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QUEST MEANS BUSINESS
Gas Leak in the North Sea; Cost Curb; A Bit of Magic; Nigerian Finance Minister Defends Ability to Lead World Bank; Jose Antonio Ocampo Also Says Emerging Countries Should Lead; Italian PM Says Europe Debt Crisis Almost Over; European Markets Fall; Europe Cause for Concern; Mass Walkouts Planned in Spain; US Stocks Fall After Disappointing Data; No Dramatic Changes in World Currencies; JetBlue Pilot Has Mid-Air Meltdown; JetBlue Flight Drama
Aired March 28, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: She's undaunted, confident, and ready to lead. Tonight, Nigeria's finance minister defends her bid for the World Bank.
(BEGIN VIDEO CLIP)
NGOZI OKONJO-IWEALA, NIGERIAN FINANCE MINISTER: You don't want to spend six months, one year, learning how the institution functions before you can lead. I can lead from the word go.
(END VIDEO CLIP)
QUEST: JetBlue defends its standards after a pilot flies off the handle in mid-air.
And the magic number is defended. How the LA Dodgers dodge bankruptcy.
I'm Richard Quest. Of course, I mean business.
Good evening. Tonight, Nigeria's finance minister tells me she's got the breadth of experience needed to run the World Bank. It's a position that's been held by an American since the institution began.
Now, two candidates from emerging economies say it's time to break the cycle. Never has there been such competition for the top job as the World Bank president.
Mr. Obama has already nominated his US citizen Jim Yong Kim for the role. There are criticisms over his experience in terms of economics. The former Colombian finance minister, Jose Antonia Ocampo has Brazil's backing, and the Nigerian finance minister Ngozi Okonjo-Iweala has the support of the African Union.
Speaking to me from Delhi ahead of the BRIC summit, Okonjo-Iweala told me she's undaunted by her US rival. She'll be hitting the ground running.
OKONJO-IWEALA: I'm highly honored that my whole continent is supporting me in doing this. So, it's not just about me. Other developing countries are excited because this is about their having a voice in global governance. And therefore, I think that all countries -- it would be good to listen.
I'm not daunted by the fact that the US has a nominee because the shareholders of the World Bank promised a free, merit-based, and open and competitive process, and we welcome competition. We welcome the US to be part of that competition.
QUEST: All right, Minister. But if you do get to become president, what fundamental change would you like to make at the World Bank?
OKONJO-IWEALA: I would very much like to move the bank to be a faster and nimbler institution that really responds to developing country problems in days, not weeks, not months. Certainly not months, but in days and weeks.
Because things are happening very fast in real time, and the bank has proven it can do that. It has a superb staff. When there was the global food crisis, food price crisis in 2008, it was able to respond to get money to countries within days. We would like to move the bank into that kind of an institution.
And the primary problem that I feel the World Bank Group should be focusing on is job creation. We have problem in developing countries of job creation, particularly for youth.
And the key question is, look, I've never met a poor person who didn't want the dignity of a job. If they have a job, they can take care of their health problems, their education problems, and the World Bank Group is well-placed to use all its instruments to help get the private sector to create more jobs, to solve infrastructure problems, health problems, education problems.
QUEST: OK, but doesn't that show the difference, then, between yourself, with an economics policy and an economics background and a growth strategy and, perhaps, your principal contender Mr. Kim of the United States, who is more on the development side? Is this not going to be a contest, if you like, between development versus growth when it comes down to it all?
OKONJO-IWEALA: I do not believe that you can have development in any of our emerging markets or developing countries without growth.
I think the key question is, what -- not just the quantum of growth, but the quality of growth. Is it inclusive growth? Is it growth that creates jobs? Is it growth that takes care of the poorest at the bottom end of society? That's the key question, how we do it.
QUEST: Do you fear the duopoly is going to win the day? The US, as it traditionally does, gets the World Bank, and the IMF, as it already has, gets the IMF (sic), and the developing world gets left outside?
OKONJO-IWEALA: You know, the developing countries, they want to be part of this global governance. They want to be part of the game. They don't want to be bystanders anymore, in which -- what happened 60 years ago continues to happen.
They deserve a voice, because the world is changing. The developing countries are contributing more and more to global growth. It's now a multipolar world, to borrow the words of Bob Zoellick, and we need to recognize these different poles.
QUEST: What qualities do you bring to this post, and why do you think you're the best person for it? After all, some would say you've been a World Bank insider.
OKONJO-IWEALA: Well, Richard, you've -- as you know, it is also quite difficult, as you said, to talk about oneself.
But let me say this, that for the past 30 years, of which 25 in the World Bank, I've acquired depth and breadth of experience and expertise that enables one to see -- to be able to manage an institution with the complexity of the World Bank, and to cut through some of the problems that are inhibiting the bank from being as responsive to its clients as it could well be.
