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QUEST MEANS BUSINESS

Controversy Over the Sale of Liverpool; Interview with PepsiCo's CEO

Aired October 6, 2010 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: Share and share alike. BA, AA, Iberia, they now launch their route to revenue tie (ph) up.

Rage in the boardroom. Liverpool's football club owners see red over a sale deal.

And will it or won't it? The Dow closes on 11,000, where not there yet, but we're watching together, because I'm Richard Quest and I mean business.

Good evening.

In the airline industry it is clear bigger is better. And tonight on QUEST MEANS BUSINESS we'll be talking to three chief executives who are ready to combine forces to stay o top of and beat the competition. It is a new transatlantic alliance amongst airlines that have been born, and with it there will be more jobs.

British Airways, Iberia, and American Airlines are the three airlines that are flying together in a partnership that has been 14 years in the making. Well, at least it was 14 years ago that BA and AA first came on board. Since then there have been numerous issues and disagreements. There have been regulatory questions. But now the new joint venture was launched at a press conference. It will mean more routes, more choice, and require more pilots and ultimately more cabin crew.

It is not a full merger. It is in the air, over the Atlantic, the three will effectively become one. They say that working together will generate revenues of up to $8 billion a year, which will be a sizable airline in its own right. The three will cross the Atlantic 5,000 times a day. That is an extraordinary number of take offs and landings.

Now, Willie Walsh, the chief and the boss of British Airways says the venture creates a one-stop shop for transatlantic travel. The core of this one-stop shop is the fact that they will sell seats on each others' planes. They will coordinate schedules and they will coordinate flights. And these are, of course, the three carriers that we are talking about.

But if we start with BA, Walsh, who is just about to take over as the chief exec of a merged Iberia, BA, international airline group. He knows that for his hubs at Heathrow, Madrid, and of course, New York, this deal is crucial.

(BEGIN VIDEO CLIP)

WILLIE WALSH, CEO, BRITISH AIRWAYS: The initial benefit would be very much weighted towards the customer. One of the best benefits that frequent flyers will see, an enhanced frequent flyer program, and you know, access to be able to earn or to redeem miles on all three airlines. So what the customer needs to understand is what will they experience; what is the customer proposition when you are flying with British Airways, with American, with Iberia?

And one of the things that we will be able to do now is align policies where policies can be aligned. But make it very clear to our customers what they will get. So there is no misunderstanding. We're not going to try and sell somebody a BA product flying with Iberia, because it is not going to be exactly the same. But we'll be very clear to our customers what they will get.

QUEST: On the deal, on the new merger, or soon to be merged, International Airlines Group, how are you doing finding other potential candidates, for you to go and make offers to?

WALSH: Well, what I've talked about is creating a platform that other airlines will find attractive. I believe in consolidation. I know there are other airlines CEO who believe in consolidation as well. And what we wan to do is create a platform that they are attracted to. SO this is not about IAG aggressively pursuing others. This is about attracting like-minded airlines who have strong brands, but believe in consolidation. That joining with BA and Iberia is the way forward.

(END VIDEOTAPE)

QUEST: And ironically, Willie Walsh said to me that after inviting or mentioning about this other airlines have been in touch with BA, but of course, he wouldn't tell me which ones.

American Airlines today announced that it was bringing back furloughed employees. Those who had been laid off during the recession; 250 pilots and 800 or so flight attendants will recalled. And as Gerard Arpey, the chief executive American explained to me, one of the reasons was, of course, recovery albeit fragile.

(BEGIN VIDEOTAPE)

GERARD ARPEY, CHAIRMAN & CEO, AMR CORP.: One of the toughest things you do in business and in this job is furlough somebody. So it is really, really a good thing to be able to bring people back to work.

QUEST: So, there must be an improvement in business to justify bringing people back onto the books.

ARPEY: Well, clearly our financial results are a lot better this year than they were a year ago and the third quarter will be even better still, when we announce, here in a few weeks. So, yes, business is a lot better. I mean, we went though the oil crisis and then the financial crisis. And things have definitely stabilized and improved. But I called it fragile because we continue to be dependent on economic activity. And to the extent economies are fragile and I think most people think economies around the world are still fragile today. Then the airline recovery is by definition fragile.

QUEST: The fundamental issue, do you need to do a consolidation or merger deal beyond this?

