Return to Transcripts main page
Quest Means Business
Dow Falls As Coronavirus Fears Grow; Elizabeth Warren Has Dropped Out Of U.S. Presidential Race; IATA Is Warning Global Airlines Could Lose As Much As $113 Billion. Aired 3-4p ET
Aired March 05, 2020 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:16]
RICHARD QUEST, CNN BUSINESS ANCHOR: Sixty minutes before the closing bell, and it's an ugly day on Wall Street.
You can see the market has been down, we're over a thousand points lower at one point. We are back basically 1,000 points off at the moment with 60
minutes ago.
The broader market across the range is also off three and a half percent for the Dow, three and a half percent for the S&P 500, three percent for
the NASDAQ.
The markets are deeply unhappy, and of course, you know the reasons why -- coronavirus.
Bond yields are at a record low as the wild swings on the stock market continues.
And airlines stocks are falling dramatically. You'll hear from the head of IATA tonight.
Carnival Cruises remains in crisis. Now, there is an outbreak aboard its Grand Princess ship. We will have the details. We'll talk about all of
these issues.
We are live tonight in the world's financial capital, New York City. It is Thursday. It's March the 5th. I'm Richard Quest, and I mean business.
Good evening. Tonight, the fall -- Wednesday's thousand point rise has been swiftly followed by a thousand point drop.
The Dow is close to the lows of the day. You can see it on the screen. The major U.S. indices are all back into correction and the chorus of companies
sounding the alarm over results is getting louder.
At the same time California has declared a state of emergency as the number of cases grows worldwide. You can see the evidence of worry, deepened
dismay. The U.S. 10-year bond has dipped to new record lows. It was below nine percent. It has rallied just a bit or two, but it's off seven and a
half percent. One of the most serious aspects or evidence of this issue.
Now on this program tonight, we are going to be covering the outbreak across the different economic barometers.
We're going to get them to you. We've put them into these various categories of markets, travel, the global economic situation, and the
health of course, the health industry, the health warnings, and what we need to be careful of.
As we go through over today and over the next few days, we will bring the details to you so you can very easily understand and see exactly how the
day is moving on.
Let's start with the markets, of course and the markets has been a case of volatility.
Yesterday up sharply, today down dramatically and we are off over 900 points, and it seems likely that we will stay that way.
The travel industry, the development today on the travel industry, IATA is warning that the outbreak may cost airlines as much as $113 billion, an
industry that was barely making money. You'll hear from IATA Director General in just a moment.
The economic front -- oil -- OPEC is producing to cut global oil production by one and a half million barrels a day. Now, the reason for that of
course, demand is non-existent. OPEC will cut a million, non-OPEC countries, i.e. Russia will cut the other half a million oil production.
Will it work?
And finally to the health. The latest development tonight. HSBC, Facebook and Amazon are closing parts of their offices and urging some employees to
work from home.
Alison Kosik is at the New York Stock Exchange. We are down a thousand. I'm trying to work out in this last crucial hour. What the mood --
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: The mood is what the mood has been for over a week now and that is fear and it is fear that is driving
this trade, Richard.
I mean, 1,000 seems to be the new one -- 1,000 seems to be the new 100, meaning, we used to see moves in the stock market a hundred or so points.
Now, we have to get used to seeing thousand point moves.
You know, and one trader telling me these wild moves, they're going to be the new norm, or at least until investors believe that government officials
have a handle on the coronavirus crisis because every day, these investors are getting the headlines just like you and me. More people are getting
tested, and we're hearing about more cases in different cities -- Richard.
QUEST: Alison, thank you for bringing us up-to-date and the overview of the market, setting the scene. It's been an extraordinary volatility week.
[15:05:04]
QUEST: Let's put this into perspective. Bearing in mind the numbers we're talking about. Monday, over the last day, down, down, down -- but by large
numbers, 1,100 points, 1,000 points, then you get a rise of 1,200 points, 1,300 points, and then another fall.
This is the scenario and what's driving stocks down, new coronavirus outbreaks and the negative impact on corporate results which -- and what of
course drives them up is political momentum. That was over here, of course, where we saw Joe Biden and the mixed effect of the Fed's interest rate cut.
It's an overarching scenario. Markets aren't a monolith. The Russell 2000 is the worst of the major U.S. indices, the industrial sector is down 14
percent. Transport down 20 percent and the energy is down 34 percent with energy shares falling with the oil price.
The significance of these areas is the vast swathes of industry that's involved. Moody's is warning when is starting to see the implications of
the virus outbreak on corporate sales and profits.
To talk about it all, William Foster is with me. Good to see you, sir. Vice President and lead U.S. analyst. Okay. When I say and now, it's getting
serious, you know what I mean? The graph I've just shown of losses and gains feels different.
