It involves the use of innovative products that enable shippers to defend themselves from pirate attacks.

While it may not seem like a lucrative business, the uptick in high seas shenanagins over the past year or so threatens to become more prevalent if it’s not addressed. And with millions of dollars worth of cargo traveling by sea every day, both the shipping industry and the companies whose cargo they’re hauling hardly want to see the trend become a full-blown epidemic.

At the moment, however, only the Department of Defense and various small private companies are responsible for “mobility denial systems.” Described as an “oil slick in a can,” these weapons make it difficult for bandits to board (and remain on) a ship.

But there are a few major, publicly traded American companies that are combating this problem amid their other defense issues…

Take That, Jack Sparrow

First up, one of the world’s largest defense companies, Lockheed Martin (NYSE: LMT). The firm has partnered with BAE Systems PLC. (Pink Sheets: BAESY) and Israeli weapons systems developer Rafael Armament Development Authority to develop “The Protector.”

While it sounds like the hero of a 1980s action movie, The Protector Anti-Piracy Robot is an unmanned robot with a mounted 7.62mm machine gun. Originally designed to protect harbors, The Protector is capable of defending ships from attackers, while keeping the crew out of harm’s way.

A more widely used form of anti-pirate defense is Long Range Acoustic Device (LRAD) systems, designed by American Technology Corporation (Nasdaq: ATCO).

Equipped with high-powered speaker systems, these devices can be used to issue ear-splitting beams of sound directly at the bandits, or provide verbal warnings (no word, though, as to whether, “Back, ye scurvy dogs!” is on the list of available commands).

Despite the fact that these systems are more common, keep in mind that ATCO is a tiny stock and can be illiquid.

Here are three other ways to play the piracy protection trend…

Three Ways To Play High Seas Banditry

The Defense Angle: You can’t dip into many sectors or industries these days without finding the presence of General Electric (NYSE: GE).

The company’s defense subsidiary, GE Security, offers various communications systems that are used to enhance ocean security.

The Insurance Angle: In addition to direct defense sector plays, there are also several insurers and reinsurers, which have an important maritime business and could face exposure if a ship is lost at sea. These include CNA Financial Corp. (NYSE: CNA), Marsh & McLennan Companies (NYSE: MMC) and Willis Group Holdings (NYSE: WSH).

The Cargo Angle: Consider commodity plays on cargo like oil. If oil cannot be shipped directly for fear of it being intercepted by pirates, it could drive up the price. A straightforward, more diverse (and thus less risky), cheaper and safer way to play this would be to buy an ETF like the U.S. Oil Fund ETF (NYSE: USO).

You could also consider timber companies like Plum Creek Timber (Nasdaq: PLUM). It’s historically a solid market outperformer anyway, which isn’t a bad investment to have in your portfolio at times like these.

Move With The Waves As This Maritime Trend Grows

For pirates, the lure of capturing easy booty from an unsecured ship in the middle of an ocean is an attractive proposition.

And while the current US-Somali standoff will eventually end (hopefully in peace), companies are realizing that there’s a more pressing need to secure their cargo and crews while at sea.

In an economy where it’s mighty difficult to make money at the moment, the prospect of losing cargo to pirates will force companies to pay for the security products and services that can protect their haul.

While the majority of the companies in the maritime security space are small and privately owned, if the piracy trend increases, you’ll likely see more well established firms enter the market – especially those with long histories of securing government contracts, such as Lockheed and GE.

Hoping your longs go up and your shorts go down.

Source:  Ocean Piracy: Fill Your Trading Account With Booty From The “Pirate Portfolio”

• Sony Corp. (ADR: SNE) forecast a full-year operating loss of $2.9 billion as falling demand, a stronger yen and reorganization expenses cut into the company’s earnings. The forecasted loss is nearly four times analysts’ expectations, Bloomberg reported.

• Citigroup Inc. (C) named Richard Parsons as its new chairman, replacing Win Bischoff, who was brought on as Citi chairman 13 months ago. Parsons is a former chief executive of Time Warner Inc. (TWX), Reuters reported.

