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Quest Means Business
Boeing CEO Discusses the Future of the Aerospace Industry; Tribune Calls Off Merger with Sinclair; Turkish Lira Hits Record Low Over U.S. Pastor Row; Russia Vows to Retaliate After New U.S. Sanctions; Wall Street Closes Mostly Lower; Boeing Battles Airbus in Order Book Race; Pence Calls for New Space Force by 2020. Aired 4-5p ET
Aired August 09, 2018 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST: Christmas has come early for this #hardkey. They have allowed me into Boeing in Everett. We've got planes,
planes and planes galore as QUEST MEANS BUSINESS airs live from Everett in Washington state. Here in this corner are America, Boeing churns out its
biggest money making exports of the country -- airplanes. Over the next hour, join me as we go inside another component of America, Inc. -- the
Boeing Company.
Everybody, good evening to you and a warm welcome to the Puget sound region. Look at the sight of that. You'll hear more about that during the
course of the program, but they are brand new dream liners waiting to be -- well, they are being manufactured and then to be delivered.
And we are at Boeing's largest factory at Everett and in a few moments, we will be speaking exclusively to the man in charge of Boeing, the Chief
Executive, Dennis Muilenburg. Boeing has an outsized impact not only on the U.S. economy, but the global economy markets and perhaps for you and
me, most important, how we travel.
Throughout the course of the program, since 1916, Boeing has been in the business of building machines that fly. Now, it's facing a variety of
turbulence on the ground. You're familiar with them, a trade war, sanctions on Iran, young conventional Trump administration. Then you've
got the issues relating to Boeing itself as the largest exporter that has billions of dollars at stake, all at the same time.
Forget the government, forget the tariffs, forget the trade, let's look at actually doing business, oh, yes, it's locked in battle, a brutal battle
with Airbus for dominance in the sky. Every order, every plane and all of this company's engineers workout how to propel this faster and further in
the skies and in space.
Boeing is truly a unique company. So, we'll look back at the iconic machines that Boeing designed and how they built the planes that you and I
now fly today.
That's all ahead in this hour, on this special edition of QUEST MEANS BUSINESS." And so, let's continue with the planes themselves. Let's begin
with this extraordinary legacy of Boeing.
Over the last hundred years, each generation of aircraft has surpassed the last, so let us enjoy a look at Boeing's famous planes.
(BEGIN VIDEO TAPE)
QUEST: For more than a century, from humble beginnings, from planes made of canvass and wood to modern aerial planes, helicopters and space rockets.
Bill Boeing's founding philosophy was build something better and he did. Boeing started by selling sea planes to the U.S. Navy in World War I
forming a military alliance that stands today.
In the 1930's, they redesigned those flying boats into the clippers and opened up new routes across the Pacific. And then, Boeing ushered in the
jet age, with the 707 single aisle plane that flew at similar speeds to today. It was the first commercially successful jet liner. The 1960s
brought Boeing another winner, the 727. It's the most successful plane ever built, the latest fuel efficient max version is hugely popular with
airlines and there are more than four thousand 373s still to be delivered.
From small and nimble to big and bold, the jumbo jet, the 747 democratized flying. In the 1990's, Boeing went big and twin engine with the 777. A
totally new plane -- as an airline, you weren't a player if you didn't have the 777.
In this century, a totally new plane. The 787 dream liner, quite simply Boeing can't make these planes fast enough, and with new versions, the 787
remains state of the art. Boeing's famous planes show that when they try, they change aviation, and now the talk is what comes next?
[16:05:16]
QUEST: Will Boeing be brave enough to launch another plane from scratch?
(END VIDEO TAPE)
QUEST: Joining me now for our exclusive interview, Boeing's President, Chairman and Chief Executive, Dennis Muilenburg, good to see you, sir.
DENNIS MUILENBURG, CEO, BOEING: Good to see you, Richard.
QUEST: And firstly, thank you for allowing QUEST MEANS BUSINESS to come from here, besides that thing, this kid have a play in the candy store.
MUILENBURG: Yes.
QUEST: So, let's talk first, there are so many issues about Boeing, but when you became Chief Executive just a few years ago, what was your
priority? Little could you have realized that your company was going to suddenly become pretty much at the heart of some very nasty political
battles.
MUILENBURG: Well, when I had the chance to take over the country a couple of years ago, we were just in the groove just celebrating our centennial,
so we were thinking about what is that next century of aviation look like and the fact that we are in a growing global business and the network
traffic of the world is growing in about six percent to seven percent a year, and so how do we take advantage of this incredible growth market,
continue to deliver value for all of our stakeholders and then really transform Boeing for its second century?
QUEST: And now -- but very quickly, once you took the job, the company too became enmeshed in some extremely difficult political waters and we're
talking here about obviously the new administration in Washington, the Trump administration. We're not going to dwell on this unduly and too
long, but on the trade -- let's look at the trade question first.
