01658345

Component

Previous research has shown that strategic fleet management can significantly improve technical, allocative and cost efficiency of airlines. The aim of this paper is to take the fleet commonality argument to the next and potentially much more important level by evaluating the impact of engine heterogeneity on airline cost efficiency. The authors' objective is to extend the lens of analysis beyond aircraft types as they argue that engines, in addition to frames, are substantial aircraft components in terms of both capital and operating cost. While aircraft commonality reduces operating cost through lower staff cost, engine commonality will be more apparent in the areas of maintenance cost and holding cost for spare parts. In today’s global environment of industry interfaces where many manufacturing firms offer not only products, but also services and therefore essentially complete solutions to business problems the authors expect their findings are to have implications for operations management well beyond aviation. Using engine data of the 2013/14 global fleet of 27,478 aircraft they apply bootstrapped Data Envelopment Analysis (DEA) followed by truncated regression models to 85 airlines from across the globe. The authors' results suggest that both aircraft and engine commonality impact on airline cost efficiency, and that the latter effect contributes more than half to the effect of the former. This confirms the key role that engines play in the airline operations, maintenance and spare part optimization and highlights the importance of OEM interfaces and servitization of manufactured products that significantly impact on the cost efficiency of their customers.

This paper was sponsored by TRB committee AV040 Standing Committee on Aviation Economics and Forecasting.

18-01933

English

14p

2018

Transportation Research Board 97th Annual Meeting

Digital/other

References; Tables

Airlines; Costs; Fleet management; Jet engines; Linear programming; Operating costs; Vehicle fleets

Original equipment manufacturer (OEM)

Aviation; Finance; Operations and Traffic Management

Transportation Research Board Annual Meeting 2018 Paper #18-01933

TRIS, TRB, ATRI

Jan 8 2018 10:29AM