500).

I was a long time virgin gold before heading down under. As time as moved on and I’ve got older, the “virgin” brand with its sexual inmeuendo and new kid on the block attitute has become a bit sad. I really struggle to connect with the brand now... same can be said for Virgin Australia.

I used to love it but now it’s like watching your drunk auntie make sexual passes at your mates at the bbq. Embarrassing !!

That aside I can’t fathom their fleet choices either.

sevenair wrote:

Perhaps getting overly political and insulting half of your UK customer base has come back to bite Dicky Branson on his wrinkly behind?

Whilst I absolutely agree that partisan politics and taking sides in a divisive debate is not a good business strategy in general (because saying anything along the lines of "ideological-block-with-more-than-30%-of-the-population is not welcome to be among our consumers" is basically fiscal suicide), I don't think that's the reason for VX's loss here.

Now, if a business wants to say "we think this policy change will be better for our interests" publically, that is okay so long as they are honest, transparent, and don't bribe politicians. But I think saying "anyone who disagrees with [policy X] is a neanderthal monster who probably wants to kill puppies and then be a necrobestiac with the corpses" is an atrociously bad PR strategy. Still, I don't think VX's loss is a backlash against Branson's pro-EU stance.

anstar wrote:

So for the last 10 or so years... they have made /lost

2007 16m profit
2008 10m profit
2009 169m loss
2010 26m profit
2011 92m loss
2012 120m loss
2013 11m loss
2014 14m profit
2015 22.5m profit
2016 23m profit
2017 23m loss


So about -300m down for the last 10 years.....

A different way to encourage current management.

...
2013 11m loss
2014 14m profit
2015 22.5m profit
2016 23m profit
2017 23m loss

25.5m profit in the last 5 years. Not that bad to go broke...

The value VS has is the slots it owns at LHR. However, with changes in the UK economy, a weakening GBP, intensified competition from low cost carriers including Norwegian, an aggressive BA at LHR and LGW, it is not surprising that VS has lost money (the 787 issues and the acquisition costs of the A332s would also not have helped. VS's model is increasingly outdated. The value premium it once enjoyed is long gone. The DL tie up helps only so much. VS needs a significant corporate redo and it's difficult to determine what that should be given the changed landscape.

Jayafe wrote:

A different way to encourage current management.

...
2013 11m loss
2014 14m profit
2015 22.5m profit
2016 23m profit
2017 23m loss

25.5m profit in the last 5 years. Not that bad to go broke...

True... although defo underperforming against competitors posting healthy profits ie EZY/IAG etc who also face GBP issues and in what is a low fuel environment. Given 2018 is also supposed to be a loss year again for VS its hardly encouraging.

Despite much of the conversation on here, the core VS business is holding up well given the considerable challenges it has faced this year. To be clear, the 787 engine issues by themselves had the potential to break the company. An airline the size of VS simply cannot sustain having up to 5 787's (plus routine maintenance of the rest of the fleet) out of action for large periods of time. The cost hits taken to pay leases on aircraft that aren't flying, return 346's to service, prolong 346 leases, fly 787 routes on the 346, introduce 4 x 332's and recruit additional crews to operate them are already in the tens of millions. There will be additional hits to take with the refit of the 332's with VS branded upper class and W cabin are yet to come.

Now you throw in everything else, from low cost competition, weak GBP (to which VS is more vulnerable than most), over capacity on TATL routes, the "B" word etc and it's astonishing that VS reported a loss of just 28M against a forecast loss of nearly 100M.

As for SRB's political views affecting the business. Maybe. But if it is, the effect is microscopic. The annual results show 100,000 less people flew with VS in 2017 mostly owing to a loss of sales from flight cancellations and late release of ticket sales due to the lack of available 787's, as well as those choosing not to travel due to the weak GBP. For those who boycott VS on that basis, if VS folded tomorrow, SRB's wallet wouldn't even notice. The only people who would be affected would be the staff. Many of who also voted out....

The greatest challenge for VS will be to manage cash flow and customer loyalty until the 787's are returned to reliable service. The disruption this issue is causing cannot be understated. The 332's should ease the pain somewhat and provide much improved reliability, however parking up brand new aeroplanes is an expensive business, this will undoubtedly be another challenging year for the company. But, for now at least, there's good money in the bank and customer satisfaction scores are still among the highest in the industry.

