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QUEST MEANS BUSINESS
British Autumn of Austerity; Six Years Austerity for UK; Modest Gains for European Markets; US Markets Rally; Morsi Advisors Resign; Wikipedia Appeal; Euro Retreating; US Oil Boom; Fiscal Cliff Loom
Aired December 5, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: Six more years of austerity. The debt continues to rise, and the British government says it's sticking to its course.
The Saudi-America effect. US oil productions at a 15-year high.
And Wikipedia meets its maker literally. Tonight, I test out the site on its founder.
(BEGIN VIDEO CLIP)
QUEST: Occupation, residence, successor.
JIMMY WALES, FOUNDER, WIKIPEDIA: Successor?
QUEST: It says successor.
WALES: They've got something planned for me.
(END VIDEO CLIP)
QUEST: I'm Richard Quest. We have an hour together, and I mean business.
Good evening. Britain must endure an extra year of austerity. With the cuts set to extend into 2018, the UK finance minister says it is progress in what he describes as a hard road. Also, turning back now would b a disaster.
It was the annual autumn statement before the House of Commons. The chancellor of the exchequer, the finance minister, George Osborne, said the period of consolidation will now go on for an extra -- or for six years. That's one more, an extra year of austerity.
The growth forecast has been cut for every one of the next five years. The UK economy is set to shrink this year, just by one tenth of one percent. Mr. Osborne said the crisis in the eurozone will constrain growth for years to com.
It was the eurozone, amongst other problems, slowdown in China, that were largely responsible for what they said is the reason. The government has missed its own debt targets. Debt is set to rise each year until 2016. Despite the miserable picture, the chancellor said austerity remained the only way forward.
(BEGIN VIDEO CLIP)
GEORGE OSBORNE, BRITISH CHANCELLOR OF THE EXCHEQUER: There are those who have been saying that the deficit was going up this year. Indeed, I think I heard it in prime minister's questions. But any way you present these figures, this is not what the OBR forecasts show today. They say that the deficit is coming down. Coming down this year, and every year of this parliament.
Yes, the deficit is still far too high for comfort. We cannot relax our efforts to make our economy safe. But Britain is heading in the right direction.
(END VIDEO CLIP)
QUEST: Now, at issue, of course, is the fact that the UK has been the poster child, the prime international example of self-imposed austerity. The UK government has taken draconian measures, it says, to protect its credit rating and to protect the economy.
The economic secretary to the UK treasury says the eurozone crisis stopped the country from growing as expected. I asked Sajid Javid, the minister, well, if all this was the case, so the UK needed another -- another -- year of cuts.
SAJID JAVID, ECONOMIC SECRETARY TO THE UK TREASURY: Well, the reason we've had to stretch out our deficit reduction period by another year is because the growth that have actually materialized the last couple of years is less than what was originally forecast by the independent OBR, that's the body in Britain that makes the forecasts. It's not the government itself.
And so, we've had to recognize that. And importantly, it said that the reason why growth is lower than they had originally forecast is because of the eurozone crisis --
JAVID: Because of peak in oil prices in 2011, and because the recession Britain suffered through the financial crisis was a lot worse than they originally anticipated.
QUEST: Yes. The OBR describes the UK economy as performing poorly, it's lacking momentum, they are pessimistic, they say the outlook has deteriorated. In that scenario, Minister, everybody is saying why are you continuing the policy of austerity and not, if you like, taking your foot off the brake?
JAVID: Because it's the right policy, and I'll explain why. It's that first of all, no country can go on living beyond its means. You can't keep spending money you haven't got, and we've seen what's happening to countries around the world that have ignored that fundamental truth. So, partly it's a necessity.
But secondly, it's also the right economic policy for long-term growth, because having a government that deals with its debts, deals with the deficit, means credibility, and if you look at Britain and international credibility, just look at the yields on government bonds. They're at all-time lows, record lows, amongst the lowest in the world, which is encouraging investment and keeping bills down.
QUEST: It's a bit depressing, isn't it, when you think that the US election has just taken place and you are now talking about austerity right the way through the Obama administration and halfway into whoever comes next?
JAVID: Well, we have to -- we have to be serious about the problems we confront, and that's what this government is doing.
And I think what your viewers would probably want to know, if you look at governments around the world, you can have a government that is running away from problems and pretending it's not happening and sticking their head in the sand, or you can just walk straight up to them and confront those problems.
