Return to Transcripts main page

Quest Means Business

U.S. Companies Post Devastating Losses In Q2 Earnings; Gov. Newsom Shuts Down California Again; Interview With Austin, Texas Mayor, Steve Adler (D); U.K. Bans Huawei From 5G Network; China To Sanction Lockheed Martin Over Taiwan Sales; Health Crisis Reshapes The Restaurant Industry; Pakistan Asks For International Help After Pilot License Scandal. Aired 3- 4p ET

Aired July 14, 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 INTERNATIONAL ANCHOR: Just under 60 minutes of trading left on Wall Street on the Tuesday session. An hour to go. A volatile

session.

But in looking at the numbers, you will see how basically the market has been on something of a tear. There are good gains across, 1.5 percent

having had a slow start, picked up momentum during the course of the day. That's the way the markets are looking and the reasons why -- an earnings

season, we are starting to get the first numbers. It seems to suggest a rocky start and a tougher time, but the market is shrugging that off.

The U.K. government does an about turn on Huawei. It's banning the company from its 5G network.

And Joe Biden is telling President Trump, opening up everything wasn't help the U.S. economy.

Live from London on Tuesday, it is the 14th of July. Middle of July already. Where did the year go? I'm Richard Quest, and I mean business.

Good evening. We've had a lot of economic numbers. Now, we are starting to get the first real numbers on how companies have been affected by the

pandemic.

So far, it's been anecdotal. Now, we are getting the numbers of what it means for the earnings. And it is really a scene of devastation, especially

in retail, and of course airlines.

Delta Airlines brought us results this morning for their second quarter. The airline lost $2.8 billion. The worst performance since 2007. And Delta

is now scaling back plans to restart flights.

Boeing, 60 canceled plane orders. It is the worse since May. Only one new order in the whole of June.

And the banks, JPMorgan hurt by surging credit costs. JPMorgan is down 51 percent -- the profit is down 51 percent. Wells Fargo actually lost money,

$2.5 billion, which is the worst since the great financial crisis.

Ed Bastian, the CEO of Delta Airlines, said the recovery will take years. And when it's over, the industry will be smaller.

(BEGIN VIDEO CLIP)

ED BASTIAN, CEO, DELTA AIRLINES: I think it is going to take us two to three years as an industry to find that new level of normal. We're flying

at scale both for business, as well as for leisure on a global basis comes about, and I have said many times myself, not only is it going to take two

to three years, but this industry will be smaller when we get there, to that new level of normal.

(END VIDEO CLIP)

QUEST: CNN's Pete Muntean, our aviation correspondent is with me. Pete, one is not surprised the numbers, per se. What we are looking for is any

indication of recovery, any indication that things are getting better. Surely, there has to be disappointment with what Delta has said that they

are scaling back again.

PETE MUNTEAN, CNN AVIATION CORRESPONDENT: Well, what delta has said really shows how bad things are for the entire airline industry especially

considering the fact that Delta was one of the more well healed airlines going into the pandemic.

It has been able to cap middle seats since the entirety of this started back in March and airline traffic cratered back in April. Now, airlines are

seeing demand has really leveled off as coronavirus cases across the country started to rise.

So, they are seeing a much more turbulent recovery rather than a bit of a straight line recovery that they were hoping for.

QUEST: But with that in mind, they have had their grants from the U.S. Treasury, and now, many of them are getting loans from the U.S. Treasury.

Will this be sufficient in terms of capital raising to take them through this crisis?

MUNTEAN: Delta seems to think it will be sufficient and it will be able to last another 18 months or so. Other airlines are making a bit of a plea for

more cash.

We know that United last week said that it would send out furlough warnings to 36,000 employees, and really, the only thing left in the tool kit of

airlines is urging more employees to take early out and early retirement packages.

[15:05:23]

MUNTEAN: So it has to be a bit of a combination, they have told us. They need to raise extra capital. They need to raise more money. They might get

some of that from the Federal government, but they need to shed some of the expenses and that includes employees.

QUEST: And on the international front, Virgin, Virgin Atlantic, which is 49 percent owned by Delta today put in place its own capital raising not from

the British government, who refused. Delta is putting more money into Virgin. I guess, they have no choice.

MUNTEAN: Yes. You know, I mean, Delta has to really sort of diversify here and find new ways to make more revenue.

Really, primarily according to Ed Bastian, focusing on losing some of the expenses as it tries to find a path forward through this pandemic. So, it

is a tough lot for pretty much every airline, not only here domestically, but around the world as well.

