American's Value Pricing Plan By 1992, the number of different fares offered by the major airlines was enormous. For each city pair served, an airline would set a rst-class fare, a full coach fare, and a wide variety of discount fares, each with its own special set of restrictions. In fact, discount fares accounted for 95 percent of all traffic by 1991. In the spring of 1992, American Airlines commissioned an internal study to identify why the growth in air travel, which had boomed through the 19803, had suddenly dropped in the early 19905. One nding was that the growing complexity of airline fare structuresa complexity that American more than anyone had created through its pioneering of yield managementwas turning off consumers. In fact, air travelers were growing more and more to appreciate the transparent connection between value and price that characterized \"Everyday Low Prices\" touted by successful retailers such as Wal-Mart. In response to the study, on April 9, 1992, Robert Crandall, CEO of American Airlines, introduced a simplied pricing structure called Value Pricing. Crandall's plan, introduced at the largest press conference American Airlines had ever held and covered as a front page story in the New York limes, involved substantial drops in full coach, business class, and rst-class fares while it also eliminated most discounts and standardized the fare structure. In particular, American dropped its full coach fares to the level of most prevailing discount fares. Finally, according to Crandall, never again would American Airlines offer a discount fare that fell more than 50 percent below the full coach price. Anatomy of a Price War American's announcement on April 9 took the rest of the industry by surprise. Still, within days, nearly all major airlines matched American's fare structure. Indeed, in an attempt to air advertisements rolling out its own version of Value Pricing, United Airlines was forced to nd a substitute for its usual voice-over announcer, Gene Hackrnan