President Trump as you're just going to -- has been quite clear in his opposition to China trade at the moment and the introduction of tariffs,
(inaudible) is his excuse. What is Boeing's policy on tariffs?
MUILENBURG: The key is to put this in the overall context of global trade, so certainly, global trade is extremely important to Boeing and our
customers. Air traffic by its nature is global and we see traffic growing around the world, as I said, six percent to seven percent a year and we're
seeing things that the administration is doing today that is enabling our growth, so I put it in the context of tax reform, which has been incredibly
beneficial, as long as we invest in innovation and in our workforce, regulatory reform is making us more competitive in helping us compete
worldwide.
Now, we do have some challenges around tariffs and trade. We have some concerns there, but the fact is, we have a voice at the table and we see
the administration leaning forward to support us a business while we deal with the realities of the trade situation.
QUEST: Let's just listen to what President Trump said about Boeing and about China because it relates to your ability to do business in one of the
newest markets, most important markets in the world.
MUILENBURG: Okay.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: One that is even more bothersome, frankly is Boeing. So Boeing -- and I've been talking about
this for a long time, Boeing is going to sell 300 jets to China, but as part of the deal, they're going to set up a massive plant in a big section
of China. They're going to build planes over in China, and you tell me why? Why aren't they building them here? They're building them over
there. That will end up taking a tremendous number of jobs away from the United States and people can say whatever they want, but that's not good
stuff.
(END VIDEO CLIP)
QUEST: All right, you have -- you obviously are familiar with that. Are you still committed to the China factory?
MUILENBURG: We are, and when you take a look at the global marketplace for airplanes over the next 20 years, the world needs 43,000 new airplanes,
about 7,200 of those are in China. It's a really important market for us. We are building a 737 finishing center in China today, the compliments work
we do here in the U.S. -- I think our approach to global growth is different than what you see in many companies.
We have a win-win approach where we're looking for growth in all countries around the world, so while we're in investing in that finishing center in
China, which allows us to grow in China, it's also allowing us to ramp up production here in the U.S. which is adding manufacturing jobs here.
QUEST: But how do you square that circle with a President who believes that everything should be done in the United States rather than putting
some of it into China. There is a straightforward difference of view in that as exemplified.
MUILENBURG: I think the difference is the structure of the aerospace business, so our business grows in the U.S. when we invest in factory and
cast it outside of the U.S.. The China example is a very real one, but I'll give you more examples. Saudi Arabia, who we're investing in
Rotorcraft Support Center, growing jobs in Saudi Arabia, as long as we grow our (inaudible) helicopter line here in the U.S..
In the aerospace business, a global supply chain and the fact that our customers are global and our airplanes are delivered globally, there is an
advantage to the U.S. to having capability in other countries.
QUEST: I assume you make this argument and you put this point to the President and the administration every time you meet.
[16:10:12]
MUILENBURG: We do, and we've had very good conversations on this topic. What I applaud the President for is the fact that he has brought business
to the table. We have a voice at this table. Our concerns are underscored --
QUEST: You have a voice at the table and that's certainly true now, but you didn't have before. But I wonder if it's a lip service voice. Is
anybody actually listening? You've been now to numerous White House events, including earlier this week in New Jersey, where I am sure you made
the points again, and I'm sure that you'll tell us, but I am sure you don't -- you wouldn't want to reveal those conversations, but is anybody
listening to you?
MUILENBURG: They are and it's showing up in actions, and I'll go back to a great example. Tax reform. We were very much at the table for that. We
talked about the benefits of tax reform here in the U.S., unleashing innovation, that's exactly what is done. It's allowed us to grow
manufacturing jobs. It's allowed us to invest in our workforce. You see some of that, there are factory space here.
Regulatory reform. We've been listened to, and even on the trade front. There is an understanding, a realization that aerospace, aerospace
generates some $80 billion a year trade surplus for the U.S..
QUEST: Let's look into your share price. You've done spectacularly well, 220 percent over the last five years, 100 percent or so in the last 14 to
15 months or whatever, but if we look at a more narrow area of just the last six months for example, we see something that looks more like the
Himalayas or the alps and the mountains. The sheer number of ups and downs, they are predicated purely on the fact that China might take
retaliatory action against yourselves.
MUILENBURG: We're seeing some recent volatility in the market, there is no question about that, but again, you have to look at Boeing from a long-term
perspective. We are long term business. When I take a look at stock price or return to shareholders, this is a long-term effort and you've mentioned
the fact that our stock price has gone up and there's been shareholder value over the last couple of years that have been generated by our amazing
team, and when you look at the growth prospects in aviation, we are very confident this is a long term sustained growth business.
