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QUEST MEANS BUSINESS

U.S. Jobs Number Shows Growth; Rival Bid for Big Board; Damage to Japan's Economy

Aired April 1, 2011 - 14:00:00   ET

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


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: It is a job lot, U.S. payrolls grow for the sixth straight month.

Muscling in, Nasdaq/OMX mount a rival bid for the Big Board.

And the guess work is over. Sorry clear evidence of real damage now at Japan's economy.

It is a Friday. We're together. I'm Richard Quest and I mean business.

Good evening.

April the 1st, and the start of a new quarter, and of course, April Fool's Day. The international festival of pranks. I can hear you already asking, will they, or won't they? Well, we may. Or we may not. And the only way you will find out is if you keep watching.

And you'll want to keep watching because we lead off tonight with America, the land of opportunity, potentially again; hundreds of thousands are heading back to work. The U.S. economy gained more than 200,000 jobs last month and it sealed a solid 6 months of growth rates in the States.

Look at the way they have rose. It was a bit of a blip in January after some winter weather. But that growth, the trend seems to be heading firmly up. The unemployment rate in the U.S. now stands at 8.8 percent. Still high by the standards of developed countries and certainly by the United States, but that is the best number that has been seen in two years. And most of the growth now starting to come from the private sector, which added 230,000 jobs. The public sector battling against these cuts, of course, with the cuts, cut 14,000 and recovery is most definitely not on the cards. Certainly as budget deficits, both local, state, and federal level, continue; 13.5 million people are still out of work in the United States.

Jeff Joerres is the CEO and chairman of Manpower Group, the new name for Manpower Inc., one of the world's largest employment agencies. Jeff is with me from Milwaukee.

Jeff, you just heard me summarize the situation. Good jobs, good private sector job growth, a fall in the unemployment, but it is still not enough.

JEFF JOERRES, CEO & CHAIRMAN, MANPOWER GROUP: Yes, we have to put it in context, as you said. This is good news. Because if you really simplify things is it getting the same, is it getting worse, or it is getting better? And it is getting better. So this is good news. The question is, when do we get to a point where we can actually feel like we are on the other side and get a breakthrough, which is closer to 300,000, 350,000, when we are really making up ground for the last four years of losing jobs. So, good news, just a long way to go yet.

QUEST: OK, traditionally, at this point in a recovery we should be seeing much more growth. You know, what you are seeing are those sectors where there is demand. What are they?

JOERRES: Well, we are still seeing demand in manufacturing. And that his key, because some of the entry-level and mid-level jobs in manufacturing pay better, it is great for the economy. But what we are also still seeing, across the board, whether it be the additions in health care, the additions in services, the additions in our industry. We added 29,000 jobs in our industry. What we are not seeing yet, is hiring in anticipation of demand. Companies are still getting more with less, driving and stretching out that workforce. And actually putting a lot of stress on that workforce right now.

QUEST: OK, if that is the situation and consumers are tapped out, they haven't fully deleveraged or they are-there is the prospect of higher interest rates. Not this year, but certainly they will arrive. Are we not just going to have to accept that the days of 4 to 5 percent unemployment are not going to be with us for many years?

JOERRES: I would agree. I mean I think it is mathematical. If you go to 250,000 jobs, or 300,000, you are still three and a half years away. You mentioned in your opening, the discouraged worker. How many turns in to that category in the next two to three years when they haven't found a job. Unemployment now goes for two years in the U.S., antiquating their skills. Companies are really in trouble right now being able to find talent. There is a mismatch. So, this "Human Age", which you announced and helped us announce, in the World Economic Forum, is on top of us. The conundrums are deeper than ever before.

QUEST: Jeff, many thanks. Have a good weekend, even with these numbers.

JOERRES: You too.

QUEST: And we'll talk again. Many thanks indeed. Jeff Joerres joining me from Milwaukee.

April the 1st, and the start of that new quarter. We need to take stock. And it is useful to do so by having a look and seeing where global economies-who gets the gold star. And what happens and where we go. This is the situation that you need to look at so far.

You've got the United States with its jobless level of 8.8, 2.1 inflation, and GDP. So far, so good. I suppose you could arguably say that gets across, that gets an OK. That's not too bad.

You then end up with Japan. We have to be a little bit careful with Japan, because of the tsunami and the earthquake. But the jobless level is high by their traditional standards. And inflation is an OK number. GDP, that is going to change.

It is the Euro Zone, jobless, a bad number, inflation, a bad number, the GDP, so-so, not too keen on that. And one of the reasons for all of this is the policies being put in place by them.

In the United States you have QE, which is nearly a trillion in the latest rounds, with states like Wisconsin, California, Illinois, making cuts. Japan, of course, has a crisis funding bill coming forward, probably in about April, and in 2010, there will be-there was obviously, 10s of billions in a stimulus package.

There is only one word of any relevance in the European Euro Zone. Except for that at the moment, it is, of course, going to be, very much the case, austerity.

Todd Benjamin is here to talk more about the situation and how it factors in.

TODD BENJAMIN, FINANCIAL CONTRIBUTOR: Great to see you. Great to see you.

