It isn't the price that's the issue, it is de-regulation. When the airlines were regulated, they didn't compete on price so much as service. As airlines began to understand how to compete in the de-regulated market, they realized that the bells and whistles were irrelevant - it was ticket price that determined market share, not just against other airlines, but also in competition with driving (or not traveling, altogether). More belatedly, they realized that they could maintain 'low prices' by creating or increasing non-ticket related prices which many travelers fail to take into account when making air travel-related decisions.

Now I am not suggesting that we revert to the previous way of doing things, but it isn't just the fact that air travel is 'too cheap'.