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Quest Means Business
Trump Says It's Too Early to Know About North Korean Missile Site Activity; Former Nissan Chair Carlos Ghosn Released from Jail; Strike Disrupts Flights at Kenya's Jomo Kenyatta Airport; KLM CEO: Not Worried About Future of Air France Partnership; EasyJet CEO Reflects on Flight Disruption; EU Describes Difficult Brexit Negotiations; U.S. Stocks on Track to Close Out Session Lower. Aired 3-4p ET
Aired March 06, 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, besides that spot of green that you saw at the
beginning of the day, otherwise, it has been a down day. Well, the course of the session, the Dow off over 420 points, it does seem to have found
some sort of stability, but this is what's been moving the markets today.
There, of course, Brexit talks, the last ditch effort seems to have been unsuccessful here in Brussels. The talks between the British and the E.U.
were finished and no sign of that elusive agreement on a legal guarantee.
The U.S. trade deficit, the worst in years as President Trump has been saying much better the situation is. We'll understand exactly what's going
on.
And a warning from Eurocontrol that air delays this summer will be amongst the worse. Certainly, worse than last year. We will talk about air delays
with Europe's top airline chief executives. I'm Richard Quest live in Brussels where, of course, tonight, we certainly mean business.
Hello, a warm welcome on a cold evening from Brussels. The reason we are in Brussels is twofold. First of all, it is just a couple of 20 odd days
or so before we go to the end of Brexit or the deadline for Brexit is on March the 29th, and airlines for Europe have been meeting. All the major
CEOs have been in Brussels and we have been talking to them throughout the course of the day. Brexit is one of the issues they have been looking at.
The other, of course is air delays.
First, though to Brexit, where the latest talks between the British legal advisers and the European authorities seem to have failed. There has been
no agreement on how to deal with the Irish backstop, and, of course, all this happens comes just a week before Theresa May is due to put her deal
before Westminster probably for the final time.
The Commission was not optimistic at the end of the talks.
(BEGIN VIDEO CLIP)
MARGARITIS SCHINAS, E.U. COMMISSION SPOKESMAN: Michel Barnier, our chief negotiator was present and informed the commissioners that while the talks
take place in a constructive atmosphere, discussions have been difficult. No solution has been identified at this point that is consistent with the
withdrawal agreement including the protocol in Ireland and Northern Ireland, which as you all know will not with reopened.
(END VIDEO CLIP)
QUEST: All right, here we go. Let's talk about this. Joining me Mairead McGuinness, the Irish MEP and Vice President of the Parliament. And, the
situation has become more than serious now, which is at that point where last-minute efforts seem to be failing.
MAIREAD MCGUINNESS, IRISH MEP: Well, I think you have difficult as the word. I think it's more than difficult and I think the reason is there is
a big void between what the U.K. is looking for and what the European Union can give.
We spent months negotiating withdrawal agreement and the British Prime Minister actually signed off on it, but can't get it through the House of
Commons. So I think all of us are speculating and wondering what will happen next week? We have another meaningful vote. There is speculation
that that might not work. The next day, there will be a vote on should there be a no-deal? And we hope that doesn't work.
QUEST: So there is a vote that no deal -- that there should be a no deal.
MCGUINNESS: No-deal. Yes.
QUEST: Then the next vote on delay becomes crucial?
MCGUINNESS: It does. But I'm not so sure that it will solve the problem. It will perhaps delay us finding a solution and there are complications,
because when I talked to member states, there is a little frustration about the delay. There is European Parliament elections.
On the other hand, we want an agreement with the United Kingdom, we want an orderly withdrawal.
QUEST: So why the move? So the program that you are now is --
MCGUINNESS: Well, I think it's not so easy to move because we have commitments and the Irish issue is front and center on this. We have
commitments made under the Good Friday Agreement. The British Prime Minister is very honorable. She wants to honor those commitments. We do,
Europe does, and the withdrawal agreement does that.
So we are in a very difficult position in trying to, if you like, it gives the U.K. an element of assurance is that we are not trying to trap the U.K.
in Europe. We are trying to facilitate --
[15:05:05]
QUEST: No, are you right, but what is said now in two years' time when there is a failure or you know, a free trade agreement is looking unlikely,
once again, this issue is going to come around.
MCGUINNESS: But hold on, don't be so pessimistic.
QUEST: Well, why not? With respect, why not because there is lots and lots of reasons.
MCGUINNESS: Well, let me give you a little bit of hope. I know it's cold and it's raining. Let me give you some hope. If we get a withdrawal
agreement through, there will be such a positive atmosphere. We want a good relationship, trading and otherwise with the United Kingdom.
Look the U.K. is not floating off into the abyss. It is going to be a part of the European story, just have a different relationship.
QUEST: So let's look at exactly the way forward as seen from Brussels.
MCGUINNESS: Uh-huh.
QUEST: There doesn't seem to be any willingness here to give the legally - - the legal guarantee that the Prime Minister needs to get through Westminster.
MCGUINNESS: Well, I think it's more tricky than that. It needs perhaps to satisfy the demands of hard Brexiteers. But on the other hand, the Labour
Party has a different reason to vote against this deal and she is not addressing that.
