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QUEST MEANS BUSINESS
President Trump Makes First Official Visit to Ireland; World Leaders Mark 75th Anniversary of D-Day; U.S. Senators Unveil Resolutions to Block Weapons Sales to Saudi Arabia and UAE. Aired 3-4p ET
Aired June 5, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: An hour left to trade on Wall Street and things are looking good. After the "bon ami"
of yesterday, the good mood continues. The market has been up with the exception of one, minor wobble in the middle of the day, but look at this,
we're just off the top of the day, a gain have some half a percent. Strong gains across the board.
Cisco is at the top. Walgreens is at the bottom. Walmart which had its annual meeting is near the top two. And if you want to know what's
happening, these are the market reasons why.
It's all about trade. Talks between the U.S. and Mexico begin this hour. Some are warning, all the trade conflicts could lead to a recession. Lower
profits for airlines. IATA's Chief Exec says the industry is facing headwinds. And turn back. Ships and planes rerouted as new restrictions
on travel to Cuba take effect.
We are live in the world's financial capital, New York City on Wednesday, June the 5th. I'm Richard Quest. I mean business.
Good evening. Tonight's talks are about to begin in Washington, as they aim to stop a trade war, a new trade war on the U.S. southern border. In
this hour, the Secretary of State Mike Pompeo and the Vice President Mike Pence are hosting a Mexican delegation where they'll discuss tariffs and
the immigration issue.
Senate Republicans are pushing back against President Trump's proposed tariffs on Mexico warning they could derail the new trade deal with Canada,
the USMCA and President Trump himself is doubling down. He says the threats against Mexico are not a bluff.
The President was speaking in Ireland after his three-day State Visit to the United Kingdom. But Mr. Trump says Mexico has to stop the flow of
drugs and migrants across the U.S. border or else.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: ... they are coming up by the millions, Mexico can stop it. They have to stop it. Otherwise, we
just won't be able to do business. It's a very simple thing. And I think they will stop it and I think they want to do something. I think they want
to make a deal. And they sent their top people to try and do it. We'll see what happens today. We should know something.
(END VIDEO CLIP)
QUEST: Paula Newton is in Mexico City, Sunlen Serfaty is on Capitol Hill. We will have Paula first. What will the Mexicans be bringing to
Washington? What can they actually promise that might -- might -- assuage President Trump?
PAULA NEWTON, CNN INTERNATIONAL CORRESPONDENT: Yes, the key word there is "might." They're armed with numbers. Numbers that say that they have had
more deportations, they are assessing more migrants. They are giving out more humanitarian visas. What does this do? This tries to stem the flow
of those Central American migrants actually making their way through Mexico and heading north.
They will continue to say, Richard, that they are doing all that they can. They are prepared to do more. That border to the south is incredibly
But at issue here is really that support that they will be getting from those Senate Republicans in the United States. Mexico is prepared to go to
bat with more numbers that have to do about the impact that this will have to not just the Mexican economy, but the American economy as well.
And remember, they are dangling retaliation there, too. They have some targeted areas where they say they are ready to go if those 5 percent
tariffs are levied on Monday.
QUEST: Sunlen, how many Republican senators are likely to defect?
SUNLEN SERFATY, CNN CONGRESSIONAL CORRESPONDENT: Potentially a significant portion of them, Richard. Over the last 24 hours, we have heard from so
many Republicans up here on Capitol Hill, especially those Senate Republicans who are expressing their concern, their anger about these
They say point blank, it would be a mistake and they feel that they have a lot of support within their caucus for trying to block the tariffs from
They huddled with White House officials up here on the Hill yesterday, and they really gave them an earful saying what's your legal rationale for
potentially going ahead and imposing these tariffs, and they are pursuing avenues for how they can potentially block it.
Here's just a taste of that Republican sentiment up here on the Hill.
QUEST: Sunlen, the President has already lost once when some senators came against him, but it wasn't enough to override a veto. Is it your view that
there would now be enough for the two thirds to override a veto?
[15:05:04] SERFATY: That is definitely going to be the next question in this process. I think a lot of Republican senators are first waiting to
see what happens in this very critical meeting that's happening at this hour here in Washington between U.S. and Mexico. Vice President Pence, of
course, being in that meeting.
A lot of senators are pinning their hopes that there could be some resolution -- could be a resolution enough to stop the tariffs from going
forward next week. But if they do, it is very clear that they will have to take some tough votes. And the question, as you noted, Richard is, do they
have enough? Two-thirds majority to override a Presidential veto? That is a very, very steep hill to climb.
But I have to say, we have heard from so many Republicans up here on the Hill with their dissatisfaction for this plan, their opposition to the
tariffs, that that could be something that they could achieve, but of course, we'll see when and if that happens.
QUEST: Paula, Mexico -- it's a bit of a long stretch, isn't it though, when Mexico has to pin the hopes of preventing its own recession from these
tariffs on the back of U.S. lawmakers? I mean, is there nothing else they have in their own cupboard that they can offer up?
