The statistics disagree. US air travel is at an all-time high: https://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/pu...
Revenue, was higher in 2014 than 2015 or 2016. https://www.statista.com/statistics/197680/total-operating-r...
So, yes all things equal people fly more when flights costs significantly less. That does not the industry makes more profit from smaller seats.