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Quest Means Business
Coronavirus And The Recession Risk; Profit Falls At Renault; Manchester City Banned From The Champions League. Aired 3-3:30p ET
Aired February 14, 2020 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:19]
RICHARD QUEST, CNN BUSINESS ANCHOR, QUEST MEANS BUSINESS: And hour to the closing bell, and well, things are down.
We are not at the lowest point of the day. No records here on the S&P, or the NASDAQ and the Dow -- that was the only bit of green we saw and then
down for most of the session.
We need to understand what's going on and what's actually happening with the markets.
The reasons and the markets behind it. First of all, the coronavirus and the recession risk. It threatens to push some of the world's major
economies into negative territory.
A shocked decision. How fans on the world's biggest football club, Manchester City gets a two-year ban from the Champions League. We all need
to understand why
And all work -- and all life and no work, Barry Diller, the Expedia Chairman's comments on the corporate culture of the company he helped
create and now runs.
We are live in the world's financial capital, New York City. What a splendid, glorious, picture perfect late winter day and it's Valentine's
Day, Friday, February the 14th. No love in the markets though. I am Richard and I mean business.
Good evening. Tonight, the coronavirus outbreak is threatening to push major economies around the world into a recession.
They latest warning comes from Singapore, where the state's Prime Minister says it is bracing for -- in his words -- a significant hit and that a
recession is possible.
Italy could be heading for its fourth recession in over a decade. An official there says it's a danger of missing this year's growth targets and
supply chain troubles at the German automakers could help push the economy down negative, too. It just reported zero percent growth in the fourth
quarter.
Meanwhile, in Asia, Macau already deep in recession says it will distribute more than $200 million worth of vouchers to residents once the outbreak is
over. Now, the head of the Centers for Disease Control is warning that actually the epidemic or pandemic, whatever we call it may not be over
before next year.
(BEGIN VIDEO CLIP)
DR. ROBERT REDFIELD, DIRECTOR, U.S. CENTERS FOR DISEASE CONTROL AND PREVENTION: This virus is probably with us beyond this season or beyond
this year and I think eventually, the virus will find a foothold and we will get community-based transmission.
And you can start to think of it in the sense like seasonal flu. The only difference is we don't understand this virus.
(END VIDEO CLIP)
QUEST: The coronavirus is clouding Europe's economic future. Difficult time for the bloc. It just recorded its lowest growth in seven years, one
tenth of one percent. Effectively that stagnant. There's very little between plus point one and minus point one.
The Eurozone's three largest economies Germany, France and Italy have failed to record any growth among them.
Jean-Yves Fillion is the CEO of BNP Paribas in United States. He joins me now. Good to see you.
JEAN-YVES FILLION, CEO, BNP PARIBAS, USA: Thank you for having me.
QUEST: We are talking obviously about your bank, but also about this crisis. These numbers are very worrying, these economic numbers.
Europe is essentially stale -- stagnant.
FILLION: If I look at the differences between U.S. and Europe, so it's definitely stronger growth here.
There is positive interest rates and there is definitely here a very dynamic and deep types of markets. This is part of what Europe is missing
there.
I believe that the new administration in place is starting addressing these issues. Hopefully, by the way, including probably a more reflection on a
more coordinated policy mix, which hopefully can provide more fuel for further growth there.
QUEST: What are your clients telling you about the underlying condition? Because your clients in many cases bridge the Atlantic between the U.S.
where they are seeing reasonable growth versus Europe. What do you do?
FILLION: Well, three things. My investor clients are still looking for yield, and actually because of the network we have there, we can provide
some attractive opportunities in the Eurozone and the 72 countries we have presence in.
My issuer clients actually are very concerned about benefiting from optimizing their cost of funding, by the way, raising capital in euro
because of the low interest rate there. Over the last year, we've actually led -- BNP Paribas -- over 50 percent of the euro funding of U.S.
multinationals, and it's an opportunity for them.
[15:05:06]
FILLION: The third thing that my clients are looking for, to be candid as well, is sustainability. It's all around, because it's become one of the
major risk assessment of any business model and Europe is important for them as well.
QUEST: Okay, but Europe just seems to have this sluggish growth. I was saying to you just moments ago. It never enjoyed the best of the growth
post the recession, the great recession, and now look at this number, a tenth of a percent, a seven-year low.
FILLION: I think part of it is structural, as you said, but just to compare metrics as well, I see in Europe interesting consumer spending, a
little bit like what we've seen here. Over the last two years, it has been slower in this quarter.
I'm seeing as well, actually, Europe is a region of savings. There are more savings there. It's less leveraged in the U.S. economy. And you know what?
Over the last few weeks, given my position as U.S. CEO, I've seen actually outflows of U.S. equities into Europe more like because I think not to
contradict what you say with the standards, but more like because there is a sense investors see some upside there.
QUEST: Upside from a low base. Let's talk though about coronavirus. How risky is this? Obviously not for the people involved though, it is very
risky.
But the Prime Minister of Singapore, you would have woken up to and seen overnight warns he potential of a recession there. Other countries, we know
are heading to recession.
FILLION: You are right to say this first and foremost. It's a humanitarian situation and the life of people is critical, but it has no question, it
has an impact on business, on business dynamic. It will have an impact on course, it has an impact on trade already. Right?
