It depends what you are after. You could most certainly do a successful airline which only had hubs in one state or city, but if you only want to do flights within that state, it isn't going to be a particularly large airline. States like Texas, California and Florida have plenty of busy cities in, and New York City has 3 airports (LGA, EWR ad JFK) on its own, never mind the rest of the state. If you were going to just have hubs in one state though, you might want to try and pick a more central state to make it slightly more realistic. You don't want people having to fly from Denver, to your hub in New York, then go back in pretty much the same direction to somewhere in California. Anywhere in Texas, Denver, Chicago, Indianapolis, and Kansas City might be good choices.
EDIT: I realised this post was in the real world aviation section of the forum, and my response was consider the game more than anything, but I still think these are things that an airline would have to consider in the real world too.