Musk is going to disrupt the airline industry in a number of ways.
What you discussed here certainly is going to have an impact. However, autonomous vehicles could also affect the short hop flights. If something is an hour flight, it likely is a 6 or so hour car ride. With an autonomous vehicle, like a sleeper, why fly when you can order one at 10 PM, get in, go to sleep, and arrive in the morning?
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It would be nice but I don't know how comfortable the ride would be since people prefer to sleep in their own bed. I also think Elon wants to build underground tunnels to speed up travel too.
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