The weak GBP shouldn't be an excuse this year. The latest positive Brexit agreement announced today saw the £ rise sharply. And I suspect it will again when more Brexit negotiations are viewed favourably by the City. Then VS will moan the UK will become too expensive for US-originating passengers !

TC957 wrote:

The weak GBP shouldn't be an excuse this year. The latest positive Brexit agreement announced today saw the £ rise sharply. And I suspect it will again when more Brexit negotiations are viewed favourably by the City. Then VS will moan the UK will become too expensive for US-originating passengers !

The GBP is highly volatile and today’s announcements won’t change that. It increased from 1.137 to 1.142, hardly record breaking!!! The drop of the currency since Brexit has been phenomenal and has a long long way to go before it can crawl back up to pre referendum levels. Add to that the UK governments refusal to address the ADP on all fares ex England/Wales and sadly Virgin (and everyone else) are in a difficult trading environment.

tonystan wrote:

TC957 wrote:

The weak GBP shouldn't be an excuse this year. The latest positive Brexit agreement announced today saw the £ rise sharply. And I suspect it will again when more Brexit negotiations are viewed favourably by the City. Then VS will moan the UK will become too expensive for US-originating passengers !

The GBP is highly volatile and today’s announcements won’t change that. It increased from 1.137 to 1.142, hardly record breaking!!! The drop of the currency since Brexit has been phenomenal and has a long long way to go before it can crawl back up to pre referendum levels. Add to that the UK governments refusal to address the ADP on all fares ex England/Wales and sadly Virgin (and everyone else) are in a difficult trading environment.

The GBP is not highly volatile, against the dollar it has steadily risen by around 10% over the past year, against the euro the maximum movement in 12 months is about 8% presently its mid way between its high and low. It was highly volatile in the immediate aftermath of the brexit vote, it soared overnight, then crashed as the result became clear. It may surprise you that the £ was worth $1.44 just before the brexit vote and is $1.40 as I type this.

VS will have been affected by the initial fall, but they do have substantial income on $ with most of their routes being transatlantic, so that will mitigate the situation.

APD affects all airlines on flights that originate from the UK, it doesn't apply to transfer passengers, so VS is in exactly the same boat as everyone else.

I'm sure that VS will be getting financial assistance from RR over the engine problems and this will show up in the accounts.

Their fundamental problems are that they have no European feed onto their transatlantic services and a very poor route network. International businesses negotiating staff travel will generally be looking for a deal to cover the majority of their needs, VS can't provide that unless you only require the UK and the US.

Their good years are where they show a low profit margin, the bad years are truly horrendous.

redroo wrote:

I was a long time virgin gold before heading down under. As time as moved on and I’ve got older, the “virgin” brand with its sexual inmeuendo and new kid on the block attitute has become a bit sad. I really struggle to connect with the brand now... same can be said for Virgin Australia.

I used to love it but now it’s like watching your drunk auntie make sexual passes at your mates at the bbq. Embarrassing !!

This is the best description of the Virgin brand that I have come across.

Bongodog1964 wrote:

Their fundamental problems are that they have no European feed onto their transatlantic services and a very poor route network. International businesses negotiating staff travel will generally be looking for a deal to cover the majority of their needs, VS can't provide that unless you only require the UK and the US.

Bingo! Someone's hit the nail on the head, I believe this is the core problem with VS, it has sod all European feed.

For example, if you are up at Manchester and want to fly VS on a route not served from MAN there are no connecting flights to the London airports aside from BA so if you have to fly BA for the shuttle you may as well do it all in one booking and fly BA on the longhaul leg as well. The same applies for everywhere else in the UK too, if you are at EDI then you need to take the BA shuttle down to LHR and so on...

I don't know how it works with the European feed but hope that KL & AF offer some kind of connection given their partnership/ownership but again why would you travel from AMS to LHR with KL to connect to a flight that you could have taken with KL in one go?

I suppose this would be where BMI would have been a great fit to at least give them something to work with...

Phil
FlyingColours

jbs2886 wrote:

JamesCousins wrote:

Despite an increase of 20% in US customers, due to a weaker valued pound, and heavy relationship with Delta, the company reversed last years £24million profit, dipping back into the red. The airline blamed much of the loss on 787 Trent engine issues:

So you are blaming DL for the loss?

