Logically speaking they have to realise the correlation they are seeing between flying and subs/activity, however this is Blizzard we are talking about and admitting they are wrong and doing something about it is almost unthinkable for them.
The truly Bizarre thing is, the devs play the game, they must have witnessed how WoD/Legion became better overnight with the enabling of flying, hell in the case of WoD the improvement was so pronounced that if it had been available at launch then it would probably never have been called the worst expan by so many as with flying enabled it's single player content was better than Cata.
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I doubt anyone really thinks the game is unplayable without flying, it's just simply not as good. Withholding one of the games best and most important features makes it simply less fun, especially when zones in post TBC WoW are designed for flying and that makes traversing them on ground mounts tedious to horrific.