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Quest Means Business
Ukraine Fortifying Mariupol; NATO Slams Russian "Aggression"; Ukraine: The Economic Fallout; Cracks in the BRICS; Sci-Fi to Reality; Britain Raises Terror Alert; Possible Ebola Vaccine Examined
Aired August 29, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
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MAGGIE LAKE, CNN GUEST HOST (voice-over): Plenty to think about. It's Friday, August the 29th.
Europe prepares fresh sanctions on Moscow as NATO slams Russia's actions in Ukraine. Tonight I'll speak to its former secretary-general.
Brazil scores an economic home goal, the World Cup hosts are back in recession.
And after the tragedies, now the turnaround: Malaysia Airlines undergoes a massive corporate rebound.
I'm Maggie Lake and this is QUEST MEANS BUSINESS.
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LAKE: Good evening. We'll have an update on the raising of the terror threat level in the United Kingdom. We begin tonight, though, with a
crisis in Ukraine. Allegations are mounting against Russia as Britain claims it is certain that Russia engaged in a large-scale incursion in
Ukraine. A government source tells CNN between 4,000 and 5,000 troops are on the ground and that may be more on the way. They estimate that 20,000
soldiers are stationed along the Ukrainian border.
Earlier NATO released satellite images of alleged Russian military operations there. Russia denies it has made an invasion. President Putin
hit back, saying Ukrainian forces are acting like Nazis. Germany's foreign minister said the crisis is slipping out of control.
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FRANK WALTER STEINMEIER, GERMAN FOREIGN MINISTER (through translator): We have to know that the already dangerous situation in Eastern Ukraine has
now entered a whole new dimension. All the hopes we had that direct talks between President Poroshenko and President Putin would contribute to
deescalating the situation have been disappointed.
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LAKE: Ukrainian troops are bulking up defenses around the key port city of Mariupol in hopes they can hold off advancing rebels. Diana Magnay is
there and she joins us live.
Diana, what can you tell us?
DIANA MAGNAY, CNN CORRESPONDENT: Hi, Maggie. Well, that certainly is one concern that the rebels who have taken over a town very close to the
Russian border of Novoazovsk may push further west towards Mariupol, where I am.
But having been to Novoazovsk today and talked to the rebel commanders there and seeing what kind of kit they have, they really need a lot more
support if they were able to really drive further in to Ukrainian territory.
Now the allegation is that it is Russian troops and Russian armor that has effectively supported the rebels in taking that town and has moved in all
the way across the border. Now we've been driving about as far as you can the last couple of days around this area. And it's very difficult to catch
sight of a Russian troop presence as such to know that the tanks that you are looking at may have come from Russia. We know from the U.S. ambassador
to Ukraine, he believes that Russia is putting in its most sophisticated air defense systems. But all of this is very hard to find evidence for,
really, on the ground. And Russia continuing its policy as it has done all the way on of denial and obfuscation, arguing that these satellite images
of NATO's are simply similar to computer games. So the denial goes on -- Maggie.
LAKE: Diana, we saw pictures of some civilians in the car -- it would appear.
What's happened to the people that live in that region?
Are we seeing heavy military action?
MAGNAY: Not so much. There is sporadic artillery shelling that we've come across as we've driven around. But compared to the main anti-terror
operation as Ukraine denotes it further north around Donetsk and Luhansk, these villages have -- towns and villages have escaped extremely heavy
fighting. It's been far more sporadic around here.
What you do see is many cars with signs saying children on board and white flags or strips of cloth to keep them safe as they travel around the roads.
But certainly further north you see much more of the flood of people leaving these besieged cities of Donetsk and Luhansk and seeking shelter
elsewhere -- Maggie.
LAKE: Diana Magnay for us, thank you so much.
NATO's chief says Russia has blatantly violated Ukraine's sovereignty in one of his strongest statements yet on the crisis. The organization says
it believes Russian forces are already operating inside the country. Moscow rejects those allegations. NATO's secretary general, Anders Fogh
Rasmussen, slammed Moscow for its denial.
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ANDERS FOGH RASMUSSEN, SECRETARY GENERAL, NATO: Despite Moscow's hollow denials, it is now clear that Russian troops and equipment have illegally
crossed the border into Eastern and Southeastern Ukraine.
This is not an isolated action but part of a dangerous pattern over many months to destabilize Ukraine as a sovereign nation.
(END VIDEO CLIP)
LAKE: Let's talk now to Mr. Rasmussen's predecessor, Jaap de Hoop Scheffer. He was -- served as the secretary general of NATO from 2004-
2009, and he joins us live from The Hague.
Thank you so much, sir, for being with us today.
First of all, there seems to be a lot of caution, to use this word.
But do you view this as a invasion?
And what should NATO be doing?
Mr. Scheffer, can you hear us? It's Maggie in New York.
OK. We seem to be having a little bit of audio problems. We'll very much try to reestablish that connection and come back to him. But we are going
to stay with the topic, the economic cost of this conflict is weighing on all sides. Today the IMF approved the next tranche of Ukraine's bailout.
