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Escalating Violence in Ukraine Moves Closer to Civil War, Threatens Peace in Europe; Boko Haram Claims Responsibility for Kidnapping Nigerian Schoolgirls; News Phase in Search for MH370; Warren Buffett Talks Housing Market.

Aired May 5, 2014 - 13:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


WOLF BLITZER, CNN ANCHOR: Welcome back, I'm Wolf Blitzer reporting from Washington.

The escalating level of violence in Ukraine now centers on Slavyansk. A Ukrainian military helicopter was shot down there in eastern Ukraine. Ambulances shuttling the wounded from battles with pro- Russian separatists.

The Ukrainian military is fighting to take back land seized by the militants but the Russian foreign ministry says the escalating violence threatens peace across Europe and moves the country closer to civil war. The spreading violence in Ukraine could show an expanding Russian appetite for more of the country, so where will it end? Who's going to stop the pro-Russian militants? And all of this coming, only days away from national elections.

Our own Arwa Damon is joining us from Donetsk in Ukraine.

Arwa, what's the feeling on the ground? How worried are they about an all-out civil war?

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: Very worried, Wolf. People are absolutely terrified. Not just about the consequences of an all-out civil war but what will happen if the Ukrainian forces decide to move into these various cities and use military means to try to regain control over the various buildings in the hands of the pro- Russian separatists, many of them in residential areas, in the very center of these cities.

They're also greatly worried about what the consequences will be of a potential Russian invasion. On a more day-to-day basis, there's this overwhelming sense of lawlessness. People being picked up off the streets. The pro-Russian camp acting with complete impunity. There's no authority for anyone to turn to. Basic things like turning to the police force if something happens to you, that's not an option for people here anymore. They're trying to cope with seeing the very disintegration of their entire society, and basically of their entire lives.

BLITZER: So what's the likely -- between now and the elections at the end of the month, what's the likelihood this is going to spread? Really, I mean, we know there's an all-out civil war in Syria. You've covered that war. What's the likelihood we could see the start of that kind of bitter awful battle going on?

DAMON: Well, that's difficult to tell at this stage, Wolf. And also it's an issue of various people within the society becoming more polarized against one another. The more moves the Ukrainian government makes, the more bitter people here grow against it, at least those in the pro-Russian camp. What's also of great concern is what's going to happen when this referendum takes place. The pro- Russian camp plans on moving ahead with it on May 11th. They do believe that they will get the votes, or that it's going to be something of a foregone conclusion, that they will vote to be their own federal entity at least for now. And then that's supposed to lead on to another referendum, asking people whether or not they want to be a part of Russia. So there's so many uncertainties and unknowns in the future that are keeping everyone here on edge. And of course, everyone fearing the worst-case scenario. And that is, as you've been saying, an all-out war.

BLITZER: An all-out civil war. Something we hope can be avoided, cooler heads will prevail.

Arwa, thanks very much.

Nigeria, London , D.C., all had protests over the weekend. People taking to the streets to help bring back more than 200 kidnapped schoolgirls in Nigeria. Just ahead, how the Nigerian government responded.

(COMMERCIAL BREAK)

BLITZER: It's a parent's worst nightmare. Your child goes to school and never returns home. That's exactly what is happening in the West African country of Nigeria. The terrorist organization, Boko Haram, has claimed responsibility for kidnapping more than 200 schoolgirls. Not only that, today, in a video, the leader of Boko Haram says he will sell, sell the girls.

CNN's Vlad Duthiers is joining us now.

Vlad, this happened three weeks ago. President Goodluck Jonathan of Nigeria says he does not know where the girls are. What is the Nigerian government doing to find these girls? Have they asked the U.S. for specific military or security help?

VLADIMIR DUTHIERS, CNN CORRESPONDENT: Wolf, we know that the president yesterday said that he felt confident that the girls would be returned home. He said he has directed his military security agencies to do everything to find these girls. He's also said he's talking with neighboring countries, Cameroon, Niger, Chad, to effectively garner support for what, now, we understand that having Boko Haram claim the fact they did this, means now these children could be in some of those neighboring countries.

In fact, the parents have been worried about that all along. They had actually said to us they've seen convoys filled with young girls and militants going into the -- on a road leading into Cameroon. And this is what they were afraid was going to happen, that the supposed leader of Boko Haram saying he is going to sell these girls in a marketplace, what these parents did not want to hear. Unfortunately, the military has not been able to do anything to bring these girls home, Wolf. It's been three weeks and the parents, not only the agony of having the children taken in ht dead of night by these armed attackers, but now understanding they may have been sold -- Wolf?

