In the USA and southern europe there are good road and rail links almost everywhere so short haul airlines are under price pressure and it may be difficult to make smaller aircraft pay.
As soon as the geography gets in the way the alternatives become less credible or often non-existant. In these cases an airline can charge whatever it takes and the passengers will pay. Few pasengers will consider heaving their guts up for hours on a ferry in rough seas when there is an island hopping airline available unless they are seriously skint.
Even fewer will have the courage to face the roads in (for example) Nepal or the Andes.