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Quest Means Business
Stocks Lower After Posting Best Gains In July Since 2020; China Warns Action If US Speaker Pelosi Visits Taiwan; Recession Fears Rise In Europe Amid Worsening Economic Data; Grain Shipment Departs Ukraine For First Time In Months; Intense Shelling Damages Civilian Buildings In Mykolaiv; Lufthansa: Talks Ongoing As Pilots Threaten To Strike. Aired 3-4p ET
Aired August 01, 2022 - 15:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN BUSINESS ANCHOR: The start of a new trading month. We have an hour to trade on today. You can see a bit choppy. The gains and the
losses are relatively small. In fact, we're at zero at the moment. That's been the tenor of the day, the market deciding which way it's going to go.
The markets and how they are looking, and the main events of the day.
Uncertain: That's the key word as unprecedented economic conditions lead just about everybody -- investors, companies, and central bankers -- there
is no future ahead.
Officials say Nancy Pelosi is expected to go to Taiwan this week. It will be the highest visit from a US officials in a quarter of a century.
And in Germany, Lufthansa pilots are voting to back a further impossible strike.
We are in New York -- I'm in New York. It's Monday, it's August the first, I am Richard Quest, I mean business.
Well, tonight, I'm back. It has been a good four weeks', a long service leave and I've been away enjoying time and enjoying myself in France and at
the beach. Four weeks in total, since I said this --
(BEGIN VIDEO CLIP)
QUEST: One of the perks of being 20 years is a one month sabbatical that you get.
Whatever you're up to end the month ahead, (Speaking in foreign language.) I'll see you in August.
(END VIDEO CLIP)
QUEST: I promised to see you in August. Well, as you can see, I had some excellent meals. I made some great coffees, and there were some
extraordinary sunsets and a plenty of chance to refresh and rethink.
Of course, everything continued quite happily without me and what a month it's been.
US stocks had their best month in almost two years, maybe I should stay away a little bit more often. With the NASDAQ up more than 10 percent, the
Dow and the S&P rose as well. And all of this, despite difficult economic environments and GDP numbers suggesting, well, the current economy is
It started with oil falling below $100.00 a barrel in the US at the beginning of July. The economy added 372,000 jobs in the previous month,
and from there, the data was sour.
The dollar hit parity with the euro, reflecting weakness in the European economy. And of course, the flight to safety. Inflation hit a new 40-year
high in the US. The Fed raised interest rates again by 75 basis points, and GDP fell for the second great quarter, prompting about whether it is a
recession or not. All of this while President Biden despite the claim saying a lot of data is still a positive.
(BEGIN VIDEO CLIP)
JOE BIDEN (D), PRESIDENT OF THE UNITED STATES: The record job market of record unemployment of 3.6 percent today. We've created nine million new
jobs so far just as I became President. Businesses are investing in America at record rates. That doesn't sound like a recession to me.
(END VIDEO CLIP)
QUEST: So Mohamed El-Erian is the President of Queens College at Cambridge University, adviser to both Allianz and Gramercy. Mohamed is with me now.
Well, a lot happened in a month, but the core question remains, the uncertainty that exists whether or not we get a technical recession or not,
the monetary medicine hasn't really started to take effect yet.
MOHAMED EL-ERIAN, ADVISER, ALLIANZ AND GRAMERCY FUNDS MANAGEMENT: That's absolutely right and welcome back, Richard. It is wonderful to have your
Yes, I mean, we have this peculiar situation in which very high inflation is causing the Fed to aggressively hike interest rates into a slowing
economy and it's not just a slowing US economy.
While you were away, we also had the IMF latest forecast, and they were labeled gloomy and more uncertain. You and I know that the IMF doesn't use
the word "gloomy" very lightly.
QUEST: So in this scenario because everybody is focusing on the fact that job growth is still there and one of the usual precursors or necessary
conditions for a recession is rising unemployment, or at least faltering job creation, do you think we are seeing a new paradigm?
EL-ERIAN: I think we're seeing a paradigm of supply disruptions and part of that supply disruptions is in the labor force. So, we are not seeing as
you know, as high a labor force participation as we would expect. We still have 1.9 vacancies for each person unemployed in the US.
