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IATA Recommends Tracking Technology; Records on Wall Street; IATA Cuts Profit Forecast; Airline Investments; Expanding Air New Zealand; Apple's Big Announcements

Aired June 2, 2014 - 16:00   ET



RICHARD QUEST, HOST: It's a record on the markets. Both the Dow Jones Industrials and the S&P 500 both reaching new highs in New York as the closing bell rings. Hit the hammer at the end of trade. It is Monday, it's the 2nd of June.

Tonight, aviation is changing. Airline executives tell me tracking must be part of the future of all airlines.

Also tonight, a century of commercial air traffic. Slightly overshadowed this year, certainly, by the disappearance of Malaysia 370. On the program, we have chief execs telling us there must be change, and it must happen now.

Also tonight, from IATA to the iPhone, the iPad, and Apple. The new changes coming from the Apple company.

All-in-all, live tonight from the IATA conference in Doha in Qatar. I'm Richard Quest, and of course, I mean business.

Good evening tonight from Doha in Qatar where the airline and aviation industry is celebrating the 70th annual general meeting of IATA. It's the trade group, the representative group, whichever way you want to call it, it is the main body representing the world's global airlines.

And this year, they have much on their minds. Not only an industry which continues to reform and need rapid change, but also the issues arising from Malaysia MH370. The technology to follow planes around the world is ready to go.

Here at the global gathering of aviation chiefs, they've been discussing exactly what needs to happen and how quickly that change can be brought into effect so that never again can a large commercial plane, or indeed any commercial airliner, go missing.

Tony Tyler, the head of IATA, is driving forward the momentum for change. Tonight, we'll hear from the airlines and the manufacturers which are supporting him. The industry's aim is to prevent another MH370.

Everyone here in Doha agrees: the current way we track aircraft simply isn't good enough. In this digital age, searchers resorting to looking out of the window using paper maps as they try to find the aircraft, which still hasn't been located.

Now, the giant Airbus company, the European aircraft maker says the technology is available. It is simply a question of will and a question of determination. John Leahy is the chief operating officer. He is the main, if you like, man who sells Airbus planes around the world. He left me in no doubt that his view is it's time to put this right.


JOHN LEAHY, CHIEF OPERATING OFFICER, AIRBUS: We could, as an industry, have black boxes that are transmitting on a regular basis, the position, the altitude, the air speed of the airplane. And if something goes awry, what's in the black box could be bounced off a satellite and sent down immediately.

QUEST: What's preventing it happening sooner rather than later? Because many of the -- Air France is a good example. They did implement many changes for more frequent monitoring of their aircraft. What's preventing more airlines from doing it? Is it cost?

LEAHY: To some degree, it's cost. But it's a little bit like seat belts in a car. If you said a seat belt is an option, you can pay an extra $100, have seat belts, maybe today you would do it, but 20, 30 years ago, nobody would have put seat belts in cars.

You almost have to legislate something like this. It's a safety issue, and everybody has to do it, a couple hundred thousand dollars for a black box or whatever, bounces off a satellite. Yes, you'd have to pay some telecommunications time, but if everybody did it, especially for over- water flights, once it's legislated, it'll be fine.

QUEST: Do you have confidence that the industry, ICAO, particularly, will ever get its act together to do it sooner rather than later?

LEAHY: Well, get --


QUEST: And note the way --


LEAHY: I think ICAO getting its act together sometimes doesn't work together --

QUEST: Right, but do you have confidence that they can --

LEAHY: -- in the same sentence, but it'll -- they'll eventually get there. But that's the level it has to be done at, or perhaps the European authorities, the FAA, could just on their own say for over-water flights, our airplanes must have this automatic telecommunication capability installed, in which case it would then, perhaps, be picked up by the rest of the world's certification authorities.


QUEST: That's John Leahy, they chief operating officer, the main salesman, for Airbus. IATA has convened a special task force to look into the whole question. It's been charged by ICAO, the UN body, to actually investigate and come up with the options. That report is due by September, and the board of governors of IATA will consider it at their December meeting.

One of the members of the board of governors is the chief executive of JetBlue, the large US low-cost carrier based in the northeastern United States. Dave Barger is the chief exec. He told me, like so many chief execs have said here, something must be done, and it's just a question of finding the right option for the right plane, the right aircraft, the right airline, and sooner rather than later.


DAVID BARGER, CEO, JETBLUE AIRWAYS: I fully support 100 percent affirmation of where all of our aircraft are across the world at any given time. And that is not the case today. By the way, there's perfectly good procedures and protocol in place, but let's use the technology that's available today to have positive affirmation of flight following.

QUEST: And when it comes to a cost issue -- now, I know you don't put a cost on safety --


QUEST: -- but there is a cost involved, both in terms of infrastructure and the running cost for sending the data.

