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Interview With British Airways CEO; Interview With CEO of Airbus

Aired July 21, 2010 - 14:00:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Tonight, Willie Walsh, BA's chief executive, in an exclusive interview tells me British Airways must catch up with its competitors.

Also, Conrad Black, released from prison, now awaiting to hear if he's out for good.

And new financial rules for America. We talk to Senator Chris Dodd, the man who helped write the law.

I'm Richard Quest. I mean business.

Good evening.

Tonight, British Airways preparing to take its place at the heart of a new deal which will transform trans-Atlantic travel. Late on Tuesday night BA was told it had won permission from U.S. regulators to collaborate more closely with American Airlines and Iberia, and other airlines in the One World Alliance. The culmination of a 14-year battle to create a powerful airline partnership in the trans-Atlantic market, that will rewrite the rules, especially for large corporate customers. The CEO of British Airways, Willie Walsh spoke exclusively to me and began by telling me now that he'd got permission for his alliance, there was a lot of catching up to do.


WILLIE WALSH, CEO, BRITISH AIRWAYS: It's been a long slog getting to this point but we've now got to work really hard. I think there is a lot of ground to make up there, particularly in the area of corporate deals. We've had a lot of corporates come to us over the last few years, asking us for a global deal, unfortunately, because we didn't have ATI we were unable to do that. So I think there is on that particular aspect of the business quite a bit of ground to make up.

QUEST: And if you hadn't got this, then you were facing, some would say irrelevance, or some would simply say a much more challenging environment.

WALSH: I think a more challenging environment. I think this is a very important strategic step forward. It wasn't a life or death environment, but it was very important strategically.

QUEST: The fear and Virgin Atlantic continue to say, that prices will go up. You are about to start the pricing negotiations and the really detailed stuff with American Airlines.

WALSH: Yes, all that activity starts now but it is very clear that the consumer has much greater choice now. And we'll see some very early benefits from this approval, particularly frequent flyers.

QUEST: Tell me the benefits that we can expect to see by year's end, say.

WALSH: By year's end we will have a common frequent flyer program, so if you are flying with American Airlines, British Airways or Iberia, if you are flying with a One World carrier, you can earn miles and you can burn miles. You can combine fairs with one airline with another. You've got greater schedule choice now. All of this will be available within the next few months. So it is very exciting.

QUEST: Staying with ATI, before we come to the merger. With anti- trust immunity, have you started talking to American now about the nitty- gritty?

WALSH: No, we'll start-we got the approval late last night. Our lawyers have been checking through it today. We'll assess the conditions just to make sure they're in line with what we had expected. And then the formal detailed negotiations take place with American.

QUEST: When we look at the Iberia deal, again, you're hoping for that to complete by the end of the year.

WALSH: I'm going to be busy over the next few months. We're making very good progress. We've received competition authority clearance on that. So we're working through the detail of the merger with Iberia.

QUEST: I understand two airlines, operating independently, but combined in the sense of schedules and the like. You will have, as joint chief exec, you will have a new airline with a big airport with long empty runways from Baracus (ph) and Madrid.

WALSH: Yes, fantastic. It is something we've argue for at Heathrow, unfortunately the government has decided that Heathrow should not pursue growth, you know, Madrid has a fantastic airport, great infrastructure that has been invested in, and that capacity will be use and we're determined to use it. There has been an argument put forward that if you control or prevent the growth of aviation here in the U.K., somehow you are doing something good for the environment. My argument is all you are doing is you are forcing the growth of (UNINTELLIGIBLE) in the industry to move somewhere else.

QUEST: If we look back to BA, the industrial action that continues, that has to be your priority, surely now. Are you expecting the union to ballot and, if so, call other strikes?

WALSH: I hope they won't ballot. I hope they'll reflect on the recent events and I think they'll look-and they should look-to reach agreement with us. We believe that we can resolve all of the concerns that exist, we believe we can do so quickly. But you know, I need to be very clear. We are running the business. And we will continue to run the business, and we will do so whether we face the threat of industrial action or not.

QUEST: Anymore talks planned?

WALSH: Nothing at this stage, but I have no doubt that there will be talks in the near future.