And those decisions are not easy. We don't pretend that at all. But Britain is being rewarded for taking its problems seriously. We've seen that in job numbers. The British economy has generated one -- over a million net new jobs over the last two years.
Employment, actually -- sorry -- is at the highest level ever in our history, and even the forecast that we saw today from the independent OBR show employment increasing, and actually it says that our work participation rate is higher than that of France and Germany and the US.
QUEST: To our viewer who might be watching in the US that's worried about the fiscal cliff, obviously, and I understand you've had more than enough on your own plate with the autumn statement to be necessarily worrying about other people's problems, but to our viewer watching in the United States who says Britain is a perfect example of why we must not go down the austerity route.
JAVID: Well, what I'd say first is that the US has gone down the austerity route. If you look at the fiscal consolidation in the US over the last three or four years, if you include the consolidation by the states as well as at the federal level, it's about the same size as a percentage of GDP as what Britain had done.
But secondly, I do watch what's going on in the rest of the world. I have to. Britain is rightly is a very globalized economy. We trade with the rest of the world at a much higher proportion of our economy than we used to in the last few decades, and that's a good thing, but what happens in the US affects us all.
So, I am watching that carefully. It's not for me to say how that may or may not go, but it is something that is important. Before I became a treasury minister, I was a bond trader for 20 years, so I'm fully aware of the impact of situations such as the fiscal cliff on international bond markets.
QUEST: That's the UK treasury minister with the perspective from the government on another year of austerity. The European markets --
QUEST: -- and the FTSE move slightly higher after the announcement. Mining stocks at a strong showing. China's new leadership and the Chinese economy was stabling.
And it's important to remember with those numbers that what we're now going to start seeing is a rebalancing of portfolios as the question and the possibility of bond yields, what it means for inflation, all the various parameters that follow any form of budget in any one of the major economies. The Zurich SMI was the only market that was off the top.
QUEST: And to Wall Street. CitiGroup up 6.5 percent after announcing 11,000 job cuts and a retrenchment from -- or retrenching from some emerging markets. There have also been -- we'll go into the details later, but there've also been a couple of encouraging noises on the fiscal cliff. As a result, over 13,000, the Dow is up more than 100 points.
Coming up next, the founder of Wikipedia, Jimmy Wales, tells me why his temple of the mind is no place for ads, and there's plenty of requests to give them money.
QUEST: News just into CNN: three advisors to the Egyptian president Mohamed Morsi have resigned over the constitutional decree by which the president granted himself those extensive powers. It follows word that two people have been killed in clashes outside the presidential palace in Cairo.
A journalist on the scene says supporters of President Morsi charged anti-government demonstrators. We'll have more details for that, of course, at the bottom of the hour in a news summary.
If you've looked online at Wikipedia lately, you can't have failed to have seen the yellow banner or orange banner at the top of the page. You only see it once a day, or give or take, which is why I can't show you on my computer here.
Wikipedia is on a fundraising drive. This is their annual attempt to bring in as much money as possible. Keeping the world's fifth-most popular website up and running is not cheap. The foundation behind it hopes to raise more than $40 million through the online donations.
Wikipedia's founder is Jimmy Wales. He was in London for the fortune forum summit, matchmaking charities and the super rich. Jimmy Wales told me donations help keep the world's temple for the mind operational and advert-free.
WALES: We think it's really important to maintain the independence of Wikipedia. We like to keep it ad-free.
QUEST: Just take ads --
QUEST: -- and you won't have a problem with your future funding stream. It's really very simple.
WALES: It's true. Yes, it's true, but I think when people go -- when you go to read the entry on General Motors, you might find it a little disconcerting if there's an ad for the new Corvette there. We really think -- I really think of Wikipedia -- and I'm not opposed to advertising. I have a for-profit company, Wikia, which has advertising-supported wikis.
But for Wikipedia, it's a temple for the mind, I say. It's a place for us to go and think and reflect, that sort of place of quiet, somewhere to go and learn something, and we really want to preserve that.
QUEST: It's a sort of -- and I know it's relatively new, I mean it's relatively new in the great scheme of things, but it is the sort of institution that when looked at on paper, you immediately say, this will never work. A group of, what? Thousands of volunteers running an encyclopedia, self-monitoring, and only 100 people at the top to actually run the organization. You're barking mad.
