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Quest Means Business
Two Top Executives Leave McDonald's After The CEO Admitted To Having A Consensual Relationship With An Employee; IAG Sets Its Sight On Air Europa And Promises To Turn Madrid Into The Next Travel Mega Hub; Transcripts of Key Testimony Released in Impeachment Probe; Flights Diverted as New Delhi Chokes on Heavy Pollution; U.K. Parliament Chooses Hoyle as New House of Commons Speaker. Aired 3-4p ET
Aired November 04, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:14]
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: One hour to go before the close of trade on Wall Street, we have records on the
indices. The Dow has given back quite a bit, it was over 27,500. But we are still up over a hundred points. As the program goes on, we'll analyze
what's a record and what's not.
The S&P is up. The NASDAQ is up. And markets are up and these are the reasons why.
Two top executives leave McDonald's after the CEO admitted to having a consensual relationship with an employee.
IAG sets its sight on Air Europa and promises to turn Madrid into the next travel mega hub.
And Apple pledges to fight homelessness in California. It's a problem some say it helped create from the start.
Now live from London tonight. It is Monday, November 4th. I am Richard Quest and I mean business.
Good evening. We begin tonight with a C-suite shake up at the world's largest restaurant chain. McDonald's top Human Resources Executive is out
following the day, of course, when the President and CEO Steve Easterbrook was fired after a consensual relationship with another employee.
McDonald's Board determined Easterbrook violated company policy and demonstrated poor judgment. McDonald's shares are down. If you take a look
at the share price, you'll see it's down some three and a quarter percent, which is worse than it was during the course of the session earlier. It
was that second resignation that took the market down. So it's off three and a quarter percent.
Now, if you want to look and see exactly what's been happening at McDonald's, you can sort of order a burger and fries and take a view of
Easterbrook's legacy as the golden arches.
The Big Mac has his ingredients for success. What he did here was actually the reason why the share price nearly doubled. First of all, he led an
aggressive modernization plan that made McDonald's relevant again. He remodeled stores and crucially installed digital menu boards, and he used
artificial intelligence at his time as CEO and throughout of that, he doubled the stock price.
It hasn't always been though a Happy Meal. The French fries shows exactly where the recipe for failure is. First of all, though, the #MeToo
controversies. There were accusations of sexual harassment. Worker strikes at the franchisees. The divide, the fight for $15.00 demanding
higher wage. Allegations of bad corporate culture. And of course, ultimately the #MeToo.
The CEO went even though it was a consensual relationship.
You've got wage protests, culture concerns. So although the profits may be up, and arguably, the share price performed spectacularly, well Clare
Sebastian is following the story for us in New York. We'll talk about the ethics in a moment. From a purely financial point of view, even as he
announced better profits, there is still stagnation in the U.S. market.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: There's still challenges here, Richard, and crucially, competition is the big one. I want to show
you, yes, the share price for McDonald's has almost doubled since he took over, but this year, it's been struggling a little bit against the
competition.
Have a look, McDonald's versus Restaurant Brands International and Wendy's. McDonald's is up about six percent this year, but Restaurant International
Brands, which owns Burger King and Tim Hortons and Popeye's -- that's up more than 25 percent and Wendy's is up about 30 percent.
So they are doing better overall and there is a lot of competition out there, Richard. McDonald's, don't forget under Steve Easterbrook has had
various menu innovations. They brought in fresh rather than frozen beef. They brought in all-day breakfast.
Now we have Wendy's moving in with their own breakfast offering next year - that is really going to prove a challenge. So while the new CEO is
formerly the head of McDonald's USA, who has been part of these strategic initiatives, he is going to have to keep executing and that is why we see
some jitters on Wall Street.
QUEST: Okay, so his performance rose the share price, and it's questionable about some of the other policies. But the new person, the new
man taking over was there throughout.
So I mean, is the feeling that the change of power is just a change in the bureaucracy, or is there another visionary behind?
SEBASTIAN: I think most people are seeing this as continuity. In fact, the new man at the top Chris Kempczinski, he gave an interview to "The Wall
Street Journal" on Sunday, Richard and he said, this isn't going to be a radical strategic shift and a quote, he says, "The plan is working."
[15:05:09]
SEBASTIAN: So if you talk to analysts, and I've seen a lot of their thoughts today, they say like, we do think there might be some short term
disruption here. He has to build out his team a little bit. There might be some kind of waiting around for that.
But overall, the strategic initiatives are in place, and he is well- positioned to keep executing them. I do think some questions around that second departure today. The Chief People Officer, David Fairhurst. I
spoke to the company, they wouldn't confirm why but it isn't entirely clear which policy Steve Easterbrook violated, whether it was a prohibition of
all relationships between managers and subordinates or whether it was a disclosure issue -- Richard.