So I think when you say what Brussels could give, remember that we are dealing with 27 member states. They have signed off on this. They worked
very hard with Michel Barnier to get this across the line, and when I talk to colleagues in the U.K. who take a different view, I try and persuade
them to, why do you mistrust us? We would for you to stay, but we know you are leaving. We want a good divorce, not a nasty one. We want you to come
back and visit us rather than have this tension at the moment, which is really unhelpful.
QUEST: So assuming she gets it through next week. There is a possibility. That will come along. Where is your optimism? You just chastised me.
MCGUINNESS: No, I am saying, I will be optimistic when we get it done. I didn't say what date we get it all done.
QUEST: All right, a bit of optimism from both of us, we get along well in this weather. Will Parliament then pass it immediately?
MCGUINNESS: Well, I mean, we are working on it. Tomorrow in our committee, we are dealing with this issue. We are ready, willing and able.
QUEST: What is your gut feeling about all of this?
MCGUINNESS: Sometimes my gut lets me down. But my hope, because the gut feeling has gone numb, because it's so difficult, and I understand the
difficulties from the U.K. side, but I understand our issues. It is unthinkable that the U.K., our friend and partner cannot agree with us on a
withdrawal treaty. It is unthinkable, let's hope it doesn't happen. Thank you.
QUEST: Good to see you. Good to see you. We'll talk again.
MCGUINNESS: We will, I am sure.
QUEST: Thank you for coming on a cold night.
MCGUINNESS: It's wonderful. Great company.
QUEST: Thank you. All right. Now, the other big story in the financial world today has been the trade deficit of the United States. If you look
at the number, it has been fairly unnerving. It is the worst in 10 years and it's even more astounding because, of course, President Trump has been
saying he is going to improve the deficit. He is going to lower it. In fact, a lot of the latest trade rouse with China, with Europe, have all
been about ways to lower the deficit. And it's gone up. Alison Kosik is with me to explain exactly why.
ALISON KOSIK, CORRESPONDENT, CNN: Yes, it's simple math, Richard. Falling tax revenue, higher spending when the U.S. government already had big
deficits. That is essentially in a simplistic way, what is the way for the budget deficit ballooning 77% in fiscal 2019 to $310 billion. So this
means that the tax rate paid by corporations, which was lowered to 21% from 35%, spending increased to 9%. You look at that spending portion, most of
it was on defense and Medicare.
Here's the thing, Richard, next week, guess what? The White House is expected to propose a new budget plan for the fiscal year that begins in
October. Democrats are working on their own spending plans, but there is really just little effort to reconcile the differences or to address the
growing budget deficit.
The ballooning deficit comes as interest rates are expected to begin rising, which could drive up the cost of borrowing money and everybody
wants to kick this issue down the road because it is more theoretical than in their face realistic, I should say.
QUEST: Okay, but Alison, if you look at the deficit, there are many governments who have sort of said, only about company -- about CEO blames
the deficit for their problems. And at what point is it reasonable for the President to start to see that number coming down?
Because eventually, the imports will become more expensive, particularly the dollar shifts its direction?
KOSIK: Well, I mean, exactly. But you use an interesting word, reasonable. You know, the reality is the White House and Congress, they've
got to reach an agreement on spending, on a new spending package by the end of September or else there could be another government shutdown.
Then you've got the debt ceiling. There has to be an agreement on raising the debt ceiling or the government will no longer be able to borrow money.
[15:10:07]
KOSIK: The problem is lawmakers haven't begun debating that. I'm talking the raising the debt and you look at the national debt, the U.S. debt, it's
$22 trillion. Reasonable? It's hard to see where that word even fits in to this equation.
QUEST: Alison Kosik in New York. Thank you. Back here in Brussels, Dan Dalton is with me. You are the Conservative Party whip here in Brussels.
Good to see you.
DAN DALTON, CONSERVATIVE PARTY WHIP IN BRUSSELS: Good evening.
QUEST: Thank you for taking time. It's a cold night. On this trade issue, because this is one of the areas that you look at. If you look at
E.U.-U.S. trade, and the real prospect of -- I mean the TTP, the Pacific -- the transatlantic trade agreement, of course, never happened. Now there
has been preliminary talks, which were unsuccessful in the last couple of weeks. What happens with the E.U.-U.S. and automobiles?
DALTON: Well, I think -- well, I'm hoping first of all that the U.S. don't impose tariffs on European cars based on national security concerns. I
mean, that's the issue.
QUEST: That's the steel and aluminum.
DALTON: Yes, but if the U.S. is really saying that cars coming from the E.U. are a national security threat to the U.S. when the E.U. are close
security partners with the U.S., I mean that is not the approach that we want to see from the Americans.
QUEST: Yes, but the reality is that the tariffs that were going to be imposed have been suspended or at least pending the talks from Jean Claude
Juncker's last visit to Washington, that is now about to expire. The President is sitting on the reports that says whether he should impose them
or not, and if he does, what are you going to do?
DALTON: Well, I think, I mean I was in Washington last week. The impression I got was that these tariffs were the start of trying to create
a trade negotiation based on tariffs. In the end, I think we might see a trade deal between the U.S. and E.U. based on tariffs, and this is probably
the opening salvo for the Americans to try and the Europeans to the table.