That will give Kiev a much needed lifeline of $1.4 billion.
Ukraine's PM says it is critically important for the economy.
Meanwhile, the Russian ruble has seen an all-time low against the dollar, sending stocks there tumbling its forecast to sink even further as the
crisis escalates. Officials have closed eight more McDonald's restaurants for what they say are sanitation issues. In total, 12 outlets have been
shut.
The U.S. and Europe are considering more sanctions against Moscow. The Dutch prime minister says sanctions so far have not changed Russia's
behavior.
Jim Boulden is in London with more.
Jim, if we're looking at sanctions at further sanctions what might they be and how quickly might they come?
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Well, we do have an E.U. summit on Saturday night in Brussels, which was going to be rather routine.
But all indications are that the E.U. leaders will discuss further sanctions.
And you're right. Everyone in Europe is saying these sanctions so far have done nothing to change Russia's behavior. One idea -- and it's just an
idea right now -- is being leaked out there to some of the media, is that they could try to stop Russia from using something called SWIFT.
Now this is the international transactions network for banks. It would be a very severe sanction for Russian banks to not be able to do this. This
isn't about access to European capital, because that's already been stopped by the sanctions.
This is actually not allowing banks to do normal transactions. That is seen as a severe but a possible sanction that could be discussed tomorrow
night. You could talk about more broader sanctions in other areas. Of course we had some in military; we had the -- obviously your -- some
European food not going to Russia because Russia isn't taking it.
So you could see further steps in other areas of the economy. But I will stress it: if they start going after Russian banking normal operations
that could be seen as quite a dramatic increase in sanctions from Europe -- Maggie.
LAKE: Yes, absolutely. And it's a decision that they're going to make with a great deal of a caution I'm sure, Jim. Let's talk about the cost to
Europe. And we know that these sanctions have certainly been weighing on sentiment; a lot of people believe they are weighing on the economy.
Can Europe really afford more sanctions?
BOULDEN: It's a very good question. You know, we're discussing deflation here in Europe. We're looking at triple recession in some countries.
We're talking about the fact that we're seeing not a lot of growth anywhere in the European Union. And people are getting very worried and want to see
what the European Central Bank could do, if anything, next week.
So if you do look at more sanctions, it becomes a very, very vicious circle, doesn't it, because Europe wants to go in step with the U.S. It's
obviously very unhappy with what's happening in Ukraine. But the same time, people are starting to say who hurts more from sanctions, Europe or
Russia?
Because so far, if the Russian people are finding it difficult, the Russian government isn't changing its stance. So the question will be who blinks
first and will Germany tomorrow night at the summit -- they're saying that Angela Merkel, the chancellor of Germany, will actually lead the call for
more sanctions.
So she seems to be saying there needs to be more done. And, yes, we will see then more economic impact here in Europe.
LAKE: A very tense and a very dangerous situation -- Jim Boulden, thank you so much.
Let's return now to Jaap de Hoop Scheffer. He served as the secretary general of NATO from 2004-2009 and he joins us live now from The Hague.
And hopefully he's able to hear me this time.
Thank you very much, sir, for being with us. And I can see from your nod that you do.
I started to ask you before, people are reluctant to use this word outright.
Do you think this is an invasion on the part of Russia and what should NATO do?
JAAP DE HOOP SCHEFFER , FORMER NATO SECRETARY GENERAL: Well, we are in a war of words if it's an incursion or an invasion. But the NATO satellite
images are very clear that Russia is now fully involved in the fighting in the eastern part of Ukraine. So I'm not that interested in defining this
as an incursion or an invasion. Russia has been lying about this position now over the past weeks.
So let's agree that they are heavily involved.
LAKE: And what should NATO's response be?
SCHEFFER: NATO has an extremely important summit, one of the most important summits in its history next week. I think NATO should certainly
show that it's a one-tier line; it's not a two-tier. In other words, in all 28 member states are guaranteed by Article V, including the Baltic
States, including Poland. And that means that in my opinion the NATO allies should decide to increase the physical presence, military presence
in Poland, in the Baltic States by prepositioning equipment, by increasing the number of exercises in that region, including the United States of
America, exercising, bringing its forces onto the European continent as we did and used to do in NATO during the Cold War because there should be no
doubt in anyone's mind in the Kremlin that NATO is serious and that it's entirely discreditable (ph). Deterrents only works when it is credible and
that's what NATO should do.
LAKE: Vladimir Putin speaking today said Russia is not looking for conflict, but he did take pains to remind everyone that Russia is a nuclear
power.
What do you make of that?
SCHEFFER: Well, that is the rhetoric you can expect from the Kremlin. But it's unhelpful to say the least.
But it makes another point, Putin makes another point, for NATO to make itself credible, to have a higher ennis (ph) force, grown from the so-
called NATO response force, which can act if and when the necessary, because one should not exclude. It's easy where I'm sitting now here in
The Hague, in the Netherlands.