So we are in the new paradigm of deficient supply. Part of it is being played out in the labor market. And of course, a much bigger part is being
played out still today in supply chains.
QUEST: The significance of the war in Ukraine, the ability of Russia now, I noticed when Russia reduced the supply of gas to Germany, prices rose,
but Germany is becoming a lot more efficient, and weaning itself off Russian gas.
So as we go into winter, can you see that as being a less significant play?
EL-ERIAN: Yes, to the extent that we are seeing high prices destroy demand. We are also seeing it for petrol or gasoline in the United States.
There is much less consumption, people are driving less, but having said that, if Russia were to cut completely gas tomorrow, Germany,
unfortunately, would still fall into a big recession.
Germany has reduced its dependency, but hasn't eliminated it.
QUEST: The earnings season is underway. The numbers are better than perhaps we had expected, not as good as some would hope. Now, as I just
started, we said that there hasn't been the -- we're not seeing the full thrust of monetary policy yet, but we are getting an idea of what the
landscape looks like, as we go into higher interest rates and what for you is that earnings landscape?
EL-ERIAN: So, I think most companies are now finding a new phenomenon, but it varies from one to the other. For a long time, they were worried about
the cost side, high costs, high inflation, and what to do in terms of you passing on to prices or not.
Now, they're worried also about the revenue side, but when you go from the general statement to specifics, I can tell you that companies vary
tremendously in terms of how robust the demand is, they vary tremendously in terms of the pricing power, so expect a lot more dispersion in company
If you get that dispersion in performance, it is very difficult for investors to value what is good value. I mean, we're moving into this
position, right? So S&P or Dow or an individual company might be down 20 to 30 percent, but it is very difficult to value whether that company is cheap
or expensive, other than traditional EPS methods, if you're going into a recession.
EL-ERIAN: It is and that's why you've seen this inability of markets to come up with a theme and stick to it. They're still over reliant on the
You know, when you were away, Chair Powell had an unscripted remark in which he suggested an interest rates with mutual, the markets took off.
Four percent of the 10 percent you cited for the S&P in July, came immediately following the Fed announcement.
It was the biggest move in equities since the Fed announcements, and it just shows you how sensitive the markets still are to any macro indicator.
QUEST: Where do you think we are? I mean, I was going to say the Fed has front loaded its rate rises with the two three-quarter percent, but that
might not necessarily be a particular strategy. That might just be a reaction to the fact that rates, that inflation is so high. Is it front
loading for purpose? Or is it front loading out of panic?
EL-ERIAN: It's the latter. They're playing massive catch up. They have fallen so far behind the inflation dynamic that there are questions about
their analysis, their forecasts, their communications, and their policy reactions. That's not good for the world's most important Central Bank.
QUEST: Finally, how does this happen? How do we get to -- all right, even with supply chain, even with Ukraine, how do we get to a situation where
every major Central Bank has been so -- and this is my word not yours -- has been so either cautious or negligent that they didn't spot inflation
about not just rear its head, but go on a gallop?
EL-ERIAN: If you want to be charitable, you would say that the changes were all exogenous and unanticipated. Who would have anticipated the war in
Ukraine? But you know, inflation was a problem before the war in Ukraine.
The US inflation rate for mid-February was already seven percent. I think is complacency. People got used to a certain macroeconomic regime of
insufficient demand and they didn't pay attention to the extent to which COVID has changed the underlying dynamics of the global economy. It was
QUEST: We're going on to the next story, but before I go to the next story, I want your thoughts on it.
China is warning, it won't sit by idly. Nancy Pelosi, as you know, is expected to visit Taiwan. The relationship -- if China decides to get
aggressive, whether because of Pelosi or any other reason, is this an exogenous event that could mate all the others pale into insignificance if
China decides to go aggressively against the US or others because of Taiwan? How worried are you on the Taiwan question?
EL-ERIAN: So I don't know what aggressive is, but if it is, when I'm thinking, you're thinking and they really do go aggressive, that would be a
major shock. It would fragment the global economy even more, and it would increase supply uncertainties and demand uncertainties.
