Dubai Air Show opens with paltry sales — only two jets sold amid tough market conditions

Getty Images | Karim Sahib | AFP

DUBAI, United Arab Emirates — The Middle East's flagship aerospace expo, famous for record-smashing deals, opened with an underwhelming first day Sunday — a possible indicator of the growing challenges facing the global aviation industry.

In a schedule packed with press conferences for industry heavyweights Boeing, Airbus and Lockheed Martin, only one deal was announced on the opening day of the 2019 Dubai Airshow: the sale of two Boeing 787-9 Dreamliners to Biman Bangladesh Airlines.

The larger and longer-range variant of Boeing's Dreamliner adds to Biman's existing fleet of four 787-8 jets, and will help modernize the fleet, improve cargo-carry capacity and expand its international reach, executives from both companies said during the announcement.

But Sunday's deal news, with a mere two jets sold, came as a surprise to many at the show — particularly when compared to previous years.

At the start of the last Dubai Airshow in 2017, Boeing kicked off the event by clinching a major sale of 40 787-10 jets to Emirates Airline at a value of $15.1 billion. Day one of the 2013 show closed with a whopping $192 billion in orders, an all-time record. By contrast, the jets purchased Sunday are valued at $585 million at list prices, according to Boeing.

Ultimately though, we are still only on day one, and there is still time for some of these large deals to emerge in the coming days.

Charles Forrester

IHS Jane's

The biennial expo held at Dubai's Al Maktoum Airport runs until Thursday (Nov. 21) by which time the order book could very well grow significantly.

The final day of the 2017 show posted an $113.8 billion on-site aircraft order book — that was a more than 300% increase on the $37.2 billion in orders made during the prior airshow in 2015. But the muted news on opening day this year reveals a continuation and perhaps a worsening of industry headwinds that have forced airlines to rethink their fleets and growth strategies.

For wealthy Gulf states and their government-owned airlines, the days of heady buying may be disappearing as oil prices remain depressed in an environment of low demand and burgeoning supply. The U.S.-China trade war and Brexit have brought about serious investor uncertainty and a slowdown in trade and growth more broadly, economists say.

But particular to the aviation industry are increased regulation and delays, caused in part by Boeing's two catastrophic 737 Max jet crashes in a span of five months, which killed a combined 346 people.

"While demand for commercial aircraft can go through peaks and troughs, the current addition of increased regulatory scrutiny has meant that some of the more widely sold platforms have had to undergo additional checks — leading to delays in some parts of the end-user market," Charles Forrester, a defense and aerospace industry analyst at IHS Jane's, told CNBC on Sunday.

"Additionally, some concerns in the aero engine market have also caused delays to potential new model aircraft."

Boeing's fleet of some 400 737 Max jets has been grounded since March, denting airlines' profits, forcing carriers to cancel thousands of flights and pushing up costs. The planemaker took a $4.9 billion after-tax charge in the second quarter to compensate airlines, but final amounts are unknown because regulators haven't yet lifted the grounding.

"The certification scrutiny has also impacted other manufacturers," Forrester said, "as FAA (Federal Aviation Administration) regulators have had to go back over work with a greater eye for detail."

"Ultimately though, we are still only on day one," the analyst added, "and there is still time for some of these large deals to emerge in the coming days."

The Dubai Airshow was first held in 1989 and driven by regional investment in both commercial and military aviation, with 200 exhibitors and 25 aircraft on display. This year, the biennial expo is its biggest ever — with 1,300 exhibitors, 165 aircraft on display and a reported 78,000 visitors.

— CNBC's Jessica Bursztynsky contributed to this report.

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