WILLIAM FOSTER, LEAD U.S. ANALYST, MOODY'S INVESTORS SERVICE: It is tremendous swings and volatility and sentiment, right, like fear to
optimism. I mean, this is kind of reminiscent of what we saw during the global financial crisis in terms of the highs and lows on a daily basis.
But there's just so much uncertainty right now with regards to what the impact will be on the global economy on obviously sectorally, this is very
acute for the transport sector in particular. We heard from the airlines today.
So earnings are now starting to be threatened globally, and the U.S. economy is now under threat as well. We thought this was going to be
contained to China, it is spreading around the world and that has major implications for the valuation of stocks.
QUEST: And yet one -- I mean, this volatility is being driven, not by fundamentals, but by algorithms and computer trading.
FOSTER: That's certainly one of the things. You know, the market has changed very much in the last decade or so in terms of quantitative
trading, algorithmic trading. Absolutely, there are much fewer players in the market now, having much bigger sway on the movements so that that's
certainly part of the catalyst.
QUEST: A computer spots the trend or sees the movement and over hundreds of millions of transactions, they shift policies. They can be a seller one
second and a buyer 10 seconds later.
FOSTER: And that can accelerate the movements and that's what we're seeing.
QUEST: Okay, but what is the fundamentals telling you? If we actually looked because -- are we not at the position where the disruption to
economic activity is so -- is getting so great. It's pretty hard to avoid a recession.
FOSTER: It depends which economy you're talking about and what your expectations are in terms of containment. So the main thing now is if this
is a situation where the virus cannot be contained, that it spreads throughout the U.S., it spreads throughout other parts of the world beyond
what we see now, and people are no longer confident to go out into public spaces, to you know, for entertainment events, to travel as we're starting
to see that will weigh on consumption. And that's going to be much bigger than the global economy that results in a global recession.
QUEST: Right. But even in the U.S., are we on the cusp of that?
FOSTER: It's -- we're on the cusp -- I think we're on the cusp. Yes. But that's not our base case today. If the U.S. can contain the spread through
Q2, then, you know, we're not going to have a recession.
If it continues to permeate --
QUEST: But growth must -- I mean, what's your forecast for what the hit on growth is?
FOSTER: Our forecasts, we're revising our forecast down. For global growth it is --
QUEST: No, no, U.S. growth.
FOSTER: U.S. growth. We expect it to -- we had previously forecasted about 1.7 percent this year.
QUEST: Right.
FOSTER: Versus 2.3 last year. We think it's probably going to be closer to about 1.5 provided the virus can be contained by the end of the second
quarter.
If it's not, then we're talking about different scenario and that would be a recession situation.
QUEST: On a quarterly basis, for Q1 though, what's your feeling on that?
FOSTER: Well, we're almost done with the first quarter.
QUEST: Right.
FOSTER: So it's going to be, you know, close to one percent growth.
QUEST: On an annualized basis.
FOSTER: Yes, and so the bigger hit is certainly going to be on Q2 because they're going to have the full brunt of the virus implications in Q2.
QUEST: Just how precarious is the position? I think that's what viewers -- the dear viewer wishes to know tonight. I mean, we know it's uncertain. We
know the unknowns and we can't quantify them. Knowing all of that just how serious and how risky is the position?
[15:10:00]
FOSTER: Well, I think if you look at what the Federal Reserve did, you can get a sense. They're scared. Ultimately, that was a very atypical thing for
the Fed to cut by 50 basis points out of out their typical meetings -- out of cycle.
And the basis for that was that this situation has changed quite dramatically. The downside risk to the economy are much more significant
today, and it could result in a U.S. recession and a global recession. And so it's --
QUEST: I guess what we all want to know is that that word you used, it could result in -- how close we are to the could.
FOSTER: Well, this is why it's impossible to say, right? It's impossible -- quite impossible to say, but this is -- you know, I think what Chair Powell
emphasized in the statement was like, look, we can only do so much in terms of monetary policy.
It's really about the health policy and fiscal policy right now, because that actually contains and then demand can be stimulated.
QUEST: Thank you always for coming and helping make us understand or help us understand what's going on. I really appreciate it.
FOSTER: My pleasure.
QUEST: Now, what would you like to know about the coronavirus? Your questions at CNN.com and CNN's Anderson Cooper and Dr. Sanjay Gupta will
help to them tonight as our Global Town Hall on facts and fears about the coronavirus. It's Friday at 11:00 a.m. in Hong Kong, 10:00 a.m. Friday in
Berlin.
Elizabeth Warren has dropped out of the U.S. presidential race. The Massachusetts senator suffered a disappointing showing on Super Tuesday.
She earned a reputation as a Wall Street skult for proposing a wealth tax and Medicare tax law. M.J. Lee is with me from Cambridge, Massachusetts.
She left, but didn't endorse. What do we make of that?
