North South Airlines Essay

BACKGROUND OF THE conjunction northern air pass maturates merged with atomic number 34 air hoses to wee the fourth largest U.S. carrier in January 2008. The sensitive NorthSouth airway familial both an senescent evanesce of Boeing 727-300 aircraft and Stephen Ruth. Stephen was a tough former Secretary of the naval forces who stepped in as new chair and chairman of the board. Peg Jones on the some other hand is the vice president for trading operations and sustenance.DEFINE THE PROBLEMStephens accusive is to gear the companys fiscal performance towards stability and continuous growth. This make him concern that the aging fleet of Boeing 727-300 aircrafts caution woo may shut down realization of this goal.The signifi stooget difference in the physical compositioned B727-300 forethought be (from ATA shape 41s) both in the airframe and engine atomic number 18as amid northern air hoses and Southeast flight paths make him to investigation through Peg Jones assi stance on determining the quantitative and graphical enunciate of the following Correlation of the second-rate fleet season to direct airframe caution cost Linear relationship between the aver mature fleet duration and direct engine maintenance costsCASE FACTS AND discipline (INCLUDING LIMITATIONS & CONSTRAINTS)In addition to the aging formulas below, Peg constructed the average age of Union and Southeast B727-300 fleets by quarter since the installation of that aircraft to service by each airway in late 1993 and early 1994 respectively. count FLEET HOURS = TOTAL eld IN SERVICE X AVERAGE daily workAVERAGE AGE OF all(prenominal) FLEET = TOTAL FLEET HOURS FLOWN OF AIRCRAFT IN SERVICEAVERAGE DAILY UTILIZATION = TOTAL FLEET HOURS FLOWNTOTAL DAYS IN SERVICEIn getting the average utilization, Peg used the substantial fleet hours flown on September 30, 2007 from Union and Southeast data, and dividing by the total geezerhood in service for all aircraft at that time. Th e average utilization for Southeast and Union were 8.3 and 8.7 hours per day respectively. In addition, available cost data including the average fleet age were calculated for each yearly stopover ending at the end of root quarter.Business addition wear and tear depends on the cost of asset and its useful life. What is distinguishable about aircraft depreciation is that each piece of an airplane is depreciated at different range and depreciation rules. The North-South Airline problem for this casing may also be unconquerable by exploitation depreciation systems as follows dead on target line with salvage think of method = summation embody/ recyclable Life The advantage of using the straight line method involves the ease of calculate the annual depreciation sum total.The disadvantage of using the straight line method is that this method does not consider the rate the asset get out demonstrablely depreciate in value. Declining balance method = Remaining Asset Va lue x Depreciation invest The advantage of using this method is that it accelerates the depreciation recorded early in the assets life and thus reduces the rateable income and the taxes owed during the early years. The disadvantage is that the method can be applied only when at that place is a residual value of the asset.quantitative method/s employed and the resultant to the problemNorthern Airlines DataAIRFRAME engineSouthern Airlines DataAIRFRAMESoutheast Airlineairframe maintenance cost embody = 4.60 + 0 (airframe age) = 4.60Coefficient of determination = 0.39Coefficient of correlation = 0.62ENGINENorthern Airlineairframe maintenance cost speak to _ 36.10 _ 0.0025 (airframe age)Coefficient of determination _ 0.7694Coefficient of correlation _ 0.8771Northern Airlineengine maintenance costCost _ 20.57 _ 0.0026 (airframe age)Coefficient of determination _ 0.6124Coefficient of correlation _ 0.7825Southeast Airlineengine maintenance costCost __0.671 _ 0.0041 (airframe age)Coeffic ient of determination _ 0.4599Coefficient of correlation _ 0.6782ethical considerations dispraise USED = SAFETYThe units of toil method involves determining the cost to depreciate and dividing that amount by the estimated intersection units the company expects to correct over the life of the asset. The advantages of using the units of production method include the ease of cipher the annual depreciation amount and that the depreciation is matched to the production quantity. The disadvantage of using the units of production method is that this method assumes the asset will depreciate evenly over its cultivatable life.The graphs below portray both the actual data and the regression lines for airframe and engine maintenance costs for both airlines.Note that the cardinal graphs sire been drawn to the same scale to assuage comparisons between the two airlines.Northern Airline There attend to be crushed correlations between maintenance costs and airframe age for Northern Airline. There is certainly conclude to conclude, however, that airframe age is not the only central part.Southeast Airline The relationships between maintenance costs and airframe age for Southeast Airline are much less well up defined. It is even more(prenominal) obvious that airframe age is not the only important factorperhaps not even the nearly important factor.Overall conclusionOverall, it would seem that1. Northern Airline has the smallest variance in maintenance costs, indicating that the day-to-day worry of maintenance is working(a) pretty well.2. Maintenance costs seem to be more a function of airline than of airframe age.3. The airframe and engine maintenance costs for Southeast Airline are not only lower plainly more nearly similar than those for Northern Airline, but, from the graphs at least, appear to be locomote more sharply with age.4. From an overall perspective, it appears that Southeast Airline may perform more efficiently on sporadic or emergency repairs, and Northern Airline may place more emphasis on preventive maintenance.Ms. Youngs report should conclude that1. There is evidence to paint a picture that maintenance costs could be made to be a function of airframe age by implementing more effective management practices.2. The difference between maintenance procedures of the two airlines should be investigated.3. The data with which she is presently working do not provide determinate results.