You know, it is interesting how you are grading all of those, I don't think I would be quite as generous as you are. You know, I think there are shadings and I think it is not as simplistic as you make it out to be.

QUEST: Oh, simplistic?

BENJAMIN: Yes.

(LAUGHTER)

QUEST: Let's talk about those jobless numbers to start with, in the United States.

BENJAMIN: Well, I think, you know, as Jeff said, it is great news. You know, it is the strongest number that we've had for a while. But still the long-term unemployed, it is very bad for them. Wages are stagnant. It has been that way four out of five months, which is great from an inflation standpoint, but not from a purchasing power standpoint. And the big question I have is once this QE2, this quantitative easing, ends in June- and it sounds like it will from all the noises most of the Fed members are making-is will the private sector really pick up the banner and create enough jobs to keep the economy growing?

QUEST: Not in the short-term, they won't.

BENJAMIN: Absolutely not. And so I'm a bid concerned about what happens, as you know, Jeff was saying, even Dudley, the vice chairman of the Fed, was talking today. He said, hey, not so fast. Not so fast, a lot of problems still in the economy. Including this idea, he said, even if you got 300,000 jobs a month, you would still have plenty of slack in the labor market by 2012. So it is going to be a very, very long process.

QUEST: All right. So, you've got Japan out of the equation for the short term. Germany is going quite well.

BENJAMIN: Exactly.

QUEST: But the rest of the Euro Zone isn't.

BENJAMIN: Yes, and I think you make a very important distinction here. You know, if you look at Germany it is going well. But if you look at other countries, you know, like Italy, like Ireland, like Spain, like Greece, like Portugal.

QUEST: Right.

BENJAMIN: Lots and lots of problems.

(DESK BELL CHIMES)

QUEST: You called me simplistic? Well, you said that my-

BENJAMIN: You are not simplistic. I just think this is-

QUEST: All right. The United States, A, B, or C?

BENJAMIN: I would give it probably a C, minus.

QUEST: A C, minus. I'm going to be more generous. I'm going to say a B, minus.

Japan, I think, well, I think it is unfair to give Japan any form of grading just at the moment.

BENJAMIN: Absolutely.

QUEST: It would be a little bit-

BENJAMIN: But it's reconstruction program is going to be about 6 percent of GDP. So, you could see a V-shaped recovery there.

QUEST: All right. We'll give it a V-shape, a charitable V-shape.

BENJAMIN: Yes.

QUEST: The Euro Zone, I mean?

BENJAMIN: Let's strip out Germany.

QUEST: Yes?

BENJAMIN: And you get a D, minus, or F.

QUEST: We both agree on that. Todd Benjamin, many thanks indeed for joining us and putting us into that form of perspective.

BENJAMIN: You bet.

QUEST: Now, we need to look and see how the markets are trading at the moment. The Big Board is open in New York, up 87 points, at 12,407. We are heading to the New York Stock Exchange later in the program to find out why its parent company is the center of a bidding war.

Stock in Europe kicked off the second quarter with a strong session. Banking and energy shares top performers. Lloyds was up 5 percent in London. BP up 3.5 percent. These are the movements of the indices over the course of a week. Investors reacting to British/Irish-to Irish banks' stress tests.

When we come back in just a moment there will be more to talk about on the economic front and we'll be in Japan to show how the country's economic fate is now fairing, following the earthquake. QUEST MEANS BUSINESS, good evening.

(COMMERCIAL BREAK)

QUEST: Tangible evidence is now starting to arrive of the financial damage being caused in Japan and the wider Asia region, by last month's earthquake and tsunami.

Now, manufacturing activity in March, it has fallen sharply, it is at its lowest point in two years. This is not surprising. The PMI down at 46.4. Remember anything under 50 percent shows contraction rather than expansion. Clearly recession of some sort on the horizon. The Japanese is cutting back and a new study says that China will over take Japan as the world's second largest tourist market. This is the Boston consulting group that say China will be that before the end of the year.

And if you look at trade overall, the ripple effects, if you look at the numbers that show exactly how much trade is done, intra-Asia, while countries like Australia and Indonesia are seeing exports to Japan obviously fall off. The Australian treasury says it will loose around $2 billion in ex-rev this fiscal year, as demand falls for things like coal and iron ore.

The ongoing struggle at Japan's crippled nuclear plant, attracted most of the headlines over the past few weeks. Now, as Martin Savidge explains, that is just one of the problems in a country facing economic catastrophe.

(BEGIN VIDEOTAPE)

MARTIN SAVIDGE, CNN INTERNATIONAL CORRESPONDENT (voice over): In Japan the first Friday in April is traditionally the first day on the job for fresh-faced college graduates who generally work for one company their whole career.

Here the latest class of 7-Eleven employees sing a song of joy. But this year across the country the chorus is not nearly so strong. It is said to be the smallest class of new hires since mid-`90s. According to experts the devastating earthquake and tsunami will only accelerate that business trend.