M.J. LEE, CNN POLITICAL CORRESPONDENT: That's right, she did not have a news to make on a potential endorsement. Obviously, the two most obvious
possibilities right now, we are left with Senator Bernie Sanders or former Vice President Joe Biden.
We know that Senator Warren spoke with both of them in recent days. Let's just listen to that sound of her telling CNN that she just hasn't had time
to think about that yet.
(BEGIN VIDEO CLIP)
QUESTION: Will you be making an endorsement today? We know that you spoke with both Joe Biden and Bernie Sanders yesterday.
SEN. ELIZABETH WARREN (D-MA): Not today, not today. I need some space around this, and I want to take a little time to think a little more.
I've been spending a lot of time right now on the question of suspending and also making sure that this works as best we can for our staff, four our
team and for our volunteers.
QUESTION: So it could be coming, but just not right now.
WARREN: Not right now.
(END VIDEO CLIP)
LEE: And, the other thing that Senator Warren told CNN is that she has no regrets about the kind of campaign that she ran in 2020. This is something
that her campaign manager said in a staff-wide call today as well, she said that she was reflecting back on years ago when it was just a Law Professor
and had these sort of grand ideas.
And she felt like sort of a lasting achievement that she has made in this race is that people now talk more about some of the ideas that she has like
the wealth tax or, you know, canceling student loan debt. And she felt like that was sort of her contribution that she had left in this race,
QUEST: M.J., from what you know, who is she most likely to endorse?
LEE: We really don't know who she is more likely to endorse. She truly did not sort of weigh into that. Her campaign staffers, her advisers have not
indicated in any way whether she is leaning in one direction or the other.
Obviously, sort of the more conventional wisdom would be that she would be more inclined to endorse Senator Bernie Sanders, just simply based on the
fact that they share more progressive ideas and some of the goals that they have in terms of policy platforms are very similar.
But again, just remember that four years ago when she was in a similar position when Bernie Sanders was running against Hillary Clinton in the
Democratic Primary, Elizabeth Warren sat that one out. She did not make an endorsement then either and she only threw her support behind Hillary
Clinton when that primary contest was over.
So again, for now, there is just no telling whether for sure she will make an endorsement if that's going to come soon, and who that endorsement would
be for.
QUEST: Thank you. Airlines are now comparing the impact of coronavirus and the 2008 financial crisis. The IATA Director General tells me governments
need to do whatever they can to help the industry.
Also, oil producers are facing the biggest drop in demand in recent history. OPEC has a plan to boost prices. Will it work?
(COMMERCIAL BREAK)
[15:17:23]
QUEST: To turn our attention in our coverage of coronavirus now to travel and the transportation sector. The transportation index is one of the
heaviest hit, you saw earlier down some 20 percent from its recent highs.
And now the Airline Industries Association, Not so in the U.S. where they have been very profitable in recent years.
And if the outbreak is contained, and the airline stands to lose $63 billion. Even that's double what they were looking at before, $133 billion
as a warning.
The IATA Director General Alexandre de Juniac says it's among the worst crises that airlines have faced and of course, it begs the question, what
can they do?
(BEGIN VIDEOTAPE)
ALEXANDRE DE JUNIAC, DIRECTOR GENERAL, IATA: We are trying to mitigate, you know the, the impact -- the financial impact of the of the virus on our
activities by reducing costs, by grounding planes, by canceling some routes, by making savings.
You know, Singapore Airlines has announced that the highest salaries will be cut. Some other companies have grounded several aircrafts. Many routes
have been -- or frequencies have been reduced or routes have been canceled. So there are big plans that are implemented.
Secondly, we are -- there is one area of relief which is reduction in oil price that will impact positively or negatively our costs.
So, we are doing whatever we can, but, you know, the main thing is that the industry is doing very well, in I think, in trying you know to collaborate
with the health authorities action. That is the key point.
QUEST: But Flybe which was already in deep financial trouble has succumbed. So, not exactly a perfect example, but are you expecting other carriers to
go out of business as a result of this?
DE JUNIAC: it's difficult at this stage to say that, because it will you know, depend on the individual situation of each carrier and mainly the
financial position, the cash position. So, first of all.
Secondly, it will also depends on the duration of the outbreak. The duration of the drop and then the recovery part of the curve.
If it lasts -- if the duration is comparable to the past outbreaks whether SARS or the H1N1, it means four to five months, the industry should
overcome perhaps with some casualties, but should overcome it. If it last longer then it will be more difficult for a larger number of airlines.
[15:20:30]
QUEST: What help do you believe the industry can receive from government software and other organizations?
DE JUNIAC: We have clearly asked governments to do two things. First of all, to maintain the floors in the airports because you know the rule is
when you do not use a slot, you give back the slot.