BLITZER: The Nigerian government, Vlad, is criticizing the girls' parents for not fully cooperating with police? What's that about?

DUTHIERS: It's a head scratcher, Wolf. Nobody -- I mean, you know, if you are going to want a dragnet to bring these girls home, it would be great to have pictures, names. But that doesn't mean you're not able to do your job. You are one of the largest militaries in Africa. This is something they should have been doing from the very beginning. That's what the parents we've spoken to on the ground have said. Not only were they angry right after this happened because they didn't see any discernible movement by the military to bring these girls home. What they told us is they were risking their own lives to go into the forest, armed with sticks, with stones, whatever they could get their hands on, to bring their daughters or sisters home. The military wasn't doing the job.

Now three weeks later, the president comes out and says it would be easier to carry out the search-and-rescue operation if the parents would provide names and pictures. It sounds -- you know, we talk a lot about this. In the United States, when there's an Amber Alert, a child goes missing, it feels like the entire country is looking for that one particular child. Here, we're talking about 200-plus girls, gone missing in the middle of the night, three weeks later, no one knows where they are.

BLITZER: Vlad, they don't want the parents to release pictures of their daughters because they're fearful if the girls' pictures show up on television, the terrorists are going to torture them even more. Is that right?

DUTHIERS: That's right. The parents we've spoken to have said they know the militants have told them if they see pictures in the media, if you release names, that you will put your daughter's lives in jeopardy. That has been relayed to us by parents on the ground. This is why they've been reluctant to do so. There's been some media outlets have been able to get names and pictures that we're not able to verify. But this is what they've said to us. And the idea you would put this child's picture on a screen or in a newspaper and jeopardize that child's life, that's what the parents are worried about, Wolf. They know the military -- they have said the militants are watching the media, they're certainly watching what we're doing, and if they were to see those pictures, harm could come to those children -- Wolf?

BLITZER: Hope it doesn't happen.

Vlad, thanks very much.

Vlad Duthiers is on the ground for us, and he has been there since the beginning of this crisis. We'll continue to cover this story for our viewers in the United States and around the world.

Other news we're following, the search for flight 370 could be going back to square one. We're going to tell you why it might also mean going into unchartered new territory.

(COMMERCIAL BREAK)

BLITZER: Later this week, Australia, China and Malaysian leaders will meet to talk about the search for flight 370. After two months of searching, they'll lay out what the next phase of the investigation will look like. One thing is almost certain, the new search area will be much bigger than the current search area.

Let's bring in our panel of experts, CNN aviation analyst, Peter Goelz, former NTSB managing director; and CNN law enforcement analyst, Tom Fuentes, a former assistant director of the FBI.

Guys, listen to what the deputy prime minister of Australia said about the new challenges that the search will entail.

(BEGIN VIDEO CLIP)

WARREN TRUSS, AUSTRALIAN DEPUTY PRIME MINISTER: We know that the water is very deep. And for the next stage involving sonar and other autonomous vehicles, potentially very great depths, we need to have an understanding of the ocean floor to be able to undertake that kind of search effectively and safely.

(END VIDEO CLIP)

BLITZER: All right, Peter, this sounds like a brand-new almost start- from-scratch monumental task.

PETER GOELZ, CNN AVIATION ANALYST: I think it is, in some ways. They're going to have to get new vehicles that can go down to greater depth and can be there for the long haul. They can't be pulling them up, you know, every 20 hours. These things are going to have to stay down and search the bottom of the ocean and map it. And it's going to be months and months.

BLITZER: And apparently, this trilateral group, Malaysia, Australia, China, they're almost going to start from scratch recording the data that was collected, the Inmarsat satellite data, the pings, all that stuff. They're going to take another fresh look at it with some other outside experts to see if maybe they're not even looking in the right place to begin with.

TOM FUENTES, CNN LAW ENFORCEMENT ANALYST: Right. This time the fact that that China's going to be included is significant. They have the space program. They have some of the best mathematicians in the world. So have them get involved, along with the Australians, along with the others who are looking at this.

BLITZER: Why not the U.S. being involved?

FUENTES: I think the U.S. is involved -- (CROSSTALK)

BLITZER: They talk about these three countries.

FUENTES: Well --

BLITZER: The U.S. has the best space program, the best satellite program. The U.S. has the best kind of information on a situation like this.

FUENTES: The U.S. has been looking at it with them from the beginning, NTSB and --

(CROSSTALK)

BLITZER: But shouldn't they be part of the real core group?