QUEST: You know what you can negotiate through me.


WALSH: No, but I've been very open with people in relation to this. We're absolutely determined to operate 100 percent of our long-haul program in the event of facing new industrial action. And I'm convinced, I'm determined to do that and I'm convinced we can do that.

QUEST: When you took the job, and one assumes you are going to stay in it a few more years, now. People have questioned, "Was he up to it? He's only ever run Aer Lingus, and it was an airline that was a minnow compared to British Airways, and now you are going to run the third largest airline in Europe, behind Lufthansa, and Air France Caroline (ph). Do you ever want to say to your critics, "told you so"?

WALSH: No, no, no. Because I've still got a lot more to do.

QUEST: There must be an element of, you know, they thought I couldn't do it, and look at me, I've done it.

WALSH: No. I think it is-I still think there is a lot to be done. And, you know, I get more enjoyment looking forward at the new challenges, than I do looking back at the ones we have overcome. So, you know-there's so much more to do in this industry. You know we have a job to do to bring British Airways back into profitability. We're on track to do that. I'm really pleased with the progress that we've made. But there is still a lot of work that we need to do.


QUEST: The chief executive of British Airways, Willie Walsh, talking to me in the boardroom of British Airways earlier today.

On Capitol Hill, at the moment, we are starting to get the first details of the testimony from Ben Bernanke. You are looking there at Senator Chris Dodd, chairman of the Banking Committee, who is giving his opening statement. Incidentally, we will be hearing from Senator Dodd, later in this program. But let me tell you what Mr. Bernanke's testimony is due to say. He is going to describe the U.S. economy as facing unusually uncertain problems. And he's going to warn of possible setbacks in economic growth. He will reaffirm the Fed is ready to act, if necessary. And he will reconfirm that interest rates will stay low for an extended period of time.

How do I know all of this? Because I've read his testimony,, is where you can see-where you can see this.

The Dow Jones industrials, if you will join me again, you'll see, it had been down about 9 to 10 points, but the Dow has now slipped down by 35 points, pretty much in the last few minutes; nothing terribly untoward or serious about what's happening. Once we have Mr. Bernanke, Doctor Bernanke, speaking, we will bring that to you. But that is the-the key phrase, that I'm seeing, from the testimony so far, the prepared testimony, usually uncertain, is what everybody is picking up on.

When we come back after a very short break we will hear from Chris Dodd, the chairman of the Senate Banking Committee. No more taxpayer bailouts for Wall Street. The new law on financial regulation is now in force in the United States. Barack Obama signed it today.


QUEST: He's been called the disgraced media magnet, whatever you want to say, Conrad Black, the Canadian, could be out of jail within hours. The price of his freedom on bail is $2 million. The judge in Chicago ruled that Mr. Black, who was Lord Black, that the conviction-who was convicted of defrauding investors-can leave prison on bail, while she considers whether his conviction for fraud and other offenses should be overturned. The CBC's Laurie Graham is there. She joins me from outside the courthouse in Chicago.

Laurie, releasing somebody on bail, when they are on appeal, that usually means the appeal is going to be granted. Is that what you are hearing?

LAURIE GRAHAM, CNN INT'L. CORRESPONDENT: Indeed. The appeal has at least at this point, the bail has been set. And what we are hearing is that while the courts try to decide what to do with this case, the fraud charges have all been thrown out. Conrad Black still faces an obstruction of justice charge that many analysts are suggesting once the courts take a look at that. They'll decide it is time served. He's been in jail for almost two and a half years. So, when he leaves the prison, sometime today, maybe tomorrow, most people believe it will be for the last time.

QUEST: The whole issue was taken up by the U.S. Supreme Court, which basically said there had been a misdirection on law. Laurie, is it your feeling and your understanding, if this appeal is allowed, and Lord Black is released, that is a stunning and absolute, stunning defeat for the prosecution, and a extraordinary victory for Lord Black?

GRAHAM: Many people are suggesting it is a "Hail Mary" for Lord Black and that this, obviously, is very good news. Not great news for the prosecution, of course. What the argument was, Richard, is that there is a law, the "honest services" law, in the United States. It sounds kind of technical.

