Return to Transcripts main page
Quest Means Business
Airbus Loses Out in British Airways' Big Order; IAG Profits Climb in 2018 Beating Expectations; Dutch Government Buys Larger Stake of Air France-KLM; Air France-KLM in Tug of War Between French and Dutch Governments; BMW and Daimler Team Up on Autonomous Driving; IMAX Rallies After Earnings Beat; Wall Street Reacts to U.S. GDP, Trump-Kim Summit and Earnings. Aired 3-4p ET
Aired February 28, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: We are in the last hour of trading on Wall Street, 60 minutes where anything could happen and the way
the market looks at the moment, don't be too off put by all of this red, the actual losses are quite small, barely a quarter of a percent, but it
suggests that the close is going to be on the down side, in other words, off.
Look at the markets, United Healthcare at the bottom. Coca-Cola at the top. You don't see that very often. Boeing is strong today, too. Put all
of it together, and this is what's moving the markets. It's bet on a breakthrough in North Korea, disappointment at what happened in Hanoi.
Donald Trump walked away, South Korean stocks feel the pain.
We had weeks of delay, now we finally have U.S. growth numbers. The news is not good, it's not bad. We need to interpret at 2.6%. And British
Airways is going for Boeing in its big new plane order. IAG's boss tells me why on this program.
Live in the world financial capital, New York City, what a spectacular day. It is chilly though, I'll tell you, it is Friday, it is the 28th of
February. It might even be Thursday instead. I'm Richard Quest, wishful thinking, because I mean business.
Good evening. "Sometimes you have to walk," and with those words, Donald Trump's Summit with Kim Jong-un in Hanoi ended without a deal and the
global markets have taken a hit. The talks broke down after Mr. Trump claimed that the North Korean dictator demanded all sanctions be lifted on
his country -- a bridge too far for the U.S. President.
The KOSPI in Seoul fell nearly 2%. It's been one of the best performing stock markets around the world this year. And a basket of South Korean
industrials known as the Peace Stocks took a sharp hit. Yong Pyong which builds resorts is down 25%, Shun Shing Cement fell 20%, Dohwa Engineering,
26%. If that wasn't enough, you've got Ilshin Stone off 27%. These businesses were of course, thought to gain the most for any deal with the
North that would create construction opportunities.
Straight to Hanoi, Paula Hancocks is staying up late for us tonight and joins us. The South Korean market is bearing the brunt of a Summit which
ended unusually abruptly.
PAULA HANCOCKS: Well, that's right, Richard. I mean, what we've heard from the U.S. side, from the President Donald Trump, is that effectively,
he had to walk away because North Korea was asking for sanctions to be lifted in their entirety in return for dismantling the Yongbyon nuclear
facility and he said that that simply wasn't something that the U.S. could accept.
But just in the last couple of hours, we've also had a very rare press statement from the North Korean Foreign Minister, Ri Yong Ho here in Hanoi
and he is disputing what the U.S. has said saying that North Korea did not ask for the entirety of the sanctions to be lifted, just five of the 11,
ones which actually affected people's livelihood saying that North Korea was willing to dismantle Yongbyon in return for that.
They say that they believe it was a realistic proposal and one of the officials alongside Ri Yong Ho also saying that she feels now that Kim
Jong-un may have lost the will to negotiate. So we're having some interesting back and forth here, Richard, and certainly a very unusual
disputing there by the North Koreans.
QUEST: What happened, do you think? I mean, Paula, very unusual this. You're an expert at looking at these events. I suppose it will come down
to whose side do we believe?
HANCOCKS: Effectively, yes, Richard. I mean, there are some that say it's better for the U.S. President to agree to no deal rather than to walk away
with a bad deal. So certainly, there is - there was the case to be made that if in fact, North Korea was asking for too much, then maybe it was
better he walked away.
But then when you have this dispute coming into it as well, it's very difficult to know exactly. We don't know when the talks will resume again,
both sides saying they don't know about any potential talks in the future, although both sides are saying that it appears North Korea is still not
going to be testing missiles. It's not going to be doing nuclear tests.
So at the very least, that is a positive sign, but we also heard that President Trump on board Air Force One heading back to the U.S. did know
that North Korea had disputed his version of events, but there was no comment at this point.
[15:05:10]
QUEST: Paula, thank you. It's late where you are, 3:00 in the morning. Thank you. Donald Trump famously wrote "The Art of the Deal." His
strategy for negotiating with Chairman Kim was to sell Vietnam as an economic model as to what North Korea could become. The Communist Vietnam,
a bitter enemy of course of the United States, war was fought, blood was shed.
However, it has since reformed its policies and its economy and normalized relations with Washington, where there was once no trade at all. The U.S.
imported $4 billion worth of goods from Vietnam last year. The economists we have spoken to are skeptical this strategy will ever work with North
Korea because Vietnam has a more open political system, and doesn't have nuclear weapons. So what can one say?
