As a journalist who has followed both the aerospace sector and China’s global emergence for many years, I can honestly say that I wasn’t surprised when China recently announced its intent to get into the jumbo-jet airliner business.

But for investors with an interest in long-term profits, this is a story that’s well worth a detailed look. It will leave you with a very clear understanding of why China is a “must invest” kind of market. And it will demonstrate, yet again, how committed China is to becoming a world economic superpower, as well as the tenacity that’s likely to make that happen.

Let’s start with a look at the basics.

Two weekends ago in Shanghai, the Chinese government unveiled its first “jumbo” passenger aircraft company, a venture that’s labeled as the Commercial Aircraft Corp. of China Ltd. (CACC). By “jumbo” jet, China is referring to the so-called widebody airliners that carry 200 to 800 passengers and make globetrotting trips to almost any point on the globe.

Right now – and for many years – the world jumbo-jet market has belonged to just two companies:

• The Boeing Co. (BA), the U.S.-based airliner industry pioneer that’s America’s biggest exporter.
• And the pan-European venture, Airbus SAS, a subsidiary of European defense giant EADS NV.

With its 747 “Jumbo Jet,” Boeing both defined and dominated the jumbo market. The jetliner, with its distinctive humpbacked silhouette, made its first commercial flight in 1970, and held the passenger-capacity record for 37 years – a mark that was finally eclipsed by the Airbus 380.

Lockheed Corp. – now Lockheed Martin Corp. (LMT) – was the first to pull the ripcord on the jumbo-jet market. Its L-1011 TriStar jet had been the third widebody jet to enter operation, following the 747 and the McDonnell Douglas DC-10, which was built by McDonnell Douglas Aircraft Corp, a defense/commercial airliner firm. Lockheed launched the jet in 1968 and, thanks to hugely disappointing orders (it only built 250 of the jets), ceased production in 1984.

McDonnell Douglas stayed around a bit longer. But it finally merged with Boeing in 1997, joining a long list of aerospace firms swallowed up by bigger suitors.

If the jumbo-jet market sounds like a tough one to crack, that’s because it truly is. But those difficulties don’t emanate from a lack of demand: The market is huge.

The $3 Trillion Shopping List

Indeed, over the next 20 years, Boeing has forecast that air carriers worldwide will require 28,600 commercial aircraft with a value of $2.8 trillion. The Boeing forecast is generally viewed as the world’s best analysis of the global market for commercial airliners and cargo aircraft. And this forecast isn’t limited to jumbo-sized passenger jets: It includes short-range connector planes, regional jets, cargo planes and the jumbos.

The huge revenue potential of the global airliner market – combined with the low number of viable competitors and the high barriers faced by new potential entrants – has been a big reason that Money Morning’s investment gurus all view Boeing as a promising profit play for years to come. Not even China’s plans will change that viewpoint.

But with such a large potential market, many observers find it surprising that there aren’t more potential players.

That’s changing – or at least it is at the lower end of the market. China and Russia are both well along on government-backed programs to develop a regional jetliner for sale to global customers. In the past month or so alone – as was reported here in Money Morning – Japan entered the regional jetliner shootout: Japan’s Mitsubishi Heavy Industries Ltd. (PINK: MHVYF) has unveiled a plan to develop a “regional” jetliner for use by airlines all around the world. The development work alone is expected to cost several billion dollars, but the program has the backing of both Toyota Motor Corp. (TM) – the world’s No. 1 automaker by sales – and the Japanese government.

Mitsubishi Heavy hopes to have the jet in the air by 2013 and is aiming to sell 1,000 of the airplanes over the next 20 to 30 years, grabbing one-fifth of expected new demand in a market that is projected to roughly quintuple to more than 5,000 planes by 2026.

However, it could be a bumpy flight: Incumbents Bombardier Inc., of Canada, and Embraer (Empresa Brasileira de Aeronautica SA) (ERJ) of Brazil, currently dominate the short-range jetliner market. Both the China and Russia ventures will take wing well before Japan’s new jet, and the eventual existence of all five combatants in this slice of the airline market could lead to some pretty congested airspace – especially since several players are expected to link up with market-savvy foreign heavyweights, including, potentially, Boeing.

As tough as that sounds, attacking the jumbo-jet market will be tougher still. Even with fewer contestants.

Jumbo Challenges for a Jumbo Jet

The tremendous appetite for capital, the engineering challenges that range from complex aerodynamics to new composite materials, and the need to be able to manage a string of suppliers scattered about the globe are just a few of the hefty demands that make this mountain too high for all but a few global companies to climb.

Right now, in fact, there are only two new jumbo jet programs under way, either in development or in testing, and both have been riddled with technical problems that have resulted in pushed-back delivery dates. There are:

• The Boeing 787 “Dreamliner,” a replacement for the company’s Boeing 767. It’s making heavy use of composite materials and depends heavily on a network of global suppliers, and delays have pushed the delivery date for the first jets well into next year.
• And the Airbus A350, a replacement for the Airbus A330/A340 line, and a program whose many delays have pushed its delivery date out to an estimated 2012 or 2013, according to several sources.

Given that huge companies such as McDonnell Douglas and Lockheed have gone up against Boeing and failed, many analysts are skeptical about the “commercial prospects” of a jumbo jet designed and built in China. China has virtually no experience in this market and the two other (known) attempts – ventures with Douglas and Airbus – ended in failure.

And even if China succeeds, it’ll be a good 20 years before U.S. or European airlines flying China-built jets will be ready to lose your bags on a regular basis.

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