My guess would be that, as you say, Portugal is mainly an incoming tourist destination and all those foreign tourists are mainly catered for by foreign charter carriers.
Because of their size they can offer much better prices and would make it difficult for a start-up to compete with them.
In Spain, for instance, being also an incoming destination, there are quite a few carriers (Spanair, Air Europa, Futura, Iberworld, etc) and they seem to be making fairly ok. I see a few reasons for this:
1.- most started as a direct competitor to IB for national routes and then expanded to other European destinations.
2.- The Spanish market is bigger than the Portuguese both in volume of National passengers and points to be served, so this gives more room for charters or other companies to fill the gap.
3.- Big vertically integrated tourist groups like IBEROSTAR have their own airline (Iberworld). Mind you, this is also how Spanair started before 51% of the shares were sold to SK (I think). Are there such big groups in Portugal?
I have taken Spain as a comparison because they both are neighbours and the tourism fenomenon is very important. I thinks as fas as Portugal is concerned it is mainly a matter of size. Portugalia though is doing very well as a regular airline.
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