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Quest Means Business
ISIS Claims Tunisia Museum Attack; Attack Targeted Tunisia Tourist Industry; Merkel Says No New Greek Deal Today; Tag Heuer to Develop Smartwatch. Aired 5-6:00p ET
Aired March 19, 2015 - 17:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
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[17:00:12] POPPY HARLOW, CNN HOST (voice-over): Yet another triple-digit swing for the Dow with stocks fall back below 18,000. It is Thursday the
19th of March.
Tonight: cruise ship companies pull out of Tunisia as the country reels from an ISIS-linked attack. European leaders get angry over Greece, now
patience in Brussels is wearing thin.
Also oil prices decline yet again.
So why aren`t you paying less for your airline ticket?
I`m Poppy Harlow and this is QUEST MEANS BUSINESS.
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HARLOW: Good evening and welcome to the program. Tonight, a terrorist attack on the jewel of Tunisian heritage is threatening to cripple the
country`s economy.
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HARLOW (voice-over): ISIS has claimed responsibility for Wednesday`s mass shooting at a museum in Tunis. And while CNN cannot independently verify
the authenticity of the claim, officials in the United States tell us there is no reason to doubt its authenticity. Tunisian authorities have so far
publicly identified two suspects and have at least nine more in custody.
Also 15 of those murdered were travelers from cruise ships that had embarked from Europe. Now Costa Cruises, an arm of Carnival, has canceled
all visits to Tunisia indefinitely.
CNN senior international correspondent Arwa Damon joins us now from the capital city of Tunis.
Arwa, thank you very much for being with me.
I wonder what we know about the nine arrests, because I know ISIS has put out these two names, Abu Zakaria al-Tunisi and Abu Anas al-Tunisi.
What else do we know?
[17:05:08] ARWA DAMON, CNN CORRESPONDENT: Well, let`s start with the nine that were detained. Now the government is saying that four of the nine
were directly involved in this attack or directly associated to it.
What we don`t know at this stage is if any of those who were detained were one of the three gunmen believed to still be at large. So a lot of
questions about that.
In terms of the two attackers who were killed inside the museum just behind us, well, one of those was an individual that the Tunisians were actually
keeping an eye on, someone who was (INAUDIBLE) intelligence apparatus. And that`s raising a lot of questions as to how it was that he was able to even
partake in this kind of an attack.
Now when it comes to ISIS` claim of responsibility, one must remember that these individuals could have been ISIS sympathizers, supporters or they
could have been ISIS members. We really don`t know that definitively. And for ISIS to claim responsibility for an attack does not necessarily mean
that it directed it or ordered it to take place. A lot of ISIS` messages out there have been trying to encourage individuals to carry out attacks,
encourage these kinds of seemingly smaller cells to launch attacks against soft targets such as the museum.
So at this stage, there`s still a lot of questions as to exactly who these individuals were, who specifically inspired them, how their own personal
journeys ended up seeing them carrying out this kind of (INAUDIBLE) violence.
But also when it comes to the economy of this country that is the biggest fear or amongst the biggest fear after security, of course, for the vast
majority of the population because if the tourism industry here takes a blow, the entire nation takes a very significant blow as well.
HARLOW: No question about that. We`ll talk about that more later in the program.
But, Arwa, can you give us the big picture here right. Let`s talk about this in the context of the hope borne from the Arab Spring because Tunisia
was really sort of the icon of hope with democracy, a changing government and leadership being born from that and a lot of people are questioning
what this does to that progress.
DAMON: And that`s a really one of the core reasons why people here are so devastated by this attack. I mean, yes, naturally anyone would be. But
given that Tunisia did have that reputation, it is the only success story of the Arab Spring. It just recently voted it a moderate secular
democracy.
And to have this kind of an attack happen against tourists, against visitors for the vast majority of the population here they`re so proud of
their heritage, it is heartbreaking.
What is also concerning for some right now is what this is going to mean for the country moving forward. These are hard-fought freedoms that
Tunisians came to find post-revolution. And now with a potential massive crackdown that could take place with this anti-terrorism law that the
country is trying to pass that is highly controversial, there are some concerns that some of those hard-fought freedoms might end up being
sacrificed as the country tries to grapple with securing itself in these current circumstances.
[17:10:04] HARLOW: And some say if we do see that path, that is reminiscent of Ben Ali`s dictatorship.
But I wonder, Arwa, these are a varied the middle ground, if there`s a compromise, if people are willing to make given that this is by far the
biggest attack we`ve seen in Tunisia since the Arab Spring uprising.
DAMON: And up to a certain degree, yes. People do realize that there is going to be a need for tightened security and the government has already
promised to do that. They are going to be upping security at sensitive sites, such as the various religious sites that are here because you do not
only have Muslim sites, holy sites but Christian and Jewish ones as well.
You also are going to be seeing beefed up security at cultural sites like the museum.
But at the same time, there are concerns about sweeping detentions that may be taking place. The government`s ministers, earlier in a press
conference, announcing that in the last four weeks 400 individuals with ties to terrorism had been detained. And some people we`ve been speaking
to were criticizing this process, saying that it`s -- detention was impunity up to a certain degree and that`s why they`re so concerned about
this anti-terrorism law eventually passing because in the past, historically, security apparatus here has operated with pretty much
complete impunity. No one wants to see a return to that and yet there is a recognition that the country is at a very sensitive stage.
