North South Airlines
Background
THE NORTH-SOUTH AIRLINE
Northern airlines merged Southeast Airlines to create the fourth largest U.S. carrier in which it inherited both an aging fleet of Boeing 737-300 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 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.
Definition of 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.
Facts/Info/Limitation/Constraints
The following are the available data to be used to help Ms. Jones in the determination if there was a correlation between average fleet and the direct maintenance costs. The following steps were performed by Ms. Jones and her staff:
The staff constructed the average age of both fleets, by quarter.
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.
The average utilization was found by taking the actual total fleet hours flown on September 30, 2007, from Northern to Southeast data, and dividing by the total days in service for all aircraft at that time.
The average utilization
THE NORTH-SOUTH AIRLINE
Northern airlines merged Southeast Airlines to create the fourth largest U.S. carrier in which it inherited both an aging fleet of Boeing 737-300 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 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.
Definition of 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.
Facts/Info/Limitation/Constraints
The following are the available data to be used to help Ms. Jones in the determination if there was a correlation between average fleet and the direct maintenance costs. The following steps were performed by Ms. Jones and her staff:
The staff constructed the average age of both fleets, by quarter.
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.
The average utilization was found by taking the actual total fleet hours flown on September 30, 2007, from Northern to Southeast data, and dividing by the total days in service for all aircraft at that time.
The average utilization