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QUEST MEANS BUSINESS
Royal Bank of Scotland Fined; Looking at Libor; Libor Scandal Shows "Sickness" in Banking Industry; European Markets Down; Liberty Buys Virgin Media; Dollar Up; US Markets Down; Spring Awakening; Retail Success in Spain
Aired February 6, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: Case of lies and libor. RBS is the latest bank to be fined on both sides of the Atlantic.
John Malone takes the Liberty of buying Virgin Media.
And neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds. Unless it's on a Saturday. We'll have the story.
I'm Richard Quest. Of course, I mean business.
Good evening. The Royal Bank of Scotland has been handed a $612 million fine for what the US government calls a "stunning abuse of trust."
If you are of nervous disposition, I urge you not read the 34 -- 30- odd page British equivalent of the DOJ's ruling, the final notice against the Royal Bank of Scotland, because this details the punishment and the activities for the deliberate manipulation of the important benchmark rate, libor. RBS employees over a four-year period again and again and again manipulated this crucial global rate.
Now, the fine will be split between the UK and US regulators. It will be paid from the US -- from the RBS bonus pool and from compensation that's clawed back from previous years. The British chancellor of the exchequer was determined that the British taxpayer, which owns RBS, would not foot the bill.
And RBS chief executive says the scandal has tainted the entire banking industry. Changes need to be made.
(BEGIN VIDEO CLIP)
STEPHEN HESTER, CEO, ROYAL BANK OF SCOTLAND: The first thing that I'm going to say is that we are -- I am -- disgusted by this and hugely disappointed, the wrongdoing of 20 people in this institution. It is no excuse that it was also across the industry. It is unacceptable. There's no place in our industry for it.
And worse than that, in many respects, the culture of selfishness, of self-serving, of which this is an extreme and unrepresentative example, but is an example, taints our whole industry.
(END VIDEO CILP)
QUEST: Of course, if it was isolated, that would be one thing, but epidemic and endemic seems to be what was happening during the libor years. RBS is the third bank to be fined for manipulating libor.
The US assistant attorney general Lanny Breuer says the investigation is still far from over, as you'll see if you join me at the CNN super screen where, tonight, we are focusing on the Quest banking district and showing you how far this scandal spread.
Let's start with Barclays. Now, Barclays was the first to be fined, $450 million. The company lost its chief executive, it lost its chairman and its chief operating officer. Barclays is first to go.
But then the investigators bring the microscope over -- or they -- to UBS, and UBS, you see, was fined $1.5 billion, two employees are being prosecuted, and potentially extradited to the United States. RBS, the magnifying glass comes down here, come right in and see the level of criminality. Fined $612 million, bonuses cut.
Now, if that was straightforward, you've then got all the other banks: Citi, Deutsche, JPMorgan, HSBC, all of these banks have been subpoenaed by the New York attorney general's office. They are all expected at some point to have to answer questions about what it is that they did as this scandal gets ever deeper and ever more murky.
Now, Brian Caplen is the editor of "The Banker" magazine, and he told me, when you look at the libor scandal, there's a sickness at the heart of the banking industry.
BRISN CAPLEN, EDITOR, "THE BANKER": I think the libor scandal is more significant, more damaging to the industry than any other scandal we've had before, and I think it's got a long, long way to run.
There are 20 institutions under investigation. It's being done in multiple jurisdictions. We've only seen three of them so far.
QUEST: So, who's next? Do we know who's likely to be the next to have to cough up?
CAPLEN: We don't know, but we know that all the big international banks are likely to be involved.
QUEST: So, we're talking here -- I mean, we've heard around a billion and a couple of hundred million, and now a few hundred million more. So, we have many, many hundreds of millions more to come from the big players over the months ahead.
CAPLEN: That's right. It's going to be a significant dent in the banking industry's profits, but much more serious, of course, is the dent in reputations and how these institutions are going to be rebuild their reputations and how we're going to trust the markets again. Because this was a major market, which determined interest rates for mortgages, derivatives, all kinds of products.
QUEST: You see, you say how they -- how are they going to rebuild the trust, but the banks keep saying this was in the past, times have changed, new regimes, new way of looking at things.
CAPLEN: This has been regarded as banking's tobacco moment. And it's not just the regulators that are going to go after them. You're going to see lawsuits from sets of investors and individuals who think that they were cheated by the rates being the wrong place.
QUEST: But -- coming to this point, you sort of say this was their moment. Have you got the impression that they're putting their house in order because they've recognized it was wrong or merely under the lash of fines and regulation?