QUEST: Let's talk about that with our next guest. Thank you, Clare. In the letter to employees, Easterbrook wrote, "This was a mistake," talking
about his consensual relationship, " ... given the values of the company, I agree with the Board that it's time for me to move on. Beyond this, I hope
you can respect my desire to maintain my privacy.,"
Avivah Wittenberg-Cox is in Toronto, the CEO of 20-First and works with executive teams to help achieve gender balance. Let's talk about this.
What -- I mean accepting that McDonald's had a zero tolerance policy for senior management having relationships with subordinates, then it was
inevitable he had to go.
AVIVAH WITTENBERG-COX, CEO, 20-FIRST: Absolutely. Tone from the top and leadership, leadership, leadership. On issues like gender balance, there
is no other way particularly with the kind of power imbalances in a sector like this one, where most of management is going to be male and most of the
staff is going to be female. It's ripe for this kind of problem, so it accentuates even more the importance of role modeling from the top.
QUEST: Okay, so what should have happened here? I mean, I suppose one could arguably say, well, don't get involved in the first place. But if
you assume that Cupid's arrow strikes where it will, what should have happened?
WITTENBERG-COX: Well, what should have happened is interesting that you brought up the term of modernization because Easterbrook did embark on all
kinds of transformations in the company. What he didn't do is include in that transformation the issue of gender balance.
The company under his mandate has had over 50 sexual harassment cases filed against it. He hasn't really focused a lot on gender balancing his own
leadership team or Board. And so he's also not entirely proactive on this issue, which means that any fault in this area is going to be all that much
more magnified.
So what he should have done is realize that he couldn't embark on this kind of a relationship with the rules that are currently at play in this
organization, without every other man in the business thinking, well, it's okay to have relationships with subordinates.
QUEST: All right, so, in this situation, let's be blunt here. In this situation, assuming attraction has been -- is acknowledged and it is
consensual, then essentially, one has to leave. And it's unlikely to be the $16 million a year CEO?
WITTENBERG-COX: That's right, and we've seen it play out this way before, but the $16 million CEO should know what his actions will lead to and what
the choices are before they hit the press.
QUEST: Right. What is best practice/
WITTENBERG-COX: That part of being -- that's part of being a gender aware leader in a post #MeToo environment that these kinds of relationships --
QUEST: Hang on, hang on. Hang on. Let me stop you. Hang on. Hang on. You threw some great jargon in there. A gender balance in the post #MeToo
environment, but the problem is the real world. And in the real world, people do fall in love with each other. They do have flirtations,
particularly in industries where you're going to be working long and late hours in difficult circumstances, often overseas. What's the reality here?
What's best practice?
WITTENBERG-COX: The best practice is that leaders take their responsibilities on board, and realize that their personal lives will often
be affected by their professional lives. This is true for men and women. It's not any different and he has to realize that whatever he does will be
giving permission to everybody else in the company to do the same.
This is called the tone from the top and on issues of gender relations, consensual or not, there is still a power imbalance with anybody inside
that company that dates the CEO and that's what the focus of the #MeToo was about -- exploiting power differentials.
[15:10:10]
WITTENBERG-COX: Now, that he has done it, other people, other men in the company will be given an okay that this is condoned in that organization
and because McDonald's is already problematic on the issue of sexual harassment issues, gender issues throughout the company have been
highlighted in the past now for a couple of years. There was a massive walkout just last year of employees suffering from sexual harassment
issues. It dials up the strategic importance for the brand and the business. He can't go in there thinking this isn't important.
QUEST: Thank you. I appreciate it. Now, U.S. stocks are marching higher. The Dow and the S&P 500 and the NASDAQ are each in record territory.
Investors are hoping that U.S. and China will reach a full trade agreement.
Commerce Secretary Wilbur Ross expressed optimism over the weekend it could happen soon. If these gains hold, it'll be the first record close for the
Dow since July. The magic number is 27, 359. We are over it. Matt Egan is in New York. But Matt, what has propelled the market to this level?
MATT EGAN, CNN BUSINESS SENIOR WRITER: Well, Richard, I think it's safe to say that Wall Street's recent recession freak out is over, at least until
the next one. I think there's three big drivers here.
One, the U.S.-China trade thaw. That is a big deal because the trade war was the biggest concern. Two, the U.S. economy is doing better than people
feared and three, corporate America is making more money than people had previously thought.
And so that's what we've seen such a really sharp swing from bearish to bullish even by Wall Street standards. You know, just a month ago,
Richard, the CNN Business Fear and Greed Index was firmly in fear territory. Now it's an extreme greed.
If you look at the NASDAQ, which is a pretty good proxy for risk taking. It's up 27 percent on the year. And you know, I think that investors are
very happy that the U.S. and China appear to be moving towards this Phase 1 trade agreement. It's not the comprehensive trade deal that everyone hopes
for. And it may not actually roll back existing tariffs, but it's obviously better than this vicious circle of tariffs.
