Biography for William Swan

Chief Economist, Seabury-Airline

Planning Group. AGIFORS Senior
Fellow. ATRG Senior Fellow.
Retired Chief Economist for Boeing
Commercial Aircraft 1996-2005
Previous to Boeing, worked at
American Airlines in Operations
Research and Strategic Planning
and United Airlines in Research and
Development. Areas of work
included Yield Management, Fleet
Planning, Aircraft Routing, and
Crew Scheduling. Also worked for
Hull Trading, a major market maker
in stock index options, and on the
staff at MITs Flight Transportation
Lab. Education: Masters,
Engineers Degree, and Ph. D. at
MIT. Bachelor of Science in
Aeronautical Engineering at
Princeton. Likes dogs and dark
beer. (bill.swan@cyberswans.com)

Scott Adams

Simple Aircraft Cost Functions

Prof Nicole Adler

University of Jerusalem
Dr William Swan
Boeing
2 July 2004
ATRS Symposium, Istanbul

Overview
1.

Cost vs.. Distance is Linear

2.

Cost vs.. Airplane Size is Linear

3.

Illustration
Explanation
Calibration
Why we care
Illustration
Explanation
Calibration
Why we care

Cost vs.. Distance and Size is Planar

Why we care

Cost vs. Distance is Linear

Cost for a single airplane design
Example 737-700

Cost based on Engineering cost functions

Data from 25-year Boeing OpCost program
Divides cost into engineering components
Fuel, crew, maintenance, ownership
Calibrates components from airline data

Records of fuel burn

Knowledge of crew pay and work rules
Schedule of recurring maintenance and history of failures
Market Ownership Rents allocated to trips

Engineering Approach is Different

Not a black box
We made what is inside the box

Not a statistical calibration

Although components are calibrated against data

Less an overall average

OpCost calibrations based on detail records

OpCost estimates costs

For standard input cost factors: fuel, labor, capital
Ongoing function recalibration
This report from 2001 version
2004 version now in use

We Generate Perfect Data Points

Cost for exactly the same airplane
At different distances

Each point with identical input costs

Fuel, labor, capital

Superb spread of data points

Costs at 1000, 1500, 2000, 3000, 4000, 5000km distances

Much larger than spreads of averages for airlines
Comparable overall average distance
Much greater sensitivity to slope

Objective is to learn the shape of the relationship

Find appropriate algebraic form
For ratios of costs at different distances

Cost is Linear With Distance

737-700 Example
30

Trip Cost (index)

25
20
15
10

Cost Data
Linear (Cost Data)

5
0
0

1000

2000

3000

Distance (km)

4000

5000

Explanation:
Why is Cost Linear With Distance?
Most costs are per hour or per cycle
Time vs. distance is linear: speed is constant
(roughly hour plus 500 mph)

Departure/arrival cycle time is about hour

Some costs are allocated
Allocation is per hour and per cycle
Ownership, for example

Very small rise in fuel/hour for longer hours

Beyond 8 hours, crew gains 1 or 2 pilots
Does not apply to regional distances.

Cost Formulae are Linear

Airplane cost/seat-km km/departure
a318
0.039
691
737-600
0.038
700
737-700
0.035
692
a319
0.036
705
A320-200
0.033
727
737-800
0.031
701
737-900
0.030
715
A321-200
0.030
725
757-200
0.029
782
757-300
0.027
815

seats
107
110
126
126
150
162
177
183
200
243

R-Squared
0.9998
0.9997
0.9997
0.9997
0.9998
0.9997
0.9997
0.9998
0.9999
0.9999

Observations

All airplanes cost vs.. distance was linear

Calibration using 6 perfect data points
Least squares
Slopes per seat-km similar
Intercept in equivalent km cost similar
757s designed for longer hauls
Otherwise comparable capabilities

Why we Care
Costs Linear with distance means
Average cost is cost at average stage length
We generally know these data
We can adjust and compare airlines at standard
distance

Cost of an extra stop are separable

Stop cost independent of where in total distance

Simplifies Network Costs

Costs are depend on total miles and departures

Costs Are Linear with Airplane Size

(Example at 1500 km)
16

trip cost at 1500 km (index)

14
12
10
8
6

Data
Linear (Data)

4
2
0
100

120

140
160
180
200
220
seats for comparable single-aisle designs

240

Why we Care
Costs Linear with Seats means
Average cost is cost at average size
We generally know these data
We can adjust and compare airlines at a standard size

Cost of Frequency and Capacity are Separable

Frequency cost is independent of capacity

Powerful Independence in Network Design

Costs and values of Frequencies
Cost and need for capacity

Calibration for Planar Formula

NOT
Cost = a + b*Seats + c*Dist + d*Seats*Dist
Yes:
Cost = k * (Seats + a) * (Dist + b)
= k*a*b + k*b*seats + k*a*Dist
+ k*Seats*Dist
NOTE: only 3 degrees of freedom

Why We Care

Planar function is VERY easy to work with

Decouples frequency, size, distance
Vastly simplifies network design issues
Allows comparison of airline costs after
adjustment for size and stage length
Calibration with broad ranges of size and
distance means slopes are very significant

Calibration Techniques
Calibrate each airplane vs.. distance
Two variables, k and b

Calibrate a for least error

Unbiased
Least squared

Compare to least % error (log form)

Compare to size-first process
Results very similar
Results also similar to 4-variable values

Calibration Formula
Cost = $0.019 * (Seats + 104) * (Dist + 722)
Where
Cost means total cost 2001US $ per airplane trip,
non-US cost functions.
Seats means seat count in standard 2-class regional
density.
Dist means airport-pair great circle distance in
kilometers.

One try at Fair Relative Seat Counts

Regional Configurations
Airplane

Nominal (all Y)

2-class (as used)

A318

117

107

737-600

122

110

737-700

140

126

A319

138

126

A320

160

150

737-800

175

162

737-900

189

177

A321

202

183

757-200

217

200

757-300

258

243

Another Try at Fair Relative Seat Counts

Long-haul Configurations
Airplane
Nominal (all Y) 2-class (long)
767-200
238
163
767-300
280
200
767-400
315
229
A330-2
355
233
A330-3
379
268
777-200
415
308
777-300
510
385
747-400
553
429

Cost is Linear With Distance

777-200 Example
120

Trip Cost Index

100
80
60
40
Data
20
0
3000

Linear (Data)

4000

5000

6000
Distance (km)

7000

8000

9000

Costs Are Linear with Airplane Size

(Example at 6000 km)
100

Trip Cost at 6000 km (index)

90
80
70
60
50
40
30
20
10
0
100

150

200
250
300
Long-haul seat count

350

400

Calibration Formula
Cost = $0.0115 * (Seats + 211) * (Dist + 2200)
Where
Cost means total cost 2001US $ per airplane trip,
non-US International trip cost functions.
Seats means seat count in standard 2-class long haul
density.
Dist means airport-pair great circle distance in
kilometers.