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As Greek Workers Strike Over The Third Phase Of An Austerity Plan, Global Market Forces Suggest A More Optimistic Tone, The Richest Men in the World; Made in Bahrain, Businesswoman in Bahrain

Aired March 11, 2010 - 14:00:00   ET


RICHARD QUEST, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: Greece comes to a stop as the country goes on strike.

There's still oil in Bahrain, perhaps even more fields.

And the V1 (ph) rotate (ph) takeoff, a new strategy for Gulf Air, the CEO on tonight's program.

I'm Richard Quest, live in the capital, where once again, I mean business.

Good evening to you from Bahrain, where once again QUEST MEANS BUSINESS is bringing you a taste of a different business world. It is part of our iList, an odyssey on global business. The iList, unwrapping for you, parts of the world that perhaps you haven't given the first thought to, but you will do now, you have seen the business opportunities.

And tonight we are in Manama, which is the center of Bahrain. And on a Thursday, just ahead of the weekend, Friday and Saturday being the weekend here, just behind me you can see, of course, the Grand Mosque, the Al Fateh Mosque. One of the landmarks here in the city, itself. We'll talk more about that in just a little bit of a moment.

Now, we've got a lot to get with you on-a lot of news to bring you over the next hour. We will be in Greece in just a moment, where of course there have been strikes protesting over the government's latest attempts to bring down the budget deficit.

First, though, an update on the European markets and how they've been trading. And as the markets move through their Friday we saw, of course, some pretty sharp movements in recent weeks that had taken European markets, particularly the FTSE, up to a 21-month high. That has now unwound and you are now seeing the markets just a little bit down, off about half a percentage point. The London FTSE down 0.4, Paris CAC currant down 0.37, and the DAX down just about a 0.1 of 1 percent.

So to Greece, and what has been taking place over there; hospitals, airports, government workers, a variety of workers, all protesting against the budget cutbacks designed to bring the Greek deficit back under control. Our correspondent Jim Boulden is in Athens and joins me now on the phone from there.

Jim, the key point here, is we know they don't like the budget cutbacks, but what do they hope, the workers, that these strikes will achieve?

JIM BOULDEN, CNN INT'L. CORRESPONDENT: Well, Richard, I think you know I was here two weeks ago when we saw these national strikes, a 24-hour strike and a massive march through Athens. It is slightly different this time because the polls are showing that fewer people now support the government's plans for the austerity measures. The government had yet a third austerity package introduced in the last week; a further $6.5 billion in budget cuts, that includes tax rises as well.

Though the majority still seem to support the government and not support the strikers, that is weakening. And we saw a lot of people on the streets today, not to say that people seem to be even angrier this time than the last time. And so they possibly think the government will back down.

Now, let's be clear, there is no indication from Prime Minister Papandreou, and his team, that they are going to back down. But that is what the people here hope. They hope enough of this will make a difference.

QUEST: Jim, the idea that the government will back down, I mean, you rightly pointed into its perspective, there is no evidence of that whatsoever. But there is the potential, is there not, for the government to fudge the long or the short of this whole dispute?

BOULDEN: Well, on March 16 the European Union will be coming back here. Ali Rehn, the European commissioner, will be coming here to talk to the government, to go over the books. This was part of the deal. To get political support from the European Union, Greece would have to open its books and let people see exactly what's going on. This third austerity package has not been passed yet by parliament. We have to wait for that to happen. So that still is a key measure as well. So we'll have to see if that goes as smoothly as the prime minister hopes it will.

But meanwhile, you know, we've been talking about these credit default swaps, we've been talking about the interest on the Greek debt. Now the interest rate is coming back down. That is very positive for Greece. But the prime minister keeps pointing out that it that Greek debt doesn't get cheaper, it will be more expensive and there will have to be even more budget cuts and tax rises. That is the kind of help he wants from Europe and the U.S., to make sure that speculators, in his mind, aren't going after the debt.

QUEST: Jim, let me interrupt you on that point, because we now have a two tier on this particular story, in one sense. You have what is happening in Greece, and you have the Greek prime minister and finance minister, but the markets suggesting that the contagion effect is lessening. So, I'm wondering, when I read stories that say "Greek budget crisis over", is it right?

BOULDEN: Well we have to see how this third austerity package goes through parliament. That is going to be key. Obviously the markets have changed their mind, haven't they? We've seen the stock market in Athens in doing very well in the last few weeks. We are seeing Greek debt still double what it was late last year, but certainly much, much lower, as the interest rates.