BARGER: Sure there is, but when you start to take a look at -- these are rounding errors. They truly are. And when I look at -- just get inside with the United States with the next gen deployment of the air traffic control system, to the extent that we're talking to satellites, as opposed to ground-base radar, Richard, this cleans up the entire issue, and that's just across JetBlue's route network.

Talking to technology, satellites around the world, from our aircraft, that technology is available today.

QUEST: Do you get the impression that ICAO may take forever to do it, but IATA's looking into this. Do you get the feeling this is going to happen?

BARGER: Oh, I do. I'll tell you, the industry is absolutely focused on resolution about positive tracking. In fact, IATA has put in place A, a tracking task force, and they're going to report out in December at our next board of governors meeting. And so this is with deliverables and working with ICAO. This is not going to be running on for a matter of years.

QUEST: Because it's not just tracking. It is extending the cockpit voice recorder recording times, which of course, the pilots are against in many cases. It is extending the battery life on the locators. It's about black boxes in the sky. It's a holistic approach here, isn't it?

BARGER: It is. And when you think about, hey, events that transpired off of Brazil or in the Indian Ocean over -- just in the last couple of years, there are investments that we can make as an industry that really make perfectly good sense, if we just knock the different agendas off and solve it.

And whether that's emergency locator transmitters and battery life or cockpit voice recorders, or how can you disable a system, my gosh, these airplanes, it's amazing what's being built today by the manufacturers. Let's just all get on the same page, and let's -- it's an incredibly safe industry. Let's raise that safety bar even further.


QUEST: That's Dave Barger, he's the chief executive of the US carrier JetBlue, with some forthright views on MH370. And needless to say, the issue of the missing airliner has been very much first and foremost on the minds of chief executives here.

Elsewhere, of course, they have had to worry about how to make money in some very difficult trading circumstances. After the break, we'll talk about the profitability of the world's airlines as discussed here at IATA.

And also, let me show you this. We'll explain what this is. The is the Benoist, it is one -- it was on this plane where the first commercial flight took place 100 years ago this year. So, the question is, how much was the fare, how much did they pay, and how much was that going to be -- how much would that be in today's money, @RichardQuest, tweet me the answer, we'll see what we've got.

We'll have Alison Kosik, now, to the New York Stock Exchange. Alison joins me now from New York. Alison, why don't you join in the discussion on that. How much do you think they paid for the fare, that first fare across the -- on the first commercial flight?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Gosh, I don't even know where to begin with that. What's your first guess?

QUEST: Oh, I know what it is. I know what the answer is.


QUEST: But we're going to give away a mug or something, or a t-shirt, or a pair of pajamas before the end of the program.

KOSIK: Pair of pajamas.

QUEST: OK, Alison, the market's hit a record, both in -- you'll have a pair of pajamas.


QUEST: Both in the Dow and the NASDAQ. Why was the market so heavily up today?

KOSIK: You know why it was up today? It was because of some ISM data. But it didn't come easy, because first of all, this data came out with a big fat mistake, and at first, that mistake drove the trade. And then the correction steered the trade in the other direction.

So here's how it started. Stocks started the day higher, then they turned lower after that weaker-than-expected reading on manufacturing from ISM came out. And then, when ISM came out and corrected it, you saw stocks turn higher again, for this May reading showing that factory activity actually topped estimates.

What happened here, apparently, a software error cased some adjustments to last month's data to be applied today. So really you saw literally this ISM data move the trade, first lower, and then higher. And you see stocks actually ending mixed, but the Dow and S&P 500 hitting new record highs. Richard?

QUEST: Alison Kosik at the New York Stock Exchange with those record highs. Alison, we thank you for that. After the break, we'll talk profitability in the airline industry, and a reminder @RichardQuest is the Twitter name, how much did they pay for a seat on this plane, and how much would that be worth in today's money? First one out wins a pair of pajamas.


QUEST: While IATA is celebrating a century of commercial air travel here in Doha, here at the Ritz Carlton hotel, where we've set up this magnificent -- although we haven't, we'll explain who has set up this magnificent model.

The organization IATA has actually downgraded the profit forecast for the industry for this year. IATA still estimates that the world's airlines will make $18 billion this year. Now, that sounds like a rather large amount of money. It's $700 million less than it predicted in March.

IATA blames the economic slowdown in China, the world's second-largest economy. In May, the World Bank trimmed Chinese growth after a slew of disappointing data. Then there's the overall picture of world trade, geopolitical risks emerging from the crisis in Ukraine.

On the positive front, if there is anything positive about a margin of just around about 2 percent on a good year, IATA says North America is doing better than most. That's why we've seen a lot of consolidation, such as the merger between American Airlines and US Airways.

Joining me now, the chief executive of KLM, Camiel Eurlings, who joins me. Good to see you, sir.

CAMIEL EURLINGS, CEO, KLM: Good to see you, Richard.

