Been pondering around with shaders in LibGDX, and I'm getting the hang of it!
The fire model has a distortion shader on it in 3D space. Around the fire model is a heat cone which functions as a mask for post-processing the rendered scene with another distortion shader. Works well on desktop but it still need optimisation for Android, it's not functioning too well. A few other glitches are also yet unfixed: alpha of the fire model and heatcone masking when obscured by other models.
In addition, I added a virtual reality option including gyroscope controls: rotating the camera with your head. Works very nicely.
Next up: LeapMotion to designate targets and fire missiles by waving your hands? :-)