QUEST: Pete, good to have you, sir. Thank you. We go from airlines to banks and Q2 numbers. They are down right rough. JPMorgan saw its profits down 51

percent. But at least JPMorgan made money, which is more than can be said for Wells Fargo.

On JPMorgan, it added nine billion to its reserves, as economic trajectory becomes more uncertain. That reserve will be used only against tier one

capital.

Wells Fargo reports a $2.5 billion loss. The stock is down more than five percent today. The bank is expected it would slash its dividend, the first

major bank to so do.

Clare Sebastian is in New York. Let's put Wells Fargo to one side because that has unique problems. JPMorgan, by far regarded as the best run of the

big sort of retail banks, still made money.

CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Richard, it's a tale of two things, really. It's Losses on Main Street and profits on Wall Street.

This, by the way, was a record quarter when it comes to revenue for JPMorgan driven by huge gains in investment banking and trading revenue

because there, the volatility and the increased volume that we have seen over the second quarter is a big boon to JPMorgan. They have a huge

investment banking arm.

But of course that was not enough to drag down the impact of those loan loss provisions. This is crucial. These loan loss provisions are a forward

looking indicator. The banks are looking forward and saying how much money from the loans that we have lent out are our customers actually going to be

able to pay back? And that's how they come up with these numbers.

I think you can look at these numbers compared to what set aside in the first quarter, just how much this has grown. You could see that their

assumptions about length and breadth of this recession have darkened.

QUEST: Right, but the share price that we are just seeing there shows that the market does believe well run will mean greater profits in the future.

Wells Fargo, as you alluded, a very different situation. How much is Wells Fargo's old problems of its banking issues weighing on the bank in the

pandemic?

SEBASTIAN: Well, customer remediation accruals as they put it, Richard, were a part of their losses in this quarter. It continues to weigh. It

continues to be an issue.

Plus the cap on loans that the Federal Reserve has imposed on Wells Fargo means that they can't grow their loan book like other banks can and

increase their profits. So, it continues to be an issue, but of course, they also -- they are a much more consumer-facing bank. They don't have the

sort of Wall Street exposure that the likes of JPMorgan and Goldman-Sachs do.

They are heavily exposed to the likes of commercial loans, real estate and things like that. So they have set aside a lot of money as well in loan

loss provisions. They are also hit by lower interest rates as well.

So, a sort of triple whammy for Wells Fargo, and that's why we see them heading into this first loss since 2008.

QUEST: Clare, I have asked you this question on several occasions in recent weeks. Repetition does not dull its significance. The market is up 400-odd

points, 1.5 percent. Yes, they had a wobble at the end.

I can only think of the word perverse to describe why a market should be doing so well, even with Fed accommodation.

SEBASTIAN: Yes, I think today, Richard, if you look across the three major markets in the U.S., you see a bit of a differentiation there. The Dow is

up significantly, the S&P 500 less so, and the NASDAQ even less so.

I think there is little bit perhaps of a rotation going on today given the start of earnings season. Results from JPMorgan and Caterpillar and the

like pushing up the Dow while people might be bringing some money out of those high growth tech stocks, which have led the rally so far.

Amazon for example, down a little bit today. So that might be playing into some of this, but as we saw yesterday, anything can happen in the last

hour.

[15:10:14]

QUEST: All right, last hour to which we are in. Clare, thank you.

Now looking at the recovery underway, it has been moving. The earning is giving us a glimpse of what it was like with the fall before the economies

started to reopen again, and the different types of recovery of which we are very familiar here on QUEST MEANS BUSINESS. We have talked about it

often enough.

You have the V-shaped -- the V-shaped recovery, I think to most intents and purposes, the V shape is now sort of receding. People don't necessarily

believe there will be a V shape.

Then you have got the W shape, which could come in a second wave. We are down and then we are back up again. And then of course, you have the Nike

swoosh recovery, a very hard fall, a gradual return.

If you have the reverse square root, then you have got a real problem. You've had a hard fall, some recovery, and then you basically plateau.

Rich Lesser is with me, the CEO of the Boston Consulting Group. Rich, it is very good to have you with us. Thank you. Let's get some sense, the easy

bit out of the way. From where you are sitting at the moment, what does the recovery look like in terms of V, W, square root -- give me an idea of what

you think it's looking like.

RICH LESSER, CEO, BOSTON CONSULTING GROUP: So we have been discussing this since April, and I think we are on the path that we saw back then, which is

once countries and communities started to reopen, it would be a long period, and really a fight phase, we've called it where you are fighting

against the virus, which is at a constant risk of coming back.

And that in general, we thought economic activity would certainly be better than in the flattened phase. But how much better completely depends on the

success in fighting the virus and keeping it down.

