Funny, because if the airlines went back to just code-sharing with smaller local service airlines, we will have come full circle. I'm not sure if that will happen, but I could see it eventually.
That never worked all that well, even though that was the system for many decades.
"Local service carriers" (the Ozarks, Southerns, North Centrals, Piedmonts, etc, etc) always lived hand to mouth, and depended greatly (under regulation) from subsidies from the Federal Government. When the "trunk" carriers served small places, it was because they were forced to by the CAB, and it was the long haul, major population traffic that subsidized small places. The ugly truth is that there simply not enough revenue in small population centers. Some of those outfits grew a brain, and actually did something with what little they had to work with, so when the shackles came off, they were able to do something.
The regional airline system, as it exists in the US, came about because the Local Service carriers KNEW there was no money in local service, and grew beyond their original raison d'être, leaving a void in the market. There's good reason for that.
Now that said, I'm a firm believer in a rising tide should lift all boats. If we believe that air transportation is a utility, then it should be regulated as such (to some extent) to provide at least some measure of utility to everyone, the same as electricity and phone service (which undergoes the same set of economics and government regulation). By that same token, people need to understand that if you live in the sticks, 2 or 3 717s to Hubsburg is all you are going to get, and if you want to fly on the big boy metal to more and exciting destinations, then you need to live in the Big Boy City.
Richman