Return to Transcripts main page

Quest Means Business

Time Warner CEO Takes the Stand in Merger Lawsuit; Democrat Senators Say They will Oppose Pompeo's Nomination; Cuba's National Assembly Nominates New President; America Mourns Barbara Bush; Investigators Probe Deadly Accident on Southwest Airline. Aired 4-5p ET

Aired April 18, 2018 - 16:00   ET

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

RICHARD QUEST, HOST, QUEST MEANS BUSINESS: There's a bell ringing on Wall Street, what a choppy day for the Dow Jones Industrials. We'll look at the

graphing in just a moment and you'll see it all over the place.

There were unique factors for the Dow that caused it some problems and I think that's a respectable gavel to bring trading to a close on Wednesday,

it's the 18th of April.

Tonight, a warning from the top of the Fed, James Bullard, President of the one of the regional banks tells me, an omen of recession may be closer than

we think.

Donald Trump's new economic Chief learns the hard way about crossing his colleagues. And new details expected on the Southwest Airlines incident.

We've got an update from investigators joining this hour, what did happen to this engine.

I'm Richard Quest live from the world's financial capital, New York City where of course I mean business.

Just look at that market.

Good evening, we begin tonight with a top official at the US Federal Reserve who told us he is sounding the alarm against raising rates too

fast. In an exclusive interview with "Quest Means Business" James Bullard, the President of the St. Louis Fed warns us, the Fed should wait and see a

little bit longer before raising interest rates much more.

He talks about a harbinger of economic recession that could become a reality before the end of the year. This is what he is referring to. It

is known as the yield curve spread. It is the difference -- the difference between the yield on a 10-year versus a two-year government bond.

Normally, of course, it should be up here because clearly people are prepared to pay a higher rate of interest to lend money buying a 10-year or

a 30-year bond than you would than a two-year bond.

The further the bond goes out, the higher the interest rate tends to be.

But what we are now seeing in the markets is this. This yield curve, the difference between the 10 and the two has dropped from a difference of 250

basis points, 2.5 down to just half, and what worried economists, what worries the Fed is that if this continues, you will end up with negative

short-term interest rates higher than the long-runs rate. It's called an inverted yield curve.

That's a sign that investors believe short-term rates will fall. The last time they went negative was before the last three recessions. For example,

in 2006.

Speaking to me earlier, James Bullard warned the yield curve could go negative and could actually invert if the Feds raises rates too fast.

(VIDEO TAPE STARTS)

JAMES BULLARD, CHIEF EXECUTIVE OFFICER AND 12TH PRESIDENT OF THE FEDERAL RESERVE BANK OF ST. LOUIS: I think we should stay flat with the policy

rate at least over the forecast horizon. I am getting concerned about the flattening yield curve which the two-year tenure now has dropped below 50

basis points.

If the committee pushes ahead here with rate increases and longer rates don't cooperate, we could have an inverted yield curve within six months

here and I think this is an issue that very much would be debated in monetary policy circles.

The inverted yield curve is a powerful predictor of economic downturns in the US data. It has many theoretical interpretations, but it is you know,

in the current environment, we don't really need to test those waters. The place is pretty low. It's just now coming back up to target, so I think we

could stay flat and wait and see at this point.

QUEST: So, you're concerned that the trends you're seeing would invert the curve if, if rates continue to rise too fast.

BULLARD: Yes, I mean, if you just look at what the markets are expecting, the Fed to do this year, several more rate hikes, if you look at the

summary of economic projections that we put out the media and now, the committee expects to raise the short end of the curve continuing on this

year.

And the longer term rate like the 10-year is still trading below 3 percent. It really hasn't moved too much recently and I think that's kind of the

question for right now.

QUEST: Why do you think the 10-year is not responding and if I just look behind me, I can see the 10-year at the moment, 2.8. It's just that

compass today, but why do you think -- what message is the market sending by not raising the 10-year as the lower -- as the short end of the curve

goes up.

BULLARD: I think fundamentally, the market just doesn't see that much inflation pressure...

[16:05:16]

BULLARD: ... even though the labor market is doing very well. We have good jobs reports. We have a low unemployment rate. That doesn't really

translate into more inflation according to the last 20 years of data. You have to go back to the 70's or the 80's where those correlations were more

robust, but today, those correlations just aren't there and I think markets have sniffed that out, so they're not expecting very much inflation.

They think inflation will stay more or less where it is, maybe move up just slightly from where it is and so, they are not pricing that into longer

term rates.

QUEST: Within the FOMC and now under Chair Powell, would you say that there is a legitimate disagreement now between them on exactly the

direction to go or is it more nuanced?

