LGS - I agree that some of the UK's smaller airports will struggle to support a meaningful level of LCC operations.
Cardiff and Newcastle are both substantial cities and their airports each serve a considerable population.
bmibaby as an airline is going through troubled times anyway, and needs to retrench to its profitable core - expansion is not the order of the day.
Neither Cardiff, nor the people live there (I'm including everything west as far as Swansea) will go away anytime soon. Unless the economy is deep in recession, we tend to find that when one airline chops a substantial number of routes from a single airport, that another airline will consider stepping in instead.
Yes, Bristol has a substantially bigger airport, but I imagine there is still good money to be made by flying to/from Cardiff. Newcastle is a more extreme case, with the nearest effective competitor being either Leeds or Edinburgh.
Perhaps Flybe now see an opportunity to open a couple more carefully chosen routes at Cardiff ? Alternatively would Thomson or Thomas Cook consider expanding operations ?