Scott Seaman is the Director for Asia at the Eurasia Group advising on political risks and joins me from Washington. This idea of Donald Trump's
to sell Chairman Kim right the way through, "Oh, they could have some very nice condos on that sea front, nice beach resorts," if you remember from
their last talks. Was it a failure, do you think, to try that strategy?
SCOTT SEAMAN, DIRECTOR FOR ASIA, EURASIA GROUP: I don't think so because it dovetails with what Kim Jong-un has himself been saying that he would
like to see his economy develop. There is no question that he has put a lot of money and time into developing nuclear weapons, but the other half
of what he wants to accomplish is really focused on the economy.
So I don't think it was wrong for Trump to maybe highlight that as something that could be a goal for North Korea as long as they are willing
to give up their nukes.
QUEST: Right, but could North Korea ever become the next Vietnam, so to speak?
SEAMAN: I would say the possibility of that happening is pretty remote. With Vietnam, of course, it entailed a leadership, a much broader
leadership deciding that they wanted to change course, and part of that involved them allowing people at lower levels to have more decision making
capabilities for example.
And this is a country, North Korea, run by one guy. So the ability for that government to loosen up enough to have decisions being made at various
levels, as business deals happen, I think that's pretty tough to wrap your mind around.
QUEST: Right, so now help us understand these two different views on what happened. The North Koreans saying they never asked for all sanctions,
just those that were citizen hurting, the five of the eleven group. What do you make of it?
SEAMAN: I don't know if we'll ever know. You know, of course if that was something that was part of the exchange where other people were in the
room, we might hear about it later and be able to decide which side is telling the truth. If that is something that happened though in a private
conversation that we know that Kim and Trump just with their interpreters, then it would be more difficult.
But I think that probably what Trump was thinking is that despite his ability to spin almost anything into a victory, perhaps this just wasn't
even enough of a deal for him to think he could do that.
QUEST: The President has also said that he would do the same for China if it looked like he couldn't get the deal he wanted. That's a much more
serious matter. Because if China falls apart, we're not talking about just sort of continuing an unsatisfactory situation. We will be talking about a
worsening trade situation.
SEAMAN: Yes, that's clearly the case. We have billions and billions of dollars flowing back and forth between China and the United States and
that's been going on for decades. With North Korea, it's a completely different situation. They're really just looking to ensure that their
economy remain stable and they can feed their people.
QUEST: Good to see you. Thank you. Thank you for taking the time to come and talk to us. We very much appreciate it.
As Michael Cohen traveled to Capitol Hill for a third day of testimony, legal experts poured over his claims from Wednesday. They raised new
questions about President Trump's relationship with Deutsche Bank and attempts to inflate his net worth.
(BEGIN VIDEO CLIP)
LACY CLAY, U.S. REPRESENTATIVE, MISSOURI, DEMOCRAT: The President or his company ever inflate assets or revenues?
MICHAEL COHEN, FORMER DONALD TRUMP PERSONAL ATTORNEY: Yes.
CLAY: And was that done with the President's knowledge or direction?
COHEN: Everything was done with the knowledge and at the direction of Mr. Trump.
CLAY: Did the President ever provide inflated assets to a bank in order to help him obtain a loan?
COHEN: These documents and others were provided to Deutsche Bank.
(END VIDEO CLIP)
QUEST: Oh, dear, and with those words Deutsche Bank's mess just got ever greater.
[15:10:01]
QUEST: And the reason is, Donald Trump's brand is tied to his net worth. How he gets his name on buildings like Trump net worth, his name is his
brand, his brand is his value and its worth. And he uses it to get loans and insurance.
Let's show you how it works. In 2011, Donald Trump was estimated to be worth $4.26 billion according to documents that Michael Cohen provided. In
2012, and you get a slight increase, not huge, a slight increase, $4.56 billion; still way, way above what third parties estimate.
But look what happens from 2012 to 2013? Suddenly out of nowhere, he's got $4 billion worth of new value and it is called brand value. Donald Trump,
the following year, used the brand value and the increased value of his net worth, $8.6 billion, to try to get the loan from Deutsche Bank to buy the
Buffalo Bills.
Now, in the event he wasn't successful, Deutsche never really believed his estimates of net worth anyway. Kara Scanelli is following the developments
from Washington, so the way I listen to Michael Cohen, I mean Deutsche -- and what I was reading in my morning newspapers, Deutsche Bank never
actually believed the figures he was providing. But they're still ensnared up to their cashier's tills in mess with Donald Trump.
KARA SCANELLI, REPORTER, CNN: That's right. I mean, if anything this will only give Congress more reason to ask Deutsche Bank for more documents to
want to question them and want to get to the bottom of this long relationship they've had with the Trump organization.
