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Quest Means Business
Apple Enters Music Streaming Market; Tech Sell-Off Brings US Markets Lower; Turkey Facing Political Uncertainty After Vote; Turkish Stocks and Lira Plummet; US and Gulf Airlines Dispute Dominates IATA; Safety Regulations After Germanwings Crash
Aired June 08, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:59:55] (NEW YORK STOCK EXCHANGE CLOSING BELL)
MAGGIE LAKE, HOST: See them clapping on the podium, but stocks in the United States fall for the third straight session. It's Monday, the 8th of
June.
Tonight, bursting into song. Apple has just unveiled its music streaming service.
Turkey's central bank rides to the rescue as the markets go into election free fall. And --
(BEGIN VIDEO CLIP)
RICHARD QUEST, HOST: I'm Richard Quest in Miami, Florida, where the world's airline CEOs are coming together and trying to avoid a full-scale
fight over unfair competition.
(END VIDEO CLIP)
LAKE: I'm Maggie Lake. This is QUEST MEANS BUSINESS.
Good evening. Tonight, the biggest player of all has just joined the music world of streaming. An hour ago, Apple unveiled Apple Music at the
annual worldwide developer conference in San Francisco. CEO Tim Cook handed the mic off to music producer and Beats co-founder, Jimmy Iovine.
He introduced the new service and explained the inspiration behind it.
(BEGIN VIDEO CLIP)
JIMMY IOVINE, CO-FOUNDER, BEATS: So, I reached out to Tim Cook and Eddy Cue, and I said, "Guys, can we build a bigger and better ecosystem
with the elegance and simplicity that only Apple can do?" One complete thought around music.
(END VIDEO CLIP)
LAKE: Dan Simon has been watching it all. He joins us from San Francisco. And Dan, this was so widely anticipated. Did Apple deliver on
the details?
DAN SIMON, CNN CORRESPONDENT: I think so. It looks like a good music service. But Maggie, I just want to give you a little context behind this
announcement, because I think it's important. If you go back, say, 15 years, the music industry was in a complete mess, with Napster and other
sites, where people were downloading music illegally like crazy.
Then came iTunes, and it was the first digital storefront where people were actually paying for music. And they built up a huge following. But
suddenly, over the past couple of years, streaming has now taken the lead. Spotify and others have captured all the momentum.
So, this is something that Apple had to do by creating one of these all you can eat plans. It's going to cost $9.99, the same prices as
Spotify, and the big difference between, say, Spotify and Apple Music is what they call human curation.
You're going to have real artists and real people creating these playlists as opposed to an algorithm, which they say the others use.
Whether or not that's a big enough selling point to get people to use Apple Mic remains to be seen, but that's one of things we're talking about.
The other difference here is there is no free tier. A lot of these other music sites -- Pandora and Spotify -- there's a free option. With
Apple Pay, you actually have to fork over money, so that may prevent people from using it. Maggie?
LAKE: Yes, you get a three-month free trial, but then you've got to agree to the subscriptions. Interestingly, there's a family plan for
$14.99, too, which I thought was interesting. They already came out with that.
Dan, this isn't their first crack at this, is it? There is iRadio. If you've been on iTunes, I'm sure you've seen it. Has not been a runaway
success. What makes people think this time's going to be different?
SIMON: Well, because it seems like they put a lot into it. And also, there is going to be a huge marketing plan behind Apple Music. The other
thing that they're building into this whole ecosystem is direct connections between artists and users. So, if you want to get photos or videos or
personalized messages from artists, you can do this right within Apple Music.
Again, the question is, there are so many different ways for artists to communicate people, through Facebook, YouTube, Twitter, and other sites,
this is going to be one more thing for artists to do. So, it's a two-way street here. So, I think there are a lot of questions behind this, but
certainly Apple needed to do this to sort of reclaim some of the momentum, Maggie.
LAKE: That's right. And Jimmy Iovine, of course, well-known, fame musician, huge success with Beats, so we'll see if that combination now
sort of gets them through the threshold. All right, Dan Simon for us in San Francisco. Thanks, Dan.
Well, put all the rock stars and hip-hop moguls involved in the Apple Music rollout aside and you'll find there is a crowded field of established
competitors already in the streaming market: Spotify, Pandora, and TIDAL, to name just a few.
Now, Apple is hoping to become the front-runner in the industry by utilizing what only a company of its size and stature can bring, and that
is scale. Apple already has around 800 million credit cards on file from years of dominating the market with iTunes. And it has $178 billion in
cash reserves.
Responses from industry players are starting to roll in on Twitter. Short and sweet, the Spotify CEO tweeted, "Oh, OK."
[16:04:58] Deezer is another streaming competitor with over 6 million subscribers in 180 countries. Beth Murphy is Deezer's chief marketing
officer, and she joins us from San Francisco. Beth, I hope you're going to be a little bit more verbose with us with your response. But what do you
think about this sort of giant now entering this market?