ARPEY: Well, we have-and you and I have talked about this before-we have a strong network in the United States, because of where our network is. Hubs in Dallas, Forth Worth, Chicago, Miami, New York, and Los Angeles. And because we're big, and we're big in the right places, we don't necessarily need a merger partner in order to make our network and One World successful. And I think less fragmentation in the airline business is a good thing. So I think that will be good for industry as a whole.

(END VIDEOTAPE)

QUEST: So British Airways is part of the alliance, American Airlines, who have been working together for 14 years, and Iberia, which of course, adds in this crucially important part of the network. Antonio Vasquez is the chief executive of Iberia. Now, Madrid's Baracus (ph) airport offers BA a huge South American hub, but because of this new transatlantic alliance for Iberia and Spanish passengers. Many new markets can be opened up, because of course of American's might, Antonio Vasquez:

(BEGIN VIDEOTAPE)

ANTONIA VASQUEZ, CHAIRMAN & CEO, IBERIA: The advantage is to be able to reach the northern side of the Atlantic, on a much more-in a much easier way, being connected with out two partners, and that doing things that more than likely we could not do on own. And so the advantage is that we are going to be able to tackle in the best benefit of our customers much more locations in the United States.

QUEST: You are going to, obviously, get much greater access to American's domestic network, as well, aren't you?

VASQUEZ: Absolutely. Absolutely. And that is key, because you know, sometimes you have a lot of possibilities, of creating routes somewhere. But if you don't have the proper distribution you can't do it. Because there are a lot of transfer-a lot of transfer people, you know, people transferring.

QUEST: The deal between British Airways or the merger with British Airways is due to close, probably at the end of this year, and early next year. I'm at that point, Madrid, you main hub at Baracus (ph), it becomes almost the jewel in the crown, doesn't it?

VASQUEZ: Well, it sounds swell, the way in which you talk about the Baracas (ph)-let's just put it this way, I think that we have a quite important asset our deal, which is the possibility of the excessive capacity in Baracas (ph). So, I think they're great asset in the way that we are emerging, to grow.

(END VIDEOTAPE)

QUEST: That is Antonio Vasquez, the chief executive of Iberia Airlines. And one final note, as part of the new joining venture alliance, all three airlines will be offering the same variety and variations of fares, across the Atlantic.

We'll follow this closely in the future. In a moment the chief economist of the IMF, next week's G20 meeting in South Korea, and the IMF and World Bank. And today we had the world economic outlook. The WEO, we're talking W-E-O, and currencies after the break.

(COMMERCIAL BREAK)

QUEST: The IMF is entering the battle over the so-called currency wars. The chief of the fund has told the "Financial Times" some countries are using their exchange rates as weapons. Dominick Strauss Kahn says governments are risking a currency war by making their currencies artificially weak. And he says it represents a very serious risk to the global recovery.

Now, the MD was alluding to tensions over the Chinese currency and its relationship to the dollar. Also, of course, the U.S. currency has been very much talked about whether it actually should depreciate. The U.S. Treasury Secretary Tim Geithner spoke out today, not mentioning China directly but it was clear what he meant.

(BEGIN VIDEO CLIP)

TIMOTHY GEITHNER, U.S. TREASURY SECRETARY: We believe it is very important to see more progress by the major emerging economies to more flexible market oriented exchange rate systems. This is particularly important for those countries whose currencies are significantly undervalued. This is a problem because when large economies with undervalued exchange rates act to keep their currencies from appreciating that encourages other countries to do the same.

And this sets off a dangerous dynamic, described first I believe by my former colleague Ted Truman, as competitive non-appreciation. Over time more countries face stronger pressure to lean against the wind, lean against the market forces pressing their currencies higher. And the collective impact of this behavior risks either causing inflation and asset bubbles in emerging economies. Or else depressing consumption, growth, and intensifying short-term distortions in favor of exports.

(END VIDEO CLIP)

QUEST: Tim Geithner, the U.S. Treasury secretary.

We need to talk about this and also the latest numbers from the world economic-the World Economic Outlook. The IMF chief economist is Olivier Blanchard. He joins me now from Washington.

Olivier, good to see you. Many thanks for coming and talking again.

Let's just-before we get into the WEO and about that, we do need to spend a moment or two just on this currency question. Because there is an enormous amount of rhetoric now. But how serious is the reality?