And right now, we are watching parts of the country and some other parts of the world that are really struggling that's going to make the economic

challenge much greater looking ahead.

I don't think we are at the stage of a full W yet, where you have to totally relock down the country again, but we are certainly at risk of

seeing and already seeing parts of the country needing to come back down.

It is going to have a major economic impact. It is going to be a drag on economic growth.

QUEST: Which is why the blog that you published on the policies we need at the moment was so prescient in the sense there aren't any policies in

place.

If I look at the United States -- I am now back in the U.K., but if I look at the United States from afar, this is a dearth of joined up policies, and

that must be giving something like BCG and your clients great cause for concern.

LESSER: It does. It does. And I think that we're at real risk right now, and really, we believe we need two kinds of policies right now to be able

to have the virus not really take hold again of both health and the economy.

Those are first in general, better policies around mask wearing, around behaviors in society, avoiding large indoor gatherings and that can apply

to everyone as a way to, in general suppress the virus.

But then we need specific policies to protect the vulnerable. I really want to highlight that. About 30 percent of adults are at particularly high risk

due to age or serious underlying health conditions and the 30 percent in that category are 20 times more likely to require hospitalization than

generally healthy adults under the age of 50.

And when you have a 20 to one disparity in health risk, then it just makes sense -- it makes sense from a health point of view, a hospital capacity

point of view, and a societal point of view from the economy to protect those individuals in every way we can.

Distributing free mask, allowing them to shelter in place, focusing on congregate living facilities and doing everything we can to protect them,

better sentinel testing, and so we need to step up our general actions. But we really need to double down on how we protect the vulnerable. Otherwise

our modelling says once you try to both reopen schools and business, the risk of outrunning ICU capacity in many parts of the country is quite

severe.

QUEST: The one thing I felt when I flew from New York to London -- and I realized as I flew over different countries, this is global in the sense

that wherever my plane might have landed, this is global.

Now, as a global consulting group, you get a better bigger picture on this.

The United States is obviously lagging. But I wonder, is anybody doing particularly well other than arguably, New Zealand?

LESSER: Well, parts of Asia and Australia have done pretty well in general to get ahead of the disease. You look at Taiwan that got ahead of it right

at the beginning. Korea and Japan have done pretty well. Australia has done well even though there is a challenge in Melbourne right now, we are all

familiar with.

So, I think that -- and there are countries in Europe that are handling it well. But the key message here is, there is no guarantees. Handling it well

today is no guarantee that you will be fine tomorrow.

And the ability to stay vigilant and not just for a couple weeks or a couple of months, but potentially a year or more until we have a vaccine at

scale is going require enormous discipline as well as alignment across the public, private, and social sector. That's one of the thing we are really

missing in the U.S. right now.

[15:15:47]

QUEST: Rich, briefly because you just said something that was crucial. Do you believe we can stay the course? Yes, as you were rightly saying, having

those early policies -- you know, yesterday's policies will not keep you safe tomorrow.

But do you believe we do have what it takes to remain vigilant and to see this through? Because the evidence is against so far.

LESSER: Look, this is a challenge the world has never encountered before at this scale. The easiest way to get through it is to have been able to crush

the virus.

When you can crush and it take it down to super low levels, then it is easier to sustain monitoring the hot spots. If you have got the right

testing in place and the right procedures in place.

The places that are far from that, including the U.S., but other parts of the world as well, it is going to be a battle. And unfortunately, I think

societies need to go through -- communities not just society as a whole, stretches to realize how bad it can get before they are ready to maintain

some of the vigilance.

Even then it won't be easy and in all honesty, reopening schools plus business is going to be a real test and I am hoping our government leaders

can step up to encourage the kinds of behaviors and put the kind of testing and other elements in place that are essential to enable us to get through

the next probably nine to 18 months until we can have a vaccine at some scale.

QUEST: I am grateful for your honesty. Some might say brutal honesty, but that's probably what we needed to hear tonight.

Thank you. Rich joining me from BCG. Always good to have you on the program.

QUEST MEANS BUSINESS as we continue tonight, Huawei will not be able to take part in the U.K.'s 5G network. Not only that, they are going to have

to strip out all the Huawei equipment. It is going to put things back.

Then California, a renewed shutdown which is hampering the state and the U.S. recovery. In a moment.

(COMMERCIAL BREAK)

[15:20:19]

QUEST: Now America's two largest state economies are facing barriers to recovery. California and Texas together contribute nearly a quarter of the

country's GDP.

California has already drastically rolled back what changes they had already made in the reopening plan, and Texas now is forced to consider

similar measures.

