The simple answer is that the low cost business model was never going to be workable in a short haul low volume environment, it has just taken a while for everything to fall apart under the pressure. It only works for Southwest, Ryanair, Easyjet and co because they are able to 'pile high and sell cheap' serve a huge market like the whole US or Europe. As we have seen recently it is not all good for Ryanair because they have pushed the principle too far in the endless and self defeating pursuit of ever increasing profit.
The travelling public have been fed the myth that a safe and reliable airline service can be provided at bargain bucket prices and what is happening to regional airlines is the inevitable failure of that idea. There are many contributing factors but I just wanted to make this one point.