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Quest Means Business

US Jobs Recovery Gaining Momentum; Grounding of Hungary's Malev Creates Opportunities for Other Airlines; Passengers Stranded as Malev Runs Out of Cash; Ryanair CEO Michael O'Leary; Europe Deep Freeze; Hotel Chain Suffers From Weak European Economy

Aired February 03, 2012 - 14:00   ET

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

MAX FOSTER, HOST: Well, at last something in the US economy is working. Unemployment drops.

Down and out rivals swoop in as Hungary's national carrier goes bust.

And the chief executives of Mattel and Starwood hotels tell us how the eurozone crisis is affecting their business.

I'm Max Foster, this is QUEST MEANS BUSINESS.

Hello to you. The US jobs recovery is gaining momentum, it seems. American employers created 243,000 new positions in January. That's more than twice as money in the same period last year.

Now, the growth was far stronger than expected and a major step up from the 200,000 new jobs seen in December. The unemployment rates for the month fell from 8.5 to 8.3 percent. It's giving US stock markets a boost. The Dow is at its highest level in nearly four years, up more than 1 percent, a big boost for the Dow today in current sentiments.

Now, US president Barack Obama says the jobs report is a step in the right direction, in remarks delivered earlier today in Arlington, Virginia. The president also urged Congress to put partisanship aside and help keep the growth going.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We can't go back to the policies that led to the recession. And we can't let Washington stand in the way of our recovery. We want Washington to be helping with the recovery, not making it tougher.

The most important thing Congress needs to do right now is to stop taxes from going up on 160 million Americans at the end of this month.

(END VIDEO CLIP)

FOSTER: CNN's Maggie Lake joins us now from New York. No -- no surprise that the president's making hay from the good jobs numbers. It's an important year for him, isn't it?

MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: It certainly is, and this is a critical piece of economic data if he wants to be reelected. And Max, there's good reason to get out in front of this number today. Hard to find something not to like in it. Not only were those headline numbers much better than the Street was expecting, as you went through just a moment ago, but even the underlying details.

Job gains were broad-based, hours worked increased, indicating this may have some forward momentum. Those who didn't add staffers sort of pushing the ones they have to the limit. Even sticky areas like black unemployment, youth unemployment, also fell.

We spoke to the White House top adviser, Alan Krueger, and asked him why now? Are we at a turning point? What has changed? Here's what he had to say.

(BEGIN VIDEO CLIP)

ALAN KRUEGER, WHITE HOUSE ECONOMIST: I think we're getting past those shocks. Confidence is coming back. And what we'd like to see is an economy that builds on itself, where we get more job growth, creates more income, that gives more confidence, enables families to consume a bit more, save a bit more, as well. And that kind of builds on itself.

And I think it's very important that we sustain the recovery with a continuation of the payroll tax cuts, which is giving families additional money to spend or to pay down their debts.

(END VIDEO CLIP)

LAKE: It's really interesting that he brings up confidence, Max, the idea that we could be entering this sort of virtuous cycle, where people are feeling a little bit more secure about the future, and that itself feeds on sort of momentum for the economy.

But you can hear the administration, worried, they don't want to lose that momentum and steam. They're really pressing hard about those payroll taxes. And they also acknowledge we're not out of the woods.

One area that is still a problem for all the good news in this report is those long-term unemployed. They are still way too high, and they are not necessarily finding work. They'd like to see this continue, but certainly very good news for the Obama administration.

And very good news for the bulls out there, who had been arguing that a recovery's here, we just haven't seen it. These are the kind of numbers you want to see month in and month out if that is, in fact, going to turn out to be true.

FOSTER: Maggie, thank you very much, indeed. Let's go to someone who really understands these things from day-to-day work that he does. Jeffrey Joerres is chairman and CEO of workforce solutions giant ManpowerGroup. He joins us from Milwaukee in Wisconsin. Thank you very much, indeed, for joining us.

