I don't think I'd argue cost-cutting leads to trickle-down fare reductions. But if the market demands lower fares and competition comes in to deliver that, being able to compete with that naturally means either accepting lower margins (probably not choice #1 ) and/or packing more seats on the plane and/or reducing costs to (at least!) compensate. And because most people on the plane shop on cost alone the end game is very similar (unless it's a business-heavy route where schedule could pip cost as a factor)