Return to Transcripts main page
Quest Means Business
BlackBerry Considers Sale; US Stocks Flat; US Airways, American Merger to Create World's Largest Airline; Dollar Stronger; Hyperloop; Japanese Growth Slows
Aired August 12, 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: Tonight, BlackBerry is on the block. The phone maker could be sold as it's struggling to survive.
There's an epic airline merger upon us. The American Airlines chief executive joins me here at the New York Stock Exchange.
And how about New York to LA in just 45 minutes? Elon Musk unveils the Hyperloop.
I'm Richard Quest, live from the New York Stock Exchange, where I mean business.
Good evening. BlackBerry is the struggling SmartPhone maker, that much you already know. But it's facing a very uncertain future tonight after the board of directors have put all options on the table and hinted that it could even be sold off.
After a latest disappointing sales numbers, the board says, and I'm quoting now, it's "exploring strategic alternatives." What does "strategic alternatives" mean in reality? One, the board is open to possible joint ventures with other companies. Two, interested in forging strategic partnerships. Or it could walk away and there could be an outright sale of the company.
The BlackBerry 10 was hailed as the savior -- or potential savior -- of the phone maker, but disappointing sales soon took the wind of that investment. Customers were unimpressed. Today's announcement led to a rally in the share price. It's up 7 percent at the NASDAQ at just over $10 a share.
You really don't need to look far to see the statistics and to realize the problem that BlackBerry is facing. It was once the dominant force in SmartPhones. In fact, some would say it invented the genre with its ubiquitous e-mail client.
Now, the slide is well and truly complete. In 2009, BlackBerry commanded about 50 percent of the SmartPhone market. Today, it is around 3 percent. And even though it's got $3.1 billion in cash, some would say money to burn, is that money just going to be frittered away? Shelly Palmer joins me now. Shelly, I suspect you are not surprised --
(LAUGHTER)
QUEST: -- at what BlackBerry has announced, so I think the thing I need to know is, what's the solution? What do you think they will decide to do?
SHELLY PALMER, AUTHOR, "DIGITAL WISDOM: THOUGHT LEADERSHIP FOR A CONNECTED WORLD": So, Richard, this is a Galaxy S4 from Samsung. This is a BlackBerry Q10. Too little, too late. The metaphor is complete. It's just not a phone that's going to do the job.
Their solution? Do you want to be boiled in oil or shot to death? It doesn't matter how you want to die --
QUEST: OK --
PALMER: -- die is what they're going to do. And by the way, the idea that they might want to sell it is cute. If I was anybody smart, I'd wait for them to go out of business and buy the IP out of the ashes.
QUEST: Right. So, effectively, it is only the IP is what you're saying that's of value now.
PALMER: And by the way, it's questionable whether that's even true. One of the things that BlackBerry had going for it that made it unique and awesome -- forgetting the keyboard, which is a really nice trick, and everybody's who's old likes a keyboard, and everyone whose young likes a glass keyboard -- they had a secure e-mail server that no government could get into.
And little by little, worldwide, every government has asked for and been granted access to their secure BlackBerry server --
QUEST: But hang on -- hang on. All right, but hang on. Just for a second. Here is the machine. Now look. Many of us love the keyboard and you've alluded exactly to that fact. But the actual software, the actual robustness of the BlackBerry system is still unique to the company, to what used to be Research in Motion.
Now, asking bluntly, is there not value in their e-mail client that somebody -- whether it's a Microsoft, whether it's a Nokia, whether it's somebody else -- would want to pick up?
PALMER: And what I would say to you is that sure there's value. But if I was smart, smelling blood and being the shark, I would wait for the fish to die before I'd bother to eat it. This can be taken from a receiver, bought out of receivership for cents on the dollar. Why would I pay good money for something I really don't need that I'm beating anyway, and ultimately is destined for failure?
There is really no way I could imagine Research in Motion's now renamed BlackBerry company coming up and going, wow, this is important. We've got something of value. If they had something of value, Richard, the time to show it --
QUEST: Right.
PALMER: -- was about two and a half years ago, not now.
QUEST: So -- but hang on, I'm not letting you get away with this too easily, Shelly, because --
PALMER: OK.
QUEST: -- there'll be people out there that are saying, there's two arguments here. There is the they can sell themselves and resurge themselves in some way, and then there are those who will say, hang on, this is Kodak, Palm, it's rank Xerox photocopiers. Which one do you think it is?
PALMER: Oh, this is over. This is like so over, stick a fork in it, it's done over. There's nothing they have that anybody wants. Not the IP -- the IP will have a value, but I'm -- like I'll say it one more time, I'm going to buy the IP out of the scrap heap.
There's -- we're moving away from smart phones over the next little while to wearable computing and sensor-based computing. Even Apple is going to have its hands full --
QUEST: OK, so --
PALMER: -- competing in the SmartPhone market. Research in Motion, or now BlackBerry? Oh, my goodness. The BlackBerry company, I don't know how they could survive. I don't know what they could do to make me go, I'm willing to buy a BlackBerry. I just don't know what they could do.
