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

Union College Graduate Management Institute Lamont House 1 Union Avenue Schenectady, NY 12308 Telephone: 518-388-6297

Josef Schmee

Union College Graduate Management Institute Lamont House 1 Union Avenue Schenectady, NY 12308

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 mag nitude 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 sig nificant financial risk. To help mitigate and man age this risk, a simulation model was developed to assess costs over the life of the contract. The pri mary objective was to establish a fair contract price. The simulation model also allowed opera tional issues and sensitivities to be examined.

Key Words: aircraft maintenance • risk man agement • MSO • contracts • aircraft engines

SIMULATION, Vol. 76, No. 2, 69-77 (2001)
DOI: 10.1177/003754970107600202


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