But if you are in the Baltic States, or when you're in Poland, I mean, it comes very, very close. And NATO should be extremely serious, as my
successor Anders Fogh Rasmussen, the secretary general, has been up until now.
European nations should also stop -- that's the second very important element -- decades of constant defense spending and this upsetting of the
post-Cold War European order by Vladimir Putin should be a reason for all European nations to look very seriously in increasing their defense
spending efforts.
LAKE: When you talk about rearming of Europe, when you talk about military presence, there are a lot in the business community have expressed to us
concerns that this is a return to the Cold War and that as unpleasant as this situation is, Vladimir Putin is in some ways a man backed into a
corner and there should be a dialogue to try to get him back in the fold with Europe.
Do you think that there is still time for that kind of dialogue?
SCHEFFER: Absolutely because this question requires a political solution. So from the conversation -- to the conversation we had up until now, should
be added that diplomatic channels should be -- should stay open.
And here again, as your correspondent already mentioned from Brussels, here again the position of Germany and the position of the German Chancellor
Angela Merkel, whom I have the greatest respect, is absolutely crucial. Because tomorrow in the European Union, she'll have to take the European
allies by the hand -- Germany is the leading nation. And the same goes for NATO in Cardiff, where a combination, strong combination of President
Barack Obama on the one hand as the leading nation in NATO, and Germany on the other hand, is taking the political lead as far as the European allies
are concerned, she'll do two things.
First of all, show their determination, that land-grabbing is unacceptable under present European and international circumstances, but secondly that
where there is an opportunity that there should be an open diplomatic channel. We should prevent Vladimir Putin anyway from being able to freeze
the situation in Donbas in the Eastern Ukraine. This is what he wants. He wants another frozen conflict in Europe with influence by Russia,
diplomatic channels should be open. And diplomats always talk -- Menachem Begin, the Israeli prime minister, said famously, "You make peace not with
your friends but with your most heinous enemies." That's what will be the order of the day at the moment.
LAKE: Jaap de Hoop Scheffer, former secretary general of NATO, thank you so much for joining us and sharing your insights.
SCHEFFER: Pleasure.
LAKE: Good evening, sir.
Well, turning to the markets now while the situation on Ukraine is very much on the minds of investors, European stocks ended the month on a high
note. AstraZeneca shares rose on reports that the drugmaker may restart talks with Pfizer.
Meanwhile Tesco shares fell more than 6.5 percent after the supermarket chain issued a fresh profit warning and slashed its dividends. Shares of
Sane Varies and Morrisons (ph) also fell on the news.
In the U.S., stocks ended the day higher in light trade. This closes out the best month for U.S. stocks since February. The Dow fell early in the
session after Britain raised its terror alert. Investors had some mixed economic data to consider as well with the fall in consumer spending and a
rise in consumer confidence.
Still to come, Brazilian president Dilma Rousseff's reelection campaign takes a new economic hit. We'll get the latest from Sao Paulo.
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LAKE: Brazil has fallen into recession for the first time in more than five years. Economic output in Latin America's largest economy shrank 0.6
percent in the second quarter. That's after a 0.2 percent decline in the first three months of the year.
Economists blame a fall in investment and a slowdown in industrial output. It's a blow to President Dilma Rousseff, who is seeking reelection within
weeks. Recent polls show Rousseff trailing her Socialist opponent, Marine Silva. Shasta Darlington is live in Sao Paulo for us and joins us tonight.
Shasta, presumably there's not good news at all.
What does it mean?
SHASTA DARLINGTON, CNN CORRESPONDENT: Not at all. I mean, the government has come out defending their performance. They say that this is more a
result of the big global scenario. They blame the drought in much of Brazil, which has made energy prices go up.
And they even blame the World Cup. And, in fact, the figures do show that output did seriously slow down during the World Cup; we had so many
vacation days, it was hard to have much output.
But obviously critics say that it's a lot more than just that. They say that under Dilma Rousseff, the economy has stagnated and they say that it's
in large part because after the whole commodities boom came to an end, or at least slowed down, Dilma Rousseff and her government really tried to put
the emphasis on consumer spending, domestic spending, when what was needed was investment. And investment really did fall back, consumer confidence,
has hit new lows.
And you're really feeling that. So what the government is seeing now is that while not that long ago it looked like Dilma Rousseff could win
reelection in a first round of voting, it now looks like this is not only going to go to a second round because she'll get less than 50 percent in
that first wave of voting on October 5th, but that this new contender, Marina Silva, a well-known environmentalist, will beat her in a runoff,
which is huge news in Brazil. The Workers' Party, first under Luiz Inacio Lula da Silva, two terms, not one term Dilma Rousseff, they've been in
power, will have been 12 years. And they really formed and created what Brazil is today in many ways, especially for the younger generation.
So the fact that people are hungry for change and are looking to a new candidate is big news. And these economic figures are really not going to
help the outlook for them -- Maggie.
LAKE: Well, and they're coming when she doesn't have much time to sort of craft a defense or a message, which I presume is going to be issued.
