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Quest Means Business
UK Growth Slashed; Further Signs European Economy Slowing; Mixed Session for European Markets; Eurozone Update; German Arms Export; Dow Down Slightly; New American Airlines; Pilots Reject American Airlines' Offer; Cathay Pacific Loss; Pound Up, Euro Down
Aired August 08, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: It's not just slow growth, it's no growth. The Bank of England hints at life support for the UK economy.
A high-stakes power grab. UK MPs are accusing the US of attacking London through Standard Chartered.
Also tonight --
(BEGIN VIDEO CLIP)
TOM HORTON, CEO, AMERICAN AIRLINES: One thing I'm certain of is that the new American post-restructuring will be a very profitable, successful company.
(END VIDEO CLIP)
QUEST: In a broadcast exclusive, the chief executive of American Airlines, why success is the only option for American.
I'm Richard Quest. Of course, I mean business.
Good evening. The UK economy is flatlining. That's not our verdict, but that of the central bank. The Bank of England today cut its growth forecast for the year to zero, saying Britain had taken a bigger hit from the global financial crisis than previously thought.
(BEGIN VIDEO CLIP)
MERVYN KING, GOVERNOR, BANK OF ENGLAND: We are navigating rough waters, and storm clouds continue to roll in from the euro area. Unlike the Olympians, who have thrilled us over the past fortnight, our economy has not yet reached full fitness.
But it is slowly healing. Many of the conditions necessary for a recovery are in place, and the MPC will continue to do all it can to bring about that recover.
(END VIDEO CLIP)
QUEST: That recovery that he talks of, it's not only the UK that's slow to heal, the whole of Europe seems to be on some form of monetary life support. And if you look at the patient, the vital signs are not looking that good tonight.
Let's start with the United Kingdom, where GDP -- we've kept the numbers fairly stark for you, as it's being cut from 0.7 of growth -- 2 percent two years ago -- to just now zero in 2012. And although the central bank describes a modest pace of recovery, it also says things like credit growth is moribund.
In France, you can see GDP -- there's a recession in France, it's falling back into recession, double-dip, second time in three years. The economy is in contraction.
And as we told you last night, Italy's economy, that is Q-on-Q a shrinkage of seven tenths of one percent. The fourth consecutive quarter of contraction.
Right over here, Germany. Well, Germany is showing symptoms of contagion. We had export numbers showing that they were down, and also industrial output fell 0.9 tenths of a percent. More is expected later in the year. It's a sorry picture.
The European markets, possibly more to do with August and thin trading than anything else, the FTSE barely changed, Xetra DAX barely down. Just look at those numbers. It's a testament to, I suppose, inactivity today after the volatility that we have been seeing in recent weeks.
Holger Schmieding is with me. He's the chief economist of Berenberg Bank. When we look at what we've just been talking about, let's start with the Bank of England. No growth. What's next?
HOLGER SCHMIEDING, CHIEF ECONOMIST, BERENBERG BANK: Well, first of all, no growth is a very optimistic forecast. On the recent UK performance, you have to say that first half of this year, the UK did significantly worse than even Spain.
Probably the UK this year's actually heading for declining GDP rather than just flatlining. The outlook is modestly positive, the emphasis is on the modestly positive.
QUEST: How do they even have the gall to use the word "modest"? This isn't modest growth that they're talking about next year. This is sclerotic growth they're talking about: 1, 1.2, 1.5 percent.
SCHMIEDING: Well, for an economy which actually is over-leveraged both on the government side, on the consumer side, which has had real estate problems and still has a real estate problem which is as bad as that of Spain, 1 percent plus growth actually isn't too bad.
What I think we need to do near-term is to get used to simply the fact that the UK has problems and won't outgrow them for at least a year or two.
QUEST: You and I have talked before on this issue that, frankly, what nobody has really ever honestly said by politicians or central bankers is, "This is going to take years. Get used to it."
SCHMIEDING: In those countries that have generally problems in their fiscal side and those countries that have households which are over- leveraged, yes. Fiscal repair and balance sheet repair takes time.
QUEST: We've just seen then industrial production in Germany is down, we've seen France is back in recession, de facto Italy. What's the overall -- what needs to be done?
SCHMIEDING: First, the outlook for Germany and France isn't actually all that bad. They are being hit by things outside their control. With the European Central Bank now, and that's what needs to be done, with the European Central Bank now saying we will do a lot to stop the rot, Germany and, to some extent, France, can proudly perk up.
QUEST: Right. But the UK, for example -- Mervyn King says cutting interest rates, cutting near the half point. Let's ignore issues of zero- bound interest rate. Cutting half a point ain't going to make much difference.
SCHMIEDING: He's absolutely right in that cutting interest rates further doesn't make much of a difference. Doing much more quantitative easing, that is buying government bonds in the UK, is helpful, but is not really going to revive the economy.