NEWTON: It is certainly the retaliation and the retaliation are those friends that they have along that southern border, the retaliation will hit
a lot of those states hardest.
But at the end of the day, Mexico has been here before where a couple months ago, Richard, I'll remind our viewers that the U.S. President had
threatened to close the border here.
Mexico had stepped up enforcement. There were some -- there was some movement in terms of their own policy. But the issue is here, Richard,
they are taking the President at his word.
They do believe that this time as Sunlen said, even though there is that opposition with the Republicans on Capitol Hill, they're wondering if the
President may just go ahead on Monday and impose those 5 percent tariffs anyway.
And in the words of Trump administration officials, keep the pressure on Mexico. I have to tell you, Richard, though, it is a tall order. Even if
Mexico wanted to come on side with everything that the United States wanted them to do, they lack the resources, they lack the strategic wherewithal
quite frankly to really stop what is the Central Americans who are coming through that very porous, southern border -- Richard.
QUEST: All right, Paula is in Mexico. Sunlen, whenever you hear any more from either the caucus or indeed those meetings, Sunlen, please, come
straight back to us and we'll take you immediately for more details. Thank you.
Now, the U.S. is challenging Mexico, and it really needs Mexico's help with China. We need to understand that we better understand exactly what's
Join me in our very own trade war room. Now, the issues at the moment are complicated. The Trump administration has triggered a host of trade
conflicts around the world at the moment.
If you look at what they've got, some are in progress, like Britain after Britain leaves the European Union, while Mexico and Canada are proxy wars.
And in the middle of it all, China is in the thick of it.
In fact, if you look at the China-U.S. tensions at the moment, and the issues that China has done, China is exporting far more to the U.S. than it
So the country is fighting in one might describe as an asymmetrical war. These are the measures that China has taken against American companies, for
China -- Ford has been hit with antitrust fines. The U.S. travel advisory issued. FedEx's investigations over Huawei. These are an entire range of
issues that are being discussed at the moment.
And in the middle of all of this, a brand new trade --arguably -- relationship, and an important one, that between President Xi and President
Putin. One calls the other his best friend.
Now, how does that play into an extremely complex trade war relationship? Fred Pleitgen is with me to discuss and report this.
Fred, I've shown the various issues that we have around the world at the moment. But the idea of a Russia-China trade angle, too, adds a new
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, I think it certainly does, Richard and I think it's something where you can really see
that the Chinese are continuing and increasing their outreach to the Russians to basically look for friends as things heat up with the
Now for Russia, China is by far the most important trading partner. So that's a relationship that's always been very, very important. But it was
in the past the case that China has sort of tried to balance out the fact that relations were bad between the U.S. and Russia and sort of tried to
keep warm relations with both countries.
But now that you have this trade war going on between the U.S. and the Chinese, you could really feel that friendship that's always been there
between Vladimir Putin and Xi Jinping really, I wouldn't say going to a new level.
[15:10:10 ] PLEITGEN: But certainly expanding a great deal. Both men today, after meeting in Moscow talked about how good relations are.
Vladimir Putin even said that he believes that the relations are better than they ever have been before.
And then he came out and blasted essentially the U.S. for what he calls breaching international norms. Let's listen to what he had to say.
(BEGIN VIDEO CLIP)
VLADIMIR PUTIN, RUSSIAN PRESIDENT (through translator): When discussing international and regional problems, it was stated that for most of them,
Russia's and China's views align or are very close.
In the joint agreement that we saw on strengthening global strategic stability in the modern era, we empathize the principled stance of Russia
and China on the unacceptability of jeopardizing the existing system of agreements on arms control and disarmament and nonproliferation.
(END VIDEO CLIP)
QUEST: Fred, we can't look into a trade in isolation, we have to look at it in geopolitical terms. And I'm always interested in, for example, the
relationship with Venezuela, China and Russia seeing things slightly different.
You look at Libya, you look at Syria, all these areas where there is a natural alliance between these other two countries, effectively against the
PLEITGEN: Yes, I think you're absolutely right. And I think one of the things, Richard that both these countries seem to have in common is that
both of them are very averse to regime change.
They believe that the U.S. sometimes is too offensive in its foreign policy that sometimes the U.S. aims too quickly for a regime change.
And if you look, for instance at China's role in Syria, we haven't really talked about a very much since the Civil War started in Syria, but yet the
Chinese have always had a presence there. They've always been they're embassy there. And they've always said that they don't back any sort of
regime change in Syria.
The same, of course goes for Venezuela. Today, the two men talked about Venezuela, so they see eye to eye on that. Very important for Vladimir
Putin today to say that in geopolitical terms, you're absolutely right, it is not just trade. It's things like defense as well that two countries see
eye to eye.
Now, that is the case, obviously, if you talk about all the places that you just mentioned, but then there's another dimension to that as well and that
is cooperation on a military level between these two countries.
