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Quest Means Business
US Fed Slows Interest Rate Rises As Inflation Cools; China Expanding Its Influence In Landlocked Lesotho; SEC Cracks Down On Influence Stock Scheme; United Airlines Expects Post-Pandemic Travel Record Over Holidays; Delta Upbeat On "Robust" Travel Demand; Airlines Industry Expected To Turn $4.7 Billion Profit Next Year; COVID-19 Spreading In Beijing As China Loosens Policy. Aired 3-4p ET
Aired December 14, 2022 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:32]
RICHARD QUEST, CNN INTERNATIONAL HOST: An hour to go before the end of trading on Wall Street, and it is Fed Day, and the result was expected, but
the projections, that's what sent the market into a bit of a tizzy, and we're down quite sharply. We're off 220 points.
We need to analyze whether this is a justifiable fall bearing in mind what they have said on the Fed. Rates did rise by the way, in case you were
wondering, by half a percentage point.
the markets and how they are trading and the event of the day of which everyone is talking. The Fed is slowing the pace of rate rises, and it
signals that rates could top more than five percent next year.
President Biden is hosting African leaders as part of the US push to build economic ties and fend off both Russian and Chinese influences.
And Morocco, fighting to stay in this World Cup after France took an early lead. We'll update you every step of the way as we move forward.
We are live at the New York Stock Exchange on Wednesday, December 14th. I'm Richard Quest and I mean business.
Good evening.
The US Federal Reserve has ended its streak of jumbo rate rises of 75 basis points, three-quarters of a percent. In the last hour, it has announced
that it was raising rates by half a percentage point. Now, that in itself would have been a considerable amount in days gone by.
However, in this new environment, it breaks the streak of four consecutive three-quarter point rate rises.
As data is showing, US inflation has cooled or at least is off the top. Peak inflation has been seen some people seem to think. The Chair of the
Fed Jerome Powell is speaking at the moment.
While he has been speaking, of course, the markets dropped quite sharply. If you look at the way the markets trade, we are now off on all three major
indices, with the largest losses being as against the NASDAQ, and the markets had been higher before the decision. So we need to understand why
they took this decision in such poor odor.
Well, the Fed has signaled it would raise rates next year to higher than previous projections. Remember our famous dot-plots. The dot-plot shows
where the Committee members think interest rates are going to go.
Now, if you look at the dot-plot before September, you can see more clearly there, they were all saying the dot-plot had it under five percent.
They did not believe rates would go beyond five percent next year, and that was all of them. Now, it's all but certain. Look at this year's dot-plot or
this month dot-plot, this quarters and you see only two participants just at the top of the range, the rest are all in there, with some going in
excess of five-and-a-half percent.
There was also a cutting growth projections from 1.2 to half a percent. In other words, you're getting very close to recession. When you're only
growing by half a percent, it is only between a cut and a slit before you do fall negative.
The Chair Jay Powell said its policy remains restrictive until inflation has been crushed.
(BEGIN VIDEO CLIP)
JEROME POWELL, US FEDERAL RESERVE CHAIRMAN: Reducing inflation is likely to require a sustained period of below trend growth and some softening of
labor market conditions. Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the long run.
This historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done.
(END VIDEO CLIP)
QUEST: Paul La Monica is with me. They expect inflation will fall sharply next year, but that's largely because of the base effect, isn't it? Numbers
drop out at one end and don't get added on the other.
So at the end of the day, where are we?
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes. I think, Richard, the problem is, at the end of the day, even though you are correct to note that
inflation pressures are easing, the Fed did still raise its projections for its preferred measure of inflation, core PCE, that is a troublesome sign
because you're going to have people talking about stagflation, especially with the GDP, revision down to, you know, only expecting 0.5 percent
growth.
[15:05:02]
So the Fed feels that this is persistently a problem and that more rate hikes are needed and Fed Chair Powell suggested as much in the press
conference just moments ago. Listen to what he had to say about that.
