Not so much a matter of LCCs offering lounge access, more a matter of passengers with lounge access through other means.

As for UP offering lounge access for what they call "Smart" tickets, I can understand it as there is no business class offering on board, it allows people the option of lounge access and for those with status.
In essence UP did not open up new routes, but replaced existing routes offering full service including business class.

Smart fares are actually incredibly expensive compared to the regular ones, and so to be honest, take away KD access and unless your ticket is paid for it makes it pretty bad value.