Low Cost Carriers provide about 47% of all UK air capacity, taking account of the concentration on Short\Medium Haul routes and the poor full service airline offering on the same routes. The LCC offer is very much in the majority.Not everyone wants to travel Lumo just like everyone doesn't want to fly easyJet or Ryanair.
Carrying more people at low prices doesn't necessarily make a service more profitable. It's also about the yield generated overall, which is why you tend to see lower priced Advance Tickets on slower/unpopular services.
Even if First Class and catering facilities were removed this wouldn't necessarily translate into lots of cheaper tickets because there are more seats - DfT and HMT want to reduce the overall subsidy for rail, so that means reducing losses where they occur or increasing profits where they occur.
But then I am rather tired of endless debates on here over the years that because someone can't get a £10 ticket from London to Manchester the solution must be to remove First Class.
Should that not be an indictor for the ECML where LCC like Lumo is a tiny percentage of capacity and the full service LNER a huge majority.