A CASE ANALYSIS ON NORTH SOUTH AIRLINES
A CASE ANALYSIS ON NORTH-SOUTH AIRLINE
I. CASE BACKGROUND
Northern Airlines merged with Southeast Airlines to create the fourth largest U.S. carrier in which it inherited both an aging fleet of Boeing 727-300 aircraft and Stephen Ruth.
As the new president of the airline, Stephen’s first concern is to create a financially solid company since it is a common presumption for airline industries that maintenance costs rise with the age of aircrafts.
He noticed that there have been significant differences in the reported B727-300 maintenance costs (from ATA Form 41s) both in the airframe and engine areas between Northern and Southeast Airlines, with Southeast having the newer fleet. He asked Peg Jones, Vice President for Operations and Finance to investigate on this issue and to know whether there was a direct relationship between average fleet age and direct engine maintenance costs.
II. STATEMENT OF THE PROBLEM
Peg Jones must be able to determine if there was a correlation between the average fleet and the maintenance cost. She must also find out if the average fleet age is related to the direct engine machine costs. Jones must be able to provide his findings to Stephen Ruth, who is the new president and chairman of the board of the two airlines, for them to be able to properly investigate and address the issue.
III. CASE FACTS, LIMITATIONS AND CONSTRAINTS
For this case analysis, the following are the available data to be used to help Ms. Jones in the determination if there was a correlation between average fleet age and the direct maintenance costs (Please see Annex 1). And the following steps were performed by Ms. Jones and her staff:
1. The staff constructed the average age of both fleets, by quarter.
2. The average age of each fleet was calculated by first multiplying the total number of calendar days each aircraft has been in service at that time.
3. The average utilization was found by taking the actual total fleet hours flown on September 30, 2007, from
I. CASE BACKGROUND
Northern Airlines merged with Southeast Airlines to create the fourth largest U.S. carrier in which it inherited both an aging fleet of Boeing 727-300 aircraft and Stephen Ruth.
As the new president of the airline, Stephen’s first concern is to create a financially solid company since it is a common presumption for airline industries that maintenance costs rise with the age of aircrafts.
He noticed that there have been significant differences in the reported B727-300 maintenance costs (from ATA Form 41s) both in the airframe and engine areas between Northern and Southeast Airlines, with Southeast having the newer fleet. He asked Peg Jones, Vice President for Operations and Finance to investigate on this issue and to know whether there was a direct relationship between average fleet age and direct engine maintenance costs.
II. STATEMENT OF THE PROBLEM
Peg Jones must be able to determine if there was a correlation between the average fleet and the maintenance cost. She must also find out if the average fleet age is related to the direct engine machine costs. Jones must be able to provide his findings to Stephen Ruth, who is the new president and chairman of the board of the two airlines, for them to be able to properly investigate and address the issue.
III. CASE FACTS, LIMITATIONS AND CONSTRAINTS
For this case analysis, the following are the available data to be used to help Ms. Jones in the determination if there was a correlation between average fleet age and the direct maintenance costs (Please see Annex 1). And the following steps were performed by Ms. Jones and her staff:
1. The staff constructed the average age of both fleets, by quarter.
2. The average age of each fleet was calculated by first multiplying the total number of calendar days each aircraft has been in service at that time.
3. The average utilization was found by taking the actual total fleet hours flown on September 30, 2007, from
References: Render, B., Stair, R. & Hanna, M. (2014). “Quantitative Analysis for Management”. 13th Edition, p. 136-156 Vega, D., Pamplona D., & Oliviera A. (n.d.). Assessing the influence of the scale of operations on maintenance costs in the airline industry. Retrieved last February 25, 2015 from http://sitraer2014.pcs.usp.br/wp-content/uploads/Apresentacoes/19-11- 2014/Session5/04-Daniel-Alberto-Pamplona.pdf PeriyarSelvam U. , Tamilselvan T., Thilakan S. & Shanmugaraja M. (2013). Analysis on Costs for Aircraft Maintenance. Retrieved last February 25, 2015 from http://www.ripublication.com/aasa/aasav3n3spl_08.pdfIX. ANNEXES