• Potash Corp. of Saskatchewan Inc. (PsOT) said its fourth-quarter profit more than doubled as a result of climbing potash prices. “The big question is the extent to which farmer demand for potash and other nutrients recovers in the North American planting season,” Russell Stanley, an analyst at Jennings Capital Inc., told Bloomberg.

• While posting 3% quarterly profit growth, Lockheed Martin Corp. (LMT) cut its full-year forecast because of increasing pension costs, Reuters reported. The world’s top defense contractor reported a profit of $823 million, or $2.05 a share, compared with $799 million, or $1.89 a share, a year earlier.

• John Thain has resigned from his post as Bank of America (BAC) Chief Executive Officer. The giant lender lost confidence in Merrill Lynch’s former CEO after he failed to tell the bank about mounting losses at Merrill late last year. Merrill lost more than $15 billion during the fourth quarter, forcing Bank of America to ask the government for billions of dollars in extra support.

• The Senate Finance Committee voted 18 to 5 to approve the nomination of Timothy Geithner to be Treasury Secretary, MarketWatch reported. Some Republicans said they could not vote for him because of errors on his tax returns uncovered by the committee.  The nomination now goes to the full Senate floor where it is expected to be cleared.

• Investors may be losing faith that General Electric Co. (GE) can protect its century-old dividend in 2009. GE stock is down 23% since Chief Executive Officer Jeffrey Immelt, restated that goal a month ago. “The rating is in peril regardless of what they do at this point, because the environment is just that bad,” Peter Sorrentino, who co-manages $16 billion at Huntington Asset Advisors Inc., told Bloomberg News.

Source:  Global Investment News Briefs Friday, January 23rd, 2009

This from Investor’s Daily Edge:

The election’s over. President-elect Barrack Obama won, and some people are worried that he’ll start taxing dividends like income. Have I got news for you… that’s the least of our worries on the dividend front.  Put it in the drawer for next year’s hand wringing.

Because just when you thought the financial news had exhausted all the bad stuff and you had found safety in dividend stocks, I have to give you a heads up. Your stock could be getting a pension fund “margin call.”

I love dividend stocks. These companies have cash, pay cash, and keep the faith with investors for the most part. But some are on the verge of breaking that faith this year. It has nothing to do with mortgages or credit markets – it’s about pension funds in trouble.

And when pensions are sucking up cash flow, your dividends could suffer. Mercer, a pension consulting firm that is part of Marsh & McLennan (NYSE:MMC), already estimates that pension shortfalls will lead to a 10% cut in stock dividends this quarter compared to a year ago.

That’s a big deal. Even the 2003 squeeze on pension funds after the three-year-long post-dot-com bear market didn’t cause that. In fact, this could be the first time pensions have been hit so hard since 1958.

Pension plan contributions are a normal expense that companies handle just as they pay the electric bill and management bonuses. But pension plans are special. The funds are separate from the general coffer and there are rules on how much money the plans must have compared to the benefits they’ll have to pay out. This is true in the U.S., Canada, UK and Europe. And though I will use U.S. examples, British and European stocks are also under pressure.

In the bull market years of the 90s, keeping a pension fund properly funded was no problem for most companies. Their funds were flush with stock, and stocks were going up. In fact, before Enron spoiled everyone’s party, some pension funds were loaded with roaring hot company stock. (The post-Enron limit is 10% in company stock in the company pension fund.) Pension funds were making money.

Obligations were fully covered and then some. Some funds were so flush the companies were able to stop putting money in them for several years. They even showed earnings from pension funds as “other” income on balance sheets, making their earnings look better than they should.

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GE (NYSE:GE) was famous for smoothing its earnings by including pension fund surpluses in its figures. Some critics called this maneuver “vapor earnings.” These vapor earnings fattened the bottom line sufficiently to bring fortunate GE execs an extra 9% in their bonuses.