JASPER KOLL, HEAD OF JAPANESE EQUITY RESEARCH, JP MORGAN: Those Japanese companies, moving more aggressively overseas, because that is where the profit margins are, and that is where the markets are. \

SAVIDGE: The disaster's economic shock is being felt by land, air and sea. Japan's auto sales in March were down 37 percent. Toyota was hardest hit. Its sales were down nearly 50 percent, with 16 of 18 factories closed.

Since the quake, Japan airlines reports international air travel has dropped by 25 percent. Other carriers such as Delta are trimming routes to and from Japan and using smaller planes. Japan's seafood industry has had a double blow. More than 6,000 fishing boats were damaged or destroyed by the tsunami, while fear of radiation is cutting into exports and spoiling appetites in the world's second largest seafood market.

These are truly dark days with two large key power facilities off line because of tsunami damage, Tokyo Electric Power Company, TEPCO, has lost 20 percent of its production capacity. Threatening the Tokyo region with rolling blackouts to save energy, lights, escalators, even mass transit have been shut down.

(On camera): 6 million people ride the Tokyo subway every single day. Now those six million will have to fit into 20 percent fewer trains to save electricity.

(Voice over): With remarkable speed the disaster is even reshaping Japanese society. In light of so much suffering, excess is out, saving is in, celebration subdued. The change felt even by the seasons. As this sign simply says, the nation's iconic Cherry Blossom Festival has been cancelled. Martin Savidge, CNN, Tokyo.

(END VIDEOTAPE)

QUEST: The situation at the Fukushima Daiichi plant remains unstable and speculation is that the Japanese government plans to intervene, or even nationalize TEPCO, the Tokyo Electric Power Company. That speculation hasn't gone away. TEPCO shares are down another 3.5 percent on the first day of the new fiscal year in Japan. TEPCO is down close to 50 percent this week alone. Three-quarters of the value of the company on the exchanges have evaporated since the start of the crisis.

And no relief for the Nikkei. It finished the day off down around half a percent.

After the break, to New York, where the world's most famous stock exchange has become the center of a bidding war itself, in a moment.

(COMMERCIAL BREAK)

QUEST: The New York Stock Exchange has been the home to many a bidding war for the companies listed on the exchange. And now, the exchange is the victim itself of the bidding war. NYSE Euronext, its parent company operating exchanges in New York and Europe, in February the New York Stock Exchange agreed to be bought by Deutsche Boerse, for $10 billion. Now it would have created the world's largest exchange.

But this is fascinating. Now, Nasdaq OMX, and Intercontinental Exchange, crashed the party.

(DESK BELL CHIMES)

Launched and $11.3-billion bid. Good grief! The big board is now a big bid. Alison Kosik is in New York.

Alison, we thought, come on, be honest, we thought that Deutsche Boerse deal was done dusted and all we had to do was lick the envelope.

ALISON KOSIK, CNN FINANCIAL CORRESPONDENT: Yes, but you know what? Nothing like a really good bidding war to get Wall Street in a flutter, right? You know? I mean, I was talking to some traders about this and, you know, just like with anything they are pros and cons. They say a big positive is what you are seeing right now. NYSE shares are up almost 13 percent. This is a great move for shareholders, because the offer comes with a 19 percent premium. And the NYSE could also keep its domestic ownership.

And then, of course, there are the negatives. You know, the Deutsche Boerse deal would be better. I'm talking about the negatives, for the Nasdaq. The Deutsche Boerse deal, traders say, would be better because it is a worldwide platform. And it is better for the NYSE in the long run.

Now, we spoke with Duncan Niederauer, the head of the NYSE, back in February, when the Deutsche Boerse was announced at the NYSE. He definitely echoed that sentiment. Take a listen.

(BEGIN VIDEO CLIP)

DUNCAN NIEDERAUER, NYSE: The fact of the matter is the equity, the U.S. equity business for our company the way it is currently constructed, is not the majority of the business anymore. It was our view several years ago that with a lot of the competition in the business here, we could not rely on U.S. equities as our single source of profitability over the long run. We also appreciate that the markets are global. The capital markets are worldwide. And I think our view is we have got to continue to be invested in those markets and services across the value chain.

(END VIDEO CLIP)

KOSIK: And of course it is all about the money making derivatives. That is really where it is at these days, you know, and the fact is many people really don't mind the exchange, Richard, being controlled by an overseas company like Deutsche Boerse, especially since NYSE merged with Euronext a while back, right?

QUEST: OK, let's put aside who owns what in terms of overseas, and the xenophobic argument that will be brought forward about foreigners ramping up the ramparts of Wall Street. But the fact is Nasdaq is, if you like, the bogie man rival to the Big Board, ever since it started. And it is, you know, scooped up all the big tech stocks.

KOSIK: And you are right. I mean, there is this-you know this-there has been this ongoing rivalry between the Nasdaq and the NYSE. You know each one, the same customer. They all want the same market share. I mean, we saw the tit for tat going on when we saw the flash crash back on May 6 of last year. You know they were finger pointing, all right, who is responsible for the glitch? Yes, there is no love lost between the two exchanges.

QUEST: All right.

KOSIK: I can't imagine Duncan Niederauer sitting down with Bob Greifeld for tea at this point, Richard.