And I think most importantly, there is a significant impact on supply chain. We don't measure it yet. But it's definitely -- one of these, you
know, new dimension systemic epidemic unpredictable that is probably changing the world in a dimension, you and I cannot really contemplate at
least medium term.
QUEST: If we look at BNP Paribas now and the way in which the bank has pulled itself back, licked its wounds and moves on, where is its strength
now in the United States?
FILLION: We here -- you know, as a U.S. bank owned by a European firm in the United States, you have to be targeted, but to have to have critical
mass. The banks here is where the U.S. bank was a diversified business model, retail, wholesale, you know, the bank really well. It's a $6 billion
revenue platform.
We have 14,000 people in the United States.
QUEST: Fourteen thousand?
FILLION: Fourteen thousand people and this is an important driver of the book's growth.
QUEST: Good to have you with us, sir.
FILLION: Thank you for having me.
QUEST: Thank you for coming in today and on an appropriate day when we've got these numbers for you. I appreciate it. Thank you. Have a good weekend.
Now, let's stay with business as usual and the dreadful week -- truly dreadful -- for the Nissan-Renault-Mitsubishi Alliance, which got worse.
Renault revealed it had its worst financial performance in a decade last year. Net profit dropped 99 percent, I don't know how you can drop 99
percent. I mean, why don't you just round it up and say you make no money at all?
The company made $21 million, but at the same time, it earned $3.8 billion, which raises the question what's gone wrong? It is a fallout so fresh in
the ouster of the alliance's chief architect, Carlos Ghosn.
Now, last month in Beirut, after his dramatic escape from Japan, he placed the blame on the new management.
(BEGIN VIDEO CLIP)
CARLOS GHOSN, FORMER NISSAN CEO: Yes, the alliance is not doing well. It's not because I am indispensable, I think, but I think the methods which are
being used today in the alliance are absolutely not efficient. And that's what worries me.
(END VIDEO CLIP)
QUEST: Now, it comes after Nissan reported 93 percent profit plunge. Think about it. So Renault is down, and Nissan, first of all; now, Renault down
99 and it's sluggish around the world as the tensions between the companies have never been more strained in this alliance. And coronavirus promises to
make things even worse.
So in total, there are 122 manufacturers -- this is across the alliance. The Renault-Nissan-Mitsubishi Alliance, 122 plants across 35 countries. You
can see the spread. This is truly global. A half a million jobs selling 10 million cars.
Now this is one in every ten to nine cars worldwide comes from the alliance. The range of this is extraordinary. But with all of this, it
can't seemingly get it right.
The man to answer this, now, I saw a wry smile there with you. Why can't they get it right?
PETER VALDES-DAPENA, CNN BUSINESS SENIOR AUTO WRITER: Well, I mean, you pointed to one thing, look at the leadership right now. This is a company
that is -- the leadership is in turmoil. Turnover at Nissan. Turnover at Renault. Just since Carlos Ghosn was taken away. And the industry as a
whole is going through an enormously challenging time right now.
These companies are going through an enormously challenging time without consistent leadership. That can't be good.
[15:10:13]
QUEST: So whenever we talk about this, I don't think it's good to establish -- are any of the companies involved: Renault, Nissan, Mitsubishi
-- or any of them at danger of disappearing?
VALDES-DAPENA: I don't think that at this point. I don't think we're really seeing that at this point. Things don't look good. Profits are way
down. There's a lot of challenges.
But I think they need to get on track and get leadership in place and get on track as soon as possible.
QUEST: But there's no evidence of that.
VALDES-DAPENA: I don't think so.
QUEST: I mean, Carlos Ghosn basically said -- well, he said, you can't run this alliance by consensus. You don't have to be a dictator. But if you're
going to try and get everybody on the same page always, you will fail. And that seems to be true.
VALDES-DAPENA: Right. But you need to have somebody in charge or at least some kind of an agreement of who is in charge where.
What they are doing right now is they're looking at something called a lead follow where they have agreed -- the different companies, Nissan, in one
case, Mitsubishi in another, Renault in another, will be in charge of separate projects, and try to keep everybody playing nicely that way.
QUEST: And Ghosn says that won't work.
VALDES-DAPENA: Right. And he may be right, we're going to have to see. Can you run -- because the idea originally was an alliance, two companies --
two were working together but with someone in charge.
QUEST: But Ghosn was trying to drive it much, too much closer. Good to see you. We'll talk more about it. Thank you very much, sir.
VALDES-DAPENA: Thank you.
QUEST: Thank you. Manchester City have been banned from the Champions League. Banned, I said for two years.
They have been suspended for not keeping to UEFA's Financial Fair Play Rules. They are also being fined $32 million. The club say they will
appeal.
World Sport Patrick Snell is with me. What did they do? For those of us that hadn't followed this, what did they actually do wrong?
PATRICK SNELL, CNN WORLD SPORT: Richard, this is a huge story for European football -- for global football as well. Manchester City, of course, one of
the world's biggest names there. They are largely backed by their Abu Dhabi based ownership as well.
And to answer your question, I'll get straight to the crux of it. This dates back to late 2018. I want to tell you what UEFA is, that's a European
governing body, UEFA is saying for the European game of football.
