Controversial budget airline chief Michael O'Leary yesterday forecast that the UK was heading for a recession - but this would be "great for the aviation industry."

Ryanair chief executive O'Leary admitted that his airline's profits could dip 50 percent this year.

Ryanair recently announced a massive expansion at Birmingham International Airport, where it will base 10 new Boeing 737 aircraft which will operate on as many as 100 new routes over the next five years, generating up to five million passengers per annum.

Despite his prediction that a recession is on the horizon, O'Leary says Ryanair fares would come down and that people would continue to want to fly.

He says, "I don't know why we are trying to avert a recession. We need a recession. I think it would be great for the aviation industry.

"A recession will get rid of environmental taxes and a lot of the environmental nonsense that's talked about regarding aviation," he continues.

He adds that recession would also "end the regulatory incompetence," which he sees as harming the airline in terms of what it is charged for using Stansted and Dublin airports.

"A recession is now likely, I don't think it can be averted by reducing interest rates.

"We would welcome a good, deep recession for 12 to 18 months.

"During recessions travel does not get cut back but people look for cheaper alternatives.

"If we get a recession I don't see people cutting back on the amount of flying they do."

O'Leary spoke after Ryanair announced it made an adjusted after-tax profit of 35 million euros (about pounds 26 million) in the period October-December - 27 percent down on the same period in 2006.

He warns that the European airline sector was facing the possibility of a "perfect storm" of higher oil prices, poor consumer demand, weaker sterling and higher airport costs.

The economic climate could lead to some low cost competitors facing problems but Ryanair was determined to slash fares

O'Leary also said that Ryanair was expected to reduce the number of winter flights it made at Dublin airport and possibly also at Stansted.

He stresses that Ryanair would never introduce fuel surcharges and said those who grumbled about the charges for checked-in luggage should "stop complaining" and arrange things so they could travel with hand luggage only. Ryanair hoped to increase annual passenger levels by 19 percent to 50 million in 2008, rising as high as 83 million by 2012, he says.

The no-frills carrier also planned to double its aircraft numbers and its profits by 2012, he adds. Analysts said airlines already making a loss and those heavily exposed to the UK market had the most to fear from the challenge posed by Ryanair.

"We view the deteriorating outlook as UK-led and consequently see ramifications for our easyJet and British Airways forecasts," writes NCB analyst Neil Glynn in a research note.