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MH17 Search for Answers; Malaysia Airlines; Rethinking Flight Paths; $50 Billion Yukos Ruling; Dow, S&P Rise, NASDAQ Falls; Most European Markets Down; Carnival CEO on Costa Concordia Salvage

Aired July 28, 2014 - 16:00   ET



MAGGIE LAKE, HOST: Blue chips reverse early losses to end the day modestly higher. It's Monday, the 28th of July.

No access, no progress. Investigators are forced to retreat from the MH17 crash site.

A $50 billion blow to Russia's economy. It's told it must pay out to Yukos shareholders.

And in an exclusive interview, Carnival's CEO tells CNN about the extraordinary salvage operation of the Costa Concordia.

I'm Maggie Lake. This is QUEST MEANS BUSINESS.

The UN human rights commissioner says the shooting down of MH17 may amount to a war crime. Navi Pillay has said that an effective and thorough

investigation of the crash site is crucial. Still, 11 days after the tragedy, Dutch investigators have not been able to lay their eyes on the

wreckage due to fierce fighting in the area.

According to Ukraine's security council, the plane's flight recorders show it was destroyed by shrapnel from a rocket blast. The damage led to a

massive explosion, decompression. Nick Paton Walsh is in Donetsk and joins us now with the latest. Nick?

NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT: Maggie, this violence continuing, really, all around Donetsk, where I'm standing.

To the north, certainly, and clearly, today, even by the Ukrainian government's own admission, a move to retake many of the key towns around

the crash site.

And we saw ourselves how that hampered the progress of that investigative mission, trying to get near the remains of MH17.


WALSH (voice-over): Days of planning, talking, but now, for Dutch and Australian police with OSCE monitors, time to move. Roads cleared by

separatists for a convoy, half journalists, towards where Flight MH17 still lay in part.

We stopped on the edge of the town Shakhtarsk, where separatists digging in on the roadside blocks the media's path while the inspectors

continued. Soon, we heard distant shelling, and later learned the inspectors had to turn back.

WALSH (on camera): They're taking up positions along this road, but people fleeing Shakhtarsk say that overnight, two planes dropped bombs upon



WALSH: They're moving us back down the road. Two planes dropped bombs and they are fleeing, frankly, out of fear for their lives. A

difficult place for the convoy to continue through.

WALSH (voice-over): A steady flow of fear. "The planes flew from this direction," he says. "My little one, she's terrified." We pulled

back to see more smoke.

This carload saying there are Ukrainian soldiers there, but it's hard to distinguish them from separatists. On the back roads, they also fled,

and we soon heard, too close, why.


WALSH: Rockets landing nearby. Quiet farm lives here, torn apart by this violence before it brought down MH17. Now, it keeps both these people

and the relatives of the plane's dead in limbo. They won't get answers or closure that they need until inspectors can start work. Those inspectors,

felt let down both by the Ukrainian army and separatists.

WALSH (on camera): So, the Ukrainians were on the move as you were, as well, towards the place you were going. Surely, this makes it difficult

tomorrow to try again if the very moment they're supposed to be stopping fighting, they're advancing.

UNIDENTIFIED MALE: Obviously, the frustration is there with us. We haven't seen any troop movement ourselves, so I can't confirm what the

press has been stating. We go back to the drawing table and we will hope that we have tomorrow a more substantial agreement.

WALSH (voice-over): Each day lost, though, another 24 hours of pain for the relatives of those on MH17.


WALSH: Maggie, you heard there hope for tomorrow that maybe something will change. I have to say, it looks like with the violence continuing

around there, the most substantial change would be the Ukrainian military being successful in holding that area. And then, they're going to have to

hold it for a while for anyone to feel safe to go there.

To give you a snapshot of where I'm standing, Maggie, kind of he center of all this, Donetsk City itself, it is absolutely deathly quiet at

the moment. The occasional screech of tires, the occasional stray dog here and there. And every once in a while, an artillery shell thumping into the


It feels like things are changing in this long civil war. But at the end of the day, now, both sides seem to want to be the one that allows

access to that crash site, and that's not good for its integrity and its ability for the evidence there to stay intact, if any remains.

And of course, for the sad fact that personal belongings and even maybe, grim to say it, human remains are there that need to be brought back

to relatives so they can have some sort of closure, Maggie.

LAKE: Nick, I do want to ask you more about the investigation in a second, but so striking when you were talking to that father. We must

remember that civilians are caught in the middle of this. It must be a terribly uneasy and confusing situation for them, with violence all around.

WALSH: Certainly. It's bizarre, to be honest, because it's hard to define where the front lines are. The separatists don't want, really,

anybody near their side. The Ukrainian military, similarly, too. But they're still fighting it out over very heavily-populated areas, sometimes.