Well, what happened was, in the appeal, they said that that law should not have actually been applied. The lawyer said it should not have been applied to Conrad Black. You know, it went to the appeals court, it went all the way up to the U.S. Supreme Court, and when the Supreme Court took a look at it, it said, you know, we can't really disagree. That law is vague and unconstitutional. So, in terms of those fraud charges, yes, you are right. It's out. And so a total blow for the prosecution.

QUEST: One final point, I was reading some reports. He's being released from Florida, but he might not be able to get on a plane to go to Chicago, because obviously, he hasn't got any identification. So, you are not expecting to see him there, is that correct?

GRAHAM: No, we will see him here. And the only way that they are going to get him here-they would not grant him a new passport. His British passport has expired. They're not sure where his American passport is, if he even has one. And he gave up his Canadian passport, when he became a lord. So, the prison will sign a very specific piece of information to get him on a plane, to get him to Chicago. He will come here on Friday afternoon, and face the very same judge that put him behind bars two and a half years ago. She will tell him that he is on bail, and these conditions are important. He will likely look at her and say, thank you, for releasing me.

QUEST: And we will say thank you, Laurie Graham, in Chicago, for bringing us up to date on that.

Just to let you know that Ben Bernanke is now speaking before the Senate-it is a very detailed piece of testimony. We've already done the work for you, in terms of what he said. And we will bring it to you, the moment he says anything of extreme relevance in the market. The Dow Jones, funnily enough, is up now about 75 points, at the moment. We'll bring that update to you very shortly, too.

Behind all of this goings on today, it was a done deal. Barack Obama signed the historic Wall Street reform measures. The measures have now become law, and it represents the biggest rewriting of the U.S. financial system, since the post-Depression of the 1930s. The rules will strengthen protections for consumers they say, and make sure the government never again has to bail out failing banks.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: For years our financial sector was governed by antiquated and poorly enforced rules that allowed some to game the system and take risks that endangered the entire economy. Unscrupulous lenders locked consumers into complex loans with hidden costs. Firms like AIG placed massive risky bets with borrowed money. And while the rules left abuse and excess unchecked, they also left taxpayers on the hook if a big bank or financial institution ever failed.


QUEST: The actual act is called the Dodd-Frank Wall Street Corporate Reform and Consumer Protection Act. It is named after the senators behind the bill, who has been talking about harmonizing U.S. reform measures with those being taken in the rest of the world.

Senator Chris Dodd says he's been talking to EU officials, members of parliament, and will arrange joint hearings in the autumn. I caught up with the Connecticut Democrat, who is a few months away from retiring. We were both at the Farnborough Airshow. And I asked why he spent two years working to change the way investment banks are regulated.


SEN. CHRIS DODD, SENATE BANKING CMTE.: It needed to be done. You know you went from about $100 billion to $150 billion over the counter derivatives market to $600,000 trillion, with almost no transparency, any accountability. And we watched the residential mortgage market, it metastasized through the securitization process, because rating agencies weren't doing due diligence. There are so many pieces to this that in the absence of this bill we'd be right back where we were in the fall of 2008, subjecting not only the United States, but globally, to the kind of financial meltdown that was being predicted by the chairman of the Federal Reserve.

QUEST: Let's talk about the international bit.

DODD: I know.

QUEST: As we look between New York, London, Hong Kong and Tokyo, no financial center is an island.

DODD: That's right.

QUEST: And to that extent the U.S. bill doesn't address an international aspect of a global agreement.

DODD: That is a great point. And I met the other day with members of the European parliament. We are going to plan some joint hearings, this fall, early in the fall. We need to harmonize, here. You are exactly right. If you end up with what I call sovereign arbitrage, much like regulatory arbitrage, where people go around and shop. You remember January of '07? How many people came to me from Wall Street and said, you know, Senator, you do that and we're moving to London. My colleagues in London and in parliament, said, you know, our bankers came to us and said, if you do this, we're moving to New York. Can't have that, right?

QUEST: Phase (ph) Three is still some way off?

DODD: It is.