But, you know, it is almost a force majeure reason that we are reducing frequency or not using slots. So, we have asked government to maintain the
slot location to airlines as they are everywhere in the world. So it's a decision that we have asked government to make everywhere.
And secondly, if governments can help us financially by reducing costs, charges of whatever we have on our P&L as an expense that would be positive
for the industry.
The Singaporean, the Koreans have already done something. So we are asking governments to do similar measures.
QUEST: Do you expect to require the same sort of measures? Admittedly, after 9/11 a lot of the insurance measures and anti-terrorism insurance
measures were put in place. They were very specific and governments had to bail out airlines for those extraordinary costs.
Do you expect to need some form of government assistance -- financial government assistance?
DE JUNIAC: We could -- if the outbreak lasts, we will probably need some government assistance in some parts of the world especially where the
airlines are weaker financially than in other areas of the world and we will ask for help.
QUEST: The slot request to de-lift the slot requirement has already been rejected in some cases. Could we see the grotesque sight of airlines
running empty aircraft to the nearest cheapest destination just to maintain their slots?
DE JUNIAC: If I may just correct one thing, it has not been rejected. For the moment, we are waiting for the decision to be made in various part of
the world, so they have asked us for additional data and comfort.
But we are pretty optimistic about the fact that the main regulators will make the right decisions.
QUEST: But you say that, you say that, but Alexandre, you say that, but what more do they need? They know the facts. They know where the cut backs
are. You've made a reasonable request, they want more data for what purpose?
DE JUNIAC: I understand that to make that decision, which is an exceptional decision, they need some data, some comfort to justify, you know, a
decision, we will see an exception.
But what we have asked them is to do that quickly, and to include in this waiver, the summer season. So, that is the heart of the discussion because
we think that it will last up to September, at least in Europe.
And second, I don't expect that the airline will continue, you know, to fly empty aircraft, only to maintain the slots -- economically it's insane.
QUEST: Finally, you've been in the airline industry a year or two. Is this the worst -- with the exception of 9/11 where we saw a specific event, is
this the worst you've seen it?
DE JUNIAC: For the moment, I have to say that the profile is not the best one. It's among the worst crisis we have had to face up to now.
(END VIDEOTAPE)
QUEST: It is airlines and cruise lines that are really bearing the brunt in the market as passengers are waning. United and JetBlue have cut their U.S.
flight schedules.
United is cutting 20 percent of its international schedule and 10 percent of its U.S. and Canadian flights. And JetBlue said it's going to reduce
capacity by an initial five percent that'll go -- and if you look at the stocks there, I mean, off 11 percent for UA, and if you look at the S&P 500
Airline Index, it is down 30 percent in the last month.
Paul is with me, Paul La Monica, not surprising by any of this, but it is difficult to see what the airlines do other than hiring freezes, cutting
back on flying and all of those things.
PAUL LA MONICA, CNN BUSINESS REPORTER: You're right. I can't imagine that they will be able to maintain anything that resembles normalcy in an
environment like this.
And Richard, the big problem is that it's not just the airlines; you mentioned the cruise lines, obviously they are struggling. But this has a
ripple effect for other transportation and leisure related companies.
[15:25:22]
LA MONICA: So UPS and FedEx, they're the Dow Jones transportation average. Obviously, they're being hurt because there are concerns about goods that
won't be able to get shipped from China to the U.S. in order to be sent to customers who paid for them.
You've got the railroads that are getting hurt, and as more and more companies enact plans to keep workers at home, you're going to see
transportation stocks get hit and companies like Zoom Video, which is zooming today, because everyone's doing video conferencing instead of
getting on a plane to go to a meeting.
QUEST: Right. Yes, but it is a double whammy here because the companies are not sending goods. They're not traveling employees. Here at Warner Media,
it's a non-essential travel ban. And in fact, it's virtually globally.
And in addition to which, they're also being hit because their business is down if you're leisure.
LA MONICA: Yes, if you are in the, you know, leisure business, obviously, it's going to be very difficult because I think the big problem is that,
possibly if you're a consumer and you hold off on going on a vacation that you might otherwise have done, you might delay it and say, okay, you know
what? I'll go in the summer or around the winter holidays.
If you are going to be going to Mobile World Congress in Barcelona, that's been canceled. They're not going to have another one once this crisis is
over, presumably until the next regular scheduled one in 2021.
So a lot of business travel, that's not going to return. People aren't going to now fly to conferences that didn't get -- you know that got
canceled because they're not coming back.
QUEST: Tomorrow, let's talk about what companies are doing about this, and also I'm really fascinated to know what it actually means. What is the
difficulty for a company when its share price halves? Let's talk about it tomorrow.
LA MONICA: We should. Carnival share price is down heavily. This time is the Grand Princess Cruise. It's at sea. They can't get into dock and there
are fears its two and a half thousand passengers are at risk.
