The other factor I just realized is that the closer the cities are, the smaller the geographic area of demand is. That is to say, if you are far from either airport you might as well just drive instead. You need to be going from somewhere close to airport A to somewhere close to airport B.

Second, if you have to wait too long for a flight, you might as well just drive. So the airline needs to offer high frequency service. This is exactly what WN did when competing with driving intra-Texas. I'll bet the demand between PDX and SEA is far less than intra-Texas.