QUEST: You have to admit, the amount of money that airlines are making is rather pathetic, bearing in mind the size and scale of the industry.

EURLINGS: It's unbelievable. If you bear in mind the investments that we need to do to run our business, the margins are very low. But the good thing is, this has been from the very start. Our company is the oldest still operating in the world, 95 years.

And our founder, when our company was just one year old, said, "You have to work very hard to lift from the air." And I think that that still is true these days.

QUEST: Now, what then needs to change? Because I know you have some strong views on the way in which airlines have to relate to each other.

EURLINGS: Of course. Well, we -- first of all, we need to decommoditize. To the customer, we need to be more special, and this is really the new thing. So, we invest on our own DNA, our own product, our own special feeling towards the customer. But behind the scenes, we must work more than ever together. And --

QUEST: But you already are. We've got Sky Team, which you're a part of, you've got Star, you've got One World.

EURLINGS: Yes, Richard.

QUEST: But you want more.

EURLINGS: We want much more.

QUEST: You've already been merged with Air France, though.

EURLINGS: But we didn't only merge with Air France. We are one company over the ocean with Delta. KLM started this as the first in the world with Northwest a long time ago. And the funny thing is, we are so deep together that it doesn't matter to us whether you fly Delta to Europe or KLM or Air France. KLM earns exactly the same because we share everything.

QUEST: Why does the passenger -- I can hear viewers saying hang on --


QUEST: Hang on. You've got all these joining ventures. I spot rising prices. They're all getting together, there'll be fewer choice -- less choice.

EURLINGS: There is still so much choice, but what the customer now has is a network that is unequaled in history, a product that is better and better every year because we have the money to reinvest. We need to have a sustainable business. If you don't earn money, the product goes down, and at the end of the day, there is no more choice.

QUEST: So why do airlines make such bad businesses? I've heard -- since I've been here, I've heard fuel, I've heard cost of capital, I've cost heard cost of aircraft. But all industries have their problems. It seems that the airlines just complain more.

EURLINGS: No, we don't complain. We love our industry, and it's safe from the day one. It was a very difficult industry money-wise. The price for that plane --

QUEST: Right.

EURLINGS: I know it, I'm not going to reveal it.

QUEST: Ah! No, no, you'll end it with a pair of pajamas if you --

EURLINGS: It was way, way, way more than you would pay right now. The price has only gone down because of the tough competition. So that is not bad.

We know to survive, as long as we are efficient, we work together with other companies, and we have a good product. What is a worry, though, is the lack of level playing fields these days worldwide.

We all know it. There was a big discussion on re-regulation, and I think we have to rebalance the level playing field.

QUEST: Rebalance the level playing field. Let's talk about this. Now, your airline, KLM, it is the oldest in the world.


QUEST: How old?

EURLINGS: Ninety-five years old this year. In five years, we will be the first ever to reach a hundred years.

QUEST: I do hope you've changed the seats since then.


EURLINGS: We already did.

QUEST: Well --

EURLINGS: You didn't fly with us a long time. This is what you reveal now. We have the best seats we ever had. Welcome aboard.

QUEST: Thank you. Would you like to have flown in this?

EURLINGS: I would have loved to. I love aviation. I would have loved to have experienced this plane.

QUEST: All right.

EURLINGS: I wouldn't have loved to pay the ticket, though.

QUEST: Sorry?

EURLINGS: I wouldn't have loved to pay for that ticket, though.

QUEST: You wouldn't have loved to pay the ticket? Well, he hasn't got the price. Bring me a pair of pajamas, just to prove that we have them. Pair of pajamas. Bring me a pair of pajamas. Thank you. Just to prove we do have CNN pajamas. They're not miserable my old pajamas left over from last night.

EURLINGS: Thank you so much.

QUEST: Have a good night, sir.

EURLINGS: Thank you.

QUEST: Thank you very much.

EURLINGS: Good-bye.

QUEST: If he doesn't wear them -- we expect him to tweet a picture. Now, also here at IATA, the main headlines from the AGM, Etihad has laid out a considerable investment and conditions for a sizable investment in Alitalia. Alitalia's board will now consider the offer, which has conditions precedent. If approved, the investment will give Etihad a stronger foothold in Europe.

Delta Airlines has ordered 15 A321 aircraft from Airbus. At list prices, $1.65 billion. Has any airline ever paid list price? There was a ringing silence in the lobby here at the Ritz Carlton.

Air New Zealand, which probably also didn't pay list price, made a major purchase. It signed a deal to buy 13 next gen aircraft 320. The price -- the list price, $1.3 billion. The airline hopes the move will cut fuel costs on certain routes.

Now, Air New Zealand is unique at the moment because its new chief executive, Christopher Luxon, is not a man of aviation. He comes from the packaged goods sector. He comes from Unilever. And anyone coming into this industry, particularly from something as competitive as consumer products, must start to think aviation is barking mad.


