Airlines operate on razor thin margins (roughly 6% pretax). 1/3 of their costs are fuel, 1/3 are labor (largely unionized), and the barriers to entry are nil. It is a tough business. The "good ole days" pricing you recall aren't enough to stay in business. So as the business consolidates (Continental, Northwest, AmericaWest all gone) the operators are "smarter" about their pricing. Relatively remote (and non-competitive) markets get high pricing that helps shave the losses in competitive markets.
Some carriers are notorious about cutting losses by cancelling less than full flights ... I really try to avoid even booking those carriers. I received way too many calls at 3am indicating that my 8am flight has "mechanical problems."
On the whole airlines give us a pretty good deal, but if you want to save your money (and your time is of little value) Orbitz, Priceline, etc. will help you. Living in a hub city like Houston, I refuse to take connecting flights within the U.S. and just work harder to pay the freight.
Refining "crack spreads" have gone haywire since 9/11/01 (blame this on the banking industry if you know how the markets work) and interestingly this recently drove Delta Airlines to buy a refinery that had been shut down by ConocoPhillips (oil companies don't operate on razor thin margins ... again, thank the bankers). This allows Delta to save the un-hedge-able portion of fuel costs (e.g. you can hedge crude oil, but except in the winter you can't hedge anything equivalent to jet fuel).
We ran a divisional last weekend. Diesel bill was about $600, entry fee $220, maybe $150 on some great cajun cooking .... once your big capital assets are paid for, most of the cost of incremental racing is FUEL!