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Quest Means Business
Turkey's Erdogan Wins Sweeping Powers; Pence Warns North Korea, Don't Test Trump; Top U.N. Court to rule on Ukraine War Wednesday; United Airlines Earnings; IAG CEO Willie Walsh on Level; Netflix Tries New Strategy
Aired April 17, 2017 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] RICHARD QUEST, CNN ANCHOR: Hall of Famer Rod Gilbert, with the New York Rangers, the hockey team are ringing the closing bell as the Dow
is up 180, not quite the best of the session but just about there. A very strong session throughout the whole of Monday went up and stayed there.
The bell is over. Three strong robust gavels on an up day for the Dow. It is Monday. It is the 17th of April.
Tonight, a major shift in Turkish politics as President Erdogan gets sweeping new powers. His critics are crying foul.
Don't test President Trump. The Vice President of the United States gives North Korea some unsolicited advice.
And United Airlines it is said to release its earnings report any moment. Now a week after a passenger was injured while being physically removed
from a flight.
I'm Richard Quest live in New York where of course, I mean business.
Tonight, we begin in Turkey where the president, President Erdogan, is to acquire sweeping new powers to reshape his country from a parliamentary to
a presidential system. It is a watershed moment and it follows the referendum that took place yesterday. Speaking to supporters in Ankara,
the President said victory in Sunday's referendum effectively ends debate on reforming the constitution. And he dismissed claims by election
observers that the campaign failed to meet international standards. Berating them for not knowing their place.
The "yes" vote -- well, come and look at the stock market. First of all, you've got to look and see what happened with them here. It brought some
relief. The stock market closed two-thirds of a percent higher. The Turkish lira advanced against the dollar, as you can see there. You're
looking at the opposite way around in terms of the numbers and the way it's put there. Ian Lee joins me now from Istanbul to put this in perspective.
Good evening, Ian. So is this now a done deal with elections taking place in 2019, by which time the laws will have changed and one assumes President
Erdogan will begin what could be two new terms as president.
IAN LEE, CNN CORRESPONDENT: Well, appears to be a done deal, Richard, but they still have about ten days to go before those official results come
out. In the meantime, opposition parties are calling on Supreme Electoral Board to nullify this referendum. They say there are a lot of
discrepancies that took place.
They want -- they also called previously for a recount of some of the votes. We also heard from that European mission coming in, giving heavy
criticism to the way this referendum was carried out, saying that wasn't very fair, wasn't -- there wasn't this fair and free referendum. Really
criticizing the amount of media coverage that was given to it, saying that the "yes" camp had a far larger proportion of the coverage and the
President had far more preferential treatment than the "no" campaign, and that's something we heard. But with all that aside, we heard from the
President very defiant against his European critics, and anyone criticizing this referendum, take a listen.
(BEGIN VIDEO CLIP)
RECEP TAYYIP ERDOGAN, TURKISH PRESIDENT (through translator): Some European countries have objected to this reform more passionately than the
opposition parties in our own country. Now the same circles are threatening us with freezing the talks on our membership in the European
Union. Of course, it's not a decision that they will make. But, my dear sisters and brothers, let me tell you that this is not that important for
us anyway.
(END VIDEO CLIP)
LEE: Richard, even with all this bluster from the opposition saying they want a new referendum, it's unlikely that that is going to happen according
to people I've been talking to, experts in this area. They believe that it is likely that the electoral board will ratify the results of this
referendum giving President Erdogan a narrow, narrow victory.
QUEST: It may be. But as we learned with Brexit, there only needs to be the smallest of margins to actually winning. Ian Lee, who is in Turkey.
[16:05:00] Now referendum leaves the country deeply divided. Mustafa Akyol is a visiting fellow at the Freedom Project at Wellesley College. Also, an
opinion writer for the "New York Times" and Al-Monitor.com, joins me from Boston. OK, for the purposes of our discussion, let us assume that this
referendum result sticks. Because we can't know how it would change if somebody was to come in and change it. If this result sticks, what is your
biggest concern?
MUSTAFA AKYOL, SENIOR VISITING FELLOW, WELLESLEY COLLEGE: Well, my biggest concern is that this is a big constitutional change, a whole new
constitution actually. This is supported by only half of the country and which is rigorously opposed by the other half. Turkish society is
incredibly polarized and divided. The "yes" voters versus "no" voters. And President Erdogan has really not done much to reach out to the
opposition and make them feel better about this change. He made a nice talk tonight, but the next day he said the people who oppose us were
crusaders and there are pawns inside.
So that very polarization makes Turkey very challenged in the country. President Erdogan is winning the battles but he's not winning the peace.
