I remember a time before the last recession when none of the major airlines charged for checked bags. The major US airlines added those fees around 2008 IIRC to pad their bottom line and predictably people started cramming more into carry on bags, making the whole process more miserable.
I don't see it as padding so much as simply hiding price increases by misleading the customer. And it's easy to see why it's a race to the bottom sorely in need of regulation: you can't compete against the airline that charges extra for bags because people will filter out your flight before they realize the games being played.
Which is the same thing that happens with shrinkflation in packaging: the "half gallon" of ice cream that is actually missing 20% can be priced lower than the full half gallon. You don't have to fool everyone but just enough to raise your market share a little with your deceptively "lower" prices.