First of all, the government -- there is not much you can do when you have a big problem. Secondly, the most positive thing the government could do is to strengthen business confidence by maintaining a business-friendly course on taxation and regulation.
QUEST: So, if you pull the strands together tonight, we're in the middle of a -- we're in the dog days of the summer, the dog-hot summer days. It doesn't bode well for the rest of the year, does it?
SCHMIEDING: It does not bode well for the rest of the year, but the end of the year is likely to be better than the summer. Why? The European Central Bank is doing more, China is starting to rebound a bit, and the US is refusing to fall off the cliff.
QUEST: I always enjoy having you here because no matter how pessimistic I try to make things sound, you always manage to put a cheerful face on it. Many thanks. Good to see you.
SCHMIEDING: My pleasure.
QUEST: Now, such is the pressure on Germany, the government is thinking about relaxing its tight arms export restrictions, according to "Spiegel" reports. The German Economics Ministry is said to be concerned that lengthy approval procedures are harming competitiveness.
It's already looking beyond the eurozone for trade, and some of its new customers are proving controversial, as our correspondent Fred Pleitgen tells us from Berlin.
(BEGIN VIDEOTAPE)
FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): It's the pride of Germany's defense industry, the Leopard 2 Main Battle Tank. Many countries are interested in buying it. Among them, Saudi Arabia and Qatar. Despite criticism, members of Germany's governing coalition want to approve the sales.
"We have to take into account our own security interests, our economic interests and, of course, also human rights," says Martin Lindner of the liberal party. "And I would come to the conclusion that this export should get the green light."
Saudi Arabia and Qatar want hundreds of tanks. The deals would be worth billions of dollars and secure hundreds of jobs in this country's defense industry, at a time when Germany itself is phasing out most of its heavy armor for lighter combat vehicles and many traditional clients from Europe are breaking away.
PLEITGEN (on camera): Germany is the third largest exporter of arms in the world, but as European economies are in turmoil and many NATO partners are cutting their defense budgets, the country is looking for new buyers for its military hardware.
PLEITGEN (voice-over): And the Middle East is emerging as one of the most important markets, not just for tanks. Germany recently sold several stealth submarines to Israel, which the IDF operates as the Dolphin Class.
Henning Riecke from Germany's Council on Foreign Relations says the deals put Germany in a dilemma.
HENNING RIECKE, GERMAN COUNCIL ON FOREIGN RELATIONS: It is a funny contradiction. On the one hand, the Germans have their problems with the use of force in international relations. They are very much afraid of an uprising militarism that might come out of this.
On the other hand, Germany is the third largest arms exporter in the world and has a large share in this billion-dollar market.
PLEITGEN: Germany has traditionally avoided arms sales to conflict areas. Last year, Saudi's tanks rolled into neighboring Bahrain to help put down an uprising there. But Saudi Arabia is also seen by the West as a counter weight to Iran in the region.
Margot Kaessmann of the Coalition Against Arms Exports says the deals must be stopped.
MARGOT KAESSMANN, COALITION AGAINST ARMS EXPORTS: In former times, there was a great restriction, to say we only export arms to NATO partner states. And certainly, if you see that we have exported arms to Libya, for instance, and now Qatar is in question of being somebody who can have arms from Germany, there's a change in politics, obviously.
PLEITGEN: The German government used Qatar as an ally in the region, but in this case, the decisions on tank sales, Berlin faces a difficult dilemma. Approve the deals and face public anger at home, or turn them down and potentially lose lucrative export markets in the Middle East for good.
Fred Pleitgen, CNN, Berlin.
(END VIDEOTAPE)
QUEST: In the United States today, stocks at this hour, little change.
(RINGS BELL)
QUEST: Those are the numbers. It's a very quiet day. The question is whether if you take European quietness, it's because of the news of the day or just exhaustion or it could be the date, it's just beginning in August and, well, you never know. But that level, just off three points. Let's not waste a second more talking about it.
Coming up next, it's a broadcast exclusive. The American Airlines chief executive, Tom Horton, he talks about putting safety first, the new American, and possible partnerships, in a moment.
(COMMERCIAL BREAK)
QUEST: More problems and challenges tonight for the US carrier American Airlines as it worked its way through bankruptcy. Pilots for the airline have expressed their anger by voting against the contract offer that the airline put to them, which would have given them a considerable stake in the airline.
Also, American is now having to face unpublished details from the US Federal Aviation Authority, which has told the court handling the proceedings it's seeking $162 million for various safety violations.
Now, earlier today, before the announcement of the pilots' decision, I spoke to American's chief executive, Tom Horton. He told me why on the safety question the FAA is acting now and why, when you look at the restructuring for American, he believes success is the only option.
(BEGIN VIDEOTAPE)
HORTON: Because we're in restructuring, the FAA felt the need to stake its claim now and put the claim in as it is, but the process of evaluating that fine will run its course.