CAPLEN: I think there's a change of thinking at the top of the banks, no question about that. So, I think if we went back to the Barclays era, a sort of gung-ho culture, trading culture, buccaneering kind of culture was encouraged from the top. And we've seen the change of management there.
And I think the other banks are doing the same thing. We've seen John Hourican depart from Royal Bank of Scotland, and we're seeing the message come down that this is not the way that we do business at this bank, if you want to stay inside this bank.
QUEST: Do you find it amazing, astonishing, even, that no one has been charged and no one's gone to prison and we haven't heard the jail door slamming behind anyone yet? And I know there are some extraditions outstanding. But nothing!
CAPLEN: Well, because as I say, it wasn't actually on the statute book. It wasn't actually a criminal offense. There is no offense that says you cannot manipulate libor. Now, that's going to change in the future, and we're going to see some people extradited. There may be other offenses that you can charge the bankers with. But definitely, it's very strange.
And because the people who are being punished now are people who were not there. So, if you think about the 21 employees at Royal Bank of Scotland, they've all gone. So, the fine coming out of the bonus pool is for people who were not involved.
QUEST: Brian Caplen of "The Banker." Banks led the declines on the major stock markets in France and Germany. SocGen and Credit Agricole are down more than 3.5 percent. Commerzbank stayed almost 2 percent.
Look at the numbers and you'll see how the markets closed. Investor attention shifts to the European Central Bank and the Bank of England. Both will make rates decisions on Thursday. No changes are expected.
When we come back on QUEST MEANS BUSINESS, a connection in the world of cable and broadband. It could mean a confrontation between two rivals of the media industry.
QUEST: Liberty Global, the media giant, partly owned -- largely owned -- by the US billionaire John Malone, is buying the British cable group Virgin Media. The $15.75 billion acquisition puts Mr. Malone against his old rival, Rupert Murdoch of News Corp. It's one of Europe's biggest and most competitive telecom markets, as Jim Boulden explains.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): Murdoch and Malone. Two names that have gone toe-to-toe in various pay TV markets. 71-year-old John Malone is doing it once again.
His international arm, Liberty Global, says with the purchase of Virgin Media in the UK, roughly 80 percent of its revenue will come from various European cable markets.
LISA CAMPBELL, EDITOR, "BROADCAST" MAGAZINE: Lots of people are looking at this with a lot of interest, given that you're going to have a clash of the titans. Rupert Murdoch against a long-standing rival, John Malone.
John Malone is known as a tough and opportunistic deal-maker. He's known as the king of cable and also has the nickname Darth Vader.
BOULDEN: But the UK pay TV market is littered with companies that have tried and failed to counter Murdoch's satellite broadcaster BSkyB, especially in the sports rights arena.
AJAY BALLA, CASS BUSINESS SCHOOL: Sky is the only serious competitor, which has got the content right, and what we can see that Liberty may help Virgin get into the content market by making further acquisitions.
BOULDEN: Virgin Media itself is made up of the remnants of American cable and phone companies that tried to break into the UK market in the 1980s and 90s, including Malone's now-defunct TCI, once the largest cable TV company in the US.
The various cable providers spent billions burying cables and then trying to sell pay TV. Some of them later gobbled up each other, and eventually became Virgin Media in 2006.
Murdoch, instead, looked to the British skies and built up BSkyB on the back of sports. Murdoch now has more than double the number of UK customers than number two, Virgin Media. But Malone's Liberty Media is bigger in Europe.
The power behind the Virgin Media man has been pitchman Richard Branson, who appeared in Virgin Media ads with sprinter Usain Bolt, emphasizing the speed of its cable TV, phone service, and super-fast broadband through one fiber optic cable. To show the power of his brand, the name Virgin Media will remain in place.
Jim Boulden, CNN, London.
QUEST: Just before we came on air, I spoke to Mike Fries, the chief exec of Liberty Global, who joined me from Denver, and I asked him how owning Virgin would contribute to Liberty's global business.
MIKE FRIES, CEO, LIBERTY GLOBAL: Listen, our business is all about building scale. We thrive on scale. And adding Virgin to our European footprint increases that scale meaningfully. We'll have 25 million customers, over 47 million video, voice, and data subscriptions, $17 billion in revenue, and really a pan-European footprint that's largely contiguous with no big holes.
Eighty percent of our revenue will come from five strong, stable European companies: Germany, the Netherlands, Switzerland, Belgium, and the UK, so I think it positions us perfectly in the European market, and we couldn't be happier.
