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Quest Means Business

Shareholders Give Green Light to United/Continental Merger; Corporate Travel Taking Off

Aired September 17, 2010 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

MAX FOSTER, GUEST HOST, QUEST MEANS BUSINESS: And the giant shareholders give the green light the United and Continental.

Back in business, the CEOs of Iberia and Cathay Pacific tell this program that corporate travel is taking off once again. And a hot product for a red hot market, China gets its first taste of the Apple iPad.

I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.

Hello to you.

The world's biggest airline has been given the seal for approval. Shareholders of Continental Airlines and United Airlines have overwhelmingly voted in favor of a merger. It is a stock swap merger, so that stock expected to close on October the 1st. Now continental is the world's fifth largest airline serving 137 destinations, from the United States; 63 million passengers a year.

Business travel seems to be taking off again. That is the backdrop to this. The message from Iberia and Cathay Pacific CEOs, the Aviation and Environment Conference is that it is all about long-haul right now. That is where the profit is, and it is coming back. Iberia has boosted its capacity by 9.2 percent, on long-haul flights. And it is planning to merge with BA next year. So a mega merger in the industry for Europe as well.

Now, capacity and traffic is up. That means more pilots are needed. Boeing says tens of thousands of pilots will be needed over the next few years. And the biggest demand will be in Asia Pacific. Boeing says a total of a million workers are next 20 years.

The aviation industry is clearly humming right now. And the M word, "merger", is very much in the air. United and Continental aren't the only big airlines joining forces to become much bigger. As I said, British Airways and Spain's Iberia are in the process of completing a merger. I caught up with Iberia's chairman and CEO, Antonio Vazquez Romero, and I asked him what stage we're at with that BA merger?

(BEGIN VIDEO CLIP)

ANTONIO VAZQUEZ ROMERO, CHAIRMAN, CEO, IBERIA AIRLINES: We are exactly sticking on the schedule. And you know we had the signatures of MOU (ph), by November last year. Signature of by the beginning of this year, merger agreement. And right now it is a time in which the agreement has to be ratified the board of the Iberia, by the end of September. And afterward it will proceed to call for the shareholders meeting and roughly the deal should be accomplished by the end of December, maybe January.

FOSTER: The name of the game for Iberia at the moment seems to be long haul as well, because looking at your performance it is those long- haul flights that are really making the money. Is the new company going to be all about long-haul? Are you going to ditch a few of these short-haul, unprofitable routes? Or do you need them to offer the service to your customers?

ROMERO: Well, I think it is the combination long-haul, short to medium haul. It is quite an important task today for the two companies, stand alone, and will continue to be. In a way, you are absolutely right. The long haul is the most profitable. It is (UNINTELLIGIBLE) today. But we cannot forget that the long haul exists because a lot of people who are coming, or going, and they need to connect. In other words, significant part of the whole long haul numbers of passengers are transit passengers, you know. So that the reason why to feed the network is extremely important. And it is exactly at the point which we have-we have to manage quite a powerful and flexible and profitable short to medium-haul activity.

FOSTER: So the secret is, however you are going to do it to get people on those long-haul flights where you are making money?

ROMERO: Well, I mean, the long haul is working well today. So we have-we, Iberia, stand alone-we have quite a leading position in the routes between Europe and Latin America. And it is working well and it is growing. And short to medium haul is another issue on a way that the mass (ph) of the-well, the competition coming from the low-cost carriers is 100 percent in the short to medium haul, in the short haul specifically, and also the competition coming from the high-speed train is a competition on the short haul, right? So the combination is becoming very important and that is the reason why we are right now talking with our trade unions and with our workers in such a way we are going to be able to shape up a proper new model of operation in the short to medium haul providing better profits and a bigger flexibility.

(END VIDEOTAPE)

FOSTER: Head of Iberia there. Well, increasing travel demand comes the need for more planes. Cathay Pacific Airways has confirmed its biggest deal yet. A $7.8 billion order for 30 new Airbus planes. Earlier I spoke to the company's CEO Tony Tyler and asked him about Cathay's big investment.

