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QUEST MEANS BUSINESS
Murdoch Dynasty; Murdoch's Legacy; NATO in Eastern Europe; Recession Warning for Russia; Siemens Plans Russian Investment; Crisis in Crimea; Candy Crushed
Aired March 26, 2014 - 17:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: The market was down when the closing bell rang just about an hour ago. The US, of course, has changed its clocks. Europe has yet to do so. Down around about 100 points when -- oh, dear, what a feeble lit hit of the hammer. Doesn't matter, it's still Wednesday, it's the 26th of March.
Tonight, one day, son, all this will be yours. Rupert Murdoch primes his sons to take over the Murdoch empire. We'll tell you who and why.
Also tonight, the most credible lead so far, 122 objects spotted by a satellite in the Indian Ocean search.
And President Obama warns President Putin over Ukraine, the cost to the Russian economy will rise.
I'm Richard Quest. I mean business.
Good evening. Rupert Murdoch has placed two of his sons near the top of his business empire. It's the strongest sign yet of an eventual succession plan. Mr. Murdoch is 83 years old and has now decided that Lachlan and James are to be front and center of the operation he's controlled, he created, for more than six decades.
So, let's look and see who is where in the Murdoch family tree. Well, bear in mind, of course, that the company was split, News Corp and the films division were split in an -- earlier last year.
But still at the top, Murdoch Senior, Rupert Murdoch, chairman of News Corp and chairman and CEO of 21st Century. They were the two companies, News Corp with the newspapers, the old established, 21st Century, that's the movies, the Fox networks, and all the modern media.
Now, Lachlan Murdoch, who hasn't had an active involvement in the business for many years, he comes back in. He will be the non-exec chairman at both companies, News Corp and 20th Century -- 21st Century Fox.
Until today, James was the deputy chief operating officer at News Corp. He had been made the head of News International, the British -- the group's British newspapers, but you'll remember, of course, that got very deeply entangled in a row and scandal over phone hacking. So, what does he become? He becomes the co-chief operating officer, the COO, at 21st Century Fox.
These two men move up the pyramid in very senior roles at both News Corp and 21st Century Fox. Elisabeth Murdoch, the third sibling, and there's no word on a new role for her after she reportedly criticized News Corp's handling of the hacking scandal.
Now, Rupert Murdoch has three other children, one has little involvement, and the other two, they're at school. For a look at all the Murdochs' moves, CNN's Jim Boulden is in London.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): Rupert Murdoch has a media empire worth some $10 billion, and two sons, Lachlan and James, getting more and more control.
DOUGLAS MCCABE, ENDERS ANALYSIS: A question that's been asked a lot today, is one surprised by this? Well, one would be surprised if somebody with the surname of Smith or Jones had appeared at the top. The fact that Murdochs have ended up at the top of these two businesses is about the least surprising thing you can imagine.
BOULDEN: The answer hasn't always been obvious. In 2005, Lachlan, seen by many as the heir apparent, surprised many when he walked away from News Corp day-to-day operations to run his own TV network.
That left the door open for the younger James to rise, first through British Sky Broadcasting, and then up the ladder to include its UK newspaper properties. Now, Lachlan is back, working alongside his father as co-chairman of News Corp and 20th Century Fox.
But it's a very different media empire. News Corp took over "The Wall Street Journal," but it failed in its bid to take full control of BSkyB.
BOULDEN: In part because some of News Corp's tabloids have been caught up in Britain's ongoing phone-hacking scandal. In response, Rupert Murdoch shut his beloved "News of the World" newspaper.
He even got a pie in the face by a protester when he and son James were hauled before a parliamentary committee investigating phone-hacking. James soon resigned from various roles inside News Corp's London operations, and in 2012, moved to New York to oversee various pay TV properties. This week, James also got a promotion to co-CEO of 20th Century Fox.
The question now, who does the patriarch of the family want to take the reins?
STEVE HEWLETT, MEDIA ANALYST: Look. The one thing one knows for certain is that it is Rupert Murdoch's fondest and keenest wish that he be succeeded at the top of the family business by a member of the family.
BOULDEN: Rupert Murdoch is now 83 years old. His two sons are now firmly back on his coattails, ever rising inside one of the world's most influential media empires.
Jim Boulden, CNN, London.
QUEST: Joining me from London to discuss the Murdoch legacy and who will control all these things -- remember, it halves, you've got the News Corp division, you've got the movies and the television bit. Joining me to discuss this is the author and journalist Peter Jukes. Good to see you, Peter, thank you for joining us.
PETER JUKES, AUTHOR, "FALL OF THE HOUSE OF MURDOCH": Nice to see you, Richard.
QUEST: So, to pull it together, whether they're the chief operating officers, the CEOs, the co-CEOs, the executives or non-executive chairman, they are being put in charge of these two -- or at least right under Daddy at these two big companies.