I have had the training and grounding for this. It's not just a question of being an economist. I've been on the other side of the table, as a minister of finance and economy, coordinating different sectors to see the actual problems that confronted countries have managed this.
It's not theory that we're dealing with, it's fact. It's experience. It's real-world, how do we take a policy decision that will help millions of poor people today? So, that gives me a lot.
Also, having been in the bank, I know what the strengths are, what the weaknesses are, where we can make the changes. I can really hit the ground running. I don't have to -- there's no learning cure in this. And I think that that's a very big advantage.
Right now, there's so much uncertainty and volatility in the global environment. You don't want to spend six months, one year, learning how the institution functions before you can lead. I can lead from the word go.
QUEST: The Nigerian finance minister talking to me earlier. At the BRIC summit in Delhi, emerging economies are set to outline plans for their own joint-development bank. Jose Antonio Ocampo said earlier this week he and Minister Okonjo have direct development experience. And that, he believes, gives them an edge over the candidate from the United States, Jim Yong Kim.
(BEGIN VIDEO CLIP)
JOSE ANTONIO OCAMPO, FORMER COLOMBIAN FINANCE MINISTER: We have a very direct experience about development. We know what development is, in terms o f economic, social, environmental issues. Best, I think, than -- and certainly better than the developed countries.
So, that's, I think, the major difference and why developing countries have made such a forceful entry into this race.
(END VIDEO CLIP)
QUEST: Now, of course, in the next few days, we also hope to be speaking to Mr. Kim, who is just starting his own world tour to drum up support from developing countries.
On the wider question, many people are suggesting that Ngozi Okonjo perhaps is the leading candidate, although she doesn't have the support of the United States, which is the majority shareholder.
Here's an article that I've tweeted earlier today called "Why Ngozi should be the next head of the World Bank." It gives the various arguments, and you can read the article where I've tweeted it, @RichardQuest on the Twitter account.
Obviously, in the days ahead, we will look at Ocampo, we will look at Kim, and today is the day for Ngozi Okonjo-Iweala. There's the article. Tweet anyway, and we'll have a chat about what's happening in the world of economics. It's a fascinating article, actually. Comes from the citizeneconomist.com.
Crisis? What crisis? Mario Monti says Europe is almost out of its debt troubles. The chief economist of the IIF, but he's not so sure. In a moment.
QUEST: Mario Monti, prime minister of Italy, says Europe's debt crisis is almost over days after he said the opposite. Three days ago at Lake Como, the prime minister said it wouldn't take much to spark off contagion from Spain. Now in Japan, Monti seems sure that Europe's almost home and dry.
(BEGIN VIDEO CLIP)
MARIO MONTI, PRIME MINISTER OF ITALY: The eurozone has gone through a crisis, a huge crisis. I believe that this crisis is now almost over. But there has been a defining, delicate moment last autumn when Italy was becoming a component of this crisis.
(END VIDEO CLIP)
QUEST: European stock markets weren't quite so optimistic. Falls of 1 percent or more in Paris, London, and Frankfurt were the order of the day. In London, the GDP figures for Q4 last year was revised downwards.
But what was interesting about the revisions is we got final numbers on Q1, which was also downwards, final numbers -- or second numbers on Q4, at both ends of the spectrum, the UK suffered badly. And that gives us cause and pause for thought.
The Institute of International Finance says its worries are still firmly centered on Europe at the moment. The chief economist is Philip Suttle. He joins me, now, from Washington.
Philip, you've got a list here -- before we get to your list of issues, the fundamental, gut feeling of what's going on, as I read your global overview and report, you are not a happy man.
PHILIP SUTTLE, CHIEF ECONOMIST, IIF: Well, there's some good things and some bad things. The bottom line is, we're getting a huge amount of support from central banks. Unprecedented in history.
But it's giving us very little in terms of overall global economic growth, especially in what we call the mature economies: the US, euro area, and Japan. And we're particularly worried about the euro area.
QUEST: And that's exactly the point. If you bear with me while I just go to the CNN super screen and we look, for example, if we look at Ireland, we can see Ireland votes in May the 31st, the referendum vote will be taking place there with the austerity effects.
If we look in Southern Europe -- if I can get it to work -- if we look in Southern Europe, in Greece, progress on targets may be happening, but there are elections and there is -- which, of course, will be highly unstable, and there is the questions of recovery.
If we go down to Spain and we see there, in Spain, budget on Friday, which will raise into questions once again the level of the deficit and a 23.3 percent jobless rate is still in Spain.
So, across the continent, as we can see, those worries are festering. And Philip, they, despite all the money, despite the LTRO, they won't go away.
SUTTLE: Well, the LTRO was very successful in alleviating what you might have called the panic or the real sort of immediate financial crisis. But of course, what's really hurting Europe is the ongoing recession.
And in some countries, as you mentioned a few moments ago, it's almost like a depression. And I think as we've discovered in Greece over the past year, year and a half, it's actually very difficult to dig your way out of a hole. And that's what much of Europe is finding.
