A possible trial run could be between the U.S. and Canada. An even smaller trial could be not to allow a hub but to allow ticketing. For example, Air Canada could be allowed to sell Seattle-New York La Guardia seats via Toronto.

For a U.S. airline to make it work, some sort of Canadian preclearance might help. For example, an end of a concourse could be blocked off and treated like Canadian soil. Southwest could do it at Chicago Midway with flights from Toronto, Montreal, Ottawa, and Halifax continuing on to Vancouver, Edmonton, Calgary, and Victoria. For Chicago passengers or other U.S. originating passengers wanting to go to Canada, they could clear Canadian customs in Chicago. An alternative would be to force Canadians to clear U.S. customs if connecting but that would slow down connections.

American, Delta, and United would probably not want to offend their partners, Westjet and Air Canada. That would leave Southwest as the most likely to be interested.

Recently, I tried flying between a U.S. city, Toronto, Vancouver, and driving to the U.S. What a long trip! It took about 15 hours each way versus 6-8 hours if not through Canada.

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I'm not sure what you're asking.

Anti-cabotage laws are a form of economic protectionism that a government imposes to shield domestic carriers from foreign-carrier competition on domestic routes. Unless and until a majority of the U.S. Senate and a majority of the U.S. House of Representatives feels otherwise, U.S. anti-cabotage laws are here to stay.

I didn't know whether it was legislation or executive branch regulations that prohibited cabotage.

Currently, Air Canada won't even sell you a LAX-YYZ-LGA ticket unless you bought separate tickets. Qantas flies between LAX-JFK but an only fly passengers who originated in Australia and are continuing on to New York.

Another kind of cabotage is if Air Canada would be allowed to set up a U.S. hub but that will never happen.

Some people living in Buffalo choose to fly out of Toronto to another US city. Similarly, people in upstate NY, VT, and NH choose to fly out of Montreal

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"Currently, Air Canada won't even sell you a LAX-YYZ-LGA ticket unless you bought separate tickets."

That's because it's illegal for AC to sell transportation between two points within the U.S. on a single ticket.

The QF JFK-LAX and LAX-JFK flights are permitted, as long as passengers are traveling to or from Australia. (I'm not sure if a QF passenger can have a stopover at LAX, or if only true connections are allowed.)

And I'm pretty sure that Canadian law prohibits U.S. carriers from transporting passengers between two Canadian points via the U.S. on a single ticket.

Cabotage works pretty well in the EU where it is allowed for EU carriers. A few European LCCs like Ryanair, easyJet and Vueling now fly domestic routes outside their home countries. Lufthansa was running an Italian domestic operation for a while, and of course it owns Austrian and Swiss.

Australia and New Zealand have a similar arrangement, and a couple of Australian airlines fly domestically within New Zealand.

But compared to these precedents, it would obviously be a big market game changer to have Canadian hubs competing with US hubs for domestic traffic and vice versa, let alone allowing full cabotage between the two countries...

Correct, just like in the US, domestic routes can only be served by domestic carriers in Canada.

But as for 5th freedoms, perhaps QF isn't allowed on the domestic segment of their flight to Australia. And I can't think of any purely domestic US tag legs, but know of some Canada-US legs that are/were allowed. BA for example used to be allowed to sell the YYZ - JFK segment of YYZ-JFK-MAN. I believe LY sold LAX-YYZ when that flight stopped on the way to TLV (not anymore). And not sure if they do anymore, but I think JL did YVR-LAS, and Phillipines did YVR-MEX (I may have mixed those last two up). CX still sells JFK-YVR on their flight that continues into HKG. I know AC applied/tried to do YYZ-LAX-SYD, while selling the LAX-SYD portion, but was denied by the DOT. But in the rest of the world, it's common enough. There are a ton of international carriers serving routes like SIN-BKK and CMB-MLE, for example.

As to the OP, really wouldn't work unless both countries allowed it, but still don't know if it would make sense. Especially as you lay it out. For example, both the US and Canada would have to change laws to have a sterile transit as you suggest like there is in Europe/Asia, etc. as both countries have laws requiring each pax to pass through immigration - even if simply doing an international transit.

As for WN being interested, I'm not sure that there is even much interest in them serving Canada, much less selling domestic Canada routings via a US hub. It certainly comes up every few years, but operating in Canada doesn't really fit in a LCC model since costs to operate out of Canadian airports are quite high and would likely cannibalize a lot of the business Canadians already provide at border airports like SEA and BUF.

It must. Just for S&Gs, I tried booking YYZ-YVR on AA.com but because they code share with WestJet, it will allow you to book it as long as the flight in or out of Canada is operated by WS. It does result in some rather creative routings, like YYZ-ORD-DFW-LAX-YVR but you could do it. There was nothing on all AA metal.

Tried the same booking on delta.com, who, AFAIK has no codeshares with Canadian carriers and it didn't allow it. Didn't even bother with UA.com since it would just give me nonstops on AC.

Fifth freedom tags (country B to country C) often have local traffic rights, but tags within a foreign country never do.

While we're fantasizing, one obvious alternative would be for the US and Canada to adopt a Schengen-like system so that there is no passport control between them at all. That would be amazingly good for business in general, not just for travel. Likelihood low, though, especially given all the security paranoia in the US.

Low likelihood is an understatement. I'd love to see it. While Europe is making it easier to cross borders, we're making it more difficult.

I have purchased AAA-YYZ-BBB tickets on AC many times with AAA and BBB being different US cities. It is issued on one ticket, however you are buying 2 fares - AAA-YYZ and YYZ-BBB

Actually, this was being talked about a lot and was somewhat close to happening...before Sept. 2001. But obviously, that changed everything. They were calling it at that time a security perimeter - for around the the U.S., Canada and even potentially Mexico. Don't know how many details were fully worked out but it would have been great - also don't know if they worked out some of the details like for countries who needed visas for the U.S. but not Canada, etc. But the idea was kind of like a schengen zone - imagine how much time that would save travelers leaving YYZ for the U.S. at peak times. Alas, correct, now this is all fantasy.

I have flown AC, HNL-YYZ-MCI on one ticket, but it was 14 years ago. Maybe they have tightened up in recent years.

Doubt that there is much appetite on either the US or Canadian side of the borde for cabotage-y type tickets. And, as to the one-offs such as QF, they might be happy to sell the inbound US segment, but less happy to sell that on the outbound. Same thing for UA on its flights to OZ.

Using the US/Canada example...and removing for a moment the politics and the customs issues...

From a geographical standpoint...and taking into account current service patterns...it's fun to think about what could work. The OP has already posited a SW hub at MDW...obviously, if that works then so would a UA/AA hub at ORD (again, from a purely geographical standpoint).

DL would be positioned fairly well with a Canada-MSP-Canada hub. I could also see AS picking up some British Columbia-SEA-YYZ traffic, with the minor hitch that they don't currently serve YYZ. But geographically, it would work.

On the flip side, YYZ would work fairly well as a connecting point from the western US to New England. If the price was right, I'm sure many folks in the Pacific Northwest would be willing to connect through YVR to head east. (Not to mention Alaska-YVR-lower 48 connections).

But not much else works, geographically, for US-Canada-US connections, especially given Americans' perception of Canada as the "great white North" (even though a significant chunk of the populated part is south of the 49th Parallel.)