Deutsche Bank has been the only major bank to lend money to Donald Trump and his company in essentially the past two decades and they have over $300
million in loans outstanding to the President right now and that whole relationship has just ensnared the bank with congressional investigations.
They have separately their own regulatory problems. So it really has been the headache that has not gone away.
QUEST: And they have of course bigger issues that we talk about regularly on this program, they have been fined for money laundering and various
issues, regulatory problems, I should say, and also in Germany, there are leadership issues about them. So Deutsche Bank is not as well-equipped as
most banks to take this onslaught. Is it your feeling that Congress has only just got started?
SCANELLI: Oh, without a doubt. I mean, the Congressional Committees now that the House is controlled by the Democrats, they've really just started
getting their staffing together and prioritizing their plans.
But the House Intelligence Committee and the House Financial Services Committee said that they're working together to try to get to the bottom of
some of their big questions with Deutsche Bank, mainly those involving around money laundering.
But they are also going to act on their own and it is completely it's fair game for other committees if they have a nexus here to want to weigh in.
In Michael Cohen's testimony, we heard today from the House Oversight Committee Chairman, Elijah Cummings saying that they're dividing up the
various crimes that Michael Cohen alleged including this potential bank fraud, and the Committees are going to divide that up and dig into that.
So we already know that there are initial conversations going on between the bank and the Congressional Committees as they're gearing up for this
big inquiry.
QUEST: And this business with the Southern District of New York that Cohen wasn't able to talk about, although I suspect the Intelligence Committee
might be hearing more about today, but this Southern District. The Southern District tends to deal with financially-based crimes or issues.
Would that be your assessment, too.
SCANELLI: Absolutely. I mean, the Southern District of New York sits in the heart of Wall Street, so much of their portfolio is financial fraud.
They have brought tons of insider trading cases, big accounting fraud cases. So this completely fits within their bailiwick and their expertise.
QUEST: Good to see you. Thank you. Coming up with "Quest Means Business," no exaggerations on this program. The U.S. economy is alive and
well, where it stands and where it's going. We are going to get to the grips of that.
And buckle up, James Bond has a license to kill and Aston Martin's stock has a license to drop through the floor. The carmaker has taken a dive.
You need to understand why.
(COMMERCIAL BREAK)
QUEST: There's some good news and bad news for the world's biggest economy. New data shows U.S. GDP growth, it slowed in Q4, not it wasn't as
bad as economists feared. Growth is still up from a year earlier. The report was delayed by the partial government shutdown. Investors are
reacting. The Dow has seesawed. Wall Street is also watching the Trump/Kim Summit and there was some interesting earnings. J.C.Penney and
HP stocks both got hit in different directions. What was interesting about HP, it's down 17% on the day so far.
Joining me now is U.S. Bank's senior portfolio manager, Eric Wiegand. Good to see you, sir.
ERIC WIEGAND, SENIOR PORTFOLIO MANAGER, U.S. BANK: Nice to see you.
QUEST: Thank you. What do you make of the GDP number? Because it was sort of -- it's lower than expected, but could have been a lot worse.
WIEGAND: Actually, I would disagree with you a bit, it was less bad than feared. You know, expectations were generally for it to come in at about
2.2%, so a report of 2.6 was good, but where you're absolutely right is it continues the trend of deceleration.
QUEST: But it means that for the year over all, the growth was --
WIEGAND: Well, you know, think about this, in the second quarter, growth of GDP was 4.2%; third quarter, it goes to 3.6% and then we finally or
3.4%, and then it goes down to 2.6% in the fourth quarter. So, you know, deceleration is something that investors have -- certainly have --
QUEST: What is driving that deceleration in the economy now, do you believe?
WIEGAND: Well, one of the bright spots in the GDP figure again was actually the consumer continued to demonstrate the favorable jobs market,
and the inflation in asset prices for them. What it is partially reflecting is a deceleration in global market activity.
So again, the United States has proven itself to be the best house in a more difficult neighborhood.
QUEST: As the senior portfolio manager, what are you now finding that you like the look of because it's getting harder?
WIEGAND: You're absolutely right. From our perspective, this leaves us in a decidedly neutral or balanced posture for clients. We're not finding a
tremendous reason to overexcited or allocated towards equities or a reason to get discernibly defensive and over allocate to fixed income.
QUEST: What do you do in this scenario?
WIEGAND: It's a great question, and what we do is take advantage of the opportunities that present themselves. From an equity standpoint, we still
have a bias towards U.S., within the U.S. we have a -- from a style standpoint, we continue to favor growth or pro-cyclical shares against
defensives.
But as far as fixed income is concerned, we want fixed income that is likely to behave like fixed income. So things that aren't highly
correlated to equities. So we tend to underweight things like high yield or leverage loans in favor of more traditional fixed income.
