Subject: Third Edition 2016 CEO Letter to FLYHT Shareholders: Industry Mandates Dear Shareholders and Interested Parties; This third edition of our letter to shareholders will focus on industry mandates, specifically those associated with commercial aircraft tracking and also those aviation satellite communication regulations that exist in the People’s Republic of China. There are, of course, many other regulations that exist or that may be ultimately adopted in the world of commercial aviation, however these two areas are most salient to FLYHT and our products and these are the regulations that have been identified and discussed by FLYHT with shareholders.
When Malaysian Airlines Flight MH370 disappeared while flying from Kuala Lumpur to Beijing China on March 8, 2014, the majority of the world was shocked to find out that a commercial airliner could simply vanish. The International Civil Aviation Organization (ICAO), a United Nations Specialized Agency, convened a meeting in Montreal shortly after the incident occurred and the result was a decision to pursue global tracking of airlines at a faster pace. At a second meeting in February, 2015, the delegates came out in support of the Global Aeronautical Distress and Safety System (GADSS) concept of operation. This GADSS concept has led to resolutions adopted by ICAO. ICAO has adopted Amendments 39 and 40 to Annex 6 (Operations of Aircraft, Part I – International Commercial Air Transport – Aeroplanes) which included normal aircraft tracking Standards and Recommended Practices (SARPs). These SARPs became effective on March 20, 2016 and will be applicable on November 8, 2018. The ICAO website states, “The SARPs also establish the requirements for data retention to assist search and rescue (SAR) in determining the last known position of aircraft. Finally, the SARPs establish when an air operator needs to report missing aircraft position information.” Amendment 39 includes SARPs which make an air operator responsible for tracking its aircraft throughout its area of operations with an aircraft-tracking time interval of 15 minutes. These SARPs are applicable on November 8, 2018 and apply to specific classes of aircraft. Amendment 40 includes SARPs related to the location of an aeroplane in distress and establishes a requirement for an aeroplane to autonomously transmit information from which position can be determined at least every one minute while in distress. The SARPs establish requirements for making the location information available to relevant authorities. These SARPs are applicable on January 1, 2021 and apply to specific classes of aircraft. These SARPs are non-prescriptive meaning they may be implemented with any chosen technology. In fact, the autonomous position reporting for aircraft in distress may be manually activated and the regulation would be considered met. There are performance criteria which must be met such as requirements that the autonomous reporting be capable of transmitting for the entire flight even in the event of aircraft electrical power loss. It is important to note that ICAO only provides recommendations to civil aviation authorities, such as the Federal Aviation Authority (FAA). These authorities will ingest these recommendations and can interpret them as they see fit for their aircraft operators. The dates for implementation of these recommendations also fall within the civil aviation authority’s control. More detailed information can be evaluated on the ICAO website at http://www.icao.int/safety/globaltracking/Pages/GADSS-Update.aspx. The FLYHT Automated Flight Information Reporting System (AFIRSTM) product line can meet these SARPs today when specifically installed to achieve compliance. The AFIRS product provides significantly more capability than aircraft tracking. Beyond location, the AFIRS unit can provide real-time access to data on the aircraft; enabling efficiencies with aircraft operations and maintenance and saving operators money. In the event of aircraft distress, AFIRS can stream the contents of the Flight Data Recorder (“Black Box”) to the UptimeTM server so the critical flight data can be available to authorities immediately.
As China’s domestic air transport network continues to expand, the Civil Aviation Administration of China (CAAC) is setting standards for state of the art aircraft communications. Regulations released in September 2013 identify the aircraft communications methods necessary to legally operate in Chinese airspace. These regulations mandate SATCOM voice communications between an aircraft and its airline operations center (AOC), independent of the air traffic control system, within four minutes anywhere within Chinese airspace. The regulations stipulated that the airlines equip during the two-year period from 2013 to 2015 and that there would then be a two-year inspection period of the equipage by the CAAC between 2015 and 2017, ending in December. Thus, from a timing perspective, we are technically in that inspection period. However, the status of the equipage seems to be that many carriers have delayed making selections and installing. FLYHT has seen significant increases in orders from China over the past year and we expect that this will continue as operators there race to meet the mandate inspection deadline which completes in December, 2017. FLYHT has spent the last decade building relationships, obtaining approvals, demonstrating products and providing services to airlines in China. FLYHT was the first and is still the only company to receive an Iridium SATCOM license and the AFIRS 228 is the ideal solution, not only ensuring the airlines meet regulatory compliance, but also for providing value-added benefits such as global flight tracking, aircraft health monitoring and triggered flight data streaming capabilities. To date, the AFIRS 228 is installed and activated on over 100 Chinese aircraft, including B737, A320 and other large transport models. Also, since AFIRS is available as a factory installed option on the Bombardier CRJ700/900/1000 models, several airlines operating this and other regional aircraft have selected it. This letter summarizes fight tracking and Chinese SATCOM regulation areas and how FLYHT fits into the solution set for each. Our company will continue to be engaged in these areas, monitoring and participating with the regulatory bodies (where possible) and providing solutions for our operator customer base in order to achieve compliance. Best Regards – Thomas R. Schmutz CEO, FLYHT tschmutz@flyht.com