What is it behind these numbers that helps explain a dynamic? I mean, are things looking better? Is there momentum in the economy now?

JEFFREY JOERRES, CHAIRMAN AND CEO, MANPOWERGROUP: Well, clearly they're looking better. When you get a number like this, anything over 250 or around that category is you're actually starting to kind of dig out the hole that you were in before. If you're at about 100, 150, you're not really adding enough jobs to substantially increase or decrease the unemployment rate.

So, we do have some momentum. It can be fleeting, though, so during periods of time like this, where you do see some kind of jagged increases. But what we're hearing from our clients is that there is demand. It may be tepid, but it's consistent demand.

And as was mentioned earlier, as you get the more hours worked and this consistent demand, there becomes a latency. In other words, you've got to start hiring. You just can't keep putting it off. And that's what we're seeing right now.

FOSTER: And are you getting a feeling that there are positions within companies which companies are afraid to fill because they think things might go backwards a bit, but as you say, there's a bit of a turning point as in they have to commit to those positions now?

JOERRES: Yes. I -- I'd like to go as far as saying it's a turning point, but I really can't say that at this point. We are still hearing, and we believe it'll be for some time, that companies are going to remain on the edge.

They are going to be very hesitant, because when you bring that staff on and then all of a sudden Europe ends up to be more of a crisis than might be anticipated now, it's tough to go back. So, there's still going to be that wait, wait, wait, see the demand, and then add if I absolutely have to.

So momentum, not quite sure. I think we're starting to see it, but we've got a few more months before we can kind of claim that we're in any kind of clover, if you will, or green space.

FOSTER: A company that has decided to hire is in a great position because there's loads of very well-qualified and good workers out there looking for work, right?

But after a while, once those have been sort of used up, those people, if I can say it like that, you get into the long-term unemployed group. That's about half of people out of work right now, isn't it? And they -- they're not as good a prospect for the companies, are they?

JOERRES: Well, it has been a challenge, and companies are going to continue to be very selective. They're going to raise the bar on what they believe they need in order to be efficient and productive on that day one. So, it's going to be a while before it kind of chomps into that long-term unemployed.

What we have in the US is we have some long-term unemployed that have been there for three years. In today's world in the business world, that's almost an entire life cycle, because they're changed their software, they've changed their process, they've changed managers.

So, clearly this is going to be really tough to get those long-term back in. So, what we can do for training, education, and demand, and I have to repeat that, because if you get an increased demand in the economy, a more robust economy, companies are going to have to dig down, pull that out, and spend the money to train those long-term unemployed to make them more productive.

FOSTER: OK, well, thank you very much. Jeffrey Joerres, appreciate your time from Manpower.

Now next, Hungary's national airline loses its wings, and its rivals are already circling. Ryanair's Michael O'Leary tells us why the grounded Hungary's Malev is a major opportunity.

(COMMERCIAL BREAK)

FOSTER: Now, Hungary's national airline is grounded -- excuse me -- and Ryanair is rushing to fill the gap in the market. The Irish budget carrier has announced 26 new routes to Budapest. That's in addition to the 5 it announced last month. It says the flights will replace most of the routes lost when Malev stopped flying.

The airline ended 66 years of service last night, saying it has run out of cash. Last month, the European Commission demanded the carrier repay millions of dollars in state aid.

Malev was placed under bankruptcy protection just this week. Its debt reportedly add up to $270 million. The airline CEO says its creditors were scrambling to get that money back.

(BEGIN VIDEO CLIP)

LORANT LIMBURGER, CEO, MALEV (through translator): Due to the events of the past weeks and days, our service partners lost confidence in us, and from one day to another, they started to demand the payments owed to them. This has accelerated the outflow of cash to such an extent that, by today, the situation of the airline has become unsustainable.

(END VIDEO CLIP)

FOSTER: Malev's demise means Hungary no longer has a national airline. The country's prime minister says he'd like its successor to be funded from the private sector.