OLIVIER BLANCHARD, CHIEF ECONOMIST, IMF: I think we haven't see the currency wars yet, but indeed there is a lot of talk of war and we should be thinking about how to prevent it. I think the big issue is that there is a need for change in the structure of exchange rates. There is a number of countries, mostly emerging market countries, surplus countries, which need to have an appreciation. There is by symmetry a number of countries which have to depreciate, vis-a-vis those countries. And this has to happen. And this is a process which might e difficult. It might be especially difficult if some of the countries, which have to appreciate, I would like them to do so, peg the exchange rate, or slow down the appreciation.

This makes it harder for the others. This makes it harder for the others to do what is right.

QUEST: Right, but are you, and do you, believe that this process should happened organically, if you like. Or does it require-and I hesitate, forgive me, to use the word leaver and plaza. Does it require some form of meeting to coordinate and organize?

BLANCHARD: I think it could happen organically. And I felt for some time that it would happen organically. The pressure is there. I mean, you have capital flows going to the countries which should be appreciating, and therefore providing the natural mechanism for this to happen. What is happening, however, is one of the main players, China, was quite willing to rebalance, and take a number of measures. He is very reluctant to move on the exchange rate front at the same time.

And so a result that China is not moving then Korea is more hesitant to go, Brazil is more hesitant to go and so and so. It might be there is a need for some kind of plaza accord, or something like this.

QUEST: Right. Let's talk-so you are then, we'll talk more about that, but lets us talk about the World Economic Outlook. Here the WEO says growth slows down next year. It also says we've got advancing economies that growth in 2011, advancing at 2.2 percent, an emerging economies have 6.4 percent, but it is a reduction in 2011 and beyond.

How serious a reduction in growth?

BLANCHARD: It is not by itself, as serious (UNINTELLIGIBLE). You have to understand in the last year or so, the recovery was very much driven by two forces. One was in eventual investment and eventually accumulation. The other was a fiscal stimulus. These things are coming to an end. The eventual accumulation is largely coming to an end. Fiscal stimulus, we know that it has to be phased out, more or less quickly, depending on the country. So what has to take the place is consumption and investing and they are not strong enough to carry growth in the same way, as the previous actors did. So there is nothing unexpected here. Actually our forecast for 2111, nearly the same as they were six months ago.

QUEST: One final thought, we know now there is no global, double-dip recession and there probably won't be a double dip recession. But do you still think that unemployment in the developed world is the single most problematic issue.

BLANCHARD: It is-I don't know what the biggest issue is, but it is an enormous issue. What we have, you know, you mentioned the radio growth of 2.2. percent for advanced countries. That is the kind of freight of growth which leads unemployment more or less the way it is. So we are dealing with an employment rates of close to 10 percent in the U.S., and the euro area. This is an enormous issue. And so anything that we can do to increase the rate of growth in advanced countries is clearly pressures. That is the only way to create jobs.

QUEST: All right. Many thanks, Olivier Blanchard. Many thanks indeed for joining us.

Thank you for joining me from Washington.

BLANCHARD: It was a pleasure.

QUEST: On Wall Street fresh signs of weakness in the U.S. economy. That put a damper on the way things were looking. A report showed a surprise downturn in the job markets. The U.S. economy lost 39,000 sector, a private sector jobs. But the market at the moment, down 11, just off one tenth of a percent. Look we have wondered and we've thought and have speculate that 11,000-and you and I have talked about this-this week. I don't now. Certainly not maybe not by tonight. I say certainly, what do I know? We still have an hour and a half to trade.

But possibly by the week, eleven thousand. And for those who want to remember, when did we last see 11,000 on the Dow, it was back in may, just about the time of the flash crash.

To the Euro bourses, and all the major markets closed up. They gained just around under 1 percent. I you look a the numbers, the FTSE was up, many deserve it at .75 percent, a five month high, mostly thanks to mining stocks. U.K. software company Autonomy was punished because it cut its forecast for the year. Shares were down 16 percent.

