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Cadbury Agrees to Kraft's Sweetened Offer; Japan Airlines Files for Bankruptcy

Aired January 19, 2010 - 14:00:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Chocs away, Cadbury agrees to Kraft's sweetened offer.

On a wing and a prayer Japan Airlines files for bankruptcy.

And will this turkey fly? Citigroup tonight, gets the Q-25 treatment.

I'm Richard Quest, as always, I mean business.

Good evening.

After several months of sweet talking from Kraft and stonewalling by Cadbury, now a deal has been done. For the U.S. giant the takeover marks a leap in scale and an entry into new markets. For Cadbury workers the attractions of the deal are far less clear tonight and could prove somewhat difficult to swallow and far from the sweet delight that you might expect.

The U.S. food giant, Kraft, is poised to swallow up Cadbury's the British company's opposition melted away at the very last possible moment just before, of course, the original offer was due to lapse. It all happened when Kraft, basically, came back with a better deal. The totality of the deal is $21.8 billion. That includes $2 billion of Cadbury's debt. It is $13. 77 a share, roughly 8.40 pounds. There will be a special dividend, as well, of some 16 cents. So that gives the net-on-net of around 8.50. Now you remember the original offer at 8 pounds, and some institutionals had hoped it was going to go as high as 9.

But when, for instance, Hershey didn't come in and it seemed that they were all on their own. Well, when that happened this was the best deal and it happened late in the day.

What does this mean when these two, the cheese maker and the chocolatier, the chocolate maker, to you and me. What does it mean? It means they are the number one confectioner, overtaking the Mars Group. Forty - this is extraordinary, 40 brands, each have a net revenue of more than $100 million, annual sales of $100. That is quite extraordinary. Which means this is a new phenomenal powerhouse in consumer goods market.

It will have a leading role and an enhanced role in some key new markets, like Russia, Brazil, large parts of South America, and of course, China; 45,000 workers throughout the U.K., work totally for the group. For Cadbury's 45,000 workers and 40,000 elsewhere in the rest, can all be now questioning whether or not their jobs are safe.

The question of jobs was on the mind of the British Prime Minister Gordon Brown, who has pledged to do what is necessary and what he can to save jobs as the deal goes through.


GORDON BROWN, PRIME MINISTER OF BRTAIN: We don't have full details yet of the completed negotiations between different companies involved in Cadbury. But the one thing I want to say is this: We are determined that the levels of investment that take place in Cadbury's, in the United Kingdom, are maintained. And we are determined, of course, that a time when people are worried about their jobs, that their jobs at Cadbury's can be secure.


QUEST: Jim Boulden, who has followed the story over the past few months.

Did you actually think they were going to get this deal done?


QUEST: It was 8 pounds.


QUEST: Cadbury -Kraft seemingly was never going to - I mean, even when their offer was call derisory, they never seemed to move until this last minute.

BOULDEN: Well, a couple of things changed. In the last few weeks the Kraft share price actually improved, which gave them more currency. Also, a few months ago, you couldn't see companies raising enough debt. And this company couldn't raise enough debt for this deal. Well, the markets have unfrozen. So that helped as well.

QUEST: And Kraft came up with a deal for how they were going to pay that debt, by selling off the pizza business.

BOULDEN: Yes, and we knew about that before. And they still made an offer, and it still didn't seem to be enough. So they had to come out with cold, hard cash to make this come through. And that is what they have done.

QUEST: Does it -doest he deal makes sense, I suppose, is the key question?

BOULDEN: It depends who you are asking. I was on the conference call today with Kraft and analysts were congratulating Kraft for such an extraordinary deal.

QUEST: Because it - it is synergistic.


QUEST: And it does fill the hole that they don't currently have in confectionaries.

BOULDEN: Yes. And these are the guys who live this stuff, and live this stuff. And I'm telling you they were congratulating them because they see this - cough, I love this word, "synergies". They are going to cut a hell of a lot out of these two companies. And they are going to have these great distribution chains around the world. That is why it makes sense for Kraft. Different story for Cadbury, of course.

QUEST: All right, the workers at Cadbury.


QUEST: They still have to make the chocolate, so are jobs at risk?

BOULDEN: Well, let's be very clear. The majority of those jobs are not in the U.K. They are not that many jobs in the U.K., something like 4,000.

QUEST: 4,000?

BOULDEN: Yes. So, their worried, because of course, this is a high cost place. And earlier some of the workers were asked what they thought about this. And some were asked if they thought jobs would actually go?


UNIDENTIFIED MALE: I think ultimately they will because Kraft has already said that they believe that within Cadbury there was $625 million worth of savings that they can make. And, obviously, with the amount of debt that involved in this take over. We believe that that could be nearer $1.5 billion.

