I think the main thrust of the article is correct in that LCC's may have reached saturation point or a natural limit of market share in say Europe and the USA, recent downgrades of profits and staff cutbacks are part of the story, but more importantly are the subtle corporate culture changes that are coming into play with Ryanair/EasyJet etc. They are rediscovering a customer culture and are having to differentiate from eachother in what has become a commoditized marketplace. I think the customers have also realized the natural limits of what they are prepared to accept in terms of reliability, cramped seating and rude crew. i.e. cheap will only get you so far... and you can go further downmarket if you really want but its a case of diminishing returns as the lower value market that you chase yields less because you are attracting economically marginal passengers that have less spending power.
Remember that the LCC business model preceded the internet, and combined with deregulation, showed up a lot of the lazy high cost & poorly run older airlines, and combined with the internets power to aggregate information and fares, so they had a good run with the business model they had - but now the business model either needs to be refined/developed to maintain passengers and yield or some other disruptive leap of technology needs to come in to completely change the rules of the game.... As to what this technological game changer is - your guess is a good as mine.
This is all relevant to mature airline markets - such as North America, maybe Australia and Europe. It is a completely different matter with the rise of Asia and other BRIC countries that will have a larger emerging middle class in the next few years.
