National may have been able to succeed, but it's original business plan was based on oil staying approximately $20 per barrel indefinitely. In their defense, it had been that price from the mid 80s to the late 90s, when they got going. N7 started flying shortly before JetBlue and as far as I am aware, no other startup has had as much capital when they started up except for JetBlue (not sure about Virgin America.) However, the planes N7 used (while I do love the 757, especially with RR engines) were a bit much for CONUS only operations (although I think they did hope to go to HNL with them eventually.) JBLU was smart in that they got a bunch of brand new A320s at very low prices when they started. N7 had a few fairly new 757's along with several rather old and beat up ones.
Also (and this is just a personal opinion) the management there was pretty corrupt (or "spendthrift" if you prefer.) They had things such as a Vacation division, way too many directors, etc. Carl Icahn did make an offer to buy N7 while they were in Chapter 11 and it was rebuffed - foolishly, as it turns
out. I guess he wanted some say in how things were run in exchange for his cash (which I can't blame him for) and the CEO of National wanted to continue on doing things his way. It was a very fun airline though, and a good place to work while it lasted - annual reunions of ex N7 people continue to this day.