The Presidential candidate, Joe Biden says those developments disprove Trump's outlook on reopening nationwide.

(BEGIN VIDEO CLIP)

JOE BIDEN (D), PRESUMPTIVE DEMOCRATIC PRESIDENTIAL NOMINEE: Mr. President, open everything now isn't a strategy for success. It's barely a slogan.

Quit pushing the false choice between protecting our health and protecting our economy. All it does is endanger our recovery on both fronts.

(END VIDEO CLIP)

QUEST: California is reverting to nearly its initial lockdown. Stephanie Elam is in Los Angeles with me. Just how wide now is this lockdown? How

detailed? What's its core?

STEPHANIE ELAM, CNN CORRESPONDENT: It is pretty large. You are talking about 80 percent of the residents in California being affected by this.

Richard, what we are seeing here is they are saying statewide, certain institutions have to close like museums. They don't want any in-restaurant

dining. You can only have dining outside of your establishment. These are the kinds of things they are saying now has to happen across the state.

But now, they are also taking a look at 30 counties -- that number is expected to go up -- that they say are trending to be very big hot spots

that needed to do more.

Those are the counties that Governor Gavin Newsom targeted and is saying more has to be done there. So shutting down salons and barber shops as

well, indoor entertainment for families, that kind of thing.

All of those shut down now in these hot spots, and one of those counties would be Los Angeles County especially since when you look at the numbers,

the majority of hospitalizations for the state are here in this county.

I can tell you, since the numbers did just come out that the state added more than 7,300 new cases from yesterday. That's an increase of 2.2

percent, and then also, knowing that we have an increase also in the ICU patients. So that number being up about three percent from the day before.

So, the numbers continue to go in the wrong direction.

And Richard, I spoke briefly to an epidemiologist based out of University of California-San Francisco and he was very clear. He's like first of all,

we need everyone to wear masks. Period.

Everything else after that, he said is frosting, is the way he put it. He also said that we could sit back and watch the economy go to hell. Those

are his words or we could wear a mask and then get back to it.

He says mask do so much, but people aren't wearing them and that is part of the problem that we are seeing here in California -- Richard.

QUEST: Okay, so they have obviously had the experience of having reopened, if you like, too soon. But has anybody tied down exactly what it is they

did wrong, so that they don't repeat the mistake over again? Because if do you lock down and if you do flatten the curve, it won't be long before

somebody is saying, it is time to reopen.

ELAM: Yes, it's bad enough that it already looks like springtime here again in Los Angeles and the rest of California because we are doing this. I can

tell you that the massive amount of spread in Los Angeles County has been in nursing homes.

So, this is that idea again that younger people can be vectors and then take it to their older loved ones and spread it to them, and then it

becomes detrimental for them.

I talked to one very large hospital here. They are saying they are now seeing 40-year-olds who are coming into the hospital. The good part of that

is they recover more quickly, so the beds -- there is plenty of capacity for people who need to come in.

But the concern here is the fact that they are being vectors. I think overall, it is clear that the states opened up too quickly, and I thin even

though California was one of the first state to go into stay-at-home lockdown, there was a lot of pressure as other states in other parts of the

country were opening up more quickly, and I think that pressure really did -- it was felt by people here, legislators in California, and I do think

that played a part.

QUEST: Stephanie Elam, thank you. Stephanie, thank you. Now, Texas is under pressure to follow California's lead. The case numbers in the state are

surging, that much of which we are aware. They have had several days of record numbers. All-time highs particularly over the weekend.

The Governor says the worst is yet to come and he is warning of a possible new lockdown, but says it could be prevented.

(BEGIN VIDEO CLIP)

GOV. GREG ABBOTT (R-TX): If people use face coverings, it will be enough. So, the only way that it would not be enough is if the public does not

adopt this practice.

If we do not slow the spread of COVID-19 with that rise of hospitalizations that you are seeing in Lubbock, with the increased death rate we are seeing

in the State of Texas, the next step would have to be a lockdown.

(END VIDEO CLIP)

[15:25:36]

QUEST: Now, the Mayor of Austin says his city is on the edge. The mayor is with me now. He is Steve Adler. Mr. Mayor, thank you. The situation is

grim. How close to the edge are you, both for ICU beds and for the ability of the healthcare structures to stay on track?

MAYOR STEVE ADLER (D), AUSTIN, TEXAS: We are on a very narrow edge. Two weeks ago or three weeks ago, we were on a trajectory that would have had

us overwhelmed in our ICUs -- intensive care units about now. But we had a community that really rallied and started showing discipline with respect

to face masking and social distancing. It makes a big difference.

