There's a time and a place for formal dress, and I just don't think that a passenger jet qualifies as one of those places.
Agreed. It is not even semiformal.
You're just there to get from point A to point B,
In Y, yes.
not to engage in a formal event.
This is the part that I find silly, conceptually:
Guy 1: I am sitting in F, I should dress up
Guy 2: What about pax in Y?
Guy 1: Why would they need to dress up? They're in Y.
Sitting in F doesn't mean I'm more respectable/classy/etc than someone sitting in Y, it's just a hilarious perception issue.
Ask it like this: Y gets you from point A to point B - why spend huge sums extra to fly in C or F on the same trip?
A major point to fly C/F is to be seen spending money. Prove that you have the money to spend on unnecessary things, and the willingness to spend it.
Which is pointless if only complete strangers see you spending money. The point of business class/jet set is that the other rich people would recognize you and remember having seen you when you have dealings with them later.
But excess money and willingness to spend it is not the only thing to show off. Thatīs what dresscode is for: publicise your respect for those around. If you dress for comfort rather than for an informal event, what are you publicising? Bad publicity is worse than no publicity.