QUEST: And you don't expect it to be anything like -- or do you expect it to be like the sort of number that we're seeing, $150, $160-odd million?
HORTON: It remains to be seen, but I don't think so.
QUEST: Give us an overview of where the restructuring stands at the moment. Because you've asked for an extension, and you've received it, now, until the end of the year.
HORTON: Well, we've made good progress. The initial phase of the restructuring is about restructuring debt and aircraft leases and grounding older airplanes and rationalizing facilities, renegotiating supplier contracts, those sorts of things. We've made tremendous progress on those things. And those amount to hundreds of millions of dollars of savings per year.
So, that is well down the track. We just reported our second quarter results for the company, and we had our first second quarter profit in five years. So, it's beginning to manifest itself in the results.
QUEST: You've had very preliminary talks with US Airways. You had a meeting, which everybody got extremely excited about. Now, I'm sure it was an amicable meeting and you got on well. But why are you waiting? What is the significance of wanting to go it alone independently rather than trying to do a deal with US Airways at this moment?
HORTON: Oh, I don't think we've pre-judged any outcome, Richard. We have been very focused in the early days of the restructuring of getting our own house in order. That was the first order of business, in my view.
QUEST: Are you in favor or against, ultimately, a deal with US Airways?
HORTON: I'm in favor of what creates the most value for American and the best outcome for its people. That could involve US Airways, it could involve another partner, it could involve no combination whatsoever. One thing I'm certain of is that the new American post-restructuring will be a very profitable, successful company.
QUEST: Does the new American include a small stake owned by IAG? Willie Walsh has said he's interested.
HORTON: Their view is the same as our view, a strong American is good for IAG and good for One World. And I think his view has been if an investment makes sense strategically for IAG and would be welcomed by American, they would be in favor of that.
QUEST: So, would you welcome it?
HORTON: I think we're not at that stage of the process yet, Richard, because we're not yet at the stage of the restructuring where the capital structured is at issue. And when it is, I think that will be -- that will be addressed. But we appreciate the support of our partner, and that's a good thing.
QUEST: You're not ruling it out?
HORTON: No, I wouldn't rule it out.
QUEST: You're now at the difficult part where your staff have to vote on the various proposals before them, and their choice, really, is clear, isn't it? They go with your proposals and get something or you end up in strife.
HORTON: We've been very focused on trying to get to consensual agreements that will create the best outcome for the company, a successful, profitable, growing company, and we think that represents the best outcome for the people of American. And I'm pleased to say that we have reached tentative agreements with all of the work groups, and they are in various stages of ratification.
QUEST: Are you confident that those that are waiting to be ratified, or is it fingers crossed?
HORTON: I think we'll have to wait and see. It's a very individual decision. Each member has a vote, and we'll have to wait and see how folks vote. The people of American want this company to succeed. I feel about American like I feel about America. Success is the only option.
(END VIDEOTAPE)
QUEST: Tom Horton, the chief executive of American. And in the last half an hour or so, the united -- US Allied Pilots' Association, representing obviously the pilots -- tells us the American Airlines offer has been rejected, 4,500 pilots voted against the measure. Just under 3,000 were in favor.
Other American mechanics approved the -- the contract by a small margin. We're waiting to hear any reaction from American on the failure of that vote.
American's One World partner, Cathay Pacific, posted its worst half- year loss in nearly a decade, $120 million in the first half of the year, which is a massive swing from profit of last year. Now, the airline says higher fuel costs were the factor, and the chief exec, John Slosar, who's been on this program more than once, says a new, more fuel-efficient fleet in the future will help cut costs.
(BEGIN VIDEO CLIP)
JOHN SLOSAR, CEO, CATHAY PACIFIC: More than 50 percent of our long- haul capacity -- our capacity is long haul. Long-haul flights by definition use more fuel, because you're flying further. So the efficiency of those airplanes matters tremendously.
So, we've been big investors in 777-300s which, I think, are the most efficient long-haul airplanes at the moment. We have orders in place for APG 900s and, most recently, APG 1000, which is almost the same size as a 777, but it's going to be 16 or 17 percent more fuel-efficient. So my goal by the end of this decade is really to have the most fuel-efficient long- haul fleet in the business.
(END VIDEO CLIP)
QUEST: Now, tonight's Currency Conundrum. Here's a good one for you. Sticking with the airline theme, how much loose change does Virgin Atlantic find, on average, per passenger per flight. You know, down the back of the sofa, or down the back of the seat, or the seat front -- the seat pocket in front? Eight cents, 18 cents, 28 cents? The average amount that it finds per passenger, Virgin Atlantic.
The pound shot up after the Bank of England's latest inflation report, a quarter percent higher against the dollar. The euro's falling by the same amount. Yen is strengthening. Those are the rates --
(RINGS BELL)
QUEST: -- and this, of course, is the break.
