(FORTUNE Magazine) – Is the U.S. airline industry headed for another suicidal fare war? Last summer a 50%-off sale filled the sunny skies, and the players are still smarting from the losses. America West Airlines and Northwest Airlines recently cut prices as much as 35% on a limited number of routes, and the other major carriers immediately followed in those markets. Some fear this minor skirmish could at any moment escalate into a full-fledged battle. So far the airlines have not cut fares as much as they did last summer, when you could buy a roundtrip, coast-to-coast ticket for $200 (for current bargains, see chart). And given that the nation's top five carriers -- AMR's American, UAL's United, Delta Air Lines, Northwest, and USAir Group -- lost an average of $803 million in 1992, you'd think they had learned their lesson. Says Shearson Lehman Brothers analyst Helane Becker: ''These guys haven't made any money. That's a problem. The industry will give up traffic this summer in exchange for better pricing.'' Perhaps. But the airlines couldn't muster much self-discipline last year, with American and Northwest blaming each other for the fiasco. And while regional carriers like Southwest Airlines have provided competition for some time, this summer the big players must also face a host of niche carriers like Carnival Air Lines, Kiwi International Air Lines, and Reno Air, which offer low fares on high-volume routes. One familiar foe the big guys don't have to worry about for now: Frank Lorenzo. The ex-CEO of Eastern Air Lines (now defunct) and twice-bankrupt Continental Airlines wants to offer low-cost service on the East Coast via an airline called, without irony, Friendship Airlines. But the Department of Transportation recently told him to cool his jets pending a judge's review of the company's fitness.

CHART: NOT AVAILABLE CREDIT: FORTUNE TABLE CAPTION: CHEAP DOMESTIC FARES