WALES: Yes, completely insane. It's completely impossible and it can't work, and yet, she flies. So, it's really -- it comes down to something, I think, quite wonderful about human nature that it turns out there's lots and lots of really nice, thoughtful people who want to come and help, and they do.
QUEST: But whether it's privacy, whether it's copyright, whether it's access, all these things, do you believe that the legal systems are now behind the curve? We have to --
QUEST: -- rewrite the rules.
WALES: Yes, absolutely.
QUEST: We're trying to -- we're trying to use rules for the printing press --
QUEST: -- for a mechanism that I can find out just about anything I want from you.
WALES: Yes. Some of the things that we need to think about are how do consumers legitimately and morally want to use the content that they've bought? So they've got some music that they legally own and they play it on the -- in the room, and they're filming their kid's birthday party, and they've put that video up on YouTube to share it with friends and family.
And then YouTube comes along, because they've been demanded by a copyright holder, to silence the soundtrack of a kid's birthday party. And I think most people would say, that's not piracy, that's -- that's what we bought the music for, so that we play it at the kid's birthday party and film it for our friends.
QUEST: I am looking up your own Wikipedia page.
QUEST: Let's have a look and see what it says about you, and do you agree with it? Did you have a hand in this?
WALES: No, not really. It's edited, and I actually hardly ever look at it, so I hope it's good today.
QUEST: It says you're 46.
WALES: That's probably about right.
QUEST: You live in -- well, you went to Auburn University --
WALES: I once -- I have to tell you, I once, when I met Stephen Colbert backstage at a thing, he said to me, "Jimmy, I've got a problem with my Wikipedia page." He said, "It says that I'm married."
And I said, "Oh, I'm sorry, is that a mistake?"
He said, "No, it's true."
I said, "What's the problem?"
He said, "It really hurts things with the ladies."
WALES: That's Colbert.
QUEST: So, you're happy with your page as is, controversy --
WALES: Yes. I just got married. Does it say that I just got married?
QUEST: Oh, hang on, hang on.
QUEST: Let's see if says you just got married.
WALES: It should do. Down -- just got married in London.
QUEST: Occupation, residence, successor.
QUEST: It says successor.
WALES: They've got something planned for me. Oh that was -- yes, as chair. Yes.
QUEST: Yes. Awards. No, it doesn't -- personal life, here we go. Let's go and discover your personal life.
QUEST: Ah! "Wales married Kate Garvey in London on 6 October 19 --" sorry, "2012."
WALES: 2012, that's right. Very good.
QUEST: And then it goes on to -- ooh, I say! Ooh!
QUEST: Oh, my word! On that -- you've had an exciting life! On that note, Jimmy, thank you.
QUEST: Jimmy Wales joining me earlier. Now, tonight's Currency Conundrum. These coins are part of a haul recovered from the Spanish galleon, which sank in 1804. Our question to you: roughly how much is the treasure from the Nuestra Senora de las Mercedes? I wish somebody had warned me about that one, that that was coming.
How much is it all worth? Five million, fifty million, five hundred million dollars? The answer later in the program.
Currency of a different type. The euro's retreating, the yen is falling, and the pound is flat. Those are the rates --
QUEST: -- this is the break.
QUEST: It's known as "black gold." Some people call it "Texas tea." It is, of course, the oil produced in the United States, and oil production is at its highest level in nearly 15 years. The Energy Information Agency says America's pumping gas, 6.5 million barrels a day, thanks to new production techniques. Maggie Lake is in New York.
Look, we know that America has always been producing a fair share of oil. "The Beverly Hillbillies" made an entire sitcom about it. It's -- we'll get you to sing the song later.
QUEST: But this new shale fracking system is revolutionizing everything.
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: It is. And I love that you went all the way back to "The Beverly Hillbillies." I was just thinking "Dallas" --
LAKE: -- which is about where we are back to for production levels, Richard, back when it was all about Houston and those big rigs. But you're right. The production levels are back to those, but how we get it out of the ground is drastically different, and this is why we are where we are.
And let's put up a graph. This is the production line you see, and it really dipped down there, especially back in 07. Look where we are now, back to levels we haven't seen in 15 years.