JUKES: Absolutely. It looks like a succession strategy. I think people are surprised by the haste of this move. I mean, it's not unanticipated that Lachlan -- that's the pronunciation -- Lachlan could have taken over the News Corp, the publishing end.
But I think that was thought to be a long-term process, and nobody thought James would be reinstated, having left the UK in somewhat of a shadow after the phone-hacking scandal. So, got to give credit to Rupert Murdoch, always the great disruptor, always sort of second-guessing people and breaking their expectations. An extraordinary move.
QUEST: James --
QUEST: Excuse me. James is being rehabilitated by this. Lachlan left some eight years ago to pursue his other interests in Australia. What makes him worthy to bring back now, beside having "Murdoch" in his surname?
JUKES: Well, he has run his own TV stations. He's quite a successful entrepreneur in his own right in Australia. I suppose that is always the question. Is it a meritocracy? Rupert Murdoch always stresses that he's a meritocrat. But as, I think, somebody said in your package, would they have got to the top had they not got the Murdoch name?
But the company is controlled by, effectively, these B voting shares, by a family trust. So, the power lies with the family. Now, is that sustainable in a modern corporation? I don't know.
The interesting thing is, it's not an equal split. 21st Century Fox is by and large the much bigger part of News Corp, which got split off. The publishing division is maybe only 30 percent. The publishing division is in trouble over legal allegations, civil claims, and also just the declining publishing industry.
So, that was a surprise, that Lachlan went to -- is straddling both companies, and that James has been rehabilitated. But this is an ongoing process. Who knows where the subsequent trials still in London, may more to come, quite what the picture will be in a year's time.
QUEST: If you were a guessing man or a betting man, one of them -- one of the three, I should say, because Elisabeth is still around -- has to take over Rupert's job at some point. Who's it going to be?
JUKES: Yes. Oh, my goodness. Who wants to be in that family where you're vying, a bit like Lear, isn't it, for the crown? I think the money would be on Lachlan, because he showed -- he left under his own will, he didn't get on in New York in 2000 -- he left in 2005. He has shown independence.
But what plays here? Independence or loyalty? James was very loyal, ran this very tricky situation in London through the phone-hacking scandal. You tell me. It's a mouse game, betting on that.
QUEST: Finally, there is view, which I was quite sympathetic with, during the split and during the whole "News of the World" scandal, that basically says when investors buy into News Corp or 21st Century Fox, they know they're buying into a Murdoch enterprise.
It's not like you're buying into a large public company. You're buying Murdoch, and if you don't want to buy Murdoch, don't buy those shares. Do you have sympathy with that view?
JUKES: Well, it's a Murdoch discount view, isn't it? I mean, you've got to remember that he -- these assets, some of them are quite recently acquired. "The Wall Street Journal." I'm not sure you can -- it's amazing ingenuity to build these businesses and to take them over.
But are those assets just the Murdoch brand? That is the fascinating thing. It's the -- I think it's now the biggest media company in the world, or at least second, depending on the catalyzation of the share price.
And the idea -- I suppose the problem is if you're buying Murdoch, which Murdoch are you buying? Rupert has a track record over 60 years. But as a shareholder, what do you know about James or Lachlan? What are you buying?
QUEST: Good point. Peter Jukes, good to see you. Thank you, sir, for joining us tonight.
When we come back after the break, the US president has a message for European leaders. It's good to repair the finances, but don't leave yourselves defenseless. We'll talk about that when we return. This is QUEST MEANS BUSINESS. Good evening to you tonight.
QUEST: Barack Obama spent Wednesday telling his European allies you've got to be ready to stand up for yourselves. Talking defense, even saying countries where money is tight have to play their part. The president said the crisis in Ukraine showed the importance of a strong presence in Eastern Europe.
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BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I have had some concerns about a diminished level of defense spending among some of our partners in NATO, not all, but many. The trend lines have been going down.
That's understandable when you have an economic crisis and financial crisis, and many countries are going through fiscal consolidation. But the situation in Ukraine reminds us that our freedom isn't free.
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QUEST: Jim Acosta's in Brussels. Jim, he -- oh, you haven't got your overcoat tonight. It's got warmer in Brussels. He didn't mention any names.
JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: Just a touch. He did not mention any names, but Richard, if you look at the numbers, the United States right now pays for somewhere in the neighborhood of 75 percent of total NATO defense spending.
And so, that is something that the president would like to see changed, and that is why the president was making that case today. He was doing a couple of different things, talking about how NATO needs to band together, step up its resources to counter this new Russian threat, as the president sees it.
But the other thing that the president was doing today, Richard, I thought it was very interesting. He was sort of going point-by-point, countering Vladimir Putin and saying no, you're wrong about your justifications for Crimea.