They're saying that the club committed -- here we go, Richard -- serious breaches of the UEFA Club Licensing and Financial Fair Play Regulations by
overstating its sponsorship revenue in its accounts and in the breakeven information submitted to UEFA for between 2012 and 2016.
So that's in it there in a nutshell. What is City saying in response? It is important we reflect that. Let's get to that because they are the reigning
Premier League champions as well and European football elite will be watching this one very closely indeed.
Man City is saying that they're disappointed, but not surprised by the announcement while adding with reference to UEFA's chief investigator, "The
subsequent flawed and consistently leaked UEFA process he oversaw has meant there was little doubt in the result that he would deliver. The Club has
formally complained to the UEFA disciplinary body, a complaint which was validated by a CAS ruling."
And here's something else, Richard, if I may. The statement going from City. "This is a case initiated by UEFA, prosecuted by UEFA and judged by
UEFA as well."
Huge story.
QUEST: All right, but, reading that statement from UEFA Club Licensing and Financial Fair Play Regulations by overstating its sponsorship revenue in
its accounts and in the breakeven information -- what is the significance of that?
I mean, I can understand the financial regulator of a listed companies saying you've overstated the sponsorship revenue, but what's the connection
in terms of a football club? What does -- by overstating -- assuming they did, what did it allow them to do?
SNELL: Well, it all comes down to balancing books, doesn't it? You look at the revenue that comes from the lucrative deals attached to the flagship
competition, the European Champions League TV rights, sponsorship deals there. Richard, you're talking of hundreds of millions of dollars and City
could well be without that for the next two seasons if this is upheld.
I do want to make a point though, that for this current season, they will stay in the tournament. Of course, they are going to be appealing. They are
taking this to the Court of Arbitration for Sport.
But to answer your question, it all comes down to this. What exactly is Financial Fair Play when it relates to the beautiful game of football? In a
nutshell, in its most simplistic form, clubs can't be spending more than they're earning, more than they're bringing in Financial Fair Play, hence
those key words.
Other questions to address tonight? What about Manchester City in terms of keeping their massive star players? Will they want to stick around their
club that isn't in the Champions League?
And the biggest question of all tonight Richard, Pep Guardiola, one of world football's truly elite manages currently at Manchester City, will he
stay there beyond? Because this is a man obsessed, Richard, with winning that tournament?
QUEST: Well, lots of questions and the one good thing about it is you will be around to help us answer them in the days, weeks and months ahead as the
appeal process goes in. Patrick, much appreciate it. Thank you
[15:15:10]
QUEST: Now, the really big debate amongst frequent fliers today, wherever you are, anyone who travels for leisure or business is sparked by a viral
video tonight.
So when is it okay to recline your plane seat in economy? Now, get out your phones and go to cnn.com/join. You can see the options on your screen. When
is it okay? The choice is well, it's never okay. It's okay if you've asked permission. It's okay during the meal. Take your choices, and we'll have
the answers after the break.
(COMMERCIAL BREAK)
QUEST: After the dramatic spike in the coronavirus that we've seen this week particularly on Thursday, now China officials are reporting lower
counts with more than 120 new deaths and more than 5,000 new cases confirmed in China.
The totals are 64,000 people are confirmed to have it. China also says more than 1,700 medical workers have been infected. Of those, tragically six
have died.
Factory shutdowns in China are affecting the wedding industry here in the U.S. and worldwide frankly. The coronavirus is choking international supply
lines for garment manufacturers and makers.
CNN's Clare Sebastian is visiting a company in New Jersey that relies on China to turn a profit and frankly surprised that the lineage and linkage
can be made so positively and directly between companies in China and wedding dresses in New Jersey.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, Richard, the apparel industry is really vulnerable. Forty two percent of all clothing sold in
the U.S. comes from China. It is right in the firing line.
For a business like this, you can see this factory is full of dresses. There's prom dresses. These are mother of the bride dresses. They also sell
wedding dresses. Ninety percent of the products here comes from China and they are facing serious disruption.
The Lunar New Year was extended this week. Their factories have been really struggling to get back to work. They say half of them have come back
online, but they're still waiting for their workers to return. They're still waiting for the factories to be cleaned and disinfected, and other
things like that. And that's something, Richard, you and I have been discussing throughout the week. We've been hearing across the board things
are very slowly creeping back to life in China.
[15:20:02]
SEBASTIAN: They're still facing problems with logistics and freight and cargo. It goes through the supply chain. And this is why a business like
this is having to tell customers that they might face delays. So I think we're starting to see that things could eventually trickle down to the
consumer.
QUEST: If that happens, I mean, the sort of -- I mean, weddings will continue to take place and problems will happen, although they may not have
dresses from the from the manufacturer or the supplier that you've got.
What plans are they putting in place to help alleviate that? How can they source their stuff elsewhere, if they can?
SEBASTIAN: Well, they have actually, Richard, started to diversify the business. I think we should bring in the CEO of the company over here,
Steve Lang right by this rather lovely wedding dress to tell us more about that.
Steve, tell us, if these supply chains take a little time to get up and running. What are your plans? What are your contingency plans here?
STEVE LANG, CEO, MON CHERI BRIDALS: Of our 45 factories, half are back online, the other half are waiting for them to get their workers back.
But of course, a lot of the fabric mills are closed. And a lot of people even who make outside of China in our industry started to happen a couple
of years ago and we too started to diversify. A lot of our materials still come from China.
