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Quest Means Business
Fed Chair: US Recession Is Certainly A Possibility; UK Inflation Hits 40-Year Record Of 9.1 Percent, Highest In G-7; Officials: More Than 1,000 Killed In Afghanistan Earthquake; Lufthansa CEO Talks Summer Challenges; Korean Air Converted Passenger Planes To Cargo; Dash To The Bell. Aired 3-4p ET
Aired June 22, 2022 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALISON KOSIK, CNN BUSINESS HOST: One hour left in the trading day and we are seeing moderate gains on Wall Street, checking up the Big Board seeing
the Dow up 137 points. That's a rebound for a second day in a row. Those are the markets and these are the main events.
The Fed Chair warns that more surprises could be in store in the battle against inflation.
Food costs surge in the UK as prices there rise at the fastest pace in 14 years.
And the CEO of Lufthansa warns travelers to prepare for a difficult summer.
Live from New York. It's Wednesday, June 22nd. I'm Alison Kosik. I'm in for Richard Quest, and this is QUEST MEANS BUSINESS.
Tonight, US lawmakers urged the Federal Reserve Chair to tread carefully in the fight against inflation after the biggest interest rate hike in nearly
30 years. Jerome Powell appeared on Capitol Hill Wednesday to begin two days of hearings. He told US senators that his number one priority is
bringing down inflation.
He said the Central Bank is not trying to provoke a recession, but one is certainly possible. Even so, Powell insisted rate hikes will continue until
prices level off.
(BEGIN VIDEO CLIP)
JEROME POWELL, CHAIRMAN, U.S. FEDERAL RESERVE: At the Fed, we understand the hardship that high inflation is causing. We are strongly committed to
bringing inflation back down and we are moving expeditiously to do so. We have both the tools we need and the resolve it will take to restore price
stability on behalf of American families and businesses.
It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all.
(END VIDEO CLIP)
KOSIK: Some lawmakers questioned whether sharp rate hikes are the right tool for the job. Democrat Elizabeth Warren warned they could set the
economy back. Listen.
(BEGIN VIDEO CLIP)
SEN. ELIZABETH WARREN (D-MA): You know what's worse than high inflation and low unemployment is high inflation and a recession with millions of
people out of work. And I hope you'll reconsider that as you drive this -- before you drive this economy off a cliff.
(END VIDEO CLIP)
KOSIK: Wow. Rahel Solomon joins me live from New York now. Great to have you with us.
You know, this was one of these hearings that had some fireworks. So, it was kind of interesting to watch. You know, lawmakers really pressed Powell
on interest rates, on the aggressive rate hikes that are expected to come down the line here, what specifically Rahel did Powell say that he is going
to be watching for in the coming months that will determine the pace of these hikes.
RAHEL SOLOMON, CNN BUSINESS CORRESPONDENT: I mean, I think all along he has said that he will be data dependent, right, and you can understand why.
There was a point where it appeared that inflation was perhaps moderating. And then we got last month's CPI report, Consumer Price Index report that
suggested that it was accelerating.
And I should say, Alison, there appears to be growing support among some Fed officials, at least for an additional 75 basis points or three quarters
of a percent next month. But there has always been to be honest, there have always been these two camps within economists, some who have felt that the
Fed was too slow, it was too late, and that they need to do more right now.
Others, however, have said look, a lot of this inflation is actually not demand driven, it is more supply driven, and there's very little the Fed
can do. So they should tread lightly.
So there has always already been this concern in the markets and you're seeing that play out. So the jobs report becomes increasingly important for
the Federal Reserve as they monitor unemployment, of course, the relationship between unemployment and the inflation rate quite documented,
but also the CPI report and the PCE report, so the inflation reports, the next few weeks becoming increasingly more important, as the Fed tries to
fight inflation that rages at 40-year highs.
(BEGIN VIDEO CLIP)
POWELL: I would say that, you know, the US economy for now is strong and spending is strong, consumers are in good shape, businesses are in good
shape. Clearly financial conditions have tightened and you're seeing growth slow from the very elevated levels of last year associated with the
You're seeing the beginnings of job growth slowing to more sustainable levels and you know, there's risk in that. There's obviously risk in that.
Monetary policy is famously a blunt tool and there's risk that that weaker outcomes are certainly possible, but they're not our intent.
