Assignment: Quantitative Methods for Business
Name: Sun Puthir
Alpha Yagouba Balde
Class: MC0104 Quantitative Methods for Business
Name: Sun Puthir
Alpha Yagouba Balde
Class: MC0104 Quantitative Methods for Business
Case Study
Chapter 4
North-South Airline:
In January 2008, Northern Airlines merged with Southeast Airlines to create the fourth largest U.S. carrier. 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.
Stephen’s first concern in creating a financially solid company was maintenance costs. It was commonly surmised in the airline industry that maintenance costs rise with the age of the aircraft. He quickly noticed that historically there had been a significant difference in the reported B727-300 maintenance costs (from ATA Form 41’s) both in the airframe and engine areas between Northern Airlines and Southeast Airlines, with Southeast having the newer fleet.
On February 12, 2008, Peg Jones, vice president for operation and maintenance, was called into Stephen’s office and asked to study the issue. Specifically, Stephen wanted to know whether the average fleet age was correlated to direct airframe maintenance costs, and whether there was a relationship between average fleet age and direct engine maintenance costs. Peg was to report back by February 26 with the answer, along with quantitative and graphical descriptions of the relationship.
Peg’s first step was to have her staff construct 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. The average age of each fleet was calculated by first multiplying the total number of calendar days each aircraft had been in service at the pertinent point in time by the average daily utilization of the respective fleet to total fleet hours flown. The total fleet hours flown was then
Alpha Yagouba Balde
Class: MC0104 Quantitative Methods for Business
Name: Sun Puthir
Alpha Yagouba Balde
Class: MC0104 Quantitative Methods for Business
Case Study
Chapter 4
North-South Airline:
In January 2008, Northern Airlines merged with Southeast Airlines to create the fourth largest U.S. carrier. 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.
Stephen’s first concern in creating a financially solid company was maintenance costs. It was commonly surmised in the airline industry that maintenance costs rise with the age of the aircraft. He quickly noticed that historically there had been a significant difference in the reported B727-300 maintenance costs (from ATA Form 41’s) both in the airframe and engine areas between Northern Airlines and Southeast Airlines, with Southeast having the newer fleet.
On February 12, 2008, Peg Jones, vice president for operation and maintenance, was called into Stephen’s office and asked to study the issue. Specifically, Stephen wanted to know whether the average fleet age was correlated to direct airframe maintenance costs, and whether there was a relationship between average fleet age and direct engine maintenance costs. Peg was to report back by February 26 with the answer, along with quantitative and graphical descriptions of the relationship.
Peg’s first step was to have her staff construct 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. The average age of each fleet was calculated by first multiplying the total number of calendar days each aircraft had been in service at the pertinent point in time by the average daily utilization of the respective fleet to total fleet hours flown. The total fleet hours flown was then