You get what you pay for.
In the early days of EZY I flew a lot EDI-LTN. I put up with cancellations and delays? Why? Because LTN is about 1 mile from my (then) office. It made no sense to fly (KLMuk) to STN or BA/BD to LHR.
For my parents the route is a godsend. My brother and family live about 20 minutes from LTN so Granny and Grandad get to see the grandchildren a lot more then they would if EZY didn't exist.
Where the full service airlines still have an upper edge is in the areas of through transfer. If I want to fly EDI-BCN with EZY, I have to collect my luggage and then queue again at another check-in. Depending on whether the flight is on schedule or not, I may be prevented from checking due to the "30 minute" rule employed by EZY. I also may end up with boarding card number 150 which means I'm last on and get the priveledge of a middle seat beside the bogs!
Do I want this? No. Am I prepared to pay a bit more for through check-in and allocated seats? Absolutely.
Another major plus for full service airlines is full service airports. If I want to go to Frankfurt, I want to go to Frankfurt-Main where I can get fast convenient onward links. I don't want to end up in Hahn, absolutely miles away from my destination.
Who will survive? Low cost or full service? IMHO Both. The full service guys will change and will play to the point to point corporate and through connection travellers. The low costs will continue to grow, but once cities stop paying for them to land there, their costs will creep up.
Will low fare work on long-haul? Doubt it. Yes, the charter operators with their DVT inducing legroom make a success of holiday routes to the US, Maldives, Goa, etc, but that is aimed at a certain market and at a certain price bracket. Low fare operators would struggle to fill the flights as charter operators do.
There is still a market for business and premium economy prodcuts in the long-haul market. I am lucky, I can afford to fly Business Class when flying for pleasure. I hasten to add I don't purchase my tickets in the UK but in other European countries whare the prices are 50% less than in the UK! How do I get to the European City? EaZY!