I guess Adam Smith was right -- big profits really do attract new competitors.
According to Boeing (NYSE: BA ) , demand for commercial airplanes will (pardon me) soar over the next two decades. Last month, the aerospace titan published estimates of a market for 28,600 planes, worth a staggering $2.8 trillion in sales. You just know that a trough that big is gonna attract some flying pigs.
For example, a couple of weeks ago, we discussed Japan's Mitsubishi Heavy Industries' return to the airplane-building business. Boeing will assist Mitsubishi in selling and maintaining Japan's first postwar commercial jetliner. Earlier this week, we learned that another Japanese player also hopes to take wing. Kawasaki Heavy Industries is working up a "CX" military transport for the Japanese Self-Defense Forces. Due out next summer, the CX may evolve into the basis for a civilian cargo plane that Kawasaki hopes to put on the market by 2012.
Like Mitsubishi, Kawasaki is shooting low on the size ladder, avoiding direct confrontation with either Boeing or Airbus for the time being. It describes the civilian version-CX as a "small to mid-sized cargo plane."
In related news...
Nor is Japan the only nation-state looking to horn in on the Boeing-Airbus duopoly. Late last month, the industry was abuzz with news that Russia had returned to the commercial airliner game for the first time since the Soviet Union collapsed. At the Paris Air Show, Sukhoi -- better known for its fighter jets than for its people-movers -- inked a deal to sell its 10 new Superjet 100s to Italian regional carrier ItAli Airlines for $283 million.
More of an immediate threat to Brazil's Embraer (NYSE: ERJ ) or Canada's Bombardier, the 75-to 95-seat Superjet has powerful backers, which could ultimately grow the franchise into a Boeing-and-Airbus rival. Later this year, Sukhoi will be merged with other storied Russian names -- MiG, Tupolev, Irkut, Ilyushin, and Yakovlev -- to form a 90.1% state-owned firm called United Aircraft. According to the as-yet-unformed firm, it aims to sell as many as 1,200 Superjets over the next two decades, for about $25 million apiece.
What does all this mean for investors? Depends. Lacking U.S. listings, Mitsubishi Heavy and Kawasaki Heavy shares can only be had through Pink Sheet trading here. At least until NYSE Euronext (NYSE: NYX ) or Nasdaq (Nasdaq: NDAQ ) extend their acquisition spree to the Tokyo Stock Exchange (which is a more real possibility than you think), I doubt many of us will be buying shares any time soon.
But for those stocks we can more easily own -- Boeing for example, or Embraer -- the continuing march of foreign wannabes into the global airplanes market foreshadows renewed price wars and compressed margins for everyone in the future.
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Fool contributor Rich Smith does not own shares of any company named above.
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