QUEST: OK. I don't know if you are a betting woman or not, but on this Friday, if ever you had to have a dollar on who is going to win, would it be the Nasdaq or the Deutsche Boerse?

KOSIK: I put my money on Deutsche Boerse, definitely. Yes.

QUEST: All right.

KOSIK: But it has to go through the regulatory process. But that is who I'm putting money on.

QUEST: Oh, oh, that is the boilerplate caveat that she' putting in at the end just to make sure. That is the disclaimer.

All right. Many thanks, Alison. Have a great weekend.

KOSIK: Thank you.

QUEST: Many thanks. Don't forget, what we say means absolutely nothing. Because it all depends on what the shareholders in those companies actually believe. But I think probably Alison is well and truly on the money.

One U.S. stock, Morgan Stanley has tipped for big growth this year, is Honeywell. CNN's Maggie Lake met the conglomerate's chief executive to find out why and bring us a closer look at this key company.

(BEGIN VIDEOTAPE)

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT (voice over): They have aerospace contracts around the world, but also make everything from home security alarms to energy efficient car products, and safety gloves. In short, a classic conglomerate, over a century old, with annual sales of $33 billion.

Morgan Stanley recently tipped Honeywell shares, which are currently at their highest level since the financial crisis. We met CEO David Cote at the firm's campus in New Jersey.

(on camera): With such uncertain times, such turmoil around the world, what is it that makes you so bullish about Honeywell's outlook?

DAVID COTE, CEO, HONEYWELL: I don't think there is as much uncertainty as a lot of people might suspect. I do believe as about nine, 10 months ago, the recovery started to become for real. And we started being a net revenue (ph) ourselves, at that time. And we saw orders continue to do well during that time. And I really think we're on the path to a global recovery right now, that could go on for four or five years, who knows?

But I do think that that the path that we're on. We're just very pleased with the positions that we have, because we pay a lot of attention to try be in the middle of macro trends that just are going to last for a long time. Whether it is energy efficiency, clean energy generation, safety and security, those are the sort of things that are going to last for a long time. We are well positioned within that. And that great positions in some good industries really puts you in the right places.

LAKE: You get 50 percent of your growth, globally.

COTE: Hmmm.

LAKE: Are those growth rates sustainable?

COTE: There are things that have to be managed as you go along. I would say the China track record has been very good at being able to figure out how you do this. Because it is not-an economy is not a static thing. In fact, one of the things you want to maintain is the dynamism in an economy.

China, so far, has made all the right calls. For 30 years they have been making the right decisions and proceeding inexorably to greater and greater growth for their people. India will have to make those same kind of decisions, because it didn't quite start so soon for them. There is more learning that needs to go on. As even the Indians would admit the bureaucracy is astounding.

LAKE (voice over): Last year China awarded Honeywell and $11 billion contract to make landing equipment for its new plane maker, Comac. Some firms have complained over a lack of openness in China, but it remains a key market for Honeywell.

COTE: The growing pains are tough for both, partners, right? And that is one of the things that has to get sorted through. It doesn't mean that we shouldn't complain about the things that do need to change. And we should. By the same token, we shouldn't view them as evil, or bad, or out to destroy us. Because at the end of the day, as you know, economics is not a zero-sum game; both sides benefit from the transaction or you wouldn't do it.

LAKE: You are growing and on an aggressive acquisition trial. Why does that work for Honeywell, when it didn't seem to work out for so many others?

COTE: First thing that we never allow to happen is exactly what you talked about. Is there is the zeal for the deal, as I call it. Where you just get so-this is going to be great. You all start believing your own stories. This is going to be terrific. And you actually start ignoring some of the stuff you find in due diligence. And you need to have the discipline that says even when you get to the final negotiating table you can still walk away. You can't fall so in live with anything that you'll do it regardless, because everything is going to be great.

(END VIDEOTAPE)

QUEST: Now that is advice from the top; zeal for the deal, from the CEO of Honeywell.

On Monday, on this program, we turn our focus to the supply chain as we examine how products that we use everyday might be linked to modern-day slavery. Part of our year-long freedom project, it is a week of coverage that could be here on QUEST MEANS BUSINESS, as we turn the spotlight on the business side of human trafficking.

(DESK BELL CHIMES)

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS. This is CNN and on this network it is the news that always comes first.

(NEWSBREAK)

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. QUEST MEANS BUSINESS, this is CNN and, on this network, it's the news that always comes first.

Violence in northern Afghanistan after a demonstration turns deadly. Police in Mazar-i-Sharif say at least a dozen people, including eight UN workers, were killed when a UN operation center was attacked after this protest. The demonstration was against the reported burning of a Koran earlier this month by a pastor in Florida.

To the Ivory Coast, where forces loyal to Alassane Ouattara are closer to taking over the commercial capital of Abidjan. They've taken control of the state-run television and attacked the residents of the self-declared president Laurent Gbagbo. France, the US, and the African Union are now calling on Gbagbo to hand over power.

Libya's opposition says rebels have launched a new offensive near Al- Brega against forces loyal to Moammar Gadhafi. Meanwhile, both sides are proposing ways to end the civil war off the battlefield, but the conditions they're setting are very different.