He rejected the Russian president's claim that it's no different than the NATO mission in Kosovo. He rejected Vladimir Putin's accusation that the US is being hypocritical after the war in Iraq.
But getting back to that idea of common defense, you're right. The president made it very clear to European allies that it is up to them right now to step up, not forget the lessons of the two world wars that occurred on this continent to make sure that Russia goes no further in its intentions. Here's what he had to say.
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OBAMA: If the Russian leadership stays on its current course, together, we will ensure that this isolation deepens. Sanctions will expand, and the toll on Russia's economy, as well as its standing in the world, will only increase.
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ACOSTA: Now, the president did say -- he did acknowledge during this speech, Richard, that by ratcheting up those sanctions, if that is the next course of action for the US and its allies, that that would have a ripple effect on the global economy, but he also made the case that that is a price worth paying in order to keep Russia in check, Richard.
QUEST: Jim Acosta in Brussels tonight. The World Bank says the fallout from Vladimir Putin's actions in Crimea could push Russia into a sharp recession. And that's without assuming any more sanctions.
The bank's forecasts for 2014 vary depending on how the crisis unfolds. Now, if tensions are to escalate and uncertainty grows, it says Russian GDP could shrink by 1.8 percent this year. On the other hand, if the crisis is contained and resolved peacefully, the World Bank says the economy could grow 1.1 percent. That would still be a slowdown compared to last year.
Vladimir Putin got a vote of confidence from one of Russia's biggest companies -- one of Europe's, I do beg your pardon -- biggest companies. Joe Kaeser, the chief exec of Siemens, met the Russian president in Moscow and says the company's committed to Russia for the long term.
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JOE KAESER, CEO, SIEMENS (through translator): The federal government is of course aware of my visit to Russia, but I want to stress that we are all interested in the long-term partnership and cooperation.
As I have already said, Russia and Siemens have been working together for over 160 years, and during that time, we managed to overcome and embrace numerous opportunities, and I have no doubt that we will manage to overcome current challenges as well.
(END VIDEO CLIP)
QUEST: Interesting words from the chief exec of a company who is protecting its interests in Russia.
Edward Lucas is a senior editor at "The Economist" who says the annexation of Crimea will be bad for Russia's business leaders, and I asked him how the impact would be on Russia's economy, never mind the micro, what about the macro?
EDWARD LUCAS, SSENIOR EDITOR, "THE ECONOMIST": I think at the kind of macro political level, Putin thinks he's got himself a pretty good deal. As you might have sung in "The Sound of Music," how do you price an asset like Crimea?
And he's got back for Russia something that many Russians think was taken away from them wrongly. And if that knocks a chunk out of the current account or out of the budget or out of some other financial statistic, it won't bother the Russians very much. They'll think that's a good deal.
It's very bad for a lot of the rich people in Russia who have ambitions to be world businessmen and run proper global businesses, but they're not the people closest to Putin. He's working with a small cabal of ex-KGB guys who see politics as being much more important than economics.
QUEST: Do you see these changes and the rumors, for example, that maybe 50 to 60 to 70 billion of outflows, do you see that as being potentially damaging? Obviously, it's going to knock some growth off Russia this year. But substantial?
LUCAS: I think that Russia has a serious capital flight problem. It had it before this. We've got to remember, even before the Crimean adventure, the Russian economy was looking distinctly ropy. Growth had ground to a halt and the whole Putin modernization project basically seemed not to have worked. It may actually be one of the reasons why he's gone in for all this saber-rattling and more.
But I think that the bigger picture is that Putin took over Russia when it was basically bust at the end of the Yeltsin era. He's paid off the debt, built up huge reserves, turned it into a -- whatever it is -- $1.5 trillion economy.
And if he takes a few knocks now in 2014, he'll look back at a record of 40 or 40 years of things getting better, and I think he won't be too bothered by it.
QUEST: You're basically saying that this -- that unless the West ratchets up the sanctions to the point where oligarchs can't travel to their homes in London, where banks can't do business with New York, that this really is not going to work at all.
LUCAS: I think that economic sanctions are pretty unrealistic, really. The only things that would really make a difference in Russia will hurt the West a lot, and I'm not sure we're ready to do that.
I think the visa sanctions, which you just referred to, are much more effective, and we should be applying them not just to the oligarchs, but also to all the people who work in the FSB, in the military, all the decision makers to a big swathe of top Russians.
We know from experience, because America did this with the so-called Magnitsky List to avenge the death of a whistleblower, we know that this really annoys Putin, and that has an impact.
QUEST: Edward Lucas talking to me from London.
