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Quest Means Business
Bank of England Adopts Forward Guidance; Bank of England Overhaul; European Markets Fall; Rangold Profit Slump; "Lone Ranger" Drags Down Disney Studios; Time-Warner Escapes Quarter With No Box Office Bombs; US Markets; Cyber Bullying Outrage; Combating Online Trolls
Aired August 07, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: Forward thinking from the Bank of England. Rates will stay low while unemployment is high.
Huge delays following a huge fire at an airport in Nairobi.
And a call for action against online bullies and the site that they use following the suicide of a 14-year-old girl.
I'm Richard Quest, mid-week, and I mean business.
Good evening. A major change for Britain's Bank of England today as it became the latest central bank to adopt forward guidance as ammunition to spur on recovery. For the first time, the central bank will link the future direction of interest rates to the level of unemployment.
The governor -- the new governor, the Canadian -- no, former Canadian governor -- Mark Carney announced that rates would not move off their record half a percentage point low until unemployment falls below 7 percent.
It's a similar policy to that introduced by Ben Bernanke and the Fed last December. Governor Carney said the time was right to change the bank's approach.
(BEGIN VIDEO CLIP)
MARK CARNEY, GOVERNOR, BANK OF ENGLAND: This is exactly the time when something like this is appropriate. It's -- we are the start of a renewed recovery. As I said in my opening comments, this is very welcome.
But it's after a very long period of -- it's after a very sharp recession and a very long period of very weak activity. This is the weakest recovery on record. Records go back over a century.
(END VIDEO CLIP)
QUEST: Now, that was Governor Carney. This is the inflation report where the announcement came out today. It's a very detailed account of the circumstances and the guidance, this chart of the MPC's guidance, is what it's all about.
The recovery appears to be taking hold, says the Bank of England, but it does say more help is needed. Exceptional weakness in productivity and inflation.
Now, there are circumstances under which this new guidance becomes null and void. It's known as the knock-out clauses. Jim Boulden is in London. Jim, first of all, the way in which the governor has very quickly introduced forward guidance, 7 percent unemployment rate.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Yes. It's interesting, because it was -- he was asked, of course, if it was unanimous and whether there was other kind of figures he would look at besides unemployment. He wouldn't answer those questions. He said we have to wait for the minutes to come out, Richard.
But he was very keen to talk about the 7 percent. He said, look, it's a very simple number, it's a number that doesn't get revised, it's a number we can easily point to, it's a number the public will understand.
And he projected, of course, that maybe they won't hit 7 percent unemployment for a couple of years. So, it's a very clear signal, I would say, from the Bank of England --
(CROSSTALK)
QUEST: Now, I was just getting to --
BOULDEN: -- that they are saying no interest rate rises.
QUEST: I'm just going to interrupt you, forgive me. Let's have a look at that fan chart again. These are the charts, this fan -- it's called a fan chart. It's the chart which shows the range of possibilities from the north to the south, and if you look at that and you follow the fan chart to the median, basically, rates will not rise of this -- at the medium until 2016.
BOULDEN: Exactly, and that's why the -- that's exactly what the message he wanted to send out. Except for, as you said, the knock-outs. Now, if -- even if the unemployment number is heading in that direction, there are a few knock-outs, including a severe dislocation to the economy, if inflation gets out of control, if it's not stable.
They said if the expectations aren't well anchored -- you know that term, of course -- then they would not just use the 7 percent unemployment number. Also we should point out that Mark Carney is saying just because it hits 7 percent doesn't mean that rates are going to automatically go up. Let's hear what he has to say about that.
(BEGIN VIDEO CLIP)
CARNEY: The message is that the MPC is going to maintain the exceptional monetary policy stimulus until unemployment reaches a 7 percent threshold, at which point we will reconsider.
(END VIDEO CLIP)
BOULDEN: So, reconsider. Let's point out, Richard, that unemployment here is 7.8 percent, so some 750,000 jobs will have to be created in this economy before we even get to the decision that maybe they should start raising interest rates.
Some people have criticized this and saying you should be looking more deflation, that's what banks are supposed to do. So, it's unprecedented for this country but, of course, as you said, it's already happened in the US, Canada, and Japan, Richard.
QUEST: And of course, now the question -- the sort of forward guidance that Mario Draghi at the ECB gave at his last one, which was forward guidance in name only, and some said was forward guidance light.
BOULDEN: Yes. Yes, he still speaks in central bank speak, if you will. We used to call that Green speak, didn't we, when Alan Greenspan was the head of the Fed? We had to parse every word that they would say, and Mark Carney today at his press conference was trying to really lay it out, I think, in very basic terms, if you will, of what they were going to be doing and why they're going to do it.
QUEST: Jim Boulden in London for us tonight. The 100 index, the FTSE closed down roughly 1.5 percent lower. Alan Higgins is the chief investment officer at Coutts.
Alan, come on, explain in simple language why, when we're told in the inflation report that the recovery is underway, albeit sluggish, and we are told that interest rates are going to remain low, therefore that's good for corporate borrowings and profitability, why does the FTSE fall?
