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Obama Nominates Jack Lew for US Treasury Chief; US Wants UK to Stay in EU; Dow Up With Good Start to Earnings Reports; Third Dreamliner Safety Scare; 787 "Teething Problems"; European Markets Rise; Central Bank Solution; Dollar Up Against Yen; BAFTA Nominations Kick Off Awards Week

Aired January 9, 2013 - 14:00   ET


MAX FOSTER, HOST: Keep your friends close. US president Obama chooses his chief of staff to head up the treasury.

Misfortune comes in threes for Boeing's Dreamliner.

And Mind the Gap. A transport revolution born in London turns 150.

I'm Max Foster, this is QUEST MEANS BUSINESS.

Hello to you. Barack Obama has decided who will become the next US treasury secretary. According to a source, the president is to nominate his right-hand man, chief of staff Jack Lew. That's to replace Timothy Geithner, of course, and the announcement could come on Thursday. White House correspondent Dan Lothian tells us more about the man whose signature may soon be adorning the US dollar.


DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT (voice-over): Jack Lew is a key Washington insider, but to people outside the Beltway, he's somewhat of an unknown. The White House chief of staff, poised to run the treasury department, whose track record has garnered, in the president's own words, "complete trust."

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: He has helped strengthen our economy and streamlined the government at a time when we need to do everything we can to keep our recovery going.

LOTHIAN: But Lew's past, now under an intense microscope, is being scrutinized from Wall Street to Main Street.

CHRIS KRUEGER, GUGGENHEIM SECURITIES: I think more than anything, Wall Street will likely view this as a doubling down of the current economic and fiscal policies from the Obama administration.

LOTHIAN: An extension of the administration's get tough on Wall Street approach that's left the president trying to mend relationships with CEOs. That criticism is seemingly at odds with this entry in Lew's resume: 2006 to 2009, chief operating officer at CitiGroup, where bets were made against the housing market.

BARTLETT NAYLOR, PUBLIC CITIZEN CONGRESS WATCH: We're concerned that Jack Lew's -- connection to Wall Street has harmed his vision for what makes America strong, and that is a strong Main Street. And while his record is thin, his public record about what's necessary is not exhaustive.

LOTHIAN: Sharp questions being raised once again over testimony Lew delivered in his 2010 Senate confirmation hearing for White House budget chief, where he appeared to downplay the impact of deregulation on the financial crisis.

JACOB LEW, WHITE HOUSE BUDGET DIRECTOR: But I don't believe that deregulation was the proximate cause.

LOTHIAN: And carefully framed his knowledge of the issue, raising eyebrows once again.

LEW: Senator, I -- as when we discussed, I missed you. I don't consider myself an expert in some of these aspects of the financial industry. My experience in the financial industry has been as a manager, not as an investment advisor.

NAYLOR: This disavowal of deregulation is what causes us very serious concerns for the possibility that he will be the chief financial architect and steward of America.

LOTHIAN: But Lew's supporters point to his extensive experience working in two administrations, helping to cut the 1997 balanced budget deal and social security legislation in 1983. He's described as a tough negotiator capable of tackling the so-called mini cliffs ahead, and winning praise from one of the administration's biggest critics.

NEWT GINGRICH, FORMER US SPEAKER OF THE HOUSE: Jack Lew is very smart, and I think that he understands a very great deal about government and about the financial market, so I think it's a sound nomination.

LOTHIAN: A nomination, he says, that's likely to get through the Senate.

Dan Lothian, CNN, Washington.


FOSTER: Jack Lew is clearly no stranger to the political games that surround the US economy. The PIMCO CEO, Mohamed El-Erian, says he has the right skills to get the US through its upcoming budget.


MOHAMED EL-ERIAN, CEO, PIMCO: He would bring to the job a few things. One, a good understanding of Washington at a time when Washington needs to step up in terms of economic governance, and the Congress in particular.

Second, he is well-versed on fiscal issues, and that is the immediate issue facing the US. And thirdly, he has a lot of contacts with other parts of the government and can play a major role in terms of inter-agency coordination.

So, I think it is a good choice, and I think it's one that will do well.


FOSTER: We'll hear more from Mohamed El-Erian later in the show, including his thoughts on the latest action from the Fed. Let's get some more, though, on the nomination from Maggie Lake in New York. Maggie, this is such an important appointment, isn't it? And Mohamed El-Erian is supporting him. What do you think the broader markets will make of him?

MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: They do seem to be going along with this, Max. The fact that he's a safe choice, that there's not going to be a bruising confirmation hearing, he's likely to get through, is really important to them, and that's sort of trumping some concerns out there, maybe, that he's not a Wall Street guy. You do hear people say that.

Listen, Geithner was a banker with very deep ties to the international and financial community. Remember, before he was treasury secretary, he was at the New York Fed, the main bank regulator.