The jobs report that came out late last week, it showed the U.S. added 128,000 jobs in October. It's not gangbusters, but it's so much better
than people thought. And it's actually despite the fact that there was the GM auto strike, and corporate earnings also look relatively resilient --
Richard.
QUEST: But Matt, the issue here is, as the market once again gets to elevated levels. First of all, it is always at risk of a presidential
tweet or a misstep on trade. That will knock a thousand off it, but secondly, that there are people waiting to sell into this market, because
they believe it's overvalued.
EGAN: Yes, that's right. I mean, the higher you go, the more you have to fall when there's some sort of a setback. And as you pointed out, there's
just -- there's so much uncertainty about the trade situation.
Right now, everyone' is feeling really good about it. But we've seen this before. We've seen the U.S. and China move towards a trade agreement, to
some sort of a trade truce, and then it's all fallen apart because of these really deep structural issues. So we do have to watch out for that.
We also have to watch out for the fact that the U.S. economy is slowing. Just because people don't think there's going to be a recession doesn't
mean they're right. In fact, the New York Fed and the Atlanta Fed, they put out some pretty bearish forecast for the fourth quarter. They have
these now cast prediction models based on all the incoming data and basically, they're calling for about one percent growth that would be down
from 1.9 percent in the third quarter and three percent in the first quarter.
So there is slow down and each time you have one of these slowdowns you become more vulnerable to a shock such as a trade shock -- Richard.
QUEST: Matt, good to see you, sir. I'm back in New York tomorrow. I shall see you then.
EGAN: See you then.
QUEST: Thank you. Now, Heathrow, Frankfurt, Charles de Gaulle, Amsterdam, Schiphol. IAG now wants to turn Barajas in Madrid into Europe's next big
hub. And it has bought Air Europa to do just that.
And Apple becomes the latest tech firm to shell out funds for California's housing crisis. How Silicon Valley have contributed to the problem in the
first place.
(COMMERCIAL BREAK)
[15:17:10]
QUEST: There you are. Cutting the ribbon. And then lighting the lamp at WTM. That was the Sri Lanka stall today. The Minister and the High
Commissioner. WTM taking place in London. The biggest of course, travel - - well, the ITP is bigger, but it's still a significant travel market and we'll be talking more about the Greek Tourism Minister coming up in just a
moment or two.
Stay with travel and tourism, IAG is buying the Spanish carrier Air Europa for $1.1 billion. Now IAG already owns the Spanish airlines, Iberia and
Vueling and Level. And of course, it's also got British Airways and Aer Lingus.
Air Europa brand will stay for now. Crucially, the deal gives IAG a bigger share of traffic between Europe and Latin America. Air Europa flies to the
Canary Islands, the Americas and other parts of Europe from its hub in Madrid.
Barajas was the sixth busiest airport in Europe last year. Comfortably though, behind London, Paris, Amsterdam, Frankfurt, and Istanbul if you
take that as being a European airport.
IAG wants to move Madrid up and maybe even turn it into a gateway for Asia and South America. So here's the question for you to join into today. On
your phones, your mobile devices, your computers, or like that. We're asking you which is the best hub airport in Europe -- best hub airport --
London Heathrow, Charles de Gaulle, Schiphol or Frankfurt? Maybe I should -- and I'm going to take it as being in the reverse. Of course, the one
that gets least is the least favorite, cnn.com/join. The best hub airport where you would like for transfer, LHR, CDG, FRA, AMS. Anna Stewart is
with me. Why is IAG buying Air Europa? Now, pretty much -- oh, the whole of Spanish aviation?
ANNA STEWART, CNN REPORTER: Yes, they own the top two biggest Spanish airlines. Now, they will own the third. And this makes sense because it's
looking for growth. It is no breaking news story that Heathrow is at capacity. Where can it grow? Well, it's already put a lot of focus on
Spain, it's going to consolidate there. The question is, of course will it own too much of Spain's airlines? It is going to have 75 percent of all
domestic routes, so there could be a competition issue there.
QUEST: Right. But how's it going to differentiate between Iberia which is the main line brand, Iberia Express, which is the cheaper version for union
rules, Vueling which is the low cost carrier based out of Barcelona, and Level, the low cost long haul division, which is very small to be honest.
STEWART: This has been an interesting point for analysts because today the message is, Air Europa you will stay a standalone brand but most people
expect at some stage down the line for it to be folded in with one of the others, but which? And that is going to be an interesting question. Could
it even be Iberia Express?
[15:20:01]
QUEST: Right. So if you take for example, Barajas, what does it give in for Willie Walsh as CEO of IAG? Where does he grow? I mean, obviously
Iberia has those long roots across Latin America. But what else just happens?
STEWART: Today, they were saying it is a gateway for Latin America and Asia. It is well positioned there and already, it has been trying to get
into Latin America earlier this year. It was foiled, I think was in Chile when it wanted to have a joint partnership and airline out there.
