I think Hat Yai ranks 3rd or 4th by population, after Greater Bangkok, Chiang Mai and Khorat - it's difficult to be exact because it depends how you measure the city population. Mueang Hat Yai is about 150k, but is just one district that comprises the total city, greater Hat Yai has a population of over 400k. Chiang Mai and Khorat the same; they all have fairly similar populations for the greater city area of between 400-500k.
Hat Yai is a commercial centre, tourism is secondary and mainly from neighbouring Malaysia. If Malaysians want to go to Phuket they'd go direct, not via Hat Yai. Thais are less likely to go to Phuket on holiday and few westerners visit Hat Yai, so who uses the route? Clearly not enough to make money, even at Bangkok Airways inflated prices.