And Turkey badly needs peace.
QUEST: If you look at the new powers that he's going to get as a result, which of them do you find most worrying? Bearing in mind in just a moment
we're going to be talking to a lawmaker from the president's party who actually says that you're all wrong, and actually the president doesn't get
any new powers. Actually, he finds himself more restricted by Parliament and elections.
AKYOL: Well, I don't think that is the case. I think any fair observant of this constitutional amendment, and that includes some European
institutions and Turkish critics as well. They all agree that this is a constitution that empowers the president. Not just in terms of executive.
He can have the executive. But also, he has powers over the judiciary now. He will appoint half of the members of the high judicial board,
constitutional court. And the other half will be elected by the parliament which is, again, dominated by President Erdogan's ruling party. Basically,
the judiciary will be subservient to the executive and that's against the basic frame works of liberal democracy, checks and balances, separations of
powers. Here we have a unity of power, a hierarchy of power at the top of which is elected president. And that is a kind type of democracy, but not
a great kind of democracy. That's a ill liberal democracy, as I would call it.
QUEST: Is it your feeling that this vote was free and fair?
Hello?
AKYOL: Hello. I hear you. Well, I think it was not fair in the sense that there are big gaps in terms of the propaganda resources. The "no"
vote was intimidated by state. "No" rallies were not allowed by governors all across the country. So, it was not fair. Obviously, the government
had big advantage of power and intimidation and everything. When it comes to the counting of the vote? I think it was free in the sense that it was
not rigged. So, President Erdogan did get 51 percent of the vote. So, in that sense it was legitimate. But it was not a fair game because the "yes"
vote, President Erdogan had all the powers of the state and used it.
QUEST: So, in other words, you're saying -- and we'll leave it here, but just to paraphrase, you are saying it is an unlevel playing field leading
up, during the match. But the final result probably reflect what actually happened in the game. All right, sir, thank you very much indeed for that
kind of view.
51.4 percent of people who voted the backed the reforms that give the president more powers. In Turkey's largest cities, Istanbul and Ankara,
the majority voted against. You saw that on the map that we just showed you a moment ago. Ravza Kavakci is a member of Parliament representing
President Erdogan's AK party. She joins me from Istanbul. Now look, ma'am, thank you for joining us. The guest before you just said, yet he
won on the day, but the way the referendum was conducted was unfair. The opposition didn't have anything like access to the same media, the same
messaging, the same population. He's right, isn't he?
RAVZA KAVAKCI, MEMBER OF TURKISH PARLIAMENT, AK PARTY: Actually, no. I'm really excited. We had a wonderful 24 hours. Yesterday we had 85 percent
voter turnout. Yes, I do agree that there wasn't enough coverage for the "yes" voters, especially in Europe.
[16:10:03] Since the "no" campaign was supported by European media, while the "yes" campaign had no voice in Europe, our ministers weren't allowed to
speak and our family and social planning minister, lady minister, was removed from the Netherlands while she was --
QUEST: No, no, let's not go down the Netherlands again. Because frankly, ma'am, I don't know any other country that would allow somebody to come in
to their country to campaign for a referendum one way or the other. So, let's put that one to one side.
KAVAKCI: Many European countries do. Yes.
QUEST: Well, if we talk about -- if we talk about Brexit. When we talk about this result, you believe that the referendum does not give the
president more powers. And yet everybody else from the European Union, the European Commission, independent observers, commentators, analysts,
everybody else says it does give President Erdogan considerable more power. Why are they wrong?
KAVAKCI: First of all, let me make this clear. This is not about President Erdogan. This is about a switch to a more democratic system
which enables the Grand National Assembly of Turkey, the Parliament is given more power for the first time in our history, the Parliament will be
able to investigate the president, and then take him to court with only 50 -- one more vote than 50 percent of the vote. I think this is
groundbreaking for Turkey and I am really, really excited for Turkish democracy.
QUEST: Do you accept that if there is a referendum on the death penalty, which is something that the President is now talking about, and the country
were to vote in favor of it, that is the end of Turkey's even candidate status for the European Union?
KAVAKCI: I don't think so. As the President also mentioned, this is something that needs to come to the Parliament first. And right now,
there's no death penalty on Parliament's agenda. It will be back in session tomorrow morning. So, this is something that needs to be discussed
within the Parliament and within the society. And then if it is voted on, then we will talk about what -- how we -- how this will influence our
relationship with Europe.
QUEST: No, no. But let's be clear. You cannot have the death penalty and be a member of the European Union. It is against the Treaty of Rome.