And investors shrugged off bad news on Ireland. Fitch has cut the country's ratings to double A, minus. Now we were talking just with Olivier about the role of central banks, of currencies, and all of these kinds of issues. There is a very good article, a detailed article, quite the sort of thing you might want to read over your morning coffee or late night drink. It is about central banks opening the spigot. I have taken the liberty of putting it on my Facebook page. Facebook.com/CNNQuest. It has got a really good visual look at the way in which the dollar movements are happening within countries. Anyway, have a look yourself. Facebook.com/CNNQuest. It is an article from "Barron's", which always makes good sense.

A new milestone has been reached in the Internet browser wars, well, who is the looser? Microsoft Internet Explorer, in a moment.

(COMMERCIAL BREAK)

QUEST: At 15 years old it is a granddaddy of the Internet age. It is Internet Explorer from Microsoft. And it indeed, not only dominated the Web, it took over a variety of other browsers. It was the subject of anti- trust activity in the European Union, and indeed, cost Microsoft a small fortune. Now an online data tracker is showing the world wide market share for IE has slipped below 50 percent for the first time.

Maggie Lake is in New York.

(DESK BELL CHIMES)

Maggie, look, when you first heard this today, I know your reaction was, tell me something new. In the sense that Internet-well, I-you know, we have a good robust discussion.

Internet Explorer has been losing ground for a long time, but under 50 percent?

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Yes, it is, you know we sort of know-we know it has been happening, Richard. But there are a couple of interesting things to consider when you see that headline that are worth talking about.

And first of all, you are tempted to say, how the mighty have fallen. It is more like stumble, but clearly this trend is in place. And what is interesting is who is catching up and why. Take a look at how things stack up right now. Microsoft Internet Explorer still has the bulk of the market, but climbing up quickly, Firefox, and Chrome, Google's Chrome. And that is the one I want to focus on. I sat down-because I don't pretend to know a lot about these things-but I sat down with our colleague from CNNMoney, who is a tech reporter, David Goldman, and asked him, why are we seeing this switch? What is going on? Here is what he had to say.

(BEGIN VIDEO CLIP)

DAVID GOLDMAN, TECHNICAL CORRESPONDENT, CNNMONEY: If you take a look at it, this is Google Chrome, right now. It really gives a lot of the real estate just to the Web itself. The browser is only lives right up there, and it is just one long line that you can use for your search and for your address bar, and for your bookmarks. It is all right here. If you compare that to something like Internet Explorer 8, which is Microsoft's browser, it is the most up to date browser that is out right now. You can see it gives a lot more real estate to the browser. There is a tool bar up there for file, edit, view, things that you can do.

LAKE: Right, the things that you can name, yes.

GOLDMAN: There is a little ribbon right down here that gives you more information, and less real estate to the Web Itself. So that is one of the reasons why people are loving Google Chrome.

LAKE: And what about, to me that wouldn't make much of a (INAUDIBLE), what about function? What about things like speed? What about security? Those presumably are issues for people.

GOLDMAN: Absolutely. And Google's Chrome, just like Firefox and Apple Safari, give you support for something called HTML 5. Now basically that just means it is the new kind of web language that is emerging. And it allows you to do some really incredible things on the Web. So there is a great video that Google has produced, to show what that looks like. Now if you go into Internet Explorer 8, you can't get it. You get a little bit of an error message. You can click on try anyway, as much as you want, but you are not going to get it.

LAKE: Right, right.

GOLDMAN: Google Chrome, all you do is, it is actually pretty neat. You type in where you grew up, in New York, and you can start to see a video. This is all in the browser itself. It is not anything running behind or on top of the browser.

LAKE: Right, which makes it completely streamlined. Why? I mean, my question, how did Microsoft fall behind? I mean, we know this is the direction that everything is moving. How did they-how is it that their browser is not doing this?

GOLDMAN: Microsoft's focus is always been on their corporate clients, right? So safety is really important to them. Security and the other really important thing is that you can manipulate it in an IT department.

LAKE: So, it is for IT departments, not so much for those of us now who want to sort of do this cool stuff, this leisure time stuff?

GOLDMAN: Exactly.

LAKE: On the Web.

(END VIDEOTAPE)

LAKE: And that is the key, Richard. That is where Google has really captured. And the important thing about Chrome, it is still a small part, but it is growing really, really fast. David said it is extraordinary the growth rate. And it is not embedded in anything. You know, I have an Apple, Safari comes with it. People are seeking out Google's Chrome, which is a really powerful statement.