So yes, finding that critical balance between security and not infringing on people`s freedoms, especially given what was sacrificed to achieve those
freedoms, is going to be very difficult and challenging for the government to achieve.
HARLOW: Arwa Damon live in Tunis for us this evening, thank you so much, Arwa. Great context. I appreciate it.
Well, officials in Tunis were quick to declare they`re unified in their desire to expel terrorism from their country. But high youth unemployment
and an economy with very few opportunities has been blamed for part of the rise in the number of jihadis in Tunisia.
Speaking to CNN, the minister of foreign investment said his country knows that investors want stability and that is what his government is pushing
for.
(BEGIN VIDEOTAPE)
YASSINE IBRAHIM, TUNISIAN FOREIGN INVESTMENT MINISTER: In Tunisia, we had set back the investment during the last years because we had, first of all,
eight governments in four years. We`ve been building a new constitution. We`ve been building a new institutions. And for the first time, we have
elections for a parliament for part years. We had the election for president for five years. So this government that started six weeks ago
were ready to build it. We are ready to build now a plan and a vision for five years.
And any investors need stability, need visibility need orientation, priorities, and that`s what we will do.
(END VIDEO CLIP)
HARLOW: Well, tourism is vital, as you heard from Arwa, to Tunisia`s economy and to support frankly the fragile democracy that emerged in the
wake of the Arab Spring. Wednesday`s attack clearly targeting tourists can be seen as a direct assault on the country`s economy and the tourism
industry.
Cruises from 12 European cities, including those in France, Italy, Malta and Spain offer Tunis as a port of call. They help bring millions of
people to visit the country every single year. Travel and tourism contributed to more than 15 percent of Tunisia`s GDP in 2013 and the
industry was primed to flourish. That figure was forecast to rise 3.5 percent last year.
Speaking to CNN`s team on the ground, a taxi driver in Tunis said the terrorists, quote, "hit at the heart of our livelihood."
Loretta Napoleoni is an expert on financing of terrorism. She`s also author of several books, including "Rogue Economics" and "Islamist
Phoenix". She joins me now from London.
Thank you for being with me. Let`s get straight to it.
When you look at what a big driver tourism is of the GDP in Tunisia, and when you look at not just Costa, but a number of big cruise lines have now
said they will not be returning to the capital city of Tunis indefinitely, give me a sense of what that does, big picture, to this country`s stability
that banks on an economy improving.
[17:15:04] LORETTA NAPOLEONI, AUTHOR AND TERRORISM FINANCE EXPERT: It`s a very big blow definitely. I mean, they -- the government was hoping to
increase the percentage of GDP produced by Tunis up to almost a quarter percent. So we`re talking about 25 percent within the next five years.
And the reason why Tunis was so important for Tunisia is because the fall of Libya, the generation of Libya that today is seeing the fact of a failed
state has taken a lot of business away from the Tunisian economy.
Tunisia was the gate of entry for trade into Libya and of course, now it`s lost that really, really important business. Think about the imports that
went through Tunisia into Libya.
So the country -- I would say that the country is really in a very bad economic situation at the moment.
HARLOW: So a lot of this comes down to money. And you`re an expert in the funding of terrorism. But there`s also the idea of funding and helping
prop up states so that they do not become failed states. I know it`s early going, but do you believe there is -- should be a call from the
international community to help prop up Tunisia`s economy, given the loss it`s seeing from tourism and frankly given the intense battle they have
within their borders with extremism?
NAPOLEONI: Well, yes. I suppose, you know, we could use the European Union -- and let`s not forget that European Union has special relationship
with the North African countries. So a special treatment in terms of trade could be put in place for Tunisia.
But that could, of course, create tensions with other countries, for example, Algeria or even Morocco. So it`s not going to be as easy. But I
think that could be a good instrument, just to use the E.U. as a sort of instrument to which Tunisia could get a preferential treatment for a very
short time, of course, we`re not talking about for a long time.
So that the country could get back on its feet.
HARLOW: And provide a bit more stability perhaps to lure in the foreign direct investment that is so critical that you just heard the minister
saying they are trying to get in every way they can. And this attack makes it even harder.
NAPOLEONI: Yes. Well, I don`t think that foreign direct investment will be affected as much as tourism, of course. I mean, depends on which kind
of (INAUDIBLE) people want to invest in the tourist industry will be most likely now not doing it.
But I think there is a lot of interest also in other sectors because Tunisia being the only country that managed to go through the transition to
a democratic country, offered great opportunities also for what concerned trade, commodities trade.
For example, is a large producer of pasta that is then sold all over North Africa. So is that kind of direct investment was thinking about investing
in Tunisia, I think you will continue to do that of course.
HARLOW: Loretta, good to have you on the program. Thank you for the expertise. I appreciate it very much.
Well, people around the world are really taking the social media declaring terrorists will not be the ones deciding where they go on holiday. Some
Instagram users posting selfies, holding signs with a pledge to visit Tunisia this summer. Many of them using the #JeSuisTunisia or
#JeSuisBardo, the museum.
Where it`s mentioned tens of thousands of times on Twitter in the wake of this horrific attack, these German tourists traveling to Tunisia said they
also won`t be deterred.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE (through translator): We`ve been to Tunisia a few times and traveled all over there. It`s a relatively safe place. Those who did
that are just a bunch of idiots.
