.Going fully demand based wouldn't see fare regulation as there is ultimately a maximum price that a customer will pay for a seat before using alternative means or not travelling, this maximum fare thus becomes the flexible refundable fare.
Sounds rather risky. Basically it's saying let the market lead and it will regulate itself. That was done with the private property and rental markets...
If there is an ultimate top line price that a consumer will pay, what if some of the consumers are very wealthy or businesses are paying? Then the average town worker may be priced out with no protection by regulation.
Airlines are not a subsidised public service with regulated fares are they? Railway franchises are. Airlines are not used as often for daily commutes to and from work, or by kids getting to and from education.
If open access operators wished to apply to operate on a purely business basis in that way, with a market based price structure and reservations only, that's a different thing and the customer would have no likely protection against unfair price rises under those circumstances.