And while they are quarter to quarter, there may be some market volatility. The strength of the long-term view of our market is very clear.
QUEST: Do you worry that as part of this trade -- I am going to call it a trade war or you can disagree with that. I know people have disagreed with
that whether the U.S. is currently in that, do you believe or are you worried that as part of this trade war, when China runs out of things to
tariff, it will start to use non-tariff barriers against you and your planes, making it more different. Do you worry?
MUILENBURG: Sure, that's a concern for us, and we voiced that concern, but again, it's important to realize that China also gains benefit from this
aerospace business. China is growing by leaps and bounds. They need the lift capacity in the country. Every year, we have a hundred million new
passengers in Asia. They need the airplanes. Airspace is good is good for the Chinese economy. It's good for manufacturing jobs here in the U.S..
QUEST: Do you feel caught in the middle sometimes? CEOs like yourself we saw with the President's counsel, you sort of feel you're caught in the
middle?
MUILENBURG: I don't think we're caught in the middle. I think the fact is we're involved in the discussion. We're at the table, and I like having a
voice at the table. And I'd much rather be engaged in being in the background and the fact that we're engaged, we have a voice at the table,
it's making a difference and I see the administration leaning forward with a pro business agenda.
QUEST: I've got to ask you then, beautifully put, if you've got a sit at the table, you have a responsibility. If you have a responsibility, you're
part of the debate, you'd agree. Today, in this country, we are seeing CEOs being -- we've called among QUEST MEANS BUSINESS the moral barometers
in many cases, having to take stands on issues, it doesn't matter what issue, in the perfect domain, that previously was always about the
government or not -- whether it be for example, the transgender battle, the LGBT rights, women's lead, whatever it might be, CEO are now leading the
agenda. Are you prepared for that?
MUILENBURG: We're again, very engaged in that dialogue. I have a responsibility as a CEO to take care of my business and to develop value
for all of our stakeholders. I also have a responsibility to run a company that has the right value set and the great thing about the Boeing company
is we've been based on that brand for years.
We operate under this context of values, so the importance of things like safety and diversity, bringing all the best ideas to the table, integrity
in how we do our work, all of it. Yet, the very nature of our products demands excellence. People's lives depend on what we do. That drives a
sense of value and excellence in how we run the business, so that's part of my job is the culture.
QUEST: Right, but when those values come into conflict or seemingly come into conflict with the policy, it doesn't matter which government it is or
where in the world, but we can take the example of the immigration policies here in the United States where many of your colleagues, your counterparts
in Silicon Valley came out very forcefully against the travel ban, against the restrictions on HB1 and all of those sort of things. Are you prepared
to put your views on the line in the same way that they are?
[16:15:16]
QUEST: Is this something you have to do as a Chief Exec?
MUILENBURG: We're engaged every day in that dialogue. Again, I'll say the most important thing I do as a CEO is invest in our people, invest in our
business --
QUEST: Even when it gets nasty? Even when it gets dirty? Even when it gets ugly? Can you see your --
MUILENBURG: We never ever compromise on our values. The values we have as a company, our integrity, the quality that we provide, the safety that we
demand, that cannot be altered. That is the foundation that we stand on everyday no matter how many business pressures there are, no matter what
issues may come up, we stand on that values foundation, but again, by having a seat at the table, I can be involved I those discussions, and we
may not agree on everything, but we engage with both sides of the aisle. We engage with governments around the world.
We don't always agree on every point, but we're engaged. We're involved because we are a global business and we are based on values.
QUEST: We'll turn our attention to another matter in a moment and finally, what is -- the biggest part of our discussion, what is it like to negotiate
with the President of the United States who wrote "The Art of the Deal." Have a listen to what the President said on Air Force One and then we'll
talk more.
(BEGIN VIDEO CLIP)
TRUMP: When the plane is totally out of control, it's going to be over $4 billion for our Air Force One program and I think it's ridiculous. I think
Boeing is doing a little bit of a number. We want Boeing to make a lot of money, but not that much money. OK, thank you.
(END VIDEO CLIP)
QUEST: Boeing taking a little bit of a number. What's it like negotiating?
MUILENBURG: Well, he's a tough negotiator, but he's a good businessman. He understands business and again, we speak the same language and this
discussion we had around Air Force One, from a company standpoint, that's a really important effort for us. This is something we do on behalf of the
country. We're proud to have a President flying on Air Force One.
And the negotiations we've had are good, strong negotiations and frankly, coming to the table with ideas on how do we streamline certification
processes, how can we make Air Force One procurement more commercial-like in its nature, so there have been things that have been done by the
administration to help us take cost out and streamline the process.
So, there's give and take, and I think it's a great process and as a result, the tax payers are getting a great deal.
