I'm admitting there isn't much innovation left in pure airlines. The customer has spoken, they want cheap flights. Some are willing to pay for legroom, some are willing to pay for luggage, [insert a bunch of other things] but will do without for cheaper tickets. It is very hard to find any more innovation that hasn't already been found in this space. Airlines are working on the things grandparent named because it works to consumer wants: lower prices.
I think part of the problem with air travel is it’s hard to know what you’re actually getting. The seating chart doesn’t visualize leg room or cleanliness or the details of the seat design on that particular flight. If there were reliable indicators of these things, people might choose to pay more for some of those.
One consequence of giving everything a discrete price is that it drives customers to consume all services they pay for completely.
If you say "I can take two checked bags, it's included in the fare", I'll probably only take one because I only need one for the duration of my trip. But I'll feel good knowing if I decide I see something awesome while on my vacation, I can take it home without too much care for penalty fees.
But if you say "Each checked bag is $50", people will pack everything up to and including an entire 1996 Toyota Corolla into their free carry-ons, exhaust the available space, and the airline has to say to the economy class late-boarding group 'everyone after this line has to check their bag anyway, but we won't charge you the $50."
As an added plus, the price awareness reduces the quality of the travel experience-- you end up asking "can I fit another souvenir in my little free bag", and often deciding against it, because it's insanity to spend $50 in bag fees for a $10 book.
