A Boeing 787 © Kevin P. Casey, Newscom, RTR

Let's be honest. One problem jet won't ground Boeing (BA) forever.

The problems with its 787 Dreamliner notwithstanding, the company remains one of America's great industrial giants. Thanks to the success of the Boeing 707 and the 747, it was the key player in the transformation of commercial aviation from a propeller-powered business into a jet-propelled business.

But is Boeing a good investment now? Or are there better bets in aviation stocks, perhaps even a "next Boeing" that will topple the giant down the line?

The answer to the first question depends on how successfully -- and how quickly -- Boeing deals with the battery problems that grounded its Dreamliners last month. (Tests of a fix to the problem may start in early March.) There's also the potential for a strike in the next six weeks. And the federal government, a key customer, has fiscal problems. For investors, that's a lot of worry that could limit gains for some time.

The answer to the second question is more complicated, because there aren't a lot of alternatives in the sector. The market for big commercial airliners is basically Boeing and Airbus, owned by European Aeronautic Defence and Space (FR:EAD). EAD's stock has performed better recently, but it has a problem jet of its own.

So the better bets are in smaller names carving out their own niches. Two possibilities are Embraer (ERJ), the Brazilian airplane maker, and Canada's Bombardier (BDRBF), both of which concentrate on smaller planes for regional use.

Charley Blaine

Charley Blaine

I'll look at these Boeing alternatives in a moment. First, let's take a closer look at where Boeing stands.

Takeoff and hard landings

A case for investing in Boeing right now would assume three things:

● The Dreamliner's problems are fixed fairly quickly, say in three or four months.
● Global demand for midsize to large planes doesn't fade away, despite the airlines' many woes.
● Defense spending remains at least steady, despite U.S. fiscal woes.

Those risky propositions are certain to try Boeing investors' patience. Which is sort of the way things go with Boeing.

This is a classic cyclical stock that moves up and down with economic and product cycles. For an investor, Boeing requires great stamina or, better, a clear plan on when to buy and when to sell.

It frequently enjoys gains of 200% or 300% over, say, a three-year period. These gains are often followed by painful swoons of 40% or more. After the Sept. 11, 2001, terror attacks, Boeing lost a third of its value in a matter of days.

Between a peak in the late 1960s and a bottom in 1971, the stock fell 88% as the development of a supersonic transport to compete against the Concorde was called off. Boeing laid off 54% of its Seattle-area workforce. One result was a legendary billboard: "Will the last person leaving Seattle -- turn out the lights."

In the 2007-2009 financial crash, Boeing fell more than 70%. Since its bottom in 2009, the stock is up 156%, compared with 114% for the Dow Jones Industrial Average ($INDU) and 125% for the Standard & Poor's 500 Index ($INX).

But the stock hasn't closed above $80 a share since June 2, 2008. It topped $80 on an intraday basis in May 2011. It had a 16% gain between June 1, 2012, and Jan. 3, but the Dreamliner problems and the budget wars in Washington, D.C., emerged soon after, and the stock has been stuck between $75 and $77 since. That's actually good news for the stock; many thought the Dreamliner woes would hit the stock hard.

When big and old is a good thing

Being big helps Boeing weather a lot of storms. Boeing sits around 39th in terms of revenue among stocks in the Fortune 500. Revenue hit $81.7 billion in 2012, up 18% from 2011.

It's also a relatively old company, founded in 1916 by William Boeing, a young lumberman from Michigan who found flying much more exciting. Boeing's age is also a positive, because it means Boeing has experience and credibility when it comes to working out the bugs in complex machines such as airplanes, rockets and helicopters. Its expertise and credibility -- along with that of Airbus -- also mean that there are plenty of reasons for other companies not to try to compete against the pair, says noted aviation consultant Richard Aboulafia.

Indeed, most rivals have either left the commercial jetliner field or disappeared altogether. In 1984, defense giant Lockheed stopped building the L-1011, a respected wide-body tri-jet, because it couldn't make enough money on it.  Now Lockheed Martin (LMT) after its 1995 merger with Martin Marietta, is content to be the top defense contractor.

McDonnell-Douglas merged with Boeing (and, in effect, took it over) in 1997 and killed off the former's MD-80 and MD-11 family of planes. The Dutch company Fokker built two short-range jets that couldn't compete, then stepped away and ultimately went out of business. That left basically Airbus, itself an amalgam of Germany's Deutsche Aerospace, Aerospatiale-Matra of France and Spain's Construcciones Aeronáuticas, as Boeing's only direct competitor.

No new competitors have stepped up. Both China and Russia have said they hope to get into the jetliner business, but it could be a decade before either is a strong challenger.

Being big and old, with experience and credibility, also means that Boeing has a huge backlog of orders: $372.3 billion at the end of 2012, up nearly 10% from a year earlier. About $317 billion of the backlog is commercial planes; the rest is defense orders.

