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QUEST MEANS BUSINESS

Australia Ousts PM; Australian Resources Pullback; Australian Market Down; Australian Politics; US Growth Slows; European Markets Up; Optimistic Outlook in UK; Dollar Up; Billionaire Investor Marc Rich Dies

Aired June 26, 2013 - 14:00:00   ET

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


RICHARD QUEST, HOST: Tonight, Gillard goes. There's political and economic turmoil in Australia.

Snowden stays. The US whistleblower ends his third day. He is in transit.

And just call this a gross domestic puzzle. US growth is revised down and stocks are headed higher. It's a conundrum, indeed.

I'm Richard Quest, live from New York, where --

(RINGS BELL)

QUEST: -- I mean business.

Good evening. Australia has exchanged its prime minister for her predecessor. The former PM, Kevin Rudd, is back through the revolving door, and Julia Gillard, by her own admission and her own words, her own promises, are out for good.

Thursday could see Rudd sworn into office after he won a snap ballot for the leadership of the ruling Labour Party. By winning the Labour Party leadership, well obviously, he then becomes prime minister, because Julia Gillard had said the third leadership test was going to be a test of whether she would stay in politics.

(BEGIN VIDEO CLIP)

JULIA GILLARD, OUSTED PRIME MINISTER OF AUSTRALIA: In the years in which I've served as prime minister, predominantly I have faced a minority parliament and I've also faced internal division within my political party. It has not been an easy environment to work in.

But I am pleased that in this environment, which wasn't easy, I have prevailed to ensure that this country is made stronger and smarter and fairer for the future. I am very proud of what this government has achieved, which will endure for the long term.

(END VIDEO CLIP)

QUEST: Julia Gillard was plagued by poor poll ratings for much of the year, and Kevin Rudd, her predecessor, is viewed by many members of parliament as the only person who can save the Labour Party from a wipeout in elections due to be held in September.

Stan Grant is the international editor of Australia's Sky News. On the line from Sydney, he told me Rudd almost missed his chance to return.

(BEGIN VIDEOTAPE)

STAN GRANT, INTERNATIONAL EDITOR, SKY NEWS AUSTRALIA: He said repeatedly that he would not challenge after he challenged and lost last year. In fact, there was a chance earlier this year, just a couple of months ago, when his supporters had pushed him and he balked at the last minute, he would not go ahead with the challenge.

This time, he said look, I have to listen to the pleadings of my colleagues. But not just that, but also to the people in the street. He said the people of Australia has been urging him to run.

And if you look at the opinion polls, Richard, he does have a case here. He has consistently been more popular than Julia Gillard, even more popular than the opposition leader, Tony Abbott. He gives the Labour Party a chance -- a slim chance --

QUEST: Right.

GRANT: -- but still some chance of being able to be competitive at the next election, which was not going to happen under Julia Gillard.

QUEST: Julia Gillard, having won last time on a put up or shut up vote, why did she decide to do it again? Was it her last gasp, if you like?

GRANT: It was death by a thousand cuts, Richard. She was not only facing shrinking popularity in the polls, she was running a minority government, which is difficult at the best of times. Almost impossible when you're being torn apart from within your own party.

The leaks were continuing, the undermining was continuing, and she had no real authority in her prime ministership. There was no real option here but to actually bet the farm, if you like, to go to the caucus and say, keep me or kick me out.

QUEST: In terms of credibility, integrity, dignity, all words that maybe one doesn't use too often in Australian politics, but who comes out of it best?

GRANT: Who really are the winners here are those members of the Labour Party who were sitting on a narrow margin. They were the ones who were going to be trounced at the next election and lose their seats.

Now, this is a very calculated risk. They believe that Kevin Rudd can stem the flow of blood here. The other winner, I suppose you would say, here, is Tony Abbott, the opposition leader. His party is already well ahead in the opinion polls and tracking to win the next election.

He says simply, if they can't govern themselves, how can they govern the country? So, really, it puts him in a very strong position.

But don't underestimate Kevin Rudd, here. He is someone who's a formidable campaigner. He does have a lot of popularity on this side, and he will make a fist of it.

But Richard, I must point out, the rest of the world must be scratching their heads. Australia has largely survived the global financial crisis. We have 5 percent unemployment when some parts of the world have unemployment around 40 or 50 percent.

We've enjoyed a mining boom, we're safe and secure. And yet, our politics doesn't match the reality of the country's standing.

(END VIDEOTAPE)

QUEST: Now, as Stan points out, there are serious concerns about Australia's mining boom and whether that is over. In fact, the whole resource base of the economy. And that's been one of the reasons for Julia Gillard's slide in popularity.

Almost $150 billion worth of projects have been canceled or delayed over the past year. Asia's once voracious appetite for resources is slowing down, not least in China, and that, of course, has taken its toll on the Australian export-led demand.

In his first address as Labour leader, Kevin Rudd said it was time to, in his words, "rebalance the economy."