(BEGIN VIDEO CLIP)
POWELL: I think now that we're coming to the end of this year, we've raised 425 basis points this year and we are into restrictive territory. It
is now not so important, how fast we go. It is far more important to think, what is the ultimate level and then at a certain point, the question will
become, how long do we remain restrictive? That will become the most important question.
(END VIDEO CLIP)
LA MONICA: Yes, and you just heard that, Richard.
Clearly, the Fed, Jay Powell thinks that more rate hikes could be necessary, and I think that you had some investors that were probably a
little bit too bullish, maybe they've been hitting the eggnog a little early in the spirit of the Holidays, thinking that the Fed would begin to
start cutting interest rates at the end of next year.
That's likely a pipe dream, and I think people realize that it is not going to happen anymore, unless inflation pressures really cool off, you're now
kicking any hopes of rate cuts, probably into 2024, I don't think the market likes that.
QUEST: Paul La Monica. Paul, thank you.
Now the Fed is suggesting it will slow the speed of rate hikes. Rates will stay elevated for longer. That's the way the medicine works. And the most
telling point was what Jerome Powell said, at the moment, it's already raised rates by a total of four and a quarter points, four and a quarter
percent in our language.
The Fed has brought its fight against inflation to a boil. Now, it is turning down the heat. It's not at a simmer. I think it's above a simmer,
as it is continuing the effort to dump down price rises.
Joining me today is Tendayi Kapfidze, the Chief Economist at Wells Fargo. What did you make of it? What grabbed you from what we saw today?
TENDAYI KAPFIDZE, CHIEF ECONOMIST, WELLS FARGO: Yes, so I think you know, you just mentioned the 425 basis points. It is really the end kind of the
capstone, right, to an extraordinary three years of economic development, starting with the COVID crisis.
So I think what the Fed is looking for, and what the hope is, is that 2023 kind of gets us back to more normal economic circumstances, with, you know,
the economy, getting past some of these dislocations that were created by the COVID crisis.
QUEST: Right. But stagflation bearing in mind, they cut the rate of growth for next year, and they have increased their preferred measure of
inflation. We have stagflation.
KAPFIDZE: So inflation is still the primary challenge, right? So what they are trying to do is they trying to ensure that they defeat kind of the
inflation beasts, right?
So the previous time that they had high inflation, 1980, we had 600 basis points of heights, they kind of eased off the boil, and inflation kind of
came back.
So even though they are projecting a slowdown in the economy, they still want to make sure that they are fighting inflation, and they don't want to
think people think that they're off that fight.
QUEST: Right. But what I'm seeing here is that inflation remains high, growth is coming down, and they keep having to ratchet it up. Now, we're
talking about peak rates at what? Five, five-and-a-half percent here. What do you think?
KAPFIDZE I think is the appropriate kind of move, right? And if you look at what the economy is doing right now, the economy is starting to slow,
right?
You look at consumer spending, you look at something -- I look at -- it is called final sales to domestic purchases, we're getting a slowdown in the
economy, which is creating a slowdown in goods inflation.
The challenge now is that you're still going to have a lot of services inflation, which is related to the labor market, so they are still in that
fight because of services inflation.
QUEST: How restrictive -- look, if we bring up the dot-plot, so we can see where the dot-plot is, and you can see it here. This is the latest,
this is the December dot plot. We're all up to five -- over five percent except for two. Do you think that's a realistic number? Are you looking for
higher?
KAPFIDZE: I think that's realistic, right? There are a couple of challenges with this. If we look at kind of the way that monetary policy
works, right, they are raising borrowing costs to slow down the economy. One of the challenges is that consumers and businesses have really strong
balance sheets. That's one of the reasons why the Fed had to be so rapid in the hikes. Right? And we haven't quite seen the amount of damage in the
economy that you'd have thought with this rapid pace of hikes, right?
QUEST: Right. So you have two choices now. You either --
KAPFIDZE: Yes.
QUEST: This either works where we are or you have to do more damage, which is it?