ALAN HIGGINS, CHIEF INVESTMENT OFFICER, COUTTS BANK: Hello, Richard, good evening. So, why did the FTSE fall today? I think you just saw a bit of reversal, not just in the FTSE, but also in sterling, in the pound, in the sense that -- with respect to the FTSE, it's been a relatively strong market, outperforming other markets. So, I wouldn't pay too much attention to that.
I would focus much more on that fan graph. That really is significant. It's basically saying central scenario rates on hold near zero until 2016.
QUEST: In that scenario -- and also, we must remember, that the Bank of England today also said that they would maintain QE or at least reinvestment of the QE gilts that they've already got. So, you've got QE, you've got rates on hold low, an accommodative status. Where does this leave the investment scenario?
HIGGINS: So, from an investment standpoint, it means search for yield, I think, is going to continue. We will see support for the UK government gilt market at the front end. Yields are very skinny there. But if you just think about it, Carney is basically saying we're not going to change rates, so a little bit of support there.
But a lot of our clients have a demand for income and the stated income on equities is higher. Also, of course, you get a growing income, but with risks, so --
(CROSSTALK)
QUEST: You see, but that's the point --
HIGGINS: -- from an investment standpoint --
QUEST: -- but that's the point, Alan. He's basically done exactly what happened two years ago when we started this low interest scenario, 18 months ago, a year ago. He has -- he's given the market a reason to rally in the medium term to long-term.
HIGGINS: Over the medium -- yes, exactly. Which I think you've got it right, it's over the medium term. And don't -- I think, don't be spooked by one day numbers, because it was --
QUEST: Right.
HIGGINS: -- it was very, very curious, today's performance. I suspect a few hedge funds were closing out some positions, like in sterling, interest rates, and in the equity market. So, basically saying yes, rates will be zero for a very long time, and therefore, in real terms, you're going to lose money on cash. Go look for investments and --
QUEST: OK --
HIGGINS: -- let's see.
QUEST: I want to ask you, finally, the three reasons in the inflation report they give for doing this. One, they say clarity of monetary policy. Two, they say reduces the uncertainty of what's happening. And three, they say it's a robust framework for the expansion. Do you buy that with -- do you buy those reasons for doing forward guidance?
HIGGINS: I buy some of it. Basically, we are -- what also came out of that speech is that we're in a different kind of recovery. It was a different kind of recession, it was a so-called balance sheet recession. So, it is a different kind of recovery, a very slow recovery.
And so, what he's basically saying is corporations, individuals, go and borrow floating rate money. It will be OK. Whether it's robust, I'm not sure. The unemployment rate is -- at least, as he said, it doesn't -- it's not subject to the same revision.
QUEST: How long -- how long have you been in the financial industry? Give us a rough idea?
HIGGINS: Oh, Richard, a very, very long time. I started before the 1987 crash, let me put it that way.
QUEST: Right. Roughly same time as I. Did you ever think you would see the day when the central bank, the BOE, would tie monetary policy to a fixed limit, particularly something like unemployment?
HIGGINS: No, I didn't. To be fair, he did couch that. He said it's a target. That's right, he said it's an indicator, not a target, let me get that right. And indicator. So, he did give himself some wiggle room.
But we are in absolutely extraordinary times, Richard. Who would've thought that rates would be zero? We've already had zero rates or near zero rates for four years. So, it looks like we've got zero rates for another four years. Incredible.
QUEST: Thank you, Alan. Good to talk to you, as always.
HIGGINS: Yes. See you again, Richard.
QUEST: Thank you. I suppose in the fullness and interest of disclosure, maybe conflict of interest -- no, no conflict, just -- of course, I'm one of these people who's got a mortgage in the UK, and my mortgage now, tied to bank rate, just been told by the governor of the central bank it's going to remain low for the foreseeable future.
(RINGS BELL)
QUEST: European markets finished the session mostly lower over concerns about the cutoff of cheap money -- not in the UK. Investors focusing more on Mark Carney's get-out clause than his forward guidance. There were still worries the Fed is about to deliver a nasty dose of sobriety. The FTSE closed at a four weeks low. Miners led the losses.
Rangold and Rio Tinto shares fell about 1.5 percent. We'll be talking to the CEO of Rangold later in the program. In fact, after the break, because the price of gold has fallen nearly 20 percent this year, and Rangold has been hit hard. Mark Bristow is after the break. Can he still try and convince me that it's all gold in the future? We'll find out, stay with us.
(COMMERCIAL BREAK)
QUEST: Rangold has blamed plunging bullion prices for a slump in second quarter earnings. The African miner reports that 62 percent -- 62 percent -- fall in profits, down to $54 million for the quarter. The average gold price dropped 17 percent in the same period. Rangold says it will slash costs, increase production for the rest of the year to remain profitable.
Mark Bristow is the chief executive of Rangold Resources, joins me now. You're surely not going to try and tell me again that gold is the place to be? Surely, Mark. I looked at the graph. Not only has it fallen, it's on a downward leg yet again.