(BEGIN VIDEO CLIP)

KEVIN RUDD, PRIME MINISTER-ELECT OF AUSTRALIA: The China resources boom is over, and China itself domestically shows signs of recovering. And when China represents such a large slice of Australia's own economy, our jobs, and the opportunities for raising our living standards, the time has come for us to adjust to the new challenges.

(END VIDEO CLIP)

QUEST: As for the market, the benchmark S&P 200 has fallen 9 percent since it reached a five-year high. It's down more than 2.5 percent so far this week. If you look at that graph, that makes rather -- I was going to say stomach-churning, but actually, it's all one way pretty much. The dollar's also a beating, falling 6 percent against its US greenback in the last month.

Michael Holmes joins me now. Michael, now, you are a -- I was going to say a student, I was going to say more of a professor of Australian political affairs. So, let's do the economy first, and then we'll do the grubby politics. Was this an economic decision and reason?

MICHAEL HOLMES, CNN INTERNATIONAL CORRESPONDENT: You know, it wasn't, really, Richard. As Stan was pointing out, too, although there has been a bit of a slide on the mining side of things, the Australian economy, most of the -- or a lot of the indicators are actually pretty good. They're -- compared to the rest of the world, not bad. It certainly didn't play really into this.

This was all about grubby politics. And Kevin Rudd, he knew that Julia Gillard -- this was going to be an historic, go down in flames electoral loss for the Labour Party.

And what happened behind the scenes was people said, well, Kevin Rudd, for whatever reason, has some sort of support among the electorate. Let's throw him in. He's got a better chance against Tony Abbott than Julia Gillard ever would have done.

QUEST: Brought balance.

HOLMES: So give it a go, you know?

QUEST: All right. All right. But Rudd has often been described as a rather gray man, although I do know he is an exceptionally fierce political fighter, and they often are in that scenario. But Gillard herself, the poor woman, she took some unfair, unpleasant, sexist beatings out of any proportion --

HOLMES: Yes.

QUEST: -- to that which other female politicians would be expected to put up with in different countries.

HOLMES: Sexist, indeed, and other nasty stuff, too. A very influential right-wing radio commentator down there once said her father had died of shame because of her politics, attacking her dead father. There was another radio DJ who, of course, just recently asking questions about whether her partner was gay.

But the sexism stuff really loomed large. In fact, Julia Gillard made a pointed speech that got a lot of attention around the world in responding to some of that, and we've got a sound bite. Let's have a listen.

QUEST: Right.

(BEGIN VIDEO CLIP)

GILLARD: And I say to the leader of the opposition, I will not be lectured about sexism and misogyny by this man. I will not.

(CROWD SHOUTING)

GILLARD: And the government will not be lectured about sexism and misogyny by this man. Not now, not ever. The leader of the opposition says that people who hold sexist views and who are misogynists are not appropriate for high office. Well, I hope the leader of the opposition has got a piece of paper and he is writing out his resignation.

(CROWD SHOUTING)

GILLARD: Because if he wants to know what misogyny looks like in modern Australia, he doesn't need a motion in the House of Representatives, he needs a mirror.

(END VIDEO CLIP)

QUEST: Michael, why did the electorate, why did Australian politics, why was Julia Gillard so disliked?

HOLMES: She just didn't resonate. A lot of people didn't like the way she spoke. I mean, the poor woman got criticism from Germaine Greer, the sort of -- the senior feminist of Australia for how she dressed. This woman was judged on things that male politicians are never judged on.

She just didn't gel with the electorate, and even though she won the last election, it was only with the help of some independents and hence governing with a minority government.

Kevin Rudd's big problem is he's now got to unite a party that is fiercely divided largely because of him, and then try to convince people that he's a better guy than Tony Abbott.

(LAUGHTER)

QUEST: You've got to love Australian politics, and Michael Holmes --

HOLMES: It's dirty.

QUEST: -- a man who I -- I suspect you've got bruises in places we don't want to even thing about.

(LAUGHTER)

QUEST: From covering Australian politics.

HOLMES: And then there was the political stuff on top of it.

(LAUGHTER)

(RINGS BELL)

QUEST: Time for a bell. Michael Holmes joining us from CNN Center. Coming up, QUEST MEANS BUSINESS, we're in New York for you tonight. This index is in the green, the breaks are going on the GDP forecast. We'll explain, why should the market be up 140 points when frankly the GDP numbers were poor at best.

(COMMERCIAL BREAK)

QUEST: The US economy's weaker than previously thought. GDP growth for Q1 was revised to an annual 1.8 percent. That's down from 2.4 percent that commerce reported last month. If you look at the trend over the whole month, it went 2.5, 2.4, and then 1.8 for the final estimate.

Analysts are blaming reduced consumer spending and investment and exports - - and shrinking exports. Maggie Lake followed the numbers. So, that's really the point. We started with the initial at 2.5. We then went to 2.4. Now at 1.8. The core question is how serious that is.

