"Sometimes the market can't correct the problem if everyone offering a service, say air travel, decides to offer smoking."
Actually, if the air travel providers were all making a profit in this scenario, then the market would be working just fine. If you specifically didn't like smoking on airplanes you would be free to risk your capital and hard work to start a non-smoking alternative. If a demand existed you would also make a profit. The market will not meet every individual's demands, but it will offer enough alternatives that people will be satisfied.
Why should the government be involved at all? Why should they make it illegal for someone to offer a smokers only airline? The answer is control, plain and simple.
We have been reduced to fighting for "liberty" on issues like blowing smoke in other people's faces, being intoxicated in public, having unnatural sex with the blessing and support of government, adopting children no matter what your perverse lifestyle, buying and selling virtual child pornography, and on and on. If these are the battles we fight for, all the while more and more of our money is being confiscated and our children's minds are being twisted and corrupted in government schools, we've already proven our unfitness for liberty. Get used to government control and just put on an x-rated movie or something to ease your sorrows.