Ultimately, a tariff deal is probably all we can really expect in the trade deal at this stage.
QUEST: Right, but then of course, the last time he comes along with a no tariff agreement on anything and with the Europeans are the ones to say not
so fast.
DALTON: I think there is hope from Europe that there will be a tariff agreement. The question is not necessarily tariffs. It's standards.
That's where the real problem comes.
QUEST: Let's look at Brexit, if we may for a moment. Is it likely that you are going to have to stand for re-election in European elections
because a delay of Brexit means that U.K. has to take part in the elections?
DALTON: Well, I think it's unlikely. I think if there is a delay it will start, if it is just a three-month delay until June and we can avoid
European elections if the U.K. leaves in June because the new Parliament doesn't sit until July.
QUEST: No, but the elections are in May.
DALTON: Yes, but the MEPs do not take their seats until July, so we have a period.
QUEST: Yes, but you couldn't be a member and not have a vote?
DALTON: No, the MEPs don't sit until July, so you have the election in May.
QUEST: Right, right.
DALTON: In the six weeks, we will now have a vote until the new MEPs come in July.
QUEST: Right, so you are saying that the U.K. wouldn't have to go through a futile vote?
DALTON: If we left from June, no.
QUEST: Right, now in that case, how realistic is it that Brussels is going to give an extension or would agree to an extension of Article 50?
DALTON: I think it's very likely. If the U.K. asks, everyone I've talked to here in Brussels suggests that the E.U. will agree to an extension until
June. Because it is relatively easy to give an extension until June. The problem comes after June as you've mentioned with the European elections
and what happens if we go beyond then.
QUEST: I asked the previous guest what her gut feeling was, what's yours?
DALTON: I think in the end, we'll get a deal. But the deal won't be until June in my opinion.
QUEST: Really?
DALTON: Yes.
QUEST: So you think that -- so the Prime Minister you think will lose next Tuesday, obviously the vote of no deal will win, but there will have to be
a vote for an extension next Wednesday?
DALTON: Yes, at the moment we've got the negotiations going on here. If they're not successful and I think it is going to be difficult, then
probably the U.K. will have to extend, I think in that period, we will be able to get to the table and get an agreement.
QUEST: Good to see you, sir. Thank you as well for coming out on a very cold night.
DALTON: No problem.
QUEST: As we continue from Brussels, the situation for air travelers. Holiday makers this summer in Europe are in for a truly miserable time.
Those aren't my words. Those are the words of the head of Control. There will be delays. It's not a question of if, but when. It is "Quest Means
Business" live tonight from Brussels.
(COMMERCIAL BREAK)
[15:15:00]
QUEST: Welcome back to Brussels. We know the world's economies are slowing down. Numbers showing just how badly and forecasts of how bad it's
going to get from the OECD. Slowdown is particularly acute here in Europe. Export dependent countries like Germany are going to be growth projections
as you can see are low. The greatest to be negative in Italy. That's not a surprise.
And the OEC is warning of rising policy uncertainty, particularly, of course, because of Brexit.
Seb Dance is with me. The Labour MEP for London. Good to see you, sir.
SEB DANCE, LABOUR MEP FOR LONDON Good to see you.
QUEST: Before we get into these OECD forecasts, I mean, you and the other MEP who will be out of a job unless you have to stand for re-election in an
election in May with a meaningless election because of the U.K.'s leaving. What's your feeling?
DANCE: Well, it wouldn't be meaningless if we have the election because I suspect if we have the election, we will be staying for far longer than a
few months.
I mean, yes, the elections will be in May. If we have an extension until June, we don't need to have an election because we are still a party
member, but if we are still a member in July, then I think we would need a catch up election because there is no provision by which a member state
could not send MEPs to the European parliament and I don't know what we can't solve in three months that we haven't managed to solve in two years.
QUEST: So what do you think happens next in the sense that the talks are clearly going very badly? The deadline for the Prime Minister is next week
in the House and then you've got to whether to have a no deal, and then you've got whether or not to delay. But the Europeans here as you know are
saying why have an extension when we haven't managed to do it in two years?
DANCE: Well, there needs to be a purpose for the extension, and I think there is a very clear purpose to be had if you have a referendum where you
put the end result to the people. So you basically say, we have a deal or we have a different iteration of Brexit if Parliament so wants, put that to
the people and say is this what you want?
QUEST: So this is the Jeremy Corbyn, new Labour policy that after several years of saying no to no second referendum, you suddenly decided?
DANCE: Some of us have been saying yes. For quite a while.
QUEST: Well, you had to, but you had to agree, your party, has sent a vote fast on the question of a second vote.
DANCE: I think that policy has always been there, certainly since the Labour Party's conference in September, but many of us have been moving and
moving and maybe dragging, let's face it.
QUEST: But you can't have --
DANCE: But we got there.
QUEST: But you'd agree, you can't have a simple rerun of the last referendum?
DANCE: Yes, absolutely. Absolutely.
QUEST: You can't simply ask people?
DANCE: You're completely right.
QUEST: Do you want to leave or do you want to stay.
DANCE: Absolutely.
QUEST: Do you agree?