MAGGIE LAKE, CNN INTERNATIONAL BUSINESS CORRESPONDENT: Not very, if you look at the market, Richard. And the reason is because investors are looking at the second half of this year. They're done with the first quarter. That's rear view mirror.

And a lot of economists saying, listen, it ended up being a little bit slower, consumers spent less, that means they have more firepower, so we're likely to see it snap back, maybe, in the second quarter. Also some questions about maybe the data being imperfect. So, they really weren't putting that much stock in it. That's why we got a market that's up 140 points.

There are two pieces of the other data that came out, though, today, that I do want to turn your attention to, and they may be more important. The market's not trading off of it, but when we're talking about the US economy and the fundamentals, this is what's going to matter.

First thing -- and this is from the GDP report, from apple -- Albert Fried & Company, housing now accounts for almost one-fifth of economic growth. We knew it was a pillar on the stool, but boy, it's an increasingly important one.

The other one, Trim Tabs says that $62 billion pulled out of bond funds in -- up until June 24th. That is -- that surpasses the record that we set back in October, the worst of 2008, the worst of the global financial crisis.

What does -- that increase in interest rates that's going to be linked to that bond sell-off -- what does that do to housing? Can housing remain strong if we see the house of borrowing going up? That equation is going to be essential as well as jobs. Not so much GDP, Richard.

QUEST: Ah, but you say that, Maggie, but the GDP number -- the rear view stuff and all of that, by the time you get to Q2, you're going to want to see an improvement on that 1.8, otherwise you're not going to get that growth that you're talking about by the end of the year.

LAKE: No. Absolutely. You want to see this trend up. If the trend continues to be sub 2 percent, then you've got a problem, and it will unnerve investors. But right now, people think it's more the sort of mix of where did the growth come in, was it related to Q1 or did it more pile up in Q2.

So, right now, not a problem. But you're right, if we remain on trend below that, people are really going to start to rethink the Fed. They're also, Richard, watching inflation really carefully. We've got inflation not only flat but falling. A lot of investors also watching that. So, jobs, housing, inflation. Those are the key indicators to watch here in the US.

QUEST: Maggie Lake in New York. New data from Germany shows consumer confidence is better than expected, and that, of course, rose the stock market. According to the GFK Research Institute, German confidence is at its highest level in almost six years.

In the UK, meanwhile, the chancellor of the exchequer, the finance minster, George Osborne, sounded an optimistic note. He was unveiling the latest round of spending cuts.

(BEGIN VIDEO CLIP)

GEORGE OSBORNE, CHANCELLOR OF THE EXCHEQUER: The action we have taken, together with the British people, has brought the deficit down by a third, helped a record number of people into work, and taken our economy back from the brink of bankruptcy.

(CROWD CHEERS)

OSBORNE: And it allows us to say that while recovery from such a deep recession can never be straightforward, Britain is moving out of intensive care and from rescue to recover.

(CROWD CHEERS)

(END VIDEO CLIP)

QUEST: Leaders of the European Union are gathering in Brussels ahead of Thursday's planned summit meeting. The chief economist at ING Investment Management is Valentijn van Nieuwenhuijzen. He joins me now, live from our London studio.

Valentijn, now, look. We've got an exceptionally complicated picture now, haven't we? We've got better than expected German consumer confidence, worse than expected US GDP, one's backward looking, one's forward looking. What are you looking at?

VALENTIJN VAN NIEUWENHUIJZEN, CHIEF ECONOMIST, ING INVESTMENT MANAGEMENT: Well, I think, actually, the undertone is quite constructive because markets were a bit concerned that the Fed would no longer be willing to support the markets by easier policy, and surely somewhat softer GDP data help to convince markets that the Fed will be there with easy policy going forward.

While at the same time, they were very worried about the weakness in domestic demand in Europe. And there is clearly now a source of strength in the domestic demand picture in Germany, which is already driving the German economy over the last year or so.

So, combined, I do understand why markets are reacting quite positively today to these two news items.

QUEST: This rotation that we're now seeing out of bonds to equities to some extent, or we've seen over the last two to three months, it was entirely understandable and predictable as higher rates and QE3 taper came along, but would you expect it to continue?

VAN NIEUWENHUIJZEN: Well actually, what we've seen, of course, in recent weeks is an orientation back into cash. But I certainly would expect the global recovery to persist in the second half of this year on the back of the latest macro data, both in Europe, in the US, and in Japan. And therefore, investors to gradually, indeed, start rotating out of bonds into equities again.

Because equities are the asset class that benefits the most from stronger domestic demand in the developed world, and we're getting more and more confidence that that is actually materializing later on.

QUEST: The volatility. How much of this volatility that we are seeing today or in the markets generally at the moment? How much of it is because of new ways of trading high-frequency trading? How much of it is because of uncertainty? And how much of it -- we never used to see these sort of gyrations and swings.