The other important thing, I kept thinking about, OK, it is interesting. Ultimately, why do we care about browser? I mean, they don't make the company's money. In and of themselves they don't. But they are the front door to the search engine and they make a huge amount of money. That is where all the revenue is. That is why it is so important that you win that browser war.

QUEST: Maggie, one quick story I need to ask you about tonight. Wall Street Journal" has on its online addition, that Apple will be making an iPhone for Verizon, similar to, but not identical to the iPhone 4. Is this a big development?

LAKE: We have been expecting at CNN is chasing to confirm that as well. It is something that we have long been expecting. It is going to be a great news for Apple with the iPhone, good news for Verizon, bad news for AT&T.

QUEST: Many thanks, indeed. Short and to the point, Maggie Lake, in New York, has to be a first.

We'll be taking a look at-now see major football transfer next. Liverpool FC, could soon be sold, despite its current owners doing everything they can to give the dealer a red card.

(DESK BELL CHIMES)

(COMMERCIAL BREAK)

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

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

The question tonight in Hungary, how long is it going to take to clean up all the toxic sludge?

The government says it's too soon to say and they're investigating who's responsible. A government spokesperson said this is not a natural disaster. Four people were killed when the reservoir of toxic mud burst at a metals plant. It sent rivers of the red mud into nearby villages.

Two attacks on NATO oil tankers in Pakistan on Wednesday. The Pakistani Taliban are claiming responsibility for the first one in the city of Quetta. Hours later, police say militants set off 17 parked tankers on fire in the northwest. The Taliban have said the attacks are revenge for U.S. drone strikes in Pakistan, which have intensified recently. Officials say there was another one today.

Fresh bloodshed and condemnation in Yemen after two separate attacks on foreign interests. The British foreign secretary is calling the attack on an embassy vehicle "shameful." Several people were hurt. The other incident unfolded when a gunman opened fire at the Sanaa offices of the Austrian energy company, OMV. A French national who had been working at the company was killed.

Now the debt-laden football club, Liverpool, its shirts are red and if a newly agreed deal goes through, its bank balance won't be. Noble's German (ph) says the board has agreed to sell the club to the Boston Red Sox owner, New England Sports Ventures. The chairman says the deal is worth just about half a billion dollars, $477 billion. Liverpool was put on the market in April because of mounting debt.

The sale would -- of the club -- would see much of it repaid. There's still some kinks to iron out before Liverpool can change hands. The deal needs to be approved by the Premier League and the club says a dispute over board membership still needs to be resolved.

We will talk about the U.S. side of it in a moment.

Jim Boulden, though, on the boardroom shenanigans and what is happening.

JIM BOULDEN, CNN CORRESPONDENT: It's extraordinary, isn't it?

It's really -- you've got a situation where three members of the board want to sell, two members -- the owners of Liverpool -- don't want to sell. And it could end up in court next week to try to figure this all out.

But let's go through the numbers first.

You remember, three years ago, Mr. Hicks and Mr. Gillett, two Americans, came in and bought Liverpool. They paid around $275 million for it. And they say in their press release that came out last night they have invested $270 million. This is why they think the club is worth something close to a billion dollars. That's what they're looking for for the sale of Liverpool.

However, the board has agreed to sell the club for something around $477 million. As Richard said, about a half billion dollars.

Why?

Well, there's a lot of reasons for that. Mostly, the club owns a lot of debt -- it owes a lot of debt. And this club has been looking for an owner. And they do have this owner who has agreed to come in to buy the club for $477 million, but will also, of course, have to invest in players and invest in a new stadium, which Hicks and Gillett said they would do and ended up not doing.

Now, where will most of that money go?

It won't go in the pockets of mix -- Mr. Hicks and Mr. Gillett. The RBS, the bank -- the Royal Bank of Scotland, majority owned by the government, the taxpayers here, is owed some $375 million, give or take, because of the debt that was built onto the club in order for Mr. Hicks and Mr. Gillett to buy it.

Now, it may sound kind of complicated. But the bottom line is the chairman of the Liverpool, Martin Broughton, was brought in to sell this club and he has made some extraordinary comments about the owners.

Listen here.

