Currently there appears to be a growing trend in the number of people wanting to tailor-make their holidays - i.e. by booking their flights, hotels and car rental separately.
Dont forget that if you do that you have NO ATOL protection. Which in of itself costs money thus pushing up the costs for charter carriers who are bonded.
They (charter carriers) have however traditionally gained by having rock bottom (or no) sales and marketing costs, this all being taken care of by the charterer (although often a parent company) However the internet has reduced sales costs massively. In effect no frills operators would find it very hard to compete without the internet due to fees from travel agents, GDS positioning etc.