Now comes today… after a bear market… into a recession. Vapor earnings are vaporizing. As of September 30, S&P 500 companies’ pension funds have lost an average of 11.6%, according to CFO magazine. They are now about 92% funded. That’s just barely OK… for a couple more months.

For many years, U.S. companies only had to keep 90% of the present value of expected obligations in their accounts. The Pension Protection Act of 2006 will raise that “coverage ratio” gradually to 100%. For 2008, the magic number is 92%. And it goes to 94% in 2009. So this 92% funding estimate means that some companies pass muster, and a lot don’t.

Standard and Poor’s says S&P 500 pension plans were $200 billion short of minimum funding levels by the end of September this year. Worse, they were on target to surpass the $219 billion record shortfall of 2003.

Who’s in trouble? What stocks to avoid? Remember that funding a pension is a normal business expense. So it’s not every company that shows a pension obligation that should bother you, but the ones that show likely shortfalls that could overwhelm earnings.

Among the companies with big pension plans that are likely to need a large shot of hard-to-find money are Lockheed Martin (NYSE:LMT), United Technologies (NYSE:UTX), Aetna (NYSE:AET), Boeing (NYSE:BA), IBM (NYSE:IBM), Eastman Kodak (NYSE:EK), Goodyear (NYSE:GT), Ford (NYSE:F) and GM (NYSE:GM).

Those are just the big names. By industry, the most underfunded pensions are concentrated in information technology and healthcare. Utilities also slipped from overfunded last year to coming up short this year.

The good news is that companies have to give you a warning in their financial reports—the bad news is that you have to read the suckers. At least if you do it online, you can use a search and go straight to the “pension” part of Management’s Discussion.

Source: Another Fancy Disaster You Didn’t Need – Pension Fund Vapors

A few months ago, DARPA (Defense Advanced Research Projects Agency, the Department of Defense’s research arm) took its contract for the testing of a nano-sized unmanned plane away from Lockheed Martin (LMT:NYSE) and awarded it to AeroVironment.

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And Lockheed just announced that it’s officially canceled its program, without much info as to why. Lockheed’s aircraft was designed to mimic the flight of a maple seed. But AeroVironment’s version is more animal than plant.

Based on the theory of a hummingbird’s quicker-than-the-eye flutterings, AeroVironment’s NanoSCOUT will have a 20 mph high-speed mode, which can be slowed down to 1 mph when navigating through a building. Yep, it’s going to be small enough to easily maneuver through buildings, although you’d probably notice it buzzing around the corridors of your office.

DARPA says the NanoSCOUT will be ready for flight demonstrations in two years. Until then, check out AVAV if you’re looking for a defense tech stock with a good future ahead of it.

Source: DARPA awards NanoSCOUT contract to AeroVironment (AVAV)

That’s why here at Money Morning we’re more interested incompanies that can secure a lot of smaller contracts on a consistent basis – and that can transform those deals into predictable, double-digit growth.

We refer to these modest-contract specialists as the “Masters of the Small Bid.”

Let me explain…

As we’ve stated, the companies we’re targeting aren’t characterized by headline-grabbing mega-contract wins, but by their proven ability to land smaller, more-stable deals. You see, by spreading their risk across many smaller deals rather than just swinging from the heels every time, the companies we follow are able to generate a consistent stream of earnings – despite a slowing economy, a wrenching credit-crisis and damaged investor confidence.

In short, our “masters” have kept themselves in front of paying customers at a time when other firms are simply worried about having customers.

Let’s look at several strong examples.

A Sample of Strong-Bid Masters

It’s no coincidence that our first example – defense-contractor and aerospace expert Lockheed Martin Corp. (LMT) – has been around for decades, and is a proven survivor. Remembered as the designer of the P-38 Lightning fighter of World War II fame – an aircraft so deadly that Nazi leaders ruefully dubbed the twin-boomed airplane “The Fork-Tailed Devil” – Lockheed Corp. went on to build the graceful Lockheed Constellation airliner in the 1950s and the cutting-edge F-117A Nighthawk Stealth Fighter in the 1980s.