Jack Lew, as you heard Dan just spell out, is really more of a policy guy, a Washington guy. He has a lot of experience with the budgets, but he doesn't have that sort of pick-up-the-phone relationship with Wall Street.

And there were some other names out there that did. Larry Fink of Blackstone, Roger Altman of Evercore, who maybe would have been a little bit easier for Wall Street. But again, they like the fact that he knows the budget, the fact that he's a Washington insider is important right now.

The most important thing for investors is that this is smooth. The problems are so big that a surprise or an unknown, I think, would have been much more unsettling in a situation that's already got so many uncertainties out there.

So, for the most part, I think the biggest indicator that they're OK with this, Max, is the big talking point today is not his resume, it's his signature. And I think we have a picture of it. You can see why a lot of people are wondering what this is going to look like when he has to do the more -- the job of signing all those currency bills that are printed out.

That is, evidently, Jack Lew's signature. That's what going around virally on Wall Street today, not his credentials.


FOSTER: It's absolutely ridiculous, dare I say? But there's a bit of fun for the notes, isn't it? You've got to ask as well why anyone would want to do this job. As you say, it's the toughest possible time he could be going into a job like that.

LAKE: Absolutely, but listen, when the president asks you at this critical time, it's hard to say no, as many have found out. And he is in the administration's inner circle, he intimately knows the positions.

And this is a big problem. Anyone who is public service-minded is going to want to do what they can to try to help resolve this, and because of his vast experience on the side of budgets, working on budgets, he was director of OMB twice, you could argue that this is a man who is situated very well to take care of this.

One of the big challenges, Max, is that he has to hit the ground running. He has no time to adjust at all to this position. No one does. So the fact that he's already in the inner circle of the White House, perhaps, makes that easier.

And another big test is going to be, I think right away, how he communicates with international markets. Listen, this is not just about the budget. There's also now -- it's linked to the debt ceiling crisis.

We saw what happened last time, the huge volatility that created in financial markets if there's a threatened downgrade again. How does he put those concerns at ease? How does he communicate with financial markets? That's going to be a really big test.

The last thing I'll say, Max, is that there is an awful lot on the rumor mill among Wall Street that he's going to pick somebody as a deputy who does have extensive Wall Street experience, who maybe is going to provide some insight on how to best communicate with international markets, so that'll be one that Wall Street is going to look out for.

FOSTER: Maggie Lake, thank you very much, indeed.

Now, the US is warning the UK to stay in the European Union. Assistant secretary for European affairs, Philip Gordon, said today it was in America's interest to see a strong British voice within the EU. Mr. Gordon also urged the UK to define its relationship with the eurozone.

His comments come just days before British prime minister David Cameron is due to set out plans for a referendum on the issue.

Let's have a look at the Dow. Maggie was talking about how there seems to be a positive response on the markets of this new appointment to the treasury. They are higher after a decent start to the earnings season in Wall Street as well, so up nearly 0.4 percent.

Alcoa traditional kicks things off, and it's reported better-than-expected sales figures, so people are looking at that as a positive sign to the earnings season.

Now, it's a hat trick of hitches for Boeing's 787. Next, we look at the teething troubles affecting three different planes this week alone.


FOSTER: Three days and three separate faults. Boeing's Dreamliner is in the spotlight for all the wrong reasons. All Nippon is the latest airline to be affected, joining another early 787 buyer Japan Airlines. Jim's been looking at the procession of mishaps, and here's what you found out, Jim.

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Yes. Well, thank you, Max. Let's start with what happened Wednesday morning. All Nippon Airways, it had to cancel its flights from Yamaguchi Airport to Tokyo because it says the crew discovered an error message related to the braking system.

But All Nippon said, "We are not changing our corporate plan due to this situation, nor are we going to change the number of our order."

Now, let's go back to Tuesday, yesterday. JAL at Boston's Logan Airport, there was a fuel leak. A valve was found to be left open on a 787. Now, it could have been operator error, we don't know yet.

The biggest and most important incident was on Monday, that also was JAL and also at Boston's Logan Airport. It was serious enough of a fire on an empty 787. It's traced to the batteries used when the plane is on the ground.

And the National Transportation Safety Board, the NTSB, is investigating along with Boeing, so we have these three issues happening to the 787, the brand-new airport -- airplane, of course, from Boeing.

Let's see what happened to the share price. It's interesting what's happened. On Monday, when we started getting reports of these glitches, these problems, the share price started to fall. Even more on Wednesday.

But when it became, really, that a lot of people have said, wait, this is probably just "teething problems," we saw the share price going right back up. In fact, it's one of the best performers on Wall Street today, Max.

FOSTER: The problem is there's so much pressure on this company, this aircraft, because there's been so much hype around it, but we should ask how common are these sort of glitches with new aircraft?

BOULDEN: Yes, I think this tells us what the answer to that, because sure, people say, OK, you're going to have teething problems with these new planes as they roll out, there's 49 of them now out. So, yes, we're going to have problems with the plane. But it's not unusual to see that kind of situation happening.