(BEGIN VIDEO CLIP)

TONY TYLER, CEO, CATHAY PACIFIC: Well, it is a very significant deal because we have signed up for 30 A350s, which we delivered from 20/16 onwards. And that aircraft will therefore sort of form the core of our long-haul, medium-size fleet. And they are very, very efficient aircraft and they are going to do a very good job for us.

FOSTER: It seems that everyone in the airline industry I'm speaking to right now is talking about long haul. Is it the same for you? Is that where you profits are increasingly coming from right now?

TYLER: We're a combination carrier so we have a big long-haul operation, but also we have a huge regional operation all around Asia. You know, we fly to-well, we cover everywhere in Asia, very thoroughly and we link those Asian flights over the Hong Kong hub, with our long-haul network. So for us it is important doing well and both growing together.

FOSTER: Why has long haul held up so well?

TYLER: Well, to be honest we are finding-we're finding both long and regional fights both doing very well. Hong Kong is just a great place to have an airline, especially as it is such a financial center. Now that hit us hard during the financial crisis, but it has bounced back very fast and very well. And so we're now seeing, you know, the bankers traveling again. Doing deals again. And that is very good for our business.

FOSTER: Does that mean they are also doing business and first, a bit more, as well, if things are bouncing back in that way?

TYLER: Absolutely, right. They are helping to fill the premium classes in business and first class, yes.

FOSTER: So the whole industry is getting a lot stronger? It was really gloomy last year, wasn't it?

TYLER: Well, I think, you know, we're doing very well. I think Cathay Pacific is doing very well at the moment. I think the Asian airlines are generally doing pretty well. There is no doubt the European carriers are still struggling a bit. The U.S. carriers are doing well largely because capacity has been quite tight in that part of the world.

FOSTER: Europe carriers fighting back. We've got this big deal, of course, between Iberia and BA. That is going to create a very large company. And scale is very important, isn't it, in this business right now? How are you competing with the likes of BA to keep your scale up?

TYLER: Well, you know, we are competing obviously with British Airways on the route to London. But look, we compete with everybody. We're competing with some of the most formidable competitors in the world, particularly based in Asia, in our neck of the woods.

FOSTER: The airline industry often brought up as the reason why we have so many environmental problems, certainly the transport industry. How do you fight that? How do you justify flights against the green lobby?

TYLER: Well, look, I mean, air transport constitutes about 2 percent of man-made carbon dioxide emissions. And it is a very small amount. And we do I think cop a lot more of our fair share of the flack, for this. But having said that, we know we're part of the problem. We have to be part of the solution. And what we're doing is we are investing in much more efficient aircraft, we are investing in biofuels, and some airlines have done trials of flying with biofuels and they work. And we're going to make sure that works.

We are trying to get governments to give us a better break on air traffic control. At the moment we fly very zigzag routes. We need to straighten those out and improve the efficiency of the airspace that we are using. We have-well, Cathay Pacific certainly has an offset scheme. You can offset all of your carbon if you want to fly Cathay Pacific.

And there is a number of things that we're doing in terms of investing in technology, new processes, better processes, to become more efficient all the time.

(END VIDEOTAPE)

FOSTER: Tony Tyler, the CEO of Cathay Pacific, there. Speaking to me a little earlier. Later in the show we'll get a little more into the executive end of the aviation industry. The president of Bombardier (ph) looks at the future of the private jet business.

Now after the break, we'll be live at the New York Stock Exchange. We'll have market reaction to today's big M&A news involving Johnson & Johnson.

And gridlock in the U.S. government, could that be the result of a U.S. mid-term elections and what might that mean for investors.

(COMMERCIAL BREAK)

FOSTER: Anyways, up for gold. Another record it seems. European stock markets ended the week lower meanwhile. Investors became increasingly nervous about the strength of the global economic recovery, especially after data revealing that U.S. consumer sentiment had unexpectedly worsened.

And banks were among today's biggest decliners. They closed down after newspaper reports said Ireland may need international financial assistance.

Although the Irish finance ministry slammed the report it failed to halt a slide in two of the country's biggest lenders. They are Allied Irish Bank, losing almost 12 percent. And the Bank of Ireland, down just over 7 percent; a disastrous day for them.

