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Quest Means Business
Volcanic Eruption Disrupts Air Travel; Is China's Economy Overheating?
Aired April 15, 2010 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Flights canceled, airports closed, a cloud of volcanic ash causes travel chaos across Europe.
How do airlines cope with such a crisis? Tonight, the chief executive of Etihad speaks to this show about operating in an unpredictable world.
And churning it out at breakneck speed, we ask the question, is China overheating?
I'm Richard Quest. Live tonight from New York, where, yes, the program and I mean business.
Good evening.
And live from New York, I'm Richard Quest. A warm welcome to tonight's program where the main news, both in the news and in the business world, the airline business in Europe is suffering its biggest shut down since 9/11. In fact, it is probably the largest disruption to European aviation since the Second World War. Thousands of passengers are stranded indefinitely as a vast cloud of ash is now sweeping across Europe. Up to 3,000 flights have been canceled and passengers are stranded.
The fears are the volcanic debris could clearly create much more havoc for European and trans-Atlantic aviation in the days and weeks ahead. As you can see from this map, there is not a single plane to be seen in the skies over large parts of Northern Europe and Scandinavia. Each of the yellow shapes you can see there is an aircraft in flight and the blue crosses are the transponders that show the direction of the plane.
Britain, Ireland, Sweden, Norway, Belgium, Denmark, and the Netherlands have all now closed their airspace. In France eight airports are already closed. Another 16 are to close within the next two hours. Many more planes are stranded at airports, unable to reach destinations in the affected area. The ash is spewing from a volcano in Iceland, which blew a hole in a glacier when it erupted on Wednesday. A plume of debris has been kicked up more than three and a half miles into the sky. Experts say it contains a mixture of rock, glass, and sand, which if it gets into an aircraft's engines could shut them down. British airspace is expected to remain closed for at least another 12 hours.
And Captain Bob Jones of the U.K. Civil Aviation Authority says this volcanic ash poses a real danger to aircraft.
(BEGIN VIDEO CLIP)
CAPT. BOB JONES, U.K. CIVIL AVIATION AUTHORITY: We're taking extreme caution. We have had incidents involving U.K. aircraft, just as there have been around the world. Probably our most significant was in 1982, when a British Airways flight over Jakarta has all four engines fail. I mean, fortunately it was an incident and not an accident in that they were able to relight the engines in the descent. So, yes, it is something we take very seriously.
(END VIDEO CLIP)
QUEST: Now let's find out the latest in the situation. Atika Shubert is at London's Heathrow Airport.
Atika, we know the airport is closed. The question is how long will it be closed and what are you hearing?
ATIKA SHUBERT, CNN INT'L. CORRESPONDENT: Well, what we know is that it is going to be closed until at least 7 o'clock London time tomorrow morning. And that could be extended. They are saying that this volcanic ash cloud could be hanging over the U.K. for the next two days, or possibly even longer if the eruption continues and more ash comes out of the volcano in Iceland. It really all depends on the volcano and on weather conditions.
In the meantime, this huge cloud is spanning hundreds of miles from Russia to France-you know, canceling thousands of flights, 10s of thousands of passengers are now stranded across Europe, really with no where to go. There are people wandering around the terminals here at Heathrow simply because they have no flights to get to. I met one person at Heathrow terminal shuttling from one terminal to another because he had nowhere else to go.
QUEST: Now, Atika, as we look at the situation. The last time this happened was in 1982. Then, of course, the then Captain Eric Moody, very famously said, and I quote, "Good evening ladies and gentlemen. It is Captain Moody. We have a small problem in that all four engines have failed. We're doing our utmost to get them going. And I trust you are not in too much distress."
Atika, if you can still hear me, is this the similar situation now, where the threat is very real?
SHUBERT: Yes, the threat is very real. Experts are saying this is a very dangerous situation for planes. That volcanic ash cloud really are very fine grains, almost like grains of sugar, but imagine that it is glass and rock, and that it gets into engines of a plane. And it can shut down a plane entirely.
That is what happened with that flight that you were referring to, flying over Indonesia, from London, I believe to New Zealand. It got into the engines and shut down four of those engines and it was only by the quick thinking of the captain that it was actually able to get through it. And we were lucky enough to speak with Captain Moody earlier today. Here is how he described what happened on that flight.
(BEGIN VIDEO CLIP)
CAPT. ERIC MOODY, FMR. BRITISH AIRWAYS PILOT: They were stunned. I mean, passengers are funny when something like that happens. They were stunned. And we didn't know for nearly two days what actually had happened. We began to guess quite quickly that we had been through something volcanic (ph). I mean, the biggest and best part of teamwork on there was we couldn't see out the front windscreens because they had been abraded with the ash and they had gone opaque.
(END VIDEO CLIP)
SHUBERT: Now, that has gone down in aviation history as being this incredible quick-thinking of that pilot to land that-to actually the engines restarted in the middle of that volcanic ash cloud, when he was able to actually get the plane out of it. And this is what experts were saying. It is very dangerous. That is why it is important to ground all the planes and make sure none of them are taking off or landing with an ash cloud in the air like this.
QUEST: Atika Shubert at Heathrow Airport. Thank you.
