I"ve chosen LHG J over AFKL multiple times this year.
-Much cheaper fares, sometimes almost equal as Y on AFKL.
-Convenient schedule! Most flights in J is priced the same in LH whereas on AFKL it seems you get forced on the 6AM flights via pricing.
-Guarantee to get empty seat even on ERJ etc.

In fact I haver rarely paid for intra EU J product on AFKL, that wasn't a mileage run.
I have in the past when the fares were around the 300-400 mark, which was competitive with LH group.

As OP said business wise it's just NOT a good business proposition if your goal is to make intra-EU J attractive.

I strongly suspect that the business goals are different (as in, sell those seats as high paid Y instead).

The only reason why I havn't fully defected to *A is that no matter how often you fly in discount J it's a struggle to even get silver status