This happens all the time around hubs. If a legacy carrier tried to move into Provo, Delta would cut costs on the corresponding flight into SLC, long enough to encourage people to go to SLC over Provo, then the competing airline would shut down that flight due to cost and load factors. There is a reason they call them "fortress" hubs. Airlines will take short-term losses on flights to protect them.

Now, maybe airlines like Frontier or Southwest might consider it. The problem for Southwest is that they only fly B737's, so they don't have the flexibility to downgauge the route.

The idea that airlines are about their "loyal" customers is garbage. Just look at what has happened to frequent flyer programs over the past few years. Airlines are interested in the customer base that flies a lot on full fare tickets and sits at the front of the plane. Everybody else is cattle.