(BEGIN VIDEO CLIP)

MARTIN BROUGHTON, CHAIRMAN, LIVERPOOL FC: I, frankly, am very disappointed that the owners chose to go down this route. It was their last opportunity to go out with their heads held high and they chose not to. In essence, when I took the vote on, I got firm undertakings -- written undertakings to me -- to the bankers with RBS, that the only person who could change the board was me and that the owners would do nothing to frustrate the sale.

(END VIDEO CLIP)

BOULDEN: And he says, of course, that they are frustrating the sale because Hicks and Gillett want to see a lot more money out of this.

QUEST: Ironically, martin Broughton is the chairman of...

BOULDEN: British Airways.

QUEST: British Airways. I can't remember, Jim, when we've had the chairman of the company and the CEO on the same program...

BOULDEN: Yes.

QUEST: -- on completely different -- look, a quick question. I come from Liverpool. I'm a Scouse by birth. So I followed this club when I was growing up, as they say. But they've done spectacularly bad lately.

BOULDEN: They have done -- they did so well up until the last couple of years. They have not won the Premier League, let's not forget. And they are now in the relegation zone.

Now, that doesn't mean that that makes the club worth less money. But what makes it worth less money is they don't have the modern stadium.

QUEST: Right.

BOULDEN: They have not invested in new players. That's what any Liverpool supporter wants to see coming from these Americans, who have been very successful with the Boston Red Sox.

QUEST: And beautifully segued from Jim Boulden in London, let's go to Richard Roth in New York, to tell us a little bit about these new owners, who, as Jim says, have been very successful and might actually have the impetus to improve the club.

RICHARD ROTH, CNN SENIOR UNITED NATIONS CORRESPONDENT: I mean you mentioned that Liverpool has not won the Premiership, I think, since 1990. Well, if you were a Boston Red Sox fan in the year 2004, you hadn't won the World Series baseball title since 1918. What John Henry and the new owners who took charge of Fenway Park -- where the Red Sox play, one of the oldest stadiums in baseball -- and when he took ownership of the team, the stadium, he turned things around.

He revamped the stadium. He changed management. He brought in new analysts and the type of people who can look at baseball players in a different way. And he didn't just flip the team for business purposes, his group still owns it. And they're very popular in Boston.

I asked on American sports business analyst to tell us more about who is this John Henry.

(BEGIN VIDEO CLIP)

DANIEL KAPLAN, "SPORTSBUSINESS JOURNAL": He moved digits in the ether, basically. He -- he was -- he was a master at -- at time -- timing the markets. That -- that's where he made his -- made his money. That was -- he was very behind the scenes, not high profile. He initially owned the Florida Marlines in Major League baseball and then, through a transaction orchestrated largely by the commissioner of baseball, Bud Selig, he -- he flipped the Marlins to a different man and he bought the Red Sox.

(END VIDEO CLIP)

ROTH: I think when soccer fans watched Celtics play sporting Lisbon in Fenway Park earlier this year, I don't think anyone had an idea that the Red Sox were gunning for Liverpool -- Richard, The Beatles, from your town of Liverpool, did play Boston once. Now, it looks like John Henry's Red Sox or his money will be playing in Liverpool at Anfield -- back to you.

QUEST: I'll buy you a ticket so you can come along and watch one day, if you take (INAUDIBLE) your baseball bat.

ROTH: I've never seen Anfield. I want to -- I want to go, believe me, to Anfield.

QUEST: All right. Many thanks.

Richard Roth joining us from New York.

Now, perhaps it wasn't someone born in America -- and a woman, at that -- to turn a quintessentially American product into a global success. When we come back in just a moment, the most powerful woman in America.

(COMMERCIAL BREAK)

QUEST: "Fortune" magazine has named the PepsiCo chief exec, Indra Nooyi, as America's most powerful woman. It's the fifth time in a row that a chairman and CEO of the soft drink company has won this particular accolade.

Poppy Harlow caught up with ms. Nooyi in Washington.

It was at the "Fortune" summit for the most powerful women.

She asked her about Pepsi's expansion plans for India and China.

(BEGIN VIDEOTAPE)

INDRA NOOYI, PRESIDENT AND CEO, PEPSICO: Both countries are emerging markets and they're called that way for a reason, because they have years of growth in front of them. China has the advantage of being centrally planned, so the growth is going to be more organized, it's going to be managed and it's going to be not so chaotic.