(BEGIN VIDEO CLIP)

VIKTOR ORBAN, PRIME MINISTER OF HUNGARY (through translator): If there is an investor on the horizon who would also risk his own money and not the state's money and would try to operate a national airline without losses, then we would like to create a new national airline.

(END VIDEO CLIP)

FOSTER: Well, the grounding of Malev's fleet has left hundreds of its customers stranded. At Dublin airport, Brian Daly spoke to some affected passengers.

(BEGIN VIDEOTAPE)

BRIAN DALY, TV3 NEWS CORRESPONDENT (voice-over): One of only two aircraft not to make it back to Hungary. This Malev Airlines plane was towed from Terminal One at Dublin Airport this money to be parked out of the way of the rest of the airport traffic.

According to Malev's ground handling agent in Dublin service air, the plane's crew was making its own way home. And it was a similar fate for the 113 passengers booked to leave Dublin for Budapest this morning with the airline.

This woman was home in Derry for her sister's 50th birthday party. She and her daughter were due to fly with Malev to Budapest for a connection to their home in Istanbul.

SIOBHAN TURKURER, PASSENGER: We've had to pay 600 euros to get a flight on Turkish Airlines, and we're having to have a seven or eight hour wait to get the Turkish Airlines flight.

DALY: And this group from Macedonia who were working in Ireland for the past week on an environmental project said they got as far as checking in all their luggage.

IAIN MCCLEAN, PASSENGER: Well, we weren't told it wasn't leaving until after we were through -- we were actually through security and at the gate, and we were brought back from the gate and no flight. That's it. Look after yourself.

DALY: And looking after themselves has cost them a lot of money to get all 20 in the group home.

UNIDENTIFIED FEMALE: It cost about 8,000. Because the -- yes, it's almost 8,000.

DALY: After 66 years, Malev announced this morning it was ceasing all operations. It came after the European Commission ordered it to repay 130 million euro in state aid it had received over three years.

But quick to spot a commercial opening, Ryanair announced today it was bringing forward its plans for a Budapest relaunch.

DALY (on camera): Ryanair will base four brand-new Boeing 737s in Budapest to launch a new service from there to 31 destinations in two weeks time. It's also holding an open recruitment day and is inviting applications next Tuesday from Malev workers who've just lost their jobs.

Brian Daly, TV3 News, Dublin Airport.

(END VIDEOTAPE)

FOSTER: Well, earlier, I spoke with Ryanair's CEO, Michael O'Leary. He told me why he's so keen to fill the space that Malev has left behind.

(BEGIN VIDEOTAPE)

MICHAEL O'LEARY, CEO, RYANAIR (via telephone): Clearly, Budapest, Hungary is a terrific tourism product, but it's not just tourism. There's an enormous demand for business as well as tourism travel to and from Budapest and Hungary, and one of the big blockages of that in recent months has been Malev's high fares, the uncertainty about Malev's future.

And I think it also calls into question the high charges being leveled by Hochtief at the Budapest airport. This needs to change. Budapest Airport needs to lower its high charges if -- Budapest -- if the traffic and the visitor numbers are to be maintained or grown.

FOSTER: When we come out of this recession, if I can describe it as that, how many airlines do you think would have been lost to the industry?

O'LEARY: I think there'll be more losses. There's clearly some other very -- there are other loss-making airlines, both in Central Europe and Western Europe. And we've had Spanair two weeks ago, Malev today. There will be others.

I think the clear message is that coming out of the current recession, there's going to be five very large, financially strong airlines in Europe. We'll be led by Ryanair, the biggest, British Airways, Lufthansa, Air France, and EasyJet.

FOSTER: In terms of the situation with all these passengers stranded around the world, according to the company, something like 7,200 passengers stranded, have you got any sense of how bad the situation is for them just when there's someone being in the industry?

O'LEARY: Actually, it's not particularly bad, A, because there was a lot of fear that Malev was going to go bust anyway. And remember that in Hungary, a lot of people can still travel over land, so there's many other alternatives. But we've launched a 9.99 rescue fare today for some of Malev's passengers to our Bratislava base, but much more.

