FLARM® works by calculating and broadcasting its own future flight path to nearby aircraft. At the same time, it receives the future flight path from surrounding aircraft. An intelligent motion prediction algorithm calculates a collision risk for each aircraft based on an integrated risk model. When a collision is imminent, the pilots are alerted with the relative position of the intruder, enabling them to avoid a collision.

Each FLARM® system determines its position and altitude with a sensitive GPS receiver. Based on speed, acceleration, track, turn radius, wind, altitude, vertical speed, aircraft type, and other parameters, a precise projected flight path can be calculated. The flight path, together with additional information such as a unique identification number, is encoded before being broadcast over an encrypted radio channel twice per second.