DANCE: Yes, completely. This is not about a rerun. So the lead proposition in 2016 was all things to everyone. It wasn't defined. This
would be a defined deliverable leave option.
QUEST: So what do you do if you have no agreement because the withdrawal agreement fails in Parliament? You get an extension.
[15:20:09]
QUEST: But you haven't a question to put to the referendum. Then what do you do?
DANCE: Well, that's a very likely outcome, isn't it?
QUEST: So what do you do?
DANCE: What you have to have, for example, if May wants her deal to go through, then that would be the question on the ballot paper. If
Parliament decides it wants a sort of Norway option with a Customs Union based approach or whatever, put that on the ballot.
QUEST: And when you heard me ask the others what their gut feelings were, what is your gut feeling?
DANCE: My gut feeling is that the Prime Minister will lose again next week. My gut feeling is that she will try and pretend that that doesn't
mean anything and I would implore everybody on all sides political shades, this cannot have legs. It's not sustainable if it's been defeated by two
Parliamentary votes. It has to go to the people.
QUEST: So you say.
DANCE: Thank you very much.
QUEST: Good to see you. Thank you. Thank you very much indeed. Now, we have been getting some views of politicians, what about business leaders.
Today I spent the day with Europe's top airline CEOs. Carsten Spohr is the Chief Executive of Lufthansa, and he is extremely concerned about Brexit.
Not for Lufthansa, which, of course, the company is well and truly sorted out. You can see there all the various subsidiaries of Lufthansa. They're
all sorted out in eventuality for Lufthansa.
But Lufthansa is Europe's largest airline by group number. A hundred and forty two million passengers last year and Carsten Spohr made it clear he
is ready or at least the company is for Brexit.
(BEGIN VIDEO TAPE)
CARSTEN SPOHR, CEO, LUFTHANSA: In the interest of our passengers, we have prepared for every imaginable scenario. I am not that worried about Brexit
as the CEO of Lufthansa, but as a European, I am very worried that something of that nature can happen in the heart of Europe that worries me
a lot more than how we are dealing with it as an airline.
QUEST: So as a European is it incumbent upon both sides to find a way to get through this and let's assume no Brexit for the purpose of the
question. You get into this two-year transition period. There is a future free trade agreement?
SPOHR: I would always assume that in the end when it comes back to aviation, this will be probably the zero sum game. I don't see necessarily
a strong impact on the way people are mobile in Europe. It will be terrible. I mean, imagine Europe has come such a long way in the last
seven years, imagine we will restrict mobility, which is the biggest driver of Europeans, feeling Europeans, I don't think any politician would bear
that responsibility.
QUEST: I was listening to the comments this morning on the air traffic delays. The only thing that amazes me is you all are more angry. I mean
20% to 30% of your flights sometimes are delayed by more than 20 minutes.
SPOHR: You should have interviewed me last summer when my passengers were suffering in the ten thousands every day. Maybe I would have shown the a
right angriness then, and probably, I am just a few weeks away from getting angry again, unfortunately, which makes me more angry. It's just amazing
that a few dozen people in two centers, Cadspour (ph) and Massey (ph) in the end have such an impact on millions of people.
QUEST: Have you made -- well, I think I know the answer to this, have you made your views known to the German government?
SPOHR: If you ask them, I am convinced we did and it's not finger pointing, though. The question, how can we you know end up with
infrastructure, which is capable to cope with the growth, which we create on the demand side? And by the way, I also believe as long as the
infrastructure isn't coping with the growth, we have to talk about restrictions. We just can't allow more movements per airspace as we cannot
allow more movement per airport. We have restricted that many, many years and it's probably time to do that in airspace as well while we are
improving of course the air space infrastructure, which is the solution.
QUEST: On the question of taxes, the industry would prefer less taxes, obviously, and doing more in terms of new renewable fuels, green flying and
the like. But governments again don't seem to be listening to aviation. The taxes are going on.
SPOHR: I think on taxes, the issue is twofold. On the one hand, we don't believe that taxes are the most efficient way to make this industry more
environmental friendly, more innovative, more technology driven because the money goes in the wrong direction.
But may be more important, this is a global industry. If you did anything on taxes without impairing individual players in the industry, you need to
have a global solution, which by the way you manage to find on CO2, CORSIA through IATA. So if there is anything like a global tax system, you might
want to argue it could basically just reduce demand, but at least not disadvantage individual players, that's nowhere in sight and it's important
we don't disadvantage your key aviation more than we already have.
(END VIDEO TAPE)
[15:25:00]
QUEST: Casper Spohr, the CEO of Luftansa and you heard him talking about flight delays. Well, things are about to get a great deal worse.
According to the head of Eurocontrol, which is the organization that meshes together the continent's different air traffic control structures.
Eamonn Brennan says that the traffic control systems are pushed to crisis point. We saw some of that last year. Now, it's going to get a great deal
worse, and it is estimated it's costing the E.U. economy almost $20 billion a year. So, what have we got to look forward to as there are problems in
Germany, and problems in France and Eamon Brennan was less than optimistic.