QUEST: You don't wince when you a tweet, it doesn't sink when you hear who is on the phone -- not sink when he's on the phone, obviously, when you
speak to the President.
MUILENBURG: It is a tremendous honor and the fact that he's involved in these negotiations, we're providing the best value for our customers, best
value for the taxpayers, and I'm honored to be involved in that discussion. We're doing important work for the country and it matters.
QUEST: When we come back after the break, we're going to turn our attention from the important work to the country, to the important work
from Boeing, and we're going to talk about the planes. This is the 787, which costs about $260 million, I believe.
MUILENBURG: List price.
QUEST: List price, not that anybody in their right mind has ever paid for this price, however, and hopefully, if I'll ask nicely you'll give me a
discount, but what we'll do after the break is talk about your planes.
MUILENBURG: Thanks, Richard.
[16:20:00]
QUEST: Welcome back, QUEST MEANS BUSINESS from the Saturn 5 Moon Rocket to the space shuttle and now the next generation star liner. Boeing has
played a major role in escaping the earth's gravity and the Trump administration's intent to explore space continues and to guard it and will
play a huge future, a huge part in this company's future. I'll discuss this with Mr. Muilenburg in just a moment.
For instance, today, the U.S. Vice President Mike Pence unveiled more details of the Trump administration's ambitions in space including a U.S.
Space Force.
(BEGIN VIDEO CLIP)
MIKE PENCE, VICE PRESIDENT OF THE UNITED STATES: President Trump's highest priority is the safety and security of the American people, and while too
often, previous administrations all but neglected the growing security threats emerging in space, President Trump stated clearly and forcefully
that space is in his words a war fighting domain just like land and air and sea.
(END VIDEO CLIP)
QUEST: You came from the defense side of Boeing, what do you make of the idea of a Space Force, which could hugely benefit Boeing -- not hugely, but
well, it will hugely benefit Boeing's space division and defense division.
MUILENBURG: Well, we applaud the administration's investment in Space Force and more broadly, in space as an enterprise, an ecosystem of space,
so we're seeing more energy, more investment going into the space program today than since the days before him, and that ranges from the Space Force
to lower orbit exploration, new products like the star liner, to deep space exploration where we're going to go back to the moon and to Mars.
QUEST: But let's be blunt here, the company is going to benefit. You'll make money on this policy.
MUILENBURG: Space is important business for us, it always has been. Boeing has been in the space business since it was invented. It's an
important part of our portfolio ranging from satellites to space craft to launch.
QUEST: You versus Musk, who will be the first to Mars? You have said it will be a Boeing booster rocket or Boeing rocket is the first to Mars. Do
you stand by that?
MUILENBURG: I do. We're working on that rocket today with NASA. This is the space launch system, I'm shaking on it. I'm sure. I'm confident in
our team and confident --
QUEST: I should have asked a play with it.
MUILENBURG: I am confident in our partnership with NASA and we're working on that first space launch system rocket today. We're building it. It's
about 38-storey tall, more than nine million pounds of thrust and put that in terms of cars, that's the equivalent of about 207,000 Corvette engines.
We're going to go back to the moon and then we're going to go to Mars, and I firmly believe, the first person that steps on Mars will get there on
that rocket and we're doing it jointly with NASA.
QUEST: Let's talk about planes. You make lots of them, what's gone wrong with the 737 reduction facility at Renton? You're making the planes faster
than you can finish them and deliver them and you're now literally parking them anywhere and everywhere.
MUILENBURG: What you see there is part of the challenge of growing the 373 line. That line has gone to 47 aircraft a month, now we've gone to 52 a
month, we're just making that transition. Next year, we're going to go to 57 a month. What this shows you is the incredible global demand for
aircraft. This is our fastest running production line.
There are always challenges with these production rate changes. We've done 20 of these rate changes since 2010. Part of this is bringing our supply
chain along and we've had some supply chain challenges. We're dealing with that right now. We're going to deliver per our guidance on airplane
deliveries for the full year, but we're having some local challenges right now as we work through supply chain.
QUEST: So, this is not something that's systemic and long running.
MUILENBURG: It's not systemic nor long running, but this is not atypical of these production rate changes and how we implement them, and we'll work
through this and we've got a lot of work to do, no question. But our team is marching through that smartly. The great news is, we're moving to 52 a
month and then to 57 a month. This is an incredible growth and opportunity --
QUEST: Are you pushing the system too far and too fast, but one thing I know from having covered this industry is that ramp up is extremely
difficult, 380 had enormous problems and cost them a fortune, your 787, brilliant plane cost you a fortune on ramp ups --
[16:25:16]
QUEST: -- say with 777 not as bad, and now with 37 Max, what is it about ramp up?
MUILENBURG: Well, airplanes are challenging. These are the most technically sophisticated machines in the world, and the production systems
behind them as you can see here are very sophisticated. We have amazing people with amazing technical depth that know how to do this work, but it
is very unique and arguably the most challenging work in the world.
