Are you referring to the Freddie Laker and People Express models?
The problem is having sufficient capacity to accommodate those you still
do not have seats for after you have filled the first airplane.
That was People Express' downfall. They didn't have the ability to have
the right equipment at the right airport to meet the demand.

Jay Honeck wrote:
Here's a mystery that I just cannot answer:
To fly to Las Vegas from Chicago costs $99.00. (For example.)
To fly to Cedar Rapids from Chicago costs $300.
Naturally, at that price practically no one flies on that plane into Cedar
Rapids.
Question: WHY do the airlines that fly into Cedar Rapids insist on flying
back and forth with mostly empty planes? Would it not make sense, say, 30
minutes before departure, to drop the price until the plane was full? This
is basic "Econ 101" -- if empty, lower the price until demand matches
supply.
Their actions seem to defy logic. In the lodging industry, you're going to
find rooms are discounted much more aggressively after 10 PM than they are
at 3 PM, simply because no innkeeper wants to sit empty, and the odds of
being able to charge full-rate at that time of day are slim. Yet no airline
seems to do it this way, at least on the short hops.
If it were MY airline, I'd sure as hell rather make a hundred bucks than
nothing!
There must be something else in play here -- anyone know?