Surplus value in propulsion system design optimization

An economic model is presented which relates engineering performance characteristics to product profitability for conceptual and preliminary design of propulsion systems and aircraft. The model represents the competitive marketplace rigorously, which sets it apart from the prevailing state of the art. The model is shown to produce significantly different design results than current approaches. INTRODUCTION Today the design, certification and tooling costs to introduce a new aircraft engine can exceed one billion dollars. To make such an investment responsibly, design engineers must be focused on creating a product that will succeed in the marketplace, providing a good value for prospective customers [Collopy, 1997]. However, today’s design teams lack the economic tools to translate among engineering parameters, market needs, and costs. Therefore, new propulsion systems are based on goals such as “reduce aircraft total operating cost by 10%” [Aviation Week & Space Technology, 1996] that neglect airline revenue and engine manufacturing costs. Attempts to incorporate economic values, such as Altman [1994], although laudable, do not incorporate rigorous, complete representation of market operation and therefore do not generally lead to optimal designs. This paper presents an economic model that relates aircraft performance and manufacturing cost to aircraft, airline, and engine profitability. The model incorporates a rigorous representation of the aircraft market. It is shown that the total profit of the airframer, engine manufacturer, and purchasing airline, referred to as the surplus value, is set by the aircraft and engine design; the market functions only to divide the profit among the parties. Furthermore, it will be shown that the optimal design for airframe and engine is that design which maximizes surplus value. This same design maximizes profit for the airline, the airframer and the engine manufacturer—a true win-win solution. An example is provided in which the economic model is employed in a simplified design study to optimize bypass ratio. The results using the model are significantly different than with prior techniques. WHY AIRLINES PURCHASE AIRCRAFT Aircraft purchases are complex decisions. Salesmanship, maintenance agreements, manufacturing offsets and international politics all come into play. But virtually all purchases rest on a fundamentally rational financial base: the intent of the airline to make money by operating the aircraft. A simple economic model of the aircraft purchase decision can be made by assuming that operating profit is the airline’s only objective in purchasing an aircraft. The influence of this model on propulsion system design is instructive. Revenue and Operating Cost Airline operating profit is the difference between revenue and operating cost. The revenue that an aircraft can earn for an airline depends on the payload and range capability of the aircraft, in conjunction with airline’s route structure and the passenger and freight demand on those routes. Note in Figure 1 that payload and range are not separate attributes—the usual measure is in fact a function of maximum payload which depends on range. Economic probabilistic models can be used to estimate the