BETH MURPHY, CHIEF MARKETING OFFICER, DEEZER: We welcome the competition. We think the music streaming category is a really -- it's at
its early stages. We still only have 45 million users who are actually paying for the category, so I think the big challenge is consumer awareness
and actually service providers providing great value to consumers so that they feel like that $10 a month is worth paying.
LAKE: And right now, you're right, a lot of the services are operating on freemium, including yourselves, where you let people listen
for free if you listen to ads, but you try to get them to convert to a subscription model. Do people want to pay for music? I think this is the
big question that's unanswered.
MURPHY: Yes, I think the real opportunity is for providers like Deezer, Spotify, Apple, to make it worthwhile to consumers. So I think
today, you have the very early stages of product innovation.
I think you'll continue to see a movement from what's now a one-size- fits-all approach to how consumers listen to music to more custom and tailored ways that we can reach different audiences to provide them better
value.
LAKE: So, I can see why bringing that muscle and awareness is an advantage that everyone can share in from Apple entering in. But those
numbers I just read are staggering: 800 million people already engaged in iTunes. With that crowded space, what are people going to listen to? Why
do they want to use your service? How are you going to differentiate yourself?
MURPHY: We're really focused on targeting our services to different segments. So, a good example is we launched Deezer Elite, which is a high-
definition audio service targeted at audiophiles. We also have a deal with Cricket where we have a $6 product offering to folks in the prepaid
channels, so people who purchased their music service at the store.
So, we're really focused on ways to provide better value to consumers, whether you're a classic music listener, or a country music fan, we really
want to create a deep offering that provides both curation as well as lean- back recommendations through our algorithm, called Flow.
LAKE: And curation seems to be a real buzz word in this conversation. I'm curious, everyone sort of acknowledges this is where the future is
going, and yet, artists themselves are very divided about this. A lot of them don't feel like this is working out for them, and some have pulled
their music altogether. Do you think that part of the conversation is going to change?
MURPHY: I think as the category provides enough value to consumers, and you actually see that paid behavior start to take off, I think that
will help that whole ecosystem and conversation start to evolve.
Today, you have very heavy reliance on the free model, and from our perspective, we're not wedded to the free model. We think there's lots of
different ways to bring new listeners to music streaming. So, I think once you start to see the category grow, I think that conversation and that
debate will become a little bit more targeted -- across the spectrum in terms of voices and opinions.
LAKE: The beginning of massive changes for the industry, no doubt. Beth Murphy from Deezer, thanks so much for joining us today.
MURPHY: Thank you for having me.
LAKE: Now, turning to Wall Street, Apple actually closed down around 60 points, about half a percent. It was part of a broader sell-off in tech
stocks that helped bring the Dow down around 80 points. The Dow is now negative for the year, if you're keeping track.
Now, in Turkey. Historic shift in power in Turkey has sent markets into a tailspin. We'll explain what has investors so spooked, next.
(COMMERCIAL BREAK)
[16:10:37] LAKE: Turkey is in political turmoil following Sunday's historic election result. The party of Turkish president Erdogan, the AKP,
lost its absolute majority in parliament for the first time since coming to power. Three other parties are now saying they will not join a coalition
government, raising the possibility of early elections.
Now, the election result sent markets reeling. The central bank was forced to intervene and prop up the Turkish lira after it fell to an all-
time low against the US dollar. And on Monday morning, Turkish stocks opened up -- opened, rather, more than 8 percent down.
They recovered slightly over the course of the day, but you could see it was very, very volatile. The Borsa Istanbul 100 is down around 10
percent this year. I asked our emerging markets editor, John Defterios, what's spooking investors.
(BEGIN VIDEOTAPE)
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: It's amazing, Maggie. Investors don't like uncertainty, and this election delivered it in a
boatload, if you will, and in fact is giving many flashbacks to the mid- 1990s, when we had a number of failed coalitions.
I think it's worth a little bit of perspective, here. The AK ruling party was looking for a two-thirds majority to try to create a presidential
republic in the framework of France, for example. It didn't even get a simple majority. At 41 percent here, it was 18 seats shy of getting that
majority here. So, it raised that whole specter of uncertainty.
The lira was the worst-performing currency in the emerging market atmosphere in 2015. The stock market fell 8 percent right at the start,
although it settled a little bit lower. And also very importantly, we see the ten-year bond climbing to nearly 10 percent.
We're in a situation right now where unemployment's knocking at 10 percent. Inflation's knocking on the door of 10 percent. And it creates a
very difficult environment for the AK party to try to grow again. This is its biggest challenge with this political setback.
LAKE: You know, John, Turkey for a long time was really the favorite destination for emerging market investors. Is that going to change now?
DEFTERIOS: Well, in fact, if you're sitting here in the Middle East, like I am, you would look and say this was the moderate face of Islam. It
was a Muslim government that could be very pro-business.