Nope, just bad punctuation.

He's saying that VS has more customers from the US, due to (1) the Pound being weak and (2) the relationship with Delta. Yet despite this, the company still went back into the red.

A semicolon could've solved it all.

FlyingColours wrote:

I suppose this would be where BMI would have been a great fit to at least give them something to work with...

But this is what they tried to do with Little Red (which were remedy slots from BMI), which seemed to fail miserably.

Richard28 wrote:

FlyingColours wrote:

I suppose this would be where BMI would have been a great fit to at least give them something to work with...

But this is what they tried to do with Little Red (which were remedy slots from BMI), which seemed to fail miserably.

This was touched upon at one of the recent LHR expansion committee sessions. In summary, UK regional flying is not sustainable under the current LHR charging structure unless you have a massive connections market to tap into (i.e. you are BA) or the route is subsidised by the taxpayer.

None of the current LHR schemes will lead to cheaper charges (in fact they are likely to increase) and LHR have not promised anything other than to ringfence unspecified slots for UK regional flying (essentially pointless if they are not commercially viable).

VS either need to expand massively at LHR, or find another way of getting feed, or retain the focus on O&D.

LAX772LR wrote:

jbs2886 wrote:

JamesCousins wrote:

Despite an increase of 20% in US customers, due to a weaker valued pound, and heavy relationship with Delta, the company reversed last years £24million profit, dipping back into the red. The airline blamed much of the loss on 787 Trent engine issues:

So you are blaming DL for the loss?

Nope, just bad punctuation.

He's saying that VS has more customers from the US, due to (1) the Pound being weak and (2) the relationship with Delta. Yet despite this, the company still went back into the red.

A semicolon could've solved it all.

Yea that makes a huge difference. Sounded very much like "its DL's fault they lost money!"

jbs2886 wrote:

LAX772LR wrote:

jbs2886 wrote:

So you are blaming DL for the loss?

Nope, just bad punctuation.

He's saying that VS has more customers from the US, due to (1) the Pound being weak and (2) the relationship with Delta. Yet despite this, the company still went back into the red.

A semicolon could've solved it all.

Yea that makes a huge difference. Sounded very much like "its DL's fault they lost money!"

My bad on the punctuation haha, I was just trying to lay out the facts from the article, in brief form. I think it's a real shame that Virgin have fallen back into the red, especially when considering the traffic a code-share from DL must drive. To me the 787 issues combined with increasing competition from BA and, particularly, DY, plays a huge role.

FlyingColours wrote:

Bongodog1964 wrote:

Their fundamental problems are that they have no European feed onto their transatlantic services and a very poor route network. International businesses negotiating staff travel will generally be looking for a deal to cover the majority of their needs, VS can't provide that unless you only require the UK and the US.

Bingo! Someone's hit the nail on the head, I believe this is the core problem with VS, it has sod all European feed.

For example, if you are up at Manchester and want to fly VS on a route not served from MAN there are no connecting flights to the London airports aside from BA so if you have to fly BA for the shuttle you may as well do it all in one booking and fly BA on the longhaul leg as well. The same applies for everywhere else in the UK too, if you are at EDI then you need to take the BA shuttle down to LHR and so on...

I don't know how it works with the European feed but hope that KL & AF offer some kind of connection given their partnership/ownership but again why would you travel from AMS to LHR with KL to connect to a flight that you could have taken with KL in one go?

I suppose this would be where BMI would have been a great fit to at least give them something to work with...

Phil
FlyingColours

Can't agree more, VS' network from LHR very much faces west, with only 4 destinations east of LHR and 2 south (happy to be corrected), and nothing touches Europe.
Even as an incentive to get feed from KL or AF, there doesn't seem to be a great deal of Whats In It For Me factor from the actual person flying, as checking both VS' Flying Club site, and AF-KL Flying Blue they aren't even frequent flyer partners for points, benefits, surely that would be a good start to at least get some association between VS and AF-KL.
VS is sitting beside a great big continent of a potential market, they don't need to start flying there themselves, but they should try and tap the customer base just a little bit more if they can, to get a sliver of the pie. Looking at the Flying Club site, the only European airline they have a partnership with is SK.