That's the end of the subject, isn't it?
KAVAKCI: Well, let me be clear, as well. Our relation with Europe, unfortunately, has had its ups and downs ever since the European Coal and
Steel Community was founded in 1958. But we have been disappointed in Turkey by the lack of European sensitivity when we had the coup attempt and
also not keeping their end of the bargain in the refugee crisis and the visa liberalization. So, there is a lot we have on our plate with Europe.
QUEST: We're very grateful that you've come on the program tonight. Thank you very much indeed for putting in the point, forcefully indeed, as you
should from Ankara tonight.
Tensions between the U.S. and North Korea seem to be rising with every hour, every statement. During his visit to Seoul, the Vice President of
the United States told CNN that the U.S. has had enough of North Korea's provocations.
(BEGIN VIDEO CLIP)
MIKE PENCE, US VICE PRESIDENT: The advent of nuclear weapons testing, the development of the nuclear program, even this weekend, to see another
attempt at a ballistic missile launch all confirms the fact that strategic patience has failed.
(END VIDEO CLIP)
QUEST: The past couple of hours the White House spokesman said President Trump will take decisive action when appropriate. CNN's Ivan Watson has
more on the story that includes Pyongyang's response.
(BEGIN VIDEOTAPE)
IVAN WATSON, SENIOR INTERNATIONAL CORRESPONDENT: Richard, in his statements here in South Korea, the U.S. vice president also invoked U.S.
uses of force within the last two weeks, specifically the cruise missile strike against a Syrian government airbase, and also the air strike using
that MOAB, that so-called Mother of All Bombs, against ISIS targets in eastern Afghanistan. And he declared that those were examples of U.S.
strength and resolve, and he warned North Korea not to test that resolve. A threat, clearly. And within hours, North Korea's ambassador to the
United Nations, where he came out to a statement to journalists accusing the U.S. of saber rattling. And as he put it, "gangster style logic."
Which he claimed was ratcheting up tensions on the Korean peninsula.
[16:15:10] KIM IN RYONG, NORTH KOREAN AMBASSADOR TO THE UN: It has been creating a dangerous situation in which the sound of nuclear war may break
out at any moment on the peninsula. And pose a serious threat to the world peace and security.
WATSON: This kind of rhetoric from both sides plus the U. S. aircraft carrier strike group that's in the region and the constant threat of more
North Korean missile tests and nuclear tests, that's part of what's got people worried here. But the U.S. vice president also had a message to
America's very close South Korean ally which of course hosts some 30,000 U.S. troops. He said that future actions would be made in concert with the
South Korean government. That's going to be a message that people here want to hear. They don't want unpredictable moves coming from a young
American presidency, and of course, South Korea perhaps has the most to lose with its capital of Seoul, some 10 million people that's within
striking range of conventional artillery on North Korea's side of the demilitarized zone. Richard?
(END VIDEOTAPE)
QUEST: Ivan Watson who's in Seoul.
Now investors in the United States got back to work. It was a long weekend. The Dow -- well, look at this, it snapped a three-day losing
streak. Straight out of the gate the market was up and they never really looked back. We gave a couple of points back. It was about 195 gain. We
gave back just a little bit toward the close. Still over 20,600.
Despite the bounce, the concerns continue over the various political situations around the world. Mohamed El-Erian is the chief economic
advisor of Allianz, and the author of "The Only Game in Town." He joins now from Irvine, California. Good to see you, sir.
Look, when I think of what's happening at the moment with North Korea, Syria, dropping of the so-called Mother of All Bombs, the poor relations
with Russia, Brexit, do you not find it weird that the market would go up like this today?
MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISOR, ALLIANZ: I don't know if I call it weird. I would tell you it is deep-rooted resilience because traders
believe that what had worked in the past will continue to work. And that is three assumptions. Despite all this political noise they see, growth,
global growth will continue with the risk being on the up side. Central bank will continue to support markets. And there's going to be more money
coming in to the marketplace. That's what the markets deeply believe and you need a major shock to shake them out of that belief.
QUEST: Do you believe it?
EL-ERIAN: No. I think that the markets are underestimating all the headwinds. It is not just geopolitics. Today we heard tax reform in the
U.S. will be delayed. So, there's lots of issues that the markets have embraced that in reality, the evidence suggests that they should be more
uncertainty priced in. So, no, I don't believe it, but I understand it.
QUEST: Now, that uncertainty. There is a difference, isn't there, between an uncertainty that causes the market to tread water and show no further
gains, or an uncertainty that's priced in to fall when it comes to fruition.