KAPFIDZE: If you look at their projections, they think it's going to work, right? My expectation is that it is probably going to work but it's a
very, very delicate dance.
What they are trying to do is they want to slow the economy below potential, right, without causing the economy to actually go negative.
That's a very narrow runway that they're trying to hit.
[15:10:09]
QUEST: Do you think they're going to do it?
KAPFIDZE: I think they have a good chance, but it's not in the bag yet.
QUEST: So, if we have a dose of stagflation in the US, you've got similar in Europe at the moment. Britain is a Brexit basket case, at the moment, in
terms of already being in a recession. What more needs to be done?
KAPFIDZE: Yes, so I don't know that I would term it quite as stagflation. You know, even in the US, right? So there are two ways that we look at
inflation, right? We look at the year-over-year number, which is what most people kind of focus on.
If you want to see what's happening in the near term, you want to look at the month-over-month number, and the print that we just got yesterday, 0.2
percent month-over-month, if you annualize that, that's about 2.4 percent, right?
So that's a much lower rate of inflation than you're seeing in the year- over-year numbers.
So I don't know that I'll quite characterize it as stagflation, particularly because the month-over-month numbers are telling you that it's
not so and we are seeing sustained downtrend in the year over your numbers.
QUEST: Thank you very much, sir. I'm grateful. Thank you.
KAPFIDZE: All right. Thank you.
QUEST: President Biden is hosting African leaders in Washington. They're attending a three-day Summit, which is a chance for the US to strengthen
ties with a continent that's being also caught of force by Beijing. That and more after the break.
QUEST MEANS BUSINESS from New York.
(COMMERCIAL BREAK)
QUEST: Leaders of more than 40 African countries are in Washington as part of a three-day Summit, which is being hosted by the President. It's a
trade investment and global competition agenda where the US wants to improve relations with Africa at the same time as China and Russia are
expanding their influence.
(BEGIN VIDEO CLIP)
JOE BIDEN, PRESIDENT OF THE UNITED STATES: Partnerships not to create political obligation, not -- or foster independence, but to spur shared
success. I emphasize shared success and opportunity, because when Africa succeeds, the United States succeeds; quite frankly, the whole world
succeeds as well.
(END VIDEO CLIP)
QUEST: The amount of trade between China and Africa hit a record, $254 billion last year. The US and Africa is a quarter of that. It's 64 billion
and even when it got to its peak in 2008, it was considerably less, only $142 billion.
[15:15:06]
The African kingdom of Lesotho is a good example of what the US is up against. For years, China has outstripped US investment in this landlocked
country.
As CNN's David McKenzie reports, Washington now needs to make up ground.
(BEGIN VIDEOTAPE)
DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT (voice over): Lesotho's brand new Prime Minister knows how to make an entrance. A millionaire
diamond magnate, Sam Matekane entered politics just six months before the election. Now, he is here to celebrate his win, and meet us at his
mountainside mansion.
MCKENZIE (on camera): Good afternoon. How are you, Prime Minister?
SAM MATEKANE, LESOTHO PRIME MINISTER: Fine. How are you, David?
MCKENZIE: Very nice to have you, sir.
MATEKANE: Thank you very much. Thank you.
Our country was gone. This is reality. Lesotho was gone. Of course, it cannot do anything for itself. You know, with the debt that we have, with
many other things that were happening, we were not happy because we can see this is now the end of Lesotho.
MCKENZIE (voice over): This tiny mountain kingdom, entirely surrounded by South Africa has struggled for years with external debt, poverty, and
unemployment.
Past leaders, often turning to one country for help.
Lesotho's Parliament, the State Library, the Convention Center are all built by the Chinese. Even their Statehouse, a gift from the People's
Republic.
Were those smart deals to make well?
MATEKANE: Well, what happened in the past is the past. I'm focusing in the future now because the debt is there.
MARIA E. BREWER, US AMBASSADOR TO LESOTHO: I will often caution my African partners that if something sounds too good to be true, it probably
is.
