It's not just airlines. I went to Toronto in June and was looking at hotels 3 weeks out. I was astounded when the cheapest basic room at The Royal York was coming back at $1,005 per night. I ended up a block away at the Intercontinental for $300.

However, I'm guessing someone must be paying those rates, as they can't be having an empty hotel? Similar logic must apply to AC as well, someone must be buying seats at those prices, as AC isn't going to fly an empty airplane around. Clearly we're not paying those prices, but somebody must be.
For my Toronto trip, I booked Porter for much less than either WS or AC. I was quite pleased with their offering, especially for the price.