And if you look at that, that's also something that has certainly been expanding as well when the Chinese recently took part in some gigantic
drills that the Russians held late last year, where the Chinese military was on hand as well.
And then if you look at the geopolitical situation, the U.S. does have issues both with Russia and with China in different places.
You have for instance, the South China Sea, the situation there where you have confrontations or at least issues between the U.S. and the Chinese
repeatedly, and then U.S. and Russia. I mean they have issues all the time basically, Richard.
QUEST: You got your work cut out for you. And it's not one bilateral relationship here one is analyzing; stay there, Fred Pleitgen is a Moscow.
Fred, thank you.
Now just look at what happened. Remember yesterday, a rollicking to 2.5 percent for the NASDAQ. We have 500 points on the Dow and stocks today are
up for the second straight day in a row.
We had a wobble at 11 o'clock in the morning. It actually went negative on the S&P, the Dow didn't, but we are just coming off the top, still good
gains, and it's because traders are optimistic that tariffs on Mexico might be avoided.
There was some negative economic data that was on job creation, the ADP survey and that raised the prospect of a rate cut from the Fed. And
bearing in mind of course, what the Fed Chair has suggested, Chair Powell has intimated that their next move could be a cut.
Europe and the markets were mixed. Mixed betwixt and between. The Italian stocks were down. The MIBTel fell. All the others were -- not by huge
amounts -- London and Germany eking out small gains.
E.U. has warned Italy again on rising debt and the word now is disciplinary action is warranted.
Coming up next, trade wars are stunning global growth, and the IMF is concerned. Some economists believe a recession is possible. Is the "R"
word coming back into our vocabulary? This is QUEST MEANS BUSINESS live from New York.
[15:17:05] QUEST: A warm welcome back. It is QUEST MEANS BUSINESS live from New York. And we are in the trade war room.
The IMF is warning that the standoff between China and the U.S. could shave $455 billion of global GDP in 2020. It is the equivalent of South Africa's
Now globally, that's right about half a percentage point on global output. So we need to talk about this in details. Get out your phones or your
devices at cnn.com/join. President Trump is calling for tariffs on Mexico to stop the flow of drugs and migrants, and on China to level the economic
So, are the President's policy goals worth the short term economic pain of tariffs? Cast your votes, cnn.com/join.
The recent escalation has become -- and the economists and business leaders rushing to downgrade their forecasts for the U.S. and beyond. At what
point does this trade war present a real risk of a recession? CNN's Clare Sebastian investigates.
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: We've got the hottest economy anywhere in the world.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT (voice over): There is a chill wind threatening President Trump's hot economy, his own trade policies.
(BEGIN VIDEO CLIP)
ANDERSON COOPER, CNN ANCHOR: Dropping a tariff bomb on Mexico.
TRUMP: From 5 percent to 10 percent, to 15 percent to 20, and then to 25 percent.
POPPY HARLOW, CNN ANCHOR: China will slap more tariffs on goods made here in the United States. Folks, this is what a trade war looks like.
(END VIDEO CLIP)
SEBASTIAN (on camera): In the past few weeks, we've gone from a relatively sunny outlook.
SEBASTIAN (voice over): The prospect of a potential deal with China and hopes for Congress to ratify the new NAFTA.
SEBASTIAN (on camera): To the prospect of a trade war on two fronts. So while most economists agree, the U.S. economy is relatively strong.
Forecasts are starting to darken.
SEBASTIAN (voice over): Morgan Stanley says if no deal is reached with China, there could be a global recession in less than a year.
Gregory Dayco (ph) led another recent survey of U.S. business leaders, they forecast a 60 percent chance of a recession in 2020.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: What if we have tariffs applied on all imports from China, which includes a lot of consumer goods, then you would start to see
much larger effects on the U.S. economy, you could think of a loss of about five tenths in terms of GDP growth.
(END VIDEO CLIP)
SEBASTIAN (voice over): Economists say once the tariffs trickle down to the consumer, the risks multiply. Consumer spending is about two thirds of
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: When you get into the 25 percent category, if you're a U.S. importer, there's no way to ameliorate that type of effect through
administrative effects or structural changes to your supply chain. You're going to have to pass those prices on to consumers.
(END VIDEO CLIP)
SEBASTIAN (on camera): An actual escalation in tariffs isn't the only reason to forecast gloom. There's another cloud on the horizon here.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: That's the biggest fear I think right now for the U.S. economy is that we talk ourselves into a recession.
(END VIDEO CLIP)
SEBASTIAN (voice over): Fear has already caused stock market volatility and that can get worse.
[15:20:10] SEBASTIAN: Another gloomy forecast, Bank of America just cut its outlook for corporate earnings by 1.2 percent because of renew trade
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: If businesses are pulling back on investments, deciding to delay investment plans, then that in itself leads to reduced activity
and in turn leads to reduce GDP growth.