QUEST: So what, then -- what, then do you want by way of policy response? You've got central banks, we've got sluggish growth, we've got a fiscal compact, and nothing seems to work -- to be -- and before you sort of suggest tax reform and structural changes to the labor markets, they are medium to long-term. They won't get us out of the mess next month.
SUTTLE: Right. And I think we just have to get our minds around the fact that this is going to be a very long haul. In other words, we shouldn't look for instant gratification in terms of near-term relief on economic activity in Europe. It's going to be a very tough slog.
I do think there's probably an over focus on austerity. That's not unusual, because it's always the creditors who tend to set the rules of the game --
QUEST: What --
SUTTLE: -- and the debtors, who have to follow.
QUEST: You say that. That is crucial, though, isn't it? Because if there is still an over-emphasis on austerity, we are digging the hole deeper when -- which will make it more difficult to get out. And that's a fundamental fault in the way the recovery is being orchestrated.
SUTTLE: Right. I think -- you mentioned earlier Spain. I think Spain's an interesting test case because the Spanish authorities, I think, have been the first in a while to push back, at least implicitly a little bit, on the prescription being given to them by their neighbors to the north.
And they've said, OK, we can produce some improvement in our budget deficit, but not as much as perhaps we were hoping for six months ago. And I think that's -- that's a kind of subtle but an important shift.
I think the other election to watch out for, the other event to watch out for, is the French election.
SUTTLE: Because if that produces a shift in policy in France, that could, again, change the tone of the environment in Europe somewhat --
SUTTLE: -- and put the emphasis, maybe, back a little bit more on expansionary policy.
QUEST: Final question. I could talk for hours on this one, but my producer's having a conniption fit. So, Philip, can the better growth in the US that we're expecting this year, along with the emerging markets, Asia, Southeast Asia growth, can that compensate sufficiently, do you think, for the weakness that we're going to see in Europe?
SUTTLE: Yes, it certainly will in those countries. And I think the US is in for its best year in a few years. Not a particularly good year, but it'll be a better year. The emerging world is doing well.
SUTTLE: The emerging world, however, will get hit by Europe, and that's a very important point to bear in mind. China will slow, not because of what's going on in China, but what's coming from Europe.
QUEST: Philip, good to have you on the program. We'll talk more about this in the future.
QUEST: Many thanks, indeed. Interesting stuff on the question of the reforms.
Now, the EU is denying reports that Spain is about to get a European bailout for its banking sector. Spanish workers go on general strike tomorrow on the eve of the tough austerity budget from the prime minister Mariano Rajoy. In Madrid, market traders told Al Goodman they'll be caught in the strikers' net, even if they don't take part.
AL GOODMAN, CNN MADRID BUREAU CHIEF (voice-over): It is one of the largest wholesale fish markets in Europe. Restaurants and neighborhood seafood dealers haggle before dawn over seafood trucked into Madrid from all over Spain.
Yet, this market and others like it are also appetizing targets for unions in Spain's general strike. They'll try to reduce transport nationwide. And union pickets are due at the entrance to the wholesale market.
People like Alfonso Mozos, a fish wholesaler who employs 120 people, wonder if any fish or any buyers will get inside the market on strike day.
ALFONSO MOZOS, SEAFOOD WHOLESALER (through translator): I think a strike is never good. It would be better if unions, the government, and employers would negotiate and find the solution.
GOODMAN: But Spain's unions, which held large demonstrations recently, say they already tried talking to the new conservative government about changes to labor laws. The government is battling a 23 percent unemployment rate and an economy expected to shrink this year.
The prime minister has won approval for reforms that he says will bring more flexibility to the economy and spur growth. But unions say the reforms just make it easier and cheaper to fire workers.
Back at the market, some employees say they plan to work despite the strike.
PEDRO MARIN, FISH MARKET WORKER (through translator): If the boss buys fish and we need to come, we'll come. But if the union pickets outside won't let us in, we'll just have to wait, or maybe go home.
GOODMAN (on camera): This market is an example of the uncertainty surrounding the strike. A lot of workers here don't want to tell us whether they will be coming to work on strike day.
GOODMAN (voice-over): But it's not hard to find workers like Vincente Munoz who's seen his paycheck shrink $30 due to the government austerity measures and tax hikes.
VINCENTE MUNOZ, FISH MARKET WORKER (through translator): Sure, it effects me and everyone. When income taxes go up, it effects every worker.
GOODMAN: The economic crisis and the strike are additional headaches for fish wholesalers already struggling, says the national association president.
MANUEL PRADOS, PRESIDENT, SPANISH FISH WHOLESALERS (through translator): Since 2001, due to competition from the big supermarket chains, our sector has dropped 30 to 40 in distribution of wholesale fish.
GOODMAN: As unions fight changes in labor regulations, the fish wholesalers fight changes in the market itself.
