While it was mostly manufacturers building more efficient aircraft, people are generally willing to trade leg room for a cheaper fair. That’s exactly the kind of thing regulators and the free market may come to a different compromise. Worse, but cheaper is often quite appealing.
So no, it wasn't just manufacturers building more efficient aircraft.
Adjusted for inflation and including fees domestic round-trip airfare in 1979 averaged $617.47 vs $366.92 in 2016 a 40% drop. Which looks pretty good, though there was that 1979 oil crisis which needs to be accounted for which complicates the inflation comparison.
Meanwhile Jets become 70% more fuel efficient between 1967 and 2007. As airliners use a mix of newer and older aircraft there’s a delay before improvements affect prices. But most of that improvement was front loaded so by 2018 domestic airlines where getting 58 pay passenger miles per gallon of fuel an unheard of number in 1979 which again also happened to be the middle of an oil crisis.
Convenience especially in terms of number of flights. This gets into a bunch of economic and logistical issues, but airlines are happy to abandon less profitable areas. While regulators want regular service even if the demand isn’t quite there
Service. The minimum number of attendants is based on safety, airlines would happily cut those workers.
Safety.
In the opposite direction, you're not actually allowed to generally buy a car without modern safety features. (Although automakers do make cars that are have higher or lower safety ratings within the regulatory framework.)
A common thread is that when push comes to shove, a lot of consumers will choose the lower price.
https://en.wikipedia.org/wiki/List_of_airlines_of_the_United...
How many does Boeing have?
If you get all of these right, price decreases, demand increases, average seat occupancy goes way up, and that causes the per-seat price to drop even more, in a feedback loop. If your costs are low enough, you can go for a direct model instead of a hub-and-spoke model, catering more towards casual travelers who just want to go somewhere instead of the business types which need to go from X to Y at time Z, no matter the cost. THe direct model drives the cost down even more, as you only need one flight instead of two, and don't have to worry about the insane costs of passengers stranded at your hub when something goes wrong.