And fracking, of course, is when they tap into those shale formations, that deep rock, to release those pockets of oil and gas that were before unreachable. It's been a game changer.
The states -- in case you want to visit the US and wondering where this is happening, get your own bird's-eye view -- the states that saw the biggest gains, Texas and North Dakota, especially the Dakotas --
QUEST: All right.
LAKE: -- have really been where it's happening, partially because it's been easier to start there, it's where it is. And also, fracking is controversial, the environmentalists don't like it, but it has been a game changer.
LAKE: And let's put this all together. Remember, the International Energy Agency said we could surpass Saudi Arabia by 2020. You mentioned that. But another fact in there is that along with increasing production, we are on schedule to consume a lot less, 33 percent decline in conduction --
LAKE: -- consumption, rather, over the next 20 years. That breaks the two big assumptions, about Americans, right?
LAKE: That all of our policy is based on oil and that we guzzle all the oil in the world, and evidently that's changing, Richard.
QUEST: Whew! She's got the bit between the teeth on this one. She's -- off to the -- Maggie's off to the races on the question of shale or -- listen. If you're right -- well, not you. If the experts are right, even as it moves towards Saudi Arabia status, the sheer numbers, this has the potential for major shift in geopolitical importance.
If the US suddenly becomes more self-sufficient, it becomes more of a net exporter, and fundamentally, you'll get lower prices.
LAKE: Yes. It's been the Holy Grail here, right, Richard? And this is why we're going to really continue to hit hard on this story throughout the next year, because it could be a very big game changer in terms of politics and economics.
The only thing I'll say -- and this is the caveat of this story -- is that fracking is producing these huge results, but the only way it makes sense to do it economically is when the price of oil is high. That's the only way it's economically possible, as opposed to Saudi Arabia, that has access to cheap get -- cheap oil.
So, if the price of oil globally starts to go down, the fracking scenario could pull back, which is why people here say, yes, let's do it, but also let's pursue other alternative energy means, because it alone won't, maybe, get us to that 2020 goal. But it is -- has the potential to be a huge game changer.
QUEST: Not often you see Maggie Lake quite as excited at the prospect of filling her gas guzzler at a cheaper price than before. Maggie, good to see you. Thank you, as always.
Wall Street's rallying, the Dow is up almost one percent.
QUEST: The reasons are private sector hiring, a slowed -- partly due to Super Storm Sandy, but we know the reasons why, and therefore, you can factor it in. CitiGroup is the big gainer as well. CitiGroup shares are up 6 percent. This is the usual.
Bad news for those involved: 11,000 jobs globally are to be cut, some cutting of the workforce. But of course, as the jobs go, the company becomes more profitable. Those are numbers.
As to our check on the fiscal cliff: 27 days to go until the cliff, when the fiscal cliff takes effect. Barack Obama says he's close to a deal with the Republicans to avoid the massive tax increase and spending cuts. The president says, little bit of give, little bit of take, and there could be a plan within a week.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: If we can get the leadership on the Republican side to take that framework, to acknowledge that reality, then the numbers actually aren't that far apart.
Another way of putting this is, we can probably solve this in about a week. It's not that tough. But we need that conceptual breakthrough that says we need to do a balanced plan. That's what's best for the economy, that's what the American people voted for, that's how we're going to get it done.
(END VIDEO CLIP)
QUEST: Don't get too excited of a deal just yet. The other side, the House speaker, John Boehner, isn't as positive.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R), SPEAKER OF THE HOUSE: America faces a very serious problem, and our goal is to make sure it gets solved. We have a debt problem that is out of control. We've got to cut spending and I believe that it's appropriate to put revenues on the table.
Now, the revenues we're putting on the table are going to come from, guess who? The rich. There are ways to limit deductions, close loopholes, and have the same people pay more of their money to the federal government without raising tax rates, which we believe will harm our economy.
(END VIDEO CLIP)
QUEST: So, those are the two sides, you hear them every day on this program, a bit from one, a bit from the other. And whilst the White House says it's confident a deal, planning has now begun for the worst.
The Budget Office has asked all federal agencies for information so it can final a contingency plan in case an agreement can't be reached. Automatic sequestration of budget comes into effect, and cuts have to b implemented.
Let's stay with cuts, they keep on coming. Europe's in the middle of an austerity onslaught. We'll ask Bronwyn Curtis how he can ever expect to grow a European economy with so much austerity. QUEST MEANS BUSINESS, good evening to you.
QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN and, on this network, the news always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Three advisers to the Egyptian president, Mohammed Morsi, have resigned over the constitutional decree by which the president granted himself extensive powers. It follows two words that two people have been killed in clashes outside the presidential palace in Cairo.
Philippine authorities say the death toll from Typhoon Bopha is now 322. Rescue crews are scouring the southern Philippines (inaudible) nearly 400 people still missing. The storm damaged and destroyed thousands of homes when it made landfall on Mindanao Island earlier this week.
Fighting between Syrian troops and rebels has been intensifying in Damascus.
Video posted online appears to show recent shelling in Zabadani. An opposition group now says 67 people have been killed across the country today.
The London hospital that's treating Prince William's wife for acute morning sickness is to revisit its telephone protocols, in their words. An Australian radio deejay made a prank call; pretended to be a member of the royal family and in doing so obtained confidential information about Catherine's condition.
Key California ports are open for the first time in a week after striking clerks reached a deal with management; we told you about this story last night on this program. The terms of the agreement aren't yet known; management and retailers say the standoff was costing the economy up to a billion dollars a day.
(END VIDEO CLIP)
QUEST: So the U.K. is to endure another year of austerity, which will now go out to 2018. But the commitment to continue the policies remains undaunted or undoubted.
So let's start with the U.K. and we can put it, 2018, 29 billion in welfare cuts, pension changes, a whole variety of things that were introduced. But if you thought the U.K. was alone, of course you know that's not the case. The difference is the U.K. is self-imposed austerity.
For instance, let's compare it to Ireland, where there are -- today there was a budget, another 41/2 billion austerity budget, a new property tax. But, of course, you'll remember Ireland is part of the E.U. IMF bailout program.
So to some -- and, of course, the country just about went bankrupt. So to some extent, that is imposed from above.
Other countries where, of course, we have similar problems, Greece, 171/2 billion over two years, multiple bailouts and downside risk to Eurozone membership remains.
So these are the countries, if you like, that are already in the thick of it. Now those that have still got quite a bit to come -- let's take Spain. More austerity, 83 billion, look at the unemployment rate, 26.2 percent and much higher, of course, for youth unemployment. And bailout speculation: will Rajoy or not go to the new for OMT and go for a conditions? That's to be watched and waited and seen.
Finally to France, 37 billion by 2013 and, of course, France has a 75 top tax rate that is to be introduced on those over -- I think it's a million (inaudible). I need to check (inaudible). But it's certainly 75 percent top tax rate.
The U.K. remains the area at the moment of concern and the one, of course, where we're focusing on today.
Joining me now, Bronwyn Curtis, senior adviser and banking (inaudible) markets at HSBC, good to see you.
BRONWYN CURTIS, SR. ADVISER, GLOBAL BANKING AND MARKETS, HSBC: (Inaudible), Richard.
QUEST: Autumn statement: so he missed his target by a year. Big deal.
CURTIS: He not only missed his target by a year, though, but the peak in debt, in the debt-to-GDP ratio, is higher than it was six months ago. So it's not just missed the target but the situation's got worse as well.
QUEST: He's borrowing more. He's missing the target. But he says he's got a perfect reason for this. On this program, the treasury minister said Europe, slowdown in China and all these other events.
CURTIS: Well, that's certainly had an impact. There's no doubt that the slowdown and the Eurozone problems, just as you were pointing out, have had an impact. But also it does look as though the austerity -- he says it doesn't have any more impact than he forecast a year ago. I think it does. So I think we've had a bigger slowdown than we would have done.
Now I think going forward, the problem is the forecast for growth, incredibly important, may look awfully optimistic. So I'm -- I am nervous.
QUEST: Concession or minus point one next year, 1.2 the year after. You're fundamentally saying that the U.K. economy, the risk is (inaudible) firmly on the downside.
CURTIS: Well, yes, because he's saying that it bounces back. So it's all -- well, not all, but a lot of it is cyclical. So by 2016, we're up to 2.7 percent growth.
QUEST: On the wider question of austerity, and whether or not the U.K. has, as I said, self-imposed austerity -- Draconian self-imposed austerity, this debate goes on. Where do you stand on this?
