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Quest Means Business

Flights to Israel Suspended; Flying Through Conflict Zones; Safety in the Skies; MH17 Investigation

Aired July 22, 2014 - 16:00   ET

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

(NEW YORK STOCK EXCHANGE CLOSING BELL)

RICHARD QUEST, HOST: The closing bell ringing on Wall Street in what's been a very busy day around the world. You will hear all the

details over the next hour, what's happened in the business world. Today it's Tuesday, it's the 22nd of July.

We bring you the biggest NOTAM, notice to airmen, the biggest of them all: a call to rethink risk assessment on global air space.

In this hour, I'll speak to Malaysia Airlines from Amsterdam, where Flight 17 started its tragic journey into Ukrainian air space.

You'll hear from the global head of the airlines body, IATA. IATA's demanding actions from governments.

And the director-general of Israel's Civil Aviation Authority on the suspension of flights to Tel Aviv. He will join us from the Israeli city.

I'm Richard Quest. I mean business.

Good evening. We begin tonight with the crisis in the Middle East as it hits international air travel. Airlines around the world have canceled

flights to Tel Aviv following a rocket attack to close to Israel's main airport, Ben Gurion.

Delta Flight 468 -- if you join me at the super screen, you'll see that 468, which had come from New York right across the Atlantic, over

France, down over the Med, had got as far as Athens and was on approach down to Tel Aviv when the decision was made to turn the plane around and

take it back up to Paris, which is, of course, is where Delta's partner, Air France, is based.

The aircraft was carrying 273 passengers and 17 crew on the flight from New York to Tel Aviv. The US FAA, the Federal Aviation Administration

has banned all US carriers from flying to Ben Gurion for 24 hours, and European carriers have joined in. Air France-KLM, Norwegian, Lufthansa

Group, which includes Lufthansa, Swiss, and Austrian. They are all canceled.

Easy Jet is continuing to fly. British Airways, and their owners, IAG, say they have the situation under review. And El Al says it will

continue to run its five flights a day to New York and to the United States, although they are offering adjustments for passengers.

The European safety agency, EASA, says it will issue a bulletin on Wednesday that will recommend airlines stay away from Tel Aviv. So far, as

I say, Easy Jet and El Al are still flying.

The Israeli Airport Authority insists Ben Gurion is safe and says the FAA's decision is giving a prize to terror. Let's go to Atika Shubert, who

is at Ben Gurion. Atika, the -- this is going to turn into a one side versus the other side, so let's be clear: has there been rocket attacks

near or on Ben Gurion?

ATIKA SHUBERT, CNN INTERNATIONAL CORRESPONDENT: Well, the most recent rocket attack to hit was in this town of Yehud, where I'm at now. And it

was about a mile away from Ben Gurion airport.

There are some pictures that came out today. You can see it completely destroyed the house. And most recently, just about an hour ago,

we heard sirens, we looked up, and we saw a rocket being intercepted just above Ben Gurion.

Now, the odds of a rocket actually hitting a plane are obviously very, very low. Most of them fall into open areas or intercepted by the anti-

missile system here, Iron Dome. But that may not be enough for the FAA or other civil aviation authorities to make them feel secure enough to have

their planes landing here. And that's what this is really about.

QUEST: Atika, we've heard the -- I've gone through the airlines that expect to -- that have said they'll stop flying. Israel says this is

handing a prize to the terrorists. They've got a point.

SHUBERT: They do have a point. Hamas is raining rockets down on metropolitan areas, like Tel Aviv, and specifically targeting Ben Gurion,

in order to really sow fear among the public here. And in that sense, by canceling flights here, it is working.

And let's be clear: shutting down Tel Aviv -- having all these planes cancel their flights would effectively cut off the gateway to Israel. This

is where a lot of the commerce comes in, a lot of the tourism comes through here. If Secretary Kerry is going to arrive here for more diplomatic

talks, this is where he's going to land.

So, it would have a tremendous impact if all of a sudden all of these flights start canceling. And that, whether we like it or not, is exactly

what Hamas has said it wants to do.

QUEST: Atika Shubert at Ben Gurion Airport. Joining me now on the line from Tel Aviv is Giora Romm, the director-general of Israel's Civil

Aviation Authority. Director-General, thank you, sir, for taking time in your busy evening to join us and to put this into perspective. I know

these are difficult moments.

Let's begin. First of all, how can you say that the air space is safe when rockets have landed close to Ben Gurion Airport?

