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Quest Means Business

ECB Cuts Rates For First Time In Nearly Five Years; Gaza Officials: Israeli Airstrike On UN School Kills 45-Plus; Heroes Of Allied Invasion Honored At Normandy; Columbia Sportswear Adapts As Consumer Habits Change; Etihad CEO: Plenty Of Room For Competition In Region. Aired 4-4:45p ET

Aired June 06, 2024 - 16:00   ET



JULIA CHATTERLEY, CNN INTERNATIONAL HOST: The day's trading session draws to a close with modest gains for the Dow, though some profit taking in big

tech stocks like NVIDIA. Traders also awaiting Friday's all-important US jobs numbers, and those are the markets and these are the main events.

The ECB becomes the biggest central bank yet to cut interest rates.

Officials in Gaza say an Israeli strike killed at least 45 people who were sheltered in a school.

And 80 years after D-Day, President Biden warns democracy is at risk once again.

Live from New York, it is Thursday, June 6th. I'm Julia Chatterley in for Richard Quest, and this is QUEST MEANS BUSINESS.

A warm welcome to the show once again, and tonight, the European Central Bank charting a new course against inflation as it cuts interest rates for

the first time in nearly five years. The ECB lowering its benchmark rate by a quarter of a percentage point to 3.75 percent. The ECB said price

pressures have eased and the inflation outlook has improved, still it warned the fight is not yet over.

And ECB president, Christine Lagarde said the bank is prepared to change direction if required.


CHRISTINE LAGARDE, PRESIDENT, EUROPEAN CENTRAL BANK: I can assure you that we take the fight against inflation extremely seriously, and if there is

one thing that I have learned in this job is that we have to be persistent, we have to be determined, we have to be data dependent, but we cannot give

up on the objective and our objective is to tame inflation and to bring prices back, to bring inflation back to two percent in the medium-term.


CHATTERLEY: The European Central Bank, just the latest central bank to ease policy. Canada became the first G7 nation to cut rates on Wednesday;

Switzerland and Sweden have also cut rates over the past few months.

Hanna Ziady is in London for us now and following the story.

Hanna, good to have you with us. What is more interesting to me, as important as it is and happiness for consumers of course to see interest

rate start to come down across Europe, it is less about the cut itself and more about what they said about inflation and growth. Those forecasts were

actually raised.

So for me the question at this moment is what does that say about the prospect of being able to bring rates even further down from here?


As you point out there, the ECB taking, I would say quite a cautious tone and not committing to any future rate cuts. Analysts are not expecting the

bank to cut rates at its meeting in July. The ECB raising forecast for inflation, as you said two-and-a-half percent from the 2.3 percent it

predicted in March.

Of course, the silver lining to some of this is that one of the reasons why inflation has ticked up is because economic growth is starting to recover

in Europe. We are seeing strong wage growth, signs of life returning to the Euro area economy, which was only narrowly avoided a recession just last

year. And the ECB upgrading its growth forecast, as you pointed out for this year, to 0.9 percent from 0.6 percent it predicted in March.

So some of this is good news, but it does complicate the picture for further rate cuts -- Julia.

CHATTERLEY: What normally would complicate the picture for further rate cuts is that all of these central banks would be eagerly watching the

Federal Reserve as well and waiting for the Federal Reserve to cut rates and then they would begin to follow.

What is also fascinating about what we are seeing is the Fed holding steady, keeping rates where they are, at least for now, and these central

banks are going ahead and beginning the cutting process.

Hanna, what do we think this means and how does it alter, if at all, the expectations for what the Fed does here?

ZIADY: So the Federal Reserve will meet next week and traders are not expecting it to cut rates overwhelmingly pricing in a hold, the ECB cut

before the Fed for the first time ever today and in fact, traders are not expecting the Fed to cut next month either.

Some analysts don't think we will see a cut from the Fed until next year. Inflation has been more stable in the US, coming down more slowly. Economic

growth in the US, much more robust than in Europe generally, although we are starting to see those economic fortunes converge.

But no rate cut is expected from the Fed, and that also complicates the picture because the ECB and other central banks will be hesitant to move

too far ahead of the Fed at the risk of importing inflation if their currencies weaken against the dollar as a result.