VAN NIEUWENHUIJZEN: Well, it absolutely plays a massive role. It's difficult to quantify, obviously, but the last moves in markets have clearly been driven by the more active players, where there's active or high-frequency traders or hedge funds.

The flows have not been massive. It's not been a massive involvement from big real money accounts, but it's really these very volatile active players that are driving these intra-day moves, which I agree have been quite spectacular, sometimes moving 3, 4 percent within the hour in some of the exchanges.

And I think the reality is that in the environment that we are in, the world is a very uncertain place. Policy is very uncertain where it's going in the future. We will continue to see these bouts of volatility, but underlying, as I said, I think there is a picture of recovery, and therefore an upward trend will come back to risky assets, I presume.

QUEST: Valentijn, we thank you for that. Risky assets back on the agenda.

Tonight's Currency Conundrum, we'll stay with Australia, where we started our program tonight. Australian one cent coins were melted down and recycled after they were taken out of circulation in 1992. This is the one cent bit. What were they turned into? Olympic medals, bridge supports, or water pipes? The answer later in the program.

The currency rates for you tonight, the dollar up against the pound and the euro, down against the yen. Those are the rates --

(RINGS BELL)

QUEST: -- this is the break.

(COMMERCIAL BREAK)

QUEST: One of the most colorful and controversial traders the US has ever seen has died. He's Marc Rich, who founded what is today known as Glencore-Xstrata, or at least that's the merged company. Marc Rich was 78. He suffered a stroke.

The commodities trader fled from the United States in 1983 to escape a string of charges, including wire fraud and racketeering and the tax demand of nearly $50 million. Rich was pardoned by President Clinton on his last day in office -- the president's last day in office in 2001. The president later said he regretted that decision.

This was Rich's home in exile in Switzerland. It was reportedly filled with fine art, Picassos in particular. "Forbes" said he was worth $2.5 billion in 2012.

As for the company he founded, Glencore, it's not as rich as it once was. Shares hit a record low this week since it went public two years ago. It's currently at 276 pence a share, down 21 percent on the year to date.

I spoke to Marc Rich's biographer, Daniel Ammann, and asked him how Rich will be remembered outside the United States.

(BEGIN VIDEOTAPE)

DANIEL AMMANN, MARC RICH BIOGRAPHER: In time, I think he will be remembered as a pioneer of globalization who revolutionized the world's trade. He actually created the independent oil trade.

QUEST: Right. But in creating that independent oil trade and in doing so many things in commodities, he revolutionized an industry. So the question becomes, where did he go wrong? Where did his moral compass on these tax questions fail him?

AMMANN: Well, he was wrong to anger the American government. This was not a good idea to do. And maybe he pushed the envelope too far. He did business with any and every dictator you can think of.

I once told him if he didn't care, and he said, "As long as it is legal, I do the business. I'm not a politician, I'm a trader."

QUEST: How much did it hurt him that he had been wanted in the United States --

AMMANN: He was indicted but not convicted because he didn't return to the United States. Well, in public or if you talk to him, I think he didn't care. He told me he's very self-confident, he heard all the accusations and charges so often that he got immune to it. All the accusations hurt him much more than he admitted, I think.

QUEST: When he got the pardon, a pardon that in itself, some say, was unpardonable, that was really pulling the rabbit out of the hat, wasn't it?

AMMANN: Well, it was a masterwork if you look at it. It was very well- orchestrated by a former Mossad officer, the Israeli intelligence, who organized the petition. He was able to organize all these Israeli politicians, dignitaries, to put in a word for Marc Rich.

Remember, it was Shimon Peres and Ehud Barak who personally called Bill Clinton to ask him for a pardon for Marc Rich. Not a bad trade, I would say.

QUEST: Was he the sort -- he liked his cigars, he liked his good life, he liked living big. But was he the sort of man that you wanted to sit next to at dinner?

AMMANN: Well, if you're a talkative person, maybe yes, then you do the talking. But if you wanted to have a conversation, no, because he was extremely -- he's not a talker. If he talked, he used five or six words, maybe two sentences, and this was it.

But on the other hand, he was able to be charming, witty, and he had what you wouldn't expect, he had quite a lot of self-irony.

(END VIDEOTAPE)

QUEST: Marc Rich, who died today. Coming up on QUEST MEANS BUSINESS, no passport, no country, and on the run. Edward Snowden continues to defy US authorities. Still in Moscow Airport tonight. We will talk about this legal limbo land in a moment.

(RINGS BELL)

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. There's 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): Kevin Rudd is back as Australia's Labor Party leader and now most likely prime minister. He toppled the current incumbent, Julia Gillard in a party leadership vote that she herself called after months of intraparty feuding. Ms. Gillard has resigned and says she'll now retire from politics and the elections in September.

