Quantitative Methods for Business Essay

In January 2008, Northern Airlines merged with Southeast Airlines to create the ordinal largest U.S. carrier. The new North-South Airline inherited both an aging drop dead of Boeing 727-300 aircraft and Stephen Ruth. Stephen was a tough former secretary of the navy who stepped in as new hot seat and chairman of the board.Stephens first concern in creating a financially solid company was tutelage cost. It was commonly surmised in the air passage 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 41s) both in the airframe and engine aras 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 Stephens office and asked to study the issue. Specifically, Stephen wanted to know whether the median(a) 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.Pegs 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 to each one 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 physical exertion 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 Septembe r 30, 2007 form 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 periodic 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.