So, the question then becomes, Julia, who really is in charge.

CHATTERLEY: Oh, perfectly teed up, Hanna.

There is only one woman in charge who is in charge at this moment, the necklace, we have to talk about the necklace.

ZIADY: We have to. We have to so.


I mean, so, the necklace, there it is. Christina Lagarde wearing a necklace in the shape of the words "in-charge" that was not missed by journalists

reporting on this, sort of sending a clear signal that we are not beholden to what the Federal Reserve does. We are moving ahead, we are following our

data, as she said in that clip you played, we are data dependent. We are meeting by meeting dependent. We are focused on the economic fundamentals

in the Eurozone and specifically what inflation is doing and what our forecasts for inflation are.

I think I should get a necklace like that, too, Julia. What do you think?

CHATTERLEY: We all need an in-charge necklace, especially for those days when we feel vaguely out-of-control. We do love her. She is quite fabulous

in general, but that's a cute statement.

It sort of reminds me of Mario Draghi and his ties. Do you remember, we used to watch what Mario Draghi's ties were potentially saying.

ZIADY: Absolutely.

CHATTERLEY: This is absolutely a little bit more obvious.

ZIADY: Reading between the lines.

CHATTERLEY: Exactly. The lines are clear here.

Hanna, great to have you. Thank you.

ZIADY: Thank you.

CHATTERLEY: Now, the United States says it expects Israel to be fully transparent about an airstrike on a UN-run school in Central Gaza.

Officials in Gaza say the strike killed at least 45 people who were using the school for shelter. The IDF says Hamas militants were operating a

compound at the site.

Jeremy Diamond has this report, and I should warn you, the images and graphics some viewers may find disturbing.


JEREMY DIAMOND, CNN CORRESPONDENT (voice over): Mohammad Farajallah (ph) is still picking through the rubble of the airstrike that killed his brother

and alongside the blood spattered walls, he is still finding pieces of flesh.

(MOHAMMAD FARAJALLAH speaking in foreign language.)

DIAMOND (voice over): He believes, they are his brother's.

(MOHAMMAD FARAJALLAH speaking in foreign language.)

DIAMOND (voice over): "May his soul rest in peace," he says. "I wish I died instead. There is no hope in this life at all."

Mahmoud (ph) is the second brother Mohammad has lost during the war. His third brother is in the hospital in critical condition. His skull fractured

in the blast.

Mohammad is not the only one sifting through the rubble. The Gaza Health Ministry says at least 40 people were killed when the Israeli military

struck this building overnight.

But this is no ordinary building. It is a UN school converted like so many others into a shelter for thousands of Palestinians displaced from there

for homes.

Bloodstained mattresses now filling the space where dozens were sleeping at the moment of impact. Fragments of an American made GBU-39 bomb identified

in the wreckage according to munitions experts who reviewed this footage.

(UNIDENTIFIED MALE speaking in foreign language.)

DIAMOND (voice over): The same type of munition used in the deadly strike and Rafah last month that killed 45 people.

The Israeli military says it carried out of precision and intelligence based strike targeting 20 to 30 Palestinian militants, who it says were

sheltering in the school and preparing attacks on Israeli troops.

An Israeli military spokesman said the IDF was unaware of any civilian casualties. Hospital records tell a different story. Nine and women and 14

children as young as four years old are among the dead delivered to Al-Aqsa Martyrs Hospital.

(JABER ABU DAHER speaking in foreign language.)

DIAMOND (voice over): Those who survived also accuse Israel of targeting civilians.

(JABER ABU DAHER speaking in foreign language.)

DIAMOND: "Netanyahu is killing the civilians, he is not killing militants," Jaber Abu Daher (ph) says. "It's innocent people asleep in an UNRWA

facility. What did children and the elderly do? What did they do to him?"

The school is one of at least 180 UNRWA buildings to be hit since the beginning of the war according to that UN agency, "Attacking, targeting or

using UN buildings for military purposes are a blatant disregard of international humanitarian law," wrote UNRWA chief Philippe Lazzarini.

(PEOPLE speaking in foreign language.)