CURTIS: Well, I think you need to have -- you need to get your debt down in the long term, but you need growth.
Now he did a couple of good things. I mean, one of them was if the restructuring in the gas market really works, we'll have lower energy prices, lower energy prices really do help the economy. If the move to do more infrastructure and less current spending works, we'll have more potential growth going forward.
So he's putting a lot of things in place that are good, but it's really difficult.
QUEST: It's going to be almost impossible, finally, Bronwyn, to really make progress. When you look at the rest of Europe and you see what's happening, because France hasn't really got to grips with its austerity yet. Spain has got more to come. Germany's probably got some austerity down the road.
The United States has got the fiscal cliff. Whatever happens is going to be austerity over there.
CURTIS: That's right. And I think it is -- you know, it means the whole thing's slow, even Asia. It's looking all right; steadied, but you know, look at the numbers coming out of Europe. They're softer and softer. So we really do have -- 2013's going to be a really challenge year, once again.
QUEST: It's just as well there's not too much Christmas cheer at the moment.
Bronwyn, thank you very much. Good to see you as always. Many thanks.
Now the U.K. supermarket Tesco has jettisoned its $1.6 billion U.S. venture. It was launched five years ago. It was called Fresh & Easy. It's become stale and difficult. And it's a money pit. Jim Boulden is with us.
JIM BOULDEN, CNN CORRESPONDENT: Yes.
You know, it was such an important thing for Tesco to have this U.S. expansion. I can remember talking about this years ago. However, Fresh & Easy, 3rd quarter sales, the growth slowed to 1.8 percent from nearly 7 percent the 2nd quarter. It's been unprofitable for five years. And there's been pressure from shareholders to sell all of this.
Tesco said in its statement it's now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form. In other words, they're going to try to sell it and see if they can get some money for this chain in the U.S.
Well, you know, that reminds us they're not the only company from the U.K. that hasn't done well in the U.S. All these retailers have embarked on a disastrous American adventure. Marks & Spencer's sold its Brooks Brothers and Kings chains. Sainsbury's put Shaw's up for sale back in 2004. HMV pulled its unprofitable U.S. stores in 2004 and Laura Ashley sold its chain in the U.S. for $1 back in 1999.
But it's not all retailers doing bad in the U.S. Top shop Topman: they're hoping to succeed where many others have failed. Philip Green is reportedly in talks to sell a 25 percent stake in these shops to fund further expansion in the U.S. So maybe Philip Green can succeed in the U.S., Richard, where others have obviously failed.
QUEST: One question: why? I mean, not why (inaudible) succeed. Why a litany, a catalog of lost money, bad decisions and failures in the United States?
BOULDEN: Every time you talk to a CEO and they say we have to be in the U.S. because it's the biggest market for where we can go, so we have to try, it's worth trying to see if you can get --
BOULDEN: -- but it takes their --
QUEST: (Inaudible) they tried -- it's worth trying to lose a billion?
BOULDEN: And it takes the focus off their core brand here in the U.K. and they think, well, if we can do it in the U.K., we surely can do it in the U.S. And actually, obviously, most of them cannot.
QUEST: Jim, thank you.
Jim Boulden, (inaudible) also shaking her head at the same time as meself.
But I think we've both lived through most of these fiascoes and financial misery and mayhem and losses.
You don't have to be a financial muscle. Be bold. Be (inaudible) and have fun. In a moment, we speak to Air New Zealand's outgoing chief exec. He's one of the greatest -- he's in this video. You'll have to watch closely, the short, the one, the shorts in the back, in a moment.
QUEST: This week's "Business Traveler" update, nothing beats getting an upgrade. Well, so to speak. Lufthansa is launching premium economy. The airline's just announced it today. The premium economy, you'll be aware, is between business and economy; gives you a bit more space, maybe a better meal. But it doesn't give you a flat bed.
The German flag carrier says it's got the investment it needs to go ahead with its own project. It will roll it out across the entire long haul fleet (inaudible) Lufthansa. Everyone's been waiting for LH to say this. It should take around two years to develop. And we'll then be aiming that new seats of both business and travel and leisure travelers.
Now it will be joining airlines like British Airways, Qantas, Cathay, all of whom -- and Virgin -- have similar -- it's often known as the fourth cabin, the fourth cabin, because it fits between economy, business first -- you squeeze in premium economy.
