We used to have numerous airlines and stiff competition in the U.S. with American, United, U.S. Air, Delta & Continental all serving Coz. Today we have American and Delta serving coz with United showing up here and there. The Anti-Trust department even initiated an investigation on airline price fixing a year or so ago. What was the outcome... Nothing because there is no evidence of price fixing. Anyone surprised? There's no evidence because there's no need for the airlines to communicate about price fixing. With only 4 major airlines in the U.S. all they have to do is not step on each other's toes. It's like an unspoken "Gentleman's Agreement" these days. The smaller discount carriers don't even try to enter major domestic routes because as soon as they may try a flight out of ATL to COZ all of a sudden the super-carriers will slash their fares and fly at break-even or at a loss on that route to drive them out. That is called "competition" today and the big airlines can say, "See, we are competing for this route" while their 5,000 other routes absorb the cost of "competing" with a small airline trying compete and start a new route at a reasonable price that works for them financially.
You need look no further than the profits the super-carriers that are left are reporting! Record profits as fuel prices have crashed (yet the baggage fees remain) and fares continue to rise (at least for me). Furthermore, I remember when we'd fly large planes into coz... of late, AA and Delta have stuck us on those mini-jets even from Atlanta, Miami, and Houston depending on demand at the time. THose little jets make sure there's not even crumbs left for a true low-cost competitive carrier.
As far as fuel hedges are concerned - Airlines hedge no more than 2 years out at the absolute max and they never hedge all fuel requirements just in case prices fall further. With record low fuel prices now going on for as long it has one would think fares would fall and bag fees would vanish but no way - not with no true "competition". Even if a small competitor tries to fly out of a secondary airport to another secondary airport each of which may be 1/2 - a 1HR drive from thelarge, regional airport what happens? The super-carriers drop prices to the point that th extra 30 min or 1 hour drive on each end can'e be justified by the savings. Airfares to CUN are exemplary of this - They knwo what it costs to take a hopper to CZM or do the bag drag to PDC with a ferry. They've priced that route perfectly because for most going to CZM, it's not worth saving a few bucks for the hassle of the bag drag or hopping the island hopper.