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Quest Means Business
U.S. Inflation Worse Than Forecast, Now At 40-Year High; Kellogg's Raises Prices To Combat Supply Chain, Labor Issues; Reports Say Russian Skater Who Failed Drug Test Is A Minor; Canada Truck Blockade Forces Carmakers To Cut Production; Call To Earth: Jeremy Jones; Disney Up With Earnings, Growth, Streaming; Hawaii May Start Dropping Travel Restrictions In Spring. Aired 3-4p ET
Aired February 10, 2022 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:16]
RICHARD QUEST, CNN BUSINESS ANCHOR: It was all going so well, and now, as you can see in the final hour of trade, investors are absolutely running
for cover. We are at the low points of the day, down one and a half percent. There are specific reasons why that I will get to, teasing you
shamelessly.
The main events that we've been watching all day, seven and a half percent inflation, U.S. numbers are climbing higher, that dashes hopes prices had
peaked. The Chief Executive of Kellogg's is with me tonight.
A positive drug test, and that puts Russia's Olympic team back under pressure.
And carmakers are forced to stop production because of protesters who are blocking the U.S.-Canada border.
Good evening. We are live from New York, Thursday, February the 10th, such a lot to get through. I'm Richard Quest. And yes, I mean business.
Good evening. Today, we've got confirmation that the U.S. inflation situation is serious and appears to be getting worse. The CPI, the Consumer
Price Index rose to seven and a half percent for the 12 months ending in January. It is the steepest annual price increase since 1982 and it was
worse than many economists had thought. They were hoping inflation at peaked and that prices would ease back.
Now, if you look at the numbers on the market, it's been a choppy day. Firstly, investors digested the inflation numbers, but they managed to take
that in its stride, if you will. Stocks were down in the morning, but not dramatically so. If you look at the Dow chart, you'll see how they were
over the -- let's say first two or three hours.
That first two or three hours, you see they are down, but they're not very badly down. And now in the last few hours, the St. Louis Fed President
James Bullard told Bloomberg that he has turned much more hawkish. He wants a full percentage point rate rise by July, a hundred percent basis points,
a hundred basis points in the bag by July the first.
He says, "I was already more hawkish, but I pulled up dramatically what I think the committee should do." You'll remember, we heard from the
Cleveland Fed, pretty much the same story last night. President Mester told us that she has now always baked in several rises in interest rates.
So the Fed is likely to start when they meet next month, that'll be the first likely interest rate rise. And throughout the year, rates are likely
to go higher, increments of a quarter, some think maybe even half a percent.
Most American executives doubt that alone will solve the problem. Three out of four in one poll said it is the supply chain problems and the wage hikes
that they will persist and that pushes prices higher.
Now, when I hear them say that, Matt Egan is with me, when I hear people say that, wage hikes, supply chain problems persisting, that is in economic
terms that is inflationary spiral, so one feeds to the next to the next, and the only way to stop that is stomp on the brakes, which is what the
Feds may have to do.
MATT EGAN, CNN REPORTER: Richard, you're right. So much about this situation is psychological. Because if people start to expect that
inflation will keep getting worse, they're going to change their behavior.
For CEOs that means you start ramping up your pay. Maybe it means you start demanding higher prices yourself from consumers. And then for everyday
people, it means that you might demand to get paid more, you might move up your purchases, which increases demand, which actually makes inflation
worse. So that's what the Fed does not want.
There is a growing sense, especially from today's report that the Fed is late here, late to acknowledge that inflation wouldn't be transitory, late
to shift into inflation fighting mode, and so they've got to play some catch up.
So that's where those comments from Bullard come in. The fact that he is talking about having interest rates at one percent by July, by July 1,
given that there's only three meetings at that point indicates that you're talking about a 50-basis point move. Richard, you know, we haven't seen
anything like that from the Fed since the year 2000. But we also haven't seen inflation like this since the 80s.
[15:05:04]
QUEST: So this is a tricky environment, because we are talking about inflation, and that is hurting people's pockets. That is actually hurting -
- you know, when people go out shopping. So when they demand or seek higher pay rises, that's perfectly reasonable if they want to maintain standard of
living.
EGAN: Right, it makes a lot of sense that people want to get paid more money because they are paying more money at the grocery store, at the gas
station, to get a car. I mean, there were some record price spikes in this latest report, new cars and trucks up by 12.2 percent. That's an all-time
high, fresh fish and seafood, restaurant meals, appliances, furniture, prices, up 70 percent, all records.
I am also putting out that that jump in new car and truck prices that was actually before, of course, the trucker protests that is disrupting auto
production in Canada, so that obviously, that situation is not going to help.