Now we heard a little earlier about Wall Street. We're going to head to Wall Street now, where stocks are looking for direction. Alison Kosik is standing by the New York Stock Exchange.

Alison, we are just talking about that United/Continental merger. But there is another one that people have been discussing, in the building behind you.

ALISON KOSIK, CNN FINANCIAL CORRESPONDENT: Exactly. Right below me. I first want to give you and update on how Continental and UA shares are doing right now. Right now, both are down about three quarters of a percent on that deal-making news.

As for the other merger you are talking about, that is Johnson & Johnson. It is in talks to buy Dutch biotech company Crucell for almost $2.3 billion. The consumer products giant already owns almost 18 percent of Crucell, but wants full control. So that it can develop and commercialize the company's line of vaccines. The talks are apparently pretty far along. J&J shares, right now, are up a fraction. While Crucell shares are up about 57 percent.

We are also keeping an eye on Oracle today, its shares right now surging 8 percent, leading the tech sector. The software developer reported double digit percentage growth in both profits and sales after the close of the sale on Thursday, here on Wall Street. The gains came thanks to rising demand for business software and servers. And because of that, the Nasdaq has been the only average to really make any progress today that is notable. The Nasdaq, right now, up about half a percent, Max.

FOSTER: There you are, you picked the highlights there. It has been a bit of a boring week, though, hasn't it, for you lot, over at the stock exchange?

KOSIK: Yes, I mean, the volume has been really low. It has been like this for many weeks now and the hesitation we've seen today is because of the latest reading on consumer sentiment, Max. You know, it tumbled in the early part of September. Analysts had been expecting an increase. Now this comes as a big disappointment and has investors feeling even more skeptical about how strong this economic recovery is and that is why we saw stocks dip into the red. Now they are in the plus column. You know, things could get really choppy as we head toward the end of the session, really, in the last hour of the session.

Today is known as triple-witching day, Max. Which happens four times a year and that is when a variety of stock options and futures contract expire all at once. And it can really make for a volatile final hour of trading, because investors wind up trying to adjust their portfolios. Also, it is a Friday, so a lot of traders really want to get their portfolios in order before the weekend, Max.

FOSTER: The weekend is upon us.

KOSIK: It is. Sure.

FOSTER: Alison, thank you very much.

Now, as well as those (UNINTELLIGIBLE) investors will also be keeping a close eye on the mid-term election. They are less than two months away now and as Maggie Lake now reports any gridlock in Washington is only likely to increase markets uncertainty.

(BEGIN VIDEO CLIP)

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT (voice over): Wall Street, watch what you wish for. While many investors think a Republican sweep of Congress in November would get stocks moving again, by putting a check on the Obama administration, others like former Bush administration economic official Glenn Hubbard, think differently.

(On camera): Investors see what is happening in Washington and say, actually, we don't mind that there seems to be so much disagreement. Gridlock is good. Gridlock is good for the markets. Do you agree with that?

GLENN HUBBARD, FMR. CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS: I think that is dead wrong for a couple of reasons. One, I think what a lot of investors mean is they are thinking back to the mid-`90s. Bill Clinton was the president. The Republican Party had taken over the Congress. What people miss in that analogy is the economy was stuck but in a pretty good place, in the 1990s. We're stuck now, but not in a very good place.

LAKE (voice over): Hubbard, who is now dean of the Columbia University Business School warns D.C. gridlock would only increase market uncertainty at a time when crucial decisions need to be made about the nation's long-term future. As businesses and investors demand clarity trillions of dollars that could be reinvested into the economy remain on the sidelines.

WILLIAM DENNIS, NAT'L. FEDERATION OF INDEPENDENT BUSINESS: One of the things that is really lacking in the country is confidence in the economic future. Where we're going; what it means. What will happen tomorrow? What is the policy going to be? Am I going to be taxed more? Am I going to be taxed less?

LAKE: Businesses we talked to say there is no question this uncertainty is paralyzing efforts to expand.

JOHN CALLAHAN, OWNER, DAY TOOL & MANUFACTURING: You are going to see some spending increases, but I believe it is going to be slow and incremental. It is not going to be crazy like it was two or three years ago. Because of the uncertainty that comes out of Washington.