MCKENZIE (voice over): In a new era of great power competition, the US government has recently taken a far more assertive line on China and
Africa.
BREWER: We want this trade investment to be on an even playing field, and that's something that again, is very important to us.
MCKENZIE (on camera): What do you mean by that specifically?
BREWER: That laws are fairly enacted, that development opportunities are open.
MCKENZIE: That would indicate that China's investment has been opaque in your mind.
BREWER: I think that we are always looking for more transparency.
MCKENZIE (voice over): Unlike China's No Strings Attached Policy, the US explicitly ties trade deals like the Africa Growth and Opportunity Act to
measures like democracy and freedom.
Agoa allows companies like Precious Garments in Maseru to export these Greg Norman golf shirts, quota and tariff free and employ thousands of mostly
female workers like Matopia Masekane (ph) who makes just under $150.00 a month.
(MATOPIA MASEKANE speaking in foreign language.)
MCKENZIE (voice over): "It is not enough to survive," she says, "But it still makes a difference, and it is better than sitting at home."
In a country with so few opportunities, even these conditions and this work can provide a lifeline for Lesotho's women. But this month, China announced
it will allow tariff free imports from the Lesotho in a host of the world's poorest countries.
And China recently forgave some of Lesotho's debt. It is donating a brand new hospital in Maseru, likely wary of its reputation for trapping
countries in debt.
MCKENZIE (on camera): If you look at the overarching trade, the Chinese have outstripped the US significantly in Africa. So, can you compete at
this point?
BREWER: We are what people aspire to be. America is what people aspire to become more and more like. We're not a perfect country, and we don't claim
to be, but our model of development, our sense of individual freedom, those are things that I think people here on the continent still very much value
and want to emulate.
MATEKANE: Competition will always be there. Whether we like it or not, it doesn't matter who is in competition with who, but it will always be there.
MCKENZIE: If you got the same offer from the US or China, which one would you take?
MATEKANE: I'll take both.
MCKENZIE (voice over): David McKenzie, CNN, Maseru, Lesotho.
(END VIDEOTAPE)
QUEST: And that is why that man is the Prime Minister.
Like Lesotho, Cape Verde is getting some help from both the US and China. It is the smallest country. It comprises 10 islands off the coast of West
Africa, potentially a strategic location. And last year, Washington announced plans to expand its embassy there and pledge closer trade and
security ties.
Beijing has also spent more lavishly. It has paid to renovate the presidential palace, and in 2017, Cape Verde signed on to China's Belt and
Road Initiative.
The Prime Minister of Cape Verde is with me now joining me from Washington, DC.
Prime Minister. I'm grateful for your time. Thank you, sir.
I'll start off with that question to Lesotho's PM, if you have the same offer, exactly the same offer, term for term, the same amount and same
terms from the US and China who would you take?
[15:20:10]
ULISSES CORREIA E SILVA, PRIME MINISTER OF CAPE VERDE: Cape Verde have a good relationship with the United States, very assured, because the United
States (AUDIO GAP) especially for Cape Verde we have more than our population residents of Cape Verde in the United States in Massachusetts,
and our relationship, it is very strong. And we're committed to develop not just in terms of trade and investment, but in terms of security (INAUDIBLE)
size of Texas.
QUEST: Right.
E SILVA: That's why our preferential partner is United States.
QUEST: Okay, so the preferred partner is the US and we are having a few difficulties with the connection to you, so I apologize for that.
If your preferred partner is the US, but you have taken investment from China, Belt and Road, and the one thing we sort of know about these Chinese
investments is they come with strings attached.
And I wonder, bearing in mind, you've just had further debt relief from the IMF following the pandemic, do you now have to be careful about the strings
that China is pulling?
E SILVA: Our relationship is about cooperation for development. We have important debt with China, although the debt is a contract with
international institution like World Bank, African Development Bank with support from IMF, Cape Verde have this problem to be dependent of the
financial and external financial whether with China.