I think the Fed does have its work cut out for it because they want to try to thread this needle. They have to try to raise interest rates enough to
show that they mean business here, that they take inflation very seriously that they're going to tap on the brakes, but they don't want to do it so
much that they freak out the market, which may not be the case because the market seems to be anticipating rate hikes, but they also don't want to do
it so much that they short circuit, this economic recovery -- Richard.
QUEST: Matt Egan, thank you.
Now, the true definition of the word "dilemma" is a choice of two unfavorable or unpalatable options, and when it comes to inflation, that's
exactly what we've got at the moment.
Most CEOs with the dilemma, say they plan to keep raising prices, where they will offset higher expenses. In other words, passing the costs on to
you and me, the consumers, but that of course, could influence the amount we buy, hence the dilemma.
Earnings reports from Coca-Cola and Pepsi both say they raised prices last year. The Chief Executive of the toymaker, Mattel told Eleni Giokos he has
been forced to raise the price of his company's toys.
(BEGIN VIDEO CLIP)
YNON KRIEZ, CEO, MATTEL: We are impacted by inflation, and of course, in this environment, pricing is one of the options that we consider. This is
not unique to the toy industry. Of course, this is something that companies have to use and think about in terms of inflation.
But when we raise prices, we always keep consumers in mind and are being very thoughtful about how do we maintain the highest quality and the best
value for consumers.
(END VIDEO CLIP)
QUEST: Now, we've got the perfect guest on the program today. That is Steve Cahillane, he is the Kellogg's Chief Executive who joins me from
Battle Creek in Michigan.
Before I ask the first question, I am wanting to go through why you are such a perfect guest as you CEOs trying to navigate your company through
this storm.
So for example, if we take Kellogg's, makers of cereals and snacks, you make products in 18 countries and sell them nearly everywhere and your
earnings beat expectations, profits have headwinds, inflation is shooting up like Pop Tarts out the toaster.
Costs are higher for wheat, corn, and other ingredients. You've got supply chain disruptions that have jumping through Froot Loops to get raw
materials and then ship out goods and the elves on the box of Rice Krispies can't get any help, severe labor shortages.
At the same time, the snap, crackle, and pop just isn't there, a three- month strike that you faced last year hurt margins.
So Steve, looking at that, you are an example in a sense of what corporate America is facing at the moment, and I'm wondering for you, what is the
biggest issue? Is it inflation? Is it supply chain problems?
STEVE CAHILLANE, CHIEF EXECUTIVE OFFICER, KELLOGG'S: Well, Richard, thanks for having me. That may be the single greatest lead in I've ever heard, so
I appreciate it, and you captured really the challenges quite well.
Inflation is probably the biggest challenge because it is inflated. It's in an environment that we haven't seen in many decades, but exacerbating that
is the supply disruptions and the unforeseen things that seem to keep happening. You know, the dislocation that happened in the supply chain, at
the beginning of the pandemic has only really become exacerbated over the last year or so, and we don't really see a way out of that until at least
the back half of this year.
So it is inflation, it is dislocation, and it is all these things coming together at one time that you know, we just have to navigate so we make
sure that we can keep the brands that our consumers love, front and center affordably priced on supermarket shelves.
QUEST: And that balancing act. You've already obviously -- I mean, you have the choice, as I said it was a dilemma. Do you eat into your own
margins on the bun, or do you raise the prices? And I'm guessing you probably tried do a bit of both.
[15:10:01]
CAHILLANE: Yes, but more than anything, we try and protect our margins, and our first line of defense against inflation is always productivity. But
it's very difficult to see the type of productivity gains necessary in this double digit inflationary environment. Then, we look to revenue growth
management, which is pricing its promotion, its trade, it is all these other things, because you have to protect your margins, otherwise, you're
going to degrade them and when inflation starts to recede, you'll have a weaker company.
So we try and do that without dampening demand. That's really the number one thing that we want to make sure that we do is keep our demand as strong
as possible, even as our prices go up because protecting margins is important, but protecting the top line and market share is as well.
QUEST: I was looking at the numbers in more detail. The interesting thing of course about it is, people always say that cereals, biscuits, and snacks
are counter cyclical and that you're recession proofed. I'm not sure I always fully believe that, but there's an element of truth in it. But more
importantly, you are a mature business with mature markets.
How do you intend to grow those markets?
CAHILLANE: So if you look at the power of our portfolio, people here at Kellogg immediately think it is a cereal company because that's how we were
born. But it's less than 20 percent of our portfolio, North American cereal.
The brands Pringles, Cheez-It, Rice Krispies, Treats, Pop Tarts, had a terrific 2021. In fact, in the fourth quarter, our snacks business in North
America grew over 20 percent. So, these are brands that can grow even though they are mature because snacking is very much on the rise all around
the world.