QUEST: And how does that put the international or the European side versus the US side? If you're growing globally or trans-Atlanticly, at what point does the outside US operations outweigh the inside domestic US?
FRIES: Well, as you know, Liberty Global is 100 percent international, so our $17 billion of revenue --
FRIES: -- which this business will have is 100 percent international. And that's been our strategy for 20 years, that's all we're focused on. So, it doesn't impact us at all. We don't plan on investing in the US through our public company ever at this point. Our shareholders are investing in, really, European broadband and digital television growth, and I think very happy to do so.
QUEST: Right, but you are moving the company, aren't you? You'll -- the registration, you're moving it from Delaware across to the UK. So, I'm wondering, are you looking for accommodation yourself over here? The weather's nice, and maybe you'd like to come and -- come and join us?
FRIES: Yes. No, it -- really, that's a good question. We're not really anticipating any changes to how we run or govern the business. That is more of a technical room for some strategic and financial and perhaps tax reasons. There's really no structural or management changes pending. But I do like London, so it's nothing against London.
QUEST: So --
FRIES: We have a big office there.
QUEST: It'll be even bigger by the time you've finished.
FRIES: Even bigger now, yes.
QUEST: Even bigger.
QUEST: So, if we put this together, the -- this battle or this challenge between content and platform -- you're a platform provider -- this content, this moving forward, do you see where it is going yet, Mike? What is the end game, here?
FRIES: Yes. I think -- look. If you look at what Virgin's done, which was sort of divorce itself from the investment it had in content to become a pure connectivity company that's providing the best experiences around mobile, voice, digital video and broadband, we think that's the right strategy in the UK market.
There's no reason in that particular market to go head-to-head with Sky or anybody else to try to steal away content or own content exclusively. We're not really believers in that strategy. We'd rather have access to everything and win customer loyalty on the basis if the sophisticated networks and platforms and user interfaces --
FRIES: -- that we provide. That's a strategy we'll pursue, I think.
QUEST: And finally -- and finally, to those who are portraying this as John Malone versus Rupert Murdoch, Liberty Global versus Sky, what would you say?
FRIES: Listen, John talked to Rupert this morning. Those guys are friends. This is a very rational market, and I anticipate very rational relationships and business dealings going forward. We work with Sky in Germany. Virgin has a very strong partnership with Sky in the UK. I think it makes for great headlines. I'm not so sure it's reality.
QUEST: Can you give me an assurance that you won't be taking QUEST MEANS BUSINESS off any of your distribution platforms any time soon?
FIRES: Done. You've got it.
QUEST: I'm going to hold him to that. A Currency Conundrum, now. The won became the currency of South Korea in 1945. There were nine years when the country used a different currency. What was it? Was it the yen, the hwan, or the yuan? An answer a little later in the program.
The rates today: the dollar's higher ahead of Thursday's rates decision from the Bank of England and the ECB, but still falling against the yen. Those are the rates --
QUEST: -- this is the break.
QUEST: The markets are open and doing business at the moment in New York, where we back under 14,000. A small loss, just about nearly a fifth of one percent. Felicia Taylor is in New York, joins me now.
We're bouncing around this 4,000. There's an element, Felicia, that the market, having made this tremendous rise or upswing, can't decide which way to go next. Or is it just pausing for breath?
FELICIA TAYLOR, CNN INTERNATIONAL CORRESPONDENT: Well, it's a little bit of both. I spoke to a couple of analysts earlier today, and they basically are saying look, the markets are going to be churning for a while. There's no clear direction.
The one real problem in this market right now is that the Federal Reserve keeps pumping money into it, and that's what's been propping it up. The concern is when that spigot finally closes that the Federal Reserve pulls back that injection of money into the marketplace, that the rally isn't going to be able to last.
And that's the concern for the marketplace for most people. Can this rally have legs if the Federal Reserve isn't a part of the equation?
QUEST: OK. But we're still looking at some distance off, aren't we, for the Fed to make any dramatic change? So, do you think that's a slightly overblown concern at the moment? They say 6.5 percent, over 7.5 unemployment at the moment. You've got inflation relatively tamed --
QUEST: -- and growth is still below par.
TAYLOR: Yes, you're absolutely right. The Federal Reserve isn't going to do anything in the near term, in the next six months to probably a year to change the direction of what they've already said. So, this rally is likely to continue.
But the problem is is that it doesn't have conviction. There's nobody out there really saying that the macro economic outlook is that great. And that's the problem. We're not going to get employment numbers that are going to be off the charts anytime soon, and that's what you need to see in terms of getting growth. You know as well as I do that there isn't real growth in this economy.
