It did work before with Manx. There were other reasons why they ceased to exist.
I too hope Eastern make a go of it, but history rather weighs against that.
Yes it did work for Manx once upon a time, 1980s, 1990s. At that time IOM was significantly more well subscribed as a tourist destination. It had Manx flying a flagship London Heathrow route, with a leisure offering to Luton and a selection of other UK routes, it also had a handful of other routes not to/ from the Island (pre the days of BA express) which helped its commercials. There was limited to no competition. The world today is a radically different one. The IOM tourist industry has declined, the key routes are served by low cost carriers, and the established Flybe/ Stobart has it sewn up. There is no business case for an IOM airline that competes in the same space as easyJet or even Flybe. EasyJet's arrival on the Island had a profound effect on the level of demand for other carriers and the level of fares that can be collected.
Citywing commercially stacked up and had points of difference, small aircraft with ability to serve thin markets, that otherwise would not operate, it had exemption from APD which gives it a competitive advantage, and it also has fully outsourced model, bringing an airline operation in house with such small scale, would mean that the overhead could not be sustained.
I would not concur that the Island can sustain its own airline.
However, I do feel that the Island should be treated similarly to Island Communities off Scotland, where an Air Discount Scheme is in place. This would make travel more affordable for IOM residents and as a result potentially drive demand, enabling the viability of services to some marginal points on the map. E.g. Glasgow, Edinburgh, Leeds etc.