There seems to be a desire for both sides to avoid fighting breaking out unnecessarily here in Donetsk, because a million people used to live

here. Significantly less now. But it's happening in these rural areas, a town called Horlivka to the north, very heavily-fought over at the moment.

And I think it's remarkable how the spotlight has come back on the civil war because of the horrors inflicted on MH17. But it's been raging

now for weeks, hundreds caught in the crossfire here. Many civilians losing their lives. So much heavy weaponry being used.

Actually, it's remarkable. Two months ago, it was all small arms, Kalashnikovs. Now there's the constant thump of heavy explosions, very

hard to navigate for us moving around, but particularly for those people who live here. Maggie?

LAKE: And that's an incredibly essential point that you just made, Nick. And that is something, obviously, the international community is

looking at closely. When you were talking to investigators, you can sense their frustration.

Is there a sense that people are in control? In a sort of typical situation, promises were made that passage would be allowed to the site?

Is there a clear command in control, or are the forces on the ground, really, sort of acting and fighting amongst themselves independently,

perhaps, where their leaders may be sitting?

WALSH: It's a very messy picture, but essentially, the OSCE are clear that they talked to the same operational commander on the ground who seems

to have control of the separatist forces that lead the way towards the crash site. That doesn't seem to change.

And while we here have seen fluctuations and changes in the senior leadership of the separatists, the prime minister, for example, has

announced today he's on a trip to Moscow trying to secure humanitarian help at this particularly crucial time.

We're also suggesting that, too, the separatist militants on the ground are more or less coherent every day. But it's a fractured group, a

fractured movement, so that's a mess, too.

The Ukrainian military? Well, yes, I think they are very well controlled at this stage by Kiev. The thing you're hearing, though, from

Kiev, too, is that they seem to be the ones who want to have sovereignty over that crash site, the ones who want to give access to it.

And we've heard suggestions from them they wanted everyone to wait until Thursday before trying to get there so legislation can pass in

parliament to legalize that access.

It's a very messy picture, but at the end of the day, it seems as though everyone's politicizing access to this site. Both sides want to be

the ones who can offer it, but neither side is actually able to do so right now because they're effectively fighting over the area around it. Maggie?

LAKE: Incredible, and so frustrating, I'm sure. And very perilous for those investigators that are trying to get there and for the journalists

who are following. All right, thank you so much, Nick Paton Walsh there.

Well, as the search for answers about MH17 continues, the final resting place of Malaysia Airlines Flight 370 remains unknown. Will Ripley

spoke to the former CEO of the airline about how the airline is handling two unthinkable tragedies in just four months.


WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT (voice-over): The number that matters most for Malaysia airlines is 537 -- lives lost in two

tragedies just four months apart.

ABDUL AZIZ ABDUL RAHMAN, FORMER CEO, MALAYSIAN AIRLINES: They've died. So, it's really very sad.

RIPLEY: The man who once led Malaysia's national carrier, Abdul Aziz, also worries about other numbers: $1.3 billion, money the airline lost in

just three years, forcing those in charge to look at restructuring plans and possibly another government bailout.

AZIZ: I don't think they have ever gone through this kind of situation in the past.

RIPLEY: A crisis coupled with fierce competition. Leaner, low-cost carriers are luring some passengers away.

AZIZ: The business model definitely needs to be changed.

RIPLEY: He says Malaysia Air needs more low fares, less full service, higher seat count, lower food costs, and he says push for open skies

agreements to make international flying easier.

AZIZ: I think they can survive. They have the foundation.


RIPLEY: But marketing experts say the battering of the Malaysia Air brand could take years to undo.

ENNEW: The airline needs to focus on the whole process of trying to recreate, rebuild trust, rebuild consumer confidence.

RIPLEY: University of Nottingham's Christine Ennew says the key is careful strategic communication with customers, a strategy that helped

other carriers survive crashes, bombings, and terror attacks.

ENNEW: Because if you're going to build trust and confidence, you need the openness.

RIPLEY (on camera): So, the transparency.

ENNEW: Transparency.

RIPLEY (voice-over): But never before has an airline faced a double dose of devastation like Flight 17 and 370, two planes, hundreds of lives

lost, and 20,000 Malaysia Airlines workers who now face an uncertain future.

Will Ripley, CNN, Kuala Lumpur, Malaysia.


LAKE: The MH17 disaster has airlines throughout the industry rethinking flight paths. Dubai's Emirates announced Monday it will avoid

Iraqi airspace. Islamic insurgents battling the government have taken control of vast parts of the country. Richard Quest spoke to Emirates CEO

Tim Clark last week about evaluating risk posed by conflict zones. At the time, Emirates was still flying over Iraq.