The fire, of course, is serious, with the batteries. But it was just that one airplane. They are investigating that. It becomes very serious if the NTSB says you've got to bring these planes in to have them looked at.

Boeing says very clearly that the incidents so far are not related to anything that happened during its training procedures.


FOSTER: -- as well, I guess. Don't you have to have the same problem occurring many times?

BOULDEN: Exactly.

FOSTER: Jim, thank you very much, indeed. Well, Ethiopian Airlines is the first African carrier to operate the Boeing 787. CEO Tewolde Gebremariam told me he's had no safety scares and that his passengers aren't worried.


TEWOLDE GEBREMARIAM, CEO, ETHIOPIAN AIRWAYS (via telephone): So far, we have -- as you know, we have four airplanes in service, and we have no serious issues on the four of them, apart from small technical delays and technical problems. We never had serious issues. We took delivery in August.

FOSTER: You talk about these technical problems. Is that to be expected with a new aircraft?

GEBREMARIAM: Yes, that's to be expected. It's not an unusual situation with new technology aircraft, especially when the change is a quantum change, like what we have on the 787.

FOSTER: Are they worried, do you think? Boeing?

GEBREMARIAM: No, they're not worried because, as I told you, it is normally expected with new technology. We see historically the 777 or the 767 or any other airplane have passed through this stage at the initial period of service entry.

FOSTER: So, you don't seem too worried, technically speaking, because it's a new aircraft, but I guess there is a concern here, a separate concern, that these faults are getting a lot of publicity right now, and your passengers, your customers, may be wary about going on a Dreamliner.

GEBREMARIAM: No, I don't think so, because it's a very good airplane, well-designed. I myself flew several times on the Dreamliner. And it's very much liked by the passengers.

FOSTER: This aircraft, as you say, is -- it's an important quantum shift, as you describe it, aircraft model. There's been so much publicity around it and so much pressure on Boeing. Perhaps they should have played it down a bit, because now, everyone's focusing on every little fault that seems to occur.

GEBREMARIAM: Yes, yes. I think you are right. There is a lot of attention going on on the airplane, a little bit too much attention because, as I told you, at an early stage of entry into service with such new technology, this is normally expected.


FOSTER: Well, stocks in London are at a four and a half year high, meanwhile. The FTSE 100 climbed to its highest level since May 2008. The big gainers were banking stocks, with Lloyds up almost 5 percent. It was green arrows all around elsewhere, too, thanks to the solid earnings start to the season on Wall Street, that we were talking about.

Meanwhile, German exports fell almost 3.5 percent in November. Weaker demand across the eurozone is to blame. Industrial output also came in weaker than expected, and the economy ministry said the last quarter was tougher than the previous one, but production was stabilizing.

Investors are also ready for the first European Central Bank meeting of the year. Mario Draghi is not expected to cut interest rates on Thursday, but the ECB will be unveiling a new five euro bank note.

Well, Mohamed El-Erian says investors have to be wary of the amount of central bank stimulus going around. The head of PIMCO told me earlier that the risks are becoming all too apparent.


EL-ERIAN: Markets were shaken last week, Max, when the minutes of the Fed meeting came out. Why? Because there was a very explicit reference and a very detailed reference for the first time, that acknowledged that what the Fed is doing doesn't just have benefits, but has costs and risks, that it created collateral damage.

And markets were very taken aback by this. We don't think it's new. We think as far back as 2010, Chairman Bernanke acknowledged this in a speech.

And I think that the Fed is putting down a marker for politicians, saying "Hey Washington, DC, hey Congress, don't rely on us excessively. We don't have the perfect tools. The best we can do is provide a bridge for you, but ultimately, you control the destination." And I think that is what the Fed is doing right now.

FOSTER: And you've warned that actually investors have got to expect more volatility this year. That's going to be a sign of the times.

EL-ERIAN: Oh, absolutely. We are in this world where long-term issues and short-term issues are yet to be reconciled. We are going to have to transition, and on one's quite sure how we're going to transition.

Add on top of that pure political dysfunction. It seems that our politicians instead of solving issues, they create more problems. So, instead of solving the fiscal cliff, we created three additional ledges going forward.

So, we tell our investors, be careful. You're entering a period of volatility, and just make sure that your seat belt is on and that you can underwrite this volatility. Because the worst thing you want to do is to be forced to do something at the wrong time.

FOSTER: And what do you think will define what the central banks can do this year? What's different this year as opposed to last year?

EL-ERIAN: I think what's different this year is that the actions, the involvement, are becoming increasingly ineffective. They are not ineffective, but they are becoming increasingly ineffective.

It's a little bit what's called active inertia, that you do the same thing over and over again, but its impact becomes less and less and less because the system adjusts less.

