Look closely at where the GuideCurveSketch intersects Sketch2. You have it using a pierce relationship to the line instead of to the arc. I don't believe this is what you intend. If you remove the pierce and coincident relationships and then make a pierce relationship with the arc, it works OK.
Your guide curve does not intersect your other sketches and is causing the error. Once you fix this I would suggest a boundary surface being used instead of a loft. I hope this helps.