(END VIDEO CLIP)
SEBASTIAN (on camera): Now, the big picture here is that last year, when President Trump started imposing tariffs, this was a much brighter economic
Now global growth is slowing effect of his tax cuts are waning, and if you add a trade war into this wintry mix, well, it may be too late to avoid
SEBASTIAN (voice over): Clare Sebastian, CNN, New York.
QUEST: With me, the former Chief Economist of JPMorgan Chase, good to see you as always.
ANTHONY CHAN, FORMER CHIEF ECONOMIST OF JPMORGAN CHASE: Good to see you.
QUEST: This is a very strange economic environment that we're in. The Fed raises rates. Everything takes a tumble under worry. Now the talk is
lowering rates, and I'm not I fully understand what changed.
CHAN: Well, what will change here is that there is greater risk that the economy can actually slow down and the Federal Reserve, the European
Central Bank, the Bank of Japan, they're all going to take a more defensive posture in order to try to neutralize the negative effects.
QUEST: But what predicated that slow down when growth is reasonably good, unemployment is low, inflation is low, and monetary policy is still
CHAN: Well, Richard, what we have here is monetary policy always impacts the economy with long and variable lags. So what the Federal Reserve does
this week, next month or next year, influences the economy 18 months into the future.
So that if we expect some sort of a bump along the road in 2020, the Federal Reserve has to be prepared to act soon.
QUEST: Is the trade war driving the slow down at the moment?
CHAN: Well, at this point, we are already starting to see business confidence taking a little bit of a hit. We're also starting to see global
capital expenditures, including domestic capital expenditure slowing down, and that usually signals what's likely to happen in the future.
Because remember that when you have slower capital expenditures, you hire less workers, you hire less workers, you get slower consumer spending.
QUEST: I'm trying to understand what the catalyst for all of this has been and what has -- what started this slow down?
CHAN: Everybody knows that one of the big drivers of global economic growth is global trade. When you have trade tensions, guess what? You
slow down global trade. Market participants assume that automatically means slower global economic growth, at some point in the future. The IMF
and the World Bank are also in agreement with that.
QUEST: Okay, so I'm choosing the words carefully so that it doesn't become a sort of a political statement, per se. But then the U.S. President's
policy of these trade skirmishes, wars, whatever, with China, with Europe, with Canada and Mexico is having a downward effect?
CHAN: Well, keep in mind that tariffs for most economies is something you don't want to do. But to the extent that you use tariffs as a negotiating
tactic, if you succeed, then the threat of that was actually a good strategy.
If you don't succeed in the negotiations, and you end up with tariffs and no agreement, at that point, it's not a successful strategy.
QUEST: We don't necessarily want to talk to you about this sort of -- the minutiae of the day to day gyrations of the market. But a market that fell
very sharply in May, six or seven percent on the back of worries, rallied yesterday, one or two percent. Now is up again, what message is the market
CHAN: The message is telling you that the trade tangents are negative, but every time they get some signals that we are going to make some progress
either with the Chinese trade negotiations or the Mexican trade negotiations, the market rallies.
And the market is also telling you that if the Federal Reserve comes to the rescue, if we have some of these negative headwinds, then the market is
also okay with that.
QUEST: Where do you stand -- time to come off the fence -- where do you stand on an inverted yield curve as a prognosticator of a recession? Do
you think this is what we're seeing now?
CHAN: I think that the yield curve is something you cannot ignore. But there are different yield curves, Richard, there is that 10-year to the Fed
funds rate, that's inverted. There's a 10-year through the three-month that's inverted.
The research that I've done focuses on the 10-year to the two-year and that hasn't inverted. I actually developed some research that finds that
whenever you get an inversion of that 10-year to two-year, which we don't have today, and you get the index of leading economic indicators dropping
for three consecutive months with a hundred percent track record as far back as you go into the day, it signals a recession.
QUEST: Hang on, hang on.
CHAN: And guess what? Today both of them are not giving you a recession signal.
QUEST: Hang on. What two signs am I looking for? The LEIs have to be negative for three months.
CHAN: Three consecutive months.
QUEST: Three months.
CHAN: And you need --
QUEST: Have we had any months?
[15:25:06] CHAN: No we -- well, right now in the month of May, we have some indicators suggesting because they look at it, this year, to the Fed
funds rate. And of course, the orders index is slowing down.
So you might get a softer number of May, but we have not had three consecutive ones. And guess what? That 10-year to the two-year has not
inverted. You need both of those signals to tell you a recession is coming.
And then on average, 11 months later, you get a recession. We don't have one.
QUEST: I am going to watch this closely.
CHAN: Please watch it.
QUEST: I will, but forgive me, I won't shake your hand with this one because unfortunately, I seem to have -- my pen seems to have leaked at the
prospect of all these inversions. Good to see you, sir. Thank you.
CHAN: Good to see you.