QUEST: And you and I could go head-to-head on this question of whether yields versus dividends and equity returns, which is the better at this moment. We don't have time for that tonight. We will certainly have time for it -- well, you know.
QUEST: Felicia Taylor, anxious to get to grips with yields. Tonight, three of America's biggest business names are offering a hint of a possible spring awakening, maybe the sort of growth that Felicia was referring to. If you join me in the library, the corporate library.
And we start with Time-Warner. Be careful what you say here, Richard. Fourth quarter earnings at Time-Warner beat estimates. Remember, Time- Warner, which is the parent company of CNN, says the network, film, and TV entertainment units achieved record profits with income rising 4 percent to $6.1 billion. TW is also -- TWX raised its dividend by 11 percent.
Ralph Lauren has raised the full-year outlook for the company with a sunny outlook as the stock soared more than 7 percent. The fashion house says it's raising its 2013 outlook as profit jumped 28 percent.
Now, if you've watched it on television, you've worn it from Ralph Lauren, you've probably done a bit of DIY-ery with Home Depot, which says - - and it's extraordinary, this -- it's hoping to fill more than 80,000 jobs this spring -- 80,000. I mean, it's a very big company, but that's still a lot of jobs. That's 10,000 more than last year, a 14 percent increase.
Spring is the best time for home improvement for those sort of people that like doing those sort of things, building things and repairing things and renovating. Anyway, thousands of jobs. The US housing rebound is expected to spur more spending in home improvement and landscaping.
So, you see there three companies, Time-Warner, Ralph Lauren, and Home Depot. If we look over in Europe at the retail industry, we need to look no further than Spain, where retail sale fell -- retail sales fell 10 percent in December compared to the year before. What a difference from those US numbers.
It's the 13th row in a month of declines, representing a miserable festive season for most retailers except, perhaps, for one supermarket chain, as Al Goodman reports.
AL GOODMAN, CNN MADRID BUREAU CHIEF (voice-over): After years of growth, the economic crisis starting in 2008 was a jolt for Spanish retailers, including this large supermarket chain, Mercadona.
RICARDO CABEDO, MERCADONA CORPORATE RELATIONS: We were losing customers, but we realized that we started to think why we are losing them. And the final answer was that we were out of our model and we have to come back to those basics.
GOODMAN: Basics like putting the customer first. Employees are trained to call customers "el jefe," "the boss."
CABEDO: The company depends on the customers. This is a main point. If sometime we lost that focus, we're finished as a company. This is why we call them -- or we call him "the boss."
GOODMAN: But Mercadona is far from finished. While retail sales are down nationwide and many Spanish stores have closed or downsized and laid off workers, Mercadona has bucked the trend. The company has hired 10,000 new employees since 2008 for a total of 70,000 and opened 220 new stores. It now has 1,350 across Spain.
That's up from just eight stores the family-run company started with 30 years ago, before they began thinking big, like this logistics center near Madrid, which opened just as the economic crisis began.
Bar codes keep computer track of inbound and outbound goods, what's needed at each store when. Only 34 products out of 8,000 are handled by a worker, because they have odd-sized packaging.
The increased productivity helped Mercadona cut prices 15 percent on the food and supplies it sells, a big incentive to clients in the crisis.
But it's not just about the customers. Mercadona also focuses on its workers and their kids. There's a daycare center at the logistics warehouse, and several weeks of training for each new employee and refresher courses every year. A union official confirmed the company's assertion that it pays above-average wages for the sector.
GOODMAN (on camera): Another thing that helps Mercadona maintain employee loyalty: a bonus plan. When profit targets are met, every worker at every level gets up to two months of extra pay.
GOODMAN (voice-over): And that's happened every year for the past decade, even during the crisis years.
Al Goodman, CNN, Madrid.
QUEST: When we come back, the US Postal Service says it can deliver profits. That is because it won't be delivering anything on a Saturday. The US Postmaster General --
QUEST: -- next.
RICHARD QUEST, CNN HOST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. This is CNN and, on this network, the news always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Tunisia's prime minister has just announced he's dissolved his cabinet. The caretaker government will take its place until new elections will be held. The move comes amid angry protests over the killing of a prominent opposition leader there. Demonstrators called it a targeted assassination.
New video shows Syrian tanks on the move in a Damascus suburb. Witnesses and activists say rebel forces are battling Syrian troops on the edge of central Damascus. Other reports from the city suggest the army has launched a major offensive on areas surrounding the Syrian capital.