Now, you don't have to be anywhere near the gigantic dust cloud to be feeling the effects of this. All airlines are now starting to have problems. Etihad is the flagship carrier of Abu Dhabi. Today it canceled all flights to and from the U.K. The chief executive of Etihad, James Hogan, joins me now from London.
James, first of all, you canceled all your flights. But how bad and how serious is this problem, do you think?
JAMES HOGAN, CEO, ETIHAD AIR: Well, the first issue is to ensure that we take the corrective action and that was to ground the aircraft immediately. We have contingency in place for these types of circumstances to ensure that the customers are placed in either accommodation, or we roll their travel plans. And our team in Abu Dhabi tackling that at the moment.
In addition to the U.K. airspace, as you have mentioned, there is also Ireland airspace closed down. In the last half an hour they have issues in regard to Brussels and Paris, also.
QUEST: James, obviously, safety becomes first, and you were saying it is a widening problem. Now, let's talk the business side of it. As a chief exec from a company from an airline, I mean, do you start-obviously safety is first. But it won't be long before you are starting to work out how much this sort of disruption can cost. Dislocation of passengers, extra flights, extra fuel, all sorts of issues.
HOGAN: Richard, as you know, we are an industry that is tackling issues on an ongoing basis. Whether it is such as this, whether it is weather in other parts of the world, so the organization moves very fast to, more importantly, to protect the customer so this time it is communication. It is making sure that we're meeting their travel requirements as we come out of this cycle. And, you know, this is a cost of doing business in such a period.
QUEST: James, let's talk about the cost of doing business. You had results out yesterday and overnight. I noticed your RPKs, revenue per kilometer, was up quite sharply. Your available kilometers were also up quite sharply. So, I'm wondering, are you making more money simply because you are flying more routes?
HOGAN: What we are seeing, we're coming out of 2009, which was a tough year for the industry. We had the global financial crisis, we had the pandemic, and we also had the capacity being introduced with A380s, for example. Now as we come out of the 2009, what is great for the industry is we're seeing traffic coming back out of Southeast Asia, Austral-Asia, India and China are as strong. And even America, on our routes, out of Chicago and New York, are showing positive growth. Europe is soft, but what is pleasing overall is that the business traffic is coming back. So-
QUEST: Right. Now, let's just develop that. You say the business traffic is coming back? Now that is good news-not I assume not only for you, its for all airlines-the traffic is coming back but are you getting any pricing pressure, and more importantly, are the yields coming back?
HOGAN: Good question, Richard. What is promising is that the rest (ph), the C factor in the yield is coming back especially in the business cabin, and economy. The challenge in first class is we are getting the yield, but we are not getting the volume back at the 2008 levels. But the trends at this stage in business and economy are promising.
QUEST: Finally, as we look, James, at the landscape, we know that Open Skies II has just been negotiated. We know, of course, that the EU, U.S. are looking at Iberia and mergers and consolidation. I have to ask you, do you see yourself merging and consolidating with any airlines in perhaps your region?
HOGAN: Well, as you know, we're only six years old and we have started with a clean sheet of paper. We don't have the challenges that a legacy carrier that have to merge and restructure to get cost efficiencies to move forward.
With that clean sheet we have been able to outsource what isn't core and be able to invest in our product and service. And we have a very good proposition based in Abu Dhabi and we are very focused on the way forward.
QUEST: James Hogan, many thanks and thanks also for giving us some real-live chief exec experience of exactly how you deal with crisis like these volcanoes. James Hogan of Etihad.
Now, talking of explosive situations, when we come back in a moment- no, it is not a volcano. It is the Chinese economy. Just how explosive? And will it go bang? In just a moment, QUEST MEANS BUSINESS, we're live in New York.
(COMMERCIAL BREAK)
QUEST: Welcome back to QUEST MEANS BUSINESS, we come to you today, live, from the Time Warner Center at Central Park, just at Columbus Circle. I'm Richard Quest. We will bring you up to date with the news headlines now. Isha Sesay is at the CNN Center.
(NEWSBREAK)
QUEST: Now, here is an interesting fact. They used to say, and the big question was always whether China would hit 9 percent GDP growth just after the recession. Well, the economy is growing at an astonishing 11.9 percent, at the same time, this time last year. Growth in the first quarter, Q1, was faster than many had expected, even managing to accelerate from the rapid pace seen in Q4. So, the question of overheating? Is it? The government says it is pleased with the progress so far.
Does Julian Jessup from Capital Economics, who joins me now, does he believe that the economy is overheating?
JULIAN JESSUP, CAPITAL ECONOMICS: Well, not yet, I mean, growth of nearly 12 percent would be remarkable by the standards of any other country. But in the case of China it is not that unusual. After all, economic growth in China has averaged about 10 percent per year since economic reforms began in the late 1970s.
QUEST: But the key number was 9, and everybody wondered if it was going to hit 9 percent after the recession-to come out with this number. Are there special factors that you might think show that this was a unique occasion.
JESSUP: Well, of course, when we talk about year-on-year growth rates, we are comparing now with pretty much the depths of the recession. So the year-on-year growth rate is always bound to be strong. If you look at the quarter on quarter number, it is actually like the Chinese economy slowed a little bit compared to last year.
