Interesting suggestions.
I feel that if you are to compete with a more established, larger rival in any industry, you somehow have to gain the customers confidence, and the best way of doing this is to provide a product that is a little bit different, one that stands out. Otherwise you haven't got a chance.
When British Midland started competing head to head with its more illustious rival BA in the 80s and 90s out of Heathrow, it did so using a innovative product that stood out.
Unfortunately, bmi has been forced down a path that has taken away this uniqueness and the public perception of the product has taken a real bashing if the passenger figures are to be believed. Now it seems there is no reason not to fly with BA because bmi dont offer anything special, anything different.
In order to win back the confidence of the masses, an innovative approach is going to have to be found. Is it the New Business Model in the long run?