Al Goodman, CNN, Madrid.
QUEST: Now, in the New York market at the moment --
QUEST: -- the Dow Jones is off 115 points, down nearly 1 percent, 13,000 is looking a little bit rocky. While we look at that number, let me tell you that the reasons are exceptionally convoluted now. Oil is also falling. Brent Crude, according to the latest numbers, the Brent Crude is down just right about 2 percent or so. Brent is down 1.5 and West Texas is down 2 percent.
Those stocks are falling and those prices are falling because stocks are relatively high. There are worries about the economy, and therefore, Bernanke may have to do more. You get the idea. It's all related, and it's all questioning the strength of the US recovery, and that's what we're seeing in the market today.
QUEST: Coming up next, the pilot, he was locked out of the cockpit. The passengers, they had to restrain him to stop him getting back in. It's the extraordinary tale of JetBlue flight 191.
The currency markets were not nearly as exciting. The -- take a look at the numbers. The Australian dollar at 1.03, the pound cable slipping slightly, the euro at 1.3309.
QUEST: You don't have to be a frequent flier to have been astounded by the events on the JetBlue flight. The airline has suspended the pilot whose erratic behavior caused an emergency landing.
The captain, who has been named now as Clayton Osborn, is receiving medical care in custody. The plane was in mid-flight when Captain Osborn was seen yelling and hammering on the cockpit door after his worried copilot locked him out.
And it was up to the passengers and the cabin crew to restrain him as he became increasingly agitated.
(BEGIN VIDEO CLIP)
CLAYTON OSBORN, CAPTAIN, JETBLUE FLIGHT 191: Take us down!
UNIDENTIFIED MALE (on intercom): Would you please help him restrain - -
OSBORN: It doesn't matter! Oh, my God! I'm so destroyed! Oh, my God!
UNIDENTIFIED MALE: Relax. Relax, come on.
OSBORN: We got Israel, we got Iraq, we got Israel, we got Iraq! We've got to get down!
(END VIDEO CLIP)
QUEST: The copilot was in control of the aircraft throughout and landed safely in Texas. JetBlue's chief executive, Dave Barger, says Osborn is a "consummate professional" who he's known for a very long time and called the incident a "tough event."
(BEGIN VIDEO CLIP)
DAVE BARGER, PRESIDENT AND CEO, JETBLUE: Really, what happened at altitude and a call into the FAA is that we had a medical situation, and that's how we responded. Clearly, especially in today's media-is-real- time, Matt, so we know that it also became a security situation.
So, I think as we know less than 24 hours later, it was -- it started medical, but clearly more than that.
(END VIDEO CLIP)
QUEST: Now, the copilot on the aircraft is, of course, being hailed as the hero. Not for landing the plane, that goes with the job. What he did that was exceptionally good was he got the captain out of the cockpit before any real harm could be done.
I asked the aviation journalist Miles O'Brien, because of the way it was handled by the copilot, if a very nasty situation had been narrowly avoided.
MILES O'BRIEN, AVIATION JOURNALIST: Well, let's not forget, Halloween night of 1999, Egypt Air 990, remember that one? I know you do.
JFK to Cairo, and in the course of departing out of JFK, somewhere over Nantucket Island, we now believe that the, actually, second officer, the relief pilot, took control of that airplane and deliberately put it into the sea, killing everybody aboard.
The Egyptian authorities would quibble with this, we know, but let's - -
O'BRIEN: -- but the NTSB and the Feds say there's a preponderance of evidence that that is the case. So, the point is, in this case, the person who was considered to be unstable was on the right side of the door.
QUEST: Right. And if anything, the brilliance in all of this was the copilot's ability to get the captain out of harm's way.
O'BRIEN: Yes. You have to wonder what happened. My guess is, this was a long flight, he took advantage of the natural need to take a lavatory break in the midst of the flight, and made the decision at that point to lock that door. How he was able to sort of neutralize the situation up to that point is going to be an interesting story.
QUEST: And also, the -- the core way in which, as you say, he dealt with the problem up to then. He must have -- he knew that the pilot -- that the captain was behaving erratically.
What about the pilot? What about the passengers and their reaction?
O'BRIEN: Well, you can imagine this scenario, when somebody is on the outside of the cockpit door screaming --
QUEST: Who's wearing a uniform.
O'BRIEN: Wearing a uniform, screaming things which are references to 9/11 and terrorism and al Qaeda. How do you process that little piece of information? Fortunately -- presumably, the first officer had let the flight attendants know what was going on.
QUEST: Do you believe that this plane was at any point in danger?
O'BRIEN: No. No. I honestly believe that this -- this is a good example of how the checks and balances of cockpit resource management, of crew resource management work. There are inherent checks and balances.
It is true that when you go for your FAA medical for a first-class medical, they're not doing a psychological evaluation of you. They say, "How you doing?" You say you're fine, and that's it.