The Supreme Court said no. It has been trying to get further into Lat-Am. This will take its market share of passengers going from Europe to Latin
America from 19 percent to 28 percent. And it's also -- yes, and it's also looking towards Asia.
QUEST: Fascinating. Well, Willie Walsh always said, if you can't go to Heathrow, Barajas has lots of runways and they're long and they're not
well-used.
STEWART: Muy bien, Si.
QUEST: Thank you very much. We'll move on. Despite the investments in new airport, Madrid still faces stiff competition in those biggest tourist
drawers -- London, Paris and Rome. Earlier, at the World Travel Market, I spoke to the head of European Tourism Association who told me how he is
trying to turn first time visitors on the continent into repeat visitors.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Given most visitors to Europe, the first time visitors, it's still the leading salient sites of Europe are still the ones that ring
the bells. There's a lot of discussion about attracting second time visitors doing more in depth, experiential activities, they call it, but in
reality, the thing that sells is still London, Paris, Rome and Venice.
QUEST: Really?
UNIDENTIFIED MALE: Oh yes.
QUEST: The big one, the big --
UNIDENTIFIED MALE: The big -- the big constellation is what people want to see.
QUEST: So this idea of get people to go -- I mean, every country that is successful Thailand, Malaysia, Brazil, every country wants to get people
further into the country. It's not happening in Europe.
UNIDENTIFIED MALE: It isn't happening in Europe. We are reaching capacity constraints in Europe as is very well publicized at the moment. But in
broad terms, I think you will see this this going out. Businesses are on the increase. The more businesses there are, the more that they will visit
provinces in lesser known destinations, but do not underestimate the impact of the big ones.
(END VIDEO CLIP)
QUEST: Now Greece isn't having any trouble attracting visitors. The tourism sector that grew nearly seven percent last year, far better than
the European average. Greece's Tourism Minister Haris Theoharis is with me. Good to see you, sir.
HARIS THEOHARIS, TOURISM MINISTER, GREECE: Nice to be with you, Richard.
QUEST: Minister, you start from a difficult base, of course, having had the crisis, but there is still great economic austerity challenges in
Greece, aren't there?
THEOHARIS: Well, there are some -- we are getting out of crisis. The situation is much, much better. But tourism is a sector that has actually
softened the blow, cushioned the economic crisis for Greece. So tourism was a way out, if you will.
QUEST: Who's your profile for now? Because Greece has always had both the backpacker and the expensive yachter and you know, the islands in there.
So where are you positioning for the future? Because you're not a cheap proposition -- Greece.
THEOHARIS: No, it's not cheap, but its value for money. So we're not saying no to anyone, really. But our product is really becoming more and
more -- it has better quality, our service level is up. There's been a lot of investment in the previous years, and this shows you the numbers.
We have, if you like single digit growth in numbers, number of visitors, but double digit growth in the tourism revenue and this is good.
QUEST: You have the advantage, of course, of being able to have -- although -- and I don't mean to denigrate it in any way. But the austerity
measures allowed for a restructuring of the economy.
THEOHARIS: Yes.
QUEST: And that also included the tourism economy, didn't it?
THEOHARIS: Well, it included tourism par excellence. I mean, the tourism economy is a flexible economy in Greece. It is an economy that changed a
lot during the crisis. A lot of investment, a lot of money flowed in, in the tourism sector. And there's for good reason -- those returns on
investment is something that we know how to do well. And during those years, this is a much better proposition now.
QUEST: But Greece is also an extremely mature tourism market. You've been at this for a good 50 odd years.
THEOHARIS: Indeed.
QUEST: So what's new? I mean, I realize that's a bit weird asking you that when you think of the Greek ruins. You constantly think of a few more
Greek words, but what's new in terms of your offering? Because when I was at WTM today, everybody is talking about holistic lifestyle, wellness, eco-
tourism, sustainability.
THEOHARIS: Yes, we've got all that and much more. You can do adventure. You can do diving. You can come for a city break. You can come in the
winter.
So Greece has a lot to offer. There are many, many propositions that normally you don't associate Greece with. So that's if you like the
challenge for us to allow people to discover the undiscovered Greece.
[15:25:10]
QUEST: Are you worried about -- because of course, one of your number -- one of your leading countries is the U.K.
THEOHARIS: Yes, indeed.
QUEST: In fact, it must be what? Number?
THEOHARIS: Now it's number one.
QUEST: Number one.
THEOHARIS: If things go well according to plan.
QUEST: That's where we're going. So it's number one. So the Brits love going to the Greek Islands.
THEOHARIS: Indeed.
QUEST: And by the way, my boss loves going to the Greek Islands as well, she --
THEOHARIS: But you -- you should love going to the Greek Islands as well.
QUEST: The last time I tried to go to the Greek Islands, there's a U.K. election and because that's the point -- Brexit. Brexit could harm your
number one destination.
