If you only look at the material side of what people are paying for: boarding a few minutes faster, deplaning a few minutes faster, comfier seats and better food, etc, then I completely agree that it doesn't make sense to pay an extra $1000 or so for a plane ticket. Here's what I think people do pay ridiculous amounts of money for: status, and ensuring they do not have to interact with normals. Air travel used to be a luxury activity in itself, but prices today mean that you are basically stepping onto a dirty sky bus (more so for some airlines than others). This is of course a generalization, but rich people do not take buses.

(This doesn't really apply to business travelers, as their companies need to pay for these upgrades to make the job travel less unattractive)