So, the case -- the way these things are checked upon, the way these things get handled is through close crew coordination.
QUEST: And that's really what the core is of all of this, isn't it?
O'BRIEN: It -- in this case, the system actually worked. It's a scary moment, but the fact is, you had a first officer who did what he should have done and did it well.
QUEST: I'm sure some of you may not necessarily see it that way. Questions about how he was allowed to fly and all those sort of issues, that will all come up in the report.
And you can guarantee that here on QUEST MEANS BUSINESS, as we take a sharp interest in aviation matters on this program, we will continue to watch very closely on that.
Now, when we come back after the break and the news headlines, it's the day four of the major gas leak in the North Sea, and the second day of the share price that's fallen for Total. The company says there's no danger. The market is far from convinced.
QUEST: Hello, I'm Richard Quest.
More QUEST MEANS BUSINESS in a moment.
This is CNN. And on this network, it's the news that always comes first. opposition groups say 26 people were killed today across Syria and they say there's no evidence the Syrian government is carrying out the U.N.-backed peace plan. The head of the U.N. is urging Syria to put its commitment into immediate effect. Video posted online appears to show the aftermath of shelling at Saraqib.
The Vatican says Pope Benedict XVI has met with the former Cuban leader, Fidel Castro. The meetings comes at the end of the pope's three day visit to the country. During an open-air mass in Havana, he avoided calling directly for reforms, saying only that Cuba and the world needs change.
Iran says it's planning to restart talks with other world powers over its controversial nuclear program. That announcement came early on Wednesday, as Turkey's prime minister arrived for a -- for a visit. Iran's foreign minister says the talks will resume next month. And Turkey is offering to be the host.
As you heard in QUEST MEANS BUSINESS, JetBlue is suspending the pilot whose erratic actions led to an emergency landing. A co-pilot locked out the captain from the cockpit. The co-pilot landed the plane w help from an off-duty pilot. Passengers helped subdue Captain Osborn in the main cabin.
And from July, it will be much cheaper to use your mobile phone when traveling within Europe. Under new roaming rules agreed by the European Parliament, consumers will pay no more than 29 euro cents a minute to make a phone call. The charge for using data services such as e-mail and Web browsing will be capped at 70 euro cents a megabyte, which, of course, you're going to hear more on this story in the -- in QUEST MEANS BUSINESS.
After four days, the French energy company, Total, is playing down fears that the gas leak at its North Sea platform could become a full-scale disaster. Now, the market doesn't seem at all reassured. Total's shares on the Paris exchange fell 7 percent yesterday and today, another 1.4 percent was wiped off.
CNN's Atika Shubert brings us up to date.
ATIKA SHUBERT, CNN CORRESPONDENT (voice-over): Workers describe it as a cloud leaving a telltale sheen on the water six nautical miles long. Energy giant, Total, is struggling to contain the gas leak that started on Sunday and continues to bubble into the North Sea.
Total has evacuated all 238 workers on the Elgin rig, the source of the leak. Shell has also stripped down its staff on the nearby Shearwater and Noble Hans Deul platforms.
There is now a two mile exclusion zone for boats, three miles for aircraft.
JAKE MOLLOY, RMT UNION: The reports we're getting from the people coming off the installation (INAUDIBLE) are extremely serious. I mean for the sea to be bubbling with gas below the installation is an extremely dangerous situation to be in, especially if it's volatile explosive gas or/and potentially poisonous gas in the form of H2S.
SHUBERT: The risk is twofold. The gas cloud is potentially poisonous, but there is also the threat of the gas coming into contact with an igniting force. That would trigger a potentially massive explosion.
DAVID HAINSWORTH, TOTAL: We've done all we can to minimize that risk. But, yes, it is certainly a possibility that it could ignite.
(END VIDEO TAPE)
SHUBERT: The Elgin rig was evacuated on Sunday, as soon as the leak was discovered. In the rush to evacuate, however, Elgin's flare, used to burn off some of the gas on the platform, was not extinguished, leaving an open flame burning just meters away from a moving cloud of gas. Total insists the wind is blowing the gas away from the flare. And Total also says the flare is likely to burn itself out, but cannot say when.
So far, the Elgin leak is nowhere near as damaging as BP's 2010 disaster, Deepwater Horizon, in the Gulf of Mexico. Now, Total is looking at creating a relief well, the same solution that eventually stemmed the flow at Deepwater Horizon. But that could take as long as six months.
With luck, the leak will simply run out of gas, enough so that Total will be able to move workers safely in to either patch the leak or kill the well.
But all these solutions take time and the gas leak shows no signs of slowing yet.
Atika Shubert, CNN, London.
(END VIDEO TAPE)
QUEST: And as we know from the Macondo Gulf of Mexico spill and other incidents such as Piper Alpha many years ago, if things go wrong, then these sort of incidents can become very expensive very quickly.