LAKE: With an eye toward offering clarity, Glenn Hubbard has crossed party lines and co-authored a new book with Democrat Peter Navarro, detailing their recommendations for how to cut the nation's massive debt obligations.

Hubbard faults both sides of the aisle, including the deeply conservative Tea Party, for not being frank with the public.

HUBBARD: Neither side is having that conversation with the American people. One side is talking about the low tax part. One side is talking about the high spending part. Those two are like ships passing in the night. A leader needs to connect those dots.

LAKE: Connecting the dots to break the gridlock, Hubbard is optimistic but says work must begin now. Maggie Lake, CNN, New York.

(END VIDEOTAPE)

FOSTER: Before polity in the United States reaches a new high, a staggering number of now in need. Up next, the human face of poverty. One woman's sacrifice to ensure her children can go to school.

(COMMERCIAL BREAK)

FOSTER: Mortgage lenders in the U.S. seized more homes in August than in any other month since the start of the financial crisis. Foreclosures are up 25 percent from August 2009. With many Americans losing their homes and millions out of work, poverty is most definitely on the rise. Have a look at this, one in seven now live on or below the poverty line, there. That is according to the U.S. Census Bureau, at least. And it is likely to get worse if you consider that the economy is faltering an unemployment is already high, and it is rising.

Let's have a look at the "Poverty Spike Graph"-is what we are calling it. Since 1991, there was a dip at 11.3 percent. But currently, the rate now, 14.3 percent; 2000, that was when it was just at 11.3 percent. More than 43 million are in need according to the latest figures. The highest number in 51 years, that since record keeping actually began. So, it could go back even further.

The numbers only tell half the story. It is a human face of poverty in the U.S. that is even more striking. And Poppy Harlow has been taking a look at that for us from New York.

Poppy.

POPPY HARLOW, CNN FINANCIAL CORRESPONDENT: Max, you know, we got this report on Thursday and the number actually wasn't that astonishing. We knew it was going to be high. But when you look at 43.6 million Americans living at or below that poverty line it is hard for anyone to digest. But as you said, the number does not tell the story. So we spent the day in Brooklyn, New York, talking with a woman and her son. Ann Valdez, she's been living in poverty since she was 18 years old. She has three children. And she is still fighting to get out of the situation. Take a listen to her and her son, Joseph.

(BEGIN VIDEOTAPE)

ANN VALDEZ, POVERTY STRICKEN NEW YORKER: It's very demoralizing. It is made to feel demoralizing, hurtful. There is so much going on and there is jobs available. No one wants to live the way we have to live.

HARLOW: How do you get by, everyday, Ann? I mean, what do you live on?

VALDEZ: I live on approximately $5,000 a year. Sometimes I have to skip a meal to make sure I can save the money so that my son Brian has what he needs. And if it wasn't for my sister, my son would not have half of his school supplies, or any of his clothing for school.

HARLOW: Joseph, how has it been for you? Do you feel like you grew up in poverty?

JOSEPH VALDEZ, ANN'S SON: Yes, but I wasn't deprived a good childhood, so I'm very happy. It doesn't matter where you come from, if you have a good childhood, money isn't an issue.

VALDEZ: I gave everything I can to my children. If I had to go without, it's OK, as long as my children had.

HARLOW: If you could have one message to send to the people watching, what would it be?

VALDEZ: My message would be never judge a book by its cover. Never make assumptions. Come outside, meet the people in your community where you live. Meet the people in the communities where you work and meet the people in the communities where you represent.

HARLOW: See the face of poverty?

VALDEZ: See the face of poverty.

(END VIDEOTAPE)

HARLOW: And you know, Max, as for Ann's story, she's been out of work since 2005, her unemployment benefits ran out four years ago. When it comes to what's ahead for her she says, look, I have two years of college experience, I haven't been able to get a job.

And I think the most troubling part of this poverty report that we got from the government is that it is now American children that are suffering the most; 15.5 million American children now living in poverty. That is up by more than 1 million in just that year-long period. The president, on Thursday, calling the poverty rate in this country unacceptably high.

FOSTER: And she really typifies, doesn't she, this poverty cycle that you've been looking into.