DIAMOND (voice over): But the devastation goes beyond UN facilities.

Scenes like this have been playing out all week in Central Gaza, amid a clear uptake in Israeli airstrikes. Bloodied and covered in soot, survivors

and victims' alike have been arriving at Al-Aqsa Martyrs Hospital at a rising clip.


DIAMOND (voice over): As one wounded child cries for her mother, another arrives at the morgue to say goodbye to his.

(UNIDENTIFIED MALE speaking in foreign language.)

DIAMOND (voice over): "Mama is going to visit grandpa," this father tells his son, "Don't cry. You're a man," he says, but he is the one who breaks



CHATTERLEY: Okay, we are going to take a quick break here, but coming up, 80 years ago today, Allied troops landed on the beaches of Normandy to

liberate Nazi-occupied France.

World leaders have gathered to commemorate the anniversary warning that Europe could be at risk once more.

Stay with us.



CHATTERLEY: World leaders are in Normandy today to commemorate the 80th anniversary of D-Day. US President Joe Biden met with the allied soldiers

who once stormed the beaches of France.

French President Emmanuel Macron gave American veterans the Legion of Honor, their country's highest distinction.

The invasion of Nazi occupied France marked the beginning of the end of World War Two.

Nic Robertson takes a closer look at the day's events.


(UNIDENTIFIED MALE speaking in foreign language.)

NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR (voice over): Heroes 80 years ago, soldiers in their hearts, again, today; honored by not one, but

two presidents.

EMMANUEL MACRON, FRENCH PRESIDENT: And you are back here today, at home, if I may say.

ROBERTSON (voice over): Survivors of an era and a battle unparalleled in history, telling their story, a cautionary tale.

JOHN DENNETT, BRITISH VETERAN: When you go home, tell them of us and say, for your tomorrow, we gave our today.

ROBERTSON (voice over): The sea is calmer, the stinging bolts of bullets gone so too the life ending explosions.

This June 6th, more than a carefully crafted commemoration of the 156,000 Allied troops 5,000 ships, 13,000 aircraft in the D-Day landings.

A warning, dangers are back on the horizon.


CHARLES III, KING OF UNITED KINGDOM: Three nations that stand together to oppose tyranny.

ROBERTSON (voice over): US President Joe Biden also connecting then and now.

Today, Vladimir Putin's Russia, the threat.

JOE BIDEN, PRESIDENT OF THE UNITED STATES: The United States and NATO, and our coalition of more than 50 countries standing strong with Ukraine, we

will not walk away because if we do Ukraine will be subjugated and will not end there. Ukraine's neighbors will be threatened, all of Europe will be


ROBERTSON (voice over): Ukraine's president, not Russia's invited this year, a break with tradition and an instant hit with the vets.

UNIDENTIFIED MALE: You're the savior of the people. You bring tears to my eyes.


ROBERTSON (voice over): Yet even here, celebrating unity, Europe's emerging divisions on show, British paratroopers reenacting D-Day air drops getting

passport checks, not needed before Brexit.

For these young performers, a new world, not bounded by the post-World War II rules-based order, the vets watching them fought for, this 80th

anniversary, their baton passed.

LT. COMMANDER KATHERINE MIYAMASU, US NAVY: American World War II veterans, you stand relieved. We have The Watch.

ROBERTSON (voice over): A watch that has a price, the account for this generation now settled.

Nic Robertson, CNN, London.


CHATTERLEY: And Jim Sciutto is in Washington and with us now.

Jim, incredibly moving to watch that for a number of reasons, I think. The first, the sheer age of the veterans that made it to Normandy to

commemorate this occasion; but two, I think hearing from both presidents, as we heard there, drawing parallels between the sacrifice, the loss, the

fight 80 years ago, and that war is back in Europe today.

JIM SCIUTTO CNN ANCHOR: Look, I did think as I saw Presidents Biden and Macron hugging those veterans that this will be one of the last ceremonies

where you'll have veterans still living. Even the youngest among them are approaching a hundred. I think the oldest was 108 years old. They are not

with us much longer.