Is it enough time for her opponent to really capitalize on it?
Well, polls say one thing, Shasta, and people say they want change. But when they have to go in and pull that lever for the unknown or the
untested, especially in an economic crisis, that's not always easy. Sometimes it doesn't work out.
Can she capitalize on this?
DARLINGTON: You know, it's a good question. But what we've seen recently is interesting because the business community and the markets have sort of
gone sour, at least a lot of them, on Dilma Rousseff, you'll see the markets go up when she goes down in the polls.
And while Marina Silva isn't an unknown, for example, she's considered not very friendly with agribusiness, which is a big deal here in Brazil, she is
-- Marina Silva's now wooing farmers and ranchers while Dilma Rousseff and her people are trying to convince everybody that these are unknowns, that
if you're worried about, for example, the past corrupt politicians, well, they generally come from these unknown camps, so watch out.
And that's kind of the path that they've been taking. But at this point, if the polls do play out, we will see a big change in the -- in the
political -- the political stage here -- Maggie.
LAKE: Any chopjo (ph). OK, Shasta, I know you're going to be watching it closely. Thank you so much.
Brazil is one of the five so-called BRICS, of course, the world's leading emerging economies. And it's not the only one showing some cracks. We
take a look over here, Russia, which we've been talking a lot about recently, the ruble has fallen to a record low against the dollar.
Analysts worry it could sink further if the conflict in Ukraine escalates.
In India, though, there is hope that economic growth is finally starting to pick up. GDP expanded at a 5.7 percent rate this spring, the best in two
years and, in fact, business confidence running very high there.
Well, joining me now, Alberto Ramos, who's Goldman Sachs senior Latin American economist and he's on satellite from New York.
Thank you so much for being with us today. Let's focus on Brazil. We heard -- it's interesting; Shasta saying we heard Dilma Rousseff blame the
World Cup but because nobody was able to get to work. A lot of people blame the World Cup, saying that was money wasted that should have been
more wisely invested.
What is really going on with the Brazilian economy?
ALBERTO RAMOS, SENIOR LATIN AMERICAN ECONOMIST, GOLDMAN SACHS: The World Cup is not really the issue. You know, this is a very big economy. You're
talking about the $2.4 trillion economy. If events like the World Cup or the Olympics were to be hosted by a small economy like Luxembourg, yes,
that would move the needle.
Not in the case of Brazil. And when you look at the recent macroeconomic data on real GDP, you see four consecutive quarters of declining
investment, four consecutive quarters of retrenchment of the industrial sectors.
So it goes much beyond the World Cup. The World Cup did not contribute positively to growth in the sense as mentioned by your correspondent back
in Sao Paulo, that the number of business days was much more than in previous quarter because in a number of days, particularly days in which
Brazil was playing was a national holiday.
But I think it's much, much --
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LAKE: Is this because of Dilma Rousseff? Or is this something larger going on with the BRICS in general? Because they're not the only ones.
We've had a lot of cheap money flooding the system that's caused capital flows to change.
Is it her fault? Is it the administration's fault? Was this a squandered opportunity?
RAMOS: I don't want to personalize the issue. I think this is mostly domestic rather than external. Has to do with the policies that have been
implemented over the last few years, which have created a situation with a lot of macroeconomic distortions and imbalances that need to be fixed.
But when you look at Brazil, we identify short-term, cyclical issues and more medium- and long-term structural issues. The short-term cyclical
issues are an indulgence or excessive tolerance for high inflation. Inflation is high, quite disseminated. That's led or turned the economy
increasingly uncompetitive. That led to a deterioration of the fiscal and current account fundamentals. And the government trying to react to the
sluggish performance of the economy perhaps was too inclined to intervene in the economy and distort a number of relative prices, let undermine the
competitiveness of the economy and at the same time contributed to a significant drop in consumer and business confidence.
That can be fixed and should be fixed. And will be fixed with time.
But then we have the structural medium-term issues that cap or limit potential GDP in Brazil, which, compared with many of the other BRICS you
were mentioning, is still quite limited. Potential GDP in Brazil at the best of times is probably between 2 percent and 3 percent. And that
requires a very aggressive structural reform agenda that we haven't seen any inclination.
From this I would say you are even in coming administrations that will be tackled. It's necessary to embark on a deep cutting structural reform
agenda in order to elevate potential GDP. Brazil has a tremendous potential but they have to work to make it happen.
LAKE: Yes and it is a challenge when you're talking about tackling those big reforms. We've seen it happen, not only in emerging markets but in
Japan as well.
Adolfo, we're going to have to leave it there -- Alberto -- excuse me. We're going to have to leave it there. But thank you so much for going in.
RAMOS: Pleasure.
LAKE: Hoverbikes and land speeders once only existed in the realm of science fiction. Now one engineer's turning that dream into science fact.
We'll explain how after the break.
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LAKE: Well, it's time to turn the clock back to 1983 because I remember thinking, wouldn't it be cool if all of us could try one of these? Check
it out, the land speeder chase in "Star Wars: Return of the Jedi." You remember it well. It's one of the film's most famous scenes. Well, more
than 30 years later, you still can't buy them in shops.