The makers of Candy Crush were hoping for a sweet market debut. Instead, it was all a bit sour. King Digital --
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QUEST: -- well, when they went on the Exchange, lots of fun and froth, but the price --
QUEST: Now, it hit the big time by getting players hooked on Candy Crush. Today, though, Wall Street refused to be wooed.
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QUEST: Oh, there was lots of hoopla. And silly things going on on the balcony at the New York Stock Exchange. But shares in King Digital Entertainment, which developed Candy Crush Saga, made their debut, and right from the getgo, they fell sharply from the opening bell. The company's bosses rang it.
But look at the share price. Now, remember, the strike price was -- there was the strike price. And --
QUEST: You don't see that very often. I think in any sort of IPO, the strike price $22.50. It opened lower. It opened considerably lower. It sort of had a little bit of a rally. It didn't manage to do -- it came back down again. You're bouncing around in a very narrow range.
And then, as the afternoon took hold, it just went down. And when it was closed down, the percentage points that it was down was around about -- 15 percent down when the closing bell rang. That is not what you would call a good IPO. No.
So, the company's story reminds us of what a goldmine its core product is. At today's closing share price --
UNIDENTIFIED MALE: Tasty!
QUEST: Yes. Well, not as tasty as it might have been, but at today's price, it's worth about $6 billion. The chairman and chief exec each wrote around 10 percent of that. And remember, they didn't float that much of the stock. That's still being held by King. Last year's revenue --
UNIDENTIFIED MALE: Sweet!
QUEST: Nearly $2 billion. So, your PE is quite strong on that. Not at all bad when you realize they let you download games for nothing, so a $2 billion revenue and a stock price worth $6 billion. Now, as for the company, how many people are playing it?
UNIDENTIFIED MALE: Sugar crush!
QUEST: They are more than a sugar crush, 93 million people play Candy Crush every day. So the revenue comes from a relatively small number who pay for the enhancements to the game, $6 billion on value on market cap, $1.9 on revenues, and 93 million on --
Let's bring in Tim Stevens, editor-at-large at the tech website -- Jim (sic), I beg your pardon -- joining me now from Albany in New York. Also joining us, Stephen Upstone, the chief executive of LoopMe, a mobile advertising firm. He is in CNN London.
Let's start with you, Jim (sic), when you start and you're looking at these -- when you look at this, what do you make of how it went so far at CNET? What are you making of it? The price down 15 percent.
TIM STEVENS, EDITOR-AT-LARGE, CNET: I think people here are definitely having a lot of flashbacks at Zynga, which IPOed a couple of years ago. Zynga's a very similar story in that it's an online game start- up, really riding the coattails of Farmville, was their big game. They had great revenues, things were looking good.
They went IPO and their stock price went down very quickly and continued to decline very quickly, because ultimately, the company was never able to deliver a big follow-up that was anywhere near as successful as Farmville was originally.
So, I think a lot of people have flashbacks of that and fears that King will not be able to follow up on the success of Candy Crush Saga. And so, they don't really want to play this game again.
QUEST: Right. If that's the case, then unless King comes up with something PDQ, that share price is going down in the toilet and ain't coming back fast.
STEVENS: Certainly is the risk. King is saying basically that they've got great teams of people that are developing great games every day. In fact, they're launching hundreds of games a year, which is a pretty impressive suite of titles, but the problem is, they're really looking for another big huge success.
Eighty percent of their players are playing this one game, Candy Crush Saga. If they can't deliver a big successful follow-up to that, then they're in trouble.
But ultimately, the revenues are looking good. It was almost $2 billion last year, as you mentioned, but the year before, it was only about $200 million. So, huge growth. If they can maintain that growth, then obviously things are looking good. But --
STEVENS: -- as the market is showing, they don't think that they can do that.
QUEST: Stephen, what do you make of this? When you look at the numbers, you look at the revenues, you look at the share price -- I am not an expert, Stephen, in this area of business, but I've been looking up balance sheets and companies and performances long enough to be worried.
STEPHEN UPSTONE, CEO, LOOPME: So, I -- yes, OK. So, I'm slightly more coming from the market point of view. And I'm not an expert in stock prices, but I do think to some extent the market is maybe guilty of not comparing apples with apples or wine gums with lollipops, to forgive the pun.
The market is actually not really taking into account, I think, a couple of key things about King. So, King is a mobile company, whereas Zynga started out as a Facebook company. And mobile is growing so much faster and is a much more interesting platform for gaming than I think Facebook presented. And so King's ability to not only --
UPSTONE: -- create its own hits, but potentially buy companies that have their own hits, is greater.
And the other thing that I think is very important here to remember is that these games are also a platform in their own right. The game doesn't finish by playing the game and monetizing from the game. It can then re- sell other games. So, the other big hidden asset that King has here --
QUEST: OK --
UPSTONE: -- is its own data about players and its ability to remarket to those players.