Dreamliner: 'Purely a question of execution'

But that brings us to the Dreamliner. Boeing's huge bet on the future helped it pull ahead of Airbus in recent years. But the plane has been plagued by delays.

The biggest issue has been getting all the parts to fit together properly, because Boeing has outsourced much of the design and manufacturing. The 787's first delivery, in September 2011, was several years late.

The battery problem that erupted in January proved so serious that the Federal Aviation Administration grounded all 787s flying in the United States. Other countries followed suit. It could be three months, at least, before a temporary fix can be made and approved, with planes returned to regular service.

The greater fear is that the plane's electrical system may have to be redesigned. That could mean months more of waiting to start collecting on an investment now approaching $20 billion.

On Friday, the company offered a fix for the battery. It would add ceramic insulation between the cells of the battery to help keep cells cool and prevent a "thermal runaway," in which one cell overheats and triggers overheating in adjacent cells. It also includes building a stronger, larger stainless steel box with a venting tube. The combination would contain a fire and vent fumes outside the plane.

Boeing had firm orders for 848 Dreamliners at the end of 2012, and it expects to build 60 this year. But newly built planes are piling up at airfields in Seattle and nearby Everett, Wash. So far, airlines that have ordered the planes have not canceled them. But United Airlines said last week that it was taking the 787 out of its flight plans at least through June 5, though it may fly one from Denver to Tokyo starting May 12, if the battery fix is in place.

Boeing does have other very profitable passenger-plane businesses. It sold 415 narrow-body 737s in 2012 along with 31 747s, 26 767s and 83 777s, all wide-body aircraft.

Its military business -- 40% of revenue in 2012 -- struggled between 2000 and 2010 because of projects that came in over budget or didn't work as well as hoped. Plus there was a scandal over procurement procedures on tankers.

In November, Boeing said it was trimming its management force in the business by 30% and expected to cut costs by $4 billion to get ahead of expected defense cuts. In 2010, Boeing's defense business employed 66,300 people. The roster has been cut 8.7% to 60,500.

So do you bet on Airbus?

Given the big risks ahead for Boeing, buying its stock now may be a brave bet, especially if the Federal Aviation Administration rejects its battery fix.

But if you're looking for a rival to bet on as an alternative -- or to capitalize on Boeing's woes -- the choices are limited.

The obvious bet is on Airbus parent EADS. The company has certainly benefited from the Dreamliner's woes, says Aboulafia. Sales of its wide-body A330 have strengthened in the past year or two, and the Dreamliner delays have given Airbus the opportunity to play catch-up with a new plane, the A350. Airbus has already has announced it won't use lithium-ion batteries in its A350.

Shares of EADS are up 22% since the end of 2011. Boeing shares are up just 2.3% in the same period.

Aboulafia, however, thinks the Dreamliner ultimately will prove a winner. He likes its use of composite materials to save weight and its fuel-efficient engines. "It's purely a question of execution," he said.

Plus, Airbus has had problems of its own. While Boeing has pushed the composite Dreamliner with its promise of lower operating costs, Airbus has bet on the jumbo A380, the world's largest passenger plane. It has had mechanical issues as well, and has struggled to find buyers as oil prices have soared.

Yes, the rest of the Airbus line of planes has proved to be durable and efficient. Many customers find the A319 or A320 more comfortable than the Boeing 737. But the fact is, there aren't a lot of buyers for commercial airplanes, and they've preferred the Dreamliner. It's hard to bet against that as an investor, despite its woes.

The better choice

So the better investment right now is likely neither of these giants, but one of the companies making different sorts of airplanes. Of these, I'd say Embraer is worth considering, a bit more so than Bombardier.

Embraer has been outselling Bombardier in recent years. And while Embraer cut its 2013 production plans by 15% after several years of weak demand, the bottom in demand has probably been reached, Embraer officials believe, and airlines will replace less-efficient planes with more-efficient aircraft.

After losing a $1.9-billion order from Delta Air Lines (DAL) to Bombardier, Embraer scored a big win: an order for 47 planes from Republic Airways (RJET) and an option for 47 more. Republic owns Frontier Airlines and several other regional carriers.

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Created by the Brazilian government in 1969, Embraer built small planes and military jets and was privatized in 1994. In the 1990s, it began to develop a line of commercial jets aimed at the low end of the market and used by such carriers as Air Canada, Jet Blue (JBLU) and Lufthansa, the German airline.

You can buy American depositary receipts in Embraer shares under the ticker (ERJ). The ADRs are up 17% this year after rising 28.6% in 2012. They're up 242% since the 2009 market bottom, much better than Boeing.

Mind you, Embraer isn't going to replace Boeing as the world's commercial airplane builder of choice or beat Airbus on size, for that matter. But if you're looking for a Boeing alternative in your portfolio, it may generate sizable gains while Boeing, like its Dreamliner, sits awaiting takeoff.

At the time of publication, Charley Blaine did not own or control shares of any company mentioned in this column in his personal portfolio.