If by “race to the bottom” you mean making flying more affordable for everyone, then I agree.
Tickets are a fraction of what they were in the 70’s due to deregulation. And in terms of comfort, based on how full flights are, it seem like airlines have struck the right comfort versus price balance.
Why are you assuming more people flying is good? The evidence is that too many people are flying. Now we've made everyone used to a thing that will either be taken away by governments proactively or by nature retributively.
Lower prices and less space per person means more people get to fly. And it's not like air travel is a high-profit industry. Regulating airlines to force them to raise prices and provide more space per customer is obviously evil by any sensible definition. I'm not even some sort of free-market zealot. Forcing an important product to become more exclusionary via regulation to improve the quality for non-marginal users is bad policy and also morally wrong. Raising airfare means that people on the margin are not going to be able to travel to see their dying relatives, visit family on holidays, travel for vacation, etc.
Or maybe people won't move as far from their relatives in the first place. You can't just assume that more flying is better. Flying has complicated effects on society. It also has an effect on the environment, and the evidence there is overwhelming that it is a negative effect.
If people don't like economy seats, they have 3 choices: 1) don't fly at all, 2) upgrade to a premium seat or 3) fly an airline with more economy room.
The vast majority of customers always pick the lowest price.
Tickets are a fraction of what they were in the 70’s due to deregulation. And in terms of comfort, based on how full flights are, it seem like airlines have struck the right comfort versus price balance.