This is a 'chicken-and-egg' argument...fares versus costs. Keep in mind that the key word in 'union contract' is 'contract.' It is locked in for a period of time.
Obviously, none of the contracts (pilots, mechanics, FAs, whomever) that were signed in the 'glory days' of 1999-2000 (when 'dot-com' mania had everybody flying and planes chock-full) could 'pre-suppose' September 11 and/or the economic bursting of the tech bubble. Hence, the carriers are locked into paying these high wages in spite of the fact that the environment and landscape have both changed dramatically. This is not to say the union negotiators should have forseen this...that's silly...but what it DOES say is that things can change, and in a hurry. People are much more price sensitive these days; heck, it is tough enough just to get people to fly at ANY price, never mind an outrageous one. And largely, travelers (even the business ones) are looking for low fares because whether it comes out of an individual's pocket or a company's pocket, it is--in the end--a cost. Being a discretionary cost in many cases (how many people on a given flight absolutely HAD to be on that plane?), price elasticity is quite high: the number of seats filled swings wildly based on fare changes, that's what yield management is all about.
So, in the end, I believe the high fares are a result of the airlines trying to first cover their high costs rather than the fares being a means for unions to extract high wages. Normally, the price charged is a function of covering costs and then adding a profit margin. The whole 'Golden Goose' syndrome applies here, and the big-buck contracts that unions win might only result in a temporary gain. I am not saying that unions are totally at fault; it never is as clear-cut as that. But I AM saying that unions coming back to the tables in the near term should look toward maintaining the health of their company first...because without that, big union contracts aren't worth the paper they're printed on.