UNIDENTIFIED MALE (through translator): If we all went into hiding and did not leave our houses, we would only support such actions. Especially now
it is important to support the Tunisians.
(END VIDEO CLIP)
HARLOW: Coming up next on the program, it is a tough night for the prime minister of Greece, Alexis Tsipras is in Brussels, trying to unlock more
emergency funding. He is facing some very angry European leaders. We`ll explain next.
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HARLOW: Tonight the key players in the Greek bailout saga are meeting in Brussels and already Angela Merkel has doused expectations of a deal. The
German chancellor is taking part in a mini-summit with the European institutions that decide on Greece`s emergency funding. It has been a
month since Athens secured a bailout extension. And tonight Eurozone leaders are expected to tell Greek Prime Minister Alexis Tsipras their
patience is running out along with their money.
The big question: where are the structural reforms?
Also the Belgian prime minister is angry because not everyone is getting a chance to hold the Greeks to account.
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CHARLES MICHEL, BELGIAN PRIME MINISTER (through translator): I am angry. I think it is a mistake that has been made in the method. The Belgian
government has not given a mandate to France and Germany to negotiate in its name. Belgium has a 7 billion euro stake in this. This is whole of
the Eurozone that is directly concerned.
(END VIDEO CLIP)
HARLOW: Well, Greek stocks fell sharply again today and a benchmark index is now down 200 points since last month`s agreement. Banking stocks also
suffering and hundreds of millions of dollars in deposits continue to leave Greek banks daily.
Jim Boulden is live in London for us on the latest.
Jim, understand the anger and the desire to see reform. At the same time, do you get the sense that this is just sort of going to be a bickering
until the final hour and then some sort of agreement because they do not want to see a failure for Greece?
JIM BOULDEN, CNN CORRESPONDENT: Well, neither side wants to see a failure. We know that. We hear that on the record but also you hear it behind the
scenes, that nobody is really looking for Greece to leave the euro but there has been absolutely no progress reported since that extension was
given.
And remember, that extension was the extension to talk. and the idea was give Greece a little bit more time in order to get the last bit of money
that it`s already been agreed to give Greece, as long as they stay the course.
Well, as far as the Eurozone`s concerned, they`re not staying the course. They`re not doing the reforms that are necessary and they`re doing things
that the troika, the people have given the money, haven`t agreed to allow the government to do.
Now the government says we want dignity; we want to have a say on how these things happen. We want to give you different ideas of how we can still get
to the same goal, which is reform and the ability for Greece to pay back its huge loans. But we`re nowhere, Poppy.
In the meeting -- the mini-summit, as they called it -- is just about to begin, I`ve been reading. So they`re going to go in and talk for a few
more hours. It is, what, it`s 10:15 in Brussels time. So they`re going to talk and talk and talk, maybe overnight. We`ll probably get Mr. Tsipras to
have a press conference afterwards.
But there`s not going to be any of that kind of progress tonight. It`s going to continue to go on. It`s going to go on and go on. But you`re
right. Are they going to go to the last second? Are they going to let the markets worry that much, investors, stock markets, bond markets?
Are they going to let them do that again because we all remember what it was like in 2011. We don`t want to do that again.
HARLOW: No, and I just wonder if you -- how long this extension can go, right, is it feasible for Greece to get another extension? What are you
hearing behind the scenes there?
BOULDEN: Well, Greece says they don`t want another extension, they don`t want another bailout, they want to be given a chance to do it their way.
They want to be able to hit the rich with taxes. They want to get -- you`ve heard the story about getting people to spy on companies to make
sure they`re paying their taxes. They have different ideas of how to do this.
And until the two sides can come closer together, but the one thing I will say is I think Greece had some sympathy. They wanted to give the new
government a little bit of time in January. You don`t get any sense that any leader from any of the Eurozone countries have any sympathy for Greece
anymore. They`re telling them you`ve got to do what we`re telling you or it`s all going to go bad. And the biggest worry now in the markets is that
Greece slips out of the euro accidentally, if that`s even possible.
HARLOW: Right. And the question, who blinks first, and when do they blink?
Jim Boulden in London for us, thank you, Jim. Good to have you on.
The European markets overall are at their highest level since the turn of the century. U.K. stocks closed at a record high today. This follows
Wednesday`s advance propelled in part by a new U.K. budget that included suggested tax cuts for Britain`s energy sector.
Well, a luxury watchmaker is getting into the smartphone business. We`re not talking about Apple, but we`ll tell you who is teaming up with Google
and Intel and celebrating with cheese. (INAUDIBLE).
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HARLOW: A look at today`s markets, U.S. stocks fell today, following dips in oil and energy losing much of yesterday`s gains. The Dow closed just
under 18,000. The S&P 500 lost half a percent. The tech-heavy Nasdaq bucked that trend, rising 9 points.
The closing numbers may not show it, but today was a major day for the Dow, not in terms of the value but in terms of a big move. Apple started
trading on the Dow Jones industrial average this morning. The tech giant replaced AT&T in the index of 30 blue chip shares in the company. Apple
did fall slightly today, closing at $127.49.
