RE:Alpha Wolf Trading Exclusive with CEO Bill Tempany FlyhtThanks to Tim Weintraut at Alpha Wolf for conducting this interview and making it publicly available.
I made a few notes. The video should be watched to begin to appreciate BT’s knowledge and understanding of AI and the aviation business. I will miss him.
In the video...
BT explained that the decision three years ago to change company direction was due to the decision by Airbus, and subsequently Boeing, to go with deployable black boxes.
(Flyht's offering of streaming black box data via satellite, data which included cockpit audio and video, was fully tested and validated on the Boeing EcoDemonstrator flights, and is ready to install on any commercial aircraft. Transmission is triggerable by any data point collectable on an aircraft.)
Flyht’s new direction would be to concentrate on creating commercial solutions to help airlines better manage maintenance, operations, airport turns, and piloting techniques – with less people.
Flyht came up with the Edge - a small, lightweight device, less expensive than AFIRS, highly connectible, 3G/4G/5G-capable, Bluetooth-capable (for IoT package-tracking as an example), with built-in intelligence to download whatever the airline wants to know from their aircraft, any way, anywhere, anytime.
Regulatory agencies are causing delays, staffing is mentioned, but these delays are surmountable.
An example of savings given was the pilot’s optional use of the aircraft’s APU (auxiliary power unit) at a cost of $100 or more per hour in fuel essentially, instead of connecting to available airport power while a plane is on the ground. With awareness, this behaviour can be corrected.
Teledyne’s patent for transmitting data from an aircraft via cell networks expired after 20 years in January of 2021. They decided not to come out with a 5G version.
Flyht is “in the process of certifying a line-fit replacement” of the Teledyne box, and there are two more hires coming from Teledyne.
The first variation of the Edge box is flange-mount, to conform with the way communications devices are presently installed on aircraft.
BT: “Data is abundant, information is scarce.” One step further, “...we’ve converted the information to actionable intelligence.”
TW: real-time actionable intelligence is “huge”.
The aviation industry is late to the table for this technology.
BT: “Our first live customer will probably be mid-January.” (Flyht first released this tech in July ‘22.)
BT: “This can be powered by AFIRS or the new Edge device.” (700 planes currently in service have Flyht-installed AFIRS. About 100 more planes are in storage in southwest U.S. due to COVID shutdowns.)
BT: “...26 people (are) coming to our sales summit in January, our sales team, to take the word out and start marketing this, because our pilot programs are done, it’s up and running, it’s working...”
In a recent co-operative trial comparing a week’s worth of Flyht AI with actual results, an airline could save $4,000 per week per airplane. Additionally, and not measurable in dollars, is improved customer satisfaction.
25,000 planes are required by ICAO to produce a FOQA report (flight operations quality assurance, aka FDM or FDA). When 3G/4G go dark (3-5 years), they will require 5G to offload the data. 40,000 planes by 2041. New aircraft can handle the downloading but they don’t have the Actionable Intelligence to go with it.
The Edge can use the 3,200 AFIRS units installed by L3H/Airbus for its data transmission. AFIRS by itself can only provide SatCOM and ACARS over Iridium.
Flyht aims to capture 20-25% of the addressable market, about $150 million in hardware sales, plus about $6,000-$8,000 annually per plane in SaaS, at 80% margin. That’s $30-$40 million in SaaS annually at full capacity, about $100 million in the ramp-up over the first 5 years.
(CF's note: If I understand the numbers, 20% of 25,000 installed units generating $150 million in sales would be about $30,000 each.)
TW describes the SaaS as “sticky” and “predictable” revenue, 30 to 40 years over the life of a commercial aircraft.
Jabil builds the units in Florida. Flyht has the critical components for the next 4,000 AFIRS 228 units.
Because of COVID, Flyht “redesigned out” any non-North American parts. They also redesigned out any parts that might be used in the automotive industry. This added about four months to Edge’s completion.
Flyht intends to grow organically and inorganically, with a goal to increase customer's connectivity with existing systems of both airlines and airports.
The biggest obstacle will be internal IT departments wanting to do this work while airline CEOs want to outsource, not re-invent.
BT: “tsunami of opportunities” are coming once Edge/AI results are in.
The Albertan government is actively attracting IT companies to replace the oil and gas industry. This will help Flyht.
Four airlines headquartered in Alberta looking towards Flyht technology to help build their ULCC (ultra low cost carrier) companies. (CF’s note: Swoop would be one.)
More new software coming in the next two quarters.
Growth planned for the weather data collection business.
ESG positive? BT: “Absolutely.” (environmental, social, and governance management, encouraging companies to act responsibly)
TW: Need to raise capital? BT: Only required if an accretive acquisition that would plug in easily is found or presents itself. Working capital is likely to increase in Q4, should not need to go back to the market again for funding standard operations.
No warrants anymore just options; only government debt (low/no interest); under $40M shares out fully diluted.
BT: “We are not looking for working capital, we’re fine.”
BT: “My biggest concern is managing growth.”
Having Jabil manufacture the product is a big relief. Would prefer Canadian manufactures for the exchange rate here.
TW: the downward trend for the last few years has leveled out, and has held up against the downward trend of many companies in 2022; bumping up against a long-term trend line that could be the beginning of a new long term trend line upward. TW recommends: “Start paying attention to the story.”
Near-time catalysts... general recovery of aviation post-COVID, flight tests to complete the STC process. Q1 should see the full Boeing 737 STC, provisions-only STC so far for the A320 is working its way through.