Implementation of Life Cycle Costing on Airline Industry (Case Study of XYZ Airline in Indonesia)
Abstract
The airline operating cost may vary along the operation time of the aircraft. This cost fluctuation should be taken as consideration for the decision-making process, for instance, the pricing calculation. A poor costing might distort pricing leading to a loss of business. A long-term oriented cost calculation to forecast the total cost of aircraft during the operation time is critical for the airline company. This research will study whether the life cycle cost analysis is fit for airline company with an emphasis on maintenance and disposal or aircraft redelivery cost and focus on aircraft operating lease context. It uses a case study framework on an airline in Indonesia with the interview and documentation analysis as the main research method. The life cycle cost is found to be fit for the airline company with activity-based life-cycle costing as the applicative model. The research presents an approach that provides a long-term oriented costing that is needed for management decision.
Keywords: life cycle costing, airline operating cost
References
[1] Bengtsson, M., & Kurdve, M. (2016). Machining equipment life cycle costing model with dynamic maintenance cost. Procedia Cirp, 48, 102-107.
[2] Dhillon, B. (1989). Life cycle costing: techniques, models and applications. Routledge.
[3] Emblemsvåg, J. (2003). Life-cycle costing: Using activity-based costing and Monte Carlo methods to manage future costs and risks. John wiley & sons.
[4] Kara, S., Li, W., & Sadjiva, N. (2017). Life Cycle Cost Analysis of Electrical Vehicles in Australia. Procedia CIRP, 61, 767-772.
[5] Kaufman, R. J. (1970). Life cycle costing-decision-making tool for capital equipment acquisition. Cost and Management, 44(2), 21-28.
[6] Knauer, T., & Möslang, K. (2018). The adoption and benefits of life cycle costing. Journal of Accounting & Organizational Change, 14(2), 188-215.
[7] Soukka, R. (2007). Applying the principles of life cycle assessment and costing in process modeling to examine profit-making capability.
[8] Sriram, C., & Haghani, A. (2003). An optimization model for aircraft maintenance scheduling and reassignment. Transportation Research Part A: Policy and Practice, 37(1), 29-48.
[9] Tsai, W. H., & Kuo, L. (2004). Operating costs and capacity in the airline industry. Journal of air transport management, 10(4), 269-275.
[10] Waghmode, L. Y., & Sahasrabudhe, A. D. (2012). Modelling maintenance and repair costs using stochastic point processes for life cycle costing of repairable systems. International Journal of Computer Integrated Manufacturing, 25(4-5), 353-367.
[11] Woodward, D. G. (1997). Life cycle costing—theory, information acquisition and application. International journal of project management, 15(6), 335-344.
[12] Xu, X., Chen, L. Q., & Xie, S. (2006). Framework of a product lifecycle costing system. ASME.