What Alistair Darling could learn from Ryanair

Now, Ryanair boss Michael O’Leary is well known for making big, headline-grabbing statements. He predicted a ‘bloodbath’ in the airline sector a few years ago, which garnered him a lot of press coverage, and he’s no reason to change tack now.

But it would be very surprising if he wasn’t genuinely concerned about what’ll happen this year. For all the protests of tour operators like Tui, the travel market can’t come through a recession unscathed. When people lose their jobs – as happens in a recession – they don’t go on holiday.

The airline reckons that profits could fall by as much as 50% next year, depending on the financial state of consumers, and the price of oil. The group hasn’t hedged its exposure to oil prices, perhaps hoping that if there is a recession, then lower oil prices will partly make up for the slowdown in seat sales.

Given that Ryanair is at the rock-bottom of the budget market, and very canny about finding new ways to charge for things once considered necessities on flights – like bags, for example – I’m sure the airline can cope. I wouldn’t be keen to buy any consumer-facing stocks at the moment, but there are certainly worse companies to be invested in.

Someone who could do with taking a leaf out of Ryanair’s book is our Chancellor Alistair Darling. But rather than indulging in any straight-talking, he’s still trying to pin the blame for the UK’s problems on the US. He said yesterday that Britain’s economy was stable and strong, but added the catch-all warning that “these are uncertain times… We do not yet know the full extent of the slowdown affecting the United States.” In other words, if anything else goes wrong, it’s the Americans’ fault. They shouldn’t have loaned all that money to those sub-prime borrowers. But what can you do with them, eh?

Of course, the fact that UK consumers are up to their eyeballs in credit card and mortgage debt, not to mention the government’s distinct lack of prudence when it comes to its own spending, didn’t rate a mention in Mr Darling’s speech. And there’s no need to worry, really – after all, as Mr Darling says: “I believe we will get through this turbulence.”

Well, I’m sure we’ll get through this turbulence too, just as we got through the turbulence of the early 1990s, and the turbulence of the ‘70s, and the turbulence of the Depression. The big worry is not whether or not we get through it – it’s about how long it lasts and how air-sick we all get on the way. And the outlook on that front is not good.

In the States, for example, credit conditions remain very tight, despite the Federal Reserve’s obvious willingness to do whatever it takes to ‘save’ the economy from recession. The Fed’s latest survey of senior bank loan officers, covering the fourth quarter of 2007, shows that “banks expect to tighten lending criteria even more in the first quarter on nearly every conceivable type of loan to households and businesses,” as Paul Ashworth of Capital Economics put it.

More than 50% of banks are tightening lending standards on prime mortgages, and 80% are tightening up on commercial property loans. “That degree of tightening suggests the commercial real estate sector could endure a more severe downturn than the residential sector is currently suffering,” says Ashworth.

Given that US residential housing is in its worst slump since the Depression, that’s not good news. It looks like there will be plenty of bad news coming from the US in the months ahead – enough to keep Mr Darling fully armed with excuses for our own economy’s woes.

Of course, one thing that Mr Darling will have a tough time blaming on the US is the mess the government has made of the Northern Rock ‘rescue’. You can read our editor Merryn Somerset Webb’s take on the latest developments here: Olivant is out - where now for Northern Rock?

Turning to the wider markets…