EL-ERIAN: Correct. And I would call this not just uncertainty, but I would use the phrase that Ben Bernanke, the former chair of the Fed used.
It's unusual uncertainty. This is very difficult to price. So, what the markets are doing, they're saying show me, show me more evidence before I
start pricing it in properly. So, you need a major, major shock to get this market out of this complacency.
QUEST: Good grief. Let's hope we're not going to see one of those any time soon. That's certainly not going to be very good for anybody, is it?
EL-ERIAN: So, I hope we don't see it. Right? And I would rather see a market that prices this in gradually. But the reality is that if you had
ignored all the geopolitical noise over last few years, you would have done well. And that's what the market is betting on.
QUEST: Good to see you, as always. Thank you, sir. Pleasure there.
EL-ERIAN: Thank you.
QUEST: We'll talk more in the weeks ahead. The International Court of Justice is to deliver a significant ruling on the war in Ukraine on
Wednesday. When we come back, I'll be joined by Ukraine's finance minister. As the country continues its trying to escape the ravages of
war. Minister, we'll be with you after the break. Make yourself comfortable.
[16:20:00] (COMMERCIAL BREAK)
QUEST: Welcome back. QUEST MEANS BUSINESS. Ukraine is awaiting a ruling by a top U.N. court in a case they brought against Russia. It says Moscow
is sending money, arms and troops to eastern Ukraine which Russia has consistently denied. The International Court of Justice says it will issue
a judgment on Wednesday.
A few years ago, the war with the pro-Russian separatists began in the east of the country. So far, it's claimed around 10,000 lives. Ukraine has
accuses Russia of fueling the conflict. Joining me now, Oleksandr Danyliuk, the Ukrainian finance minister. Good to see you, sir. You're
obviously waiting -- we'll deal with your economy in a second. But you're obviously, waiting for this ruling. But to some extent, it could be a
false storm, a pilot victory. Because if you win, Russia will just ignore it anyway.
OLEKSANDR DANYLIUK, UKRAINIAN FINANCE MINISTER: Well, I think we're definitely waiting for the results. Right? And how you phrase it, as that
Russia backs the insurgents in the east, although it is absolutely clear that this is a clear aggression against Ukraine. It's not just fear that
supporting it, there is some proof of Russian troops to be present in the uncontrolled territories. So, it's very, very kind of -- situation is
quite bad in the east and Russia playing a key role in fueling the conflict.
QUEST: How disappointed are you at the moment do you think at position of the U.S. administration? Now they've made more recently the right noises
concerning Russia, Ukraine and Crimea. But it's been a long time coming and you must have felt that Washington was abandoning you.
DANYLIUK: What is important is that's where we now. Now we see the right messages, we hear the right messages. To be honest, we expected this
because having -- trying to build good relationship with Russia, which does not share democratic values. Which does not recognize the world order, you
know, human rights. Look at Crimea what's happening with Crimea and others. What's happening in the east of Ukraine. It's just difficult to
imagine, even to see how United States could have a good relationship with such countries, such government.
QUEST: Do you feel now that both the EU and the U.S. are back in your camp, so to speak, supporting you, or would you like more support and more
assistance?
DANYLIUK: We would like ever to course more support. The situation is not easy. But we do understand that internal issues faced by countries,
European countries, for example, they distract attention. But clearly, we are getting the support and clearly, we will have joint front against
Russia.
QUEST: Let's talk about your economy because that's what you're here for. We're a business program. You've got good growth. Not as good as you'd
like, but you've got better than expected growth. So, what's your next priority in this regard to rebuild the economy?
[16:25:03] DANYLIUK: Next priority is passing the package of long-awaited reforms that the country -- the governments, previous governments, were
avoiding for almost 25 years. This is pension reform, this is land market reform, and this is --
QUEST: Land privatization.
DANYLIUK: -- privatization, which was, unfortunately, nonexistent for the last years.
QUEST: But are you going to avoid -- or how are you going to avoid the mistakes of it turning into a bonanza and a free-for-all, creating your own
oligarchs?
DANYLIUK: OK, I was working on privatization in 2005. The most transparent privatization, which was bought by Mittal Steel at that time.
I know I was working on it and I know what means transpired privatization. That's privatization. That's the way we're going to do it forward. Right?
We want to see the foreign investors want to see honest Ukrainian investors participating. We will not discriminate against no one. It should be a
transparent process which generate right revenues for the budget and right technologies coming to the country.
QUEST: 2019 your IMF program comes to an end.
DANYLIUK: Yes.
QUEST: I'm guessing you're hoping to go back -- you're going to test the market soon and I know your test in the market now.
