The existing network carrier inherited a cost base that made anything outside of Heathrow a loser. Compare BA's costs with, for example, let me think, Qatar. Now we all love their shiny aircraft, product and network but they don't exactly treat their people well. For BA to compete it had to smash it's own staff's terms and conditions and outsourse a lot of loyal and hard working people. That's a lot of destruction of jobs and lives to get to where they are now, and that's still not making a particularly decent margin.
Lufthansa is stepping away for German Wings, Air France retreated to Paris, Iberia pulled back to Madrid and KLM re-trenched at AMS. If we want to fly in Europe at loco prices we can't expect a business with network carrier costs to work at MAN as they have no feed, whereas the other guy, AF/KLM/LX/TP/LH is feeding their hub at the other end.
We rejoice at low fares, but we ignore the price on (our own) people's salaries and careers whilst lauding certain sandy companies who treat their staff in a way 90% of us would, quite rightly, not tolerate. What flybe is doing is interesting but remains tinkering at the edges of what's possible, although how to bring it to fruition is beyond me in the current marketplace.