I don't know that you would see a huge increase in sold seats, but what you would see is what is more important, a decrease in capacity as the carriers who operate on ridiculous margins either change their business model or fail. Which will bring about a reduction in capacity and an increase in fares.

Which is not bad. This arguement that free markets will define business is total crap. It may work in a business where you can shift production to sweat shop countries, move the business offshore for tax purposes and the like, but the cold hard fact remains that unless you operate an airline or any business that produces a perishable commodity; like an airline seat, you can't operate the business on float. Selling seats below cost in one segment and trying to make it up by price gouging in another won't work because eventually you will sell more underpriced seats than you can recover. Demand for the cheap seats will by nature increase and the death spiral tightens until you have debt that you can't service with your assets and you run out of cash.

You are correct that service drove the market in the pre dereg days. And yes, badly managed companies did suffer and those managements should have been replaced.

If the only thing an airline can sell is low cost, better heeled competition will allow them to build a market, then come in and undercut them and push them out or out of business. Then the fares will go up.

This industry has more failed low cost, post dereg carriers than Corrosion Corner had junk planes in the late 70's. Every one was built on the idea that cheap was good, more capacity was better and float would make the bills and payroll until they became bigger and could charge more. And the ones still here play "chase the tail" and when one drops their fares, everyone else follows, lest they lost customers.

The question remains: Is an airline better off flying a plane at a loss that they can't recover, or setting a price that provides a reasonable profit margin and not budging? If they do the former, they lose their butt. If they do the latter, they may shrink their capacity, but will operate aircraft and the business profitably, providing shareholder returns and stability to their workforce and the community.

Just as we're seeing today in the global economy, we need to realize that air travel is not a right. Not everyone can afford it, nor can they afford trips to Disney World just because some marketing knob says so. That's why before there was People's Express, there were station wagons, busses, trains and Weber grills.