Well, the wait might be over, actually. This is a Kickstarter page to raise money to develop a hoverbike. It's the dream of a British engineer
who's always wanted to get it off the ground in tonight's "Make, Create, Innovate."
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CHRIS MALLOY, ENGINEER (voice-over): When I was younger I always wanted to fly. I always dreamt the different flying vehicles, always dreamt about
budima (ph).
UNIDENTIFIED MALE (voice-over): Chris Malloy is an engineer. His passion is making things fly.
MALLOY (voice-over): I invented a hoverbike that has all the properties of a helicopter and flies like a helicopter but has the freedom and look of a
motorcycle. When I was young, I saw "Star Wars." As that speed moment inspired me somewhat to design a vehicle that could fly just like that.
UNIDENTIFIED MALE (voice-over): The idea went from "Star Wars" to reality in December 2008. Malloy was himself a test pilot of the world's first so-
called hoverbike.
MALLOY (voice-over): I knew all the time in the background that what I was doing was quite dangerous, as was the first flight test and lots of
unknowns. However, you know, I had to just go and do it.
I was happy that I got off and I was in one piece. My friend, who was a nurse, she had tails (ph) in the car, ready to wrap limbs just in case.
UNIDENTIFIED MALE (voice-over): After a lot more tests, they made a fundamental design change, four propellers rather than two.
MALLOY (voice-over): We decided to mention the quadcopter design because it was a far cheaper and safer method of controlling the vehicle than using
the bikecopter.
This is a scale model of our full-sized hover bike. It produces thrust and hovers like a helicopter by pushing air down with its propellers. In order
to move forward, we decrease the thrust on the front and increase the thrust on the rear. And same to go backwards.
In order to rotate, we change the speed of the propellers whilst keeping the thrust the same.
UNIDENTIFIED MALE (voice-over): Malloy always starts out by using scale models; with a camera on one, you get a sense of what it might be like to
fly the real thing. Malloy is well aware that he has competition, that he's in a hoverbike race. Teams in Los Angeles and the Czech Republic are
also developing hoverbikes. But Malloy believes his machine will be the most versatile.
MALLOY (voice-over): A hoverbike is different because it's been designed as an area (INAUDIBLE). It's not designed as a toy. So we can deploy it
in an emergency areas. We can use our design is autonomous, so it can ferry goods and people in without their needing to be a pilot.
UNIDENTIFIED MALE (voice-over): More manned test flights are planned in the next few months. Malloy will again be the test pilot. The first he
hopes of the true hovercyclists.
MALLOY (voice-over): If I was looking down the road in 5-10 years' time and saw a hoverbike working in a farmer's field, I'd be honestly happy. I
think whether it's mine or somebody else's, this will happen. But I hope it's mine.
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LAKE: The company behind Angry Birds is pushing its CEO out of the nest. Rovio says this man right here, Mikael Hed, will step down at the end of
the year. Now, the company, once high-flying, is struggling. Profits have plummeted. Rovio is having trouble with the so-called freemium model
offering games for free and charging for features like extra levels. The company now gets about half its revenue from licensing Angry Bird
characters for toys and clothing, and Rovio isn't the only game-maker in trouble.
King Digital has yet to produce another hit like its flagship game Candy Crush Saga. User signups have lagged, investor expectations as well. And
finally, let's not forget about Zynga, the maker of Farmville is playing catch up in the mobile market as it diversifies beyond its Facebook
platform. Zynga's stock had lost around 80 percent of its value over the last two and a half years. We'll be right back with more "Quest Means
Business" in just a moment.
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LAKE: Welcome back, I'm Maggie Lake. Here are the headlines this hour. Britain has raised its terror alert to severe -- the second highest level.
Prime Minister David Cameron cited the danger from Islamic extremism. He says ISIS poses the greatest security threat Britain has ever seen. Still,
government officials say no intelligence suggests any attack is imminent.
Meanwhile, Britain claims it's certain that Russia is engaged in a large- scale incursion in Ukraine. Earlier NATO released satellite images of alleged Russian military operations there. A British government source
tells CNN between 4,000 and 5,000 troops are on the ground, adding that more may be on the way.
The United Nations says it's still working to free 44 U.N. peacekeepers in the Middle East. Syrian rebels detained them on the Syrian side of the
Golan Heights buffer zone after seizing the crossing from government troops. An Israeli military official tells CNN those holding the 44
members are of the Al-Nusra Front which is linked to al-Qaeda.
Meanwhile, the U.N. says almost half of all Syrians have now been forced to leave their homes because of the country's civil war. The number of people
fleeing Syria has now moved past three million. Another six and a 1/2 million have been displaced. A U.N. spokesman said the aid operation for
those refugees is the biggest in the organization's history.
Iceland has reopened its airspace despite the eruption of Bardarbunga volcano. So far there is no huge ash plume, that's because it's a fissure
eruption and not an eruption from the volcano's main chamber.
