all good and illuminating points. a quick response to them:

How is the profit hidden? You see the bottom line before you pull the purchase trigger. - yes, this is true from the buyer's perspective. however, when considering the airline's margins, they (and this is true of full service as well as low cost) generally quote an inclusive figure for taxes and fees, giving the impression that they are pass throughs to government, airports etc. however, in reality, a fair proportion - and sometimes most - are actually fuel surcharges and other items which contribute to revenues. one interesting aspect of this is to see the different tax and fee charges for the same route between different airlines.

US consumers hate "oh by the way" charges, and a "free tickets" promotion would be roundly criticized if the tickets really cost hundreds of dollars (as can be the case with European LCC promotions). That's why Expedia has had good success showing the "bottom line price," and I expect Travelocity will do the same thing soon.

indeed - and ba and other carriers here are applying the same 'all inclusive'; quoting in europe now. however, the taxes and fees vary widely between countries and, within them, airports - so many of the offers remain ultra cheap even after this.

for historic reasons, US airlines dispose of surplus capacity through FF schemes - fascinating and I'm sure partially true explanation. but begs the question, why didn't/hasn't southwest or other US LCC with less of a legacy tried the same approach?