QUEST: Are you seeing within the Chinese economy, the affects of the limited, limited, measure taken by the central bank and the authorities to start to withdraw liquidity, mainly through regulatory credit limits?
JESSUP: Well, remember the Chinese economy never actually slowed that much during the global recession. So, what we're seeing now is a pick up from the lowest base, but not too disastrous. The sort of tightening that we've seen isn't that dramatic.
QUEST: No, but it has been very sophisticated and it has been highly detailed in terms of-it has been right in the bowels, if you like, of the financial industry.
JESSUP: Right. It has been more about sort of tinkering at the margins rather than the sort or aggressive policy tightening that some people have been feared. There is no sign, for example, that China is about to significantly increase interest rates to chop back the very rapid growth of credit that we've seen over the last year or two. The Chinese authorities, although they talk a little bit about the risk of overheating, I think it is more a question of expectations management. In practice they're still more concerned about the risk of double-dip in economic activity.
QUEST: Right, now, the big issue, of course, with the Chinese economy is the currency.
JESSUP: Hmm.
QUEST: Whether or not they are going either going with the Renminbi or the yuan whichever one you want to call it, I'll take either from you.
JESSUP: Yes.
QUEST: Do you believe that there is now a tacit understanding that the Chinese will allow their currency to rise?
JESSUP: I think it has always been the case that the fixed peg against the dollar was exception and they were looking to move a more flexible exchange rate, at some point. Now, the world economy appears to be back on its feet, I think there is one less excuse for them to dilly- dally. The chances are they'll revert to a wider trading band over the next few weeks and maybe allow modest appreciation of the currency over the remainder of the year.
QUEST: Right, that is not going to be a major appreciation.
JESSUP: It isn't, no. The sort of figures we're looking at is about 3 percent against the U.S. dollar, which is pretty much is priced into the market.
QUEST: Right.
JESSUP: Of course, we-
(CROSS TALK)
JESSUP: That's nothing, right.
QUEST: That is not going to have an effect on the trade imbalance.
JESSUP: No, no it isn't. I mean, frankly the currency would have to move by 10,20, 30 percent, to have much impact on that.
QUEST: You're stranded here, aren't you?
JESSUP: I am, unfortunately. At least it is a lovely day, but I'm supposed to be flying back to Heathrow this evening. But feel I'll be here for at least another 24 hours.
QUEST: At least. Many thanks, indeed.
JESSUP: Thank you.
QUEST: Come and talk to us again. Many thanks, Julian Jessup joining us there.
Now, the markets are open and doing business here in New York. With such a glorious day in the weather forecast, you might be surprised if anybody is doing any trading on Wall Street. Felicia Taylor gives us an update.
Is anybody doing any business?
FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: Well, you know, something, actually Richard, it is quite a quiet day, frankly. And this is what some people call kind of a sausage day, where the meat is kind of passed from one side to the other. We have seen the market go up and down, and up and down, and up and down.
They were down at the open thanks to those worse-than-expected employment numbers. Weekly jobless claims jumped by 24,000 last week. The markets pretty much took that in stride. That wasn't so bad, putting stocks back in the green. And the reason is because that increase in layoffs may not be really because of layoffs, but because a lag in claims related to that Easter holiday.
So, but by mid-morning we saw a member of the European central bank warning that the second phase of the financial crisis could have already begun. That sent prices down again. He says maybe we have already seen massive trade imbalances and a growing government debt. So, we are in what people have been calling this reluctant rally, the slow steady climb higher. There is still a tug of war as to those who believe we are on the road to recovery and those who aren't so sure. We have had good numbers on retail sales, manufacturing, even homebuilders, but the missing link still remains the job market. It is not getting worse, but it is not really getting that much better, fast enough.
QUEST: Hang on, hang on. You and I have talked about that 11,000.
TAYLOR: Yes.
QUEST: Which we waited and we held our breath. But I just look at these numbers, I've been a way for a day or two, and you turn around and suddenly, you are over 11,100. So, I suspect everyone is now waiting with earnings season, for 11,500, the results that we got yesterday that earnings were good.
TAYLOR: There is no question. I mean, we have gotten off to a rocketing start when it comes to earnings. Even today, we had another great one from UPS. That is largest mail deliverer in the country, they reported better than expected earnings, not only here in the U.S., where they have seen volumes increasing, but also overseas that lead to a 33 percent jump in profit.
Most significantly this week, when we heard from Intel and JP Morgan Chase, not only did they have good profits, but also planning to add jobs. If we continue to hear things like that, you bet the stock market is going to keep going higher. But I think it is going to keep the sort of reluctant pace, because people aren't really quite sure if we are in that recovery phase full on. The earnings season, though, kicks of in -what should I say, in earnest next week. We have a number of companies, still this week, Google, as well as Bank of America, GE, tomorrow. But then next week, you've got everybody. Citigroup, IBM, Coca-Cola, Johnson & Johnson, I could go on and on.
QUEST: Yeah, yeah, yeah.
TAYLOR: I know you don't want to hear it.
QUEST: Yeah, yeah. I do. I want to hear it all, I want to hear it all next week.
