Graduate Case Study Format
Running head: NAME OF CASE STUDY
1
NAME OF CASE STUDY
2
In January 2012, Northern Airlines merged with Southeast Airlines
to create the fourth largest U.S. ca
ier. The new North–
South Airline inherited both an aging fleet of Boeing XXXXXXXXXX
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 B XXXXXXXXXXmaintenance
costs (from ATA Form 41s) in both the airframe and engine
areas between Northern Airlines and Southeast Airlines, with
Southeast having the newer fleet.
On Fe
uary 12, 2012, Peg Jones, vice president for operations
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 co
elated to direct
airframe maintenance costs, and whether there was a relationship
etween average fleet age and direct engine maintenance
costs. Peg was to report back by Fe
uary 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 B XXXXXXXXXXfleets, 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 divided by the
number of aircraft in service at that time, giving the age of the
“average” aircraft in the fleet.
The average utilization was found by taking the actual total
fleet hours flown on September 30, 2011, from Northern and
Southeast data, and dividing by the total days in service for all
aircraft at that time. The average utilization for Southeast was
8.3 hours per day, and the average utilization for Northern was
8.7 hours per day. Because the available cost data were calculated
for each yearly period ending at the end of the first quarter,
average fleet age was calculated at the same points in time. The
fleet data are shown in the following table. Airframe cost data
and engine cost data are both shown paired with fleet average
age in that table.
Case Study
North–South Airline
North–South Airline Data for Boeing XXXXXXXXXXJets
Nort hern Airline Data Southeast Airline Data
Northern Airline Data
Year Airframe Cost Per Aircraft ($) Engine Cost Per Aircraft ($) Average Age (Hours)
2001 XXXXXXXXXX51.80 XXXXXXXXXX43.49 XXXXXXXXXX6,512
2002 XXXXXXXXXX54.92 XXXXXXXXXX38.58 XXXXXXXXXX8,404
2003 XXXXXXXXXX69.70 XXXXXXXXXX51.48 XXXXXXXXXX11,077
2004 XXXXXXXXXX68.90 XXXXXXXXXX58.72 XXXXXXXXXX11,717
2005 XXXXXXXXXX63.72 XXXXXXXXXX45.47 XXXXXXXXXX13,275
2006 XXXXXXXXXX84.73 XXXXXXXXXX50.26 XXXXXXXXXX15,215
2007 XXXXXXXXXX78.74 XXXXXXXXXX79.60 XXXXXXXXXX18,390
Southeast Airline Data
Year Airframe Cost Per Aircraft ($) Engine Cost Per Aircraft ($) Average Age (Hours)
2001 XXXXXXXXXX13.29 XXXXXXXXXX18.86 XXXXXXXXXX5.107
2002 XXXXXXXXXX25.15 XXXXXXXXXX31.55 XXXXXXXXXX8.145
2003 XXXXXXXXXX32.18 XXXXXXXXXX40.43 XXXXXXXXXX7.360
2004 XXXXXXXXXX31.78 XXXXXXXXXX22.10 XXXXXXXXXX5.773
2005 XXXXXXXXXX25.34 XXXXXXXXXX19.69 XXXXXXXXXX7.150
2006 XXXXXXXXXX32.78 XXXXXXXXXX32.58 XXXXXXXXXX9.364
2007 XXXXXXXXXX35.56