We are in the age of "smart regulation," and have been for about 40 years. Prior to the 1970s and 1980s, you had government regulation that tried to micromanage markets (as the article explains, regulating "prices and routes"). Airline regulation was representative: the airline told you what you could charge, where you could fly, what your customer experience had to be, how much profits you could make, etc. The problem is that the government was terrible at making these sorts of decisions.

In the late 1970s through the 1990s, we rolled back that sort of regulation all across the economy. Instead of micromanaging prices and routes, we refocused the government on regulations like safety and maintenance standards. And it was a huge success: http://www.econlib.org/library/Enc1/AirlineDeregulation.html. So much so that Europe copied it: http://www.economist.com/node/146627. It's not just because ticket prices are way cheaper than they used to be (though it's partly that). Carriers like FedEx and UPS (and companies that depend on them, like Amazon) wouldn't have been able to exist under the previous model where bureaucrats micromanaged the air cargo industry.

The article isn't espousing "smart regulation." It's asking for the government to get back into the business of micromanaging prices and service:

> There should also be rules on how many passengers an airline can cram into a plane, and what extras it can charge for. And there should be limits on price gouging. It makes no sense to allow airlines to charge an astronomical fare just because a flight is nearly full, and a dirt-cheap fare for an advance booking.

There is no economic rationale for the government to tell airlines what extras they can and cannot charge for, any more than there is for the government to tell app or game developers what kinds of DLC they can charge for.

Airline service is crappy for the same reason pop music and fast food are crappy. People are willing to give up almost everything in the way of amenities in return for saving a few bucks on the ticket price. It's not the government's place to tell them they shouldn't do that.