QUEST: Thank you. Global trade tensions are also taking a toll on the airline industry. The IATA, the International Air Transport Association is
slashing its profits outlook for 2019 by more than a fifth.
The Chief Executive, Alexandre de Juniac told me why warning bells are sounding.
(BEGIN VIDEO CLIP)
ALEXANDRE DE JUNIAC, CHIEF EXECUTIVE, IATA: We have revised down, you know, our previous outlook, you know, for three reasons. First of all, the
consequences of the trade wars and protectionism and international trade that has harmed severely the cargo business.
Secondly, you know, the macroeconomics, especially the fluctuation in currency and some consequence to the geopolitical events that have
triggered some rising cost -- cost of fuel and also cost of labor, cost of infrastructure.
And thirdly, some geopolitical measures that have been taken, you know, the whole strutting aspect are adding cost. So as a whole, it has an impact on
QUEST: Is it a worrying level yet? I mean, is it likely to get worse? Where is the balance of risk?
DE JUNIAC: First of all, you know, is it worrying? It's always you know, it's always worrying to see a downgrade, first of all. Secondly, you know,
the headwinds that we had identified that have happened, you know, we do not see them disappearing.
(END VIDEO CLIP)
QUEST: More from IATA's Chief Executive, Alexandre de Juniac later in the program. You're also going to hear from Lufthansa's CEO, Carsten Spohr.
He will talk about the many headwinds facing global aviation, particularly low prices.
As we continue tonight, President Trump promises a phenomenal post-Brexit trade deal for Britain, what's on the table and what's offered? And what
might still be part of it?
It is QUEST MEANS BUSINESS, live from New York.
[15:30:00] RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest, a lot more QUEST MEANS BUSINESS in just a moment. The U.K.'s Trade
Commissioner in the United States tells me what could be on the table in the U.S.-U.K. trade deal. And flight of shame, the CEO of IATA tells me
why airlines aren't fairly branded as major polluters. You are with CNN tonight and on this network the facts always come first.
President Trump is making his first official visit to Ireland as U.S. president. He had a brief meeting with the Prime Minister Leo Varadkar at
the airport in Shannon where they talked about the impact of Brexit on Ireland. Mr. Trump says he thinks it would all work out in his words "very
And then the president fly to Ireland from Portsmouth in England, there he took part in D-Day commemorations with other world leaders including the
queen. They honored the sacrifice of allied troops who left Portsmouth 75 years ago to storm the beaches of Normandy, an invasion that freed Europe
from Nazi control.
A new CNN poll shows a majority of Americans think President Trump will be re-elected in 2020. Fifty four percent of those questioned said he will
win, 41 percent think he will lose. His supporters point to a strong economy, those who dislike his leadership cite lying, racism and
incompetence as the main reasons.
A group of bipartisan U.S. senators have announced 22 joint resolutions to block weapons sales to Saudi Arabia and the UAE after the Trump
administration waived the Congressional review process for arm sales. A CNN report this year found Saudi Arabia and its coalition partners have
transferred weapons to al Qaeda-linked fighters in violation of agreements with the U.S.
We return to President Trump's visit to the U.K. and Ireland. In an interview on Wednesday morning, Donald Trump backed off claims that
Britain's health system, the NHS must be on the table in any trade negotiations between the U.S. and the U.K. post-Brexit.
There's fierce opposition to any perceived rolling back of British food and animal welfare standards which the U.S. might demand. Antony Phillipson is
her majesty's trade commissioner for North America, he's the British Consul General in New York. He joins me now. And good to see you, sir, obviously
you're in the U.K. for the visit as opposed to be sitting next to me here.
What did you make --
ANTONY PHILLIPSON, BRITISH TRADE COMMISSIONER FOR NORTH AMERICA: Indeed --
QUEST: Of the president's comments that in any future trade negotiation, everything must be on the table including the NHS although it's difficult
to see why that would be on the table, but there it was.
PHILLIPSON: So, I mean, first of all, good evening, Richard, it's a great pleasure to join you from here. I mean, I think I would just start if I
may by going back to the president's remarks in the business event that he did with the Prime Minister yesterday morning where they both talked about
the depth of the existing relationship and their shared ambition to take the relationship on to the next stage including through a bold ambitious
As you say, there's been a lot of comment about specific aspects, but I think the important thing is that the U.S. have been preparing their
negotiating objectives, we are preparing our negotiating objectives for when we're able to begin a negotiation and then we'll conduct our
negotiation in the interest of both economies.
QUEST: When do you expect that to happen? I mean, you're allowed to -- essentially, as I understand it under the Brexit and the EU rules, you're allowed to choose your dancing partners and you may even start to suggest
what sort of dance you would like, but you can't lead each other onto the floor, is that about right?
PHILLIPSON: I think that's probably a good way of describing it. Yes, so the U.K. and the U.S., as you and I have talked about before, we've been
engaging in a trade and investment working group since the Summer of 2017. We're both very clear about when we can do what including the need for
congressional and parliamentary scrutiny on both sides. But we are preparing for that moment once we have left the EU that we can then move
really fast into a substantive negotiation.
