Consider Southwest Airlines and read the article about the problems with the Boeing 737 Max. They...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider Southwest Airlines and read the article about the problems with the Boeing 737 Max. They operate a fleet of 200 aircraft. Half are Boeing 737's and the other half are the brand new Boeing 737 Max. The new Boeing 737 Maxes are financed and every month Southwest must service their debt. To fly, Southwest uses their fleet of planes, buys gasoline, and must pay salaries for pilots, stewardesses, and ground crew. Ordering new planes takes 3 years from placing an order to taking delivery. Selling planes has a similar time horizon. In a one year period, the airplanes are a variable input variable input and salaries are fixed input gasoline is The second crash occurred in early 2019 and resulted in the grounding of the all Boeing 737 Max's. Southwest could continue to operate their old 737's. The new planes could not fly but Southwest had to continue servicing their debt. The grounding shifts the MC curve from MC to the MC curve does not shift The difference between ATC and AVC (the black double ended arrow on the blue unit cost curves) will widen after the grounding of the 737 Max. $/unit P Southwest Airlines Monthly Unit Costs MC MC MC ATC AVC Q(firm) Price P Airline Industry San (100 Airlines) Q (market) How Boeing 737 MAX's flawed flight control system led to 2 crashes that killed 346 Samya Stumo arrived at Bole International Airport in Addis Ababa, Ethiopia, on the morning of March 10, 2019, after a long flight from Washington, D.C. The 24-year-old, who had been raised on a Massachusetts farm, was on her first overseas assignment for the global health care group, Thinkwell. After a two-hour layover, Stumo was scheduled to move on to Nairobi, Kenya, on Ethiopian Airlines Flight 302. Along with her were 148 other passengers from 35 different countries. Many were on missions of goodwill. Some were heading to Nairobi for a United Nations conference, according to Ethiopian journalist Hadra Ahmed. Others, she said, "were going to volunteer and do good for the world." Just six minutes after takeoff, ETH302 dove at full speed into a field 30 miles away from Bole International, near the town of Bishoftu. Everyone on board, including Stumo, was dead. "On the BBC at 3:00 in the morning, it said that a plane, Ethiopian Airlines taking off from Addis Ababa, had crashed," said Stumo's mother Nadia Milleron. "I remember I couldn't breathe." Milleron said some of her daughter's personal belongings were recovered and returned to the family, including Stumo's work journal, passport and articles of clothing. "It all smells of jet fuel. They fill the room with the smell," Milleron said. "To me, it's the smell of death." The plane that crashed on that clear, sunny morning in Ethiopia was a Boeing 737 MAX 8, a new model that had become the fastest-selling plane in Boeing's history. The 737 MAX was a revamped version of Boeing's highly popular 737 aircraft, with added power and fuel-efficient engines. Boeing touted the MAX as being so similar to the previous model of the 737 that it said pilots wouldn't be required to undergo any training for it in a flight simulator -- a costly expense for airlines. Instead, Boeing said pilots could get up to speed on the new model by reviewing a 56- minute online course. "It went through a robotic voice describing what the MAX is about," said Capt. Dennis Tajer, an American Airlines pilot and spokesperson for the Allied Pilots Association. "You can sit at Starbucks or sit at home, and it would ask you a couple of questions to affirm the learning." The Lion Air disaster Indonesia-based budget airline Lion Air was one of Boeing's biggest buyers, ordering over 200 Boeing 737 MAX 8s at a cost of $22 billion. And after its first flight in May 2017, the 737 MAX 8 went 17 months without incident. Then, on Oct. 28, 2018, Lion Air Flight 610 from Bali to Jakarta experienced an in-flight emergency as the plane suddenly began to nosedive after take-off. "All of us were screaming like we are in a roller coaster," said Rakhmat Robbi, a passenger on the flight. "To be honest, I was thinking it's almost like my last flight and this is my last day." The aircraft nosedived four times as the pilots struggled to regain control, according to Indonesia's National Transportation Safety Committee (NTSC). A third pilot who just happened to be in the cockpit was able to help the two pilots resolve the situation and the plane landed safely in Jakarta. However, according to the NTSC, the crew left incomplete notes about the details of the emergency "The pilot reported that he had a problem with the speed and altitude indicated on the captain's side," said Capt. Nurcahyo Utomo, senior safety investigator of the NTSC. Nurcahyo said the captain failed to mention the plane's trim system had suddenly activated, causing it to repeatedly nose