TAYLOR: You got it.
QUEST: And we are going to factor it all into our Q25, which you'll be helping us with. We'll explain more next week.
TAYLOR: Good.
QUEST: Many thanks indeed, go and have an ice cream outside. It is a glorious day.
TAYLOR: I will.
(LAUGHTER)
QUEST: You'll put it on your expenses and tell them I approved it.
(LAUGHTER)
QUEST: When we come back, here at Columbus Circle, we are going to introduce you to a world at work, that fights for workers rights. This is QUEST MEANS BUSINESS. We're live in New York.
(COMMERCIAL BREAK)
QUEST: Enjoying the delightful sunshine in New York City. Good evening to you. I'm Richard Quest. QUEST MEANS BUSINESS, live from New York.
If I said to you, a rat was coming you way, you'd probably run a mile. But not for New York's Laborers Local 79, Laborers Local 79. It is one of the unions in the city, a construction workers union, and they use a rat to make an extremely important point. It is an unusual way to earn your living, but as I discovered when I want out with Local 79, a rat is just part of their "World At Work".
(BEGIN VIDEOTAPE)
CHAZ RYNKIEWICZ, NY LABORERS 79: We are about to protest this non- union construction site over here. The workers are being exploited.
MEN CHANTING: Fight, fight, fight, we're going to fight for the workers' rights.
QUEST (On camera): It is a construction site?
RYNKIEWICZ: Yes. It is a-we're in the construction industry. We're in the Laborers Union.
It is our job to make sure that everybody in this city and in this world knows that there are criminals out there exploiting workers.
They are blatantly not paying their workers what they are supposed to be paying them. They are avoiding safety issues and they are avoiding structural issues that they are supposed to comply with, they are not compliant.
Come on, guys, let's start unloading some of these rats over here.
We have Anthony over here. We have Holland, Joey Rizzo, we are going get these rats up. Well, we like to blow off a big giant inflatable rat and we blow that up, it gets us a lot of attention. We hand out leaflets with the literature on it explaining what is going on here.
UNIDENTIFIED MALE: See that flyer, read that.
RYNKIEWICZ: You know he knows.
Also, I want to make sure that you know what the rate is, if you are getting it, God bless.
UNIDENTIFIED MALE: OK, I appreciate it.
RYNKIEWICZ: We just want to make sure everybody is educated over here. Guys work safe in there today, all right?
A smallest rat-our smallest rat is probably about 6 feet tall and then our tallest rat goes three stories high, it is 30 feet tall.
(LAUGHTER)
RYNKIEWICZ: Generator stalled out. If I can get this rat's tail out.
OK, let's this big boy up. This rat symbolizes everything that these guys are. Rats are a species that will do anything, eat anything, do whatever it takes to survive. We are always changing our tactics. One thing that stays constant is the rat. It has been effective, it still is effective. It will always be effective.
One of the main tricks of the trade is education. To get the education out there, sometimes you have to be loud, you have to be vocal, you have to be boisterous. The rat is a perfect example of people-getting people's attention. They don't want to hear what you say if you are handing out a piece of literature. They stop to see the rat and you get that 30 seconds to educate them. That's our shot.
MEN CHANTING: Workers have rights, workers have rights, workers have rights, workers have rights.
UNIDENTIFIED MALE: Fight for your rights.
RYNKIEWICZ: I've been doing this 11 years, almost now. We do what nobody wants to do. We have won some, we've lost some. I've been arrested a half dozen times. I've been beat up almost as many. You know, it is a tough job, man.
MEN CHANTING: Everyday, everyday, everyday.
UNIDENTIFIED MALE: We're fired up, won't take it no more.
RYNKIEWICZ: We're putting up a sign now over there, to let people know what is going on. We'll going to set up more signs. As you can see, we put up a sign with the wage rate.
UNIDENTIFIED MALE: We are the union!
MEN CHANTING: We are the union!
RYNKIEWICZ: If we're not out here, these contractors will get away with everything. It would be unbelievable what they do.
QUEST: You don't think the rat's had his day?
RYNKIEWICZ: No, the rat is here to stay! Did the rat have his day, no way, he's here to stay. He ain't going nowheres. The rat is part of our society, part of New York City, part of the culture.
(END VIDEOTAPE)
QUEST: Now, the rat makes a great deal of noise, well metaphorically and physically, when they are in location. So, it is only fair to get the other side of the story from the construction company. Even though we didn't name that construction company in that report. Fairness and transparency requires that we do bring their response to their attention.
The developer said, "It pays its employees prevailing wages in compliance with all New York State and federal prevailing work schedules. And works regularly with both union shops and open shop contractors. The developer creates jobs for local residents, which construct its projects. The developer cooperates from all requests from Department of Labor and other agencies. And inspection for all its projects. The developer continues to build the highest quality developments at the most competitive pricing so non-profit organizations can deliver best housing for their community's long term future."
You now have had both sides of that particular story. Tomorrow we have a "World at Work", a beauty for you, which comes from Staten Island Ferry.
When we come back in just a moment, here in glorious New York, we are going to turn our attention back to the other side of the Atlantic and the U.K. election, where the weather is not nearly as nice as here.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. QUEST MEANS BUSINESS, this is CNN. Tonight, coming to you live from New York.
