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Quest Means Business
Airlines Scramble For Cash By Trimming Jobs, Seeking Bailouts; Qantas Ultra-Long-Haul Project Sunrise Suspended; Trump Visits Arizona After Weeks Of Lockdown. Aired 3-4p ET
Aired May 05, 2020 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:05]
RICHARD QUEST, CNN BUSINESS ANCHOR, QUEST MEANS BUSINESS: Now to go on trading today, there's 60 minutes left and the markets are higher, quite
considerably higher today looking at the Dow Jones Industrials. The Dow is back above 24,000. A gain of one and a half percent. That's the market.
These are the reasons why.
Virgin Atlantic in the U.K. says it will lay off a third of its staff at the same time other airlines are asking staff to take unpaid leave.
Donald Trump though says, it's time to get back to work despite worrying new projections and he is on an away day out to Arizona, the first trip
since the crisis began.
And they have more COVID deaths than any two nations. Now, the U.S. and U.K. officially are beginning trade talks.
Live from New York. It is Tuesday. It is May the 5th. I'm Richard Quest and of course, I mean business.
Good evening. Tonight, we're going to focus on an industry that's perhaps been hit the hardest. It is, of course travel, airlines and aviation. And
if you look at the way the pandemic has hit things so far, the one thing we can say with any degree of certainty, travel will not be the same after as
it was before. Just look at some of the announcements we've had in the last few hours.
Around the world, there are dire warnings and dramatic action that is being taken -- Virgin Atlantic, laying off a third of the workforce, it's about
3,000 jobs and ending operations at London Gatwick where they've been for 35 years and were indeed, the airline began in the 1980s.
In the US, United Airlines is urging employees to quit. The layoffs are banned for six months because of the bailout rules. However, United is now
asking 11,000 workers to take 20 unpaid days.
And Norwegian Cruise Lines says it has substantial doubt, it told the market, substantial doubt about the future and warning that it could go out
of business.
Pete Muntean is our aviation correspondent he joins me from Washington. Let's deal with United and the airlines so far, Pete, if we look at this,
they've had a bailout money. They've had extra loans on top, but the real problem here is not now, it is that there is no foreseeable way that
aviation gets back to normal.
PETE MUNTEAN, CNN AVIATION CORRESPONDENT: Well, we know that September 30 is when that CARES Act money runs out. And United is already getting a
little bit of ire from saying early on, that this is what the airline may look like after that.
So, this is the week that we really get a snapshot into what airlines look like in a recovery as they've struggled to try and get back to normal. You
know, last night I obtained a trio of letters from United to its employees, all internal memos.
One to its pilots group saying there's a massive reorganization coming. Those pilot sources that I have tell me that this is foreshadowing
furloughs on the horizon.
Also to the 11,500 management and administrative employees. Those are like HR and public relations employees, those in the legal team. So, this will
be a massive shift in how the airline looks not too far from now.
QUEST: Is it likely, certainly possible, that the airlines have -- as the year goes on -- have to seek protection of Chapter 11 once again?
MUNTEAN: Well, we've already seen a little bit of that in the regional airline world here in the United States. We know that Compass Airlines went
out of business, accelerated its Chapter 11 bankruptcy and essentially, laying off all of its employees.
Airlines are already foreshadowing, this is just the beginning, you know, United trying to be proactive with these internal memos. I've spoken with
other airline sources who say that more announcements like this are coming out soon, likely sometime this week.
QUEST: So, if we look at the other industries and the other travel industry, because we're going to be talking obviously with the
international sector, Norwegian is saying it may not survive.
Other cruise ships, Carnival is saying that it's basically closed until August. There is no easy and obvious way that any of these travel industry
behemoths get back in business easily?
[15:05:07]
MUNTEAN: Well, we know peripherally, I mean a lot of it stems from the airlines. You know, if the cruise lines don't have flights going to them at
major ports of call like Miami or Baltimore, if those flights are shredded. The routes are trimmed back, it's harder for them to stay in business, too.
So, one has to think that this is related in part to the fact that the airline industry is struggling as well.
QUEST: Pete Muntean, first of course, welcome to CNN International.
MUNTEAN: Thanks.
QUEST: Newly joined us. It is very nice to have you with us. And we certainly look forward to having here with us on QUEST MEANS BUSINESS.
MUNTEAN: Thanks, Richard.
QUEST: Since airlines and aviation are one of the things we are most concerned and now turning into international airlines, Lufthansa says it is
hemorrhaging cash and desperately needs a rescue. So far, though, nothing has been forthcoming by the German government or indeed the Austrians or
the Brussels government or the Swiss government for them.
The CEO says, we need government support, not government management. That is a reference, of course, to the idea that if they get major loans, the
governments will request stakes in the company, or at least say on how they are actually managed.
