Just a few observations
The traditional carriers are first and foremost network operators. They will get you and your bags from any point on their network to any other point with a single fare, a single ticket, the minimum of hassle (that’s the theory anyway). These are the real frills and they have real costs attached – think of the baggage transfer system under any hub airport. Most of their passengers are point-to-point, they are paying for these facilities but not using them.
The biggest single cost advantage the LoCos have is seating density – 25% more seats means 25% lower unit costs.
The LoCos in general but especially Ryanair are into maximising their non-ticket revenues – subsidies from the airports, but also inflight catering, car hire, insurance, photo developing, hotel bookings, anything that will turn a few pennies.
Nobody is ever going to make a profit with £1.99 or even £19.99 fares. The money is made as the aircraft fills up and the upper fare levels kick in. The last batch of passengers on a Ryanair flight will have paid fares close to business class. Failures in the LoCo sector probably didn’t pay enough attention to this.
Ryanair’s business model is substantially different from the others. Easy fly to where they think the market is. Ryanair will fly anywhere if they believe they can line up the costs and non-ticket revenues in order to get the fares down to rock-bottom level.