GIORA ROMM, DIRECTOR-GENERAL, ISRAELI CIVIL AVIATION AUTHORITY (via telephone): Richard, we have worked very hard to make sure that we can fly

out of Ben Gurion and into Ben Gurion through safe aviation -- safe aerial areas, and we have been doing it for the first two weeks of the current

crisis. And we had, like, between 400 and 500 movements every day with no problem at all.

The question is, what are the chances that the Ben Gurion area will be hit by a rocket from Gaza? And that has been taken care extremely

seriously by the Israeli Air Force, with extremely strong protection through Iron Dome, defense of Iron Dome batteries --

(CROSSTALK)

QUEST: Right. But sir -- but sir, you don't want --

ROMM: -- and it is not -- I'm neither surprised that no rocket has come and hit the Ben Gurion area.

QUEST: All right. But you don't want --

ROMM: So --

QUEST: Just hang on a second. Let me jump in here.

ROMM: -- what's happened today is --

QUEST: Let me jump in here, sir.

ROMM: -- completely something different.

QUEST: But you don't want any rockets near any planes, and you certainly don't -- I mean, you don't want to have to rely on Iron Dome to

prevent a rocket from destroying the runway or from -- even if there's a mere risk of it, surely caution requires airlines to just stop flying,

surely?

ROMM: OK. So, in this sense, we have different opinions. The only connection of Israel to the world is the aviation connection, and we are

using Ben Gurion in the safest way you can think about. And the fact that rockets are flying, that doesn't change our mind if we have made the right

preparations.

And the Israeli airlines are flying out -- in and out with no problems, and we have in mid-July 8 percent more passengers than in July

2013.

QUEST: Right.

ROMM: From far away, you feel as if the air is full with rockets. It's different, and Richard, we are fairly --

QUEST: Right.

ROMM: -- disappointed by the decision of the FAA to take the approach that they have taken this morning.

QUEST: Surely you can understand following MH17 -- and I know the two things are quite different, and the circumstances are different -- but

didn't -- to a large extent, didn't the rules change last week with MH17, when a plane, being brought down on an air corridor that was thought to be

safe, and now everybody is, if you like, rushing to much safer ground?

ROMM: Well, I'm not a supporter of using all kinds of examples or experiences to demonstrate an idea. The Malaysian aircraft was gunned down

-- was shot down by people who used surface-to-air missiles that can shoot down an airplane in a way which is completely out of line.

This is not the case with the randomly-launched rockets from Gaza. We have made a lot of research about that, and we have no doubt that we can

maintain the aerial connection with the world with no problem at all.

QUEST: Director-General, let me ask you, if -- if -- it became clear that you had a doubt as to the safety, or for any reason, you needed to

change your mind, would you have any hesitation in closing the airport and the air space?

ROMM: No. I will do it instantaneously, and I've -- I've been the director-general of the Civil Aviation Authority for six years, and I have

taken many tough decisions as to the safety of aviation in Israel, which is impeccable. Totally impeccable. And I don't have any sentiments about it.

QUEST: Right.

ROMM: So, if I had any hesitation or doubts about the safety, I wouldn't need to wait even a second to close down the airport. As of now,

I don't see any reason to do it.

QUEST: Finally, Director-General, how are you going to convince, if that is what you're going to have to do, the FAA, and now the EASA, how are

you going to have the job of convincing them that the air space is safe and that they should lift any bans?

ROMM: We will meet with them or have a conference call with them, and we will explain in a more detailed way how the Iron Dome batteries are

giving the best protection against any rockets hitting the Ben Gurion area, which takes a special protection. And I hope that they will fully

understand what we try to tell them.

QUEST: Director-General, thank you, sir. I know you have a busy day, and I do appreciate you giving us time. Thank you for joining us on QUEST

MEANS BUSINESS.

ROMM: Thank you, Richard.

QUEST: We will be back after the break. When we do return, you'll hear why there is so much discussion. The chief commercial officer of

Malaysian Airlines basically says now everyone has to rethink the rules of the air after MH17. Good evening.

(COMMERCIAL BREAK)

QUEST: Now, airlines rely on national and international authorities that tell them where they can and can't fly, which routes are open and

which routes are safe. Following the downing of MH17, the leaders of some of the world's airlines are now saying the industry needs to rethink

regional conflicts. MH4 -- let me show you first of all the situation.

Now, of course, you had a situation where MH4 from Kuala Lumpur to London used to fly -- this is what it used to fly. MH4 used to fly through

Ukraine. That was the old days.

Now, of course, since MH17, all routes have changed. Now, you might have thought, well, good. They're avoiding Ukraine. But Malaysian has

been criticized for changing the route of MH4. Instead, it now goes around, but goes right through Syria instead.