India is an ultimate democracy. And it's a democracy which is very complex because there aren't just two parties, there are hundreds of parties. It's a country not united by language. It's a country which has a bunch of, you know, diverse states knitted together under one federal government.

And so I think India is going to be a thriving democracy for decades to come, because they have the demographic advantage. They have many, many people who are very young. But growth in India is going to come very differently. It's not going to come planned by government. It's going to happen in spite of government.

And I think the -- we have to contrast the two. I think in India, you're going to make money faster, because private enterprise...

POPPY HARLOW, ANCHOR, CNNMONEY.COM: Really?

NOOYI: -- can go in and get out fast.

HARLOW: Looking at the U.S. economy, the hiring picture here, what does Pepsi need to feel comfortable hiring in a meaningful way?

And on top of that, is it a change in policy from the administration, because the Obama administration has taken a lot of heat for its economic policy right now. But we need the private sector in this country to really hire to see any kind of turnaround.

NOOYI: Look, private sector is going to hire if consumption picks up. Consumption needs to pick up. I mean, look, the reason companies are not investing in a big way is people are not buying. If consumption picked up, companies would invest.

So, yes, some of it is policy. Some of it is fixing all of the issues of the past.

So I don't think there's a single policy weapon available with the government that, if applied, bluntly or otherwise, is going to trigger consumption.

(END VIDEO TAPE)

QUEST: Now, Indra Nooyi talking to Poppy Harlow.

You remember last night, we were talking about Societe Generale and the Kievel, who has been ordered to pay them back $5 or $6 billion. Now, Societe Generale tonight says it will not ask the rogue trader, Jerome Kievel, to pay back nearly $7 billion. He lost the cache in unauthorized trades. The court ordered him to pay the money in full. The bank said -- and I quote -- "We have no wish to put him into debt for the next 107 -- 177,000 years. The answer is we are not seeking the money back."

A sunny past few days in Northwest Europe and now some possible relief in sight.

Pedram is with us at the World Weather Center.

PEDRAM JAVAHERI, CNN METEOROLOGIST: Richard, yes, the conditions out there are going to get nicer. Of course, we know the Ryder Cup had to be delayed there. But a front -- the tail end of it beginning to move out of across parts of the U.K. So, clearing conditions. A lot of moisture in the lower levels of the atmosphere. So with that, some morning fog possible, but high pressure as it stays put. Some pleasant weather on the way. But another front going to bring in some showers mainly across portions of, say, Portugal. Some heavy rain in their forecast.

But travels don't look to be a problem right now. Some showers around Dublin. Conditions in Paris, 22 degrees; 16 in Vienna; and around Kiev at 10 degrees. But I'm going to take you out across Southern China, because we've had remnants of a tropical depression producing an immense amount of rain and a high pressure blocking the moisture to the north near Beijing.

What that's done, it's been compressing the air. As it has, all the pollutants have been settling down in the valleys. And with that said, to the south, around Changzhou, a lot of fires. The NASA modis imagery here showing some of those thermal signatures of some of these fires.

And, again, I want to zoom it out. This is from Monday. Now let's zoom it out and give you the perspective of what it looked like on Wednesday. And, again, look at Beijing carefully. Look at the smoke extend all the way into the valley there in Beijing. And, again, a closer look and you can kind of pick out the channels, the valley there getting really all of this particulate matter, the ozone being extremely high, very unhealthy air there.

And you can see how they're sitting right now with the unhealthy air. So the last thing they want to do at this point is being outside in Beijing. But, again, conditions for them looking very dire with these last smoky conditions -- Richard.

QUEST: Many thanks.

Tonight's Profitable Moment.

Fourteen years ago, I sat at a press conference when BA and America announced their alliance. Today, that alliance, with Iberia, became a reality. The three airlines coordinating fares, flights and frequencies and will act as one, offering the same fare across the carriers.

Clearly, this doesn't reduce -- this reduces competition. BA and American were fierce competitors and it rather misses the point. These days, the real competition is between the Oneworld, Sky and Star alliances. United, Continental are adding flights for Star. Delta is doing the same for SkyTeam.

So leveling the playing field -- that's what happened today. Fourteen years ago, when I first reported this story, I never for a moment thought I would still be covering it today.

And that's QUEST MEANS BUSINESS tonight.

I'm Richard Quest.

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

"MARKETPLACE AFRICA" is next.

END