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Silver lining for Ryanair in economic turbulence

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There is something so appealing about the candour of Ryanair. On Monday, first Michael O'Leary and then Michael Cawley, mentioned the R word.

Yes, there could be a recession in the airline business but as far as Ryanair's top brass are concerned, that's life.

O'Leary announced that there are going to be tough times ahead. He even suggested to investors that Ryanair's profits could fall by 50pc next year.

Cawley was even more candid on Matt Cooper's programme when he said that Ryanair would move aggressively into the downturn, slashing prices where they could and investors had to either come along for the ride or bail out now.

Ryanair's management's stance on oil was again unusually honest. If there is to be a recession, then oil prices will fall and as they do, one of Ryanair's major costs will fall too. So rather than "hedge" their petrol exposure they are betting that oil prices will fall. Their view is "bring it on" and make the best fist of a bad situation.

Given the corporate bulls**t that most company bosses and their PR lackeys spew out day after day, it is a breath of fresh air to hear Mr Cawley.

Here is an adult treating the rest of us like adults; no spin, no obfuscation just the facts as they stare the management in the face.

They are looking at a fall in demand and a possible rise in costs which they can do nothing about. The Ryanair view is that their profits might fall, but so too will the profits of their competitors and the downturn gives them a chance to expand their market share at a time when everyone is suffering.

Now this might all be bluster from a company that has over-invested just as the industry is turning down, but the form of the Ryanair management is to tell it as it is. This is what makes them different.

Contrast this honesty with the type of stuff we are still hearing from estate agents. Rather than tell the truth that stamp duty revenue has halved since this time last year and will obviously go lower again, they are spinning about recovery before they have even admitted a downturn!

However, if you drive out to the newer suburbs or go onto any property website, you will see what is going on.

To save yourself the trouble, just log on to www.daft.ie and go to their map which shows how many properties are for sale all over the country.

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It reveals the same pattern as we have seen in the US over the past few months: properties in the outer suburbs are now coming on stream almost daily and they are not moving.

For example, in one newly built estate -- called Hopkins Haven (the name alludes to Gerard Manley Hopkins's apparent fondness for the area) -- in an outer commuter town like Monasterevin, neighbours are vying with each other to get up their For Sale signs.

There are five properties for sale on the one road here -- all put on the market recently. There are 93 properties for sale in the town and all prices are falling.

This is Deckland and the trends for Deckland are ominous. Having spent more than a year there while researching 'The Pope's Children' in Ireland's commuter towns, I was fascinated by the explosion of outside decking in Ireland.

During the boom, most of us were prepared to dispense with our critical faculties and dream. So in a country that receives more rain than most, the preponderance of decking and its handmaiden -- the top of the range barbeque and grill -- verges on the delusional.

Nonetheless, go to any Woodies DIY shop on a Sunday morning and there you can see the Deckmen of Deckland, comparing barbeques and decks.

Up until very recently, the conveyor belt of rising house prices whisked Deckland along in an upwardly mobile dream. We were prepared to believe -- like Americans -- that tomorrow would be a better place than today.

This Hibernian version of the US's manifest destiny is now under threat. And the reason is simple: outlying areas get hammered in property downturns.

In the UK for example, the commuting region of East Anglia saw falls in property prices of 40pc in the last slump, whereas in the borough of Kensington & Chelsea, overall average property prices did not fall at all.

This week, the Irish media is obsessed with the US election, however something much more pedestrian should be catching our attention.

An article in this month's Atlantic magazine shows what might happen to Deckland in the years ahead.

In the US, like Ireland in the past few years, unlimited credit led to an explosion of building in the outer suburbs.

As long as prices were rising and petrol was cheap, a nice house in the suburbs was an asset; today it is fast becoming a liability.

Today, America's suburbs are experiencing a huge increase in foreclosures as the mathematics of paying huge mortgages begins to overwhelm families who up until recently looked not only comfortable but wealthy.

As the Atlantic states, "Many areas of go-go growth -- the southwest, California's central valley, much of Florida, eastern Colorado and greater Atlanta -- have been hardest hit". All these areas are the new commuter-belt.

Ireland's commuter belt -- Deckland -- is experiencing something similar. However, we are probably a year or two behind the US.

The Federal Reserve has acted to ease the burden on the average US homeowner by cutting interest rates aggressively.

Unfortunately, for the sellers in Hopkins Haven, our interest rates are determined by a haughty Frenchman, living in Germany, who doesn't give a monkey's about Monasterevin. And, worse still, no one back home has the courage or honesty of the Ryanair management to call a spade a spade.

www.davidmcwilliams.ie


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