(BEGIN VIDEO TAPE)
EAMONN BRENNAN, DIRECTOR GENERAL, EUROCONTROL: Europe handles 37,000 flights every single day and we have got a number of black spots for air
traffic control capacity in Europe. First of all, we have two black spots, one in Germany, where we have got a capacity staffing issue, and in France,
then we have an issue with strikes. These are causing delays that are essential bottlenecks in the system. What we are trying to do is to come
up with a system that actually goes around these areas.
QUEST: Right. If, though, even if those bottlenecks didn't exist, the system would still I'd say groaning capacity. I mean, it wouldn't, it's
still full.
BRENNAN: Yes, I mean, the reality which it is growing by 3% per year and we've had compounded growth of nearly 20% over the last seven or eight
years. And yet there hasn't been really significant investment in new air traffic systems and there is a real need for reform of the way Europe is
managed from an air traffic point of view.
You have got to see more of a kind of a centralized function to manage air traffic control. That's missing from Europe because of the fragmented
nature of the states.
QUEST: Right and of course, that's all of these bedeviling issues, isn't it?
BRENNAN: Yes.
QUEST: The nation states don't want to or are reluctant to hand more control to the center, which would be to Eurocontrol?
BRENNAN: Yes, I mean, that's a reality of Europe. But the real business reality is aircraft fly across borders and you have to have a network. So
in the United States, you got a very strong central system of the command center which regulates traffic and capacity. We need the same in Europe.
QUEST: Why haven't we got it do you think?
BRENNAN: Well, we haven't got it for a number of reasons. First of all, demand, the system hasn't filled up until recently. Now we have a crisis.
That's number one. Number two, have you the nation states. They don't want to give up the sovereignty issue. And I think number three is that
it's not a crisis.
But this summer we have a crisis. Delays last year doubled in 2018. They are going to increase again this year and you will find that the air
traffic system in Europe will become full. You will you not be able to have any more flights. You will you have a capacity problem and we're
looking at passengers not being able to fly.
QUEST: How does -- explain to me, how does merely transferring more control to a central division increase capacity? If all the nation states
are doing their best and report as much in as they can, then what difference does it make?
BRENNAN: It's really simple, Richard. They don't have the system view. In Eurocontrol, we see the whole system, 41 states, we see where traffic
comes in, where it goes out. The best way it should go.
When you are looking at it from an individual country, you just look at France. How do you the traffic in and out of France? Air traffic control
organizations do a super job, keep the traffic safe. But our job is to make sure that the overall network in Eurocontrol brings the whole thing
together and this is the issue. Nobody is joining up the dots.
QUEST: Nobody is joining up the dots. Nobody has joined up the dots. What makes you think that a new commission will join at the dots?
BRENNAN: Well, first of all, the current commission has launched a wise person's group and I expect that you know, the initiatives from the
commission -- the commissioners are very helpful. But I think what will happen is SES3, a Single European Sky Three package will come for the new
commission and if you are looking at the airlines today and at the commission, they are all planning this.
So I am optimistic. I think the commission will do a good job in the years ahead.
QUEST: What is your message to the travelers this summer?
BRENNAN: My message for the travelers this summer, is there is going to be more misery. We are going to have increased delays. I mean, to give you
an idea, 33% of flights had a delay last summer and the average delay was 49 minutes, it's going to be worse this summer and I think 2020 is going to
be difficult. We should see an improvement after that.
(END VIDEO TAPE)
QUEST: More misery for airline passengers. As for KLM Air France, it looks like there is much more misery to come with the new arrangement
between the Dutch and the French government and yet after the break, the KLM Chief Executive says, no, he thinks everyone is going to get on just
fine. After the break.
(COMMERCIAL BREAK)
[15:30:00] RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, welcome back to Brussels. Twenty three days before the U.K. is due to leave the
European Union. We'll be talking more about that and what it means and what the view is from here at the European Center in Brussels.
But first, this is CNN and on this network, the news and the facts always come first. President Trump says it is too early to know if North Korea
has begun rebuilding a missile engine testing site. New satellite images appear to show construction activity at the site. Donald Trump says it
will be disappointing if North Korea is again ramping up its missile program.
Carlos Ghosn, the former head of Nissan and Renault left a Tokyo jail after three months in detention. He was seen wearing a blue cap and a face mask
as he left prison. Ghosn is accused of financials misconduct, he denies any wrongdoing. He is out on a $9 million bail.
Aviation workers are on strike in Nairobi have disrupted flights at Jomo Kenyatta International Airport. Hundreds of passengers were left stranded,
waiting for flights to be rescheduled. The union leader says he and nine other people have been arrested. They say they were protesting against
poor working conditions and corruption.
So last week, the airline industry was taken by storm when the Dutch government invested 14 -- took a 14 percent stake in Air France-KLM,
supposedly to counter-balance the weight of the French government which has a 14 percent stake in the airline too.
Today, the CEO of KLM said he is not worried by this. Pieter Elbers told me it's time to move forward for the airline after the stake. Pieter
Elbers says he's not worried and I asked him then, why the Dutch government took the stake in the first place?
[15:35:00] What did they hope to gain by taking a stake to equal the French?