QUEST: Right. But the problem I have, gentlemen, that I need you to both address, I've been around long enough to be told that men of my age or investors of my age don't understand the new paradigm. We're clearly not seeing things that other people -- we learned it in the dot-com boom and bust. Stephen, I can see with these numbers revenues, cap, and users, I can see this isn't a long-term bet.
UPSTONE: I remember a whole ton of people said just exactly the same thing when Google launched at $99. They said it's never going to go bigger, this is too frothy. They said the same about Facebook for a whole year.
So, let's face it, the herd runs in both directions. And right now, I think they're being a little bit unfair to King, because they're not seeing it as what it is, which is a mobile company that has a mobile platform and mobile data which is much, much --
UPSTONE: -- more interesting than Zynga when it launched. And actually, its basic numbers look better than Zynga's right now. The market's --
QUEST: All right.
UPSTONE: -- valuing King below Zynga, and that feels unfair, given those other comments I've made about the platform and the data piece.
QUEST: Tim, am I ignoring something here, or am I being wise to hold onto my wallet?
STEVENS: No, there are certainly plenty of opportunities and avenues for them to increase their revenue for sure. But by and large, this is a game development company, and they need to deliver big hits. And that's the big question of whether they can do that again. Especially these days, when it comes to mobile gaming. Big games come and go very quickly.
STEVENS: And Candy Crush has actually had a pretty long run of success, but it's not going to last forever. So, again, for me, it's all about whether they can deliver creative titles or acquire companies that are creating creative titles that can deliver the kind of revenue and user growth that they're going to need to continue the growth and to continue to raise the stock price.
QUEST: Oldest rule in the book, gentlemen. Stephen, thank you. Tim, thank you. Oldest rule in the book, used to say cash is king, but we can add to that, content is king.
We come back in the moment after the break, it's being called the most credible lead so far. New satellite images in the search for 370. We'll be in Perth after the 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. Abdel Fattah El-Sisi has resigned as chief of the Egyptian Army on Wednesday. Speaking on national television, he announced he would run for president. The election is expected to take place later this year.
U.S. president Barack Obama has arrived in Rome after meeting European Union leaders in Brussels. Mr. Obama warned that any further incursion by Russia into Ukraine would result in deeper isolation and more sanctions on Moscow.
Search planes looking for the missing Malaysia Airlines flight 370 will head out to sea again in the next few hours. On Wednesday, new satellite images showed scores of objects in the Southern Indian Ocean. Officials say they may be related to the missing jet. We'll have more on this story in just a moment. A court in Turkey has ordered the country's telecoms authority to lift a ban on Twitter. The Turkish Prime Minister Recep Tayyip Erdogan recently vowed to eradicate the micro blogging site. The government says it may take up to 30 days for the ban to be lifted.
Osama bin Laden's son-in-law has been found guilty of helping al Qaeda conspire to kill Americans. Sulaiman Abu Ghaith was arrested last year in Jordan. He was tried in a New York federal court. Prosecutors say he played a crucial role as al Qaeda's main spokesmen. Sentencing won't take place until September.
The developments that you need to know about in the search for Malaysia Airlines flight 370, the newest lead comes from satellite images taken on Sunday. A hundred and twenty-two objects were spotted. Some as small as one meter long. Others were almost 23 meters. They were scattered across an area of 400 square kilometers. So far, no search crews have been able to pinpoint anything that's definitively linked to the plane. Five-thirty in the morning when Garratt (ph) in Perth Western Australia. Within the hour the search planes will take off. As she has joined us each day to bring us up to date, once again we say good morning to Atika Shubert, and she joins us now. Atika, 122 objects. Now this is interesting, isn't it? Because when you hear those sort of numbers, you're starting to think about a debris field.
ATIKA SHUBERT, CNN CORRESPONDENT BASED IN LONDON: Well exactly. And in fact I spoke to an oceanographer yesterday about this and he said, you know, up until this point, we really haven't seen that much debris. But he built a model based on the ocean currency studies, and he thinks that where the location of these new images are fits his model - where he would expect to see a debris field. So the fact that we are seeing 127 objects of varying sizes, some of them as big as 24 meters, and this sort of description of them as being quite bright, it seems very promising. But the fact is we won't know until some of these planes have had a chance to go over the area, really get down low and get some pictures and see what they really are. I mean, we've had so many false hopes in the past that it really is imperative that these planes get over there and confirm what we hope is a breakthrough.
QUEST: If there are that many objects, there is a better than good chance that one or other will be spotted. It's not like the early bits with the gray and green and the orange rectangular. Here you're talking about quite a few objects, albeit in a very large sink (ph).
