The costs of improvements in aircraft drag reduction design changes are outlined in the context of production decisions. A drag reduction design with increased airframe weight requires cost increases for direct labor, overhead and direct expenses, plus general and administrative expenses

Tumlinson, R. R.

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8.1 (I) Cost Consideration For
Aircraft Configuration Changes
N76 11022
R. R. Tumlinson
Beech Aircraft Corporation
Drag reduction, in our industry, is a principle that ranks with Motherhood. There
are about as many aircraft engineers who would demean ways to reduce drag as there
probably are politicians who would attack apple pie. Most of the people here have spent
a great deal of time searching for ways of reducing drag and of trying to convince others
of the merits of the efforts required to do so. I am sure that ! have a lot of company in
the frustration that goes with that search and effort.
We are all members, or supporters, of an industry which is fueled by profit. And
that profit is directly dependent upon del ivery of aircraft which provide good value for
our customers. Or, simply said, the costs of changes and evolutionary improvements
must be at least balanced by the beneflts.
I'm not an expert by any means on costst but I have had a lot of experience in
trying to overcome the obstacles provided by the cost considerations of proposed changes.
So, today, let me take the role of the Devil's Advocate on aircraft costs and cite some
of the considerations which must be made and which may outweigh potential performance
improvements.
As a means of illustrating both costs and benefits, I'd llke to present a very
arbitrary example which will touch on many of the important cost considerations which
must be made to arrive af a production declslon.
Let's say that we have arrived at a modification which will reduce the drag of
our airplane so as to provide an increase in cruising speed of 4 mph. In the course of
this workshop, we have considered many possibilities for achieving this, so r m not going
to specify how this was achieved. But, as an arbitrary assumption, let's say that we cant
in fact, increase our cruising speed by 4 mph; and also, just as arbitrarily Jet us assume
that the resulting changes would net an increase in airframe weight of 5 pounds. This
represents a loss of payload of 5 pounds. And, in addition, this will typically require
design and production changes to another 10 pounds of the existing airframe weight,
although this would depend in a particular case on the nature of the configuration change.
For the purpose of this example, we will apply this to a hypothetical turboprop with a
cruising speed of 250 mph.
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Let me emphasize at this point that the figures I am using have been chosen to
be representative for the industry, and I belleve they are suitable for this example.
First, let's consider the cost increase for direct labor. The 5 pounds of new and
increased weight will be a net increase to the airplane, and an appropriate slope and
man-hour/pound figure must be selected for the new effort. The 80% learning curve is
found to be fairly typical for the general aircraft industry, and I believe they are suitable
for this example. The 5 pounds will be projected from Unit 1000 at 1.0 man-hour/pound
to obtain Unit No. 1. This is shown to be an increase of 46 hours at Unit 1 with a cum-
ulative increase of 15 hours for 100 units.
A somewhat different consideration must be made for the "changed" weight of
10 pounds, where there is not the same potential for "learning" improvements. Something
less than the 80% slope typical for "new" production would be more appropriate. If we
assume a 90% learning-curve sloper using the same factors as before (1.0 man-hours/
pound atUnit 1000 for 10 pounds, this time), the cumulative man-hours over 100 units
is 16.6 man-hours.
As the changed effort has replaced an existing task at 1.0 man-hours/pound,
this 10 hours can be subtracted from the 16.6, leaving 6.6 hours for new learning. Our
total direct labor increase now becomes 15 hours + 6.6 hours, or a total of 21.6 hours
each for the 100 units.
Next, these man-hours must be converted to dollar costs. The latest figures
published by the Bureau of Labor Statistics show that direct labor rate applicable for the
aircraft industry as a whole is $5.78 per man-hour. With inflation and differences within
the industry, this rate can become obsolete quickly. Overhead and direct expenses plus
general and administrative expenses can add a so-called "burden" of 200 to 300 percent
to this rate.
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TABLE I
Overhead and Direct Expenses Include
Indirect salaries and wages; support labor such as planning, scheduling personnel,
etc.; holidays, vacations, sick leave, etc.
Insurance, payroll taxesu social security, group life-insurance, workmen compen-
sation, retirement plan t sales taxes, personal property taxes, and depreciation.
Maintenance and repair on shop equipment and on buildings.
Shop supplles such as perishable tools, office supplies, etc.
Travel, telephone, freight, etc.
Overtime premiums, product I lability, etc.
General and Administrative Expenses Include
Executive and management salaries; accounting; procurement; office supplies;
and other costs which cannot be directly associated with labor cost - either
manufacturing or engineering.
There are two other contributions to the costs, the materials and the develop-
ment costs. Material costs for an airplane in this category vary with the size and com-
plexity. Development costs also vary with the class of airplane and the accompanying
complexity of the development effort and the FAA certification program required. A
range of $3000 to $4000 per pound is the general ballpark figure when everything is
added up, and in this example 100 units was selected to amortize these costs.
When the pieces are all assembled, a price change can be determined for the
improved airplane which adds up to approximately $1600.
The cost to the customer must be weighed against the additional value to the
customer. LePs look at it this way: our hypothetical airplane cruises at 250 mph. To
keep it simple, I'll use this cruising speed, although it would be more accurate to deter-
mine an average block speed based on a customer's particular routes. For a customer's
usage, we will assume 600 hours per year. Appropriate operating costs are quoted on
Table If. And, as noted on the table, the costs of the modification can be recovered by
the savings in operating costs in 1.87 years. After that time r the savings would represent
a net galn to the customer which would contlnue.
333
TABLE II
Operating Cost Comparison
Before Modification
D i rect Operat ing Costs/Hour
Indirect Operating Costs/Hour
Total Operating Costs/Hour
$ 77.50
13.18
$ 90.68
Cruising Speed
Total Operating Costs/Mile =
250 MPH
$90.68/HR $ 00.3627
250 MPH
After Modification
Total Operating Costs/Mile =
$90.68/HR
254 MPH $ 00.3570
Savings Per Mile
Savings Per Year = $.0057 x 250 MPH x 600 Hours =
0.0057
$855.00
$16O0.00
= 1.87 years
$ 855/YR
I am not going to exercise judgment on the 1.87 years, because of some of the
arbitrary assumptions that could drastically affect the results. In estimating costs for a
particular project, appropriate values must be used which would not be the same as
those used in the examples. The actual special improvement, the weights affected, the
cost factors that are current for a particular project, the number of units used to amortize
the development costs could each produce significant differences. I believe the figures
here are representative, but primarily, I hope they illustrate the key factors which can
affect a production decision considering the costs involved.
And, even after this type of analysis, there are other factors which may strongly
influence both the costs and/or the decision to proceed. For example, the FAA recerti-
fication considerations. If this can be avoided, perhaps by timing the modification with
a complete model change, these cost figures would look much mare favorable.
In the last analysis, a decision to proceed may depend on the philosophy of the
company management. Beauty is in the eye of the beholder, the saying goes. There are
many changes made in the name of progress, or to satisfy a dedication for a clean-looking
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airplane, which might be difficult to justify solely on the basis of this type of comparison.
I would not suggest that this would not be desirable. But--- sometimes the stroke of
intuition is not enough to convince a cost-mlnded management --- and that's where this
analysis would help.
Thank you.
335


Cost consideration for aircraft configuration changes, 1

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