I'll grant that the assumption of "free, competitive marketplace" is too often made regarding various industries where the assumption is not justified, but airline industry isn't one of them.
The one thing, competitiveness of a market depends on most is what is called "barrier to entry", which can be various things, from laws/regulations enacted by congress, monopoly granted by various levels of government, start-up capital costs, customers' switching costs, etc. With no barrier to entry, any excess profit will be fleeting, as profit opportunity will attract competition, lowering prices and, essentially, removing the profit. With airline industries, there is no government-enforced monopoly, and most flyers have minimal switching costs (perhaps loss of points in loyalty programs).
While one could argue that there is never a completely free, competitive market, I would say airline industry comes close enough. I propose two measures of whether a market is competitive: number of competitors (high is competitive), and the profit margin in the industry (low means competitive). By these two measures, airline industry is competitive. Given any route, as long as you don't impose arbitrary requirements as your sibling poster has done (why must you fly direct? And really, can't you fly to nearby airports in the same area, rather than insisting connecting only two specific airports?), at least 3 or 4 airlines will be competing for your money.
In fact, people (especially those who cheered on the recent United-Continental merger) say there is too much competition in the airline industry, which led to airlines having a reputation of being a terrible industry to own in your stock portfolio (the only airline ETF, FAA, is specifically designed for speculative purpose, not investing).
So, reality supports my (implicit) claim that airline industry is "free, competitive marketplace". What reality do you live in?