NEW YORK (TheStreet) -- It's not just Dallas where old-style fare wars are cutting into airline industry profits.

United (UAL - Get Report) is also seeing fare skirmishing in Chicago, Chief Revenue Officer Jim Compton said Thursday at a Deutsche Bank investor conference.

"In the case of Chicago, we've seen American (AAL - Get Report) match more Southwest (LUV - Get Report) pricing at Midway," Compton said. "Once a largest competitor does that, there's a lot of capacity at O'Hare that's exposed.

 "We have to make a decision and manage that," he said. "We've seen more of that activity."

 At O'Hare, United operates a hub with about 600 daily departures to 179 destinations.

Airline shares have taken a beating in recent weeks due to concerns about rising capacity, rising oil prices and an increase in efforts to match competitive fares, particularly in Dallas, where Southwest expanded at Love Field, Spirit (SAVE) has added flights at Dallas/Fort Worth International Airport and hub carrier American has said it needs to match the fares, even the fares at Spirit, which offers far fewer amenities and far fewer frequencies.

On Wednesday, Bank of America/Merrill Lynch analyst Andrew Didora downgraded American to neutral from buy. "American is the most exposed to capacity concerns that have arisen of late given that it goes head to head with Southwest in Dallas," Didora wrote in a report.

In an interview, Deutsche Bank analyst Mike Linenberg said, "The Chicago situation has been brewing for several months. It seemed inevitable that someone would finally talk about it at one of these conferences. My sense is that many investors, although not all, are aware of it," Linenberg said.

On Thursday, United shares fell $1.30 to $54.57.  Shares in nearly every airline declined on Thursday, but United's 2.3% decline was the biggest. United shares year-to-date are down 18%.



This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.