A disastrous foray into commercial jetliners – in which only 250 airplanes were sold, even though the program lasted from 1968 until 1984 – would have likely bankrupted many companies. But Lockheed’s been a survivor. Indeed, back in the 1990s, to keep pace with a wave of defense-sector consolidations that created a smaller group of bigger players, Lockheed linked up with Martin Marietta Corp. to form Lockheed Martin.

Lockheed Martin re-established its fame with the so-called “Skunk Works” advanced-technology unit, and even today remains a defense-sector heavyweight. But it’s also a Master of the Small Bid. For proof, just look at some recent deals.

Lockheed roared into April, landing a $50 million contract for the U.S. Navy on April 1, and a $234 million Air Force contract on April 2. A week later, the company landed a deal a day for four straight days, in the process rolling up $725 million in total business from the U.S. Army, the Turkish military, and Japan’s Mitsubishi Heavy Industries Ltd.

The rest of the month saw still more action as the Navy signed on Lockheed for a one-year, $15.5-million contract for continued program management and engineering services for the United Kingdom’s Trident II D5 Fleet Ballistic Missile (FBM) program. The company closed the month in a decisive manner with two more major deals on April 30. The National Aeronautics and Space Administration (NASA) signed a $39.5 million contract modification with Lockheed Martin Space Systems to implement an employee-retention program, while the Navy supplied a contract boost worth up to $190 million to supply tooling and special test equipment for its new F-35 Joint Strike Fighter.

Not a bad month’s work. And it’s certainly representative of how Lockheed generates a predictable earnings stream. Because of deals such as these, the company’s share price rose nearly 8% in the month of April alone. In May we’ve been seeing even more deals, and the stock is advancing again.

Clearly, small deals can have a big impact on a company’s bottom line.

The Gamer That Doesn’t Play Games

At a time when other gamers are worrying about the next best thing, Japan-based Konami Corp. (ADR: KNM) retooled one of their most successful releases, Metal Gear Solid, adapted it for mobile phones, and then built up a lot of buzz as they pushed it out to customers of the Verizon Wireless unit of Verizon Communications Inc. (VZ).

Not only did Konami save a lot of money because it wasn’t developing a new platform from scratch, it also kept its audience smaller to produce bigger returns per person.

While the pumped-up adolescent males soak up this stealth shooter game, Konami hasn’t forgotten to take care of the over-moneyed and under-served teenage-girl market with its recent new game, “Diary Girl.” The Nintendo Co. Ltd. (OTC ADR: NTDOY) Nintendo DS game provides girls of all ages the ability to interact with friends, while also organizing a calendar and address book in their own, password-protected electronic journal.

A month ago, Konami announced an agreement with Win Systems International Holdings Inc., to use Konami content in certain of Win’s pending lottery and gaming projects in Europe and Latin America.

Deals like this have caused Konami’s shares to seek higher ground. With a 19% gain over the past three months, the only thing that could help this company even more is if it had a highly awaited Sony Corp. (ADR: SNE) PlayStation 3 game coming in the near future – which just happens to be the case. Metal Gear Solid 4, the highly awaited PlayStation 3 game, will debut June 12.

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.

More than 30 years after Japan’s only airliner program since World War II ended as a commercial failure, the country is making a multi-billion-dollar bet that it can succeed in the jetliner market.

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 controversial project gained global credibility in recent weeks after analysts began to speculate that Toyota Motor Corp. (TM) – the world’s No. 1 automaker by sales – would join the development team. Toyota subsequently confirmed its involvement, announcing plans to take a 10% stake in the venture and injecting $67 million to help get the initiative off the ground. The Japanese government is backing the program.

It’s a big gamble for Mitsubishi and its partners: The regional airliner market is right now dominated by Bombardier Inc., of Canada, and Embraer (Empresa Brasileira de Aeronautica SA) (ERJ) of Brazil. And firms in both Russia and China – each with a major U.S. corporation as a partner and co-pilot – already have targeted this market, and have a solid head start on the Mitsubishi team.