QUEST: Mohamed El-Erian, I'm grateful to have you with us, sir. Thank you very much.
EL-ERIAN: Thank you.
QUEST: As we continue to look at that story, the Chinese leader, Xi Jinping has warned President Biden last week. HE described it as "Don't
play with fire" over Taiwan and Xi urged the US to honor the one China principle.
Meanwhile, the Secretary of State in the US, Antony Blinken, pushed back. He hasn't revealed the Speaker's plans, but there was a pushback.
(BEGIN VIDEO CLIP)
ANTONY BLINKEN, U.S. SECRETARY OF STATE: If the Speaker does decide to visit, and China tries to create some kind of crisis or otherwise escalate
tensions that would be entirely on Beijing.
(END VIDEO CLIP)
QUEST: Now, officials in the US say Beijing may try to impose a no fly zone around Taiwan, potential US-China clashes, all in all uncertainty for
Taiwan's 24 million residents.
CNN's Will Ripley is in Taipei.
WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT (voice over): Taiwan's first line of defense from a Chinese invasion, Taipei Port, a crucial river
gateway to the capital. If China takes the port, the Presidential Office could be next.
For decades, Taiwanese troops have been trained to defend this island from the Mainland's massive military. The world's only Chinese-speaking
democracy preparing for a "David and Goliath" scenario made more credible by Russia's war on Ukraine.
The latest fiery threats from Beijing, its communist rulers regard Taiwan as a breakaway province, reaching fever pitch all over, leaked plans of a
potential visit to this self-governing island by US House Speaker Nancy Pelosi, the highest ranking US official to visit Taiwan in 25 years.
Pelosi is leading a congressional delegation to the Indo-Pacific region, including Singapore, Malaysia, South Korea, and Japan. No official mention
Senator Tammy Duckworth's delegation dropped by Taiwan for just a few hours in May, China still flew dozens of warplanes near Taiwan.
Taipei leaders called Beijing a bully, and the news cycle moved on.
UNIDENTIFIED MALE (through translator): I don't think they will retaliate. I don't worry about it. Mainland China is just threatening us. If they
really decide to invade Taiwan, they can kill it within two to three days. They don't need to talk much.
RIPLEY (voice over): It's a view shared by many in Taiwan. They've been riding this rhetorical roller coaster for decades.
As the latest US-China threats dominated global headlines, they were barely mentioned by the media in Taiwan. The island with the most to lose has lost
UNIDENTIFIED FEMALE (through translator): I wasn't interested in finding out more about it. I'm not concerned. China has done the same thing many
times, but exchanges between Taiwan and the US shouldn't be stopped because of this.
RIPLEY (voice over): Many Taiwanese people perceive war with China as a distant threat, a threat some observers say could draw closer with each
Xi Jinping is China's most powerful leader since Mao. He is bound to bring Taiwan back to the Mainland by force, if necessary, is backed by a massive
military and growing nuclear arsenal.
QUEST: Will Ripley. We will follow this closely.
Oil prices are down sharply today. And it's because investors think a manufacturing slump will bring down demand. There is not exactly an
encouraging reason why the prices have fallen, but nonetheless it has moved.
The IEF Chief is with me after the break.
QUEST: New economic data in Europe is increasing fears of an upcoming recession there. German retail sales fell 8.8 percent in June. Yes, you
heard me the right first time, 8.8 percent and there is the number on the screen, a large one. It is the biggest annual decline since records began
in 1994, not much better in the UK, manufacturing fell to its lowest level in more than two years.
CNN's Clare Sebastian now tells us that this is only the beginning. More disruption could be coming as Russia's war in Ukraine continues.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Even as Europe races to try to minimize the impact of Russian energy disruptions, there are clear signs
it may already be too late to avoid economic damage.
New data from Europe's largest economy shows rising prices and rising uncertainty are taking their toll both on how much consumers and how much
businesses are willing to spend.
German retail sales fell 8.8 percent in June compared to a year ago. That's the biggest year-on-year fall since they started collecting the data in
1994. Factory activity in Germany, which accounts for about a fifth of that economy also contracted for the first time in two years in July.