Lloyd's of London know this only too well. The 324 -year-old insurance broker has posted its first annual loss in six years. And the reasons, as you can see by these incidents behind me, the reasons -- these are not -- these are not manmade catastrophes, they are natural catastrophes. But they did make for the worst year for catastrophe claims.
For example, 2011 saw the Japanese earthquake and the tsunami, which was besides the terrible, terrible loss of life, was an expensive one for the industry -- insurance industry.
Then, there was devastating flooding in Thailand and in Australia. Again, expensive in the extreme.
And the quake in New Zealand, in Christchurch, New Zealand, where I'm told by those who live in Christchurch and who come from New Zealand, that much of the downtown CBD district is still walled off. It is still cut off and, indeed, it is still going to be an extremely expensive part. Apparently, there are whole shopping malls now in containers in -- in Christchurch.
So on to the insurance question.
Earlier, the chairman of Lloyd's, John Nelson, joined me.
And I asked him what percentage of all these claims Lloyd's had had to incur.
JOHN NELSON, CHAIRMAN, LLOYD'S OF LONDON: The total incurred claims for Lloyd's in 2011 were about $13 billion. Of that, just under $5 billion were so-called catastrophe claims.
The interesting thing is, though, that in 2011, we showed the loss of $500 million. At the half year, we -- we were standing at a loss of over that, $700 million.
So the second half of the year we were profitable. But the important point is that if you compare the scale of that loss with the capital at Lloyd's, which is just under 60 billion sterling, then it's less than 1 percent of the capital.
QUEST: So that's a -- that's the financialese way of telling me that Lloyd's can withstand these losses?
NELSON: Yes. Lloyd's is in a very strong position. And in the last -- over the last nine years, the way in which we have op -- provided oversight over the underwriting discipline has improved the underwriting standards in Lloyd's. And the man -- and the managing agencies of Lloyd's, of whom there are 54, have done a good job in 2011 in underwriting with discipline.
QUEST: Underwriting with discipline, of course. Now you have -- what else is on the horizon this con -- the Costa Concordia, which is -- the bills will start to come in for, for that. And we have, for example, only today, we have the -- the North Sea Total...
NELSON: Total oil rig.
QUEST: -- oil rig. One expects that whatever the bill there is, it's going to end up, metaphorically, on your desk.
NELSON: Well, it is. It's too early to say. I have no time to look into it today. But it is -- it is very likely that Lloyd's will -- will be somewhere involved in the insurance of that rig.
But in terms of the Concordia, it's a significant marine claim, but it's not an enormous claim. It's not likely to be an enormous claim in the category of a catastrophe.
QUEST: There's nothing you can do, by definition to, on -- on catastrophes. They happen.
So the ability to meet the costs has to be on the revenue side, doesn't it?
NELSON: It has to be on the revenue and the capital side, absolutely. We have to have a very strong capital base to withstand shocks. We have to have well priced risks so that over an underwriting cycle, we keep the insurance business sustainable. And by that, I mean showing a return for our capital providers so that the nature of our business is we would expect to show losses during an underwriting cycle.
So between 2001 and 2012, we've had three loss making years. And I would say that that would -- you should expect that.
(END VIDEO TAPE)
QUEST: The chairman of Lloyd's joining me earlier.
When we come back, when A to B equals three, four or five -- there's still no single double rail system. And SilverRail Silver Rail is hoping to help. We will speak to the chief executive and a statute on roaming charges, in a moment.
QUEST MEANS BUSINESS.
QUEST: Ah, business travelers rejoice in our Traveler Segment tonight. It's been announced it's about to get cheaper to use your mobile phones in Europe. The EU has agreed new rules that will force mobile firms to lower their prices and hallelujah. For the first time, data downloads, roaming charges, data is going to be capped. This is very good news, except, of course, for shareholders of telco companies.
From July, calls will be capped at 29 euro cents per minute. Consumers will pay no more -- this is the bit -- 70 euro cents per megabyte. And that will slowly fall over the next couple of years.
To put this in perspective, in the U.K., Vodafone, at the moment, charges 1.20 euro. It's almost double the cost of what it will fall to. Orange charges even more, 3.5 euros per megabyte.
I can hear the country -- the companies already saying there are various deals and there are various this and that. But the fact is, from this year, data will be capped. Of course, this might not be such good news for train enthusiasts, as people chattering away on their phones, ruining the peaceful journey.
Rail is the single fastest growing travel sector today, though ticketing is a slow and painful process.
As you can see on this particular -- as we -- as we demonstrate here. Many state railways, if you take the journey from London to Amsterdam, a ticket is required for each section of the journey. That's the Eurostar, that's the national rail up to Amsterdam.
If you then look at Edinburgh to Brussels, again, it's one and it's two, that being the Eurostar.
But then you start getting complicated journeys, Paris to Berlin, one; to Brussels, across to Cologne and whoops, three to Berlin, because if you're going through three different countries on the way.
