There are lots of ready-made new route opportunities about to open up for FR as other airlines drop routes. BA are expected to reduce short-haul services. When they do, FR will be offering 1p fares on a similar route, and picking up the volume.
They will look at opportunities like that wherever in Europe they occur. If Alitalia were finally to collapse, FR would be enhancing their services from CIA and BGY to the destinations once served by AZ, or a field nearby.
I for one don't believe the wheels have fallen off the model yet.
Remember...there isn't only FR who will take the BA routes, if any are to be lost from LGW (which I expect as LHR has a 'use it or lose it' policy) then U2 will compete on the EXACT same route which will probably be more effective.
If Alitalia were to go (which I doubt), U2 again will be on the hunt offering services from MXP which are EXACT route duplication. Not to mention Air One who would be the big benefactors as they move into the long-haul.
Ryanair do have a good model that works well in a healthy economy but when it comes to the crunch - they struggle more:
1. Not a huge business base
2. Rely a lot on seasonal traffic
3. Don't serve business airports very much
4. Have a lot more seats to fill than other carriers
5. Don't have a large commited customer base because of their lack luster service
When we come out of the troubled economy, which I have no doubt we will do, the airline will prosper and they have the money to keep them going through this period.