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Quest Means Business
Earnings Season Begins; Cameron Proposes Tax Evasion Crackdown; Tata Steal Sells Part of UK Business to Greybull Capital; Saudi Arabia Plans Bridge to Egypt; Egypt Give Two Islands to Saudi Arabia; Ukraine's President Calls for New Coalition; Poroshenko Expects Groysman as New Prime Minister; New York Poll Shows Clinton Tops Sanders By Double-Digits; Poll: Trump Leading in New York; Stars Cancel Concerts to Protest Divisive Laws; Low-Cost Carriers Thrive in Asia; Savile Row's Gender Breakthrough
Aired April 11, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00]
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PAULA NEWTON, HOST: Wall Street a bit indecisive today, cranked out a small loss that is for the Dow as trading comes to a close, it's Monday, April
11th.
A tabloid business story, the Daily Mail confirms it could make a bid for Yahoo, guess what it's not alone. The fight over David Cameron's taxes
turns nasty in the House of Commons.
And after 200 years, London's Savile Row gets its first female master tailor.
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NEWTON: I'm Paula Newton. This is "Quest Means Business."
Tonight, the beginning of what's expected to be a brutal earnings season and it could be, get this, the worst since the great recession.
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NEWTON: Now first, a quick look at today's movements and the Dow is down slightly. Even though it could not maintain that momentum from overseas
gains and an oil futures rally. All eyes really are on the beginning of earnings season as analysts expect it to get very ugly.
Now first up, you don't envy them, do you, is metal producer Alcoa which will release its results in a little under an hour. Now JP Morgan will do
so on Wednesday. Thursday, will be about the airlines. Delta Airlines and of course Bank of America and Wells Fargo as well. Citigroup will release
on Friday. Remember, those kinds banking stocks expect to be the ones that may be hit most gravely.
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NEWTON: Talking about all this now is Allianz chief economic adviser, Mohamed El-Erian. Thank you so much for joining us. We have to say that as
you and I speak we believe Janet Yellen is still speaking to President Obama. It's only her second time at the White House.
Now Mohamed, I like to call this an inflection point. What is going on when you look at the global economy, because it does seem a bit wayward right
now.
MOHAMED EL-ERIAN, ALLIANZ CHIEF ECONOMIC ADVISER: Yes, you're right, and for two reasons, one is global growth is slowing down and becoming more
uneven. And I suspect we'll get confirmation of that tomorrow from the IMF. And the second reason is that central banks appear and are less effective
in repressing financial volatility and artificially promoting growth. So put these two things together and people get nervous. Companies cannot earn
as much. And then there's a lot of question marks as to what are policymakers going to do.
NEWTON: You know the central bank impotency is something that comes up again and again and again and it's really making people shudder. Mohamed
why? Why would this be a very grave concern at this point?
EL-ERIAN: The reason why it would be a concern is since the global financial crisis and with the exception of a moment in 2009 central banks
have been doing all the heavy lifting. They've been the only game in town when it comes to active policies. Why? Because political polarization has
frozen other policymakers. The great advantage of central banks is they're politically autonomous. They don't need to go to parliament to implement
something. And therefore, they've taken on a huge burden but they don't have the right tools. So all they can do is borrow growth from the future,
borrow returns from the future, in the hope that others will step up to the plate.
NEWTON: Yes, it's interesting that we've had prominent players from the market saying, that look, this whole thing about negative interest rates
has gone too far. It's almost as if they want to see a more equilibrium which is interesting.
That brings me to the issue though of the U.S. dollar. You know that U.S. dollar rally is now over. I mean, you're even looking at those highs in the
yen. Does that give you a little hope? It certainly has given emerging markets a little bit more breathing room.
EL-ERIAN: Yes and no. Hope because it gives some countries some breathing space.
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EL-ERIAN: I don't think much, but some. No, because it shows that central banks are becoming more ineffective. The dollar has weakened, particularly
against two currencies. The yen and the ECB. That should not have happened. Both these central banks have taken interest rates negative. One of the
reasons they took interest rates negative is to weaken their currency instead their currency appreciated.
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EL-ERIAN: Which points to beyond a certain point and certainly negative interest rate territory. These experimental policies can be not just
ineffective, they can be counterproductive.
NEWTON: Yes, and you make a good point there in terms of going forward. If you're President Obama and you're listening to Janet Yellen, I think what
he wants to hear from her is that the U.S. economy still has the steam to be able to pull the rest of the world along. I'll look to you to get an
opinion on this. Does it have that kind of steam, do you think?
EL-ERIAN: I think what chair Yellen will say is we have the ability to grow. We have healed in many ways. But we can't grow more than 2 to 2 and a
half percent unless one of two things happen. Unless the global economy gets stronger. We don't control that. But there is something we do control
as a nation and that is, we get more comprehensive policy response.
[16:05:11]
So I suspect what she'll be telling the president as a trade views is that the Fed is doing what it can but this economy will be stuck at low level
with downside risk unless congress steps up and implements certain policies.
NEWTON: Yes, and we know how effective that has been in the last few years. Appreciate it Mohamed, we'll continue to check in with you, appreciate it.
EL-ERIAN: Thank you.
NEWTON: Now Yahoo! Is taking offers and bidders are ling up.
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NEWTON: Now, the publisher of Britain's Daily Mail confirms it's exploring a possible offer and it could find itself in a dog fight with Verizon and
Google along with a raft of Wall Street buyout firms that now want to own a piece of that pioneer, that internet pioneer. And they reportedly have,
now, until April 18th to make their opening bids.