All of this happened of course, at the Lufthansa virtual Annual General Meeting, the pictures of which you're seeing on the screens now. The AGM
was held by web interface.
Now, Fred Pleitgen has been given exclusive access in Frankfurt as Lufthansa tries to cope and has actually seen the planes on the ground.
(BEGIN VIDEOTAPE)
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): While most of Lufthansa passenger fleet stands idle at the company's hub in
Frankfurt, grounded due to the coronavirus pandemic, the cargo wing is still humming. This plane carrying medical gear among other things, getting
ready to depart for the U.S.
The pilots saying they constantly have to adapt to new rules for international travel in times of the pandemic.
(BEGIN VIDEO CLIP)
JENS PIOTTER, CAPTAIN, LUFTHANSA CARGO: We have longer duty periods so we have -- you need more pilots in the cockpit.
We are flying with four pilots, so for example, when flying to China.
(END VIDEO CLIP)
PLEITGEN (voice over): Lufthansa has even had to convert some passenger planes into cargo planes to meet demand. Those weren't hard to find as
Lufthansa Group says it's only flying about one percent of its usual passenger load.
Management saying Europe's largest airline group needs billions in bailout money from the German and other European governments.
PLEITGEN (on camera): The Lufthansa group says of the 760 planes that they own, about 700 are currently on the ground. Many of them don't look like
they're going to be taking off anytime soon.
Now Lufthansa says it needs government assistance to get through this crisis, but also to be competitive in the future.
PLEITGEN (voice over): European competitors like Air France KLM have already secured state assistance and the Trump administration says it will
prop up struggling U.S. carriers with billions of dollars.
Lufthansa says it believes the market for international air travel will remain volatile. And Lufthansa Cargo CEO tells me the company is currently
adapting to an ever changing business environment.
(BEGIN VIDEO CLIP)
PETER GERBER, CEO, LUFTHANSA CARGO: This is clearly a challenge because we have all this assets we have to plan. We need the pilots. We need the
traffic rights and all of that, so this needs of course, some days, but sometimes we have to adapt really in hours.
(END VIDEO CLIP)
PLEITGEN (voice over): For now, Lufthansa continues to bleed money as its planes standstill, with only the occasional one taking off what is normally
one of Europe's busiest airports.
Fred Pleitgen, CNN, Frankfurt, German.
(END VIDEOTAPE)
QUEST: It doesn't matter which continent we talk about, the new reality for aviation is very much here now. So, for example, Qantas in Australia,
which announced that it was putting into hibernation and hiatus for the time being Project Sunrise.
These were the two nonstop flights from Sydney to London or Sydney to New York. You'll remember late last year, what different days they were. I was
on the demonstration, although the research flights that they'd done for Project Sunrise, we flew from London, non-stop all the way to Australia.
But that was then. Now, there are new IATA recommendations. Face coverings for all passengers and crew and do not fill the empty seats. They do not
support -- I beg your pardon -- IATA does not support in keeping the middle seat empty for the simple reason that if you do that the airline can't make
money.
Brian Kelly is the founder of The Points Guy. He joins me now from New York. So, you've heard over the course of the program, Brian, the litany of
problems, issues. We now need to know what we think the future of aviation will look like. Say for example, after the summer and into the autumn.
What's your best guess?
[15:10:11]
BRIAN KELLY, FOUNDER AND CEO, THE POINTS GUY: Well, I mean, it's certainly going to be trimmed down dramatically, you know, so much still hinges on
getting testing out there, and whatever -- you know, I tested positive for the antibodies, but what exactly does that mean? Can I travel? Can I still
transmit the disease?
So, no matter what way we look though, it's going to be a much smaller industry.
QUEST: So, let's go through this methodically. Who is like -- are you expecting that some won't survive, for instance? Are you expecting some
airlines will go under?
We've seen small ones. We've seen regionals, but we haven't seen one of the truly big majors basically go out.
KELLY: Yes, I mean, Virgin Atlantic is in a precarious spot right now as you discussed. I mean, Norwegian was hanging on by a thread before this
happened.
So, you know, the issue, you know, they got some funding in the short term, but, you know, without a long-term recovery, and the biggest issue is
business travelers.
There's just not going to be conventions in business travel, at least not in 2020, and as we all know, that's the bread and butter of the airlines.
So, I actually foresee crisis coming back.
QUEST: You're saying about cruises, and we will come there in a second. But the Norwegian one is interesting because Norwegian has put the airline
into hibernation until late next year, where do you stand on the middle seat? Fill it or not fill it? Keep it empty or let passenger sit in it?
KELLY: I think you know, over time, keep it -- let passengers sit in it. You know, families who want to save money should be able to sit next to
each other. I don't believe that consumers should be forced to pay for that because that's who will pay for these seats as consumers and I do believe
in the health of the airline industry and being able to make a profit is a good thing for global GDP.