Still, the potential payoff is hefty enough to warrant the risk. Such key global trends as rocketing fuel prices, soaring global travel, fast growth in Asia, Latin America and the Middle East, and ongoing problems with major air carriers across the world are stoking worldwide demand for efficient, economic regional jets. And that demand could persist until 2030, many experts predict.

“In terms of the macro picture, demand is there for this type of jet,” Mizuho Investors Securities Co. Ltd. senior analyst Yuichi Ishida told the Reuters news service. “Money-losing regional routes could turn profitable by using them. But the real question is whether there is room left in this market for Mitsubishi Heavy.”

To date, the so-called NAMC YS-11 – a turboprop airliner built by a Japanese consortium – is the only commercial aircraft made in Japan in the post-World War II era. The program was initiated by Japan’s Ministry of International Trade and Industry in 1954. The aircraft was rolled out in 1962 and production ended in 1974 – hardly qualifying it as a “success” from a financial standpoint.

Toyota’s Desire to Fly

Toyota said its motivation was primarily patriotic – the Mitsubishi jet is being backed by the Japanese government, which is searching for ways to for its smallish aerospace business to become more of a global player, especially after losing other industries to South Korea and China.

Toyota – which edged ahead of General Motors Corp. (GM) in the first quarter to become the world’s top-selling automaker – said it also would be looking for ways to adapt the technological know-how developed in its aerospace activities to its core automaking business. That’s not just an empty claim made to justify its diversification into the aerospace sector: The Mitsubishi MRJ70 (70 seat) and MRJ90 (90 seat) jetliners are to be the first regional jets to make extensive use of high-strength/lightweight “composite” materials, such as those found on the new 787 Dreamliner being developed by U.S. aerospace giant, The Boeing Co. (BA).

Although it hasn’t built a commerical aircraft in decades, it is an experienced subcontractor in that area, and is a veteran defense contracting firm. For example, Mitsubishi already is a key manuacturing partner on the long-range Boeing jet. And it has experience building such military aircraft as the F-1 fighter, T-2 trainer – both supersonic jets that the company built on its own – and the F-2 fighter, a Japanese-built version of the U.S. F-16 Fighting Falcon that was produced in partnership with Lockheed Martin Corp. (LMT)., the No. 1 U.S. defense contractor.

Toyota, too, has some experience, and already operates a small aerospace research team. Analysts say that venture could easily take flight and become a major business operation. That’s just what happened with Toyota’s robotics business, which started out as a fairly tiny research operation, but today is one of the company’s better-known businesses outside its core auto operation.

Honda Motor Co. (HMC), Toyota’s chief rival in Japan, already has expanded into the aircraft business; its futuristic seven-seater HondaJet light business jet has garnered heady praise for its advanced design and elegant lines. The company was supposed to start taking orders for the airplane sometime this month.
Toyota’s investment in the Mitsubishi jet is the largest of any company outside the Mitsubishi corporate network, or “keiretsu” of related companies. Other backers include domestic Japanese trading companies and the government-supported Development Bank of Japan. Foreign suppliers also will be involved.

To Market, To Market

Why is Mitsubishi – Japan’s largest producer of machinery – getting into the airliner business? In a word: Opportunity.

Over the next 20 years, Boeing itself is forecasting that air carriers worldwide will need to acquire 28,600 commercial aircraft of all types – with a potential value of $2.8 trillion. The Boeing forecast is generally viewed as the world’s best analysis of the future global market for commercial airliners and cargo aircraft.

The huge revenue potential in the global airliner market – combined with the low number of viable competitors and the high barriers faced by new potential entrants – is a big reason that Money Morning’s investment gurus have repeatedly mentioned Boeing as a promising global investment for years to come.
During that same 20-year stretch addressed by Boeing’s market forecast, China will have to buy 3,400 airliners, a requirement worth $340 billion. That will make China the fastest-growing airliner market in the world, and will also rank it as the biggest market outside the United States for new commercial airliners. In fact, if you average it out, from China alone you’re talking about sales of $17 billion a year for the next two decades.