Now, as we ramp up, our key is to maintain production rate feasible. We don't want to ramp up too fast, nor do we want to ramp up too slow. We are
in a growing market place and so we try to hit a production rate ramp that meets that market place need while managing the risk of the enterprise.
QUEST: You are in a fierce battle order for order with Airbus. When it comes to Airbus you've been litigating before the WTO for almost longer
than you and I have been in the business. Is it time to say enough?
MUILENBURG: Well, I think what you saw just recently earlier this year is the WTO ruling that said Airbus had received about $22 billion illegal
subsidies over the last couple of decades. Those need to be remedied. It's important to us again in this global trade environment that we thrive
in that everybody plays by the same rules, that's purely our stance here.
So, as long as everybody plays by the same rules, we're more than happy to compete with. In fact, competition makes us better. We love to compete.
QUEST: But you've just of course taken the stake in it. You've just bought Embraer's business. You've not got -- you've really got a duopoly.
I mean, and I don't say that in a pejorative sense, but I think you'd agree in aviation now, now, Embraer is with you, Bombardier with Airbus, there is
a straightforward duopoly for jet engines -- for jet planes.
MUILENBURG: Yes, in the commercial airplane world, for some time now, we've had roughly a 50/50 market share, heavy competition with Airbus.
QUEST: We can look at the numbers on Airbus and we can actually see the production numbers and the order numbers. You go backwards and forwards
between the two.
MUILENBURG: Yes, if you take a look at the order numbers, you can see that. The other thing I prefer to look at is delivery, airplane
deliveries, because that's really the base of the business and you'll see that we've out delivered our competitor for the last six years, and so
we're playing into a strong market place right now. We've got the right product line up. We've bringing more innovation to the market now than we
ever have in the form of the Max, the 787 dream liner, which you see here, the new 777 X and so while we're introducing new products, we're ramping up
production.
QUEST: Was the 7478, beautiful plane, was it a mistake? I mean, it's a great -- it's got a nice career as a freighter. You've got 24 orders for
freighters, but it didn't -- the very large aircraft seems to be not needed at the moment.
MUILENBURG: For that market segment, it's the right airplane. It's by far the best airplane to operate in that outsized cargo market and it's a great
VIP aircraft for certain customers who need that size of a VIP aircraft.
QUEST: How many VIPs have bought --
MUILENBURG: Well, these are typically head of state kind of vehicles, and it serves that need well, but this is a market niche that is not a big
growing market segment for us, but an important one. We see stronger market growth in aerobodies and our mid-sized wide bodies and that's again
where we see a need for 43,000 new airplanes over the next 20 years.
QUEST: On that point, finally, you are of the opinion that the industry has changed -- airlines and aviation -- no longer cyclical, now it's become
sustainable. I suggest you're all fooling yourselves with respect -- I think that you are as cyclical as ever and it's just a matter of when.
MUILENBURG: Yes, I would counter that. I think the nature of the business has changed, and you're right. Over its history, aerospace -- commercial
aerospace in particular has been a cyclical business, but in its history, it's been dominated by American and European carriers, that's been the
primary traffic of. The large majority of our backlog has been focused in those regional areas.
QUEST: You don't think -- I mean, you sell planes, you don't think we're heading towards a glut of planes by airlines that have bought too many that
eventually, we'll put too much downward pressure on prices.
MUILENBURG: Quite the opposite. In fact, we look that in the next 20 years, 43,000 new airplanes for the world about 40 percent of those are
replacement, replacing existing fleets, 60 percent of it is because of the growth of the market.
The nature of travel has changed. This dream liner for example, almost 200 new (inaudible) have been created because of the technology, so global
traffic is more networked. We have 100 million new passengers in Asia every year and less than 20 percent of the world's population hasn't even
taken a single flight yet, it's one of the best growth markets in the world.
QUEST: Finally, when you look at these planes, I mean you can tell me that -- you can give me any number you like. You can tell me how much it costs
-- I'm still going to get a good discount on one of them.
MUILENBURG: We'll talk on the side.
QUEST: By the way, pricing is the one thing that they'll never talk about.
[16:30:16] You can -- they threw me over here before they mention, discuss by any -- but more importantly, you give me every number you like about
profitability, cost, blah, blah.
But when you look at it and you think of the people that will fly in it, and you think of its economics, you have any of this space, what do you
make of it? Tell me what --
MUILENBURG: Well, this is a fantastic air place, it's called the Dreamliner for a reason. And what this does for people the way it enables
safe travel around the world, comfortable travel, connecting city pairs in ways that have never been done before, it's connecting the world in new
ways.
This is an incredible product and the revolution that it's creating in global network traffic is amazing.