(BEGIN VIDEO CLIP)
PIETER ELBERS, CHIEF EXECUTIVE OFFICER, KLM: Well, I'm not -- I'm not a spokesperson for the Dutch government obviously. But in this statement,
the Dutch government has released in the press conference which the Dutch Finance Minister has given. They put a lot of emphasis on the enormous
importance of people as it happened, the role of KLM and the links to the economy of the country.
QUEST: Obviously, something leads up to the government doing it?
ELBERS: Sure.
QUEST: It doesn't happen in isolation. You don't wake up one morning and say, I'm going to invest $700 million euros in an airline.
ELBERS: Usually not, no.
QUEST: Right. So have you felt that there has been -- KLM has been at a disadvantage in the Air France-KLM relationship?
ELBERS: Well, the Air France-KLM group was built in 2004, and if you look at what has happened since 2004, KLM has been able as part of the Air
France-KLM group really to move forward. We were a 6 billion company, revenue company back in 2004.
We are an 11 billion company today. We have been able to expand our network, have fantastic partnerships. So really the -- going together with
Air France has brought KLM a lot and we've been able to sort of grow and strive going forward. But it's also fair to say that in the last few
years, we had a few of our internal challenges and internal debates, probably like in every marriage, we had our fair share of discussions.
QUEST: And now we're left with a really interesting situation.
ELBERS: Well, again, I think what is important now that we look at the business. We look at how to move forward. As we learned again this
morning, we still have a lot of challenges in European aviation -- in European aviation field and with all the governance stuff finished now and
hopefully a bit more clarity on that, we can move forward focusing on our business.
QUEST: Do you envisage difficult times running KLM as a result of this new investment?
ELBERS: No, I think we have a very clear strategy how to move forward with KLM. We have been doing that for the last couple of years. Again, within
the context of the Air France-KLM group. We've done it with good results. Our results have gone up, our passenger appreciation have gone up, and
there would be absolutely no need for the Dutch government on the contrary, I should say, to sort of have a negative impact on this.
QUEST: Let's talk now about the industry. We heard this morning some pretty damming statistics about delays. Taxes, ineffective taxation. The
airline -- I mean, European airlines are strong, but you are facing some serious headwinds.
ELBERS: Yes, I think the numbers this morning were really serious when it comes to -- when it comes to air traffic delays. And if you see a quarter
or more than a quarter of all the flights having delays because of air traffic control and average delays going up and up and up and up.
And that in combination with some of the ineffective legislation around EU 261, all kinds of passenger claims, makes it a very tough spot to be in
right now.
(END VIDEO CLIP)
QUEST: Pieter Elbers of Air France-KLM or the KLM side of it. Now, it's not surprising though Michael O'Leary; the chief executive of Ryanair has
wasted no time in taking advantage of the situation, complaining officially about Air France-KLM and the Dutch government stake and promising the
passengers in the Netherlands cheaper prices.
(BEGIN VIDEO CLIP)
MICHAEL O'LEARY, CHIEF EXECUTIVE OFFICER, RYANAIR: I think it's fantastic. I mean it opens up all sorts of untold opportunities for mischief.
Firstly, what have the French got to do? I suspect the French will now increase their stakes to 25 percent, and so you're going to have this kind
of he said-she said as the French and the Dutch governments spend ludicrous amounts of money, re-nationalizing airlines that they originally sold off
because they were plainly last making and badly rogue(ph), but they were state owned.
The other more interesting opportunity it opens up is in Holland. Where the Dutch government have for many years protected KLM, restricted Schiphol
where there is no need for restrictions, postponed the delay, the opening of Lelystad which is the second airport for Amsterdam.
They obviously had to do this on the basis -- well, it's not state aid because we don't own KLM-Air France. Now they own KLM-Air France, these
now become state aid decisions, and the restriction of competition, the protection of KLM now become woozy to the state aid sphere which I think
opens up enormous and exciting opportunities for Ryanair, for EasyJet, airlines that want to compete with KLM in Amsterdam --
QUEST: Are you --
O'LEARY: To take -- go after the Dutch government for under the state aid rules.
QUEST: I was going to say, are you about to become a troublemaker on this? Are you going to be --
O'LEARY: No --
QUEST: Instructing your --
O'LEARY: Absolutely not.
QUEST: Yes, you are.
O'LEARY: No, we've --
QUEST: I think you do --
O'LEARY: We've never been a joke maker. In Ryanair, we want to help, we want to help the Dutch government, we want to help Dutch consumers, we want
the freedom from the onerous air fares they are forced to pay at KLM by creating more competition. I mean --
[15:40:00] QUEST: Are you going to raise a complaint?
O'LEARY: Absolutely. I think we're going -- most of the complaints now that is in under the state-aid rules because now we have the Dutch
government is now no longer just the Dutch government. It's the Dutch government and a shareholder in KLM-Air France.
QUEST: Ryanair, for Ryanair and you ready for Brexit?
O'LEARY: Yes, although, I don't think Brexit is going to happen. They're going to vote for Mrs. May there before the end of the year which will --
but I know Brexit in name only, and they will kick the can down the road for another 21 months and will be back here again at the end of 2020, which
will keep journalists like you fully occupied and criss-crossing the Atlantic to update everybody on what's not happening in the U.K. economy.
QUEST: It will keep you busy, too?