HARLOW: Yes.

FOSTER: Why is it so hard for her to find a job? Is it simply because there aren't any jobs?

HARLOW: You know it is a great question, because I spent the day last week at a small business that said, look, we're hiring but people would rather be on unemployment than take this job for minimum wage. I spent a long time walking around the neighborhood with Ann, talking to her. And she said, I've been able to find work intermittently. Here for a few weeks, there for a few weeks, or a month, but she can't keep a solid job.

And her son, who is 28 years old, who you heard in the piece, he has this same problem, and now he has a three-year-old child. And when you look at the entire family, Ann's mother lives in that public housing. She lives there. Her son live there. And you fear that the cycle continues. What Ann says is we want more government aide, but how much more can the government give? We are facing huge, huge deficits. At the same time you have the issue of a straight jobs bill. That is what Ann says she wants to see from the government, a straight jobs bill. She's a bit frustrated with money going to corporations, she says, to hire. She wants to see a direct jobs bill. We'll see what happens.

But when you see her face, you see her story, you look at those pictures of her children, you really grasp the reality. She is one in almost 44 million Americans that are going through this right now, Max.

FOSTER: Poppy, thank you so much for that story there. It really does bring it home.

It is difficult to compare the latest numbers from the U.S. to other countries because the each has its own poverty level. But a 2009 U.N. report took a look at some leading economies and they found that in the U.S. almost 17 percent of the population lives below the 50 percent median income line, the average, a form of average.

In Japan it is almost 12 percent. More than 8 percent, there, in Germany. And more than 7 percent in France. Here in U.K., 11.6 percent live on less than half the country's median average income.

You are watching QUEST MEANS BUSINESS. Still to come, we are going to the opposite end of the scale. VIP travel is making a comeback. Meanwhile, as all this poverty goes on business jet maker Bombardier sees more demand from global high flyers.

(COMMERCIAL BREAK)

FOSTER: Welcome back. I'm Max Foster in London. More "Quest Means Business" in just a moment, but first here are the main news headlines.

Another arrest in what Scotland Yard called a possible plot to attack the pope in Britain. Investigators now have six men in custody on suspicion of terrorism. The pope is continuing with his itinerary though. The Vatican says it has full confidence in Scotland Yard's ability to protect him.

In Chile, one of three drills has a punch a hole through a 633 meter section of rock mine. This chops deep underground. That hole will guide to drill to bore a bigger hole. Engineers warn it will still weeks to reach the trapped miners.

Angry crowds in Karachi, Pakistan set fire to cars in reaction to the killing of a prominent politician. Imran Farooq was stabbed to death at his London apartment where he'd been living in exile since 1992. He was a member of MQM, one of Pakistan's largest political parties.

Afghan President Hamid Karzai admits there might be some irregularities in tomorrow's national elections, but he's urging voters to go to the polls anyway. The Taliban are warning Afghans to (inaudible) vote. Eighteen election workers and the parliamentary candidate were kidnapped today. The latest act of violence (inaudible) discussed today's election.

Earlier in the show, we heard from two leading airlines on how business travel is picking up it seems. Plane manufacturer Bombardier is seeing signs of the big business jets market is also improving. The company is the world's third largest civil aircraft maker.

You've probably heard of their luxurious Learjet brand. They make commercial and specialized aircraft too, and business does seem to be booming. Their latest sales figures show they brought in maybe $9.5 billion last year alone.

I had a chance to speak to the president of the aerospace unit, Guy Hachey kicked off by telling me about the uptake and demand for private jets.

(BEGIN VIDEOTAPE)

GUY HACHEY, PRESIDENT, BOMBARDIER AEROSPACE: If I look at both sides of our business. The business jet side is actually starting to show some slight recovery. So we've seen some improvement. The pipeline of activity is continuing to increase.

On the commercial aircraft side, things are still slow. We anticipate more of recovery next year. So I would say depending on the region for business aircraft, the Middle East, the Asia Pacific regions are quite active. Not so much in Europe and the U.S. For commercial aircraft (inaudible) things are relatively quiet.

FOSTER: So those emerging markets -- for those emerging giants of industry are in private jets, is that correct?