And he had a very attractive track record as prime minister, Mr. Erdogan. They tripled the size of the GDP in ten years. It's just under
$1 trillion. They tripled the per capita income of Turks, that's why they elected him. And he was a friend of business.
In fact, he had aspirations, Maggie, to create a $2 trillion economy by 2023, the 100th anniversary of the Turkish Republic. It's very
strategically important, of course, as a NATO member. It sits on the door of Syria and Iraq. It is the stable force in the region.
But many got very concerned over the last couple of years of the very strong-armed tactics that Prime Minister Erdogan, then President Erdogan,
took, particularly in the financial markers, trying to jawbone interest rates lower again. His Finance Ministry, his central bank governor, even
the deputy prime minister in charge of the economy.
And very importantly, he took a very heavy hand in Syria and Iraq. And many are wondering now, is this -- Mr. Erdogan going to be much more
moderate going forward, or he'll take a much stronger hand going forward. And this is the big question mark raised by this election right now.
He also has a huge challenge, Maggie. He doesn't have an obvious coalition partner. The three main opposition parties indicated over the
weekend during the polls they weren't interested in joining forces.
We have the HDP, which is the Kurdish party in the south, which crossed the 10 percent threshold for the first time. But again, they
didn't embrace President Erdogan and suggest we'll help you along here now that you don't have that simple majority.
LAKE: Yes, and as you described, that piecemeal coalition is going to make it very difficult. What's the most pressing challenge in terms of
trying to reboot that economy and also, now, calm investor nerves?
DEFTERIOS: Well, first and foremost, Maggie, they have to have the infighting stop between the prime minister, the president, and the economic
arm of the government, particularly with the central bank.
Inflation is rising, so they have interest rates at 7.5 percent. I can't see a scenario right now where they're going to be able to lower
interest rates to boost growth because of the inflationary pressures, and even the unemployment pressures.
But he has to become someone very different than he's been since 2002, and that is a coalition builder. Remember, he has this entire track record
built on the ability of driving the AK party forward and being very pro- business.
[16:15:04] He also had phenomenally big infrastructure plans. A third bridge over the Bosphorus in Istanbul, another canal on the Bosphorus
in Istanbul, a third airport for Istanbul. This is his hometown, of course, and he wanted to leave with a legacy on the 100th anniversary of
the Turkish republic.
This may be more challenging if he cannot reach out to the other side and say let's build this together. I think that is the number one
challenge today. And also in this politically uncertain environment that we see with Syria and Iraq, he has to again find the common ground with
allies here, particularly within NATO, to try to stabilize the region.
(END VIDEOTAPE)
LAKE: Up next, Richard is in Miami speaking to airline CEOs at the International Air Transport Association's annual meeting.
(BEGIN VIDEO CLIP)
QUEST: Coming up after the break, the chief executive of American Airlines tells us why he believes the claims against the Gulf Three are
gathering stream, and why he's still paranoid about the merger that's creating the world's biggest airline.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
LAKE: The world's airline CEOs are gathered in Florida for the International Air Transport Association's annual meeting. Richard Quest
has more on the dispute between American and Gulf carriers that is dominating the conversation there.
(BEGIN VIDEOTAPE)
QUEST: Miami, Florida. Absolutely picture perfect. And somewhat ironic that this year's IATA annual general meeting is being held here in
the United States when the Big Three US carriers -- United, Delta, and American -- are complaining to the US government that the Gulf Three --
Etihad, Emirates, and Qatar -- are receiving subsidies and engaging in unfair competition.
The whole question of the Gulf Three is the elephant in the living room. Everybody wants to talk about it, just not publicly. I discussed
the Gulf Three claim with Doug Parker, the chief exec of American Airlines, and I asked him whether he thought the US government was taking notice.
DOUG PARKER, CEO, AMERICAN AIRLINES: These are three US airlines petitioning our government to go enforce our trade policies against two
other governments that happen to be state subsidizing airlines, and we don't think that's the right policy.
So, we produced evidence that we've given to the government. They came back with a series of questions, we responded to those. We're staying
in regular contact. They're going through a diligent process, as we all expect them to do.
But I also expect that the end of that process is going to result in consultations. That's what the trade policy calls for. And we certainly
have produced the evidence that shows that that's what's called for here.
QUEST: Of course, a consultation is a very low bar, isn't it? A low bar to sort of get to wedge the door open in that respect. But you'll
agree that this has split asunder the aviation industry, when even your JV partner, British Airways and IAG, is arguing against your position.
PARKER: Everyone -- people have different views. That's certainly true. But look, the reality here is as it relates to the United States,
this is an issue that we believe has the impact -- that has the potential to have a profound impact on our airlines, on the US commercial aviation
business, and on the people we employ. And we are obligated to go fight for all those things.
[16:19:54] And in this case, some may have other views. We feel really strongly that indeed, what we're doing is right and that what --
these flights and the potential for flights from part of the Unites States from other parts of the world being subsidized by governments is going to
have a bad impact on the US airlines.
