Restricted airspace

I'm not sure why or how, but the New York Times reported on the difficulties newer airlines face in the U.S., in what is by no stretch of the imagination a "free market":

In the airline industry, the fittest do not always survive. But that has not stopped start-up carriers like Virgin America from trying.

...

Industry experts offer a long list of challenges faced by start-up carriers, as well as upstarts like Southwest and JetBlue. That list includes access to take-off slots and gates at desirable airports, restrictions on foreign investment in American airlines, and rules preventing foreign carriers from flying within the United States — all hurdles that Virgin America has had to overcome.

...

“King Solomon couldn’t start a U.S. domestic airline these days,” said Hubert Horan, an aviation consultant. “No matter how well they’re run, it’s tough for any airline that’s small to survive.”

...

“Here are these well-run efficient airlines — people like them, they have low costs — but they can’t get the badly run inefficient airlines to go away,” he said. “In a competitive market, the people with the better-run companies ought to drive the high-cost companies out of business and that just doesn’t work in the airline industry.”

Boy, I wonder if there are any other industries that have similar structural problems...

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Fly out of under served cities. Duh!

Check out the service available from Richmond, VA -- or lack thereof. This is not a small town. It wouldn't be hard to find other mid sized cities with similar lack of service.

Flying to the big cities is pretty easy. The existing carriers offer lots of direct flights, at a good price. It if flying to places like Portland Oregon or Richmond Virginia that will clobber your wallet and take forever with transfers.

issue is volume

you need a critical mass of passengers to be profitable. I honestly have no idea what that number is, but I imagine it is higher then the big carriers deem necessary to service Richmond. Smaller cities suffer from the same bias. Just not enough people coming from or to those cities to justify an airline. I really think the money might be in regional high speed rail for smaller cities. Perhaps the passenger number is smaller given the fuel savings of not flying.

similar structural problems...

The USPS must service small towns. UPS can be selective. I read someplace that the UPS et alia use the USPS to deliver some of their packages to isolated areas.