Yahoo! Is expected to fetch something in the region of $8 billion for its core internet business. But we should say that that is also very much in
dispute. So why do these firms even want to buy Yahoo!?
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NEWTON: For the owner of Britain's Daily Mail, it's a question of scale. The world's largest English language news site and that means a lot wants
an even broader web presence. Verizon could also be a player now it owns Yahoo rival, AOL and other media assets. Buying Yahoo! would help boost its
digital advertising and of course its global ambitions.
Now Google would be eyeing things like Yahoo! Mail, part of the fading giant's core services. But crucially, Google may also face antitrust
concerns.
Now, I want to bring in Ross Gerber, founder and CEO of Gerber Kawasaki Wealth and Investment Management. He joins me now from Los Angeles and we
should say you do not own any Yahoo! Stock. We're not sure how you feel about that but we should say you don't have any skin in this game.
We've just gone through all the possible players. What's so incredible to me, is that when you look at who would buy each one, Yahoo! could come out
of this as a completely different entity. I mean what do you think makes the most sense when you look at the comes vying for Yahoo! and what would
have it emerge as a strong player again on the internet?
ROSS GERBER, FOUNDER AND CEO GERBER KAWASAKI WEALTH & INVESTMENT MANAGEMENT: I mean, for the overall business, I think Verizon makes the
most sense. With Tim Armstrong taking control of the Yahoo! digital assets, I think will really increase value for the shareholders. But Verizon has
really moved to being a content provider, not just a service provider. And by doing this, this is kind of a great crown jewel for them to build off
of. So it makes a lot of sense for Verizon and using some of Microsoft's money to keep their search deal in place. Because Google really wants to go
in and be the spoiler and take the search assets and such and then they'll have a monopoly. And then the Daily Mail, it makes a lot of sense for them
to get into the United States this way. But Verizon makes the most sense to me.
NEWTON: Do you in terms of value, value going forward as a huge point right now? Some people say it's worth 8 billion. Other people say much less. What
do you think? And we should say the main value that Yahoo! is cash on the books and its Chinese assets beyond its core business.
GERBER: Right, right. So when we strip out all these cash and other businesses, you know, Yahoo! actually doesn't really trade at any real
value for Yahoo!'s core business. So whenever they get for it, something above zero, is a plus. I think that's the worst part of Yahoo! is the
embedded tax implications of taking the whole company. Obviously, you're going to lose $15 a share in taxes if you sell the assets. So they're just
trying to sell off a little part of it. And I don't think Yahoo!'s worth 8 billion, I think it's worth more like 5. It's a declining asset and you
know I don't know what I'd do too much with it. So we'll see how this works out.
NEWTON: And for people wondering what Yahoo! may look like, is this going to be your mother's Yahoo! By the end of it when we come out of the other
end of this deal?
GERBER: No. Unfortunately, this is the demise of Yahoo! And the term Yahoo! will be gone within the next probably year. It's really sad. I think it's a
really sad decline that you can follow for many, many years. Ultimately, with the currency really just driving it into the ground. So this is the
end for Yahoo!. A lot of jobs will be lost. And it's a very sad ending, it's poor business management. And somebody should be accountable and it's
really the board.
NEWTON: And quickly Ross, just do you think Verizon's got a good chance here or do you think we're going to see another player enter the market
still for Yahoo!?
GERBER: I think it's about price. Verizon and Microsoft are smart bidders and they don't want to overbid for properties. If Daily Mail's going to
overpay, then it's not worth it to them. But it makes the most sense, and I think if Yahoo! really wants to have the best chance to do the best thing
for its employees, they'll go that direction with Verizon. Verizon's make great moves, I must disclose we own a small stake in Verizon. I think the
direction of the business and I think it's a great addition and I think Tim Armstrong is great. So it makes the most sense for everybody.
[16:10:11]
NEWTON: Well, and we all know that Yahoo!, the board and the shareholders just want the highest bidder to come in. So Ross, thanks a lot, we'll
continue to watch this drama unfold. Appreciate it.
Now, Brent oil is up today ahead of Sunday's meeting in Doha between the world's key producers.
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NEWTON: And it's well over you never would have imagined this months ago, would you, get this, 42 -- more than $42 a barrel, and it hit 43 earlier in
the day. Now prices are expected to swing in anticipation of as we said, this weekend's OPEC meeting.
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NEWTON: Meantime, Africa's largest oil producer, Nigeria is facing a new energy crisis. It's running short on refined fuel and can't produce enough
to meet demand.
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NEWTON: Now some refineries are shutting and pipelines are falling victim to sabotage once again. CNN money correspondent Eleni Giokos has the
details.
ELENI GIOKOS, CNN MONEY'S AFRICA CORRESPONDENT: Africa's largest oil producer has always imported around 50% of its fuel and that is because of
the lack of refining capacity. But now there is a fuel crisis. Importers are backing to get their hands on much needed dollars because of capital
controls. The situation has further been exacerbated because of an explosion at a very important fuel pine line which has also cut back on an
electric supply.
Most Nigerians are standing in queues that are five hours long. We are showing massive queues on the traffic front as well which of course is
showing how desperate the situation has become. We caught up with Nigerian Finance Minister Kemi Adeosun to find out just how reliant Nigeria is on
oil.