QUEST: One last question on this area. How easy is it for you, or difficult is it, then, to get on with business? Because with many of these
airlines you code-share in some cases, with Emirates. And in other cases, you've got JVs, and you've all got to do business.
PARKER: Right.
QUEST: So, how easy is that?
PARKER: Look, everybody's civil, and you have to separate the business from the politics. This isn't about this is personal. This isn't
about commercial relationships. This is about public policy.
And our argument is with the US government right now. It's not with any of those airlines. Our argument, if there is one, is with the US
government, asking them to act and enforce the US trade policy.
QUEST: I hear at the moment you're paranoid.
PARKER: Yes.
QUEST: I've read it time and again --
PARKER: Yes.
QUEST: -- that you're paranoid as this date comes around as you merge the two airlines together.
PARKER: Paranoid in a healthy way.
QUEST: In a healthy way.
(LAUGHTER)
QUEST: Yes.
PARKER: Because I think we need to be. The team has done a really nice job of integration thus far. We've -- and haven't even had as much,
really, as a road bump because they've done such a great job of coming together and integrating on a number of systems, such as frequent flier
miles, single operating certificate.
We've just been doing so well, at some point you start to worry that success can breed complacency, and we don't want to be complacent.
QUEST: And you're doing the big bit now, aren't you?
PARKER: We are.
QUEST: You're about to merge the reservation systems.
PARKER: Correct. And that was coming. So, that's the last time to be complacent, when you have the biggest one still to come.
It's an extremely important project to get under one reservation system, and one that we are confident that we have all the right people and
plans in place. We're buoyed by confidence because of the success we've seen on other projects, but we're also being very diligent.
QUEST: We are in Miami. Thank you for for having us here. Cuba is only -- I did my first visit to Cuba in March.
PARKER: How was it?
QUEST: It's fascinating. Have you been?
PARKER: I've never been.
QUEST: You've not been there yet. Well, you will be.
PARKER: Sure.
QUEST: Because you'll probably be on the first American Airlines flight that can go there.
(LAUGHTER)
PARKER: I hope so.
QUEST: Is your plan ready?
PARKER: Oh, yes, we're ready. American is the largest airline serving the Caribbean, so this is a -- and by the way, we also -- we fly
charter flights, about a thousand flights on a charter basis to Cuba last year. So, we know the market well.
And as soon as -- we have all -- the governments still have a lot to work out as to how it actually works, who's going to be able to fly when
and where. But we are ready to go once that's resolved.
QUEST: Doug Parker, the chief executive of American Airlines.
One of the giant European carriers that's also concerned about the Gulf Three airlines is Lufthansa. The chief executive, Carsten Spohr,
believes there needs to be process or a procedure which allows these claims to be looked into and decided upon.
Lufthansa has had some notable problems of its own lately, with the pilot suicide of Andreas Lubitz in Germanwings 9525. On that question, I
asked Carsten Spohr whether he now believed there need to be more psychological testing of pilots.
CARSTEN SPOHR, CHAIRMAN AND CEO, LUFTHANSA AIRLINES: Well, I think the second priority after this accident has been what we can do to increase
flight safety. Priority number one was taking care of the relatives and the families of the victims. And we learn as an industry from every tragic
accident, and we need to learn from this one as well.
So basically, potential solutions are packaged in two groups. One is the cockpit door procedure. The other one is the testing, medical
examinations of pilots. But this two complex areas, and we should take the necessary time and wait of the final investigation output to draw
conclusions from this.
QUEST: For you and for the airline, this has been the most -- obviously extraordinary -- but the most difficult of times, hasn't it?
What surprised you most about the whole way everything unfolded?
SPOHR: Well, I think first of all, I'm glad that we focused as we did on the families of the victims, because that's what you can do in those
hours and days after the crash to reduce this tragic impact, of course, this had on so many people. So, I'm also proud that we were so focused on
doing this.
Secondly, I was positively surprised how little the brand was impacted. People trust us. People sent us letters of comfort from around
the world, partners, customers, expressing their loyalty. So, I think those 60 years of investment into our safety culture, into our idea of
safety first, in a way, paid off after this tragic accident.
QUEST: And the other thing that does strike me is this is an industry problem. This isn't a Lufthansa issue or an any other -- any particular
airline, is it? The industry has to deal with this.
[16:25:06] SPOHR: And I think the industry does deal with it. We have discussions as an industry about this accident. The industry
expressed their comfort that Lufthansa is dealing with the issues. So, I think when it comes to those tragic incidents, the industry comes together
very, very close and works on solutions.
QUEST: You've elegantly taken me to an area where the industry has not come together: the Gulf Three versus the Big Three. The US carriers
versus the Gulf carriers. Now, we can dress this up any way we like, but there's no -- you'd agree with me, I think -- there is a fundamental
fissure in the industry on this question at the moment.
SPOHR: Well, the Lufthansa position on this has never changed. I think we were one of the first airlines years ago to bring up the question
that openness and fairness of trade have to be balanced. That's the only way long-term an industry can work.