We have been able to change that trajectory. But I am still precariously close to running out of or not having the staff sufficient to be able to

put personnel in my intensive care units.

I am especially concerned when I see what is happening in other Texas cities like Corpus Christi and Houston that are more hard-pressed in the

valley than we are that are already asking if we have space in our ICUs for them.

This is a statewide, not just a metropolitan issue.

QUEST: Is it time for a full lockdown of Texas?

ADLER: You know, if it's not, it is precariously close. And at the very least, I think the governor should let those metropolitan areas, urban

areas that want to move to a lockdown, to let them do that.

I just saw that four mayors down in the Rio Grande Valley have asked for that. The Mayor in Houston asked for the ability to do that at least for a

couple of weeks. The county judge in Harris County, which is Houston, has asked for that ability.

I asked for the ability to be able to do it locally. I don't know that we would pull that trigger right now, but, again, we are close. And I think

that local cities should have that option if the governor is not going to impose it statewide.

QUEST: Mr. Mayor, one of the advantages I took of being in London and hearing what people outside of the United States are saying. They are

somewhat aghast at the way in which four months, five months into this crisis, and places like Texas have the worst numbers they have ever had.

It is not like you got it right the way down and had a second wave. What did go wrong? How did the world's richest, most developed country get this

so wrong?

ADLER: Well, we made mistakes. Back in March and April, we were one of the first areas really to react. We closed down one of the biggest festivals in

anticipation of this back in the first week in March.

When our state government wouldn't act to have a shutdown, the cities acted on their own and we got 60 percent of the state under a shelter in place

and then the governor followed statewide that took us through March and April.

Then the governor started opening things up. I think there were three mistakes that were made. First, we opened up too quickly, without going

past the right gating. Second, we went from phase to phase without learning from each phase before we went into the next phase. Finally, we tried to

open up the economy in a way that looked like the way the economy looked before. You can't do that.

People have to innovate and adapt. If we are going to open up businesses beginning with everyone wearing face coverings, it is got to look

different.

QUEST: That's the crucial point, sir. I am grateful. And we will leave it there. Because I want those words to be the words ringing in our ears. The

mistakes that were made, and the lessons to be learned that the rest of the world can watch and learn from.

Thank you, Mr. Mayor. I am very grateful. The wonderful city of Austin. I do look forward to visiting again. Thank you, sir.

Now, as QUEST MEANS BUSINESS continues tonight from London, Huawei has been told by the British government that it won't be allowed to take part in 5G.

Not only that, get rid of your old equipment, out of the U.K. telecom system.

After the break, QUEST MEANS BUSINESS.

[15:30:00]

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS for you in just a moment. We'll discuss the U.K.'s decision to ban Huawei from its

5G network. The allegation, of course, the U.K. gave in to U.S. pressure. Now, what will China do in retaliation.

And we'll hear from one of the world's biggest restaurant chains. They are obviously watching re-openings and wondering -- well, they want to make

sure they don't make the mistakes that as others have. All that is still to come. It follows, of course, the news headlines, because this is CNN, and

on this network, the news always comes first.

Breaking news to bring you, the U.S. government has reversed its plans to deny visas to international students who are only able to study online.

According to a U.S. district judge, the policy first came after several universities announced plans to move all classes online.

Moderna expects to begin its biggest trial yet for possible vaccines on July 27th. According to a U.S. government database, 30,000 adults will take

part in the biotech firm's phase three trial. The study will be conducted at 87 locations across the United States.

Colombia's two largest cities, Bogota and Medellin, have reinstated partial lockdowns after COVID infections in the country surged past 150,000. 20

percent of the total number of cases have come in just the last seven days. Nonessential stores in Bogota will close for a two-week period, and that

will rotate across three regions.

Ghislaine Maxwell will stand trial about a year from now, after she pleaded not guilty to an indictment on six criminal counts. A longtime confidant of

the alleged sex trafficker Jeffrey Epstein, Maxwell is charged with recruiting many of the underaged girls that Epstein abused. She was

arrested some weeks ago to a remote estate in New Hampshire.

[15:35:15]

China says it will sanction Lockheed Martin for its involvement in U.S. arms sales to Taiwan. The defense manufacturer is the main contractor for

$620-million upgrade package for Taiwan's Patriot missiles. The U.S. government has approved the sale last week.

Mike Pompeo, the U.S. Secretary of State, has praised the British government's decision to ban Huawei from its 5G network. It describes the

move as advancing transatlantic security and protecting free world values.