MARK BRISTOW, CEO, RANGOLD RESOURCES: Yes, but what do you want me to say, Richard? I think the industry itself is struggling, but inside that industry, there are companies that are profitable, and we're one of them.
QUEST: So, in this environment, making money out of these lower bullion prices, as we've just seen from your results, it requires a different form of chief executive action, now, doesn't it? You've got to be looking in different ways.
BRISTOW: No, I think -- let's just correct that. Remember, let me take you back to 2002 when we listed on NASDAQ. Gold price was $300, that's 2002. Today, it's $1300. If you look at Rangold Resources stock price, it's up 1700 percent. That's not bad. Let's not get caught up with -- a couple of hundred dollar correction, but let's look where we've come from.
QUEST: So --
BRISTOW: And Rangold resources posted -- healthy profits, we've got a new mine coming online, we've got very good exploration, we've got grade on our favor. We're not slashing costs. We're delivering profitable answers.
QUEST: So, how are you going to maintain that profitability in this more challenging, environment, Mark?
BRISTOW: Well, I think the first thing, Richard, is we -- unlike many of our peers, we didn't have to impair anything because we, as you and I have discussed in the past, we use a $1,000 gold price to allocate our capital. We look to make returns at $1,000 gold price. So, we're -- we've got an inbuilt profitability in our business.
Kibali's on track, you saw. We're going to produce gold this year. And that's a low-cost producer, average $600 an ounce. Loulo Gounkoto in Mali's doing well. It's going into higher grade parts of its ore body. That'll drive the cost down to around $600 an ounce.
QUEST: Right. But, now, this thing -- I'm pulling the strands together from the earlier part of our program tonight. Mark Carney, he's keeping money cheap. He's keeping rates low. I suppose ultimately, once growth does return, that does become -- something of a fill-up, something of a help for the gold price is this inflation prospect comes back onto the cards again.
BRISTOW: I think the other thing, Richard, is when I watched all these commentators, everyone wants everything to go back to where it came from in the late 90s. It's not going to happen. The world's changed. The real drivers in the global economy are the emerging markets.
It's great the main Western economies certainly will recover. But you can't see -- well, I can't imagine them getting back to upper -- towards the teens growth, 2 or 3 percent maybe. But that's not going to drive the global economy.
What'd going to drive the global economy is the urbanization engine of the emerging markets. And those -- and with that, that's where all the money is, as we've talked before, and gold is part of that balancing one's risk in currencies.
QUEST: And we will talk more about this. It's a fascinating time for gold.
(LAUGHTER)
QUEST: Mark, you and I have gone over those fences a few times. Good to see you, as always.
BRISTOW: OK, good to see you, too, yes.
QUEST: Joining me, and as I say, we most definitely will talk about this.
Walt Disney's biggest commodity isn't doing so well at the moment. Never mind gold, Walt Disney's got a few problems. Its movie studio was the worst performer across the group last quarter. Zain Asher is at the New York Stock Exchange and joins me now.
Movie studio worst performer. So, you've got movie studios, you've got amusement parks, you've got ancillary products. What went wrong?
ZAIN ASHER, CNN BUSINESS CORRESPONDENT: Well, it's particularly that the movie "The Lone Ranger," that was the biggest problem for Disney. So, Disney right now just looking at share price down about 1.5 percent.
The company did actually top earnings expectations pretty much because of good ad sales at ESPN and also attendance at theme parks continues to grow. But as I mentioned, poor performance in its movie business did actually weigh heavily on revenue. So, Disney has said it expects to take a loss as big as $190 million on its "Lone Ranger" film.
Another media company to talk to you about, Richard, Time-Warner, parent company, of course, of CNN. Pretty much got luck this quarter, was able to escape the quarter without having a box-office bomb. "Man of Steel" was pretty much the biggest -- one of the biggest grossing movies of the year. Time-Warner shares are up about 1 percent right now. Earnings and sales both topped revenue.
I do also want to talk to you about the market overall right now. It is down, obviously, down by about 50 points. The markets pretty much, Richard, are exhausted. Investors first of all don't really have that much data to trade off of, but it really is all of this taper talk that is getting investors nervous.
You have several Fed members over the past few days saying that the central bank could start pulling back on stimulus. Two of them said yesterday that tapering could actually begin next month, September, which is just around the corner.
So, investors knew this was going to happen at some point, so they are trying to sort of re-price risk based on this possible new environment. Richard?
QUEST: Zain, we thank you for that. Time-Warner, parent company of this network and pays my salary --
(LAUGHTER)
QUEST: -- which pays the mortgage, which of course will now remain low for the rest of the next few years. You start -- thank you, Zain. You start to see on this program how all the strands of the financial world finally come together.
When we come back after the break, they're called cyber bullies, and they're using social media sites. Now, they've been accused of driving a teenager to suicide. So, we'll investigate the site and tell you what you've probably heard, after the break.