But the words from Biden that stood out to me were in particular this line in this speech, he said: "The fact that they were heroes (speaking now for

those who stormed the beaches) those 80 years ago today, does not absolve us of what we must do today."

Something of a nudge, a reminder that yes, this is a time to celebrate that sacrifice 80 years ago, but that there is a new test today and in the face

of that test, the US and its allies must stand up again.

They were remarkable words to here and echoed, I think, as you said, Julia, there by President Macron's comments and others and to see Volodymyr

Zelenskyy there in person, right, hugging a veteran from those wars, from that war years ago in the midst of a war in Europe, the largest that Europe

has seen since World War II, and that is a very real threat today that those leaders there you see walking describe in much similar terms as they

did World War II in terms of global fight for freedom.

CHATTERLEY: Yes, democracy is never guaranteed. Another quote from President Biden that gave me goose bumps.

To your point about Ukraine, we've seen providing further aid and military support has been increasingly difficult. We've certainly seen that in the

United States.

Our colleague, Wolf, got to speak to Lloyd Austin, the Defense Secretary, just to talk in part at least about how US weaponry now can be used

particularly as far as Russian territory is concerned. I just want to play for our viewers first. Here is the snippet of that conversation and we will

talk about it.


LLOYD AUSTIN, US SECRETARY OF DEFENSE: Our policy using long-range strike weaponry to go into Russia hasn't changed, but what we have done is

provided Ukraine the ability to counterfire, to fire back at those Russian troops that are firing at them and to be able to take out their artillery

batteries as they are firing at the Ukrainians.

And I think that is going to prove to be very, very helpful to the Ukrainians going forward.


CHATTERLEY: Jim, I think something like this unthinkable, even perhaps six months ago, those incremental progress on providing further to support

Ukraine and as you said, Volodymyr Zelenskyy was treated as a hero there in Normandy, but they still need more. I think that's the ongoing message.


SCIUTTO: They do and there has been a consistent stop and start pattern to these weapons deliveries. First of all, you had a six-month pause in effect

without any US military assistance and for a time, it wasn't clear that it was a pause, right? I mean, there were scenarios in which the us did not

renew that aid and that pause mattered. Russian forces saw an opportunity and that seemed to be part of their calculation to carry out this larger

offensive in the northeast.

But with each new weapon system and each new change in restrictions like this one allowing Ukrainians to hit inside Russian territory, a long lead

time and then some limitations placed.

The motivation for that is because President Biden and others, they want to reduce the risk of escalation with Russia. But that man, you're seeing

there, Zelenskyy says that those delays and limitations are making it harder, not just for them to defend themselves, right, but to have any sort

of hope of winning this war.

I did see today that the French announced they are going to be sending mirage fighter jets to Ukraine. So you're seeing some of the allies more

forward leaning than others in terms of weapons systems, et cetera. And of course, Macron, I mean, he has even raised the prospect of putting French

forces on the ground there in a training role, which of course would be a significant step as well.

CHATTERLEY: Yes, but even with those planes, Jim, it is six months training. So to your point about that, the lag time each time it is

extended, a reminder, 80 years on of the challenges that we still face today.


CHATTERLEY: And the need to come together.

Great to have you with us. Thank you.

SCIUTTO: Thank you.

CHATTERLEY: Jim Sciutto.

Now, our colleague, Christiane Amanpour spoke exclusively to actor, Tom Hanks earlier, too. If you remember, he starred in the film, "Saving

Private Ryan," which famously depicts the Normandy landings.

Hanks said he wanted the movie to truly reflect D-Day.


TOM HANKS, ACTOR: I remember when we were shooting and by the way, this is one of the reasons Steven Spielberg wanted to make the movie. He said

finally, I will be able to do with film technology, I will actually be able to capture what happened on Omaha Beach, and here is how I am going to do


First, it is going to take three weeks. And secondly, it is going to be every single day and third, we are going to have all kinds of stuff going

off. And forth in-between there, we will make some sort of movie. At the same time, we are trying to load it up with as much authentic, I don't want

to use the word again as much as we can, okay, that's our job as filmmakers.

It is also our job as lay historians because for good or for bad, that movie is a document that has to accurately reflect the tenor of that day.