And we saw the very successful bond sale from Greece last week. You have a lot more to go. We have one in March and April, going through to May, we have to see how the market digests that. But for people betting against Greece right now it looks like the markets are going in the opposite direction.

QUEST: And we will leave it there. Jim Boulden joining us from Athens this evening. When there is more to report Jim will be back with us.

This is QUEST MEANS BUSINESS coming live to you tonight from Manama, the capital city here in Bahrain, where over the course of the next hour we are also going to hear from the oil minister. We will hear from the CEO of Gulf Air, and we'll bring you up to date with the markets in New York.

But you need to know the news headlines now and for that Fionnuala Sweeney is at the CNN News Desk.


QUEST: Now, earlier I mentioned the Al Fateh Mosque, the Grand Mosque, beautiful landmark here. Now we can actually get a proper look at it. All lit up at the start, of course, on the weekend, Friday and Saturday being the weekend here in the Gulf.

When I come back, in just a moment, we are going to talk about oil. You and I have talked about it a lot during the course of the week, but now the oil minister, what does he make of the dwindling oil reserves? And he's blunt about telling me.


QUEST: Welcome back. QUEST MEANS BUSINESS live from Bahrain. Let's turn our attention to the stuff that comes out of the ground, Texas tea, I think it-black gold, whatever you want to call it. I'm not sure what it is called here. It is, of course, the oily stuff.

Now the oil giant, BP, has announced that it is to pay $7 billion for the right to tap rich deposits off Brazil. Initially, the Brazilian oil wells could boost BP's output by 40,000 barrels of oil a day. BP says the site in the Campos Basin has the potential to produce a lot more than that. It is done. The deal is being done with Devon Energy of the U.S. It will give new assets in the Gulf of Mexico and Azerbaijan. Devon Energy will also pay BP $500 million, or a 50 percent stake in BP's oil stands in Canada. The two companies will develop the field-the project, together.

There is one popular myth, apparently, when you talk to people about the oil wealth here in Bahrain. And that is that the oil is about to run out. They've had oil here for many decades. And for just as long people have said, it hasn't got much more to go. But as I discovered, on a quick tour of the oil fields, that is no entirely true.


QUEST (voice over): It began in 1931, at Jebel Dukhan, when the very first well to be drilled spurted oil. Within three years the field was producing thousands of barrels a day. An industry was established. At its peak in the 1970s, the field produced more than 70,000 barrels a day. And with the high price of oil during the Arab oil embargo, Bahrain was awash with cash.

(On camera): Oil head (ph) number one's producing days are long since over, but not the Bahrain indigenous field, which still produces around 33,000 every day. The nodding donkeys across the area, a testament to the fact that this is still a real-live working oil field.

(voice over): Nowadays these wells produce half the maximum amount. But Bahrain also gets 150,000 barrels from the offshore Abu Safa field, that the country shares with Saudi Arabia.

So, in all, Bahrain still has 180,000 barrels a day. And while that is small by Saudi or Kuwaiti standards, it still contributes 70 percent of government revenues.

(On camera): So, now the challenge is how to ensure that these mature fields become more productive. The answer, of course, is new technology, which will ensure that these nodding donkeys extract, out of the ground, greater supplies. Which is just as well, because Bahrain's future oil wealth depends on it.

(voice over): New technologies mean the older fields will produce more within a few years. And total production for the country will top a quarter of a million barrels a day. The hope is, with deeper drilling, further fields will be discovered.

Bahrain may not enjoy the oil and gas reserves of wealthier neighbors like Qatar and Saudi, but the country is not out of the oil and game just yet.


QUEST: Now, whether it be onshore or offshore, the oil companies have paid Bahrain quite considerable sums of money to continue the development and continue looking for new reserves. I asked the Bahraini oil and gas minister, Abdul Hussain Bin Ali Mirza-I asked the minister, so it is not running out anytime soon, but where were the new reserves going to come from?


ABDUL HUSSAIN BIN ALI MIRZA, MINISTER OF OIL & GAS AFFAIRS: The production had been declining, however, the rate of decline has been halted by the experience in using technology.

QUEST: So, you are looking for new fields. But, I mean, this is a fairly mature area in the industry. So what makes you think there is anything out there?

MIRZA: The technology has advanced quite a bit since, of course, early when oil was discovered here in 1932. And that is why we offered all our offshore blocks to international oil companies. And these international oil companies are already now working in the offshore area. And if they were not sure that there is something there, they wouldn't be venturing to risk their capital.

QUEST: How much more do you think the indigenous field can produce?