(END VIDEO CLIP)
SOLOMON: And Alison, part of the reason why monetary policy is considered a blunt tool is because there is, of course, a lag in terms of what the
Federal Reserve does in terms of interest rates and when we start to see that play out in the economy, it's about six to nine months.
And so, the Fed just recently started raising rates. I believe the first rate hike was in March. So we're still really not even seeing that play out
in terms of economic demand.
KOSIK: You know, the market clearly was watching the hearing today, and we see green arrows. What do you think is going through the investor's mind at
SOLOMON: Well, I think if I could tell you why the markets are doing why the markets are doing, I'd probably be a very rich woman, Alison, but it's
so hard to know. Because again, just like economists are in two camps in terms of what the Fed should and shouldn't do, there are different sort of
camps within the investment community.
Some believe that a more aggressive Fed perhaps is good because it reduces the risk or it increases the risk rather, of a recession, but it reduces
the risk of inflation. There are others, however, that are feeling very concerned. There are of course, lots of negative overhangs on the market
right now and the war in Ukraine being a huge one, supply chain disruptions that still haven't quite eased and of course, inflation, not just here in
the US, but around the world.
So lots for the markets to parse through every single day. And you know, we have seen bounces during this bear market, but that's really not that
uncommon. We see bear market bounces quite a bit in the middle of the bear market.
KOSIK: Yes, and good point we are seeing green arrows, but the NASDAQ, the S&P still in a bear market. Rahel Solomon, thanks so much.
Across the Atlantic, prices are rising even faster. The UK just reported its highest inflation rate in 40 years. Prices in May were up 9.1 percent
in a year. That's the worst in the G-7 and Central Bankers expect it to get even worse, forecasting double digit price rises by October.
Once again, it was staples like food and fuel that saw the biggest gains, CNN's Clare Sebastian took to the streets of London to find out how
consumers are coping.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Here at this East London food market where people are on their lunch breaks, it's not immediately obvious
that the UK is facing 40-year highs in inflation and a cost of living crisis.
But inflation is here. Food prices were the biggest contributing factor to the latest rise in inflation. Add to that the cost of energy, motor fuels
are up around 33 percent in the past 12 months, and you have a situation where pretty much everyone here is feeling the pressure.
UNIDENTIFIED FEMALE: I think the food shops especially are just like ridiculous. You can't get anything on offer, just so -- yes, it adds up too
much. But yes, unfortunately, money doesn't go so far.
UNIDENTIFIED FEMALE: I have also been busy trying to fix my mortgage because we are facing significantly rising mortgage rates as well.
UNIDENTIFIED MALE: The oil has gone up. The vegetable oil and the price of the chicken has gone up basically. But we've not passed it on yet because
we are trying to keep it to the absolute minimum, as long as we can.
SEBASTIAN: Well, that vendor may not be passing on the costs to its customers, but data shows more and more businesses are. Add to that, the
fact that we've already seen disruption this week from rail strikes, these latest inflation numbers could lead unions to increase their demands for
more pay rises in line with inflation.
And then you have another worry, the UK economy is actually shrinking. It shrank in both April and March data shows. If inflation keeps rising and
the economy keeps shrinking, the risk of recession keeps going up and that means a whole new set of challenges for the businesses hoping to make a
living off people's lunch breaks.
Clare Sebastian, CNN, London.
KOSIK: Central Bankers around the world are scrambling to raise interest rates to help calm inflation. Last week, the Fed and the Bank of England
both announced their most aggressive rate hikes in decades.
The European Central Bank which has kept rates at zero says it plans to raise them 25 basis points next month.
Vivek Paul is the Head of Portfolio Research and the UK Chief Investment Strategist at BlackRock Investment Institute.
Thanks so much for being with us.
VIVEK PAUL, HEAD OF PORTFOLIO RESEARCH AND UK CHIEF INVESTMENT STRATEGIST, BLACKROCK INVESTMENT INSTITUTE: Thanks for having me on.
KOSIK: All right, so I know that you have noted that the Bank of England was you know, the earliest of its peers to begin the process of monetary
policy normalization. It is now further along this tightening path.
Do think keeping this in mind that the US Federal Reserve that it kept rates too low for too long, so it made a mistake.
PAUL: I think there were a bunch of differences and similarities between the two situations. And I guess the similarity, I guess, is as per the sort
of previous correspondent you had, we're in an environment where supply led sort of issues are dominating the inflation regime globally.
