I am not an economist, so please bear with me. I think that the microeconmic theory would be consistent with actual practice if the airlines could move thier resources (planes, people, equipment etc) easily from one route to another. If LAX-JFK is more profitable than LAX-SEA, the airline should move resources from LAX-SEA to LAX-JFK. However, I would think that the airline must also take into account the benefits that accrue from having an extensive route network. Many airlines have tried to just serve the highly profitable routes (MGM Air etc.), but they have failed because travelers (especially high paying business travelers, but also fare conscious leisure travelers) prefer airlines that have a complete route network that can get them from point A to point B, as well as as from B to C. I would think this is part of the theory behind code sharing, as more recently, the airline alliances. United doesn't serve every city on this planet, but through code shares and alliances, they can now "say" they serve many more destinations.

As such, I am not sure if airlines could really equalize their rate of return across all thier invested capital. This would be the "peanut butter" rate of return, where rate of return is equally spread across the whole route. I am sure each airline has a low profit routes that they would love to stop serving, but that they continue due to competitive pressures. The majors would probably want to exit a route where WN enters (and drops ticket prices ), but can't because that route is maybe a feeder route etc.

just my $.02.