KEMI ADEOSUN, NIGERIA'S FINANCE MINISTER: The truth is, one of the things we're really trying to focus on in Nigeria is to deemphasize oil. I think
one of the problems we have now is that we overemphasized or were over reliant on oil. I'd love to be able to say that in a few years' time, that
we're really not interested in the oil price, and we're not interested in what OPEC do. Because we want to ensure that we build an economy that is
not driven by the oil price. Because actually oil is not a huge part of our GDP, it's not a huge part of our economy.
GIOKOS: And it's all about diversification. And it's not just a Nigerian problem. We're seeing other African oil producing nations experiencing the
same issue. 70% of Nigeria's government revenue comes through from oil. So the country has very little choice but to try and diversify in some way as
quickly as possible. Paula, back to you.
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NEWTON: And thank you for that Eleni, appreciate it. Now, one week on and the "Panama Papers" continue to reverberate around the world.
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NEWTON: Now it's David Cameron's turn to take a beating in front of his own parliament. The leader from the Scottish National Party will join me when
we're back.
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NEWTON: Now it's been one week since a leak of more than 11 million documents known as the "Panama Papers" sent shockwaves around the globe.
They are casting a light in the alleged secret network of offshore companies used by the worlds rich and powerful to try and hide their
wealth.
Now some governments are saying they're going to take some action.
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NEWTON: In the U.K., Prime Minister, David Cameron plans to tighten the nation's tax laws. In Brussels, the European Commission will debate a new
law requires companies to disclose their taxes in each of the E.U. countries. And in Iceland where the Prime Minister was forced to resign
over his link to the "Panama Papers," the unrest continues. Support is growing for the opposition Pirate Party which could make gains in the next
general election.
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NEWTON: In an effort to boost transparency, David Cameron's labour party leader Jeremy Corbyn, and Chancellor of the Exchequer, George Osborne, each
published their own taxes right in the House of Commons and things quickly turned personal.
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DENNIS SKINNER, MEMBER OF BRITISH PARLIAMENT, LABOUR PARTY: This man has done more to deep side this nation than anybody else. He's looked after his
own profit. I still refer to him as "Dodgy Dave." Do what you like.
UNIDENTIFIED MALE: Under the power given to me by the standing order number 43, I order the honorable member to withdraw immediately from the House for
the remainder of this day's sitting.
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NEWTON: Joining me now from London is the Stewart Hosie, he's the Scottish National Party spokesperson on the economy and its deputy leader. I mean,
it certainly has a ring to it, "Dodgy Dave" but is it accurate? I mean the Prime Minister is saying, look, I disclosed this. We did pay taxes on this.
Are we really kind of losing forest for trees here? Because we know that there is large-scale tax avoidance in Britain.
STEWART HOSIE, SCOTTISH NATIONAL PARTY SPOKESPERSON: Indeed and I've been very clear. The Prime Minister has done nothing wrong legally. He paid
income tax on the dividends of these units he had. He didn't have a capital gains tax liability to pay. He's done nothing wrong in that sense. What the
story has done, however, is shone a big bright light and a very murky corner which is offshore companies registered in overseas territories,
administered by Panamanian lawyers, which we all know can be used by people if they wish to hide assets and income from the tax authorities here or
indeed elsewhere in the world.
NEWTON: Now let me ask you something. I mean, it's brought -- I knew this from when I lived in the U.K. and I'm sure you knew as well. These papers
also made links to London's property market and the links that it has to perhaps people trying to hide money or avoid taxes. But also you guys have
a tax category in the U.K. which allows people to be non-domiciled which means they can avoid paying a lot of U.K. tax. Here in the United States
they have the issue you can avoid taxes by filing companies in certain states. I could go on and on and on. Is this not a much larger
jurisdictional issue that really politicians have been dodging for years?
HOSIE: Yes, it is. And I think much of this will have to be resolved on a global basis, on a global level. However, there are a number of things
which can be done. There should be a real push for the British overseas territories where many of these companies exist to publish openly the
ultimate beneficial owners. And the same in the U.K. It is the case that taxes paid if an expensive property is owned by a company but the
beneficial owner of that company isn't declared. We need to know who the beneficial owners of the business are and indeed of some of the properties.
As you say where the money is parked or invested so that the tax authorities around the world can frankly follow the money.
NEWTON: But do you worry that that will become impossible? And that in the meantime, people will still have this impression that, look, as everyone
has been saying, it is one system for the rich and one system for the rest? I don't think people have any confidence that any politicians do will
change that.
HOWIE: Well that's the perception. But I think that's actually wrong. I think we can deal with this problem. If the tax authorities here, and
indeed throughout the world in the advanced economies, if they begin to seriously clamp down and try and identify how much of the perhaps $21
trillion of wealth which is parked offshore should be taxed, then I think many, many countries and indeed the public would see that the public
services we all rely on could actually be properly funded and we would remove the perception, one law for the rich and one law for the rest of us.
NEWTON: OK, the problem is actually getting there. By some estimates, 8% of GDP - of global GDP going to those offshore funds. We'll continue to watch
the debate in Britain and elsewhere with interest. Appreciate your time tonight.
Now Cameron's tax issues may be a liability for the campaign to stay within the European Union. It's not changing the mind of the CEO of Samsonite who
says Britain remaining in the E.U. makes more sense.
Now last month the luggage company agreed to buy luxury rival Tumi in a $1.8 billion deal. Richard Quest spoke to the luggage boss earlier and
began by asking him if he's worried of course about a possible "brexit."
