Sir Richard Branson has warned of costs threat to airlines

There could be more casualties in the airline industry because of spiralling costs, Sir Richard Branson has warned.

The Virgin Atlantic boss said fuel rises would mean some smaller companies would either be forced to merge or go under.

And he predicted the costs of oil, which stands at 125 dollars a barrel, would go up to 200 dollars a barrel by 2010.

During a trip to promote Kenya's tourist industry, Sir Richard told the Press Association: "There will be consolidation, either by failure of airlines or by merger of airlines. Virgin Atlantic will remain strong because of the strength of the Virgin Group.

"Our fuel bill has gone up from 250 million about three years ago to about a billion this year - and that's pounds so that's a lot of money.

"We have absorbed some of that cost as a company, but we have had to pass on quite a lot of that cost."

But he was optimistic about the economy in Britain and around the world, as the effect of the financial crisis had so far been limited.

He said: "We have not found less people using our trains, planes or mobile phones. It seems to be a crisis mainly affecting banking."

It had been "fairly confined" so far, although, he added that in America five airlines had gone bankrupt in the last few weeks.

He added: "We have been through so many crises - 9/11, Sars, and so on - think Virgin Atlantic has got a loyal base and is resilient to this."