CHRISTOPHER LUXON, CEO, NEW ZEALAND AIRLINES: I sit in a part of the world where increasingly there's this shift from power economically, culturally, from the Atlantic to the Pacific. You would have previously have thought New Zealand was geographically incredibly isolated, but we have a unique proposition.

We're a leisure-based airline. We very much consider ourselves a tourism company, and we have huge populations sitting in the Americas and Asia and Australia-Asia that actually a proposition of coming and visiting New Zealand is really fantastic.

And so, I look at America, 310 million Americans, 120 million with passports, 40 million tell us they've got New Zealand on their bucket lists, but last year only 220,000 came. So, that's a marketing sales challenge.

QUEST: But if I look, for example, you want to grow the airline.

LUXON: Yes. So, we're seeing big growth across that Pacific Rim region. So this last year, our North American traffic would've grown about 13 to 15 percent. Outbound travel out of the US was up about 1.7 percent.

That's all about us understanding the proposition and actually understanding how do we get those customers who've said they want to come and visit New Zealand to come to us first before they choose Croatia or some other country in the world to actually go visit.

So for us, a lot of it is treating our routes exactly as we would like product lines. So, we've been quite ruthless about that in saying if we can't get a route profitable, we will take control and actually do something about that, and actually to fix it or we'll do something else.

QUEST: It's a -- soap powder, toothpaste --


LUXON: Ice cream.

QUEST: Ice cream. And airline routes.


QUEST: Come on, there must be a difference I this, Christopher.

LUXON: No, I mean the big difference is --

QUEST: Airline routes!

LUXON: No, but it is that people use airline routes as excuses for why they must lose tens of millions of dollars each and every year for a decade. And I think that's just not smart business, right? And so, we've got assets, and we've got to find higher margin places for those assets to go to, or we get to retool the business.

We get to change -- we've had routes that were previously unprofitable, but by focusing on higher yield in customers or a different mix of customers, we've been able to turn them around after decades of losing money.

So, yes, I think it's a mindset thing. And maybe you do hit it a little big differently coming from outside the industry. But for a business like ours, we've had now three CEOs from outside the industry, and that combination it comes from, why do we do it this why? Why can't we do it a different way? As well as the deep industry knowledge is important.


QUEST: That's the chief executive, the new chief exec of Air New Zealand, Christopher Luxon, who's a relative, I should say, newcomer to the industry. Plenty of you tweeting. Remember, you can't just tell me how much the fare was, you've got to tell me roughly what that would be in today's money.

And to prove to you that we do actually have sleep suit pajamas, for those of you taking long-haul flights, the first person out of the hat will win this fine pair, which I assure you, has not been worn. Take my word for it.

When we come back after the break, Apple has made a new announcement. The new IOS 8 is being revealed. Not only will it be faster, better, smoother, longer, shorter, whatever, it will also look after your health. We'll have the details on that in a moment. QUEST MEANS BUSINESS, live from Doha.


QUEST: Welcome back to the coverage of the IATA annual general meeting, from the Ritz Carlton in Doha in Qatar. One of the interesting statistics we learned today from Tony Tyler, the director general of IATA, is that these days, you could, for the price of four iPads, fly around the world.

I have to say, IATA had clearly bought the iPads in Switzerland and not in the United States, but still, the point was made that four iPads was the cost of a round-the-world ticket.

Well now, the maker of the iPad, Apple, wants to move in with you and monitor your health. Today, Apple announced new versions of its mobile and desktop operating systems at its developer conference on the West Coast. A new home kit feature would allow you to control smart home devices, like lights and thermostats.

And Apple a day will keep the doctor away. A new HealthKit app will monitor the health and fitness information. Apple is teaming up with the Mayo Clinic, a huge care provider, to bring a bit of care closer.


TIM COOK, CEO, APPLE: When a patient takes, let's say, a blood pressure reading, HealthKit automatically notifies their app, and their app is automatically able to check whether that reading is within that patient's personalized healthcare parameters and thresholds.

And if not, it can contact the hospital proactively, notify a doctor, and that doctor can reach back to that patient, providing more timely care.


QUEST: Now, if the developers were wowed -- and let's fact it, anybody in that audience, they only have to mention Apple, and they all start to cheer and froth at the mouth. Apple's investors in the market were not. The stock dropped $5, at $625 over the course of the presentation. It clawed back some ground, $628 was the close, still down on the day.

Dan Simon was at the presentation. He's in San Francisco for us now. A new system, some new gadgets, tweaks, and odd things. But is it what people had been hoping for, Dan?

DAN SIMON, CNN SILICON VALLEY CORRESPONDENT: Well, I tell you what, Richard. Sometimes the software is just as important if not more important than the hardware. And clearly this is one of these days.