Malaysia Airlines notes that in both cases, previously with Ukraine, now with Syria, that they are flying an ICAO-approved route. The US

airlines are discouraged from that. I put -- in fact, US airlines are discouraged from flying through vast areas of the region.

I asked Malaysia Airlines chief operating officer why they were continuing, or why they routed MH4 through Syria.

(BEGIN VIDEO CLIP)

HUGH DUNLEAVY, COMMERCIAL DIRECTOR, MALAYSIA AIRLINES: We operate about 400 flights a day, and one flight went over Syrian air space, again,

because it was designated as a safe flight corridor.

In hindsight, my personal opinion is that when I found out about it, we immediately contacted our flight operation guys and said please take a

closer look at these flight corridors. MH17 should be a warning to everyone, and I'd rather err on the side of caution.

(END VIDEO CLIP)

QUEST: Extraordinary transparency and honesty in explaining how that flight, sort of, if you like, slipped through the net. But look at how the

FAA has restricted airspace. Obviously, we've not put Israel in there just not. You can add Ben Gurion tonight.

But you've got eastern Ukraine, you've got Crimea, Libya, Mali, Iraq. These are prohibited, they are restricted or where there is a warning.

When you come to put all this together, Hugh Dunleavy went on to tell me the airlines, IATA, which is their representative body, and ICAO, the UN

organization, it's simply not reasonable to expect them to have to decide where to fly, what's safe, what's not.

Look at this. This is Iraq right at the moment. Look at the plane. That's a Qatar Airways plane. That's Middle East Airlines at the moment.

Just over Mosul, Turkish Airlines. Kirkuk, another Turkish. In Syria, Syrian Air. You get the idea of exactly what is in the air at the moment.

So, with Iraq, with Syria, with parts of Iran, Afghanistan, who's to say where to fly? Hugh Dunleavy of Malaysia Airlines says change is needed

now.

(BEGIN VIDEOTAPE)

DUNLEAVY: Why have an organization that's there to look after the international civil aviation operations if you cannot rely on the

recommendations they make?

Having said that, in addition, airlines are not intelligence services. We're commercial airlines. For us to be able to assess all of the issues

going on in all of the regions of the world and then determine, is this safe or not safe, you can imagine the confusion if every airline has to do

that independently.

That's why I believe the best way to do this is for the airlines, IATA, and ICAO to get together and review that process, and maybe set more

stringent standards about what they consider to be safe flight corridors.

QUEST: Ultimately, are you prepared to say now to me, Hugh, that the existing system is not fit for purpose?

DUNLEAVY: I think the very fact that we've had a civilian airline shot down out of the skies over what was designated a safe flight corridor

is proof that we need to take a much closer look and redefine what we consider safe flight corridors.

QUEST: And I don't believe you fly to Tel Aviv, but if you did fly to Tel Aviv, would you have stopped flights there? You'll be aware, of

course, that all the US carriers have, Lufthansa has, Air France-KLM. Is this another example, sir, of what you're talking about, of where airlines

are having to make decisions that governments should be making?

DUNLEAVY: I believe that's an accurate representation of the situation. I have been informed that American airlines have closed down

operations to Tel Aviv. I think the escalation there has shown that either side could deploy very significant weapon systems, and aircraft would be at

risk.

But you're absolutely right. We can't do this on a piecemeal. We've got to do this as an industry, and we've got to have the world

organizations working with us to make sure that we don't create a patchwork of flight corridors that are simply unmaintainable and will become an

enormous challenge for the air traffic control systems to manage.

QUEST: Finally, in your other capacity, of course, as a senior executive of the airline, does Malaysia Airlines now have to be

restructured more fundamentally with the potential, perhaps -- and maybe the correct thing to do would be for the government to take the airline

into the national ownership so that the incessant speculation about the airline's future comes to an end?

DUNLEAVY: Clearly having two accidents in the space -- or two incidents in the space of four months, it would be a challenge to any

airline. Malaysia Airlines was undergoing a restructuring with our shareholders. I think MH17 will certainly accelerate that.

The final solution that will be decided on by our shareholders on how they wish to restructure the airline, that will be taken by Khazanah, who

are our major shareholder, and of course, represents the Malaysian government.

But I do want people to remember that Malaysia Airlines has been around for 42 years, and it is one of the few airlines in the world

designated as a five-star airline, and we do have, I believe, a world-class reputation for the quality of our product and services. We will overcome

this, and we will continue to operate as an airline.