SHUBERT: Yes, I mean we're talking quite a few objects over a large area, and this is just a fraction of the search area. But remember in addition to actually finding the debris field, then the next step -
SHUBERT: -- is bringing out that pinger locator, and that could take several more days yet. So, even if we do find the debris field, that doesn't mean that we definitely know that that we're going to find the flight data recorder at this point.
QUEST: I was just reading your e-mail that you sent a short while ago - the briefing note that you send us all regularly about what is going to be in the air and on the sea. Quite a lot of assets are to be deployed today, Atika.
SHUBERT: Yes, 11 in all - six military aircraft, five commercial. Remember those commercial aircraft are able to fly for longer over the area, so they have been quite critical I terms of getting more time and eyes onto the sea and looking for this debris. But they are concerned still about the weather. This has been a big problem, and of course the day before yesterday, the -
SHUBERT: -- whole search was suspended and they are saying that they do expect the weather to deteriorate later. So it is really important they get off to an early start.
QUEST: Atika, thank you, grateful. Come back the moment those planes start taking off please. And we're very grateful and we're very fortunate that we have CNN's aviation analyst Miles O'Brien who joins me now live from Washington. Good evening, Miles. Good to see you and welcome back.
MILES O'BRIEN, CNN AVIATION ANALYST: Hello, Richard, a pleasure.
QUEST: Miles, -- OK, this is - it's a paucity of information but it's the best we've got and it's the best hope so far. Do you agree?
O'BRIEN: Absolutely. Absolutely. We've had a couple of days of what we may say in retrospect were the turning points for this particular investigation. We had that final so-called 'half handshake' or 'half ping' which the Inmarsat folks were able to suss out of the data - very cleverly I might add. And that might give us some indication as to where the plane or at least the vicinity of where it impacted the water, and now this - this 122 or so object debris field. And that's significant because we saw, you know, a pallet here and a rectangle there. None of it looked like anything from an airplane. Looking at what we've seen released this morning in - on the east coast of the U.S. this morning that is -
O'BRIEN: -- it looks like pieces. I mean you know, I see the tapered pieces potentially of an aerodynamic airfoil.
QUEST: The whole - the whole investigation and the whole sort of 370 investigation seems to be moving into the next level up as they look - find - this debris, the pilots' backgrounds are being investigated, there's a greater momentum now. Would you agree?
O'BRIEN: Well things are coming together. You know, as you well know, Richard, we've both been frustrated by the slow release of information by the Malaysian - you know a combination I think of them being overwhelmed by this complex task - and some cultural issues on releasing information generally to the public. And that's been difficult for us to sort of see what's going on on the inside of this investigation. But coming out of the U.K., this Inmarsat track really helped crystallize a lot of thoughts both you and I, I think, agreed. The first turn fit, jives with some sort of mechanical problem, perhaps some -
O'BRIEN: -- sort of rapid decompression, a fire. Those two turns after, however, really have to be willful acts of some kind -
QUEST: Do you - sorry - (inaudible)
O'BRIEN: -- and so the - the question is who?
QUEST: Right. Well, let's not go there, there'll be plenty of time for you and I to take care of that one. But do you - I looked at those two turns - the left turn and then the south turn. It does look as though whoever was doing those turns - executing them - was avoiding actually going over Indonesian - the mainland. I mean, they may have been in the airspace but they weren't going to go over land. Am I jumping too far with that?
O'BRIEN: You know, if I were trying to avoid that very thing in my airplane, that's exactly what I'd do. You know, we've had, Richard, so many reports of altitudes. I'd really love to know -
O'BRIEN: -- what altitude that aircraft was at at that time because one would think that military radar would've picked up a primary target down to a fairly low altitude, even at that location. But we haven't heard from those authorities. If that information is known to the investigators, it's not been shared with us. But clearly that appeared to be somebody evading detection.
QUEST: Finally, Miles, briefly - I just need you to make it clear to our viewers tonight just how difficult this investigation has been and how it has taken us to the extremity of what science can do to compared to traditional investigations
O'BRIEN: Yes, this is - this is absolutely unprecedented, and really in the 21st century it shouldn't have been. We should've been able to know exactly where that airplane was as it went along. We didn't, and now it is in one of the most remote parts of the world and it's going to be a tough effort to locate that wreckage at the bottom of the sea floor and those black boxes which is what we really need.
QUEST: Good to see you, Miles. Thank you very much. You and I will be talking many more times about this on various programs in the course of the hours ahead. Thank you. Miles O'Brien joining us from Washington. There's a first for European airspace, Airbus agrees on multi-billion dollar deal with China. The "Business Traveller" update is after the break.
