A modest proposal for the rebuilding of Damcyan

[Roogle]

I would imagine they'd survive the same way they did before the terrible bombardments from the airships.

Anyways, keep in mind that Edward and Anna - both very much non-combatants at the time - managed to travel from Kaipo to Damcyan despite the monster in the underground waterway. Plus I'm sure the kingdom would've had more than one hovercraft.

Edward and Anna used the hovercraft to travel between Damcyan and Kaipo. It is hinted that the Underground Waterway is not the type of place that ordinary travelers take. Edward, in the sequel, goes through the entire Underground Waterway by himself twice to help someone in need. It shows you a little bit about how far he had come.

Incidentally, Damcyan is a nation of commerce and trade, so it was rebuilt and restored after the events of the game.