So, you know, in the short term where there's not full planes anyway, absolutely, you know, block it. But long term, I don't believe consumers
should be forced to pay for that if they want to sit next to someone or if they have the antibody and they don't care, they shouldn't have to pay
extra.
QUEST: Brian, I was reading a recent article you were saying about all the travels and trips that you've taken, and how this is -- and I think I can
say the same for myself. This is the longest period for at least 20 years that I haven't actually flown somewhere within six or seven weeks and had
done some travel.
But you were saying how this is going to make you appreciate your travels more in the future.
KELLY: Absolutely. I think a lot of jet setters before this, you know, one or two days in a city, go, go, go, constant jetlag and it is kind of nice
to reset.
And I do think there have been so many places that I want to go like Machu Picchu that I just, you know, take for granted and oh I'll do it next year.
But I think now I'm thinking that when I get back to the skies, I want to go to those unique places.
The only problem is now, the U.S. passport may not be as valuable as it used to be considering a lot of countries may not let a foreign citizens
in, so there's still a lot to be seen there because we may not even be able to go even if flights are going.
QUEST: Brian, we will talk more about this. It's a subject we follow very closely here on QUEST MEANS BUSINESS. Thank you.
Now, when we come back, as we continue, the stock market is rising and it does so at the same time as more companies are warning about the prospect
of going bankrupt.
And key models are projecting more deaths. This all raises issues of why the market is rallying. We'll talk about it after the break. It is QUEST
MEANS BUSINESS and you are most welcome.
(COMMERCIAL BREAK)
[15:16:21]
QUEST: Welcome back. Stock market is higher, considerably higher today as more states reopen in the United States and they go deeper and ever greater
into that. So, we are seeing a bullish session on Wall Street, over 24,000.
Over in Arizona and over, you know, the President of United States is doing his first visit within the U.S. since the crisis happened. We're waiting
for Donald Trump to exit from Air Force One.
There's all sorts -- I mean, he's already said he doesn't like the idea of wearing a mask. But there's going to be lots of discussion over the course
of the day over -- he is probably not going to wear a mask, but do other people who are meeting him wear a mask? Who does get to meet him does
social distancing? You get the idea. We'll watch that accordingly as the day goes. This is one of the first trips outside the White House since the
lockdown.
As we continue, the White House is continuing to wind down the Taskforce, so it says, later this month. It is going to announce. According to White
House officials, medical experts will continue advising the President, but it won't be on the same size or scale that it has been so far.
Now there are those who say that that would be a mistake because despite the new -- this is despite the new projections -- internal Trump
administration numbers are suggesting 3,000 deaths a day by June.
Another model says, 134,000 deaths by August and that's twice as many as the same projection a month ago.
Donald Trump has cast doubt on that.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: That's a report with no mitigation. So, based on no mitigation, but we're doing a lot of
mitigation. We have to get our country open. We have to open our country. So, you have all reports. Look, models have been very inaccurate.
(END VIDEO CLIP)
QUEST: All right, Donald Trump there now. Think about this, 42 states are planning to reopen in some shape or form over the next week, even though
the cases are trending upwards in many of those states.
So most of the country will be open. But many of those states still have rising numbers.
Jim Yong Kim is the former President of the World Bank. It doesn't really quite tell the whole story because he is also one of the world's leading
experts in public health, as we discovered during the Ebola crisis, and so he is a true global experts on this at the moment.
Now, you have a five-point plan to defeat COVID in a reopened environment. Before we get to that, Jim, let's just, first of all -- the models that we
are seeing and the increase in the number of deaths, is this because the models are now taking account of reopening, and potentially less social
distancing?
JIM YONG KIM, FORMER PRESIDENT OF THE WORLD BANK: Yes, this is what I've heard, Richard. I haven't spoken with the people who are now adjusting
these models. But you know, we've learned so much from China, from New Zealand, from Australia, from Spain and Italy. We know a lot about how this
virus behaves.
You know, I was born in Korea and I called the Korea C.D.C., the Centers for Disease Control of Korea relatively early on, probably seven weeks ago,
to get an understanding of what this virus is doing.
And at this point, it's really quite predictable in the sense that it's not changing. It's not going away with warm weather. And unless we get after
the virus, aggressively chase the virus, we're only going to get so far.
I think what we've learned is that even with very strict social distancing measures, you can only get to a flattening of the curve. You can't make
that curve go down as they have in places where they've had essentially the five-step strategy.
[15:20:13]
KIM: I didn't invent it, Richard. This is just the most tried and true strategy that we use with every kind of epidemic-pandemic outbreak. This is
what we've always done.
For some reason, this time, we were slow. We didn't get out of the gate quickly enough, especially in the United States. And we gave up. We sort of
said, well, there's so many cases, we can't do this.
But what we now understand is that unless we have systems where we're testing much more broadly, where we're tracing the contacts and we're
isolating and quarantining, we can't get out of a lockdown.