So, there's a risk that if all that is -- happening is that central bankers are responding but nobody else in government is responding, that we'll find that central banks become less effective, that the cost and the risks start compensating and overwhelming the benefits, and that in the process, we'll lose the credibility of central banks.

Remember, credibility of central banks is critical to the functioning of a market system. So, the hope is that the central banks will end up being a bridge. The concern we have is that they may end up being the only game in town, and they will lose their credibility in the process.


FOSTER: Time now for a Currency Conundrum. The British Royal Mint has struck a two pound coin to commemorate the 150th anniversary of the London Underground. We'll have more on that for you later in the hour, but first, a question to you.

Why did they choose the two pound coin? A, the coin is traditionally used to commemorate anniversaries? B, the coin's shape is reminiscent of the roundel, the Tube's logo? Or C, it was the only coin big enough to carry the design. We'll have answer for you later in the show.

The US dollar has ended two days of declines against the yen. The greenback has put on more than 1 percent against the Japanese currency so far. Traders are anticipating looser monetary policy from the Bank of Japan as it comes under increasing pressure from the new prime minister, Shinzo Abe. The dollar is down against the pound and the euro.


FOSTER: Well, today we got the nominations for Britain's BAFTAs. They, along with the Golden Globes and the Academy Awards, are the status symbols of the movie business. The red carpets are soon to be unrolled.

Tomorrow, Oscar nominations will be revealed. That's the really big one, of course. On Sunday, we'll find out the winners of the Golden Globes as well. As for today, Becky Anderson looks at who made the short list here in the UK.


BECKY ANDERSON, CNN INTERNATIONAL CORRESPONDENT (voice-over): Scraping in a day ahead of the Oscar nominations, the British film industry announces which movies and which stars it believes are the best of the bunch.

JEREMY IRVINE, BRITISH ACTOR: And the nomination for Best Film is "Argo," "Les Miserables," "Life of Pi," "Lincoln," and "Zero Dark Thirty."

ANDERSON: The BAFTA list confirms that the awards season is shaping up to be a closely-fought battle between three very different films.

DANIEL DAY LEWIS AS ABRAHAM LINCOLN, "LINCOLN": We here highly resolve that these dead shall not have died in vain --

ANDERSON: Steven Spielberg's presidential drama "Lincoln" received the most nominations, a total of ten, though not for best director.

LEWIS AS LINCOLN: -- government by the people, for the people.

ANDERSON: "Life of Pi," the fantasy adapted from the Yann Martel novel, was given nine nods.

HUGH JACKMAN AS JEAN VALJEAN, "LES MISERABLES" (singing): Another day, another destiny. (speaking) Mademoiselle?

ANDERSON: So, too, "Les Miserables," including a leading actor nomination for Hugh Jackman. The musical epic was also nominated under the Outstanding British Film category, up against another of the biggest blockbusters of the year.

The Bond film has received eight BAFTA nominations, including Best Supporting nods for Javier Bardem and Dame Judy Dench.

ALICE EVE, BRITISH ACTRESS: I was thrilled to see "Skyfall" on the list in its various incarnations, because I'm a huge fan of the Bond franchise, and I think it's lovely that we're recognizing our own -- it's a huge industry here, the Bond films.

ANDERSON: Only Daniel Craig's first Bond film, "Casino Royale," has earned more acclaim for the now 50-year-old franchise. It's being seen as another credit to the British film industry.

MARK KERMODE, FILM CRITIC: The fact of the matter is that many of the movies that you think of as being Hollywood blockbusters are driven by British talent. British directors, British craftsmen, British technicians, British screenwriters, British actors, British actresses. That's the way it works.

BEN AFFLECK AS TONY MENDEZ, "ARGO": I've got an idea. They're a Canadian film crew for a science fiction movie.

ANDERSON: Apart from blockbusters, it's films based on true stories, such as "Argo," adaptations, including "Life of Pi," and stories about growing old, such as French film "Amour" and "The Best Exotic Marigold Hotel" that have delighted British film buffs the most this year.

JOHN WILLIS, CHAIRMAN, BAFTA: I think this is actually one of the best years that we've had for a long time.

DANIEL CRAIG AS JAMES BOND, "SKYFALL": They're going to kill him first.

ANDERSON: Becky Anderson, CNN, London.


FOSTER: Something to look forward to, isn't it? Well, a major court victory, meanwhile, for supporters of Hugo Chavez. The president's new term will begin this Thursday whether he's there to be inaugurated or not. We'll be live in the Venezuelan capital to get to the bottom of it.


FOSTER: Welcome back, I'm Max Foster, and these are the news headlines.

Venezuela's Supreme Court says President Hugo Chavez can be sworn in at a later date than scheduled. Mr. Chavez was due to be inaugurated on Thursday but is too unwell to attend the ceremony. He remains in Cuba, where he's recovering from cancer surgery. Opposition groups have called for a temporary president to be installed and new elections to be held.