(END VIDEOTAPE)

QUEST: That's the chief operating officer, the COO, for the -- for Malaysian Airlines, Hugh Dunleavy. What all this shows, of course, is that

somebody has to take the lead.

Where airlines fly, what routes are determined safe, since every single plane that you're looking at on this map at the moment, including

those over Iraq, including those over Syria, including those heading towards Israel are all flying on legitimate legal flight plans, whatever

the risk may be perceived.

So, who takes that lead, with many in the industry saying that there needs to be change? Tony Tyler is the director-general of IATA, which is

the representative body of airlines. He joined me earlier to put into perspective the need for change.

(BEGIN VIDEOTAPE)

TONY TYLER, DIRECTOR-GENERAL, INTERNATIONAL AIR TRANSPORT ASSOCIATION: If the route is open, then you cannot criticize an airline for using it,

because how else can airlines make their plans? Airlines are not in a position to make careful assessment of each and every place where they're

flying over.

They rely on governments to do it, and I don't think we should get away from that crucial fact. It's governments' responsibility to monitor

and manage the safety of their air space, and if they cannot manage it safely, then they need to say so so that airlines will know that they

should avoid flying over it.

QUEST: In situations where governments may be distressed or governments may be compromised, who then takes the responsibility? Because

ICAO seems to be willing to pass the buck frequently to the governments, but in many cases, the governments are in position. So, I put it another

way to you, Mr. Tyler: ultimately, does ICAO need more teeth?

TYLER: Well, remember that ICAO is an institution consisting of governments. ICAO is, if you like, a union a governments, and it is

governments who call the shots, even, within ICAO.

So, governments come together in ICAO to lay down overall standards and principles, which then it is up to the member states of ICAO to

implement. So ultimately, implementation has to be the responsibility of individual governments.

QUEST: Do you believe there needs to be a review of the system? Sir Tim Clark has basically said some sort of summit -- maybe that's too grand.

Some sort of conference needs to be held. Do you support a conference to look at the way in which air traffic is managed over conflict zones?

TYLER: I do think that in the wake of this terrible tragedy, it is incumbent on the authorities to have a look at how they make these

assessments, and I believe that sort of activity should be done and should be led and coordinated through ICAO. It exists to bring governments

together to manage the issue of civil aviation around the world, and I believe that is where it should be done.

QUEST: Are you prepared to go one stage further and say post-MH17, it's been shown and proven that the current system does not work?

TYLER: I don't think we should go as far as to say the current system does not work. We have seen a terrible incident where somebody, an

individual somewhere, has taken it upon himself to shoot down a civilian airliner. That doesn't mean the system doesn't work.

It does mean, however, that governments need to look at how they make the assessments of safety and make sure that this kind of thing cannot

happen again.

(END VIDEOTAPE)

QUEST: When we come back after the break, we will completely change direction and we will, of course, bring you up to date with the final

journey for the victims of MH17. The process of repatriation is underway, and we are live in Kharkiv in just a moment.

(COMMERCIAL BREAK)

QUEST: Some semblance of decency and dignity is now being accorded to those who died on MH17 as the Dutch authorities begin the task of

identifying those who perished onboard the flight. The flight recorders have also now been taken away for examination.

A train has delivered a certain number of bodies recovered so far to a facility in Kharkiv in Ukraine, according to officials. The only problem

is, no one is quite sure. It was thought there were 282 bodies onboard, but nobody is quite sure the exact number. It's all a deeply unsavory

business and, of course, for those who have to deal with it, exceptionally difficult.

But from one point of view, from a humane point of view, from a simple decency, at least now the remains are being placed inside coffins, and they

will be flown with all the dignity and ceremony that they are entitled to Eindhoven in the Netherlands, where the real work of forensic examination

and identification begins. And then, of course, they will be sent home.

Nick Paton Walsh joins me now. You're in Kharkiv. It's awful to say it, but frankly, Nick, thank God at least now some accordance of decency is

happening to these people.

NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, certainly, Richard. I mean, 24 hours ago, these bodies were still making

their way out of a war zone, out of separatist-held territory.

Now, they're here, at least, in Kharkiv, where the resources of the international team of experts here are trying to work out what happened,

and also trying to bring the bodies back to their relatives for burial can at least get involved in the catastrophe here.

(BEGIN VIDEOTAPE)

WALSH (voice-over): They wait for the bodies here, and in the Netherlands, Australia, for the train. For it to crawl out of a savage

civil war so the dead on it might rest.

It emerges, ghostly, silent. A few defiant men dressed in fatigues. Ukrainian police also there. And inside, we glimpse two Malaysian

officials. Onboard also, the black boxes.