QUEST: It's very pessimistic, but I suppose --
PALMER: That's me!
QUEST: -- this is a natural evolution -- no! You're not normally -- you're normally a little more cheerful than that. But I have to tell you on the other hand, I've declared my conflict. I still like the BlackBerry when it comes to e-mail.
(CROSSTALK)
PALMER: Richard, you --
QUEST: I still like the BlackBerry.
PALMER: -- no, no. You're -- by the way, you are not the demo. This is an awesome device, it truly is, and if you want a keyboard, I would heartily recommend to everyone, if you want a keyboard, go out and buy the Q10.
QUEST: Right.
PALMER: But the problem is that once you touch this device, once you understand what it does, this is a computer you're holding in your hand -- or even an iPhone 5 --
QUEST: All right.
PALMER: -- but this specifically is something that will take you to another place, and this does e-mail and it does texting --
QUEST: Thank you.
PALMER: -- with a keyboard. Period.
QUEST: Shelly, good to talk to you.
PALMER: Always great to talk to you, Richard.
QUEST: Let's check on the market.
PALMER: Take care.
QUEST: Down 32, the Dow is off 32, 15,393 for the markets. Ten minutes we've gotten into our program. Now, it's basically flat at the moment. Joining me, Ben Willis. Ben, good to see you, sir.
BEN WILLIS, ALBERT FRIED AND COMPANY: Sure. Pleasure to see you, Richard.
QUEST: So, we're off just 32 points. We've had such a tremendous run up in stock -- in shares of late. Are we just in a summer doldrum?
WILLIS: Absolutely summer doldrums. We started out -- oddly enough, we didn't really pick up on the important news out of China, but it would appear that we rekindled some of the buyers' hopes after we saw the sell- off of the -- based on the Japanese news.
This market has been by the dip mentality. We saw the -- again, the U-shape formation of the early trading pattern. The sell-off came from the professionals who keep looking for a correctionist market, but the retail investor keeps saying I want to own them.
QUEST: All right. In that scenario --
WILLIS: Yes?
QUEST: -- if we take a breather for the summer -- we're still at 15,300 -- do you -- are you one of those people that believe the upside, it's still all there?
WILLIS: Absolutely. But I also believe that a correction is necessary to get to that.
QUEST: Oh, but corrections we're used to. We've seen corrections a gazillion times.
WILLIS: But we haven't seen a significant enough one. We've only seen 3.5 percent correction in a week's time in the last several months. That's not a real correction. A real correction is 5 percent or more. You need that. The same way you trim a rose bush if you want the blooms later on, you have to do the same thing to the stock market.
QUEST: No, I disagree. You can have, instead of a correction, you can have treading water.
WILLIS: You can, but it's not healthy. You're going to get tired sooner or later. And we have had some of a correction. The early leaders of this market, from our lows, which are led by particularly utilities and the telecoms, saw rotation. We saw those corrections over 5, 10 percent in those groups and rotation into this higher beta names, like the technologies we're staring to see.
QUEST: Right.
WILLIS: So, that's part of what the game we're seeing, and hopefully, that will continue, just a rotation of a correction --
QUEST: Good.
WILLIS: -- inside the market.
QUEST: Good to see you, as always.
WILLIS: All the best.
(RINGS BELL)
QUEST: As we continue on QUEST MEANS BUSINESS tonight, over here is our next guest. It's Tom Horton, he's the chief executive of American Airlines. We'll be talking to Tom about the merger that's about to take place in a moment.
(COMMERCIAL BREAK)
QUEST: This week, we could see the birth -- or at least the beginning of the world's largest airline. The merger of US Airways and American Airlines is likely to go ahead. It's entering its final stages. It's simply going to be called American Airlines. It'll be based in Dallas-Fort Worth. It'll be a member of the One World Alliance. We know all those facts so far.
And it will be the biggest of the big three against Delta, which has now teamed up with Virgin, and of course United, which merged with Continental. Consolidation in the US market now just about complete.
In Europe, the authorities have granted their approval to the deal last week. Here in the US, the US bankruptcy judge have been delaying their decision since March, and that's likely to happen this week.
There'll also be some major announcements. We'll have the following: on Thursday, there'll be the hearing on the company's restructuring, and then there should be the approvals of the bankruptcy judges and the Department of Justice. Joining me now -- it's been a long road.
TOM HORTON, CHAIRMAN, PRESIDENT, CEO, AMERICAN AIRLINES: It has been a long road.
QUEST: How close are you now to the end of that road?
HORTON: Well, very close. And as you and I discussed over a year ago, this was a mission to put American back on top. And thanks to the hard work of 75,000 people at American Airlines, we're about to complete a very successful restructuring and turnaround of this company.
QUEST: You've got the bankruptcy judge has to approve, and the DOJ. What do you expect in the Department of Justice? Are they going to want slots?
(LAUGHTER)
QUEST: Reagan National, for instance?
HORTON: Well, we've been working very closely with the Justice Department, people at American, people at US Airways, making sure that they have all the information they need to make an informed view of the merger. And we'll just have to wait and see.