When it comes to it, because Air New Zealand has exactly premium economy, a small carrier that's been making some big statements. It's the opinion of Air New Zealand's outgoing chief executive, who's no shrinking violet.
In seven years at the top, Rob Fyfe's passion for the job has seen him through a restructure, a return to solvency and an extraordinary starring role in Spandex. I asked Rob what he's enjoyed most.
(BEGIN VIDEO CLIP)
ROB FYFE, CEO, AIR NEW ZEALAND: The business is about people, right? Everyone thinks it's about planes. It's not about planes. It's about people. And if you love people, if you love being around people, if you love interacting with people, it's a great business to be in.
But it's tough (inaudible). It's 24 hours a day. It's seven days a week. Got fuel shorts; you've got volcanic ash clouds. You have all this stuff to deal with. But if you like a challenge, if you're competitive like I am, it's fun.
QUEST: When did you realize that this was like really no other type of business that you might have seen before?
FYFE: Probably about 18 months into the role. I -- when I went in, I went into the airlines to do a strategy review. And I said I'll come and do that for two years and then I'll go and do something else. Well, after about 18 months, I suddenly realized I'd never been enjoying myself as much as I was enjoying myself in this role.
And I just -- I got seduced by the job. I really did.
QUEST: Why? What is about an airline? People constantly say to me why do I love a -- love covering the aviation industry? What is it about airlines? So what is it?
FYFE: That's tough. That's innovation, it's people, it's -- there's a lot of energy. And in our particular case, we brought a whole lot of personality to our business that I can't imagine another business that can express its sense of identity the way we've been able to. And that's bloody good fun.
QUEST: Outspoken, wearing some extraordinary outfits and almost frightening the horses at times. If we take a look.
(BEGIN VIDEO CLIP)
RICHARD SIMMONS, EXERCISE GURU: And (inaudible) this flight is strictly nonsmoking. It's a safety hazard. So the captain says let's kick butt.
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QUEST: How important was it for you to have that personality? Because at the end of the day, Air New Zealand is a small carrier in a niche market that could very easily be swamped, even by regional carriers like Qantas and onto Virgins (inaudible).
FYFE: I've got two core beliefs. First one is a small carrier (inaudible) to the world. We have to make a statement and look very large markets like Europe, like the U.S., like Asia. We will -- got no financial muscle to justify our position. So you've got to be provocative. You've got to -- as I say, you've got to be bold.
QUEST: What's the biggest risk you took, do you think?
FYFE: Probably the biggest financial risk we took was when we ordered 787s; we were the second airline in the world to order 787s. Still a large (inaudible) for our business. And we made a decision to license Virgin Atlantic's business class seat off them and put them on our aircraft.
And we had to take the gamble that every flight we flew, we were going to get four more passengers in a business cabin of 40 seats. And you just don't know. And if that hadn't worked, that would have cost us tens, probably hundreds of millions of dollars over the last 5-6 years.
QUEST: Your decision to get into bed with Cathay Pacific for China and that part of Asia, come on; you just stuck your knee into the groin of Star Alliance arrangements with that.
FYFE: No, I wouldn't use that term; I've just finished as chairman of Star Alliance. We're absolutely committed to Star Alliance. We actually think we create a lot of value in Star Alliance. But at the same time, there are strategic relationships that we need to protect the integrity and the future of our business. And Cathay Pacific, that particular deal with Cathay Pacific is one of those.
QUEST: Is it your ambition to do something again in the future in aviation?
QUEST: You're finished?
FYFE: I'm finished. I've -- if I wanted to stay in aviation, I'd stay with Air New Zealand. That's the best little airline in the world, and there's no other airline I'd prefer to be running. So I've made a conscious decision to say I think I've made a difference for Air New Zealand. I've had a great time. I think I've added value. I want to go on to a different business, a different industry and try something new.
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QUEST: We will keep that in the library and if and when Mr. Fyfe appears in an airline in the future, we'll play it to him.
The weather is in a moment. QUEST MEANS BUSINESS. Good evening.
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QUEST (voice-over): The answer to today's "Currency Conundrum," (inaudible) treasure trove discovered from the sunken Spanish galleon, how much is it worth? The answer, C, chose the $500 million, five-year legal battle. It all belongs to Spain. The country says that they won't use it to pay down the deficit and the debt. It's part of the country's cultural heritage.