Now, the issue I guess, and the difference is where each of those two sort of central banks are in their journey towards ultimate tightening, and
there are differences here because you rightly pointed out there that the UK was earlier to sort of get going, but the other point would be that the
UK's natural sort of neutral rate of interest is also probably lower than the US.
So from here, you know, you can almost kind of see in some ways that the Bank of England, there's almost a little bit of a case study for other
Central Banks as they get further on in their sort of tightening journey.
We are of the view here that actually, you know, this is an environment where you're going to see material rate rises for a period of time,
particularly in the US, whereas the Bank of England might be a little bit more of the camp that they're getting to that stage where they're
explicitly weighing up that sort of dichotomy that they're facing here, which is do they prioritize getting inflation under control or do they
worry about those growth impacts.
And while markedly the Bank of England is a bit different to the Federal Reserve, its more explicit acknowledgment of that trade off, more explicit
acknowledgement of the fact that there are sort of real recessionary pressures baked into their own forecasts, and as your previous
correspondents are saying, the growth prospects in the UK in the near term look quite weak.
KOSIK: And you used the "R" word there and I know that you say that the Fed seems dead set on raising rates this year to levels that would clearly
slow the economy.
I'm curious to hear what kind of recession you see, is it one that would be fully entrenched, or one that would be more shallow?
PAUL: Well, I think with using that dreaded "R" word. I think it is different, I guess, in terms of the likelihoods going across the world. I
think the proximity, I guess Europe and the UK has to the crisis that it's unfolding in the Ukraine is greater that means the impact on our energy
prices indirectly, and also, I guess, more broadly on growth is more pronounced and felt here.
So the likelihood is clearly I think, will be greater in Europe than they would be in the US, I think in the US, a big risk, I think is I think one
of your previous correspondent is talking about that lag effect between enacting policy and the impact that it might have on growth.
And the real fear here, I guess, is that the Federal Reserve might go materially above neutral. That's what they are indicating to markets, sort
of middle -- mid digit, sort of three and three and a half tight range where we see neutral for them more like two and a half.
So with that in mind, if they go materially above neutral, that's when you're likely to see potentially that slowdown occurring, perhaps in the
first half of next year. And to be clear, you know, we're not talking about, I guess, automatically, that being a repeat of the global financial
crisis or something like that, although you know, recessions are different. But still, the odds of a downturn are materially greater than they perhaps
KOSIK: You know, the Fed obviously, is in the middle of a very delicate dance trying to lower inflation while raising rates and possibly causing a
recession. Do you think that the Fed is misreading something here about inflation that is looking to resolve the problem?
PAUL: I think what I would say is, you know, clearly, Central Banks across the world have come to the fair and right conclusion that it is right to
normalize policy. We don't need the same level of extraordinary stimulus in an economy broadly speaking, that is restarting in the West than we did,
you know, during the pandemic.
So the idea of normalizing makes a lot of sense. I guess, it is more of that explicit acknowledgement of the supply led nature of it and the idea
that in such an environment, there is only so much Central Banks can do or put another way, they have to impact growth, much more materially to see
the same impact on inflation than would have been in the case had this been demand led.
And I think that's the area, kind of being explicit about that trade off about the sort of the difficult choices they're facing, I think that's the
element where other Central Banks have been a little bit clearer, and therefore, there is less likelihood of an about turn in terms of policy in
KOSIK: Vivek Paul, thanks so much for your perspective, and thanks for coming on the show today.
PAUL: Great to be on.
KOSIK: Up next, Putin returns to the world stage for his first International Summit since the Ukraine invasion as China slams Western
KOSIK: And Afghan official says more than 1,000 people are dead following a powerful earthquake that struck the country overnight. More than 1,500
people were hurt after the quake hit Eastern Afghanistan.
The World Health Organization said it expects the death toll to rise. Its team leader for emergencies said the country is not equipped to deal with
(BEGIN VIDEO CLIP)
DR. ALAA ABOUZEID, TEAM LEAD, EMERGENCIES, WHO AFGHANISTAN: The resources are overstretched here in the not just for the earthquake even before the
earthquake. We are expecting the situation to evolve as I've mentioned in the coming hours, and we will be able to identify exactly what is needed
because right now, we couldn't conduct a full assessment of the situation and we are receiving the information from different sources.
