The global aircraft business sure is complex. Big companies are both suppliers and customers of each other. There are only two major competitors -- but one new one, backed by the Chinese government -- threatens to alter the structure of the industry. And aircraft are so expensive that financing is the critical fuel that keeps the industry going. Meanwhile, the global economic slowdown threatens to cut demand for air travel and slice that capital flow.

This complexity comes to mind in analyzing a General Electric Co. (NYSE: GE) threat to Boeing (NYSE: BA) -- which it leveled by placing a $750 million order for five aircraft -- with an option to buy 20 more -- with China's Commercial Aircraft Corporation of China (CACC). CACC was formed earlier this year through the merger of China's two state aircraft makers, AVIC I and AVIC. And the expansion does not stop there -- today China announced plans to acquire a foreign general aviation aircraft maker to "shore up its technology capabilities."

GE's CACC buy is hurting one of GE's biggest customers -- that's because GE Aviation sells billions worth of engines to Boeing. And GE's aircraft financing unit -- GE Capital Aviation Services -- is in competition with American International Group's (NYSE: AIG) aircraft financing unit, International Lease Finance Corp. -- which is one of Boeing's biggest customers.

These days in commercial aviation, airlines are finding ways to operate more efficiently amid the toughest sector conditions since the first oil shock in 1973-74.

And while there's no love lost between passengers and the major carriers' unconventional way of increasing total consumer flying costs by adding separate baggage fees, there's one a-la-carte fee the public may be willing to pay for: a fee for internet access on airplanes.

Delta Air Lines (NYSE: DAL) announced it will start offering broadband internet service on domestic flights as early as October, The Washington Post reported Wednesday. Other airlines, including Continental (NYSE: CAL), Southwest (NYSE: LUV), and Virgin America are planning or testing internet services. (Delta will merge with Northwest Airlines (NYSE: NWA), pending U.S. Justice Department approval.)

Analysts generally credit JetBlue (NASDAQ: JBLU) with raising coach class amenity standards for flights in the United States when it introduced satellite TV and other services on its flights.

Delta's service will cost a $9.95 flat fee for flights lasting three hours or less and $12.95 for flights longer than three hours.

Public seen receptive to Wi-Fi fee

Stock analyst and frequent flier C. Leonard Bauer says Internet fees would be "a lucrative revenue stream" for the airlines, and ironically one that will probably be popular with the public.

Boeing Co. (NYSE: BA), whose shares have been battered by concerns about delays in the 787 Dreamliner, today reported better-than-expected earnings.

Profit rose to $1.21 billion, or $1.61 a share, from $873 million, or $1.12, a year earlier, the company said in its earnings release (pdf). Sales gained 4.1% to $16 billion. Analysts had expected earnings of $1.35 on revenue of $16.52 billion, according to Thomson Financial.

"We're off to a good start in what we expect to be another strong year of financial performance for Boeing," said Chairman, President and Chief Executive Officer Jim McNerney in the release. "We are methodically working through our challenges, including the start-up of the 787, and our people remain focused on satisfying our customers and leveraging growth and productivity into better bottom-line and top-line performance for our
company."

Backlog at the quarter was $346 billion, up 32% year-over-year, driven by orders for commercial airplanes at the V-22. Investors responded positively to the news, sending the shares up in premarket trading. The company also reaffirmed its guidance of $5.70 to $5.85 this year and gave guidance of $6.80 to $7 per share for 2009. Analysts expected profit of $5.93 this year and $6.87 for next year.

This goes to show you that yesterday's dogs become today's heroes on Wall Street. Anything remains possible in today's market where conventional wisdom regularly is proven wrong.

Most of the momentum for aircraft sales has appeared to be with Boeing (NYSE: BA). Its 787 Dreamliner has been selling well despite a delay in launching the plane. Its new stretch 747 has also done well, as have some of the newer versions of its old planes.

Rival Airbus picked up a key piece of business when aircraft leasing company AWAS (Ireland) Ltd.decided to buy 100 of its jets. According to The Wall Street Journal the "jetliners are valued at $6.9 billion." The paper adds, "AWAS Chief Executive Franklin Pray said he was surprised how eager Airbus and Boeing had been for AWAS's business, given the strong demand."

That may get to the heart of the matter. With large production facilities going at full capacity, it is hard to say what Boeing and Airbus are actually charging for their planes. Each is fighting for market share because the demand for big aircraft is not going to stay white hot forever. And, cutthroat competition often means discounting.

When Boeing releases its earnings for the fourth quarter, it will be interesting to see whether its gross margins will stay high. The market is obviously concerned. Boeing trades at a 52-week low.