Gay rights advocates are celebrating two landmark decisions by the U.S. Supreme Court. In one case, the justices struck down part of the federal Defense of Marriage Act. Same-sex couples can now receive the same federal benefits as straight couples.

The court also dismissed an appeal over a California marriage law which opens the door for same-sex marriages to resume in that state (inaudible) the 13th to recognize same-sex marriage.

The U.S. president is to touch down in Senegal in about two hours from now. Barack Obama is hoping to open more doors for U.S. investment in Africa. He and his family will also visit South Africa and Tanzania during their seven-day visit.

The South African president Jacob Zuma says the status of Nelson Mandela's health has not changed. The 94-year old remains in critical condition. He's in a Pretoria hospital. Today he is visited by an archbishop who offered a prayer for a peaceful end.

To Pretoria now and Isha Sesay is outside.

I think -- I think when you hear the archbishop say -- and praying for a peaceful end, that pretty much sort of sums up the situation, isn't it? It's as they say a life drawing to a close.

ISHA SESAY, CNN CORRESPONDENT: I think that is fair to say, Richard. Yes, good evening. I think that South Africans as a whole are in a position of grim resignation as they prepare for the passing of Nelson Mandela. He has been in critical condition for four days now, according to South African media reports. He's on life support. We know his condition is unchanged.

He remained in that hospital behind me and this is day 19. His family have been visiting him, as you pointed out.

But I also want to draw attention to the mood outside the hospital, Richard, where crowds have gathered throughout the day. They continue to leave signs and cards, balloons and express their gratitude to Nelson Mandela, who many consider to be the father of this nation, the father of democracy.

As somber as it is, and as anxious as South Africans are, it's also worth pointing out that there's also been a lot of singing outside the hospital. It's very striking and it really makes the hair on your arms stand up, because they're singing in praise outside. They're singing in gratitude.

And there have been incredible scenes behind me playing out for the last couple of hours, of people really just going up and down this road, singing out Mandela's name, Richard.

QUEST: Isha Sesay, joining us from Pretoria this evening, Isha, thank you.

(MUSIC PLAYING)

QUEST: There's no greater issue in Europe at the moment other than unemployment, particularly youth unemployment. All this week on QUEST MEANS BUSINESS, we're looking at how Europe is tackling this serious issue, growing huge challenge.

And of course, the epicenter -- well, you can choose one of several, whether it be Spain or Italy, but perhaps Greece ranks largest. An estimated 150,000 young people left the country to try and find work. Nina dos Santos spoke to one who has come to London hoping for a job.

(END VIDEOTAPE)

NINA DOS SANTOS, CNN CORRESPONDENT (voice-over): Meet Lefteris Kalogerakis who likes to be known as Terry (ph). He's 23 years old, equipped with a degree in museology (ph) and a two-page resume He may have the education and some experience to boot. But one thing this young Greek just can't seem to get is a job.

LEFTERIS KALOGERAKIS, UNIVERSITY GRADUATE: Hi.

DOS SANTOS: Hey, nice to meet you.

KALOGERAKIS: Nice to meet you.

DOS SANTOS: Nina. Sit down.

KALOGERAKIS: Thanks very much.

DOS SANTOS: So this is your CV.

KALOGERAKIS: Yes.

DOS SANTOS: How many CVs have you sent out like this?

KALOGERAKIS: Three or four per day.

DOS SANTOS: Any jobs yet?

KALOGERAKIS: No.

DOS SANTOS: And any take up, any interviews?

KALOGERAKIS: Most of them, they don't even answer.

DOS SANTOS (voice-over): Terry (ph) may be unemployed, but he's not alone. Over 60 percent of young people in Greece are out of work. Even if he'd wanted to stay, Terry's (ph) parents made it clear he'd have a better chance of getting his dream job in a country like the U.K.

KALOGERAKIS: They told me that I have to try to find a better future. So I decided to come here and find a job more similar to what I've studied because the United Kingdom is a country with many museums (ph) and they love museums (ph).

DOS SANTOS (voice-over): But in this age of austerity, even London's mighty museums aren't hiring, meaning Terry's (ph) options are limited.

DOS SANTOS: And what's interesting here is that you spent some time as a waiter. There's so many things that you've done, this part-time work here. But you hvaen't had a permanent job yet.

KALOGERAKIS: Yes because there are not many chances in Greece.

DOS SANTOS: (Inaudible) unemployed people in Greece angry?

KALOGERAKIS: Yes. That's something that (inaudible). They have anger and sadness in them because they don't -- they haven't done anything wrong. They (inaudible) their fathers and grandfathers. And (inaudible) unfair.

DOS SANTOS: (Inaudible) waiting skills to the test and order us two Greek coffees.

KALOGERAKIS: Why not?

(Speaking Greek).

DOS SANTOS: So you want my advice on your CV?

KALOGERAKIS: Yes. I'm trust your professional opinion.

DOS SANTOS: OK. So what I'd do is instead of saying currently a graduated student...