MIRZA: The production will increase from 33,000 to 75,000, that is double in five years. And two years after that it will go to 100,000 barrels a day, which is a three-fold increase and it stays 100,000 until 2028.

QUEST: Let's be blunt here, Minister. Is Bahrain running out of oil?

MIRZA: That cliche has always been there, that the area is running out of oil. Bahrain is running out of oil. So far, in 78 years, the crude which has been used from our reserves is only one-fifths of the reserves that we have, 78 years.

QUEST: Yes, but you can't get the rest it is too difficult.

MIRZA: That is why new technology allows us to get more. And these new technologies, now, can take the reserves which were not recoverable, and make them recoverable. However, the Bahrain government wisely wants to diversify away from relying solely on oil income, because we don't have as much resources as our neighbors. The population is growing and the ambition of the people is growing.

QUEST: Except for 50 years, you have been enjoying the fruits of oil and gas, and haven't (ph) really diversified.

MIRZA: Bahrain actually has succeeded very well in diversifying. If you look at the-

QUEST: Well, 70 percent of government revenues still come from oil.

MIRZA: That is true but if you look at the contribution to the GDP the services sector now provides equal contribution to the GDP as oil. And that wasn't the case in the 50 years ago.

QUEST: Where do you see the role of your industry in the future here?

MIRZA: We hope Bahrain will be a hub, because of its geographical strategic location. Saudi Arabia has got the largest crude oil reserves in the world and Qatar has got the third-largest gas reserves in the world. So we are between these two major oil reserves and gas reserves countries. Bahrain has the workforce and has the expertise and the human capital which can be used as a gateway to get into these two areas.

QUEST: That is a tremendous shift in policy, isn't it?

MIRZA: That's true. That's true. And we have-now we are starting joint ventures with many countries, with our neighbors, and we are in partnership with countries outside the Gulf. Like we have formed a joint venture with a Finish company called Neste, to produce base lube oil products.

QUEST: Would you agree that in the long-term, Bahrain is destined to be a niche player in the industry.

MIRZA: I would agree with you there. And-but we always are optimistic and we must keep trying. There are fields which have been tried in other parts of the world, 30 times, and they had not discovered oil, but the 31st time they discovered oil.

When I joined the oil industry in 1962-how many years is that?-I asked-I was a young, sort of graduate, and asked how many more years of crude do we have. They said 15 years. This was in 1962-'62. Now if you ask me I say another 20 years. Maybe in 20 years, Richard, if you ask somebody who is in my place, he will say another 20 years, and then after that another 20 years.


QUEST: The minister first started working in the oil industry the year I was born. Johnny D is with me now, who I think is just about the same year-


QUEST: Born in the same year, absolutely.

All right. John Defterios, let's talk about where the oil actually is.


QUEST: Now, we know-I think, who has got the most.

DEFTERIOS: Well, no doubt it is Saudi Arabia. But we thought if we are standing in the Middle East, we should see who is sitting on all the black gold. So, let's take a look at global total reserves and where the Middle East fits in.

Total global reserves, right now, really kind of put at 1.25 trillion barrels. And then if you take the Middle East proportion of that, the latest estimates, it comes in at about 63 percent. About 790 billion barrels belongs to the Middle East and primarily around here, to answer your question, over the causeway, in Saudi Arabia. Let's take a look at, now, the four major countries that sit on top of it, beyond Saudi Arabia.

Saudi Arabia at 267 billion barrels; Iran at 138 billion; Iraq at 115 billion, and then you have Kuwait at 104 billion. Another notable there is the UAE, around 100 billion barrels. But there is a big question mark, right now, Richard, about how credible these numbers really are. Let's take a listen.


VAHAN ZANOYAN, CEO, FIRST ENERGY BANK: I've personally been always skeptical about the base reserve estimates. There is no confirmation of this. There is no validation. There is no third party access to any of these countries reserves to say, yes, I went I saw, and I confirmed. So, I take the base reserve figures with always-with a little grain of salt.


DEFTERIOS: It's interesting what he brings up here, he was, Zanoyan is one of the leading oil consultants around the world and the CEO of FirstEnergy bank here in Bahrain and he was saying, they were in question, you know why, because they go back, these figure's to the 1970s and then ratcheted up, almost doubled in the 1980s.

RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Which is what the oil minister was saying that actually here in Bahrain, production will double to levels that weren't seen before, because of new exploration techniques, but that's expensive isn't it?