New airplanes are still selling, but at what price?

Douglas A. McIntyre is an editor at 247wallst.com.

Bloomberg News reports that Boeing Co. (NYSE: BA) set another sales record in 2007. While it's not yet clear whether Boeing sold more than its competitor, Airbus, the 1,413 commercial jets Boeing sold last year highlight the power of effective competitive strategy.

I'm in the middle of writing a book about Boeing and have found it fascinating to examine the competition between Boeing and Airbus. In the 1990s, Airbus decided that it could beat Boeing by building the biggest jumbo aircraft on the market. By contrast, Boeing -- which was then under pressure from Airbus -- listened to the airlines and heard them say that they were facing competitive pressure from low-cost, point-to-point airlines like Southwest Airlines Co. (NYSE: LUV) -- whose strategy I analyzed in Value Leadership -- and needed mid-range aircraft that were more fuel efficient.

Only with Israeli ingenuity can you take a technology that was once reserved only for video games and make it functional in the real world. The news that Israel has launched the anti-hijacking pilot ID system developed by Elbit Systems(NASDAQ:ESLT) is good not just for the company, but for air travel as well.

Starting next year, Israel will require pilots who fly to its airports to use the Security Code System (SCS), a local invention designed to ensure planes that have been commandeered for al Qaeda-style attacks are spotted in time. Israel plans a trial run for the system, using a credit card-sized keypad, next month, in cooperation with five airlines from the United States, Europe and Africa. About 10,000 of the units will ultimately be issued, with Israel bearing the cost. Pilots who fail the authentication test when they approach Israeli airspace will be denied entry. Should a plane go ahead, ignoring further warnings, Israel will consider it hostile and scramble fighter planes for an interception. In the worst case, that could mean an aircraft is shot down.

Several experts familiar with Israeli methodology say the system -- also known as "Code Positive" -- is based on the assumption that a hijacking will take place in one of two ways. Hijackers could either kill the pilots and take control -- as is believed to have been the case in the September 11 attacks on the United States. Or they could force pilots to issue a compliant response to the system in the hope of buying enough time to reach Israel and crash the planes into a target on the ground. In the first case, the hijackers would fail the security check as they entered Israeli airspace, giving military authorities about 15 minutes to launch a response. In the second, Dani Shenar, chief of security for Israel's Transportation Ministry said, pilots would be expected to relay a "May Day" alert.

Let's all hope that this system is never put to use, but in the event of a hijacking, this Israel system could save hundreds of lives.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Author holds a position in ESLT as of 11/21/07.

Remember four, five years ago when everything that could go wrong did go wrong for Boeing (NYSE: BA)? The company not only lost market share to Airbus SAS but ousted its CEO, Phil Condit, and his successor, Harry Stonecipher, for among other things having affairs with subordinates. Former CFO Michael Sears was sent to prison for his role in one of many Pentagon scandals involving the company.

Under Chief Executive James McNerney, who joined the plane maker from 3M Co. (NYSE: MMM) in 2005, Boeing has managed to put its problems behind it. The company reported net income of $1.11 billion, or $1.44 a share on revenue of $16.5 billion, beating Wall Street expectations. Boeing also raised earnings, revenue and cash flow guidance for the year. It trimmed back its forecasts for 2008, but that's to be expected given the delays in the 787 Dreamliner and the slowdown in the defense business.

Shares of the Chicago-based company are up about 6% this year, underperforming peers Lockheed Martin (NYSE: LMT), General Dynamics (NYSE: GD) and Raytheon (NYSE: RTN) mainly because of worries about the Dreamliner. This reaction is overblown. First of all, the fact that new, sophisticated aircraft has been delayed is hardly surprising. If the delays continue however, that's more serious. For now, Boeing's customers haven't lost faith, placing 710 firm orders.

If the Dreamliner stays on track and the company gets its fair share of defense spending, the shares may head higher.

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Bloomberg News reports that Boeing Co. (NYSE: BA) beat and lowered. But the market is applauding -- lifting its shares 1.6% in pre-market action.

The market likes nothing more than a company that beats earnings estimates and raises its sales and profit guidance. But Boeing seems to have exceeded expectations while lowering guidance -- albeit less than expected. Boeing reported that its earnings rose 61% in the third quarter as it increased production to deliver nine more jetliners than a year earlier.

Its earnings and sales exceeded expectations. Net income increased to $1.11 billion, or $1.44 a share, from $694 million, or 89 cents, a year earlier. This was 18 cents a share about the $1.26 a share that 11 analysts surveyed by Bloomberg expected. Revenue of $16.5 billion exceeded the analysts' $16 billion forecast.