The financial fallout from the Japanese disaster, far and wide, as you've heard on this program. Now, for Japan, tourism accounts for just two percent of the economy, according to the World Travel and Tourism Council.

Scott Durchslag is the president of Expedia Worldwide, and yesterday he joined me and told me what travel trends Expedia is seeing in the region and has been seeing since March the 11th.

(BEGIN VIDEOTAPE)

SCOTT DURCHSLAG, PRESIDENT, EXPEDIA WORLDWIDE: Well, it's interesting. We're seeing, lately, there has been some decline in demand, as you'd expect, given the seriousness of what's happening there.

But in the first days, it was much more mixed, because you had an explosion of outbound travel, obviously, happening. And a lot of domestic hotel bookings happening. So, it's still very early days, in terms of the long-term impact on this, but at the moment we are seeing some decline in the demand.

QUEST: You see, the thing is, Japan is actually quite an important part for Expedia, isn't it? And you were looking at Japan as being a major source in revenue in the future.

DURCHSLAG: Yes, Japan is, for us, a pretty high-growth market, and it's part of our broader Asia investment profile, which is a market that's been growing 54 percent in the last two years.

QUEST: Just to explain that, you don't expect that to continue, surely?

DURCHSLAG: I do expect that to continue, sure. What's happening in Japan is one of many events that's been happening in a year that's out of Revelations. Floods in Australia, earthquakes, tsunamis, nuclear issues. It's been a very difficult year.

But overall, the intrinsics on Asia are very powerful, $200 billion travel market that's growing faster than any other market in the world, and online penetration, which is very important to us, is only 20 percent, less than half the US or Europe. So, there's a lot of upside growth in Asia.

QUEST: Which is why, of course, your deal with Tony Fernandes of AirAsia is particularly relevant, isn't it? Even though it's been criticized by the opponents?

DURCHSLAG: Well, sure. We are really excited about our partnership with AirAsia, the reason being, it's the first deal ever that brings together an online travel agency and a low-cost carrier.

QUEST: Now, aren't you in an uncomfortable position? Because you've got this deal, but you're still saying you are neutral or, at least, not biased towards that particular airline.

DURCHSLAG: Well, we're all about bringing the best choices to our travelers, and having a low-cost carrier on Expedia, in addition to all of the other 300 airlines that we have, 130,000 hotel rooms, that is only to the benefit of consumers.

QUEST: You've obviously online, and the penetration online is very severe and very harsh, the marketplace. But now, you're moving into social media, as well.

DURCHSLAG: Yes, we're driving a new strategy called Expedia Everywhere that's all about mobile. Because what's more intrinsically mobile than travel? And what's more intrinsically social than travel? One of the major trends in travel is friends and families going together.

So, we've announced just today the largest sweepstakes ever done on Facebook that's been hosted on Facebook, and we just announced last week a brand new application called Expedia Hotels, Mobile and social are the future of travel.

QUEST: Why? Why do you want -- I mean, I go online and I book my ticket. Why do I need Expedia getting in my Facebook, my Twitter, and all these other social media areas?

DURCHSLAG: Well, because first of all, we want to be a personalized travel assistant in your pocket while you're on the fly, if you're late, on a flight, or you have to rebook or a flight is canceled. With one click, you can do that on Expedia.

And socially, you want to be able to share your itinerary with your friends so they can come with you. Or your pictures afterwards.

(END VIDEOTAPE)

QUEST: The president of Expedia Worldwide talking to me. On this program, of course, we take great importance to the travel and tourism industry.

Now, we've been hearing a lot about how the disaster in Japan has been affecting the travel industry. There is, of course, another factor that affects airline prices, and that is the cost of fuel. Brent is currently trading at almost $119 a barrel. It's gained 25 percent, give or take, since the start of the year.

On this program this week, we've had three airline chief executives, and here are their thoughts on the sky-high price of oil.

(BEGIN VIDEO CLIP)

WILLIE WALSH, CEO, INTERNATIONAL AIRLINES GROUP: I think at $115 a barrel, it's a challenge. But I don't think it's going to undermine the economic recovery that we've seen in most major economies.

I think if oil goes above $150 a barrel, it's something that everybody will be concerned about, but I'm pleased to say we're not there at this point.

ROB FYFE, CEO, AIR NEW ZEALAND: I'd actually be happy with fuel at $150. I'd be happy with fuel at $200. We are actually an incredibly robust airline. We've got a very strong balance sheet. There's a lot of airlines out there that struggle to economically survive. They get by by the skin of their teeth. To be honest, if high fuel started to claim some of the struggling airlines out of the industry --

QUEST: Oh!

FYFE: -- it wouldn't concern me at all.

QUEST: Oh! Oh! That's a polite -- you just want -- you want nutcracker the competition!

FYFE: Well, the reality is, the strong should get stronger, and those that aren't strong enough should, actually, fall by the wayside.