Cadbury is an icon firm that many of us love. So, yes, I'm sad. But I think I'm more concerned about the economics of this. Most takeovers actually fail, as many as 80 percent of them. You add in particular concerns about Kraft and how much it has borrowed, it's track record in shifting production outside the U.K., and I have a real concern about what will happen.


BOULDEN: You know, Cadbury's CEO called this a slow growth dinosaur, this Kraft company; and Cadbury's is a fast growing company, it is. And that is exactly why Kraft wanted it. Because it is in places that Kraft just would have spent an enormous amount of money to into. It grows by gobbling up other companies.

QUEST: The chairman and chief of Kraft, Irene --

BOULDEN: Roosevelt.

QUEST: Roosevelt, has - to use a cricketing term, has played an absolute blinder.

BOULDEN: Yes. I don't know cricket very well, but I'm guessing what that means is that she did not blink, she built and built and built. She got it -

QUEST: She came up with a deal that was good.

BOULDEN: Good enough, yes.

QUEST: Good enough.


And Cadbury's very large private institution of shareholders said it is good enough. We are going to say yes to Cadbury's you should say yes.

QUEST: We thank you, Jim. You can put this one on the back burner now and look for the next. There you are, the book has closed on Cadbury's.

The deal will end nearly 180 years of independence for the British company. So, here it is. This is a timeline for you. The Cadbury story began in 1824. John Cadbury sets up selling coffee, tea and drinking chocolate. Cadbury was a Quaker. He saw the damage that alcohol did to people. He wanted to give them an alternative, so Cadbury's drinking chocolate.

By 1879 the Bournville factory, 50 years later the son establishes it. This is going to become a model, very much in the Roundtrees of York idea. The ultimate in paternalism, of corporations, at Bournville, in Greenfield, away from the smoky city of the U.K. midlands. Later, there were villages, there was housing, there was medical, there was education. Bournville becomes the watch word.

Cadbury's best-known product comes along in 1905, dairy milk. And you know, is was launched in '05, two years after, Kraft began selling cheese on the back of a wagon, 6,000 kilometers away, in Chicago.

And before we move on, I have to say, there is nothing like a piece of dairy milk. There is really isn't.

OK, move on to now. And Cadbury had seen a century of expansion. Its merge with the drink maker Schweppes, then separated it again. It has done this, it has done that, but Cadbury still has the cache and the genre. So, John Bradley, who worked for Cadbury for 24 years wrote a book about the company. He called it "Cadbury's Purple Rain".

John joins me now, via broadband, from Toronto.

And, John, are you -which side of the fence do you come down on, on the question of this takeover by Kraft? Are you sad or are you happy?

JOHN BRADLEY, AUTHOR, FMR. CADBURY EMPLOYEE: Well, I'm sad. For someone who has been associated with the company for 30 years. To see it lose its independence, is never going to be good news. Whether it turns into good news is entirely down how to Kraft chooses to run it.

QUEST: You see, that is the point, Kraft obviously know what they are buying. They want the chocolate part. But Cadbury for many years has never been that paternalistic, that social welfare bastion, has it?

BRADLEY: I would actually argue I'm not sure it ever was. If paternalism is taking decision away from people, Daddy knows best. Cadbury was actually the opposite. Its biggest strength was how it empowered its workers and got the most out of the people who worked for it, in a way that made everybody feel good. So, you know, that has been a big part of why people love Cadbury. It is not just the sort of rational like of the products and the recipes. People emotionally bonded with how the company have done business over a very long period of time. And I think Kraft will be taking a big risk to assume it can take that for granted.

QUEST: You see, we have also taken for granted, a lot, as my time line made clear. Kraft has its own long history, illustrious history. So, I'm just wondering whether there isn't something that perhaps Cadbury and Kraft do get by coming together? Or do you think I have me rose-colored spectacles on?

BRADLEY: Well, perhaps a little bit. I mean, I grew up eating Kraft dairy triangles, but I don't love Kraft the same way I love Cadbury. I mean, they are a great company and they make some marvelous products. But Cadbury is quite a unique company in the bond that it has with consumers. Not just in the U.K., consumers in Australia, India, New Zealand, South Africa, will be feeling exactly the same today. That Cadbury has always stood for something a little bit different.

And at a more rational level, I can see why Kraft has bought Cadbury. They already have a sizable chocolate business. They own the Suchard brand.

QUEST: Right.

BRADLY: And there is very little geographical overlap between Cadbury and Suchard in the world.

QUEST: John, I'm not sure, you are joining me from Toronto. I'm not sure whether you can get Cadbury's dairy milk in Toronto. I suspect you can. You can get it in large measure. But if not, I'll send you a box. I suspect you must be missing it.

