So far, I would say building a <40 seat small airline is very possible : but there do seem to be 'new rules' on doing so : avoid competition on routes where possible, go for the unfilled demand first and take advantage of the RI@0 still = 20% of demand 'knows' you are there : do not go for the frequency benefit of too many flights early on, it dont work as well anymore, I'm finding that deliberately under-supplying routes is bringing in good early LF's : even with RI in the 20's I'm seeing 90%+ LF's on some routes, 80%+ on most, and that's after a default+10% price hike on the 90%-ers, which are holding up still. New 'thin' routes are coming in at about LF30% or so but seem to build quickly, esp. with a first month -10% price cut.
It still holds that you have to watch your out-goings and not spend too much on marketing, but again, even with minimal spends, both CI and RI are ticking on up : be interesting to see where the sticking point's are for CI (and how much it matters if you stay at that level) and when its time to bump the spend a bit more:
I have found its cheaper to order in new plane's rather than take the over-priced dregs in the market (took 2 to get started on 1-yr leases), and with delivery times for small aircraft at a month or so with 2-week intervals on multi-orders, not much longer to wait either; and new means long c/d checks and all the benefits of new for pax preference and reliability (tech delays/cancelations now minimal).
So far, by my calculations, leases will be well-covered when they all kick-in, c-checks too : d-checks may be more difficult but they are all 7-8 years away... so, meh... worry then
First impressions are good, but longer-term, I think that its gonna be a tough haul, but achievable.