Well, luxury watchmaker Tag Heuer is not only cutting a big thing of cheese right there, but they are entering into the smartwatch market. The Swiss
company has announced that it`s working with Google and Intel to develop an Android-based smartwatch, obviously directly competing with Apple.
[17:25:03] The three companies celebrated the partnership over -- what else? -- a wheel of cheese at the Basel World Watch Show in Switzerland.
Tag Heuer CEO Jean-Claude Biver spoke with our Nina dos Santos about what brought the luxury brand to Silicon Valley.
(BEGIN VIDEOTAPE)
JEAN-CLAUDE BIVER, CEO, TAG HEUER: As we don`t have the soft for ware will you have too soft. You have iOS Apple and you have Android ware. We
decided as we don`t have the technology, we should partner with the strongest people. And the strongest people we found -- and we believe --
are in Silicon Valley and one is for the microprocessor, is the leader, is Intel, Intel inside. And the other one for the language under with ware is
Google. And Google and Intel are going to produce together with Switzerland, it`s where Silicon Valley meets Switzerland. We`re going to
make a connected watch all the three together. And that gives me an incredible hope, the incredible privilege to be associated with the two
leaders in that field.
NINA DOS SANTOS, CNN CORRESPONDENT: So, will this watch be able to connect to an iPhone, for instance, or will it be used with just be Android
operating software (INAUDIBLE)?
BIVER: It will be used for sure with (INAUDIBLE) wearable, which is a new language. It`s the extension of Android. It is -- it will, in principle,
in the beginning, not be able to connect with iOS. For the time being, the two languages cannot connect one with the other one. But I believe it`s a
question of time.
DOS SANTOS: A lot you can send here that Tag Heuer`s operating itself up into the battle between Google and Apple here. You`re a luxury brand. But
you`re going to get caught between the two. Isn`t that competing wearable devices?
BIVER: No, no, not at all. We are, number one, the connected watch is not 100 percent of our production. The connected watch might become 10 percent
of overall production. And the connected watch is just one part of what we produce.
We are finally at the end of the day a watchmaker, an expensive, luxury watchmaker. So we are not afraid at all.
Now for certain people and even for myself, Google, Intel, Apple, from what they innovate, from the quality they produce, from the importance they
have, they can be associated also to luxury because luxury does not mean just the price. Luxury is not just a question of price. It`s also a
question of performance, it`s what you do.
(END VIDEO CLIP)
HARLOW: Well, the U.S. Treasury Secretary is celebrating the fact that U.S. companies are raising minimum wages. It comes amid reports this week
that Target will raise its minimum wage to $9 an hour following the lead of Walmart. Jack Lew made the comments to CNN`s Christine Romans in Miami
during a tour of the seaport there.
(BEGIN VIDEO CLIP)
JACK LEW, U.S. TREASURY SECRETARY: Well, we have seen some movement in some pretty high-profile places in the retail industry and there been a
broad series of announcements by companies that they`re raising their minimum wages.
CHRISTINE ROMANS, CNN ANCHOR: Why do you think they`re doing it?
Is it good business case?
LEW: Well, I think that ultimately employers want to retain good workers. They want to be able to recruit good workers and when I talk to CEOs, they
tell me what they`re waiting for is to have confidence in the future. So I take it as a good sign when companies start doing that. I means that they
have the confidence to make those kinds of decisions.
(END VIDEO CLIP)
HARLOW: Well, the Treasury Secretary also commented on a subject that we`ve been coverage a lot here on QUEST MEANS BUSINESS. Who will be the
face of the next $20 bill in the United States?
Here`s what he said.
(BEGIN VIDEO CLIP)
LEW: We`ve been looking at a full range of issues on how to modernize our currency and we`re not going to make an announcement today.
But we`re looking at a lot of interesting things.
(END VIDEO CLIP)
HARLOW: That comes amid the campaign by some to put a woman on the $20 bill. We`ll see what happens.
Coming up after the break, we will look into why the cost of your airline ticket isn`t exactly reflecting lower oil prices at all.
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HARLOW (voice-over): Hello, I`m Poppy Harlow. Coming up in the next half hour of QUEST MEANS BUSINESS, digital music streams ahead of the humble CD.
I will speak to the head of America`s record industry association. Also the CEO of Ericsson tells me why the future is 5D but it`s going to take a
while.
Before that, this is CNN and on this network, the news always comes first.
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HARLOW (voice-over): Tunisia`s president says two attackers killed by Tunisian forces after the shooting at a museum in Tunis were carrying
explosives, which they did not have time to use. ISIS has released a video, claiming responsibility for Wednesday`s attack. CNN cannot
independently confirm the statement but a U.S. official says there is no reason to doubt it. At least 23 people, mostly tourists, were killed.
There is progress being reported from Switzerland at the talks over Iran`s nuclear program. U.S. Secretary of State John Kerry says difficult issues
are still being discussed but they have made headway. Delegates are aiming to close the remaining gaps and agree on a framework deal before the end of
the month.
CNN`s Nic Robertson caught up with Iran`s foreign minister on his way into the negotiations.
(BEGIN VIDEOCLIP)
NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Have you made progress, sir?
JAVAD ZARIF, IRANIAN FOREIGN MINISTER: We are making progress but there are issues that need to be resolved.
ROBERTSON: Which issues, sir?