DANYLIUK: Yes, that's correct. That's why I'm here.
QUEST: What are people saying? Not on your life? Or maybe we do this or we're interested? What are you hearing from Wall Street?
DANYLIUK: We're hearing "we're interested." even now. But it's not -- it's our conscious choice not to go on the market now.
QUEST: Why not?
DANYLIUK: Because first of all, we don't need capital at this moment. Right? We are progressing within IMF program. We're a new cooperation
with IMF year ago. We got two tranches which is very positive trend. Now when we pass next two important reforms being pension and land market
reform, pretty much we cross the middle of the problem with some very good results. And that's the story what investors are expecting from us.
QUEST: So, you think -- or you believe and you're hopeful -- that there will be enough support for you to become sustainable in terms of financing
by 2019.
DANYLIUK: I don't say the word support. Is we will do every single thing --
QUEST: What I mean is, that the market -- the markets will --
DANYLIUK: I'm confident about this. I'm confident. We have strong team that are delivering on reforms. That shows a totally different purpose of
the country which investors like for see. There will be huge appetite for Ukrainian bonds and equity investments. I'm confident about that.
QUEST: Just as well. Good to see you, sir. Thank you very much indeed.
DANYLIUK: Thank you.
QUEST: Good to see you, minister. Thank you very much indeed.
Now, as we continue tonight, United Airlines, the shareholders are bracing themselves after a week of horrible news. Now the company's reporting
earnings. Everybody says the earnings aren't going to be grim. Well, they are out. I'm just -- profit is down some 69 percent. Now that sounds
pretty awful. I think it is, actually. But we will explain why after the break. QUEST MEANS BUSINESS.
[16:30:00] (COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. We'll be looking at United Airlines first earnings report
since the worldwide storm of a passenger was dragged off one of the planes.
And an interview -- my interview with IAG chief exec, one of the biggest names in aviation, Willie Walsh. His new airline is called Level. He
levels with us. You can imagine, there's going to be a variety of puns and jokes. Enough to fill the cup. This is CNN.
Turkey's President, Recep Tayyip Erdogan is defiant against the referendum criticism. The president won on a razor-thin majority. Opposition is
calling for the result to be annulled.
Meanwhile, president Trump has congratulated the Turkish president in a telephone call according to Turkey's state news agency.
The North Koreans representative to the United Nations is accusing the U.S. of pushing the countries to the brink of war. Nuclear war. Saying it
could break out at any moment. His remark came after vice president toured the Korean demilitarized zone and warned Pyongyang that the era of
strategic patience is over.
Authorities say a plane crashed near an airport in Portugal. All five people onboard were killed. It crashed after taking off from a local
airport.
Police across the United States are searching for the suspect in a murder that was posted on Facebook. Steve Stephens is accused of shooting an
elderly man walking home from an Easter meal with his children. He recorded the attack and later uploaded it to Facebook.
The former South Korean president has been fully indicted for bribery and abuse of power charges, accused of acting as criminal accomplice and
allowing her close friend to extort millions of dollars from business. She was impeached last month following widespread outrage and massive protests.
Make yourself comfortable. Welcome aboard Quest Air. Now, make sure your seat backs and tray tables are in the full and upright position. And as
always, make sure your seatbelt is securely fastened.
Now today's aviation news. It is time for the latest earnings. United Airlines says first quarter profits slumped 69 percent from a year ago.
The two biggest expenses of any airline, fuel and labor, rose sharply in Q1. The drop wasn't as bad as Wall Street had expected. They were looking
at a 70 percent drop. Maybe the market will be at least relieved by what it sees. Overall the aviation industry is starting to make changes after
the United debacle. First of all, you have United with new rules for employees. They must check into flights an hour before takeoff. Delta has
made changes as well. Delta is now prepared to offer up to $10,000 -- $10,000! -- as a voluntary payment for voluntary de-boarding or deplaning
if a passenger's to give up their seat. Now a supervisor has to approve it, but even so, even the normal payment is expected to be higher. And
American Airlines is vowing that seated passengers won't get booted. Three major developments.
Joining me from Los Angeles, the operator of onemileatatime.com. By the way, Ben, this is an economy seat. It is not something I suspect you're
ever terribly familiar with but --
BEN SCHLAPPIG, BLOGGER, ONE-MILE-AT-A-TIME: Richard, good thing my screen is off. I can't even see you.
[16:35:00] QUEST: Excellent. I'll send you a picture just to give you some indigestion. Look then, these changes that they are making, the three
changes being made, too little, too late, obviously. But are they a step in the right direction?