dive. "The pilots were able to control it," said aviation attorney Steven Marks. "They knew they had a problem. But they didn't understand exactly what the nature of the problem was." Early the next morning, on Oct. 29, 2018, the same plane departed from Jakarta to Pangkal Pinang, Indonesia. Just 13 minutes after takeoff, Lion Air Flight 610 plummeted into the Java Sea. Authorities launched a search and rescue mission immediately, but all 189 people on board died. David Moreno, 12, whose mother Fiona Ayu Zen was on the flight, said "I prayed so she would be found... I prayed for her safety, but she didn't make it." The 737 MAX's flawed flight control software The flight data recorder from Lion Air 610 revealed that the plane had gone out of control -- it had moved up and down over 24 times before it finally dove into the sea at full speed. "I never knew ... any case of the aircraft that fly down and up and up and down like this," Nurcahyo said. "I knew that the pilot was fighting with the plane." Nurcahyo said the NTSC asked Boeing about the kind of system on the 737 MAX that could have caused it to behave in such a manner. He said investigators were surprised to learn that Boeing had installed a flight control software program that could force the plane into a dive without the pilots' knowledge. The software, called Maneuvering Characteristics Augmentation System (MCAS), was added to compensate for the larger, more powerful engines that had been added onto the existing 737 airframes, which changed the in-air flight characteristics of the aircraft. "The aircraft starts to want to pitch up all by itself," said Peter Lemme, a former Boeing engineer, who didn't work on the MAX design, and now serves as chief consultant for Seamless Air Alliance. "The idea was to provide something that would offset that pitching moment, or causing the nose to como hack un" When the aircraft's computer sensed that the plane was in danger of a stall, MCAS worked by triggering the horizontal stabilizer located on the aircraft's tail to push the nose back down. MCAS was accidentally triggered on both Lion Air flights because a defective angle of attack (AOA) sensor had transmitted incorrect information about the position of the plane's nose. Although there are two AOA sensors on the 737 MAX, MCAS was only connected to one of them. "It's a lack of redundancy that appears to me to be unacceptable in airplane design," said aviation journalist Christine Negroni, author of the book "The Crash Detectives." Boeing responds In the wake of the Lion Air tragedy, then Boeing CEO Dennis Muilenburg reassured the flying public about the safety of the 737 MAX 8. "The bottom line here is the 737 MAX is safe and safety is a core value for us at Boeing," Muilenburg said in a Nov. 13, 2018, appearance on Fox Business. Boeing followed up by issuing a bulletin to airlines instructing pilots to cut off power to the horizontal stabilizer in the event of an uncommanded nose-down emergency, which would also prevent MCAS from activating. Boeing also noted in a statement that the pilots on the Lion Air flight from Bali to Jakarta were able to successfully land because they had correctly followed this procedure. The pilots on the fatal Lion Air flight failed to take this step. In a private meeting with the pilots' union of American Airlines that was secretly recorded by the union's president, Boeing said it had decided not to reveal the existence of MCAS in the 737 MAX flight manual on the grounds that it didn't want to inundate pilots with unnecessary information. "That enraged us," Capt. Tajer said. "Boeing always gives you the information, they don't parcel it out." > Question 12 Continued from the previous question. When the second Boeing 737 Max crash occurred the 737 Max was grounded. Originally Boeing and Southwest thought the problem could be fixed quickly and expeditiously with a software update and pilot training. As time passed, the FAA and other governing bodies around the world made it increasingly difficult for Boeing to re-certify and return the 737 Max to service. Instead of months, the grounding stretched to over a year with no end in sight. Discuss the following 3 issues using economic theory and terminology. 1. At what point, does Southwest lay off workers but continue to fly a reduced schedule? What economic logic do they use to make their decision? 2. At what point, does Southwest cancel all schedule flights, both 737 and 737 Max, until the 737 Max returns to service? What economic logic do they use to make their decision? 