Some background and an update:

I may have mentioned this before, but I think it's interesting. The FAA requires that children over 2 years old sit in their own seat on an airplane, but leaves it optional for younger children, who are otherwise allowed to sit on an adult's lap. Interestingly, the FAA flatly states that having these smaller children in their own seat (preferably in a carrier) is safer than being on a lap, but they've opted not to require it. Why? Because if they require that infants have their own seat, then many families may opt to travel by car rather than pay the added expense of another airline ticket. And traveling on the streets and highways is statistically more dangerous than traveling on an airplane, even sitting on someone's lap.

Here's the update: Until recently, many airlines have offered a reduced fare (usually half-price) for families buying a seat for their infant of less than 2 years of age. Apparently this is changing. Airlines are dropping this discount, and according to the story, the motivation is market forces, plain and simple. For a time, many airplane seats were empty, but lately capacity has been reduced and demand has increased, so flights are more often full or close to it. When chances were that the seat would otherwise be empty, airlines were happy to get 50% fare for it, but now that the seat would likely otherwise be occupied by a full-fare passenger, half-fare isn't such a good deal for the airline.

Here's a brief commentary on the story which includes a brief survey of airline policies via their websites.

One more wrinkle: online versus in person booking. Many airlines offer their cheapest fare online, even offering a discount over the same flight booked on the phone with a person. Those that do still offer an infant fare reduction typically don't let you book that online; you have to call in.

This weekend I booked tickets with Frontier for the three of us (Dana, Jessica, and myself) to visit Colorado in late March. I searched for the flights we wanted online, then called in to make the reservation so I could get the infant reduction (a big deal for me; I pretty much always prefer an online transaction to placing an order over the telephone).

I got two tickets at full price and one at (roughly) half-price. Great. Except that I was getting the 'in-person' booking fare, not the online booking fare. I didn't do the math until I'd hung up the phone, but it turns out it would have been cheaper to buy 3 full-fare tickets online than it was to buy 2 full-fare and 1 half-fare ticket on the phone. Live and learn. (The third commenter here found a similar scenario with Southwest.)