The Syrian opposition is hailing a prisoner swap with Bashar al-Assad's regime as a huge victory. Rebels freed 48 Iranian captives on an exchange for more than 2100 Syrians and at least four Turkish nationals. The deal was brokered by a Turkish charity, along with the governments of Turkey, Qatar, and Iran.

American retail giant Walmart now says it can attend the Thursday meeting on gun control led by Vice President Joe Biden. Walmart is the largest seller of guns in the US. Earlier, the company had said it had a scheduling conflict and would not participate.

India and Pakistan are warning each other against escalating tensions. India accuses Pakistani troops of killing two Indian soldiers in Kashmir on Tuesday and mutilating their bodies. India's foreign secretary expressed his anger on Wednesday after summoning the Pakistani ambassador. Pakistan denies the incident happened at all.

In New York, a ferry crash has injured at least 57 people, two of them critically, according to authorities. Witnesses say the ferry crashed into a pier in lower Manhattan, throwing passengers into the air. Coast Guard records show the ferry has been involved in at least two previous incidents.



FOSTER: Well, political struggles in Venezuela come at a critical time for the country's economy. It is the biggest oil producer in the Western Hemisphere. And it's currently wrestling with inflation that was close to 20 percent last year. That rate could increase further if the government devalues the country's currency, the bolivar.

And Venezuela's economy grew around 5.5 percent last year. And both unemployment and poverty rates have fallen since Chavez came to power in 1999. Paula Newton is in the Venezuelan capital, Caracas, for us.

Paula, we talk about, you know, devaluation or these decisions that need to be made. The problem is no decisions are being made right now and if there's a delay in getting the permanent leader, it's going to cause even more problems for the economy, isn't it? That uncertainty that the markets hate.

PAULA NEWTON, CNN CORRESPONDENT: And that's what has people rattled on the streets at this very moment here, Max.

You know, the Supreme Court, in coming out with a ruling just a few hours ago, basically said, look, this president can lie in bed, recovering from any (inaudible) for his entire 6-year term and they're not prepared to say when he would be back. I want you to listen now to the head of the Supreme Court here (inaudible).


LUISA ESTELLA MORALES, VENEZUELAN SUPREME COURT PRESIDENT (through translator): The Supreme Tribunal of Justice has not considered conditions of time, place and form regarding the oaths of office to be taken by the president of the republic.

We know that it's necessary and undoubtedly something that will be complied with. But at this moment, we could not speculate about when, where and how the president will be sworn in.


NEWTON: Can you imagine that they're basically saying even we don't know when he's going to be back. We've had absolutely no indication of when he could be back, and they're willing to live with that. They're saying that's constitutional.

In terms of what this means to the economy, when you talk about a devaluation, trying to bring oil production up to what it was a decade ago, these are problems and this is an economy that is really struggling right now.

And we -- the vice president Maduro, who is now in charge, has now canceled the press conference.

We were going to be able to put some questions to him, but no indications from the government at all that either than trying to have some type of a ceremony tomorrow in Chavez's absence, that they have anything -- anything on the drawing board so far to really put this economy back on confident footing.

FOSTER: Some questions, Paula, about the independence of the constitutional court, what's the general view?

NEWTON: Well, the general view is that if you're talking to people who do not support this ruling is that it's highly politicized. You know and speaking with (inaudible) used to be the head, used to have Madam Sosa's (ph) job before Chavez was in power, sorry; Madam Morales' job before she was in power, as the former president of the Supreme Court, she's saying this whole ruling is embarrassing.

She has (inaudible) no footing in constitutional law whatsoever. And that has been highly politicized. The same time (inaudible) political ruptures that are happening between the opposition and the government are really going to come to a head. If there's any good news for the economy here is that there will -- there will not be conflict in the streets, at least not just yet.

FOSTER: The worst-case scenario is that there is no leader in the country, and people can't even make a judgment, good leader, bad leader, they can make judgments on whether to invest there. How long do you think the markets will give the political sector to come up with some sort of solution?

NEWTON: Well, you know, unfortunately for the Venezuelans themselves, probably a long time. The fact of the matter is, most people believe that Hugo Chavez is terminal. So you're probably just speaking about the fact that something political here will have to change at least in a matter of months.

The fact of the matter is, in producing so much oil, they do have that constant flow coming in and that will tend to keep things at bay (inaudible) trying to keep the economy limping along. And I say limping. In terms of foreign investment and what you mentioned, all bets are off until this government has a secure leader going forward and someone that they can actually show some confidence in.

FOSTER: OK, Paula, thank you very much indeed for joining us.

Well, the United States is actually steadily reducing the amount of oil it imports from Venezuela. The -- as oil production in the U.S. heads towards its highest point in a quarter of a century, that is. The Energy Information Administration says the U.S. will product almost 8 million barrels of oil a day in 2014, and that's 23 percent more than it does today.

