This is the very start of the game world. Being the first on the route, & putting only one flight on it allows you to charge a significantly higher price. Although you incur significantly higher gate fees, your little starting B737-300 can be making in excess of $1m a day. I've done it before myself; it does work. The two main problems are:
(1) It's a lot of work,
(2) It only works at the start of the game, & you have to be first on the route. As soon as someone else comes along & dumps a decent capacity on it, the trick is up & your demand at your higher price drops to nothing.
So no disrespect to our crafty colleague, but the best way to defeat or deflate someone doing this is just to put your planes on his routes at the default price.