So it's kind of a waiting game to try and figure out what's happening right now. But we have started to diversify. We're in Vietnam. We're in Myanmar.
And we're in India. As a matter in fact, our main India factory is here today.
So we are lucky that in this warehouse, we should have 50,000 units. Right now we have 35,000. And the other distribution centers around the globe
probably have at least another 35,000 units.
So that's 70,000 units. It is really about two months' supply. So we're in a situation where we are getting shipments. They are coming in slowly. But
it's a waiting game for us and, you know, the entire country and people who are involved in apparel as well as technical goods.
SEBASTIAN: So a huge amount of uncertainty. I want to ask you about another element of uncertainty over your business and that's tariffs.
We have the Phase 1 trade deal kicking in today, tariffs on apparel are coming down from 15 percent to 7.5 percent. Tell us, say on a dress like
this, what kind of numbers are you seeing in terms of tariffs? How does this affect you?
LANG: On clothing, and again, you're right that 42 percent of all duties are paid by the apparel industry. So our normal duty rate before the
tariffs went in was 16 percent, so now we're ahead. We were hit with 15, plus the 31, so now the 15 is has been cut to seven and a half.
But again, a lot of the merchandise we've been bringing in since September, we have paid that high a rate. It cost us millions of dollars that might
came out of cash flow. Luckily, we're a financially strong company. We've passed a little bit of it along to the consumer, but for every hundred
dollars of goods we bring in, we were paying 31 cents, which is more and we couldn't pass all that along to our customers.
So we ate two thirds of it, but it's a big hurt. And again, those duties are being paid by us the Americans. They are being paid by the foreign
countries as opposed to what you hear in the news. We're paying those duties and you know, it some ways comes out of our food, you know, our good
to eat as well as our customer, so it's painful.
SEBASTIAN: So this dress that you were at 31 cents on the dollar, you are now down to 23 and a half cents, Richard, even when these products do stop
being imported, again, there's a double layer of uncertainty over an industry like this.
You've got coronavirus, you've got tariffs, but this business says as you've heard, they are strong enough to weather this.
QUEST: The interesting thing there, Clare, is this is the real life economy. Thank you for showing us that. Much appreciated. Thank you very
much.
Stocks on Wall Street are extending their losses. There are 30 minutes left to trade. If you take a look, down a hundred points, just about almost the
worst day. Not quite.
And as Clare was showing us in real life, some U.S. tariffs on China are being clawed back as part of the Phase 1 deal.
When you see those wedding and prom dresses in New Jersey, the whole thing becomes very real and not just the thing that you see on television.
Now, just as things start to be ramping down on the trade front, the White House's fight with Beijing over Huawei is reaching a fever pitch. Huawei is
now pushing back against new charges from the U.S. of racketeering and conspiracy to steal trade secrets.
The company is calling it political persecution to damage Huawei's competitive edge in the global market.
Nick Paton Walsh is at the International Security Conference in Munich. Fascinating, Nick because one wouldn't normally see -- I mean, the sort of
meat and veggies for your conference there is missiles and attacks and geopolitical issues, not the economics of 5G.
NICK PATON WALSH, CNN INTERNATIONAL SECURITY EDITOR: Well, certainly, but also remember, Richard you know, the new front line, frankly in global
warfare is cyber where a nation state can do damage on another nation state, but not necessarily be called out for it in the usual conventional
kind of way.
What we heard today from senior U.S. officials here from the Department of Justice and Department of State was their consistent message, frankly,
trying to embellish I think what we heard last night from that wide ranging indictment accusing Huawei, frankly of anything under the sun from
racketeering, to try and stealing intellectual property, theft, even the suggestion they've been involved in repressing the people of Iran, and
North Korea in the last decade or so.
[15:25:25]
PATON WALSH: It was an embellishment of that message, pointing out these U.S. officials that, you know, this 5G technology can be introduced to
systems and then suddenly software can be updated, leaving it vulnerable potentially, to what they say is the Chinese government's interest in
Huawei and getting in to people's private data and secrets.
But as you point out, too, you know, we've had at the same time, Huawei said, this is all about a U.S. bid to irreparably damage their image.
The Americans have said, look, it's up to Huawei to prove that they're innocent. Huawei said, where is your evidence?
This back and forth continuing and a lot of it here about trying to convince European allies of the United States that are still kind of on the
fence almost about whether Huawei should be part of their 5G world, not including the U.K. who said it will be partially that they should be
sticking with the U.S. idea here.
But it's a very complex argument to make. Richard.
QUEST: Thank you. Nick Paton Walsh who is in Munich. Thank you. Now, the coronavirus is hanging over the fashion industry's biggest events.
This week, the organizers of Shanghai Fashion Week announced it had to be canceled. Not surprisingly, in London and New York Fashion weeks -- Fashion
Week events are going ahead with extra health precautions taking place.
Designing duo Mark Badgley, James Mischka are the co-founders of the fashion label, Badgley Mischka, and they join me now.
Gentlemen, just how difficult is this for you? I know precautions are being taken. But how difficult is it for this week -- this Fashion Week.
JAMES MISCHKA, CO-FOUNDER, BADGLEY MISCHKA: It has made Fashion Week very interesting this season. It's been a lot of different things going on.