It also expects oil imports to fall to their lowest level since 1987 at 6 million barrels per day. The price of Brent crude and NYMEX's falling slightly. Light sweet crude is just a few cents off its three-month high point.

(Inaudible) carriers are spreading their wings on "Business Traveller." The CEO of Emirates tells us where they're heading next.




FOSTER: Emirates has started flying from the world's first terminal dedicated to serving the Airbus A380 Concourse A at Dubai International Airport cost $3 billion to build and comes with double-decker bridges to move passengers on and off the super jumbos.

The Gulf carriers, Emirates, Etihad and Qatar, have turned the airline industry on its head over the last year with rapid growth and new partnerships. Over the next month, we'll be taking an in-depth look at what's behind this tremendous shift. We start with Emirates.


RICHARD QUEST, CNN HOST: This is Dubai Airport, the headquarters of Emirates, the dominant carrier here. Morning, noon and night, thousands of passengers transit through these terminals.

QUEST (voice-over): This growing army of connecting passengers is driving the growth and the hub role of the airline led by Tim Clark.

TIM CLARK, EMIRATES PRESIDENT: Well, it's a strategy that is essentially very simple, recognizing the geocentricity of Dubai. And it maps and introduce it to our network, our programs, just in every major city on the planet.

QUEST (voice-over): Backed by Dubai's ruling royal family, Emirates is less than 30 years old and has quickly grown to be a true global carrier.

QUEST: The interesting thing is you're doing it yourself. It's very similar to the way in which airlines grew in the early days of aviation.

CLARK: I think you're right. I guess I'm a little bit (inaudible) that school because I'm about vintage, Richard. I personally am a great believer in that if you can't do it yourself, don't bother; do something else.

QUEST: Until 2012, when in one fell swoop you did a deal, a strategic partnership with Qantas, which everybody said was a game-changer. Given the dynamic of international aviation today, yes, it was. Why was that?

CLARK: Because a major player, a dominant carrier over the last 50-60 years decides that it's going to do a kind of partnership deal with Emirates (ph).

QUEST: It's the long-range aircraft that's really allowed the airlines to spread their wings. Emirates, for instance, has 90 A380s on order. It's allowed the airline to offer capacity and a different level of service.

And most famously, for the first time at 35,000 feet, the shower.

QUEST (voice-over): With multiple awards under its belt, Emirates continues to grow fast with a new dedicated A380 terminal. It's not surprising that Tim Clark believes he can continue this rise without joining an alliance.

CLARK: If Emirates ever entertained going beyond Australia to the U.S., say, it would be in hand in glove with Qantas, because that's the nature of the arrangement.

It is possible that we could actually put our coat onto their aircraft going transpacific. You could have a truly transglobal 380 operation with Qantas and Emirates working together.

QUEST: Did I just hear the glass cracking in the One World Alliance?

CLARK: You know, that's not the intention.


CLARK: But you know my views about the strength of the alliance is they need to change out to go where the winning markets are and where the winners that operate to those markets exist. They were designed to concede in the late '80s, executed in the '90s.

Now we are 25 years on. Things have changed a lot. Unless they morph into a new dynamic, a new set of structures, they will perish. Yes, I believe that.


FOSTER: Fascinating interview, isn't it? And we will speak to Jenny Harrison, who has been looking at the weather situation because that's (inaudible) as it is every day.

JENNY HARRISON, CNN METEOROLOGIST: Every day, Max. But I'll tell you, (inaudible) the weather across in Europe, (inaudible) where you are. We've had this milder air flow and things have been relatively calm and clear.

But across central eastern regions, not only is it very cold but also some snow is being heading across. But look at the temperatures, because there really is this east and west of ice, 6 Celsius in Glasgow right now, whereas as you can see here, clearly Moscow, Kiev -12 is the temperature there. That cold air filtering right the way down to the southeast.

It's -2 in Istanbul, just 3 degrees above freezing in Athens. And you can see it's 15 Celsius over there in Lisbon. So the rain along with the snow has been working its way once again across areas of Germany.

But the system also working its way through Poland and then pushing up into the Baltic. So widespread snow and we've got some pictures to show you of the really icy conditions across parts of Poland. So I say it's not just about the snow. Of course it is coming down.

But it's also as some sleet and some rain mixed in, of course, the roads hopefully being kept clear where they can. But as you can see here, it's pretty hard to keep ice off the roads. In fact, with the temperatures (inaudible) really are dipping down a low way. So let me show you what else is going to be happening because we're also looking at this particular region across into the Middle East.

This is, of course, where we've seen another area of low pressure, brings some very heavy amounts of snow. But not just that. December through January is always the wettest few months across this region and throughout the year. But in the last three days, more than a January average has come down in Amman and Jordan and (inaudible) we've had 5 centimeters of snow.