Well, the main reason for that was a big drop in new orders. Customers scared off, you guessed it, by uncertainty and higher prices. Factory
activity in the Eurozone as a whole also fell in July.
Well, this comes after GDP data on Friday showed the Eurozone actually grew in the second quarter performing better than expected, but inflation rose
again to 8.9 percent, and arguably, it's the second half of the year, where the real test will come. The EU is asking members to ration energy,
industrial companies and making contingency plans for a full gas cut from Russia, and the European Central Bank could raise rates further as it tries
to rein in inflation.
Whichever way you look at it, the odds of a recession in Europe are rising.
Clare Sebastian, CNN, London.
QUEST: Now, with that thought, oil prices are tumbling on signs manufacturing is losing steam in Europe and China. The two main benchmarks
are both under $100.00 a barrel and prices have been falling for two straight months with investors looking for OPEC on Wednesday where
September's output will be decided.
QUEST: Matt Egan is with me. This is a perversion in a sense, isn't it? Because the reason prices are falling is because there are concerns about
economic growth and recession and the demand.
MATT EGAN, CNN REPORTER: That's right, Richard. This is good news for consumers, even if it is not happening for good reasons. US oil prices
closing today below $94.00 a barrel. We haven't seen anything like that in five months. Brent, the world benchmark settling at an almost exactly
$100.00 a barrel. This is a far cry from about a month and a half ago when both were $120.00 a barrel, and this does mean that relief is coming for
some consumers who are dealing with very high gasoline prices.
You know, in the US, the national average has actually done 48 consecutive days, gas prices are still high, but they've gotten a lot lower. But we do
have to talk about why this is happening and a lot of it does go to what Clare Sebastian was just talking about, which is that there are all of
these economic concerns.
There are worries about a recession in Europe. Also, of course, concerns about a recession here in the United States, and a slowdown in Asia and you
put all that together, and you get weaker demand for energy. So it's nice to see that oil prices were coming back down. It's nice to see the gasoline
prices are coming down. That will be helpful when it comes to inflation, but it does speak to this darkening economic mood right now -- Richard.
QUEST: The other side, of course, is China where the prospect of China reopening from its Zero COVID Policy would create a greater demand for
EGAN: That's right. I mean, these China COVID lockdowns have been major impacts for oil prices. They sent oil prices going down sharply earlier
this year. And as China's started to reopen, that has driven up prices. But I also think that there's just greater concerns about the health of China's
economy, especially its property sector.
And so if you have China, you know, the biggest source of demand in the world, if they're dealing with some real economic trouble, that of course
is going to weigh on oil prices.
QUEST: Matt Egan, thank you, sir.
Joseph McMonigle is with me, the Secretary General for the International Energy Forum, and former formerly Chief of Staff at the US Energy
It's a fool's game to predict or to forecast or to speculate where oil will be tomorrow or next Thursday, but I think it is useful if we understand the
trend. Where do you see the trend?
JOSEPH MCMONIGLE, SECRETARY-GENERAL, INTERNATIONAL ENERGY FORUM: Yes, well, I think Matt Egan sort of spelled out I think, a lot of the data.
Really, this is, I think, a tale of two markets. We've got the financial markets, the paper markets that are looking at this weak economic data,
fears of a recession, bad economic data, also out of China. And so they're pricing in recession and therefore lower demand and that is why prices are
On the other hand, you have the official selling price set by Saudi Arabia and other key producing countries, those are rising. So the physical
markets are quite tight, still, but the paper markets are pricing in, bad economic data and future declining demand.
But going forward, Richard, I mean, I have to say, the one thing you pointed out in your question to Matt, China reopening, which I assume will
happen around the time of the People's Party Congress that will put additional pressure on an already tight market.
You're going to increasingly, I think, have jet fuel demand come roaring back, I think as well, especially with China reopening. That's going to --
that's been this kind of the missing part of demand returning to pre-COVID levels when jet fuel returns. That's additional pressure. And there's a
whole host of other factors this fall that I think -- go ahead.
