First of all, competition increases the available passengers (I do not know why, but two airlines with the standard price can gather more passngers than a single one). Secondly, I'll assume that you reduced your prices significantly. The demand is tied to the ticket price, so a lowered price will enable more passengers to fly. The other way round you can charge a higher price when offering fewer seats. Thirdly, while connection passengers pay less, they still pay something and a big hub can give you a lot of connecting pax, enabling a much higher number of filled seats. Lastly, large airlines are only little affected by much smaller ones on such big routes. I once ran an airline using only A330 within the USA. Even though I regularely exceeded demand, my extra capacity hurt the smaller airlines on that route much more than the huge one flying 49x a week - both absolute and relative.
So why doesn't the demand graph change along with the passenger numbers? i mean if I'm flying 21 flights a week and filling demand why wouldn't it show me more passengers so i can add flights. This alos goes along with my frequency question. My bar is at yellow even flying 21 times a week and filling demand. Why isn't my frequency or any frequency green when you can fulfill the demand?