And when you look at any other industry but aviation, the WTO takes care of that balance. So, I think we should look at the WTO and their
experience, and maybe we can learn something from this for our industry as well. And this has been our position, and now it turned into a global,
very transparent discussion. Maybe it's good it comes around.
QUEST: You're firmly on which side in this, on the G3 versus B3?
SPOHR: It's not about taking sides. I'm firmly on the Lufthansa side that we want to convince customers that paying money for a Lufthansa ticket
is the best way to spend money on air transportation and to convince our customers in this regard.
And be successful at the same time, we need to be on a level playing field. If that doesn't exist, again, we need balancing elements.
(END VIDEOTAPE)
LAKE: In 2008, Iceland imposed capital controls that were supposed to last no longer than two years. Now, seven years later, the government says
it's ready to lift the restrictions. The country's finance minister will tell me why next.
(COMMERCIAL BREAK)
LAKE: Hello, I'm Maggie Lake. Coming up on the next half hour of QUEST MEANS BUSINESS, Iceland's finance minister tells me why the time is
right to left capital controls seven years after the financial crisis.
And we'll take you inside the mansion of a Russian billionaire's wife who wants to take half his fortune in their divorce.
First, here are the top news headlines we are following for you this hour.
US president Barack Obama says the country's plan to tackle ISIS is not yet complete. Speaking at the G7 summit in Germany, Mr. Obama said he
was waiting for certain commitments from Iraq's government before finalizing a plan to help Iraqi forces. The president said he would not
publicize his plan until all details had been confirmed.
[16:30:09] (BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: When a finalized plan is presented to me by the Pentagon, then I will share it with the American
people. It's not -- we don't yet have a complete strategy because it requires commitments on the part of the Iraqis as well about how
recruitment takes place, how that training takes place. And so, the details of that are not yet worked out.
(END VIDEO CLIP)
LAKE: In Turkey, President Erdogan's party has lost its majority in Sunday's election. Now three parties have told CNN Turk they won't join a
coalition with the AKP. A pro-Kurdish party will have a presence in Parliament for the first time after winning more than 10 percent of the
vote.
A migrant being rescued by the British Navy off the Italian coast has given birth during the operation. Migrants who were rescued over the
weekend arrived in Italy earlier Monday, more than 2,000 people in total were rescued on Sunday.
The ship's captain told CNN that one woman went into labor during the rescue mission.
(BEGIN VIDEOCLIP)
NICK COOKE-PRIEST, COMMANDING OFFICER, HMS BULWARK: Well, yes they were pregnant in various different stages of pregnancy. There is one very
happy story to come out of that in which one woman's waters broke while she was being recovered and it didn't look her pregnancy was going perhaps as
planned.
So I took the decision to fly her ashore and she was taken to mortar (ph) and I'm delighted to say that she gave birth to little boy very safely
and happily this morning.
(END VIDEOCLIP)
LAKE: Para-Olympian Oscar Pistorius could soon be leaving prison. A parole board met with him last week and will recommend he be released in
August. Pistorius will have served ten months of a five-year sentence for killing his girlfriend Reeva Steenkamp.
Today marks the end of one of the most painful chapters of the financial crisis. In 2008, Iceland's economy was in freefall. Banks
collapsed and the value of the krona plunged. The government imposed restrictions to prevent a mass exodus of capital that would have damaged
the economy even more.
The restrictions sparked legal battles with other European countries that lost money when Icelandic banks failed.
The capital controls were supposed to last no more than two years. Seven years later, the government says it is ready to rejoin the global
financial community.
Iceland's finance minister Bjarni Benediktsson joins me now live. Thank you so much for being with us, sir. And this is, I'm sure a welcome
end to a very painful chapter in your country's history. What will this mean for Iceland's future?
BJARNI BENEDIKTSSON, MINISTER OF FINANCE AND ECONOMIC AFFAIRS, ICELAND: Well, I think it means a brighter future first of all while
introducing measures to deal with the major factors that have led us to introduce to begin with the capital controls and the reason why they've
lasted so long as you mentioned. So we're dealing with estates of the banks, we're dealing with the offshore krona problem as we address it, and
we're answering questions with regards to how we will lift capital controls for the real economy in Iceland.
LAKE: There are some who although have waited for this day, they are worried about how it's going to play out. Are you concerned about a rush
of cash out of Iceland?
BENEDIKTSSON: No, I'm not worried about the rush of cash leaving. What we are doing is we are coming up with a very comprehensive plan on how
to lift the controls in a very well-managed manner. First of all, dealing with the estates of the old banks is the major issue we've been faced with
for a long period now.
And this plan will make sure that we will not see adverse effects on our currency or the balance of payments going forward with - when the
assets will be distributed to creditor groups.
And what's more, we already are seeing indications that core creditors will be interested in concluding competition now and undergoing the
stability conditions that we have introduced.