BULLARD: Well, I think the debate at the FOMC is always hairsplitting along how to interpret various pieces of data and how to interpret the

economy, the strength of the committee I think is that there are many viewpoints represented, but I do want to flag this yield curve issue

because I do think it's time to have that debate right now, not until we get to the end of 2018 or the beginning of 2019. We're actually looking at

an inverted yield curve.

At that point, I'd rather not get to that point, so I'd rather have the debate right now.

QUEST: And that debate is -- you know, to viewers who are not as familiar with necessarily the niceties of the monetary policy, that debate comes

down to raise now or wait and see.

BULLARD: Absolutely, and you know, I'd be advocating wait and see. If we get surprises to the upside, I am happy to go with the data. If we get

more inflation than we are anticipating or maybe faster growth that we're anticipating, I think that that would be fine, but I don't think we should

bake in rate increases at this point given where we are in the US economy.

We've got a very good economy, good growth, good labor markets and inflation is still below target. This is a very good situation. I think

we have preemptively raised the policy rate to try to take care of any incipient inflation pressure. We will go off zero. We are up at about 150

basis points or so from zero, so I think we've put ourselves in good position here.

I would just not go any further unless there are further surprises.

(END VIDEO TAPE)

QUEST: The President of the St. Louis Fed with some strong views on the prospect of further rate rises in the US. Now, the US market's bout

between gains and losses throughout the session particularly the Dow. The Dow -- I mean, just look at that, that tells us the story, but we shouldn't

be too concerned about the low number, down 38 in the (inaudible), the choppiness of the day.

The Dow was -- the weak performance was howling because of a 7 percent fall in IBM. So, IBM was off some $12.00 a share which is about 80 or 90-odd

points on the Dow, and therefore, it was purely IBM that pulled the Dow down.

If you looked at the other markets, the S&P and the NASDAQ throughout the course of the day did show a much different story where there were actually

gains throughout the session.

Now, joining me from Chicago is Diane Swonk. We need to understand what the Fed was doing, the Chief Economist Grant Thornton. So, you were

listening carefully I am sure to President Bullard. He was very forthright, it's time to wait and see if there is the necessity for higher

-- for faster higher rates.

DIANE SWONK, CHIEF ECONOMIST: He has been that consistently. That is the view he's had. He's an outlier among the FOMC. I think it's certainly is

legitimate to worry about the next recession or what tools the Fed has to deal with it.

I am more concerned that we are ceding a boom bust cycle and that in fact, inflation has been validated, that it was transitory. We saw it pick up

exactly when it was supposed to in terms of what Yellen had argued and what Jay Powell had argued that you know, "Hey, in March -- the March data

showed a pick up." And pipeline inflation is picking up.

It also showed up in the beige book today, and so, even tariffs are adding to inflation. So, this puts the Fed in a very difficult position and I

think some of the inversions concerns that Bullard have are somewhat countered by the idea that this is the same time we're going to be issuing

a lot of debt because of debt finance tax cuts and spending increases and the Feds removing the ceiling on long-term rates that it had by reducing

its balance sheets.

So, all of that suggest that perhaps this may not be a flattening of the yield curve environment. We could actually see it steepen again, and the

Fed chasing that long term rate up.

QUEST: All right, but obviously...

[16:10:16]

QUEST: ... I am sure, in the last couple of months in terms of government borrowing, if borrowing does increase dramatically that will have an effect

on the long end of the curve.

But stay with me on the short end and the question of an inversion. Explain to those that is maybe not as familiar, why an inversion usually

suggests a recession because this is a good moment for us to understand what we might be seeing in six months to a year's time.

SWONK: Well, the concern is and it is a legitimate concern and we have seen different Fed people discount it different times, but the concern is,

and it's a legitimate concern is that as you have higher -- short term rates go up, you crowd out borrowing and you actually are precipitating a

recession and that is what is the concern and it's a legitimate concern.

That said, there may be special factors that are pushing up the two-year. At this point in time, issuance of two years in particular and changes in

the Feds balance sheet on two years, so those are some factors that are pushing it up.

I also think the markets are somewhat complacent because inflation has been so benign for so long. The fact that it may come back even a little bit

will be a major shift for the markets because it's been way below target for so long. If we see it sustained at or above target that would be a

major shift for the market.

QUEST: And if we look for example at the prospects, say of another two rate rises this year, that would be three or four. Now, look, I don't want

just to be dancing on the head of a pin. I mean, does it really matter in the great scheme of you know, a monetary cycle whether they raise three

times or four times this year?

SWONK: It actually matters more now than it once did because we're going off such a low base that the percentage increase in interest expense by

that additional quarter point rate hike is much higher.