QUEST: Right, because the moment you start going for the higher yielding stuff, you're going for that because it's higher yielding.
[15:20:08]
QUEST: Therefore, ergo it's going to behave like stocks.
WIEGAND: That's correct.
QUEST: Whereas if you're going for 10 years and longer treasuries or even mortgage back securities type of stuff, then you're going to get much more
of a sturdy boat.
WIEGAND: You will, but it's interesting, for taxable investors, you know, there is still a positive slope in the municipal yield curve, but when we
look at the tax, looking at Treasuries, that slope is very, very thin.
QUEST: We saw today -- I alluded to HP down 16%, 17%. J.C.Penney is down 27% today. We are going to be talking about Aston Martin in a minute.
Share price was off 19%. I mean, you J.C.Penney is 20%. This is now a new normal? This even on bad days of stocks, you didn't see the move 8%, 10%
12%, 15%. How do you cope with that?
WIEGAND: Yes, I mean, in the past you would consider those anomalies when you would see such sharp volatility. What we are seeing right now as
investors are extreme in their discrimination. Whether it's to the upside and companies that have decidedly surprised or offered guidance that it is
better than expected or those that are trying to trim guidance, narrow guidance, you know, they're quick to discriminate.
And an important thing to remember is, a lot of these stocks have had a sharp run off with those Christmas time lows. So with decelerating
earnings growth overall, investors are being much more picky.
QUEST: In a sentence, regrets you didn't commit more to equities after December?
WIEGAND: Certainly. But we're actively rebalancing on an ongoing basis.
QUEST: Good to see you.
WIEGAND: Nice seeing you. Take care.
QUEST: How kind of you to come in. Thank you.
WIEGAND: Thank you.
QUEST: Now, it was a mixed day in the European bosses. Two up, two down. A rising pound in the U.K. pushed stocks, and there you see it. It may be
James Bond's car of choice, and Aston Martin stock took a sky fall today, down more than 20%. It follows the carmaker posting a $90 million loss and
that's entirely related to costs of the IPO.
Even after a 25% of increase in revenue, investors said live and let die. The stock is down 40% since its IPO launch. Anna Stewart is in London.
Anna, we normally find that where you can see the reason for stocks suffering an exceptional item or whatever, that the market is kind and
favorable to it, but not here.
ANNA STEWART, REPORTER, CNN: This is what is so interesting because if you strip out the cost of that IPO which was $180 million, if you take out this
big Brexit cost on their report, as well, which is $40 million, if you take out the pension one across, it actually wouldn't have just gone into
profit, it would have topped its profit from the last year. But investors are not happy.
And part of this, I think is the concern over the strategy. It's still midway through its turnaround plan. Some analysts I spoke to, to today
saying, you know, at the moment the market puts a premium on profit on the here and the now. They wanted to see it now.
QUEST: Okay, but then, it's only in the last year that they IPO'd, and indeed, during that IPO that price was at 19 pounds, which then, they
thought they could get away with. I mean, nobody goes for an IPO expecting the share price to crater by 40% in year one.
STEWART: No, but remember, when they first announced it, it could have listed that price even higher and at 19 pounds a share which was where it
was when it went on IPO, very controversial, I would say at the time. That put it at a price to earnings ratio of 19 times, very close to Ferrari, and
yet this is a much smaller brand that is undergoing a huge restructuring plan.
So there was a lot to of cynicism, I would say at the time as to whether it was overpriced and perhaps it was.
QUEST: All right, so what do they do?
STEWART: Well, they are continuing with the plan, and today the CEO says that they are not going to change their guidance for the full year. They
are churning out more cars in every single region around the world, including China, which is up 31% over the last year. That's pretty great
considering how some of its rivals are doing in China. It will continue with that. It is still going to do a new model every year until 2022 and
it is opening a new factory in Wales to make this new SUV, Richard.
QUEST: SUV from Aston Martin. I look forward to taking it for a test run. Anna Stewart, thank you.
First, Airbus ceded defeat with its A380 Super Jumbo, now another blow. This time, from British Airways. BA and its parent, IAG is ordering a
fleet of Boeing 777 to replace aging 747 jumbo jets. IAG's Willie Walsh after the break.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in a just moment." On the program, the Chief Executive of IAG, Willie Walsh, he
tells me that more European carriers could go under, thanks to volatile oil prices and competition.
And fresh from the Oscars, the Chief Executive of IMAX will be here off the back of a bumper quarter as you and I continue tonight, this is CNN and on
this network, the facts always come first.
Israeli Prime Minister, Benjamin Netanyahu is decrying corruption indictments against him as a political witch hunt. He is set to be charged
with bribery, fraud and breach of trust. He will get to defend himself before anything is made final, but that will come after he runs for re-
election in April.