We're talking about not only getting the curve go to go down, but finding a path out of a lockdown.
QUEST: Well, just pausing there. We are watching pictures of President Trump who came down the stairs of Air Force One. You can't see those
pictures. He went jokingly to shake somebody's hand. I'm not sure whether it was a joke or not. But they didn't shake hands.
There doesn't seem to be a lot of social distancing going on. To be absolutely fair, a lot of elbow bumping going on. People are standing
easily within six feet of each other.
And while we watch these pictures, while we watch these pictures, Jim, your five-point plan is social distancing, testing. The President says that's
too much. He doesn't believe in as much testing, as you say, tracing the contacts, isolating them and treatment.
But the U.S. is miles away, miles away from doing most of those things in any meaningful way. Would you agree?
KIM: Yes, right now we're quite far away from doing that. But about five weeks ago, I was desperately looking around for a state that might start
this.
And so I call a lot of different Governor's offices, and finally, an old friend of mine, Charlie Baker, Governor of Massachusetts, listened to me
and in a time when no one was talking about contact tracing.
You know, Richard, you hear a lot about contract tracing now. But five weeks ago, just about everyone was saying, no, it's too late for that.
There are too many cases for that.
So, we were able to talk with Governor Baker and he said, okay, let's do it. And the way I told it to him was one, you know, we have not seen those
flattened curves go downward, unless we apply these other measures, and moreover, if you want to have any hope of getting out of the lockdown, you
have to have something that replaces the lockdown.
And so the testing, contact tracing, isolation and quarantine, if you do it effectively, and jump on any new case that you that you find can actually
be a nice replacement for the effect of these major lockdowns.
You know, everyone is getting tired of the lock down. It's very difficult to do it for a long period of time. But now, if we put these other pieces
in place, we can actually stop the virus.
QUEST: Jim, let's talk more about this in the future, Jim. I'm very grateful. I'm going to need your help to understand exactly --
KIM: I just want to say one more thing, the big problem, Richard is we're using bazookas on fiscal and monetary policy. You've heard -- we've talked
about this in so many different settings. Why is it that we have bazookas for fiscal and monetary policy, and the public health community is forced
to fight with squirt guns?
We are not investing enough and it makes no sense, because the fiscal -- the economic problem is the result of the public health problem. We need to
invest in the public health response, and there's not a single country other than the Asian countries, Australia, New Zealand, the ones who have
gotten it under control, who are investing enough.
This is the most important message. We've got to invest and we've got to invest right now.
QUEST: Good to talk to you, Jim. We will talk about that, I promise you as this moves into the next phase of the reopening. Thank you, sir.
Now, a substantial majority of people around the world want their governments to prioritize saving lives over restarting economies.
This is the conclusion of the latest trust barometer, of course, that comes from the Edelman report. Sixty seven percent say public health should be
the government's top priority. Public trust in corporations is waning, too.
They believe that business is putting profits before people and 40 percent say companies aren't protecting employees.
Richard Edelman is with me, Chief Executive of Edelman. He joins me from New York. Richard, very good to talk to you. Let me jump straight on to
this because this is the exact opposite of what we normally find where you have told me at Davos every year that people have more faith in their CEOs
and their companies than they do in their governments. So it's changed majorly.
[15:25:05]
RICHARD EDELMAN, CHIEF EXECUTIVE, EDELMAN: This is a huge change in the trust landscape, Richard. It's like World War II. It's a global pandemic.
It's also an economic crisis. And people are scared and they're going to Big Mama government.
And the trust levels that are given to government are stunning, 75 percent say it's okay to be locked down, 65 percent say it's okay, you have my data
from my cell phone about where I am. That's real change.
And also government leaders are now more trusted than CEOs. We've never seen that before. So, in fact, this pandemic has really changed attitudes.
QUEST: What is perhaps worrying is this perception that CEOs don't care, that corporations don't care. And it's -- I would say, especially worrying,
Richard, because they've spent so much time and money on feel good commercials telling us how much they care.
EDELMAN: So, here's the story. We need CEOs now to be public leaders, not just communicate through ads, or through product donations, that's good for
a first phase.
Now, that we have a moment in which the world seems to be opening up again, that we're going to go back to business to the new normal, CEOs have to
describe a future that's actually going to be safe.
So the Starbucks restaurant with, you know, very few people sitting in it, and PPE for the employees and, you know, six-foot distancing for the
customers. This is the new normal, that's going to be for any restaurant.
And similarly, you know, airlines are going to have to decide about putting masks on the people who fly the planes, because that makes everybody feel
safe.
QUEST: Richard, you know, you come to this from both sides. You run your own company as well obviously, but how realistic is all of this in the
sense of the reopening of the economy, which is another moment of trust for people to look at companies.
But at the same time, we were talking earlier, the idea that the middle seat remains empty is uneconomic for an airline that can't make money if
they do that.