THEOHARIS: Indeed, that's a possibility, but we're moving from less clarity to more clarity and that's a good thing. People will be able to
know what will happen with Brexit as things unfold, and as we get more clarity they can plan their lives better. They can plan their vacation
better. And we're hoping that this will actually make a difference. Not a negative difference, a positive difference.
And also, despite the fact that we had Brexit, we had the financial situation, Greece grew in the U.K. much more than the average.
QUEST: And one assumes, I mean, we know there's going to be no visa requirements.
THEOHARIS: Indeed.
QUEST: The flights will continue between the two destinations.
THEOHARIS: And we're also making sure that employees of tourism enterprises in the U.K. continue operating in Greece with no problem
exactly as they did up to now.
QUEST: Where was your first holiday? Do you remember?
THEOHARIS: My first holiday?
QUEST: Your first holiday.
THEOHARIS: My first -- in Crete. Yes, I was --
QUEST: In Crete.
THEOHARIS: Yes, yes. My first holiday by myself. You mean without my parents, so 17 years old.
QUEST: I think we'll draw a line. Good to see you, Minister.
THEOHARIS: Good to see you.
QUEST: Many thanks indeed.
THEOHARIS: Thank you.
QUEST: As we continue, chaos in major cities around the world have been extremely tough on the tourism industry. But as Greece was saying, of
course, you can recover and you can thrive despite the most challenging of destinations.
The most visited destination in the U.S. just saw a record number of visitors. Orlando manages to keep people coming back year after year.
We'll discuss how after the break.
(COMMERCIAL BREAK)
[15:30:00]
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest, a lot more QUEST MEANS BUSINESS in a moment. We'll dig into the details of Saudi
Aramco's mega IPO. Apple makes a $2.5 billion pledge to fight homelessness in California. How real is this? This is CNN, and on here on this network,
the facts always come first.
U.S. House Democrats for the first time have released transcripts of key testimony in the impeachment inquiry. The move now shines the light on the
closed door depositions of the former U.S. Ambassador to Ukraine, Marie Yovanovitch and the former State Department adviser Michael McKinley. It
follows four White House officials who refuse to appear on Capitol Hill.
Thick smogs causing travel disruptions in India's capital. Dozens of flights have been diverted or delayed because of the poor visibility in New
Delhi. The air is so toxic, officials have declared a public health emergency and have closed schools so children can stay at home.
The British House of Commons has just elected its new speaker. The deputy Speaker Sir Lindsay Hoyle will replace John Burcow. There you see the
ceremony, supposedly the speaker has to be reluctantly dragged to the chair after the election. The final vote came down to Hoyle and another MP, both
of whom were members of the opposition Labor Party. Hoyle will now of course stand unelected in the forthcoming -- or unopposed, I should say, in
the forthcoming election.
More casualties in the anti-government demonstrations in Iraq on Monday. Security forces fired tear gas at crowds in Baghdad. At least, three
protesters have been reported killed in the clashes. Activists say three protesters were killed and dozens injured when security forces opened fire
in Karbala as protesters tried to storm the Iranian Consulate.
And Hong Kong has been rocked by a 22nd straight weekend of pro-democracy protests. Police arrested more than 300 people over the weekend. There
was a stabbing outside a mall where the protests took place earlier in the day. Four people were injured.
At the World Travel Mart, the theme of resilience in the face of adversity was very much on discussion. Now, Chile's tourism industry is feeling the
pinch from ongoing protests. And yet, tourism is an important part of the industry in there. Demonstrations are now in their third week. I spoke to
the chief marketing officer for Chile's tourism board and asked him, how do you sell a country when -- if you look at these pictures and the number of
people who have died, and the ongoing political instability, how do you try and convince people that this is a place to go and have fun?
(BEGIN VIDEO CLIP)
FELIPE URIBE, CHIEF MARKETING OFFICER, CHILE TOURISM BOARD: We know that the pictures are not so good, but the reality is a little kind different in
the tourism situation because the airport is working 100 percent. All the tourist destinations are working properly. So, we know that we have these
kind of problems. But in the tourism, we don't have these problems right now.
QUEST: But are you seeing the number of tourists drop in the last few weeks? You must have.
URIBE: Yes, but we know that the tourism is the first economic sector that will be affected, but will be the first economic sector that will go up
when the situation goes.
QUEST: You see that's true, it's all -- but do you have to do anything to convince tourists it's safe?
URIBE: Let's see. We are in an environment that they've -- what's safe is not properly their best working years, yes? Even that, we are, I think, the
most safer country in Latin America. So, we are handling the situation, and as I told you, I think that we can do it even better right now.
QUEST: And what are you telling people here, besides the problems? What are you actually saying as your tourism message this year? I mean, or is it
all just lost in the crisis of today?
[15:35:00]
URIBE: No, in fact, we see all the tourist industries that are working well. Some spots in Santiago and even in Valparaiso. But the real
majority of tourist attractions are working perfectly. So, don't worry about it because Chile is working in the industry right now.