Pakistan says it will release the pilot of the Indian fighter that jet was shot down over Kashmir. Pakistan's Prime Minister says the pilot will be
returned to India as a peace gesture, but Indian military leaders say their forces remain on high alert.
Moments ago, the U.N. Security Council failed to pass a U.S. resolution calling for new elections in Venezuela, although a majority of the Council
supported the resolution, Russia and China vetoed it. Russia also has a resolution that's up for voting that supports the current Venezuelan
government, the U.S. is expected to veto that.
Donald Trump says he believes Kim Jong-un did not know about an American student who was jailed in North Korea for more than a year. North Korea
released Otto Warmbier in 2017 after the 22-year-old student fell into a coma. He died days later. The U.S. President says he does not hold Kim
responsible for Warmbier's death.
British Airways will be getting rid of its Boeing 747s over the next five years. That much has been known for some time. They're going to replace
them, we learned today, with Boeing 777s. Now, if you take the value, some reports value the order in excess of $440 million before discounts per
plane. It's a blow to Airbus which had pitched the A350. So here we have the two planes on either side.
According to their websites, the 777-900 over here costs around $400 million. The 351,000 over here is slightly cheaper. But money was not the
factor when it comes to these two planes. It's which was the best aircraft for the best routes. So one may be bigger than the others, but
the 777-9 would allow BA to run the four classes of first, club world, club -- economy and premium economy.
It also had fleet commonality with the other 777s that BA has in the route. It begs the question to you, what's your favorite phone? Join in the
conversation for your favorite plane. Get out your phones and go to cnn.com-slash-join. And tonight, we're asking which is your favorite plane
to fly?
You've got the 747, the 777, the Airbus A350, brand new or the super jumbo, the A380. Go to cnn.com-slash-join and vote. Now, as for the two planes
or the plane, the BA did decide to go to 777-9, it's not flown yet, it's extremely popular, it's wrapped up a lot of orders, and it comes as British
Airways parent company IAG is reporting a rise in profits. The Chief Executive Willie Walsh told me why it chose Boeing over Airbus for the
order.
(BEGIN VIDEO CLIP)
WILLIE WALSH, CHIEF EXECUTIVE OFFICER, INTERNATIONAL AIRLINES GROUP: Delighted to have ordered the 777-9, I think it's a great airplane. I'm a
big fan of Boeing having been a Boeing pilot in my early career. So, you know, I don't allow these biases to influence our financial decisions when
it comes to aircraft choice. But I think this is a perfect aircraft for British Airways to replace the residual fleet of 747s that we've not yet
replaced.
QUEST: Why the 777-9 over the 350,000 which although the other 350 Boeings which you have already bought, so there would be commonality across fleet.
WALSH: Yes, it's principally a size issue. So with this aircraft, we operated in a four-cabin configuration. So we'll have first class,
business class, economy, and you know, the premium economy cabin. We'll have 325 seats, and that's very similar to the configuration that we have
on the 747, the A351,000 is a smaller aircraft, and so this really fits the bill in terms of size.
We will have further aircraft to replace going forward. The fleet's 777- 200s that we have, and clearly, that gives both Boeing and Airbus an opportunity to bid for that business. But I think it's the right aircraft,
very efficient. I think our customers will love it, we like the changes that Boeing have made and we're very pleased with the agreement that we
have with GE as well, which is an important factor in acquiring the aircraft, having good relationship with the engine manufacturer as well.
QUEST: Numerous airlines went out of business during the course of the year in Europe. It obviously tells us that times are hard and yields are
soft and passengers are being fought over. Would you expect to see more airlines go?
WALSH: Yes, regrettably, I think more airlines will suffer, you know, it's a challenging environment, we're doing extremely well in that challenging
environment. But we're looking at a fuel bill that will increase by another 800 million euros in 2019.
And that's on top of the almost 700 million euro increase in the fuel bill that we witnessed in 2018. Now, there are a lot of airlines that will not
be able to cope with the volatility that we've seen in the fuel price. And as you said, it's mainly upwards pressure on the oil price that we're
seeing at the moment.
So I do expect the weaker airlines to get weaker, and then in the case of some, unfortunately for them they will disappear.
QUEST: I can -- my next question could be really very simple. Are you ready for Brexit and all its extremes?
WALSH: Yes, that's a simple answer to what is a very complex issue, but yes, we are.
QUEST: If we look at the performance of the airlines or the group of airlines now, excellent result, no doubt about it. So what is your biggest
worry as you look forward? Because maintaining this level of profitability will become more challenging. I notice in looking at that, you kept costs
very well under control, and your capacity and revenue rose pretty much in lock step. So what now is your biggest concern?