We've also got a very exciting emerging markets business, got a very big business in Africa where the middle class is forming and business is
booming.
So there is a lot in our portfolio outside of North American cereal, which is quite mature that is showing terrific growth momentum and it is why in
the fourth quarter, despite the work stoppage that lasted the entire quarter, we were able to still grow our timeline in a meaningful way.
QUEST: I have to say, I am a confirmed snack-a-holic, so I just -- never met a snack I couldn't pass without eating it. At the end of the day,
though, as you turn the company in and move it round and grow the international bit, which of course has its own problems in terms of
currency and constant currency, which is difficult to manage.
What's the one thing you now want from policymakers as we come out of the pandemic, at least in in Europe and the U.S.?
CAHILLANE: Well, I think, you know, we want certainty. All businesses really require certainty as we plan ahead and the pandemic has been so
difficult because it has created uncertainty for all of us and unforeseen circumstances.
But what we really want to understand is, you know, what policymakers have in mind, less regulation is better, obviously, but also an understanding I
heard at the beginning, before I came on, you know, a lot of speculation around what the Fed is going to do, what is going to happen, so having an
understanding of what's on their agenda and less surprises is really quite important.
QUEST: Steve, it's good to see you, sir. I'm grateful you took time to talk to us tonight. Much appreciated. Thank you.
The CEO of Kellogg joining me.
CAHILLANE: Thank you.
QUEST: The Russian Olympic team finds itself in a familiar place at the center of an Olympic doping scandal, and now we have an idea who tested
positive for a banned substance.
We'll be in Beijing, in a moment. QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
[15:16:13]
QUEST: CNN has learned that the Russian figure skater at the heart of the Olympics doping scandal is a minor. The officials aren't identifying the
athlete by name, but there is only one underage member on the six-person team. It is 15-year-old Kamila Valieva. It is unclear when the positive
drug test was taken, and now the team's gold medal standing at the Winter Games is unclear.
CNN's David Culver is staying up late for us tonight. It's very early, actually. But you're in Beijing. David, what more have you learned?
DAVID CULVER, CNN INTERNATIONAL CORRESPONDENT: Yes, getting up early, because there's a lot to cover in this, Richard. It's a familiar sight for
the Russians, really. I mean, this is space that they've navigated before. These athletes are already unable to compete under their flag and under
their anthem because of punishment for state-sponsored doping.
Now, more speculation swirling.
(BEGIN VIDEOTAPE)
CULVER (voice over): Russia is once again at the heart of an Olympic doping controversy as multiple sources tell CNN, the athlete from the
Russian Olympic Committee figure skating team who tested positive for a banned substance is a minor. The only minor on that team is 15-year-old
breakout star, Kamila Valieva.
CHRISTINE BRENNAN, CNN SPORTS ANALYST: That I think complicates it because if this were, you know, an athlete in their 20s or 30s, you would say,
okay, they knew what they were doing, they made that decision.
The question here is: Did she know what she was doing? Was she told to take it? Or did she do this on her own? And pretty much increasingly you would
think that there would be adults in her life who were part of that decision.
CULVER (voice over): Valieva is the biggest star in skating. She has already set nine world records and made history Monday by becoming the
first woman to land a quad at the Games.
Russian Ministry spokesperson Maria Zakharova expressed her support to the young athlete on Thursday
MARIA ZAKHAROVA, RUSSIAN FOREIGN MINISTRY SPOKESPERSON (through translator): Miracles can be simply right in front of us and what Kamila
Valieva did is a true miracle.
CULVER (voice over): The ROC team won gold in the team event Monday between the U.S. and Japan, but the medal ceremony was delayed Tuesday
after the IOC said there was a legal issue.
MARK ADAMS, INTERNATIONAL OLYMPIC COMMITTEE SPOKESMAN: We don't want to hear about the other stuff, but it arises, its life and so it has to be
dealt with, it has to be dealt with properly. It has to be dealt with in a proper, transparent way, a legal way and we will deal with it and we will
deal with it as quickly as possible.
CULVER (voice over): It is unclear when the positive test was taken, but a Russian newspaper "RBC Sports" reported that a sample taken in December
from one of the six Russian team members tested positive for trimetazidine.
Trimetazidine is listed as a prohibited substance by the World Anti-Doping Agency under a category of drugs that increase blood flow and improve
endurance.
DR. ELIZABETH MURRAY, PEDIATRIC EMERGENCY MEDICINE PHYSICIAN: This is a medicine that's used for angina, you know, chest pain that is not something
that kids normally get. What this drug does is actually kind of make your heart work more efficiently and it doesn't change your blood pressure very
much or change your heart rate.
So an athlete wouldn't get jittery or necessarily feel all that different, but they would theoretically be able to perform at a higher level for
longer.