The coronavirus has definitely impacted our supply chain, mostly our manufacturing -- our samples all got out way before Chinese New Year
happened and then coronavirus sort of hit our factories, not technically hit them, but has hit the area right after Chinese New Year happened.
So instead of going back on that 10th, our factories are reopening on the 20th.
QUEST: So what you do in that situation?
MARK BADGLEY, CO-FOUNDER, BADGLEY MISCHKA: The big question is when did the factories reopen? All of our stores are waiting for their goods. Of
course, we're all in the same --
MISCHKA: All manufacturers are.
BADGLEY: You know, in the same situation. They're being very patient but it's a very scary time.
QUEST: But the stuff -- I mean, I suppose there's no point in showing stuff on the catwalk if you can't then sell it subsequently. I mean, you
can make the one for the catwalk, by hand, yourselves and you do, but it's making it at scale.
BADGLEY: Sure. It's making the production that's the big question, and how quickly can we can we answer the buyers orders?
QUEST: We always think about fashion and the beauty. We're looking at the pictures and all of it, but at the end of the day, it's manufacturing like
anything else, isn't it? It requires a factory. It requires a supply chain. It requires product.
BADGLEY: It really does. People think fashion is nothing but glamour and it's certainly glamorous. There's -- five percent of it is glamorous, 95
percent of that is everything you just mentioned.
QUEST: What are you going to do?
MISCHKA: We're hoping our factories will reopen on the 20th. They will have to ramp up in what ordinarily would takes five days to get going, they
have to do in one day because we can't lose those 10 days of manufacturing.
QUEST: Where are the factories? All over or are they just primarily in that north -- in that central Wuhan district?
BADGLEY: They're all over.
MISCHKA: No, they're not -- our factories are nowhere near Wuhan.
QUEST: Oh, good.
MISCHKA: Yes. So we're -- that's a very fortunate thing for us. Ours are clustered around Shenzhen and that kind of area in China.
BADGLEY: Some of our fabric mills are centered around Wuhan.
MISCHKA: Fabric mills are around Wuhan.
QUEST: Why is -- is it a question of price? Is it a question of manufacturing cost that China has cornered this because many, many people
are now saying look towards other parts of ASEAN: Cambodia, Vietnam, other parts -- this manufacturing chain -- I'm sure you've looked at that, but
yours --
BADGLEY: It's not just price. They have the skill level now. They're expensive now. They are sort of like we used to be. They are a luxury
manufacturer now.
MISCHKA: China has become like a luxury manufacturing now.
BADGLEY: It's like manufacturing in Hong Kong or New York, but their skill level is exceptionally good.
QUEST: Really? So the old days when you and I were growing up, Made in China was the watchword for cheap and cheerful.
BADGLEY: Not anymore.
QUEST: Really?
BADGLEY: Yes, all the high-end designers have moved sample rooms there. They'll manufacture a high percentage of the garment, maybe finish it off
in their countries for nature of origin, but it's -- their work is exquisitely beautiful.
QUEST: So, very funny, the length of this could go on. I mean, you're ready. You've got a plan. You're hoping for the best. You're preparing for
the worst.
MISCHKA: Absolutely, we're preparing for the worst. We have been off sourcing, outsourcing our manufacturing. We do have factories standing by
in Vietnam. We have a factory standing by in New York City if we need to use them as well.
QUEST: So the next time you come, we can discuss what's the latest in pinstripes?
BADGLEY: That sounds good.
MISCHKA: Pinstripes and sequins. That'll be the fun part.
QUEST: Let's leave the pinstripes.
[15:30:10]
QUEST: Let's leave the pinstripes --
MISCHKA: Good seeing you --
QUEST: I challenge you for next year, something appropriate for pinstripes and sequence.
MARK BADGLEY, CO-FOUNDER, BADGLEY MISCHKA: Consider it done.
QUEST: Because -- thank you very much. Now --
MISCHKA: Thank you.
QUEST: As you and I continue tonight, the former lawyer for the porn star, pinstripes sequence and porn stars -- now his -- the former lawyer has been
found guilty. Michael Avenatti who you see there, extorting Nike. We'll tell you about the latest legal troubles for Avenatti. It's QUEST MEANS
BUSINESS, we're live in New York.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest, there's a lot more QUEST MEANS BUSINESS in just a moment. As we move forward, this is CNN, and on this network, the
facts always come first. A team from the World Health Organization is heading to China this weekend, focusing on how to keep the coronavirus from
spreading, when 64,000 infections are now reported globally and 1,400 deaths so far.
China is struggling to get its economy moving again after weeks of lockdowns, business closings and canceled international flights. U.S.
officials say the Attorney General is ordering a re-examination of several high profile cases including that of Donald Trump's former National
Security adviser, Michael Flynn. You'll recall Flynn pleaded guilty to lying to the FBI by the conversation with the Russian ambassador.
A review could potentially be a victory for Flynn and his legal team, and also brings new scrutiny of political motives behind actions of the Justice
Department. United States and the Afghan Taliban have reached a deal to reduce violence over a seven-day period. That's what according to a senior
Trump administration official at the Munich Security Conference.
The official says the deal could lead to the withdrawal of U.S. troops from Afghanistan. The Syrian government says Turkish-backed forces shot down one
of its military helicopters on Friday and killed the entire crew. The opposition Syrian National Army has taken responsibility.
