According to Sir Richard Branson casualties of rising fuel prices could increase in the airline industry.
The Virgin Atlantic boss warned that rising costs could offset earnings, forcing small companies to merge or be forced out of business. Branson also said that oil, which is currently close to $150 a barrel could go as high as $200 a barrel in about ten years, say reports.
Branson was speaking to the press during a trip to the tourist industry in Kenya when he said, consolidation in the industry will be the result of either mergers or failure of airline companies to stay afloat in the wake of spiraling costs.
He explained that Virgin Atlantic’s fuel bill has risen from 250 million pounds to approximately a billion pounds in 2008. And that is a lot, he said.
Although Virgin has been adept at absorbing some of the rising costs, it has also passed on its extra costs to passengers. Nonetheless, Branson says the outlook for the future of the UK economy as well as the global economy is reasonably sound, as the effects of the global financial crisis has been contained to a large extent.
It appears that the banking sector has taken the bulk of the beating, Branson noted, adding that, Virgin still has the same number of people using their planes.
Despite the fact that five major carriers in the U.S. have collapsed in a few weeks time, the weakening economy is fairly confined, he said.
In aggregate, Branson was hopeful that his airline firm would come out of the financial crisis with flying colors because Virgin has a loyal customer base and has been resilient to the major crises like the terror attacks of September 11, 2001, Sars, etc.