If I could Richard, what I'd like to do is just kind of run down what I thought were the four coolest things that came out today. The first thing to me was the seamless integration between your IOS devices and your Macintosh computer.

So, just for example, if your phone is across the room or down the stairs, your phone will actually ring on your computer and you can answer it right there on your computer and have a conversation through the speaker and the microphone.

The second thing, Richard, family sharing. Now, this is something that will better enable parents to track their kids' whereabouts.

Now, teenagers may not appreciate this very much, but easier features to track your kids wherever they go, and also to approve or disapprove the purchases they make on the phone. So, for instance, they want to buy something, you can be alerted and say yes or no to that.

The third thing is this HealthKit, which we've been talking about. I think this is a precursor to the rumored iWatch, which is likely to come later this year. So, you talked about it, better monitoring your heartbeat, blood pressure, calories burned --

QUEST: All right.

SIMON: -- all the steps you take. For now, it's going to work with just third-party devices. Go ahead.

QUEST: Dan Simon, who is in San Francisco for us this evening. Dan, we thank you for that. The blood pressure, I keep it under control.

When we come back after the break, we will have more from IATA, the Airline Transport Association, the aviation organization representing the global airlines. This is QUEST MEANS BUSINESS, we're live in Doha.


QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" from Qatar in a moment. This is CNN and on this network the news always comes first.

Spain's King Juan Carlos is abdicating after nearly 40 years on the throne. He'll be succeeded by his son the Crown Prince Philippe. Some Spaniards are now announcing rallies, calling for an end to the monarchy altogether.

In Ukraine officials say seven people have been killed in an explosion at a state-run building in Lugansk, that's part of the self-declared Donetsk People's Republic. Earlier, Ukraine's border guard said five militants were killed in violence in Lugansk. It happened after they apparently took part in a large, coordinated assault on a border guard base.

FIFA says it will finish its investigations into the 2018 and 2022 World Cup bids next week. The "Sunday Times" newspaper says it has evidence that the Qatari official paid more than $5 million to buy votes for his country's bid. Some FIFA officials are calling for the vote to be rerun.

The five Taliban detainees who were released to Qatar in exchange for the U.S. army sergeant Bowe Bergdahl have arrived in Doha. Bergdahl is in stable condition at a hospital in Germany. He's recovering from five years of captivity by the Taliban.

And a warm welcome back to "Quest Means Business" joining you - joining me now to talk about IATA is Ben from "USA Today." Good to see you, Ben.


QUEST: Nice to see you - come on in and have a chat. Here at IATA, the issue that they have been talking about again and again is one of profitability.


QUEST: How to make money in this very difficult market.


QUEST: Ben, what are they doing wrong?

MUTZABAUGH: Well, I tell you right now they're doing a lot right. You know, their profits are up, they are on these very thin margins and that is a concern. But in the U.S. especially, we've seen restraint in capacity, it's been a little more mixed in other parts of the world, but I think that right now is the big - is the big lynchpin for this is restraint capacity.

QUEST: Well here in Doha -


QUEST: Are they all being unduly polite -- all the other airlines about the Gulf 3 - Qatar, Emirates, Etihad - who, let's face it - you're a journalist, you can be honest - those three Gulf carriers are eating the others' lunch.

MUTZABAUGH: Well, they can like it or not, but there's not a whole lot these other airlines can do. You know, the airlines in Europe who don't like it - these hubs and Istanbul are so strategically located to connect passengers from Asia, from Australia to the Americas, and that's really tough at the hub at Frankfurt or Paris or Amsterdam - some of these other places to compete with.

QUEST: Right, but are these other airlines running better airlines or are - is - there the question of unfair competition? I know it gets perennially asked -


QUEST: I guess all the time etakis (ph).

MUTZABAUGH: Well I just think, you know, you probably have people on both sides take the unfair competition out of the equation. I think the challenge that the other - the carriers that aren't in the Gulf have, is that these carriers here are all relatively new, they're not burdened with a lot of legacy costs and they fly a lot of these lucrative long international routes. They don't have to do these little puddle jumper flights like Lufthansa or United or an airline like that does.

QUEST: Well you talk about the U.S. carriers. The U.S. carriers have in recent years had a fairly awful reputation.

MUTZABAUGH: That's true.

QUEST: You'd agree?

MUTZABAUGH: Yes, everyone would.

QUEST: They may be big - they may be big and they have lots of planes, but they have had a pretty shocking reputation. Have they got better? Are they now raising the bar themselves?

MUTZABAUGH: They have, and I think this is why we're - this is where passengers are seeing the benefit of this profitability. Yes, the U.S. carriers are probably the bottom of the barrel, perhaps across the whole civilized world there for a while.

QUEST: Right.

MUTZABAUGH: But now we're seeing Delta have new aircraft orders announced today that will start to phase out, presumably the 757s. We're seeing American and even JetBlue, a discount carrier, offering live flat suites - or beds at least - on cross-country flights. So there is an improvement underway.