3. At what point, does Southwest go out of business, either declaring bankruptcy or selling all their assets including their fleet of planes. What economic logic do they use to make their decision? Edit View Insert Format Tools Table 12pt Paragraph BIU 15 pts T V Consider Southwest Airlines and read the article about the problems with the Boeing 737 Max. They operate a fleet of 200 aircraft. Half are Boeing 737's and the other half are the brand new Boeing 737 Max. The new Boeing 737 Maxes are financed and every month Southwest must service their debt. To fly, Southwest uses their fleet of planes, buys gasoline, and must pay salaries for pilots, stewardesses, and ground crew. Ordering new planes takes 3 years from placing an order to taking delivery. Selling planes has a similar time horizon. In a one year period, the airplanes are a variable input variable input and salaries are fixed input gasoline is The second crash occurred in early 2019 and resulted in the grounding of the all Boeing 737 Max's. Southwest could continue to operate their old 737's. The new planes could not fly but Southwest had to continue servicing their debt. The grounding shifts the MC curve from MC to the MC curve does not shift The difference between ATC and AVC (the black double ended arrow on the blue unit cost curves) will widen after the grounding of the 737 Max. $/unit P Southwest Airlines Monthly Unit Costs MC MC MC ATC AVC Q(firm) Price P Airline Industry San (100 Airlines) Q (market) How Boeing 737 MAX's flawed flight control system led to 2 crashes that killed 346 Samya Stumo arrived at Bole International Airport in Addis Ababa, Ethiopia, on the morning of March 10, 2019, after a long flight from Washington, D.C. The 24-year-old, who had been raised on a Massachusetts farm, was on her first overseas assignment for the global health care group, Thinkwell. After a two-hour layover, Stumo was scheduled to move on to Nairobi, Kenya, on Ethiopian Airlines Flight 302. Along with her were 148 other passengers from 35 different countries. Many were on missions of goodwill. Some were heading to Nairobi for a United Nations conference, according to Ethiopian journalist Hadra Ahmed. Others, she said, "were going to volunteer and do good for the world." Just six minutes after takeoff, ETH302 dove at full speed into a field 30 miles away from Bole International, near the town of Bishoftu. Everyone on board, including Stumo, was dead. "On the BBC at 3:00 in the morning, it said that a plane, Ethiopian Airlines taking off from Addis Ababa, had crashed," said Stumo's mother Nadia Milleron. "I remember I couldn't breathe." Milleron said some of her daughter's personal belongings were recovered and returned to the family, including Stumo's work journal, passport and articles of clothing. "It all smells of jet fuel. They fill the room with the smell," Milleron said. "To me, it's the smell of death." The plane that crashed on that clear, sunny morning in Ethiopia was a Boeing 737 MAX 8, a new model that had become the fastest-selling plane in Boeing's history. The 737 MAX was a revamped version of Boeing's highly popular 737 aircraft, with added power and fuel-efficient engines. Boeing touted the MAX as being so similar to the previous model of the 737 that it said pilots wouldn't be required to undergo any training for it in a flight simulator -- a costly expense for airlines. Instead, Boeing said pilots could get up to speed on the new model by reviewing a 56- minute online course. "It went through a robotic voice describing what the MAX is about," said Capt. Dennis Tajer, an American Airlines pilot and spokesperson for the Allied Pilots Association. "You can sit at Starbucks or sit at home, and it would ask you a couple of questions to affirm the learning." The Lion Air disaster Indonesia-based budget airline Lion Air was one of Boeing's biggest buyers, ordering over 200 Boeing 737 MAX 8s at a cost of $22 billion. And after its first flight in May 2017, the 737 MAX 8 went 17 months without incident. Then, on Oct. 28, 2018, Lion Air Flight 610 from Bali to Jakarta experienced an in-flight emergency as the plane suddenly began to nosedive after take-off. "All of us were screaming like we are in a roller coaster," said Rakhmat Robbi, a passenger on the flight. "To be honest, I was thinking it's almost like my last flight and this is my last day." The aircraft nosedived four times as the pilots struggled to regain control, according to Indonesia's National Transportation Safety Committee (NTSC). A third pilot who just happened to be in the cockpit was able to help the two pilots resolve the situation and the plane landed safely in Jakarta. However, according to the NTSC, the crew left incomplete notes about the details of the emergency "The pilot reported that he had a problem with the speed and altitude indicated on the captain's side," said Capt. Nurcahyo Utomo, senior safety investigator of the NTSC. Nurcahyo said the captain failed to mention the plane's trim system had suddenly activated, causing it to repeatedly nose dive. "The pilots were able to control it," said aviation attorney Steven Marks. "They knew they had a problem. But they didn't understand exactly what the nature of the problem was." Early the next morning, on Oct. 29, 2018, the same plane departed from Jakarta to Pangkal Pinang, Indonesia. Just 