QUEST: Phase Three some way off. There is WTO, Doha round, is still a shambles. The G20 has got more committees than you and I can probably count with all our fingers.

DODD: Right. But don't give up. This is what we have got to do. Because you are absolutely right. If we do an island unto ourselves, each nation goes off, a group of nations goes off and sets their own rules. Not trying to harmonize. You can't end up with one set of rules, globally, but if the G20 countries end up with at least common principles in these areas, so you don't have what Arthur Burns used to call the race to the bottom. One nation, one group, rather, saying come here we'll treat you so much better. If we don't do that we're going to be right back where we were before.

QUEST: Finally, Senator, we came as close as any of us ever want to see to financial apocalypse.

DODD: That's right.

QUEST: Do you believe that we are safer today and that there can be no repeat of that?

DODD: Well, we are safer today and based on what we've done with this bill, again the harmonization globally, I think we can-we'll have other economic crisis, as certain as you and I are standing here. We didn't stop that. But we are going to stop these things from mushrooming into the kind of global threat that this crisis posed for us. That much I am certain about.


QUEST: Senator Chris Dodd, and the point that the same principles are adopted in different parts of the world is his crucial issue. The way the others are looking at things and what's being planned in the European Union. Well worth us just reminding ourselves, for example, tax funded bailouts, G20 leaders say they want to end the too big to fail, U.S. reform establishes a route to orderly liquidation. In the EU so far there is no agreed insolvency policy. Each country gets to set up its own national resolution funds. Some believe in the EU, that the levy being set by banks should pay for that. On bank trading restrictions, new U.S. Volcker rule, which of course prohibits banks from trading for their own accounts, in other words, back to the old Glass-Steagall Act. It aims to limit the size of the banks.

Now, many key countries in the EU don't want a Volcker rule, but they want to keep the universal banking model. Particularly, for example, the U.K. Hedge funds agreements on closer scrutiny of the industry. Huge, bearing in mind the size of the hedge fund industry. The EU wants to apply the same rules to hedge funds from other countries that market within the EU. That would be an extraordinarily wide, extra territorial bit of legislation that would allow those to be regulated over there.

OK, we need to just consider what the chairman of the Fed has been saying. He's giving testimony on Capitol Hill. Let's tap into to listen to what Mr. Bernanke is saying.


BEN BERNANKE, CHAIRMAN, THE FEDERAL RESERVE: First in response to the periods of intense illiquidity and dysfunction in financial markets that characterized the crisis, the Federal Reserve undertook a range of measures and set up emergency programs designed to provide liquidity to financial institutions and markets in the form of fully secured, mostly short-term loans. Over time these programs helped to stem the panic and restore normal functioning in a number of key financial markets, supporting the flow of credit to the economy.

As financial markets stabilized the Federal Reserve shut down most of these programs during the first half of this year. And took steps to normalize the terms on which it lends to depository institutions. The only such programs currently open to provide new liquidity are the recently reestablished dollar liquidity swap lines, with major central banks, that I noted earlier.

Importantly, our broad-based programs achieved their intended purposes with no loss to the taxpayers. All of the loans extended through the multi-borrower facilities that have come due, have been repaid in full, with interest. In addition, the board does not expect the Federal Reserve to incur a net loss on any of the secured loans provided during the crisis to help prevent the disorderly failure of systemically significant financial institutions.


QUEST: So, there you have the chairman of the U.S. Federal Reserve, Ben Bernanke. Let me recap. We didn't join him, perhaps, at the most exciting part of his testimony. But he has given an assessment the FOMC expects real GDP growth of 3 to 3.5 percent in 2010, slightly lower than expected. The unemployment rate expected to decline to between 7 and 7.5 percent, but that is only by 2012. So that is another disappointing aspect. And most on the FOMC, Federal Open Markets Committee, viewed uncertainty as being greater than normal. The majority saw the risks to growth as weighted to the downside. That is why the markets are heading down. It is a pessimistic, at least, uncertain outlook from the head of the U.S. Federal Reserve.