JEFF SMISEK, CEO, UNITED AIRLINES: We need to make money no matter what the oil prices. And we need to adjust to that, which means investing in modern fuel-efficient aircraft, engines, operations. So, we need to learn to make money in high oil prices. And I believe that we're likely to have oil prices for a -- high oil prices for a long time.

(END VIDEO CLIP)

QUEST: Jeff Smisk, Rob Fyfe, and Willie Walsh talking to me during the course of the week.

Frequent fliers, business travelers, are horrified when we board a plane and find children sitting in business class near us. Well, there are two sides to this argument, and anyone with a young family will tell you it's difficult flying with kids.

Well, today, we heard of a new airline that's courting a very specific clientele. These are flights exclusively for children.

The flight-booking site Skyscanner says Urchin Airways will become the world's first kids-only carrier. The rules will say no passengers under (sic) the age of 16 will be allowed onboard. There will be flight attendants, and children will be entertained during the flight with competitions and the cabin crew dressed as clowns. Urchin will coordinate with other mainline regular carriers so parents and children can be reunited at their final destination. The families we spoke to thought this was a most exciting prospect.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I think it's a wonderful idea. They're going to have so much fun. They've talked of little else for days. I mean, win- win. I get to drink a glass of wine and they get to play. It's perfect. I'll meet them at the other end. It's wonderful.

UNIDENTIFIED GIRL: Well, I can't wait to meet the clowns, because they're going to be cabin crew. And I heard there's going to be egg and spoon games, as well, so that sounds really fun.

UNIDENTIFIED GIRL: Also, there's going to be, like, ice cream and we can eat it for supper, and there's going to be screaming contests and on one's there to say that we can't scream as much as we like.

(END VIDEO CLIP)

QUEST: A brilliant idea, just don't book me ever, ever, on Urchin Airways.

That's not the only airline proposal raising eyebrows this Friday. Everyone, it seems, they're going to ever more weird and wonderful ways to keep your business. We'll talk about the airlines after the break.

(COMMERCIAL BREAK)

QUEST: It has been mild weather and we've had sunny skies. Western Europe's had a wonderful week. Except, of course, if you're heading towards allergy season, like myself. And frankly, Pedram, at the World Weather Center -- I -- I mean, I knew the weather was changing. The throat gets tighter, the nose starts running.

PEDRAM JAVAHERI, CNN METEOROLOGIST: Yes, you don't need a forecast. When you see the conditions that have been as nice as they have, of course, they're going to have hard effects, there, on folks that are suffering allergies.

And as Richard said, it's been fairly mild, and the conditions over the next 24 hours, going to remain mild for at least one more day across portions of London. There it is. That's 17 degrees, your forecast high temperature. We'll call it partly to mostly cloudy by the afternoon hours, perhaps a shower.

That's really the good news out of this as it begins to help clean up the air, the atmosphere that has been a little polluted with the pollination that's been taking place out there.

But as we talked about, what's going on out there, especially across the United Kingdom? What's causing all this? Well, you have to keep in mind, Richard's not alone with this one. Some 20 percent of folks across the United Kingdom are affected by allergies this time of year.

Now, you just go back a couple of months, the harsh winter that we had. Remember the snow showers, the cold conditions? That actually helps promote early pollination as we get these warm spells that we were getting in the past few days. So, with the warm temperatures, that's helping things out.

What's the predominate pollen right now for this time of year? Typically, we talk about birch, ash, elm, and willow, the tree pollens. That's probably what Richard is feeling, here, the past few days with the tree pollens being among the high.

Now, if you suffer symptoms in June and July, more than likely, that becomes a grass pollen concern as we head on towards the summer season.

But what do you do? Well, the best thing to do is to avoid the peak times. Experts say 7:00 to 10:00 AM, that's one of the times the trees begin pollinating, and also releasing pollen about 4:00 to 7:00 PM. So, early mornings, early afternoons, that's really the concern out there, being staying indoors.

Also, changing your clothes. Believe it or not, changing your clothes when you get back inside the house, that could help the concern, as well, as a lot of the pollen clings on right to your clothing and makes you sneeze all around the house after you've come indoors. So, you're wondering why you're feeling the symptoms when you're inside? That could be the reason. You can change your clothes.

But here is a storm system that is entering the picture. That, again, will help mix up the atmosphere a little bit as we head on into Saturday, partly to mostly cloudy skies around London, and Western Europe could get some showers out of this. And also across the north, a few showers.

So, the temperatures are going to cool down, that'll suppress some of the pollen levels, there, in the next few days, and the conditions are going to improve. But really, the warmest air mass still stays to the south, here, across portions of southern France into Spain, Portugal getting well above-average readings, some 10 to 12 degrees above average over the next couple of days.

And if you've got some travel plans out there, looks like travel not going to be affected by this much, as we're seeing breezy conditions and, again, a few showers possible. But all in all, an improving forecast for Mr. Quest out there, and perhaps some of the folks that are dealing with the allergies, Richard.

QUEST: We thank you for that. I'm not sure whether knowing about the allergies actually makes it any better, but Pedram, we do thank you. I think the most extraordinary thing is the way I'm finding them coming on as I get older. There must be a moral in there somewhere. Pedram, have a good weekend.