The decision by Boris Johnson's government is an absolute reversal from its previous stance. It had given the go-ahead for policy and for Huawei in

January. Now, the U.K. says the decision could delay 5G to two to five years. Huawei's slammed the move saying it's based on U.S. trade policy,

not security.

Hadas Gold and Nic Robertson join me from London. Hadas is looking at Huawei, Nic Gold -- Nic Robertson on the wider geopolitical issues. Hadas,

how much on a technical front is this a major setback for the United Kingdom?

HADAS GOLD, CNN BUSINESS REPORTER: Well, if, Richard, if you were looking to have 5G connectivity in the United Kingdom within the next year, you

won't get it. Because of this reversal, because of this change, all U.K. operators will need to strip any existing Huawei equipment from their 5G

networks by 2027.

And the U.K. Government has been very transparent in saying that this will cause a delay to this massive 5G rollout that Boris Johnson had promised in

the previous election. They said this could delay the rollout by two to three years, and will cost upwards of 2 billion pounds, as he said about

$3.1 billion to the country.

So, it will be a massive delay for the United Kingdom. And it's something that the U.K. telecom operators are not necessarily pleased about. Vodafone

called it disappointing. BT said that they're looking into it, but they did say they should be able to absorb some of the costs that it would cost for

them to just to go through all of their equipment because, as you said, this is a dramatic reversal from that January decision that did allow

unlimited role for Huawei to play in the -- in the new 5G network in the United Kingdom.

And it was absolutely triggered by the United States. It was triggered by the May sanctions from the U.S. Department of Commerce that limited the

types of supplies that Huawei could get. And that is exactly what the U.K.'s new security review found, that because of these limits, they would

not be a reliable partner in 5G, and that caused this reversal today.

QUEST: All right. Nic Robertson, why did the U.K. change its mind? This is embarrassing. It puts the U.K. on the back foot. Was it as simple as U.S.

pressure or so-called Five Eyes and we're being shut out or hampered?

NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: I don't think these decisions are ever simple, Richard. And certainly, that's what you hear

from the British government that they're complex.

I think there's a lot of people that do think that this new review, security review, by Britain's security body that looked at the sanctions

the United States had put on China, and reviewed the fact that the chips that China would no longer have access to for the United States would

preclude Britain from using the network -- Britain from using Huawei's 5G equipment for their 5G network. I think very many people see that as face

saving.

But, you know, the bigger picture here is that when Britain decided to get out of the European Union, Donald Trump was not in the White House.

When Donald Trump got into the White House, he started laying a different set of laws down and dealing with China, we entered the sort of trade war

period; there's been an escalation in tensions. And Britain found itself coming out of the European Union, relying on a good and positive trade deal

with the United States, but doing business with President Trump, President Trump is very transactional. And part of that transaction has been, do what

I want you to do with Huawei and 5G, and we might get a better trade deal. So, the U.K. has been under pressure there.

But it does get to that underlying concern, an issue about security, national security, China's actions in the past, you know, the accusations

of stealing vast amounts of corporate information, espionage on that sort of scale, and certainly there are many countries in Britain will be one of

them, that would support what President Trump has tried to do, perhaps not the methodology.

QUEST: And what will China do, Nic Robertson, how will China respond? Because respond, they surely will.

[15:40:00]

ROBERTSON: Oh, respond, they surely will. Okay, so let's take the example of Australia. Australia recently said that the World Health Organization

should examine specifically China's role in -- on the spread of COVID-19. And that was back in the United States' position.

That wasn't the direction that WHO went in. China, then put tariffs on barley being imported from -- being imported from Australia has hit

Australia with other such economic measures. Let's look at the United States, as well, now finds itself in a situation where, you know, it puts

sanctions on China for human rights violations with Uyghurs. We just have the Chinese putting sanctions on Senator Marco Rubio and Ted Cruz amongst

others.

That says, a tit for tat, so what we've heard -- look, what we've heard basically from the -- from the Chinese ambassador in London, is saying that

Britain is -- this is disappointing and wrong, and that perhaps Britain is no longer an -- can be unopen, unfair, nondiscriminatory business partner

for other countries around the world.

Go back to what he said when the new national security law was passed in Hong Kong, just a couple of weeks ago, when he was pulled in to the British

Foreign Office to discuss this. He said, Britain will have to bear the consequences.

So, we can expect there to be consequences from the Chinese for the British, who if you go back to David Cameron less than 10 years ago, we're

hoping for golden era of trade with China. Britain's gone the other direction. Today was a diplomatic watershed, Richard.

QUEST: Hadas and Nic, thank you. Now in a moment, we'll have the CEO of one of the world's largest restaurant groups. They don't want to the mistakes

that others have made when it comes to reopening. In a moment.