(COMMERCIAL BREAK)
QUEST: The death of a 14-year-old girl has prompted a call for advertisers to boycott a social media website popular with teenagers. Hannah Smith from Leicester in England was found at her home on Friday, apparently having taken her own life. Her father said that she had been bullied on a website called ask.fm after looking for advice about eczema, the skin condition.
Abusive comments were also left by so-called internet trolls on her memorial Facebook page. It's an extraordinary story.
In a nutshell, ask.fm is a personalized quotation and question and answer site. The idea is very simple: you just type in a question and wait for others to give the answers. So far so good. Seems such an obvious and simple idea.
The question can be about anything. The popular ones include housework, homework, love, life, health issues, you name it. You don't have to be registered to post a reply, and the bullies do it anonymously.
The brains behind the website are these two men, Ilya and Mark Terebin. The Russian brothers and internet tycoons profit by selling advertising on the site. Ask.fm is registered in the Latvian capital Riga, part of the EU, of course, 65 million users. And the Terebins say it has 300,000 new users every each day.
We invited them to join us on the program tonight. They declined. They sent us this statement: "Hannah Smith's death is a true tragedy. We would like to convey our deepest condolences to her family and her friends. We have reached out to Leicester police and will be happy to cooperate with their investigation into the true circumstances of her suicide."
So, let's find out what goes through the minds of the troll. Dan Rivers spoke to Mike Smith, who is a journalist specializing in the online abusers.
(BEGIN VIDEOTAPE)
DAN RIVERS, CNN SENIOR INTERNATIONAL CORRESPONDENT: So, where is a lot this abuse being orchestrated.
MIKE SMITH, JOURNALIST, EXARO NEWS AND SPECIALIST IN ONLINE BULLYING: On image forums around the web, in particular this one, a notorious image forum called 4chan.
RIVERS: And what is that, exactly?
SMITH: 4chan is a forum where there are no rules, almost no rules. Anyone can post anything they like, and as a result, a lot of people use it to organize these kinds of attacks on people they think where it would be funny. Where can I provoke a reaction, for example, on this memorial page.
So, here we're seeing someone posting, anonymously, of course, saying that he intends to create a fan page explaining that Hannah deserved to die and he's asking people for a suggestion of what the title should be.
RIVERS: And there's no way of knowing who, for example, this person is.
SMITH: The way that we could track them down, the people who own the website would have their IP address. So, if a serious threat is posted, you could get their IP address.
RIVERS: Do you think a lot of this is because people want a reaction? They want attention?
SMITH: I think that's the only reason they're doing it. They just want to get a reaction, they want to see the other people on the forum laughing along with them at innocent girls who have committed suicide.
RIVERS: You might imagine these people are all sort of 13 years old. But they're not.
SMITH: Yes, they're not. The age profile is actually much older. The people who have been arrested so far are between 21 and 35. And so, it's not your usual kid dwelling in the basement posting online. It's just normal people who are a bit weird and want to get a reaction out of people by issuing death threats online.
RIVERS: So, what would be your advice to parents or to teenagers who are experiencing some form of online bullying. What's the best means of defending yourself.
SMITH: Parents should talk to their kids, especially younger kids, 13, 14, about what sites they're using on the internet and whether they're aware that people can be posting terrible stuff on it. It's about having a conversation.
(END VIDEOTAPE)
QUEST: Now, let's talk to the man who wants ask.fm advertisers to think again. He's Maryland's attorney general, Douglas Gansler, who cares deeply about this issues. His office received a complaint from a parent whose child had a bad experience with ask.fm. Mr. Attorney General, where does the responsibility here lie, and who can really put the pressure?
DOUGLAS GANSLER, MARYLAND ATTORNEY GENERAL: Well, the responsibility lies in a number of places. I think just in the interview you just had, one of them is education. Having parents educated their children as to what a website like ask.fm is and what it is not and to make sure that the reaction from the child is not overblown or --
QUEST: Right.
GANSLER: -- to a place where they will actually commit themselves. But for ask.fm, obviously it's with the guys that are running the website. And the problem there is that they have no social consciousness.
They're fully aware that children as young as eight years old are on these websites. They know there have been multiple people that have taken their own lives just from ask.fm and there are other sites like it, ask.fm being one of the most egregious.
But then, what we've been asking people to do is say, look, the only way these websites can actually function is if they're funded. And the way -- the people who are funding it are advertisers. Most legitimate companies, once we notify them that they were actually advertising on ask.fm have taken their advertisements off of ask.fm.
QUEST: Right. This is the idea that you go for the pocketbook. And, indeed, CNN spoke to Hubzu, a real estate website whose banner appears on ask.fm. They say, "We have controls in place to prevent our banners from showing up on inappropriate sites. Our ad should never have appeared on this site, and we are investigating the issue with our network partners."
So, Mr. Attorney General, just as with Facebook and Twitter and all these other things, go for the pocket.
GANSLER: Go for the pocket. And that's what we did. There was a website called JuicyCampus, which was the same type of insidious, anonymous cyber bullying that was going on on college campuses in the United States. And then there was something called PeoplesDirt.com, same thing, but in high schools in the United States.