(END VIDEO CLIP)
QUEST: That's Chile. Now, when crisis strikes, the tourism industry takes a major hit amid of slew of challenges around the world. Of course, in Sri
Lanka and Egypt, there were series of terrorist attacks. The Bahamas and Japan have had to endure devastating hurricanes and typhoons. And the U.K.
travel agency Thomas Cook went bankrupt.
Dangerous mass protests have been breaking out in countries like Hong Kong, Lebanon, and as you've just been hearing, Chile. And yet, amid all these
challenges, there are success stories. For example, Orlando, the city of Orlando welcomed its 75th million visitor last year. In a year, it's
America's most visited destination. Jerry Demings is the mayor of Orange County, Florida, of which part of Orlando or Orlando is within. The mayor
joins me now, good to see you, Mr. Mayor.
MAYOR JERRY DEMINGS, ORANGE COUNTY, FLORIDA: Glad to be here tonight.
QUEST: When we look, we think of Orlando. We do think of Orlando as a sort of a theme park central for the world that does have great attractions
that bring people to it. How do you view it?
DEMINGS: Well, that's part of the story about Orlando. We brand the entire region as Orlando, however it's really much larger. We have a $70
billion industry with tourism, but we have much more to offer. Our business community is growing and thriving, our technology community is
growing.
We have hard sciences and businesses starting in the science, technology, engineering and math-related areas as well.
QUEST: But talking about tourism, there's no question those parks and the ability of Orlando -- and you do a phenomenal job. The airport does a
phenomenal job, you in the city do and the tourism authority there, of which you're responsible.
DEMINGS: Yes, I am on the airport governing board, and our airport in a 12-month period of time brings in over 50 million passengers. And we're
under way with a $2 billion expansion now.
QUEST: What do you need? What's the challenge that Orlando or the Theme Park and your area -- that your area faces in growing tourism. Over
tourism is certainly an issue.
DEMINGS: Some of the challenges we have really is maintaining a certain freshness so that people will continue to come back to the area. And our
theme parks are certainly investing in new attractions with the epic universe at Universal Studios and "Star Wars" with Disney.
QUEST: But is it difficult for any government official in a place like Orange County or Orlando, which is -- you know, if you've got Walt Disney
on your doorstep and all the Disney properties, how -- don't they do what they want?
DEMINGS: Well, we work very closely with the Disney Enterprise and especially we have what is called a Reedy Creek Improvement District, which
is a governmental arm. I work very closely with them. They pay significant taxes in our community, but they also are a good community
partners. They give back in many ways to support our philanthropic efforts and social needs as a community as well. But certainly they pay -- play a
--
QUEST: Right --
DEMINGS: Pivotal role with the overall economy.
QUEST: And you'll obviously take a tourism tax, which of course the authorities -- the tourism industry hates. I mean, it's not you, by the
way. Britain has the worst tourism tax --
DEMINGS: Yes --
QUEST: The ADP -- APD on its -- on its airline tickets. So, you're not alone in trying to make money out of tourists. But the industry doesn't
like these.
DEMINGS: Well, they might not like it, but really, because of the tourism tax, we're able to promote our area to keep that robust growth that we have
been seeing for several years now going.
QUEST: But there's always a danger that local government views tourism as a cash cow or a slot machine ready to get some more money out of.
DEMINGS: Well, we still offer quite the experience --
QUEST: Yes --
DEMINGS: And people would not come if there was not an experience there. And that's something that we really want to maintain, our competitive edge.
People are coming from all across the world to experience what we have to offer there because of the multicultural experiences that we have.
QUEST: Now, I'm curious, you've obviously been to all the -- how often do you go to the parks and what's your favorite ride?
DEMINGS: I am at the parks for more often than not for business-related endeavors --
QUEST: Oh, come on, do you ever go on a ride?
DEMINGS: I recently with the new "Star Wars", I was there for the Galaxy Edge opening and participated on one of the rides there.
QUEST: Good to see you, sir --
DEMINGS: Thank you very much --
QUEST: Be sure to bring us your pictures, thank you very much indeed.
DEMINGS: Yes.
QUEST: So, Saudi Aramco finally going public. How the expectations have changed and where the money is going to go. There will be a lot offers,
but it's an interesting flotation in Riyadh, not in one of the major exchanges around the world. In a moment.
[15:40:00]
(COMMERCIAL BREAK)
QUEST: Saudi Aramco's long-awaited IPO is finally going ahead. Concerns about the evaluations, questions about its location and which market, and
the turmoil in the kingdom all held it back. Now, Aramco says it will float shares only on Riyadh's Stock Exchange. Even so, it's a scaled back
IPO that could set records.
The IPO's crucial as the government plans to diversify the economy away from oil. Now, when that flow of oil stops, the money will continue.