TIM CLARK, CEO, EMIRATES: You're right that we do fly through Iraqi air space, and like the Ukrainian air space, but without, I hope, the

ordinance that it is deemed to be safe to operate above a certain flight level.

But yes, it does cause us to look at what we need to be doing in the future, whether we should be routing more to the east or more to the west,

these routes can be done and can be taken. And at the moment, we're already doing it. Our access to the Lebanon is well out into the

Mediterranean. It doesn't go anywhere near Israeli air space, Syrian air space, or anything like that.

We have taken a number of measures. Tripoli, we've had to stop flying. We had to stop flying to Peshawar when the Pakistan International

Airlines aircraft was shot at. We are constantly assessing what is going on.

But yes, when we are now overflying areas of conflict which could quite potentially become far more serious, far more acute in their actions

and more contagious in their effect in the region, then we will be having to review all of that.


LAKE: Global aviation leaders are set to meet at a conference in Montreal tomorrow. Officials will discuss the threat posed by conflict


It is a landmark victory for shareholders of defunct oil company Yukos. After the break, the man who's been locked in a decade-long battle

with the Russian government tells us what he thinks it will take to actually collect the damages.


LAKE: "Devious and calculated." That is how a court in the Hague has described Russia's expropriation of Yukos, once the country's biggest oil

company. In a landmark ruling, Russia has been ordered to pay more than $50 billion to damages to Yukos shareholders.

The case dates back to the early 2000s when Russia charged Yukos and its CEO with tax evasion and sold off the company's assets at below-market

rates. Most of those assets ended up at Rosneft, Russia's state-owned oil company. Yukos chief executive, Mikhail Khodorkovsky, was sent to prison

in Siberia.

The lawsuit has been working its way through the courts for nearly a decade. Russia's finance ministry has promised to appeal the ruling,

calling it politically biased.

The lawsuit was filed by GML, a holding company representing Yukos' biggest shareholders. GML's director says he is thrilled with the ruling,

although he has told Jim Boulden he doesn't expect Russia to pay out anytime soon.


TIM OSBORNE, EXECUTIVE DIRECTOR, GML: I would be surprised if they gave over $50 billion because of this ruling. But it is important to

remember that they participated fully in the arbitration. They've turned up to both of the substantive hearings, they had any number of lawyers

present every day, and they put all their pleadings in on time, they paid all their fees.

So, they have participated fully, they have little reason to complain about the process. But ultimately, yes, I don't expect them to simply send

us a check.

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: So, how do you expect to get the money?

OSBORNE: We have to register our award in domestic court and relevant countries, and then, once we've done that, the award effectively becomes a

local decision, and we attach assets in that country that we can find that belong to the government of the Russian Federation but which are not

diplomatic assets.

We haven't narrowed it down to specific countries, but certainly the countries that immediately come to mind are all the major Western European

countries and the North American countries, the USA and Canada, because there are significant Russian assets in all of those countries.

BOULDEN: What about going after Rosneft? Because, of course, Rosneft was created out of what was then, of course, Yukos Oil.

OSBORNE: I think there's an emotive reason why Rosneft is immediately chosen as the example, but the same applies to any state-owned company. We

can't go after companies just because they're majority-owned by the Russian state. What we would have to do is demonstrate that they were

instrumentalities or agencies of the government.

And in the awards that were published today, our tribunal went a very long way to confirming its view that Rosneft was an instrumentality of the

state, was the vehicle by which the Russian Federation bankrupted Yukos. And of course, as you say, was the recipient of most of the Yukos assets.

BOULDEN: Because here in the UK, of course, BP is a 20 percent shareholder of Rosneft, so I wonder how messy this might get.

OSBORNE: Oh, I don't think BP would ever come into the litigation. What BP would do is if we were successful in Rosneft and that had an effect

on Rosneft's share price, then BP, like any other shareholder in Rosneft, would suffer. But that's not on my list of worries.

BOULDEN: I think I read that you said in 2006 you wish you had never gotten involved in this. You've been doing it since 2004. How do you feel


OSBORNE: I feel today very pleased that we have established that the rule of law can prevail even in these situations, and that if we get to an

independent tribunal with -- where the rule of law applies, then we can get a judgment in our favor.

Enforcing it's another issue, but I do feel that we have established the importance of the rule of law internationally. And for that, I'm very

pleased. So, actually, I feel better about being involved --


OSBORNE: -- today than I did in 2006.


LAKE: Tim Osborne has good reason to believe it will take time to get the money, if he ever sees it at all. At a press conference earlier today,

Russia's foreign minister, Sergey Lavrov, suggested Russia would fight the ruling with everything at its disposal.


SERGEY LAVROV, RUSSIAN FOREIGN MINISTER (through translator): Court procedures are not over. Appeal is possible. The Russian side, those

agencies which represent Russia in this process, will no doubt use all available legal possibilities to defend its position.


