There are 3 things I would follow as an airline CEO
1) Only pick fights that I can win
2) If a cost is avoidable, pass it on to the passenger as an ancillary charge/change passenger behaviour
3) Once you have decided upon the level of service offered by your airline, avoid confusing passengers by offering different levels of service in different parts of your network
It looks like the Flybe CEO is failing against all three of those tests then. They have picked a fight that they appear to be losing very badly, have chosen to drop baggage charges and differentiate the product across the network.
What I can't understand is that Flybe have been saying to the City very loudly that they are reducing capacity and taking rational decisions about loss-making routes. They then go and charter in four aircraft from Eastern to fly six routes, all of which must be massively loss-making if the figures being thrown about are even half-way accurate. It's totally inconsistent with their stated strategy. I do wonder whether their shareholders have any idea of just how much trouble is around the corner in this airline, both with the venture in Scotland, the bleed from Heathrow and the credit card income loss. It adds up to a bucket load of trouble, and that's even before you get onto Q400 maintenance / landing gear issues.
Someone is on a serious ego trip with all of this stuff. The last CEO's ego was damaging enough to the business and you'd have thought that corporate lessons would have been learned from that alone. Clearly not.