Case Study on North-South Airline

Introduction

The Boeing 727-300 Jets maintenances costs and frequency can increase as the age of the Boeing 727-300 Jets increases. However, the rate of the depreciation the engines and the airframe tend to vary. To determine the cost of the Boeing 727-300 Jets, it is important to take into consideration the age of the Boeing 727-300 Jets the maintenance cost of the engines and the maintenances cost of the airframe. In this study, the relationship between the Boeing 727-300 Jets age, the cost of maintaining the airframe and the cost of maintaining the Boeing 727-300 Jets engine is investigated. The goal is to model and equation that will be used to determine the cost of maintaining and Boeing 727-300 Jets using the age, the cost of maintaining the Boeing 727-300 Jets engine and the cost of maintaining the Boeing 727-300 Jets frame.

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Hypothesized

The researcher hypothesized a significant cohesion between Boeing 727-300 Jets age, and maintenance cost for both the engine and airframe cost. Therefore, the researcher developed two hypotheses as shown below.

Hypothesis 1

• Ho: There is a correlation between average fleet age was correlated to direct airframe maintenance costs
• H1: there is no correlation between average fleet age was correlated to direct airframe maintenance costs

Hypothesis 2

• HO: There is a relationship between average fleet age and direct engine maintenance costs
• H1: There is no relationship between average fleet age and direct engine maintenance costs

Hypothesis 3

• Ho: There is a significant positive correlation between aircraft age, airframe cost per Boeing 727-300 Jets ($) and engine cost per Boeing 727-300 Jets ($).
• H1: There is no relationship between aircraft age, airframe cost per Boeing 727-300 Jets ($) and engine cost per Boeing 727-300 Jets ($).

Data Analysis

The researcher conducted a regression and correlation analysis as well as graphed a scatter plot on the relationship between the Boeing 727-300 Jets age, cost of maintaining Boeing 727-300 Jets engine and the cost of maintaining the Boeing 727-300 Jets frame.

Research Finding

Hypothesis 1

Multiple regression analysis was used to test if there is a relationship between average fleet age was correlated to direct airframe maintenance costs (figure 1). The results of the regression indicated the two predictors explained 72.4% of the variance (R2 =.724, F (1,10) =26.176, p < 0.00). this means that there is a significant positive correlation between the average fleet age and direct airframe maintenance costs. Therefore, the age of the Boeing 727-300 Jets could be used to determine the direct airframe maintenance costs. The older the Boeing 727-300 Jets, the higher the cost of airframe maintenance cost. The same is also explained by the correlation analysis in figure 2 below: and the scatter graph equation y = 118.84x + 3602.4 in figure 3

Hypothesis 2

Multiple regression analysis was used to test if the average age (hours) predicted the engine cost per Boeing 727-300 Jets ($). The results of the regression indicated the two predictors explained 56.5% of the variance (R2=.565, F (1,10) =12.994, p<.005). It was found that age significantly predicted the engine cost per Boeing 727-300 Jets ($) (v = .56, p<.005). the equation of the relationship between the average age (hours) and the engine cost per Boeing 727-300 Jets ($) is as shown in figure 4 of the scatter graph. The regressing analysis output is as shown in figure 5.

Hypothesis 3

To determine if there is a significant positive correlation between Boeing 727-300 Jets age, airframe cost per Boeing 727-300 Jets ($) and engine cost per Boeing 727-300 Jets ($), the researcher conducted a multiple linear regression analysis. The researcher found out that there was a significant positive correlation between the three variables Boeing 727-300 Jets age, airframe cost per Boeing 727-300 Jets ($) and engine cost per Boeing 727-300 Jets ($) (R2=0.724, F (2, 9) = 11.78, p < .003). ;The individual predictors were examined further and indicated that airframe cost per Boeing 727-300 Jets ($) (t = -2.03, p = .072) and engine cost per Boeing 727-300 Jets ($) (t = 2.271, p = .049) were significant predictors in the model as shown in figure 7.

Conclusion

Based on the regression and correlation analysis results, we can accept the null hypothesis in hypothesis 1 and hypothesis 2. We accept the null hypothesis in hypothesis 1 that there is a significant positive correlation between the average fleet age and direct airframe maintenance costs. Never the less, the relationship between the average fleet age and direct engine maintenance costs is positive but not statistically significant. We also reject the alternative hypothesis in both the first and second hypothesis tests in both cases, there is a positive relationship. The regression equation or model below can be used to determine the aircraft costs for maintenances using aircraft age: y = 3594.824 +118.559*Airframe Cost Per Aircraft ($) +0.54*Engine Cost Per Aircraft ($).