HACHEY: That's correct and primarily we're seeing quite a level of activity in China for business aircraft activity at this point in time.

FOSTER: So are the companies buying them more or individuals?

HACHEY: I would say both, but right now in Asia Pacific, we're talking specifically of China, I would see individuals right now. The level of activity with individuals has increased quite a bit.

FOSTER: How high-end are we talking about here? Obviously, private jets are all pretty high-end, but it could be broken down and segmented that market. And the very, very top end of the market is that the long hold, the larger cabin-type of jet. Is that the part of the market that is doing well?

HACHEY: Yes, absolutely. In fact, the larger aircraft for us, it's the Global XRS and the Global 5000 had been almost insulated throughout the recession. We've seen very little, you know, reduction of activity. Things have picked up actively in that level.

The lower end of our business aircraft portfolio, the Learjet and Aerobodies, things are still relatively quiet. So the high end of our portfolio has continued to be very, very active.

FOSTER: Why do you think that is? Who's flying them or where are they going? Why are they traveling long haul in private jets?

HACHEY: Well, I believe the high end of portfolio is more insulated from economic downturns. If you look at the kinds of people that buy those aircraft, they are very high-net worth individuals.

And yes, they suffer through the recession, but in relative terms, they could still afford the aircraft. Whereas a purchaser of a Learjet probably is lot less insulated and a lot more anxious in an environment that we just had in the last two years.

FOSTER: I just want to bring out the Gulf Stream G50 because that's the top end of the market. It's something which we're told you're going to emulate. You may adapt to an existing plane or you may create a new plane. Now, just let us know what are going to do then. You do need to be competing directly with that aircraft, don't you?

HACHEY: Well, this is more of a sort of catching catch from a Gulfstream standpoint. It has - it has some attributes that are superior to our Global, but in general, we're feeling they're catching up to our Global.

We are constantly evaluating the situation with our customers in the markets and ultimately, you know, as we've gained a large part of this market in terms we share, we don't intend to relinquish that.

So at some point, we'll make sure that we have some type of reply, but at this point, we're very happy with the position we have and with the product that we offer in this segment.

(END VIDEOTAPE)

FOSTER: A bullish airline exec, not surprising at the moment. Now, braving the rain for one of these must-have technological toys.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I am rely happy because I'm among the very first to get an iPad and use it.

FOSTER (voice-over): The wait is over for millions of Apple fans in China. John will be telling how some of them manage to jump (inaudible).

(END VIDEO CLIP)

(COMMERCIAL BREAK)

FOSTER: Well, hundreds brave the pouring rain, (inaudible) for hours.

(BEGIN VIDEO CLIP)

FOSTER (voice-over): They were just itching to get their hands on an iPad, the first to be officially sold in China.

Apple source in Beijing and Shanghai today began selling this year's must-have gadget, which first went on sale in the U.S. back in April.

Most are predicting strong demand to the iPad even though access to content is pretty difficult for many Chinese users.

UNIDENTIFIIED FEMALE (through translation): All of my classmates are here today buying the iPad. We've been using the iPod for a long time and we think it's pretty so that's why we're here today for the iPad.

UNIDENTIFIED MALE (through translation): It wasn't easy getting this. I waited in line a long time today and the rain to buy this iPad.

(END VIDEO CLIP)

FOSTER: Well, the Chinese Apple fans who are unwilling to wait for the (tablets). There was an alternative for them as John Vause reports there has been no shortage of locally made copies.

(BEGIN VIDEO CLIP)

JOHN VAUSE, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): Can't get an iPad? No problem.

(on camera): The i-Robot, OK? It's like an iPad.

(voice-over): Apple's iPads are wholly (inaudible) of gizmos, which causes a sensation everywhere it's sold is only now widely available in China.

But in the scrolling electronic market in the Chinese city of Zenchen, there's no shortage of locally made one of these.

(on camera): It's pretty good. Does Apple know about this?

(voice-over): And they're cheap.

(on camera): $140. How much is this? $175.

(voice-over): All the tablet PCs we saw there are either Android or Windows. Some better than others.

(on camera): It looks like a great big iPhone. Wu Yebin (inaudible) just three months for his J10 tablet to hit the market.