QUEST: Thank you, sir, thank you for having us here --
MUILENBURG: Thank you --
QUEST: We're going to have a look at the plane later --
MUILENBURG: You bet, thanks --
QUEST: That's --
MUILENBURG: For visiting our factory.
QUEST: Thank you for having us, that wasn't going to get out of it, right. As we continue, we talked about it, you heard us then discussing the battle
for dominance in the skies. The rivalry between Boeing and Airbus after the break.
(COMMERCIAL BREAK)
QUEST: Welcome back to a special edition of QUEST MEANS BUSINESS, we are in the engine room of the American economy, largest exporter in the
country, it's Boeing's Everett plant; the biggest factory of Boeing.
And we will hear from the whole of the next half hour, we're going to look at the battle for the skies. Airbus versus Boeing and how the two have
duopoly, how it has survived and grown. And then how do you build one of these things? We're inside the factory and we'll show you the people and
how they actually filled a Dreamliner.
[16:35:00] Before we go any further, the business headlines at this hour. The Chief Executive of Boeing says the Trump administration is bringing in
policies that helped his company. Speaking exclusively to us on QUEST MEANS BUSINESS, Dennis Muilenburg said he has a seat at the table to
discuss trade and tax concerns.
And he says the administration is listening.
(BEGIN VIDEO CLIP)
MUILENBURG: We're at the table, and I like having a voice at the table, and I much rather be engaged than being in the background. And the fact
that we're engaged, we have a voice at the table, it's making a difference and I see the administration leaning or with a pro-business agenda.
(END VIDEO CLIP)
QUEST: Sinclair's $3.9 billion deal with Tribune Media is dead. Tribune walked away from the deal and is now suing Sinclair, saying its
negotiations with the U.S. regulators were unnecessarily aggressive. The breakup of the deal is a loss for Sinclair which has been scrutinized with
ties with the Trump administration.
The Turkish lira hit a record low against the dollar. The United States has imposed sanctions on Turkey over the intention of an American pastor.
A Turkish delegation returned from Washington without any sign of a diplomatic breakthrough.
The Finance Minister says he will unveil a new economic plan for Turkey on Friday. Moscow is vowing to retaliate after the Trump administration
imposed new sanctions, targeting Russia's exports and potentially restricting flights by Aeroflot.
The U.S. says it's in response to the poisoning of a Russian spy and his daughter in the U.K. earlier this year. The government is calling the
sanctions illegal and categorically unacceptable.
So to the markets, Wall Street closed mostly lower, second strong quarter or second good quarter earnings is winding down and investors are now still
considering the trade war with China. The Dow extended losses quite sharply if you look at the map.
Not huge losses, but sharp losses down 75 points, the NASDAQ scored its eighth third gains in a row. In terms of business and corporate battles,
this is one of the most watched races in the business world. It's the order book, the challenge between Boeing and Airbus.
Now, so far, Boeing is ahead this year in terms of orders. As you can see there, 534 versus 269, that's just after Farnborough. Airbus came top over
the last four years. Now, the vast majority of orders are for 737s and A320s. They are similar planes, similar planes from rival companies.
And that's been the tale of Boeing versus Airbus. One makes the plane, the other comes out with something relatively similar. The 747 for example was
revolutionary, then came the A380, it was the queen of the skies versus the Whale, the Whale is bigger.
Sales for both have just about evaporated and demand remains sluggish, at least for passenger planes for both. And then you've got the plane behind
me, the Dreamliner, now that competes. The Dreamliner was first, that competes with the A350 and as a composite plane.
Boeing's winning, the 787 has 14,000 orders, the A3450 only 900, I suspect that might be 1,400 orders, and I'm just not reading properly, forgive me,
my mistake, I've added a zero.
And then finally at the smallest end, the A320 versus the 737, these are work horses for both companies, and now Boeing and Airbus are stretching
the planes for more passengers putting more fuel in the wings so they can fly further.
The rivalry between Boeing and Airbus, I saw it firsthand at the Farnborough Airshow.
(BEGIN VIDEOTAPE)
QUEST (voice-over): The brand new Airbus A220 soaring and twisting in ways that would unsettle the most frequent of flyers. The A220 at the heart of
the biggest shake-up in global aerospace in decades.
(on camera): It's not a regional jet, this is a full size aircraft.
UNIDENTIFIED MALE: Absolutely, it's a 150-seater, you've got a range, more than 3,000 nautical lines.
QUEST (voice-over): This plane which recently joined the Airbus stable boasts as the dominance of the duopoly Airbus and Boeing. A deal with
Canada's Bombardia bought the plane which was then called the C-Series. Airbus rebranded it the A220.
And now Airbus owns nearly 60 percent of the narrow body jet market.
[16:40:00] (on camera): You're expecting it will sell better now as part of Airbus.