[15:30:28]
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest, there's more QUEST MEANS BUSINESS in just a moment. We'll look at how the (INAUDIBLE) airline Flybe into bankruptcy,
admittedly, it was not particularly steady legs to begin with. And the Vice President of the United States Mike Pence is warning there's a shortage of
medical tests to deal with outbreak. (INAUDIBLE) this industry emergency. This is CNN, and here on this network, the facts and news always come
first.
Coronavirus fears continued to get Wall Street. The Dow is off by more than 1000 points. Energy and travel stocks are leading the way down. The three
major U.S. indices are all back into correction.
Hong Kong is reporting what could be the first case of human to animal transmission. Authorities say there, that dog is repeatedly tested
positive, although they're calling it a weak positive. The dog is under quarantine and won't go home until the test results is negative.
A ceasefire is due to take effect in a few hours in Syria's Idlib Province as part of the effort to ease one of the worst humanitarian crises in the
world. Presidents of Russia and Turkey agreed to the term a short while ago at marathon talks in Moscow.
Some of the world's biggest oil producers are taking action as they face the biggest dip in demand on record. OPEC has released a plan to cut
production by 1-1/2 million barrels per day. The move involves Russia signing on to cut its supply as well. John Defterios is at the OPEC meeting
in Vienna in Austria. Was there a feeling of panic about all crises about these moves?
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Richard, I think the case was here. Seeing that drop-in demand and also the price, by the way, linked to
Wall Street. I think the OPEC ministers are not their side of the aisle wanted to come in here to Vienna and make a bold statement. The Saudi
Ministry emerged after only three hours of meetings.
Sometimes these things can stretch six, seven hours, suggested they're going to cut 1.5 billion barrels a day, as you suggested here, though, they
need the buy in from Russia, and the Russian minister went back to Moscow to meet with Vladimir Putin and the big five oil companies there. It's a
delicate subject, but to give you some context of that demand destruction, Richard, this cut would take them in the OPEC plus to 3.6 million barrels a
day. That's three times where we were this time last year.
And you talked about a market correction on Wall Street, how about a bear market in oil? If you take a look at the Brent price here since the start
of the year, we're looking at a drop of nearly 25 percent. And you ask why, in the first quarter, demand has dropped by 4 million barrels a day and
those like Goldman Sachs and IHS market are suggesting throughout 2020, we could contract by a million barrels a day. Something we haven't seen since
2008. And get this figure, Richard, in the last 50 years, we've only seen a contraction in the oil market four times. 2020 will definitely be the fifth
time with what you see in the airline industry.
QUEST: But John, well -- let's assume that they agree to this production cut, how long before they cheat?
DEFTERIOS: Oh, the compliance is going to be a very big issue here, Richard. You can't walk away out of Vienna and say, look, it's 1.5 million
barrels a day. Russia's pushing back and they don't put hard numbers on the table. So, clearly, they have the outline Who's cutting what and by when.
There's no doubt about that. But I think we've learned a lot since 2016. You know, the OPEC plus agreement was born out of $30.00 oil. Remember in
the first quarter of 2016, I don't think anybody on either side of either OPEC and non-OPEC wants to see that again.
You go back to 2008, remember, $140 down to $30.00 a barrel. If you didn't have OPEC, plus, it would be a very different game right now. The Russian
complaint is we're cutting so much. We gave in too much leeway to U.S. Shell producers, Norway and Brazil. The U.S. is at 13 million barrels in
the first quarter. But right now, Vladimir Putin has to decide: do I go along to get along with King Salman of Saudi Arabia or do I want to destroy
this deal over about a half a million barrels a day? They try to negotiate that figure lower Friday. They left the tough work to the final day.
QUEST: John Defterios in Vienna. John, thank you. Now, as QUEST MEANS BUSINESS continues, the Coronavirus has claimed its first airline.
[15:35:02]
It was a struggling U.K. carrier called Flybe. It's gone bust as you heard my discussion with IATA, will other stronger airlines be next?
(COMMERCIAL BREAK)
QUEST: Princess Cruises is once again feeling the effect of Coronavirus about second row after the outbreak aboard its Diamond Princess ship. Now,
the ship itself, Grand Princess, is unable to dock in San Francisco after a former passenger died from the virus in California. To be clear, there's no
sign yet of Coronavirus on board the ship itself at the moment. The shares of Carnival, the owner of Princess, are down more than 14 percent as the
vessel is not allowed to dock for the moment.
There are currently no confirmed cases on board. About 100 passengers that are being tested, and the results are expected on Friday. Dan Simon is live
in San Francisco, California. So, if I understand this correctly, this is a passenger who had already finished and disembark, who's now been, who's now
been tested. But all the same passengers on board, were they there with them, what's the, what's the story?