You're getting the idea by now. Some of them get really complicated. If this particular -- I'm not sure where you would be going between, but one, two, three and four. And then if you want to go all the way from Madrid to Munich, one, two, three, four once again.
And that doesn't even include the tickets traveling within the starting country. It's all very complicated and it's because the ticketing system does not work or work well.
SilverRail is hoping to narrow the gap with its new SilverCorps (ph), a platform for worldwide travel.
I spoke to SilverRail's chief executive and asked him why the rail industry has been so slow to get this together.
AARON GOWELL, CEO, SILVERRAIL: You know, at some point in time, they will figure out how to have a single ticket that crosses all of this stuff. But at the moment, step one is just get it so the information, the search at least works the same way in all of these places. And that's the first problem we're solving.
After that, once you solve that, then we can start to think about can you create a ticket that will actually get you across all of that.
But that's, you know, you've got to get countries to work together. We're not talking about for-profit airlines working together. We're talking about nationalistic enterprises who are saying, hmmm, am I going to let somebody else sell my ticket over there in that country and actually have that same ticket work on my system and their system?
That's -- that's a lot of political work that have to get done.
QUEST: So what do you offer?
GOWELL: We put all of these systems together and we single data set a single platform so that any seller in the world, whether that's Expedia or ebookers or any other consumer site, can go to one place, access the data and actually be able to sell that, compare it up against the airlines in their search, be able to buy hotel and rail packages together.
QUEST: All right, all right, but so...
GOWELL: To do all of that.
QUEST: -- so you're saying that in the future, I'll be able to go onto the computer, to whichever booking platform I like...
QUEST: -- whether it's Expedia or -- or whatever else it might be.
GOWELL: Ebookers, yes.
QUEST: Ebookers -- and I'll be able to go on, find the rail, say, the rail from Madrid to Barcelona...
GOWELL: That's right.
QUEST: -- or Frankfurt to Paris...
QUEST: -- or whatever and book it that way?
QUEST: But it's still going to be multiple tickets if it's multiple...
GOWELL: At the moment...
QUEST: -- multiple rail lines.
GOWELL: -- you cannot buy one rail ticket across these carriers. At the moment, you still -- each system wants to sell you its own ticket and they will be separate tickets.
QUEST: But there have been attempts to bring together the rail networks, make a single booking opportunity, like Railteam...
QUEST: -- and, to some extent, Eurostar, connecting with others in France...
QUEST: -- and -- and...
GOWELL: Yes, the places that have worked best initially are these joint ventures like Eurostar and Thalys, which are a combination of a couple of rail lines coming together and saying let's work together...
GOWELL: -- at least on this route. But with they've never been successful at doing is actually pulling all of the data, all of the information from the various systems into the same place.
GOWELL: They've never figured that out.
QUEST: How do you know there's a demand for this sort of stuff, since the sort of...
GOWELL: Oh, that's...
QUEST: -- distances you're talking about...
QUEST: -- people will often be flying anyway?
GOWELL: If it's under four hours in travel time, it does not matter where it is in the world. If there's a high speed train between those two points, that train is going to own at least 50 percent of the market share in every single case. It doesn't matter if we're talking Boston to New York City or we're talking London to Paris or we're talking Madrid to Barcelona, it is the same case every single place.
And if you look at the investment that's happening in Europe around high speed rail, there was $200 billion invested in high speed rail last year, twice the amount that was invested in the entire air industry.
And all of these markets, all of Europe, in the next 10 years, is going to be linked by high speed trains.
(END VIDEO TAPE)
QUEST: OK, the question of Eurorail and the question of easy ticketing across the continent.
The weather forecast now.
Jenny is at the World Weather Center, where -- you know what the question is, how long -- Miss. Harrison, how long?
JENNY HARRISON, ATS METEOROLOGIST: I don't want to know.
HARRISON: It is going to get a bit cooler, Richard. Temperatures back down to average. Still nice. Still nice. And, look, there's a negative side to all this hot, dry weather.
I just want to quickly show you what's going on the with oil rig. Concerns, of course, because of that big gas cloud and what's going to happen?
It is going to ignite?
Well, this is how far the rig is from Aberdeen, 241 kilometers out there. Right now, the winds are pretty strong, 50 kilometers now. But coming in from the northwest, so blowing in that direction. The temperature is just eight degrees. That's not really particularly relevant.
The winds, though, are. This is the forecast Wednesday. The winds are actually set to increase. And certainly by Thursday, the winds are coming from a more northerly direction. And so obviously, you get the general idea.
This just shows you the wind forecast for the next 48 hours. So if you imagine the oil rig, the elegant platform out about here, the winds coming in from this direction. So the hope is it will continue to blow any gas that's coming off away from that flame and also, of course, away from land.