And what we did there was we went to the internet provider, which were American registered companies, and said you have a contract with these advertisers. There's a violation of the contract, because it says this is a website appropriate as an educational bulletin board for young children. Well, clearly that's not what this is.
The problem is, most advertisers don't go directly to the website. They use brokers, and the brokers then are putting all these -- picking sites in the provider and sort of scattering them.
QUEST: OK. In the great scheme of issues that comes across your desk as attorney general of Maryland, from consumer protection to crime to anti- trust, all the issues you deal with, this internet trolling, this sort of abuse, where do you put it?
GANSLER: Well, I put it high because I have children. I think anybody who has children and understands that we live in this cyber bullying world puts it very high. I was actually the president of all 50 of the attorney generals in the country, and this was our issue, privacy and the internet.
And we've worked with Facebook, we've worked with Twitter, we've worked with responsible companies in the United States to try and pull this type of insidious material off of the internet. It's not protected by first amendment, because it's being directed at children --
QUEST: Right.
GANSLER: And they're actually violating American laws by collecting information from young people as well.
QUEST: Truth is, though, until you lock somebody up, nothing much will happen. Yes, you can go for the economic effect, sir, but ultimately, the sound of the jail door behind somebody, that'll soon sort it out.
GANSLER: It would, but the problem is the kind of conduct that's going on, most of this cyber bullying is not of the threatening nature or of a criminal nature.
It's just dumb people doing really insidious, egregious things that are actually resulting in people taking their lives, or the thousands and thousands of other children who stop short of killing themselves, but have to live with this cyber bullying every day.
QUEST: Douglas Gansler, attorney general of Maryland, thank you, sir, for joining us. Good to talk to you.
GANSLER: My pleasure.
QUEST: And having a robust discussion on this. You may have some thoughts about this, @RichardQuest, it's the usual Twitter name, @RichardQuest is where we'll show you that in a second or three. And on the question of cyber bullying, be interested to hear your thoughts and your views, too.
We'll be right back. This is QUEST MEANS BUSINESS --
(RINGS BELL)
QUEST: -- mid-week.
(COMMERCIAL BREAK)
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QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. This is CNN and, on this network, the news always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Russia says it is disappointed by Barack Obama's decision to cancel a September meeting with President Vladimir Putin. The two leaders last met in June before Russia granted asylum to U.S. security leaker Edward Snowden. The Kremlin says its invitation to a meeting still stands.
In Kenya officials say domestic flights are resuming after a huge fire at the Nairobi International Airport. The fire engulfed the entire international terminal, a major travel hub in East Africa. We'll be talking more about this after this news summary.
The house where Ariel Castro held three women in brutal captivity for years has now been torn down. Castro forfeited it as part of a plea deal that spared him from the death penalty. He had pleaded guilty to 937 counts, including murder and kidnapping.
Egypt's interim government is still planning to disperse pro-Morsy protesters in Cairo. They've been demonstrating for five weeks in two Nasser City district squares. The protesters have vowed to stay until President Morsy is reinstated. The government says diplomatic efforts to break the deadlock have broken down.
The U.S. and the U.K. are helping non-emergency government personnel to leave Yemen amid concerns about a threat from Al Qaeda. Washington has urged all American civilians to leave the country. Today the government announced it had foiled a plot by the terror group to seize oil and gas facilities.
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(END VIDEO CLIP)
QUEST: So the situation in Kenyatta International Airport and what's been happening, we've been talking about it throughout the course of the day. Nima Elbagir is with me and joins us from there.
But before we talk to her, let's just remind you the situation in Nairobi, first of all, why this is so significant. There are three major hubs in Africa.
That's in Johannesburg, Addis Ababa and Nairobi. And between them, as you can see, particularly with the Kenya Airways route map from Europe into the continent, across down to Asia, down into the continent and if you add in the other carriers, too, you suddenly get a view as to why Nairobi is so significant.
Let's talk to Nima about the situation tonight.
Traffic, we're told, is starting to get going again.
Is that what you're hearing?
NIMA ELBAGIR, CNN CORRESPONDENT: Yes, absolutely, Richard. They're working frantically to relieve some of that backlog. The resumption of domestic flights will allow some of the flights, the international flights that were meant to be coming here to head to the coastal airport in Mombasa and pick up some of those stranded passengers.
We're also hearing from Kenya Airways, the national carrier, that tomorrow morning, they're going to start resuming a limited service for international departures, one of which will be their Amsterdam leg in partnership with KLM.
And that'll slightly start to release the pressure here, because this is the beginning of tourism season. And it's been really disappointing for a lot of those who've been booking for months at a time.
QUEST: But as we look at the -- this map that we've been showing about, the connectivity that takes place through Nairobi, it is crucial -- and you've alluded to this -- to the economy of the country, isn't it? Not just for passengers, but also for those agricultural products as well.
ELBAGIR: Agricultural products, the flowers; Kenya provides a third of the world's flowers, Richard. And we've been told that they're going to clear the backlog in the warehouses here. But there really isn't any plan for those goods that are meant to be coming in and heading out to export.