[15:35:00] WALSH: You know, to be honest with you, I'm not concerned about anything that's within our direct control. You know, there will
always be issues outside of our control which will impact on the business. The general macroeconomic environment is clearly being impacted by some
political issues that we're witnessing at the moment.
Anything that impacts on global GDP tends to have a negative impact or a downward impact on global GDP, it tends to have a negative impact on the
airline industry. But as I look into 2019 and beyond, I see no reason why we shouldn't be confident about our ability to compete and continue to grow
because we've got significant growth ambition in all of our airlines as we move forward.
QUEST: Does it -- do you find it strange -- finally, Willie, do you find it strange that the Dutch government is buying into Air France-KLM? One
always thought since British Airways itself is the product of a privatization, it seems a bit rum when governments are buying into airlines
just to beat another government of the similar airline?
WALSH: Yes, I admit I didn't see that coming. I can understand why the government has done that. I think they want to have more balance in the
ownership of the airline. And I suppose -- if you want to look at it from a strategic point of view, I think having the Dutch government as a major
shareholder may well be a positive in terms of balancing what some people see as the negative influence of the French government on Air France, KLM
or particularly on Air France.
But clearly, in the Netherlands, they're concerned about any negative impact that we might have on KLM, which I think is a fantastic airline. I
think the management in the KLM under Pieter Elbers system have done an outstanding job. And you know, when you look at the performance of KLM and
contrast that to the poor performance of Air France, you know, I think you can begin to understand why they might have made this move. But it is a
surprise.
(END VIDEO CLIP)
QUEST: Air France and KLM, head-to-head. As Willie was telling me there, have been mischievous though, there's a tug of war between the French and
Dutch governments over the airline. Now, the two airlines merged in 2004. The KLM side has always kept its separate corporate structure.
It has to under the law. KLM has resisted efforts to drive this partnership towards closer integration. But the reality is, it is one
airline group in the same way BA and Iberia or Lufthansa and Swiss are. But you would now have -- the anomaly here is their government owns 40
percent, their government now owns 14 percent. What happens next?
Live from The Hague in the Netherlands, I am joined by Arjan Noorlander; political correspondent with "NOS". Good to see you sir, thank you for
joining us, we do have a bad delay between us on the satellite. Why did the Dutch government get so angry or so pissed off they decided to spend
700 million buying this stake?
ARJAN NOORLANDER, POLITICAL CORRESPONDENT, NOS: Well, simply because they don't trust the French anymore. They weren't fair businessmen, they think
-- and for them at KLM, they think that the French are doing what they want in this merger between the French and Dutch company.
And lots of talks between the Dutch and French governments, between the two companies didn't come to any solution. And last week, well, all the trust
was gone, and they started buying stocks.
QUEST: It's extraordinary, though. I mean, this is a merger that was the pioneer merger for airlines in Europe back in 2004. Yes, there's been lots
of strikes amongst the French side, and be honest, the Dutch think that the French airline is not as good as the KLM side, and that the French side is
being badly run.
NOORLANDER: Yes, there's quite a bit of arrogance of KLM and with the Dutch people about KLM and how the French aren't running their airline as
lean and mean as the Dutch are. You can see this in the results as well. KLM is still doing yearly results for their own airline in this merger
between two airlines.
And you can clearly see in those results that KLM is doing much better than the French, that when the French company, the French side of the company
wants to be leaner and meaner as well, there are strikes, there's a powerful labor union still that tries to delay these efficiency projects.
QUEST: Right --
NOORLANDER: So there is a lot of frustration in Holland about the French wanting to rule the company and not doing a great job at it.
QUEST: So the French -- the Dutch people, as much as one can tell, will support this because it's a lot of money. Do you think ultimately they
would like to see KLM go off on its own?
[15:40:00] It's not going to happen by the way. But do you think that they'd like to see KLM spun off, sold off, go back to be independent?
NOORLANDER: Yes, they definitely want to be independent --
QUEST: Good --
NOORLANDER: If you would do a poll on the Dutch people, there's still a lot of sentiment around KLM. We lovingly still call these planes the Blue
Swans because of the blue color of the KLM logo. It's a bit like I think in America, once the sentiment there are, Pan Am and these kinds of --
QUEST: Oh --
NOORLANDER: Airlines, people don't want it to disappear, they want to be proud of having their own airline, it's important for the Dutch economy as
well. So if you would do a poll, people would probably say get rid of the French and let's do it ourselves.
QUEST: Good to see you, sir, thank you, we very much appreciate you joining us tonight on QUEST MEANS BUSINESS. Now, according to those of you
voting at cnn.com-slash-join, not on the question of out-hearing, but which is your favorite airline -- aircraft, it's a landslide for Airbus.
Most of you say, the A380 super jumbo is your favorite plane, in fact 54 percent of you. And the enemy of the enemy is my friend. As we continue,
BMW and Daimler are taking that approach as they face the self-driving future together. We will discuss that and put it into some context after
the break, and after I've had the chance to play with the planes.