DOS SANTOS (voice-over): He may be homesick, he may be humbled, but for now, Terry (ph) remains optimistic he'll find work. And until he does, he's not giving up -- Nina dos Santos, CNN, London.

(END VIDEOTAPE)

QUEST: And tomorrow as we continue our tour of the continent, Jim Bittermann in France meets a graduate who finds work after applying for nearly 40 jobs. The special, "Europe's Lost Generation," the personal struggles of young people looking for work; 7:00 pm London, 2:00 pm in New York and you can probably work it out the time where you are.

Coming up, one year after the merger that created LATAM Airlines, the head of international tells me why the past 12 months have been a learning curve, what they've learned and now how they're actually going to put it to good use. QUEST MEANS BUSINESS. Good evening to you.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

(MUSIC PLAYING)

QUEST: On this week's "Business Traveller" update, a year after the merger of Chile's LAN Airlines with TAM of Brazil and the head of international says it's crucial not to rush the integration process.

Shares of the combined carrier -- it's called now LATAM Airlines -- is down more than 37 percent over the past year. You might be wondering why they bothered if they're going to destroy, of course, the share value.

I sat down with the senior V.P. for international passenger operations at IATA in South Africa. I asked where's your growth, bearing in mind the nature of this new, much larger airline?

(BEGIN VIDEOTAPE)

DAMIAN SCOKIN, SVP, LATAM: That's a good question because it's not been easy, actually running the airline and making the integration (ph) hub. It's been happening -- it's actually very hard work, hard (inaudible). But the good side of it is that we continue to see and confirm all the growth opportunities we saw prior to the merger.

We still believe we have growth opportunities to our current international markets, the U.S. and Europe and also within the domestic. Remember that Latin America still is one of the regions in the world with the lowest price (ph) per inhabitant. So there's still room there.

And once we make the merger actually happen and comply with all the requirements to operate as a single company, we'll explore opportunities beyond our current network, Africa --

(CROSSTALK)

QUEST: -- long way off in your priorities?

SCOKIN: Yes. Unfortunately, yes, we see opportunities by the way to focus right now in making the integration happen effectively and we need to grow and (inaudible) markets.

QUEST: Your competitors have done similarly and are drilling down into the region.

SCOKIN: Absolutely there's -- the beauty and the downside of being in a growing region is everyone's looking at it. And everybody's putting capacity into Latin America. So it's a tough act to battle on the day-to- day operation and making integration (ph) happen.

QUEST: What's been the single biggest difficulty? What -- when you and I met last year, and we talked about it --

SCOKIN: A little bit younger and had more hair.

QUEST: With hindsight, what's been the most difficult part?

SCOKIN: Well, with hindsight I would say we took an approach of integrating the worst, do it as quickly and as deep as you can on the commercial side. And we -- as Monday morning quarterbacks, as the Americans like to say, maybe we should have just to do it slightly at a lower pace while understanding the difference of the two companies.

(END VIDEOTAPE)

QUEST: The head of international for LATAM Airlines.

The destination of the man who lifted the veil on Internet snooping remains a mystery tonight. Edward Snowden is seeking asylum from Ecuador, Iceland and other unknown countries. The Ecuadorian embassy says it's in the process of considering Snowden's request.

Officials in Iceland says Snowden hasn't applied for asylum there. Tonight, the location is thought to be a transit hall in one of Moscow's main airports in a state of diplomatic limbo.

It's all a bit like the scene from the Tom Hanks film, "The Terminal." In 2004, it was a movie about a man -- you know the movie -- he was trapped in an airport unable to enter the country or return home. It was Paris' Charles de Gaulle. He was there for 17 years. And Snowden -- I mean, that was the real story. That's after all the real story was.

Snowden has supposedly been at the Moscow airport since he arrived on Sunday afternoon. Someone who's arrived just there is Jim Boulden, who is on the line now.

You've just arrived -- are you in the transit area? Are you in arrivals and have you see any sign of Mr. Snowden?

JIM BOULDEN, CNN CORRESPONDENT: Well, I am in the transit area, so you can come to Moscow if you're transiting elsewhere later without a visa. And that's where we are. We're in the very modern, very large terminal, Richard, with lots of people who are waiting to go onto other international destinations from here.

No, I haven't seen him. I have looked in TGIFriday's and I've looked in Burger King and the bars and I haven't seen him. There's also a little hotel attached to this, called the Capsule (ph) Hotel, with little, tiny rooms, very clean and tidy. He could be in one of those rooms or he could be in the diplomatic lounge. That's one of the theories, Richard.

But none of the reporters I spoke to who have been here all day have seen him. But you know from Mr. Putin that he's here and apparently not crossed the, if you will, border into Russia. So --

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QUEST: All right, Jim, OK. Now, Jim, you're in the transit lounge, because obviously you are in transit. You're in transit to somewhere and getting into that lounge, was it difficult? I mean, you obviously got a ticket that delineates you as being in transit to somewhere else.

