It's funny that you posted this, I was thinking the same thing, in fact I have a little theory that may not sit well with some people, deep breath time.
There are a couple of reasons going through my head, the first one being that VS has gotten too big. It has become what BA was in the 80's, it has become complacent with its place in the UK (and world) aviation market, it is living off of the image it cultivated during the early 90's as being at the head of the pack. It has failed to listen to its passengers and their insights and lastly, it has cut too many 'perks' in the premium cabins.
With size comes costs, now if done correctly growing as an airline can be a good thing, there is a certain amount of cost that is fixed no matter what, office staff etc. The use of an effective website can mitigate a lot of those costs, really in this day and age there is no reason why a person should have to call VS in order to purchase a fare to do an upgrade, it is something small, but imagine the number of calls made each day and the costs add up, a simple drop down menu on the website should be in place to take care of this. Also in place should be an option to purchase a Y or W then upgrade to the W or J cabin.
With airlines such as BA upgrading their services VS's response has been to cut, when you are charging the same as others and your product is inferior you're in trouble, let's look at AA for a second, they have a massive FF base, their J cabin was sub par, they were losing pax to other airlines, so what did they do, they improved their cabin, the moved to a flat bed seat and improved the food, the FF's were happy, AA got their pax back. Its product is still inferior to VS's, but an AA FF is not even going to look at VS now.
The VS LHR clubhouse : VS spent a small fortune on this and I am sure that the rent they pay BAA each month to rent the space does not come cheaply, now certainly it is one of the best airline lounges in the world, it is a fantastic place to spend a hour or eight before your flight, but realistically it is too much, was there anything wrong with the CH before its expansion ? I really don't think so, it was more than adequate for VS's need, however VS felt the need for a show piece and decided that the LHR clubhouse would be it.
This of course has come at a cost, now my argument has always been would you rather VS spend the money to make your stay more pleasant for the couple of hours on the ground, or the 7 - 11 hours you are in the air ? I know where my priorities are.
Now whilst airlines have made huge gains in the catering department it seems to me that VS has decided to lower its menu standards, not just in the number of choices but also in what is actually offered, now I will say that they have taken steps to correct this with the latest menu, it is a huge improvement over what has been offered before, however as LRoM pointed out, BA and a number of other airlines now feature a 'raid the larder' type thing, making life easy for the pax and the crew, I do seem to remember that VS had something like this before, or maybe old age creeping in [?]
Next would be aircraft choice,the 744 and 346 are both great aircraft, however for VS's routes and size they are too much, VS made a mistake when they ordered the 346's, they should of gone for the 77W's, same lift, greater cargo and lower costs.
Lastly and one they will probably wrinkle a few noses, the UCS.
Yes it is a good product, however again the cost of developing it (shared cost may be a better term) and implementing it may have been to much for an airline the size of VS. Also its design limits the number of seats that can be placed on the aircraft, in a similar area BA manages to fit in 70 CW seats, meaning (as long as you can fill them) more revenue per flight, meaning more money can be spent on each pax while still keeping the flight profitable.
Just some of my thoughts.