What's going to happen next for the goods that are destined to European markets and some of those major European supermarkets that rely on Kenyan goods and beyond, and this really is going to be the question when finally the investigation kicks in. For an airport that was looking to expand itself even more, Richard, just to the other side of me here, is the new expansion.
And really step up to the international stage, this doesn't look good. How do you not have a sprinkler system? How do you run low on water? What kind of a message does this send? So all the international companies, like General Electric, Visa, Pfizer, who are choosing Nairobi to hub in over South Africa?
QUEST: Now on that question, it would defeat most airports if you have a fire of the magnitude that Nairobi has suffered today. So is there a feeling in Nairobi tonight that they've handled, if not exactly the infrastructure in the past, but they've handled the crisis today well in getting flights started and the prospect for tomorrow?
ELBAGIR: Well, obviously, the speed with which they've moved to try and relocate a lot of the flights and work with the major airline operators, that's something that people are talking about positively.
But again, given the traffic, given the scope of the ambition of the Kenyans in terms of placing themselves as the African hub for business, for agriculture, for the airline industry to have an airport in which you don't have a sprinkler system -- and I've been in this airport. You've been in this airport. Often we end up walking to planes because the traffic here, it just gets difficult to handle for the infrastructure, an airport that was built in the '70s.
QUEST: Nima, thank you very much. Interesting, Nima, in all the airports that I must have been in over the years, Nairobi is the one airport I've not actually been through. And judging by today's fire, I'm guessing that I could be actually going through it.
The (inaudible), of course, all of this. Nima, thanks very much; good to see you.
And all of this, of course, is that there were no injuries as a result of this.
When we come back, "Business Traveller" -- it's not a pleasant business, but no passenger aircraft can leave the ground without it. I'm not talking about the pilot, although they're essential, the flight attendants are important as well. (Inaudible) lavatory. We look at the operation that goes on below so you can flush and forget (inaudible).
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(COMMERCIAL BREAK)
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QUEST: The confusion of low-cost carriers with full service carriers, creating the so-called hybrid is becoming ever closer. We got a good example of that as the New York-based JetBlue announced economy seats will become a little thinner and that'll make room for lie-flat beds in what's going to be a new first class cabin.
The premium proposition is a change in strategy. Remember what I said: it's a merging of low-cost with full service to create hybrid.
Maggie Lake spoke to chief exec Dave Barger and asked if coach passengers are the losers.
(BEGIN VIDEOTAPE)
DAVID BARGER, CEO, JETBLUE: We're not about gouging the traveling public. It's a fair fare. And even at this core offering that you talked about, with the new interior, the personal space is going to be the same in our core experience. Other airlines would say coach.
And today, if you want to fly from New York to the West Coast and those premium offerings on the other guys, it's close to $4,000. We'll be nowhere close to that type of a ticket on a round trip basis. This isn't about ripping off the traveling public, Maggie. We're really excited about what this means for us and also for earnings.
MAGGIE LAKE, CNN CORRESPONDENT: How are you doing it, if they have to charge so much, are you just taking less profit?
Is there some way that you're able to recoup the cost another way?
How can you undercut on price like that?
BARGER: Well, for the most part, the network, the legacy airlines, they're about the corporate client, the corporate traffic. And what we're really after is the small business owner, somebody who's been priced out of being in front of the curtain, if you will, also the high end leisure customer.
And this has been our success against them since 2000, Maggie, nine straight J.D. Power awards in a row, best in class. You can't do that by ripping off the traveling public in the nickel-and-diming. So we think that this is going to be a fair fare and just a great product. And, again, at a lower price point.
(END VIDEOTAPE)
QUEST: And the fascinating part about this, of course, is the hybrid model is coming everywhere. In Europe, it's easyJet, which of course now has got the business by easyJet. It's selling its first, selling its front seat to the higher price, offering business flexible tickets, all the sort of things that the low-cost airlines never said that they were prepared to do originally.
In the United States, you've now got JetBlue. There across in Asia you've got more products being added as well.
Fascinating, the two are merging into one.
And whilst the upgrade experience continues, there is one service that all airlines maintain for the essential needs of every passenger.
Now if you are of modest or easy disposition, perhaps you are a little bit sensitive. You may not want to watch too much more. The aircraft lavatory: now it looks simple enough. And certainly the use of it's fairly obvious.
But do not be fooled. This is a piece of machinery that is much more complicated than you might expect. And when it goes wrong, you don't want to be around, as Ayesha Durgahee discovered.
(BEGIN VIDEOTAPE)
(MUSIC PLAYING)
AYESHA DURGAHEE, CNN CORRESPONDENT (voice-over): Flush and forget because modern aircraft now have sealed toilet systems. So when the plane lands, making a speedy exit with all our luggage is only on our minds. There is a team, however, who are more concerned about what's been left behind: to empty the toilet tanks.
I'm going to see first-hand how it's done on the largest of them all, the A380. Our toilet waste truck, affectionately known as the honey truck, is tucked under the tail. A short ride up in the lift and we're ready to literally clear the decks.