BRADLEY: No, it has been made in Canada since 1930.

QUEST: Exactly. There we are. In which case - I've just saved myself the price of a bit of Cadbury's dairy milk to you.

BRADLEY: Absolutely.

QUEST: To (UNINTELLIGIBLE) chocolate instead (ph). John Bradley, joining me live from Toronto.

1930, just shows you, should have known that, perhaps.

Save a bit of money. Cadbury shares popped higher this session. Kraft's offer came in above the recent market price. It wasn't the only share on the move. European markets closed higher for the second day in a row. Another British brand had a good day, Burberry took off, well, I hope they didn't literally take off, after an upbeat sales report.

Not every one was in a party mood. U.K. government figures showed consumer prices had the biggest monthly rise ever recorded. Now that sparked fears of inflation. Although there are other reasons of course, which a way, of course, it can be written off. But even so, monetary policy in the U.K. will be the big issue.

To the U.S. markets now. And if we take a look and see the Big Board, up 108 points. The sell off, the lift that we saw over the last few days has been reversed quite nicely. Technology stocks scooped. The market was actually lower when it opened. But a 1 percent gain, 10,700 looks comfortable. And we seem to be fine after the Martin Luther King Holiday.

In just a moment, one week on, we will turn our attention; it has taken a long time, some would say, but the aid is finally starting to move in Haiti. Supplies are few and far between in some cases, and some are taking matters into their own hands. The situation from Haiti, in a moment.


QUEST: Evening, QUEST MEANS BUSINESS, the news headlines now demands our attention. And Jim Clancy is at the CNN Center to bring us up to date.


Well, the U.S. military trying a two-pronged approach to clear the blockage of Haiti's relief supply line. U.S. Army setting up a base on the grounds of the ruined presidential palace, some Marines working on a parallel plan, we are told. They have established a beachhead west of Port-au-Prince and they will begin ferrying supplies ashore there.

Before last week's quake hit United Nations peacekeepers were already there in force in Haiti. The peacekeepers now trying to deliver the food and water rations that are arriving; 270,000 ready-to-eat meals have been handed out. The World Food Program reports that militaries across the globe have been asked to donate 100 million ready-to-eat meals.

The situation inside Haiti no longer appears chaotic, but it is far from settled and there are still concerns about how do you best distribute the aid? Karl Penhaul on the ground in Port-au-Prince. He joins us now live-Karl.

KALR PENHAUL, CNN INT'L. CORRESPONDENT: Jim, we are at the general medical hospital here in downtown Port-au-Prince and this is where the first American troops, paratroopers from the 82nd Airborne Division, set up a base. They flew into the grounds of the presidential palace about four city blocks away. Marched through the streets and came here to set up security. Now, of course, they are providing security but the prime focus here remains on giving attention to the patients.

And right now, I just want to show you, over here, Haitian doctors, some of whom are part of a team of Haitian doctors who flew in from New York, are about to bring a patient out of a truck here. And we have seen these scenes all through the day. And what the doctors here, the volunteer doctors, the Haitian doctors, the aid workers are telling us is that they are still in need, one week after that earthquake, of vital medical supplies.

One doctor, this morning, said here at this, the main government hospital in the whole of Haiti, that we are still using vodka to swab down key medical equipment, to sterilize medical equipment. They can get vodka, but they can't necessarily get surgical alcohol. They can get nine helicopters of troops in, but some of the doctors here say if they can do that then why can't they also bring with them IV fluids and other much needed supplies.

Now, I put that an 82nd Airborne colonel, who I was just talking to a few moments ago. And he said, "Hey, don't worry," he said, "We have got the troops here now." And he said within the next 24 hours we are going to be bringing in food, we are going to be bringing water, antibiotics and other vital medical supplies. He was very clear that this military presence here was just the kind of launch pad for then, the aid effort to follow in beside.

Now, I have just gone back to this patient they are unloading. I'm going to let you have a look at this. Again, this has been the scene. It is a very busy hospital. In the last week they have done 1800 surgeries, according to the doctors, from crush injuries of the survivors of the earthquake. And still, these people are arriving for treatment.

Here comes the lady that I was telling you about. Some of these are a team of Haitian doctors who have flown in from New York.

Again, very, very busy. And as I say, within the Haitians here, there is a tent city where the U.S. military arrived this morning. And there was a great deal of curiosity from Haitians. The last time they saw American troops here, in the capital, was 2004, shortly after President Bertrand Aristide was deposed. Some of them are saying, fine, it is good the Americans are here. Maybe they can sort out this uncoordinated aid effort. Others were saying, hey, we don't need any more guys with guns. We first of all need food, water, and medicine, Jim.

