I don't believe VFF makes a loss. I believe it is highly profitable and always has been.
The separate company (VFF) overall is profitable, but like any other company they have profitable streams and loss streams.
For example VA-i, that company is loss-making overall, but they had few profitable routes prior to administration such as LAX and arguably NAN. However, if there are very few profitable streams that can't prop up the losses overall, it makes sense to downsize (which they did through only flying to NAN, DPS and ZQN) if not close the subsidiary. The income from LAX alone couldn't sustain the losses elsewhere (HKG, AUH, etc) on the old long haul division.
Neither party wins more than the other. Similarly, SQ sold KF points to VA for money and both partners did well from the trade.
However this is Private Equity we're talking here. Bain being one of the leading PE firms, it's "WIN AT ALL COSTS" from their end. Considering the transfers are less of a priority for them, I'm sure when they'll eventually come around to it, they'll apply their "win at all costs" approach after looking at the past results of VFF/KF transfers, and knowing the traffic is largely one way and mostly benefitted SQ/KF more, an agreement drawn up by Bain will likely want them to "benefit" them more than SQ/KF, even if it may possibly "screw" SQ/KF over.
Passengers already paid - they gave a set number of VFF points in return for a proposed number of KF points. I am sure VA set the rate at one that was highly profitable for them - and indeed they changed the rate when they saw an opportunity to make it even more profitable.
This was called a 'devaluation' from a passenger side of view. A lot of people were complaining about that when it was announced. I do note the ratio from the other side (KF to VFF) was largely left untouched.
It wouldn't surprise me if it was done to attempt to make the program more 'sustainable' on both ends, if not stem the losses the program that may had affected VFF.
I would think the exchange was cancelled because VFF saw a 'run on the bank' as everyone wanted to cash out their points at the same time which would have caused cash flow issues. I imagine VFF would want to make sure they have a sound offering for members to redeem their VFF points on VA issued tickets before they introduce transfers again - because even though I am confident the exchanges were profitable, I am sure redemption on VA tix is the optimum outcome for VA.
I'm sure they'll still finalising their partners atm and JH was on record of willing to work with anyone that support their aims. VFF will adjust accordingly should VA pick up more airline partners before going onto other priorities.