UNIDENTIFIED MALE: That's the vacuum system. We turn it on. And you notice that it's on because you can hear how it's taken. And what we do is (inaudible) here and turn it. So it locks.
We also take down our other hose for the water and disinfection and now comes the fun part. Now we open each system itself. You see, the system's going down now.
DURGAHEE: (Inaudible) this (inaudible) aircraft (inaudible)?
UNIDENTIFIED MALE: Yes, because the toilets are full. So nobody can use them. The system has to work or the machine stays on the ground until it's fixed.
DURGAHEE: So this is the detergent (ph).
UNIDENTIFIED MALE: Yes. It's cleaning the system. It's going through. (Inaudible) going through. You can also see here (ph) --
(CROSSTALK)
DURGAHEE: (Inaudible).
UNIDENTIFIED MALE: I know. Well, you get used to it in a while. We personally don't notice it any more at all because when you do this every day, you don't notice it.
DURGAHEE: Yes, it really is (inaudible).
UNIDENTIFIED MALE: I know.
DURGAHEE: So how many planes can you do in a day then (inaudible)?
UNIDENTIFIED MALE: Well, it depends on the area that you're working on that day. Between 20 and 40 planes a day for each shift that we work.
DURGAHEE (voice-over): It takes between 15-20 minutes to empty all four tanks on the A380. Lufthansa has tried to improve the toilet experience for its first class passengers.
DURGAHEE: Not only do you get the spacious bathroom on the upper deck, Lufthansa's added a unique feature for the generates, installing the only urinals in the sky.
DURGAHEE (voice-over): Whether it's first class or economy, all the waste is taken to the same place.
DURGAHEE: And this is where everything ends up, at the waste facility at the airport, where everything gets separated, the solids, the liquids, right down to the toilet paper.
DURGAHEE (voice-over): (Inaudible) Airport has 13 honey trucks that collect 120,000 liters of waste a day.
UNIDENTIFIED MALE: The fluid is led to a channel and it's transported by the sewer to the municipal wastewater treatment plant in Frankfurt.
DURGAHEE (voice-over): With four busy runways, ground handling operations are carefully choreographed to keep traffic moving.
DURGAHEE: A Boeing 747 jumbo jet rolling down runway 25 center. You can fly without catering, but you certainly can't fly without working toilets. And honey trucks at airports play a crucial role in our everyday flying lives because without them, we would be grounded and unable to fly.
(END VIDEOTAPE)
QUEST: Fascinating how they work. Of course Ayesha didn't necessarily tell you what happens when they have to disconnect it and they don't necessarily -- it's not fully empty. Anyway, we'll leave that story for another day. Enough effluent for the moment.
Jenny Harrison is with us at the World Weather Center.
JENNY HARRISON, CNN METEOROLOGIST: (Inaudible) coming after the most lovely stories, don't you?
Anyway, weather conditions, severe storms, (inaudible) quite a few of those. We've got some more of those as well, Richard, all across the same region, actually, of Europe. They're coming in from the west through France, the Low Countries and Germany. But my goodness, do we have some pretty severe storms on Tuesday.
Look at these storm reports. It's the hail. Look at this, 8 cm in diameter in Germany, just outside Frankfurt. And then in the Czech Republic, very heavy rain, 19 millimeters in three hours. And a wind gust of 115 kph.
So all of these conditions are the sort that give rise to the warnings and surprise me with some more as we go through Wednesday into Thursday because the storms continue to come up from the south and they continue to work their way, particularly through Germany.
This is where we've got the warnings in place for the most severe thunderstorms, that red area is where we'll most likely to see some of these very severe storms. So again, we've got the heavy rain, officer, but the severe winds, the chance of tornadoes and again more of that large, damaging hail. This is the culprit, this area of low pressure, this front trailing through.
And along the line of this front, more of those severe thunderstorms, particularly strong along with southern end of this. And of course all the time, trying to squeeze away this hot, dry air. But not doing a particularly good job, not at the moment. Look at these temperatures. These are the highs this Wednesday, 37 in Budapest and Belgrade, 10 degrees above the average, now Warsaw at 34.
That's actually 11 degrees above. But look at what happens over the next few days. A huge drop in those temperatures, Vienna, we go from 38 on Thursday to 23 on Saturday. Similar drop in Belgrade, 38, not quite as dramatic, (inaudible) down to 29.
And those temperatures really coming down as the front goes through, it really cools things off. And you can see the rain, of course, coming through. This is what is really going to bring in this cooler air. And as it does that, those temperatures will eventually come down. It's feeling fairly cool already across in London and Paris, 25 in London and 24 in Paris.
Now we are here across the west of Europe. And I want to just set the scene a little bit because something rather special happened this Wednesday. It took place the other side of the Atlantic. We're getting it here in a couple of seconds.
I'm going to take you across to Plymouth Harbor, up there in New England and in particular to Cape Cod (inaudible) in Massachusetts, glorious conditions, 26 degrees. We got there in seconds. But it took a few months to get there back in 1620.
