For me, it´s very unlikely, that a new carrier will start a big domestic operation in Germany. The reasons have been mentioned before: high costs and fees, rare slots, expanding fast railways service etc. Mainly European Air Express will grow (airlinersonline wrote today that EAE will receive 6 additional ex-EW AT42), due to the fact that they´ve been choosen to be the competitor against LH/EW on some routes like MUC-DTM/PAD und NUE-BER.
A good guess is an expansion of serveral low cost carriers like Ryanair (also Go and Buzz, but very slightly) and perhaps a new entry of Easyjet. But they won´t fly to the expensive big airports like FRA, MUC and DUS. They will stick to smaller ones like SXF and CGN and especially Ryanair to the smallest ones: "Frankfurt"-Hahn or "Hamburg"-Lübeck. That will happen for sure.
Deutsche BA is indeed in a difficult situation. I don´t think, that they´ll shut down operations completely. All is possible at the moment, but it´s just speculation. They have some valuable slots in MUC and especially in DUS and TXL. BA would be silly to give them away.
Just some thoughts about DI:
They failed - together with their owner BA - in creating an overall convincing concept for the german market. A little codeshare-agreement there, few new routes here, that´s not the way it works. I also think - as already mentioned in another post - that they have got too big a/c (only B733 with 136 seats in all Y). A small airline like DI can´t build up new routes with the rather big B733, that´s one main problem. Even LH usually uses Cityline´s regional jets first of all to introduce a new destination or to increase frequencies (except at their hubs). In addition, the support of BA seems to be very weak. OK, they have to pay all their recent losses, but that´s it, there is no overall concept concerning their network, marketing, fleet and frequentflyer program.
Their intra german network is quiet good. Many of the main routes are served, except the ones to FRA (that´s definitly a real lack, because HAM, TXL and MUC-FRA do have many local pax on it, not mainly connecting pax). I see no possibility for DI to serve small airports like BRE, DTM, FMO, LEJ, DRS and so on. They should stick to the major ones in future. The named smaller airports could be served by a partner (perhaps in future by the growing European Air Express EAE - only a thought).
DI is lacking in a small (but good) european network. They have many valuable slots at DUS, TXL and MUC. Especially ex DUS (problems there again are the slot restrictions) and also from some other airports, they should be able to develop some routes to intra-european key destinations with smaller a/c (50seat RJ) in cooperation with the Oneworld partners. France, Spain, Great Britain (dest. like MAN, BHX ...), Italy, Scandinavia for example could be new or growing markets. And some time they have to decide to build up a real hub operation at one airport, in order to concentrate the Oneworld longhaul traffic mainly at one airport, of course beside FRA. FRA (Oneworld longhauls AA,QF, JL and CX already there) or DUS (huge local potential, with fewer LH competition than in FRA and MUC) would be a good solutions for them, but both are lacking in available slots. Again MUC (also a huge and growing local market, but strong LH competition as in FRA) would be keen on providing them with infrastructure und slots. That´s what MUC is actually doing already, but unfortunately DI doesn´t use it, because they don´t have a real plan for the future.
No question, it doesn´t matter what they´ll do, LH will fight them in any case at any place. But that´s the situation where BA could step in. LH and Star Alliance have been able to help establishing BD in England, despite the BAs struggle against it. BA should try the same in Germany and other parts of Europe, that´s my opinion. I´m not anti-LH, but some real competition is extremely necessary. It would be the worst, if DI would remain only as a feeder into LHR/LGW for BA.
Just my thougths. Don´t know whether BA wants to try it once again with a once more restructured Deutsche BA. For BA, this would be a new (esp. financial) adventure. It seems actually, that they don´t want to try it once again ...