Except for the lcc's, who have similiar costs, the airlines can't without getting caught in a spiral. If they don't match the lower fares of other carriers, they lose traffic. Losing traffic lowers revenues. Losing revenue means charging higher fares to make up the revenue. Charging higher fares results in losing traffic, which means lower revenue, which means charging still more. Keep repeating.

So the only option is to match where necessary to hold onto passengers and try to make it up with higher fares where they can. See the never popular PHL-BOS fares after FL pulled out and before WN entered the market.

Jim