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[16:20:00]
RAMESH TAINWALA, CEO SAMSONITE: Not really. I mean and of course, you know, as a business man and those who have business globally we would - we would
like to hope that the U.K. should stay in the European community but it's up to the British citizens to decide what is best for them. So you know for
us it really doesn't matter, but our own wish would be that it makes more sense for them to stay within the European community.
RICHARD QUEST, HOST QUEST MEANS BUSINESS: I have to say when I - when I heard that you were buying Tumi, I raised an eyebrow. I wasn't sure that I
understood the purpose. Yes, it's a luxury brand. Yes, it has a certain market. But what does it give you that a very well-known brand like
Samsonite doesn't have already?
TAINWALA: Yes, you know, Samsonite, if we really go back, way back, into 2008 we have been predominantly a single brand, single category company
which is operating in the midsegment of the market. So Samonsite primarily operates in the mid-segment of the market and since that part of time we
launched a brand American (inaudible) which is operating the values of the middle market. But yet on the premium segment of the market we were not
having a credible presence.
So Tumi gives us a play in that segment of the market. And also, we believe that you know we -- we're one of the companies which are making the maximum
investment in terms of R & D, new technology, new development, new process developments. And some of those investments that we do, we can - we can use
it and we can deploy it not only for the midmarket brand like Samsonite but part of them we can also deploy for Tumi.
QUEST: Samsonite has done an extraordinary job building robust luggage. Luggage with wheels. Some with wheels, some without wheels, some with
pouches, so whatever. I mean, so -- but that's not where the future development is, is it? The future development is in smart luggage. What
does that mean?
TAINWALA: We also have been working on smart luggage, you know a luggage which can do more than just bring your stuff from point a to point b, you
know. A luggage which probably can check for itself, the luggage can tell you where it is, luggage which can communicate with you all the time in
terms of if it's safe, if somebody's handling it or not handling it.
The challenge is that the technology also needs to be safe and secure from a travel safety point of view. And I would say that at this stage, you
know, there are some gaps in the technology. And we are working on that.
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NEWTON: Luggage that can tell you where it is. Wouldn't we all like that? Now, in the meantime, the Greek Prime Minister has some tough talk for the
International Monetary Fund.
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NEWTON: Alexis Tsipras says the IMF insists on adopting what he calls the wrong policies in Greece. Now Athens is still struggling to close a crucial
review of its third bailout. It's at loggerheads with the IMF on measures required to reach fiscal targets and I don't have to tell you a lot of
those - a lot of what they're argument about they've been arguing about for months.
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NEWTON: Now I spoke to the head of the Greek opposition, Kyriakos Mitsotakis, President of the New Democracy Party, and he's tipped, in fact,
by some, to become the next Prime Minister. It's been many months since the last Greek crisis. I started by asking him if Athens looked like it could
stumble into another.
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KYRIAKOS MITSOTAKIS, PRESIDENT NEW DEMOCRACY PARTY: I hope not. Having said that, I need to point out that the government had made a commitment to
complete the first review by November. It's April. And we're still negotiating with the troika. So it is absolutely mandatory that this review
gets completed as soon as possible. However not all reviews are the same, we disagree with the government when it comes to the specific policy mix
that the government is proposing. It's again proposing to tax the middle class more so than the middle class can tolerate rather than contemplating
spending cuts. So we have a fundamental disagreement with a policy mix that is proposed.
NEWTON: And yet spending cuts as you know are hugely controversial. What do you propose to do? Because the way you're talking now is as if you do have
some kind of magic wand and as everyone knows in Greek finances there is no magic wand.
MITSOTAKIS: There is no - there is no magic wand in Greek finances. Having said that, there is still room for selective spending cuts. I was minister
for administrative reform and I do know that there's still - savings could be squeezed out of the public administration. And we very much intend to
put forward specific proposals in that - in that direction. Look, with the current marginal tax rates where they are, it is very difficult to envision
the Greek economy returning to a sustainable growth path.
NEWTON: You're margin really in those successes in the public service while impressive, the scope was still quite small. In terms of taking
Greece forward, what is the strategy then? You're talking about the anti- austerity people in Europe really have a hold on public policy right now. Don't you think make a point, that the more austerity that you have, the
worse it's going to be?
[16:25:00]
MITSOTAKIS: Well that's right but it's also pretty sort of obvious conclusion. What Greece needs at present is significant foreign and
domestic investment. The problem is that this government cannot deliver on that front because it fundamentally does not believe in these types of
investments. It's a government that is coming from the hard left, it is viewing the private sector with skepticism, hence we've seen very little
investment activity taking place in Greece.
What you need is a government that is fully committed to attracting foreign investment, you need a stable tax regime, you need to cut down on
bureaucracy, establish a proper level playing field for all companies active in Greece. Unfortunately, the government has not done much on that
front.
NEWTON: You know you keep saying "the government" but they have the people behind them. How much do you think you could cut pensions and increase
income taxes where you would not have a huge population of the Greek population on the street saying look we will not accept this?
MITSOTAKIS: Well first of all let me point out that all recent polls indicate that this government no longer has the public support. My party
has been leading a by anywhere between 5 and 10 percentage points in all recent polls. So it's clear that people are fed up with this government and
they're fed up both because they're incompetent but also because they lied to the Greek population.
I don't have to remind you what Mr. Tsipras was saying before the election. He has backed off all his electoral promises. And the real problem today is
that he is not even delivering on the correct reforms that this country needs.
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NEWTON: Now from one European country in crisis to another, Ukraine's President says he has expectations on who the country's new Prime Minister
will be. Yet he says, look, I'll work with anyone. We'll have more on that when we come back.