Now CNN, on this program, well, we're full of exclusives. You have already heard BA's Willie Walsh, you've heard, of course, Chris Dodd. Next, our exclusive corporate barometer the Q25. Coca-Cola, Morgan Stanley, Yahoo! and more, and the balloons will be divvied out.


QUEST: Wall Street has been worrying about the quality of corporate earnings that we are so far seeing this earnings season. I have to tell you they're not bad. They're just not that good. So maybe the brighter side needs to be looked at, after the latest raft of reports. On Wednesday, let's put into perspective, Coca-Cola surprised the Street, not only with stronger earnings but with upbeat news on one of its major markets. The investment giant, Morgan Stanley, swung to a profit in Q2, easily exceeding, well, rather low expectations. Wells Fargo reported strong profits. And became the latest financial institution to report encouraging news on consumer credit.

All this comes after a stellar report from the tech sector late on Tuesday. Apple announced its best quarterly figures ever and raised its revenue forecast. Those are some of the companies we're following in the Q25, which is of course, our own index, which will give you a very good idea of what we have seen.

So, let's-before Maggie, bring in Maggie Lake, so I've got Maggie, so she can join in and launch herself out of the chair if she doesn't agree.

I'm going to give a green to Apple. You can just nod or shake your head there. Yeah, there we are. It would be perverse if it was anything but.

A red for Yahoo!, disappointing numbers. Maggie, disappointing all around for Yahoo!, isn't it?

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Yeah, they're actually OK in their earnings per share, it was the revenue, Richard. Ad sales are down, so that hurt them. And that really-they-investors weren't expecting it.

QUEST: Morgan Stanley, now you and I have already gone head to head on the banking system this year. But Morgan Stanley was in the toilet, it might not exactly be out of the bathroom, but at least it is doing-it's out of the water.


LAKE: It's true. It's true. You know, those trading revenues continue to be a problem but Morgan Stanley's were so much better than everyone else. And this is-you know, Goldman Sachs, JP Morgan Chase, you know, Morgan Stanley was really left behind, chasing them and trading revenue, they did much better than the best in breed. So, people are really, really excited about that. And Morgan Stanley sort of indicating, hard to quantify this-but indicating that their brand is serving them well. Remember, Goldman had all that trouble with the regulators and stuff, so Morgan Stanley really outdoing Goldman at its own game.

QUEST: Morgan Stanley, we give a green to.

I'm going to move quickly, through Wells Fargo, consumer bank out West. It's lower debt provisions against loans. A green, I think, there for Wells Fargo.

LAKE: Yes, yes.

QUEST: And Coca-Cola, dear old Cola. We gave a green to PepsiCo. We threw Coca-Cola in today because we really wanted a good point-of-point comparison.

LAKE: Yes, and they get a green. You know, similar story really, volumes up. And in that weak North America market. And a lot of people pointing to their association with the World Cup, the advertising both, helping out Coke. So they get a green today.

QUEST: So there you are, Maggie. We're pretty much Even Steven, at the moment. We just need to, you and I, before I love you and leave you, just need to talk about Ben Bernanke. The word that I am seeing, and you are seeing as well, this phrase, "uncertain times", "uncertain" what's happening. What do you make of it?

LAKE: Yes, I mean, he's saying what we all know, right? Absolutely no one knows what to do, it is unusually uncertain. People are finding it hard to plan. Richard, the market is really disappointed though. So far, they wanted some kind of indication from Ben Bernanke that the Federal Reserve has more ammunition and that they planned to do something if this economy does turn south and go double-dip, which Ben Bernanke doesn't think it will do. The Fed is not forecasting that. But they wanted some indication that they have something left in the arsenal. And Ben Bernanke not giving any detail on that. And that disappointment is what you are seeing in the market. We'll see if he covers that in the Q&A.

QUEST: Right, and we also know that the Bank of England is monetary policy committee, from the minutes we saw there, have reconsidered, although they decided not to-

LAKE: Right.

QUEST: Reintroduce quantitative easing.

So, OK, Maggie, many thanks. We'll be brief today, but the Q25 is pretty much even as we saw. Say it with me in case you want to jump in as I go through the Dow.