Right now, there's a sheen of oil reported on the surface of the sea stretching about 11 kilometers. It's very, very fine and they're not proposing at this stage, anyway, to use any dispersant. So we'll continue to monitor conditions here.
The seas, of course, will also increase in height as those winds increase.
Now, this is the problem when we talk about warm, dry weather. Look, the U.K. and much of England, actually, in some form of a drought. And particularly bad across northern areas of Spain and Portugal. And so not surprising. And when we get these hot, dry conditions that certainly last for a while, as they have been now, we have these fires that obviously are triggered. So there's a big fire right now that's burning across the northwest of Spain. Fighters working very hard to put that out.
But the smoke is also causing a problem. Fifty kilometers it's extending away from that fire. So as you can imagine, the visibility is impaired.
And look at the fires that, of course, these firefighters are fighting. And as long as we have these hot, dry weather conditions with the drought so severe, unfortunately, they will continue.
The last 24 hours, Wednesday, in fact, this Wednesday, the highest temperatures reported this time, Oslo in Norway, 22 degrees, 21 up in Edinburgh. That's where the warm weather is. It is about to change. All this cloud bringing with it an area of low pressure. Some rain showers threatening on the eastern side. And that is why things are going to cool off. That high is pushing off to the west.
Cool, Richard, for you, but not exactly cold.
QUEST: Jenny Harrison, we thank you.
Jenny Harrison at the World Weather Center.
Now, it's come to our attention that earlier in the program, we did show an incorrect flag for Spain as part of our program and stories earlier on, which -- for which, of course, we deeply apologize and regret any offense that might have been caused. It was, indeed, as a result of a computer glitch. We apologize for that.
QUEST MEANS BUSINESS.
We're back in a moment.
QUEST: The Los Angeles Dodgers have finally found a way out of bankruptcy and all it took was a mere $2 billion and a little bit of Magic. Magic Johnson, the NBA legend, is part of a group that has agreed to buy the baseball team. At $2 billion, it is the most expensive purchase of an American sports franchise ever, $2 billion.
The Dodgers have been stuck in Chapter 11 bankruptcy since the previous owner, Frank McCourt, went through an expensive divorce with his wife and the co-owner, Jamie.
There were a lot of investors who wanted to get a piece of the action.
Casey Wian is outside Dodgers Stadium in Los Angeles and joins me now -- $2 billion, look, clearly, Magic Johnson isn't buying this out of his own back pocket.
So where's the real brass coming from?
CASEY WIAN, CNN CORRESPONDENT: Well, Richard, we've actually made our way inside of Dodgers Stadium, as you can probably see. That money is coming from an investment group. Magic Johnson is leading this -- this investment group. He will be sort of the face of this effort.
And if you wonder why someone is willing to pay $2 billion for a sports franchise, part of the reason you can see right behind me, is this beautiful piece of real estate. There's nothing more enticing to me than - - than -- or to a baseball fan in general than a stadium right before opening day. You can see that they're putting the -- the final touches on the stadium, getting ready for opening day next week. There will be some exhibition games next weekend. The season starts after that.
And, of course, Dodger fans are hoping that with this new infusion of money, the team is going to have a lot more success and that could lead to these seats, which were uncharacteristically empty for many games last year, being full more of the time.
Of course, this deal, as you mentioned, the result of the financial problems, the divorce, the bankruptcy, by the previous owner, Frank McCourt.
This investment group, though, includes a Hollywood legend, a -- a -- an executive who's had previous experience in Major League Baseball, taking teams to the World Series, and, as you mentioned, Magic Johnson.
So a lot of Dodgers fans very excited about what this team -- what this deal is going to mean, assuming it's approved by the bankruptcy court, by Major League Baseball, what this is going to mean for this team's future -- Richard.
QUEST: Casey, with $2 billion on the table, one can't imagine that it would be rejected, unless there's somebody else who's got $2.5 billion.
Casey Wian, who is clearly a baseball fan. Of course, I've never really understood the game. It's a bit like cricket, it seems to go on forever and I'm never sure who's won.
I'll have a Profitable Moment after the break.
QUEST: Tonight's Profitable Moment.
It is not my job to say who should be the next World Bank president. That much I think we can both agree on.
However, you would surely agree with me that it -- whatever the process, it must be open, transparent and based on merit.
These are the three candidates that you will be familiar, the U.S., Brazil, and, of course, the Nigerian candidate.
The IMF got it just about right. In the case of the IMF, Christine Lagarde was the standout candidate. She was rightly appointed, even though there were other qualified candidates.
Well, this race is much closer. And tonight, we heard from Ngozi Okonjo-Iweala. The fact is, her resume is outstanding. And in the coming days, we will hear all the praise and criticisms of her bid. And the same applies for her two rivals, too.
And, fortunately, if things stay true to form, the U.S. candidate will get the job by default. It is such a close race.
The World Bank must prove, ultimately, that the winner is deserving and not just the right candidate with the right passport.
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.