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American Airlines' Fleet Update Decision

(Meta Rascov and Elizabeth Powell, 1996)

For the past several months, American Airlines has been conducting an analysis of whether to keep their fleet of 727-200 aircraft or purchase some of Boeing's new 737-800 aircraft. This analysis was prompted by a noise reduction policy that the Federal Aviation Administration (FAA) has issued to take effect in the year 2000. The noise reduction policy will affect all aircraft that do not satisfy the FAA's new proposed noise levels. Thus, American Airlines has to make some decisions concerning their fleet of older 727-200 aircraft.

We chose to do an analysis similar to that of American's. However, given that we do not have access to all of the data necessary for such an in-depth analysis, we chose a simpler substitution analysis using all of American's fleets. Our analysis began with a basic cost comparison of the 727-200 and the 737-800. As our project progressed, the analysis was put into a fleet perspective. After some guidance, we obtained some of the necessary data from Form 41 form the Department of Transportation (DOT) and American's flight schedule book. This information was then used to calculate the cost per mile per fleet per day for each aircraft. These values were then used in a substitution model which completed our analysis.

Richard S. Barr
Fri Feb 17 16:09:51 CST 2006