(COMMERCIAL BREAK)
QUEST: The Bank of England governor, Mervyn King, says the British economy is like an athlete who has not returned to full fitness. Well, tonight, we'll see if he's right. Welcome to day three of the Quest- athlon.
(BEGIN AUDIO CLIP)
(CROWD CHEERING)
(END AUDIO CLIP)
QUEST: And on today's competition, we have once again Great Britain, Brazil, China, Germany, and the United States, each competing on five different events. So far, we have had China winning the growth forecast race.
(BEGIN AUDIO CLIP)
(CROWD CHEERING)
(END AUDIO CLIP)
QUEST: On the question of the stock market, it is Germany which is way out in front with a 17 percent jump in the main index.
And now, today -- today's battle is all on the economic stakes, it's all about the Credit Rating Weightlift. Which of our five countries has the highest rating, and therefore goes into the next stage with more points.
Let's start with Brazil. Brazil's credit rating is A Minus. China's credit rating is Double-A Minus. Germany's credit rating -- the crowd get's ready -- Germany's credit rating, of course, is Triple A!
(BEGIN AUDIO CLIP)
(CROWD CHEERING)
(END AUDIO CLIP)
QUEST: And it's another Triple A for the United Kingdom!
(BEGIN AUDIO CLIP)
(CROWD CHEERING)
(END AUDIO CLIP)
QUEST: And the United States, because remember 12 months ago, it lost, and it's just A -- Double-A Plus.
So, as we come to the end of day three in the economic Quest-athlon, we can see double gold for Germany and the United Kingdom.
(BEGIN AUDIO CLIP)
(CROWD CHEERING)
(END AUDIO CLIP)
QUEST: Factor that into our scoreboard and you can see the scoreboard shows overall, Germany is in the lead with 12 points, United States with 10, Great Britain, China, and then Brazil. Ah, exciting stuff as we move on to the next stage, day four.
Credit ratings measure risks. Weightlifting, which is what we had tonight for you, is not exactly risk-free either. Becky Anderson who, perhaps, instead of a bit of weightlifting is more often than not likely to raise a glass every now and again to keep the muscles in check.
(LAUGHTER)
QUEST: Becky joins us from Olympic Park.
BECKY ANDERSON, CNN INTERNATIONAL CORRESPONDENT: Thank you, Richard.
(LAUGHTER)
ANDERSON: My reputation stand before me, of course. Do not try this, viewers, at home. And talking about risks, we saw a really, really risky situation here at the Olympic Park earlier on.
The German weightlifter -- one of the German weightlifters in the 105 kilograms plus competition today went down, he was on a snatch, he went up. His knees went, he buckled, and let me tell you, he dropped a 432-pound barbell on his head. On his head.
He walked away, let me tell you. It was some time after he walked away. They put a sort of canopy around him at one stage, Richard, to make sure he was all right. But the guy -- the guy's a big guy, right? So, he walked away.
The audience gave him a standing ovation. But how about that? That really is one of those times you just go, no, this is not a sport for me. I know you shift weights every so often, but please, please, Richard, please promise me the 432 pounds on a snatch is not something you'll be doing going forward.
QUEST: About a hundred -- no, no, no, no. Not with my lumbago. In fact, thinking of my lumbago, I'm not about to do the decathlon, which is about -- is it underway, or is it kicking off shortly?
ANDERSON: Yes, the --
QUEST: Decathlon, it's a large number of events.
ANDERSON: Yes, it's ten events, none of which you would want to take any part in. They're all toughies. Daley Thompson, who you'll remember from our youth, Richard, was absolutely fantastic through the 70s and the 80s.
Well, for the new set of fellows out here in this stadium, day one today, day two tomorrow. This is one of those real, real sort of Olympic moments events, let's call it. Jess Ennis, of course, in the women's equivalent, the heptathlon, already winning a gold.
I've got Linford Christie with me, a man who knows more -- or has probably forgotten more about winning medals than you and I will ever know. Who do you fancy in this decathlon, as it were?
LINFORD CHRISTIE, CNN CONTRIBUTOR: You've got to go for the American. He's just -- Ashton Eaton, he's just recently broken the world record, so I think he's out there way, way ahead. He's a young guy, new guy coming in and, yes, he's going to --
ANDERSON: Ten events. What would you suggest is the hardest?
CHRISTIE: At the end of if, you've got to finish with 1500 meters. Now, that is tough. And it's the same as the women, they finish with an 800, men's finish is a 1500. It's grueling, especially after doing nine events, you've got to go --
ANDERSON: It's -- I find it remarkable that some of these decathletes and heptathletes are actually almost good enough to compete in the individual events as they are competing in their main events. Unbelievable. Jess, for example, one of your athletes, fantastic at the 110 meters hurdles, I believe.
