Mars... I am not sure you really are getting this. BA specifically cited the NY to LAX route in their model to DOT as an example. Virgin America was initially refused a license because they were not considered to meet the foreign ownership rules.
The rules relating to baggage really have nothing to do with this, and
I don't necessarily advocate banning airlines from charging for each element, I argue it should be regulated, NOT price controlled. For example, I would require all airlines to advertise the total cost of a return ticket, with one bag, including all charges. This way consumers can compare like for like. There is no reason why this should lead to higher prices. On the contrary, fair competition would reduce them.
The Market may expand, but not necessarily get significantly larger. Therefore, the number of planes wouldn't necessarily increase. For example, if Lufthansa bought Alaska Airlines.
You seem devoted to the idea that the Market will not work for airlines. I have no idea why you think this...but your arguments don't support your position.
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