[15:35:00]
It's the second time a Syrian helicopter has being shot down in the Idlib region in the week. Prince Harry and Meghan Markle are cutting more ties
with the royal family as they prepare for their new live in North America. They're closing their office at Buckingham Palace, this comes in a little
more than a month since their bombshell announcement, and they're stepping back from royals as senior members of the royal family.
News in the last hour, a federal court in New York has found lawyer Michael Avenatti guilty of extortion. He's accused of demanding millions of dollars
from Nike, Avenatti became known for representing Stormy Daniels in the early election against Donald Trump. Polo Sandoval is here. So what
happened in court today?
POLO SANDOVAL, CNN CORRESPONDENT: This is the described, Richard, from the very beginning as an old fashion shake-down. Prosecutors here in lower
Manhattan have been making a case based on two things here, extortion and betrayal. Let's explore both of those cases here that were presented over
about three-week long trial. You had the extortion component here, where according to prosecutors, he threatened Nike with holding a press
conference and claiming that they were illegally paying members of a youth basketball team.
And then the betrayal portion aspect or at least the aspect, this comes from -- what federal prosecutors are saying that he did not include his
client who was one of the coaches in California at the time of this youth basketball team in those dealings. So, those are the two elements and then,
it ended with a conviction, guilty at extortion, wire fraud -- folks in the courtroom said that before that verdict was read out loud about an hour
ago, he simply did the sign of the cross and then faced that verdict. Who knows when how actually we sentence him?
QUEST: Right, but one imagines with extortion and wire fraud of this case, he's looking at -- and particularly bearing in mind, he's a lawyer, so,
you've got a breach of trust in the sense there. We're looking at a term of imprisonment, incarceration.
SANDOVAL: And early on, he faced being disbarred, and then that was one of the consequences of these legal proceedings. Now, it's important to point
out here, Richard, that his troubles are far from over, not only does he have this conviction now, but also he still has two more pending trials.
One of them for allegedly stealing Stormy Daniels' book in advance.
And then the second one, for frauding California, but he's been in custody since December when the judge found that he violated the terms of his --
of his probation or of his conviction of release, so they ordered him behind bars.
QUEST: Bearing in mind, this is the man who put together the deals for Stormy Daniels and the photographs and the story about Donald Trump. Is
there an allegation here that the federal prosecutors have gone against him at the whim of Trump to try and get rid of somebody who is done Trump down?
SANDOVAL: Well, it certainly would be something to consider down the road at this point. But I think that what we have seen in this particular trial,
the one last -- that's been -- that had been ongoing for the last few weeks is they were really focusing on these -- on recordings for example. They
had evidence that was mounted against Avenatti.
QUEST: Right, but they might --
SANDOVAL: And that was what was put to use --
QUEST: But they might never have started any of this, they might never have looked into him. They might never have been a person of interest if he
hadn't been the person that led to the allegations against Donald Trump and Stormy Daniels.
SANDOVAL: Yes, ultimately, that's what put him in the spotlight --
QUEST: Yes --
SANDOVAL: And that's one of the reasons why prosecutors took a hard look at his dealings, what he was doing in California, and also what he's been
potentially doing in these two other cases that are still outstanding.
QUEST: Any word from Donald Trump?
SANDOVAL: Not at this point, he has not sounded out, his family certainly has. They've been quite vocal, of course, they've been very -- they've been
very vocal critics of Avenatti, and the moment that these verdicts came down, including one of his sons took to Twitter right away to basically
call him out for this.
QUEST: Good to see you, sir --
SANDOVAL: Yes sir --
QUEST: Much appreciate it, thank you very much.
SANDOVAL: Thanks, Richard.
QUEST: Now Expedia earnings defied expectation as the chairman's comments about his company's corporate culture that really got investors talking. In
a moment.
(COMMERCIAL BREAK)
[15:40:00]
QUEST: OK, we've all used Expedia, the travel company at some point, and the share are up more than 11 percent today. Now this is despite the fact
that they beat expectations with its earnings after the bell on Thursday. And it says it won't release guidance for this year because it's uncertain
about coronavirus. But it's 11 percent even though -- even though the Chairman Barry Diller excoriated his staff. Explain.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, Barry Diller who now has 29 percent voting power at Expedia, he really had strong words about the
corporate culture. And he said, I quote, this is during the conference call, "I've heard that at Amazon, it was all work and no life, and then
Expedia was all life and no work." Now, that's an enormous exaggeration. We've got wonderful people in the business, this is not damming our
employees, but for several years, we really lost clarity and discipline.
QUEST: What does he mean by that?
LA MONICA: I think that he feels that this is a company that may have lost its way in a world where Google owner Alphabet obviously wields much more
power over the travel agency business right now. You have a stiff competitor in booking.com, the form of price line. And then Expedia also
owns the VRBO unit for rentals that in some respects has been eclipsed by the phenomenon that is Airbnb.
So, I think there's this notion that they just need to be more focused and really, you know, just get down to business because they have tough
competitors.
QUEST: You see, I just booked -- finished, I just booked a ticket with Expedia because it was the cheapest option from where I was going. But I
don't naturally now go to Expedia, you know, one looks at Kayak or Google flights or all the others. So he's got his work cut out, I mean, to put
Expedia back at the heart of people's travel experience.
