The problem is surely that are people who, or whose employer, are prepared to pay an economic fare for an early or late flight. But there aren't during the middle of the day, hence the low fares.
As soon as easyJet announced BHX flights from Edinburgh and Glasgow I immediately thought that this would mean the end of the entire Flybe service, because there would no longer be the cross subsidy between the different flights.
EZY send 4 (5 from S20) planes from EDI on domestic flights first thing. When these return, they leave for cities on the continent - Berlin, Geneva, Paris etc. The reverse happens in the evening. This efficient operation isn't open to the likes of Flybe.