Hi Radeng, glad to find I'm not the only Baboo fan on PPRuNe. As you say, comfortable seating with generous legroom, nice free snacks, excellent crew, and generally pretty low prices (although certainly not always). I like the friendly atmosphere, and the way they do things a bit differently, with a bit of style and flair (e.g. help yourself to a selection of canapes offered from a tray, rather than having a shrink-wrapped package plonked on your table).
I'd also wondered about the economics of the thing. I think the answer is probably mainly in the size of the operation: it's a very small outfit. When they started, they had a "fleet" of two Dash-8s. Now I think they've got a couple of Embraer 190s as well, and one or two more Dash-8s, but still only 6-7 aircraft total. So it's simple and (relatively) cheap, with a pretty small crew roster to manage. The catering, although a refreshing change from the usual, is also simple and cheap: bottles of water (they don't offer/carry anything else) and the canapes/tiramisu type of thing. Minimum variation, minimum wastage. They seem to pick their routes carefully, looking for the niches missed by the bigger fish, and they certainly work the aircraft hard.
So their philosophy would seem to be keep it simple, do it well, and offer something a bit different. Seems to be working so far. On the downside, the small fleet and heavy schedule leads to big problems when things go wrong - I've seen (but thankfully not yet experienced) some severe delays.