And so, I think there is this misnomer of yes, we are just raising rates to what our still historically low rates. People forget to think about what

the percentage increase and interest expense is from that lower rate.

QUEST: And what's your forecast for what you think your current forecast, but I won't hold you to it, for what you think this cycle tops our gut?

SWONK: Oh, that's a hard one. I actually think we're going to -- I think we're going to top out above 3 percent and the Fed funds rate which would

be a tighter monetary policy, I also think that we're going to see this year four rate hikes which means three more rate hikes than we have already

seen, the next one in June.

And I do think the Fed is going to give itself some flexibility to move in between their press conferences by hopefully having a press conference at

every meeting.

QUEST: Good to see you, thank you so much. Thank you, Diane Swonk who is in Chicago.

SWONK: Thank you, Richard.

QUEST: As we continue, Europe. Let's look at the markets in Europe. The bosses there, they closed higher, investors reacting to solid corporate

earnings. The FTSE was the best performer of the day with 1.25 percent and that was largely on the prospect that interest rates may not be going up as

fast as people have first thought because inflation numbers there were lower than they had expected.

Their mining shares, mining stocks were up across the board as well.

A public dispute at the top levels of the Trump administration, mixed messages over sanctions afoot Nikki Haley against the new economic advisor,

Larry Kudlow. We'll explain in a moment.

[16:15:00]

QUEST: Donald Trump's top economic advisor hasn't been in the job very long and has already managed to upset a senior colleague. Larry Kudlow has

been rebuffed very publicly by UN Ambassador, Nikki Haley who is proclaiming that she got momentarily confused when she announced there

would be no -- there would be no sanctions on Russia.

Haley's response was blunt. "With all due respect, I don't get confused," she said.

A White House official said Kudlow later apologized. Jeff Zeleny is live from West Palm Beach in Florida where the President -- two issues to deal

with. Let's deal with the first one. Is Larry Kudlow discovering there's a world of difference between what people like we say as a television

commentator, pundit anchor and what happens when you happen to be the National Economic Director?

JEFF ZELENY, CORRESPONDENT, CNN: Richard, I think he is getting a first taste of that. Certainly, it will not be the last taste, but I asked the

question of Larry Kudlow yesterday when he was briefing reporters here about the Japanese Prime Minister's arrival and frankly, I didn't think

that he would necessarily weigh in and answer the question, but he was the only administration official who was speaking publicly at a briefing

yesterday, so we did ask him.

And he launched right into saying that Nikki Haley, the UN Ambassador certainly outranks him and certainly has been here longer, said she was

confused. That of course set of a series of events.

She chose her words very carefully saying she was not confused. He apologized. I am told, Richard, that she accepted that apology, but it

certainly doesn't explain all the confusion that still exists around those new Russian sanctions.

QUEST: And that's the second part. The fact that the UN Ambassador, which is the only Ambassadorship cabinet level. The UN Ambassador is out of the

loop on something like a foreign policy decision such as Russian sanctions.

ZELENY: It speaks to the fact that the President makes decisions very quickly, changes his mind very often. We are told when Nikki Haley left

the White House, she was in the West Wing virtually most of Friday afternoon. Last Friday, she left and this was the plan in place. And if

you look at the words she said on "Face the Nation" on Sunday, she said this was going to be announced on Monday, if Secretary Mnuchin has not

already put it into place.

There was no question that this was going to happen, but what happened between the Friday evening when she was briefed and Sunday morning, the

President apparently changed his mind or maybe he changed his mind when he saw her saying this.

The question still remains and I expect President Trump will be asked this question in the next hour when he has a press conference at Mar-o-Lago with

Japanese Prime Minister Shinzo Abe what exactly are his intentions for these new Russia sanctions because certainly, there is no clear cohesive

policy.

QUEST: No, but Jeff, I just want to draw the strands together on this because we have seen exactly the same behavior with result with TPP. Now,

last week or 10 days ago whenever it was, the story was quite clear. He even tweeted and admitted he'd ask Kudlow and Mnuchin to look at reentering

TPP.

Well, they barely got time to sort of make a phone call and he tweets yesterday that it's a bad deal and it's not going to happen and all of

that. I mean, where is the consistency of policy here?

ZELENY: There certainly isn't much, but it always or usually at least, Richard, is based on the audience that he is in front of. So, he made that

TPP ruling, you know, he ordered essentially his new Economic Advisor, Larry Kudlow to look into TPP. He did that while he was meeting with farm

state senators, Republican senators and governors.

Senator Joni Ernst, a prominent Republican Senator of Iowa asked the President directly to consider reengaging in TPP. They are very worried

about the soybean commodity market, the beef, the pork trade.