China is our partner for the development. We have some private investment from China, but not very, very important.
QUEST: So what do you want from the US? When President Biden talks to you all and says, okay, we are here. We want to start redressing this balance
of influence. What do you want?
E SILVA: Our political dialogue, I think, United States and Africa must have a more open conversation, complicity in terms of values in Cape Verde
over values, principles, and the main values of democracy, freedom, and good governance is needed to create good conditions for the developer.
And our diaspora that is very important here, United States, as I said, you must show to have most of descendant of Cape Verde is here, and we need the
United States to be a good partner that has I said in terms of development for the trade investment process of our diaspora and security because
maritime zone is very, very important, and we need a good eyes for security.
QUEST: Prime Minister, we do have a poor connection, so I do apologize for that, but I'm grateful that you joined us today from Washington. Thank
you, sir.
As we continue tonight, the SEC is cracking down on influencers, who use social media to manipulate stock prices. It's a classic pump and dump
scheme of which you and I have talked about many times, you know, someone promotes a stock, inflates the price, they sell their holdings, and you are
left with the baby, so to speak.
Seven Twitter users and podcasters have been charged with fraud. A hundred million dollars is said to have been involved in this.
Brian Fung is with me from Washington.
You know, Brian influences may be new, and maybe have new gimmicky things, but pump and dump has been around for years.
BRIAN FUNG, CNN TECHNOLOGY REPORTER: It really has and what we're seeing Richard is just the latest flavor of very age old type of scheme. According
to the US government, these seven Twitter users and one podcaster allegedly engaged in a scheme to hype up stocks to over a million Twitter followers
and hundreds of thousands of users on Discord, a messaging app, and building up the hype around these stocks would encourage a lot of these
users to then buy that stock and drive up its price.
[15:25:02]
And what the US government says these people did was to then sell their positions in these stocks very quietly without, you know, advertising to
people that that was the plan all along.
And what this now shows is, you know, how social media platforms and new technology is letting, you know, potentially bad actors engage in age-old
types of stock manipulation, and now, the US government is saying, it is going to disallow that by bringing this case against these defendants, who
have now been accused of conspiracy to commit securities fraud, and each count comes with a potential maximum prison sentence of 25 years. So that
just gives you a sense of the stakes here in this case -- Richard.
QUEST: Brian Fung is in Washington. Brian, thank you.
It is QUEST MEANS BUSINESS tonight. You're going to hear from two top people from the aviation industry as we continue.
United Airlines Chief Executive said he is expecting a travel broom in the weeks ahead -- weeks and months. Scott Kirby will be with us on the
program.
And IATA's Director General, that's Willie Walsh, former head of IAG, he is going to boast about a very small potential profit for the airline industry
next year. It is so small, you might miss it if you blink. We'll certainly talk about return on capital employed. It's all after the break.
QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: I'm Richard Quest. We have together a lot more QUEST MEANS BUSINESS. The economic outlook may be gloomy. The airline industry though
says it sees clear skies ahead.
You're going to hear from United's Chief Executive and IATA's Willie Walsh.
And Beijing's COVID U-turn is giving some China whiplash, COVID whiplash, if you will. We will be on the streets of Beijing.
It's only after the news headlines, which you would expect because this is CNN and here on this network, the news always comes first.
[15:30:15]
(MUSIC PLAYING)
QUEST (voice-over): Ukraine's president Volodymyr Zelenskyy says all 13 Russian drones that attacked Kyiv earlier Wednesday were shot down. It was
the largest attack on the capital city in weeks. Ukrainian officials say they failed with no casualties reported and no energy infrastructure
damaged.
A new CNN poll finds there is little enthusiasm in the U.S. for a Biden/Trump election rematch. More than 60 percent of Republicans surveyed
said they do not want Trump as their party's nominee. And almost 60 percent of the Democrats said exactly the same thing about President Biden.
