Sure people still fly, there aren't many alternatives. They don't take out old precautionary measures either, they just keep adding on. The difference you don't see is cost. But I remember getting free hot meals in cattle class, I remember checking firearms and fishing poles without paying an extra $50, or paying for an extra checked bag, I remember not having to pay a security fee, I remember a 5 minute breeze through security from the end of the line, I remember being able to take a Tim's, bag lunch or bottle of water through the checkpoint, I remember not having to take my shoes off, I remember having a restricted area ID card being sufficient to get through secuity without being physically searched, I remember being able to accompany someone to the boarding lounge when I wasn't travelling, I remember knowing security personnel by sight if not by name, just to name a few, and that doesn't include the fun stuff involved in going to the US. These are all changes that have happened in the last 9 years.
AS JLM says, what really suffers are the short flights, it takes longer to fly between Calgary and Edmonton than to drive, (mind you, that's a poor example since the airport is in Leduc and not Edmonton, a 20 minute drive right there). But even Toronto to Sudbury, you're better off to drive.
The only way to keep an airport safe is to build a 5 mile perimeter around it, not let any unauthorised vehicle traffic or people into that perimeter and screen everybody who does enter. Still, there would be holes in security, but that wouldn't matter because the costs would be so prohibitive no one could afford to fly, and even if they could it would be less of a hassle just to drive to Disneyland. Problem solved. And don't laugh, this idea is already making its rounds, I didn't just pull it out of thin air.