These are the way the numbers are, Morgan Stanley is up 9 percent; Coca-Cola up 1.9 percent; Wells Fargo up 2.8 percent; Yahoo! is down 7.

But, Maggie, the Dow, itself, has tumbled nearly 100 points, in the last 15 minutes.

LAKE: Yes, on the back of Bernanke. But it was vulnerable before that, people not happy with what they're seeing coming through earnings, Richard. That's the uncertainty that you've seen Bernanke talk about and it's playing out in the market.

QUEST: All right, there you have it. The Dow is down over 100 points now.

Maggie, don't touch any buttons, don't do any damage.

We'll talk to you tomorrow.

We'll have more of the Q-25.

We have a busy program ahead.

In just a moment, more from Farnborough. Airbus has really achieved lift-off. The orders have been flying in over the past few days. The industry sees confidence return. And Tom Enders, the head of Airbus, will be with us after the break.


QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN. And here, the news always comes first.

The British prime minister has turned his attention to finances after meeting the U.S. president in Washington. David Cameron has spent today meeting business leaders in New York. Mr. Cameron has financial regulation plans he wants to run past corporate leaders. He's also encouraging investors to continue to pump assets into Britain.

The United States is showing its solidarity with South Korea. During a visit to the demilitarized zone, the U.S. secretary of State, Hillary Clinton, announced tougher sanctions against North Korea. The move will included freezing sort of Pyongyang's assets to keep it from buying and selling weapons.

More rain is in the forecast for China, which is still recovering from deadly storms. Tropical Storm Chanthu is making its way to the southern part of the country. More than 1,000 peopled have died or disappeared in severe flooding this year alone.

Seeing is believing, but apparently not, in this case. The oil giant, BP, has admitted a staff photographer doctored this photo on its Web site of engineers monitoring video screens at its oil spill response center. In the original shot, three of the screens are black. The photograph -- photographer used special software to paste images into the empty screens. BP says there was no intent to malead -- mislead, but, in any event, it has taken the image off its Web site.

The man in charge of sales of aircraft at Airbus said he's more than doubled the order for this year and it's only Wednesday. The chief financial officer, John Leahy, had a bet with the chief of EADS that he'd have 131 orders in the bag by Friday. Already, he's up to nearly 200. So it's a year that's going well for Airbus.

The word is that Airbus is already on track to beat its forecast of 300 planes for the whole of 2010. He's predicting Airbus will have taken 400 orders by New Year's Eve.

But as we have been hearing already on this program, the economic recovery underway, some would say, is uncertain, at least the U.S. head of the Federal Reserve believes it to be that way.

So, at Farnborough, I spoke to the Airbus chief exec, Tom Enders.

And I asked him how fragile he felt the ecovery -- the recovery was.


TOM ENDERS, CEO, AIRBUS: I think it's not fragile at all. I mean throughout the crisis, we have had quite a few airlines that went out of business, cancellation happened, etc. And people who are ordering right now are very solid companies. Today we had a first order -- the first order ever by the -- the Air Lease Corporation, the new company of Steve Hazy, one of the founding fathers of leasing -- the leasing model, GKAS (ph). So these people know exactly what they do.

QUEST: And the -- the range of issues facing Airbus at the moment, or even EADS, on one level. I mean you've got the 350, which you've got to still bring in, get if flying. You've got to decide the re-engineering -- the re-engineering of the 320. There's the 400M for the military side of it. There's a lot on the plate.

ENDERS: Absolutely. And, Richard, I don't call it issues, I call it challenges. It is -- it is challenging, absolutely. But we are making progress in -- on all these -- on all these fronts. If you look at the 380, I mean the production is -- is really ramping up right now. And what is more important, the business proposition that we sold to customers is really -- is really demonstrated. So you see that with the Emirates repeat order.

The 350, well, we are still more than three years until we are supposed to -- to bring out the first deliveries. We are in the midst of the -- of the red hot phase of development right now. The A400M, beautifully flying. You saw that today, probably.

So there are a range of challenges, obviously. But I think we can -- we can muster them.

QUEST: And if we look at Airbus as a -- as a company now performing...