Was there any -- I mean, do you feel like legal limbo?

BOULDEN: No, I don't feel like legal limbo, because it is a very clean, tidy -- there's no issues coming in at all. You just come in and show your ticket for your next destination and off you go and no questions asked, Richard.

It's a very, very simple, very straightforward -- of course, the difference to that film you were mentioning was the chap that was in the Paris airport for 17 years is he was able to use all the facilities. And (inaudible) here, no one has seen him using any of those facilities, which all the other passengers have a right to use, Richard.

QUEST: Jim Boulden, who's in Moscow and no doubt he'll be there for some time to come.

Coming up next, QUEST MEANS BUSINESS, how the sport of cycling is greasing its sponsorship wheels (inaudible) to recover from the doping scandal.

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QUEST (voice-over): The answer to tonight's "Currency Conundrum," what became of the 1-cent coins in Australia after they were taken out of circulation in 1992? Obviously they were turned into Olympic medals. The 1- and 2-cent coins were melted down and became medals for bronze-winning athletes in the 2000 Sydney Games.

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QUEST: British cycling is urging the U.K. government to get more people on bikes after U.K. finance minister allows the cut in the transport budget. Government funding isn't the only way cycling to make money. Sponsors used to queue up to do that and that was before the doping scandal, of course, the Lance Armstrong scandal which, of course, has since spread much further.

CNN's Amanda Davies looks at how the sport is trying to recover.

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AMANDA DAVIES, CNN CORRESPONDENT (voice-over): From its very beginning in 1903, sponsorship has been the lifeblood of professional cycling. French newspaper "L'Auto" set up the Tour de France as a way of boosting circulation. The yellow jersey, a brazen advert for its yellow pages.

A hundred years on, sponsorship is as an important as ever to cycling. But the last Armstrong doping scandal hit the sports revenue stream hard with big name sponsors like Radio Shack and Rabobank pulling out.

SIMON CHADWICK, PROFESSOR, SPORT BUSINESS STRATEGY: Commercially, cycling is in a very poor state right now. Clearly how you've got large number of sponsors who pulled out and taken big contracts with them.

DAVIES: The saying "all publicity is good publicity" has certainly been tested in cycling in recent times. There's been scandal and retreating sponsors. But for many investors, the rewards still outweigh the risks.

DAVIES (voice-over): It's a business left relying heavily on domestic sponsors and the grandest tour of them all has proven resilient.

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BRADLEY WIGGINS, PROFESSIONAL CYCLIST: Bradley Wiggins, winner of the Tour de France.

First, professional people will ask you what you did for a living and you say, "I'm a professional cyclist," and they'd say, "Have you done the Tour de France?" It's the first question. It's there in the public eye and it's the most recognized -- one of the most recognized sporting events in the world.

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DAVIES (voice-over): And one that's attracting more and more viewers. (Inaudible) saw a 54 percent increase from the previous year with 68,000 TV ads broadcast across 175 countries. And there's been a boom in participation with a new breed of rider.

DAVID MILLER, PROFESSIONAL CYCLIST: I think there's a whole new culture of cycling that's happening with the crossover from golf, the demographic is very much -- the joking term is MAMIL, middle-aged men in Lycra.

DAVIES (voice-over): Simon Mottram went from sporting Lycra to selling it. He's turned cycling into his life, kicking Adidas off the block to close Team Sky.

SIMON MOTTRAM, CEO, RAPHA: Most people are already in for the whole -- the recent Lance saga. And they were in it already. They weren't going to be thrown off course by one guy being done for doping.

DAVIES (voice-over): Despite its problem, cycling generated over $2.1 billion from TV sponsorship exposure last year. You can only imagine the potential rewards with a well-structured clear road ahead -- Amanda Davies, CNN, Italy.

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QUEST: Jenny Harrison is hoping to trounce me once again. We'll see if she manages it. The weather forecast first, though, Ms. Harrison.

JENNY HARRISON, CNN METEOROLOGIST: Haven't done it yet, but yes, we will get to that in all good cause. But let us start first of all with a look at what has been going on in Europe, because we've got some pretty cool air out there, stretching all the way from Scandinavia down towards central and southern Italy.

The cloud a bit of a clue, because they've got some rain to the north and that area of low pressure which is in place is really producing that cooler air. But look at the rain that's come down in the last 24 hours, first of all, in Wroclaw (ph), you can see here, 72 mm. The monthly average is 79. So that's a lot of rain in a very short space of time.

And then in Krakow, 80 in eight hours, 80 -- 61 -- can't read today -- 61 mm of rain. So again, very heavy amounts in a short space of time.

It's all because of this area of low pressure though we are seeing quite a lot of scattered showers across much of central and western Europe, still sort of the hot air clinging on across the southeast and it is, of course, warming up across much of the west as that high pressure also builds in.