QUEST: Once the U.K. has left, that's the big problem, Antony. That is the big problem. I mean, October the 31st is the date, but we still know
so little about what the future arrangement will look like.
[15:35:00] Boris Johnson, if he becomes Prime Minister and your boss says he will, you know, leave on the 31st with a deal or without a deal. I
mean, what's your understanding of the current situation besides it being a mess?
PHILLIPSON: Well, it's very clearly uncertain as to what will happen and when. Although as you say that the next deadline is the 31st October, we
had been preparing to leave on the 29th of March and obviously that didn't happen, rather obviously. So we are now preparing for that next moment.
We will wait and see who the next leader of the Conservative Party, the next Prime Minister is and how they will conduct the next phase of the
Brexit negotiations, and then we will be able to work out what we can do, when -- to go back to you analogy, when we can lead our dance partner off
QUEST: But you see, the --
PHILLIPSON: You quite obviously point out, we don't know that yet.
QUEST: But the big problem is Customs Union, isn't it? Because if there's a Customs Union as some wish, then you are going to be hobbled in what you
can negotiate with the Americans.
PHILLIPSON: I think the key way I think we should look at this, is that you have two highly engaged economies already and a shared ambition to
deepen and strengthen the relationship between us including through a bold ambitious FTA as I say. The precise nature of our relationship with the EU
will obviously be relevant to what we can do.
But I wouldn't accept that if we ended up in one particular place, that meant that we couldn't do anything. And that's why we're having a broad
engaged discussion with the U.S. to see what is -- what is the art of the possible? And when we know -- when we have greater clarity on the EU side
of this, we will be able to put sort of more firm building blocks into place and begin a process that will deliver future jobs, growth and
prosperity for the people of both countries.
QUEST: The U.S. -- the current U.S. administration would much prefer the U.K. to just basically dump out and go for a free trade. I mean, listen,
I'm not interpreting, this is what President Trump has made claim, even today, he would like the U.K. out of the EU, no shackles and with a -- with
a full throttle U.S. free trade agreement. Is that realistic in this day and age?
PHILLIPSON: I think again, we have obviously talked a lot to our American colleagues over the last couple of years. I have always felt that there
are three, sort of key strategic objectives that our U.S. partners talk to us about. One is that we leave the EU in a way that allows us, allows us
to scope, to conduct a free-trade agreement and deepen the strength in going forward.
But there are a couple of other -- I think really crucial issues as well. One is, let's not maximize the disruption to the enormous amounts of
existing U.S. investment in the U.K. It's not all there because of our relationship with the EU, but quite a lot of it is. And then the third one
of course is the border in Ireland.
And we certainly hear in no uncertain terms from -- not just from Congress, but also sort of other partners in the administration that, that is a
fundamentally important issue to the U.S. So what we're looking to do is leave the EU, give ourselves both the legal competence and the scope to
negotiate a future agreement, minimize the disruption which is why, you know, fundamentally important part in the withdrawal agreement, obviously
implementation period that would give business a period of certainty and protect the hard one gains in the peace process in Northern Ireland.
Those I think are all really fundamentally important objectives to us and to the U.S. administration.
QUEST: When are you back in New York? Coming back soon?
PHILLIPSON: I'm flying back sometime next week --
QUEST: Excellent --
PHILLIPSON: And I look forward to seeing you soon in your office --
QUEST: Absolutely, come and visit, we've got -- we'll keep the seat warm for you in the studio. Good to see you, sir, thank you, I much appreciate
it as always, thank you.
PHILLIPSON: Thank you --
QUEST: After the break, the Director General of IATA talks about the highly competitive environment and gets the issue of the environment, why
the whipping boy has become aviation.
[15:40:00] (COMMERCIAL BREAK)
QUEST: Oh, welcome aboard Quest Air. I've just returned from Seoul and before you ask no, I wasn't in the middle seat at the back of the plane,
but that's another story for another day. The most important event of the year took place -- no, the aviation event of the year took place in South
It was the IATA Annual General meeting. And it comes as a crucial time for the airline industry. The headwinds are many. There's the trade wind --
trade war between the United States and China. Now, that has a major effect on the cargo business.
And then after two crashes and 346 deaths, Boeing and the 737 Max is still very much in crisis. There are those who are hoping that the planes will
be back in the sky soon. But there's no telling how long the reputational damage will last. The brand of the 737 Max may have to be completely
And then there's a growing backlash against air travel over the industry's carbon emissions. It is a perception that they must do more. Lufthansa's
Carsten Spohr told me the industry has faced down many worse crisis, but his concern is overcapacity in Europe.