LAKE: The Russian Finance Ministry said the ruling was "flawed, one- sided, and politically biased."

Now, turning to the markets, the Dow and the S&P saw tiny gains in New York. The NASDAQ actually ended the day lower. Zain Asher is in the -- at

the New York Stock Exchange. I guess you're in it, too, Zain, really. She joins us now.


LAKE: It looked like it was going to be a little bit of a tough day. We did see some selling, but then investors kind of moved a little bit more

neutral, I guess, at the end. What were they talking about.

ZAIN ASHER, CNN BUSINESS CORRESPONDENT: Right. Yes, so, basically, the Dow was in negative territory for much of the day, then it sort of

swung into positive territory halfway through the day, and that ended basically a three-day losing streak.

I've been downstairs talking to traders, who sort of seem surprised by this market's resilience. Besides the negative guidance issued by Goldman

Sachs last week warning investors to be cautious, and then you had weak pending home sales we got today -- the pending home sales dropped one

percent in June. The Dow still ended the day up about 22 points.

Overall this week, though, Maggie, the focus is going to be on macro data. Yes, of course we're going to be focused on earnings, but listen,

we've got this Fed meeting this week, you've got the July jobs report.

And there was this feeling that since we have seen consecutive sold jobs growth within the 200,000 range, what is going to happen to rates?

Are we going to see interest rates rise sooner than expected?

And of course, we had a pretty big day in terms of mergers. We've got Zillow buying Trulia, and then you've got Dollar Tree buying Family Dollar

as well. And tomorrow, we've got earnings from Pfizer, UPS, Merck, Aetna. And then, you've got GDP as well. So, a lot to look forward to in terms of

earnings, and also macro data, too. Maggie?

LAKE: Absolutely. We're going to hear from the Fed as well. Some investors are going to be busy. Zain, thank you so much. Zain Asher.

In Europe, unrest in Ukraine and the Middle East and uncertainty about corporate earnings pushed markets down. The Russian MICEX fell nearly 2

percent following that court's $50 billion ruling in favor of shareholders of former oil giant Yukos.

There were a few bright spots, however. Ryanair shares rose over 2.5 percent after the budget airliner raised its forecast for the year. And

Reckitt Behckiser shares rose 2.7 percent after the health goods company announced it was looking to spin off its pharmaceutical unit.

Well, as the Costa Concordia reaches its final destination, the junkyard, marks a sorry end to a disastrous period for Carnival Cruises.

We'll have Richard's exclusive interview with the group's CEO after the break.


LAKE: The sorry sight of the wrecked cruise liner the Costa Concordia being dragged towards a breakers yard closes one chapter in a difficult few

years for Costa Cruises. The Concordia, which capsized off the coast of Italy in January 2012, killing 32 passengers, will now be broken up for


The company has seen a number of crises following that disaster, including this one in February 2013, when passengers onboard the Carnival

Triumph were left without water and toilets after a fire just off the coast of the US.

Richard asked the CEO and president of Carnival Corporation, Arnold Donald, for his reflections.


ARNOLD DONALD, CEO AND PRESIDENT, CARNIVAL CORPORATION: It was a tragic accident, and those that suffered will always be in our hearts. The

other part of it is that now it's with the salvage company. It was a major technical achievement to right the ship and to float it into Genoa. The

Italian people are proud of that technical accomplishment.

And then, we'll take into the future what we take -- whether it's a minor accident or a serious accident, such as the Concordia, what we take

from all of those, which is the learnings that will help us make cruising even safer in the future.

These are extremely rare occurrences in marine, loss of life, and we want to make certain that they become even more rare in the future.

RICHARD QUEST, CNN INTERNATIONAL: It was an extraordinary salvage operation. You must have followed it closely.

DONALD: Oh, yes, of course we followed it closely. And we're involved, obviously, in evaluating the various engineering firms that

participated in the salvage operation. But it was extraordinary. It was actually a massive technical achievement. Nothing that that has ever been

attempted before, let alone successfully completed.

QUEST: And who paid for the salvage?

DONALD: In the end, we all pay for it in the end. You pay for it because you lost a ship. There's obviously a reputational damage that the

brand suffered temporarily. They're fully recovering from that, they're moving on.

We have a new ship, the Costa Diadema that'll be named in November, and the brand is moving forward. Bookings are up and booking curves are

further out. So, the brand has moved on. But there's always a price to pay.

QUEST: What have you learned from incidents like Concordia that you as the chief exec are now implementing across the fleet?

DONALD: First of all, Richard, there are no incidents like Concordia. Those are extremely rare. But what we learn from every incident, whether

it's a minor or very serious one -- and it may not be what you learn exactly related to the incident itself, but you look at everything. You

just go back in and you look at everything. So, what we've done, what we do differently now is --

QUEST: But have you discovered anything that might have been a cultural or a systemic problem that led to that?