QUEST: I want to just finally talk about MH370, because it is the issue that everybody's talking about but nobody's talking about.

MUTZABAUGH: Well, you know, I'm not a safety guy and -

QUEST: No, but in terms of do you get the feeling that this industry - that the airlines here - will pay whatever it takes to get this thing right.

MUTZABAUGH: I think they will. And the question that I have too is that, you know, this was one plane. This was a very unusual occurrence, but I do think that like Tony Tyler said this morning, it's an excellent question and this day and age, how can a large jetliner -

QUEST: Right.

MUTZABAUGH: -- vanish? So I think that, you know, when they come up with their recommendations, I think that they'll pay.

QUEST: Now, would you - would you have - spent the money? Don't tell us how much, but would you have liked to have been the chap in that seat if I was to give you a ticket?

MUTZABAUGH: Oh, who wouldn't? That looks incredible. Yes, and probably saved a lot of time back in the day back in the day going across Tampa Bay.

QUEST: Going across Tampa Bay. Good to see you, sir. Ben, thank you very much indeed --


QUEST: -- for joining us. Give him a pair of - give him a pair of pajamas.


QUEST: We've got to get rid of them somehow before we're finished. A pair of CNN pajamas - you can use them on a long-haul flight, short-haul flight. And now, when we come back after the break, he has been king for decades, he was regarded as the savior and democracy in Spain. In recent years that view may have tarnished. Now Juan Carlos has decided to go, and our Madrid correspondent will tell us why. It's "Quest Means Business." Good evening.


QUEST: Welcome back to Doha. There is warm weather, there is hot weather and then there is the Gulf in the summer. The weather for - the temperature - Tom Slater joins me from the CNN World Weather Center. I think it's 41 or 42.


QUEST: But what they've been saying here is that these temperatures even this early on in June are somewhat unusual. There must be something weird happening with the weather, and if something weird is happening, you're the man to ask about it.

SATER: Oh, is that right? Well, I'll tell you, I do what I can to answer it, but Richard, they're not the only area on our planet that is seeing higher than normal temperatures. Beijing for instance at 41.1 on Thursday - the hottest they've been in 12 years. Tokyo has seen three days at 30 or higher, and they typically have three days for the whole month of June. No problems - going to start in Europe. If you're flying out of that area for business or pleasure, or what have you, really no major issues. Already 22 - Madrid's dropped 3 degrees in the last two hours, but teens can be found - Vienna 14. We are watching some thunderstorms that have been dropping some good-sized hail, even producing some minor wind damage, mainly from Ukraine northward, Belarus as well. Russia - look at that hail - 3 centimeter diameter hail and even a rainfall across Northern Africa is going to spread across parts of the Mediterranean. That's the next storm system we're going to be watching

But the threat for severe weather for those of you who have interest, you can see just clipping parts of Poland all the way down again as mentioned across Ukraine. So, thunderstorms could fire up any time in the afternoon, and they did in Istanbul. Take a look at it - heavy rain now from a flash flood - just a thunderstorm. Very rainy day, but we're watching that area gain because even though we have isolated showers across Central Europe, the storm system moving across the Central Mediterranean could really kick up the winds. Watch Athens get winds up to a good 75 kilometers per hour, then of course as the center is over them, they start to lighten up somewhat. So we'll keep an eye on that area. On Tuesday, high temperatures along with the thunderstorms - Kiev 23 degrees, Istanbul 24.

In the U.S., the stage is set for a day of severe weather in the Midwest and Central Plains. That'll take shape on Tuesday afternoon. Again, isolated tornadoes to even a pretty good bet with a second little system. Here you see that you have the slight risk. When it comes to a moderate a risk, you can almost count on it. That storm system will slide into the Great Lakes. So all the ingredients are there for the possibility of some delays from Kansas City, St. Louis and into Chicago. Again, isolated thunderstorms in the afternoon. High temperatures quickly for you - 31 in D.C., 29 in New York on Tuesday.

Elsewhere, Taipei looking at the chance of heavy rainfall, Kuala Lumpur thunderstorms. Here's the heat in Beijing we talked about starting to see a little bit of a drop now from the extreme heat wave that they had. Again, 41 last Thursday. Thirty-two will do it for the day today and 31 in Hong Kong.

But I got to share this with you because I want to shift gears over to the capital of Iran. Notice the thunderstorm blowing up through here. Take a look, Richard, at what happened at 5 p.m. in the evening local time. Strong winds kicking up a wall of sand and dust that swallowed the capital city. Buildings were destroyed, four died in this. This is a massive wall that was recorded here on YouTube, we were able to share it with our viewers, and as the photographer kinds of moves his way around, you'll see the other end of this massive wall that just blocked out the sun. Temperature dropping from 33 degrees down to 18 in just an hour and a half. But the other pictures do justice for you as well. I mean, when you see images like this, that is definitely a massive sand storm. So, again, we're looking at temperatures -


SATER: -- to be right about 42 where you are, Richard, you're correct on that.