CLANCY: All right. Well, it is the 82nd Airborne, and Karl, I think, perhaps just as was promised in the next 24 hours, standing where you are standing, you should expect to see some humanitarian aid and medical supplies flowing in.

Karl Penhaul reporting live from Port-au-Prince. Those are your Haiti headlines right now. Let's go back to the studio, in London and Richard Quest.

QUEST: And you will be back with us before the hour is up, Jim.

CLANCY: You bet.

WOLF: With more details on what is happening in Haiti.

QUEST MEANS BUSINESS, when we return in just a moment, we turn our attention to the Q-25. There have been some interesting results in the corporate world. We'll be right back (ph).


QUEST: The U.S. reporting season is well underway and this week we are sorting out the winners and the losers. The Q-25, you know, of course, it is our barometer, whether it is apples, bears or balloons, of the corporate climate.

We have decided on this quarter we are specifically looking at the 25 of the biggest U.S. companies reporting numbers. Their figures go through the machine that is the team that puts this program together. We decide, of course, on whether they get a green or a red balloon. And that they go into these machinations of this machine.

Now, the U.S. companies are the focus, if you like, for our Q-25, because this reporting season, as a result of the fourth quarter, is so important. So today we start with Citigroup, which said its fourth quarter loss narrowed to $7.6 billion. A lot of money, it pales besides the money that Citi was losing a year ago. So, you might question a red or a green balloon, bearing in mind the size of the loss, or the fact that it is getting better.

Forest Laboratories makes anti-depressants and a number of other drugs and posted higher than expected quarterly profits, more than $200 million. We already have two greens, from Intel and JP Morgan Chase. Maggie Lake is in New York and joins us.

Maggie, now, let's start with Citigroup. The losses getting - I mean, we know why it made a lot. It made a lot because it paid back the U.S. government. So, I'm leaning towards a green.

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Yes, that is true, Richard, but you know they are still losing money. We can't get around the fact that Citigroup is still losing money while competitors are making money. Not only that, even if you exclude all the money you paid back the government, it still lost something like $1.4 billion. So, you know, this isn't a non-profit. I mean, it is still clearly struggling, especially against its rivals. And there is no possible way you could give it a green when it is spending (ph) that much cash.

QUEST: I was just winding you up. And I'll tell one other reason, definitely for the red. The warning from last week from the owner (UNINTELLIGIBLE) basically to Vikram Pandit that he's had two years and now it is time to actually get something done.

LAKE: Yes, that is right. And remember also they had a really difficult time paying back the government. They tried to do a big share offering. It didn't go well. Everyone points to this as really a weak link. Things are getting better, but they digging out of such a hole, they have got a long way to go still.

QUEST: All right. I was winding Maggie up elegantly. They get a red.

What about Forest Laboratories? Don't worry there are plenty more reds than greens if I need them. Forest? Red, or a green?

LAKE: Yes, Forest is a good story. I'm not sure what it says about us, since the main things they sell are anti-depressants and Alzheimer's drugs.


LAKE: So, it doesn't say great things about where we are all at, state of mind. But the company itself doing well. It beat by a wide margin, about 11 cents; revenue came in above even the company's own expectations. And another thing I liked about this one Richard, they are doing well with one of their newer drugs, which is important. Because remember some of the expirations on these blockbusters, like Lexipro, the depression drug, are coming off and facing competition from generics. So you want to see something else coming up in that pipeline. And their newer drugs are doing well. And some of the pipeline, they say, looks strong. So, all around this looks like a strong report.

QUEST: We agree.

LAKE: This looks like a green to me.

QUEST: It is a green. It is a green.

Maggie, briefly, are we right in this quarter, to just be focusing on the U.S. in that sense? It struck us, in the production, that you know, this quarterly in the fourth, was quite crucial.

LAKE: Yes, it really was crucial. And you have to remember, too, these U.S. companies, we say they are U.S. because they are based here. But these, a lot of them, are global multinationals that have their business spread right around the world. So, a lot of people are focusing on them, as an indicator as to where we are in this global recovery. For both the economies of the regions and also the corporate balance sheets, Richard.

QUEST: Maggie Lake, who is in New York. And we thank you, as always. See you again tomorrow now.

On the off chance, I don't know why since you can see it in front of me, here, somebody had an idea that perhaps you needed to see where the Q-25 stands in the early going. So, this is where we stand so far. Three greens and one red, one, two, three. It is too early, of course, to make any massive assessment. I promise you, by the time we get to Thursday and Friday, these tube will be full up and the screen will be bursting at the seams. But that is the way things are looking at the moment.