So, the President, speaking to that audience, it sounded good. So, he said, look into TPP. Of course, as the days went on, yesterday, he tweeted

that no, that was not going to happen. They are more interested in bilateral discussions here as opposed to multilateral, so you know, he

changes his mind often, so one can imagine why Nikki Haley was confused to put it in some people's words, Richard.

QUEST: Yes, I am grateful, Jeff, that you have not confused us and left us with a lot clearer view, maybe if not a better understanding of the policy

making at the White House. Thank you, sir.

[16:20:16]

QUEST: Or at least in Mar-o-Lago. I am joined now by Sergei Brilev. He is an anchor at Watch Russia 1. Russia 1 is one of the country's most

watched state-owned TV networks. He joins me live from Moscow. It's good to have you on our network tonight, so thank you for taking the time.

The whole question of Russian sanctions whether they arrive, whether they don't, the existing sanctions that are in place are having a serious

economic effect at the moment in the country aren't they?

SERGEI BRILEV, ANCHOR, RUSSIA 1: I wouldn't say that. The last portion of sanctions arose about a week and a half ago, then last Monday and Tuesday,

there was a panic on the currency market here. The ruble which had stood at 58 went up to 64. But if you look at the exchange rate today, it's a

healthy 61. Nearly about Belgian franc before the Euro disappeared.

Besides that, Richard, to be honest with you, the economy is stupid motto does not work in this country. The National Security issues are very much

in the mentality, not just of the Russian government, but of the Russian public, so if you think that sanctions impress the Russian public, I

wouldn't say that, although having said that, I am not going to say that sanctions is something pleasant.

QUEST: Okay, the relations with the UK at the moment, following on from the Skripal -- now, look, neither you nor I know for a fact whether or not

Russia was involved, so it is moot for us to get into a snazzy pedantic argument or discussion about that, however, when the people like the OPCW

say what they said today, which is that clearly it was a nerve agent and they were able to identify it, where does Russia move forward on this? How

does Russia seek to somehow put this to rest when clearly, certain western countries believe they were behind it?

BRILEV: Richard, to begin with, the Russian government building is behind me and I'd look for a Russian government to be telling you things behalf of

the Russian government. What is important though is that A, speaking about tactics. Today, even today, the OPCW hasn't identified the source of this

nerve, which has caused this horrific tragedy. And B, which is so much more important, you've just referred to a minor crisis in the US government

between Nikki Haley and the US government.

We could be talking endlessly about all of those fights between the conservatives and labor in the UK, but I think the main problem is not

about tactics. The main problem is about strategy. When the west is seen from Russia, what a lot of Russians think about is the following: Let me

give you a very concrete example.

Mr. Trump is saying that one day he would withdraw with Syria. A lot of people ask here that if he withdraws from Syria, isn't this the start where

he completely withdraws from the rest of the Middle East.

And the EU -- and the United States and indeed the United Kingdom disappeared from the Middle East, who will be patrolling the seas which

connects the Persian Gulf with the rest of the world? The Chinese? The Indian? The Russian maybe? Is the west actually ready to give up its

strategic position? Who fills the gap?

I think this is the real global discussion which we should be having. Now having said that, everyone is absolutely appalled by the tragedy which

happened over this sleepy city of Salisbury, and I think one day, we will have an answer. At this moment, both you and I are absolutely confused,

aren't we not? Are we not?

QUEST: We are. I would just want to finally talk about the James Comey book, which of course, you should have been following very closely what Mr.

Comey has been saying. Look, I am not going to get into the salaciousness of it, but he basically says he does not know whether or not a tape exists

of certain activities with the President in Russia, and he doesn't say -- he does not know whether Russia has something on President Trump.

All right, again, what's your thoughts on that? Do you think Russia has something on him?

BRILEV: Do you think, I should? Do you think Russia should? I think we are adults here and if you look at Russia and the United States, these are

the two biggest nuclear powers on this planet with special responsibility for global security and global stability.

The kinds of conversations which we are having are the kinds of actions in the form of Russian and American diplomats being expelled and Russian and

American consulates being closed either in St. Petersburg or Seattle in the state of Washington is something which certainly does not help to the

notion of global security and if I may use another motto from the BBC building in London, nations shall speak unto nations.

As they say...

[16:25:16]

BRILEV: ... following the demise of the British Empire in the Soviet Union, the United States have managed to be the sole superpower for only 10

to 15 years. The world is changing and changing fast. The United States used to be the main pillar of the global stability, which is it is no

longer. This pillar is trembling. Don't you think that other pillars would not be growing?