CULVER (voice over): Russia is technically banned from competing in the Olympics. After an investigation by the World Anti-Doping Agency in 2019,
Russia was punished for a widespread and sophisticated state sponsored sports doping network. They were hit with a ban from all international
sporting events until December 2022.
But Russian athletes can still compete as neutral athletes in the ROC team, as long as they prove they had no link to that doping scandal. If these
latest allegations are true, it's unclear if there would be any punishment for the team or if the ROC team would be stripped of their gold.
BRENNAN: Now you have all these questions about: Are you serious about your rules? I mean, that's where we are right now. What are the rules? Are
you serious about the rules? Is it really okay for a nation that has a positive drug test to go ahead and keep an Olympic gold medal?
[15:20:07]
CULVER (voice over): A spokesperson for the U.S. Olympic Committee told CNN: "We don't have all the details, but in situations like this, it's
about more than gold. It's about the integrity of fair sport and accountability."
Valieva was seen back training on Thursday as news of her team's fate awaits.
(END VIDEOTAPE)
QUEST: Really, on their side, is it, David Culver because there will be more events, they're going to have to decide if she can compete, and of
course there is the medal afterwards. What does happen next?
CULVER: Yes, and the timeline of all of this remains uncertain, too. I mean, you point out all just the unknowns here. One thing that is for
certain is that there is an embarrassment factor here, right? We're seeing even the Kremlin pushing back a bit on this, though, as far as the
investigation is concerned, it's going to incorporate a lot of things including age, Richard.
Age is going to be a factor in this, the fact that she is only 15, and so according to the World Anti-Doping Agency's Anti-Doping Code, athletes can
in some cases be banned for a maximum of four years if they are found guilty of committing anti-doping violation.
But there are exceptions to this rule and that includes a minor and it could be lessened, it could be two years, it could be no ban at all.
QUEST: I guess what everybody else -- what everybody else is saying, one of the other countries, is there a feeling of, you've got to get them this
time. They've been warned. They are now back to -- they are up to no good. Or is there a feeling of just oh, I can't be bothered.
CULVER: I think there is a question here as what is the IOC really going to do? Are they going to have teeth to move forward in a lot of this?
Because the IOC has come under a lot of scrutiny recently, not just with this. So there's going to be a lot of eyes watching this.
But it's also been with China as a whole, the host country in all of this. So, if they start to back off on a lot of these issues, including something
that may seem rather minor to folks outside of geopolitics and that is a sporting competition, it really does raise the question, how are they going
to stand up to some of these really errors and offenses and show that they actually have strength in confronting them?
QUEST: David Culver, 4:21 in the morning in Beijing, very grateful you got up earlier and probably will stay up many more hours to chat. Thank you,
sir.
Russia's Defense Ministry says it has launched joint military drills in neighboring Belarus, and that of course adds to tensions. It is putting
pressure on oil prices. Brent is now more than $90.00 a barrel. It's up 50 percent in the last year, and JPMorgan says it will go to 120 if the
Russia-Ukraine crisis escalates into fighting, who knows where it'll go in that eventuality.
France is making a big bet on nuclear energy to fight climate change. President Macron announced his country would build six new nuclear
reactors, as he visited a GE factory to announce the deal.
France's state-owned company -- electric company is buying part of GE's nuclear steam turbine business. Vattenfall is the state owned power company
in Sweden. About a third of its electricity comes from nuclear plants. Vattenfall delivers electricity to nearly seven million customers across
six European countries.
Anna Borg is the Chief Executive. She joins me now. Anna, it is good to see you. I'm grateful you've joined us tonight.
Look, wherever I look, I hear higher fuel prices. I understand this is what's happening in the market and I understand this is -- there is not a
lot that CEOs can do about it.
But it is going to take its toll, especially in those markets, where -- or in those countries where there has been deregulation of energy provision,
isn't it?
ANNA BORG, CHIEF EXECUTIVE OFFICER, VATTENFALL: Well, I would say that the market situation for the energy market in the entire Europe has been quite
the unusual this winter, due to the high fuel prices as you indicate, but also because the weather has been quite cold.
In Europe, however, there is a transformation going on with the clear aim to phase out the fossil fuels like gas and oil and coal and move into a
fossil free energy system, and that transformation is in the making.
In Vattenfall, which is a European country originating from Sweden, we decided a few years ago to set out on a journey which we call enable a
fossil free living within one generation. And you can see all around Europe that the competitive situation is shifting away from fossil fuels and into
renewables and into more nuclear power.
QUEST: Off course, I'm old enough to remember all the protests against nuclear power, which was seen to be dangerous. Now, it is not exactly the
answer, it is certainly a major part of the equation and formula as we saw today in France.