Richard, have a look at this video. (Inaudible) first of all. This is it. Look, this is Mayflower II. This actually -- well, it's been in dry dock since September 2012. Now they've finally just spent quite a few months trying to refurbish it, get it back to a good standard. But this is the Mayflower II that they redid to recreate the original Mayflower that did the journey back in 1620, all the Pilgrims came over in 1620. There were 102 of them. And so this is all about recreating the voyage, I mean coming up to that 400th anniversary in 2020 and they're really want it to be just back up to its full glory so they've got it back finally into its (inaudible) Plymouth Harbor.
QUEST: All right. So we've got the Mayflower. Frankly, if everybody who had a relative on the Mayflower, and all those relatives were on board who claim they were on the Mayflower, the thing would have sunk.
HARRISON: Yes, well, that (inaudible) 102. And actually I did a little bit of reading. They said about -- here we go. They said about 50 crew members as well with those 102 on there. But you're right. There's not that many. We can't all have come from these 102 people, can we?
QUEST: No.
HARRISON: No.
QUEST: No. And I wasn't on the Mayflower.
(CROSSTALK)
QUEST: And none of my relatives were on the Mayflower.
(inaudible)
HARRISON: Well, the Mayflower II, this one, it did the voyage in 1957, this one.
QUEST: And I suspect the toilet conditions -- I'm back to the toilets again.
HARRISON: Well --
QUEST: I suspect they were not as commodious --
(CROSSTALK)
QUEST: Over the side. Over the side, yes, thank you.
HARRISON: Not very big. I want to just tell you, not very big, you know. There's 32 meters long, 7.5 meters wide. Can you imagine going across the Atlantic in that in 1620? Two months.
QUEST: Thank you. (Inaudible).
What's the weather like here in Atlanta for the rest of the day? I'm flying to New York.
HARRISON: (Inaudible) thunderstorms; we have some torrential rain here earlier on today. Scattered thunderstorms for the next few days. Fingers crossed. That's all I'm going to say. There may be delays. (Inaudible) rowing up the Atlantic.
QUEST: Row, row, row your boat, up the Atlantic Seaboard.
When we come back, we'll have more from Jenny.
Now the faithful mobbed the pope's car in Brazil and they still can't get enough of it. Look at the Francis effect as QUEST MEANS BUSINESS after the break.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
QUEST: When the pope speaks, the world listens. And it seems it's also does when he chooses the car, when he choose to ride in this vehicle, it sold out relatively rapidly. The automaker Fiat says sales of the humble hatchback used by His Holiness have hit high gear. Shasta Darlington in Sao Paolo reports.
(BEGIN VIDEOTAPE)
SHASTA DARLINGTON, CNN CORRESPONDENT: You've probably already seen the images, Pope Francis being driven around Rio de Janeiro not in a bulletproof Mercedes Benz, but in a simple silver Fiat hatchback. What you may not know is the impact it's had on Fiat, especially this model right here. It's a Fiat Idea. It's built in Brazil for the Brazilian public and dealers say it's selling out across the country.
Now Fiat offered a number of different models to the pope's entourage, but they never imagined the pope himself sitting in the back seat of their family hatchback. Of course they were quick to post the picture on their Facebook page with the simple caption, "Good idea, Francis."
Vatican officials were attracted to its high roof, roomy interior and of course its simplicity.
Fiat is Brazil's biggest carmaker and the country is one of its biggest markets. Cars in Brazil are expensive, so the ticket price of about $18,000 is actually very affordable. Official sales figures aren't in, but if dealers are right, they have skyrocketed. In fact, this Idea, the last on the lot, has already been sold -- Shasta Darlington, CNN, Sao Paulo.
(END VIDEOTAPE)
QUEST: Now that gives a new meaning to product placement. Forget getting your product in a movie. Get the pope to sit in the back.
We'll have a "Profitable Moment" after the break.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment" -- it is absolutely refreshing to feel the wind of change that has swept through the world of central banking. And it came in a rather tedious report known as the inflation report from Britain's Bank of England. But what this contained was a sea change, a different way of thinking.
It came, of course, with forward guidance. The Bank of England now tying future interest rates to a 7 percent rate of unemployment in the U.K.
After months, years of sclerotic, difficult-to-understand, opaque, boring, tedious language, suddenly we have a central banker who's talking common sense. Not just making it obvious when the bank will move, but talking about knockouts and the sort of movements that they will take.
Now we've got to look forward to Mario Draghi at the ECB getting a whiff and wind of this change, too. And maybe also doing what it takes to open up the world of central banking.
Oh, and yes, I'll be quite honest; as a result of what happened today by the Bank of England, I now know that my London mortgage is unlikely to go up in price until 2016. So that's more money for me to spend elsewhere.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable. We're in New York tomorrow.
(MUSIC PLAYING)
(BEGIN VIDEO CLIP)
QUEST (voice-over): The headlines: it is the top of the hour.
Russia says it is disappointed by the U.S. president's decision to cancel a September meeting with Vladimir Putin.
END