So, 7,000 passengers isn't going to be a huge disruption, particularly when you have coach, rail, and air alternatives.

FOSTER: You're obviously taking up a lot of those routes, now, off the company, and you had some routes already. So, in terms of the number of bookings you've had today, what sort of impact has there been?

O'LEARY: It's just been a -- we've had an extraordinary surge. Ryanair responded this morning by announcing that we'd open a base in Budapest in just two weeks time. With the opening of the Turkey one, new routes at fares starting from 9 euros or 2,900 forints.

And in the first two hours when we -- we announced it at 1:30 today, and the first two hours, we've taken over 5,000 bookings from Ryanair's new Budapest base already. And I think that's a testament to the fact that the airfares are so low.

FOSTER: But it's also because they haven't got any alternative on Malev anymore.

O'LEARY: Well, I'm not sure Malev was ever really an alternative. Malev has been a kind of a -- a limping, very ill patient for many months, now.

I think what's happened, though, is Wizz Air have fares of about 30 euros, EasyJet have fairs of 60 euros. Today, Ryanair's arrived into Budapest with just 9 euros, and I think this is what will really drive Hungarian tourism and jobs for the rest of this year.

We're also going down to Budapest again next Tuesday to interview or to invite applications from Malev pilots and cabin crew to help us launch these -- this base and these 31 new routes in two weeks time.

(END VIDEOTAPE)

FOSTER: Well, another thing that's affecting the airline industry right now is the freezing temperatures across the continent. Jenny Harrison has been monitoring that for us. So, what have you got in terms of a look into the weekend, Jenny?

JENNY HARRISON, CNN METEOROLOGIST: Yes, not getting any better, actually, Max. And in fact, there's a lot of heavy snow on the way, so that will just compound the issue, of course, which is this continuing bitterly, bitterly cold air.

Over 160 people have died, now, across areas of Europe, particularly the central regions out towards the east. Ukraine has been particularly hard-hit. And as I say, there's more snow in the forecast.

As for those temperatures, another bitterly cold night. Look at these numbers. Minus 27 in Kiev, the average is minus 7. The overnight low, the same. In Minsk, the average there is minus 9, and so the list goes on.

And it has been going on, now, of course, for -- this is almost into the sort of week, a second week. And this is another reason why it is now having such a big knock-on effect.

These are the current temperatures, so minus 17 in Kiev right now, Moscow colder at minus 22. But then, you factor in the wind and those temperatures go down again.

Now, what will be happening as we go into the weekend is these temperatures across the -- the southeast, Kiev for example, begins to come up a little bit, because the really bitterly cold air is still in place. It's going to push further to the wish across more central areas, so Germany, for example. You're going to see your temperatures dip across those eastern regions.

And then, this low pressure system comes in towards the southeast. So, as it does that, the winds are going to come in the anti-clockwise direction, coming in for a slightly milder air, and so that will actually bring the temperatures up.

But on the downside of that, with all the moisture coming in from the Atlantic and the moisture that's being picked up, as well, across the Med, this is what is going to bring in the very heavy amounts of snow.

No heavy snow so far in Rome, it's looking very nice. 1985 was the last really heavy snowfall, but there's more in the forecast. And of course, there has been plenty across the mountains in Italy, and there's more again through the weekend.

Greece, again, not unusual to see snow, but pretty heavy here, as you can see. And in the north coast of Spain, San Sebastian, again, look at this, one of those lovely pictures with snow on the sand.

So, there's more in the forecast generally across Europe, but certainly Kiev adding to your problems, there, there is more snow. And with these temperatures as well, over 1,000 people in Kiev have been treated already for frostbite, hypothermia. And this will continue, as well.

There have been tents, actually, erected in the city, heated tents, in Kiev. And then -- you can see, obviously, for people to try to find somewhere that it's actually warm.

