What more profit?

If the increased costs due to regulation is X and AC shareholders expect a Y% ROI, then ticket prices will go up X+Y*X. Total margins will still be Y%.

Basic economic theory would suggest that as prices go up consumption goes down, but it could well be the case today that the lowest price today is lower then the price consumers are willing to pay. Impossible to know, and airline RM departments are generally good at this. But AC (and WS) could well support a $10/ticket increase with zero decrease in traveling. Indeed, the high load levels that exist today would suggest that that is exactly what would happen.

Actually, since the race to the bottom has many people disgusted with the service, they might not fly at all; Those who 20 years ago might have flown in business might not fly at all because of the huge violent pain that flying is today. AC (and WS) charging $10 more and thus offering service not comparable to a cell phone company might increase sales. But WS and AC are in a spiral to cheap, focusing on that local optimization before all others.