UNIDENTIFIED MALE: Absolutely.
QUEST (voice-over): With Airbus buying the C-Series, last month, Boeing announced a takeover of the passenger jet business of Brazil's Embraer Air.
The deal is now awaiting approval. You did your deal with Bombardia, Boeing immediately had to do their deal --
UNIDENTIFIED MALE: Yes --
QUEST (on camera): With Embraer, the duopoly can't be beaten.
UNIDENTIFIED MALE: We were not surprised by that, but I'm damn sure we have a better aircraft, and that is what counts.
QUEST (voice-over): Having swallowed up smaller rivals in a tit-for-tat series of mergers, the smaller competitors simply can no longer match the
strength of Airbus and Boeing.
(on camera): You must be sad to be leaving -- to losing this part of the company, there must be a sadness to it.
UNIDENTIFIED MALE: Well, it's yes and no. Because this is the opportunity for Embraer Air to grow in Brazil. So we will have much more access to
market, so we will sell more of these machines here.
QUEST (voice-over): Selling more machines to be sure, it's not clear though who is the boss.
(on camera): Are you starting to see airlines and customers showing more interest, now that they're starting to realize it's backed by Boeing.
UNIDENTIFIED MALE: Well, I think, I think with time certainly, they'll see that. I mean, there's no question they'll be able to deliver more value to
the customer at the end of the day together than even when we can suffer.
QUEST (voice-over): The behemoth continue to rack up orders to find formidable challengers in the future, they may have to look east.
UNIDENTIFIED MALE: The duopoly was not given by God, it existed only since the late '90s, so some good 20 years and at some point, I think the most
serious challenger will be the Chinese.
QUEST: China as a challenger is still some way off. Boeing and Airbus, the duopoly has been strengthened, the competitors couldn't compete.
(END VIDEOTAPE)
QUEST: As we continue, the sun may be setting on some planes like the jumbo jet, the stars are shining for space exploration. The astronaut
Scott Kelly joins me after the break to talk space and space force and here at Boeing, we will show you -- look at that magnificent, it's a 7879
Series, the rear there, it's at its last days of manufacture flying soon -- beautiful.
[16:45:00] (COMMERCIAL BREAK)
QUEST: Welcome back to the fuel jet sound, we're just at the Pacific Northwest at Boeing. You heard Boeing's chief exec tell me that he
applauds the Trump administration's investment in a space force. The vice president of the U.S. Mike Pence says the force should be established by
year 2020.
Now, the NASA astronaut Scott Kelly has spent more time in space than any other human. He joins me now live from New York. Scott Kelly, I just --
before we go any further, having given that statistics, just how long have you spent in space.
SCOTT KELLY, ASTRONAUT: Well, I've spent 540 days, yes, 5 -- no, I'm sorry, 520, I can't even remember. But not the longest of any human, but
the longest single space flight of any American.
QUEST: And it's an extraordinary achievement. And when we look at the space force idea, how concerned might you be about the militarization or
the further militarization of space?
KELLY: You know, my concern is that we would be potentially encouraging other countries to do the same thing, and to -- you know, have a military
space race -- I don't think it's necessarily in our best interest. We already have -- you know, the capabilities that we're talking about
currently in the U.S. Air Force and you know, I just think that's a vision.
QUEST: Of course, defense and space to a large extent go hand-in-hand or at least they traditionally have done. Let's give place to companies like
Boeing, but now the private sector is well and truly in on the space race, isn't it?
KELLY: Well, yes, I think we've seen over the last several years that the private sector is taking on a renewed and more important role in space
flight, and I think that's a great thing.
QUEST: Scott, we had a discussion here with Dennis Muilenburg about who will be on Mars first. Elon Musk said he'll get there first, Muilenburg is
convinced it'll be a Boeing rocket that will get there first. First of all, when do you think -- I think this is just pie in the sky literally and
figuratively, when do you think we will get something to Mars, manned to Mars?
KELLY: I have no idea, Richard, you know, I think going tomorrow's is more an issue, and I'll use something my brother says, I'm not going to
plagiarize him without giving him a credit. But he says that going to Mars is more about political science than it is rocket science.
I think there, which means it's really about, you know, support and the money that's required to do it. I think technologically we're in a good
position to do that, we've you know, learned a lot over the many years we're going to fly in the --
QUEST: Right --
KELLY: Space station. So I think we're ready to go if we have the money.
QUEST: On that point of political versus economic or versus scientific, arguably, 1960s and the whole Kennedy, we're going to go to the moon was a
political decision, I think you might agree was as much politics as anything else.
But it was politics that bore fruit for science and benefit. Do you think Mars will be the same?