This staggering shopping list will include the globetrotting tarmac queens being built by Boeing and European rival Airbus SAS.

But global forces also are revving up demand for regional jetliners, like those being dreamed up by Mitsubishi.

According to Mitsubishi, the world’s airlines will order 5,000 regional jets over the next two decades as global carriers seek out fuel-efficient airplanes for shorter routes and developing nations expand their airliner fleets to fuel economic growth.

That’s not an arbitrary figure, either: The company spent several years analyzing the market and projecting the potential demand for the jet, and designed the specifications specifically around its findings. The plane will be:

• Small, so it can fly out of regional airports.
• Made of lightweight composites to make it strong and fuel efficient.
• Fast (with cruisng and maximum speeds of between 0.78 and 0.82 times the speed of sound, according to published reports).
• Profitable to operate, carrying 70 to 90 passengers, depending upon the model.
• And with a good range – 920 nautical miles for the base model, although extended-range (1,400 nm) and long-range (1,960 nm) versions will be available.

“Mitsubishi Heavy has always been just a partner of Western aircraft makers,” Mitsubishi Heavy President Kazuo Tsukuda said at a news conference that talked up the company’s pet project. “Now we want to take advantage of changes in the marketplace such as high fuel costs and a greater need for environmentally friendly aircraft.”

Shares of the world’s No. 2 commercial jetliner-maker soared $3.53 each, or 4.49%, to close at $82.09 because of Boeing’s record backlog and a bullish outlook for next year. Earlier yesterday the shares touched $83.36, the biggest increase since June 2006.

Investors had pushed the stock down 15% in the quarter over worries about delays in the “Dreamliner” jetliner program, and the surprise loss of a $35 billion U.S. Air Force tanker contract to a team that included Airbus and U.S. defense contractor Northrop Grumman Corp. (NOC).

Boeing is one of the companies that Money Morning has written about repeatedly, having identified it as a so-called “Global Titan” – a company that’s positioned to capitalize on worldwide trends and that derives the bulk of its sales and profits from such fast-growing overseas markets as China. Jetliner deliveries rose 8.5% last quarter, with almost two-thirds getting delivered overseas.

Profit from continuing operations rose to $1.21 billion, or $1.61 a share, from $873 million, or $1.12, a year earlier, the Chicago-based Boeing reported. Sales advanced 4.1% to reach $16 billion. The results beat the average estimate of $1.35 per share, according to a survey of 20 analysts conducted by Bloomberg News.

Profit for 2009 will be $6.80 to $7 a share on sales of as much as $73 billion, Boeing said in its first forecast for 2009. That projection also exceeded expectations: Analysts had predicted that profits would increase from about $5.93 a share this year to $6.87 next year – even after about a dozen estimates had been slashed after Boeing announced another delay in its 787 Dreamliner program, the third time the airliner maker has pushed back the scheduled first flight for the high-tech commercial jetliner. But the company announced a record backlog.

“We are encouraged that they added to the backlog in the first quarter,” Eric Marshall, research director at the Dallas-based Hodges Capital Management, said in a Bloomberg Television interview. Delays to the 787 Dreamliner program, which dragged down Boeing’s stock price this year, have “created an attractive opportunity for long-term investors. We think the stock could go back above $100 over the next year,” which is why Hodges is adding to its Boeing position of 330,000 shares.

From yesterday’s close, a move to $100 would represent a return of 22%. And that doesn’t include income from Boeing’s current dividend yield of 1.95%.

Weak Greenback Stings Airbus

With a decline in the greenback of nearly 9% so far this year, Boeing has gained an advantage over its bureaucratic European rival, Airbus. Most of Airbus’ costs are euro-denominated, while Boeing’s sales are conducted chiefly in dollars.

Airbus, currently the world’s biggest maker of commercial aircraft, said it’s raising the price of its planes in response to the dollar’s decline against the euro, and to offset an escalation in metal prices fueled by the ongoing global commodities boom.