LAKE: So and I know part of that is, as you mentioned, a 39 percent tax on assets to make sure that you don't have that flight. We've
mentioned in the intro that you were ready to rejoin the international community. Do you think the community is ready to embrace you? How do you
repair the economy and really restore that confidence that was so badly hurt?
BENEDIKTSSON: Well, I think we have come a long way already. We've balanced our budget, we see the pillars of the economy growing.
[16:35:03] The tourism industry in Iceland for example in double digits, year-on-year the fishers industry and the energy-intensive industry
are also historically very strong at the moment.
So we have something to show to the outside world and I believe we will gain interest as long as we can show that we can in a safe and managed
manner lift the controls and deal with increased debt that we had to take on when the banks failed in 2008/9.
And that levels our coming down. So I think Iceland has a very good and solid story to tell.
LAKE: I'm curious - something to show the world. A lot of people think there are important lessons here. What would your advice be to
Greece right now? A lot of people are making comparisons, concerned about capital controls there. What would your advice to them be?
BENEDIKTSSON: Well, in some aspects the Greece situation is quite different from the Icelandic one. What we had at - in - 2008 was very low
debt levels for the states whilst the private sector was heavily debt - indebted. And the major decision we took in 20088 already was not to take
on that private debt and just leave the banks to fail. S
And what happened was, we - in this small economy, we now have three failed banks. Each and every one of them are on the list of the ten
biggest bankruptcy failures in history. So that also tells the story about the magnitude of the task before us when lifting the controls.
The assets which the creditors are trying to seek are in excess of our GDP.
LAKE: Right.
BENEDIKTSSON: But for Greece, I'd say, you know, considering your own currency must be an option. We've been able to save a lot of jobs in
Iceland by having our own currency and not taking on private debt.
LAKE: Bjarni Benediktsson, thank you so much for joining us, saying congratulations on the milestone.
BENEDIKTSSON: Thank you so much.
LAKE: Stocks across Europe ended lower on Monday. Stocks in Athens fell nearly 2.7 percent. That followed a warning from the European
Commission president that time is running out to get a debt deal with Greece. And after a 26 percent rise in the first four months of the year,
the DAX has come back down to earth.
It's down 10 percent from its high in April, partly thanks to a strengthening euro. That 10 percent puts the DAX into a technical
correction.
Deutsche Bank shares are surging after a dramatic change at the top. Shares rose nearly 8 percent in Frankfurt before falling back to finish the
session 3.6 percent higher. It came after the bank's co-CEOs announced their resignation following a shareholder revolt last month.
The bank has been plagued by weak results and a series of scandals. In April, Deutsche Bank paid a record $2.5 billion fine to settle charges
of interest rate manipulation.
Investors hope the new CEO John Cryan will be able to put those scandals in the rear view mirror and focus on a cost-cutting plan.
Investors are also looking to Mr. Cryan to scale back Deutsche's investment banking business.
Hans-Christoph Hirt is the director of Hermes Equity Ownership Services. The firm is one of Deutsche Bank's biggest investors and has
been vocal in calling for change at the top. Mr. Hurt told me Deutsche Bank's CEO is the right person at the right time.
(BEGIN VIDEOCLIP)
HANS-CHRISTOPH HIRT, DIRECTOR, HERMES EQUITY OWNERSHIP SERVICES: He brings an interesting mix. One, he's an experienced banker, he was at UBS
for example as a CFO. But I think more important is that he's on the one hand an outsider at Deutsche Bank so he hasn't been an executor at Deutsche
Bank, but on the other hand he knows the company well because he sits already on the company's supervisory board. So he's a known executor-
director in the German two-tier system and that gives him a very good idea of hat the key problems are and the key challenges he will be facing as
CEO.
LAKE: And I'm sure you'd like him to hit the ground running, that will help. But there's going be pressure on him to dramatically cut costs.
How do you think he should go about doing it? What lines of business would you like to see Deutsche Bank exit from?
HIRT: It would be very clear that strategy business models, structure of the business is one to decide for the management board and the
supervisory board.
But if they really plan to work novice (ph) to having another big strategy discussion, the strategy was unrated at the end of April.
We now would like to see more detail, we want a clear explanation how Deutsche Bank will create value for shareholders, we want to see clear
milestones - short-term, mid-term, long-term objectives and then we really want to see delivery on the strategy that has already been presented and,
as you said, part of it is cost-cutting, part of it is trimming down the investment banking and part of it is selling off past (ph) banks or part of
the retail business.
[16:40:06] LAKE: So you're not going to micromanage the decisions, but it seems - does it seem inevitable that they're going to have to roll
back from this universal banking model?
HIRT: I mean, that's probably fair to say but the announcement really suggests they're trying to stay a universal bank but having different
focus. It was (AUDIO GAP) but also focus much more on cost control and that's one of the areas where strategy 2015 which they set up in 2012
hasn't been successful and they recognize they have work to do.