JAVAHERI: Yes.

QUEST: Now, finally to you, don't say you weren't warned. April Fool's Day on a week when we've spoken to a number of the top airlines. The entire industry, why oh why is it the airline industry that decided to get April Fools silly?

For example, Virgin Atlantic, they announced that they were growing fresh herbs and vegetables for upper class passengers in the galley. Apparently, the galley would be onboard, and they promised fresh mint for mojitos.

That was an April Fool.

Ryanair had everyone confused. They said they had child-free flights from October. The press release was dated April the 1st, but it was released, seemingly, yesterday, because I read that story. So, Ryanair -- I'm not sure who the final fool was, Michael. Your press release came out early. Anyway, we still had that one.

And then, finally, yes. We did it to you. Urchin Airways, kids only flights, the opposite of Ryanair, kids only, sorry. April Fool!

(BEGIN VIDEO CLIP)

UNIDENTIFIED GIRL: You've been April Fooled.

(END VIDEO CLIP)

QUEST: They were, of course, in on the joke. And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest in London. Whatever you're up to in the weekend ahead, have a good weekend. Thank you for your time and attention. MARKETPLACE AFRICA is next.

(COMMERCIAL BREAK)

ROBYN CURNOW, CNN HOST: You're watching MARKETPLACE AFRICA. I'm Robyn Curnow here on the streets of Johannesburg. We begin this week's show with a look at a multibillion-dollar industry that is both dangerous and illegal -- counterfeit drugs.

The World Health Organization estimates that a third of all medicines in the developing world are fake. So, how do you choose between what is real and what isn't? Lives are lost in that gamble. But as Christian Purefoy now reports, mobile technology is helping Africans to make an educated choice.

(BEGIN VIDEOTAPE)

CHRISTIAN PUREFOY, CNN CORRESPONDENT (voice-over): Armed police cracking down hard on Nigeria's fake drug sellers. But, say the authorities, these raids are not enough to stop counterfeit drugs flooding Nigeria's streets.

GARBA MACDONALD, DEPARTMENT DIRECTOR OF ENFORCEMENT, NAFDAC: Considering the level of poverty, people will want to go for the cheapest.

PUREFOY (on camera): And the big men behind the sale of these drugs? Do they pose a danger to you and your men?

MACDONALD: Yes, they do. They are problems because they can organize, they have the money, they can organize thugs to attack us. We cannot deal with this without more policemen.

PUREFOY: So, this is big money.

MACDONALD: Oh, it's big money, yes, sure. Big money.

PUREFOY (voice-over): As Femi Sorenmekun, director of a local diabetes drug company, explains, the major problem is identifying which box of drugs is real, and which is fake. Until now, with the introduction of a small scratch card packaged with all his medications.

FEMI SOREMEKUN, MANAGING DIRECTOR, BIOCHEM PHARMACEUTICALS: Then they scratch it, and upon scratching it, a number is revealed.

PUREFOY (on camera): If we text that now -- ?

SOREMEKUN: Definitely, if you text that now, you're going to --

PUREFOY: What happens?

SOREMEKUN: You're going to get a message telling you --

PUREFOY: Can we try it?

SOREMEKUN: Yes, you can.

PUREFOY: There you go. So, that's almost immediate.

SOREMEKUN: Yes. Almost immediate.

PUREFOY: But when someone receives this text, it says "OK," they know that drug is original.

SOREMEKUN: Is original.

PUREFOY: Has it worked? Has it helped your business? Has it helped the sales?

SOREMEKUN: Yes, it has. We've been able to capture most of our market share back. Because we can't eliminate fake 100 percent. But what we've lost, we've captured it back, and we can see some growth, now, in the business.

PUREFOY (voice-over): The idea is borrowed from the scratch cards sold on street corners across Africa use to top up mobile phones with credit.

Applying this scratch card innovation to the drug market is the idea of Ashifi Gogo.

ASHIFI GOGO, CEO, SPROXIL, INC.: The good thing is the consumer is not paying. The government is not paying, as well. And it's the pharm companies that are paying Sproxil for the service. The rationale being they can recoup market share that's been lost to counterfeiters.

So, in some sense, the counterfeiters are paying for the service, which puts a smile on lots of people's faces, I guess, except for the counterfeiters.

PUREFOY (voice-over): A simple tool that investigators hope will make raids like this one less necessary. Christian Purefoy, CNN, Lagos, Nigeria.

(END VIDEOTAPE)

CURNOW: So, anti-malarial drugs are the most commonly counterfeited medication here in Africa. The United Nations estimates that in some parts of the continent, between 50 to 60 percent of all anti-insective drugs don't have acceptable levels of their active ingredients.

And more disturbingly, a World Health Organization Study found that Ghana was the worst affected, 67 percent of their most common anti-malarial drugs were found to have failed potency tests.

Now, up next, he coined the phrase "BRIC" to describe the top emerging-market economies. But what does he have to say about South Africa's entry into that elite club? Up next on MARKETPLACE AFRICA, we interview leading economist Jim O'Neill.