(COMMERCIAL BREAK)

QUEST: Welcome back. QUEST MEANS BUSINESS. It is the range, the breadth and depth of change of the pandemic that's brought about. For example, the way

in which food is produced is evolving and accelerating as a result of what's happened with COVID-19. Burger King, for example, is experimenting

with how it feeds its beef cattle.

And the CEO of the Restaurant Brands International, owner of some 27,000 quick service basically says, the whole industry needs to evolve. Jose Cil

is the CEO of Restaurant Brands; he joins me from Miami via Skype.

Jose, good to see you, sir. Thank you. Before we talk about the new ways in which things are evolving, just want to be clear how difficult it is for

you, the reopening. You reopen places in Texas and in California and in Florida, and promptly, you're going to have to start thinking about closing

them down again. Are you ready for that?

[15:45:16]

JOSE CIL, CEO, RESTAURANT BRANDS INTERNATIONAL: Hey, Richard, how are you doing? Thanks for having me. It's certainly challenging. We've been in the

midst of this pandemic since early January, actually in China, as it's worked its way West. And so, our teams have been working closely with our

franchisees and our restaurant team members to ensure that we were delivering our food safely all around the world.

And when it hit North America, hit the U.S. in March of this year, our teams had already spent several weeks on new procedures, contactless

procedures, enhancing the off-premise elements of our business, drive thru, delivery, curbside pickup.

Our digital apps have been a huge part of our business coming into the pandemic and have played a significant role throughout because it's allowed

people to pay without cash prepayment and order has been critical. So, we've been in the midst of it for quite some time. And obviously as we

started to reopen, we were working on contactless procedures, acrylic screens, PPE, masks, everything to ensure the safety of our team --

(CROSSTALK)

QUEST: No, I got -- I got that.

CIL: And so, now I --

QUEST: I follow that.

CIL: Oh, yes. So, it's been -- it's been a challenge, but our teams are focused on ensuring that we deliver the right thing. If the -- if the

restaurants close again, the dining rooms close again, we've got the off- premise business that allows us to continue to serve our guests, and that's what we -- we're focusing on, is reacting and staying abreast of what's

going on in each of our municipalities and states around the country.

QUEST: And the way in which food processing, the growing, the feeding, the way that's changing as a result of COVID-19, is what?

CIL: Well, the biggest changes that we've seen have been at the restaurant level, so ensuring additional steps on contactless service, so ensuring

that we can deliver our food to our guests without -- or with minimal human contact. That's been a big change in the process. And that's through the

drive thru as well as in the front counters.

We've done this as well through delivery. What we shared earlier this morning, and what we've shared globally, with Burger King, is that we've in

addition to focusing on the pandemic and focusing on the short-term challenges that each of our markets are dealing with, we've also been

working on something that we think is important as we build our gameplan to building the most-loved restaurant brands, which is all around addressing a

significant issue related to sustainability.

And we launched this cows menu which addresses how we feed cattle, adding some lemon grass to their diet to be able to reduce methane, and ultimately

have a positive impact on the environment. So, these are things that we're working on for the long term. While in the short-term, we focus on our

franchisees' profitability, and our team members safety, and our guest's safety to ensure the business continues to move forward.

QUEST: The issues facing business leaders like you, is now enormous, and you're being drawn into having to make decisions such as safety, health,

and welfare. But not only that, but also masks, making sure whether it's a political issue or not a political issue, but whether they should be worn

in establishments. And do you sometimes feel that you're having -- you're in an area that really is very, very deep and difficult?

CIL: Certainly, the last 120 days have been like none other than I've seen in my entire professional career. I've been in the business for about 20

years. And so, I've seen quite a bit; I've worked all around in 70-plus countries and territories with Burger King and now with Popeye's and Tim

Hortons.

I've never seen anything like this. I don't think anybody has seen anything like this. And so, what I've -- what I've shared with our teams and our

franchisees is that these extraordinary moments require extraordinary leadership, focusing on the things that are important, starting with safety

and wellbeing of our teams.

And then, making a lot of decisions in the short term, adjusting the ones that don't work and continuing to implement the ones that do. And we've

been fortunate that we have a great team that's fully dedicated and focused on doing the right thing here. And that's helped us throughout this

pandemic, and I'm confident will help us get out of this stronger and better than ever.

QUEST: And as we go through this pandemic, we look forward to talking to you again. Thank you, sir. Very appreciative of the update on how things

are being COVID. Hearing from people like yourself is important, because we get a real idea of the difficulties that businesses are facing.