[15:25:03]
BORG: Well, I think that if it's going to be possible to both mitigate the climate change and also transfer an industry and way of living into these
new fossil free environment, it's going to be necessary to explore all of the fossil free technologies, including, for example, the new small modular
nuclear reactors.
And it is possible, I think, because you can see that there is a lot of innovation going on around the fossil free technologies, and you can also
clearly see that the customer demand is shifting.
So, I would argue that this is actually a matter of being competitive in the new business environment in the future. So, that sort of transformation
needs to happen sooner rather than later, for many reasons.
QUEST: The disparity between sustainable goals, the provision of electricity, the emissions trading systems that are in place, what is it
you now want to see?
BORG: Well, I think that the emission trading system is extremely important, because that puts a price on the emissions and that also changes
the relative competitiveness between technologies, but it also sparks a lot of innovation around fossil free technologies.
And today, I think we can see that companies and customers are actually moving much faster than nations or global initiatives. So I think that,
again, this is a business strategy for us. It's not the sustainability strategy first and foremost, it's a business strategy, and it is
sustainable. But we can clearly see that through this transformation, we are actually getting increasingly competitive.
QUEST: We looked at -- we did the breakdown of your provision of electricity, and you've still got -- there is still a 20 odd percent from
fossil. At the end of the day, do you see much higher prices coming? Whether from supply issues, whether from Ukraine, worries about
geopolitical? If that gets worse, how much worse do you think it gets?
BORG: Well, first of all, the situation looks a bit different in different countries. So, I think that impact will also be different in that sense.
But it is true that fossil fuels and especially natural gas will be an important transition fuel for quite some time.
Whether the prices will be higher or not, I'm not sure, but they will definitely be more volatile. So, they will be higher at certain times and
lower at other times.
And yes, there is of course an import into Europe from Russia and other countries when it comes to gas, but we also see an increase import now
especially of LNG, liquid natural gas, from the U.S.
So it depends a bit on the many factors going forward.
QUEST: Anna Borg, it is good to have you with us this evening from Stockholm. I'm grateful that you joined us. Thank you, ma'am.
Now it's QUEST MEANS BUSINESS from New York from Ontario to Alberta. Canadian truckers are blocking more U.S. border crossings and the impact
that it is having on business.
(COMMERCIAL BREAK)
[15:30:00]
(MUSIC PLAYING)
QUEST (voice-over): Hello, I'm Richard Quest, together we've got more QUEST MEANS BUSINESS. What I'll be telling you and talking to the CEO of
Hawaiian Airlines. He'll tell me how lifting the state's travel restrictions could finally bring tourism back to prepandemic levels.
And Disney earnings showing (INAUDIBLE) in the streaming world, even as competitors like Netflix seem to falter. We'll get to all that after these
headlines. This is CNN and, on this network, the news always comes first.
(MUSIC PLAYING)
QUEST (voice-over): Prince Charles is in isolation, after testing positive for COVID-19. The fully vaccinated royal also tested positive in late March
of 2020. Now the concern is Charles recently met Queen Elizabeth. According to local sources, the queen is not displaying COVID-19 symptoms at this
time.
London's police chief has resigned, Cressida Dick stepped down, saying the mayor, Sadiq Khan, no longer has confidence in her leadership. Her
resignation follows a scandal involving offensive messages between officers on social media chats.
The mayor says new leadership will help deliver the change necessary to root out racism, sexism and homophobia.
Former president Trump is denying new claims in an upcoming book by "The New York Times" reporter Maggie Haberman, which says staff at the White
House residence believe the president tried to flush (INAUDIBLE) papers down a toilet, after finding them clogging the pipes.
The news comes as Mr. Trump is being accused of failing to preserve government documents.
Bob Saget's family confirms he died of head trauma. The comedian was found dead in his hotel room last month. According to a family statement,
authorities determined he hit his head and then went to sleep. (INAUDIBLE) say there's no indication of drug use or foul play.
(MUSIC PLAYING)
QUEST: Canadian truckers are now blocking three U.S. border crossings in their growing protest over COVID restrictions. This started by blocking a
key bridge from Ontario -- Windsor, Ontario, to Detroit, Michigan.
Now they've expanded to checkpoints between Manitoba, North Dakota, and Albert and Montana, the blockades affecting carmakers on both sides of the
border.
Ford, GM and (INAUDIBLE) cut production at nearby plants because of shipment disruptions. Miguel Marquez is in Windsor in Canada and joins me
now.
Can you hear me, Miguel?
No?
Looks like we're having a few difficulties getting to Miguel. If we come to that in a moment, we will return to --
MIGUEL MARQUEZ, CNN SENIOR NATIONAL CORRESPONDENT: Hi, there --
(CROSSTALK)
QUEST: I beg your pardon.
Miguel, can you hear me?
