I think Birmingham is ripe for a 'LCC' (as Flight have christened them). I don't think Brummies associate themselves with east Mids, for example public transport there, especially from birmingham, is appalling, no, non existant. EMA has a fair old catchment area of its own, the cities of Derby, Nottingham, leicester an Sheffield (yes, Sheffield) must house a few million between them.
Conversely public transport to BHX is quite good, and will be improve this summer once the new monorail system is running.
BA appear to be ownsizing at BHX (Embraers and them godawful 146's from A319s), perhaps focusing on 'higher value' or whatever. But their heart isn't in it (think JFK, and 146 for an A319 is an insult), I wouldn't be entirely surprised if BHX in 5 years consisted on XYZ Low fare Airlines, with British European catering for those who want the traditional product.
Furthermore if XYZ Airlines at Birmingham serve 'business' destinations (AMS, FRA, CPH, CDG, MXP, wherever) they are in a different ball game to Baby and Go at EMA.
So there.
WT
(PS no need to turn this into a 146 debate, its about BHX!)