Warsaw is going to be mostly clear. There won't be any snow in the forecast but, again, bitterly cold by day, by night, not much change in the temperatures. And you can see here in Minsk, it does get a little bit less cold as we head into London. But in all cases, there's snow in the forecast.

And there it is, again, just a reminder. There's the snow coming into the southeast, bitterly cold air still across those central and northern regions, and look at the amounts. Just staggering. And in fact, in Sarajevo, there's going to be over a meter of snow.

And Max, I have to warn you, there is some snow coming across towards the UK. That means London and possibly Paris as we head through the weekend, so get ready for that.

FOSTER: OK. I'll wrap up. Jenny, thank you very much, indeed.

Coming up next on QUEST MEANS BUSINESS, why there's a little too much peace and quiet in Europe's luxury hotels, to the owner, at least.

(COMMERCIAL BREAK)

FOSTER: The company behind the W and St. Regis hotel brands says Europe is not a very welcoming place at the moment. Starwood Hotels and Resorts saw profits cut in half in the fourth quarter, partly on weaker revenue in Europe.

It's expecting demand for rooms in the region to remain fragile, and its outlook for this year is on the low side of market expectations. However, revenue beat forecasts this year, up 14 percent to $1.5 billion thanks to strength in the US and in emerging markets.

We go live, now, to CEO Frits van Paasschen at our New York bureau. Thank you very much, indeed, for joining us.

First of all, I want to talk about the US, which is where you are, because you had these great jobs numbers, and there's a sense from the jobs market that there may be a bit of a turning point, some momentum. What are you feeling from your industry?

FRITS VAN PAASSCHEN, CEO, STARWOOD HOTELS AND RESORTS WORLDWIDE: We continue to see strength in the US market. Our sense is that the financial markets are pricing in a much more pessimistic scenario than what we're hearing from our customers.

Our customers are coming back. And just like in Europe, in North America, there have been very few new hotels built in the last several years, and none on the way. So, rates are going up. We're already at occupancies that are just about right where they were before the crash.

FOSTER: You obviously rely heavily on the business market. Are business people traveling still? Aren't they coming back?

VAN PAASSCHEN: Absolutely. What you see today is most companies are very profitable. They're deleveraged. They recognize that the world economy is growing slowly, and where that growth is is probably not in their home market.

So, we continue to see what we've been calling a travel-intensive recovery, and that's one where the economy is a bit more tepid than the growth and demand.

FOSTER: But why aren't they cutting back? You're at the top end of the market. Why aren't they downgrading from your level of hotel?

VAN PAASSCHEN: What we find, and typically our customers are professional services, they're high in executives, they're affluent travelers, these are people who have an appetite for luxury. In fact, we doubled the number of luxury hotel rooms in our system over the last five years, and occupancy and rate has kept pace with that growth in supply.

FOSTER: And what about Europe, then? Because that's the big concern in the global economy right now. Are European business people traveling? Are people traveling to Europe?

VAN PAASSCHEN: To put it in perspective, Europe's about 12 percent of our total room base, so it's an important market, but we're certainly well diversified geographically.

So far, we saw a drop-off in demand in the fourth quarter and don't see prospects of that coming back necessarily quickly. On the other hand, this is the off season, so it's very tough to call what the actual impact on the business will be.

And there's a couple of things that give us a sense of optimism. The first is the fact that even though our business overall is 80 percent business to business, our European business is 50 percent travel and leisure, and what we see, there, is an increasing growth in demand and interest in Europe from so many markets outside of Europe.

The other is, there are many global companies based in Europe who, while they certainly have Europe as an important market of their own, their fortunes are tied much more to their success around the world. So, they're out traveling, as well.

FOSTER: I was interested to see that you've really boosted your loyalty program, haven't you? What's the thinking behind that? Have some of your customers been straying?

VAN PAASSCHEN: No. In fact, just the opposite. Over the last five years, spending by what we call mega-travelers -- and by the way, these are people who are out on the road 50 or 100 days a year. Spending by that group of people within our system has tripled.