MARQUEZ: We are at the crossing here in Windsor, Ontario, Canada. This is the scene here right now. Hundreds of protesters are out here, antivaccine
protesters, antimandate protesters as well.
These individuals are, they want all of the mandates lifted prior to the -- prior to them leaving here. They want them lifted nationally as well. This
is starting to be a very big concern here because the city of Windsor, the mayor here, saying that he has asked for more resources from the federal
government and from the provincial government.
And they are arriving here right now, saying if they refuse to leave, they're all for protest peacefully.
[15:35:00]
MARQUEZ: But if they refuse to leave, then they will clear them out. They will remove them forcefully. These protesters have been here, this is going
on the fourth night now and it is having a massive effect on both sides of the border, both the auto manufacturers, auto parts suppliers, from
Lansing, Michigan, to Toronto.
It is, you can sense that the seriousness here is getting more intense by the hour. And it will be, at some point, a push is going to come to shove
and the government here is not only going to shut down probably this protest but others that are growing across the country.
QUEST: Miguel, can you hear me?
I just wanted to see if you can hear me?
Can you hear me?
MARQUEZ: Sorry, I can hear you now. Yes, I couldn't hear anything before. Great.
(CROSSTALK)
QUEST: A quick question. Look, it's -- these disrupters or these protesters have been painted as extremists or off to the right or whatever
it may be. But the sheer number of them now in multiple destinations causing such havoc leads one to assume there must be some grievance or some
justifiable grievance we're not seeing or hearing.
MARQUEZ: Well, look, one, they're not just truckers; these are Canadians from all walks of life, coming in from the neighborhoods here in Windsor,
going to other locations.
They're seeing the success of getting headlines on this protest as well. But these are also people who have worked through the pandemic, people who
have been affected by the pandemic negatively.
They are angry, they are upset, as many people -- the vaccinated, the unvaccinated -- it has been a horrific two years for just about everyone.
The entire world is in a very bad mood.
The people here, they feel ostracized right now, from the economy because they're not vaccinated; from the society because they can't go to the
movies or restaurants; even from their family in some cases.
So there's growing anger, frustration, they're tired of the rules, the mandates. They basically want to get back to full engagement in their own
communities in their own country.
QUEST: Miguel, thank you, Miguel Marquez on the border between U.S. and Canada.
Now Disney shares are rising, the company had blockbuster earnings. Disney is doing really well, particularly in streaming and hospitality, where
others are struggling. After the break, we'll talk about that.
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(COMMERCIAL BREAK)
(MUSIC PLAYING)
[15:40:00]
QUEST: As the Winter Games are playing out in Beijing, scientists are worrying that the snow season is becoming too short for winter sports.
Today, renowned snowboarder Jeremy Jones discusses his effort to Protect Our Winters from climate change.
(BEGIN VIDEOTAPE)
(MUSIC PLAYING)
JEREMY JONES, PROTECT OUR WINTERS (voice-over): The mountains to me are just the great teacher. They challenge me, they make me feel alive. They
ground me but also, take me to this, like, really special place.
Globally, there's 100 million people that really identify with the outdoors. It's a huge part of their life. And if you're in the outdoors
consistently, you don't need to be convinced that climate change is real.
Protect Our Winters is an organization I started in 2007, with the goal to unite the winter sports community to have a unified voice on climate
change.
(MUSIC PLAYING)
UNIDENTIFIED FEMALE: Thanks for helping with these measurements today.
JONES (voice-over): And Anne Nolin is one of several incredible scientists we work with.
ANNE NOLIN, SCIENTIST (voice-over): Well, this might be a really good area to dig a snow pit.
I became aware of Protect Our Winters when they came and talked to me, they wanted to know more about the science of snow and climate.
JONES (voice-over): How deep are you going?
All the way to the bottom?
NOLIN (voice-over): Usually, we'll see.
JONES (voice-over): That'll take a minute.
NOLIN (voice-over): Yes it does.
My research focuses on snow and glaciers and how they melt and become water supply for people and forests. And lately, I've been looking at the effects
of wildfire on snow packs.
So this really high burn severity occurred as a result of the Caldor fire. And it was a huge fire that exploded over this landscape. We don't usually
expect that kind of fire behavior.
So the black carbon that we see here in the snow pack came from these burnt trees all around us and the burned woody debris, the burned bark, the burnt
needles, these black trees will continue to deposit that stuff on the snow for another 10 years.
JONES (voice-over): And when that, when this nice pristine white surface gets that black, burnt debris on it, then that speeds up the melting,
right?
NOLIN (voice-over): Yes, it melts it weeks earlier than it would otherwise.
Across the West, around the world, we see declining glaciers, we see declining snow packs, at all latitudes. We see a lot more warm winters than
we did, you know, 30 years ago.
