Hmm. I think BA need to tread very carefully with this one.
In a nutshell, they are in danger of following the Ryanairs and easyJets of the world into making flying a commodity, and, as perception is reality, what will help them differentiate?
The fact that they fly to airports closer to the cities won't, free airport check-in won't, and a free luggage allowance won't, as easyJet and Ryanair's passenger numbers testify. Lower the price and they will fly.
The staff, and to a slightly lesser extent, the food, in my opinion, will. But it has to be done correctly. On my recent flight to Prague, there was something comically surreal about everyone munching their sandwiches at more or less the same time, and it felt almost like school dinners the way they were distributed. I wouldn't miss that. What I think would have been perfect for a flight of that duration was a hot drink and a biscuit. And I think that's what they are proposing.
The staff on my flights were great, especially the return flight. We didn't come off the plane saying 'That was a great flight because of the sandwich', it was a great flight because the crew were happy and laughing and at ease. But when I booked with BA, it was because although they were more expensive, it just felt more civilised, (plus I thought I was going to have a hot meal, like on their LCY domestics, but that's by the by).
So, BA, by all means, save money. But keep your staff smiling. By doing that, you will make sure you do enough so that people know why you are different, and why they are paying more.