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Quest Means Business

Greek Banks Face Funding Crunch; Emirates CEO Says Delta CEO Crossed the Line

Aired February 18, 2015 - 16:00   ET

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

RICHARD QUEST, CNN HOST: He was officially late pushing the bell. You don't see that very often. But don't worry, the Dow is only off some 20

points today; surprised they didn't boo. Normally they boo if you're late when you push ringing the bell.

Oh, dear. Oh, dear, oh dearie me.

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QUEST (voice-over): We had a late pusher and a wimpy gavel and it's only Wednesday, the 18th of February. Tonight: the former head of Deutsche

Bank tells me a deal on Greece will take time. You'll hear (INAUDIBLE) on this program.

Gulf airlines anger, now an apology. Delta says it's sorry for the chief exec's comments on this program.

And Eurostar's chief exec says it's getting a boost from the British business traveler. You're going to hear chief execs galore. I'm Richard

Quest. I mean business.

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QUEST: Good evening. We have a very busy hour ahead of us together and during this hour, we are expecting President Barack Obama to come out and

lay out his vision to combat violent extremism across the world. It's a keynote address of a special White House summit that's tackling extremists

and whether it's brutality of ISIS in the Middle East or the terror attacks in Paris and Copenhagen.

Now there you see the White House and the president -- I think that's the Briefing Room -- where the president, it looks like he's going to be

speaking around 15 minutes from now. When we do -- or when the president does, we will be joining our sister network, CNN, in the United States and

we will bring you the speech from the president and, of course, the analysis afterwards.

As we continue though, and wait for the president, we will bring it to you the moment he starts speaking, tonight there are negotiations over how to

keep Greece afloat during this crucial six-month period after February the 28th. And those negotiations are now reaching a crucial stage.

(BEGIN VIDEO CLIP)

QUEST (voice-over): The Greek government says it will ask the European Union to extend credit for up to six months. Athens wants to hold onto its

financial lifeline but not the strings that are attached to the current bailout.

German officials say that is a non-starter.

The U.S. Treasury Secretary has urged Greece to strike a deal with its creditors; Jack Lew said if it wasn't worked out quickly, it would cause

uncertainty in Europe and that would also include hardship to Greece.

Meanwhile there are unconfirmed reports the European Central Bank has extended a lifeline for Greece or at least for the banks. And the reports

say the ECB has raised the cap on the emergency assistance, the so-called ELA provided by the Bank of Greece.

Now join me at the superscreen and you'll see. They had to raise the cap on the money because you'll remember the ECB has cut off Greek banks from

normal ECB monetary operations. So the only way they can get their hands on money is through the ELA, the emergency liquidity assistance.

Now apparently, despite this reprieve, Greek banks are still facing a very dangerous crunch at the moment because most of the authorized emergency

fund has been used up. The ECB's put another 3 billion through the so- called ELA funds. But deposits are flowing out from the banks. Depositors are pulling as much as $500 million a day out of Greek banks.

Now without more money coming from the ELA at the top, you can see this. It's really very simple. There's no great mathematics involved. The ELA

money comes in the top and it seems to be going straight out to the depositors.

So what they may have to do if there is no deal, this is the possibility. Stop the money going out by way of capital controls. That would stop the

withdrawals. All of this will be dramatic and drastic.

Josef Ackermann is the former head of Deutsche Bank. Now this titan of European finance says there's no certainty Greece will have the deal at the

end of the month.

Mr. Ackermann helped broker the original 2012 deal with Greece, convincing investors who own bonds to take a haircut. That deal, by the way, was the

big deal that really wrote down much of the private sector debt. But it still wasn't enough. Ackermann was a confidant of Angela Merkel throughout

this crisis. He used his position at the top of Europe's biggest bank to help prevent a complete meltdown of the banking system.

Today he is the chairman of the Bank of Cyprus. The bank was one of the hardest hit by the writedowns that came along with the Greek bailout and of

course also it's also had to sequester depositors' funds in the Cypriot bailout, which then followed.

I asked Josef Ackermann what would it take to get a deal between Greece and its creditors.

(BEGIN VIDEOTAPE)

JOSEF ACKERMANN, CHAIRMAN, BANK OF CYPRUS: I think the baseline scenario still that you will have some sort of last-minute compromise but it is

clear that Greece, the Greek government has to understand that it will not be an extension of a loan agreement but an extension of the current

program, which includes a lot of measures, reform measures, fiscal measures and so on so on. So I think that is clearly part of the deal. Any

modification of the current program has to be approved by parliament and several member states. And first of all, that will take time. But

technically that's not a done deal, either.