QUEST: Right. Tom, the mere thought of 42 which is well over 100 in old money is enough to have me rushing to the air conditioning. Tom Slater at the World Weather Center. As we told you a moment ago, the King of Spain says it's time to hand the throne over to the next generation. King Juan Carlos the First stepping down after reigning for nearly 40 years. Credited of course with helping bring democracy to Spain after the death of the dictator Francisco Franco in 1975. He will be succeeded by the Crown Prince Philippe. The King says his song will be better-equipped to handle the social scars which have arisen from the country's deep economic crisis.


KING JUAN CARLOS, SPAIN, VIA TRANSLATOR: There is time to hand over to a new generation, younger with a lot of energy, that can with determination take on and carry out the changes that the current situation demands and to face with intensity and dedication the challenges of tomorrow.


QUEST: Our Madrid bureau chief Al Goodman is in Madrid for us tonight. Al's at the scene of a - of an - anti-monarchist protest that's taking place. Al, the King was loved, revered. We all remember him standing in Parliament after an attempted coupe. Why is he going now?

AL GOODMAN, MADRID BUREAU CHIEF FOR CNN: Because after a long, really good ride and very much in touch with the Spanish people in the last couple of years, the criticism has been that he and his monarchy have been quite out of touch. And what he didn't mention in he - in his - in his - speech today that was recorded about his reasons for abdication, he did not mention, Richard, the scandals that have hit him personally and also the monarchy. The scandal that hit him on a safari hunting trip to Africa a couple of years ago at the height of the economic crisis, seen as very ill- timed. He even came out and apologized to the Spanish public for that. And also, the ongoing corruption scandal involving his daughter Cristina and her husband, the King's son-in-law, who are accused of possibly diverting public money into their pockets which they denied -

QUEST: Right, but -

GOODMAN: -- but there is an ongoing court investigation into that.

QUEST: Al, you're at the scene of an anti-monarchist demonstration and protest. Is there any real risk that Crown Prince Philippe will not take over, or if he does it will be a short reign. In other words, is the monarchy in danger in Spain?

GOODMAN: Well, they're going to have to really watch their step and Prince Philippe assuming he becomes then next king, he's going to have to really to start the - hit the - ground running to try to restore the damage. Now, there are dozens of demonstrations in large city here in Madrid, in Barcelona - many large city. There's a petition drive online - 100,000, but the countries got 45 million people. Polls have consistently shown that those who wish to get rid of the monarchy are till a minority.

So, it does appear that the monarchy will pass from Juan Carlos to Prince Philippe and that they - he - will have a chance to try to undo the damage and carry forward, the Prince - the King - pointing out that the Prince is a fountain of stability and that appears to be what the political class in a monarchy needs. Richard.

QUEST: Al Goodman in Madrid for us tonight. Here at IATA they've been celebrating 100 years of commercial aviation. A hundred years since the first flight was taken in the Benoist. We'll tell you more about it and the developments, and we'll talk about this magnificent model after the break. This is "Quest Means Business" in Doha.


QUEST: It was 100 years ago that the first commercial flight took place. It was in the Benoist, it was a flight across the - across Florida - that's Tampa Bay. And the pilot paid - it was the mayor, the local mayor actually who bought it at a local auction and he paid $400 for the privilege of being on that first flight. That works out at roughly 9.5 to $10,000 in today's money. But what this started 100 years later, through many airlines, many incarnations, through prop planes and jets, from supersonic and down back to earth again, a revolution in aviation began. The risks and rewards of commercial flying.


QUEST: It all started with a 23-minute flight in a flying boat across Tampa Bay, Florida in 1914. It was humble beginnings for an industry which has transformed our world. Then, the mayor of St. Petersburg paid $400 - worth $9,000 in today's money for the privilege of becoming the world's first paying passenger. Scheduled commercial flights were born. What the Wright Brothers started, others continued. Alcock and Brown, the Gipsy Moth, these are the machines that helped create an industry which today is worth trillions of dollars. Think about it - eight million of us each day get on a plane and take to the skies. Some three billion journeys were taken last year. And with those trips went the hopes and dreams of deals to be done, families to be reunited, ambitions to be realized.

The entrepreneurial spirit of risk-taking spawned by the early pioneers continued as more and more airlines took to the skies. Pan American World Airways blazed a trail across the Atlantic with jet aircraft and trumpeting service.

Male: A new concept in air transportation. The travail has been taken out of travel.

QUEST: The smooth for passengers it might have been, but for the airline, the concept of risk and reward eventually went into reverse - Pan Am couldn't survive. The CEO of the airline industry's trade association Tony Tyler has seen them come and go.