There's always cause for hope. Nature is resilient. And things grow back. Forests thinning can actually increase forest health by allowing forests to
use the water more effectively.
If you open up a forest to some extent, you can increase the snow accumulating on the ground, because it's not being caught in the canopy.
JONES (voice-over): I've been able to call myself a professional snowboarder for almost 30 years. I'm well aware of my carbon footprint,
trying to reduce it every year.
But some of the bigger things would be changing my diet to a plant-based diet; most recently, solar panels on my house; really reducing the amount
of air travel that I do. But to get the CO2 reduction we need, we need large-scale, systemic change.
NOLIN (voice-over): It's something that we can address. We have to address it head-on. What people can do is, you know, think about what you can do in
your daily lives but, more importantly, think about how you can band together with other like-minded citizens to advocate for climate change
solutions, like Protect Our Winters.
JONES (voice-over): The work I'm doing is for these future generations, so that I can hopefully look at my kids and my grandkids and say, you know
what, I had this opportunity and I did everything I could with it to get us on the right path.
So not only can you slide on snow but you have a healthy planet.
(END VIDEOTAPE)
QUEST: Interesting. I'd like to know about your journey to answer the call, #CallToEarth.
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[15:45:00]
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QUEST: Disney appears to rediscover its magic, the shares are up more than 3 percent, it had stellar earnings yesterday after the bell. And the
company says its theme parks are roaring back to life. The division's quarterly earnings more than doubled from a year ago.
Subscriptions to Disney+ have picked up 12 million in the last quarter, way above expectations. Disney+ added only 2 million subscribers during the
previous two. Brian Stelter like I say with us now.
I'm going to be a carping one here, Brian. The critics say, well, it's all to do with special offers, promotional rates, bundling everything else
together.
Am I being mealy-mouthed here?
(LAUGHTER)
BRIAN STELTER, CNN SENIOR MEDIA CORRESPONDENT: It's important to note what they are doing, the strategies that are effective, to get people into
Disney World. But -- and I mean the Disney World, I don't mean the theme park; I mean the Disney universe, whether you're paying for a subscription
or going to a theme park.
But that is what Disney needs to do to get the feet in through the proverbial door and it's working. So, yes, there are discounted rates, some
promotions, some attempts to juice subscribers to Disney+.
But I think what we're seeing here is a fundamental story that Disney and other big media companies are telling, a fundamental story. You either
believe it or you don't. The move to streaming is a huge, multiyear move, causing hundreds of millions of people to sign up for streaming.
And when you do that, they're more likely to go to the Disney parks and go ahead and buy other merchandise, et cetera, et cetera. That's a
foundational story that feels quite true to many investors.
So as we see the stock jump up and down, we're starting to see a reset or a recovery when people realize that fundamental story although some quarters
aren't as strong as others, that fundamental story is still intact.
QUEST: So the art now is to keep people. The art now is to -- sorry, I forgot the other art, make money at it. They lost money. The streaming
service lost money. Netflix doesn't make money in that sense. I suspect we won't make money on CNN+, HBO Max.
How do you make money?
STELTER: When you talk to these executives who run the streaming services, they acknowledge it is an incredibly hard challenge. They say you can't
possibly have enough content. You need to keep making more and more and more, even the Disneys of the world feel they need to make more and more
content.
Because what are these if not super networks?
These streaming services are a bundle of a variety of what we used to call cable networks but they're presented more on demand than they are live.
This is in some ways, there's nothing new under the sun, nothing new in television. This is a new way to do something old.
[15:50:00]
STELTER: And you're right; the issue now is, they've built this, created so much content, invested now years into the future and it is very hard to
turn a profit with these streaming services.
That is, I think, in some ways that is going to be the story of this year and next year.
Can any of these services start to create, to reduce churn to the point where there is a healthier business at the bottom line?
QUEST: Brian Stelter, thank you, Brian Stelter with me.
The picture behind Brian Stelter, of course, a picture outside of New York, where it was clear and sunny.
In Hawaii, looking at your picture there, Brian, not you --
(CROSSTALK)
QUEST: -- get you out of the way, thank you.
Now it's just after 10:30 am in Hawaii and the beaches are emptier. That's a live picture from Kauai. Now the beaches are empty; tourism hasn't got
back to prepandemic levels. Officials hope that will soon change as the state's attorney general expects travel restrictions to fade away in the
spring, barring another variant or such.
Isn't that gorgeous?
Look at the wonderfulness. For now, visitors must still prove they're vaccinated to avoid testing or quarantine. Peter Ingram is the CEO of
Hawaiian Airlines.
I've lost all, any sympathy for you, having seen the magnificent live camera shots of beautiful weather where you are.
