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Airline on Ground Case

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Dear Sir,

The support assembly of the thruster reverser (hereinafter, TR) on the left engine on the CML19 failed, and caused the Airline on Ground (hereinafter AOG). To have CML19 flying as soon as possible while keeping revenue and customer goodwill losses to a minimum, we have made a deliberate assessment on every possible solution, and suggest buying spare part from ARC solution immediately to fix the TR immediately.

In order to determine what the most efficient approach is, we did analysis of possible cost with appropriate estimation and methodology of decision tree.

As following decision tree, we have two solutions with the malfunctioning TR, to purchase a completely new one from one Miami-based maintenance supplier, or to exchange the faulty TR with exchange suppliers. There are also two options of exchange suppliers, which provide different spare parts and delivery. ARCSolutions (ARC) offers the transcowl and support assembly together, while Bennett Cargo Sales (BCS) offers the support assembly alone.

If ARC is chosen as supplier, the spare part should be delivered from Tulsa to Miami. There are also options of transportation. ARC provides two ways of transportation for the components, by land or by air. By land, there might be possible rish of delay due to traffic conditions. The delay of truck transportation may result in missing tonight's LAC cargo flight. In that case, the part has to wait another day the next flight. Then CML19 will be fixed and recover normal flight service on 18th January, causing 4 flights cancelled. Certainly, it is more likely truck transportation arrives in time to catch up tonight's LAC cargo, and leave only 2 flights cancelled. Air transportation is more safe way to deliver the spare part to Miami, though it is more expensive. It can be assured that CML19 will be fixed on 15th January.

Instead, if BCS is selected as exchange supplier, it is completely another picture. With this option, it is accompanied by a risk with high probability that TR of BCS may not fit the support assembly, which will make us turn back to ARC again. And the same comparison should be made between two types of transportion. If the TR can fit support assembly properly, CML19 will befixed on 15th January with 2 flights cancelled.

If the component of the flight cannot be fixed before the departure time, the flight needs to be cancelled. Cancelling flight will not only generate cost to compensate to customers, but also do harm to the company's goodwill. As a result, trying to cancel as few flights as possible would be a choice to the company.

By cancelling a single trip flight, the company needs to arrange customers according to their preference. The flight between Santiago to Miami is quite a busy flight and there are 4 flights altogether, 2 from LCA and the other 2 from AA. The Boeing 767 has 28 business class seats with occupancy rate to 80%. Therefore, there are 22.4 guests on the plan. (The case only considers a probability so we will not round up the figures to an integral. In real situation, guests' numbers are integrals. ) Among these guest, 15.68 guests (70%) would like to re-book in the same day and another 6.72 guests(30%) would like to stay for one night. There are another 3 flights in the evening and each flight has 5.6 available seats. The guest will first be re-booked to LCA's another flight which does not generate extra cost to LCA. There are 11.2 seats from AA's another 2 flight. The rest 10.08 guests will be re-booked to these 2 flight. Both LCA and AA are in One World Airline Alliance so that there is a 5% discount. For each single flight, it costs LCA $3087.5 per person to re-book to AA. There are another 6.72 guests to prefer to have a 24h stay. It costs the company



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