DEFTERIOS: The new exploration certainly is, you see it off the shore, offshore in Brazil, you see it in West Africa are right now, but going back to the credibility of the numbers, the cause of the OPEC politics, many of the state's took their oil production and boosted it up in the reserves, 30 to 50 percent in the mid 1980s and there's never been a third party going in there and saying, can we really verify the numbers. So we're living off of numbers that are really going back to the 1970s and in ratcheted up for internal OPEC politics.

QUEST: What does that mean though?

DEFTERIOS: They wanted to get higher quotas for production, so they basically took the numbers, perhaps out of the air.

QUEST: Well nothing new about OPEC cooking the numbers.

DEFTERIOS: But going back to Mr. Zanoyan said there, they probably sit on about 50 to 60 percent of global reserves. We don't know the exact number still, and the technology, going back to your point, is getting better.

QUEST: Alright, Johnny D. Many thanks; what are we talking about tomorrow, briefly?

DEFTERIOS: Tomorrow, youth unemployment.

QUEST: Youth unemployment, both on the wrong side of 40, both heading towards 50, both deciding that we've really got to look as if we're a bit younger than we really are.

When we come back, here in Bahrain, we're going to be talking about a very exclusive club that neither Johnnie D. or I ever have much hope of joining, I'll tell you more in a moment. We're live in Bahrain.


QUEST: Now it was the ex-hippies against the money men and in court it was a defeat for big business. The name, the bands, and the Pink Floyd, the rock group that believes a concept album should remain just that, an album. The group has won a lawsuit against its record company EMI now of course owned by (inaudible), forcing it to stop selling tracks from albums like "Dark Side of the Moon" individually as downloads. The judge agreed with Pink Floyd that the contracts specified, the albums could only be sold in their original, complete format; thus preserving their artistic integrity and probably profits for others. To use a phrase from Pink Floyd, another break in the walls, some of them seem to be falling out. I'm being a little obscure, but it's a good way to get into our next story.

We're talking about the world's richest list. We know that there are still many people on it, but are they the same ones as last year?

Maggie Lake is in New York; who is on this illustrious list?

MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: We've got a bit of the changing of the guard, Richard; this is only the second time since 1995 that Bill Gates is not the world's richest man. Mexican telecom billionaire Carlos Slim, tops this year's list with a net worth $53.5 billion, it's the Forbes magazine's list we're talking about of course. He edged out Microsoft founder by $500 million. Berkshire Hathaway, CEO Warren Buffett was knocked out by about 6.5 billion; now this is the first time since 1994 in fact that an American has not topped the list. And there are more than 1000 billionaires worldwide, that is believe it or not up, more than 200 last year. The U.S. has still the highest number of billionaires, 403 that is followed by China with 64 and Russia with 62, but in the top 20, get this, only seven are Americans and here is the reference you were starting with, that Pink Floyd reference, three are from brick Countries, two of those from India and one from Brazil. Forbes says it's no secret why more billionaires are coming from the parts of the world we call, the emerging market.


ROBYN MEREDITH, SENIOR EDITOR, FORBES ASIA: Stock markets are way up in most emerging markets and there's been a huge shift in the IPO market. Used to be that London and New York led the IPO market, but that's all come to Asia, particularly Hong Kong and you're seeing that reflected in the billionaire's list, both because people are taking their company's public and because those who are already rich are investing in a lot of IPO's in this neighborhood.


LAKE: And it's a shift a lot of people think is going to continue Richard. Now I heard you saying that you don't think you and John have much chance of getting on that list; if you want to see exactly where you stand using go to a web site and that tells you exactly what you're ranking is, a bit of fun, check it out.

QUEST: Maggie, many of us are trying to do this, with our current money, making it stretch, just a little bit further and I'm wondering, is there any difference, is there any difference, between the way these people are actually making their money, these days?

LAKE: Yes, it's sort of interesting; I mean it's a big list Richard, one of the things that's really notable that jumps out, field technology, you heard her, the Asia editor mentioning IPOs and stuff, listen that area is still producing these billionaires. Take a look down the list in the top 50 you see those names, some of them have been on it for a while, Larry Allison, you got the Google guys there, Steve Bommer, Jus Bazo (sp), so technology, that whole area is still a big force, Face book is on there as well some of the people associated with Face book, other than that it's a really interesting mix. You've got the inventor of beanie babies all the way down to Mexican drug lords, so a very diverse group, but a lot from the tech area.

QUEST: Alright, Maggie Lake in New York. Many thanks for that.

I still think, listen if you want to know how to be successful and you don't want to have to do this, like me, you want to actually make some money and you want to actually know the best way to do it. When we come back we'll introduce you to one of the most successful men here in Bahrain and the fascinating part about him is, he started with nothing.


