As much as I think that connectivity is (very) important to the regions, I can't see how state intervention is appropriate in this instance. Going forward the business will have to resize and focus- so it's not going to be offering what it is today. Should routes operating in to and out of LHR & LCY be subsidised where there is competition? Those must be some of the most profitable routes. Services deemed "essential" may well be served more efficiently using different operators, so why should Flybe get the subsidy?
Connect Airways dabble with Flybe was just an easy opportunity for some rich men and woman to become even richer. The shareholders in Connect Airways Limited seemed to have loaned money to the company (with interest), while covering themselves with charges over the Assets.
And my guess would be that Stobart Air will be unaffected by any demise of Flybe as was previously suggested, in a similar way that Condor still operates.