At least four people have died after a small boat thought to be carrying migrants capsized in the English Channel on Wednesday. A number of other
people were rescued in an operation involving French and British services. It follows the British prime minister, Rishi Sunak announcing plans to try
to stop migrants crossing the Channel in small boats.
(MUSIC PLAYING)
QUEST: United Airlines says it sees travel hitting a post pandemic record over the forthcoming holidays. It is expecting to fly more than 440,000
passengers a day. Think about that.
Along with that optimism, United is betting big on the future, having placed that historic order with Boeing only yesterday, 100 787s, dozens of
Maxes. I spoke to United's chief exec Scott Kirby, who told me that the company is positioning for the future and he reminded me that business
travel is doing better than everybody thought.
(BEGIN VIDEO CLIP)
SCOTT KIRBY, CEO, UNITED AIRLINES: Business travel is going to be different than it was before. Business people are still traveling.
One of the interesting things, Richard, that I hear frequently now from small businesses who are traveling more than 100 percent, I heard a number
of accounts say we are in a winning business that we could've never competed for because the big corporations aren't traveling.
And because we show up in person, we are winning business.
QUEST: The issue of cost, environment, net zero, all of these issues continue to swell around. There is no easy solution to sustainable aviation
fuel. I've got. That there is no easy or --
(CROSSTALK)
KIRBY: But there is a solution. It's not easy but there is a solution. The solution is staff, which by the way, the Inflation Reduction Act is,
sustainability provisions, I think we look back 10-20 years from now and say that's some of the most consequential legislation passed.
It makes a lot of investments for sustainability, not just for sustainable aviation fuel but carbon sequestration, hydrogen, nuclear -- it makes a lot
of projects pencil out. And I think we're going to see huge growth. Be able to see huge growth, not overnight but we're -- that is the foundation that
we can build a real industry, grow its investor scale (ph) (INAUDIBLE).
QUEST: The growth of your international is quite, it's quite strong. Well, it is not quite, it is very strong. You are making a big play on
international.
Have you got (INAUDIBLE) now?
KIRBY: We do. We really believe in the fleet we have. Now and we believe in the position that we are set up. It happened during COVID. All of our
competitors, because they thought that demand was never going to recover, retired huge sections of their wide-body fleet.
They downgraded all their pilots. We kept all of our airplanes. We (INAUDIBLE) around the world negotiated a deal with our pilots to keep
everyone place. And now we are (INAUDIBLE). So our competition internationally is going to struggle for years just to get back to where
they were in 2019. And we are light years ahead.
QUEST: Finally, and boom. (INAUDIBLE).
(CROSSTALK)
QUEST: I mean, I don't know how much you put into it but it got a lot of publicity at the time.
Do you still see boom as supersonic as a realistic flight option in my lifetime?
KIRBY: Yes. Oh, absolutely, is the answer. There's a lot yet to be done and, it is not a layup and is not going to be. But it's on the right path
and I feel good that, with the right focus, the right resource, we can ultimately get that over the finish line.
(END VIDEO CLIP)
QUEST: Scott Kirby, from United.
Delta is also optimistic next year. It's expecting earnings to double. The stock is up this session. Southwest is positive.
[15:35:00]
And if you look at the numbers, United was up previously. So that is sort of a reverse in a sense.
IATA, the group that represents the airlines is feeling. Good it's forecasting airline industry as a whole starts making a profit again 2023.
Willie Walsh is with me, director general of IATA, from the headquarters.
Willie, I have got the bunting out. You're forecasting a profit in '23 for the industry of a margin of, whoa, 0.4 percent.
WILLIE WALSH, DIRECTOR-GENERAL, INTERNATIONAL AIR TRANSPORT ASSOCIATION: Yes, it is good news, Richard. We are going in the right direction. We have
come through a terrible time. Still a long way to go but at least we are now heading back into profitability at a global level.
There is still quite a bit of work to do in some of the regions, particularly in the Asia Pacific region, which has been dragged down by the
continuing restrictions, although many of these are now being rolled back.