QUEST: Good evening I'm Richard Quest, QUEST MEANS BUSINESS, this is CNN. If you want to be successful we're now going to introduce you to two people that you really ought to meet. The first quite literally started with nothing and now is huge success heir and a colorful character in the local community. He told me off his difficult personal history, the overcoming of adversity, which made him probably millions in business. I'm going to introduce you to Jamil Wata.

RICHARD QUEST, ANCHOR: The local community. He told of his difficult personal history, the overcoming of adversity which made him probably millions in business. I'm going to introduce to Jamil Wafa.

He is the creator and the main principal holder of the UNITAC business. He was an orphan, a refugee, a child without a home, but Jamil Rafa the beginnings of life were hard.


JAMIL WAFA, FOUNDER, UNITAC GROUP: It was all wrong at the start. I lost my father when I was 6 years old. I lost my mother when I was 9 years old. At the age of 16-1/2, you know like many Palestinians, we were thrown out of the country and not only without home, but without passport.

QUEST (voice-over): With work in a bit of luck, he ended up in a career with the Old British airline, BOAC, British Overseas Airways Corporation. And for years, Jamil Wafa was Mr. Aviation of the Gulf.

WAFA: Those were truly the grand days and I can see now - see the modern airplanes almost repeating what the luxury of travel used to be then.

QUEST: What was it like in those days travel, I mean, did women wear big hats and men wore a tie?

WAFA: Indeed, they were not even - Passengers were not allowed to go improperly dressed on the aircraft. You cannot wear a desert shoes. You had to wear a suit and passengers were immaculately dressed. Shaved and - really it was fun to see them.

Even the crew was well dressed. The captain was not allowed to make announcements instead we used to have and it was passed from one rule to another. Everything was quiet and the captain used to come with white gloves to talk to passengers. It was a real pleasure of traveling those days.

QUEST: After BOAC, he started his own travel agency in Bahrain in the 1970s where he thrived aviation and catering businesses came next, and through his company UNITAC, he has followed the fortunes of Bahrain.

WAFA: You can see it's all water. It's a reclaimed land.

QUEST (on camera): So - there's no - it was very -

WAFA: Absolutely, that's what behind it. Look at all - it's absolutely total water.

QUEST (voice-over): For the Palestinian refugee, this was the perfect place upon which to make his mark.

WAFA: With my passion for airlines, I took the general agency of UTA which is an independent French airline then I traveled to New York to bring in PanAm, first ever non-stop between United States and Bahrain or the Middle East. Then British Caledonian, Cathay Pacific and Philippine Airlines, et cetera, et cetera.

QUEST: So you've seen huge amounts of change in these -

WAFA: Indeed, yes, indeed, at the time BOAC and British Overseas and Quantas were the only international carriers.

QUEST: Now 78 years old, and Jamil reflects on how his company and this country became what they are today.

WAFA: The real commercial boom started here in '77, '78. Before that, it was a passive sort of attitude in -

QUEST: What's the trick of the trade to being successful as you have been?

WAFA: In my case because I was deprived for a number of things in life, and I wanted to really prove to myself and to whoever trusted me that I'm worthy of that trust. I had to work harder possibly than others to achieve what I achieved.


QUEST: A privileged and an honor it was to meet Jamil Wafa and hear his stories of success. Just as much of a privileged and an honor, it is now to talk to another leading Bahrainee, a lady who joins me from Washington who just received a Leading Industry Award for Leadership in Public Life.

She is Afnan Al Zayani, the Chief Executive of the Al Zayani Commercial Services Company. She is a champion of business here, and Afnan, let's just begin by talking about the unusual role that women enjoy in Bahrain. They have the right to vote. They obviously run businesses as you do, but do they enjoy total equality do you believe?

AFNAN AL ZAYANI, PRESIDENT, AL ZAYANI COMMERCIAL SERVICES: Yes, as per the charter, the National charter and the constitution, there is nothing that is unequal for women. Women can practice their rights equally like men do, and the only barrier to that would be glass ceiling that they have within themselves.

And we have seen over the last few years, a tremendous development in women's role in the business sector, and we have seen many success stories that we are very proud of. More over the leadership and the strategy of the country, the 2020 vision supports women and endorses women in actual measure rather than just words.

QUEST: OK, but let's - one thing I'm finding a little difficult to understand as I've been around this country over the course of the week. Women have the right vote and yet, there's barely one woman in parliament. It seems as if leadership and women and rights on these issues are very much diverged into part because the conservatism that does not translate yet?

