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UPDATE 1-Dassault says business jet market still weak

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PARIS, July 26 (Reuters) - Dassault Aviation, the French maker of Falcon private jets and Rafale warplanes, said on Wednesday the business jet market remained weak, with high stocks of unsold aircraft hampering a tentative recovery in benchmark second-hand trading.

"The recovery is uncertain," Chief Executive Eric Trappier told a news conference.

"The drop in prices is much sharper on the second-hand market than the discounts that we can provide on new aircraft."

Dassault earlier said first-half earnings rose to 2.05 billion euros ($2.4 bln) from 1.662 billion in the same period last year, while new orders were basically flat at 1.381 billion euros.

Operating income dipped 2 million euros to 123 million, implying weaker first-half operating margins.

Dassault Aviation, however, reaffirmed forecasts for 45 Falcon and nine Rafale deliveries and higher net sales in 2017.

The company's operating margin fell 1.5 percentage points to 6 percent, weighed by research and development spending on the Falcon 5X which first flew on July 5.

Trappier said he still expected that Malaysia would buy Rafale warplanes, while noting that no movement was expected on the issue before upcoming elections.

A source with knowledge of the matter said earlier this month that Malaysia had put on hold the $2 billion plan to replace its aging fleet of combat aircraft, looking instead to upgrade its aerial surveillance capabilities.

The recent diplomatic rift in the Middle East has had no impact on efforts to implement a deal to sell fighters to Qatar, Trappier said.

He said he expected a joint study on a combat drone with Britain to lead to the launch of a demonstrator before the end of the year, without any disruption from a new Franco-German study aimed at developing a joint warplane.

Dassault is offering to be architect of the warplane project but discussions are at a very early stage, he added. ($1 = 0.8553 euros) (Reporting by Tim Hepher, Cyril Altmeyer; Editing by Ingrid Melander and Susan Fenton)