The carriages with the bodies, sealed with construction foam. Little dignity. Holiday-makers caught up in a callous civil war.

WALSH (on camera): We understand this man is part of he security detail accompanying this train. We don't know whether they are separatists

or with the Ukrainian government, but this is the first time this train has been seen in public outside of separatist-held areas. And for the families

of those onboard, really, just one part of a tragic and awful journey.

He says he's from Donetsk, but not who he's with. But he does this if we ask if he's Ukrainian.

(MAN SPEAKS IN FOREIGN LANGUAGE)

WALSH (voice-over): Inside this compound, the painful, grim work will begin of placing human remains in coffins. It may be hard to even count

the damaged bodies on the train definitively, one told me. But with the crash site so compromised, the bodies and black boxes inside may be the

closest to hard fact of what happened to MH17.

A steady flow of Dutch officials coming in the night before. Forensic experts -- a huge task ahead.

WALSH (on camera): Can you explain what it is like for the Dutch people, what's happened in the past four or five days?

HOWARD MAY, DUTCH SOLDIER: I think it was very sad and very hard for most majority, because everybody probably knew someone, obviously, who was

on the plane.

WALSH (voice-over): The bodies slowly to be brought here, flown home, where still, then, some will need to be identified before they can rest.

(END VIDEOTAPE)

WALSH: Now, Richard, as you were alluding to earlier on, there is a real question, now, as to exactly how many bodies were on that train. Now,

where a Malaysian security official traveling on the train himself told me there were 282 reasonably intact bodies and 87 body parts. It's a gruesome

science, but it has to be done by somebody.

That, unfortunately, has not been ratified by the Dutch investigators here. They've given a number of statements today in which they say at this

point they're satisfied there are at least 200 bodies on that train.

They haven't been through all five of the refrigerated wagons, just the first one in full, and they've begun work on the second one, but

there's a question here as to what they were given and exactly what they will find in that train, and whether that will satisfy the relatives on

whose behalf they're trying to work. Richard?

QUEST: Nick Paton Walsh, please keep us informed. Thank you, sir. Now, after the break, we'll turn directions completely and we'll talk about

sanctions on Russia in a moment.

(BEGIN VIDEO CLIP)

ROBERT SHAPIRO, FORMER US UNDERSECRETARY OF COMMERCE FOR ECONOMIC AFFAIRS: If this doesn't shock the conscience, then Europe doesn't have a

conscience.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. There is more "Quest Means Business" in just a moment. This is CNN, and on this network the news

always comes first. Israel has said that its airport and its airspace remains safe. The head of Israel Civil Aviation Authority has denied that

flying into and out of Ben Gurion Airport can be dangerous. This is despite the fact all U.S. flights to Tel Aviv have been ex - been suspended

following a rocket attack near Ben Gurion Airport. Now the director general of the Authority says it's an overreaction.

(BEGIN VIDEOCLIP)

GIORI RUMM, DIRECTOR, CAA OF ISRAEL: We are using Ben Gurion in the safest way you can think about and the fact that rockets are flying, that

doesn't change our mind if we have made the right preparations. And the Israeli airlines are flying out - in and out - with no problem, and we have

in mid July 8 percent more passengers than in July 2013.

(END VIDEOCLIP)

QUEST: Dozens of Palestinians have been killed in the latest violence in Gaza with Palestinian officials now putting the death toll at 630.

Twenty-eight Israeli shoulders and two Israeli civilians have also been killed during the conflict. In Cairo, U.S. Secretary of State John Kerry

said talks on a ceasefire had been, in his words, "Constructive." The victims of Malaysia Airlines Flight 17 are to be flown to the

Netherlands tomorrow. It's believed 282 bodies were on the train which arrived in the city of Kharkiv where preparations are now being made to

repatriate. They'll be taken to Eindhoven in the Netherlands for forensic examination before returning to their home countries.

Activists say heavy fighting in Syria has claimed more than 700 lives in just two days. Now, we warn you that the video is graphic. The horrifying

casualty count would mark the highest 48-hour death toll since the Syrian conflict began in 2011. Rights (ph) groups says ISIS extremists killed 270

people after storming the gas field east of Homs last Thursday and Friday.

