Cloud Cutter
You are still missing the obviouse point that they will always cost more to aquire and insure.
Wrong. In the first place, nobody buys aeroplanes any more, they LEASE them. The lease deals on the Q400 are very, very good at the moment. And even if you did buy it, it would still cost you less than many smaller aircraft.
Insurance difference is negligible, particularly as the Q400 has better systems than its predecessors and is thus safer (read cheaper to insure).
BCF Breath
What do you think Air NZ HAS been doing for the last 18 months?? It is the only airline with both low cost and full service.
Well, in New Zealand, maybe, and only if you ignore Virgin and Qantas, who have done exactly what Air NZ is doing (yes I know Jetstar isn't here - yet...).
More to the point, trying to do both usually ends in tears, as others have found (KLM/Buzz, BA/Go... remember them...???)
The only really successful Low-Cost carriers, anywhere in the world, specifically refuse to do what Air NZ has done.
With Air Nelson they have a golden opportunity to go completely with the Low-Cost model. Will they take it? Nah...
Some of you need to get out into the world and see what happens elsewhere. The way aviation is done in NZ is outdated and out of step with the rest of the world. I only realised how badly Air NZ had slipped when I returned to NZ recently. Doggy old aircraft, pathetic IFE systems, badly-supervised handling agents in other countries. Change is needed.