DONALD: We discovered things that clearly, not having an experience like that, because they are so rare, that you learn from one of the things

was the many languages onboard. So, when it was time to muster, we have a lot of language skilled people onboard, but getting those organized in a

fashion where communication is seamless and where there's areas we can improve in that.

QUEST: As you look now at the reputational damage when you took over, how have you, then, worked forward to improve things?

DONALD: Well, first of all, we've had extraordinary recovery in both brands. The Carnival brand, YouGov just had a national poll that came out

that listed Carnival as the number one brand in the United States in terms of change in positive reputation in the last six months.


QUEST: What does that tell you?

DONALD: Number one in the rankings.

QUEST: What does that tell you about both holiday-makers and the ability to change? Because everything I've ever discovered in my coverage

of the travel and tourism industry is that it bounces back. Whether its a tsunami, a riot, an earthquake, a disaster, it bounces back.

DONALD: It tells you many things. First of all, it tells you how fundamentally safe and how enjoyable these activities are. Because these

are rare incidents that occurred. Number two, I think it tells you what a great value that the holiday or vacation for the money is in cruising. And

in our case, that we have nine of the world's leading cruise lines.


LAKE: Still to come on QUEST MEANS BUSINESS, the underground war between Israel and Hamas. We'll take you inside one of the elaborate

tunnels that Israel says are the main target of its Gaza offensive.


LAKE: Welcome back, I'm Maggie Lake. This is CNN and these are the headlines. It's been a day of deadly violence in both Gaza and Israel.

Ten people have been killed in a mortar attack at a refugee camp in Gaza. Hamas blamed Israel for the deaths, a charge Israel has denied. Meanwhile

in Israel, four people died when a mortar struck two kilometers from the Gaza border.

The UN human rights commissioner says the shooting down of MH17 may amount to a war crime. Navi Pillay says that an effective and thorough

investigation of the crash site is crucial. On Monday, Dutch investors again abandoned their attempt to visit the wreckage due to fierce fighting

in the area.

Liberia has sealed most of its borders in an attempt to halt the spread of Ebola disease. Medical checks have been stepped up at airports

and major trade routes. Liberia has seen 127 deaths from the spread of Ebola.

A massive fire at a fuel depot in Libya is adding to the chaos already engulfing the country. A gas container caught fire Sunday during ongoing

clashes between heavily-armed rival militia groups. This comes as several Western governments have evacuated their embassies in Libya.

An international court has ordered Russia to pay $50 billion to former shareholders of Yukos. The case dates back to the early 2000s when Russia

charged the county's biggest oil company and its CEO with tax evasion and sold off the company's assets at below-market rates. The Russian

government has said it will appeal.

Israeli Prime Minister Benjamin Netanyahu says his country needs stamina and determination for a long campaign in Gaza. His comments come

as a renewed violence takes a deadly toll today on both sides of the border. At least ten children were killed in a strike on a refugee camp

within Gaza. That is according to Gaza's health ministry. Hamas is blaming Israel. Two people were also injured in a strike on a Gaza

hospital. An Israeli official told CNN errant Hamas rockets are to blame for today's violence.


LIEUTENANT COLONEL PETER LERNER, IDF SPOKESMAN: Since the beginning of this operation, we have noted 200 cases of rockets that have fallen

short within Gaza Strip.


LERNER: By Hamas at Israel that have fallen short in the Gaza Strip. This is just another case. It's unfortunate that it lands in the Gaza

Hospital, but it has absolutely nothing to do with Israel.


LAKE: Meanwhile, Israeli media reports say four Israelis died in a mortar attack today. The strike hit about two kilometers from the Gaza

border, and the IDF says five soldiers were killed in combat. Ian Lee is live in Gaza City with the latest. And, Ian, bring us right up to date on

what you are seeing there. Clearly the finger-pointing continues and more people are dying.

IAN LEE, FREELANCE CORRESPONDENT: Oh, that's definitely right. And what we're seeing right now just behind me, we've seen a lot of activity

tonight coming over here. We've seen a lot of tank fire, a lot of air strikes and a lot of artillery focusing on this area. But really, what

we're hearing is around the perimeter of Gaza, around the border, residents there got messages tonight that told them to leave the area and head

towards Central Gaza. They said it's not safe, these areas that include Beit Hanoun and Shijaiyah. These are two areas I have visited previously

and residents received messages from those areas before. Those - parts of those neighborhoods are completely destroyed, and when we were there, they

were essentially ghost towns. A lot of the residents have already moved out into these U.N. schools as well as settling in that Shifa Hospital

where that strike took place today. Now, we don't know who was responsible for that strike. Hamas does say that it was Israel responsible and they

say they have evidence of the Israeli strike, and as you just said, Israel says that it was an Hamas rocket that went off target. It'll take an

independent investigation to figure out what happened there. But we did have a CNN team on the ground at the beach refugee camp. They looked

around, they talked to some people who said that they heard a drone above and then a strike. Our team on the ground said they didn't see any signs

of a Hamas rocket falling down and hitting that area. And as we know, over eight children have died in that and two adults. A lot of people are

wondering though tonight where they can go to be safe, Maggie.

