Prepare Peg Jones€™s response to Stephen Ruth.

In January 2012, Northern Airlines merged with Southeast Air-lines to create the fourth largest U. S. carrier. The new North€“South Airline inherited both an aging fleet of Boeing 727-300 aircraft and Stephen Ruth. Stephen was a tough former Secretary of the Navy who stepped in as new president and chairman of the board. Stephen€™s first concern in creating a financially solid company was maintenance costs. It was commonly surmised in the airline industry that maintenance costs rise with the age of the aircraft. He quickly noticed that historically there had been a significant difference in the reported B727-300 maintenance costs (from ATA Form 41s) in both the airframe and engine areas between Northern Airlines and Southeast Airlines, with Southeast having the newer fleet. On February 12, 2012, Peg Jones, vice president for operations and maintenance, was called into Stephen€™s office and asked to study the issue. Specifically, Stephen wanted to know whether the average fleet age was correlated to direct airframe maintenance costs, and whether there was a relation-ship between average fleet age and direct engine maintenance costs. Peg was to report back by February 26 with the answer, along with quantitative and graphical descriptions of therelationship.

NORTHERN AIRLINE DATA SOUTHEAST AIRLINE DATA AIRFRAME COST PER AIRFRAME ENGINE COST PERAVERAGE COST PER COST PE ENGINE R AVERAGE YEAR AIRCRAFT (S) AIRCRAFT (S) AGE (HOURS AIRCRAFT (S) AIRCRAFT (S) AGE (HOURS 2001 2002 2003 2004 2005 2006 2007 51,80 54.92 69.70 68.90 63.72 84.73 78.74 43.49 38.58 51.48 58.72 45.47 50,26 79.60 6,512 8.404 11.077 11,717 13.275 15,215 18,390 13.29 25.15 32.18 31.78 25.34 32.78 35.56 18.86 31.5S 40.43 22.10 19.69 32.58 38.07 5.107 8.145 7.360 5,773 7.150 9,364 8.259