CHRISTIE: Well, Jess runs 100 hurdles, and she is world class. But I think you'll find that, like you said, that some of these guys are almost - - and almost doesn't quite get you there.
(CROSSTALK)
ANDERSON: You'd never admit -- you'd never admit that a decathlete was any good, would you, really?
(LAUGHTER)
CHRISTIE: They're really good. Some of these -- these big, strong guys.
ANDERSON: Yes.
CHRISTIE: And they're the guys that the women love to see.
ANDERSON: Yes.
CHRISTIE: They've got the rippling muscles and everything else, and they're out there for a long time, so good eye candy.
ANDERSON: So, I may not be here for the next 48 hours, because there's nothing going on down there and, in fact, I'm off now. Richard, back to you.
QUEST: We thank you for that, Becky Anderson, who is at Olympic -- I'm still horrified at the idea of 400 pounds dropped on your head.
After the break, a trans-Atlantic tussle. British lawmakers bite back over the treatment of Standard Chartered. One of them will be joining me here next. Are they being fair?
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in just a moment. This is CNN and, on this network, it is the news that always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Syrian rebels say they have begun setting up roadside bombs in Aleppo, designed to take out regime tanks like these seen rolling towards the city last week. Opposition fighters are preparing for a massive ground assault by government forces. The activists say more than 100 people have been killed across Syria today.
We now know Syria's former minister's escaped to Jordan -- excuse me. Riyad Hijab was reportedly being sheltered by rebels in southern Syria over the past few days. He then crossed into Jordan early on Wednesday morning. An official there says he was accompanied by 30 family members.
Tanks are patrolling the northern Sinai as Egypt cracks on militants. Egyptian forces say they've killed 20 militants during airstrikes on Wednesday. Those came after armed attacks that killed or wounded more than a dozen Egyptian soldiers and guards.
Hours ago, Egypt's president fired the North Sinai governor and replaced Egypt's intelligence chief.
A Russian judge says a verdict will be issued next Friday in the case of a female punk band charged with hooliganism. The three women were arrested after performing a song that criticizes President Vladimir Putin. The song was performed inside a revered Moscow cathedral.
Floodwaters are continuing to wash away homes and belongings in the Philippines, where at least 16 people have been killed. Hundreds of thousands of people are now spending the night in evacuation centers and Manila has experienced more than a month's worth of rain in a span of just 72 hours.
(MUSIC PLAYING)
QUEST: Standard Chartered's shares are coming back after two disastrous days. The shares listed in London finished up more than 7 percent (inaudible) 16 percent on Tuesday as the scandal continues (inaudible) actions with Iranian banks.
The British Bank of England governor, Mervyn King, says he doesn't believe there's a trade war between the U.S. and the U.K., though he says British authorities would appreciate better communication from their colleagues overseas.
(BEGIN VIDEO CLIP)
MERVYN KING, GOVERNOR, BANK OF ENGLAND: I think all the U.K. authorities would ask is that the various regulatory bodies that are investigating a particular case try to work together and refrain from making too many public statements until the investigation is completed. That seems to be the appropriate time to make clear what the judgment is and what the punishment is.
(END VIDEO CLIP)
QUEST: Now the number of U.S. regulators far outstrips that in other countries. Each state has its own regulator. This is just an alphabet soup of some of them. You have the major ones, obviously, the U.S. Federal Reserve. You have the Securities and Exchange Commission. There you have the FDIC for deposit insurance. And then you've got newcomers or merged or changes.
For example, one we're talking about here, which is the New York Department of Financial Services. Now for the poor banks involved, well, you frankly risk falling afoul of any of them at some particular point. And quite often, you might fall afoul of all of them at the same time.
Stuart Meissner is a long-term securities attorney and former securities regulator.
Stuart, I mean, it is an alphabet soup of regulators. And I'm not denying if there are allegations proved to be true. But for any organization, how do you keep track of which regulator you need to be compliant with?
STUART MEISSNER, MANAGING MEMBER, STUARD D. MEISSNER LLC: Well, it's important for any bank or financial institution to make sure that they not only deal with the federal regulators, which usually act in tandem, although not always, but also the state regulators.
I think this is a perfect example, me being a former state regulator in New York State attorney general's office, oftentimes companies as well as governments ignore the state regulators to their peril.
QUEST: Right. But on this --
MEISSNER: (Inaudible) point out, actually, that the state attorney general's office.
QUEST: Right. But on this one, we've got -- I mean, this New York State Department of Financial Services is (inaudible) -- it's a new merged department. It comes from Mario Cuomo. I'm sorry; Andrew Cuomo. I beg your pardon. Get that -- get the right Cuomo. It comes from the governor and it's very concerned, putting it crudely, to show that it has strength and can do something.