DAN SIMON, CNN CORRESPONDENT: Well, you have about 60 passengers who were aboard the previous voyage and they're now on this ship, and all those
people, Richard, they are confined to their state rooms. You also had three people from the previous voyage who did test positive for the Coronavirus
and one person died. And on this current cruise ship, about 20 or so people are exhibiting Coronavirus symptoms and that is why the helicopter, the
Coast Guard helicopter, dropped these testing kits this afternoon. Hopefully, you're going to get results in the next few hours so they'll
know what they're dealing with. But because, but, but because you have people who seem to be sick, they don't want to take any chances and let
this ship come onto short and, and put other people at risk.
QUEST: So, this was a, this was a previous cruise, the passengers from a previous cruise, that's I'm trying to follow sort of exactly the timeline
here.
SIMON: Right. So, this cruise set sail for the Hawaiian Islands. This was a 15-day cruise that was supposed to come back on Saturday. And on this
current cruise ship, you have 60 people who we're still on board for the previous cruise, if that makes sense. And then on that previous cruise, you
had a couple of people, you had a cluster of people who got sick.
[15:40:09]
But on top of that, on top of that, you have 20 or so people who are exhibiting symptoms separate from the 60. So, so, let's add them up. You
got 80, who are potentially risk and all those people are going to be tested.
QUEST: Oh, I mean, Japan was roundly, someone said correctly criticized for the way they dealt with the Diamond Princess, allowing with absolute
confusion and chaos. How far the authorities on top of it in California?
SIMON: Well, what they're saying is they're not going to let anybody leave the ship until the tests are completed. Now, it's getting people on the
ship some anxiety. I've been texting and talking with several of the passengers and they don't really know what's in store for them. They don't
know what they're going to be dealing with, with an extended quarantine situation like what you saw in Japan, and it is making them terribly
nervous knowing that they may not get on to the shore for a couple of weeks, so they're basically just waiting to see what's going to happen,
that they feel pretty good that they're getting taken care of, as far as, you know, meals and the staff is working to make sure that they're
comfortable. But you know, in terms of their overall sentiment, this is very stressful.
QUEST: Dan, keep watching. There'll be much more to talk about on this. Thank you, Sir.
Mass producers are seeing a massive spike in demand. Companies saying, more shortages may be on the horizon, and there are even claims and calls that
people shouldn't buy masks, they should leave that for the healthcare workers.
(COMMERCIAL BREAK)
QUEST: The Vice President of the United States Mike Pence met the Chief Executive of the 3M company today. The company is the manufacturer of N-95
masks. They are in short supply in some places. Mr. Pence thanked the company for its actions in response to the virus outbreak.
(BEGIN VIDEO CLIP)
MIKE PENCE, VICE PRESIDENT OF THE UNITED STATES: Decisions were made here 3:00 a.m., literally at the at the outset of the Coronavirus. 3M made the
decision literally to go to full capacity here in the United States in the production of the respiratory masks, the N-95 masks that you create with
such professionalism.
(END VIDEO CLIP)
[15:45:04]
QUEST: Now, the shortage has been widely reported. In some cases, now the authorities are asking people not to buy masks to, because that it should
be reserved or left for healthcare workers and those in the industry. Clare Sebastian visited a medical distribution facility to see the crisis
firsthand and send this dispatch.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: So, these are all our face masks. We store them in a secure room.
CLARE SEBASTIAN, CNN INTERNATIONAL CORRESPONDENT: For medical supply company, Dealmed, this is part of a new reality at the New Jersey
distribution center. They have also added security outside.
UNIDENTIFIED MALE: These people that keep coming in from the street knocking on the door trying to take a product.
SEBASTIAN: Masks are the biggest concern here as demand spikes because of fears over the spread of the Novel Coronavirus and supplies run short.
Dealmed like many others in this industry, sources it's masks from China.
UNIDENTIFIED MALE: The only production that we're told that's happening right now is a production in China, which is staying domestic for the
Chinese government.
SEBASTIAN: So, you're going to run out.
UNIDENTIFIED MALE: We're absolutely going to run out but we have contingency plans in place. We're trying to do the best we can for our
customers.
SEBASTIAN: Dealmed can no longer sell based on demand alone. Every day, they hold a meeting to make potentially life changing decisions about who
should get their limited stock.
UNIDENTIFIED MALE: Let's go on to the actual hospital. I want to try. Let's do 10 today. We'll talk tomorrow again, we'll put them on the list for
tomorrow.
SEBASTIAN: 10 boxes is just 200 masks. Dealmed tells us that the hospital had requested six times that. Supply issues amounting China the world's
biggest manufacturer of medical facemask says it's not imposing any export restrictions. But several Western companies tell us they have not been
receiving orders. Countries from Germany to Thailand have banned exports and the French authorities announced this week they are taking control of
all medical masks to distribute to health professionals. Medicom, a Canadian manufacturer of masks and other medical supplies says, as of late
January, their three Chinese factories are prioritizing local demand. They're not yet sure what will happen to their factory in France. And here
in Augusta, Georgia, they are ramping up as fast as possible.