FUENTES: Well, I don't --

(CROSSTALK)

BLITZER: A U.S.-made plane, a Boeing.

FUENTES: Yeah. I don't know to what extent they're being excluded, but I would think it's just more on top of what they already have.

BLITZER: You think the U.S. should be intimately involved, just as these other countries?

GOELZ: I think they should. I think, from a support standpoint, they are. NTSB and FAA officials have been out there from the beginning. I think they're getting ready to stay for the long haul. But it's expected. Australia, China, Malaysia, they're going to take the lead. They're going to pay for it.

BLITZER: Malaysian authorities -- you're a former FBI assistant director. You've worked with Malaysia on various counterterrorism issues. They arrested 11 suspected terrorists. They insist this roundup has nothing to do with the disappearance of Malaysia flight 370. What's your analysis?

FUENTES: What I've learned about that case is it's been ongoing for more than a year. So it precedes the event of the plane going missing on March 8th. It's in an outer area of Malaysia. And the Malaysians have been working with the FBI on this case. Again, it's a year-long case they were working on.

BLITZER: It doesn't look, at least as of now, as if it has any connection at all to the disappearance the flight?

FUENTES: No, other than the terror groups constantly make the threats of all the things they're going to do, so they have to take a look at it. The group was under very strong surveillance for this year. But it's not like they were out free to go do anything.

BLITZER: But is there any indication any of these alleged terrorists are boasting they had a role in the disappearance?

FUENTES: No.

BLITZER: As far as you know, no one has claimed credit or responsibility for this disappearance?

FUENTES: No one has, particularly this group, no one specifically has.

BLITZER: Where do we go from here?

GOELZ: Well, I think probably in about a week or ten days, we'll see a new plan announced. My guess is they're going to have to deal with the families by issuing a presumptive certificate of death for those families that need it, so they can plan their lives and start to go forward. I assume they'll be a large cash payout in accordance with the treaties. And we're just going to be into it for the long haul.

BLITZER: These families, so many of them, if you listen, they don't want to believe their loved ones are dead. And they're not ready to give up yet, until they see at least some wreckage, at least not yet.

All right, guys, thanks very much.

Coming up, Warren Buffett's nickname is, of course, the Oracle of Omaha. Now he's predicting the future of the housing market. You're going to love his explanation of why he isn't worried.

And all those baggage fees. Thanks to passengers, the airlines are making some sky-high profits. Stand by for that.

(COMMERCIAL BREAK)

BLITZER: Despite a strong jobs report Friday, an all-time high for the Dow last week, Wall Street is off to a sluggish start today. Take a look at the big board. There you see if down about six points. Part of that is due to the winding down of the earnings season. And escalating tensions in Ukraine also seem to be making investors nervous.

Here in the U.S., the big data breach at retailer Target has claimed a casualty. Target's CEO Greg Steinhafel is out after 35 years with the company. You'll recall private information of as many as 110 million customers was believed to have been compromised in that breach. Cleaning up the mess has cost the company at least $60 million in losses so far.

If you wondered if the airlines are making a profit off of all of the baggage fees, guess what? They are. A new report just out says all of us are paying a lot more. The major carriers have cashed in big time.

Erin McPike is here, going through the report for us.

Erin, what do the numbers tell us? ERIN MCPIKE, CNN CORRESPONDENT: This is a new report from the Department of Transportation that just came out a few hours ago. The U.S. Airline industry has gone through a tumultuous period. They weren't always so profitable. In some years, in the red. But these ancillary fees have really boosted their profits.

Take a look at some of these numbers. Just in 2012, the U.S. airline industry made an overall profit of $98 million. Last year, that jumped to $12.7 billion. So a huge jump there in baggage fees were a big part of that. $3.3 billion in profits in 2012 alone, so a quarter of the profit for last year.

So let's go through some of what the airlines made. Delta collected $833 million from baggage fees in 2013. United, $624 million. U.S. Airways, made $528 million. American Airlines made $505 million. So you put those two together, that's over a billion last year for those two. Spirit Airlines with $211 million.

On top of that, one of the other fees for changing your reservation, they can charge you 100 bucks for that. In 2013, the U.S. airline industry profited $2.8 billion

BLITZER: That billion?

MCPIKE: Billion dollars?

BLITZER: Some airlines, they want to charge you were carry on if you put your bag in the overhead compartment, they will charge you $25 or $30.