QUEST: Right. But, yes, I just wanted to jump in. The issue -- the unknown in all of this, well, it is the known in a sense, is OPEC. Because unlike
most markets, here we are going to have the group of OPEC countries and the OPEC+ sitting down and pretty much gerrymandering, if you will, where the
price could go by supply and demand manipulation.
MCMONIGLE: Well, look, OPEC+ has a big say here, but I think it would be a mistake for us to assume that they are completely in control of this
because you know demand is back to pre-COVID levels, but supply is not and the difference in the gap between supply and demand, half of that gap is --
I mean, I think everybody assumes it is OPEC or Saudi Arabia responsible for the whole gap.
MCMONIGLE: Really half of the gap is from the US producers that are not back to pre-COVID levels of production. And there's a whole host of reasons
of why that is happening. But it's not all OPEC, I think it's a mistake for us to keep pointing the finger at OPEC and Gulf producers.
QUEST: Would you expect OPEC -- I mean, the deal that they came up with in terms of, they basically borrowed oil from future. They didn't necessarily
produce more. They borrowed from future quantities, and brought it forward. Would you expect that to continue?
MCMONIGLE: Well, look, the agreement is up in September, and they have a new Secretary-General that just started I think, today, from Kuwait, and so
they have a window of opportunity to make some changes here.
My guess is they -- you know, they're obviously monitoring this economic data just like everybody else is and I don't think they want to get too far
in front of things, but at the same time, I think they recognize that there is a supply deficit, and they want to be responsive.
I do think you will see some additional supply coming, but it will depend on, you know, is this agreement going to be renewed? Or it will be a new
agreement? Or, you know, a lot of times what they do, you probably know from covering a lot of OPEC meetings is they'll just extend the current
agreement to the end of the year.
But then that means at the end of the year, there will be another opportunity, another window to make changes. But I think we're in a supply
deficit. I think everybody recognizes that now, despite falling prices now.
QUEST: Is there the supply capacity that can be added? Because the one thing that the countries involved say, is, look, it's not a question of
just turning on the tap, we can't do it. Even Saudi has suggested that there are limits to how much extra could be produced?
MCMONIGLE: That's right. I mean, spare capacity is the key question going forward. So you just can't add unlimited amounts, I mean, you sort of have
to thread the needle here, you need to add some additional supply to meet demands and to keep prices at a smart level.
But if you add too much production, that means spare capacity is growing towards zero and then if there's a supply emergency, you don't have any
And so by adding more supply, it could actually be bullish for prices because you're lowering spare capacity.
QUEST: It is now the fundamental theory of OPEC, always the same and that is that prices collapse, for whatever reason, you suddenly see excess
capacity put into the market, demand falters or doesn't create, and prices drop. That's the big fear they have.
MCMONIGLE: Well, look, I think -- I like to say that the IEF is the producer-consumer organization of countries. You know, the IEA that's the
consumer group, and OPEC, of course, is the producer group.
I think this is one area where both sides agree, high price -- nobody really wants high prices. I know the conventional wisdom is that the OPEC
producers want high prices, but really they want healthy economies and healthy customers so that they can buy more -- the economies are growing so
they can buy more of their products.
So it's really not in anybody's interests for prices to be rising high. That said, we're not just in another energy boom and bust cycle here. We've
made structural changes to supply in the name of decarbonization and climate and the energy transition before demand has been reduced.
And so that's a structural change, unless we address that, even if the war in Ukraine ends, we're going to see not just for this year, but for the
next several years rising prices and a lot of volatility, and that's not good for anybody.
QUEST: But we'll have you talking more about it in the future, sir. Grateful you came to us tonight. Thank you.
MCMONIGLE: Great to be here.
QUEST: QUEST MEANS BUSINESS from New York. It is good to be back.
There's cautious optimism after a grain shipment finally, left Ukrainian port of Odessa. Western officials are not yet convinced that Moscow will
allow these exports to continue, after the break, in a moment.
