I've been saying something to this effect since I joined this forum. check some of my earliest posts. Anyway; DCA-ROC guy is correct about the three types of travel. I personally believe that there is the segment of society that wants first class, so I think that sometime in the future there will be maybe one or two Midwest Express model carriers flying those folks at a price still more reasonable than the network carriers current first class. I believe most domestic mainline type routes will be taken over by LCCs. Regional carriers will most probably exist relatively unchanged to handle the domestic regional routes that need served. I think they will only grow over the next few years, so they will probably be larger than they are currently. I think current cartel carriers will have to make a decision. The will 1.)convert to a Midwest Express model domestic carrier (my guess; American); 2.)Convert to a LCC model domestic carrier(My Guess; Delta or whats left of US Air); 3.)Convert to a purely International carrier with little change to current international service or structure (Possibly Northwest or United to Asia or Delta or American or Continental to Europe) or 4.)convert domestic operations under option 1 or 2 and keep international as a separate business unit, like how Delta operates the Delta Shuttle separate completely from the rest of Delta.
For option 3 to be viable the Cartel carriers would have to have domestic feed from the other purely domestic carriers under the LCC model or Midwest express model or both. This is not so hard to believe because for example Delta already has necessary ticketing and baggage agreements with Airtran, Vanguard, Frontier, and Midwest express.
Option 4 is what most cartel carriers would like to do because there is money to be had on both sides, but they will have the most problems with this because of the difference in pay and things for pilots/FAs etc. As well as the passengers will not like whatever they choose for their domestic operations.
Or the airlines may be re-regulated in which case none of this will matter.
Actually, though, the more I think about it the more I realize that the network carriers have the right Idea because they cater to those that need the lowest fare with many coach seats and also allow for those that like first class and they have the connections that make it possible to go from Grand Rapids Michigan to Milan, Italy with the least ammount of hassle possible. The problem is that when the LCCs come in they don't make money on their domestic routes, so they cut back. This cuts back on the feed for the longhaul and international feed, so the longhaul and international flights lose money, so the airline loses money. Smarter people than me will figure out the future of the airline industry, but I hope to be a part of it well into the future