(END VIDEO CLIP)
KOSIK: Wind and heavy rain is making for a struggle for rescuers to find and help survivors. Getting aid to the remote region is also difficult.
Scott McLean reports.
SCOTT MCLEAN, CNN CORRESPONDENT (voice over): This is the sound of help arriving in Afghanistan's Paktika Province. Overnight, the extremely remote
area was struck by a magnitude 5.9 earthquake that destroyed buildings and killed more than a thousand people, the deadliest quake in more than two
The injured are rushed to the helicopter to be taken for help. At a clinic in the region, the injured lie waiting for whatever help they can get.
The epicenter was a sparsely populated mountainous area, but the impact was felt much farther away.
(UNIDENTIFIED FEMALE speaking in foreign language.)
MCLEAN (voice over): "It was midnight when the quake struck," this woman says. "The kids and I screamed. One of our rooms was destroyed. Our
neighbor screamed and we saw everyone's rooms."
(UNIDENTIFIED MALE speaking in foreign language.)
MCLEAN (voice over): Another local man says, 'The houses of our neighbors were destroyed. When we arrived there were many dead and wounded. They sent
us to the hospital. I also saw many dead bodies."
Taliban trucks were seeing moving bodies out of the area. Some homes were badly damaged. The government says some entire villages were destroyed
(UNIDENTIFIED MALE speaking in foreign language.)
MCLEAN (voice over): The mother the man shooting this video says that one of his grandchildren was buried in the rubble, but they managed to pull
them out alive.
At a press conference, the Taliban pledged to send more than $500.00 to the families of those injured and more than a thousand to those killed, a bold
pledge for a cash strapped government in the midst of an economic crisis.
Scott McLean, CNN, London.
KOSIK: Russian forces are closing in on the last Ukrainian controlled city in the Luhansk region. The military chief for the region says Russia has
taken several villages around the city of Lysychansk. He says the city and the whole region are under heavy fire.
Street fighting continues in nearby Severodonetsk where Ukrainian defenders are desperately resisting inside a chemical plant. Western leaders are
trying to show support.
Europe is expected to grant Ukraine the status of EU candidate this week. Officials warned joining as a full member will be a long process.
As Russia gains grounds in Ukraine, President Putin is making the diplomatic rounds. He spoke virtually to leaders of the BRICS nations, a
group that includes Brazil, India, China and South Africa. It's his first major Summit since the Ukraine invasion.
He said Russia is rerouting its trade to the BRICS nations because of Western sanctions.
Mr. Putin's remarks followed a sharp criticism of sanctions by China's Xi Jinping as Selina Wang reports.
SELINA WANG, CNN CORRESPONDENT: At the keynote speech for the BRICS Summit hosted by Beijing, Chinese President Xi Jinping called sanctions on Russia
a double-edged sword.
He said at the virtual Summit, "Facts have proven time again that sanctions are a boomerang and a double-edged sword, politicizing, instrumentalizing,
and weaponizing the world economy," adding that "Sanctions take advantage of the international financial system to bring harm to the people of the
Now, China claims it is not taking sides of the conflict, but China does not call it an invasion, and China along with other BRICS leaders have
avoided outright condemning Russia.
The BRICS Summit is Putin's first forum with the heads of major economies since Russia's invasion of Ukraine. It is a virtual forum, but still seeing
Putin's face on screen alongside the leaders of China, India, Brazil, and South Africa, well, it sends the signal that Russia is not alone, that
Russia is not a pariah to every country.
His invasion does, however, throw another complication into this relationship. BRICS has already long struggled with mistrust and
conflicting geopolitical interests among members. China has tried to portray BRICS as an alternative to the G-7 as a leader for the developing
Ever since its inception, BRICS has been calling for more representation of major economies on the world stage, pushing back against what it sees as
disproportionate dominance of Western powers.
BRICS countries comprise more than 40 percent of the world's population, about a quarter of the world's GDP. Also likely to be a discussion point at
the Summit is about how BRICS countries can settle trade in their own currencies outside the US dollar system. That's added relevance after
Western sanctions on Russia.
Russia is also China's largest supplier of oil. It is a major supplier of arms to India. Just days after this Summit, the G-7 meeting, which has been
united in their voice against Russia will be kicking off.
Selina Wang, CNN, Beijing.