LA MONICA: Yes, I think he definitely does because Google is as you pointed out, really, that is probably the first destination so to speak for
many people when they are thinking about travel now. And there was another quote where he talked about how this is a company that we are a bloated
globalization, he talked about how they added so much complexity over the past couple of years, and to the point where he said it again, in his
words, very few people could figure out what the hell they were supposed to do during the day.
QUEST: Now, Barry Diller controversial in the sense of movie mogul, record industry kind of a -- but he got into this, and now he's having to run it
with his partner having fired the CEO and CFO.
LA MONICA: Yes, they forced out executives last year because Expedia, he has this huge ownership position where he has the majority -- almost
majority of the voting shares, and he's obviously not happy with how they had been run. So, this is a guy who throughout his history, he had so many
other businesses that he has his hands in between IAC and you know, other businesses that IAC controls like Match which they've recently spun off.
Diller usually has a hands-off approach if he has managers that he trust, clearly, he doesn't feel that, that is the case at Expedia and he now is
going to take on a more hands-on approach.
QUEST: But the market likes it, good to see you.
LA MONICA: Thank you sir.
QUEST: Have a good weekend, sir --
LA MONICA: You too as well.
[15:45:00]
QUEST: As we continue tonight, the viral video that sparked a huge debate -- OK, it's very simple. To recline or not to recline? Cnn.com-slash-join,
we're asking you, when it is OK to recline your seat? Is it fine any time, never, tit-for-tat if the one in front or only if you ask? Cnn.com-slash-
join, and join, please.
(COMMERCIAL BREAK)
QUEST: Welcome onboard, Q-Air, to recline or not to recline? It is a -- it is a question that is prompting fierce debate on social media. And it's all
because of the viral video of a man punching the back of a woman's seat in economy. She and her -- says she plans to go to the FBI and press charges
against the offending passenger.
(BEGIN VIDEOTAPE)
QUEST (voice-over): When Wendy Williams reclined her seat on an American Airlines flight, she had little idea of the trouble that was in store. She
says, she was flying back from a teachers convention when the man sitting behind her asked if she would return her seat forward while he ate his
meal. Williams said she did, and that she reclined it again only when he was finished eating.
But William says the man started punching her seat repeatedly as the video shows. CNN is not able to reach the man in the viral video for comment. To
recline or not to recline is not the first time the issues had been brought up in the close quarters of economy. In 2014, a United Airlines flight was
forced to divert when two passengers got into an altercation over a gadget called the Knee Defender.
The tool was invented by Ira Goldman in 2003. The idea is to block the seat in front of you from reclining. Goldman told me, it's all about passenger's
consent.
IRA GOLDMAN, CREATOR, KNEE DEFENDER: If I buy an economy ticket and it's this much space, that's the space I get. But I don't agree when I get on an
airplane to saying, sure, come and whack me on the knees.
QUEST: And so the traveling world is once again roiled by the question of reclining seats in economy. And just what is the right thing to do? As
airlines cramp in more seats to fit more passengers, they're going to have to reckon with the consequences of their design.
(END VIDEOTAPE)
[15:50:00]
Now, go to cnn.com-slash-join where we are asking you whether it is OK to recline your seat? Is it fine any time, never, tit-for-tat, or only if you
ask? Get out your phones and go to cnn.com-slash-join to vote. New Yorkers are never short of an opinion. This is what they think.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I think it depends on the length of the journey, but I think they should be reclining for longer journeys.
UNIDENTIFIED MALE: Just recline and deal with it. Book a better seat if they don't want someone reclining on them.
UNIDENTIFIED FEMALE: It depends on the time of the travel in a way, but traveling -- think that is still, you need to be -- I mean, comfortable.
UNIDENTIFIED FEMALE: The airlines are reducing the amount of room they have, and as such you need to recline some times -- which is a courtesy for
people, so --
UNIDENTIFIED MALE: Airline etiquette will be welcome.
(END VIDEO CLIP)
QUEST: Some airline etiquette exactly the issue. Zach Honig is here to talk about the editor-at-large at "The Points Guy". Good to see you.
ZACH HONIG, EDITOR-AT-LARGE, THE POINTS GUY: Good to see you, Richard --
QUEST: All right --
HONIG: Thanks for having me.
QUEST: When -- what do you make of the video that you've seen?
HONIG: I would say I've seen it several, many times now. And it is disturbing to watch. I mean, it's really upsetting. You know, I can
envision myself in both of those positions, I've been seated behind someone who's reclined, it's especially challenging when you're trying to work on a
laptop or you know, enjoying a meal. But you know, I --
QUEST: But the thing that gets me about it is, she did after requesting, come forward while he ate --
HONIG: Absolutely --
QUEST: And then went back afterwards. But what should she have done?
HONIG: Well, I mean, I think that because he responded so heavily at first, I would have just stayed forward, you know, move the seat all the
way back up and stay in that position. Obviously, he was really irritated, maybe he was having a bad day, but definitely, you know, he responded.
QUEST: And yet, there's this view, look, I've paid for this seat. This seat reclines by all of three inches. It's my right to recline.
HONIG: Yes, you know, absolutely. I mean, I have been in both positions. It's -- you know, I certainly wouldn't have responded the way that he was.
And that was what was really upsetting about that video. It's just -- you know, he should have said politely perhaps, you know, would you mind
raising your seat up.