So some people might want to know if you have any - any moral qualms, any problems with what seems to be kind of a rip off of an Apple product.

WU YEBIN, Teso Computer Company: I'm not copying from them, he says, I'm only following them and producing something similar.

VAUSE: The small run down factory complex in Southern China, the makers of a tablet PC say they too had been rip off, only in this case, the accusations are being leveled at Apple.

(voice-over): Sang Wu says he's been selling his P88 for more than a year. This is for grown-ups, he says, iPads are for kids.

And Mr. Wu says he's gathering evidence for a possible legal action. When Apple released its new product everyone around the world started pointing finger at us saying we're the fake version of the iPad. It was devastating, he says.

Apple declined to comment on the accusations, but considered this. Mr. Wu can make about 300,000 tablet PCs a year, that's how many iPads were sold when it was first launched earlier this year making a potential legal case of battle between a giga-Goliath and nano-David. John Vause, CNN, Zenchen, China.

(END VIDEOTAPE)

FOSTER: Well, Apple's iPad isn't the only touch screen tablet on the holiday wish list so far this year. It's got some of the iPad competitors.

Samsung's Galaxy Tab is widely considered to be the iPad's top rival. It runs (inaudible) Android operating system and it's smaller and lighter than the iPad. Unlike the iPad, it is only available through mobile carriers.

Toshiba also it's own Android tablet called Follo. It has a 10-inch touch screen, available with either Wi-Fi only or with Wi-Fi and 3G connections.

In January, Microsoft COC showed off the HP Slate, a tablet running Microsoft Windows 7 operating system, but no launch yet has been announced. Many people believe HP will release a tablet based on Palm's operating system since HP bought Palm earlier this year.

There are also rumors that Blackberry (inaudible) will release it's own tablet. They're suggesting or people are suggesting it will be called the Black Pad.

Now a dangerous situation right now along the eastern coast of Mexico, I want to bring you up to date on that at this moment. Guillermo is at the Weather Center. Hi, Guillermo.

GUILLERMO ARDUINO, CNN INTERNATIONAL WEATHER CORRESPONDENT: Max, we had a hurricane making landfall in the city of Vera Cruz, barely north of it. Originally, we were talking about Tampico and Vera Cruz, this area.

It is dangerous because it's hurricane. After all, it's now a hurricane Category 2, but it is - was it made landfall on a Category 3 status, which is a major cyclone and that also surprised everybody.

It (inaudible) to be a hurricane Category 3 all of a sudden. Well, watch out because now this is not - even though it's making landfall, we see some weakening of the system. It is not the end of it and it's affecting many areas of the country.

The areas in red is where we have the red alert, Vera Cruz, Hidalgo, (inaudible) and Puebla, and the other states to the north Tamaulipas also or the extreme south (inaudible) we have yellow alert.

San Luis (inaudible) also this other state. As you see the next step is to go very near Mexico City that is a very densely populated area. It doesn't matter if it's going on - on a Category 1, 2 or hurricane or tropical storm basis because it is going to be a significant storm.

And the concern - the immediate concern is the city of Vera Cruz, which is prone from flooding and also the (inaudible) effects although those mountains around are going to bring even more rains to the bottom of the mountains, the bottom of the hills that's where the city of Vera Cruz stands.

Also in the next 24 hours, we will see the impact of Carl especially in the area of Puebla with winds at 70 kilometers per hour, but within the next 5 to 6 hours, we'll continue to hear about this in (inaudible) north of Cordova and north of Mendoza.

And it's not the only cyclone, we have Hurricane Igor here in the middle of the Atlantic taking aim at Bermuda. It is two and a half days (inaudible) when we see land fall. It's going to weaken a little bit, but it will be a significant storm anyway.

Everybody is in agreement that the cyclone is going there and finally, we have Julia. But Julia is not going to affect anybody in particular, Max, so it is only a meteorological story that we're looking at.

But the concern is Igor, immediate concern Carl over Mexico. Back to you.

FOSTER: OK, Guillermo, thank you for that. We'll keep (inaudible). That is "Quest Means Business." I'm Max Foster in London. "Middle East Market Place" starts right now.

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