Investor Communications

FLYHT CEO Letter- Seventh Edition

September 2, 2016 Subject: Seventh Edition 2016 CEO Letter to FLYHT Shareholders: Customer Success Stories, Continued Dear Shareholders and Interested Parties; In the fifth edition of our letter to shareholders, I shared stories about our customers’ successes and the value they receive by using the Automated Flight Information Reporting System (AFIRSTM). This letter will provide additional examples of the usefulness of AFIRS and how FLYHT’s customers use our products to save money by streamlining the companies’ operations and improving operational safety. There are two success stories I wish to share with you:

  1. AFIRS facilitated cost avoidance for a leasing company,
  2. Use of AFIRS to qualify for a higher class engine trend monitoring profile to save money.

These are two real-world examples that help to demonstrate the range of scenarios where AFIRS provides significant cost and operational savings.

1) Avoiding Aircraft Lease Penalties

Our first example involves a customer that had entered into a lease agreement for four Boeing 767 aircraft. As part of the lease agreement, the customer had to demonstrate to the leasing company and the engine Original Equipment Manufacturer (OEM) that ten percent (10%) of all takeoffs would be conducted at reduced thrust. If our customer did not meet the reduced thrust threshold or if they were unable to verify that they met this reduced threshold, they would have been subjected to incremental financial penalties captured in the clauses of the aircraft lease agreement. A reduced thrust takeoff is accomplished by utilizing less thrust than the engines are capable of producing. The reduced thrust evaluation must take into account various aircraft and environmental factors (e.g. air temperature, air pressure) at the time of actual takeoff. The primary advantage to a reduced thrust takeoff is cost savings through increased engine life and reduced overhaul costs. Secondary advantages include fuel savings and, under certain circumstances, it may be possible to increase the maximum takeoff weight for a specific runway by using a reduced thrust profile. This customer installed AFIRS, which has the ability to monitor thousands of parameters including engine and environmental conditions. FLYHT, together with the customer and the engine OEM were able to create real-time reports that captured and delivered all of the required data to demonstrate to the lessor the operator’s compliance with the lease obligations. The result of this installation and configuration has helped the operator avoid hundreds of thousands of dollars in lease penalties. This is a great example of how the installation of AFIRS pays for itself and actually contributes to an aircraft operator’s bottom-line. An interesting aspect of AFIRS is that it is a flexible solution that can solve a large number of very specific customer issues. The following story outlines yet another example of AFIRS’ broad capabilities.

2) Engine Trend Program Cost Avoidance

The second success story describes how a customer used AFIRS to qualify for a lower-cost engine trend monitoring program. At the time, an engine manufacturer offered four engine trend monitoring programs called Flight Profiles. Flight Profiles provide a graphical representation of the engine condition throughout a year, based on the ability to track life-limited parts. The profiles are classed from A to D, with Flight Profile A being the highest standard. In this particular case, the customer was operating under Flight Profile B and wanted to obtain Flight Profile A certification. However, in order to qualify for Flight Profile A, the airline had to demonstrate to the engine OEM it was capable of providing the quality, frequency and reliability of real-time data necessary in order to obtain such approval. The customer requested assistance from FLYHT in obtaining more favorable engine trend monitoring conditions for its fleet of B757’s. Trend monitoring goes by many names: engine monitoring, engine health monitoring, engine condition trend monitoring, health and usage monitoring, predictive maintenance, and others. Engine trend monitoring is defined as using engine operational data to find symptoms of damage, deterioration, or excessive wear. Generally speaking, there are two ways to capture the required data, manually by the flight crew, or automatically through some form of on-board technology, such as AFIRS. FLYHT worked with the customer and the engine OEM in order to create and deploy a customized report that would satisfy the requirements of Flight Profile A. After a short trial period, the customer was able to fully implement the final solution and obtain Flight Profile A certification from the engine OEM. The result saved our customer over one million dollars during the course of its lease agreement. Over the years, FLYHT has demonstrated considerable expertise in the field of aircraft trend monitoring and established relationships with engine OEMs. AFIRS is ideal for solving complex data models and has proven itself to be a viable and cost effective alternative to well-established technologies currently offered in the marketplace. AFIRS provides this capability through its highly configurable software and customized reporting capabilities. The intent of communicating these success stories is to describe various applications in order to demonstrate the flexibility and provide examples that may encourage other uses of AFIRS. They are both very different examples, but share commonalities in the flexibility and cost saving capabilities that are provided by FLYHT’s AFIRS product. AFIRS interfaces with aircraft information systems and captures the relevant data into its quick access recorder functionality. As part of this capture, the embedded logic, or personality, which is downloaded via the Iridium network from the UpTimeTM ground-based server, processes specific data elements according to the objectives and requirements of the operator. The number of problems that AFIRS can solve is essentially limitless; if the data can be routed to AFIRS then the on board computing resources can identify limit excursions and alert and alarm operators of problems onboard the aircraft. I hope these success stories provide insight into FLYHT and our product, AFIRS. Best regards – Thomas R. Schmutz CEO, FLYHT