Some news just coming in to CNN. The IMF says it will stand behind managing director Christine Lagard. She's facing criminal investigation in
France tied to a political corruption probe dating from six years ago. The executive board has expressed confidence that she will continue to carry
out her duties for the IMG. The British government is warning a terrorist attack on home soil is highly likely. It's raised its terror threat level
to severe in response to the growing threat of ISIS. Prime Minister David Cameron admits there's work to be done to tackle extremists.
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DAVID CAMERON, BRITISH PRIME MINISTER: It is becoming clear that there are some gaps in our armory, and we need to strengthen them. We need to do
more to stop people traveling, to stop those who do go from returning and to deal decisively with those who are already here.
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LAKE: Atika Shubert joins me from our London bureau now. Atika, do we have any more information about this?
ATIKA SHUBERT, CNN CORRESPONDENT BASED IN LONDON: Well, what we know is of course that the Joint Terrorism Assessment Center raised the terror threat
level to severe. Now that doesn't mean that there's any information of an imminent attack, it simply means that they see that the threat of ISIS in
Syria and Iraq has deepened substantially, and of course this comes after that video was released of the killing of the American journalist James
Foley. And the militant in that video has a very distinct British accent. And of course, for the last few days -- for more than a week now -- we know
that British investigators have been working around the clock to try and identify that militant and find out his network. So it seems that these
two are connected, and now that ISIS poses as deep a threat -- not just in Syria and Iraq -- but also to Europe and the U.K. in particular.
LAKE: Absolutely, and of course the U.K. has had its experience with terrorist attacks on home soil. Atika, the administration in a tricky
situation here, aren't they? Because clearly this was a decision that was taken with a lot of thought. They are clearly worried about something, and
yet at the same time telling the public that nothing's imminent. Is anything going to change? What does it mean that they have raised the
terror threat? Are ordinary citizens going to see anything different?
SHUBERT: I think the important thing to remember here is that this is actually -- the terror threat is actually -- raised independently of the
government by the Joint Terror Assessment Center, and they make that decision based on the intelligence that they're seeing. And what that does
is that automatically triggers certain changes in policing, certain other security measures. So we may seem -- see -- some extra police for example
at train stations. I saw some earlier today when I arrived at the train station. And so you might see some of that, but nothing that's going to be
so significant as to disrupt daily life. People are going to go ahead with their travel plans over the next few days.
But what it also means is that the prime minister took this opportunity to come forward and say that there will be now a renewed focus on the
extremist elements here in Britain, and that possibly having a discussion about new legislation that will control the flow of fires going into Syria
trying to stop them and prevent people from coming back, but also trying to counter that extremist narrative that does exist here in Britain.
LAKE: Atika Shubert for us live in London. Thank you. The terror threats come as the United States prepares for a busy few days of travel for the
Labor Day weekend. CNN's aviation correspondent Rene Marsh explores what the heightened alert means for the United States.
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RENE MARSH, CNN'S AVIATION AND GOVERNMENT REGULATION CORRESPONDENT, BASED IN WASHINGTON: It's an unsettling mix -- terror threats during a busy
travel holiday. The U.K.'s threat level raised to severe for fear Westerners fighting for ISIS overseas could fly back home. And the U.S.
Department of Homeland Security said it has enhanced security overseas at airports with direct flights to the U.S., but no change so far in the
terror alert system.
JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: I don't anticipate at this point that there are -- that there's a plan -- to change that level.
MARSH: This summer, following intelligence, terrorists were developing more sophisticated bombs designed to avoid airport screening. Flyers from
Middle East and European airports bound for the United States have had to power up all electronic devices to prove they weren't explosives.
Governments are on high alert for foreign fighters looking to return to their home countries.
CAMERON: We are stopping suspects from traveling by seizing passports, we're barring foreign nationals from reentering the U.K., we're depriving
people of citizenship.
MARSH: The U.S. is striking a similar tone after two Americans were killed fighting for ISIS in Syria this week.
JEN PSAKI, STATEMENT DEPARTMENT SPOKESWOMAN: We have the prerogative at the State Department in coordination with law enforcement authorities to
revoke pass -- passports -- when it comes to a point where somebody is working with a terrorist organization or posing a threat to the American
public.
MARSH: The government's no-fly list and law enforcement watch lists are updated and sent to TSA in real time as threats develop. But it's not a
perfect system.
UNIDENTIFIED MALE: When I went back to Florida, --
MARSH: Moner Mohammad Abu-Salha grew up in Florida. He flew to Syria, trained as a jihadist, then returned to the U.S. He was able to fly again
overseas, not to be seen again until (IMAGE OF BOMBING) he blew himself up in a suicide attack in Syria.
STEWART VERDERY, FORMER ASSISTANT SECRETARY OF HOMELAND SECURITY DEPARTMENT: We know something about somebody, they're going to be
questioned. The real concern is the sleeper cells -- somebody that hasn't -- has kept them -- they're (ph) under the radar.