QUEST: The bankruptcy judge is expected to approve it. I mean, it'll be extraordinary if they don't. But your pay packet is still an issue within that. For the third time, the trustee has said no, the judge has to decide it.
HORTON: Well, truly, it's a matter for the board of directors, it's a matter for the owners of the company, and of course for the court. And my focus has been all along on what's best for American Airlines and what will help put our company back on top, and that's what I'll continue to focus on.
QUEST: That's what I want to talk about now, because forget the past. Chapter 11's just about over. All the problems that got to this particular point.
Do you and your successor, Doug Parker, have to run an airline that competes with an emboldened Delta, who's got a large pot of cash; United, which of course has now merged. What's going to be the secret for you of doing that, besides obviously giving passengers what they want?
HORTON: Well, I think we have the best airline franchise in the world, starting with our name. But we have a great network around the world, we'll have a very competitive cost structure, a strong balance sheet, and over 600 new airplanes on order, which we're beginning to take delivery of right now.
QUEST: But you see -- in this battle between the three big carriers, you -- I remember, in fact, it was a former CEO of American, Bob Crandall, who famously used to say we all fly the same aluminum tubes. What counts is the difference of what happens when you get onboard. And he was right.
HORTON: Well, I think network matters a lot, and we'll have, I think, the best network in the world, in concert with our One World partners, and the best partners in the world.
But we also have -- we've really been investing in an industry-leading product, starting with this radical transformation of our fleet which, as you recall, started with the largest aircraft order in history just about two years ago.
And that's really built the platform for what the new American will be. More efficient airplanes, better product for our customers.
QUEST: Talk to me a little bit about the sort of stress for somebody like yourself -- and your coworkers, obviously, but you as the chief executive. You and I talked about when you had to take it into Chapter 11, there were all these sort of errors. The sort of stress that it puts somebody like yourself under to do this sort of mammoth transaction.
HORTON: Well, I've viewed it as a great privilege to lead the company through this time. But it was character-building, I think, for the whole team at American. But I'm proud to say the people of American stood very tall, they stood together, and they stayed focused on our customers. And that's why this has been such an extraordinarily successful restructuring of this company.
QUEST: And if you look at the industry now outside of the US, you've got the Gulf carriers. You take Emirates, for example, bringing three A380s into New York. You can almost hear the sucking sound as it pulls the passengers out. You've got Qatar, you've got Etihad. What worries you most about the global position for airlines?
HORTON: Well, it's a very competitive marketplace. It's very competitive in North America, it's very competitive around the world. That's why it's so important that the new American be strong, fit, competitive, and profitable. And we will be.
QUEST: It's a long road, but you got there. Sort of.
HORTON: We did. And as you know, this is a restructuring where it looks like all of our creditors will get full recovery. And indeed, there is equity value for our old equity holders.
QUEST: What would you do? Are you going to be chairman? What would you do after that?
HORTON: Well, I'm very focused on making --
QUEST: Ah!
HORTON: -- things at American better. That's my whole focus. And beyond that, Richard --
QUEST: Don't get too comfortable -- with the television camera, please.
(LAUGHTER)
QUEST: "Horton Means Business" ain't happening just yet.
HORTON: I think we're a team.
QUEST: I'm going to leave it there. Tom, good to see you, as always.
HORTON: Richard, good to see you, too.
QUEST: Thank you very much. Tonight's Currency Conundrum: customers on the Canadian Royal Mint's website aren't happy with the new coins commemorating the birth of Prince George of Cambridge. What's their main complaint? Are the coins too expensive? The coins are poor quality? Or there's no mention of the baby's parents, the duke and duchess. The answer later in the program.
The dollar is stronger against the pound, the euro, and the yen. Those are the rates. From the New York Stock Exchange, this is the break.
(COMMERCIAL BREAK)
QUEST: Maggie Lake now joins me from CNN New York as we discuss new ways and new forms of travel. Maggie?
MAGGIE LAKE, CNN INTERNATIONAL BUSINESS CORRESPONDENT: Richard, you - - as you well know being in New York this week, there is nothing worse than descending into a New York City subway when it's this hot out. It's a miserable experience. So, we are all desperate.
And that counts for anyone who's been on trains. Transportation, investing in infrastructure, really on the decline. And a lot of people excited about what may be a way to get out of it. We braved the New York City subway to find out just what all the buzz about the Hyperloop is about. Have a listen.
(BEGIN VIDEOTAPE)
(MUSIC - THEME FROM "THE JETSONS")
LAKE (voice-over): It sounds like something out of the cartoon show "The Jetsons," a space age method of transport that some say could get you from New York to LA in less than an hour.
Superstar entrepreneur Elon Musk of Tesla and SpaceX fame hinted at the project in an interview with tech site PandoDaily.
ELON MUSK, ENTREPRENEUR: I have a name for it, which is called the Hyperloop.
SARAH LACY, PANDODAILY: The Hyperloop?
MUSK: The Hyperloop, yes.
