In real-life people are, of course, very price-sensitive.
One of the reasons why it isn't as easy as just fixing it in this particular game is because certain people know how to play the game really well. If all one had to do was throw a plane on a route and give the seats away for almost nothing, a certain number of people can get away with doing that on dozens, if not hundreds, of routes simply because without competition on most of their routes (unrealistic in itself) they have plenty of cash to burn on those few routes where there is competition.
It's already easy enough to jump into force a smaller player into bankruptcy fairly quickly. It would happen instantaneously if customers were as price-sensitive as they are in real-life. The guy HQ'd in Saint Louis wouldn't have the cash that the guys HQs in New York, Atlanta, LA, etc all had -- so all they'd have to do is charge $10 a ticket, subsidized by all their other money-gushing international routes, and the poor guy in STL would be bankrupt before he knew it or at least would have to abandon all his routes leading to major cities. Which would only further feed the machine of the larger players being unhindered by a lack of competition.