Correct to an end I think -
A city of 500 000 people would sound like it could support an airline service on the face of it but the socio-economic demographic of many of these cities is such that the vast majority of the population will never afford to fly on an aeroplane in their lives. Looking at macro figures like GDP as a measure of wealth is making a pretty BIG assumption about a population - and internet usage in Asia increasing - I know it's pointing toward the development of disposable income - but i think it's mre accurately an indicator of the growth of telecommunications infrastructure able to support data at a usable speed and the ever reducing cost of internet access.
My guess is that the airlines current fixation on the Aus & NZ is a compromise between per capita wealth & population mass.
The cost and difficulty of developing & maintaining an airline product in many developing asian economies might not be sufficiently supported in a very low yield market. - YET.
The key is the word YET - These developing economies are doing just that and the opportunity to start early while it's cheapest might prove fruitful - the problem is that attempting to time markets in such a way is a rather foolhardy thing to do as it is fraught with danger.
We will see - I would love to go back and work in SE Asia for a while.