So I think the outlook for 2023 is actually quite positive.
QUEST: And I look back to the previous good times; airlines made money but they didn't make a fortune. Even some of the U.S. carriers did for
individual reasons did as an industry with a return on capital, this is even when the good times are here, they are not that great.
WALSH: That's true. If you look at that period between 2010 and 2019, 10 best years in the history of the industry, the average operating margin for
the industry was 5.5 percent. So it is razor-thin.
Now it clearly masks the fact that there are many airlines out there, who do significantly better than that. And indeed, to make a decent return on
the capital investment. But as an industry collective, the industry has always struggled to return its cost.
QUEST: What do you need now in an industry?
The industry remain the whipping boy -- and girl -- for environmentalists, even though all the measures that you have been taking -- and regulators
seem to be slow to want to remove any restrictions on things like ownership.
So what do you, as an industry overall, what is in your, on your Santa wish list for 2023?
WALSH: I think it is just good solid management by the teams around the world. I think many of them -- I just listened to Scott doing an
exceptional job. You look at how they have navigated through the crisis and the opportunities that they are taking advantage of now.
I think that the positive thing again about the industry from an environmental point of view is the commitment that was made during the
crisis. The depths of the crisis, many airlines continued to invest significant sums of money to guarantee the improvement in their
environmental performance.
That we all know we're all going to have to deliver on. So there are a lot of positives out there; certainly challenges ahead. But I think the
industry knows what it needs to do and is getting on quietly with what measures need to be taken to ensure we start returning to reasonable levels
of profitability.
QUEST: The reality is Europe. The European, whether it be airspace or regulatory or the slot system, Europe just can't get its act together to
make necessary changes.
WALSH: Yes, I think that is fair, Richard. I don't think Europe gets it. I mean they take for granted what they have in relation to aviation. And
clearly Europe has significantly benefited from deregulation and the consumers in Europe have had huge benefits from the growth in competition
that we have witnessed over the last 20 years.
And regulators, politicians there probably feel that they can keep that while still proposing additional restrictions, which is nonsense. But you
contrast that with the rest of the world. Where you go to the Asian and African regions. They are begging for more flights because they see the
economic contribution that they would be able to bring.
QUEST: Right. So if we look at next year, there has been a lot of consolidation.
Do you think we are over with?
And I don't just mean that niche but here or there or certain opportunistic moves.
As an industry globally, do you think we are done with large-scale consolidation for the time being?
WALSH: No, I think there is still opportunities there. I think the industry will be more cautious given the damage done to balance sheets over
the past 2 to 3 years. But there will be opportunities that I think some of the more ambitious airlines will pursue.
[15:40:00]
I think once that balance sheet damage has been repaired -- and that will take a couple of years -- then we'll get back to more serious M&A activity.
QUEST: Willie Walsh, have a good Christmas, sir, a good holiday season. Thank, you as always for being on the program and talking on these. I'm
always grateful for your time.
WALSH: Thank you.
QUEST: Now I need to point out here, if you are a JetBlue shareholder, you probably had a conniption a moment ago (INAUDIBLE) that we showed you that
they were down more than 9 percent. Absolute nonsense. The stock is actually off by less than 2 percent and the reason, the problem with our
data provider, something to do with the computers and the widgets.
We will sort it out, I promise you that. COVID numbers are soaring now that China have begun to ease restrictions, entirely predictable to be sure. The
government is opening new fever clinics to help control cases. How to live through the surge -- next.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
QUEST: China is opening up new fever clinics across the country to handle the unprecedented wave of COVID infections. New data shows around 42
percent of people have received a third dose of the vaccine.
CNN's Selina Wang checked out the eerily quiet streets in Beijing and then asked locals what it was like now that COVID restrictions have been eased.
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SELINA WANG, CNN CORRESPONDENT: China is starting to unravel its zero COVID policy. But instead of crowds out, celebrating, this is how reopening
is going in China, clothes shops, empty streets, people avoiding each other, because, for the first time, since the start of the pandemic, COVID
is spreading like wildfire, in Beijing.