KOSIK: Prince Charles has become the first British Royal to visit Rwanda. He met with the country's President. He's standing in for Queen Elizabeth
at the Commonwealth Heads of Government meeting.
The visit comes a week after a controversial UK flight to deport migrants to Rwanda was called off, thanks to a last minute Court ruling.
The Prince of Wales also visited a memorial to victims of the Rwandan genocide, which took place almost 28 years ago.
Since the genocide, Rwanda has stabilized politically and its economy is steadily growing. Recent global challenges have put that progress in danger
though. COVID brought the country's first recession since 1994 and the war in Ukraine has caused growth estimates to be slashed by more than a
Nick Barigye is the CEO of Rwanda Finance Limited, an organization focused on bringing investment into the country and he joins me now from Kigali,
Thanks so much for your time.
NICK BARIGYE, CEO, RWANDA FINANCE LIMITED: Thank you for having me. Good evening.
KOSIK: Good evening.
We will get to the controversy surrounding the Rwanda-UK asylum deal in a moment. But first, Rwanda is hosting the Commonwealth Heads of Government
meeting, coming at a time as the Russian invasion of Ukraine and pandemic supply chain issues are helping to cause crippling inflation.
Talk with me about what your biggest focal point is at the conference.
BARIGYE: The biggest focal point for Rwanda is to showcase to the world members of the Commonwealth, the opportunities of investing in Rwanda.
In June 2021, the World Bank released a report and it is entitled "The role of the private sector in financing infrastructure gap." And in this report,
they mentioned that over the last couple of years, the government of Rwanda has spent close to 13 percent of its GDP on public investments and this is
almost the third highest globally.
This means that we need private sector to support and complement government of Rwanda's financing needs if we have to attain sustainable development
goals. Now, this is where Kigali International Financial Center comes in, because it's about creating a Pan-African financial center that facilitates
investment in Rwanda and across the region.
KOSIK: How much of a challenge is it though to attract investment as Rwanda's economic growth has been downgraded?
BARIGYE: I wouldn't say it has really been downgraded. Again, let's look at the facts as they are. July last year, the government of Rwanda issued
the Euro bond which was heavily subscribed.
Yesterday, during the Commonwealth meeting, we had the groundbreaking of an infrastructure project worth $100 million under Kigali International
Financial Center, we are seeing investments that are coming to be domiciled in Rwanda for example we have an African Exim Bank fund called FEDA, $200
million fund that is aiming at funding private companies both in Rwanda and across the region.
So in as much as we are seeing concerns around global recessions, our Central Bank has a very prudent monetary policy and we are confident that
we will be able to, together with other government of Rwanda agencies, we will be able to ride the wave.
KOSIK: Right, right. All right. Let's get to the question that I alluded to at the beginning the UK government deal with Rwanda to send asylum
seekers to Rwanda.
As you know, it's drawing major criticism with Prince Charles kind of wading into the issue. There are reports that say he called it appalling.
Talk us through why Rwanda is accepting them. Is this about, you know, the money that the UK is being given to Rwanda by the UK?
BARIGYE: I don't think that's something that -- I will talk about Kigali International Financial Center. Most recently, the Minister of Foreign
Affairs and the office of the government spokesperson have been very clear on why Rwanda is entering into this agreement.
For us at Kigali International Financial Center, instead, how do we work with British private and public institutions to see how we attract capital
to Rwanda, and an example is we have a very strong partnership with British international investments that has been supporting us on our legal
framework, so that we have under Kigali International Financial Center, a very robust legal framework that is compliant, and that is transparent as
per international standards.
KOSIK: And once again, you're hosting this major international event, putting the spotlight on Rwanda. So that spotlight shows not just
strengths, but also flaws. What are you hoping the message is that gets out?
BARIGYE: The message that should get out is Rwanda continues to seek partnerships among member countries of the Commonwealth. We are saying to
them, we need partners who we share mutual interests.
We have opportunities in Rwanda that are attractive. We have an environment that is conducive, and we are ready to work with them. That's the message
that we would want to come across.
Like any other country of course, there are always challenges, but our attitude has always been how do we collaborate to address and overcome the
challenges as they arise.
KOSIK: Nick Barigye, the CEO of Rwanda Finance Limited, such a pleasure to have you on the show. Thanks for your time.
BARIGYE: Thank you for having me.