EDELMAN: So, we're going to have to reconsider our business models. And we're going to have to look at it very carefully in the wake of COVID.
This is the moment of reckoning for business. And we have to show that in fact, we can make money and keep people safe. This is not just about
somehow a short term problem, this is a long term reconsideration that is keeping the promise of stakeholder capitalism that the big businesses made
last August with Jamie Dimon and Alex Gorsky of J&J.
They signed -- 189 companies, so now they have to do it, and we have to help them do it by communicating what they see in the future. We can't just
surprise people.
We have to tell them what they're going to see. We're going to have to show them that it's been checked by health experts, and then we're going to have
to deliver.
QUEST: From what you know, so far, are we prepared for an autumn and into next spring that -- and continues to require a level of social distancing,
the likes of which we've never seen before, from your research and from what you've seen about the public's acceptance of this?
EDELMAN: So, I think people are getting tired of being cooped up. That's sure. Last weekend in New York, you know, people were out in Central Park,
sunning themselves on the Great Lawn.
But we're going to have to condition ourselves to a gradual return to a new normal, because otherwise we're going to have outbreaks.
So, everyone is going to have to be about we, not me. And I believe in the people and I believe that companies need to show the way forward, that it
can't just be government and governments are also going to run out of money at some point.
We can't just keep doing PPP programs. We actually have to get back to business. And business is going to have to figure this out.
I'm going to have to figure it out for my own employees, maybe run A and B shifts. Make sure that people wear masks around the office.
We have got to find a way also go to travel to see clients because that's what we do.
QUEST: Richard, I promise you, I think this is the first time I've had the privilege of talking to you during this crisis so far. So, please make a
promise that you'll come back again, as we go into this next very difficult stage of the reopening. Richard Edelman, joining me there.
Now, several Spanish islands are reopening, the Balearic Islands, particularly, they are lacking tourists and there's no likelihood of
tourism in any meaningful sense.
In a moment, our correspondent Scott McLean is there. You'll hear from him. This is QUEST MEANS BUSINESS. It is a good day on the market, which
continues to be happy and be gay, everybody in the way this continues, in a moment.
(COMMERCIAL BREAK)
[15:30:18]
QUEST, CNN INTERNATIONAL HOST: Lacking choice and there's no likelihood of tourism in any meaningful sense. In a moment, our correspondent Scott
McLean is there. You'll hear from him. This is QUEST MEANS BUSINESS. It is a good day on the market, which continues to predominantly (INAUDIBLE)
everybody in the way this continues, in a moment.
(COMMERCIAL BREAK)
QUEST: Hello. I'm Richard Quest. There's a lot more QUEST MEANS BUSINESS for us tonight. We're going to be talking to the U.K. trade commissioner in
the United States, as the U.K. and U.S. begin trade talks for a free trade agreement. You might wonder if everybody's got enough on their plate, but
they decided to add that to theirs too. And it's just been announced Airbnb is laying off a quarter of its workforce. And we'll talk about that and
understand why.
Well, we're going to need to know why, would it just be it's the wares and the workforce and what this all means. And of course, that of course, isn't
the same day that we are talking about aviation in such detail. And all of it comes up in a moment. Glad to have you with us even in these difficult
times. This is CNN. And on this network, the news always comes first.
The Coronavirus has now killed more people in the United Kingdom and anywhere else in Europe. Britain's official death tolls reach more than
29,400. That's the fastest account in Italy and a second only to the United States. Critics are accusing the U.K. government of reacting too slowly to
the pandemic.
A German drug company BioNTech says it could have several million doses of an experimental virus vaccine by the end of the year. They've partnered
with the U.S. brand Pfizer, in anticipation of wide distribution. The potential vaccine has only just begun human trials in the United States.
And the official once in charge of developing a vaccine for the U.S. has filed an official whistleblower complaint. Dr. Wright -- Bright says his
early warnings on the dangers of Coronavirus were ignored. He says his caution about the treatment praised by President Trump led to his
reassignment.
[15:35:20]
The Airbnb has just announced that it is to lay off 19 or 25 percent of its workforce. That's 1,900 staff roughly, going to leave the company. Clare
Sebastian is here. OK. Now, let's understand this, they're laying off, they're not furloughing or maybe -- I'm getting somewhere. So, this isn't
just another case of trying to do a PPP which, of course, they wouldn't necessarily be eligible for other forms of lending, but they're actually
laying off.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: They are laying off, Richard. This is -- you said 1,900 people, about 25 percent of their 7-1/2 thousand
employees. It's happening right away. The company is saying that notifications in the form of calendar meetings will go out to staff in the
U.S. and Canada within hours. And their last day will be this coming Monday, May 11th.
