If your costs are higher than the competition, regardless of historic or current reasons, if you cannot convince your customer to pay a premium, you will go out of business
I think the issue at QF is how the costs are being allocated. Don't believe everything management put in the newspapers.
As for Europe I have flown BA short haul and that is hardly 'full' service. It's no different to anybody else it's just that you don't pay for the food.