Pumping money from the IPO could raise between $15 billion and $40 billion. It depends, of course, on the valuation and how much actually gets listed,
and then the refining.
Through the public investment fund, aims to have 400 billion in assets in the next year, distributing it out into investment funds, different areas,
tourism, tech and infrastructure. So, you see the way it goes from the IPO to the investments and the new ventures. Is all this going to work? John
Defterios is at OPEC's headquarters in Vienna.
John, the reality is that this is significant large sums of money, but it is not what we all thought the IPO was going to be.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Yes, this has been on the boil, Richard, as you know for three years, going back to 2016, and the
aspirations to your point, Mohammad Bin Salman; the Crown Prince wanting a $2 trillion evaluation. And remember, they were talking about floating 5
percent, New York, London or one of the big Asian countries that are big customers of Saudi Aramco.
We were talking about Tokyo, Shanghai, perhaps even a Hong Kong. That did not come to the fore here, and I think they went back to Riyadh, saying
this is the safest play possible. They have scores of billionaires that will be encouraged if not leaned on to invest in the Aramco IPO. It's a
sense of national pride, so, you'll have Saudis investing, of course, and the CEO, I mean, Nasser saying at a press conference in Tehran during the
announcement of this IPO, they welcome the comparisons now with a big five international oil companies because they made $111 billion in 2018.
[15:45:00]
QUEST: OK, the reality is, you and I talked earlier on "EXPRESS", the transparency, the same level of transparency through the exchanges isn't
there. But John, speak to whether it's just significant that the IPO is taking place at all. The fact that this vast behemoth of the Saudi economy
-- I mean, technically will change its ownership structure once it goes public.
DEFTERIOS: Yes, so, you're not going to have the transparency of the New York Stock Exchange or London, that's a very fair point, Richard. But I
think because the Saudi market has been opened up to the MSCI, the emerging market indices, much more transparency than we would have seen five years
ago in that market.
But I think to your point, it is very important for Saudi Arabia, the kingdom to get this thing out the door, even here at OPEC headquarters, I
think it became somewhat of a distraction because we didn't know when it was going to go out. In fact, in a private briefing we had with the Crown
Prince back in 2017, he said, oh, definitely it happened in 2018, and sooner rather than later.
But after the murder of Jamal Khashoggi, after the arrest of the Ritz Carlton 400, the acquisition of SABIC, the big chemical giant that Saudi
Aramco took a $70 billion stake in, those were major distractions, major setbacks for the IPO process. Then you start to lose credibility if you
don't get this announcement out before the end of 2019 --
QUEST: Right --
DEFTERIOS: And may I remind you, Richard, we don't know if it's 1 percent, 2 percent, or whether it comes in the first quarter of 2020 or not.
QUEST: John, good to have you with us, thank you. John Defterios in Vienna. As the energy landscape changes, renewable producers are looking
for ways to make their energy more flexible. A potential solution is virtual power plants. Now, John is back with more as part of his "GLOBAL
ENERGY CHALLENGE".
(BEGIN VIDEOTAPE)
DEFTERIOS (voice-over): Germany has long been one of Europe's biggest producers of coal and nuclear energy. But since Chancellor Angela Merkel's
2011 moratorium on nuclear plants, renewable energy has been on the rise. This year for the first time, renewable production is anticipated to be
higher than both coal and nuclear combined.
CHRISTIAN RYNNING-TONNESEN, PRESIDENT, STATKRAFT: We are in the midst of a huge transition. It is like going from typewriters to computers. It's
going from dominantly fossil fuel to dominantly renewable.
DEFTERIOS: But this kind of radical growth poses a question. How can so many different sources of energy be both flexible and efficient? As the
largest producer of renewables in Europe, Norwegian company Statkraft think they have an answer.
RYNNING-TONNESEN: The key of it all is to integrate all this intermittent capacity of wind and solar into the system that we call virtual power
plant.
DEFTERIOS: At their hub in Dusseldorf, Statkraft's virtual power plant works almost like a trading floor, connecting more than 1,500 renewable
plants and powering around 5 million households.
ANDREAS BADER, VICE PRESIDENT OF SALES & NEW PRODUCTS, STATKRAFT: It works like a human brain. So, like the neurons connected in your brain, we
connect thousands of renewable assets, and today and in the future where the energy world is more and more renewable, the whole energy sector is
depending on the weather.
So, you need to be in the market 24/7 to understand and forecast every change of the renewable production. If there's too much energy for
example, produced by abal(ph) plant, you can store it into batteries or the other way around. We can connect batteries from Spain with wind farms in
Germany. And that makes it scalable.
DEFTERIOS: For small-scale producers of renewables like BMR Energy, the service Statkraft provides is essential as they attempt to reduce the
reliance on government subsidies and create a profitable operation.
GUIDO RULANDS, MANAGING DIRECTOR, BMR ENERGY: The trend will continue that more and more assets will need to be commercially viable and carry their
own costs. So, we're producing the power and Statkraft is selling it to maximize our revenue.
