I believe it's the recent change in corporate bankruptcy law that is responsible for a complete change in philosophy at the major airlines.
It used to be that the bankruptcy laws were a total joke. USAir went into bankruptcy protection 3 times in almost as many years. United stayed in bankruptcy for 3 years, and its CEO had the cahones to admit he was using the process to gain a competitive advantage. The catch phrase of the past decade was "gaining market share." The airlines just wanted growth, even if they were losing money, as they figured an eventual bankruptcy filing would allow them to sort out their finances later.
Now that the bankruptcy laws have changed, many airlines are realizing that this is getting harder to do. So airlines are actually trying not to lose money on flights for a change. This means capacity reductions, without caring about the once sacrosanct "market share." And since all airlines now care about costs, they aren't worrying about a competitor swooping in and replacing the discarded money-losing flights with new money-losing flights.
So that's why all the flights are full, airfares are up almost 20% over last year, and there's still layoffs for pilots.
For the regional industry, there are additional concerns. The majors have decided that profit is the ONLY consideration now, and so they're using the capacity reductions to their fullest advantage, to get shrinking regionals to fight amongst themselves for the remaining flying. So now regionals are playing the "market share" game, while flying at a loss. Obviously this is unsustainable, and at some point something's got to give. The industry cannot survive by eating its young; there will be significant changes coming, one way or the other.