(COMMERCIAL BREAK)

CURNOW: Welcome back to MARKETPLACE AFRICA. They're known as the fastest-growing emerging markets, Brazil, Russia, India, and China. Together, they're known as BRIC, an acronym coined by our next guest on Face Time, Jim O'Neill, chairman of Goldman Sachs.

In the next few weeks, South Africa joins the BRIC summit in Beijing, hoping its inclusion will raise its status and prestige on the world stage. But Jim O'Neill now weighs in on whether he thinks South Africa really deserves a seat at that table.

(BEGIN VIDEOTAPE)

JIM O'NEILL, CHAIRMAN, GOLDMAN SACHS ASSET MANAGEMENT: To be a BRIC, it has to be an economy that is really at the core, today, or likely to be in the future, of the world economy. So, it has to be big enough to be economically impactful on everybody else.

And so, against that general background, an economy that is already three to five percent of global GDP or is likely to be on in a vaguely foreseeable future. And if you go with that definition, there's only a clear four there are, Brazil, Russia, India, India, and China.

To be a "Next 11" country, it is literally a phrase that I dreamed up seven years ago as a result of people saying, well, why just those four? Why not Indonesia? Why not Mexico? Why not Turkey? Why not South Africa? Et cetera et cetera. And it's a phrase to describe the next 11 largest population countries from the emerging world.

NIMA ELBAGIR, CNN CORRESPONDENT: If the N-11 is such a fluid --

O'NEILL: Yes.

ELBAGIR: -- concept, why do you think there has been so much controversy over South Africa jumping over the N-11 to be part of the BRICS club.

O'NEILL: South Africa's so unique and, in this context, quite odd. Because South Africa has some aspects of development, particularly financial markets, some aspects of the better standards of Western practices in terms of regulatory matters and Western law. And with that, there has been historic trade organizations that South Africa's linked to, particularly with Brazil and India.

And so, with the whole growth of the BRIC idea, particularly when it became a BRIC political club, for South Africa to be not part of it is obviously something that South African leaders feel a little bit, "What's going on here?"

Beyond that, I'm not sure why South Africa's managed to leap above it. Because if you look at the criteria I said earlier about what's a BRIC and what's a Next 11, South Africa doesn't even come close to -- certainly, not a BRIC. South African economy at, what? $350 billion is half the sum of global GDP.

So, it's nowhere near constituting a BRIC, and without staggering productivity improvements and major immigration or improvements in birthrates, et cetera, et cetera, it's never going to get there.

South Africa's really stimulated my mind to explore this further, because there are some others, like Poland, Saudi Arabia, who have more reason to be irked about these things, perhaps, than just South Africa. Because, of course, when you look at the Next 11 definition, South Africa doesn't actually have that many people, either. And in the context of the continent, Nigeria is the place that really matters.

ELBAGIR: I was going to say, do you think they've missed the trick by taking in South Africa rather than Nigeria?

O'NEILL: I think it's been, because the South African leaders and leading intellects have been so persistent about it and maybe the Chinese and Indians and others thought, "You know what? OK, guys. If it shuts you up, come in."

But there is another angle to it, of course, that I'm sure South Africa has perhaps played on the notion that because they do have developed markets and western government standards in some areas, they've said, "Look, we're the gateway to the rest of Africa," and that's certainly an argument with some legitimacy.

ELBAGIR: What would you advice -- if you were advising the South African government, what should they do to earn their place at the BRIC table?

O'NEILL: That South African --

ELBAGIR: The South African government. Or do you think it's a -- anyhow, it's a lost cause?

O'NEILL: No, I don't. No, nowhere is a lost cause. I think South African leaders have to be bolder about the basics and not be so worried about what club they're in or not. They've got acceptance, they're in the G-20, they've been invited to the big political meeters -- leaders' meeting, and they're there.

What they've now got to do is, as with the World Cup, turn an event into some lasting improvement. Stop thinking that because of Apartheid and other tragic historical things, stop thinking that world owes South Africa something for its past, and do things to create a better environment where you can attract a lot more international business.

And most importantly, embrace all your own people in a competitive, open way and find everybody jobs.

(END VIDEOTAPE)

CURNOW: Is South Africa qualified to be a member of BRIC? Tell us what you think. We're having a discussion on our Facebook page. But for now, let's just take a look at what's trending this week.

Foreign mining firms in Zimbabwe are scrambling following President Robert Mugabe's demand that they must sell a majority stake to local black Zimbabweans within six months. Shares at major mining companies dropped sharply upon the news.

The regulation follows an indigenization act signed into law three years ago, which aims to make foreign companies junior partners in Zimbabwe.

And Kumba Iron Ore is proposing a $7 billion steel plant in South Africa to help reduce unemployment.

President Jacob Zuma has asked businesses to help create 5 million jobs in the coming decade. The proposed plant would create 3,000 jobs and export up to five billion tons of steel each year to buyers in Asia.

So, if you have any ideas on who we should interview or what stories we should be doing, please do connect with us. We're on Facebook, we're on Twitter, and you can e-mail us. We'd love to hear what you have to say.

But until next week, for me, Robyn Curnow, here in Johannesburg, good- bye.

END