And I would like to think that we did.

And hearing it from a number of people that said, as confusing as that is, well, multiply that by, we did not have this smell of cordite or burning

flesh or blood on the sand, but we did have some version of that, whatever you can get out of a motion picture.

I think we captured it and to Steven's credit, and I will also go along with the audience's credit as well. They were willing to suspend whatever

disbelief of it and say, I've always -- if you've ever wondered what it was like, that is as close as somebody in Davenport, Iowa or Oakland,

California, or Minneapolis, Minnesota was going to get to that.


CHATTERLEY: And once again, returning to our top story today, the European Central Bank has cut interest rates for the first time in nearly five


Markets in Europe were expecting the decision and closed slightly higher while the ECB said price pressures are improving. The ECB president,

Christine Lagarde warned the fight against inflation is not yet over and that she is prepared to change course if needed.

Now, the cut in Europe marks a split with the United States. The Federal Reserve is expected to keep its rates at a 23-year high for the next

several months. The wider gap in rates could weaken the Euro and make it harder for the ECB to bring inflation back down to target.

Jumana Saleheen is the chief European economist at Vanguard, and she joins us now.

Jumana, great to have you with us.

The cut today was expected, a quarter of a percentage point. What did you make of the upgrade in forecast both for growth, good news; inflation, not-

so-good news, but it does acknowledge what the data has been telling us, I think for the past few months.


Yes, absolutely. I think people kind of expected that the projections are likely to be revised up a little bit given the latest inflation print for

May. It was a little bit stronger than people expected. Wages remain elevated.

So I think it was a little bit of expectation, but maybe the fact when Christine Lagarde said she expect inflation to stay above above-target well

into next year, that was probably a little bit of a surprise to market participants and analysts.


CHATTERLEY: And what about to you personally? Because you were saying, at least forecasting into this that you expected a quarter of a percent cut

each quarter that was your thinking, but we've got what? Just about one further cut now priced by financial markets this year and that's it.

Where do you land now after what you heard and what you saw today?

SALEHEEN: We stick to our call of three cuts this year on a quarterly cadence. So obviously we've had one today for Q2. We are still expecting Q3

and Q4 to see cuts because the path is going to be bumpy.

Financial markets are probably reacting to the news today and potentially changing their views on what rate expectations are. So we stick to our view

of three cut this year as the base case view. However, we have said, we see the risks to be potentially for fewer cuts only if inflation ends up

stickier than expected or if we see oil prices or other energy prices rise, but we stick to our base case view because the path is bumpy.

So today, it might be inflation is looking strong and sticky, but tomorrow, when we get the compensation for employees, which is a measure of wages, we

might be more optimistic.

CHATTERLEY: Okay, so it is a case of, but watch this space and certainly watching the data for the European Central Bank.

Can I ask you about this weekend's European elections as well? We've got what? Over 370 million Europeans, at least eligible to vote, let's hope

they do.

We've had these sort of economics of slower growth. We hope that's improving. The challenge of course of inflation sort of feeding into the

politics in many respects. The polls are suggesting increased gains for far-right parties. Are you looking at this in any respect in terms of

course, from your perspective, how perhaps this makes the economics of the region more challenging?

SALEHEEN: Yes, so absolutely. I mean, I think the way that we view the elections is kind of more of a long-term development that will drive more

the structural factors that drive economies and drive long-term growth. So you know, the policies can come together, then we could see potential

changes to the trend growth rate of the economy, which in the Euro area is much lower than it is in economies like the US where it is higher.

So the way that we see that political landscape is kind of more of a long- term trend. And even though the polls are suggesting the far right, it is still not going to be a majority, it is going to be around a quarter is

what the polls are suggesting.

So there will be other voices at that table, and that will probably moderate what actually happens in terms of the policy decisions made.

CHATTERLEY: Yes, so don't be too alarmed by the headlines. It is a case of watching it rather than necessarily reacting to it.

Jumana Saleheen, great to have your wisdom today. Thank you. The chief European economist at Vanguard there.

Now, coming up after the break, competition is heating up amongst sportswear brands. I will have to CEO of Columbia sportswear with me to

talk about how his company is staying ahead.