QUEST: Airbus has signed an extended manufacturing deal with China. In fact, the multi-million dollar order all at the same time. Airbus has been building jets in China for five years now in the city of Janjing (ph). The new agreement extends that alliance to at least 2025. China has signed up to buy 70 planes from the European plane maker. It's worth $10 billion at list prices, as we always say. The deal had to be put on hold because of a trade dispute. Now the deals were signed during a state visit to China - by a visit to France, I beg your pardon - by the Chinese leader, marking 50 years of diplomatic relations between France and China.
Boeing has been ordered to make an immediate fix to its 747-8 plane by America's FAA. A software glitch could cause a malfunction during landing. Boeing says the issue has never caused a problem in flight. And this is fascinating. The NTSB - National Transportation Safety Board - you'll be aware of that, we talk about it so much over the last few days. It is the main safety regulatory authority in the U.S. It's issued a safety alert all about planes landing at the wrong airports. There've two incidents within two months of each other. In January, the Southwest Airlines plane landed at the wrong airport and in November a Boeing Dreamlifter landed at the wrong airport in Wichita. Thankfully for both cases, they were able to get the planes off the ground again because the runways were long enough. Travelers heading for Venezuela are slowly running out of options. International airlines are suspending flights to the South American country because they're owed billions of dollars. Rafael Roma reports.
RAFAEL ROMO, SENIOR LATIN AMERICAN AFFAIRS EDITOR OF CNN WORLDWIDE: First Colombia's Avianca decided to reduce itineraries by more than two- thirds, then Air Canada suspended all of its flights to Venezuela. Within the past year, 11 airlines have cut flights or stopped flying to the South American country altogether. And there may be more to come.
TONY TYLER, CEO, INTERNATIONAL AIR TRANSPORT ASSOCIATION: Airlines are faced with a very difficult decision. You know, do they continue flying when they - when at the moment, they're not being paid? Can they afford to do that? If so for how long can they afford to do that?
ROMO: The International Air Transport Association CEO estimates that as of mid-March, Venezuela owes international airlines about $3.7 billion.
TYLER: What's needed is for the situation to be resolved as quickly as possible and for the airlines to be able to receive their money. This is their money they're talking about. It's not the government's money.
ROMO: The International Air Transport Association has been hearing complaints for months. Airlines have been unable to access money earned in ticket sales in Venezuela. The problem - tight currency controls have lowered the amount of dollars available for international transactions, affecting airlines and other businesses. President Nicolas Maduro isn't budging.
NICOLAS MADURO, VENEZUELAN PRESIDENT, VIA TRANSLATOR: Airlines have no excuse to reduce flights to Venezuela. I will take severe measures against any airline that does so. If an airline chooses to leave the country, it won't come back as long as long as we're the government. They will have to overthrow us. It won't return. I'm telling this to the owners of international airlines.
ROMO: His transportation minister says travelers including Canadians will still have plenty of options.
VENEZUELAN TRANSPORTATION MINISTER, VIA TRANSLATOR: Canadians will still keep on flying to Venezuela, I'm sure of that. Venezuela is a very safe country with excellent tourism alternatives like Margarita Island.
ROMO: But some travelers may have second thoughts in announcing its decision to suspend flights. Air Canada expressed concerns about the recent ongoing civil unrest in Venezuela, a situation that may deter people from flying to the South American country. Rafael Romo, CNN Atlanta.
QUEST: Jenny Harrison's at the World Weather Center. Jenny, you've got a lot to get through, I'm aware of that, but we do need to begin I think with a quick update, or at least we need to hear from you - what is the conditions for today's search. Planes are taking off in the next hour in the South Indian Ocean.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Yes, well so far, Richard, it's a pretty good start of the day actually across the southwest of Australia at Perth into the north of the Pearce Air Force Base. But this is the problem. This is the search area of course and this front is going to be starting through as we go through Thursday, and it's going to bring some very, very strong winds with it. Some fairly heavy rain at times as well, of course all of that causing some particularly rough seas and some fairly low cloud cover as well. Now, it's moving through quite quickly, so it's looking pretty good as we get into Friday on into Saturday.
I just want to show you this though, because we've been talking again of course as to the search area, and in particular this sort of field. But this one area - just this one big block - is 300 kilometers long x 160 kilometers wide. And then again just showing the satellite image that I know you've been looking at many times. But just look at what the satellite is looking through because of the conditions. And this is why we need good, clear conditions, obviously from up on the air but also down on the seas - the rough seas. But look at all this cloud and then just within this cloud, this is where they've been able to zoom in take some of these snapshots and then of course zoomed in much, much closer to see the actual debris. But when you think again, just the amount of debris and the size of these search fields with those weather conditions as well added in.
