This wasn't because of regulatory overhead, it was because they had created regional monopolies for the airlines. It's exactly like insurance (or prescription drugs, if you're thinking internationally) is now, and that industry wages a life and death fight every time that"deregulation" comes up. It's corporate welfare created by federal corruption.
Is it possible that extremely high costs to enter the business, as well as extremely high operating costs mean that only the biggest airlines, with the most network benefits survive?
Sure. It's not an either/or. An airline company is hard to start regardless of what the gov't does. However, parsing out routes and giving airlines monopolies on them adds a significant number of bricks to the wall.
