There's nothing prohibiting businesses from operating a cost-plus model, and nothing prohibiting those that don't. You can find examples of successes in both types. We have a couple high-end grocery chains in our area that seem to do alright with their higher prices despite a heavy presense of Walmarts, Costcos, Meijers and Aldis. LCC/ULCCs operate more like a cost-plus model. Nonetheless, because airplanes and pilots are expensive, you can't really keep around excess seat inventory for peak demand times (and thus you see higher ticket prices on them at those times).

However, the LCC/ULCC model is not everyone's cup of tea and there is also room for hub-spoke legacy model. Business flyers are willing to pay more for the convenience of frequent, non-stop flights and the legacy airlines are meeting that need. It's not entirely negative as those who are willing to connect on a legacy that does not have a hub at their airport (such as leisure flyers) likely benefit from lower fares than they would otherwise have with a cost-plus model. I just bought a connecting ticket from DTW-MSP on UA for $325 roundtrip. DL is charging from $582 roundtrip on same dates on it's non-stop flights. While I generally stick with DL, when fare differences get that large I have no problem spending a bit more time on connecting flights.

You can be non-binary in your thinking about these things and realize that each model can have both benefits and drawbacks and the government doesn't necessarily need to play favorites and decide which model should be allowed to exist and which one shouldn't.