So, this is the system going through, and as I say, it's going through very quickly Thursday on by Friday. By Friday it really should have cleared out of the picture, but the winds will certainly be strong for most of the day. And some of the rain will be heavy at times as well, particularly in the northern sections - you can see at that search box. But the winds probably at about 60, maybe even 80 kilometers an hour from time to time. So that will not help the conditions at all. But right now, it is actually clear. You can see a little bit of cloud, but for the most part good visibility and in fact the winds coming in as calm.
Now moving on from there, heading across the Pacific Northwest in United States. This of course continuing to be such a deadly story - over two dozen people already have been found dead following the landslides, the mudslides that happened on Saturday. Conditions have been variable throughout the day. In fact, it's been raining most of the day in Seattle, but there's certainly more rain on the way. One system clears through and another one Friday into Saturday coming straight in from the Northwest. So, all of it adding to the problems of this recovery and search effort as it continues. You can see in some areas around also, we could be seeing as much as three more centimeters of rain, so making that land even more unstable. Potentially of course the snow is well along the line of the Cascades. And in the Northeast of the United States, they've had a huge Nor'easter come through in the last 24 hours. And just look at this - Hyannis in Massachusetts. It looks like the middle of winter. Well that is because the winds have been so strong - 80 kilometers an hour at times. And of course the rain and the snow has been coming down - in fact daily records on Tuesday. Ten centimeters in D.C., 15 across in Lynchburg in Virginia and as the system continues to work its way Northeast with more snow coming down, 23 centimeters in Yarmouth. The system is on its way out, and really bypassing all the big cities. So the only problem really, Richard, is the winds that remain quite strong across the Northeast. But really the rain and the snow - that is clearing out of the way.
QUEST: Jenny, thank you. A very busy time for you. I appreciate it. Jenny, many thanks indeed. When we come back, the 'Bling Bishop' - as he's been known. Well, he's gone.
QUEST: The bishop of course who was accused of a shopping spree that may now be over for a famously free-spending Roman-Catholic cleric. Pope Francis accepted the resignation of the Bishop of Limburg in Germany. 'Bishop of Bling' as he became known. The bishop was under investigation for spending $42 million of church money renovating his apartment and his properties. And he's not just a high-roller at home. There were allegations he flew first class - of all things - on a mission re - trip to India to help the poor. CNN's Vatican correspondent Delia Gallagher has more on the story as she reports from Rome.
DELIA GALLAGHER, VATICAN CORRESPONDENT: Richard, it's an unprecedented decision today from the Vatican. It's the first time that a bishop has been removed from his post for reasons of lavish spending. It's a clear indication from Pope Francis that he means business when he says he wants a poor church for the poor and that the lifestyles of priests and bishops should reflect the simplicity of Gospel values. It's an example which the Pope sets himself everyday here at the Vatican in the way he lives. Now, Bishop Tebartz-van Elst came to the Vatican to meet with the Pope to plead his case in October. He did offer his resignation at the time. The Pope suspended him from his duties pending a Vatican investigation, the results of which we have today which is they are accepting his resignation and thereby removing him from his post. The Vatican says that they will find him a job at an opportune time in the near future. He remains a priest, he remains a bishop in title, but presumably any new job that they give him will not include the handling of Church money. Richard.
QUEST: Delia Gallagher who is in Rome tonight. European stock markets closed the day higher. Frankfurt Xetra Dax and the Paris CAC Ront (ph), they were the best performers as you can see there. London's FTSE - very - not often you see a deal like that for London where you barely get a market that change. As for the United States, roll the numbers and you will see. You can see today very firmly everything turned at about 1:30 this afternoon. It all sort of was very, very definitive - down 100 points and the Nasdaq 16 - I'm sorry, the Dow - at 16,268. The NASDAQ was down 'round about 1 and 1/2 percent.
Citigroup is one of a number of banks operating in the U.S. that's failed the Federal Reserve's latest stress tests. The Central Bank rejected the capital plans of five lenders, some of them based overseas. Citi, HSBC North America, RBS Citizens, Santander - that's a Spanish group - and Zions Bancorporations. In particular it was Citi's plans to hand back more cash to shareholders via increased dividends and stock buybacks. The Fed said it's concerned about their ability to withstand economic shocks. They have 90 days to work out their plans again. Important to note - this was not a failure on existing capital levels in terms of - all of these have done quite a lot to raise their capital levels. This was a failure on the prospects of what happens if things get worse. We'll have a "Profitable Moment" after the break.
QUEST: Extraordinary announcement and safety alert from the NTSB today, reminding pilots of the importance of making sure they land at the right airport. Well, you couldn't make it up, but since two pilots did land at the wrong airport in the United States in the last year, I guess there is cause to remind them to check their maps, to have spatial awareness to know where they're going. It just seems a bit odd when you've actually got to say to the pilots - excuse me, do you know where we're heading? And will you make sure we get there? And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) hope it's profitable. I'll see you tomorrow.
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