13 minutes after takeoff, Lion Air Flight 610 plummeted into the Java Sea. Authorities launched a search and rescue mission immediately, but all 189 people on board died. David Moreno, 12, whose mother Fiona Ayu Zen was on the flight, said "I prayed so she would be found... I prayed for her safety, but she didn't make it." The 737 MAX's flawed flight control software The flight data recorder from Lion Air 610 revealed that the plane had gone out of control -- it had moved up and down over 24 times before it finally dove into the sea at full speed. "I never knew ... any case of the aircraft that fly down and up and up and down like this," Nurcahyo said. "I knew that the pilot was fighting with the plane." Nurcahyo said the NTSC asked Boeing about the kind of system on the 737 MAX that could have caused it to behave in such a manner. He said investigators were surprised to learn that Boeing had installed a flight control software program that could force the plane into a dive without the pilots' knowledge. The software, called Maneuvering Characteristics Augmentation System (MCAS), was added to compensate for the larger, more powerful engines that had been added onto the existing 737 airframes, which changed the in-air flight characteristics of the aircraft. "The aircraft starts to want to pitch up all by itself," said Peter Lemme, a former Boeing engineer, who didn't work on the MAX design, and now serves as chief consultant for Seamless Air Alliance. "The idea was to provide something that would offset that pitching moment, or causing the nose to como hack un" When the aircraft's computer sensed that the plane was in danger of a stall, MCAS worked by triggering the horizontal stabilizer located on the aircraft's tail to push the nose back down. MCAS was accidentally triggered on both Lion Air flights because a defective angle of attack (AOA) sensor had transmitted incorrect information about the position of the plane's nose. Although there are two AOA sensors on the 737 MAX, MCAS was only connected to one of them. "It's a lack of redundancy that appears to me to be unacceptable in airplane design," said aviation journalist Christine Negroni, author of the book "The Crash Detectives." Boeing responds In the wake of the Lion Air tragedy, then Boeing CEO Dennis Muilenburg reassured the flying public about the safety of the 737 MAX 8. "The bottom line here is the 737 MAX is safe and safety is a core value for us at Boeing," Muilenburg said in a Nov. 13, 2018, appearance on Fox Business. Boeing followed up by issuing a bulletin to airlines instructing pilots to cut off power to the horizontal stabilizer in the event of an uncommanded nose-down emergency, which would also prevent MCAS from activating. Boeing also noted in a statement that the pilots on the Lion Air flight from Bali to Jakarta were able to successfully land because they had correctly followed this procedure. The pilots on the fatal Lion Air flight failed to take this step. In a private meeting with the pilots' union of American Airlines that was secretly recorded by the union's president, Boeing said it had decided not to reveal the existence of MCAS in the 737 MAX flight manual on the grounds that it didn't want to inundate pilots with unnecessary information. "That enraged us," Capt. Tajer said. "Boeing always gives you the information, they don't parcel it out." > Question 12 Continued from the previous question. When the second Boeing 737 Max crash occurred the 737 Max was grounded. Originally Boeing and Southwest thought the problem could be fixed quickly and expeditiously with a software update and pilot training. As time passed, the FAA and other governing bodies around the world made it increasingly difficult for Boeing to re-certify and return the 737 Max to service. Instead of months, the grounding stretched to over a year with no end in sight. Discuss the following 3 issues using economic theory and terminology. 1. At what point, does Southwest lay off workers but continue to fly a reduced schedule? What economic logic do they use to make their decision? 2. At what point, does Southwest cancel all schedule flights, both 737 and 737 Max, until the 737 Max returns to service? What economic logic do they use to make their decision? 3. At what point, does Southwest go out of business, either declaring bankruptcy or selling all their assets including their fleet of planes. What economic logic do they use to make their decision? Edit View Insert Format Tools Table 12pt Paragraph BIU 15 pts T V
Expert Answer:
Related Book For
Strategic Management An Integrated Approach
ISBN: 978-1111825843
10th edition
Authors: Charles W. L. Hill, Gareth R. Jones
Posted Date:
Students also viewed these economics questions
-
Read the article about information mining below. Discuss your opinions of the legalization of mining for physician data. From a patients perspective and a pharmaceutical employees perspective, how...