GUILLAUME LAVERDURE, GROUP COO AND PRESIDENT NORTH AMERICA, MEDICOM: We were basically doubling the capacity of the factory or -- four to six
months. Between the additional shifts, additional equipment. But additional equipment takes a lot of time. These are custom made machines.
SEBASTIAN: They're also not taking on new customers.
LAVERDURE: We decided from day one to go on allocation, to only distribute to existing customers. The historical demand to avoid any speculation,
stockpiling additional safety stock, which is a bit as big disruption.
UNIDENTIFIED MALE: They have wipes, gloves as an example. These are other products that are increasing in terms of demand.
SEBASTIAN: Dealmed staffs are also working extra hours, three new team members have been hired, and they're starting to feel the pressure.
UNIDENTIFIED MALE: There's a terrible situation right now what's going on right now. I mean, it's terrifying. And we'll have healthcare (INAUDIBLE)
around a facemask. That's a terrifying situation to be in. But we feel that it's our obligation and our responsibility to the industry, to work with
our customers and be the calming voice during these crazy, crazy times.
SEBASTIAN: A calming voice in the face of unprecedented demands and dwindling supplies.
(END VIDEOTAPE)
QUEST: Clare Sebastian is with me, as you can see. And so, this -- I saw earlier some people are saying don't buy mask. President Obama, Former
President Obama was saying don't go rush to buy masks.
SEBASTIAN: And we had the same from, from Mike Pence today at the 3M factory. They're telling the CDC and other U.S. authorities are telling
people if you're not sick, don't go and buy a mask. And I think part of that is to try to control the panic buying that we're seeing that is that
is sort of exacerbating the emergency that this industry is already in, Richard. There are very few people in the United States who actually make
these masks.
QUEST: Do they work?
SEBASTIAN: They, I mean --
QUEST: N-95 is different to those sorts of surgical masks that we see that people are using.
SEBASTIAN: I don't know, I'm not a doctor, I'm not qualified to tell you whether it will work or not, but I think, you know, certainly in China,
they're encouraging people in some regions and some regions, it's mandatory. I think that's partly cultural. You would see people wearing
them some of the time anyway. But, but look, I think perhaps they do block out some of the pathogens, that N-95 especially block out 95 percent of
particles.
But the bottom line, Richard, is that this industry is facing unprecedented challenges. And we now have a situation internationally of sort of medical
supply protectionism. France is requisitioning supplied. Germany has banned exports, the same in Taiwan, Thailand, all around the world, people are
trying to protect their domestic supplies. The good news is that it's probably temporary.
QUEST: But also, it's very difficult to suddenly, I mean, an existing facility can be rammed up.
SEBASTIAN: Yes.
QUEST: Within certain parameters, but you can't suddenly build a factory that's going to produce these masks in the short time of this crisis.
SEBASTIAN: It takes a long time. You heard the, the, the COO of Medicom, the Canadian companies saying there that that they have very specialized
equipped. These are custom made machines they have to, they have to be very careful about how they ramp up because other companies have been burned.
They told me during things like H1N1, when they ramped up and then didn't have anything to buy to at the end of it.
[15:50:10]
QUEST: Clare, just want to talk about the market and we're seeing it down, we're down a thousand points (INAUDIBLE) three quarter percent. And the,
those stocks that we've kept looking at just absolutely creamed.
SEBASTIAN: I mean, it's hard to know what to say. And, you know, the, the, the volatility is, is really something that you've only seen during the
financial crisis and missing some of the top news is today the likes of Boeing, which is, you know, one of the highest weighted on the Dow that's
clearly dragging down the rest of the index and the banks as well.
QUEST: Thank you. Clare Sebastian. Now, Coronavirus has dealt the final blow to Flybe, the British Regional Airline. Demand has slumped down. It
wasn't doing very well to begin with. The U.K. carrier, and the U.K. Government have been in talks with Flybe about a rescue before the
outbreak. Speaking to me earlier the head of (INAUDIBLE).
(BEGIN VIDEO CLIP)
ALEXANDRE DE JUNIAC: DIRECTOR GENERAL, IATA: if the duration is comparable to the past outbreaks, those SARS or the H1N1, and that means four to five
months. The industry should overcome their ups with some casualties but we should overcome. If it last longer that it will be more difficult for a
larger number of airlines.
(END VIDEO CLIP)
QUEST: In London, it was a highly controversial bailout the government was going to do. Some airlines want it and others didn't. But Flybe just simply
couldn't survive.
ANNA STEWART, CNN INTERNATIONAL REPORTER: Yes, and it's been on the brink of collapse, Richard, since the beginning of the year. So, it's really no
surprise when Boston early as of this morning courses airlines due, when no flights were actually in the air, no planes in the air.