And now you can see here that we've also got some warnings, though, across more eastern areas, large hail, maybe some heavier spells of rain, hence those heavy rain showers we saw there across in Poland in the last 24 hours. But look at the cooler air that's in place. That's what I mean about how far it stretches.

All those in Scandinavia right the way down to southern Italy and then across the southwest, particularly Portugal, temperatures are above average and also through much of Turkey and also Russia and eastern areas of Ukraine. But very cool in those central areas.

Here are some of the cities with the temperatures over the next few days, not that much above average in Madrid. We've got 32 Celsius the next couple of days; the average is 29; Budapest 24, by Saturday the average is 25. So it does warm up a bit. And in fact, Copenhagen, about the average, a few degrees below over the next few days.

As I say, you will see quite a few showers pushing in across the west and more rain across those central and eastern areas and temperatures overall at a bit below par, but 26 in Rome, still very nice there and of course what does all that mean for Wimbledon? Well, it does mean we'll see increasing cloud on Thursday but it should stay mostly dry throughout the day for play.

But then by Friday, expect some rain showers, Saturday warm again with a high of 21. That of course for Richard, he likes it in old money, 21 is 70 degrees Fahrenheit. And here is today's Wimbledon quiz question.

So how many championships in all those years have there been no rain or has there been no rain at all, Richard? There's been 135 of them. How many times have there been no rain?

QUEST: All right. This is a pure, unadulterated guess. So I'm going to accept I could be -- how many in all have there been?

HARRISON: One hundred thirty-five. Began in 1877.

QUEST: I would say -- OK. I would say 23.

HARRISON: Oh, good. I'm glad. You're way wrong. You've very wrong, look. Just five. Twenty-three. Five. It's rained a lot, but actually I was going to make it more difficult for you. But because you were so wrong, I won't test you. I was going to ask you come up with at least one year. But no, 1878, 1903, 1908, 1949 and 1993. That was when it didn't rain.

QUEST: Yes, of course. I would only -- I would only remember the 1993 one. We'll have to leave it to others to remember the 1949 one.

HARRISON: Yes, well, I guess you wouldn't remember those. That's true enough. Yes. We'll let you off on that one. And I shall have another good quiz question tomorrow.

QUEST: I'm going to Wimbledon on Saturday, so I'm relieved to see that that's going to be sunny there. Very, very good. Good news indeed. Jenny Harrison, who is at the World Weather Center, I was going to say (inaudible). I was going to say three or four. Actually, I was going to say 12. My first answer was going to be 12.

HARRISON: You -- oh --

QUEST: All right, Jenny. Many thanks. I was wrong, I was wrong. Looks like it's raining here in New York, according to the picture behind me.

We will have a "Profitable Moment" on Australian politics, which are always down and dirty and nasty, after the break. QUEST MEANS BUSINESS.

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QUEST: I've always been fond of Australia, you know. Tonight's "Profitable Moment," I first visited Australia, oh, what, in 1991 and I've been there many times since. A photo of the Sydney Opera House stands proudly as my desktop screen saver. It's also on my phone, my iPad. You can always tell by them.

To an outsider like me, what has occurred in the last 12 hours is perhaps baffling and astonishing to see in a country which has such good economic shape. What's happened politically is gripping, more so than an Aussie soap opera.

Kevin Rudd, ousted by Julia Gillard, Kevin Rudd plots revenge, gets his job back. And as we've heard tonight, the reasons why are many and varied. Maybe Gillard wasn't rated as a prime minister. She didn't resonate with her people. Perhaps MPs wanted to save themselves from electoral annihilation at the next election as the polls suggested.

Australian politics is a unique beast. It's nasty, brutish and short. And it's ruthless. But what Julia Gillard did give the Australian population, of course, was the dignity and respect to show that in sexism and misogyny, that, of course, has no place in Australia's political system.

And that's QUEST MEANS BUSINESS for this midweek edition. I'm Richard Quest in New York.

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

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QUEST (voice-over): The headlines at the top of the hour: the South African president Jacob Zuma says the status of Nelson Mandela's health has not changed. The 94-year old remains in critical condition in a Pretoria hospital. Today he is being visited by an archbishop who offered a prayer for a peaceful end.

The U.S. president will touch down in Senegal in just under two hours. Barack Obama is hoping to open more doors for U.S. investment in Africa. He and his family will also visit South Africa and Tanzania during the seven-day trip.

Kevin Rudd is back in Australia's Labor Party leader and likely prime minister after he toppled Julia Gillard in a party leadership vote that Gillard herself called after months of intraparty feuding. Gillard has resigned and says she'll now retire from politics in September.

Gay rights activists are celebrating two landmark decisions by the U.S. Supreme Court. The justices struck down part of the federal Defense of Marriage Act meaning same-sex couples can now receive the same federal benefits as heterosexual couples.

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QUEST: You are up to date with the news headlines. Now also in New York, "AMANPOUR" is live.

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