RYNNING-TONNESEN: We think it is fully possible that renewable electricity will supply 80 percent of total electricity supply by 2050.
DEFTERIOS: The transition may have been prompted by Chancellor Merkel's u- turn on nuclear, but with the help of virtual power plants, the renewable producers are indeed catching up. John Defterios, CNN.
(END VIDEOTAPE)
QUEST: Apple is the latest big tech company to offer a sizable check to address California's housing crisis. Tech giants have been increasingly
criticized for their role in upping the cost of living in the Bay area.
(COMMERCIAL BREAK)
[15:50:00]
QUEST: Apple is committing $2.5 billion to fight the steep cost of housing in California. The latest in a string of tech companies who are pledging
to combat the crisis. Now, it's fine to do this, of course. Look at the numbers and you'll see how much money is coming across. But arguably, the
critics say, rather the crisis was because of the companies themselves.
California has a bigger homeless population than any other state. It is the influx of high-paying jobs in Silicon Valley that's pushing house
prices even higher. Ahiza Garcia joins me from San Francisco. I mean, it is true, isn't it? At the end of the day, Apple is paying guilt money on a
-- to help solve a problem that they helped create.
AHIZA GARCIA, CNN BUSINESS TECH WRITER: So, I would say that they exacerbated it. I wouldn't say that they necessarily are the sole factor
behind this crisis. San Francisco has some really unique issues with kind of zoning and how permitting works. And the fact that quite simply, it was
just never meant to be built this big, to be this big.
It wasn't -- there aren't redundancies in transportation. There are certain restrictions and people protest in terms of when you want to build
vertically. So, there are other factors that have exacerbated this, and --
QUEST: Right --
GARCIA: Certainly, tech is a big part of that. But other factors definitely contribute to that.
QUEST: Yes, but, I mean, obviously under the homeless issue and mental health issue of some of those people who are on the street, and the fact
that of course, that San Francisco is a magnet. People get on buses from other parts of the country and go to San Francisco. But the -- the way the
high tech -- the high pay -- the high paying tech jobs have made things worse, you must be hearing that from your friends, from what you see every
day in life in San Francisco.
GARCIA: Certainly, and you know, both from people working in the tech field and people outside of it. What tech did essentially is create a
bigger disparity, right? An income disparity between people making hundreds of thousands of dollars, millions, billionaires even, and people who --
firefighters, teachers, even lawyers, doctors who are feeling the strain of how much housing costs just continue to propel upwards.
So, you know, across the spectrum of industries, certainly that disparity has been exacerbated, and it's putting a lot of strain on people, you know,
who are just trying to live in the areas where they work.
QUEST: Good to see you, thank you. Keep bringing us more stories, please, from the Bay area. We want to see more of what's happening, the good, the
bad, the indifferent, and the latest tech. And thank you for joining us tonight.
[15:55:00]
Now, the last few minutes of trade on Wall Street, and all three indices are set to close --
(RINGS BELL)
At record levels. If I come early, you'll see. So, we've 114, we've gone back up again over here. We've gone back up again, it's the Dow's first
record since July, investors are optimistic about U.S.-China trade talk, energy stocks are the best of the day, Chevron and Exxon are doing well,
strong gains up there, and down here, well, the usual McDonald's for obvious reasons. I'll have a profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, now, let's remind you of our question that we asked earlier today, CNN.com-slash-join. Which was your favorite
place to -- best European hub airport? And there's the results, London Heathrow came at 22, Paris CDG only 5 percent of you like that, who voted.
But 57 percent of you went for Amsterdam Schiphol, and Frankfurt at 16 percent.
It merely shows once again of course the relationship we have with travel. And today, at World Travel Market, it was fascinating to be able to be
there, see the ministers and hear exactly how once again the significance of this industry. Time and again, we are told, but people don't fully
appreciate that more than 10 percent of the world's population is in some shape or form involved in the business of tourism.
It might be something obvious like an airline flight attendant or it might be somebody who sells ice cream or a corner shop or a B&B. The numbers are
huge, and the significance of the industry is vast too. And that's why we spend so much time talking about aviation, tourism, hotels, the hospitality
industry on this program.
But it also shows the significance when things go wrong. The Bahamas with a hurricane. You've got Egypt with terrorist attacks, Sri Lanka with
terrorist attacks. We know that these destinations recover quite quickly afterwards. And the significance of that recovery is, of course, once
again, the size and scale of the tourism industry.
So, when you go on holiday or you spend money on a flight or a hotel, you are a part of a vast organization of the economy. And that's QUEST MEANS
BUSINESS for tonight, I am Richard Quest in London. Whatever you're up to in the hours ahead, I hope it is profitable. We're back in New York
tomorrow.
(BELL RINGING)
Yes, stay there! Records!
END
