Preliminary Design Capability Enhancement via Development of Rotorcraft Operating Economics Model STi E By OF TECHNOLOGY Michael P. Giansiracusa SEP 0 1 2010 B.S Mechanical and Aerospace Engineering Cornell University, 2004 LjBRARIES Submitted to the MIT Sloan School of Management and the Department of Mechanical Engineering in Partial Fulfillment of the Requirements for the Degrees of Masters of Science in Mechanical Engineering and ARC HVES Master of Business Administration In conjunction with the Leaders for Global Operations Program at the Massachusetts Institute of Technology June 2010 @ 2010 Massachusetts Institute of Technology. All Rights Reserved. General Electric Company hereby grants to MIT permission to reproduce and to distribute publicly paper and digital copies of this thesis document in whole or in part and to post it on any MIT website. Signature of Author: May 7, 2010 Michael Giansiracusa Department of Mechanical Engineering, T Sioy School of Management Certified By: CEistopher 1gee, Thesis Sufervaor Professor of the Practice, Mechanical Engineering and Engineering Systems Division Certified By: RgfWelsch, Thesis Supervisor Professor of Statistics and Management Science, MIT Sloan School of Management Accepted By: ~ardt Chairman, Committee on Graduate Students, Department of Mechanical Engineering Accepted By: A Debbie Berechman Executive Director, MIT Sloan School of Management MBA Program Preliminary Design Capability Enhancement via Development of Rotorcraft Operating Economics Model By Michael P. Giansiracusa Submitted to the MIT Sloan School of Management and the Department of Mechanical Engineering on May 7, 2010 in Partial Fulfillment of the Requirements for the Degrees of Masters of Science in Mechanical Engineering and Master of Business Administration Abstract The purpose of this thesis is to develop a means of predicting direct operating cost (DOC) for new commercial rotorcraft early in the design process. This project leverages historical efforts to model operating costs in the aviation industry coupled with a physics-based approach. The physics governing rotorcraft operation are combined with fundamental considerations encountered during rotorcraft design to identify potential design parameters driving operating costs. Sources for obtaining data on these parameters for existing designs are explored. The response data is generated by estimating operating costs for seventy-seven currently available commercial rotorcraft models under a fixed set of operating assumptions. Statistical analysis of this data is combined with the physics and first principles approach to identify key explanatory variables demonstrating a strong relationship to operating cost. Multiple regression techniques are used to develop transfer functions relating rotorcraft design variables to direct operating cost. The analysis shows that the maximum takeoff gross weight of the rotorcraft design is strongly correlated with direct operating costs. Specifically, a simple regression model using the square root of maximum takeoff gross weight as the only explanatory variable can be used to account for over 90 percent of the variation in total direct operating cost (TDOC). After accounting for maximum takeoff gross weight, the analysis suggests that rotorcraft models with two engines have higher TDOC than those with a single engine. A multiple regression model using maximum takeoff gross weight and the number of installed engines in the rotorcraft design is presented and accounts for 97 percent of the variation in TDOC. This model allows designers to quickly estimate TDOC for new rotorcraft early in the design process, before many of the major design parameters have been finalized. In addition to the aggregate or total DOC models, regression models for a few key subcategories of DOC are developed including, fuel related DOC, airframe maintenance related DOC and engine maintenance related DOC. In the case of fuel related and airframe maintenance related DOC, the maximum takeoff gross weight is found to be the single strongest explanatory variable. For the engine maintenance DOC, the engine weight is found to be the single variable most strongly correlated with operating cost. We conclude that an appropriate measure of weight (maximum takeoff gross weight or engine weight) is an important driver for direct operating cost. After accounting for weight, the models are refined by considering additional explanatory variables leading to models of greater accuracy and complexity. The modular nature of the model presented allows operating cost estimates to be improved and refined as additional details of the rotorcraft design become available during the design process. Thesis Supervisor: Christopher Magee Title: Professor of the Practice, Mechanical Engineering and Engineering Systems Division Thesis Supervisor: Roy Welsch Title: Professor of Statistics and Management Science, MIT Sloan School of Management This page has been intentionally left blank. Acknowledgements I owe many thanks to a number of people for their support, encouragement and advice throughout the process of completing this work. I would first like to thank the Leaders for Global Operations (LGO) Program for giving me the opportunity to complete this incredible two year journey. I have only begun to realize the impact that it has had on my life. I am confident that the lessons learned and bonds formed over the past two years will shape the rest of my career. It has been an incredible two years, and I sincerely thank the entire program administration and staff for making this possible. I would like to sincerely thank my management and mentors at my sponsor company, who supported me throughout my academic pursuits. A special thank you goes to Tyler who helped get me started at MIT and whose candid advice and support helped me through the process. I would also like to thank my company sponsors, supervisors and champions, Mike, Jim and Rick who make the internship possible and openly embraced the opportunity to be involved with the LGO Program. Without them, this project would not have been possible. In addition to my direct management, I had multiple company mentors and advisors that kept me on track during my internship and provided countless bits of advice and counsel over the past six years with the company. I owe you all a sincere thank you. I want to thank my thesis advisors, Roy Welsch and Chris Magee, whose wisdom and insights guided me throughout this research project. I have gained a new appreciation for looking at things with a systems perspective and drawing insights from available data. I will remember your lessons and use them throughout my career. I will never be able to thank my family enough for their love and encouragement throughout my life. Mom, Dad, Meg, and Colleen, you have provided more support than one could ever wish for, and I feel sincerely fortunate. You have all pushed me to keep going during tough times and reminded me of the finer things in life. A special thank you goes to my fiancee, Ami, who has been there for me day and night throughout the past few years. I cannot imagine going through this without you, and I look forward to sharing our life together. A special thank you to my friends and classmates at LGO, who have made this among the best two years of my life. I will never forget traveling the world together, long discussions at the Muddy, procrastinating on projects and laughing the hardest in my life. We have shared some incredible times over the past two years, and I am excited to see where the future takes us. This page has been intentionally left blank. Table of Contents Abstract......................................................................................................................................................1-3 Acknow ledgem ents ................................................................................................................................... 1-5 Introduction ..................................................................................................................................... 1-12 1.1 The Problem - Need for New Design Capability......................................................................1-12 1.2 Research M ethodology ............................................................................................................ 1-13 1.3 Thesis Outline...........................................................................................................................1-13 2 Background on Aviation Economics.................................................................................................2-15 2.1 Overview of Com mercial Helicopter M arket ........................................................................... 2-15 2.2 Aircraft Operating Econom ics .................................................................................................. 2-16 2.3 Com m ercial Rotorcraft Operating Econom ics ......................................................................... 2-16 2.4 Aviation M aintenance Structure..............................................................................................2-20 2.4.1 Types of M ajor M aintenance Program s...........................................................................2-20 2.4.2 Developm ent of M aintenance Program for New Designs ............................................... 2-22 2.4.3 Econom ic Impact of M aintenance Program ...................................................................