LAKE: But naming it is the easy part.
WALT MOSSBERG, ALL THINGS D: But I don't know what that is.
LAKE: Trying to explain it is something else entirely, as the host of All Things D found out.
MUSK: It's this cross between a Concord, a rail gun, and an air hockey table.
(LAUGHTER)
LAKE: Still confused? I met up with science writer Brian Merchant inside the old-school New York City subway system to get the real Hyperloop scoop.
LAKE (on camera): What do we think it might be like? It's supposed to be nothing like the infrastructure we're used to, right?
BRIAN MERCHANT, MOTHERBOARD: Right. So, he says it's going to be the fifth mode of transportation, like nothing we've every seen before.
LAKE: Hopefully, nothing like this. So, what would it look like?
MERCHANT: Right. So, the smart money says it'll look something like a pneumatic tube, sort of like an enclosed tube and we just blast air through that, kind of like those old-school mail systems --
LAKE: Right.
MERCHANT: -- where they stuff the package up and it gets sucked up? And we're going to be launched out of this rail gun, boom, you're off, 600 miles per hour.
LAKE: And so, I'm imagining my face like -- is this going to be something I want to ride on?
MERCHANT: I think so. Because in a controlled environment, speed itself doesn't actually impact human health.
LAKE (voice-over): The basic idea for this type of transport has been around for decades, and while we don't even know when or if the Hyperloop will even be built, it has captured the imagination of futurists. Videos like this one on YouTube are attempting to show what a Hyperloop system would look like, but in the real world, there will be challenges.
MERCHANT: We're going to have some serious "not in my backyard" problems.
LAKE: But all of us stuck in traffic jams, air delays, and stinky subways can dream, can't we?
MERCHANT: I love it. Is it a voice that is needed to move us forward, somebody that says, you know, these old ways aren't working. Old transit is kind of boring, it's inefficient. Why don't we leapfrog all that with something radical?
LAKE: We'll see if Elon Musk can take radical and turn it into reality.
(END VIDEOTAPE)
LAKE: Now, Richard, we are expecting to get some of those details in about just two and a half hours' time, possibly over Twitter. But I'm going to rein in expectations just a little bit. Elon has said that, listen, he's stretched pretty thin.
This is likely to be a design that's put out there in an open source form to get lots of people to start working on it, not an announcement that it is coming to a neighborhood near you soon. But hey, if it can get you to the east coast to the west coast in an hour, sign me up. I'll be on the first. I'll be on the first ride for sure. What about you, Richard?
QUEST: I've -- oh, please. Now listen, I haven't got a lot of time for the naysayers, the doom-mongers. Those people who are a wet weekend. This is fascinating, Maggie. This is different.
In 30 years' time -- @RichardQuest, by the way, is the Twitter name where you can join in -- would you take a Hyperloop? Maggie, this is -- you and I will be talking about this in 30 years' time as being a normal way of travel.
LAKE: And this is what is needed. It needs a visionary to get it in, to --
QUEST: Yes.
LAKE: -- get the conversation going.
QUEST: Absolutely.
LAKE: Move it out of the budget argument and back into the world of where are we going with these kinds of investments? I think it's fantastic.
QUEST: Absolutely. Maggie Lake, who is with us, and I'll -- we'll buy you a ticket, Maggie.
(LAUGHTER)
LAKE: You got it.
QUEST: And -- a return ticket. Hey, I'm a nice guy.
(LAUGHTER)
QUEST: A return ticket. We'll bring you back. I can't say fair enough.
LAKE: You're too kind, you're too kind, Richard.
QUEST: Would you travel the Hyperloop? Is this something you might think might have merit and value? @RichardQuest is the tweet and Twitter name where, of course, you and I can continue our discussion.
The paper -- listen, you think my papers are messy, the floor is tidy today -- well, sort of -- here at the Stock Exchange. I must confess, I do remember the days when there was literally paper everywhere.
When we come back, we're going to talk about the Japanese economy and we're going to put into perspective exactly what's happening there and where your investment decisions might want to go. This is QUEST MEANS BUSINESS.
(RINGS BELL)
(COMMERCIAL BREAK)
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. The headlines.
At least four people are dead and dozens of others have been wounded after a suicide bomb attack in Iraq. Officials say it happened at a popular cafe in Balad some 80 kilometers north of the capital, Baghdad. Militants have carried out a number of attacks on cafes in recent weeks.
There is still no sign of police or security forces at protest sites in Egypt. Media reports suggested that the government was planning to start removing supporters of Mohamed Morsy today. State media report the ousted president will remain in custody for 15 more days.
One of the two British teens who were attacked with acid in Zanzibar last week has now been released for hospital. The other remains in care. The 18-year-olds were walking down a side street in Zanzibar when too men on motorcycle through acid on them.
The royal family says the Dutch prince Johan Friso has died. The prince suffered severe brain damage after he was buried by an avalanche while skiing in Austria earlier last year. The younger brother of King Willem-Alexander was known as a risk-taker who valued his independence. Prince Friso was 44 years old.