So, it is happening quickly. It's happening around the world. They employ people in 24 different countries, it's happening across their -- all their
different teams within the company. The reason as you say, it's not unexpected given what we see in the travel industry, but they say that
their revenue will now be less than half of what was expected this year.
And there are, of course, key uncertainties going forward. Brian Chesky, the CEO, laid them out in a letter to staff. He says quite clearly, we
don't know when travel will return and when it does, it's going to look different. So, Airbnb is refocusing, he says, on the core of the business
that the short term rental markets, the holiday let's -- it's cutting investment in areas like transportation and Airbnb studios.
And it's dramatically scaling back in hotels in lax or any other side projects that the company had basically either going or being dramatically
scaled back. He says, going forward, they will just refocus on what they started out to do.
QUEST: Is there any suggestion that company's in danger of going under?
SEBASTIAN: So, I mean, I think 25 percent is a lot, Richard, but it's given that their revenue has been cut in half this year, is perhaps not as bad as
it -- as it might have been. And they are -- they have been able to raise money. He says they've raised about $2 billion in financing. They are
cutting costs aggressively. So, certainly in the note from the CEO, there was no suggestion of not being able to continue going forward. But I think,
like we just don't know as he said, you know, when travel is going to return.
This is a company that's heavily, of course, dependent on that. Plus, they're caught in the middle in terms of states not wanting short term
less, not wanting people flocking to popular areas, so there is a lot of uncertainty, but he says that they will continue with the staff that they
have left.
QUEST: Before you go, forgive me. I'm just going to (INAUDIBLE) but you are our retailing expert. J.Crew announcing chapter 11 rumors of Hertz, which
is, of course just got its financing, still issues of Neiman Marcus, whether they will go into chapter 11. Is it your feeling -- you've studied
this and you've looked at the retailing for years now, is it your feeling that we are at the beginning of the dam breaking, and many major retailers
will end up going for chapter 11?
SEBASTIAN: Yes, Richard. Sadly, I think that is the way things are going. What we're seeing is not -- these are not just COVID-19 related problems
for these companies. What you didn't want was to be going into this crisis on the back foot. And there were a lot of these legacy retailers that were
struggling because of changing consumer tastes because of the shift to online. And frankly, because of the burdens of debt that many of them
already had.
So, we're seeing an acceleration of the downturn that they were already in and frankly, you know, when the governors of various states closed
nonessential businesses, what they sort of unwittingly did, Richard, was hand to the likes of Amazon and Walmart, another giant leap forward, when
it comes to market shares. So, that really did sort of put the nail in the coffin of some of these legacy retailers, particularly the department
stores.
QUEST: So true, Clare, when you think about what the things that the shopping that one's done over this crisis, the supermarket across the
street and Amazon, it basically comes down to that. Thank you. Clare Sebastian, joining me from New York. In just a moment, the U.S. and the
U.K. are starting virtual trade talks. Well, I mean, they aren't real trade talk, but they were done by virtually, you get the idea.
Afterwards, the UK trade commissioner after the break will be with me. And I think the core question we need to understand is why, what they hope to
achieve, particularly at a time on such crisis, in a moment. It's QUEST MEANS BUSINESS. You're very welcome.
(COMMERCIAL BREAK)
[15:40:00]
(COMMERCIAL BREAK)
QUEST: The United Kingdom and United States have formally opened trade talks today, hoping to at some point, conclude a free trade agreement. It's
a two-week session that began and it began by videoconference, both sides have expressed and professed a wish to move quickly, hoping to get it done
by the time of the end of the transition period, for when the U.K. of course, no longer enjoys the benefits of E.U. membership.
Possible hiccups will be agriculture, autos, finance, pharmaceuticals and the NHS. Antony Phillipson is the U.K. Trade Commissioner for North
America. He has always kind of joins us to talk about these issues. He joins me now from New York by Skype. And Antony, the first cause? Why? Why
have these tragic -- I know they have to take place at some point, but is now the time to divert precious attention, when there are so many other
really more life and death pressing issues to deal with?
ANTONY PHILLIPSON, U.K. TRADE COMMISSIONER, NORTH AMERICA (via Skype): Well, thanks very much, Richard for having me on. It's a shame not to be
able to see you in person. I think there has never been a more important time to do this. As you and I have discussed, this has been a long-term
ambition in the U.K. and the U.S. governments.
We've been preparing for a long time, including before the crisis. But actually, I think it's now really, really important that we get on and see
if we can continue to deepen and strengthen this absolutely vital economic relationship that we have with each other. We can then take that into the
global context and work with others, to keep supply chains open, to keep trade flowing, to create, you know, part of the economic recovery that is
going to be so important for both our countries. So, I think there's never been a more important time to do this.
QUEST: So, so the logistics of this will be video conference. And it's highly unlikely that you will be in a position to have the negotiators in
the same room at the same time, anytime soon. Realistically, how much progress can be made?