SCHLAPPIG: They definitely are a step in the right direction but I think more than anything, this is sort of lip service. This has been a horrible
week for PR for the airlines and really just a bad few weeks. I think this is really just an effort to try to favorably change the impression people
have of the airlines. These are all very minor things. For example, Delta says that they'll offer up to $10,000 of compensation. In practice, that's
almost never going to happen because people will take their offers at much lower cover these. But there is a great way for them to get positive PR
out of what's really a bad situation.
QUEST: And the results that we are seeing from United, I assume if United suffered the same problem with rising fuel prices, then the other three,
then all the other airlines, we'll see a reduction in profitability and earnings from all major airlines this quarter.
SCHLAPPIG: Exactly. The airline industry is so cyclical. The airlines were doing very well, so all the unions want more pay, so labor costs are
going up. At the same time fuel costs are going up a bit, so unfortunately, we're just going to see their profits drop or I guess for
consumers, fortunately, because we don't really like to see the airlines do well.
QUEST: But here is the real issue. Passengers were shocked by last week. The airlines have spent the last three or four years hand over fist making
out like bandits. Do you believe that they are in for a tough time ahead? Of course, there will be no sympathy from the traveling public.
SCHLAPPIG: There will definitely be no sympathy. I don't think times are going to be that tough. I think they've had a very few good years when you
think at it historically. When fuel costs go way up or there are even bigger economic issues globally and in the U.S., that's when they are
really going to suffer and maybe then they will actually be competing on service again and try to swoon customers rather than, we kind of just feel
like self-loading freight nowadays.
QUEST: Ben, stay with me. I want to ask you another question after we've heard from Willie Walsh. Ben, don't go away.
Willie Walsh, IAG which owns British Airways, Aer Lingus is adding a new airline to its portfolio, it is called Level. It is transatlantic low
cost. The CEO told me so far, the interest in Level has blown away expectations.
(BEGIN VIDEOTAPE)
WILLIE WALSH, CEO, IAG: Just under 108,000 seats have been sold already. I can tell you these are genuine figures. The response has been very, very
positive. It has exceeded our expectations. We launched late, 17th of March for a June start is not normally what you would do in this industry
but it shows you what you can do with attractive pricing. We have fantastic prices in the market. Sell it through your websites, level.com,
flylevel.com, and it all just take off from there. To a new level.
QUEST: Come on. Level with me. You bought -- you brought every version of fly level, level straight, you brought every version of level that you
can find to aviation.
WALSH: You know me, I'm not smart enough to do that. There are plenty of smart people. But the more publicity we get, the better. No, it is great.
This is truly a fantastic opportunity.
QUEST: Who is your customer here? Because this is really -- I've no doubt that medium/long-haul, low cost is probably the next big area. If you were
not to cannibalize your hub and spoke traffic over London and/or over Iberia or Dublin, how do you decide and price so that you don't detract
from the other airlines of the group?
WALSH: It's a challenge, but it is not impossible. This is a new customer segment. Think most of the customers that we are serving have not thought
about traveling with any of our existing airlines. To be honest, I suspect a lot of the people who have bought tickets with us weren't thinking of
visiting places like Buenos Aires or San Francisco or Los Angeles. But you make it available to them at prices that are clearly very attractive. What
is interesting if we look at demographics, almost 50 percent of the customers are in the 18 to 34 age bracket. So, the demographic is very
interesting. More than 50 percent sold through mobile devices. It's a very different scene that we're seeing here to our traditional, if you
like, legacy carriers like Iberia and British Airways.
[16:40:00] QUEST: How significant is this going to be for IAG? How quickly are you going to grow? You have two aircraft to start with. Do
you see this as being a serious contributor to the group?
WALSH: Oh, absolutely. In financial terms, we believe it can generate returns within the ranges that we've set for all of the airlines in the
group. We wouldn't do it if we weren't absolutely convinced this would be financially successful. The rate the growth will be something we're going
to look at. I think it is very encouraging, the early sales. That's probably given us more reason to be optimistic about how fast we develop
this. But we are certainly looking to expand both in terms of the operations at Barcelona, but also then to extend operations to other
European cities.
QUEST: I suppose one could finish off by saying, Willie, that really what you want is a "level" playing field.
WALSH: Absolutely. You know, we're going to take competition to a new level. We're going to be operating -- you name it. I challenge you the
next time I see you as to how many times you can use it in a sentence and I'll try to beat you. I don't think I will, but we'll try.
(END VIDEOTAPE)
QUEST: Willie Walsh. Ben is back with me. Is Level an evolution or a revolution, and are we going to see everybody else doing the same?