But look, I looked at your numbers, Peter, and the reality is domestic travel is going to come back. It's the international bit that is going to
give you the biggest headache to get back, particularly Japan.
PETER INGRAM, CEO, HAWAIIAN AIRLINES: Well, I think that's a reasonable assessment, Richard. In fact, domestic travel was back by last June and
July to more than 100 percent of where it was before the pandemic.
So we've had a little bit of a roller coaster in the back part of 2021, with the Delta variant and then Omicron. But I have all the confidence that
domestic is going to be back very, very soon.
And we're seeing bookings tick up now that Omicron is easing. We've got Australia coming back now; we've started flying to Australia, starting in
December of last year. And what we're really looking for is an airline.
And the state is really looking for, is an easing of restrictions in Japan that will make it easier for the Japanese visitors, which are the key part
of our international market, to come to Hawaii. We know the pent-up demand is there; it's just a matter of people being able to do it.
QUEST: Now you may not -- you're not parry pursue (ph) with Spirit or Frontier but more consolidation in an industry like Spirit and Frontier or
whatever stage, whether full service, low cost or ultra low cost, it creates opportunities and puts people in play.
Do you take this as a moment to look around yourselves, to see if there's a deal to be done?
INGRAM: Well, I don't think that this particular transaction really makes a huge difference for us. Neither Spirit nor Frontier flies to Hawaii right
now. It really doesn't affect our competitive environment.
We're obviously going to always look out for the best interests of our team and the best interests of our guests, the best interests of our
shareholders. But nothing about this deal really changes that outlook.
QUEST: And if we look at your 787s, now they're delayed until 2023 -- Q1, Q2. Now that would be find if they were incremental, if they were adding to
capacity, then you might be glad not to have them. But they're to replace older 330s, which are less fuel efficient.
So is this going to be a minor but an inconvenience of a burden?
INGRAM: Well, we've already extended some leases of the A-330s we have so we haven't had to shrink our fleet. And I think the 332-100s that we're
flying, that have been a terrific international and long haul airplane for us are going to be available.
And we'll be able to continue extending leases if we have to. So the 787s for us are incremental as well. And we can manage the delay. But obviously
it's an airplane we're excited about getting.
QUEST: And for good reason. It's very popular with passengers. When we look at now the state, if you like, state of the airline post-pandemic,
you've done some phenomenal work in terms of keeping things going.
Now as -- I suppose all carriers are looking at where to go next, when the opportunities arise, as they are.
So for Hawaiian, what is the opportunity you want to take advantage of?
INGRAM: Well, our team has done a fantastic job managing through this pandemic. And the real credit goes out to everyone who works for Hawaiian
Airlines for that.
[15:55:00]
INGRAM: We've built back the domestic part of our network and really seen the recovery of that in 2021.
The next step for us is bringing back the international. And we're continuing to make sure we evolve our airline to serve the needs of our
guests better and better every day. We've made it so our Hawaiian miles never expire; we've eliminated change fees.
So we're thinking about how we can serve our guests better and allow our team to do the great job they always do.
QUEST: Peter, it is lovely to have you on the program. As always, sir, appreciate your time. Thank you.
INGRAM: Thank you, Richard.
QUEST: The last few minutes of trade on Wall Street. Down most of the day, we're just off the lows of the day, 1.5 percent, pretty ugly. It's all
about the hawkish comments from one of the Feds, James Bullard.
Disney is one of the few Dow components that's still up, Boeing's going (INAUDIBLE), Coca-Cola hanging on to the gains. I suppose if you took
Boeing out of that, bearing in mind the losses of Microsoft, Honeywell, Cisco, 3M and Apple, Boeing is such a heavyweight, it's pulling the whole
thing up dramatically.
If you took Boeing out, it could be down 800-900 points. We'll take a "Profitable Moment" of sorts, after the break.
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QUEST: Tonight's "Profitable Moment": travel is slowly but surely getting back to something approaching normality. It's not going to happen quickly,
we know that for a fact.
And when people do travel, they may find that prices are going up across the board. Inflation, as we know, the reason I mention travel, of course,
is we had Hawaiian Airlines on the program, the CEO, who talks about travel coming back.
But we also, of course, had the CEO of Kellogg's on tonight's program. At both ends, it seems, whatever you choose to buy, you're going to see things
getting -- you're already seeing things getting more expensive.
But here's the crucial part. As the Fed moves, we're going to see the economies getting tighter and that's going to be even more difficult across
the board, too. So I guess -- I don't want to leave you on an unpleasant note or a down note as we end our Thursday together, because the market is
sharply down.
But it does mean economies are moving to solid ground rather than perhaps the uncertainty and the froth that we've had so far. Down 510. Oh, well,
closing bell ringing on Wall Street 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.
END
