Definately an interesting thread Cedric. I think you have to go back many years to the late Sir Freddie Laker days to see why low cost has been successful. He made the mistakes that paved the way for the likes of Easyjet and Ryanair.
The market now is the same as then, he was trying to open up air travel to “the masses”, those that would not travel with the major airlines because of price. The US model was seen as the way forward in the late 70’s and early 80’s. In those times if you travelled to Spain you went BA or IB, but sometimes it was possible to go on a charter with the likes of Thomson, Intasun or even BA’s Enterprise and throw away the accomodation which had to be offered.
The regulatory system changed the way air travel was offered. The Europeans we dead against opening the skies to protect their national airlines. Perhaps Laker would still be a brand name if he had operated to Europe rather than the US.
When you look at air travel in the retail sense, there is a market for both styles, low cost and full service. In much the same way as one would shop in Waitrose or M&S for quality as opposed to say Lidl or Asda for cheap and cheerful.