A federal jury in Boston has found the reputed gangster James "Whitey" Bulger guilty of racketeering. It follows five days of deliberations and a trial, which lasted seven weeks. The 83-year-old was accused of being involved in 19 murders and extortion.
Bouncing around, the market is at the moment. From the New York Stock Exchange this evening, it's just half past 2:00 in the afternoon, and you can see up there, the Dow Jones Industrial is down 28.3, trading at 15,000, the index is at 15,397.
The -- what people are telling us, of course, is that it is the dark, hot, dog days of summer. A correction -- actually, it's not a correction that is underway, but a pause for a breath underway as things have been trading.
Now, economic news came to us from Japan, and we saw that growth has slowed over the past few months, and that has raised questions over the country's stimulus measures.
Official figures show the economy grew at an annual rate of 2.6 percent in Q2, that's a full percentage point lower than what analysts had expected, casting doubts over the bold plan of fresh government spending and central bank action to boost the country's economy.
The Nikkei dropped more than 1 percent. Bob Parker is with us from Credit Suisse.
Bob, when you hear that sort of number, do you think it's a pause for breath or that Abenomics is somehow hit the buffers?
BOB PARKER, CREDIT SUISSE: I certainly think it has not hit the buffers and if you actually break down the GDP numbers in Japan, consumption was up; government spending had a positive impact on growth.
The big negative -- and this is where the number came out lower than the consensus, was that business investment had a negative impact on growth. And I think what we have to watch carefully over the next 2-3 quarters is, yes, the Japanese consumer is spending. And he's very motivated to spend because inflation has now returned, albeit at a low level.
But the key factor is will Japanese companies invest, that very high level of cash that they are running at the moment?
QUEST: That taken, if you put Japan to one side, you have those slightly -- and I preface it by saying slightly lower growth numbers in the U.S. You have a slightly better performance in the U.K. Europe just muddles along.
But we are now in the summer, so it is worth taking stock for investment decisions for the rest of the year, Bob.
BOB PARKER: I think that's probably right in the short term. And I think just one point I would make on Europe is that the data over the last month actually has been universally better in Europe. And I think we will see this month and next month Europe finally coming out of recession and particularly led by a strong growth number in Germany.
Now coming back to your question about the markets, my central case is that for the rest of August, we probably trade sideways. We're going to have one week up, one week down across all global markets.
I am worried that we could have a market correction in September and October. And that's not surprising, given the very significant --
(CROSSTALK)
QUEST: Based on that, if you traded -- if you've traded or you've gone sideways during August, doesn't that create the breeding space necessary as we wait for more economic or corporate data?
BOB PARKER: Well, I think two factors, Richard. The first factor is if one looks at the States, even if one looks at European markets and obviously the very strong performance of Japan year-to-date, we've had a very strong equity market rally in the first seven and a bit months of this year.
I think a second factor is that investors including ourselves are nervous about a number of risk factors, whether it be the Fed tapering, starting in September or October, whether it be a budget gridlock in the United States and a problem with the debt ceiling again, let's not forget a number of European governments are very fragile.
And we might have a government failing in Italy or Spain or Portugal, furthermore. And I think investors are also going to be nervous ahead of the German election on the 22nd of September.
QUEST: Factoring all that together, somebody's just stolen me bell.
Factoring all that together, do you still go for big caps, those big cap cyclicals or the non-cyclicals?
BOB PARKER: At the moment, I would actually reduce risk, but with a view on a setback in September or October, to going back into risk and going back into risk means actually going from large cap to small caps, going into cyclicals and away from the defensive position.
And where are markets the cheapest? The markets are cheapest at the moment are actually in Europe and emerging markets. And emerging markets have now underperformed -- notably the BRIC markets -- for a good year and a half. And that's where you actually have very cheap valuations.
QUEST: Cheap valuations. Bob Parker joining me from London. We thank you, Bob. Always good to hear --
BOB PARKER: Thank you.
QUEST: -- get your advice. (Inaudible).
Now a quick look at the European bosses and how they've moved London's FTSE, the CAC in Paris both finished slightly lower. In Frankfurt, the DAX and Zurich's SMI, they edged even higher. I don't know why I'm looking at my machine to tell me that. There's actually of course in a screen surround here that would give me that sort of information.
The Dow Jones industrials is just off 30 points again this trading sideways, which is going to be so prevalent.
The bell is back. You turn your back in a moment in the stock exchange and somebody tried to nick the bell.
When we come back, we'll turn our attention to Mexico and the question of an energy policy and what happens there. (Inaudible) after the break.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
(BEGIN VIDEO CLIP)
QUEST (voice-over): The answer to tonight's "Currency Conundrum," I asked you what the main complaint on the Royal Canadian Mint's website about the coin commemorating the royal birth? The answer, C. There's no mention of the baby's parents, the Duke and Duchess of Cambridge, Kate and Wills.
Mexico's president has proposed sweeping reforms to the country's massive energy sector. The issue of Mexico and energy, of course, is one that never goes far away.
