Southwest Could Get Undercut in Chicago

Last Updated Mar 14, 2008 8:16 PM EDT

Two ultra-low fare carriers could undercut Southwest's dominance in the Chicago area as cheaper Gary, Indiana threatens both O'Hare and Midway.

There has long been talk of a third airport in Chicago, one of the world's busiest flight hubs. For years, Chicago's mayor has tried to build a massive new complex in Peotone, a good 45 miles south of the Loop, but he's been unsuccessful so far. With O'Hare at capacity and Midway not too far behind, there will be a need for more room. Some airlines have started turning to Gary, just over the border in Indiana and only 25 miles from the Loop.

Sure, O'Hare is in the middle of a massive expansion that will give it some breathing room, but in the long run, that's not going to cut it. And O'Hare isn't exactly convenient for those living south of Chicago anyway. So Gary does have some attraction even now, but nobody has made it work there yet.

It doesn't help to have Southwest running its second largest operation at Midway, already on the south side of Chicago. It takes a special kind of airline to make Gary work in such a large low-fare shadow. There are now two of them giving it a shot. Skybus began flying there recently, and now we're told that Mexican startup Viva Aerobus will do the same.

What do Skybus and Via have in common? They're both ultra low cost carriers looking to entice travelers with extremely low fares. Gary will give them some of the lowest airport costs around, and that means they can actually survive on lower revenues.

Is it as convenient as Midway for South Siders? Nah. But if the other airports can't handle enough supply to feed demand, then prices will rise. The promise of low fares at a not-too-distant airport might have some pulling power in this town.