QUEST: The first time in five months a commercial ship loaded with grain has sailed from Ukraine's Odesa port. Russia agreed to give it safe passage
after signing a U.N. broker deal to ease its Black Sea blockade. The ships go into Lebanon, it's carrying thousands of ton of corn to countries that
depend on Ukrainian exports. CNN's Eleni Giokos has the details.
(BEGIN VIDEO CLIP)
GIOKOS (voice over): After weeks of negotiations, the first ship leaves port in Ukraine. A slow sail and only a drop in the ocean to alleviate the
grain crisis. The Razoni carrying corn expected to arrive in Istanbul on Tuesday for inspection set up by grain deal between Russia and Ukraine.
Before setting sail to Lebanon, Tripoli port, the U.N., a broker of the Green Deal inked in Istanbul welcomed the development.
Turkey who spearheaded the negotiations and now host the Joint Coordination Center says more ships to depart soon. The shipment is very positive,
according to the Kremlin spokesman, while the U.S. Embassy struck a more cautious note about the deals future. The agreement remains shaky with
Russia hitting the Odesa port just after the signing last week. The first ship has left the port.
But the success of the deal and ending global grain shortages will depend on whether or not the grain's precious transport keep sailing.
Eleni Giokos, CNN, Abu Dhabi.
(END VIDEO CLIP)
QUEST: Now, CNN's Nic Robertson is with me from south central Ukraine and join (INAUDIBLE) the significance. I mean, it is torturous, the lengths to
get this first ship gone, if you will, and there's not the prospect of many more at the moment.
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Well, there are more lined up in the ports of course, about 30 odd ships waiting to go and if
this one can get down all the way to Turkey without hitting a mine and without running foul of Russian shipping then that's going to be a success
and it's going to head off the port and then there'll be an assessment, did it go OK? Lessons learned.
But then the idea is to get brief very quickly, the rest of those remaining ships gone with their cargoes already loaded, last year's harvest. And then
get new ships coming in to get out the remainder of what's the 20 million tons that are left here in Ukraine to get those going and out. That's going
to depend on shipping costs and insurance costs, making sure that those are the price that the market can sustain.
So, it is -- it is an important first step but we have to see how it gets on. But at the same time while this is happening, Russia in the south of
the country has been ramping up its attacks on another port city over the weekend in Mykolaiv.
ROBERTSON (voice over): With dawn an end to Mykolaiv's heaviest night of shelling so far. But not to the fear it brings. In the immediate aftermath,
fires to be put out. The only fatalities at this residential mansion, multimillionaire businessman Oleksiy Vadaturskyy and his wife Raisa were
sheltering in the basement when their home took a direct hit. Neighbors still in shock.
MAXIM, MYKOLAIV RESIDENT: I don't know what to do. We hate Russia. It's unbelievable that it can -- in one modern just destroy everything.
ROBERTSON: Maxim has lived here almost 20 years, but maybe no more.
MAXIM: I just don't want to stay here right now.
ROBERSTON (on camera): This crater here gives you an idea of just how big the blast was. Debris strewn down here. And the windows of the building
ROBERTSON (voice over): Other buildings around here also hit. Those with military links off limits to our cameras. The mayor concerned Russian
sympathizers at work.
OLEKSANDER SENKEVYCH, MYKOLAIV MAYOR: I'm sure that they have spies who are going around the city. And they say like I saw the number of machines or
the people, military people. They send this information and Russian attack there.
ROBERSTON (on camera): And do you think those saboteurs might have helped in the attacks last night?
SENKEVYCH: I'm sure they helped.
ROBERTSON (voice over): Within hours, life returning to what passes as normal. Pensioners and others in line for drinking water. The city's clean
water supply destroyed months ago.
They hit us and they hit us hard from 1:00 a.m. until morning, Valantina tells us. We are scared, we want to leave. But that's how life is for us
ROBERTSON: Where the mansion was hit, and residents are richer. Another neighborhood of the dead businessman tells me he can't take it anymore,
that he'll leave.
Not clear if high-profile businessman Oleksiy Vadaturskyy was an intended target. President Zelenskyy held him a hero. His death and the up tempo
strikes here chilling this city's otherwise resilient mood.