CHATTERLEY: Welcome back to QUEST MEANS BUSINESS. Now, as we've been discussing, as rates come down in Europe, all eyes are turning to the

United States and the Federal Reserve which meets next week.

The economic picture in the U.S. though becoming more complicated consumer spending growth has slowed considerably. And we've seen it's causing some

U.S. retailers to report weaker guidance too.

The sportswear brand Columbia is trying to stave off softening demand, extending its focus towards bricks and mortar stores, catering to new

climate needs, and collaborating with other fashion brands to drive sales.

Tim Boyle is the CEO of Columbia Sportswear and he joins us now from Oregon. Tim, fantastic to have you on the show. It sounds like you are a

very busy man.

The U.S. is your biggest market. Just tell me what you're seeing just on a macro level, we can talk more micro in the specifics of the business, but

just what are you seeing from the U.S. consumer at this moment? And any reason for concern?

TIM BOYLE, CEO, COLUMBIA SPORTSWEAR: No, I mean, I think, you know, frankly, for our business, it's typically much more weather sensitive than

it is economically sensitive.

But I would like to comment, make sure that people know how much we're spending time thinking about the 80th anniversary of D-Day today.

So, it's just -- it's top of mind for us.

CHATTERLEY: Tell me, because I do think it's important, what do -- what is in your mind with regards D-Day? Because we've certainly covered it on the

show, it is a very important moment.

BOYLE: Well, you know, I guess when you're in the middle of a presidential referendum here in the states where you have -- for all intents and

purposes, I show it (ph), isolationists versus globalists, and we fall clearly in the globalist camp.

It's always good to remember how important the combination of activities that happened on D-Day that really made the world what it is today.

And frankly, we talk a lot about how important it is to have an experience globally with people of different cultures, religions, languages,

practices, and how much a rich environment that makes for career enjoyment.

And we use it in our -- in our recruitment a lot to say, hey, welcome to a global company, you're going to meet people that you never thought you'd

meet, so.

CHATTERLEY: Wise words, Sir. But to your point, though, it is also having an impact on how you're operating the business.

I mean, you have an Asia supply chain, you're also -- you felt the impact of that certainly during the pandemic, there's the China-U.S. tensions and

the risk of more tariffs.

And I know you're also looking at perhaps shifting that supply chain more towards South America.

Talk to me about some of those decisions as well, because I think it cuts to the heart of what you're saying.

BOYLE: Well, that's true. So we have a business that's about 60 percent U.S. that balances around the world. And we source most of our products

from Asia, not as much frankly from China. And that's been a function of pricing, as well as, you know, managing our risks with certain countries

and having too much risk in concentration.


But the U.S. has encouraged sourcing of textile products from Central and South America using tariffs, adjustments, and other countries are joining

that as well, which would include Canada, that's had an impact on where we can source products and how we're encouraged to source product from a

financial standpoint, but we try to spread our risk broadly across the globe.

And the tariff and duty rates that we see specifically in North America are also present in other parts of the world, including China and when we're

selling in those markets.

CHATTERLEY: Now, you mentioned it, so I'd be remiss not to talk to you about the fact that you acknowledge and are honest about the fact that

you're weighted towards colder weather gear.

So, in milder months and years and we know the planet seems to be heating, it means careful balance sheet and inventory management.

But also surely it's an opportunity too to look at products that involve sort of some protection clothing, breathable wear. Talk to me about

innovation, Tim, and what you're thinking about in terms of shifting the business perhaps to make it less weather reliant to some degree and also

for a heating planet.

BOYLE: Right. Well, as you know, the company has historically been known as an outerwear company. And that's where we began our business.


BOYLE: But frankly, we talk a lot at the company about nobody needs another brand of footwear and apparel. There are over 100,000 of them.

So, how do we differentiate ourselves? And we've really chosen innovation as a way to make our products different.

So, we have great products that are useful in cold weather to keep warm. But we also have a very large menu of products that we've internally

invented, which help keep you cool and keep you, you know, very much more comfortable in hot weather.