And shouldn't we together, Moscow and Washington be looking very attentively at those new pillars?

QUEST: Good to see you, sir. I would only just forgive the minor adaptation or correction to what the BBC's motto is, you are right, except

you've missed out one key word, nations shall speak peace unto nations. Good to see you, sir. Thank you for joining me from Moscow.

BRILEV: Absolutely, I wholeheartedly agree with you, Richard.

QUEST: Thank you very much. Now, the new Executive of CNN's parent company, Time Warner says the government's argument for blocking its merger

with AT&T is ridiculous.

Now, by the way, I am talking about the boss, so I will be careful here. Time Warner-AT&T it is Jeff Bewkes that we are talking about and Jeff

Bewkes took the stand today where he made those comments describing it as ridiculous. We are also due today to hear from John Stankey, AT&T's Senior

Executive Vice President, the EVP.

Incidentally, Stankey is the man who will be responsible if the deal goes through into new AT&T media. This company, CNN, all the other assets of

the media group would be put into a specific subsidiary or at least, division of AT&T that Stankey would run.

However, the government's last witness before Bewkes and others took the stand. The government's last witness was this man, James Holanda. Now,

Holanda is a Chief Executive of RCN, a supplier of broad band and digital TV services.

What he said three out of ten networks that his customers watch, three out of ten viewers at RCN belong to Time Warner. Its programming costs have

been going up significantly. He said the merger could even mean higher fees for access putting RCN at a disadvantage and the bigger company will

be able to steal more broadband customers.

In other words, AT&T gets its hands on the content. Once you've got the content, you can steal the broadband customers as well. Hadas Gold is at

the portals, so now we are getting to the sexy bit in a way. We've got the Chief Executives on the stand, how did our boss perform?

HADAS GOLD, CORRESPONDENT, CNN: Richard, that's exactly right. Today and tomorrow are some of the biggest highest profile day of this trial.

The courtroom has been absolutely packed. He's had line sitters out here all night, and Jeff Bewkes, he is currently right now still in cross

examination with the Justice Department and he spent the morning defending the deal, saying that AT&T and Time Warner should get together as a way to

compete better against the Netflix's and Amazons and Googles who right now not only have the content that you watch, but the types through you which

you watch it.

And as a result, they have really valuable data that's really important for advertisers and advertisers can know who exactly is watching, how old they

are, what gender they are, what they are watching and in that way, they can really tailor those ads to you.

And the Time Warner Executive, Jeff Bewkes said that they just can't do that right now. They don't have access to that data and that's put them at

a disadvantage. He is on cross examination right now with the Justice Department and the Justice Department cross examination, I have to be

honest, is a little bit shaky right now and it's not quite clear what they are getting at.

They are trying to prove that AT&T somehow does not compete for advertising dollars or AT&T and Time Warner don't compete for advertising dollars with

Google and Facebook, but that's just not the case in today's world where advertising dollars aren't just on TV, they are all over the place and a

company might find more value in advertising with Google than they might on traditional television.

QUEST: Except when you get the RCN head saying clearly costs have gone up, there's a risk to losing customers to broadband because of the content plus

broadband and does the judge seem to be giving much weight to that?

GOLD: The RCN witness was definitely a very strong witness for the Justice Department and an important point that he pointed to us, another vertical

merger that was similar to this was the Comcast NBC merger from a few years ago where again, a distributor, Comcast bought a content provider like NBC

and the RCN executives said that actually, his cost -- that he's had a more difficult time as a result of that merger.

Now, Time Warner and AT&T are saying that's not going to happen with them because they have this arbitration offer which would really stop any sort

of blackouts that would prevent, that would somehow turn them to be able uphold their content and would put the two parties -- the distributor and

the content provider in an arbitration situation which would, Time Warner is saying, would give some protections to those distributors.

QUEST: Thank you Gold, think more to watch today and tomorrow, hopefully we'll get back to Gold, thank you very much.

As we continue, we are waiting the press conference with the NTSB, the news conference that will give us more details we hope -- well, should do, on

what happened to the Southwest plane yesterday afternoon. In a moment.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, there's more QUEST MEANS BUSINESS in just a moment. We are expecting a news conference at any time now, it's the

NTSB and it will be about the deadly Southwest Airline accident, we'll bring that to you when it happens live.

And answering the question 110 million people have been asking, what happens to my Marriott and Starwood loyalty points, now the two have

merged. We'll have somebody from Starwood -- who's from Marriott, I should put it -- now, it is about to be sustaining on the program tonight as we

continue. This is Cnn, and on this network, the facts always come first.