ZARIF: Even more progress is needed - huh?
ROBERTSON: Which issues need progress, sir?
ZARIF: All of them - no - some of them.
(END VIDEOCLIP)
[17:30:06] HARLOW: The White House says U.S. President Barack Obama has telephoned Benjamin Netanyahu to congratulate him on winning Israel`s
election. Meanwhile, the Israeli prime minister is now backtracking on very controversial pre-election comments he made when he ruled out the
creation of a Palestinian state.
In an interview today with MSNBC, Mr. Netanyahu said he does not - that he does rather - want a two-state solution as long as Israel`s security is
ensured.
(BEGIN VIDEOCLIP)
BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: I haven`t changed my policy. I never retracted my speech in Bar-Ilan University six years ago calling for
a demilitarized Palestinian state that recognizes the Jewish state.
What has changed is the reality. Mahmoud Abbas (ph), the Palestinian leader, refuses to recognize the Jewish state. He`s made a pact with Hamas
that calls for the destruction of the Jewish state. And every territory that is vacated today in Middle East is taken up by Islamist forces, so -
Female: But they are saying -
NETANYAHU: We want that to change so we can realize a vision of real sustained peace and I don`t want - I don`t want a one-state solution. I
want a sustainable, peaceful two-state solution.
(END VIDEOCLIP)
HARLOW: FIFA has confirmed the 2022 World Cup final in Qatar will take place on December the 18th. The tournament has been moved from its
traditional summer spot due to the Gulf (AUDIO GAP) intense summer heat. FIFA says they will aim to shorten the length of the tournament to around
four weeks.
Well oil prices hit six-year lows this week. Consumers have clearly felt the impact of the steep decline on the road, but what about in the air?
Let`s take a look.
What you`re looking at right here is Brent crude oil prices. The decline we`ve seen over the past ten months from the multi-year highs that we all
saw back in June. And then take a look at this number - a decline of 5 percent.
The question is, is that savings is being passed on to passengers by the airlines through lower ticket prices or maybe no fuel surcharges? It`s not
the case.
Let`s take a look at this because IATA which is the international agency that regulates these airlines projects that airfares will drop 5.1 percent
this year. That excludes taxes and surcharges. So we asked some of the airlines why the discrepancy? Why not a further decline in ticket prices?
And why, frankly, are they still adding fuel surcharges to tickets that do not reflect the falling cost of crude. Here`s our conveyor belt of
responses. Let`s picture what we`ve heard.
Airlines for America - that`s a trade organization representing the U.S. carriers including Delta, United, American and other major airlines told us
after four years of $100-per barrel oil, the recent dip is giving carriers some breathing room they said to invest more than a billion dollars per
month in things that customers value.
Lufthansa telling us this, saying the marginal fuel cost decrease was mainly due to the weakness of the euro compared to the U.S. dollar. In
addition, hedging fuel delays the effect. They said their fuel surcharge was in line with market requirements.
Also Air Canada telling us this - the recent decline in the Canadian dollar has had an unfavorable impact because fuel is purchased in U.S. dollars.
And the CEO of Gulf carrier Emirates says, well, they believe they are already offering, quote, "fair value to customers."
That`s what Emirates CEO Tim Clark told Richard when he asked him if low oil is really reflected in his airline`s ticket prices.
(BEGIN VIDEOCLIP)
TIM CLARK, CEO, EMIRATES: They have dropped enormously. I mean, we have just launched an enormous inventory sale about two days ago which was value
for travel for the next four or five months at levels that people have never seen before in terms of fare offering.
So for us to be accused of not dealing with the benefit of fuel pricing -
RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: That`s an offer. That`s an offer. That`s a promotion.
I`m talking about basically saying we`re cutting prices across the board on all tickets because our cost of fuel is lower.
[17:35:03] CLARK: And as far as Emirates` concerned, that is what we are doing. Watch the space with regard to our pricing points, on the multiple
city fares that we offer. We already offered a very fair and reasonable value proposition.
So as far as Emirates` concerned, we will be doing what we believe to be the right thing - ensuring that we get a fair margin on the business
(inaudible) and as I say we`re not a subsidy - subsidized - so we have to make sure that we get a return, but we will ensure that we offer a
fair/fare (ph) value to the customers.
As far as the rest of the industry is concerned, all I can say is this - many of them hedged forward. Some of them were hedged forward as high as
$116. So the benefit of the fuel price reduction hasn`t worked through to them yet.
Let`s assume that if they unwind some of these positions or they burn off some of these positions, then the time will come that they will also
consider their price reductions. But at the moment not all of them are in a position to do that.
(END VIDEOCLIP)
HARLOW: So there you have it - a number of reasons some airlines saying investment, a strong dollar, also hedging and fare/fair (ph) value. Let`s
talk to Seth Kaplan, he`s the managing partner of "Airline Weekly." He joins me now from Fort Lauderdale.
Thank you for being with me, sir. I got to say it really feels like the consumer is being ripped off.
SETH KAPLAN, MANAGING PARTNER, "AIRLINE WEEKLY": Yes, it can feel like that, can`t it? But you know the - really the key is something the
airlines didn`t quite touch on is that the simple fact is that the airline business, like many businesses, it`s not really a cost plus business. It`s
not as if the airlines just sort of add up all their costs, you know -- the aircraft, the pilots, the fuel and the rest of it and then add some margin
and charge people something beyond that.