And if she hadn't, then I would have just sat patiently. I mean, it's a short flight, he was flying from New Orleans to Charlotte, can't be more
than an hour and a half.
QUEST: It was pretty horrific. What is the etiquette? So, let's forget this -- what is, you're the editor-at-large, you are the guru on travel.
HONIG: Yes --
QUEST: So, what is the etiquette for when you recline your seat?
HONIG: So, I will usually look behind me before I recline. So --
QUEST: Right --
HONIG: We happen to have this amazing prop right here.
QUEST: Right --
HONIG: All right, so, you're seated behind me, I want to take a look --
QUEST: Yes --
HONIG: You're a pretty tall guy, and so, I would see you're really close, and you know, I might say, Richard, would you mind if I recline my seat a
little bit? OK, all right, I'm going to stay upright for sure.
QUEST: But you would ask.
HONIG: I would absolutely ask, you know, at the very least, I would take a look back, and I've done this many times. And if someone is seated back
there, they're working on their laptop, they're enjoying a meal, you know, I'm going to be less inclined to recline.
QUEST: You see, I sort of do -- I sort of do what you do, and I sort of have a look, and then I'll catch their eye, and I might just sort of do a
ginger-test --
HONIG: Yes --
QUEST: I'll do --
HONIG: Oh, yes --
QUEST: Just a little --
HONIG: Just about an inch --
QUEST: Yes --
HONIG: Perhaps, yes --
QUEST: And let's say a wings(ph) --
HONIG: Yes --
QUEST: Then you know, you've pushed it too far.
HONIG: Yes.
QUEST: The airlines are an average cabin now. Trans-Atlantic has business which is really more like first these days. Premium economy, the U.S.
carriers have this strange beast which is only known in the U.S. --
HONIG: This extra-leg room problem --
QUEST: This extra-leg room problem --
HONIG: Yes, exactly --
QUEST: Which is not known elsewhere. And then you have real chickens at the back.
HONIG: Yes, I know, and so what I'll actually do is I fly United frequently, and I choose row 21, and the reason for that is because row 20
in front is the emergency exit row seat, the seats in row 20 cannot recline. And so I actually won't have anyone -- there's no option to
recline.
QUEST: Yes, the problem with me is, I intend to go for row 21, and I end up by accident choosing row 20, which is the seat that doesn't recline.
HONIG: That happens all the time --
QUEST: Or there's another emergency exit, the one that does. You've got to be very careful, do you -- do you -- do you have seats that you prefer?
HONIG: Yes, certainly. I mean, this particular aircraft they were flying on is the Embraer 175, and so, it's a regional jet, but the seats are a
little over 18 inches wide. And so, you know, it's more spacious that what you'd find on most short-haul flights.
QUEST: Planes are more full than we've seen them of late. Capacity is down, load factor is up. Is there an inevitability to these sorts of
disputes?
HONIG: You know, I mean, it certainly haven't. I've witnessed it myself. Nothing this violent, and you know, what he did was, you know, appalling
and really, you know, difficult to watch. But --
QUEST: Right --
HONIG: It's certainly not the way I would behave.
QUEST: I should hope, not that you would be off this aircraft, continue using -- all right, so let's just update you as the last few minutes. The
megaphone question, any time, 45 percent of you say, any time it's OK to recline your seat.
[15:55:00]
Never is 26 percent or 27 percent, it looks like to me. Tit-for-tat is 9 percent, and only if you ask is just in the 20s. Good to see you, sir --
HONIG: Thanks for having me.
QUEST: Excuse me, I'm getting off here, this is my place, you keep the seatbelt fast --
HONIG: All right --
QUEST: Trade table and lift right, and scold position. The markets, we pull back very slightly, there we go, just down 33, look at the Dow, even
Stevens overall. Visas are the top, IBM -- that's a big fall for IBM, down 2.37. Everyone else, much of a much less. But let's keep it in perspective,
it's a flat Friday after a good week on a difficult market. We will have a profitable moment after the break. I've left something on board the plane.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, of course, from the airplane seats. It's pretty grim flying. That doesn't really matter where you are in the
plane, I want to be sure at the front it's more comfortable, better food, more space. But even so, you're still in a metal tube for many hours with
complete strangers, some of whom have disgusting habit like swiping the video screen with their feet or at least walking around with odorous sighs.
Which requires us all to be -- remember, yes, it's my right to recline, but it's my responsibility not to be rude to you behind. It's my right to use
both armrests, but it's my responsibility to remember that there's a passenger here. One of the things I've never met is people who never say
hello to you. Just think, you get on a plane, that you're going to sit next to somebody for 8, 9, 10 hours, and you don't even say hello. That's weird.
I really sort of freak them out. I sit down, and say hello, how are you this evening? And immediately think, oh, no, we've got a talker, he's going
to talk all the way to Bombay! But no, you know what I mean. My call tonight is really simple. When you get on a plane -- and I am going to
London tonight, if you see me on my travel, just say hello. How are you? Did you have a good day? And then we can all go to sleep and have a good
flight.
And that's QUEST MEANS BUSINESS for today and for this week. I'm on my travels next week, Lagos, Nigeria and Seychelles. Whatever you're up to in
the week ahead, I know it will be profitable. Today is over! The Dow is down.
(BELL RINGING)