MEISSNER: That is correct. It's a merger of the banking -- the state banking department and the state insurance department. And they have a lot of power. In addition to another state regulatory agency, the attorney general's office, so there is a myriad of regulators to oversee financial matters, especially New York, which is the capital of the economic industry in New York.
So he is a new regulator and it's a -- it should be expected that, as with any new regulator around the world, they will probably try to make a splash and there's always a tug-of-war between the federal government and the state regulators, who do not always coordinate. So --
(CROSSTALK)
QUEST: But I don't want to --
MEISSNER: -- one-upmanship.
QUEST: I don't want to sound sort of poor banks, poor banks, we all should feel sorry for them. But if you take these particular regulations they are the (inaudible) regulations which are U.S. Treasury regulations. They are federal in nature.
What on Earth is the state -- even if it's jurisdictionally allowed to do it, surely this is the province of the federal authorities and they should be dealing with it, the Treasury, the Fed and all the others, not some jumped-up state authority.
MEISSNER: Well, Richard, you know, I used to also work at Manhattan D.A.'s office (inaudible) Robert Morgenthau, and if you recall, BCCI, that was a major international scandal. And the Manhattan D.A.'s office prosecuted it.
So frankly, the way we see it or a lot of people in the States see it, it's helpful to have competition between state and federal regulators for enforcement purposes. Otherwise, they sit on their hands. There are negative effects as well, as you know, lack of coordination. But it is the situation that banks face.
And they should keep in mind that they have to deal with the state regulators and hired law firms that deal with state regulators, not just with the federal government and the Treasury.
QUEST: Sure. Thank you. Thank you for that BCCI -- don't mention it; I think I've still got the scars from covering that case all those years ago like the rest of us.
Many thanks, Stuart Meissner, joining us there.
British lawmakers are fighting back against the U.S. regulators who made those accusations. They say American authorities are trying to paint London as the Wild West of finance in order to shift more business to New York.
Sam Gyimah is a member of Parliament for the U.K. (inaudible) for the U.K. Conservative Party. Good to see you, Sam.
SAM GYIMAH, MP, UK CONSERVATIVE PARTY: Good to see you.
QUEST: Now come on, be real. Are you saying that this is a naked land grab by the Americans to try and put the boot into the Brits while they're down?
There are two issues here firstly. And the first one relates to the nature of the allegations, which are vigorously contested by both parties, in this case, the U.S. regulator, the New York Department for Financial Services, and Standard Chartered, the bank.
So I think the reasonable expectation here should be innocent until proven guilty, which brings me onto the point that a lot of lawmakers in the U.K. have been concerned about, which is the nature in which the allegations have been portrayed.
So for example, you know, Standard Chartered is referred to as a rogue institution, as a statement of fact, in a 27-page report that the New York regulator published --
(CROSSTALK)
QUEST: Why do you think -- why do you think they're doing it?
GYIMAH: Well, what is really -- and that's really concerning. The exaggeration and the lack of a sense of proportion and that makes one wonder what the motivations really are here. I mean, after all, it's political open season. You know, what exactly is going on? Is this a new organization that wants to make a name for himself?
But one thing that is clear, one thing that is clear is that this is not the language of a careful and sober regulator, but the language of (inaudible) sensational journalism.
QUEST: Let's be clear, though. Some of your colleagues in the house have suggested that it is an attempt to basically gain ground, Wall Street to gain ground at London's misfortune.
GYIMAH: What gives reason for that --
QUEST: Do you subscribe to that view?
GYIMAH: No, I don't. I think it actually misses the point, (inaudible) enough. Regulating banks that are global and international in nature is extremely difficult. There are provincial (ph) banks in the U.K. as well as in the U.S.
Now what is of concern, therefore, is when the U.S. regulator uses the language that it uses, therefore suggesting that there is another agenda, when actually what we need to do to regulate banks is for both sets of regulators to cooperate.
QUEST: Well, no one could ever say that the U.K. regulation system worked, because it's been a complete -- and I know the -- I know your party, the coalition, is changing that. But, you know --
GYIMAH: Come oh, Lehman Brothers, you know, AIG.
QUEST: All right.
GYIMAH: There are problems for banks. They've been problems with banks all around the world as far as this financial --
QUEST: Will you be asking the U.K. regulators, the FSA, the Bank of England or the Treasury, the Chancellor, will you be asking them to take this issue up with the U.S. authorities?
GYIMAH: I think what Mervyn King said today, actually highlight of the U.S. regulatory -- U.K. regulatory authorities are more than willing to work with the U.S. regulatory authorities as they did recently in the LIBOR scandal with Barclays.
They all coordinated. They issued a coordinated response and there was a fine to be paid. What we've got is we've got one new regulator, led by an ambitious man, who have jumped the gun.
QUEST: A new regulator, though bad ambitious (inaudible). We'll leave it there. Thank you very much. Good to see you, Sam. Many thanks indeed.