-
Read the article about Price Waterhouse Coopers (PWC) and its association with the worst accounting fraud in India related to its audit of Satyam Computer Services, Ltd. titled "Price Waterhouse...
-
Read the article about Princ of microecon Why would cash transfers typically be preferred by recipients over in-kind transfers? What are the pros and cons of each from a government perspective? Who...
-
Establishing causality is difficult, whether conclusions have been derived inductively or deductively. (a) Explain and elaborate on the implications of this statement. (b) Why is ascribing causality...
-
Use Solver to create a Sensitivity Report for question 28 at the end of Chapter 3 and answer the following questions: a. What total profit level is realized if 100 extra hours of labor are available?...
-
Jim Dandy invests a sum of money today. He earns the following interest rates over the next 5-years: j2 = 10% for the first 2-years j4 = 8% for the next 2-years j12 = 6% for the last year What annual...
-
The data in Table 19.5 originate from the 1991 edition of the Historical Loss Development Study, published by the Reinsurance Association of American. These data have been widely used to illustrate...
-
Jaynet spends $20,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firmone offer was for $100,000 per year, and the other was for...
-
Jacquelyn's business had a budget of $154,000 in sales and $95,980 in total variable costs. What is the most her fixed costs could be for the businen to break even?
-
A headlight produced by Enterprise Lumiere was found to be defective. The company has three factories (labeled below as A. B, and C) where such headlights are manufactured. A Quality Control Manager...
-
In what ways do distributed operating systems employ sophisticated fault tolerance mechanisms, leveraging consensus protocols and distributed algorithms to ensure system reliability in a networked...
-
1. Using the schematic capture software construct a full adder as designed in the PRE-LAB. Simulate the circuit to make sure that it is performing all desired functions. 2. Make four copies of the...
-
Consider that you are recruited as a Procurement Manager of a large enterprise in Western Australia. You need to identify an appropriate company where you will have access to all relevant document...
-
Plot the torque (y-axis) versus speed (x-axis) curve by finding the torque at (set adjustable resistance to 175 ohms) No-Load, 1200 rpm 1100 rpm 1150 rpm Stall, 0 rpm Plot the output power versus...
-
Let (an)nez be a sequence of real numbers. Recall the 2(N), as a vector space over R, has the norm given by 2||(alle) (n=1 lan2)1/2 = lim N-(N=121/2 We will often denote this by llanlle to have a...
-
Light electric transport such as electric bicycles (EB) are expected to be common means of short distance transportation in urban area. As the engineer of an EB firms you are tasked to come up with a...
-
A ship is 6000 meters directly South of a lighthouse and is sailing on a bearing of 034 . If the ship continues on this course, what is the closest distance it will come to the lighthouse to the...
-
The maximum pressure that can be developed for a certain fluid power cylinder is 15.0 MPa. Compute the required diameter for the piston if the cylinder must exert a force of 30 kN.
-
1. What drove Merck to develop, release, and recall Vioxx? Did this coincide with their core values? Why or why not? Did their business definition change? Explain. 2. What suggestions can you provide...
-
1. Determine if Gore's business formula corresponds to the theories of the I/O model of above-average returns or the resource-based model of above-average returns. Explain your response. 2. What...
-
What are the problems associated with implementing a strategy of related diversification through acquisitions?
-
Graph the discrete probability distribution given in Table 1 from Example 2. Approach In the graph of a discrete probability distribution, the horizontal axis represents the values of the discrete...
-
Compute the mean of the discrete random variable given in Table 1 from Example 2. Approach Find the mean of a discrete random variable by multiplying each value of the random variable by its...
-
Which of the following is a discrete probability distribution? Approach In a discrete probability distribution, the sum of the probabilities must equal 1, and all probabilities must be between 0 and...
Study smarter with the SolutionInn App