KOSIK: Several travel delays have already left a dent in one of the most profitable seasons for airlines.
The CEO of Lufthansa gives his take on the chaos. That's next.
KOSIK: The Lufthansa CEO says travel chaos will likely continue throughout the summer. Thousands of flights have been canceled in recent weeks amid
staff shortages and bad weather.
In the U.S., cancellations are happening four times as often as they did in 2019. Richard Quest spoke to the CEO of Lufthansa during the IATA summit in
Doha. He told him why he feels optimistic despite all the recent challenges.
CARSTEN SPOHR, CEO, LUFTHANSA AIRLINES: The interest of flying, it's coming back with a huge energy and to be honest later but steeper than we
expected, that's true. That's why it is probably no real surprise that the industry, after being grounded for almost two years, is going back to 100
It needs a little bit more time with infrastructure and staff. And that is unfortunately what our passengers are experienced around the world. I think
it will not get much better this summer, we have to be honest. I think crews do what they can. The aircraft are on the ground. But this will be a
norm in terms of operations I think so much has to be said.
RICHARD QUEST, CNN HOST: When you look at the Lufthansa Group, where do you see the particular pinch points?
SPOHR: In our particular case, it is basically lack of staff or infrastructure progress, which is ground handling, baggage handling,
security checks, that probably is the worst. But there are also some areas in Lufthansa where we are now hiring again because we are short.
So then we have to reallocate pilots who have trained on the wrong aircraft. We need to retrain them. So indeed also within the Lufthansa
Group, we have our homework. But to be honest, like everywhere around the world, the main topic is infrastructure on the ground. And that's what the
industry has to cope with.
QUEST: That is to do with airport providers, it has to do with third parties. It's about the length of checks necessary for security. It is nuts
and bolts details.
How does the labor shortage --
SPOHR: -- indeed, as many countries in the world, my home country, Germany, sure, being one of them, where there is a shortage of especially
blue-collar labor. And we need around the world, at least countries like the one I am from, new immigration policies.
How do we attract people to our industry for the blue collar parts of the industry?
I think that is an issue, not just post COVID but general.
QUEST: I admire and appreciate your honesty about this because I think there is a wish to put a rosy scenario but the reality is, all of the
passengers will feel the effect.
SPOHR: Absolutely. I think that's another truth. At least for the airlines I'm representing, we can't cancel many more flights because they're sold
out. It's one idea, always to take load off the systems and some European airports have one that, reducing the number of flights.
And we have done that also internally but we can't go much further because the flights we now have in the systems are overbooked with high load
factors. And just to cancel those and rebook the passengers has reached its limits.
So one way or another we have to cope with bottlenecks; weather will play a role. And again, what I'm doing here, asking our passengers for a little
bit of understanding and sometimes for some patience. Probably it's part of the jobs that we as CEOs have in the industry this summer.
QUEST: On this question of recession, traditionally recession hasn't had a dramatic impact on air travel.
So you expect the same time around?
SPOHR: I think you give the answer yourself. I agree that, if you look at history, we don't see that much of an impact in the industry.
Now on top of that we see return of corporate travel from hopefully parts of Asia opening up. So we might well on and that's what we are hoping for,
seeing an effect of growth elements overcompensating potential recession elements.
So we are preparing for more growth in '23 and for the industry to come back to pre-COVID levels much less than we are expected.
QUEST: As I look at the group, you are now going for 20 percent of ITA in Italy, according to the reports. And as you look at the different elements
of the group, where is your focus now?
SPOHR: The focus will be premium long haul. That is always the backbone of what Lufthansa has been doing. Historically the Lufthansa Group has been
doing historically and our to most premium brands Lufthansa and Suisse are focused on.
But we immediately established point-to-point business and we established national brands from national carriers to expand our whole markets, indeed
looking at Italy within the Lufthansa Group would be a great home also for the new Italian home carrier, ITA. So that strategy will move on.
And we will see if the high loads of our premium classes around the world, I think that's where it's paying off.
QUEST: All in all, how would you describe your mood?
SPOHR: Well, after two years of being grounded, one way or another, including physically being grounded myself to a certain degree, I think I
am sharing the upbeat mood you feel around this conference.
And again, people want to fly again. People want to connect again. Our industry is back, indeed, it's talking about some bottlenecks which are
caused by too steep growth. What a great problem to have compared to the problems we have been now suffering for the last two years.
