While I understand and agree that smaller versions of a plane's family will feature higher costs per seat mile than larger versions, aren't there flights where a 73G or A319 make sense? Like markets where 80 or 90 seaters are too small and flights where 150-180 seats are too many? As an aside, I don't view the 73G as a shrink; the 736 is a shrink; the 738 and 739 are both stretches of the basic 737 design.
For years, the conventional wisdom has been that 50 seaters, despite their higher costs per seat mile, were advantageous because they permitted airlines to attract higher yields and featured lower trip costs than larger jets. Of course, with fuel at $3.30/gal, the economics of 50 seaters no longer makes sense on many routes - larger jets, with 70-90 seats, will have much lower CASM and trip costs not all that much higher than the 50 seaters.
I would think that flying 150-180 seaters where 120 seats would really be optimal would decimate yields. Or are airlines immune from the supply v demand rules applicable to other sellers? Can airlines routinely get an extra 30-60 passengers that are necessary to fill the 738s, 739s and A321s without dragging down the average fare to unprofitable levels?
Is it merely a function of today's fuel prices? Southwest flies more than 360 73Gs and 165 733s (same size as the 73G) and I don't think anyone would say that WN erred when it bought those 137 seaters (525 of them). Will their 175 seat 738s feature lower costs per seat mile? Of course. Will WN be able to consistently fill those 175 seats at profitable fares? Gary Kelly better hope so.