That was the Peel MO. Cheap and cheerful as long as you put x number of passengers through our terminal so we can generate revenue through ancillaries. Won them a court case against Bmibaby which provided a rare public example of the commercial terms on offer, got FlyBe in at a cost to themselves rumoured to be £1million per year. Only really worked at LPL because they have a bigger population to draw from. It’s why I can’t understand where the high charges rumours come from but it seems to be accepted that this was the case. Probably only half a story, airlines wanting the freebies but not putting the volume through would be my guess.
The problem, if you are a public body or wealthy owner of the airport paying the subsidy, is picking to right airline. If the airline tries to renege on the deal or goes out of business, the passengers leave with them. This is not always understood by those providing the subsidy.