At the New York Stock Exchange, in New York, is Susan Lisovicz.

Firstly, Susan, do you generally agree with our greens and reds so far?

SUSAN LISOVICZ, CNN FINANCIAL CORESPONDENT: Well, I think the market disagrees with your red balloon today, clearly, because Citigroup's stock is one of the reasons why we are seeing this broad-based rally, Richard.

Citi share no longer a Dow component. But still something closely watched. They are up 3 percent, financials are rallying, and that is why we are seeing a nice rebound from Friday's losses. There is relief. Citi has been a disaster. It is still losing money, as Maggie, accurately pointed out. But the fact is, it is setting aside much lower loan-loss provisions, for the future. And it is doing something that JP Morgan couldn't do. JP Morgan made money, it was a disappointment on Friday when it posted its results. But it is seeing increasing losses on consumer loans and Citi sees that abating. And so, that is a relief.

QUEST: All right. We are going to talk health care in a moment, but I just want to know, a yes or a no, would you have gone with -don't look at me like that! Would you have gone with that red balloon, or would you have been kind and gone to the green?

Don't take all day.


LISOVICZ: I'd say, yes, I'd say red. I agree with one of its big investors, that you know, show me the money. It has been two years. The stock is down still 85 percent over two years.

QUEST: We know there is a special election for Ted Kennedy's Senate seat in Massachusetts. But health care stocks, very much feeling something form this as well. What is the relationship? Briefly.

LISOVICZ: Well, the relationship, as a number of traders pointed out to me today, is that the market is seeing Brown, not green. And we are talking about what could be the name of the upset challenger, in this heavily Democratic state. And if, in fact, a Republican wins this special seat vacated by Senator , the late Senator Ted Kennedy, you will see Republicans able to block important votes in the Senate. And one of them, of course, is health care. And what you are seeing is a profound rally in healthcare stocks that would benefit from some changes to health care reform as it presently stands. HUMA is up nearly 5 percent, United Healthcare is up 3.25 percent, WellPoint is up 2 percent. You get the idea. The market sniffs and upset.

QUEST: Susan Lisovicz, we'll have more from you, during the week, as we continue with the Q-25. Take her away.

When we come back in just a moment, after the bankruptcy filing, now the bidding war.


JOHN MCCULLOCH, MANAGING PARTNER, ONEWORLD: JAL is a tug of war, but we should be able to win this one.


QUEST: So, as two carriers fight about JAL, Japan Airlines, what's it got that they want?


QUEST: Good evening.


This is CNN.

A Japanese corporate icon for many years, now Japan Airlines is one of the country's biggest corporate failures. JAL did what everybody had been predicting it would do for weeks, and some would suggest perhaps should have done it a lot earlier -- filed its official request for bankruptcy protection under the Japanese bankruptcy laws.

Now, JAL is saddled with $25 billion worth of debt. That sort of debt is going to be written off in some shape or form. JAL is getting more than $10 billion in government funds to keep it running and rolling and flying while it does a restructuring, because the one thing the Japanese government has pretty much made clear is that it's not going to let JAL go out of business.

But the question is what happens to these 16,000 jobs?

Sixteen thousand will go as the airline slashes back. Owners of shares have lost everything. The Tokyo Stock Exchange is delisting the shares on February the 20th, and, of course, JAL's former employees, they've already agreed to take the most dramatic and drastic cuts in their pensions.

The bankruptcy brings to an end this long struggle for JAL, which has been bailouts and cash.

Kyung Lah now in Tokyo took a flight to find out what went wrong and how it might affect passengers.


KYUNG LAH, CNN CORRESPONDENT (voice-over): Japan Airlines Flight 1381 takes off from Tokyo, with a lot of nobody -- empty seat after empty seat. It is a lonely flight for this reporter.

(on camera): It is just very empty (INAUDIBLE).

(voice-over): Most of the passengers are seated toward the front of this plane that seats about 160. But a majority of the seats are empty.

(on camera): Here's a look at it.

(voice-over): Our destination, a small town in Western Japan called Shirahama. Shirahama is near a world heritage site -- a beautiful but remote and sparsely populated area of Japan. Japan Airlines flies two flights in and out of this small airport twice a day. Figures from Japan Airlines show that for last November, on average, the Tokyo Shirahama flights were more than half empty and the airline says it's been this way for at least the past few months.

After a brief fuel up...

(on camera): (INAUDIBLE).


(voice-over): The problem for Japan Airlines isn't that this plane is so empty, it's that so many of its domestic flights all over Japan are flying with so many empty seats. According to Japan Airlines, 65 percent of all of its domestic flights took off in November with 40 percent of the seats empty.