People now either have COVID or they're scared to get it.
So I just spoke to the shop worker, in the store. And he told me that he's the only employee, without COVID, which is why he can still come to work.
And he says, "I am the only customer, who has come into this store all day."
The only crowds, I'm seeing, in Beijing, outside of hospitals, like this and pharmacies.
(Speaking foreign language).
UNIDENTIFIED MALE: (Speaking foreign language).
WANG: So he says his fever has gone down but he still has a cold. Hoping to buy medicine but he's worried they don't have any stock, because there's
these long lines, forming outside of pharmacies, across the country. People are trying to stock up. But stuff is selling out.
For years, China has been demonizing COVID, playing up the risks of long COVID.
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And now, suddenly, state media is publishing headlines, every day, saying "COVID is not a big deal." It's whiplash, for a lot of people. Because just
weeks before, if you got COVID, your whole community would have gone into hard lockdown. This is such a major and sudden change.
So China is finally opening up.
UNIDENTIFIED MALE: Yes.
WANG: How do you feel about it?
UNIDENTIFIED MALE: I feel it's pretty great. I wish they could have opened up earlier.
WANG: Has business been very slow or difficult?
UNIDENTIFIED MALE: You know, you can see there are -- there are not that many customers or other people just got the virus.
WANG: Are you scared about getting COVID?
UNIDENTIFIED MALE: I'm worried about my parents and my grandparents, a little bit.
WANG: People are relieved though that you no longer have to go to a quarantine facility, if you get COVID. Getting sent to one of those rundown
facilities was such a big source of anxiety, before.
And these health QR codes, that have been used, for years, to track and dictate where we can go?
Well, the government is now saying that you don't need them to enter most public places.
(Speaking foreign language).
UNIDENTIFIED FEMALE: (Speaking foreign language).
WANG: (Speaking foreign language).
So I don't need to scan my code. It feels surreal though that I can literally just walk in.
(Speaking foreign language)
UNIDENTIFIED FEMALE: (Speaking foreign language).
WANG: So she said, I can only do online delivery. So you can't even sit inside or order inside, in Shake Shack.
So outside the Starbucks, they have a sign saying you need to show a 40- hour COVID test. Even though the national rules don't require it, in Beijing, you still need a recent PCR test, in order to enter restaurants,
gyms and entertainment venues.
There are way less places now, to get COVID tests, in the city. And the lines are short, because most people are just staying at home. But just a
week before, at this exact same location, this was packed with people, waiting in line.
So behind me is a graveyard of COVID testing booths. It's like almost overnight in Beijing, they removed all of these testing locations. And
here's the remnants.
After years of harsh lockdowns, the government is finally letting people manage their own health. But people don't feel ready. And experts say the
country isn't either.
The country hasn't vaccinated enough of the elderly population and hasn't improved the health care capacity enough. So this reopening, it's going to
continue to be messy and uneven -- Selina Wang, CNN, Beijing.
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QUEST: Now here at the New York stock exchange, there been a certain amount (ph) of trading. But frankly, the noises behind me have all been
about football. We'll be in Qatar after the break. France and Morocco, then the winner meets Argentina in the final.
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QUEST: I'm not sure I've got time for a "Profitable Moment." But I will say goodbye (INAUDIBLE).
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QUEST: Tonight's "Profitable Moment," I can sum it all up like this: the Fed did largely what was expected and told us things will be even maybe
next year.
In the World Cup, France beat Morocco. Well, that might have been expected, too. They now face Argentina in the final this weekend. That promises to be
a corker.
And on the airline front, we were told airlines will make money, probably next year. Barely a smidgen; nothing new there. That was the way that day
went and that is QUEST MEANS BUSINESS for tonight. I am Richard Quest at the New York stock exchange.
Whatever you are up to -- and the closing bell is ringing, I've got my own little bell -- I hope it is profitable.
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