Probably a case of they're exploiting the fact that often people are forced by necessity (lets face it, what business trip, or working man's hard earned holiday is going to spend it all travelling by road, rail and sea) to buy from them, so they offer a cheap service and cram as many in as they can get away with without a lawsuit.
They'll plead economy woes whilst posting 'our profits are down x million, or about 1% wah' whilst putting half the population through hell.
If you took 2 seats out of a q400, thats what maybe £ 140 of revenue lost, which wouldn't exactly be hard to make back by spreading the cost (be less than a fiver each on top) yet the precious extra inches of legroom would be well worth it in customer satisfaction, yet they wont do this, unless its offering some kind of 'premium' service and charging twice as much.