Whilst the airline will want their LBA services to run as smoothly as possible, they also have other concerns. It's not just about their LBA service. If an aircraft diverts (for which there can be many reasons), this can introduce a significant delay into the schedule of that aircraft. This in turn has a knock on effect on routes that the aircraft will serve later., which could all then be significantly delayed. On top of that, you have crew hours. If the aircraft waits at it's diversion airport for passenger to be transferred there, or for conditions to improve at the original destination, the crew could end up our of hours, thus requiring overnight accommodation and further delaying later routes that the aircraft was scheduled for.
It is therefore in the airlines best interest to cancel one flight and get it back to base, than to have significant delays on the remainder of the aircraft's planned services. That way, there is only one flights worth of compensation claims.