And for most of their history that actually worked against them. I mean a decade ago, Poppy, the airlines - especially those U.S. airlines that were
quite literally bankrupt who were saying, you know, we can`t manage to pass these rising fuel costs -
HARLOW: Right.
KAPLAN: -- through to consumers. So, they restructured the industry to their benefit and right now they`re kind of reaping a buffer car (ph)
basically - operating in an environment that`s a bit more as if fuel were still expensive even though it`s not.
HARLOW: I get it, but we have seen some of the airlines and major carriers in this country adding some capacity, right, which they cut back with
higher prices. And I guess the question becomes this can only continue so long as the entire industry works in tandem and no one sort of jumps the
boat and starts really cutting their prices.
KAPLAN: Right, Poppy, and you know while on one hand the airlines are trying to reassure consumers - hey, we`re not trying to rip you off. On
the other hand, they`re telling investors, you know, we`re not going to become undisciplined about capacity as you mentioned because really that`s
the key. In the end, this is supply and demand economics.
HARLOW: Right.
KAPLAN: You know, you cannot charge people more than they`re willing or able to pay. So they`re saying, look, we`re not going to start adding more
seats, but looking into the coming months, let me tell you, we`re seeing the airlines actually adding more seats. And, Poppy, that - not the
generosity of airlines but additional capacity -- simple supply and demand - is what would indeed put down under (ph) pressure on fuel price - on
ticket prices rather - going forward.
HARLOW: You know and also in defense - in defense of the industry here -- as I was in defense of we the consumer, it`s going to take a long time for
them to forget the recent memory of what it feels like to be in bankruptcy.
KAPLAN: It sure will and they really, you know, used that as a springboard - bankruptcy first of all to cut costs in very painful ways for especially
their employees but also other stakeholders. And then they said, you know, let`s restructure this thing in a way that we can survive in almost any
kind of environment, Poppy.
It`s really remarkable, you know - a decade ago, the then CFO of Delta Airlines said as oil was, you know, going up, said, you know, there`s no
industry - there`s no airline rather - that`s set up to make money at $50 or $60-dollar a barrel. And I mean, nobody doubted that at the time. They
managed to change things in their favor to a situation where they could make money at $100-dollar oil. I mean, that very same airline, Delta, made
$3 billion with oil near $100 a barrel last year.
So, you know, really impressive what they achieved and they`re basically saying, you know what? If we have a few months - and that`s really what
it`s been at this point of some outsized profits that, you know, we`re not really going to apologize for. Even if they don`t quite say it that way.
But, you know, the other irony, Poppy, is that high - low fuel prices in some ways are actually party responsible for high airfares because let`s
not forget in the U.S., the economy is good. Consumers have more money in their pockets because of low gas prices at the pump and that in turn
actually bids up --
HARLOW: Yes.
KAPLAN: -- the price of air travel.
HARLOW: And we have no choice. When we`ve got to fly somewhere, we`ve got to fly somewhere, especially businesses, paying very high fares for those
last-minute tickets. Thank you very much, Seth. Good to have you on the program, sir, we appreciate it.
Coming up next, streaming companies like Spotify and Pandora are singing a happy little tune. We`ll tell you why after the break.
(COMMERCIAL BREAK)
[17:41:58] HARLOW: You may remember the old days of old-time radio or cassette tapes. Do you remember these? I don`t even know where we got
these. And of course CDs. You can still buy these at some places.
Now streaming has officially topped the charts when it comes to revenue. In 2014, streaming services in the United States like Spotify and Pandora
beat out CD sales for the first time.
The Recording Industry Association of America reports streaming eked out a win - it ranked - raked in rather - an astounding $1.87 billion last year.
CDs trailed at $1.85 billion. Cary Sherman is chairman and CEO of the Recording Industry Association of America. They published that report.
I don`t know, sir, if you can see this, but we have quite a display here including a beautiful, beautiful record player here. So these are of the
past. Why has streaming been so, so successful not just with younger people?
CARY SHERMAN, CEO, RECORDING INDUSTRY ASSOCIATION OF AMERICA: Well, you can get access to anything you want without taking up room on your computer
or, more relevantly, your mobile phone. Especially in new markets, more and more people are using their smartphones as their music player and
there`s only so much capacity you`ve got for storage on the phone.
So streaming is a wonderful alternative and you can have access to up to 30 million tracks on demand, listen to whatever you want for a monthly
subscription fee. It`s a very attractive model.
HARLOW: So let me ask you this. You say monthly subscription fee but you can use Pandora, Spotify without any subscription - just listen to some
commercials (inaudible) complete access. What does this do to payments for artists long-term though?
SHERMAN: Well that`s the $64,000-dollar question. This is something that the industry is trying to work out. How best to monetize these streaming
services and reflect the real value of the music. We have models where people - a relatively few number of people -- $8 million are paying almost
$100 million for subscription services and then you have 80 million people paying the same amount of money -
HARLOW: Right.
SHERMAN: -- and getting it for free. So the question is, how do you balance that out so that artists and labels and songwriters and publishers
get the money they need to actually make a career out of this business --
HARLOW: Right.
SHERMAN: -- and that the businesses can invest?