LAKE: You know sometimes although it is painful, you can move quickly to bring some costs into control to reduce head counts, to make those side
of change. The harder thing is changing a culture at an institution. Do you believe that's necessary and, again, is this the man that can do that?
HIRT: Absolutely right. I mean, we have said to them there are three problems. One was delivery on a strategy and the other one was the pending
litigation and the investigation. The third one was progress on culture change. So bringing someone who's an outsider who hasn't been a Deutsche
Bank executive for that job to lead and focus on culture change in particular.
We think that's a very good thing and he's - he's more credible in that role because he hasn't got the legacy issues, he hasn't got any
connection to the legacy issues and that's very positive.
(END VIDEOCLIP)
LAKE: As the leaders of the G7 countries met in Germany, the heads of two countries that dominated the discussion were nowhere to be found.
We're talking about Russia and Greece.
U.S. President Barack Obama says he's convinced European leaders to keep up sanctions on Russia even though the measures have been ineffective
at curbing violence in Ukraine.
Mr. Obama also warned Greece that tough choices are needed to resolve the country's debt crisis.
(BEGIN VIDEOCLIP)
OBAMA: -- it's going to require is Greece being serious about making some important reforms, not only to satisfy creditors, but more
importantly, to create a platform whereby the Greek economy can start growing again and prosper.
And so the Greeks are going to have to follow through and make some tough political choices that will be good for the long-term.
(END VIDEOCLIP)
LAKE: It could be a divorce settlement for the record books. We'll head to Russia where ex-spouses are fighting over $15 billion.
(COMMERCIAL BREAK)
LAKE: Vladimir Potanin is used to tough negotiations like this one with Russia's prime minister. He's Russia's richest man.
Now, half of his business empire could be handed over to his wife of 30 years in a divorce settlement that could break records. She gave an
exclusive interview to CNN's Matthew Chance.
(BEGIN VIDEOCLIP)
[16:45:09] MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: We met Natalia Potanina at her opulent mansion on the outskirts of Moscow.
For 30 years this woman was married to Russia's richest man. Now she's demanding the biggest divorce settlement the world has ever seen -- half of
his estimated $15 billion fortune.
If you're successful, what are you going to do with that money?
NATALIA POTANINA, SUING EX-HUSBAND FOR HALF OF $15 BILLION FORTUNE, VIA INTERPRETER: I prefer to think of one step at a time. First I need to
get it, then I'll decide how to spend it.
CHANCE: The ex-husband is Vladimir Potanin, one of Russia's most prominent oligarchs and close to the Kremlin. His vast interests include
Norilsk Nickel, one of the world's biggest metal producers. His lawyer told CNN a divorce settlement including property and a monthly allowance of
$250,000 should be quote, "more than enough."
But Natalia Potanina told me she's due much more. It's the real wealth she said he's held in offshore companies. An international legal
battle is now underway to decide what assets should be divided.
POTANINA, VIA INTERPRETER: In the past it was the way things were done for all big businesses and businessmen. Now it's changing. Vladimir
always had all his companies offshore and kept his money away from Russia.
It was a safeguard for his business.
CHANCE: The divorce is also offering a rare glimpse into the intensely private lives of Russia's super rich. Natalia gave us this home
video recorded 20 years ago of her son's sixth birthday party. But this is no ordinary family. With their vast wealth came super yachts, private
jets, extravagant and luxurious vacations.
You mentioned to me earlier that you often spent $10 million on a summer holiday. I mean, how do you spend that much money.
POTANINA, VIA INTERPRETER: Look, our kids were interested in aqua biking. It sounds casual, but it costs money. Once we organized a world
championship in aquabiking in Monaco. There were lots of guests - the Prince of Monaco was among them, there were preparations, yachts, dinners.
On the one hand, aqua biking was just a family hobby that we all shared. But if you could imagine how it was organized.
CHANCE: Most of us can only imagine the life this immensely wealthy family enjoyed. Even Natalia herself says she never even dreamed of so
much money when she first married Vladimir Potanin.
But now half of the $15 billion fortune, she tells me, is rightfully hers - what any woman married for so long to a billionaire should expect.
Matthew Chance, CNN Moscow.
(END VIDEOCLIP)
LAKE: IATA is forecasting the best-ever year for making money in the airline industry. Still profits are razor thin. Richard will ask the
director general what needs to be done for airlines to grow their margins.
(COMMERCIAL BREAK)
LAKE: We're about to show you profits from two different organizations. Take a look and decide which one you would like to invest
in.
[16:50:06] Now, A has profits of $29.3 billion, company B has profits of $13.6 billion. Seems like an easy call. But if you'd said you would
rather invest in A, you might be wrong.
That is the new profit forecast from IATA for the global airline industry this year. B is the profits for just one quarter from Apple.
Apple made almost half as much money in three months as every single airline in the world is expected to make combined this year. Richard has
more from Miami.
