Pricing and Managing a Maintenance Contract for a Fleet of Aircraft Engines

Abstract

A large corporation wished to expand its role as a provider of maintenance and repair services for aircraft engines. These services were to be provided to airlines based on long-term contracts. The magnitude and uncertainty of the costs involved (total costs for a typical contract would be in excess of a billion dollars) could expose the corporation to significant financial risk. To help mitigate and manage this risk, a simulation model was developed to assess costs over the life of the contract. The primary objective was to establish a fair contract price. The simulation model also allowed operational issues and sensitivities to be examined.

The adaptation of product cost estimation techniques to estimate the cost of service

“…There was also limited literature relating to SCE, although there was some research on maintenance and contracting (Bowman andSchmee 2001, Partha andRajkumar. 2010).…”

Cost modelling techniques for availability type service support contracts: A literature review and empirical study

“…The final cost is added from the bottom up from this CBS and CERs are constructed to predict the maintenance costs. Bowman and Schmee [28] suggested a discrete event simulation model utilizing historical cost and failure data analysis results to evaluate contract price. The simulation discussed in the paper utilized the statistical failure and cost models to generate the simulated failure and cost models to generate the simulated failures and repair/replacement costs.…”

Engine Management: A Decision Support Tool for Strategic Engine Maintenance Planning

“…1,2,[4][5][6]8,9,11 This engine was chosen due to the fact that the fleet used to calibrate and validate the maintenance planning tool operates on this engine type. The most relevant theory from the literature review needed to grasp the concept of the model is presented in this section.…”