(BEGIN VIDEO CLIP)
CARSTEN SPOHR, CHIEF EXECUTIVE OFFICER, LUFTHANSA: If I talk to my global peers here in Seoul, it's very much a European issue, overcapacity in
Europe, unfortunately especially in Germany, our whole market, so be it. I think it's an issue that locals carry us who have enjoyed a huge growth
path over the last years are now coming to the end of their business models.
So they're starting to slow down their growth. But they need growth to keep the costs low. At the same time, many legacy carriers have been able
to do their homework and are able to grow again on top of each other. And then, I think, at least in Europe, there's a final phase of consolidation.
So everybody is fighting for markets.
QUEST: Is there going to be more -- is there going to be more consolidation? I mean, where are the margins now? I mean, can't -- you're
interested in candor, you've said you're looking -- you're working off the candor, your company takes more of Thomas Cook if you were allowed to, to
take more. But the regulators are now going to start saying enough.
SPOHR: Well, I think there's two ways of consolidation. One way is one healthy airline taking over another airline. The other way of
consolidation is that airlines just disappear because they can't survive and that capacity, the passenger volume is distributed. We'll probably see
more of the second in the future than the first.
QUEST: Airlines are fitter today than they have been in the past.
QUEST: But are they fit enough? Are you satisfied that Lufthansa and your subsidiaries are where you want them to be for the next downturn that's
about to come?
SPOHR: Well, for our group, it's probably fair to say we're healthier than ever since privatization. To answer your question in more general, I think
distance has grown between the healthy ones and the ones who are less healthy, which is also a reason why consolidation is accelerating.
QUEST: The competitive environment in Europe is brutal. And you're competing against airlines that are prepared to sell tickets at a loss. Is
SPOHR: Well, as long as the environment is a level playing field, it's a fair competition.
[15:45:00] QUEST: So you all lose money on those tickets --
SPOHR: We all lose money, and the healthy ones will survive, the unhealthy ones will not. It's another question if it is responsible to do this from
an economic point of view, from an environmental point of view, even from a political point of view. There I have big doubts, I think is hurting our
QUEST: Right, answer that question. You've been tactful in saying big doubts, you're saying it's irresponsible.
SPOHR: I think it is, and it hurts the industry, it hurts politician's perspective of our industry, it hurts our image in public. So I think this
is something which in the end, the industry is taking some harm from.
QUEST: Finally, I want -- the environment. The industry has done huge amounts and is getting no credit for it in the public's mind. What's gone
wrong? I mean why does the industry get beaten up when it's not the worst offender, it's making huge strides to biofuels and offsetting and like and
yet, you're still being criticized left, front and center.
SPOHR: Well, I think part of it is communication as always. We probably should talk about it more often. We should be on CNN more often. The
second issue is of course the growth of the industry has overcompensated our efficiency gains. That's why I believe the industry needs to discuss
its growth path for the future.
Can there be blind growth as in the past? Some of the demand we have seen was not natural demand, it was created by crazy ticket prices. That demand
came on top of the growth of the industry by the fact that we're basically becoming more mobile. So, I think we need to unfortunately, look at
ourselves as well if we have created some growth which didn't need to be there.
(END VIDEO CLIP)
QUEST: Now, that's Carsten Spohr of Lufthansa. Alexandre de Juniac is the IATA chief executive. He says the perception of airlines when it comes to
pollution is unfair.
(BEGIN VIDEO CLIP)
ALEXANDRE DE JUNIAC, CHIEF EXECUTIVE OFFICER, IATA: Perception from the general public is totally unfair. It's totally unfair. First of all, we
are not the greatest polluter to present via emission. I don't -- I don't claim that it's not enough or that it will not grow, but I say it's 2
percent. There are other area that are probably more worse.
Secondly, we are the only one who have taken ten years ago, you know, very strong commitments not only to curb the emission, but to reduce them. And
thirdly, it's not only commitments in the air with nothing behind it. We have implemented successfully the programs at all levels, with every
industry members but also with 193 governments.
QUEST: But you're --
DE JUNIAC: And we are proud of that, but we haven't -- we haven't said that enough outside the aviation circles.
QUEST: You're losing in the court of public opinion.
DE JUNIAC: Yes, that's true because we haven't explained enough what we have done outside the aviation circle, and it's a nice story that we should
be proud of that we can -- that we can -- and when I say this story to those who are not informed, frankly, they change their mind.
QUEST: Is it --
DE JUNIAC: So I still hope that they will change their mind when they will have heard what we have to say.
QUEST: Is it -- whose responsibility is it to get this message across?
DE JUNIAC: Everybody.
QUEST: Is it -- is it IATA's?
DE JUNIAC: Everybody --
QUEST: Is it individual airlines?
DE JUNIAC: Everybody. It is IATA, but helped by our members because it's an enormous effort. We have to touch billions of people, and the key
decision-makers and the key influencers is also the industry, the aircraft manufacturers, the OEM, the airports, because everyone is contributing,
everyone has committed it's not only the airlines, everybody.