And so, what we're doing is we're investing in making sure that we build even more loyalty, even more opportunity to recruit and maintain exactly that type of traveler.

FOSTER: OK, Frits van Paasschen, thank you very much, indeed, for joining us.

Now, as US unemployment falls, stocks on Wall Street are rising. We'll have the latest from the New York Stock Exchange with good news from there this Friday. We'll have more on that in just a moment.

(COMMERCIAL BREAK)

FOSTER: Welcome back, I'm Max Foster, you're watching QUEST MEANS BUSINESS, and these are the main headlines this hour.

Cairo is seeing its worst protest violence in months. Some 1400 people have been injured in clashes with security forces. At least five people have died in the past two days of unrest. The deadly football stadium riots on Wednesday revived anger at the military government and calls for the ruling council to step down.

Israel's defense minister says later may be too late to stop Iran's nuclear program. His remarks followed reports that the US now believes Israel might attack Iran this spring. That brought a harsh response from Iran's supreme leader, who said Iran can issue threats of its own.

Amateur video out of Syria is said to show protesters running from live fire in the flashpoint city of Hama. It's one of several violent hot spots this Friday. Meantime, Russia is rejecting the latest version of a UN Security Council resolution on the Syrian government's crackdown.

A group of hackers claims to have secretly recorded a telephone call between the FBI and new Scotland Yard. Anonymous released the 16-minute conference call on its Web site today. The FBI and new Scotland Yard have confirmed the call is genuine.

There's no letup in the deadly cold snap that has left much of Europe under a blanket of snow and ice. It's killed more than 100 people in Ukraine. Many people literally froze to death in the streets. These pictures were sent to us from Romania, where at least 24 people have been reported killed by the cold.

Now posted, U.S. jobs numbers are giving stocks on Wall Street a boost this Friday. U.S. employers created 243,000 jobs in January, more than twice as many as expected. CNN's Patricia Wu joins us from the New York Stock Exchange. So good day there today?

PATRICIA WU, CNN REPORTER: Yes, well absolutely, Max. We're hearing fantastic, amazing, a monster report, just some of the superlatives that have been used to describe the 243,000 number in January.

One analyst even called it a touchdown, invoking this weekend's Super Bowl of course, with the New York Giants in the big football game this weekend, we have got a very good mood on the trading floor today.

Now this jobs report was really about the expectations game, with caution over Europe, worries about U.S. economic growth tempered the expectations about just how well the U.S. jobs market was really doing.

And the estimates that we saw were all over the map, and they were all lower than the actual number. So it shows just how uncertain analysts have been about the economy, but what a difference a day makes. The solid jobs numbers giving the Dow a chance to close at its highest level since May 2008.

We're still hovering near session highs right now, and really just one more big push away from 13,000. And you know, Max, last time we saw 13,000 on the Dow George W. Bush still in office, and Lehman Brothers was still in business.

FOSTER: A long time ago, that feels (ph). Patricia, thank you very much indeed. Let's have a look at a snapshot of the social media and tweets from the top, then, because the Republican presidential candidate, Mitt Romney, tweets that, "While we welcome a decline in unemployment, these numbers can't hide the fact that the president's policies have prevented a true recovery."

Dan Alpert, managing partner of Westwood Capital, tweets, "Blowout jobs number. Participation up. Other indicators steady or slightly up. Service sector is gearing for recovery -- hope it's right. #QEnot"

Facebook's IPO may be up front, but estimations that Google's social network is already close to 100 million followers has Rupert Murdoch tweeting this -- he's a favorite on this segment (ph), isn't he? "All eyes today on Facebook and sweeping statements. But note really interesting news by Google. Things are buzzing."

And if you want to keep up with what's buzzing here at CNN, follow me at MaxFosterCNN. After more than 50 years now, you might think the fantastically pink, anatomically challenged Barbie might be losing her appeal, but with sales up 12 percent last year, she's obviously a girl who's in demand. Full year profits for her maker, Mattel, rose by 7 percent.