KOSIK: While Western airlines struggle with capacity, Korean Air is still coping with lockdowns in Asia. And bookings are slumping as a result. Its
CEO spoke to Richard Quest about how the airline is staying afloat.
WALTER CHO, CEO, KOREAN AIR: So we are at about just under 40 percent capacity right now, mostly long hauls. We hope by the end of July we will
be about 40 percent, which is very slow.
QUEST: You must be looking enviously at the other airlines here that are now, in many cases, exceeding capacity of 2019.
CHO: Right. Yes, a lot of our network covers China and Japan, which is still very closed, which is a handicap for us right now because we cannot
operate there. And that is the biggest cost over right now.
QUEST: How are you operating the airline?
Because if you've got 40 percent into capacity, you are still losing money there you're your higher fuel prices than everybody suffering from, it must
be making management (INAUDIBLE) very difficult.
CHO: Well, we are not losing money. Our freight business is really holding us up very strongly and, this year, the first half of the year was actually
stronger than last year, which last year was our strongest year ever in our company history. And cargo demand is still very strong and we are just
adjusting our capacities accordingly.
QUEST: The merger with the takeover of Asiana is well and truly bogged down with China's regulations, the U.S. regulations, the E.U. regulations.
Do you have concerns that this may not happen?
Are you hearing rumblings that this is going to be very difficult to get through?
CHO: No, I'm confident that we are on track, we are on schedule. We will be ready for their demands of their authorities when we finally get to meet
them. We will be able to discuss and meet their requests. And I'm confident we will be through it by the end of the year.
QUEST: What do you think you learned about yourself during the pandemic?
I've asked lots of CEOs about this. And they all talk about the ability to lead. They talk about just make a decision. If you have to change in the
future, fine. But just make a decision.
What have you learned about yourself?
CHO: Well, when my executive staff first came and told me that they're going to convert our passenger plane into freighters, I thought that was a
crazy idea but I just wanted to try it because that was better than just parking it.
And first flight was a small margin. But it became very successful and that was a success story for the last three years. Then I realized, OK, I have
to listen. I have to listen to our staff because they know better.
I mean, I don't know everything. If we combine our brains together, we could win this. So it was tough, very tough, but also very exciting and, in
some ways, it was fun.
KOSIK: Great interview. And that is QUEST MEANS BUSINESS. I'm Alison Kosik. Feel free to follow me on Instagram and Twitter. I'll be back at the
top of the hour as we dash for the closing bell.
KOSIK: Hello, I'm Alison Kosik. It is the dash to the closing bell and we're just two minutes away. The Dow turned positive this morning during
the Fed chair's Senate testimony. Jerome Powell said he doesn't think the fight against inflation will necessarily cause a recession. The S&P 500 and
the Nasdaq both flat as well.
All three major averages coming off strong gains from Tuesday. Central banks around the world are fighting soaring prices. Earlier I discussed the
risk of a recession with Vivek Paul at the BlackRock Investment Institute. He said a soft landing is more likely in some countries than others.
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VIVEK PAUL, BLACKROCK INVESTMENT INSTITUTE: Using that very dull word, I think it is different I guess in terms of the likelihood of going across
the world, I think the proximity I guess that Europe and the U.K. has to the crisis that is unfolding in the Ukraine is greater. That means the
impact on our energy prices indirectly and also I guess more broadly on growth is more pronounced and felt here.
So the likelihood is clearly I think would be greater in Europe than it would be in the U.S. I think in the U.S. the big risk is I think that I
think one of your previous correspondents was talking about lagged effect between enacting policy and the impact that it might have on growth.
And the real scene here I guess is that the Federal Reserve might go materially above neutral. That is what they're indicating to markets, sort
of a middle digit 3.5 type range where we see neutral for them more like 2.5.
So with that in mind, materially above neutral, that is when you are likely to see potentially that slowdown occurring in house in the first half of
next year. And to be clear, we are not talking about I guess that automatically being a repeat of global financial crisis or something like
Recessions are different. But still, the odds of a downturn are materially greater than they have been.
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KOSIK: Looking at the Dow components, United Health Group and Johnson & Johnson are near the top. Chevron stock, that is near the bottom.
That is your dash to the bell. I'm Alison Kosik. As you can hear, the closing bell is ringing.