(COMMERCIAL BREAK)
QUEST: Too many rivals are teaming up to take on a shared threat. It's BMW --
(COUGHING)
Excuse me, BMW and Daimler. Now, they compete fiercely in the luxury car market. Now the two companies say there were shared costs and technologies
to produce self-driving cars. Leaders of BMW and Daimler are trying to reduce costs and compete with upstarts in Silicon Valley.
It's BMW's and Daimler's second partnership announced in just a week. ROBO Global tracks AI and reports its companies. Travis Briggs is ROBO Global's
chief executive and is with me now. Good to see you, it's a bit strange --
TRAVIS BRIGGS, CHIEF EXECUTIVE OFFICER, ROBO GLOBAL: Thanks for having me.
QUEST: Two major competitors, BMW --
BRIGGS: Right --
QUEST: And Daimler deciding to team up.
BRIGGS: Yes --
QUEST: All alarm bells of anti-competition should be ringing.
BRIGGS: Well, I'll tell you, I actually see it as more a collaborative effort that's been actually occurring in the entire industry. You have
Honda and General Motors had partnered up, you have Volkswagen and Ford, and I think it's a recognition of the auto industry that this is where it's
headed and teaming up makes sense.
[15:45:00] QUEST: Look, where do you draw that line? I mean, you know, the aircraft manufacturers have teamed up before on capital cost type of
basis.
BRIGGS: Right --
QUEST: But at some point, you have to recognize your competitors --
BRIGGS: Right --
QUEST: Not friends --
BRIGGS: Well, let's not kid ourselves here. Daimler and BMW will continue to compete fiercely in selling cars. Where they've decided to collaborate
is in the mobile services. So they've really identified three or four different areas in which they're going to work together, and that's ride-
sharing like Lyft and Uber, public transportation as well as electric cars and charging station.
QUEST: How far ahead do you believe China is on AI --
BRIGGS: Right --
QUEST: Than, say, the United States. And of course, you know, the debate goes on, but what we hear is the case that they are sizably ahead.
BRIGGS: Here's what I'll say about that. Is China is a very real threat to AI dominance. But where they are right now is still behind Silicon
Valley. The problem is they've made a commitment, a dedicated, well laid out three-point plan to be global leaders by 2013. It starts with huge
investment, they're doing right now, by 2025, they expect to have major advancements and by 2030, it is a goal, it is their sputnik moment to be
the global leaders of AI.
QUEST: Right, but you say they're behind at the moment. The problem with Silicon Valley is, it's always market driven --
BRIGGS: Right --
QUEST: And market-led. There's no cohesive plan, there's no grand design.
BRIGGS: Right. I'm cautiously optimistic that the government recognizes they need to get involved. I don't know if you saw this, last Monday, the
current government created a plan, outlined the money they were going to be spending, where they're going to be spending it. Admittedly, it lacks
details we would expect, but at least the acknowledgment is there.
QUEST: So, should we be -- with AI, I've seen, for example, numerous spinoffs of companies that have broken themselves --
BRIGGS: Right --
QUEST: Honeywell for example and bits went here and AI for automobiles and bits there.
BRIGGS: That's right.
QUEST: Is there any cohesive ETF vehicle, you know, besides yourself, with yourself, that looks at this, that provides the -- a clean, pure play for
AI?
BRIGGS: Right, so I'll say this. We do focus on AI and robotics and have been doing it for five years. Our firm is probably as well equipped to
study this as anyone. The problem is a lot of the technology innovation is occurring at the private company level, right?
And so if you look for a pure play into it, there's a lot of companies and more and more every day that are piling into R&D and investment, but
there's very few pure plays.
QUEST: Good to see you, sir --
BRIGGS: All right, thank you --
QUEST: We'll talk more about this in the future, thank you for taking the time.
BRIGGS: All right --
QUEST: Thank you.
BRIGGS: Thanks.
QUEST: When we come back, look, the Oscars may be over, but IMAX's Chief Executive Richard Gelfond will be with us after the break. Because the
Oscars give great opportunities for re-releases and for more at the movies. In a moment.
[15:50:00] (COMMERCIAL BREAK)
QUEST: That's a nice-looking share chart. It's for IMAX, which has done rather well from January through to now. Now IMAX is celebrating strong
results this week with the announcement of even more movies. New "X-Men" trailer was released, it's called "Dark Phoenix" and it's in theaters this
June.
Also reported a record-breaking Chinese new year. The Chinese Sci-Fi film called "The Wandering Earth" now being released in the United States. Rich
Gelfond is IMAX chief executive with me from Los Angeles. Good to see you Rich, as always, thank you.
The Oscars came and the Oscars went. And now we sort of work out what -- who made money and who didn't. What did you make of it?