(COMMERCIAL BREAK)
NEWTON: Hello I'm Paula Newton and there is of course more Quest Means Business in a moment when we look at who Ukraine's next Prime Minister
could be. Plus why Bryan Adams is turning his back on Mississippi.
Before that, this is CNN and on this network, the news always comes first.
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NEWTON: In Brazil, lawmakers are taking the first steps towards possibly impeaching President Dilma Rousseff. A congressional committee is meeting
now in the capital Brasilia ahead of a key vote. Now they're debating whether there are constitutional grounds to move forward with the
impeachment process. Rousseff is being accused of breaking budget laws to hide deficit, perhaps to help her re-election bid.
The British Prime Minister, David Cameron has defended his tax affairs in front of parliament. Mr. Cameron published a summary of his taxes following
the "Panama Papers" scandal a week after the so-called "Panama Papers" revealed links between Britain's Prime Minister and an offshore fund set up
by his father. Under fire David Cameron made this statement to parliament to deny any wrongdoing.
DAVID CAMERON, BRITISH PRIME MINISTER: Mr. Speak, I accept all of the criticisms for not responding more quickly to these issue last week. But
as I've said, I was angry about the way my father's memory was being reduced. I know he was a hardworking man and a wonderful dad, and I'm
proud of everything he did to build a business and provide for his family.
(END VIDEO CLIP)
NEWTON: The investment fund Greybull's Capital has agreed to buy one of Tata Steel's UK plants, saving some 4,000 jobs, for now at least. Unions
will have to agree to significant changes and lower costs as a tilt to better days. The business will be renamed British steel, a name that
disappeared in the 1990s.
Oils rich Saudi Arabia has promised billions of dollars in aid and investment for Egypt. King Salman is on a state visit to Egypt, working to
try to bolster cooperation between the two allies. As well as economic deals, the Saudi King also said a bridge will be built across the Red Sea
to connect the two countries. In return, Cairo has handed Saudi Arabia control of two strategic islands in the Red Sea.
Ukraine's President is urging lawmakers to vote in a new prime minister. It comes after Arseniy Yatsenyuk, the Prime Minister turned into his
resignation on Sunday. We should say he did it by twitter. Political infighting has delayed the payment of billions in IMF aid. President
Poroshenko says he expects a political solution as early as tomorrow.
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PETRO POROSHENKO, UKRAINIAN PRESIDENT (through translator): I am sure that on Tuesday we must have a coalition and I must have offered a candidate for
prime minister. I am underling that I expect it will be Groysman. I am not going to give up this idea, but I will work with any prime minister.
(END VIDEO CLIP)
NEWTON: Joining me now live from our London Bureau is Orysia Lutsevych, at the Ukraine Forum, at Chatham House, and thank you very much for your time.
I know you are keenly looking at the events in Ukraine. Despite the fact that what we're looking at is political turmoil, some people though believe
that this could actually have an opposite outcome for Ukraine. Do you agree with that? Do you think this has kind of resignation actually has
some hope for a new government that can turn a new page?
ORYSIA LUTSEVYCH, MD, UKRAINE FORUM, CHATHAM HOUSE: I think Arseniy Yatsenyuk's resignation has clearly three implications. On one hand, it
opens the way out of political stalemates that started two months ago. On the other hand, it tilts the balance of political responsibility more
towards the president, where if he will nominate the candidate for the prime minister from his camp, it will be clear who is in charge of reforms
and who has to deliver. And, thirdly, of course they are supporting the chamber in the parliament for the pro-European Union coalition eroded.
Because now only two parties are likely to form the backing for the government. Whereas before, they used to have a constitutional majority of
five political parties, so it's very volatile. And even if the new government is voted in, it will be very hard to build that political
support for reforms.
NEWTON: So, Orysia, that doesn't sound very optimistic. I think this is being billed as something more for Ukraine. Are you not hopeful, then,
they will be able to garner more funds from the IMF and really work out some of the stumbling blocks to reform?
LUTSEVYCH: You're right. The continuation of the IMF program and other international assistance is vital for Ukraine. Ukraine needs to get cash
flows because a lot of debt is coming out for restructuring also. But all will depend on the names we will see as ministers. We have recently issues
the report on can Ukraine make a reform breakthrough. And at this moment, Chatham House is saying, you know, the forces for change marginally
outweigh those trying to block them. But if the new government will not shift the balance, you know, in the critical months of reformers, both
Ukrainians and the West will have very little trust in the new government. So they really need to deliver on putting more change makers and driving
seats in the ministries.
NEWTON: I'm noticing here that the White House, like other Western allies, are now cautiously optimistic. They're saying this can lead to political
reform. But do you worry they're really going to test the patience of the people that are trying to invest more money, mainly Europe, the United
States, other Western allies into Ukraine, and given all that they're dealing with in the country right now?
LUTSEVYCH: Well, absolutely. Both Ukraine and people are carrying a huge economic burden. Ukraine's opportunity is very fragile. Poverty is
growing. There's absolutely no time to waste. That's why President has to put all the political backing in making sure that the new government is
shaped as soon as possible.
[16:35:00] And we shouldn't also forget about the volatility in the East. The security situation is escalating. I mean, Ukraine is a country at war.
It's paying every day the price for it. So consolidating all forces inside Ukraine that are pro-reform, is critical. A fact that the new prime
minister think Arseniy Yatsenyuk and Prime Minister, decided to remain in the coalition, I say it's a sign of serious political maturity.