So the situation is, in my view, still encouraging to some extent because we are still talking, we are trying to find a solution. But it's

absolutely no certainty that we will have the deal by the end of this month.

QUEST: Do you think we are looking more towards a Greek exit now than we have been before?

ACKERMANN: Well, absolutely. And of course I was always saying it would be a disaster for Europe some years ago. We were not prepared. We didn't

have the banking union. We didn't have the ESM. We didn't have other measures in place. And banks were undercapitalized. Now we have made huge

progress and we are much better protected and much better prepared for such an exit.

But the only risk is that of course in other countries, which are also paying a high price for the current programs, similar political movements,

made and gain momentum and that we will have similar voices being expressed in other jurisdictions. That will -- could be a risk to the Eurozone as a

whole.

QUEST: When quantitative easing now just about to begin, do you think there's cause for concern or optimism?

ACKERMANN: No, there's cause for optimism because first of all, it would help to -- of course, the euro is now weaker, it's lower, which helps the

export nations of Germany again. Then secondly, I think we will see a little bit an upward pressure on the price stability and the inflation

side, which is positive in that moment.

And the third one is that we will probably see lower funding costs for especially countries on the periphery and it gives a little bit more

certainty and stability to these countries.

So overall, I'm still quite optimistic that we continue to develop in a positive way. But we have a few problems and one of the most urgent one is

of course the Greek situation. And we have known that for quite some time. It is a little bit a pity that Greece has really some lost years behind

them in certain ways. They have not done the necessary reforms. They have not talked openly to their people and said we are in a very challenging

situation. It will be tough for the next two or three years but we go through that and we will survive and we will be much stronger than ever.

And I think that message has not really come across and many of the reforms like the land registry and tax collection and corruption and things like

that, which are structurally very important for the economy going forward, have not been tackled with the -- enough force which would have been

required. And that's why the new government had in certain circles some sympathy because we felt that this new government is willing to tackle some

of these issues. And unfortunately we are now in a situation where the whole process is being halted for a time being.

(END VIDEOTAPE)

QUEST: Strong words from Josef Ackermann, who, of course, has sat at the table and continues to advise.

It's a war of words between rivals in the skies and it's been unfolding here on QUEST MEANS BUSINESS. You've heard from the chief execs of Delta

and Qatar. After the break, the head of Emirates weighs in.

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(COMMERCIAL BREAK)

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QUEST: So to the story we've been following all week. Now Delta Air Lines has apologized for comments by the chief executive, Richard Anderson,

earlier this week on QUEST MEANS BUSINESS.

Mr. Anderson was speaking about claims that Delta and other U.S. carriers got financial help from Washington in the wake of 9/11. Some airlines from

the Persian Gulf call that a state subsidy.

On Monday, Mr. Anderson called it a great irony to be under fire from Middle East competitors because, in his words, "the terrorists behind 9/11

were from the Arabian Peninsula."

Now Delta said it was sorry if those remarks caused offense.

In the same interview we received, "Richard was reacting to claims the Gulf carriers have been making that U.S. airlines received subsidies in the form

of payments from the U.S. government after the 9/11 attacks and the bankruptcy proceedings that resulted. He didn't mean to suggest the Gulf

carriers or their governments are linked to the 9/11 terrorists. We apologize if anyone was offended."

The statement continues that the point Richard was making is the Gulf carriers have tried to defend their government subsidies by charactering

such payments as subsidies. And as they say, that couldn't be further from the truth.

The three huge U.S. carriers -- Delta, United and American -- are in a battle and they're now feuding with their rivals based in the Gulf. The

Gulf 3 are Etihad, Qatar and Emirates.

So what's the background?

Thank you very much, seconds away, round one.

Round one was Monday. Richard Anderson told me why the U.S. airlines are upset. He said, quite clearly, the Gulf 3 benefit unfairly from state aid.

(BEGIN VIDEO CLIP)

RICHARD ANDERSON, CEO, DELTA AIR LINES: . we have spent two years analyzing their financials and we have found evidence of their actual

financial statements from other places in the world that provide documented evidence that can't be refuted of tens of billions of dollars in direct

government subsidies.

(END VIDEO CLIP)

QUEST: Now round two: the CEO of Qatar Airways joined us by phone to respond, Akbar Al Baker made his position clear. Anderson and Delta should

compete harder and complain less.

