Personally, I don't think this is a bad move for bmi.
By keeping our diamond club & diamond lounges, I'm sure that we won't lose as many premium passengers as we would have if we had pulled those, although I'm not completely convinced about pulling business class. Some pax from longhaul business transfer to the shorthaul product, and there are still people who will pay the full-fare economy ticket price to be able to travel in the business cabin. Business Class is always a selling point for premium passengers to fly full-fare on your airline to earn the miles, and bmi will really miss out on this market. After all, that's exactly what has happened with bmi in the Midlands, when all routes went to baby. When they did, most of the biz pax went to BA.
The economy class idea will work. We'll have a better money intake from the new bar service, and it will provide bmi with the opportunity to provide a more thorough service. Apparently the new food & drink service will be more than baby's snack/drink service, but more like "the song deli" that Delta's LCC offers in the US, with snacks/salads/light meals/healthy options/drinks/cocktails for offer. Better than a bacon sandwich & a tea any day, even if you have to shell out £5.
With regards to tidying up the cabin after each flight; it saves costs & isn't backbreaking labour. It's moving through the cabin & checking the area around each seat, which we do anyway when doing safety checks. Only extra thing is bunging an old newspaper in a binbag!
Rumours are true that LH wants to sell their shareholding. They originally bought it in the hopes of bmi being able to fly trans-atlantic & really turn themselves into a hub carrier but this really hasn't worked out.