HIDDY, we need to differentiate here between short- and long-haul, I think. The subject about LoCo competition [financially] broadly affects the former, whereas the 'quality' aspects tend to belong with the latter. But you are right in highlighting the price difference for the receipt of 'baubles': I think the baubles should be much larger, and actually meaningful.
My mind, such as it is, tends to break it down into:
s/h Economy ... pile it high and sell it cheap.
s/h Business ... make it miles better than a free meal in the same low-pitch economy seat. Forget the moving curtain, install a few rows of decent Business-class seats.
l/h Economy ... pile it high and sell it cheap
l/h Economy+ ... make it an affordable enhancement above WT..
l/h Business ... make a major effort to start competing with other carriers, both East- and West-bound with the hard and soft product. Those seeds are starting to germinate, albeit painfully slowly.
I would hope that savings in one area could be fed back to real enhancements in the other, rather than into shareholder profits.
And, as
Porky Speedpig implies above, don't even
think about cutting back on the quality of the staff. They're the on-the-spot saviours of every situation, so invest MORE in Customer Services, not less.
That's my amateur Business Plan. But then I know nothing about running an airline.