NEWTON: And certainly many people hope you are right about that. We will continue to check in with you as we watch the developments unfold in the
Ukraine thanks so much.
Now turning to the U.S. presidential race, it's all about New York. A new poll shows Democratic front-runner Hillary Clinton leading rival Bernie
Sanders by double digits. Thankfully Mark Preston is in the house, he's the Executive Director for CNN Politics. Look, Mark, this is a big state.
Can it hand all the politics? It's crazy. You've got the Republicans and Democrats really bare-knuckle fight here.
MARK PRESTON, CNN POLITICS EXECUTIVE DIRECTOR: They really are. And if there ever was a state here in the United States that could handle it, it
will be where we're sitting right now in New York City. You're absolutely right, the two front-runners have basically in each party, have claimed New
York as their home. Of course, Donald Trump on the Republican side. This is where he was born. And Hillary Clinton decide to settle down here after
her life in the White House and served in the U.S. Senate. Just to make things more confusing, Bernie Sanders, while he's from Vermont, the State
of Vermont up on the Canadian border, he still maintains that Brooklyn accent. So it is a bare-knuckle fight right now here in New York.
NEWTON: There's no mistaking he is from Brooklyn. I think if you can reset for the international audience, we'll turn first to the Democrats,
why does New York hold the key here in terms of this race?
PRESTON: Let's look first, I guess we'll look at the Republicans first.
NEWTON: OK.
PRESTON: So let's look at the Republicans, Donald Trump, bigger than life person right now. If he is able to maintain his lead over Cruz now --
NEWTON: Look at that lead.
PRESTON: -- if he is able to get more than 50 percent, if you look at that right there. And he gets more than 50 percent of the vote, he will sweep
the delegates here in New York. He needs a major win. He's had a few weeks of very stories. Not only for how his campaign's being handled, but
we're seeing Ted Cruz, the Texas Senator, come out of nowhere, and he's stripping away these delegates that Donald Trump needs to win the
nomination. So we're seeing that happen on the Republican side. Donald Trump needs a win for momentum.
For Hillary Clinton, very much the same way. Bernie Sanders, while she has a big lead over right now -- while she has a big lead over Bernie Sanders
when it comes to delegates, he still has won seven of the last eight Democratic contests. But the way the rules are set up in American
politics, certainly in the Democratic Party, she maintains the lead, so she needs to regain the momentum.
NEWTON: You know, Mark, let me ask you a question, a little bit more forward thinking perhaps. You know, the international audience really has
a lot of interests, as many people do in Trump. Not only what kind of a presidential candidate he has turned out to be but what kind of a president
he may be. If we look forward, the nastiness of this fight, the knockdown, drag out nature of this fight, do you think that will change the very
character of the campaign we see post-convention?
PRESTON: It will be interesting to see. Because I think heading into the convention, there's going to be a lot of problems here in the U.S.
specifically on the Republican side. The conventions will be back-to-back in the month of July. I think that if Donald Trump is denied the
nomination, we are going to see a convention that potentially could have riots outside. That you can see a lot of violence. Some ways harkening
back to 1968, outside Chicago in the Democratic Convention. Not to the same extent on the Democratic side, but I do believe we're going to have a
contentious fight in the Democratic Party.
Although we saw Cameron, just a short time ago, talking about the Panama Papers and he's getting booed. So in many ways while here in the U.S. we
like to try to hold ourselves up higher than others. It does happen in other countries. But your point about our international audience, and
specifically world leaders, when you have Barack Obama, the sitting President of the United States, come out and say last week that world
leaders are asking him about Donald Trump and whether Donald Trump is saying when it companies to policies that is troublesome.
NEWTON: He might be saying that for political purposes, but we know that he is hearing that from leaders. Our Mark Preston, thank you so much for
coming in.
[16:40:00] Now we'll going why this man is so stressed and so busy. Because it continues to be a big week of politics here on CNN. For the
next three nights, Anderson Cooper will host Town Halls with each of the Republican candidates, and get this, their families. On Monday, John
Kasich is followed by Donald Trump on Tuesday, and Ted Cruz rounds it out on Wednesday. And this then on Thursday, you do not want to miss the
Democratic presidential debate as Hillary Clinton once again squares off with Bernie Sanders and that is live, as we say, I'm right here in New
York, and it all happens this week at 9:00 p.m. eastern time. That's 2:00 a.m. in London.
Now, rock stars are making their voices heard by canceling concerts and increasing occurrence in the U.S. driven by politics. Singer songwriter
Bryan Adams won't be running to fans in Mississippi. He's has canceled his concert to protest the state's divisive religious freedom law that
opponents call anti-gay. He's following in the footsteps of Bruce Springsteen who canceled a concert in North Carolina because of a different
law affecting the LGBT community. Proponents of the law say they are design to protect the religious rights of people with deeply held
convictions. But opponents say the laws legitimize and legalize blatant discrimination, particularly against lesbian, gay and transgender people.
Paulo Sandoval explains both arguments in Mississippi.
(BEGIN VIDEOTAPE)
JACKIE BUCHANAN, SEAMSTRESS: So this is what I do daily.
PAULO SANDOVAL, CNN REPORTER: Jackie Buchanan is a second generation seamstress in Mississippi who stands by her Christian beliefs. She says
that faith is the foundation of her business.
BUCHANAN: This is the time of year when the weddings occur.
SANDOVAL (voice-over): Buchanan says the doors to her shop are open to anyone. But dressing a bride for a same sex marriage goes against her
Christian values. Now she won't have to.