HARLOW: Because we saw Taylor Swift sort of make her statement known when she pulled off Spotify, but, you know, hers was more a statement of
principle not about, you know, that she needs more money. But there are a lot of artists that don`t make anywhere near that amount ofmoney. They
really rely on this.
I just wonder, sir, if you are fearful that when you give something to the public for free, and then you try to charge them for it, i.e., newspapers
online, it doesn`t always work.
SHERMAN: That`s for sure and that`s why there`s a debate raging within the industry right now about what the right mix is between free and paid.
There are some people who think that free can`t survive - it can`t create a sustainable business model any longer.
[17:45:02] There are others that think free is what gets people into the subscription ecosystem. An once they get used to having all that music
available, they`ll be willing to pay for it down the road. We don`t know what the answer is but everybody`s trying to find that sweet spot that
brings in maximum revenues and yet makes sustainable models for the digital music services themselves.
HARLOW: What companies? What business empires - recording empires - stand to gain the most from -
SHERMAN: I`m sorry - I`ve lost you.
HARLOW: Oh, that`s OK. Can you hear me now?
SHERMAN: Yes, I can.
HARLOW: OK, so what businesses - what companies - stand to gain the most from this shift?
SHERMAN: Well, the - there are a lot of streaming services that are now coming in. Jay-Z just bought a streaming service which is very
interesting. Apple is moving into a subscription service in a big way very soon. Google, Amazon, Deezer -- more and more companies are getting into
this, so there may be a shakeout as things evolve.
But right now the idea is for people who create music to be able to benefit from this because when you have recurring revenues instead of the one-time
revenues from a sale, --
HARLOW: Right.
SHERMAN: -- when you have subscribers paying monthly to have access to everything, then you have an opportunity to really restore growth to the
industry.
HARLOW: Cary, got to let you go, but you know what I miss? I miss these. I miss mixed tapes - remember those? Your friends making mixed tapes.
SHERMAN: Well now you can make mixed tapes digitally and send it to a - you know - it`s a playlist - that`s great.
HARLOW: Yes. You can indeed. Good to have you on the program, Cary. Thank you very much for that.
SHERMAN: Thank you.
HARLOW: Well coming up, the CEO of Ericsson says in the future cellular networks will support devices way more complicated than just our mobile
phones. At the Mobile World Congress in Barcelona, Ericsson announced its plans to upgrade to 5G by 2020.
I spoke with Ericsson`s CEO Hans Vestberg and asked him why it takes so long to develop these networks.
(BEGIN VIDEOCLIP)
HANS VESTBERG, CEO, ERICSSON: Remember, I mean, we started to invest in 4G in 19 hundred and 91.
HARLOW: Right.
VESTBERG: And it`s basically clone (ph) came out with the first net in 2009.
HARLOW: So what do you think about it taking so long?
(CROSS TALK)
VESTBERG: The industry`s very special. We contribute, all of us, to a standard and we decide this is how it going to work. And that standard is
then deployed in the whole world. That`s why we have seven billion mobile subscriptions in the world because again bringing down the cost. And of
course everybody used a 3/4G, and that`s why we`re now standardizing these - taking the best innovations -
HARLOW: Right.
VESTBERG: -- and all are using that.
HARLOW: You`ve said that 5G, to really be successful, be its best means to be particularly flexible.
VESTBERG: Yes.
HARLOW: Why?
VESTBERG: Because it`s going to be so many use cases. I`ll give you two. One can be a sensor in the far remote places where you don`t have power
grid, so you need to send a very low-powered radio signal so the battery is only changed every ten years.
Another use case could be an autonomous car. Which need the latencies that is so small, so you can actually steer it autonomous. Those are two use
cases. So then there are hundreds of other use cases. So the networks need to be much more intelligent.
We call it a slice networks. Instead of just increasing the speed and the capacity - because not -
HARLOW: Right.
VESTBERG: -- every application need higher speed or better latency. We need to be much smarter in the networks - that`s 5G.
HARLOW: You being Ericsson has filed a range of lawsuits against Apple. Apple, a company that was up until recently a big partner of Ericsson. It
relates to patent royalties. I know this is all being played out in arbitration right now, but Apple argues there should be some limits on
patents for essential technology.
That`s sort of the fundamental argument they`re making. You disagree, why?
VESTBERG: This industry is unique. We share all the patents. Anybody wants to come in to create a phone, it can do it - they can use the $5
billion U.S. dollars that I spend on R&D every year. So of course there are standard essential patents to create all those standards - 2G, 3G then
4G. Ericsson has most of all those patents.
We have agreement with more than hundred hands (ph) of manufacturers and infrastructures. In the case of Apple, unfortunately we could not come to
agreement of what we believe is a fair and reasonable charge for that cross license.
HARLOW: Do you think there`s any merit in Apple`s argument there - that there should be some sort of limitation when you`re patenting something so
essential?
VESTBERG: I think that we think that our essential patent are enormously important. And of course we think what are very fair and reasonable cross-
licensing with more than 100 companies in the world. And so we think we are very fair and reasonable and we also think we`ve done contribution
beyond the involvement that anybody else has done in this industry.
HARLOW: It was astounding to me when I was in Haiti to see the digi-cell dominate and the reliance on mobile phones there. Also when you look
across Africa, it`s astounding how many people use mobile devices. Where is the area of greatest hope for you and greatest growth?