SCHLAPPIG: First of all, your puns were spot on. But I think really this is just more of a monkey see, monkey do thing. We've seen Norwegian and
wow air take over so much transatlantic market share. Unfortunately, the legacy carriers have to compete. British airways can't compete anymore
when Norwegian is charging half of what they do. I think this is more response to what others are doing. I think this is slowly going to become
the norm rather than the exception. There are even rumors British airways will eventually introduce buy onboard food and economy on long-haul flights
so that they charge for food and drinks. This would follow exactly what Norwegian has done.
QUEST: Right, but as a "leveling -- yoo-hoo -- you see everybody else onboard.
SCHLAPPIG: Absolutely. This is going to be the new normal.
QUEST: Thank you, sir.
Now as we continue, days away from the French election. With everything to play for, Russia looms large over the campaign. We'll talk about that
after the break. It's QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: Hello. Protesters interrupted a rally held by Marie Le Pen, one of the front-runners in next week's French presidential election. Take a
watch.
The young woman invaded the stage, was quickly dragged away by security. There was a second incident half an hour later involving a naked protester.
It is bound to be an election campaign that stirs up strong emotion emotions. Protests, radical policy proposals, the whole lot. As CNN's
Melissa Bell now tells us, add in fake news and also possible Russian meddling, too.
(BEGIN VIDEOTAPE)
[16:45:00] MELISSA BELL, CNN PARIS CORRESPONDENT: The choice facing French voters is stark. 11 candidates with radically different visions of what
the future should be. Of them, the two front-runners have almost diametrically opposed proposals. On one hand, a stronger relationship with
Europe and a tough approach to Russia. On the other, a referendum on leaving the EU and a closer relationship with Moscow. Marie Le Pen has
already started working on a visit to Moscow.
Vladimir Putin took the opportunity to state Russia's position.
VLADIMIR PUTIN, PRESIDENT OF RUSSIA (translation): We do not want to influence events in any way.
BELL: But inside Emmanuel Macron's headquarters, the fear is that Moscow has been trying to help Marie Le Pen. His campaign manager says they are
being targeted by both cyberattacks and fake news.
RICHARD FERRAND, MACRON CAMPAIGN MANAGER (translation): Emmanuel Macro wants a strong European Union, and we know that the strategy of those
countries that don't want a strong Europe means making him lose the election.
BELL: So, is Russia interfering in France's presidential campaign as it has alleged to have done in the American poll? France's internet watchdog
has warned of the danger of cyber interference. We asked an expert on French cyber security whether he thought Russia was involved.
FABRICE EPELBOIN, CO-FOUNDER YOGOSHA: Yes, probably. Just like the United States has been interfering in many, many presidential elections around the
world for the past -- I don't know -- 50 years at least? Just like France has been interfering in almost every African presidential election since
the last 60, 70 years. It's the way democracy works around the world.
BELL: The trouble, he says, is that it is impossible given the sophistication of the technology to determine where a particular hack
originated. CNN reached out to the Kremlin to get their response. A spokesman said, "We strongly disagree with these accusations. They are
groundless. Moscow was not involved in any cyber-attacks and can't be involved." So, what about fake news? At the French daily, "Le Monde," a
special unit was set up where 12 journalists worked to identify and debunk fake news. One reporter tells us of the French presidential campaign has
seen partisan news from Russian media but not entirely fake news, stories that are entirely made up. They have tended to come, he says, from inside
France.
ADRIEN SENECAT, JOURNALIST, LE MONDE: We stop stories the past couple of months on French internet where mostly being made up by far-right websites
or far right Facebook pages. They mostly targeted migrants or medias of Macron.
BELL: For those inside Macron's campaign headquarters, fake news stories targeting their candidate are all the more worrying because of the nature
of his electorate. It is untested because he's never stood before, and the polls suggest much more volatile than Marie Le Pen. Melissa Bell, CNN in
Paris.
(END VIDEOTAPE)
QUEST: Just reminder of the timing. The first round of the election is this Sunday with the two top candidates then going on in a face-off. That
takes place on May the 7th. So, it is this Sunday to begin with, which is April the 23rd. And then May the 7th for the final two. Of course, goes
without saying, you would expect that we will be all over it like a cheap suit. We'll be covering it cover to cover from the moment the polls open
to when they close and the results.
Coming up, streaming services are spending millions in the hunt for new audiences. Netflix thinks it may have found the answer. They've got
results as well today. After the break.