BUCHANAN: I would probably decline on servicing them because I believe a marriage was -- the marriage was instituted by god between a man and a
woman and that is my belief.
SANDOVAL (voice-over): From private business owners, like Buchanan, to public employees who issue marriage licenses, the law will allow them to
refuse a customer if it means servicing a same sex wedding. Some legal experts are warning the law's reach could extend far beyond.
PAGE PATE, ATTORNEY: Also, it will allow the discrimination based on couples who are not married simply because there's one recognition in the
Mississippi law that it's a, I guess, respectable or legitimate religious belief that sex only occurs within the confines of marriage.
SANDOVAL (voice-over): Back in the heart of the Bible-belt -- Jackson bartender Mark Leopold wonders why the law was needed in the first place.
MARK LEOPOLD, JACKSON, MISSISSIPPI RESIDENT: They're worried about maintaining religious freedom in a state that ranks among the most devoutly
religious states in the country. Protection from who?
SANDOVAL (voice-over): So far the law's effects have been less religious than economic. Only days after Governor Phil Bryant signed it into law
Tuesday, the Mississippi Tourism Association reported people are canceling or postponing trips to Mississippi due to the national media reporting on
this new law.
"Everyone's Welcome Here" is the name of the new campaign launched by the state's Restaurant and Hospitality Association in response to the
controversy.
SANDOVAL (on camera) With this threat of an economic fallout, some businesses here in Jackson's trendy Fondren neighborhood are taking steps
of their own, making it very clear that all customers are welcome.
KNOL AUST, LAW OPPONENT: It's bills like this killing our economy. It's one reason why we're the poorest.
SANDOVAL (voice-over): Knol Aust and Dwayne Smith were among the first gay couple to marry in Mississippi after the Supreme Court's ruling legalizing
same sex marriage last year. For them, the new law is precisely why they'll stay in Mississippi. To fight it.
AUST: I have family here, I have my home here, I have friends here. And I worked hard for that. I'm not leaving my home, my family, my friends,
because some men in the capital think I'm a second class citizen. I'm committed to fighting it. And I'm staying here to fight it.
SANDOVAL (voice-over): Paulo Sandoval, CNN, Jackson, Mississippi.
(END VIDEOTAPE)
NEWTON: Now, on Quest's recent trip around the world he stopped long enough, just long enough, in Malaysia to sit down with the CEO of AirAsia.
Tony Fernandes will explain how his low-cost airline has united Asia in the air.
(COMMERCIAL BREAK)
[16:45:00] NEWTON: The global aviation industry is being shaped by the rise of low cost car carriers. And nowhere is this more evident than in
Asia, where business is booming as budget airlines capitalize on a flourishing middle class now. Richard experienced this phenomenon
firsthand on his round the world trip. It took him from London through the Middle East, on to Asia, down to Australia, and right across the U.S. and
then back to London. By the way I'm told he stayed in a fantastic mood through this entire trip. Shocking, I know. Anyway, Tony Fernandes is the
CEO of AirAsia. And he often brags that he runs the lowest cost airline in the world. Fernandes met Richard in Kuala Lumpur. He explained how he
built his airline from scratch.
(BEGIN VIDEOTAPE)
TONY FERNANDES, AIRASIA CEO: Clearly, the product is a product that people want. I think that's the first start of any business. And then the rest
has been a bit of -- you know, it hasn't been easy but what a success low cost travel has made across the region.
RICHARD QUEST, CNN ANCHOR: You introduced low cost into a market that said it wanted it, but the regulations said otherwise. It was much more
difficult here than in Europe.
FERNANDES: What happened was we went under the radar. No one really took us very seriously, and by the time they did, we were already a very popular
product. And then others emulated and it's become a -- it's become very much part of Asian society.
QUEST: I looked at the route map as well and I see these long blue lines. AirAsia X. Each of your airlines has an AirAsia X. So you are in the
long-haul business or the medium-haul
FERNANDES: Oh, the Medium-haul. I mean, Asia, what I realized quite soon when I got into this business. EasyJet, Southwestern American, can cover
their market more or less with a narrow body plane. You can't in Asia. You can't go from Jakarta to Shanghai on an A-320 just physically can't
reach it. If we are really to cover AirAsia, we needed another network. And that's why the birth of AirAsia X came along. Now we're getting
something quite unique with many people are looking at. But you're getting people from Xian flying to Bandung in Indonesia, and you're getting people
from Korea going to Sydney. And AirAsia X has made Asia one place with an AirAsia X strategy. This is Disneyland stuff for me right now in my mind.
But you can imagine a hub in Japan, which goes to the West Coast of America. You can imagine a hub in India, which goes over to Europe. So
next time you do this, you could probably fly AirAsia all the way around the world.
QUEST: If you can do at all that but you have to keep the costs down. That's the key to it. Because everything, you know, you have spoken to
many airline CEOs who very soon get grand ideas and before long they've got their cost per available seat --
FERNANDES: Well, you know, that's always been the question, you know, when you do this, when you add this, et cetera. Our costs are still -- we're
still the lowest cost airline in the world. We have been for 14 years. But that doesn't mean you keep your model the same exactly. You've got to
adapt to the world. But principally, we won't run away from the fact we have to be the lowest cost airline in the world.
QUEST: You say you have to adapt. So tell me about how you adapt? What is the adaptation that you're currently under way with?
