It all depends on the pricing really. Train fares from SW England to London are not cheap (especially if not booked months ahead). If Flybe can price themselves competitively versus FGW then they have a chance. I shall ignore SW trains Exeter to Waterloo service 'cos that trip takes ages!
I've said before that air travel from Exeter to London has traditionally struggled due to the relatively fast trains that are occasionally available. It's the extra hour to get to Plymouth from Exeter and 2 hours+ to get to Cornwall that have made services from there to London viable. I hope that Flybe can break that tradition. Good luck to them.