Hezbollah has dismissed allegations it was responsible for blowing up a bus carrying Israelis last year in Bulgaria. The Lebanese militant group calls the accusations part of an Israeli smear campaign. Five people died in the bombing last July. The Bulgarian investigators say the bus driver and the bomber were Hezbollah militants.
Iran's president had a run-in with protesters during an historic visit to Egypt. At least one man threw a shoe at him in Cairo. Mahmoud Ahmadinejad is the first Iranian president to visit Egypt since the 1979 revolution. He's in Cairo for a two-day summit of Muslim nations.
There have been scuffles between about 300 steelworkers and riot police outside the European parliament in Strasberg. The protesters were demonstrating against European job cuts and restructuring plans by the world's largest steelmaker, Arcelormittal.
(END VIDEO CLIP)
QUEST: "We can be profitable and pay our debts off." Those are the words of the U.S. postmaster general to me just a short time ago.
Earlier, Patrick Donahoe officially announced the end of Saturday mail deliveries in the United States, an historic move in the country. Tired of waiting for help from Congress, the postal service unveiled a plan to cut $2 billion a year. The postmaster general said it was difficult to compete with the Internet.
(BEGIN VIDEO CLIP)
PATRICK DONAHOE, U.S. POSTMASTER GENERAL AND CEO: If we had the same volume mail that we had many years ago before people paid bills online, we wouldn't even be worried about this. If people pay their bills online, it's simple. It's easy, it's free. We cannot be free.
(END VIDEO CLIP)
QUEST: Now on top of the tech threat, the postal service has to come up with billions of dollars in prefunded retiree health benefits, pensions. It's a burden imposed by Congress and no other U.S. corporation or government body has to bear. Put it all together, and the postmaster general told me the service can still make money, which begs the question: how?
(BEGIN VIDEO CLIP)
DONAHOE: Well, we've got a five-year business plan that we put together and moving mail delivery from six-day to five-day is part of that. Now if you noticed in our announcement, we will continue to deliver packages six days a week and, in some cases, seven days a week in the not- too-distant future.
What's happening is we're seeing a big increase in packages with e- commerce, people shopping online, shipping to the home. We do a great job delivering that. But what we've also seen is a relentless drop-off in first class volume. Here in the U.S., a lot of people, for years, have paid their bills through the mail. And at 46 cents apiece, that was pretty good income on a piece of mail.
Today, they pay their bills online and when you look at the differential, it's upwards of 30 billion pieces of mail in less than a 10- year period. So it's substantial financial hit that has put great pressure on our system and we have to react.
QUEST: And you said, of course, that you really only have two choices: the price goes up, which people don't want, or you have to alter the service to accommodate and to balance the books.
Is it feasible in a five-year plan to balance the books for a modern- day postal service?
DONAHOE: We will not only balance the books; we will pay off our debt, which is about $13 billion right now, and we will be in the black and profitable by 2016.
Here's how we'll do it. This change is one change -- and it's not the biggest one. The biggest one is resolving retiree health care and our own health care issues going forward. The postal service is required by law to prefund retiree health benefits to the tune of $5.5 billion a year.
By taking over our own health care system and moving out into a private plan with one of the big providers, we can save a total of $7 billion a year.
QUEST: The pension issue is, of course, a financial issue that will go to the balance sheet. But if you talk about the core business of delivering parcels and mail, is it -- in this day and age, can any postal service thrive, any national postal service thrive?
DONAHOE: We think there are three core products going forward, commercial first class mail: in the U.S., a substantial number of businesses still send bills, statements, utility bills through the mail. That hasn't shrunk at all. People like to get that hard copy in their hands. So we think that will be a good, steady cash flow that way.
Advertising mail, direct mail, that's the most direct way to get in front of a customer's eyes. With the mail, you get the best return on investment and packages. We think those three core products will keep us at a $65 billion to $70 billion income level moving forward and, of course, we've got to continue to squeeze costs out. But we think that we can be profitable and pay our debt off.
QUEST: And finally, sir, the universal service, beloved by the people, bedeviled by the postal service, whether it's delivering to the north part of Dakota and Alaska or the Royal Mail delivering to the Hebridean Islands, you're stuck with it, aren't you?
DONAHOE: Well, it's a blessing in one way and less than a blessing in another, because with the universal service -- and we do; it keeps the volume coming through the system, to your point, though, sometimes it's hard to do. In the U.S., we are responsible for delivering universal services far away as the island of Guam and American Samoa. That's a pretty long way.
But we understand that and that's part of what we do in terms of serving the American public.
