You are both very right in your observations. Again, it is alledged that headcount has been dramatically reduced in the business as a whole and this will mean that less people will have to do much more, which in turn, affects morale and performance and ultimatly hits the fee paying passenger.
Returning to the initial point of inviting low cost carriers to the business, this "easy win" of bringing in business is placing a commercial bias on taking money away from operational revenue - eg landing fees etc.
The direct effect of this low-brow strategy places pressure on attaining money solely through the need of passengers to spend in the airport shops and services and nowhere else, now this may work in an larger airport such as Manchester where the retail message is subtle but effective, however a smaller, cramped and inferior infrastructure such as LBIA does not give a paying passenger the opportunity to enjoy the beginning of their journey.
I suppose the term "fattening the pig for market" would be a good analogy.