Now President Enrique Pena Nieto's plan will mean a major shakeup for Mexico's state oil company, Pemex. It will offer private companies lucrative profit sharing contracts. Reforms are controversial and (inaudible) is a source of national pride for Mexico. Protests erupted on the streets of Mexico in 2008 when the previous government tried to privatize the sector.
Nick Parker is in Mexico City for us tonight.
Energy in Mexico, the privatization of Pemex is going to be even the mere threat, Nick, of tinkering around with it will have repercussions.
So why are they doing it?
NICK PARKER, CNN CORRESPONDENT: Yes, inevitably, Richard, I mean, this is really something that's so wrapped in Mexico's national identity, this idea of self-reliance and self-sufficiency (inaudible) some extent the United States. Further north as has been deeply enshrined in the country for 75 years since they first nationalized the oil reserves in 1938 by expropriating the reserves from foreign companies.
Why are they doing it? Essentially they're going through a situation where they've lost something like 1 million barrels a day of oil in the last decade, as their old oil fields basically ran low on reserves.
And (inaudible) largely unable to exploit deepwater reserves.
QUEST: But is -- you say that, is that just because they're inefficient or because they haven't got the capital? What do they hope that the private sector will do that the public sector has been unable to do, Nick?
NICK PARKER: Right. Well, to put it simply, all of the above. They say that they have suffered from underinvestment, that they don't have the technical know-how particularly to do some of these processes, such as deepwater drilling and fracking as well.
So they're seeing a situation where they have something like 29 billion barrels of oil estimated in the deep waters. And so far, they have nothing in production. So the aim would be to enter into some of the risk sharing, profit sharing agreements with some of the super majors, for example, ExxonMobil, and hopefully that will be able to generate new revenues and new reserves, Richard.
QUEST: Can you get it through? Can the -- is this one of those things where -- I mean, help us understand the political, geopolitical along with the energy sector and the structure of this.
Is this something that if the president wants, the president will get?
NICK PARKER: No, not at all. Former presidents have tried to reform the energy sector in the past. The previous president, Felipe Calderon, came -- got largely unstuck in 2008 and he ended up with something that's extremely watered down.
Analysts you talk to right now say that they do think there is some optimism, that this can go through. You have the ruling party, the PRI, which has come out with something that's reasonably liberal, not as liberal as the PAN, which a party they need to basically join up with in Congress to get the right number of votes.
Analysts say that now there should be some kind of middle ground between the two parties, which will allow it to go through. They are expecting it to go through. But in early September, we had the defeated presidential candidate, Andres Manuel Lopez Obrador, who's calling for street protests. And he's certainly somebody that knows a thing or two about mobilizing the masses.
So it's not a subject that's going to go away anytime soon and will remain extremely controversial long after it's even passed.
QUEST: Finally, Nick, is this the sort of issue that will have people on the streets again? Again, I should say.
NICK PARKER: Again, I think inevitably, when you have a figure like Andres Manuel Lopez Obrador, he will be able to get people out onto the streets. The question really will be what kind of numbers will he be able to get.
Is it still such a controversial subject for a majority or Mexicans? Or have most of them come to accept that really the energy industry is in need of some kind of reform and that perhaps they could look the other way and hope for the best, Richard.
QUEST: Nick Parker, who is in Mexico City for us this evening, Nick, we thank you for that.
Now in New York this morning, having had the most glorious weekend, the heavens opened. I mean, it was -- it really was quite a tropical type of storm. Of course, maybe you've had worse where you are.
Tom Sater's at the World Weather Center.
Europe, of course -- I got an email, incidentally this morning from a friend and a colleague who basically said the first whiff of autumn felt like it was in Europe.
TOM SATER, AMS METEOROLOGIST: We've got cool weather heading your way, Richard, first of all. And a nice cooldown in Europe.
How long do you plan to stay in the Big Apple?
QUEST: Oh, I'm here now. I'm back in Atlanta with you next week, but I'm here all this week.
SATER: OK, very good.
After a bout of rain tonight and tomorrow, it's going to get beautiful there, mid-20s and a lot of sunshine.
QUEST: Ah.
SATER: Just for your arrival.
QUEST: From your mouth to the heavens.
SATER: Wow. That -- there you go. I'll take that, Richard.
Here's your rainfall this morning, as you said, it was kind of tropical in nature. I mean, it really did come down in Long Island, parts of New Jersey, too.
Now once you get this batch that's moving through Detroit and Cleveland, that's tonight and tomorrow morning, behind that, it's just refreshing and it's cool Canadian air sent down with love, of course. But you can see the atmosphere and just how ripe it is for the development of just deluge after deluge, day after day, the heavy rain has been soaking parts of Kansas, Missouri, to Tennessee, Alabama and into Georgia and into North Carolina. Temperatures are nice; we still have our fires that we're dealing with out in parts of California, even the Desert Southwest, 26 for a high tomorrow in Washington, D.C., 25 in New York, just the beginning of something very nice.