(END VIDEO CLIP)
QUEST: That's the U.S. postmaster general. And a quick question and discussion point for you and I to think about: do we still enjoy getting a piece of post in the mail, a piece of mail, something you can open up and read or digest over morning tea and toast?
Well, of course, I haven't got time to get your replies in the mail. So we'll use social media and Twitter, @RichardQuest. Do you still value the letter in the mail? @RichardQuest.
In a moment, on QUEST MEANS BUSINESS, Korean Air's chief exec, he's taken the long-term view, beefing up the fleet, adding routes and reminding everybody, when it comes to running an airline, longevity counts.
QUEST: In an industry where contraction is commonplace, especially for the legacy carriers, the Asian carrier Korean Air is heading in the other direction, already flying from its hub in Seoul to 43 countries. It's bulking up with new routes and, crucially, new aircraft going across to the Americas, across the Pacific and across the countries into Europe that way and then south into Oceana.
Fifty-three planes are in order including 10 Dreamliners and five 747s. You see, for Korean, it's not about short-termism. In Seoul recently, I met the chairman and chief executive and he's playing the long game.
(BEGIN VIDEO CLIP)
QUEST (voice-over): The runways are cleared and the planes are landing at Seoul's Gimpo Airport, the domestic headquarters of Korean Air. Inside the hangar, the airline's chairman and chief executive, Cho Yang-Ho, is very clear about how to run an airline and how not to.
CHO YANG-HO, CHAIRMAN AND CEO, KOREAN AIR: I've been here for 40 years. And (inaudible) joined the airline industry, airline run by the airline experts. Now airline run by bankers, finance guys, politicians and stock analysts, not for the customer or not for the airlines. They all look at the just -- most people just look at the numbers, profit.
QUEST (voice-over): The chairman believes investing in the future is crucial, even more so in the current climate.
QUEST: Which is the biggest challenge at the moment, do you think?
CHO: Environment and the price, low-cost airlines. So it's a price war. It's a challenge.
QUEST (voice-over): With decades of experience, the chairman knew he had to respond to this challenge. So in 2008, Korean Air took a major step, launching JinAir, its own low-cost subsidiary, which last year carried 2.3 million passengers.
QUEST: You knew the low-cost carriers were coming?
CHO: Yes. I know it's coming. So we prepared for the low-cost airline. Now I (inaudible) low-cost airline or other airlines with a low price. So we found the low-cost airline to protect and to maintain our own marketing career.
QUEST (voice-over): The chairman tells me that passenger experience is paramount for Korean Air, whether it's on one of their major jets or their private jets for charter.
CHO: Let's go and look at it.
QUEST (voice-over): For instance, the plane he uses, when it's not being chartered out.
QUEST: So this is -- so you have these four bunks.
CHO: Yes. Real flat (ph).
CHO: You can sleep here, four people comfortably.
QUEST (voice-over): The reclining seat takes a little getting used to.
CHO: Side. Side.
QUEST (voice-over): So?
QUEST: Oh, yes.
QUEST (voice-over): And these are spare parts and tires, stored in the cabin.
QUEST: Now you didn't put a shower in this plane.
CHO: Not many airlines have with shower on it.
QUEST (voice-over): Korean Air is not usually known for doing what other airlines do. While many of its rivals are cutting long-haul routes to reduce costs, Korean's doing the opposite.
QUEST: Which other -- which other countries are you looking to expand to?
CHO: Right now, near future, Sri Lanka and the Maldives. And we are already in (inaudible) Nairobi, Africa, Kenya and Chad and Riyadh in Saudi Arabia.
QUEST (voice-over): A chief executive of an airline in it for the long haul.
(END VIDEO CLIP)
QUEST: Ah, the Korean Air story in Seoul.
The weather forecast now, Jenny Harrison is at the World Weather Center, busy 24 hours that you've had in your area.
JENNY HARRISON, CNN METEOROLOGIST: A lot going on, Richard, yes, indeed. I have to say right now the south of the U.S., it's a very nice, quiet picture. But that, of course, is not about to last. You can see some cloud beginning to really come through Texas and also at the same time the Midwest, a swath (ph) of cloud appearing there.
The snow, of course, further to the north and the cold air, and fairly heavy rain already developing, particularly along the coast. But having said that, ahead of that system, is actually a spectacular day, gorgeous blue skies, lovely temperature -- look at this, 19 Celsius right now in Atlanta with 23 in Dallas. It is cold to the north, -3 in Chicago, -1 in New York.