Analysts say those flights lost money. This is a symbol of what's led the airline into its current financial state, says aviation specialist Kotara Torayumi (ph). The carrier, which has suffered from the global economic downturn and a drop in air travel, has been slow to alter its business model and adapt to the changing economy. But Torayumi also says it's not entirely the fault of Japan Airlines.

"Japan Airlines couldn't cut the unprofitable routes because of political pressure," says Torayumi (ph). "Local governments wanted to sustain routes in airports traditionally seen as a source of vital transportation and income into its communities."

"We'd be cut off if this route didn't exist," says this woman, who just flew in from Shirahama.

Japan Airlines would not speak to CNN on camera, citing its upcoming bankruptcy proceedings, but said in a statement that profitability of a route is not determined by passenger capacity alone and that profitability varies from route to route. But the airline also says that it's suspending 20 unprofitable domestic routes and progressively switching to smaller aircraft, both domestically and internationally.

Bankruptcy will give Japan Airlines a somewhat fresh start. The analysts say it needs to learn from what's failed in order to fly high in the future.

Kyung Lah, CNN, Tokyo.


QUEST: So, Kyung Lah reports on the plight of domestic routes and the cuts. But restructuring will mean major changes to JAL's global reach, too.

Take a look at this. JAL -- over here, of course, the two major hubs. JAL currently flies to 220 destinations in 35 countries. It covers Europe, Asia and the United States, of course, going trans-Pacific.

Some of the routes likely to be scrapped, though, as it concentrates on the ones making money. One point to highlight for JAL passengers, whichever routes, some clearly will not go. But it's -- it's not a massive leap to suggest some down here might go, probably some in Europe will go.

But it doesn't matter. Frequent fliers won't lose their miles. Even in its current state JAL's franchise is something other international airlines would love to get their hands on.

CNN business traveler Ayesha Durgahee joined me earlier.

When Ayesha and I get together, it's time to get to grips with JAL's options for life after bankruptcy.

AYESHA DURGAHEE, CNN CORRESPONDENT: Richard, it just comes down to a battle between airline alliances. It's a tug of war between oneworld and SkyTeam.

JAL is currently a member of the oneworld alliance, with the likes of American Airlines, Cathay Pacific...

QUEST: Right. And...


QUEST: ...and American has offered money for JAL to stay in oneworld.

DURGAHEE: They have put a sweetened offer of $1.4 billion on the table to persuade JAL to stay.

QUEST: Right.

DURGAHEE: They are desperate for JAL to stay within the oneworld alliance.

QUEST: Desperate.

So why doesn't JAL want to stay?

Where is it looking?

DURGAHEE: Because there is a juicier offer on the table from SkyTeam, led by Delta Airlines. They are offering JAL $1 billion to jump ship and join the SkyTeam alliance because they want a stronger foothold in the Asian market...

QUEST: But when it comes to -- hang on. Now, wait a minute. I'm confused. When it comes to an airline -- American and Delta, what difference does it make?

Who's got the bigger network?

Who's -- who offers the better deal?

DURGAHEE: Well, when Delta merged with Northwest, it became the largest airline in the world. It already has a hub in -- in Japan. It flies from -- to 23 cities out of Tokyo. So with JAL joining the SkyTeam alliance, they will significantly have an increase in trans-Pacific traffic.

QUEST: I see one word over here -- anti-trust. Surely, Ayesh, Delta raises more anti-trust questions with JAL than American Airlines.

DURGAHEE: Well, oneworld believes that it is the -- the best option for JAL to stay put, that they are more likely to win anti-trust immunity. And John McCulloch, the managing partner of the alliance, believes that JAL isn't going anywhere.


MCCULLOCH: And we think that a combination of Delta and Northwest and JAL is never going to get anti-trust immunity under the U.S.-Japan Open Skies agreement. And their whole deal and their whole deal and their whole offer to JAL is predicated on that happening, quite apart from what it will do to the customer -- much less choice, consolidation, less capacity, more price control between those carriers.

So we think it would be disastrous. JAL is a tug of war, but we should be able to win this one.


DURGAHEE: So, as you can see, that it is a tug of war between oneworld and SkyTeam.

QUEST: And they're both fighting over a bankrupt airline.

DURGAHEE: Yes, but JAL could be the jewel in either alliance. So that's why they are desperate to -- to win JAL.

QUEST: Ayesha Durgahee, thank you.

And in a moment, we'll bring you new video of the moment when, in Haiti, there was the earthquake actually took place. Seven days on, rescuers are still finding people alive. We have so much more of your stories, in a moment.



The news headlines now from Jim Clancy, to bring us up to date.