We're also looking at how much sky cover we're going to have, not just in the U.S., but in Europe as well, Asia as well. Tonight the Perseid meteor showers should reach their peak. The Perseids happen every time this year but sometimes from around the midnight hour toward right around dawn, they can get quite active. And you can have hundreds of them per hour.
And so we're watching Europe as well. All looks pretty good. We do have some thunderstorms that are occurring in parts of the Pyrenees and northern parts of Spain. You can see making its way in toward across extreme southern France, central Germany have a few scattered showers. It's a little unsettled up in parts of the U.K.
Now as Richard was talking about, getting reports of some refreshing air, wait till you see what's coming in the parts of the north, into Central Europe. It does get a little unsettled here, but look at the numbers, much better in Paris at 20 degrees, or 19 in London and then the heat wave that you've had.
Vienna, much better at 24 than 32 or 33 degrees. Now last Thursday into Friday, we had the extreme heat in parts of Slovenia and Austria. We're still looking a little bit further to the south, the heat to remain in place in parts of the Balkan Peninsula or even into Portugal and Spain.
Here's the numbers from Monday and the highs, as you can see, Romania, Bucharest, 31 degrees, Kiev 27, much above average. And we're still seen a few areas that are going to see extremely, but it's going to be short- lived. This trough is really promising some nice, almost autumnal like weather as you can see it in the temperature trend. And that's what we want to see, a little trough like that. We do have our two areas of heat as talked about. Of course if you're really looking to kind of tie up the ends of your summer, there it is, a beautiful resort picture in Spain and your numbers for Tuesday, 23 in Paris, 22 in London. Should be pretty nice but enjoy it there, a little bout of rain again tonight and tomorrow morning, Richard, before you have a little taste of fall there as well coming this week.
QUEST: Very much looking forward to that.
And I always think that the best time to be in Spain, frankly, is that first and second week of September when the heat is off, the children are back at school where they belong and the beaches are nice and clean.
All right, Tom Sater at the World Weather Center.
Last week, and of course over the last few days, we've been telling about Kenya and the fire at the main international airport, the Kenyatta Airport. Well, now we've got the real numbers that showed the effect, the economic effect on the dominant hub carrier there.
Kenya Airways says it lost $4 million from last week's fire at the international airport. Kenya Airways is the dominant carrier at that airport, which is East Africa's main hub. The airport was brought to a standstill last Wednesday by raging flames. The president of the country says no terrorism was involved.
As for Kenya operations, they were seriously affected. CNN's Nima Elbagir caught up with the chief executive, Titus Naikuni, to ask him how the carrier was coping.
(BEGIN VIDEOTAPE)
NIMA ELBAGIR, CNN CORRESPONDENT: Are you now back operating at full capacity?
TITUS NAIKUNI, CEO, KENYA AIRWAYS: We're not at full capacity internationally. I think we have around (inaudible) percent (inaudible) flights. But we are at 100 percent on domestic, domestic meaning Kenya. We believe by Wednesday, Thursday, we should be back.
ELBAGIR: What impact has this had?
NAIKUNI: It's still not very clear to us from a financial position, the net financial position, but if you look at our revenues, we believe we're about $4 million loss of compared to what we had planned.
ELBAGIR: This has clearly hit the confidence of not only the investors looking at Kenya Airways, but the major airline operators that are working out of Nairobi.
NAIKUNI: I don't think it's got a major (inaudible) on us. I don't think people should lose confidence in us and so forth, (inaudible). (Inaudible) that we're able to turn around the situation and start flying very quickly.
So I think the major challenge that we're going to have is how soon can we get the airport back, that is (inaudible). But when you look at what we've done in terms of moving domestic (inaudible) to our cargo center, it does feed capacity for us.
So as soon as (inaudible) capacity, you won't feel the issue or the impact of what has happened.
ELBAGIR: And in terms of a timeline for getting that airport back on track?
NAIKUNI: I can't answer that. That's really within the main of (inaudible). But I know the government is putting a lot of pressure on the (inaudible) people to make sure that either that is done (inaudible) or together with (inaudible).
ELBAGIR: Kenya Airways has been such a success story, not just regionally but transcontinentally. But that success has very much been symbiotic (ph) with this airport, with the success of Nairobi as a regional and continental hub.
What assurances are you seeking from the Kenyan Airport Authority that something like this won't happen again?
NAIKUNI: I'm seeking not only assurance that something like this would never happen again, but also (inaudible) a modern airport put in here (inaudible). And we've been given assurance right up to the president of this country.
Don't lose sight of the fact that Kenyans have always been known to turn things around and we are turning them around. We're going to do so.
(END VIDEOTAPE)
QUEST: That's the CEO of Kenya Airways.
There's an old saying I had that such-and-such in the back of my cab. They say that in London about cab drivers. Well, now passengers in Norway are saying you'll never guess who was driving the cab that I got into this morning. Who would be driving the cab in Norway? I'll tell you after the break.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
QUEST: It's amazing what world leaders will do in the middle of the summer, where they take their holidays and, in some cases, what they'll do to help get reelected.