VESTBERG: Think about this - I mean - so far 2.9 billion mobile broadband subscriptions in the world. That has taken us six/seven years. The next
five years we`re going to go to 8 and 1/2 billion more mobile broadband subscriptions meaning we`re going to have three times as many people on
this earth having access to internet in five years. It`s an exponential growth.
[17:50:09] Of course many we do come from Africa. Africa will go from 70 million people having access to internet to 700 million.
HARLOW: In five years?
VESTBERG: Five years. To 2020. It is amazing numbers because the scale I talked about before - we have standards, we use the same technology in
Africa as we do in the U.S. And that of course - the patents are coming back to that.
This industry is so different from others. We share our technologies. That`s why so many people on this earth will have mobile broadband in the
next five years.
(END VIDEOCLIP)
HARLOW: Well Parma Foot Club - Parma Football Club rather - is bankrupt. We`re going to tell you what that means for the city and its beloved club.
That is after the break.
(COMMERCIAL BREAK)
HARLOW: An Italian court has declared one of Italy`s most storied football clubs bankrupt. Parma Football Club is believed to be over $100 million in
debt. The team`s owner was arrested on Wednesday.
As Don Riddell reports, the team`s fall has been quite difficult for its city.
(BEGIN VIDEOCLIP)
(ITALIAN MUSIC PLAYS)
DON RIDDELL, CNN ANCHOR AND CORRESPONDENT FOR "WORLD SPORT": It`s an historical medieval city. Situated in Northern Italy close to Milan, Parma
is renowned for its dairy products - its gift to the world - its beloved parmesan cheese.
And for a brief while it was also exporting an exciting brand of footballers. The Parma team twice conquered Europe`s UEFA Cup in the
1990s.
ANGELO MANFREDINI, PRESIDENT, PARMA SUPPORTERS CLUB, VIA INTERPRETER: Look at the team we had - players like Taffarel - the first Brazilian goal-
keeper to play in Italy -- Alessandro Melli, our top scorer. He was raised in Parma and he made his fortune here.
Tomas Brolin from Sweden, Gianfranco Zola, Tino Asprilla, Gigi Apolloni. And finally, look at this - the best team in our history - Re (ph)
Cannavaro, Chiesa, Buffon, Thuram, Veron. All were players who meant something to football.
RIDDELL: But despite finishing sixth in Italy`s top league, Serie A, last season, the club is now facing financial ruin. The former striker now team
manager Alessandro Melli has been with Parma most of his life and he`s heartbroken.
ALESSANDRO MELLI, MANAGER, PARMA, VIA INTERPRETER: One day they stopped the laundry. The next day, computers were taken away. Then we don`t have
e-mails anymore.
And then the physical objects related to sports like benches, like the team bus - everyday it`s like being stopped. It feels like we are zombies.
Working without knowing where we are going. We want to find a way forward, but at this moment, we can`t see one.
RIDDELL: Parma`s demise has been spectacular. Twice this season the club has been sold for pennies. They`re bottom of the league and they`re broke.
The first thing Alessandro asked when we got here today was, "Can you feel the sadness?" And you really can. Even though the first team didn`t train
here today, there`s no way that I`d normally be allowed to wander unchallenged through the dressing room of a top flight European club. But
I can here. This place is practically deserted.
A few recent games have been postponed, and currently everyone is working for free. Emergency funding from the other Serie A teams should enable
Parma to make it through `til the end of the season. But their long-term future is bleak. With debts estimated to be around $100 million, Parma
will face a bankruptcy hearing on Thursday.
[17:55:14] A wheel of parmesan cheese will set you back around $150. And if you manage your consumption of it properly, it`s a worthy investment -
it will last you a while. Eventually it will crumble away and there`ll be nothing left. It`s a fitting if tragic analogy for the fate of the city`s
football team. Don Riddell, CNN Parma.
(END VIDEOCLIP)
HARLOW: On a much lighter note - coming up, long lines and a rare sale. We will show you what caused Hong Kong shoppers to go crazy.
(COMMERCIAL BREAK)
HARLOW: Coco Chanel was all about the cool but her iconic handbags have sparked quite the shopping frenzy. The luxury label is adjusting its
prices around the world because of a realignment in currency rates. In Hong Kong, there were lines outside of the Chanel stores as customers took
advantage of the cheaper price tags in shock.
(BEGIN VIDEOCLIP)
Female, VIA INTERPRETER: Normally they will only increase the price but not lower the price. I heard they adjusted the price of several vintage
bags so I`m here to take a look.
Male, VIA INTERPRETER: I`m buying it for my girlfriend. We`ve bought it from websites before, but now we have money so we can buy a better one.
(LAUGHTER).
Female, VIA INTERPRETER: The price is lowered and because I have a lot of friends in China, so I`m buying for them.
(END VIDEOCLIP)
HARLOW: Of course a bargain can be a relative thing. We`re still talking about thousands of dollars per handbag. The classic Chanel flap bag will
cost you around $5,400. In this sale it is discounted to $4,380 and the boy bag now sells for $3,830 - that is $1,000 off the original price tag.
[18:00:00] That is "Quest Means Business" for today. Thanks so much for being with us. I`m Poppy Harlow. Stay with CNN for the latest breaking
news.
END