Now coming up next, we're counting the U.K.'s Olympics windfall and we'll hear more from Tom Horton, the chief executive of American on their new business class and why this product will put them on top -- after the break.
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QUEST: Now overseas visitors to the U.K. spent more than $700 million on their Visa cards last week. Visa says that's up 8 percent on the same time last year, suggesting the Olympics are proving to be a boost to the British economy.
Tourism consultant Anita Mendiratta joins us (inaudible) well beyond the host country.
Anita, what sort of benefits, besides a feel-good (inaudible) even if we do have a feel-good factor, how did that translate to anything more significant?
ANITA MENDIRATTA, MANAGING DIRECTOR, CACHET CONSULTING: The feel-good factor has a point in that it turns into people coming together, which brings people and their pride into productivity. Ultimately any major event is a business case. It is a reason to actually get the country working again.
QUEST: Right. But what we're seeing here, of course, is not just the U.K., which is the host country, are we? Other countries are gaining. Explain to me how they're gaining.
MENDIRATTA: It comes with national pride in terms of countries winning major medals. It's massive.
If you look at countries such as South Africa, with Oscar Pistorius; if you look at what's happened with the Saudi Arabian, who was actually performing as one of the first female athletes, even before she hit the mat, everyone knew that she had actually had a win for the world and for Saudi Arabia long before she competed.
The Palestinian who's now actually performing in terms of other major events, this is critical for other countries to feel that they are respected by the global community and that they stand tall and compete equally.
QUEST: How does that translate to a dollar, a yen, a riyal (ph) or whatever you want to say, back into tourism, though?
MENDIRATTA: What we can't forget is that we're in the middle of a global recession. And ultimately need to feel a reason to feel proud about their countries and to work for their countries.
If you look around the U.K. right now, people are proudly wearing their flags, whether it's Great Britain, Canada, the U.S., Japan, China, whatever the case may be. Ultimately that allows people to see what the people of a nation stand for and makes them more curious to go and visit that destination.
QUEST: Does it really? Does it? Come on. Does it really make that difference?
MENDIRATTA: It makes a huge difference. If we look at the Beijing Olympics in 2008, that we knew was Beijing and China's engaging with the world, and showing the world what it had to offer. The U.K. was very much about engaging East London with the rest of the nation and with the rest of the world.
Every single destination, when it runs a major event, has a tourism objective, but it has an economic development objective underlying it. It can't not. Otherwise, the feel-good factor costs too much. There has to be an ROI.
QUEST: ROI -- a return on investment.
MENDIRATTA: Indeed, and return on inspiration.
QUEST: Return on inspiration?
MENDIRATTA: Indeed.
QUEST: Many thanks indeed.
Now visitors to the U.K., talking of return on inspiration, spent $80 million on air travel over the past week, according to their Visa card. It's in up around 40,000 business class tickets from London to New York.
American Airlines chief exec Tom Horton wants his airline to be the best in the world. You'll recall he was with me talking earlier. Besides the restructuring, I took the moment to find out from Tom about the new planes and the new products, the new business class that he says will surpass business travelers' expectations.
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HORTON: So we're going to have a new fleet of airplanes, which means lower fuel costs, lower maintenance costs and, of course, a great product for our customers.
QUEST: What's your goal for what you're putting on, say, for example, your new 777-300s?
HORTON: Well, my view is American Airlines is America's flag carrier, and we should have a product that is the finest in the world. I mean, the U.S. invented the aviation industry. And I think our -- I think our airlines should have a great product for our customers. And that's what American Airlines is going to be all about.
We introduced the new 777-300s later this year. We'll the first and only U.S. airline to operate that airplane, and it will have an interior that is -- I think that is beyond everyone's expectations. It'll have features like international wi-fi and fully lay-flat first class, business class, all-aisle access seats, state-of-the-art in-flight entertainment, just going to be a fantastic airplane for our customers.
QUEST: I looked at the pictures of the 777-300 product in business class. It's basically 1:1, which is an extremely expensive configuration, isn't it? It takes up a lot of real estate on the aircraft, when most are 2:3:2 or some variant thereof, or 2:2:2.
HORTON: Yes, the idea is to make sure that each business class seat has aisle access, so you don't have to climb over another passenger on the airplane to get to the aisle. And that's just going to be a great product. And I think, you know, that is what the premium sort of business class travelers want.
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QUEST: Tom Horton of American. Earlier in the program, we told you that American's pilots have voted against the airline's contract offer and will now go to the judge to decide.
Bruce Hicks, American Airline spokesman tells us in the last hour, he says, "We are, of course, disappointed with the outcome of the pilot vote on that tentative agreement.
"We must now await a ruling by Judge Lane (ph)" -- that's the judge in the bankruptcy proceeding -- "on the pilot contract that will allow the company to implement the changes necessary to move forward with our restructuring." That's from an American Airlines spokesman.