PHILLIPSON: I think we can make lots of progress, sir. You're absolutely right. This is not going to be a normal trade negotiation, as those who are
steeped in these things have done. But actually, you know, business has been talking to each other virtually and remotely for a long time. I took
part this morning, after Ambassador Lighthizer and the International Trade Secretary Liz Truss had launched the negotiations, the two chief
negotiators convenes their full negotiating teams in a virtual plenary session.
So, we are often running that will now break down into the chapter groupings and the chapter sessions. We are going to pursue all of those
chapter sessions alongside each other, but we won't see how far we can get and we are absolutely committed to getting as far and as fast as we can.
QUEST: Is the NHS off the table, discussions about allowing access and procurement?
PHILLIPSON: Our position on that is very, very clear. It is off the table.
[15:45:07]
We will not be addressing issues around access to the health system or indeed pharmaceutical drug pricing.
QUEST: Right. Can I just turn to the only question of Brexit, if I may, I saw obviously as you were going across the recent meetings and discussions
with Michel Barnier and co, but it raises the issue, hasn't British business got enough to worry about with uncertainty and everything that's
going on, without the added pressure of the potential for the U.K. to crash out of the transitional period and no longer have the benefits of it.
Wouldn't the sensible thing, Antony, be, to simply say where it will happen, but we'll put it off for a year until businesses have -- can
concentrate on it.
PHILLIPSON: I think what business needs is two things, a new certainty and renewed opportunity. And I think we have been very, very clear. And my
colleagues in London, including ministers, of course, have made very, very clear that the important thing to do on the E.U. track, we have left the
E.U., we left the E.U. at the end of January this year. We now need to complete the process and leaves the transition period and give business
certainty about what that future looks like.
Again, in the broader context of the economic crisis, we're all going through, that certainty has never been more important. And then secondly,
we need to give them opportunity. So, we need to find new markets for them to invest in new markets to trade in, new products and variety and better
prices for U.K. consumers. And that's what this is all about.
QUEST: But I'm not questioning the sort of the philosophy in the biggest term, I'm questioning the practicality. Every day, companies are laying off
thousands of workers. Many of those jobs won't come back, many of those orders won't come back. Is it right as you go into a reopening later in the
year, to load them up with more initial uncertainty by the end of the year?
PHILLIPSON: We're aiming to do and we're absolutely confident we can do and this is also shared ambition about E.U. partners, is to give them
certainty, is to give them clarity about what the future of that relationship looks like. As I said, we left the E.U. on the 31st of
January. We now need to make clear what that future trading relationship is.
But at the same time, as deepening and strengthening our partnership not only with U.S. but with others who we want to deepen these links with
around the world.
QUEST: Antony, always good to have you. And please, let's talk more. And don't worry, I'm not going to invite you to give a running commentary on
the trade talks. Trade talk could be very slow and you wouldn't anyway, but you get the point. It will be nice to have you back to talk about it as
things go on and understand where we are. Thank you, sir.
PHILLIPSON: I'd be delighted. Thank you.
QUEST: Thank you. Now, the shipping industry is facing one of its major challenges and I don't just mean because of Coronavirus, new rules and
regulations require much less fuel to be used in an environmental effort to try and cut emissions, but it's going to have long term implications. John
Defterios now reports for this week's global energy challenge.
(BEGIN VIDEOTAPE)
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: In our day to day lives, the shipping industry is a vital sector, accounting for about 80
percent of global trade by volume. More than 50,000 ships crisscross the globe, bringing us the goods we need to survive. But the fuel these giants
of the seas burn has made it one of the largest polluters in the world.
CO2 emissions from shipping have accounted for nearly three percent of global greenhouse emissions, about the equivalent of Germany. Now, the
shipping industry is being forced to burn cleaner fuels.
Since the start of the year, new regulations from the U.N. agency that oversees the shipping sector have come into force. The International
Maritime Organization rules prohibit ships from using fuels containing more than 0.5 percent sulfur. Prior to this, sulfur rates were capped seven
times higher, and some areas have even stricter limits. The new fuel is more expensive, but compliance according to the IMO has been solid.
ROEL HOENDERS, ACTING HEAD OF AIR POLLUTION AND ENERGY EFFICIENCY, IMONTERNATIONAL MARITIME ORGANIZATION: Fines for noncompliance to the eye
in certain areas. Other sanctions can be the detainment of a ship for a certain period, so it will lose a lot of its income. And of course,
reputation is an issue that is increasingly important for many ship owners.
DEFTERIOS: The new fuel will improve air quality and reduce acid rain. And there should be huge health benefits too.
HOENDERS: Sulfur particles can induce strokes and eventually also lung cancer and by reducing by over 75 percent, these sulfur emissions from
shipping, we have seen studies that pointed out reduction of premature deaths in the (INAUDIBLE) immediately after the introduction of the
requirement by over half a million premature deaths.