AL ZAYANI: Exactly, that's when I said the glass ceiling? And I said there is a gap between the legislation and between - and the regulations and between what people practice. Part of this is culture gap and that has to be bridged by creating awareness, shedding light on successful models, and giving women an opportunity to prove their ability in public offices, in the parliament, and in the National Assembly and other positions.

QUEST: Right, so if we take that as a business imperative. We know that Bahrain is trying to better match the skills that with the people. We also know of tensions in the Sunni and the Shiite communities. How difficult does that make it for you running a business here to balance these competing interests?

AL ZAYANI: I don't see that affecting my business at all. As any business person, stability is the important thing for any economy, and there is no threat directly, you know, related to my business because of that because business continues.

Now I don't see the point of raising that question as long as we have stability, we both - we are Bahrainees - both sex are Bahrainees and we enjoy living together and we have been living together for many years, and (inaudible) this will continue.

The only thing now we have even (inaudible) because we have the National Assembly where people can voice their opinion and present their cases, and you know, there is a mechanism now.

QUEST: All right, now, Afnan, as we come to an end. Where - we need to be a little brief here, but where do you see - for you, your company - where do you see the biggest opportunities in the future bearing mind Saudi out to the west, Qatar out to the east, Iran up to the north, and in this position that the crown prince is trying to position the country within.

AL ZAYANI: We have always had our special position, and then we will continue to do that especially now that we have a national vision and we have a national strategy. Bahrain always had its niche and I see that in offering services, we are well established. In banking services, we are diversified and you can see that the crisis did not hit us as hard as (inaudible) area because of our diversified economy.

And then our biggest asset is our people. The people of Bahrain are educated and they are participating actively in the work force. And that is really the biggest asset so any company - our rules and regulations are very easy, open for foreign companies to come and they have Bahrain as their headquarters. And we continue to promote that role for Bahrain especially with the free trade agreement and other agreements.

QUEST: Afnan, many thanks indeed. (Inaudible) country we could have enjoyed a cup of tea together.

AL ZAYANI: It's OK, Richard. This time we switch positions. Next time we'll meet maybe halfway, maybe in Bahrain.

QUEST: Many thanks indeed for joining us. All right, when we come back in just a moment, an airline's battle for survival. It's symptomatic of what's happening in this country. Gulf Air has a new strategy, but is it the right one?


QUEST: Over on the horizon, you can see the night twinkling lights of another jet, probably a Gulf Air jet heading into the airport here in Bahrain. Pilots at the airline are trying out two new planes that arrived this week, Embraers. They're part of the new strategy of Gulf Air to reposition itself within the market.

Is Gulf Air a symptom of what's happening within the country?

Now, whenever it comes to airlines, as we know, that I'm delighted to talk to it with the chief executive. We'll do that in just a moment.

First, though, you need to know what's happening with Gulf Air.

And for that, we turn to


AYESHA DURGAHEE, CNN CORRESPONDENT (voice-over): The falcon spins of Gulf Air -- a reminder of its history -- an airline that took off in the region in 1950 as a small scale commuter service under the name Gulf Aviation.

Some two decades later, the airline would be named Gulf Air and be jointly by the governments of Bahrain, Oman, Qatar and Abu Dhabi.

Eventually, though, four became one, with Qatar pulling out first in 2002, Abu Dhabi in 2005 and Oman in 2007, to form their own national carriers.

Qatar Airways and Etihad have kept pace with Emirates, growing strong and steady despite trying to attract more passengers with chefs and nannies on board, Gulf Air found it difficult to compete with the big three.

SAMER MAJALI, CEO, GULF AIR: It was doomed. It wasn't going to work. The funding requirements to have carriers of that size, both the initial funding requirements and the continued funding requirements, are just beyond the capabilities of -- of Bahrain as a state. Gulf Air had to find its own new strategy and its own market for the future.

DURGAHEE: With an operating loss of $500 million last year, the focus is on developing the airline's regional network, selling its long range A340s and leasing smaller Embraer jets. Gulf Air CEO Samer Majali has gotten rid of first class and is renegotiating contracts for its order of wide body aircraft. Taking a leaf out of the low cost carrier model, the plan is to turn things around in a couple of years. In the short-term, Majali needs to ensure that the airline is in it for the long haul and that his tenure won't mark the last gasp for Gulf Air.

Ayesha Durgahee, CNN, Bahrain.


QUEST: Samer Majali, the chief executive of Gulf Air, joins me now.

Good evening to you.

MAJALI: Good evening to you.

QUEST: Many thanks, indeed.

Did -- the strategy is clear-cut now, isn't it?