So we have to do our job together. And we will make it, we will -- and so it will be a general mobilization to explain, to explain something that we
are proud of, that we can be proud of.
QUEST: You've got a lot of explaining to do.
DE JUNIAC: Not a lot, only the truth and facts. What we are doing, you know, optimizing operations, using new technology, fuel efficient aircraft,
billions invested, cleverness, you know, go see a program, sustainable fuels, we have a lot -- we have lots of things to say that are really
efficient and convincing.
(END VIDEO CLIP)
QUEST: Alexandre de Juniac was absolutely on fire when he was in South Korea, and an excellent IATA session it was too. Now, we've arrived at our
destination, but where are we going to go? Well, I was going to go to Cuba, but maybe not. The U.S. ban on travel to Cuba is now in effect from cruise
lines to airlines.
The travel century is rushing to comply, having ramped up. Now, they're being told, no.
[15:50:00] (COMMERCIAL BREAK)
QUEST: World leaders have been commemorating the 75th anniversary of D-Day in Europe. An unsung hero of the 1944 landings was the DC-3 Dakota plane.
There were some 800 Dakotas that took part in the historic air-borne assault. Now dozens of them are gathered on British soil again to honor
that memory. One of the war-time Dakota pilots shared his own memories with CNN's Nick Glass.
NICK GLASS, CNN CORRESPONDENT (voice-over): That famous dolphin nose, a splendid row of them in varying livery. Everywhere you looked at RAF
Duxford, there were Dakotas with DC-3s and the military version the C-47 and the growing band of admirers.
We counted 24 planes in all, the greatest gatherings of Dakotas on British soil since 1945, all here to mark the D-Day anniversary. No historic
military transport plane is more revered, forever remembered as a crucial component in the allied victory.
Some 60 miles away in eastern England, nature has been reclaiming another old airfield, slowly but surely. Seventy five years ago, this was a brand-
new American air base. Dave Hamilton, 97 next month hasn't been back since the second World War as a young Dakota pilot, he took off from here on a
special mission on D-Day.
This was his first sighting of one of his old runways.
(on camera): How vivid is the memories of that night?
DAVE HAMILTON, D-DAY DAKOTA PILOT: Very vivid. In fact, I have a bunch of pictures taken three hours before a takeoff that night.
GLASS: Was that the first time you'd ever flown in Europe?
HAMILTON: It was my first combat mission.
GLASS: Your first?
HAMILTON: Yes, on yes.
GLASS: How old were you?
HAMILTON: Twenty one.
GLASS (voice-over): First lieutenant Dave Hamilton had a pencil mustache then, he was commander of one of 20 Dakotas on the night. They took off
just a few minutes before 10 p.m. on June 5th, 1944.
(on camera): You were the first guys in.
HAMILTON: We were the first ones in, and that meant we were the first ones out.
GLASS: What altitude over the Channel?
[15:55:00] HAMILTON: Fifty feet, just above the water.
Stayed under the German radar.
GLASS (voice-over): Dave had 18 paratroopers on board, the guys all painted up and combat ready.
HAMILTON: I dropped my paratroopers a quarter after 1:00 in the morning, and then came back home with lots of holes in my airplane. And I had
nobody injured or hit, unbelievable, but they just hosed us, you know as I ran into a water shower.
GLASS: We heard it before we saw it. The special Dakotas flied past in honor of a 96-year-old fly-boy.
UNIDENTIFIED MALE: Hey, Dave --
GLASS: Your plane, do you hear that?
UNIDENTIFIED FEMALE: Yes, just look up Dave.
HAMILTON: Hey, familiar sound.
GLASS: Seventy five years on here above an abandoned old American air base, a poignant salute from one veteran to another. Back at RAF Duxford,
they've been preparing for a commemorative flight and air drop.
HAMILTON: Whoever designed that airplane did a wonderful job. They ought to paint one in gold and put it on a mountain top somewhere and honor it
the way it ought to be.
GLASS: Luckily, Dave is going on a beloved Dakota again over to Normandy for the anniversary, but this time as a passenger. He's hitching a ride on
D-Day Doll. Looking forward to that?
HAMILTON: Oh, yes. I haven't done it since 75 years ago.
And this time we won't be hosed.
GLASS: Nick Glass, CNN, with Dave Hamilton and the Dakotas.
QUEST: We owe them so much.
QUEST: When Lieutenant Colonel David Hamilton flew his Dakota, he was part of that generation. They had barely any training. The aircraft that they
were building -- flying in had been thrown together. And no one really knew exactly what they were doing or how they were doing it. But they had
purpose and they had mission.
And there are many of us here today, most of us, many who owe everything -- the fact that we are very here to the way they flew and the way they
behaved. And that indeed is worth remembering today. And that's QUEST MEANS BUSINESS for tonight. I am Richard Quest, the markets, good day,
best of the day.
Whatever you're up to in the hours ahead, I hope it is profitable. I think we're at the best of the day. Yes, indeed, we are.