RICHARD GELFOND, CHIEF EXECUTIVE, IMAX CORPORATION: You know, I thought it was a really good result, the wealth was spread around by a lot of the -- a
lot of the producers of content. You know, "Roma" won some things, but didn't win everything. We were involved for the first time -- people
didn't really talk about this, but more blockbusters were nominated than usual.
"Bohemian Rhapsody" which we were involved with which was terrific. "Black Panther" was the first film in a while with that kind of popular success.
That got nominated and "A Star is Born" also was a big success. So that was a trend people didn't talk about, but it was nice to see some kind of
movies that --
QUEST: Right --
GELFOND: The public liked and big numbers get nominated.
QUEST: And as for yourself, you've had great numbers, very good numbers, and you had an excellent --
(COUGHING)
Excuse me, Chinese new year releases. And I was surprised, looking at your results, I didn't realize you had that many screens now in China.
GELFOND: Yes, we have about 600 screens open, and we have another 350 in backlog. For the Chinese new year film, we did 10 percent of the Chinese
Box Office, and when you figure that there is something like 70,000 screens in China, almost double, that we're doing very well.
There have been a rough patch in there for a while, but what we started to do was we changed our marketing and our programming. We're actually up 60
percent year to date in China over last year. "Wandering Earth" was a new genre also in China. It was Sci-Fi with better special effects than they'd
used before.
The Chinese saved the earth, so that was a nice plot twist. But it was -- I think it's a start of higher budget production in China and more movies
and genres that are going to work for IMAX.
QUEST: What needs -- do you see what needs to happen in the western markets? In the U.S. and Europe for IMAX now? What is it you need? Is it
you need more content? Do you need different content? What is it?
GELFOND: Well, fortunately this year, Richard, I don't think we're going to need much. Remember, we're not an exhibiter, we display blockbuster
films in an immersive way. And this is a magical year for blockbusters. I mean, you have "Captain Marvel" which is opening on March 8th with
Disney.
And that movie, the pre-sales for us are better than they were for "Thor: Ragnarok" and "Wonder Woman" and a bunch of other things. So the tracking
is excellent, then right after that, you have "Avengers" --
(COUGHING)
Which was the biggest movie last year, and this is the end of that series, I think it's going to be a big. You've probably heard about "Lion King",
Jon Favreau, it's a huge scope movie, "Star Wars: The Final Chapter", and we should underline the word "final" because there's actually an end this
year. "Spiderman" with Sony, I mean, I could go on.
QUEST: Right --
GELFOND: It's one of the best years I've seen going in for us.
QUEST: Will it be the final, the final for "Star Wars"?
GELFOND: I've told it's the final, Richard, but as you know in science fiction, you never know.
(LAUGHTER)
QUEST: Good to see you, thank you, Rich. Keep well, sir, always good to see you, thank you.
GELFOND: Great to see you, thank you.
[15:55:00] QUEST: Now, CNN is partnering with young people around the world for a student-led day of action against modern slavery on March the
14th. It is my freedom day, and we spoke to the American song legend George Clinton, and we asked him what makes you feel free?
(BEGIN VIDEO CLIP)
GEORGE CLINTON, SINGER, SONGWRITER: Being able to live my life in the pursuit of happiness without the fear of being unfought with.
(END VIDEO CLIP)
QUEST: Tell us and tell the world what makes you feel free? Share your stories using the hashtag my freedom day. And the last few moments, the
losses extended, I mean, we're five minutes to go, we are down now 78 points. Not huge numbers off by the way, but the market is -- I think it
actually -- if you look at the way it's gone, it tried to rally down, tried to rally down, tried to rally down.
And I think this is a result of really being no reason at this particular time on this particular Thursday to actually rally any further. GDP
numbers, good, near meddling Trump-Kim Summit, earnings, and as the market itself, United Healthcare Group is the lowest, coke is the strongest.
And it's not often you see Coca-Cola leading the day. The rest, a bit of a mishmash for moot than it was a really quite small today. We will have our
profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. It is remarkable, the Dutch government spending several hundred million euros to buy a 14 percent stake
in an airline, because they don't trust the French government, which owns the other large 14 percent stake in the combined Air France, KLM.
This is an unhappy marriage at its very worst. You've got it. This marriage led airline consolidation in Europe back in 2004, but now when
you've got the Dutch literally saying, we don't trust the French, and the French saying, we're not sure what the Dutch are up to, you've got to ask
yourself how on earth this airline continues in some sort of harmony when the two sides, the two governments simply cannot or will not agree.
Amsterdam's Schiphol and Charles de Gaulle will be in trouble. And that is QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York. Whatever
you're up to in the hours ahead, I hope it's profitable! The Dow is down, the bell is ringing, the day is done.
(BELL RINGING)
END
