The reason TEVA South is making the cheap routes is because they want you off their turf. They have a lot more money than you do, so I reccomend doing as they wish.
Find a nice little airport where no other airlines have created a base. It'll have to be a very small airport (around 1 million passengers), but if you create a base there and fly routes that nobody else is flying you should be able to survive.
This sort of behavior happens in real life. Look what United Airlines did to Independence Air at Dulles.
and how am i saposed to do this when im 6 million in the hole and cant make any money??