[16:50:00] (COMMERCIAL BREAK)
QUEST: Shares of Netflix are down after hours. Now, this is somewhat unusual when you think of the company's just reported earnings that beat
expectations. Indeed, for investors it is all about new subscriber numbers. So, Netflix added 5 million subscribers in the first half of the
year. Well, obviously, they now say they've got 99 million and Netflix says they are going to go through 100 million in the next -- over this
forthcoming weekend. Now that they've had this policy of wanting to be in every country around the world. At least every country that's feasible and
practical for them to be in. So, subscriber numbers and original content seems to be the way forward. Samuel Burke joins us and shows us how
Netflix and others are coming up with new ways to attract viewers to the box.
(BEGIN VIDEOTAPE)
SAMUEL BURKE, CNN TECHNOLOGY CORRESPONDENT: In the Middle East, it's not always easy to know who the good guys are. Netflix's latest thriller blurs
the lines even more, showing the human side of the Israeli/Palestinian conflict. Netflix thinks the series may rival the success of "Homeland"
across the globe.
Fauda's creators said they set out to make a groundbreaking show from the start.
LIOR RAZ, LEAD ACTOR AND CO-CREATOR, FAUDA: This is the first time I think that you open this window to people abroad to see the conflict in Israel.
AVI ISSACHAROFF, CO-CREATOR, FAUDA: This is what we were trying to show, that there is a price for this war and every one of us, each and every one
of us is paying that price.
BURKE: "Fauda," which follows a group of Israeli soldiers who disguise themselves as Palestinians, this is just the latest attempt by Netflix to
appeal to both its English-peaking base as well as to its growing number of international subscribers worldwide. A user base that it's increasingly
counting on to drive profits.
Instead of spending $100 million on mega productions like "House of Cards," Netflix is shelling out just a few million for the rights to local shows
like Danish drama, "Rita," the Norwegian hit, "Occupied," and "Call My Agent" from France.
RICH GREENFIELD, MEDIA ANALYST, BTG: The beauty of the Netflix models, it doesn't really matter where it is created. It's available globally. That
globalization is something Amazon and Netflix are doing an incredible job of leveraging.
BURKE: Netflix also needs to fend off giants like Amazon and upstarts like Hulu which has also found success showing subtitled series like the
original version of "Homeland", the Israeli series, Hatufim.
GREENFIELD: Netflix is probably spending upwards of $8 billion of cash investment in new programming showing on a global basis. Amazon's probably
spending $5 billion on global programming. Both of these companies have the ability to finance very expensive great content wherever it comes from.
BURKE: For the creators of "Fauda," the global success of the show has been unexpected.
ISSACHAROFF: This miracle, this very mysterious thing that happened in Israel is happening all over the world now.
RAZ: I can show you my Twitter. I can show you my Instagram. So many people related to it.
BURKE: It shows when it comes to compelling content, binge watching knows no borders. Samuel Burke, CNN money, Tel Aviv.
(END VIDEOTAPE)
QUEST: Fascinating stuff.
Now one piece of news to bring you. Snapchat is facing a fierce backlash in India over allegations that its chief executive, Evan Spiegel, once
dismissed India as a poor country. The allegation against the country is that Spiegel said in 2015 the app was only for rich people and did not want
to expand it into poor countries like India.
[16:55:00] A statement for the company said those words were written by a disgruntled former employee. We are grateful for our Snapchat community in
India and around the world.
Some viewers -- or some users in India vented their anger using the #boycottsnapchat. And some tried to actually then delete the wrong app.
The markets and how they traded on this first day back after the long holiday weekend and New York. Dow Jones industrials, strong session.
Almost at the best of the day. Straight out of the gate, which is fascinating that you get a 1 percent rise on the Dow at a time of
geopolitical tensions when tax reform in the U.S. seems to be some way off. But all put together, the markets like what it sees, or at least
consolidates its position. We will have a Profitable Moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight, Profitable Moment. United Airlines has reported a 69 percent fall in profits. It's got absolutely nothing to do with what
happened on that plane from Chicago. Instead, it is about rising fuel prices and the rising cost of labor. Put all that together, what we're
going to see with United we'll see with British Airways, we'll see with Lufthansa Group, we'll see with Delta and American. The reality of course
is that the airlines are still making money, but this hand over fist that they made, the true era of very cheap fuel has pretty much gone away. And
all this at the same time as Delta saying it's going to give back more to their passengers. United says it will no longer remove passengers for
staff. You get an idea that the airline industry, even here at QUEST MEANS BUSINESS, where the seats always recline. That's QUEST MEANS BUSINESS for
tonight. I'm Richard Quest in New York. Whatever you are up to in the air, I hope it is profitable. I'll see you tomorrow.
END