MARSH: The 14 million Americans taking to the sky this weekend may see heightened security already in place because of the busy Labor Day travel.
But more security is being considered, and not all of it will be visible.
(BEGIN VIDEOCLIP)
LAKE: Loss-making Malaysia Airlines is taking some drastic steps to keep on flying. The troubled Asian carrier has just announced a major overhaul.
The details and what it means for travelers in just a moment.
(COMMERCIAL)
LAKE: Six thousand jobs are to go as Malaysia Airlines makes drastic cuts to survive. The national carrier is slashing 30 percent of its workforce.
It was already struggling financially before the disasters of MH370 and MH17. This week, the reported losses of nearly $98 million in the second
quarter. We're all waiting to see is which destinations will be affected by the cuts. Analysts say the long-haul routes are at risk. Chris Yates
runs an aviation consulting firm. He joins us via Skype from Manchester, England. Thanks very much for being with us today. Do you believe that
Malaysia Airlines can restructure itself back to profitability?
CHRIS YATES, YATES CONSULTING: Well, it's going the right way in terms of the restructuring with the job cuts, with likely cuts to the long-haul
services that are being much talked about in the moment. There have been discussion of course that those long-haul services might be axed all
together. That was never on the kance (ph) because of course Malaysian Airlines is a flag carrier -- it waves the flag as much as it does carry
passengers back to the home country. So it's the long-haul routes which are thin. In other words, those not turning a profit which are most a
threat.
LAKE: Chris, is this largely due to the tragedies we saw with MH370 and MH17? Or would this have to happen anyway, and how does that inform them
in the restructuring?
YATES: It's mostly to do with the two major accidents the airline has had of course. But then again you mentioned it at the very outset the airline
has been in financial difficulty for some time. And that's not least because of the stiff competition in the southeast of Asia from many of the
low-cost carriers that operate in that part of the world. So, the airline had been losing vast sums of money and that primarily because the airline
is overstaffed. It's long been overstaffed. And this pruning of the workforce will help to correct that imbalance.
LAKE: Yes, I'm glad you brought up the issue of staffing, Chris, because any time we would see any other restructuring -- corporate restructuring --
and that many job cuts, we would say can they keep the talent they need -- nobody wants to be facing an uncertain future if you've got the talent and
the skill. Is it a different situation here? Do you believe that they will be able to right-size this and have the kind of people/the level of
expertise where they will be able to compete?
YATES: Well as I mentioned before, they're going the right way. Holding on to the right caliber of staff might well be difficult, and that's where
the introduction of a new CEO would enter into the equation of course. He's got to be pretty sharp. He's got to be able to sell paying now for
gain later, and the bottom line to that is we need somebody at the helm with lots of airline experience with the ability to pull the workforce back
together. It's been pretty fractured lately, and it needs to be pulled back together so that they're all driving in one direction.
LAKE: And what about reputational damage, Chris? It's so difficult. Of course Malaysia Airlines' not the only airline to face an air tragedy --
many have come back before. But this is an extraordinary circumstance we saw, and you couldn't blame the superstitious out there to think 'I might
want to try another airline.' How do they overcome that?
YATES: Well of course the numbers -- the buns on seats as it were -- they're down at the moment. They've been down something like 30-odd
percent or so. It's pretty difficult to convince people to fly with an airline that's had two major accidents within the space of just -- what? --
four months. But it is doable, provided that the airline gets its act together, identifies the right sort of routes, the right sort of people to
shed, then, yes, it's entirely doable. But, you know, we've got some way to go yet before we see whether the airline is coming out of the doldrums.
LAKE: It will take time to heal. Chris Yates, thank you so much for joining us this evening.
YATES: Thank you.
LAKE: Now, time for a check on the world weather forecast. Of course Samantha Moore is at the CNN International Weather Center. Hi there,
Samantha.
SAMANTHA MOHR, METEOROLOGIST: Hi there, Maggie. Oh, my goodness, yes we've had a lot of activity lately in terms of volcanic activity. In fact,
three -- one here in Iceland and then another in New Guinea and Philippines we'll get to in just a moment. But not as much earthquake activity --
seismic activity -- during the past 24 hours, but since the middle of the month, you can see how much activity we've had with some earthquakes of
great magnitude.
So still an unsettling situation here. We are now at orange alert. We were at red a little bit earlier this morning because of a fissure eruption
that occurred early in the morning here. And so we have some possible scenarios that we are looking here as far as the Bardarbunga volcano is
concerned. We could end up seeing things gradually alleviate -- there the magma movement -- to slow down and for it eventually to stop. We could end
up seeing -- of course that would be the best of the scenarios. We could end up seeing it cause an eruption as it comes to the surface, and that
would obviously would cause a big lava flow. Not as much in the way of dust being thrown into the atmosphere.
And the third possibility would be the grace -- greatest -- ash producer, and that is if a large portion of a fissure just blasts off and we see the
volcanic ash launched well into the atmosphere. And if we do, you can see that would get caught up in our general flow across much of the U.K. and
then down across Europe as we have this pattern that has this upper-level winds moving from Iceland down across Europe.