(BEGIN VIDEO CLIP)

AKBAR AL BAKER, CEO, QATAR AIRWAYS: Quite frankly I think that Mr. Richard Anderson doing his job, improving and competing with us instead of just

crying wolf for his shortcomings in the way the airline is run.

And blaming us as Gulf carriers whilst not saying anything to other countries, which have similar organizations.

(END VIDEO CLIP)

QUEST: So now round three.

We hear from the chief executive of Emirates Airline, Sir Tim Clark. In an exclusive interview, I asked Sir Tim to respond to the allegations from the

U.S. carriers.

(BEGIN VIDEOTAPE)

TIM CLARK, EMIRATES CEO: We have not had the benefit or the courtesy of being supplied with this report. We have not had the ability to check the

validity or the veracity of what has been said in that report. And I would have thought that if they are going to make allegations about subsidies or

other forms of government intervention of any form, the least they could have done would to -- would be to supply us and the other entities involved

in this part of the world with that report.

I cannot comment on anything that we haven't seen. I cannot comment on statements about $14 billion, $15 billion or whatever because we have yet

to see the contents of the report. And until we get that, I think it's a little bit unreasonable for us to be forced into a situation where we have

to report on something we have no knowledge of.

QUEST: You say in your statement that you put out -- you say it's worrying. But you say, "at a time where the overarching requirements of

the Middle Eastern geopolitical calculus requires relationships to be cemented, not fractured."

What did you mean?

CLARK: Well, I -- these accusations -- and as far as we're concerned, as I said earlier -- unsubstantiated allegations -- come at a time when, you

know, the Middle East has its issues. We have to be absolutely aware of the fact that the United Arab Emirates has been a staunch and loyal

supporter of the United States for decades. And I would have thought that the accusations and allegations that were made -- as I said, unfounded

until we have checked the veracity of what is being said -- it's not an opportune time to make these kinds of statements.

And that's the point I was making. We all need to pull together at the moment and that's what we're doing. So I hope that that point has been

well understood.

QUEST: Do you think the U.S. carriers have -- have, to some extent, unleashed or opened a can of worms, if you like, that the likelihood of

which -- the ramifications of which might be far greater than anyone realizes?

CLARK: Frankly, I don't, Richard.

And why do I say that?

I do not believe that Mr. Anderson's statements are representative of the whole of the aerospace and airline industry of the United States. I know

for a fact that many of them have written to the administration, the government, to say they are not supporting what has been said, particularly

when it starts to encroach on the very liberal open skies regime that the Americans pioneered and prescripted with regard to agreements and

negotiations with the countries of the world that currently have agreements.

QUEST: Are you angry, frustrated or just bemused by this latest attack?

CLARK: I'm not angry. I mean, I kind of get used to it. I'm a little bit concerned that Mr. Anderson crossed the line in some of the statements he

made with regard to what went on with regard to 9/11. And I know that has caused great offense in this part of the world and I'm sure will be dealt

with at the governmental and state level.

But apart from that, I'm fairly, let's say, used to it. I believe our position is utterly defensible and will be. And we will demonstrate that,

by offering quality products into the United States, we will continue to draw business to points that currently the American carriers don't serve,

have never served and probably never will serve.

So why would you deny us that?

So if there's anger -- it's not exasperation. It's -- you could say I'm bemused because, in the end, we want evidence to everybody concerned that,

frankly, we're doing a good job, that people value what we do. The value proposition is an exceptional one. And long may it last.

QUEST: And as to the 9/11 comments, you believe they will be taken up by others?

CLARK: Well, put it this way. As an airline manager, I cannot speak for what the States may do. But I have to say that I wonder whether Mr.

Anderson considered the feelings of his SkyTeam partner, Saudia, when he made these allegations or these carefully crafted statements -- words.

Unfortunate, but there we are. He must answer to those questions.

(END VIDEOTAPE)

QUEST: Sir Tim Clark, talking to me earlier. And it's a story we will continue to follow in some detail.

Now we are waiting for President Obama to start speaking at the White House. The president is due to be giving a major address. It's a keynote

address, a major policy statement on -- for the very word extremism. It takes account of events not only in Copenhagen but accounts of course in

Paris, the "Charlie Hebdo" and now the President of the United States.

(PRESIDENT OBAMA SPEAKS)

(CNN SIMULCAST)

END