In terms of the other suggested exceptions to the rule that small airlines can't survive... Aurigny (govt backed), Loganair (public sector reliant, and whose success Highland Airways wasn't able to recreate perhaps as a result of economies of scale) & Scilly Skybus (no competition; not even all year round by the ferry from the same operator!) are all "different". Lyddair is very unique and not really an example of an airline
How about Scot Airways? ... I recall Scot Airways (Suckling) starting out some 30 years ago with their solitary Do228 operating in/out of Ipswich Airport's grass runway (more famous for testing Qualcast lawnmowers on) whilst Mrs Suckling prepared the in-flight catering from her kitchen.
How about BMI Regional? ... I recall them starting off as the Scottish arm of Euroair, something like 'Euroair Business Centre', operating a Bandit or few before going on to become Business Air etc.
How about Flybe? ... I recall Flybe (JEA & Spacegrand) when they operated DHC6's, then Sheds, to/from such grand airports as Blackpool and Shoreham, when they went F27-500's that was like entering the premier league for them.
How about Jet2? ... I recall Jet2 (Express Air Services) when they operated a DHC6 and a HPR7 and a right cowboy outfit they were in those days, look what they have become.
How about Ryanair? ... Ryanair started off as a Puddle Jumper, in those days there were only three recognised airports in Eire, Ryanair came in with some turboprops operating to/from Irish regional airports, look at Ryanair today.
How about Easyjet? ... When Easyjet commenced operations they didn't even have an AOC, they commenced flying operations on Air Foyle's AOC.
Starting out as a Puddle Jumper operation is not necessarily a 'Road to Nowhere'!
