can you give the kernel in comment #1 a try?

** Also affects: linux-kvm (Ubuntu Xenial)
   Importance: Undecided
       Status: New

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  please include the kernel module VXLAN

Status in linux-kvm package in Ubuntu:
Status in linux-kvm source package in Xenial:

Bug description:
  The kernel built with this packages does have VXLAN compiled.
  It would be nice if this could be fixed since VXLAN is used by Flannel and 
maybe other CNI plugins for Kubernetes.

  $ grep -i vxlan /boot/config-4.4.0-1039-kvm
  # CONFIG_VXLAN is not set

  When running a kubernetes cluster with Flannel with this image:

  $ kubectl logs kube-flannel-ds-amd64-jfkc8 -n kube-system 
  I0116 11:35:34.176962       1 main.go:475] Determining IP address of default 
  I0116 11:35:34.177231       1 main.go:488] Using interface with name ens3 and 
  I0116 11:35:34.177259       1 main.go:505] Defaulting external address to 
interface address (
  I0116 11:35:34.191358       1 kube.go:131] Waiting 10m0s for node controller 
to sync
  I0116 11:35:34.273844       1 kube.go:294] Starting kube subnet manager
  I0116 11:35:35.274075       1 kube.go:138] Node controller sync successful
  I0116 11:35:35.274106       1 main.go:235] Created subnet manager: Kubernetes 
Subnet Manager - node-1-case1
  I0116 11:35:35.274113       1 main.go:238] Installing signal handlers
  I0116 11:35:35.274233       1 main.go:353] Found network config - Backend 
type: vxlan
  I0116 11:35:35.274292       1 vxlan.go:120] VXLAN config: VNI=1 Port=0 
GBP=false DirectRouting=false
  E0116 11:35:35.275803       1 main.go:280] Error registering network: 
operation not supported
  I0116 11:35:35.275860       1 main.go:333] Stopping shutdownHandler...

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