And the temperature in western southern Turkey there, -2 and the average is actually +5. We've seen some very heavy amounts of rain as well. It has led to flooding. The system really has been coming in through the east and then the Med. So picking up a lot of moisture there in the cold air. It's been turning to snow.

This has been a problem in Istanbul for the last several days. It is improving across this particular area, though. As I say that, all this system will move eastwards.

It'll take the very heavy snow with it. It's not about to disappear but maybe (inaudible) northern eastern areas of Turkey, the far northeast of Iraq, but in the wake of this system, still very, very cold with some very strong northerly winds. But the snow certainly does actually give up for a while.

And so does the rain. But we could just run into some more coastal showers as we head into the next (inaudible), the latter part of the 48 hours. Now once the system comes through, of course, the other problem we then face, both strong winds, they'll be blowing up the dust. The visibility will be reduced across much of the Middle East.

So even if you don't get the snow and the rain, which you've had lately, the winds will cause a problem soon with the dust. You can see the temperatures on Thursday across this entire region well below freezing, in some cases not actually getting above freezing.

But at least the weather condition's improving in terms of sunshine. You can see here for the next few days into the start of the weekend, we will see a return to that as opposed to the rain and the snow, Max.

FOSTER: OK, Jenny, thank you very much indeed.

Now after the break, the (inaudible) torture that transformed a city. And Jenny Harrison no longer has to endure, 150 years of the London Tube.





FOSTER (voice-over): (Inaudible) the answer to our "Currency Conundrum," what was the 2-pound chosen to commemorate the 150th anniversary of the London Underground?

Well, the answer is B, the designers of the coin, Edward, Barbara and Jay Oskovy (ph) said the 2-pound coin lent itself perfectly to the (inaudible) design because it's naturally reminiscent of the (inaudible) tube's logo. One of the world's most famous logos, interestingly.


FOSTER: On the night of January 1963, the world's first underground passenger train pulled out of 1863, rather, pulled out of Paddington Station. It journeyed 5.5 kilometers under the streets of London to Farringdon (ph) and into the record books.

London's tube has come a long way since "The Times" labeled it a "mild form of torture." It has encouraged population growth and urban development as well as inspiring roughly 160 other underground networks around the world. They do work. Nick Glass has more.



NICK GLASS, CNN CORRESPONDENT (voice-over): Out of the tunnel, into the light at a top speed under central London at about 50 kilometers an hour. So many cities -- over 150 of them -- now have metro underground systems. We forget that London was the first in 1863.

It remains one of the busiest -- up to 4 million passengers a day -- the equivalent of roughly half London's population. But let's step back in time. Imagine it before the first tube map was drawn when so much transport was horse-drawn and the traffic congested. The solution was to dig just below the surface and bring in steam trains.

GLASS: This is, believe it or not, the only surviving steam engine from the London Underground of the 1860s. It dates from 1866 and it's known simply as No. 23. Just imagine what it was like to travel on it, all that smoke, all that sulfur, "like breathing crocodile's breath," as one passenger put it.

GLASS (voice-over): This is substantially a Victorian Underground. The arch and some platforms of Baker Street are pretty much unchanged. The Underground system was launched by competing railway companies line by line. It was electrified in the early 1900s.

Strangely enough, the companies were unified, the system made whole by an American, a financier and convicted embezzler from Philadelphia, Charles Tyson Yerkes.

MIKE ASHWORTH, LONDON UNDERGROUND: An amazing almost crook in some respects is largely responsible for the development of large parts of London's tube network. We still say please move down inside the car, not carriage as you would hear elsewhere in British railways. And that goes back to that American influence in the early tube railways.

GLASS (voice-over): We all know the diagrammatic London tube map, a much imitated design classic. But the first version in 1931 wasn't even commissioned. Harry Beck, an electrical draftsman, dreamt it up in his spare time. Initially, the Underground wasn't keen.

SAM MULLINS, LONDON TRANSPORT MUSEUM: For many people, Londoners and visitors, it's become a kind of mental map. You see, the London is the Underground map, even though that doesn't go very far south of the river and I guess half the city in it. But we all kind of still use Harry Beck's map.


GLASS (voice-over): To mark its 150th birthday, the Underground is celebrating with a special poster exhibition. Of course, Londoners moan about the tube, the overcrowding, the heat, the delays, much as they do about the weather. But they can't really get around quickly without it.

And the fact it, it's transformed the city, helped it spread and almost tripled its population in the last 150 years -- Nick Glass, CNN, London.


FOSTER: Well, it's estimated around half a million mice are living on the -- or in the London Underground. Let's take a look through some more tube trivia for you.

On the day the tube opened back in, what is it, 150 years ago, it was said a ticket cost a penny. Today's money, that's around a pound or a $1.60. And today you will pay 2 pounds 10 with an Oyster card. So that's a little over $3. And the Oyster card was a system introduced in 2002, has proved very popular indeed.

