What can the airlines do? They are heavily regulated and expensive to operate. The industry over its history is littered with bankruptcies. For most passengers, price is the number one factor, not service. Southwest probably has the best business model that combines good price with service.
It's always been that way. But over the last few years it's apparent that for most airlines the goal is to make basic coach as unbearable as possible in order to justify charging more for the better seats.