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North South Airlines

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Submitted By temitims
Words 336
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BACKGROUND OF THE COMPANY
Northern Airlines merged with Southeast Airlines to create the fourth largest U.S. carrier in January 2008. The new North–South Airline inherited both an aging fleet of Boeing 727-300 aircraft and Stephen Ruth. Stephen was a tough former Secretary of the Navy who stepped in as new president and chairman of the board. Peg Jones on the other hand is the vice president for operations and maintenance.

DEFINE THE PROBLEM
Stephen’s objective is to gear the company’s financial performance towards stability and continuous growth. This made him concern that the aging fleet of Boeing 727-300 aircraft’s maintenance cost may impede realization of this goal.

The significant difference in the reported B727-300 maintenance costs (from ATA Form 41s) both in the airframe and engine areas between Northern Airlines and Southeast Airlines made him to probe through Peg Jones’ assistance on determining the quantitative and graphical report of the following :
• Correlation of the average fleet age to direct airframe maintenance costs
• Linear relationship between the average fleet age and direct engine maintenance costs

CASE FACTS AND INFORMATION (INCLUDING LIMITATIONS & CONSTRAINTS)
In addition to the aging formulas below, Peg constructed the average age of Northern and Southeast B727-300 fleets by quarter since the introduction of that aircraft to service by each airline in late 1993 and early 1994 respectively.

TOTAL FLEET HOURS = TOTAL DAYS IN SERVICE X AVERAGE DAILY UTILIZATION

AVERAGE AGE OF EACH FLEET = TOTAL FLEET HOURS FLOWN # OF AIRCRAFT IN SERVICE AVERAGE DAILY UTILIZATION = TOTAL FLEET HOURS FLOWN TOTAL DAYS IN SERVICE

In getting the average utilization, Peg used the actual fleet hours flown on September 30, 2007 from Northern and Southeast data, and

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