[15:50:12]
DEFTERIOS: The industry has had to adapt quickly to the new fuel standards. Today, Fujairah Port in the United Arab Emirates is one of the largest
producers of low sulfur fuel in the world.
CHRIS WOOD, MANAGING DIRECTOR, UNIPER ENERGY DMCC: Improve safety in industry over many decades. The time is now to do the same thing in the
energy mix. And I see now is that the evolution coming where particularly in the marine industry, we're going to see that come in a lot more. And
that makes us very exciting.
DEFTERIOS: An industry adapting fast to a new reality and developing a roadmap for a zero carbon fuel in the near future. John Defterios, CNN.
(END VIDEOTAPE)
(COMMERCIAL BREAK)
QUEST: And now, to our "VOICE OF THE CRISIS" tonight, we've heard from many restaurants over the course of the crisis. We've got a pretty good idea of
what they do with this restaurant, of course, has been relying on delivery services. Nobody has been sacked or laid off yet. And now, of course, this
question for the future. It's in Mexico City. It's a barbecue restaurant, and it's made drastic changes.
Let's look at it. Sales are down by some 70-odd percent on this. It's lost all its events and revenue business. And it's only online delivery.
Everyone took a 50 percent pay cut, but no one lost their job. Dan DeFossey is the co-founder and CEO of Pinche Gringo. He joins me now. Dan, firstly,
I take my hat off, if I was wearing it, I'd take it off. You haven't laid anybody off. You haven't had to lose any members of staff. But I'm guessing
that has come at a great personal cost to you, your family, and your partners.
DAN DEFOSSEY, CEO AND CO-FOUNDER, PINCHE GRINGO RESTAURANT (via Skype): Yes, not really, because when you have a restaurant of the size that we
have, we have 85 employees, we are very personally connected to our employees. And if we have to make a decision to close and they lose their
jobs, then we know that they are going to suffer with their families when they don't have any income.
So, this is an incredible decision that we've made to continue to stay open and find other revenue streams to ensure that we have enough money to
continue the operation.
QUEST: So, let's talk about those other revenue streams, obviously takeout and delivery. But what else have you been doing to bring in badly needed
cash?
DEFOSSEY: Well, we had been able to add new products to our portfolio that are more for customers that are eating frequently, and we've opened up dark
kitchens in different parts of the city where we are producing our food.
[15:55:13]
And our main site that we smoke our meat for 14 hours, only with wood and we take that meat, bring it to our kitchens, and then they assemble them
there to ensure that we have incredible coverage in different parts of the city. We're also taking our performances and the things that we do inside
the store and we're putting it online in a campaign called stay at Pinche home, so our customers can be able to see all of this content, online.
And our team is really focused in making sure that delivery systems are awesome. We have our own proprietary system, as well as other third-party
dining services that have been helping us as well.
QUEST: I mean, you will reopen, that wasn't a question. You will reopen and you will get back in business. And I wonder, give me an idea, are you
already planning the social distancing way in which Pinche Gringo can reopen, and you can still make money?
DEFOSSEY: Well, the good news about Mexico is that we're about two to three weeks behind the rest of the many parts of the world, in terms of what's
going on. And so, we know that we're going to learn a lot from other businesses and other parts of the world that had reopened with these
certain measures. So, we're paying really close attention, watching what they're doing, and then we're going to incorporate what they do into our
business.
QUEST: Dan, time for my promise. I don't think I'm going to get to Mexico City anytime soon, but we'll find some way to find out what you're doing
later in the year and make sure that we keep tracks so we know how you're doing. Thank you, sir. I really appreciate you taking time.
DEFOSSEY: No problem.
QUEST: When --
DEFOSSEY: Thanks for having me on.
QUEST: -- we come back -- thank you. The profitable moment returns. We're going to have a "PROFITABLE MOMENT" after the break.
(COMMERCIAL BREAK)
Tonight's "PROFITABLE MOMENT," we've talked a lot tonight about the way in which the airline industry, the travel industry, will never be the same.
And you've heard us -- you've heard about how Airbnb is laying off 25 percent of its workforce. The layoffs will continue, by the way. They're
not going to be like other companies were furloughed staff will be taken on in large numbers. The airlines will be shutting staff. Every single airline
in CEO in the world has made it clear that the airline will be smaller in the future.
And that's why it was interesting to hear Brian Kelly earlier say when he does restart traveling to make the most of it. This is the longest period
in some 30 years that I haven't traveled somewhere on a plane to do something for work or pleasure. And yes, I'm feeling it. And you are
probably too if you are regular travelers. But we both know that we'll soon be back on planes or traveling or whatever. But it will be different. And
it'll make us grateful for the old days and have gratitude for that which we've now got.
We'll be back. I promise you that. And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours
ahead, I hope it's profitable. The closing bell is back. Slightly sorrier than normal, but it is back.
END
