Airfare is actually relatively cheap right now because there is a lot of competition and the airlines have to keep the price low for the amount of abuse they subject their passengers to. That's why they nickle and $20 passengers for travel "extras" like legroom, luggage, zone 1 boarding, and on RyanAir - using the bathroom. RyanAir is even trying to get permission to allow standing passengers for short haul flights. Yes, I know RyanAir doesn't operate in the U.S., but how long till a carrier emerges here that tries that?
The airlines have shifted to an "a la carte" system because of cost, largely due to the price of fuel. In order to keep fares low, airlines have adopted this model because it enables each passenger to pay for exactly what he or she desires instead of bundling it into one fare. There are flyers who are not interested in advanced seat assignment, do not carry checked bags, don't care to access airport lounges, and who don't want to eat onboard, just as there exists the opposite. Airlines are for-profit businesses, and as such, they can charge their passengers however they want. The public is not somehow entitled to cheap fares, free luggage, and free meals. It is very unlikely that Ryanair would ever get regulator approval for such a seating setup. The concept isn't new, and it is possible that Ryanair announced it simply for publicity purposes like it has done so many times before. Commercial aircraft have maximum seating capacities set by the manufacturer, a capacity that is closely tied to the amount of emergency exits. An airline simply cannot go over that number. A Boeing spokesman was quoted as saying, "We are not considering standing-only accommodations, nor do we have any plans to do so. Among other things, stringent regulatory requirements - including seats capable of withstanding a force of 16 Gs - pretty much preclude such an arrangement."