Terrible news, over 2000 people who worked for fly be now. The problems for Flybe were multiple, whole complex of issues. Some specific to that airline
is a regional U.K. airline. It faced huge competition. It was passed over ambitious, it had set its sights on Europe and hadn't really worked out to
the loss of money on a fleet for Europe.
Then, you've got all the other headwinds that the fuel costs and so on. But it did say today that what was compounding all the problems as to why it
fell into administration today was the Coronavirus and a collapse in demand. And you can see why, in the U.K., lots of people who would have
flown to a hub airport in U.K. via a regional Flybe flight won't be doing so because so many thousands of routes and flights have been canceled.
QUEST: And also, there is this question of course of taxation, the advanced passenger duty. Flybe got hit twice by it because all flights were within
the U.K. And on a wider issue, is there any evidence that the Chancellor, the Finance Minister in his budget is going to announce a catch or
reduction or suspension of APD?
STEWART: Not yet, we're still sort of holding our breath for the budget. That will be next week. It's interesting when you look at Flybe, actually
rigid in terms of who was to blame because lots of people blame the government for not stepping in, for not bailing out the airline. And some
people blame Brexit because if the U.K. was not still in this transition period, with the EU, it might not be able -- it could sort of create his
own state aid rules, some relaxation.
Lots of people also blaming the airlines like Virgin Atlantic, which was one of the owners of Flybe maybe they could have stumped up more cash flow
because they are also under pressure from the Coronavirus and a slump in demand. So, lots of finger pointing here. It will be interesting what the
Chancellor announces next week, and whether or not it's sort of forward looking and how much it can help insulate some of these sectors.
QUEST: Anna Stewart is in London. Anna, thank you. I need to update you on the last few moments of trade on Wall Street. Please join me at the super
screens and you'll see what I mean.
All right, we've been down all day we are off the lows of the day. We're down just the thousand points. The low point was 1147. The other key bit of
economic news today, of course, the U.S. 10-year bonds has hit a record low on terms of theology of the price, 105; the yield is now under 9.9, and
under one, obviously, point nine. And if you look at the what we're seeing being hit, Walgreens is the best of the day, but that's because it's
basically selling medical goods and the like.
The worst of the day, Boeing is way down there. Clearly, the demand for aircraft, for travel, it's all extremely serious. For bank oil prices
you've got as what we're talking about, there ExxonMobil down. The banks are lower. Disney not surprising. All those leisure parts and maybe they'll
be the potential (INAUDIBLE) will put off some movies into release.
[15:54:44]
And a special reminder of our program later, CNN's Anderson Cooper and Dr. Sanjay Gupta will be answering. Your questions, it's our global Town Hall
on the facts and figures of Coronavirus. That's Friday morning at 11:00 in Hong Kong. Those are the markets out of a "PROFITABLE MOMENT" after the
break.
(COMMERCIAL BREAK)
QUEST: Tonight's "PROFITABLE MOMENT," the airline industry is in chaos and crisis tonight. You heard on this program, the head of I.R. to discussing
just how they are going to handle what could be potentially losses of $113 billion across the industry. Now, whilst the U.S. industry and sector has
been healthy and profitable, the rest of the world is far from it.
European airlines have been in difficulties, Asian airlines similarly. And there's no question there'll be failures. Flybe was just a minor point
serious for those involved, but it was an airline in trouble. It's not surprising. Cathay Pacific has now cut nearly three quarters of its flying
schedule. The British Airways has taken drastic action. United down 20 percent in terms of its flying internationally. These are extraordinary
measures, but necessary.
And now, governments will be asked to come in and help. Would it be bad lights right after we saw after 9/11, I don't think it'll be as blunt or
basic as that? But certainly, airlines will be looking for some form of relief on things like passenger duties, taxes and the like, which of course
could help in the future. It would be a foolish government that doesn't listen. The airlines are the backbone of international, of course, travel.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York. Whatever you're up to, I most certainly hope it's profitable. Jake Tapper
now with "THE LEAD" to closing bells, coming next.
JAKE TAPPER, CNN HOST: President Trump says he trusts his hunch more than health data. THE LEAD starts right now.
Breaking news, a cruise ship held off California with close to two dozen people possibly infected with a Novel Coronavirus and thousands potentially
exposed.
Hunch Science President Trump blast it for causing Coronavirus confusion as he publicly doubts what doctors are saying about how deadly the virus is.
Plus, Senator Elizabeth Warren exits the race, leaving Bernie and Biden to battle it out. Could her endorsement change this campaign, yet again?
ANNOUNCER: This is CNN Breaking News.
[16:00:05]
TAPPER: Welcome to THE LEAD, I'm Jake Tapper. We're going to start with breaking news. A brutal day.
END