That pattern also is bringing a cold front across the region with the unsettled conditions continuing here across much of Europe as we head into
the weekend. With that possibility of severe weather here, especially where you see the bright red and pink colors, heavy rain, large hail,
severe winds as well as a few tornados. We'll have to monitor this as we head into the beginning of your weekend.
Also we will be monitoring New Guinea where they had a much more explosive volcano. This ash went up some 20,000 meters into the air, and you can see
just that fiery explosion. So this area is in a fairly populated area where two volcanoes -- this one along with Mount Vulcan ended up joining
forces back in 1994 and it eradicated the town of Rabaul, so that -- near that volcano -- that was near where that photo was.
So not only this one, but we also have another in the Philippines, Maggie. So, we are watching all of the volcanoes over the course of this weekend.
It looks like it is going to be very active.
LAKE: And that means you will be very busy. Samantha, --
MOHR: That's right.
LAKE: Thank you so much. Have a lovely weekend.
MOHR: You too.
LAKE: Well still to come, the Ebola virus. It continues to expand in West Africa. But the World Health Organization warns efforts to contain the
disease are hurting, not helping. We'll have the latest.
(COMMERCIAL)
LAKE: The deadly Ebola virus has spread to yet another country. Senegal is confirming its first Ebola case. It's a 21-year-old university student
from Guinea, and they're now under quarantine. Meanwhile, the World Health Organization says closing borders or banning flights is not a good way to
fight Ebola. WHO says that isolates those countries, making it difficult to provide them with help.
Human trials of an experimental Ebola vaccine are set to begin next week. The tests have been fast-tracked by an international consortium charged
with containing the deadly virus. Healthy volunteers will be monitored to see if the vaccine will produce a strong immune response or if they suffer
any adverse side effects. It was developed by GlaxoSmithKline and the U.S. Institute of Allergy and Infectious Diseases. Data from the tests could
come as early as the end of the year. Jon Pender from the Global Health and Access Team at GSK says trial volunteers are not at risk of being
infected by Ebola.
(BEGIN VIDEOCLIP)
JON PENDER, GLOBAL HEALTH AND ACCESS TEAM, GLAXOSMITHKLINE: It's a vaccine which is a technology which has been well-developed now. It's been used in
many other vaccines. It's completely safe and there's no danger at all of somebody contracting Ebola disease from using this vaccine.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: So how does it work?
PENDER: Well that's a technical question that is really beyond my expertise, but basically there's a -- a protein is extracted from the
virus, it's then connected to an adenovirus which is derived from chimps and when injected into humans, we hope -- it's never been injected into a
human so far -- but in animal trials, when injected into animals, it has shown that it has both safe and produced an immunogenic response.
QUEST: Now, from your experience and from the experience of companies like GSK -- GlaxoSmithKline -- by the time you get to human trials, you have a
pretty strong confidence that this thing's going to work, don't you?
PENDER: Well think we're more confident in vaccines than we are in medicines. But then you can't preempt anything in this area. There is a
lot of serendipity in bio-medical research -- whether it be for vaccines or medicines. We've had promising results from animal trials. We really
wouldn't want to prejudge the results of these first-time in human trials.
QUEST: If -- from the moment you inject the first vaccine or trial vaccine, to the moment when it could potentially become available in
countries to be given to people, how long would you think that could be? I know, I've just asked you how long is a piece of string, but you've been
looking at this a lot more than I have and therefore you've got a better idea as a better guess for what sort of time scale. Months or years?
PENDER: Well, typically it takes years to develop a vaccine, but this is a very unique situation we're suffering in West Africa with Ebola. And the
partnership that we're announcing today enables us to accelerate the development of this vaccine -- do things in parallel which we would
normally do in series. So we are hoping that we will have the data from these first series of trials -- first-time in human trials -- by the end of
this year and then depending upon what that data looks like from a safety point of view, and in terms of providing an immune response, we will then
have a much better idea of how soon we can start using this vaccine in the field.
(END VIDEOCLIP)
LAKE: Still to come on "Quest Means Business," we'll have a sneak peek of this week's "Reading for Leading" just ahead.
(COMMERCIAL)
LAKE: Don't miss this weekend's "Best of Quest" where the former British lawmaker, Norman Fowler, is in charge of "Reading for Leading." He chooses
a comedy about journalism as his favorite novel.
(BEGIN VIDEOCLIP)
NORMAN FOWLER, FORMER BRITISH LAWMAKER: My chosen book is Evelyn Waugh's "Scoop." Now, that is not a book that I read and said, 'My golly, I must
go into journalism' -- I was a journalist -- or go into politics. But it did show quite a lot about modern life. It showed I think above all it
showed chance, and that was -- is -- something which takes place in everyone's life.
(END VIDEOCLIP)
LAKE: That is the "Best of Quest" only on CNN at 7:30 p.m. London time. And that's "Quest Means Business." I'm Maggie Lake.
END