QUEST: -- after the problems with the 380, after the reorganizations and it's still undergoing the -- the parent (ph) organization -- reorganization...

ENDERS: Right. Yes, we are on a change journey. That will take some years. We always said that. We always said that it's a marathon.

We've certainly taken away quite a few of lessons from the -- from the 380 --tried to implement that in the -- in the integration.

QUEST: What would be the number one lesson, because those are -- it's a -- it's a moving target...


QUEST: -- and you can't stand still. So if I said to you, Tom, the number one lesson you took away from it?

ENDERS: The number one lesson is integration, because we were not intrigued really solidly as a company when we started the development of the 380. And we paid dearly for that. And that is the number -- I mean it comes in different forms. And that is what we've been driving through the companies, move away from national styles, from functional styles to a more direct interaction, introduce common systems rather than having legacy systems in all the different countries.

QUEST: And, finally...

ENDERS: That's very important.

QUEST: Finally, you and I will have retired by the time the WTO- Boeing-Airbus subsidies issue comes to rest.

Is it ever going to end?

ENDERS: Now, that's your prediction. I mean that -- I take that from a -- from a real expert. No, seriously, we know it's going to be a long process. We know this is not the end of it. There will probably be appeals. There will be a report on the -- on the -- on the Boeing side, which we are anxiously waiting for...

QUEST: Are you disappointed you're not seeing that yet?

ENDERS: Yes. We found that a little bit odd that the third time in a row, the Boeing report was -- was delayed, now into September. We hope to see that in -- in September. But at some point, as we always said, we probably need some negotiations to solve it.


QUEST: Tom Enders of Airbus.

And I'll be back in a moment.


QUEST: The questioning has begun on Capitol Hill.

Ben Bernanke being questioned by the Senate Banking Committee.

We need to listen in.

UNIDENTIFIED MALE: The Congressional Budget Office believes our current policies are, then the only way that can end is through a crisis or -- or some other very bad outcome.

SEN. RICHARD SHELBY (R-AL), VICE CHAIRMAN, SENATE INTELLIGENCE COMMITTEE: Do you, as chairman of the Fed, do you believe that our current continuing to have these big deficits adding to our debt is unsustainable?

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: I do and I think that view is widely shared.

SHELBY: Thank you.

Mr. Chairman, the minutes of the June FOMC, the Federal Open Markets Committee, meeting stated -- and I'll quote -- "The committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably."

Aside from taking the federal funds rate and the interest rate paid on reserves to 0, it's not clear to me what further policy stimulus would mean. If further stimulus were to involve more asset purchases that you alluded to, by the Fed, would the Fed buy Treasuries or would they try to channel credit to specific segments of the financial markets, such as housing or perhaps even municipal debt?

BERNANKE: Well, Senator, I think it's important to preface the answer by saying that monetary policy is currently very stimulative, as you -- I'm sure you're aware.

SHELBY: Right.

BERNANKE: We have brought interest rates down close to 0. We have had a number of programs to stabilize financial markets. We have language which says that we plan to keep rates low for an extended period. And we have purchased more than a trillion dollars in securities. So that -- so certainly no one can accuse the Fed of not having been aggressive in trying to support the recovery.

You know, that being said, if the -- if the recovery seems to be faltering, then we will at least need to review our options. And we have not fully done that review and we need to think about possibilities. But broadly speaking, there are a number of things that we could consider and look at. One would be further changes or modifications of our language or our framework describing how we intend to change interest rates over time, giving more information about that. That's certainly one approach.

We could lower the interest rate that we pay on reserves, which is currently 1/4 of 1 percent.

The third class of things, though, has to do with changes in our balance sheet, and that would involve either not letting securities run off, as they are currently running off, or even making additional purchases...

QUEST: So there you have an indication from the chairman of the Fed, Ben Bernanke. He says if the recovery is faltering, then we will review our options and think about other possibilities.

The Dow Jones Industrials is off more than 105 points on this disappointing -- disappointing testimony, talking of unusual uncertainty in the U.S. economy.


I'm Richard Quest in London.

Whatever you're up to in the hours ahead, I do hope it's profitable.

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