KELLY: I'm not sure we have the same political argument that we had with, you know, going to the moon in the 1960s and you know, just a battle
between, you know, our form of government and communism. But I do think it's --
QUEST: Right --
KELLY: A very worthy thing for us to be doing, I think we should do it, I think there's a lot of benefits in doing it, and I hope to see it during my
lifetime.
QUEST: Scott Kelly, we appreciate it, thank you.
KELLY: Oh, thank you, Richard. In this factory behind me, they also make the 747 like the jumbo jet. Now the 747 is only now being made as a
freighter and many airlines are of course getting rid of their 747s. So as the sun sets on the jumbo jet, we celebrate after the break, the 777 which
is made somewhere over there or maybe over there.
And the Dreamliner, we're going to show you 250 million or so, I'm pretty certain Dennis said he would give me a good discount on one of them for me
to take home. The most technologically advanced plane in the world, some would say, it is the Dreamliner we'll show you after the break. It's QUEST
MEANS BUSINESS live from Boeing.
[16:50:00] (COMMERCIAL BREAK)
(BEGIN VIDEOTAPE)
QUEST (voice-over): Boeing's Everett factory, it's difficult to overstate the sheer size of this plant, it's ginormous.
(on camera): How far is this road which is the width of the factory?
UNIDENTIFIED MALE: It's one-third of a mile.
QUEST: A third of a mile? That's the longest one.
UNIDENTIFIED MALE: That's third, that's the width --
QUEST: Right --
UNIDENTIFIED MALE: Longest to seven-tenths of a mile.
QUEST (voice-over): They really want to leave a pen at one side and --
UNIDENTIFIED MALE: Not so much.
QUEST: It takes a building of this size to make the big, wide, body planes. The 777, the jumbo and of course the Dreamliner or to give it the
proper name the 787. It's the fastest selling plane in Boeing's history, marking up nearly 1,400 firm orders.
The Dreamliner is a mid-sized, long-range aircraft that revolutionize aviation. Super strong carbon fiber composites make up the fuselage. New
engines and aerodynamics mean the plane is 20 percent more fuel efficient. On board, the atmosphere and the lighting make the less jet line.
(on camera): Building a 787 is a truly international enterprise. For instance, the London gear (INAUDIBLE), well, they're made in Korea. The
bearing panels, they're manufactured in China, and the joining structures, they are made and brought in from Italy.
Two-point-three million parts of a jigsaw that are all brought here to be put together to make a plane.
(voice-over): Today, the Dreamliner assembly line is producing planes a month.
UNIDENTIFIED MALE: We're going to put out some big toys out here.
QUEST: Cody Kelly(ph) is the team leader for the London gear.
(on camera): Do you ever stop for a second and think of all the thousands of flights it's going to make --
UNIDENTIFIED MALE: Everyday, coming in to work, it's -- we build amazing aircrafts.
[16:55:00] QUEST: So much intricate work on something so big. Phillip Vagaro's (ph) team attaches the wings to the plane.
UNIDENTIFIED MALE: Every wire, every facility we have has to be in its place. So there's no room for air.
QUEST (voice-over): The first few years of the Dreamliner's life were doubtable, the plane was dreadfully delayed, cost ballooned over $20
billion, and the cliche was that Dreamliner had become a nightmare.
UNIDENTIFIED MALE: Building an aircraft that's new, we needed a new production system, the sections arrived more complete. They come in with
insulation, with ventilation, lowering doors, windows. All these things already in the aircraft, where in the past we had to add all those things
to the aircraft.
QUEST: Boeing has learned some painful lessons with the Dreamliner. A plane that will be opening new routes and carrying passengers further for
years to come.
(END VIDEOTAPE)
QUEST: The story of Boeing factory and indeed how they make the Dreamliner. Let me show you very quickly how the markets closed in New
York, they were just down very briefly -- by the way, there was a sharp pull at the end, but the numbers aren't very high, and more importantly
than that, it's all in the back of, of course, an August.
And so when we come back after this very short break, there will be our profitable moment from Boeing, which bearing in mind Boeing's revenue
numbers would be very profitable.
(COMMERCIAL BREAK)
QUEST: In United States, Boeing is unique as a company. There's nobody else, it is the country's largest exporter that is so emerged in the
economy and the politics and the life in some senses of this country. And we've seen that very clearly in the way the chief executive on this
program.
Now they gated its way through the tricky issues of trade tariffs with China. But when all is said and done at the end of the day, Boeing is a
global company and the planes they sell mainly go overseas -- as you can see from behind me, around the world.
And that gives this company more say on things that it needs in the future than just about any other company in the world. Boeing is unique because
of its size, scale and outreach it makes. And that's it for this special edition of QUEST MEANS BUSINESS, I am Richard Quest at Boeing in Everett.
Whatever you're up to in the hours ahead, I hope it's profitable, I will see you back in New York tomorrow.
END