Fourth quarter profits rose by 14 percent, $370 million. Barbie and her sisters aren't the only ones making big money for Mattel. The company said overall toy sales have increased as the staff of (ph) the financial crisis. That means yourself (ph) has grown by 5 percent despite rising costs.

CEO Bryan Stockton says at least part of the reason is the crisis itself, with parents spending more to try to shield their children from economic hardship. I spoke to Bryan Stockton, who is at the Nuremberg Toy Fair in Germany. I began by asking him how the holiday season, always the great barometer for the toy industry, had gone for Mattel.

(BEGIN VIDEO CLIP)

BRYAN STOCKTON, CEO, MATTEL: We felt very positive about this year's holiday season for toys. As an industry, the industry quite well with the splat (ph) just slightly up, and we saw actually growth in Europe of about 3 percent, which we thought was terrific, given the economic concerns that consumers have.

For Mattel, we had a very good year. Our share grew by about a share point, both in the U.S. and Europe. So it was a very successful time for us.

FOSTER: Certain segments doing particularly well. Fisher-Price not doing as well. Is there something going on with the age groups here?

STOCKTON: Well, we've said for the past year that the Fisher-Price brand is in a transition mode. There's been a tremendously successful brand for us and a real part of our strength and growth over the past few years.

But we also know that moms are changing and Fisher-Price needs to change with those moms. So we've focused on sharpening our message this year with the new campaign called "The Joy of Learning." And it focused on retail execution.

So we're actually pleased because we saw consumer sales begin to pick up at the end of the year for Fisher-Price. So, but there will be another transition this year in 2012, but we're very pleased with our progress.

FOSTER: Also this year I presume the deal for Hit (ph) Entertainment is going to close over Thomas the tank engine and Bob the Builder.

STOCKTON: Yes.

FOSTER: Playing at my house constantly. But what are you going to do with those brands, because they're big already, aren't they? But I guess it's a case of commercializing them.

STOCKTON: Well, we actually closed the deal on Hit (ph) Entertainment yesterday, so we're thrilled to have the portfolio brands and the terrific people that are employed there with the Mattel team now. You know, the brands are terrific. Thomas is one of the great infant-preschool brands. It will actually be one of our top five brands at Mattel.

Having said that, there's still plenty of opportunity to grow Thomas in Europe. There's a lot of opportunity in Asia and Latin America as well. They've got some terrific other brands in their portfolio, like Mike the Knight (ph) and Bob the Builder, and we're going to work hard with them to see how do we really get the most value out of those brands.

FOSTER: And in terms of the toy sector, isn't it the case that if we go into a recession or uncertain times, parents may cut back on some things, but one thing they're not going to cut back on is compromising their kids. Is that part of the trend here?

STOCKTON: That is absolutely true, and I think this year was a particularly watershed year in terms of understanding that.

So if you look at the toy industry today, it's about 5 percent larger than it was before the economic crisis started. And that's despite the fact that commodity in crisis, including labor that impacts everyone in the toy industry, are up about 30 percent. So we think it's proven to be a pretty resilient industry in these difficult times.

FOSTER: Is there -- sometimes the case that they actually spend more on toys to try to compensate for the gloom?

STOCKTON: Well, I can't speak for each parent, but we certainly know that the toy industry grew in Europe about 3 percent. So that would suggest that parents do want to make sure that their kids are happy, and frankly, insulated from some of the issues and challenges that we all face as adults in an economic crisis.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

FOSTER: A warning from the E.U. trade commissioner. Karel De Gucht told Richard that protectionism is here, and it's very dangerous. In our series of special interviews this week, called "Davos Plus," Richard asked the commissioner just how concerned he is about trade barriers.

(BEGIN VIDEO CLIP)

KAREL DE GUCHT, E.U. TRADE COMMISSIONER: I'm very worried. And in fact, I'm more worried than most other ones, because I see a much more structural protectionist -- protectionism coming up. It's not focused any more on (inaudible).