In just about an hour from now, history be made in the United Kingdom, when the first-ever prime ministerial debate will take place between the leaders of the three major parties. Barely three to four weeks before voting takes place on May 6th. And with the polls suggesting that there will be a hung parliament, this will be the British electorate's first opportunity to see the three leaders going head to head. The rules of the debate are fairly scripted. It certainly won't be anything like the cut and thrust of an American presidential debate, but nonetheless as Jim Boulden now joins me to explain, history is about to be made.
JIM BOULDEN, CNN CORRESPONDENT: Well, Richard, first of all, we're going to look at some of the indicators -- the economic indicators that -- how we're going be focusing on during this election period. And none of them are getting very worked up in this period, less than two weeks since the election was officially called.
What is clear is whoever does get in after these three debates will have to make some tough economic decisions.
Now, the election was called on April 6th. That date was widely expected for some time before the official announcement.
Now, here's the British pound against the dollar. Since then, it's -- since the announcement was made, the dollar did fall against the pound. But since then, we've seen the pound actually gaining on the dollar, climbing fairly steadily. More or less, the same is true if you look at the pound against the euro.
Now, let's look at government bonds, an issue a lot of people have been discussing. Again, when the election was called, the bond was right about here and then it did actually -- the price did fall slightly, meaning that the yields rose.
Now, that can often be a sign of growing nervousness about economic prospects since the bonds have seesawed since then, but in a pretty narrow range. Right now, the yield on the gilt is slightly higher than it was in March.
Finally, this is the FTSE 100. It doesn't seem to be driving -- driven at all by this election. Its gains in the past couple of months have been following the rally on Wall Street pretty closely. And that's leaving the FTSE near the highest since June 2008.
The hunch is investors will reserve judgment until we can find out who's in charge or who's not in charge. And that issue of the so-called hung parliament is one of the hot election topics in the business community. Another is Britain's huge budget deficit.
Earlier, I spoke to David Blanchflower.
He's a former policymaker at the Bank of England. And before the crisis hit, he argued for holding interest rates low. Now, Professor Blanchflower says attacking the U.S. -- the U.K. budget deficit is not the number one priority.
(BEGIN VIDEOTAPE)
DAVID BLANCHFLOWER, ECONOMIST: I'm concerned about it in the medium to long-term. But in the short-term, we need to keep this recovery going. What's been driving it is public stimulus and the difficulties -- we have seen very little action, if you like, in the private sector. Firms aren't investing and they aren't hiring. And if we pull the public sector stimulus away, the danger is we drop off a cliff.
So my view is keep going until we really see some growth and then start to pay off the deficit, but not yet.
BOULDEN: But we keep hearing oh, the bond market will react, sterling will collapse, the -- the AAA rating will disappear from -- from gilt.
You -- you just don't think that's going to happen?
BLANCHFLOWER: I really don't think it's going to happen. One thing we've actually seen is that if you compare the amount of, if you like, the AAA rating, what it means and how much we can borrow at. First, we're borrowing pretty cheaply. A country like Italy, who's four notches below us in its credit rating, borrows at pretty much the same rate as we are now. And we're borrowing pretty low. So I don't suggest that it's something that we want to see.
But you have to weigh up the consequences of that to fiscal tightening, a big increase in unemployment, collapse of demand, firms dying.
So my view is that we can defer this. There's a sensible fiscal regime and monetary regime here. We simply have to generate growth. A strategy for growth will raise revenues, will not impact our -- our bond rating.
So my view is you keep the recovery going.
BOULDEN: A strategy for growth means investing more money, not less money.
BLANCHFLOWER: Yes.
BOULDEN: So that you're talking about increasing the budget deficit in the short-term.
BLANCHFLOWER: Not necessarily, but the classic thing that Keynes explained was governments can borrow at very low, long run rates of interest. It makes sense to invest in the economy. If people aren't -- aren't spending, we need to keep that stimulus going until we really see signs of growth.
And my -- and I've argued in a number of places there could be gateways. We say once we have achieved certain goals, once this amount of growth has come, then we will start to retreat.
But once you have growth, you have more revenues. The problem has been a drop in revenues. You need to get revenues up, firms starting to make profits and then they'll pay revenues. So it means, if you like, helping the economy along rather than smashing it in the face.
BOULDEN: You currently live in the U.S.
Looking from the outside in, how do you see this election?
How do people in the U.S. see this election?
Do they care about what happens to the U.K. economy and how much is that a concern for them?
BLANCHFLOWER: I think they care about it. I think the view in the U.S. is that the people in the U.S. are waiting and watching. They're looking at the economy. And in some sense, they're looking to the U.K., as well. I think that expectation is, perhaps, that there will be a -- a different government. But, obviously, the newspapers there are starting to think maybe there will be a -- a hung parliament and I think that -- so people -- it's -- it's very much an economic -- sitting, waiting, watching (INAUDIBLE). And I think in politics, it's the same.
BOULDEN: A few weeks ago, we were saying and people were saying to us, a hung parliament would be the worst possible scenario, where no party has overall control. You actually think there may be a silver lining in a hung parliament.
