Hi there!
@LF: It's best to avoid everything between 23:55 and 04:55. Next to "bad" flight times you can also have less LF due to competition. Since this is not the case here, maybe you get the "aircraft too small penalty". You said your route has a demand of 4000. So if you use a small prop aircraft, you probably use a "too small aircraft". That's a warning which appears during opening a new route. This happens mostly on international flights or long flights, though. For example, you may technically fly a 737 from the US east coast to the UK. But for game mechanic reasons, that's a "too small aircraft", so people actually use wide bodies. Maybe you also increased prices which leads to less LF? Or your company image went down? There are many factors.
@Competition/opening new bases: If the demand is filled or not is only of minor importance. Obviously it's perfect to find unfulfilled demand, but that's not always easy to find. So let's take an example:
Hamburg - Cologne
Demand: 600
Competion: 1 airline with 3 daily flights with 200 seats each ("demand filled")
So there are 3 flights in total which offer 600 seats in total. Let's say you open a fourth flight on this route. You'd get 25% of the potential passengers, so 150 passengers for you. So if you take a Dash 8 Q400 with 68 seats or a EMB175 with 75 seats, you could easily fly 2 times daily this route without risking anything. Your 2 flights would be full while your competitor is stuck with now only 450 potential passengers instead of the original 600.
What I do is: I look for airports with a small number of airlines. Then I check if those airlines use rather big aircraft on short/medium haul routes (737, 757, A320 etc). Then I use ATR, Dash, Ejets, Fokker etc. ("medium aircraft") to challenge him on short haul/medium haul. It's much better to have full prop aircraft with a high frequency than 1 flight a day with a big bird. The small aircraft run profitably while the big bird is near empty.
So you can actually go to airports with competition. Just make sure that you have a good concept. I have a competitor which focusses on long-haul. No problem there going regional for me. Depends really on what's your plan. As you may know you should not have more than 3 fleet types at a time to avoid fleet commonality costs. So if an airline uses 737, 767 and 777, you can go regional without much trouble. You could use routes with demand between 30-200. But if you have a competitor with the fleet types ATR, Ejet, 737, you know he doesnt do longhaul. So your best guess is to go longhaul there.