ROBERTSON: And the message from the mayor to people in the city and there's about 230,000 of them left. Now there was 480,000 before the war, his
messages quite simply leave. The city has had almost constant shelling. The amount is going up. This is what we saw over the weekend. And his message
the other resident says really, this is a time to leave. Come back when the shelling stopped.
QUEST: Nic Robertson, thank you, sir. European travelers and are facing the uncertainty of a possible pilot strike at the German airline Lufthansa.
Lufthansa is running into labor issues at the height of the summer. CNN's Anna Stewart has those details.
ANNA STEWART, CNN REPORTER: Lufthansa pilots voted overwhelmingly by nearly 98 percent in favor of industrial action. Now that doesn't necessarily mean
a strike. Both sides can hope that some sort of agreement can be reached. The pilots union V.C. is demanding a 5-1/2 percent pay rise this year for
pilots and then for it to rise with inflation thereafter. In 2020, these pilots working for Lufthansa actually agreed to take a drastic pay cut of
up to 45 percent in order to help the company stay afloat during the pandemic.
Now that agreement ended this June, so after two years of cuts, along with rising inflation, they are wanting compensation for the loss of real wages.
He's also calling for uniform pay for pilots across all the Lufthansa group's airlines, which includes Austrian Airlines, Brussels Airlines, as
well as Swiss. And separately, pilots at Swiss, the other airline within the group rejected a proposal after months of negotiations.
So potentially, a strike could lead from the Lufthansa airline but also the Swiss Airline as well. Now the Lufthansa Group says they respect the
results of the pilots union vote from V.C.
They say they will continue to hold constructive talks to find a joint solution. And they added that the next meetings dates have already been
agreed. The Lufthansa airline is already suffering some of the worst strike action in the world. Ground staff went on strike last week and caused around 1000
flights to be canceled. And that impacted 130,000 passengers.
Those I spoke to last week who were stranded in various airports around the world said they might not be able to get on a rescheduled flight for days
or even more than a week. And a huge part of the problem is the fact that this strike action is happening when there is incredibly tight capacity in
terms of flights. Anna Stewart, CNN, Dubai.
QUEST: And for the moment that's QUEST MEANS BUSINESS. At the top of the hour, you and I together will make a dash for the closing bell. Until then,
join me in Riyadh gateway to Saudi Arabia. Together, we're getting to Saudi Arabia.
QUEST: I'm Richard Quest. Together we have two minutes before the closing bell. It's time for a dash ahead. Today in the market, Dow was flat. Three
numbers between (INAUDIBLE) Dow down 15 points. The sea soaring is well underway. The S&P, the NASDAQ, they are also taking a breather, perhaps
entitled to after the best month in almost two years. Economist Mohamed El Erian, the guru blames central bank complacency for rising inflation,
slowing growth and says the shocks of the pandemic and the war caught them off.
(BEGIN VIDEO CLIP)
MOHAMED EL ERIAN, PRESIDENT, QUEENS' COLLEGE, CAMBRIDGE UNIVERSITY: If you want to be charitable, you would say that the changes were all exogenous
and unanticipated who would have anticipated the war in Ukraine. But, you know, inflation was a problem before the war in Ukraine. The U.S. inflation
rate for mid February was already seven percent. I think its complacency, people got used to a certain macroeconomic regime of insufficient demand.
And they didn't pay attention to the extent to which COVID has changed the underlying dynamics of the global economy. It was complacency.
(END VIDEO CLIP)
QUEST: And now look at the Dow components. You can see the best is Boeing and had a good day. Two announcements out of Boeing and much of the Dow's
gains is on the back of Boeing. You've got Boeing struck a deal this weekend to avert a strike and it's their approval to resume 787 deliveries.
At the other end, you have travelers, you have Chevron not surprisingly, with oil prices, Dow's down. Caterpillar had a good strong session and now
it is off. Having been upset four percent previous day. That's the dash to the bell. I'm Richard Quest. Whatever you're up to in the hours ahead, I
hope it's profitable. On Wall Street the closing bell is ringing. Pamela Brown is with "THE LEAD" now.