QUEST: Staying now with the reaction, Europe has woken up to a reality. Those of the words of Sweden's foreign minister as the E.U. has

now threatened tough new sanctions against Russia. European officials there were meeting in Brussels, and now they've been asked to prepare ideas

for fresh measures against Moscow that are to be represented by Thursday. The E.U. says it will punish Russia if the country does not cooperate with

the MH17 investigation. So, the new sanctions could likely target a variety of things. First of all, access to European markets. There could

be the possibility of an arms embargo which of course would affect countries like France which is selling helicopters to Russia. And measures

to impact the energy sector - one of the most significant in the Russian economy.

The E.U. ministers have stopped short of immediate action at this meeting. After all, getting 28 members to agree on key action is going to be

challenging. Put it all together, the foreign minister of Russia's neighbor, Estonia, believes the E.U. has no choice but to move ahead with

tougher sanctions.

(BEGIN VIDEOCLIP)

URIMAS PAET, EASTERN FOREIGN MINISTER: The ultimate goal should be together with other partners in the world to influence Russia to stop all

what Russia is doing at the moment and it's involved with Ukraine. And of course also not to make any more problems for independent investigation

what concerns air cash. So that in this regard, today's decisions to put on some more people to put on some more companies into sanctions list and

also be ready for so-called third stage of sanctions is absolutely important. But of course I would like also to see more and more

cooperation between for example the United States and European Union what concerns both political/diplomatic and at the same time also, well, the

language of sanctions.

QUEST: Will those countries and some suggest Germany is one of them. Will those countries that have been slightly slower wanting to move forward

with aggressive sanctions - will - are they onboard now for more robust measures?

PAET: Well I - and this is glad that today we managed to reach consensus. So it means that all 28 European Union countries were in the

same position that we have also to move forward with measures and with sanctions, including country umage (ph).

QUEST: What about countries like France that sell helicopters to Russia or the countries like the U.K. which have a large financial services

sector - the largest in Europe and are reluctant to damage the banking and financial sector? Or indeed Germany with its massive industrial machine?

The problem is everybody speaks a good talk, Minister, and then when the crunch happens, agreement and consensus frays.

PAET: Well, it's always difficult of course to find consensus among 28 different European countries, and there are of course lots of different

interests. But at this stage, it seems to me that we reached common understanding and consensus that we have to move forward and that's why

actually also very concrete theories (ph) were mentioned including financial sector, including defense sector, (inaudible) arms embargo also

including different elements of top technology. So it shows that there are a variety of options on the table to move forward also in measures.

(END VIDEOCLIP)

QUEST: Estonia's foreign minister talking to me earlier. Now, the relationship, the industrial, the economic relationship between Russia on

the one hand, and the E.U. on the other is complex to say the very least. Think about it - Europe gets 30 percent of its energy from Russia, going

right across. And in many cases, European countries, that number is considerably higher. The level of exports becomes very detailed between

these two. Take this ship for instance. It's the Vladivostok. It's a perfect illustration. The French President Francois Hollande has confirmed

plans to deliver the helicopter carrier to Russia, and this is despite opposition from the United States and the U.K. France has agreed to build

two warships for Russia, for $1.6 billion. That of course was done for several years ago. Now in this case, Hollande chose to prioritize France's

stagnant economy over solidarity with E.U. partners against Russia. The French president said the delivery of the second ship will depend on

Russia's attitude. Puts it all together and you start to understand this enormously complex relationship.

I spoke to the chairman of Sonecon, Robert Shapiro. He served as undersecretary of commerce, economic affairs and an IMF advisor. If there

was ever a time, I asked him, for Europe to send a clear message, surely, Mr. Shapiro, this was it.

(BEGIN VIDEOCLIP)

ROBERT SHAPIRO, CHAIRMAN, SONECON: You're absolutely right. As a political matter, as a moral matter, the behavior in particular of the

French is really shocking. The - you know - Cameron has been much more forthcoming, Merkel is kind of in between, but that's exactly right. If

this doesn't shock the conscience, then Europe doesn't have a conscience.

QUEST: And, to that extent, this incremental ratcheting up of sanctions, whilst that might be very interesting to geopolitical and

strategic thinkers like yourself, leave ordinary people on the street - cold.

SHAPIRO: Yes, I think that's right. Although remember that until this incident, the incremental sanctions had been fairly effective. That

is, Putin pulled back. He didn't pull out but he pulled back. He stopped the advance and it seems stopped at Crimea whereas there was certainly a

suggestion that it could go further.

QUEST: Right. *

SHAPIRO: Now he's using proxies right now and he can't control his proxies. This is a despot with bad judgment, and that makes them all the

more dangerous. It's a good reminder to conservatives in the United States, who like Giuliani and Charles Krauthammer (ph) and others, who

praised Putin as a great leader in order to draw a contrast with President Clinton. That certainly is not the case.