The list price of the single-aisle Airbus A320-series jet will rise by an average of $2 million as of May 1, while twin-aisle airliners will typically cost $4 million more, the Toulouse, France-based Airbus said Tuesday.

“The price increase is mainly triggered by the weak U.S. currency and the overall increase of the world’s raw-material prices, especially with regards to metal,” Airbus said.

The falling dollar hurts earnings at both Airbus and its parent company, European Aeronautic, Defence & Space Co., when revenue from dollar-denominated aircraft sales is “translated” into, or converted into, European euros.

Metal costs also have crimped profits, as the price of aluminum alone has soared 28% just this year, due to supplies constrained by rising purchases in China, and shortages of energy needed to make the lightweight metal.

Conversely, a weakening dollar makes foreign purchases of Boeing aircraft cheaper – almost as if the buyers are getting a price cut. But since Boeing doesn’t have to convert those dollars into a different currency, the “price break” buyers are getting has no effect on its revenue or profit.

Boeing also is getting a boost as carriers such as Continental Airlines Inc. (CAL) buy more of the U.S. airplane-maker’s Boeing 737-class jet to replace older, less fuel-efficient aircraft to reduce the effect of record oil prices. Unfilled commercial orders rose to an unprecedented $271 billion.

Boeing Chief Executive Officer W. James McNerney Jr. had held back his annual forecast until yesterday to learn more about delays in the Dreamliner, which is at least 14 months behind schedule and won’t enter service until late 2009.

Boeing said that its commercial sales rose 8% to reach $8.16 billion, generating a 39% jump in operating earnings, while Boeing’s military business saw sales fall 1.8% to reach $7.58 billion, even as profit increased 10 percent. Boeing is also the second-largest U.S. defense contractor, trailing Lockheed Martin Corp. (LMT).

Boeing said today it expects to deliver 500 to 505 airliners in 2009 – up from as many as 480 this year. Asia is expected to be a major market going forward, as will be China. Consider that:

• The global demand going forward is almost beyond belief. China alone will require 3,400 new airplanes worth about $340 billion over the next 20 years – an average of $17 billion annually. And that doesn’t include other Asian markets, such as Vietnam, which will need to modernize their air fleets as they commercialize their commodities.
• The Vietnam deal announced in November is worth $1.9 billion.
• In fact, over the next two decades, Boeing has forecast that air carriers worldwide will need to acquire 28,600 commercial aircraft – with a value of $2.8 trillion.

Boeing spent $1.2 billion last quarter to buy back 15.6 million shares, part of a $7 billion repurchase authorization. Thirteen of 24 analysts in a Bloomberg survey recommend the company’s stock; nine say to hold it, and two recommend selling.

Founded in Seattle by timber millionaire William E. Boeing back in 1916, the company got its start building seaplanes and operating a series of air transport services. In 1933, Boeing built the world’s first true commercial airliner, the Boeing 247, which was all metal, instead of the conventional wood, fabric and metal construction of that time.

But the company really came to prominence in the late 1930s, in the depths of the Great Depression, when it made a bet-the-company decision to develop a long-range Army Air Corps bomber on spec. The four-engined aircraft was so impressive that an awestruck newspaperman dubbed it the “Flying Fortress.” The name stuck. That airplane was the Boeing B-17, a heavy bomber without which most experts say the Allies might never had defeated Germany in World War II.

With the arrival of the jet age in the 1950s, the company risked its own capital to develop what eventually became the Boeing 707, a jetliner that leapfrogged offerings from Great Britain’s De Havilland, France’s Sud Aviation and Russia’s Tupolev – and revolutionized jet airliner travel in the process. A subsequent model, the 737, is the best-selling commercial jet ever. Boeing’s double-decked, humpbacked 747 “Jumbo Jet” debuted in the late 1960s, and opened the door to true intercontinental travel.

Since World War II, Boeing has also been a heavyweight in the defense-aerospace sector, building long-range bombers, aerial tankers, missiles, and helicopters, among other weapons systems. The military-contracting business has helped Boeing through periods in which there might have been a lull in the commercial side of the company’s business.