MCPIKE: And they will also charge you for extra leg room if you're tall. But as you know, Wolf, this is Washington, so we're seeing a number of trade organizations push for legislation so that airlines will have greater transparency in the overall purchase price of a flight. Senator Bob Menendez is pushing that legislation. And he's making another big push today.

Also, we are seeing local airport executives say to the airline industry, look, you should be paying more for access to our airport and infrastructure.

BLITZER: All right, Erin McPike, thank you very much.

Housing recovery in the United States has taken years to get off the ground. Housing starts finally reached $1 million this year. That would be the first time since 2007. But if you're still wondering how a potential investor is affected, Warren Buffett says have no fear.

CNN's Poppy Harlow spoke with Warren Buffett this weekend. Poppy is joining us from New York.

Poppy, so what is Buffett's rational for the housing market comeback?

POPPY HARLOW, CNN CORRESPONDENT: Well, there's his serous answer and, of course, a little joke. We'll get to that. This was at the annual shareholder meeting for Warren Buffett's company, Berkshire Hathaway. Some 38,000 people, believe it or not, descended on Omaha to hear what the so called or Oracle of Omaha had to say about the U.S. economy, the housing market. We also talked to him about issues like executive compensation. But he made news last week saying the U.S. housing market has not improved as quickly as he had anticipated. When you look at the numbers, the applications for mortgages hit a 14-year low in this country in the first quarter. That is far below where it was when we were going through the financial crisis.

So I wanted to ask him what his outlook was because so many of his businesses are in the housing segment or exposed to it.

(BEGIN VIDEOTAPE)

HARLOW: The housing market is not improving in the pace you would wish to see. Are you worried about another decline?

WARREN BUFFETT, CEO, BERKSHIRE HATHAWAY: No. No. It just hasn't improved at a fast rate. Housing prices are still reasonable. The financing is fabulous. It's out of sight. Hormones are still out there. Families that are horrible get tired of living with their in- laws. You have got some things going for you.

(END VIDEO CLIP)

HARLOW: And there you hear it. He is bullish that the housing market is still recovery, not as fast as he would like to see. But saying hormones cause people to want to have children and not want to live with their in-laws.

I will say he got a lot of questions about how the U.S. economy is doing because there is a growing income divide, and he said, quote, "American business is doing extraordinarily well." We know that with the stock market highs we have seen. But still there is that divide with so many people still, despite how well the market does, that cannot seem to get by on what they're making.

BLITZER: You had a chance to speak with Mark Zuckerberg, the founder of Facebook. What's he saying?

HARLOW: Well, we had a chance to ask Warren Buffett about Mark Zuckerberg. We wanted his take because increasingly some people have been saying, with Facebook making all of these acquisitions, Mark is so young as the CEO of Facebook but already so successful, so what does Warren Buffett think of Mark Zuckerberg? Listen.

(BEGIN VIDEO CLIP)

HARLOW: Looking at rising corporate leaders in America right now, I would like your take on Mark Zuckerberg.

BUFFETT: He's a remarkable guy. I don't know him well. He joined our Giving Pledge and he's changed the lives of billions of people around the world. It's remarkable what he has done. He's done more for the world than -- I was doing nothing at that age.

(LAUGHTER) (END VIDEO CLIP)

BLITZER: I have a hard time believing Warren Buffett was doing nothing at that age. I think he was building up to be the investor that he is today. But interesting to get his take on Mark Zuckerberg.

We also talked about the issue of executive compensation that he's been very vocal about. He was asked in the meeting what the next CEO of Berkshire Hathaway, his successor, should make, and he said that they deserve to make a lot, but the question is how much money will they accept. So stay tuned. More from Warren Buffett ahead on that -- Wolf?

BLITZER: Did he give people specific advice in terms of where to put money. In other words, does he name companies he really likes?

HARLOW: He never does. You can look at where Brookshire Hathaway invests. They are in a number of big banks and conglomerate big companies. But he will say be a long-term value investor. Put you money in the market. And over time -- I'm talking decades -- he believes the market won't fail you, Wolf. That's his strategy.

BLITZER: I'm sure you will speak to Mark Zuckerberg at some point in your career.

(LAUGHTER)

Poppy, thanks very much.

And if you want to check out Poppy's interview with Warren Buffett in its entirety, go to our "CNN Money" website.

That's it for me. Thanks very much for watching. I'll be back 5:00 p.m. eastern in "The Situation Room."

NEWSROOM with Martin Savage starts right now.

MARTIN SAVIDGE, CNN ANCHOR: Thank you, Wolf.