OPS 574 Week 1 Operations Strategy and Value Example

Hangar Days Are Lost Seats: Operations Strategy and Value at a Regional Airline's Maintenance Base

[Student Name]

University of Phoenix

OPS/574: Creating Value Through Operations

Week 1 Assignment

[Instructor Name]

[Date]

Blue Ridge Regional Airlines, its maintenance base, fleet and figures are composites written for a model paper.

Blue Ridge Regional Airlines is a composite regional carrier flying 54 regional jets on about 300 daily flights for two major airline partners under capacity purchase agreements. Under these agreements, Blue Ridge is paid for flights it operates and faces penalties when it cancels, so an aircraft that cannot fly costs it directly. Its maintenance base in Knoxville, Tennessee, with about 260 technicians, inspectors and planners, performs scheduled heavy checks, detailed inspections every 18 to 24 months that keep each jet out of service for about 12 days. Over the past year, checks averaged 15.4 days, and the airline had to cancel or reassign about 1,100 flights because aircraft were not back when planned. This paper examines how the base creates value and what its operations strategy should be.

Who the Base Serves

The base's direct customer is the airline's flight operations, which needs aircraft available on the dates the schedule assumes. Behind it stand the two partner airlines, who judge Blue Ridge on completion rates, and passengers, who notice canceled flights. Regulators are a further stakeholder: every check must meet the approved maintenance program and leave each aircraft airworthy. The base does not sell anything; its value appears in other people's results.

Defining Value in Numbers

The finance team estimated that each extra day an aircraft spends in the hangar beyond plan costs about $38,000: lost contribution from flights not flown, penalties under the capacity agreements and the cost of reassigning crews and spare aircraft. A heavy check's labor and parts cost about $410,000. At last year's average overrun of 3.4 days per check, about 40 checks a year cost about $5.2 million in lost value, against labor savings the base was proud of: it had cut labor hours per check by 7 percent in two years. The base had become more efficient while the airline lost more than the savings.

Value for Blue Ridge is therefore an aircraft returned on the planned date, airworthy, with no defects that reappear in the following weeks, at a reasonable cost per check. Turnaround dependability comes first because its absence is so expensive.

Competitive Priorities for the Base

Hayes and Wheelwright's tradition in operations strategy holds that an operation should choose which dimensions to excel on and design itself accordingly. Ward et al. (1998) described cost, quality, delivery and flexibility as the main competitive priorities and showed that firms emphasized them differently depending on their environment. For the base, the ranking is: quality first, in the strict sense of airworthiness, which is a constraint rather than a choice; dependability of turnaround second; cost third; and flexibility, the ability to absorb unexpected findings during inspection, fourth, supporting dependability.

A check that saves forty labor hours and returns the jet three days late has destroyed value, not created it.

The Efficiency and Effectiveness Trade-Off

For years the base was measured on labor hours per check and parts cost, measures of efficiency. Those measures encouraged practices that hurt turnaround: assigning technicians to several aircraft at once to keep everyone busy, waiting to order parts until an inspection confirmed the need and running a single shift on weekends. Each saved cost; each lengthened the time an aircraft sat idle. Skinner (1974) argued that a plant trying to excel on every dimension at once becomes good at none, and recommended a focused factory organized around a limited set of tasks and priorities. The base's mix of objectives, judged on efficiency while the airline needed speed, is the kind of unfocused operation Skinner warned against.

Not everyone accepts that trade-offs are unavoidable. The sand cone argument (Ferdows & De Meyer, 1990) holds that capabilities can be built cumulatively, quality first, then dependability, then speed and then cost, so that later capabilities rest on earlier ones rather than being traded away. Boyer and Lewis (2002) found evidence that trade-offs persisted in plants facing capacity constraints. The base sits between these positions: some practices, such as ordering likely parts before a check starts, improve both turnaround and cost over time by reducing idle labor; others, such as a full weekend shift, raise cost to buy time. The strategy must say which costs are worth paying.

What the Data Say About Lost Days

An analysis of last year's 40 checks showed where the 3.4 extra days came from: waiting for parts not ordered in advance, about 1.4 days; findings requiring engineering dispositions, about 0.9 days; technicians shared across aircraft, about 0.7 days; and weekend idle time, about 0.4 days. None of these is a skill problem. All are consequences of how the operation was designed and measured.

How the Base Is Measured Today and Tomorrow

Today the base reports three numbers each month: labor hours per check, parts cost per check and safety incidents. None captures turnaround. The proposed scorecard keeps safety and adds check duration against plan, days of aircraft availability lost, repeat defects within 30 days of release and cost per check including the value of lost days. With turnaround in the scorecard, a manager who spends an extra $15,000 in overtime to release an aircraft a day early can show that the decision created about $23,000 of value rather than appearing to have broken the budget.

What Competitors Do

The two largest independent maintenance providers in the region quote heavy checks on similar jets at about 11 days and guarantee completion dates with penalties. They achieve this with dedicated teams per aircraft, parts kits staged before induction and inspectors assigned to each bay. Blue Ridge's partner airlines know these figures, and one has asked whether outsourcing heavy checks would serve them better. The base's strategy must close the gap or risk losing the work.

Why Outsourcing Is Not the Easy Answer

Outsourcing heavy checks to an independent provider would transfer turnaround risk but not eliminate it. Independent providers serve many airlines and give slots to whoever books first; Blue Ridge would lose control of when its aircraft are inducted and would pay to ferry aircraft to and from the provider's hangar. It would also lose the knowledge its technicians hold about its own fleet's history, which helps them find problems early. The better course is to make the in-house base competitive, with outsourcing kept as a benchmark and a fallback for peaks.

Decisions for Later Weeks

The strategy leads to five decisions for the coming weeks: how work should flow through a check and where the bottleneck lies; how much capacity and what shift pattern the base needs; how quality assurance can be built into the process without slowing it; how parts and engineering workflows should change; and which improvement project should come first.

Conclusion

The Knoxville base creates value by returning airworthy aircraft on time; every day of delay costs the airline about $38,000, far more than the labor saved by running lean. Its priorities should be airworthiness, then turnaround dependability, then cost, with flexibility serving dependability. Research suggests the base can build capabilities that reduce some trade-offs, but where they bind, the base should spend to buy time. Measuring the base on turnaround as well as labor efficiency is the first step.

References

Boyer, K. K., & Lewis, M. W. (2002). Competitive priorities: Investigating the need for trade-offs in operations strategy. Production and Operations Management, 11(1), 9-20. https://doi.org/10.1111/j.1937-5956.2002.tb00181.x

Ferdows, K., & De Meyer, A. (1990). Lasting improvements in manufacturing performance: In search of a new theory. Journal of Operations Management, 9(2), 168-184. https://doi.org/10.1016/0272-6963(90)90094-T

Skinner, W. (1974). The focused factory. Harvard Business Review, 52(3), 113-121.

Ward, P. T., McCreery, J. K., Ritzman, L. P., & Sharma, D. (1998). Competitive priorities in operations management. Decision Sciences, 29(4), 1035-1046. https://doi.org/10.1111/j.1540-5915.1998.tb00886.x