I would have thought that Air Southwest would take an entirely pragmatic approach to this. Competition will always happen; you can't bleat about it unless you believe the competition is unfair or illegally based. I can't see how either accusation could possibly be levelled at Flybe, so suspect the WOWboys will simply get on with what they do. From all that I can see, they're doing just fine.
If the appalling state of ground handling at Liverpool is anything to go by, I could completely understand any decision to forego operating there in favour of flying to Manchester (if that is indeed what Flybe choose to do). I am surprised that Servisair still put their name to the shambles of a ground handling operation there, and having to cope with this daily operational crap must form part of an airline's thinking on the routes to be served (or not, as the case may be). Perhaps if Flybe do indeed give up the ghost at LPL, it will encourage the airport authority to do something pro-active to manage the quality of the "service" providers trading on their patch.