JIM CLANCY, ANCHOR, CNN INTERNATIONAL: It's not exactly the latest, Richard, but I wanted to take us all back one week and show you some new video that shows the terrifying moments after the earthquake hit. It was shot by an American at the Christian Service International Ministries Hope Orphanage. There were, one moment, missionaries playing with children. They felt the quake hit. Volunteers immediately evacuated the 20 girls in that orphanage.


CLANCY: And just so you know, none of the children in the video was injured.

Now, it's seven days later and aid is being shuttled into the airport around the clock, but how do you get it to the victims in time to help them?

The U.N. says 16 million ready to eat meals are on their way to Haiti.

But officials say a quarter of a million rations have already been handed out. Now, that amount still woefully short -- woefully -- of what's needed. But with roads blocked between the airport and Port-au-Prince, transporting aid creating headaches.


JOHN HOLMES, U.N. HUMANITARIAN CHIEF: I think whatever delays you are seeing -- and, of course, we're all frustrated by that -- in getting the aid on the ground, it's not because of problems of coordination, it's because of problems of delivery and logistics and the capacity and the -- the escorts. And those are the issues which are causing delays, not lack of coordination.


CLANCY: Well, the bottom line here is the window has all but shut on recovering people from underneath the rubble. But as you're about to see, even people, after they're pulled out alive from the wreckage, their struggle to survive very much continues.

Chris Lawrence and his crew found themselves playing an unexpected role in a high stakes medical drama.


LAWRENCE (voice-over): We're driving to a story when a -- when a paramedic runs out in front of our truck begging for help.

UNIDENTIFIED MALE: Right now. Right now. Up here. Right now. Up here.


What you got?

LAWRENCE (on camera): So what's happened was, we were just passing by and the rescue teams told us, can we please use your truck?

UNIDENTIFIED MALE: Hey, listen, man.

LAWRENCE: (voice-over): They just pulled a young woman out of the rubble and her blood pressure is 60 over 20. She's got to get to a hospital. They need to keep their truck to search for other survivors. So our CNN pickup truck becomes an instant ambulance and it's our driver behind the wheel.

A rescue team from Peru and Nicaragua had just pulled her out of a collapsed building six days after the earthquake.

(on camera): It looks like she had lost consciousness for -- for a minute or two and she just -- she just blinked and now she's opened her eyes again. I can see the paramedic. He's got her head -- his hand firmly on her neck. He's feeling for her pulse.

It looks like we're pulling up now to the -- to the U.N. Hospital. Maybe we were driving for 10 minutes.

Do you think 10 minutes?

A 10 minute drive. It seemed like a lot longer.

Now, this place really isn't set up for any sort of long-term care. You can see where she's being treated outside right here on the sidewalk. The doctors are telling us what they're trying to do is just stabilize her enough so that they can transport her to a better hospital.

(voice-over): She's a college student named Maxi Fallon (ph) and her sister tells me she's been looking for her all week.


LAWRENCE: We think it's over, but, no. They load another quake survivor in our flatbed. Both need to go to a better hospital.


LAWRENCE: The first one can't take them, so we drive another 40 minutes. And it's dark by the time we get to this French hospital, where the paramedics finally get her inside.

(on camera): The doctors say she was severely hydrated and may have a few fractures, but she's OK. She's going to live.

The paramedics told us that her legs were bent back over her chest, which may have taken some pressure off and allowed her to breathe. Maxi (ph) told us that she could smell the dead people around her, but she prayed every day and never gave up hope.

Chris Lawrence, CNN, Port-au-Prince, Haiti.


CLANCY: What it's like for the people of Haiti, what it's like for our correspondents in the field. Tune in for a special half hour long edition of "BACK STORY" tonight. It's going to be an hour long, I should say. They've -- they're going to be examining what's happened since the quake hit one week ago. A full hour of Haiti on "BACK STORY," 22:00 hours in London, 23:00 in Central Eastern Europe, only here on CNN.

And Richard Quest will be watching that, as well, I'm sure -- Richard, back to you.

QUEST: And, Jim, you know, before you've got -- dash off, just when you think you've really heard every aspect of every bit of this story, there is always something else that just hits and just blows you away.

CLANCY: We're going to hear a lot more. There's still so much more to be done -- Richard.

QUEST: Jim Clancy at the CNN Center.

We need to turn our attention to matters perhaps right back in your garden. Snow is coming back. It is staying in Germany. It will be within the U.K.

And Guillermo is at the World Weather Center.

In -- in terms of how bad it was last time, is it because, once again, we've got a -- a high pressure area that's refusing to let low pressure come up from the...



ARDUINO: No. I think that in this case, we have cold air and the cold air in addition with the humidity that is coming from the West is going to create not a big snow event, but we will see snow first in the highlands of Wales and then all over Wales and in the Midlands, as well. I think that Manchester is going to see the snow, too.