It has to be executed?


QUEST: And to that extent, how difficult is it turning out to be?

MAJALI: Well, obviously getting people used to, number one, a new strategy, making sure that we do the changes required for the next work, change the fleet in order to serve this new network well and do the cost savings that we need to do and improve our product.

It's -- it's quite challenging in the years ahead.

QUEST: But you do also face the problem that your airline has been -- and I don't think I'm giving any secrets away -- a political football. I mean politicians love to tinker with the airline.

MAJALI: That's true. But -- and everybody, actually, loves -- loves to tinker with the airline. The -- the stakeholders, the press, the -- the general public. Everybody believes that they have a stake in Gulf Air because it's such an important part of -- of Bahrain.

QUEST: If you're unable to compete head-on with the Etihads, Emirates and Qatars on the long haul routes, how do you build that niche for yourself within the region so that, you know, your passengers stay with you but don't automatically gravitate to your competitors?

MAJALI: Well, we're -- what we're doing is we're actually implementing a strategy that touches all secondary points in the region as well as primary points. And we're introducing the new smaller jets, the narrow bodied 320s and the Embraers in order to reach all the secondary points in the region, points that have not been very well served up to this point in time.

QUEST: Is that because nobody wants to go there?

Or are you hoping that like the low cost carriers, but a full service carrier, there might actually be traffic there that you can build?

MAJALI: Exactly. I mean these -- these are new population centers of half a million to a million people. Up to this point in time, they're just opening up.

QUEST: Let's be blunt, if your strategy is less than successful, what happens?

MAJALI: Well, I -- I get fired. No, I -- I -- we will give it our best shot. I mean everybody is really putting their best efforts here. The entire country is putting their best efforts, the people of Gulf Air themselves, doing the changes necessary to put the airline back into a solid commercial footing.

QUEST: Once again, many thanks, indeed for joining us this evening.

MAJALI: Thank you.

QUEST: And thank you for the -- helping us with CNN Business Traveler because we -- I've been spending quite a lot of time in Samer's planes lately. It's for this month's CNN Business Traveler, where Ayesha and I competed to see who would make it as a flight attendant.


QUEST: Sir, what would you -- would you like maybe a muffin or a Danish or a -- try that croissant, sir.


QUEST: What would you prefer?



QUEST: I promise you that -- I promise you that is much harder than it looks and you will see my hands tremble on Business Traveler, up in the air, 21:30 in Abu Dhabi, 18:30 Central European Time.

At my age, I have to look closely at the writing. It really should have been printed a bit bigger for me to read in this light.

I'm giving Jenny Harrison some free ammunition there.


QUEST: And, yes, I do need reading glasses. I'm too -- I'm too mean to buy them. I'm going to do your job for you, Jenny.

HARRISON: Oh, you do that.

QUEST: It's unseasonably warm here, 30 degrees today it was in Bahrain. And it will be nice for the Grand Prix.

HARRISON: No, you're absolutely right.

QUEST: Beat that.

HARRISON: No, you're right. Temperatures are actually at about 10 degree above average all this week and getting very warm across much of the Middle East. And then I'll tell you what, Richard, I'd keep it warm for you, but I'll bet you're not glad you're back in Europe right now.

Look at these temperatures. This is, of course, the current temperature with -- with the wind factored in. And, of course, it's time of the day now. Temperatures are beginning to certainly dip down. They're minus 5 in Berlin, minus 4 in Munich, not as cold as it was, actually, a couple of days ago at this time. Minus 6 in Milan and just 2 degrees in Madrid.

You can see that cold air filtering all the way down into northern areas of Spain, and all because of that high pressure. The same position - - winds coming from the north and at the northeast.

But look at all this. This, of course, is all part of that main area of low pressure, bringing the very unsettled conditions across the Mediterranean. But some good news here. As we head through Friday into Saturday, in particular, we are going to still see some snow coming from this storm system. But it continues to weaken quite steadily. But it is weakening, nonetheless.

Now, something else that I notice here. I notice there's snow coming in through Friday and Saturday, heading from the north southwards. And that's a very weak front waiting for you down from Scandinavia. So that is why we could see some snow again. That cold air still in place.

But you notice a mix of rain and snow into northern Spain and the southern areas of France. And there are the accumulations. You can see that they're not the big deep colors we've been looking at. But we will see some pretty big accumulations up into Norway, 25 centimeters or more. And this is where we have got the avalanche risk in place.