QUEST: And if we now look at the position of President Obama, who frankly on this one is in a very difficult position -

SHAPIRO: Yes.

QUEST: Because he needs to lead a European coalition with himself against Putin, but that seems to be the single thing he's failed to do.

He's failed to make the case and keep the Europeans with him.

SHAPIRO: Well, he - I don't know whether it's his failure or the failure of Europe -

QUEST: Isn't that the same thing? Isn't that exactly the same thing? Because he's supposed to lead.

SHAPIRO: No, because - yes, he is supposed to lead but in this case, this is after all an issue which primarily implicates Europe - not the

United States. This is largely a European matter, not an American global matter. We're standing behind Europe, we're taking in fact a stronger

stance than Europe, when in fact it ought to be Europe that is leading this. This is really - this has been a really pathetic performance by the

leaders of the continental governments.

(END VIDEOCLIP)

QUEST: Now there's been a grim development in the hunt for a businessman who's wanted over the South Korean ferry disaster in April.

Police have identified a body as the man they're looking for. We'll talk more about it in a moment. This is "Quest Means Business." It's good

evening to you.

(COMMERCIAL BREAK)

QUEST: A fugitive billionaire who's wanted in connection with the ferry disaster in South Korea has been found dead. A farmer found the body

of Yoo Byung-un in a field last month. Now people have only now been able to identify him through DNA and fingerprints. He's 73 year old, he went

missing after the Sewol ferry sank in April - 294 people were onboard. Of course many of them were school children. Prosecutors believe Yoo and his

sons controlled the ferry company's operating company, and investigators report accused the firm of putting profits before safety. Paula Hancocks

is our Seoul correspondent, and followed the story since the beginning of course and was there. So, the - it was one of the great mysteries of the

post-sinking that this man had disappeared.

PAULA HANCOCKS, INTERNATIONAL CORRESPONDENT FOR CNN INTERNATIONAL, BASED IN SEOUL, SOUTH KOREA: Absolutely, and South Korea, apart from the

captain, who of course was filmed getting off the sinking ship - he was effectively the most hated man in South Korea. He was vilified in the

press and by the public. Even the president criticized him for going on the run a week after the Sewol ferry actually sank - he disappeared even

though prosecutors wanted to talk to him about tax evasion, financial irregularities which they believe may have contributed to the sinking.

So he was very much vilified publically. They had a huge manhunt - 8,000 police were looking for him.

QUEST: I mean, at this point in the proceedings, you know, we talked about - Lord help us - dead bodies so much that we've got no more sense of

shame in asking these sort of questions. Did he commit suicide?

HANCOCKS: There is an assumption among South Koreans he did - the police aren't confirming that at this point. They say they don't believe

there was foul play. They say there were empty alcoholic bottles around where he was. But the fact is, they don't know exactly when he died. He

was found on June the 12th in a farm by a farmer, and his body by that point -

QUEST: June the 12th and we're only finding out about it now?

HANCOCKS: Exactly. And by that point he had already been there some time. His body was decomposed, they had to use DNA to find out exactly who

he was, which we assume is why it took so long for them to announce it. So they don't know when exactly he died, they don't know how he died.

QUEST: What did the company - I mean-imagine -- I talked about cutting costs and putting profits before safety. Why, what are they

alleged to have done here? I mean, I know they built an extra bit on the ship without necessarily worrying about whether this was going to imbalance

the ship. Is that part of it?

HANCOCKS: That is part of it, yes. The profit before safety is the crux of what prosecutors say led to this disaster. The fact that they were

modifications made so that they could make more money. They say that there was too much cargo on board, and they say that 50 percent of the time this

ship was sailing, there was too much cargo on board so that they could make money. They also said that it wasn't tied down properly. They say they

have proof of this. All of these factors together led to the sinking. And so of course it adds to the anger of South Koreans that this actually

shouldn't have happened - this disaster.

QUEST: Where do we stand in terms of the prosecution in terms of the captain? I mean, obviously he abandoned his ship in the most shameful ,

but where do stand on prosecutions and anybody else that's going to get prosecuted?

HANCOCKS: Well that trial is ongoing at this time. I started a couple of months ago, I went to the beginning of the trial, and some of the

families were there as well, obviously extremely angry - shouting and screaming at the captain, and 15members of the crew as they walked into the

courtroom. They're all on trial at this point. It will be an interest court as you know, the president Park Geun-hye already said that what they

did was akin to murder before they even got to court. So of course it will be interesting to see if they can get a fair trial in South Korea.