The big story is here, that this high is bringing the cold air into the east from Germany onwards. So we are going to see a lot more snow into Germany, perhaps maybe 20 centimeters. We'll see the details in a second.

It is going to be more significant here toward the Black Sea.

So, in terms of airport action, it seems that things are not that bad. So we have some winds in Dublin, that's about it.

You see here in Romania, Bulgaria, Moldavia, is where we see 60 centimeters or even more.

Now, Northeast England may see some snow, as well. And Germany definitely. The Czech Republic, the entire country has warnings of snow. Berlin is going to see snow. Then all these other locales are looking fine. Frankfurt, maybe some snow showers, as well. And these are the temps.

I'll leave you with that.

See you on the other side of the break.


QUEST: Google has postponed the launch of its mobile phone in China amid ongoing rows over Internet freedom. Google had originally chosen Wednesday as the rollout day for its own brand handset, which incorporates its Internet and e-mail functions. It's only a week since Google said it was prepared to quit China after claiming hackers had tampered with e-mail accounts of Chinese dissidents. Google did not spell out why it called off the mobile phone launch and whether there was any connection.

Beijing gave its first direct response on Tuesday to the threat to shut down its Chinese site, saying, foreign firms in China must respect the country's rules.

You will, of course, be aware that Yahoo! has also changed the way it owned its China subsidiary, much to some criticism of other partners.

So I asked ahead of the famous Internet service, Wikipedia, Jimmy Wales, the chief executive, whether he thinks, realistically, when it comes to playing in China, you have to play by their rules alone.


JIMMY WALES, CEO, WIKIPEDIA: You know, it's a really difficult thing. I'm really pleased to see Google standing up to that kind of thing. But it's really hard to predict what's going to happen next. I mean Google is up to around 30 percent of the search market in China, which is low for Google, but it's still pretty impressive. And I think the Chinese government doesn't really want to lose Google, but neither does Google want to lose China.

But, you know, well, if -- if the things people are saying are true, I don't see how Google can operate in that climate anyway.

QUEST: You see, of course, Google was the one, of course, who -- who came in for a lot of flack two or three years ago when they agreed to accept certain Chinese restrictions.

If we also factor into this, Jimmy, the -- the Yahoo! decision and how it's going to move forward with its Chinese subsidiary, do you believe that corporations are going to find it more difficult playing by the Chinese rules in the future?

WALES: I -- I don't think so. I actually think the way I -- from where I sit, I see China opening up more and more. I see a lot of these kinds of restrictions getting to be less and less. That doesn't mean things don't happen that are pretty bad, but I actually think that -- that the opening of markets in China is -- is changing China quite a bit. And I suspect people there are beginning to get a little bit restless with all this control.

QUEST: It is absolutely a fascinating part, isn't it?

It's a question of whether the Internet and slash online capability shifts the country, or -- in the democratization -- or is it the other way around?

And -- and would I venture to suggest the jury is out on that?

WALES: I would say the jury is absolutely out on that. And it's an interesting thing, we in the West try to think of ourselves as important, but within China, we're not that important. What's really important is the Chinese people and the Chinese government and their relationship to each other. I see that beginning to change in slow ways. The Chinese government is very nervous about it, but I think that change is inevitable.

QUEST: The final question. I can't have you in my studio without asking, as we look at the technology sector, as we look at 2010, are you optimistic, pessimistic?

Do you think we've seen the best in '09?

WALES: So I'm -- I'm moderately optimistic. I think -- I think 2010 is still going to be a tough year in a lot of ways, but I think it will be a little bit better than it was. I think a lot of the -- the financial market stuff is beginning to work itself out. I do think we're out of the woods yet, but I -- I'm cautiously optimistic.


QUEST: Jim Wales, the chief executive of Wikipedia joining me and talking about Google and -- and China, something that we will talk about on this program in the weeks and months ahead, no doubt.

A Profitable Moment in a moment.


QUEST: Tonight's Profitable Moment.

The fighting over the bankrupt Japanese airline, JAL -- between you and me, I find it fascinating. Delta and American are offering to stump up more than a billion dollars to either attract or keep JAL to their respective alliances, SkyTeam or oneworld. Whoever wins this battle will gain long-term advantage in terms of trans-Pacific aviation.

JAL may be bankrupt, but it still has an impressive, well known brand and a raft of interesting international routes.

This whole episode, I think, is interesting because it shows in bankruptcy, there is long-term value. JAL may have flown itself, financially, into the ground, but there's two airlines that want this phoenix to rise again.

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest in London.

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

Christiane is after the headlines from the I Desk.