O'LEARY: Well, not really because we're a U.K. air -- we're an EU airline -- yes, we're the EU -- we're the EU airline --
QUEST: Which one are you?
O'LEARY: EU --
QUEST: Today?
O'LEARY: We're good Irish --
QUEST: You're both --
O'LEARY: We're good Europeans. Well, we've set up a U.K. AOC, but that's the only to operate the three U.K. domestic groups that we would want to
operate post-Brexit. I don't think we'll need it, we will see as it continues to grow strongly across Europe because thankfully we are an EU
airline, not a U.K. airline.
QUEST: For Ryanair, what do you determine, what do you think where you need to innovate or you can look to innovate?
O'LEARY: I think where it goes, I mean, you look at the innovation of the future, the larger good, next -- the revolutionary innovation in the future
is going to be moving away from two pilot cockpits to single-pilot cockpits, and then ultimately not in my lifetime, drones will be flying
airplanes rather than humans.
QUEST: Terrifying --
O'LEARY: There's one for innovation.
QUEST: Terrifying.
O'LEARY: Safer.
QUEST: That remains to be seen.
(END VIDEO CLIP)
QUEST: Drones flying airplanes with passengers on board? It won't happen in his lifetime and I will suspect it won't happen in mine. Well, since
I'm pretty much the same age as Michael O'Leary, that makes sense.
As we continue tonight from Brussels, the CEO of EasyJet, now EasyJet flies more than 19 million passengers every year, and Johan Lundgren will be
telling me it's very simple. His airline is one of the worst, percentage- wise, hit by delays anywhere in Europe, and he wants something done about it, he's angry -- after the break.
(COMMERCIAL BREAK)
[15:45:00] QUEST: The worrying position on delays for airlines is what's really being focused and the attention from the airlines for Europe here in
Brussels. The fact that they're having enormous delays and paying huge amounts of money through EU 261 care and compensation is what's angering
the CEOs.
The new Chief Executive of EasyJet -- there's another one who is expecting a difficult and expensive Summer. And he, too, isn't happy.
(BEGIN VIDEO CLIP)
QUEST: Just about 30 percent of your flights are delayed by up to -- you and Ryanair have the two highest numbers of delays as a result of ATC. Why
aren't you angry?
JOHAN LUNDGREN, CHIEF EXECUTIVE OFFICER, EASYJET: We are very upset. First of all, I will say that look, we run a very efficient model.
QUEST: Right.
LUNDGREN: And we are always looking after our customers in terms of their welfare and the compensation. Our on-time performance is actually
improving quite a lot, we're investing a lot in it as well. But you know, we are very upset. We are very frustrated about this, because the majority
of these delays and the cancellations that takes place that effects us is something that is caused by the mismanagement of the airspace.
Now, because we look after the customer and we do the compensation, therefore, there is the perception from customers as you would expect that
this is something that is the airline's fault. Well, the majority of the cases shows that it's not.
QUEST: What can you do about it? I mean, people don't get angry with the cab when they're delayed on the motorway because of road works. They get
angry with the -- you know, the local authority or the government or whatever. But the airline industry has been really rather good at managing
to take the blame for all of this.
LUNDGREN: No, I would -- you know what? I wouldn't agree with you, I mean, in the fact that, you know, it's time now that we actually start talking
about the actions that needs to take place and the political willingness has to be transferred into action.
Look, there's a lot of things in life that has a lot of complexity to it. This doesn't. This is about us actually getting more mandate to, for
instance, euro-control to organize the airspace. It's about getting enough people, air track controllers into the places where we see there are
problems. Australia has an example, it's about giving proper notification when people go on strike.
QUEST: Bob Crandall; the former CEO of American Airlines who famously said, we all fly the same metal tubes, it's what you do inside them that
makes the difference, and that is true. Everybody -- and you see as with the Rotterdams(ph). They're all flying the same metal tubes. So how's --
LUNDGREN: There are some other materials in there this day, but I --
QUEST: Right, but that's the point. That's --
LUNDGREN: Yes --
QUEST: The points of my question. How are you going to go alter -- how do you foresee what the future inside your metal tube will look like?
LUNDGREN: Price is hugely important for us. That's why we are, you know, we are fortunate in the fact that you know, we have started with an
efficient model to start off with. We've had high load factors, we do quick turnaround in there, and the efficiencies around that result in very
attractive fares in what we are doing.
Now, what we don't want to do and have done and will continue to invest in is to make sure that the whole of the customer experience gets better.
That it's actually a difference to fly with us compared to what it is flying with our airlines --
QUEST: Do you think that, that customer experience in the past got left behind, but maybe with the concept of low cost air travel?
LUNDGREN: Well, not in the composite of low -cost air travel. I think that, you know, there's been a huge, you know, demand --
QUEST: Yes --
LUNDGREN: For low-cost air travel, and we would certainly position ourselves also because we have a lower cost base than a number of our
competitors that gets them, you know, resulted in this price.
But what we also do not talk about, we know that, for instance, our crew, our people, they are a -- you know, play a big part in how people choose
to fly with us versus other airlines in the way we are engaging with people beforehand through our app as an example on our website.