TONY TYLER, CEO AND DIRECTOR GENERAL, IATA: These name have gone - the Pan Ams as you say, and the British Caledonians and others. But of course their businesses went into other businesses, and that tells us that consolidation is the way forward in this industry. But we're also seeing, as you say, the rise of new kinds of airlines which bring a new business model, a new way of looking at the business. And then something else has happened over the years. I mean, they're not the first ones to be new. Every airline starts off with a new model and a new way to go.

QUEST: Risk and reward is everywhere in aviation. A stroll through the engine display at the London Science Museum ends up at the RB211 built by Rolls Royce. And this more than perhaps any other air engine symbolizes the contradiction in aviation. On the one hand, it is a technological marvel ushering in the turbo fan and a new generation of power plants. Unfortunately, it costs so much to develop, it drove the manufacturer of Rolls Royce into bankruptcy.

The industry has suffered as much turbulence in the pocket as it has in the air. American Airlines is another example of risk and reward. Doing what it does best wasn't enough to keep American from bankruptcy and it was the last major U.S. carrier to merge with U.S. Airways.

TYLER: What we need in this industry to be - to be -- really successful looking forward is a global mindset. The point is this is a global industry. It's become global over the last 100 years. We are - we're the industry that makes global possible. And to - what that means is that everybody in it has to understand they're part of a global network, they're part of a global system and the need to think globally in everything they do.

QUEST: Aviation has always been at the heart of big dreams. Today's mechanical birds are a century away from that airboat which crossed Tampa Bay. But there's one thing that everyone still shares - they balance the risk and the rewards.


QUEST: Bob Walker and Bill Barnes from the Florida Aviation Historical Society built this magnificent model of the Benoist. How - what is it like flying in that thing do you imagine?


QUEST: Really?


QUEST: He paid 400 - he paid $400 for the trip. How did that come about?

BILL BARNES, DIRECTOR, FLORIDA AVIATION HISTORICAL SOCIETY: They needed lights at the end of the railway pier and it was $400 to put lights out there so he did money for the lights.

QUEST: So that's why he paid. But it was a fortune in those days.

BARNES: I know, but he was a former mayor so he probably had the money.

QUEST: He was the former mayor, he'd pay for it. But from this trip - how long was it? Because the airline involved here didn't last very long.

WALKER: Twenty-three minutes.

QUEST: Right, the flight was 23 minutes.

WALKER: Yes. From St. Petersburg to Tampa, across the bay.

QUEST: Do you think they had any idea what they were starting in that regard.

BARNES: I doubt it really. You couldn't envision what happened - what came about from that flight. I mean, look at today, you couldn't envision that.

QUEST: This - go ahead.

WALKER: I think that Percival Fansler who was the promoter of this whole thing had a vision, you know, farther than anybody else.

QUEST: Do you, gentleman, you obviously love aviation -- why? Tell me why - what is it?

WALKER: Why - I don't know - fascination. It's 3D. You know, it goes left, right and then up and down, and that's exciting.

BARNES: It's great to manipulate a machine in three-dimensional space. I love it.

QUEST: Oh that's a very - that's a very - clinical way of talking about it though, isn't it? Manipulate a machine in three-dimensional space. It's magic, it flies!

BARNES: It does. And this was the beginning of my career. That's why I wanted to be part of it.

QUEST: Really, it was part of - the beginning of your career. If there is one change that you think was absolutely seminal at the core of aviation, what do you think it was? What moment changed aviation? Was it this sort of development?

BARNES: This started it, but the big thing in aviation's the turbine engine. The jet engines made today possible. You could never get these airplanes flying with reciprocation.

WALKER: But I also think that Tom Benoist who designed this airplane was a far thinker than the rest of them because if you look at it, it's got -

QUEST: Right.

BARNES: -- rudder elevator in the tail and ailerons built into the wings. (Inaudible).

QUEST: In other words, in other words, what we're looking at here is very similar in basic language to the airplane that we fly today. When we come back, a "Profitable Moment" from Doha.


QUEST: Tonight's "Profitable Moment." IATA, well it's hardly the most exciting organization in the world, some would say. But that has been put to rest at this year's annual general meeting, the 70th of the organization. First of all, this splendid model to commemorate 100 years of flying, but then who would've thought that an IATA idea you would've had Kylie Minogue serenading the airline CEOs. Some of them didn't know - looked as if they knew what had happened to them. Aviation is amongst the most exciting inventions industries in the world. I can put it any which- way and backwards. You can talk about the profits or you could talk about the people or the global economy or you could talk about the contribution it makes to society. But when all is said and done, what really is magnificent about this industry, is you take something like this, you shove it down the runway at a great speed and if everything goes according to plan, it goes into the air. If that's not magic, tell me, what is? And that's "Quest Means Business" for tonight. I'm Richard Quest in Doha. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable. I'll see you tomorrow.