QUEST: Well, good to have you in New York, but let's not waste too much time getting you back there to carry on covering. Good to see you.

HANCOCKS: Thank you, Richard.

QUEST: Thank you, Paula. Now, when we come back after the break, we'll turn our attention to our normal digest of markets and corporate

earnings, and we'll update you with those that've come out, as we move into the second quarter (inaudible). It's "Quest Means Business." Good evening

to you.

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QUEST: So, to the stock market. We obviously need to update you on those. We have 61 points over 17,000 once again while we've been covering

obviously these other major matters in the world. The market's had quite a bit of a resilience attached to it, a gain of a third of one percent. The

S&P hit an end of day record. After the bell, Microsoft released earnings that were below expectations and where sales topped forecast. Interesting

dilemma there where you get sales at the forecast but earnings which suggest there's a car (ph) space mismatch there. Apple's earnings beat

estimates but sale were lower than expected -the exact opposite from the two companies.

To the European markets, let's have a quick look 'round there. There the FTSE up. In fact, they're all up. The strongest markets were up were

Paris CAC where saw a gain of one and a half percent. Trading in Asia has been disrupted by a typhoon in Taiwan. Tom Slater is at the World Weather

Center for us. If it's not one typhoon, it's another. How bad is this one?

TOM SATER, METEOROLOGIST FOR CNN INTERNATIONAL: Well, this is the third typhoon in three weeks. This is not a super typhoon like the first

two, Richard, but we're just now starting to see the effects economically to Rammasun, the last super typhoon. I'll share more of that in a minute.

The first one was Super Typhoon Neoguri - moved up into central Japan and we had five fatalities and of course structural damage with the mudslides

and land slips that they had there. Twenty-two provinces across the Philippines. Their death toll's at 94 - they're still assessing the damage

and looking for some missing. But this province - the Southern Province of Hainan - economically speaking, authorities there saying from Rammasun's

damage, $1.7 billion, and that's just for one province. We had three separate landfalls here, and the death toll continues to rise.

Now we have Matmo. Matmo was never expected to be a super typhoon, but it doesn't matter because the amount of rainfall that is moving into Taiwan,

and everything is screeching to a halt there. But I got to back you up - Southwest China. The waters are slow to recede, businesses are still

closed. Many schools have been delayed as well. If we look at the landslide problem in China alone, infrastructure damages

with bridges washed out, roads are closed, authorities are still searching and trying to make contact with some isolated communities. Vietnam's death

toll has risen from 11 to 27, that's with China's 33, so we have one Super Typhoon, three countries and a death toll right now at about 154. They are

moving all of them, and have been moving - all the fishing vessels and the merchant ships, locking them down.

To give you an idea of the preparations, show you some of the video. All schools in Taiwan, closed. All businesses are shut down. Richard, the

Taiwan Stock Exchange suspending all business operations until this system moves through, and it did exactly that.

Here is a radar picture. It was midnight local time. It's almost 5 in the morning now. You can see the center of Matmo, you can see where Taiwan is

here, moving directly across the entire island nation. It will most likely make, and it will, a second landfall in Mainland China. But it's the

topography that's of real concern. It wasn't about the winds here - we've got mountain ranges that are almost up to - you know - 4,000 meters. So

flash flooding's going to be a problem. The second landfall will take place roughly around noon in Fujian Province, but we're already getting

rain - staggering amounts - up to 500 millimeters and they've got more hours to go with this. So the mountain terrains are going to cause a big

problem. As the system moves toward Mainland China, Fuchu - that is a city right on - in - Fujian Province. You can see 150 kilometers, but quickly

for you, there's 7.1/7.2 million people in Fujian. This is going to move up but should stay out of Shanghai, Richard, but we've got to watch it

closely as landfall will be roughly around noon, Mainland China.

QUEST: Tom Sater, thank you. We'll have our "Profitable Moment" after the break.

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QUEST: Tonight's "Profitable Moment." The aviation and airline industry's in a bit of a mess tonight. Some airlines are flying to Tel

Aviv, others are not. Delta, United, American, Lufthansa say it's too dangerous. British Airways, easyJet and others say they're still flying.

Meanwhile, the Israeli director of aviation says on this program it's safe. What's the true position? I don't know? What I do know is when Tony Tyler

of IATA and airline CEOs tell me that it's time to have a conference to discuss the ways in which routes are declared safe, following on from MH17,

and now with Tel Aviv. Yes, you're right, the sooner the better they have that conference. And that's "Quest Means Business" for tonight. I'm

Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable. I'll see you tomorrow.

END