FERNANDES: I think what we provide is choice. You know, some people want to sit in front of the plane. Some people want to have more luggage. Some
people want to have their meal provided. And some people want to interline and go on to AirAsia X and do a fly-through. Why not provide those
services rather than lose that market to someone else? Consumers want choice. Consumers now are mobile and democratic and they look around.
[16:50:00] QUEST: How difficult is it for you to keep control of the costs? Is that something you have to really work on?
FERNANDES: Yes, yes.
QUEST: Talk to me about this as a CEO of a low cost carrier.
FERNANDES: It's constant monitoring, constant pressure. But the culture is the most important. You can take a dog to drink water -- you can't
force it. And I think that's where we've been pretty successful. When I see my CEO, Irene, you know, refusing to stay in a five-star hotel and
going to a cheap hotel, my CFO saying I'm not staying with you because this hotel is too expensive. You know you've won, you've got that kind of
culture inbred. But bureaucracy's the killer. And airline complexity is the killer. To keep people thinking simple and turning away business
opportunities that look great but will add complexity and cost.
(END VIDEOTAPE)
NEWTON: Now you can see Richard take flight on the first part of his round the world trip. And I promise you will learn a lot if you ever thought
about taking these airlines. That's "BUSINESS TRAVELER" which airs Thursday at 9:30 a.m. in London.
Just ahead we'll look at an annual spotlight on the stubborn wage gap between the sexes. And we'll bring you a story that's tailored for
success. First though, a highlight from "MAKE, CREATE, INNOVATE."
(COMMERCIAL BREAK)
NEWTON: Now in just a matter of hours, U.S. women everywhere will know it is an equal payday. And it's an awareness raising day that has been
observed now for nearly two decades. And it symbolizes how long women must work to earn what men earned in the previous year. And that usually
amounts to an extra four months. In London, meantime there has been a breakthrough on the world famous Savile Row. After 200 years of tradition,
the Row, as it likes to be known, is setting a new trend. Nina dos Santos has more.
(BEGIN VIDEOTAPE)
NINA DOS SANTOS, CNNMONEY EUROPE EDITOR (voice-over): Once described as the best dressed street in the world, Savile Row has been synonymous with
quality and tradition for more than 200 years. It's also been very male. But that is changing.
SANTOS (on camera): This iconic street in London's exclusive district has been regarded as the epicenter of hand crafted men's tailoring. Now, the
row is setting a new trend. For the first time in history a female master tailor has her name above the door.
SANTOS (voice-over): Kathryn Sargent was drawn to street as a student. Began her career 15 years ago as a tea girl with the Royal Tailor, Gieves &
Hawkes. Before eventually breaking ground to become the industrial's first female head cutter. Now her return to Savile Row working under her own
name has been welcomed by this close-knit community.
KATHRYN SARGENT, MASTER TAILOR: It's been very well received with my colleagues and my contemporaries. They know me, I'm one of them. So
they're pleased to see a tailor who practices of art of true tailoring in the Row alongside them.
SANTOS (voice-over): And that art doesn't come cheap. Irrespective of the tailor's gender. Sargent's bespoke two pieces for men start at $6,000 and
go up to an excess of $10,000. In the true spirit of equality, she also makes suits for women.
[16:55:00] SARGENT: For me, the fact that I love getting up in the morning and doing my job, it's enough -- it doesn't matter to me that I'm a woman.
It's certainly an issue but first and foremost I'm a tailor and a craftsman. I'm just pleased to be taking this business and working amongst
my neighbors. And inspiring other people.
SANTOS (voice-over): Her breakthrough's reflective of a broader pattern in the sector. With a majority of last year's newly qualified tailor from
several Rows apprenticeships being female.
SARGENT: There's more and more women in the tailor departments. There always has been women behind the scenes, but never in client facing roles.
Sixty-five percent of the newly trained and qualified tailors last year were women. So, you know, it's a positive, you know, sort of change. I
think it just makes it even more diverse.
SANTOS (voice-over): Diversity meets distinction. With every cut and every stitch, this trail blazer is tailoring a timeless tradition to
today's world. Nina dos Santos, CNN Money, London.
(END VIDEOTAPE)
NEWTON: And we'll have much more on the women's fight for equal pay From Wall Street to Hollywood. Academy award winning actress Patricia Arquette
made waves when she used her acceptance speech at the Oscars to demand equal pay for equal rights and she will join me tomorrow live. We'll have
a final check of the markets right after this.
(COMMERCIAL BREAK)
[17:00:00] NEWTON: As we've been saying, earnings season is upon us again. Shares in Alcoa are down nearly 3 percent in afterhours training. Now the
aluminum giant was expected to report declines in earnings and revenue for a third consecutive quarter. It did beat on profit, mind you, but reported
a miss on sales. Alcoa's earnings are viewed as the unofficial opening of earnings season.
And in the meantime, as we were telling you, the DOW dipped into negative territory after that mid-morning gain. It comes as earnings are projected
to mark a third straight quarter of negative growth. Wall Street profits have been hit by oil and the strong dollar, hurting the sales of U.S.
multinationals.
Now, meantime most European markets closed higher on the day, and was thanks to an Italian bank rally. Expectations of a state-backed fund to
deal with bad loans continue to grow. Mining stocks also gained yet there was a fall in house building stocks. That held the FTSE back. Oil
recovered ahead of the weekend's OPEC meeting in Doha. In fact oil barely hit $43 and then went back down. That's it for QUEST MEANS BUSINESS. I'm
Paula Newton, and I'll be right back right here tomorrow.
END