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QUEST: Snow, snow and cold, that's what we've got in large parts of Europe. Jenny Harrison is at the World Weather Center for us this evening.
I mean, I don't exaggerate.
JENNY HARRISON, CNN METEOROLOGIST: You don't exaggerate at all. You're quite right. Snow, snow and cold. And a lot of both. I'm going to talk about the problems, of course, Richard, that is bringing with it certainly this snow, Stockholm for one. I'll get onto that in just a moment. But look at the picture across Europe. It's been looking like this for a few days now.
Lots of cloud. There is some rain in there. But by far and large, most of it is actually snow because of the temperatures. This is how it feels right now in Stockholm, -10 with the wind factored in; at -17 in Oslo; London, -2 degrees Celsius.
And you can see in the last few hours, again, Germany really seeing the snow coming down, very persistent and a little bit of a dividing line in terms of slightly less cold air across the northwest. But have a look at this; one of the UEFA Cup Champions League matches actually was halted. The referee halted it for 10 minutes because of the snow.
It's coming down; they couldn't see the lines on the pitch -- always a problem. And so guess what? Here's what you have to do, of course, try and clear it. So they were playing in the snow. And there's plenty of it to come.
In fact, before I explain this, have a look at these pictures too, coming out of Stockholm because Wednesday, the airport, the main airport in Sweden, Stockholm in Sweden, was actually paralyzed because of the amount of snow.
Thirty centimeters fell -- 30 overnight. That was Tuesday through Wednesday. The problem here is that literally at the moment we've got the Nobel Peace Prize winners, all the nominations, the nominees, I should say, actually arriving because it's this weekend coming when they're actually going to be receiving their awards.
So hardly any flights leaving Arlanda, but nothing coming in at the moment. They've been working so hard to clear all that snow, as I say. There's more in the forecast. They've had 30 centimeters. They could in the region get about another 20.
Let me show you what's going on then because as I say, not a great deal of change. These two areas in particular seeing some very heavy amounts of snow, starting out at rain coming in from the northwest. But in that cold air, turning over to snow, we could see some snow into Paris by the end of the week.
And look at the temperatures. The snow's going to stick around, Berlin, for example, -2 by day, -6 in the overnight hours, well below average. Paris a similar story, it should be 9 Celsius, the high from -1 on Saturday, very cold Thursday night as we go into Friday, -3 in London, - 4 in Berlin.
There is all the snow and let's just quickly end on the accumulations (inaudible) looking very nice (inaudible) some of these cities but it will cause travel disruptions, Richard.
QUEST: By jingo, it's parky out there, parky and snowy. And Jenny Harrison has the forecast. I'll have the "Profitable Moment" after the break.
QUEST: Tonight's "Profitable Moment": the age of austerity is set to last that little bit longer here in Britain. The chancellor, George Osborne, has talked of healing. We know there's more pain on the way. His assessment of Britain's economic prospects was a blast of Arctic air across the nation. It chilled any nascent hopes of a blossoming recovery.
Don't laugh at the prospect of spring green shoots. Debt, deficit, decline: they're hanging about the like icicles in the U.K. A chill wind blowing from Europe. It may be coming for the new year with abstemious and aesthetic, the truth is the whole of Europe is about to feel the same effect.
And that's QMB for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable.
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QUEST (voice-over): The headlines: three advisers to the Egyptian president, Mohammed Morsi, have resigned over the constitutional decree by which the president granted himself extensive powers. It also follows words that two people have been killed in clashes between supporters of the president and anti-government demonstrators outside the palace in Cairo.
Philippine authorities now say the death toll from Typhoon Bopha has jumped to 322. Rescue crews are scouring the southern Philippines for nearly 400 people who are still missing. The storm damaged and destroyed thousands of homes when it made landfall earlier this week.
Fighting between Syrian troops and rebels has been intensifying in Damascus. Video posted online appears to show recent shelling in Zabadani. An opposition group now says 67 people have been killed across the country today.
The British hospital treating Prince William's wife, Kate, for acute morning sickness says it's to revisit telephone protocols after two Australian deejays made a prank call and obtained confidential information about Catherine's condition.
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QUEST: Those are the news headlines. You're up to date. Now to New York; "AMANPOUR" is live.