Donald Trump says he is confident that the CIA Director Mike Pompeo will be confirmed as the next U.S. Secretary of State. Two top Democrat senators

say they will not support his nomination. The top Democrat of the Senate Foreign Relations Committee said Pompeo should have disclosed his meeting

with North Korea Kim -- North Korea's Kim Jong-un to senators during those hearings a couple of weeks ago.

There's a changing of the political guard in Cuba, the country's national assembly has nominated new President Miguel Diaz-Canel is the current vice

president and the only proposed candidate to succeed Raul Castro.

Raul Castro and his brother Fidel have led the Cuban government for almost six decades.

The first lady of the United States Melania Trump along with several ex U.S. presidents are to attend the funeral of the former first lady Barbara

Bush on Saturday. The patriarch of the Republican Party dynasty died on Tuesday, she was 92.

Her funeral will be held in Houston, Texas. According to her wishes, it will be a simple service and her burial will be private.

Any moment now, we're expecting an update from the investigators who are looking into what happened to the Southwest that ended with the death of

one passenger on Tuesday.

So let's just remind ourselves what we know. According to the NTSB, which is the investigative body, the left engine, number one engine, the fan

blade is missing, which suggests evidence of metal fatigue.

[16:35:00] Now the theory is that the blade broke off for some reason and the debris hit the plane's fuselage. Parts of the cowling was found 70

miles from the place where it landed.

Southwest chief executive says the plane was inspected on Sunday, but they will now inspect the entire fleet of the injured, seven were injured, one

is dead. And the person who died is Jennifer Riordan; 43-year-old mother of two, works for Wells Fargo in New Mexico.

Mary Schiavo is a former Inspector General at the Department of Transportation and Cnn aviation analyst in Charleston, South Carolina. So

Mary, if this is -- I mean, we've already heard them say that the fan blade is missing.

I mean, it's too soon to say that that is the cause, but if it is, metal fatigue or something that dislodged it.

MARY SCHIAVO, FORMER INSPECTOR GENERAL, DEPARTMENT OF TRANSPORTATION: Well, absolutely. I mean, and the similarities between the 16, the August

16 incident and yesterday's accident are just stunning.

When you put the pictures side-by-side, they're amazing. And then when you go back to the service board attempt, that the manufacturers see them put

out after the 2016 incident. I mean, it just becomes stunningly eerie how describes what happened.

And unfortunately, of course, that bulletin is as you know a service bulletin, its advisory. They don't have to do what it says, it's well

advised, if you do. But they set out a whole series of things which they wanted to operate, there's a bad engine to do.

And there were turbine blades specific that service board actually has a list of turbine blade that they suspect are subject or might develop a

fatigue cracking. And it's very detailed what they wanted the operators to do.

Take them off, do ultrasonic testing and only once they pass, put them back on, what they're supposed to do if it didn't pass. And so it will be very

interesting if that is indeed -- it turns out to be the cause of this tragic accident.

(CROSSTALK)

QUEST: I'm guessing -- I'm guessing now that there's no time to lose in the sense of maybe putting it out on a directive or at least some form of

mandatory check, bearing in mind the similarities as you point out.

SCHIAVO: I couldn't agree with you more, yes, to me, it was very telling that the manufacturer put this out, this service bulletin out in advance of

the FAA putting forth of a notice of proposed rule-making for an hour in his directive which of course went nowhere.

But the manufacturer wanted all these inspections done by last September. And then of course in October, the FAA over -- by the way, Southwest

objected to that airways directive. But then the FAA did nothing.

So I do find it very telling in the timing, but yes, I mean, I think that had they put out a warning and certainly they should put out a warning now

-- it was an interesting development though because Southwestern's objection last year to an airways directive said, hey, we don't know where

these blades are, we don't keep track of them right here --

QUEST: Right --

SCHIAVO: Serial number, provide the service number, we don't know where they are, they're -- could be on all of our planes.

QUEST: Right. The pilot, the captain, the captain who did a remarkable job in extremely challenging circumstances. You know, as I hear the praise

for Ripen(ph), so for the way she handled the aircraft.

But I am reminded that what we are looking at is an example of superb professionalism of pilots. And this is a celebration that actually the

training does work that these pilots are trained to the very highest standards.

SCHIAVO: Absolutely, and it also didn't escape my notice or yours either that she had prior military training as did Captain Sullenberger and co-

pilot Skiles in the "Miracle on the Hudson" landing.

It was this extremely good training that they had gotten in the military, perhaps it made it different, it certainly did in the Hudson river landing.

And it seems like it did here too. And I think that that is something we will see disappearing in decades to come because let's face it, the

military just does not train in using that many pilots anymore.

