6.1.2 Procedure Simulation Design of Experiment 23
6.2 Business Case 24
6.2.1 Business Case Design of Experiment 25
7.0 Results 26
8.0 Recommendation and Conclusion 26
9.0 Project Management 26
9.1 Work Breakdown Structure 27
9.2 Schedule 27
9.3 Budget 30
9.4 Risk and Mitigation Plan 30
9.5 Performance 31
10.0 References 32
Table of Figures
1.0 Context Analysis
Commercial air transportation is an immensely complex system and an equally complex business. Transportation is a large percentage of the US economy with commercial aviation accounting for of total US GDP . Moving cargo and passengers around the world is a vital service with far reaching impact to consumers and businesses. Successfully operating such a complex system is dependent on a business’ ability to efficiently meet transportation demand by balancing operating constraints and financial goals. As major stewards of economic growth, commercial aviation is responsible for balancing flight demand with profitability driving business decisions.
Despite air transportation’s importance, the industry has historically had extremely poor financial performance over the course of its existence, which has intensified in recent years. Between 2000 and 2012 thirty percent of all United States based airline companies have filed for chapter eleven bankruptcy.
Figure : Profit/Loss and Net Income for commercial air carriers. Overlayed are bankruptcy filling events. Note: values are adjusted for inflation to 2012 dollars. Figure illustrates the volatile nature of the industries finances in the last two decades. The chart specifically demonstrates the financial performance of major US based air carriers, which, for the purposes of this study, will be defined as any agency with operating revenue greater than twenty million dollars. A portion of this volatility can be correlated with major market trends at the time, such as the dotcom bubble of March 2000, which acted as a catalyst in exposing some of the underlying issues plaguing the industry. The crash in 2000 ended the period of relative financial stability that had lasted through most of the previous decade.
The major contributor to the industry’s poor financial performance has been rampantly increasing operating expenses. As shown in Figure , total operating expenses have grown steadily over the last two decades with several noticeable spikes during the last decade. Based on data taken from the Bureau of Transportation Statistics (BTS) the total operating expenses are expected to grow by approximately three billion dollars annually.
Figure : Yearly operating expense for large US air carriers domestic operations with projected expense based on exponential fit. Note: adjusted for inflation to 2012 dollars.
Furthermore, Figure shows that revenue has not consistently been above expenses indicating a lack of consistent profitability. There is a need to push operating expenses significantly below revenue in order to create a stable financial system.
Figure : Operating revenue and expense for major US carrier’s domestic operations.
Eighty percent of total operating expenses can be decomposed into four major categories: fuel costs, airline operations, pilot labor costs, and direct maintenance costs. As illustrated by Figure 4 airline operations, pilot labor, and direct maintenance costs have all remained relatively static over the past two decades. Fuel costs, however, have rapidly risen since the end of the 1990’s. Fuel costs are variable, and dictated by entities outside of the airline industry. Other costs, like pilot labor are within the jurisdiction of airline management and can therefore be manipulated to beneficially affect the industry’s total operating expense. Pilot labor costs make up fewer than six percent of total operating expense. Although pilot labor costs have remained relatively constant over the last two decades it is beginning to slowly increase.
Figure : Percentage of major commercial airlines’ operating expense by category.
According to the FAA’s Aerospace Forecast FY 2013-2033 a 3% yearly increase in revenue passenger miles is projected over the period of 2012-2022 . That is equivalent to a increase in passenger demand by the end of the next decade. Using BTS data as the baseline for comparing passenger miles demand with operating expense, it is shown that there is an increase in passenger miles (slightly less than FAA forecasts) from 2012-2022 . Since the scope of the analysis is concerned with domestic operations, the total increase in demand for domestic passenger miles is projected to increase based on the same BTS data when fitted for domestic passenger miles only. As it is shown in Figure , domestic passenger demand comprises the majority of passenger miles flown.
Figure : Total and domestic passenger miles based on a regression fit of R^2=0.86 and R^2=0.78 respectively.
Rising expenses and declining revenues have motivated airlines to operate aircraft that have reduced crew requirements enabled by technological innovations. With advances in technology, the systems benefit with increased reliability, safety, and affordability . Fundamentally, the dynamics of aircraft flight haven’t changed but advancements in flight control technologies, imposed by the need to reign in operating expenses, have significantly shaped the way systems operate, or more appropriately, how pilots fly the aircraft.
A core component in any aircraft and air transportation system are the pilots who fly the aircraft. As the need for reduced operating expense has lead to advanced technologies in the aircraft, the roles and functional need of pilots change. The goal of this project is to design a system that supports a level of automation that would enable the flight of an aircraft by one pilot to support decreased operating expense while maintaining or increasing system safety and reliability.