Most start up's are under capitalised from the outset. Because of this they skimp and generally can only afford old unreliable airframes, not to mention they have no bargaining power to get a good deal. This then leads to tech problems which impacts on the schedule/reputation/refunds of the airline etc. Also since there is little money left in the bank after leasing/buying aircraft and setting up the organisational side of things and probably piggy backing of another AOC then marketing suffers. As a result very few people ever hear about the airline until it has gone under. A decent marketing campaign to reach your target market will cost millions. Invariably people then say oh what a shame, if only I had known I could get to xy and z for 29.99 then I would have given them a try.
Your also up against the competition. If you think they will sit around watching you undercut them then think again. Ryanair as just one example will happily fly pax for free to put you out of business. Then when your out of the equation they will jack up the prices again. How much cash will you have in a war chest to go toe to toe with the competition. And if you just happen to find a profitable route that isn't being flown despite the airlines having thousands of people involved in route proving and yield management then don't expect the competition to just sit there letting you get on with it either.
The major problem you will face is securing sufficient funding in the current climate and being able to pitch your business plan to the city who are no doubt growing tiresome of this sector. eg: EOS, Now, Silverjet, Futura, XL Airways, Skyserivce, Zoom, Euromanx etc etc. Read any analyst report about the industry and it is all about mergers in order to secure economies of scale and protect your own backyard. None of them mention setting up a new airline nor talk about their being any opportunities for such.
Airlines gone bust