In a moment, we'll be back with the weather update after this. QUEST MEANS BUSINESS, good evening to you.
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QUEST (voice-over): The answer to our "Currency Conundrum," how much loose change does Virgin Atlantic find on average per passenger per flight? The answer, B, 18 cents. Now if you take that number, 18 cents, and you hold it true for the 320 million people flying internationally each year, the total amount of loose change down the back of the sofa would be $58 million.
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QUEST: If that's the case, look after the pennies and the pounds will take care of themselves. I suspect most of that money on the back of planes all goes to those to the charities.
Tom Sater now at the World Weather Center. And we need updating on a variety of tropical storms that seem to be afflicting us.
TOM SATER, AMS METEOROLOGIST: Well, Richard, I mean, as you know, of course, financial hub in Shanghai, they were well prepared for the tropical storm that moved in. But back you up in time, Saola was a typhoon when it made landfall in Taiwan.
Damrey increased its strength to typhoon status. Now Haikui was a tropical storm. They were very well prepared. They evacuated a couple hundred thousand from the coast, shut down schools in Shanghai and businesses as well. This is Taizhou here, just 60 kilometers north of Taizhou is where they had landfall. They had their own problems.
But again, you know, this entire area in the Yangtze delta region, you know, can flood easily. But they were very well prepared. Now China's meteorological administration -- notice that the winds were really kicking up, and a little bit stronger than expected. They have now classified Haikui here as a typhoon. So that's three typhoons.
You can see the winds and how strong they were, 183 kilometers, windfall -- or as far as rainfall, not as bad, of course, as we have seen with the monsoons down in the Philippines, but still, Shanghai picking up 106. Keep in mind, you know, as Richard knows, 40 percent of the economic output in China comes from this delta region here.
And of course, anytime you shut down some businesses, there's some financial concern. But the system is kind of stalling. At this hour, we lose the daylight, of course, heating. So it's still hanging in the area. But we will find it regenerate in strength somewhat as far as rainfall. It's not going to be anything tropical in nature, but it's not moving very far. It moves inland just a little bit.
It's not the only storm in town, of course, as you say the rainfall totals that'll pick up during the day, we have what was Tropical Storm 13. It's been given a name now. This is Kirgiz. Kirgiz will not follow the same path as Damrey or Haikui.
This moves up near northern parts of Japan, but it encounters the cooler water. So some very good news there, Richard. The last thing we want to see is another system, the fourth one, moving back behind the last two. But a lot of schools going to start to reopen, still looking at the floodwaters to recede a little bit in and around the Shanghai area.
QUEST: We thank you for that, Tom Sater at the World Weather Center. Keep us updated as things progress. We'll have a "Profitable Moment" after the break.
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QUEST: Tonight's "Profitable Moment," on this program, the chief executive of American Airlines, Tom Horton, said "Success is the only option" for his airline, American. American's in a good position. It's cutting its costs under bankruptcy protection and it's just reported its first second quarter profit in five years.
And unlike many other bankrupt carriers or restructuring carriers, it has options. US Airways is hot on its heels, wanting a merger. IAG's Willie Walsh says he wants to take -- or is interested in taking -- a small stake in American. It's to keep it in one world. There can be few airlines in Chapter 11 who have found themselves in such an advantageous position.
Now, no doubt Tom Horton's restructuring at a difficult time. His main competitors are powering his head. And as you heard tonight, his own pilots threw out a tentative contract agreement. But the American chief exec knows that to succeed against the odds, you will set the airline up for that highly competitive future. As Tom Horton says, success is the only option.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable.
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QUEST: The headlines at this hour: Syrian rebels say they have begun setting up roadside bombs in Aleppo, designed to take out regime tanks like these seen rolling towards the city last week. Opposition fighters are preparing for a massive ground assault by government troops . Activists say more than 100 people have been killed across the country today.
We now know Syria's former prime minister escaped to Jordan . Riyad Hijab was reportedly being sheltered by rebels in southern Syria over the past few days while the regime hunted for him. He then crossed into Jordan on Wednesday morning. He was accompanied by 30 family members, it's said.
Tanks are patrolling the northern Sinai as Egypt cracks down on militants. Egyptian forces say they killed 20 militants during airstrikes early on Wednesday. They came after armed attacks that killed or wounded more than a dozen Egyptian soldiers and guards.
Hours ago, Egypt's president fired the northern Sinai governor and replaced the intelligence chief.
And a Russian judge says a verdict will be issued next week in -- Friday in the case of a female punk band charged with hooliganism. The three women were arrested after performing a song criticizing President Vladimir Putin. They performed that song inside a revered Moscow cathedral.
You are up to date with the news headlines. Now, live to New York for "AMANPOUR," tonight with Ali Velshi.
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