QUEST: Fascinating point, thank you Mary, interesting, appreciate it, good to see you as always. Now this is QUEST MEANS BUSINESS live from New York

and of course, lots.

[16:40:00] (COMMERCIAL BREAK)

QUEST: We are going to go and join the press conference of the NTSB on the Southwest Airlines crash.

ROBERT SUMWALT, CHAIRMAN, NATIONAL TRANSPORTATION SAFETY BOARD: It's Bill English(ph); Bill is the investigator in charge for the accident. Last

evening, we reported to you the preliminary findings from the addition of the cockpit voice recorder, and this afternoon, we will give you a

preliminary rundown of the flight data recorder information.

Just as reported -- as we reported last evening, as the aircraft was climbing to about 32,500 feet, the engine parameters, the RPM, both RPM

indicators on the left engine went down to zero or pressure went to zero.

And the engine vibration which is measured -- there's an indication in cockpit for engine vibration. It increased significantly on the left

engine. Shortly thereafter, the cabin altitude warning horn activated, and from my experience of flying a 737, I can tell you that that warning

activates around 13,500, 14,000 feet somewhere in there.

So shortly after the engine indications went down and the vibrations increased, that's when the cabin altitude warning horn started making

noise. Indicating that the cabin altitude was going through 13,000 -- to about 14,000 feet.

The aircraft began a rapid, uncommanded left roll of about 41 degrees of bank angle. So usually when you're flying on an airline, it gets real, we

get over about 20, 25 degrees of bank, this went over to 41 degrees.

The pilots are leveled to the wings, and throughout the rest of the flight, that's what I'm going to describe is a fair amount of vibration throughout

the air frame, the airplane.

As I mentioned last evening, the flight crew alerted to land with flaps five as opposed to normal setting of flaps 30 or flaps 40. And they did

that because they were concerned of aircraft controllability issues.

And because they're landing with lesser flaps, that will mean a higher approach speed. The speed it touched down was around -- was right about

165 knots and that converts to 190 miles per hour.

Now to put that in perspective, again, I'm just going back to my days of flying 737, so the speed and touchdown varies according to the weight of

the aircraft. But to put it in perspective, I'm going to say that a typical approach to the 3H4-737 might be around 135 knots.

[16:45:00] And this aircraft was landing at 165 knots. Again, the higher speed is because they landed with a lesser flap setting than typical. The

time from the initial event to touchdown 22 minutes.

We have a very talented neurologist in Washington working for the NTSB as well as air traffic control specialist and they noticed on the air traffic

control in the ATC radar indications, they can see debris, reflections of debris being painted on the radar indicating that there was debris falling

through the atmosphere.

And so they plugged in the winds and estimated where they thought this debris would land, and sure enough, the debris landed in about the area

that they anticipated it would be as we are finding.

Yesterday, we reported that an engine cowling had been located about 65 miles northwest of Philadelphia. And in fact, we are finding, residents

are finding additional pieces of engine cowlings.

Of course, people have asked me this morning, what is the engine cowling? It's just the exterior part of the engine that keeps all the wires and

pipes from being exposed. And so it's -- that's what that is. It's the outside of the engine and that's the part that will be painted in the

aircraft colors, the Southwest colors.

So we are finding additional pieces like that, and we're finding it because people are reporting it to us through our witness line, our witness e-mail

which I'll give you in just a minute. And there are also notifying local law enforcement officials that they found components.

Keith Holloway; our Public Affairs officer will tweet, he said he will tweet as soon as I started speaking, he will tweet a picture of one of

these components that was located yesterday.

Our operations group, they have requested all FAA records related to the flight crew as well as company training records. And that's standard for

any investigation like this. The pilot interviews are being conducted as we speak, and if question I'd be glad to talk about how we go about with

the pilot interviews.

The cockpit voice recorder group, it will convene in Washington in the next few days. So typically what we do is we take representatives, we take an

NTSB investigator who is a specialist and cockpit voice recorder radars.

We have a representative from the FAA, someone from the aircraft manufacturer, somebody from the airline, somebody from the pilots union,

and they all listened to the cockpit voice recorder.

And as they do it, they listen and say, what were they saying? And it's done the old fashioned way. They listen and type out what they hear. And

somebody says I didn't hear what he said. So they back the tape up the old-fashioned way and play it again.

And then everybody agrees on it, they create a transcript. That transcript will be the official record of the cockpit voice recorder. So that becomes

a public document.

QUEST: So we're listening to the chairman of the NTSB, he is going through the investigative process, he hasn't yet started talking about what might

have happened. We're listening to a sort of summary of the flight.

Mary Schiavo is with me. He hasn't -- we're going to leave him there, we'll obviously monitor him, Mary, just in case he does come on to that.