Delay wise, not too bad out for the north and west of Europe. But look at this again, Germany and then it's (INAUDIBLE). We've got those fairly long delays. And then, as I say, Milan, as well, in the morning. But, again, that snow beginning to peter off -- Richard.

QUEST: Many thanks.

Jenny Harrison at the World Weather Center.

Isn't that a delightful sight on a lovely warm evening -- the grand mosque here in Manama.

We'll be back with more from QUEST MEANS BUSINESS in Bahrain in just a moment.


QUEST: This weekend sees the Gulf Air Bahrain Grand Prix taking place on the island, a big sporting event and one way that countries manage to put themselves on the map. I think of Beijing and the Olympic Games. South Africa later this year, with the World Cup Soccer Tournament.

But when it really comes to tournaments, money and business, it's the Middle East that perhaps shows the way, as Kim Kelaita now reports.


KIM KELAITA, CNN CORRESPONDENT (voice-over): Formula One, golf, tennis, horse racing...

GILES MORGAN, HSBC: Corporations, particularly in financial services, quite often are quite dull products. But they need to engage with customers and people in their passion. And sport is one of the great ways of doing it, whether it be cricket or football or rugby or golf or tennis. It's just a great way to communicate with people.

KELAITA: Horse racing and golf, like the Dubai Desert Classic, have been a success in the region for years. Now, the GCC is looking to capitalize on that by hosting some of the world's biggest sporting events.

FRANK GABRIEL, JR. CEO, DUBAI RACING CLUB: Well, if you go back to the origination of the Dubai World Cup 14 years ago, it really put Dubai on the map as a global sport, especially it's one of the races that definitely are in the sport. But now you look at the -- at the tennis tournament, the golf classic, you know, motor sports.

KELAITA: All sporting events that multinational companies hope pull on the heartstrings of their customers. From the world's richest horse race in Dubai to top notch tennis in Qatar, huge amounts of prize money and five star treatment has sports' top players returning year after year.

For the past 20 years, Emirates NBD has had an association with sponsoring events in the region. They say sports branding has helped their brand grow internationally.

PETER LOAKMAN, EMIRATES NBD: The sports that we sponsor here in the UAE very much build our -- our franchise with the local markets. And we're involved in things like golf, the Dubai Desert Classic, which is an international golfing event, part of the European PGA Tour.

In terms of our profile, that's helped us grow internationally because of the coverage that the Gulf event gets around the world.

KELAITA: Sponsorship spend is currently $2 billion in the Middle East out of a $40 billion global industry. Experts say that sponsorships in the Middle East will double in size in the next five years.

JAMIE CUNNINGHAM, PROFESSIONAL SPORTS GROUP UK: I can only see sponsorships growing here as a business tool, particularly in the current climate, where, you know, ultimately, brands want more value for their money. So, you know, traditionally this region has been about print advertising, outdoor advertising, and, you know, it's been masterfully successful. It's now (INAUDIBLE) completely fallen off the map. Brands want more value. Sponsorship does that.

KELAITA: Some CEOs say because of the latest economic recession, sponsorship deals are now being renegotiated.

LOAKMAN: It's a buyer's market, basically. So we're able to perhaps extend the tenure of the sponsorship for the same budgets or drive a harder bargain.

KELAITA: And in today's global economy, many say making the switch from just advertising to sponsorship is a way countries can differentiate their brand by aligning themselves with world class sporting events.

Kim Kelaita for CNN, Dubai.


QUEST: And a reminder, of course, as I said, that the 2010 Bahrain Grand Prix takes place this weekend, one of the most important -- well, it's the first of the season. Schumacher returns. Jenson Button moves to a new team. It's going to be a good day on Sunday.

When I return in just a second or two, I'll have a Profitable Moment.


QUEST: Forget the glamour of television, this is what it's really like. Look on the air conditioners on the roof.

For tonight's Profitable Moment, there comes a time in any airline's life when there has to be a dose of reality. And that moment has arrived, as you've heard tonight on this program, for Gulf Air.

A political football in recent decades, the carrier has been run and been pushed from pillar to post by politicians and countries anxious to promote their own agenda, often flying the wrong planes on the wrong routes for certainly the wrong reasons.

Well, those days have come to a shuddering halt and it's been -- been impossible now for Gulf to compete with Etihad, Emirates and Qatar.

And so the airline has a new strategy, as you heard from the chief executive tonight -- one that plays into the national strategy going for niche routes and to be a bit player across the stage on which it operates.

Will it work?

We don't know. But Gulf, at least, deserves the chance to prove this 60-year-old airline has a chance for the future.

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest in Bahrain.

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

I'll see you tomorrow.