And that is just giving an indication as to what we have to look forward because we have this system working its way through over the next couple of days, working its way across the southeast, very heavy amounts of rain. And once it hits that colder air, it will, of course, turn over to some snow.
Now we could be seeing as many as 60 centimeters in some part of New England. Boston, the airport there, could well be impacted. This will really be happening on Friday. So look at that very heavy rain. And then once we get through the Carolinas, those higher elevations along the line of the Appalachian Mountains, it could well turn to the snow.
And of course, it will work its way up into the northeast. So be prepared, Friday and Saturday, for some pretty long delays at the major airports, windy conditions, too. But New York, Boston, Philadelphia, that sort of area, even D.C. could see some light snow as well. So temperatures on Thursday will be lower; 14 at best in the southeast and Atlanta, 1 Celsius in New York.
And it'll be colder Friday in the northeast. Then across into Europe, now we know it's cold here, very unsettled as well. Plenty of snow, plenty of rain. But look at this, another very high wind gust reported in France, 141 kph. That's actually stronger, of course, than hurricane force winds.
But look at this, a tornado in Belgium and then into the northeast of France, 8 centimeters of snow. But that tornado really did cause quite a lot of damage. Here is one picture; no reports of any injuries from all this, which is amazing, given the time of day, but also caused the damage that you can see that's been done there.
So not surprisingly, we have got some more warnings in place across regions of Europe for more potentially strong thunderstorms. You can see in the last few hours, more rain, more snow and coming down on a pretty strong northerly breeze.
But in fact, that system is moving into the central Med. So this is where we could see more in the way of heavy rain, thunderstorms, always a chance of those tornadoes. But the winds are pretty strong, particularly around the northwest of France, La Havre at 40 kph.
And very cold as well, -4 in Glasgow, -2 in London. And that's the system heading southwards and just ushering that cold air before turning to snow across many central regions.
So again, Richard, possible problems at the airports because of the snow and the ice and the winds.
QUEST: Jenny Harrison, we'll keep an eye on those. And we thank you at the World Weather Center.
When we come back, something that Jenny might enjoy, a luxury yacht. She's the sort of woman who would enjoy swanning around the Med, perhaps the Asian islands. The toys of the rich and famous, the lives of the megayachts. And to them, size is everything.
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QUEST (voice-over): The answer to tonight's "Currency Conundrum," we asked you, what was the currency that South Korea used when it took a break from the yuan, and the answer, the hwan. The Bank of South Korea introduced the hwan in '53. (Inaudible) high inflation after years of the Korean War. South Korea came back to the yuan in 1962, the year I was born.
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QUEST: If there was -- there's no connection, I have to tell you.
If there was ever an index of the really superrich -- and I'm talking serious money here -- it's got to be the top 100 of the largest yachts in the world. This year, 10 new vessels -- 10 -- are expected to join this exclusive club, and perhaps a sign that the billionaires think it's safe to go back on the water. They're ordering them like never before.
As Jim Boulden explains, if you want to win the ultimate one- upsmanship competition, there really is only one way to do it. My boat's bigger than yours.
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JIM BOULDEN, CNN CORRESPONDENT (voice-over): You may not have worried too much about the yachting set during the economic crisis, but thousands of people are employed designing, engineering, building and kitting out these yachts.
UNIDENTIFIED MALE: OK, guys, give us a big smile.
BOULDEN (voice-over): During London's recent Boat Show, the builders of the largest yachts were in the mood to celebrate again after some rough economic waters, even for them.
HERBERT ALY, CEO, BLOHM + VOSS: We've seen the rock bottom of it. And I think 2013 will be a promising year for the industry, for the big ones.
BOULDEN (voice-over): The big ones, indeed; the largest ever private yacht is about to hit the high seas. Part of a project code named Azzam, the yacht is estimated to be a whopping 180 meters or 591 feet long and rumored to be for a Saudi prince.
The finishing touches are taking place at the Lurssen Shipyard in Bremen, Germany. Lurssen's owners can't tell us much; that's because yacht owners insist on secrecy, though at some point that becomes harder, as it did recently for this megayacht.
PETER LURSSEN, OWNER, LURSSEN SHIPYARD: The yacht practically one shed floats with the river into the next shed. And even all the noise wasn't on, specialists were there with the instruments and they figured out, yes, it will certainly be longer than what is long today.
BOULDEN (voice-over): Another big yacht just revealed, the 79-meter Venus, which was commissioned for the late Steve Jobs. Note the iPhone- like rooflines. The Venus builder, Henk De Vries, says the Apple-like superyacht couldn't be more different from what he'll soon deliver to another unnamed customer.