LAKE: And that's the thing. There must be so much confusion tonight, Ian. We started the day, earlier today when I was speaking to you with a

humanitarian ceasefire, Israelis saying they would not be fired - they would not attack unless they were fired on themselves. The situation now

that we have nightfall again seems to be going in the absolute reverse direction. Explain to us again that this tweet that went out - this

warning to stay inside - is this a departure from what we've seen coming from the Israelis? Have the Israelis given any explanation as to what is

expected to come tonight?

LEE: Well we got a little bit more clarification from the Israelis about the messages they're sending out. The messages are meant for these

people in Beit Lahiya, Beit Hanoun, Shijaiyah, these areas along the border telling them to move away. They haven't told the people in Gaza

flat out don't leave tonight, but they are warning people in these certain neighborhoods. They've also dropped leaflets telling them that there will

be increased fighting and that is what we're seeing. And you're right, we talked earlier today about this lull that we're seeing and there was talk

of cease-fire and both sides had come and they really couldn't nail down any sort of solution and tonight we're just seeing how quickly it can go

from a lull to a full-out fighting just like that, Maggie.

LAKE: And yet the diplomats say they will continue to try to stay at work to try to find some sort of solution. Our Ian Lee, thank you so much.

Ian -- from Gaza City tonight.


LAKE: Israel insists that its soldiers cannot leave Gaza until they found and destroy all of Hamas' so-called terror tunnels. In fact, that's

one of the main reasons they didn't accept the cease-fire proposed by U.S. Secretary of State John Kerry. Martin Savidge takes a look underground.


MARTIN SAVIDGE, ANCHOR AND CORRESPONDENT FOR CNN BASED IN ATLANTA: Israel considers tunnels like these such a threat, it has continued working

to destroy them, even during the cease-fire. So far Israel defense forces say they've discovered more than 30 of what it calls `terror tunnels'

running beneath the security border between Gaza into Israel. Finding and demolishing them has been one of the primary stated reasons for Israeli

troops going into Gaza on the ground since hitting them from the air wasn't effective.

Just how dangerous the tunnels can be is demonstrated in this Israeli military video said to show Hamas militants firing on IDF soldiers on the

Israeli side of the border, after emerging from two tunnels. Four soldiers were killed in this attack. The militants were killed by an airstrike.

This is another tunnel the military says Hamas intended to use to attack Israel. It reportedly runs for three kilometers or close to a mile

and a half underground before emerging on the Israeli side near the farming community of Nir Am (sp). Subterranean passageways are lined with tons of

cement, have wiring for electricity, and the military says are used to move men and weapons undetected.

SOLDIER, TRANSLATED BY SAVIDGE: You can see the high-voltage electric lines here, --

SAVIDGE: -- the soldier says. It makes it possible to operate powerful machinery like these winches to pull heavy carts. The IDF says

some of the fiercest fighting in Gaza has been around tunnel entrances as Hamas tries to defend and keep them. Destroying them can be just as

difficult as their capture. Israeli engineers carry out the time-consuming work often under fire using earth movers or carefully-placed explosives.

Israel believes there are still more underground passages like these to be found. And says its military operation in Gaza will not be complete until

its soldiers literally reach the light at the end of the last tunnel. Martin Savidge, CNN, Jerusalem.


LAKE: The situation in Libya grows more tense by the hour. Rival militias are clashing with each other and government forces. Western

governments are warning their citizens to stay away. And in Tripoli, an oil tank fire is only adding to the chaos. Fionnuala Sweeney has the very



FIONNUALA SWEENEY, ANCHOR AND CORRESPONDENT FOR CNN INTERNATIONAL: Thick, black smoke from fuel tanks burning out of control rises over the

Tripoli skyline. Heavy shelling can be heard not far away as rival militias battle for control of the airport. Earlier, an airbus, owned by a

Libyan airliner erupts in flames on the tarmac. All of those signs that Libya has descended into its worst violence since the uprising that ousted

Muammar Gaddafi three years ago. In Benghazi, dozens of civilians are caught in the cross-fire between Libyan special forces and Islamist

militants. The health ministry says in two weeks of fighting, more than 100 people have been killed in Benghazi and Tripoli, many of them

civilians. And Libya's central government finds itself outgunned by the increasingly powerful militias.