And we haven't done frankly as good a job promoting those. We hope that the next launch of the intuitive machines, lunar launcher, which we've signed

up for, which will be about this -- the end of this year, we're going to have not only our Omni-Heat reflective, but we're going to have a product

we call sun deflector, which will be also present on the lunar lander, which will be used to deflect the sun rays and heat away from the


So, we're going to have a bunch of our best stuff on the moon. And hopefully that will help us to get more better known for the cooling

technologies that we've invented and haven't promoted as well as we should.

CHATTERLEY: Yeah, this is the Omni-Heat Infinity technology and stuff. But I know it's in your jackets as well.

Tim, you're going to have to come back because I've run out of time. But this is super cool. You definitely need to be talking about this more and

advertising the fact.

Great to chat to you for now, Sir. And to hear about your innovation. Tim Boyle there. Thank you, Sir.

BOYLE: Thank you. Thank you.

CHATTERLEY: Now, the CEO of Etihad Airways says there's plenty of room for all in his region. He spoke to Richard Quest there to AGM earlier this

week. But there's no shortage of competition in the Gulf region, Emirates Qatar Airways, not to mention Riyadh Air coming online next year too.

And Antonoaldo Neves told Richard Quest, he is not concerned about them because Etihad has an advantage.


ANTONOALDO NEVES, CEO, ETIHAD AIRWAYS: The idea is this airline is trying to find its own space in the Middle East, which is very important.

I still remember the first time we met. And that was at Etihad, you asked me, what is the competitive advantage, right? You remember that? That what

is --

RICHARD QUEST, CNN INTERNATIONAL HOST: I do. And I'll ask you that again.

NEVES: Yes. And I think we found it, right? I mean, we want to be positioned as an airline, and we're getting there, right? That is displayed

on the frequency side -- frequency side.

So, if you take a look at Riyadh, if you take a look at Mumbai, Delhi, Jeddah, we're the only airline with four flights a day to those markets.

I mean, I was talking to a guy that lives in Riyadh. And he told me, look, Antonoaldo, I'm taking your plane to go to Madrid. Because you have the

best connecting time in the region, right? And so --

QUEST: Can you make money on that?

NEVES: Oh, sure, we can -- we can -- we can. Because these markets are growing a lot. If the challenge that we have with the famous freedom,

right? Is as when markets are not growing, when markets are not growing, and the cake is fixed, right? The size of the pie is fixed.

But in this case here, I mean, it's probably a lot, right? If you take India, if you take Southeast Asia, if you take the Middle East, it's all

growing so we can really make money -- actually we are making money, right?


Q1, we made money. Q1, my colleagues are shocked.

QUEST: Isn't it time that we just grasped this nettle and talked about what point?

I mean, FlyDubai is now part of Emirates, de facto, the shake is high as it said so. The common sense of putting together and add into this with the

new airport coming along is becoming obvious.

NEVES: We do a lot with them, right? So, they -- I mean, our 350 pilots are training their pilots. We use the NATA for our call center.

I mean, I think we have a lot on our hands right now. And it's a good partnership. And as I told you before, right? I do believe there's a space

for many airlines in the region.

I mean, 120 million passengers a year in the UAE, my country, Brazil, 80 million, right?

So, shocking, isn't it? So, and this region is growing five percent per year, every time we grow five percent per year, I mean, air traffic grows

10 percent per year. And we actually had to go 40 percent in Q1. And we made money, we expanded our margins.

I mean, our competition here is also very happy about the results they have. So, I do believe there is space for everyone.

QUEST: What happens when we add air comms (ph) on board? What happens when Tony starts (ph)?

NEVES: I mean, I think it's going to be another opportunity for the bar to be raised even further. I mean, and I think that's OK.

QUEST: So, what is your focus?

NEVES: My focus right now is very simple. I need to make sure that as we grow, we keep at the same time expanding margins and improving the service.

So, growth is extremely important, but only if we make money. So, my focus now is guaranteeing that we have the resources, pilots, flight attendants,

planes to make sure that we can deliver what we have to deliver.


CHATTERLEY: OK, and that just about wraps up QUEST MEANS BUSINESS. I'm Julia Chatterley.

Up next, "CONNECTING AFRICA", stay with CNN.