I have not seen LX base fares in the 2-5USD range for quite a while - care to provide a few examples? EI has a different business model in that they rely much more heavily on ancillary revenue made from pax while they travel, so that is not a valid comparison.
Also, we are talking here about long-haul travel and not short hops, where I grant you that airlines probably make some money out of "fuel" surcharges.
The difference between a non-rev and this fare is that the non-rev only travels when the seat really would go empty otherwise, whereas a pax on this fare might obviously displace another pax willing to pay more. And even a non-rev frequently pays something like 10% of the real fare, which still consists a contribution towards the variable cost.
Mind you, I don't try to defend LX here and think they should come forward with a better response than just "we cancel on you". But I am pointing out that this would certainly not be a profitable course of action for them.