Life Cycle Analysis of Aviation Products

Introduction

It is straightforward to question a nation's decision to retire seemingly functional aircraft, but many economic factors must be considered. We often hear about how much it costs to buy a particular plane model, but people often underestimate just how expensive it is to operate and maintain an aircraft. Not only do you have to consider the direct costs of flying the plane (pilot pay, fuel, and other consumables), but also the costs of pilot training, the prices of parts and labor to perform routine maintenance, the prices of training ground crew to perform that maintenance, the fees of obtaining and maintaining support equipment needed to service the planes, and the costs of the facilities necessary to complete this service and care. We often lump all these factors together into the "life-cycle cost" of an airplane.

General Discussion

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Life Cycle Cost is significant when determining whether to retain or replace aircraft, acquire new or used aircraft, and evaluate the fundamental economics of competing aircraft, whether purchasing, financing, or leasing. With this program, you can predict Cash Flows and Net Present Values and compare different forms of ownership.

As aircraft have become increasingly complex, the life-cycle costs associated with maintaining sophisticated equipment and training crew to operate and service that equipment have grown substantially. For this reason, we see a trend in militaries worldwide to standardize as few types of aircraft as possible. By operating only a couple of kinds of planes, an army can consolidate its training and servicing activities, thereby minimizing the money needed for aircraft operations and maintenance.

This motivation is likely a significant factor in the business decision to eliminate their old aircraft. The business can instead focus its maintenance and training budgets on a few designs, which tend to share much in common, as opposed to siphoning off a large chunk of that money to support a completely different scenario. Understanding and modeling factors related to learning, economics, marketing, risks, and uncertainty can enable designers to design more cost-effective systems. Developing comprehensive life cycle cost models cannot be over-emphasized concerning affordable plans. Particular areas of concern include production cost, estimating, organizational learning, pricing and marketing, sub-contracting production, and predicting competitors' prices.

In addition to the component of the cost estimation, usually the focal point of most cost models, accurate modeling of all factors related to the production, operations, and support is necessary to generate calibrated life cycle cost profiles. Basic engineering economics can determine the price once the cost has been estimated. Interest formulas are available for predicting rates of return and other profitability indicators. However, the complex models used for life cycle cost prediction must utilize algorithms for stimulating additional factors such as organizational learning and manufacturing processes.

The three primary components f the system life cycle are nonrecurring, recurring, and operations and support costs. According to Apgar, H. (1993), there are two principal objectives for a life cycle cost trade study the identification of the design and production process alternatives that meet minimum performance requirements, both at the lowest average unit production cost and at the quietest operation and support cost per operating hour.

A full range of cost models exists today, from detailed part-level models, based on direct engineering and standard manufacturing factors, to conceptual design-level life cycle models. While most conceptual design level models are parametric and weight/complexity-based, much research is being conducted to develop feature-, activity-, and process-based models. Many detailed models use measured data from the shop floor for regression analysis and algorithm development. At the other end of the spectrum are the top-level, parametric cost-estimating models for life cycle estimates. Few models exist between the two ends of the modeling spectrum; no suitable methods have been demonstrated for a model that accepts multi-fidelity data from multiple levels of product analysis within an integrated design environment.

Detailed estimates of direct materials and hours used for fabrication and assembly of the aircraft's major structural components (accommodating the many and varied material types; product forms such as sheets, extrusions, fabrics, etc.; and construction types utilized in advanced technology aircraft structures) will replace the weight/complexity-based algorithm for estimating the aircraft cost in the top-level, parametric life cycle cost model. These differentials in the aircraft cost estimates due to fabrication and assembly alternatives will propagate via the system roll-up cost through the life cycle for production, operation, and support for the entire plan.

With such a tool/model, the designer can determine sensitivities in the top-down life cycle cost model to changes or alternatives evaluated in the bottom-up cost model. It will be possible to calculate sensitivities and design for robustness with the life cycle cost model due to perturbations of some factors such as entities external to the manufacturer, functions internal to the manufacturer but external to manufacturing, and processes internal to the manufacturer.

