That's not what they were betting on at all.
They were assuming (incorrectly, as we now know) that the rebels would have smaller missiles, for example shoulder fired missiles like Stingers. Those missiles are able to shoot down planes flying at lower altitude, but they are unable to reach an aircraft at cruising altitude.
I believe the eastern Ukraine already had a closure for flights under 32,000 feet before MH 017. The military planes that were shoot down in the days before were all flying at much lower altitudes.
Surface to Air missiles that can engage planes at cruising altitude are usually only owned by state actors. They also require specially trained personal to operate them. Obviously both missiles and personal were available to whoever shot down MH 017.
I hope they stay away from Israel/Gaza airspace as well and not wait for another incident. Maybe airlines should publish their flight paths to the public so that we can make our own decision!
When they're at an altitude that they can be affected by a laser pointer, chances are they're not. The number of aircraft that can do a full Cat III approach with autoland is very small.
This bet turned out to be bad, very bad.
I don't know of the economics involved, but I'm guessing that, aside from political reasons, the different flight paths avoiding this would have cost the airlines enough to where they didn't want to do it. Which is pretty disturbing...
The again, you don't need war to have air defenses shot down a civilian passenger jet: http://en.wikipedia.org/wiki/Siberia_Airlines_Flight_1812