BLANCHFLOWER: Well, I certainly think it will be very dangerous for any government to come in and start slashing spending and start slashing spending and starting cutting back.
One benefit, I think, of actually having a hung parliament is that maybe it rules out the possibility that anybody would do anything stupid. I mean at this moment, the status quo is perhaps not a bad thing to be in. We should be reassured that calm -- calm waters, keep going, steady as you go.
So I -- you know, I'm not that concerned about it. And I don't think the markets should be, either.
(END VIDEO TAPE)
BOULDEN: And, Richard, Professor Blanchflower will be heading back to the U.S. in a couple of days. And you'll be catching up with him next Thursday to see his perspective from that side of the pond -- Richard.
QUEST: All right. Many thanks there.
Jim Boulden with tonight's debate.
And we'll obviously follow that up.
And you can join us for special coverage on this debate in "CONNECT THE WORLD" -- a special edition of the program. As the debate takes place, Becky Anderson looks at the key exchanges. A special panel picks the winners and the losers, centering on domestic policy tonight.
"CONNECT THE WORLD'S" special edition, 21:00 London, 22:00 in Central Europe.
Let's face it, if you're stranded in Europe, this is one thing that you want to be watching tonight.
You can also follow the action on line. "CONNECT THE WORLD" hosting a running commentary on its blog and taking your comments. Log onto CNN.com/connect for details -- for details.
OK, when we come back in just a moment, imagine you are a small business owner. You have an ambition that you really want to open a restaurant. Misty is that small business owner. This is some of the food that she creates.
So why wouldn't anybody lend her any money and how did she manage to do it anyway?
I'll taste it and you'll taste the story, in just a moment.
QUEST MEANS BUSINESS live.
(COMMERCIAL BREAK)
QUEST: Tonight on QUEST MEANS BUSINESS, we are adopting a city startup business right here in New York.
The business is owned by Misty Kurpier, who is attempting to open up a prepared food store in Brooklyn.
Misty has her work cut out for her. We'll hear from her in just a moment about how she solved some of the problems.
But first, let us see exactly what she's hoping to do and how she's hoping to go about it.
(BEGIN VIDEOTAPE)
MISTY KURPIER, LUCAS FINE FOODS: Here we are. This is my (INAUDIBLE) at 8478 Union Street in Park Slope, Brooklyn.
I'm Misty Kurpier, owner and chef of Lucas Fine Foods. The name of the store, Lucas Fine Foods, is named after my son, Lucas.
How does that make you feel?
UNIDENTIFIED CHILD: Excited.
KURPIER: We'll have everything from vegetables, fish, meat, pastas, red meat dishes, everything. This will be where my register is, as well as the pastries. I was a photo director and in the photo and entertainment industry for 13 years and was really starting to get burned out. But I find myself a single mom and basically not able to get work.
I started throwing some numbers around and realizing there was a great need in the Park Slope community for a prepared foods store.
Part of the reason that I'm physically doing this work is because I don't have the funds. I happened to realize that I had a Home Depot card with like three grand on it that I didn't realize I had from 2007, went, got all my supplies. The tools have all been loaned from friends.
This is Matthew.
I have had an enormous outpouring of support in financial ways, physical support -- people coming in and helping me build the space. It's turned into an incredible community effort.
And over a year, I've been trying to get financing and, of course, it's not been at a good time with the banks. It comes down to the fact that unless you have, you know, a great deal of assets, money in the bank, the banks are just not lending. And even if your credit score is good, you know, maybe it's not good enough.
I'm putting in -- installing the awning. The store is taking shape really nice. We've got the chandeliers in. This is -- these will be over the -- the seated bar.
I literally have started it with nothing. You know, I don't -- and I'm not employed now, so I really don't even know how I'm doing it. It's truly through the grace of God and -- and prayer and my family that I'm getting through.
But it's just a matter of -- of pushing forward.
But at the same time, I know it's going to happen. It's got to happen.
(END VIDEO TAPE)
QUEST: All right, Misty is now with me.
Let's booked -- let's be blunt.
Have you borrowed -- have you managed to do this with any money from the bank at all?
KURPIER: Not at all.
QUEST: So how much money have you put into this?
KURPIER: Thus far, close to $40,000.
QUEST: Forty thousand dollars.
Where did you get the money from?
KURPIER: That's a good question. Through friends, family, credit cards, doing a lot of the work myself, literally, as you've seen from the piece and...
QUEST: So savings -- savings are a thing of the past and no hope for the future?
KURPIER: Exactly.
QUEST: Why?
Of all the businesses to open, I heard the report. I can think of no bigger hole to pour money down except maybe an airline, than a restaurant.
KURPIER: Well, the difference with my store is it is not a restaurant. It's prepared foods. People have to eat. There's lots of families in Park Slope. And it's ready made. It's easy. People can come in, they're wanting to sit down, have those Sunday dinners gain and spend time together.
QUEST: That's a restaurant.
KURPIER: Well, it's not. You don't have to come in and sit down.
QUEST: Well, what's the difference between a prepared food and a restaurant?