The manufacturer cannot control certain factors external to the enterprise. For instance, the number of aircraft ordered, the times of the orders and the corresponding payment schedule, interest rates, and projected inflation rates are not variables the manufacturer has complete control over. The monthly or annual production rates; sub-contracting decisions; learning curve effects; and manufacturing and sustaining costs are internal to the enterprise but can be categorized at a higher level than the actual material purchasing, processing, fabrication, and assembly. The sequences of activities and processes used for fabrication and assembly are assumed to be internally controlled by the manufacturer.

The lowest level of the life cycle cost model consists of the cost estimation for the aircraft, based upon the direct engineering and manufacturing estimates for its major structural components. The highest level includes the determination and distribution of the nonrecurring and recurring production costs and the operations and support costs over the entire aircraft life cycle.

According to Febrycky, W.J., and Blanchard, B.S. (1991), a thorough understanding of specific economic theories must be achieved before any good life cycle cost analysis can be undertaken. Alternative instruments can be compared against each other reasonably only if their respective benefits and costs are converted to an equivalent economic base, with appropriate consideration for the time value of money. Three factors are involved when determining the economic equivalence of sums of money. They are the amounts of the aggregates, the times of occurrence, and the interest rate. Interest formulas are functions of all three. These functions are used for calculating the amounts occurring at different periods.

The life cycle cost analysis of aircraft comprises the following capabilities. The unit production costs are estimated with a series of experimental equations for generating airframe component manufacturing costs for specific classes of aircraft. According to Lee, P. (1994), a theoretical First Unit Cost is generated by summing the individual component costs of the airframe, propulsion, avionics and instrumentation, and final assembly. Most of the structural component cost equations are weight-based. Engine costs are based on the thrust, the quantity produced, and the cruise Mach number.

Alternatively, the actual price/cost of the engine can be specified as input parameters. Another series of exponential equations are used to calculate the production costs based on the total number of vehicles produced. The average unit airplane costs, either including or excluding airframe and engine spares, are also calculated. A comparison of the average aircraft manufacturing costs versus the quantity of aircraft produced is provided. The elements of the total vehicle cost can be reduced with user-specified learning curves for the airframe, avionics, propulsion, assembly, and fixed equipment. The manufacturer's cumulative and annual cash flows are calculated by fortified production rate, ship set, and average aircraft selling prices; the yearly and incremental aircraft deliveries are calculated first, based on an input production rate schedule. The manufacturing cost is the sum of the production costs of all operational vehicles produced yearly. The cost to manufacture one car includes airframe, propulsion, avionics and instrumentation cost, and the cost of final assembly. The manufacturer's sustaining costs are the total production costs minus the cost of the operational vehicles and the manufacturer's profit fee. Ten elements constitute the total sustaining costs: airframe and engine spares, facilities, maintaining engineering, sustaining tooling, ground support equipment, training equipment, initial training, and initial equipment. The sustaining costs are distributed equally for each aircraft over the same months each aircraft's manufacturing costs are distributed.

Conclusion

There is usually a conflict between cost-effective and affordable choices for alternative designs. Today, the desire for cost-effectiveness is often sacrificed to the practical considerations of the available funding. With the development of more complexes and comprehensive life cycle cost modes that can accept and process multi-fidelity data within an integrated design environment, it will be better to calculate the potential to calculate future systems' cost-effectiveness better and affordability that are ultimately cost-effective yet still affordable.

Reference

1. Apgar, H. (1993). Design-to-Life-Cycle-Cost in Aerospace, Aerospace Design Conference, Irvine, CA.
2. February, W.J., and Blanchard, B.S. (1991). Life-Cycle Cost and Economic Analysis, Prentice Hall, Englewood Cliffs, New Jersey.
3. Lee, P. (1994). A Process Oriented Parametric Cost Model, Aerospace Design Conference, Irvine CA.

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