That is what the market, not the airlines, drove. When an industry has as profit margin of 3%, as it did for years, that’s 4 seats on a 150 seat 737. One row is 6 seats. 4% increase.
The airline that added that one row increased their revenue by enough to go from loss to profit.
Airlines, like American, that famously, in the late 1990s, increased their seat pitch, lost money compared with those that squeezed in more seats.
People buy on price, and then complain that the airlines squeeze them - well, if people would stop chasing the cheapest ticket and buy the seats that have more room, then all the airlines would have kept those larger seats.
But the public didn’t.
So, the airlines didn’t.