DAVID BESANKO \"The Mother of All (Pricing) Battles\": The 1992 Airline Price War In the summer of 1992 the U.S. airline industry experienced one of the most brutal price wars any industry had ever experienced. This fare war deepened the already-record losses the airline industry was suffering in the wake of the recession that began with the Persian Gulf crisis in 1990. The airline industry is, of course, prone to price wars. However, in terms of the number of markets affected, the scale of the 1992 price war was extraordinary, even by the brutally competitive standards of the U.S. airline industry. Airline scholars Steven Morrison and Clifford Winston estimated that the reduction in overall industry prots in 1992 solely due to fare wars was $1.53 billion.1 The opening salvo in the 1992 fare war was launched on May 26, when Northwest Airlines initiated a promotion titled \"Grown-Ups With Kids Fly Free.\" American Airlines responded the next day with an unprecedented fare sale: a 50 percent price cut on every seat on every route in its system. The sale, which was to last through June 5, covered all ights through September 13, and within 24 hours all major airlines had matched American's cuts. It was, in the words of one industry observer, \"an electronic passenger riotthe telecommunications equivalent of shoppers tearing through soft goods in a sales bin.\"2 So eager were U.S. consumers to buy bargain airline tickets that at the height of the fare sale, AT&T experienced its single largest daily volume of long-distance phone trafc.3 Consumers who were unable to get through to the airlines or travel agents by phone drove to airports to buy tickets in person. Within days, every major airline's inventory of seats for the entire period was sold out