If you pay a full cash fare between Covent Garden and Leicester Square, today a distance of 250 meters only, it works out that 18 pounds, around $29 a kilometer. The prices can be controversial. A U.S. talk show host, Jerry Springer, was born at Highgate Station during World War II. His mother had taken shelter there from a Luftwaffe bombing raid.

Onto Great Portland Street and (inaudible) only took around a month for the first letter of complaint about the tube to be published in "The Times." It was actually written by Irving Courtney (ph) and Mr. Courtney (ph) was most upset about the lack of first-class seats available on the 11:38 train in particular from Portland Road Station. That's now Great Portland Street Station.

He also noted that while he had been told there would be a 1-minute stop at each station, the train was only halting for around 15 seconds by his estimates. Mr. Courtney (ph) was concerned this would lead to the reprehensible practice of getting into the train whilst in motion.

Doesn't happen anymore for health and safety reasons.

If you take the tube to Vauxhall (ph) Station meanwhile, take a stroll along the Thames, you'll reach another London icon, and that is Battersea Power Station. The British government recently announced plans to extend the Underground network to the area. And the plan has given impetus to its redevelopment as Isa Soares reports.


ISA SOARES, CNN CORRESPONDENT (voice-over): On paper, it may not seem like much. But with 39 acres and sweeping views of the River Thames, the Battersea Power Station is bound to attract large crowds. From Thursday, you can own a part of this iconic building. You'll just to wait until 2016 to move in.

ROB TINCKNELL, CEO, BATTERSEA POWER STATION DEVELOPMENT: (Inaudible) Battersea Power Station is going to be 800 really fantastic new apartments.

Between the power station and our eastern boundary, with great views over the river, over the city, over the power station. And the combine with shops, restaurants, cafes, a theater and offices all to create a fantastic new addition to this area of London.

SOARES (voice-over): Battersea Power Station is one of this country's most important buildings, a symbol of Britain's industrial past.

SOARES: Twenty-nine years since it closed, Battersea Power Station is finally getting a new lease of life. But it won't come cheap. A studio apartment here will set you back $540,000. But if you prefer the penthouse, now that's $9 million.

SOARES (voice-over): Despite the cost, thousands of people, I am told, have already registered.

TINCKNELL: Interested parties have been able to register for this project over the last three to four months. And it's been unbelievable, the level of interest we've got, from all over the world, in fact. Obviously, with our shareholders being some of the biggest and most respected property developers in Southeast Asia, we've had a lot of interest from Southeast Asia.

But we really wanted to make sure that London was properly prioritized. So we're starting off our global (inaudible) here in London and then we move to Malaysia, to Singapore and to other key markets.

SOARES (voice-over): But the Malaysian developers won't have to do much to attract buyers. For years, the power station has been an iconic cultural backdrop for this Pink Floyd video from the "Animals" album.


SOARES (voice-over): And Batman's "Dark Knight." It has also been a base for sporting events and a backdrop for computer games. For the developers, this history adds to the challenge, how to make it shine without losing its heritage.

TINCKNELL: The chimneys are in a terrible state of disrepair. If you repair them, you only get a 10-year life and it's not even certain you can do that. So we want to give them a proper life and replace them with like- for-like replicas, exactly the same construction, exactly the same materials. And then this building will be here for many, many years to come.

SOARES (voice-over): Isa Soares, CNN, London.



FOSTER: Time for a quick look at the U.S. markets before we go. The Dow is still in the black after a well-received start to earning season. Alcoa got things started with some better-than-expected sales figures.


FOSTER (voice-over): It was a positive day as well for the European markets. The FTSE 100 climbed to its highest level since May in 2008. The DAX saw some weaknesses as German data showed a fall in exports. That's the worry.


FOSTER: That is QUEST MEANS BUSINESS. I'm Max Foster in London. Thank you for watching. "AMANPOUR" follows after an update to the news headlines.


FOSTER (voice-over): Venezuela's Supreme Court says President Hugo Chavez can be sworn in at a later date than scheduled. Mr. Chavez was due to be inaugurated on Thursday but is too unwell to attend the ceremony.

He remains in Cuba where he's recovering from cancer surgery.

Opposition groups have called for a temporary president to be installed and new elections to be held.

The Syrian opposition is hailing its prisoner swap with Bashar al-Assad's regime as a huge victory. Rebels freed 48 Iranian captives in exchange for more than 2,100 Syrians and at least four Turkish nationals. The deal was brokered by a Turkish charity along with the governments of Turkey, Qatar and Iran.

India and Pakistan are warning each other against escalating tensions. India accuses Pakistani troops of killing two Indian soldiers in Kashmir on Tuesday and mutilating their bodies. India's foreign secretary expressed his anger on Wednesday after summoning the Pakistani ambassador. Pakistan denies the incident happened at all.


FOSTER: That's a look at some of the stories we're watching for you here on CNN. "AMANPOUR" is next.