Over the weekend, fighting near the U.S. compound in Tripoli forced the U.S. to evacuate its embassy under heavy military protection. Britain

and other countries are also pulling their diplomats out. Germany is one of several nations urging its citizens to leave Libya now. But flights out

of the country are limited. The U.S., E.U. and the Arab League are calling for a cease-fire from all sides.

JOHN KERRY, U.S. SECRETARY OF STATE: So many people died and gave so much effort to the birth of the new Libya, and we're very, very hopeful

that together all those people will recognize that the current course of violence will only bring chaos and possibly longer-term difficulties.

SWEENEY: Perhaps, as one envoy says, the situation in Libya is reaching a critical stage. Fionnuala Sweeney, CNN.


LAKE: Argentinians are bracing for bad news this week. The country's heading toward a default again over unpaid debt. After the break, how the

nation is coping with its precarious situation.


LAKE: Argentina is heading towards default on Wednesday for the second time in 13 years. Everything hangs on a meeting with U.S. creditors

who are holding out for money they say they're owed since 2001. Another default could deepen the recession and push up inflation. Isa Soares has

been talking to Argentinians trying to make ends meet.


ISA SOARES, REPORTER AT CNN INTERNATIONAL: The flags are still flying high, a sign of pride at their recent footballing achievement. But behind

the patriotic display, there's an undertone of uncertainty and fear in Buenos Aires. Here on these streets, people are worried about the fragile

state of their economy, and the implications of speaking out about it. After several interview cancellations with other Argentines, we meet mother

of three, Mercedes (ph) who agrees to speak to me, and she doesn't hold back when I ask her how difficult life has become for her. She tells me,

"Everything is much more expensive. Our purchasing power has decreased significantly as well as our standard of living has changed. My lifestyle

has changed. I've changed the way I dress. I had comforts such as help at home and I no longer have this. My children went to good schools, and

we've had to lower the level of education and move schools. And then we've had to change the social programs we had as a family, such as eating out,

we no longer go to restaurants. Holidays are no longer possible. This has all changed," she says.

But Mercedes (ph) knows the hardest change may be yet to come. The country's GDP was down in the first quarter of this year, and it's declined

even further in the second quarter, and the recession will only be made starker with expectations the economy will contract by 1 and 1/2 percent

this year. Economist Daniel Artana said the economy has been precarious the last several years.

DANIEL ARTANA, ECONOMIST: Basically, the economy had a high fiscal deficit, high inflation and instead of addressing those problems, the

government decided to tighten (externalary) (ph) controls, and the only thing that - the only result of that was a declining recession while

default (ph). The government lost about $15 billion of reserves since October 2011 to today and the economy lost momentum - we were growing at

that time, now we are in a recession, and inflation at that time was about 25 percent, now it's about 40 percent. So everything went wrong for the


SOARES: This already unsustainable situation may become less sustainable still. If Argentina cannot find a way to pay its exchanged

bondholders by the end of the month, the country will be in default, and then the fears that Argentines like Mercedes (ph) faces everyday may be

harder to escape from. She tell me, "I try not to be fearful. I fight not to be fearful, but there are things that one lives through on a daily basis

that makes you fear for first the economic uncertainty how things may turn out, then the pressures we face over individual freedom and security. So

the fears are there - they're permanent. I try not to fear them, but they're there," she says.

Getting people to talk openly and on camera about the economic realities they're facing has been a challenge. Many are fearful that the

government will look into their finances, into how they're spending their money. Well, one Argentinian who wished not to appear on camera, basically

told me you can smell the recession - it's everywhere. Well, with soaring inflation, depleted reserves and social discontent, you don't have to smell

it, you can feel it. Isa Soares, CNN, Buenos Aires, Argentina.


LAKE: Time now to check on the weather. Tom Sater is at the CNN International Weather Center for us. Hi, Tom.

TOM SATER, METEOROLOGIST FOR CNN INTERNATIONAL: Hi, Maggie. Get ready for a couple of splendid days in New York City. Some of the best

weather you've seen yet - it's right on your doorstep. We'll get to the U.S. in a moment.

Let's start in Europe where we've got the heat continuing in parts of Portugal into Spain, 28 currently in Madrid. And then out - you get a

little bit further to the east, the temperatures are really quite high. In fact, we're well into the 30s in a few locations. London 19, cooling down

now that an area of low pressure's dropped south from (Scalon) - we'll let you know where it is now. Moscow, 32 for a high when your average is 23,

heat will continue for you. Tallinn and Estonia 32, Warsaw into Finland we're getting temperatures in the 30s. So, again, a tale of two air

masses. Here's an area of low pressure, you can see it spinning here, dropping all the way down from Scotland, and with it its associated cold

front. Pretty good rains too that have been pouring out in Romania as well. But let's take a look at this because everything is funneling back

and around, a pretty good area of low pressure. So, again, lightning, some damaging winds. See it sliding in from France, up and across Germany as

well coming in from the Czech Republic.