And that's crucial here on QUEST MEANS BUSINESS. I'm grateful, sir, thank you. In a moment, one particular business, one industry that's facing

enormous difficulties. Aviation in Pakistan, ever since pilots were found to have dubious licenses. The whole industry has now been put under a deep

cloud, after the break.

[15:50:11]

(COMMERCIAL BREAK)

QUEST: Pakistan's Information Minister says the country wants international help to help restore the country's ailing aviation industry. You'll be

aware, of course, that hundreds of pilots in Pakistan were found to be flying on dubious, some say fake licenses.

The airline has now been banned in most other parts of the world. But the question is, how does Pakistan, once again, restore the integrity and

reputation of its airline industry?

(BEGIN VIDEOTAPE)

QUEST: The airline was founded in 1946. Pakistan International Airlines, better known as PIA. And it has long been a source of intense national

pride. A national flagship that transported world leaders, including the U.S. First Lady Jackie Kennedy.

Over the last three decades, budget cuts, mismanagement and the spiraling safety record. It's all tarnished PIA's reputation. And this May, a PIA

passenger jet crashed in Karachi, killing 97 people on board, and bringing to the forefront, the worries and concerns about PIA.

In the aftermath of the crash, the aviation minister made a shocking announcement. Almost a third of Pakistan registered pilots were flying on

dubious licenses. And that included 141 pilots at PIA. Though, not the pilots involved in the fatal crash.

SHIBLI FARAZ, INFORMATION MINISTER OF PAKISTAN: We are proud of the fact that our government takes on this -- these such irregularities and, you

know, we face the world and tell them that, you know, we are not putting things under the carpet.

QUEST: Pilots allegedly paid bribes to avoid taking theoretical exams, or paid others to take those exams for them. The reaction, both at home and

abroad, has been swift and brutal. Regulators in Europe and the U.S., Malaysia and Vietnam, have either banned flights from PIA or suspended

Pakistan licensed pilots working for local airlines.

CPT. MAJID AKHTAR, PAKISTAN AIRLINE PILOTS' ASSOCIATION: It's a blow to the aviation industry in Pakistan.

[15:55:02]

QUEST: A spokesperson for Pakistan's Airline Pilots' Association says, while they know there's a problem, they don't believe it's as widespread as

the government claims.

AKHTAR: 262 is absolutely ridiculous. 34 people out of the 141 have -- are not in PIA. They're -- either they have never worked or they may have

retired or passed away, etc.

QUEST: PIA and the Pilots' Association say no pilots are accused of actually faking the practical flight hours required. The government says

all pilots on suspicious licenses were immediately suspended. PIA has now fired 28 of them. Further action is clearly needed and quickly. Firstly, to

fix the problem, and then to stem the damage to the reputation of Pakistan's aviation industry.

Are you going to bring in external scrutiny so that as licenses are re- issued, the rest of the world can have confidence? Because, frankly, at the moment, they won't have confidence if it's the same regulator issuing the

license.

FARAZ: No, obviously that is our topmost priority. We want to restore the confidence that the international aviation industry had in our -- in our

pilots, in our airlines. We are asking our (INAUDIBLE) and international agencies, they come and they observe, and they approve our systems that we

have put in place.

QUEST: Airlines are already struggling to stay aloft during the COVID crisis. Pakistan International Airlines must do so, whilst at the same

time, winning back faith in the men and women who fly their passengers.

(END VIDEOTAPE)

QUEST: And we will take a "PROFITABLE MOMENT" after the break. This is QUEST MEANS BUSINESS live tonight from London.

(COMMERCIAL BREAK)

QUEST: Tonight's "PROFITABLE MOMENT." The one thing I've been very surprised at since I was in Britain, is the few people who are wearing

masks. Now, obviously, I'm in quarantine so I haven't been out and about, but on the one occasion coming from the airport here and a quick trip to

the shops, just to get some milk once I arrived, it was quite clear.

People aren't wearing masks in the U.K. Coming from New York where everybody's wearing masks all of the time in shorts and round and about, it

was a surprise. So, I wasn't surprised that the U.K. government decided to introduce masks for people inside shops, as of 10 days.

I'm not sure why they put a date away into the future. Why not do it tomorrow? I don't really understand. I mean, if you haven't got a

collection of masks by now in the pandemic, then I don't know what you've been doing for the last three to four months.

We all have a collection. Anyway, it will be masks galore in Britain. And that's probably just as it should be. Otherwise, that's QUEST MEANS

BUSINESS for tonight. I'm Richard Quest in London, in quarantine, whatever you're up to in the hours ahead, I hope it's profitable. We'll do it again

tomorrow.

END