And we're doing a lot of investments now into data as an example to make sure that we can, you know, work and become even better in how we engage.
(END VIDEO CLIP)
QUEST: The CEO of EasyJet on the future of travel. When we come back after the break, Ryan of "Politico" is with me, good to see you, sir --
RYAN HEATH, POLITICAL EDITOR, POLITICO: Good to see you --
QUEST: We need to analyze exactly what happens between now and March of 29th. And --
HEATH: We go around in circles --
QUEST: In circles --
HEATH: That's what happens.
QUEST: But what happens when and if do they lose the flagpole behind us as the U.K. leaves. We'll talk about it after the break, it is QUEST MEANS
BUSINESS, we're in Brussels.
[15:50:00] (COMMERCIAL BREAK)
QUEST: We now need to pull the strings together of exactly what is happening. Ryan Heath is with me, the political editor of "Politico" here
in Brussels. Good to see you, sir.
HEATH: Good to see you.
QUEST: OK, so the talks are at an impasse, difficult is how they're been described. What do you think happens next?
HEATH: Well, difficult means that they haven't been going very well. So what you are going to see is Theresa May turn up here on the weekend, the
EU is going to explain again for the 100th time that not much can be done on the backstop.
But they'll offer some kind of document which outlines that they will meet a certain series of tests around how they're going to make sure this
backstop isn't permanent. She's going to try and sell that back to the commons, she might fail, but if she runs it down to the last minute, she
might scare them into voting for the deal.
QUEST: How do people now view Brexit in this building?
HEATH: I think they're sick of it, frankly, they know that it's going to be a hit no matter what happens, so they're concerned with planning their
future and keeping the EU system together than in the details of the impact of Brexit.
So they're prepared for a no-deal Brexit, they're not worried too much if it's going to cause impacts on the economy, because they've done better
preparations than the U.K. has, and they brace for the impact. They've built it in, they've priced it in.
QUEST: And on the question -- this is very sobering to hear you sir, talk about this. But on the question of a delay or extending article 50, if
there's no reason to do it, why do it?
HEATH: Well, partly courtesy, partly you get pressure from across the road, Donald Tusk and other figures, you want to seem reasonable, so you
might allow the can down the road a little bit.
QUEST: So where is the power here? Is it with the council across the street --
HEATH: It's the council.
QUEST: So it's really up to the council on this one?
HEATH: Yes, absolutely.
QUEST: And to that extent, from your information in the council, is Donald Tusk more willing at this very late stage to be a amenable?
HEATH: I think he is, but the power is not necessarily with him. The power is with Angela Merkel, with Emmanuel Macron, with the leaders in
national capitals, and they're less than amenable. Donald Tusk is the good guy if you're the U.K. in this situation.
QUEST: If it gets -- I mean, we are at 23 days, so we are there. There's no saying last minute. If there's a delay, what happens? Do they just
continue negotiating?
[15:55:00] HEATH: Yes, but then there'll be real world impacts. You've got European parliament elections in May, if it's more than a six-week
technical delay, the Brits are going to have to go and vote, and that's an absurdity. Leaders like Sebastian Cooks in Austria, they recognize that,
that's absurd.
You would have people who voted to leave the union, determining the future of the union and then maybe they'll pack up and leave a month later.
QUEST: All right, as we -- minute left, give me an assessment at this late hour of how bad or good or optimistic or pessimistic we should be?
HEATH: I think you should assume that there are high chances of a no-deal Brexit.
QUEST: Still?
HEATH: Still, they've been increasing --
QUEST: Even though the -- even though the U.K. says it's prepared, parliament seems to be prepared to vote for a no deal?
HEATH: We've heard that many times before, though. I don't believe it until I see votes and hands in the air in the House of Commons.
QUEST: And you're saying it's optimism, pessimism?
HEATH: I'm not that optimistic to be honest with you. But I have been watching this go around in circles for two and a half years now. So I am
waiting for the result rather than making too many predictions.
QUEST: Good to see you, sir, thank you for coming out --
HEATH: Good to see you --
QUEST: On a cold night tonight --
HEATH: My pleasure --
QUEST: I appreciate it, thank you. We will take our profitable moment, before we do, a quick look at the markets in the last few seconds of
trading. If you take a look, it's been down all throughout the session, there's a spot of green at the beginning. But for the rest of the day,
we're off 111, so the market seems to have found the bit which it likes just a second or two before the closing bell. We have our profitable
moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. That the airlines for Europe conference today, it really was extremely sobering to hear the report of
how bad the airline delays are going to be this Summer. And there are some very simple solutions to this, opening up different airspace, changing
things around and getting more staff, things that could be done quickly, easily and without any difficulty.
But they're not going to be done, and there's going to be some awful delays, because seemingly, government airlines and regulators can't get
their act together. So we'll watch closely and we'll watch carefully. But ultimately, it's going to be very difficult traveling around the
continent this Summer.
If you're flying on holiday, take a good book and a comfy cushion with you. And that is QUEST MEANS BUSINESS for tonight, I am Richard Quest reporting
from Brussels, Brexit is only weeks away. Whatever you're up to in the hours ahead, I hope it's profitable.
(BELL RINGING)
The bell is ringing, the day is done.
END
