Actually, I-Air didn't "attempt to compete" with UAL per se, it was more incidental to what happened. Picking up and moving to an entire different airport wasn't feasible. Add to that, ACA/I-Air held the leases on those gates for something like 20 more years and a decent lease rate.

Part of the market research that went into it discovered that people would GLADLY drive all the way to BWI to take advantage of SW's low fares. As opposed to paying higher fares out of IAD where AA, UAL, and USAir dominate. The NoVa area is huge, and that's a large market of passengers.

The business plan was to capture the flier who drove all the way to BWI and draw them back to IAD with a low cost option. As has been mentioned, when carriers in bankruptcy match fares, it's hard to compete. Add to that the same thing that helped do XJT/Branded operations in, fuel had just about doubled from start up to shut down.