But I think the interesting things are here. When the incident happened, Mary, that rapid uncontrolled left roll, a 41 degrees.

That would have been very -- I mean, 41 degrees, that's sort of well and truly all the way over. That would be very terrifying.

SCHIAVO: Absolutely. That would be one of those moments -- I was on a flight once, personal flight behind a heavy -- a lighter weight plane

behind a heavier weight plane and we got to some weight turbulence issues, and when a plane sits on its side, it's scary.

It wouldn't have been quite on its side at 41, but and that would have -- that would terrify the passengers. They're not -- people aren't used to

that nowadays. We have smooth flight.

[16:50:00] QUEST: Right, in terms of about -- just maybe, flaps -- 5 degrees of flap, so obviously a much faster landing than would have been

normal because they obviously didn't want to deploy anymore flaps because the wings were compromised.

So you know, a strong challenging way to get the aircraft down.

SCHIAVO: Yes, and I think the pilot wanted to make sure she had that reserve of air speed as they teach you first day in flight. Speed -- air

speed is your plan, you know, once you're lost, you sometimes can't get it back.

And I suspect that given what the pilot was used to flying in the military, this wasn't a high-speed landing, but I think that was probably wise to

keep your air speed up because you don't know what you're going to face on the ground and how your control is going to be.

Fortunately, it had a nice long runway, you know, modern long runways, so I think that that was probably the right thing to do.

QUEST: Mary, thank you, when we get more information of what they believe on the fan blade. The chairman is taking his time getting to that part,

but we'll come back to you, thank you very much. This is QUEST MEANS BUSINESS, I'm back after the break.

(COMMERCIAL BREAK)

QUEST: OK, La Compagnie; which is the airline that flies Dream Paris and New York and it is an all business class airline. Now it is expanding.

The all business class airline is with me -- it's co-founder Jean-Charles Perino, good to see you sir, thank you --

JEAN-CHARLES PERINO, CO-FOUNDER, LA COMPAGNIE: To you --

QUEST: For joining us. Now, I indeed -- we were coming onto the airline in just a second. But I do need to ask you, the Southwest, the Southwest

incident, obviously, we don't know what caused it. But it is a reminder, isn't it? Of the complexity and the necessity of training and good

maintenance on the road.

PERINO: Well, as you know, flying safe and secure is number mission for us, La Compagnie as well as any other airline in the world. And the safety

and the maintenance and training, training is a mission critical for us.

And I cannot comment on these, obviously there's an investigation, but it's critical for us.

QUEST: Right. You fly between Paris and New York on an all business class.

PERINO: Right.

QUEST: And you're moving from Charles de Gaulle to Orly, why?

PERINO: Orly basically is first closer to city center of Paris, so our customers then point it's easier to get to Paris when you arrive in Orly.

And in the meantime, so you do need the opportunity to kind of be on points. For example, French provinces, if you want to go to (INAUDIBLE) or

any other in Europe, thanks to connectivity out of the way.

QUEST: It doesn't have the same cache(ph) as CDG.

PERINO: Definitely, not the type of airport as CDG, but it's closer to Orly which is people's help-point, believe it.

[16:55:00] QUEST: You also used to fly from London, Luton to New York and you stopped that route. Which led people to assume or to question the

viability of an old business class. There have been many of them and most of them have failed.

Even OpenSkies is out of Paris, it's no longer all business class as it was. So are you just holding on?

PERINO: That's a very good point because since we are -- had to cancel our activity from London after the Brexit, we decided to increase our capacity

from Paris to New York, and performance has never been that strong since we doubled the fleet in Paris-New York.

And where -- this is where we announce (INAUDIBLE).

QUEST: New aircraft, new routes?

PERINO: New routes in the coming weeks -- in the coming months --

QUEST: What do we have?

PERINO: Weeks will be early, months will be some other development. Once we will have the two new A321neos that will be joining the fleet at the end

of the quarter one to certainly 19.

QUEST: So there's a role for the all business class airline.

PERINO: Well, it's moving and it's moving into the right direction for us.

QUEST: Good to see you, sir, thank you very much indeed --

PERINO: Thank you very much.

QUEST: I got you. Rushing(ph) the old business class airline and that is QUEST MEANS BUSINESS for today. The markets -- just leave you with a look

at what happened in those markets over the course.

After the way the Dow looked, it was absolutely all over the place. Larger in the market for IBM, we will have more earnings numbers tomorrow,

otherwise, that is QUEST MEANS BUSINESS for tonight. I am Richard Quest, as always, whatever you're up to in the hours ahead, I hope it's

profitable.

(COMMERCIAL BREAK)

END