KURPIER: I'll tell you. You walk in a restaurant, you have to sit down, you have to order, it's expensive. You have to wait for your kids to behave.
This, you walk in, you order your food, you pay, you leave.
QUEST: Or you stay?
KURPIER: You can stay.
QUEST: Which (INAUDIBLE) a restaurant.
KURPIER: There's a few seats. There's a few seats, but it's mostly to go.
QUEST: All right. All right. Let's -- the core issue here is really when you went to the bank and they said no, what did -- what was their reasoning?
KURPIER: Typically, it's all based on how much you have in the bank. You know, they talk a good game. They say, oh, your credit is good, you know, the business plan. But at the end of the day, they want you to put money in a CD that they can secure the loan with.
QUEST: So is it that old famous if it -- if it wasn't so true, it would be funny -- the only people who can borrow money are those people that don't need to borrow money?
KURPIER: I agree. Absolutely. At this point, that's what I said to one of the bankers. I said, if I had the money, I wouldn't be coming to you.
QUEST: And what did they say?
Tough.
KURPIER: Yes, you know, they smile...
QUEST: Yes, yes.
KURPIER: And, you know, every -- they talk a good game. But -- but no one thus far, no bank -- I've been to all of them.
QUEST: Are you angry?
KURPIER: No, I'm not. It's frustrating, but I'm not angry because I believe in what I'm doing and I'm passionate about it. And it's turned out to be actually more beautiful than borrowing from a bank because the community and families come around. It's made it a beautiful story.
QUEST: OK. And tell me the stage of the business at the moment.
KURPIER: I'm about three quarters of the way there. I'm still looking for a little bit of funding and close to opening.
(HANDS MONEY)
KURPIER: Two dollars is not going to cut it.
QUEST: Hey. Hey. Don't -- now she's -- she's turning down my offer.
KURPIER: I -- I won't. Sure, I'll take it.
QUEST: And I don't even want (INAUDIBLE).
KURPIER: No returns.
QUEST: No returns.
All right, listen, let's -- you stay -- you stay there one moment. And you come with me over here. All right, here we go. So, this is the sort of thing.
This is the difference between a restaurant and prepared food?
KURPIER: This is the difference.
QUEST: What is it?
KURPIER: Well, actually, it won't come on this lovely plate...
QUEST: Right.
KURPIER: -- when you come into my store. But it's already cooked for you.
QUEST: Yes.
KURPIER: It will in the prepared food case.
QUEST: Yes.
KURPIER: You'd say I'd like that. This is a filet of sole with a sun-dried tomato cilantro pesto. You would say I'll have that, we'll wrap it up for you, put a label on it and out you go, after you pay.
QUEST: We will thank you for that.
Don't -- you leave that. You can leave that. You can leave that in my capable hands.
(LAUGHTER)
QUEST: I suppose I sort of have to offer. Well, we'll sort up -- we'll settle the bill later.
KURPIER: We'll sort it out.
QUEST: All right. Good luck.
We're going to follow you. We're going to continue to follow on what's happening with you...
KURPIER: Absolutely.
QUEST: -- after you (INAUDIBLE).
KURPIER: All right.
Thank you.
QUEST: We need to turn our attention now back to other matters, particularly to the volcano and the volcanic ash that is over large parts of Europe.
Guillermo is at the World Weather Center.
I'm particularly curious -- and I -- forgive me, Guillermo. I haven't given you notice of this question, but I -- I wonder, how high up or how big or how wide or what -- what's going to sort (INAUDIBLE) of this volcanic ash?
GUILLERMO ARDUINO, CNN METEOROLOGIST: Well, I think the answer comes from the warnings that we have in place for Great Britain, Scandinavia and northern parts of Europe, especially here, the Lower Countries. But that can get spread a little bit more into the Continent.
The good thing is that the longer it takes, the more diffuse it's going to be. I have the latest satellite picture where we can see what's going on with that cloud here, how it's being spread all the way. I'm going to press the button again into the Faroe Islands, you see. And then it's getting close to the Shetland Islands and very soon it's going to come into other sections close to the Continent.
I'll explain to you the reasoning why. We need to see the immediate effect on it when we compare the air traffic on Wednesday. Look at Breat - - Great Britain especially and here, the northern parts of Europe, what happened today.
After that,. You're going to see how it fizzled out. And then we have no action over Britain and very few planes over Europe. The yellow dots that you see here are transponders. They get the information and they send it to us.
At the same time, this is also another image that shows how the cloud travels. Remember, we're talking about at higher levels right now and you will understand how this cloud is traveling closer to the Continent because of the presence of the jet stream.
The jet stream is very high velocity and high level winds that are over Iceland right now. And they take that very thick image that you see when we show you the volcano and they start making this cloud travel all over. And in the direction that the jet stream is coming to.
Remember when I talk about how the jet stream is like a highway for storms and it brings rain?
Well, in this case, it's the same thing. It picks up the cloud and pushes the cloud wherever the jet stream is going that is defined at this moment by a very prominent high pressure center over the Atlantic Ocean. So here we have no problems.
It's expanding. It is pushing the action northward. But then it's -- the cloud is landing into Northern Europe. That's why the warnings are in place in these countries. And we need to look at this very seriously, because it will continue to affect, gradually, all these northern countries.