It's focused on national (inaudible) that you have to respect on the forced transferral (ph), things like true property rights, because that is the only raw material (ph) that we have. It's about caps on investment --

RICHARD QUEST, HOST, QUEST MEANS BUSINESS: So it's protectionism through the back door?

GUCHT: Yes, through the back door, but very dangerous, because it's changing the game. And you never come back on that. You know, once you have done, it's there for ages.

QUEST: Are you seeing evidence of that happening? Because Pascal Lamy (ph) said that the -- to me that the evidence that was there of protectionism was as yet not too significant, but was worrying.

GUCHT: I'm more worried about this in terms of order of magnitude than Pascal (ph) is. I believe it's really a driving force in a lot of states and certainly in the emerging economies, like for example, Brazil and China. You see an enormous lot of protectionism.

QUEST: We've nobody else to blame but ourselves then, have we, in the sense of there's been a stunning failure to complete the Doha round, which is inevitable -- and in an economic crisis situation, it's inevitable people are going to put the barriers up.

GUCHT: It's a political mistake that we didn't finish the Doha round, because apart from opening new market, this was also about making sure that no tariffs increase could happen any more, that we are -- we're in fact sort of taking a picture, and that's very hard to say. And we are witnessing now that, as a result of the economic crisis, a lot of the increases of taxes and other measures are taken.

QUEST: Would we be better off killing off the Doha round, taking what can be salvaged from it, and working with that, but admitting that Doha as an overarching round cannot be reached, and now working towards the individual segments that can be sections and chapters that can be?

GUCHT: I have my doubts about this, because unless we reach a certain common understanding at the monetary (ph) level, also the kind of prelever (ph) agreements on new topics that are very important, I'm not going to be a fruit (ph), you know, this is -- this is a false question. I believe that at least to the -- we need to do part of the DBA (ph), around like, for example, what you do --

(CROSSTALK)

QUEST: Look, no, I'm not suggesting that you don't do those parts in the --

(CROSSTALK)

QUEST: -- but you no longer call it the Doha Round.

GUCHT: I'm not a journalist and not a politician, so it wouldn't change that much to the -- to the content. You have to do part of it, for example, the part for the LDCs for least developed countries.

And then I think you could create momentum to tackle, for example, problems like papers that have dates (ph) which are then important to everybody, investment which is particularly important for the developed economies. So we need to create momentum and for doing that, we'll have to do some parts of the DBA (ph) as well.

(END VIDEO CLIP)

FOSTER: Now the Prince of Wales weighed into the fisheries debate today, and he says it's not all doom and gloom. A report by the prince's new charity, the International Sustainability Unit shows fishing could be worth $50 billion more per year if certain stocks were given time to recover and then managed in a sustainable way.

Prince Charles says there are three core principles that need to be adopted more widely: managing fisheries in the context of the whole marine ecosystem, changing the economics of fishing through rewarding positive behavior and regulating and enforcing the rules of fishing activities.

The Prince of Wales told leading industry figures fishing is at a turning point which in collapsing or increasing both the amounts of fish in the oceans and the money generated from the industry.

(BEGIN VIDEO CLIP)

CHARLES, PRINCE OF WALES: Of course, the challenge of making the transition to more sustainable fisheries is only one of a number of pressures on the marine environment.

Oceans are becoming more acidic, runoff from industrialized farming is causing waters to become too rich in nutrients, thus creating dead zones in the oceans, waters are getting warmer and more and more square miles of them are being polluted with plastic.

The human assault (ph) on the Earth is depressingly comprehensive. Many -- and like myself -- but there's enough (ph) at present -- are deeply concerned about all of these issues.

(END VIDEO CLIP)

FOSTER: Now that's QUEST MEANS BUSINESS for you. I'm Max Foster in London. Thank you for watching. "MARKETPLACE AFRICA" is next for you. See you next week.

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