(BEGIN VIDEOCLIP)
RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: The world's airline executives at play - or at
least at the IATA annual general meeting. If you privately ask the airline execs who they support between the U.S. carriers and the Gulf 3, they'll
give you an answer.
Ask them publicly which side they support, and they go very quiet. In the case of IATA itself, the organization has decided not to take sides
between the U.S. carriers and the Gulf 3 because the membership of IATA comes from both.
I spoke to Tony Tyler, the director general of IATA and I asked him whether he should take sides between the two.
(BEGIN VIDEOCLIP)
TONY TYLER, IATA DIRECTOR GENERAL AND CEO: This is not an area where IATA is engaged or involved because we operate in the area where all these
airlines - who, by the way, -- are all very strong supporters of IATA and engage very closely with us. They come together to do things that are good
for the industry as a whole.
QUEST: So how damaging is it for industry as a whole to have this - frankly inter nest (ph) time (ph) warfare between two very large sections
of the industry. Is it damaging?
TYLER: It's only damaging if it affects our ability to, you know, represent the industry's point of view in a way that is credible and is
coherent and is trusted. And I don't think it is. Everybody recognizes airlines have different competitive positions - they compete like crazy.
Airlines operate in different political environments and they'll seek to influence those to their advantage or whatever. It's always been like
that.
But having said that, it's not - these are not good headlines to be getting as an industry, but I can understand why different companies are
representing their positions strongly.
QUEST: When it's over, do you fear you'll have to do the sweeping up? You'll have to put - sort of put the china back together again.
TYLER: No, I won't. I mean, look, these are matters ultimately it's a matter for governments to decide. And these are matters of government
trade policy for governments to decide. And that's what they'll do.
What we will continue to do in IATA is represent the industry, to serve the industry and deliver benefits to the industry and their
operations and in their advocacy.
QUEST: Money is being made, more money that in any time of recent memory, but one shouldn't get the bunting out and start celebrating yet.
TYLER: That's exactly right, Richard. Industry profits this year we're forecasting to be $29.3 billion. As you said, it's more than we made
before, but it's still a very difficult business to make money. Those profits are very unevenly distributed and are in some parts of the world
doing - are doing - quite well.
Other airlines are still struggling quite hard. People have been helped by the lower fuel price, but on the other hand, the U.S. dollar's
gone up, trade rated 20 percent - that's taking a lot of the benefit away from a lot of airlines.
QUEST: So what needs to happen for this industry to become - to approach anything like normality?
TYLER: Well, we need to keep - keep on the track that we're on now. We need - we need governments to get off our back and let us do business
and just to stop looking at us as an easy target for taxation. We need better infrastructure so that we can operate more efficiently.
We need to be able to make a bit of money so that we can invest in better equipment, more efficient equipment in the future.
QUEST: When you and I spoke last year, one of the issue was tracking of aircraft.
TYLER: Yes.
QUEST: Following the MH 370. Since then, there have been two - there have been several high-profile incidents. There was AirAsia and of course
Germanwings. The contradiction or even paradox between the safest industry of the world but having some of the highest profile accidents anywhere.
TYLER: That's right. I mean, these terrible tragedies are always going to make the headlines and of course one understands why. And the
fact that we have had these does put aviation very much in the spotlight for the wrong reasons.
But despite that, in fact, aviation and flying is safer than it's ever been. In 2014 it was the safest year ever. Only one hull loss for every
4.4 million flights. And -
QUEST: And yet if you talk to people out there, they believe because of 17, because of 370, because of AirAsia, because of Germanwings, people
believe it to have been a terrible year. Or am I to blame?
TYLER: I wasn't going to say that, Richard, but since you do -- . No, I think, look, people obviously take an interest in what they see in
the newspaper, on the television and so on. And in these days of rapid, instant news everywhere, figure to know, I mean, they should know - it is -
I can understand. It's a story. It's hugely important to people to follow these stories.
[16:55:18] What most people don't necessarily take account of is the fact the industry has grown so much now that these incidents in fact are
very, very rare.
(END VIDEOCLIP)
LAKE: Richard will be back with a "Profitable Moment" from Miami in just a second.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment" from Miami Beach. When the airline execs get together, they do so in some very nice places and there's
lots of cocktail parties and drinks when they can discuss business.
The big issue here this year is the claims by the U.S. 3 that the Gulf carriers enjoy unfair subsidies and unfair competition. It's an issue that
goes to the very heart of aviation today. And there is no easy way to settle it. One side says it's illegal and unfair, the other side says
they're doing nothing wrong.
And there's no tribunal or venue by which it can easily be sorted out. And so here in Miami, everybody's tiptoeing 'round the situation. Nobody
wants to say publicly too much one way or the other. What's clear is the U.S. government is going to have to make a decision whether this is going
to go any further. And if they decide it is, then who knows what will happen at next year's AGM.
And that's "Quest Means Business" for tonight. I'm Richard Quest enjoying Miami Beach. Whatever you're up to in the hours ahead, I hope
it's profitable.
END