Take Norway's prime minister. Jens Stoltenberg became an Oslo cabbie for a day. He offered what was literally a premier cap taxi service. He's trailing in the polls ahead of next month's scheduled elections. And as Dan Rivers now reports, Norway's leader decided it was time to get behind the wheel of the car.
(BEGIN VIDEOTAPE)
DAN RIVERS, CNN CORRESPONDENT (voice-over): Explaining that today will be quite different to most Friday's, Norway's prime minister was the master of understatement as he donned a driver's uniform and headed for his taxi, a political stunt to enable him to get closer to the voters.
He waited on a taxi rank like any other cab, and this is what happened.
UNIDENTIFIED FEMALE: (Inaudible).
RIVERS (voice-over): Some passengers seemed totally oblivious that the man running them around should have been running the country. But plenty clocked him immediately and then tried to figure out how to bring up the awkward fact that he was, well, the prime minister.
Some were delighted.
(LAUGHTER)
UNIDENTIFIED FEMALE: (Speaking foreign language).
RIVERS (voice-over): But Jens Stoltenberg is trailing in the polls ahead of an upcoming election and some wanted to take him to task.
UNIDENTIFIED FEMALE: (Inaudible).
RIVERS: It's difficult to imagine David Cameron doing a similar political stunt here in London, but that's because to get the license to drive one of these famous cabs the so-called knowledge test can take two or three years.
RIVERS (voice-over): But for Norway's leader, the only qualification needed was a driving license, a pair of sunglasses and a sense of humor, a premier taxi none of these passengers will ever forget -- Dan Rivers, CNN, London.
(END VIDEOTAPE)
QUEST: Now to the other leaders and what they're doing for their annual vacations:
Angela Merkel is not going to be outdone. She's going to play a history teacher -- no, (inaudible), she's going to play -- she's going to become a history teacher, I should say, in Berlin for the day.
The German chancellor will tell schoolchildren what it was like growing up behind the Berlin Wall, (inaudible) at the head of the classroom marks the end of a holiday season when she had a three-week summer holiday in the Italian Alps, and then she's back on the campaign trail ahead of September's elections, September the 22nd. Germans go to the polls.
Very little relaxation for Francois Hollande. He has cut his vacation from three weeks to one and he's told cabinet members to stay close to Paris as he tries to get France's unemployed back to work.
Barack Obama began his week-long holiday at the weekend on the Martha's Vineyard not far from Boston. White House says that the president will receive daily briefings on national security. They often take their holiday on the Vineyard. He started things off with a round of golf on a public course.
Now to the -- some of the thoughts of what people have been telling us, would you travel on the Hyperloop? This is what's going to be announced today, or the idea. It's a bullet that goes through a tunnel. It would take you from L.A. to San Francisco in 30 minutes.
Gaula Ambula (ph) says, "Yes, I'd go on the Hyperloop if it's tested and trusted. Why not?"
John Bruns (ph) says, "I'd travel on it. Elon Musk is a genius. He succeeds where others fail."
"No, because China came up with a fast train and it ended up killing people," says Exta Vigit (ph).
@RichardQuest, wouldn't you go on the Hyperloop if it came to a city near you?
After the break, a "Profitable Moment." QUEST MEANS BUSINESS at the New York Stock Exchange.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment": I don't know, boiled in oil or shot to death? Shelly Palmer told me on this program those were the less than palatable options facing the manufacturer of this, the BlackBerry. The device that was ubiquitous for every business traveler, everybody that wanted to seem cool had a BlackBerry. I love my BlackBerry. It's the reliable way that I always get emails whenever I get off a plane, wherever I am in the world. And yet it managed to lose the battle to this, and not just to this, to every other device. This is a telling story of what happens if you don't stay on top. And who knows where BlackBerry will end up? But one thing certainly seems clear: they won't be around much longer in their current guise.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable.
(MUSIC PLAYING)
(BEGIN VIDEO CLIP)
QUEST (voice-over): The headlines; it's the top of the hour.
At least 12 people are dead and dozens of others have been wounded after a suicide bomb attack in Iraq. Officials say it happened at a popular cafe in Balad. Some 80 kilometers north of the capital, Baghdad. Militants have carried out a number of attacks on cafes in recent weeks.
In the United States, the reputed mob boss James "Whitey" Bulger has been convicted for his role in several murders. A federal judge in Boston found him guilty of 31 of 32 counts, including racketeering and faces a maximum sentence of life in jail plus 30 years. He'll be sentenced in November.
There are still no signs of police or security forces at protest sites in Egypt. Media reports suggest that the government was planning to start removing supporters from Mohammed Morsy today. State media reports the ousted president will remain in custody for 15 more days.
And the royal family in the Netherlands says that Dutch Prince Johan Friso has died. The prince suffered severe brain damage after he was buried by an avalanche while skiing in Austria earlier this year. The younger brother of King William Alexander was known as a risk taker. Prince Friso was 44 years old.
(END VIDEO CLIP)
QUEST: You're up to day with the news headlines. Now "AMANPOUR" from New York.
END