HENK DE VRIES, CEO, FEADSHIP: Of course, the Venus as we said about eliminating everything and going back to even more than basic, just purity in form and in design. This project that will be shown to the world once it gets out.
UNIDENTIFIED MALE: Again (inaudible) --
DE VRIES: I cannot say anything except that it's very large and it's immensely complex and everything is included in that one.
BOULDEN (voice-over): So can a yacht costing a half-billion dollars or more -- and that can take seven years from design to delivery -- be a good investment?
CHARLIE BIRKETT, Y.CO: A yacht that is built nowadays by one of the leading shipyards -- they're all here tonight -- they are definitely holding (inaudible).
BOULDEN (voice-over): Even those brought back after a few years for a facelift?
ALY: When it comes to complex conversions, lengthenings, the wife, you tell her, (inaudible). That's what we'd like to do.
BOULDEN (voice-over): Especially when trying to keep these very wealthy clients very happy and occasionally to manage expectations.
DE VRIES: I asked somebody else (inaudible) the other day, so, but you can't say no to a prince. We do it all the time.
BOULDEN (voice-over): But not, apparently, when it comes to size. While 180 meters will soon be the new record, these builders say they are prepared to go up to 200 meters, nearly two football fields long -- Jim Boulden, CNN, London.
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QUEST: Wow. So what else do you want for Christmas?
Earlier on, I asked you about the joys and delights of still receiving a piece of snail mail, the delight of opening the post and seeing what's in ours, for your viewers, particularly the time of the Internet and you've got the -- and the U.S. Postal Service stopping Saturday deliveries.
Well, Laura Messenger (ph) -- always good to have you with us, Laura - - says, "I love getting big, thick, colorful catalogs and magazines I can pore over all morning."
Deepak Anand (ph), "Nothing beats the smell of snail mail from our loved ones. I still enjoy letters from 10 friends."
Most -- and here's the -- here's the point: most of us still seem to love it, except Stanley Diketsie (ph), says, "With nearly 2 billion smartphones in the world, who needs a piece of paper delivered to your door?" @RichardQuest, where we can still enjoy a piece of snail mail every day.
When we come back after this short break, "Profitable Moment" and why Monopoly is leading the way forward in business.
QUEST: Ah, tonight's "Profitable Moment" -- and a very profitable one we have for you, the game of Monopoly. Now we've all played it and cheated at it, particularly if you're like me and you are the banker. Well, now the game has been updated. They scrapped the iron and they've swapped it for the cat. This updating of the game is crucial.
Monopoly brings out the very worst of us. Think about it. You bankrupt Dad; you foreclose on Mum. And you do the evil deed with anybody else who is playing. It's a ruthless game and more important, you -- we can relate it to just about everything in tonight's QUEST MEANS BUSINESS.
For example, let's take this card. Ha, "Get out of jail free." Or maybe this one, with the RBS, manipulating global interest rates. Sorry, I've got to pay a fine of $612 million, provided I've got the money. Maybe as we go around the board, we should buy something such as Virgin Media perhaps. I hope there's enough than $16 billion in the bank; $500 will do for the middle for the time being.
We all know how this game can go; the rich get richer and the poor drag themselves around the board until it's all over. But it can all change with the roll of a die, perhaps like the chief exec of Korean Air who we heard tonight. We should be focusing on the long game, short- termism leads the instability. And the big winner, like in the game of Monopoly and those that survive the longest.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in London. Whatever you're up to in the hours ahead, I hope it's profitable.
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QUEST (voice-over): The headlines at this hour: Tunisia's prime minister has announced he's dissolved his cabinet. A caretaker government will take its place until new elections will be held. The move comes amid angry protests over the killing of a prominent opposition leader there. Demonstrators call it a targeted assassination.
Hezbollah has reacted with fury over allegations it was responsible for a bombing in Bulgaria last year which killed five Israelis. In a statement posted online, the organization said Israel is waging a terrorizing global campaign against it. Bulgarian investigators say the bus driver and bomber were Hezbollah militants.
In Syria, new video shows Syrian tanks on the move in a Damascus suburb. Witnesses and activists say rebel forces are battling Syrian troops. Other reports from the city suggests the army's launched a major offensive on areas surrounding the capital.
There have been scuffles between 300 steelworkers and riot police outside the European parliament in Strasberg. The protesters were demonstrating against European job cuts and restructuring plans from the world's largest steelmaker, Arcelormittal.
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QUEST: You're up to date with the news headlines. Now to New York, "AMANPOUR" is live.