Flyht Surges After Malaysia Jet Raises Black Box Concern
By Hugo Miller Mar 12, 2014 2:27 PM PT
Flyht Aerospace Solutions Ltd. (FLY), a Canadian maker of real-time flight-data recorders, has surged 30 percent this week as the disappearance of a Malaysia Airlines jet highlights shortcomings of conventional black boxes.
Flyht Aerospace rose 11 percent to 73 Canadian cents at the 4 p.m. close in Toronto, up from 56 cents on March 7. The Calgary-based company has more than tripled in the past 12 months, lifting its market value to C$116 million ($104 million).
The jet operated by Malaysian Airline System Bhd. (MAS) with 239 people on board disappeared from radar about an hour after takeoff from Kuala Lumpur on March 8 en route to Beijing. Onboard data recorders like those on the Malaysian jet store information collected in flight, so the units must be recovered to give investigators the fullest picture of what went wrong in an accident.
Airlines are looking for alternatives in the wake of the fatal Air-France (AF) jet crash over the Atlantic in 2009 where it took investigators almost two years to find the black box at the bottom of the ocean, and now the Malaysia jet disappearance. Flyht offers a compelling alternative, said Dev Bhangui, analyst at Byron Capital Markets Ltd. in Toronto. He is one of three analysts who track the company who all rate it a buy.
“Authorities in aerospace move at a glacial pace,” Bhangui said by phone. “It’s only very recently that the authorities have jumped on this. After the Air France disaster, this has come into high profile and obviously the Malaysian Airlines incident is going to bring it to a head.”
Flyht’s technology can automatically transmit data back to the ground the moment a plane diverts from its flight path or exhibits other unusual behavior, Flyht Chief Executive Officer Bill Tempany said in a telephone interview today.
The software is not yet authorized to be used onboard as aviation regulators debate what the criteria should be for a trigger and how the data is transmitted, he said. Once that’s decided, the installation would be “weeks away” as it can be done through a software upgrade, he said.
Flyht’s AFIRS hardware box generates non-emergency, mechanical information about the jet back to flight maintenance crews in real-time, saving up to $100,000 a year in maintenance and flight turnaround costs, said Tempany. The cost of installing the hardware in an existing jet is less than $100,000 and can be done in a few days.
The AFIRS system is currently in use on about 300 aircraft worldwide and new customers include NetJets Inc., the jet charter company owned by Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), which now uses it on its European operations, said Tempany. The hardware was not on board the missing Malaysian flight, he said.
Installation of the first dozen units is underway with a major aircraft manufacturer, or original equipment manufacturer, Tempany said, declining to name it.
“The opportunities we’ve been working on for many years are coming to fruition,” he said. “We’re getting there with the OEMS to do factory installs and that’s a huge hurdle for a company of our size to get over.”
Flyht Aerospace’s U.S. competitors include Teledyne Technologies Inc. (TDY) and Avionica Inc., Bhangui said.
Flyht’s business model is a good one as once installed, its technology creates steady, high-margin subscriber revenue, said Bhangui who has a 12-month price target on the stock of C$1.25.
“It’s like HP,” he said, referring to Hewlett-Packard Co. “It’s not the printer, it’s the ink. They’re after the recurring revenue.”
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