Palmair
FLYboh, I think your observations about Palmair already competing with locos merely reinforce the very questions about them that were in my mind. To drop from £230 to £99 may be an impressive competitive response, but;
a) Your experience is that people are still migrating to still lower fares from BRS/SOU/LGW etc
b) Unless you're making truly massive profits in the first place you can't suffer a yield reduction like that without sustaining serious damage.
The only hope an operator would normally have when faced with these pressures is to change their business model (i.e.abandon seat only, or become a loco themselves). Bigger equipment with the attendant economies of scale would be one antidote, especially they've got a loyal client base, but the risks would be enormous.
I guess what I'm trying to say is that Palmair might be like the family grocer on the corner of the High Street faced with a Tesco Superstore opening just out of town...