The list of failed "airline within an airline" is long and one of the first attempts at this was by Lufthansa in the early 90s. Usually these concepts are driven by cost savings and it was no different for Lufthansa Express, which although short-lived helped change Lufthansa forever:
Lufthansa Express Airbus A310 & Boeing 737-300 by rstretton, on Flickr
Lufthansa Express Airbus A310 & Boeing 737-300 by rstretton, on Flickr