Now, what we can expect, of course, is the longer we go into the forecast, the thinner it becomes, and especially in Iceland. It's taken up to the jet stream and dragged around and we're talking about 30,000 feet, 50,000 feet, as well -- Richard.
QUEST: Guillermo, fascinating stuff.
We will talk more about this, obviously, in the days ahead as we have to get (INAUDIBLE)...
ARDUINO: Definitely.
QUEST: -- with this, because it's the sheer raw force of nature that's the fascinating aspect of this.
Guillermo at the World Weather Center.
When we come back in just a moment, a force of a different kind. We're going to turn our attention to the space industry. President Obama has made cutbacks.
So what is his plan for the future?
We will be hearing more in just a moment.
(COMMERCIAL BREAK)
QUEST: How appropriate. That is the world that we are now going to go into outer space, because we're going to talk about the future of America's space program.
President Obama is shortly to address space workers in Florida. He is due to outline what will be the direction of the space program, having already agreed and announced some serious and severe cutbacks. For example, a man going to the moon is now put -- or returning to the moon is now put on hold.
let's join John Zarrella, our correspondent in Florida -- John, when President Obama announced the -- some months ago, that the -- that the space spend was going to be reduced, a lot of people were quite upset. There was a certain amount of disappointment about this.
Is he going to commit new money today, do you think?
JOHN ZARRELLA, CNN CORRESPONDENT: You know, this is where it stands. Two months ago, as you mentioned, when they came up with his -- his new vision then, it called for really moving in the direction of commercial space. That's still the plan.
But he also called for the cancellation of the Constellation program, which was the replacement to the Space Shuttle program. He talked about not going to the moon right now, new technologies down the road. But no real plan for where the astronauts would go in the future, long-term -- back to the moon, on to Mars, to a near Earth asteroid.
There was so much criticism in Congress, amongst the aerospace industry, that they have rethought that. And today his new new vision comes about.
What's interesting to note, though, is his first stop after he landed here, Richard, was to SpaceX, one of the leading commercial operations vying for taking astronauts into low Earth orbit, to be the commercial company that carries astronauts to the U.S. Space Station. It won't be NASA doing that in the future, but a commercial company.
So the president is expected to say, look, we're going to commit $40 million right here to retrain workers, to help get them in position so that they can get some of these new generation jobs. We're also going to determine by 2015 a new space vehicle that will take astronauts into deep space. We'll decide on a design.
And we're going to go ahead and take the Orion Space Capsule, that would have taken astronauts to the Space Station, we're going to take it now and scale it down and make it a rescue vehicle that we will attach to the International Space Station.
But the workers here, the people here, Richard, have said to me, look, we want proof. We want to see some real direction and answers.
QUEST: John, all of this is fine and good, but none of it is really big picture, we're going to put a man on the moon by the end of the century and people -- we're going -- it's not -- it's not Kennedy-esque, we're going there, we're doing these hard things because they're hard, is it?
ZARRELLA: You know what?
You hit the nail on the head, because NASA has always been on -- at its best when it's had a direction. Go to the moon, build the Space Shuttle. At its best.
Now, they're still saying well, we're not quite sure where we're going to go yet. But, you know, Elon Musk, who is the founder of SpaceX, this commercial company, has said in a statement today that he believes that these -- this speech the president is giving right now will be on the order of the speech that Kennedy gave at Rice University when he said we will put men on the moon.
He believes that this will be a major sea change in the way space business is handled in the future. And he believes by directing dollars away from low Earth orbit on the part of NASA and allowing commercial companies to do that, that NASA can take the limited resources it has and focus on putting humans on Mars and near Earth asteroids.
QUEST: All right...
ZARRELLA: We'll have to see how it all plays out -- Richard.
QUEST: John, I need a yes or a no answer from you. I've been dying to ask you this one question.
Will you shed a -- will you shed a tear when that last Space Shuttle lands and the Space Shuttle is no more, a yes or a no?
ZARRELLA: Yes, absolutely. Two words.
QUEST: John Zarrella joining me live from Florida. And we'll talk more about that.
When we come back in just a moment, whether it's space or whether it's civil aviation, up in the air -- it's all upping the chants, as we're discovering just today in the world of aviation. A Profitable Moment in just a moment.
(COMMERCIAL BREAK)
QUEST: President Obama in Florida at the Space Center giving his vision for NASA, that we were just talking about a few moments ago, setting out what he believes the future will be for the space industry.
Meanwhile, of course, today a reminder that the aviation industry is in turmoil. Things never go quite according to plan when you're talking about being up in the air. That volcanic ash another reminder that space and aviation, airlines, anything at the forefront of technology in the air is at the whim and easily can be disrupted.
I wonder whether it was the same back in 1492, when Columbus here in New York -- Christopher Columbus -- sailed the ocean blue.
Who remembers whether or not, of course, it was just as difficult in those days?
And that is QUEST MEANS BUSINESS from New York, pulling all sorts of torturous links together.
I'm Richard Quest.
Wherever your travels may take you this time, I hope it's profitable.
I'll see you tomorrow.
The headlines are next.
END