But some of the rain totals have been extremely healthy, especially for the Netherlands. In Amsterdam you picked up your entire month's

rainfall in just 24 hours. Seventy-five millimeters, you average is 66. In some areas, over 130. Even to just the north and northwest of London

getting 40 and now to 50 millimeters. So if you are traveling, Milan Tuesday may be a 30 to 45-minute delay, Rome as well - isolated

thunderstorms there. Frankfort, again, they're still going to be dotting the skies across the region of Berlin. It doesn't look that great, but,

again, call ahead if you think weather's going to be an issue. Definitely should be as well in some other areas as well.

So as we've been looking at these, this area of low pressure, here's the one that's been dropping down, another area of low pressure. Here is

our concern - as the heat continues to build out to the East and into Spain as well. These are some healthy numbers - in the next 24 to 48 hours, I

mean, we're getting a good 20, 30, 40. So, again, will run the gamut for some of the rain totals. Heat - look at this, a nice little drop in Warsaw

down to 26 by Thursday. You get into Helsinki - look at it - 25 by Thursday, that's good. Moscow, unfortunately, the heat continues with you

up to Saint Petersburg.

In the U.S., we've got nice air moving down from the areas of the Great Lakes - a world of change. The second time now this has happened for

the Eastern U.S. The West continues to bake and extremely dry. But what a 24-hour period it was. We had rough weather moving across several states

from the Great Lakes into the Ohio Valley to the East. Several rare tornadoes even occurring with damage and lightning strikes from Michigan

down to Kentucky and Tennessee. And a rare tornado up near Boston. Suffolk County. Records go back to 1950. It's the first tornado they've

ever recorded there. So, Boston, look for a little bit of a delay as you get into the evening period. And in fact that's our biggest threat. New

York City, the rain'll be moving out soon, and with that, some refreshing air. Twenty-seven expected in Washington, D.C., New York about 27 as well.

We'll look for at least temperatures to try to rebound a little bit, have some good rain back in areas of the desert Southwest. Maggie, enjoy the

weather. It should be approaching, oh, in the next 12 hours.

LAKE: Ah, fantastic. We look forward to it. Thank you so much, Tom. Great note to end on. Well after the break, an online house-hunting site

is off the market in a deal worth $3 and 1/2 billion.


LAKE: Two of the biggest names in online house hunting are joining forces . Zillow and Trulia both list homes for sale and rent. Agents pay

the site to post their names with listings. Now, Zillow is buying Trulia for $3.5 billion. Trulia says it had 54 million unique visitors to its

site in June. Trulia had very little user overlap with Zillow. The two sites combined to bring in less than 5 percent of the $12 billion the

industry spends on marketing. Zillow's CEO Spencer Rascoff told me why the deal will benefit his company.


SPENCER RASCOFF, CEO, ZILLOW: The way we look at it because it's a stock deal is what the pro forma ownership of the new company will be. So,

Zillow's current shareholders will own two-thirds of the combined company. At closing, Trulia's shareholders will own 1/3rd. So, I - in my shoes as

CEO of Zillow - I have to ask myself would I rather own 2/3rds of the combined company or 100 percent of Zillow. And I would much rather own

2/3rds of the combined company. So that's why we thought Trulia was worth it, and the reason is because we're going to operate multiple brands. We

already operate Zillow, HotPads which is our rentals brand, and StreetEasy, our New York brand. But by adding the Trulia brand to our family of real

estate media brands, we can grow our audience quite significantly.

LAKE: Some estimates say that you're going to now control 60 percent of the internet market when it comes to real estate here in the U.S. Do

you think you're going to get this past the regulators?

RASCOFF: Yes, those types of numbers are very overstated because they don't consider the long tail of small local real estate site, individual

agent and broker sites in every city in the aggregate, and accumulating quite a bit of traffic, but they don't get picked up in the national stats

that just measure the top 100 or so national real estate website. So, the audience is really much more fragmented than that type of data would

indicate. The agent advertising budgets are extremely fragmented, which is what I think regulators will also look at. Zillow and Trulia together only

have about 4 percent of the $12 billion a years that agents and other real estate professionals spend on advertising. So, it's a very early,

relatively immature fragmented market, and therefore I do believe that regulators will look favorably upon the transactions.

LAKE: When you say you're going to achieve $100 million in cost savings - where's that going to come from?

RASCOFF: It's going to come from a variety of places. Basically, avoided future costs is one way to think of it. So, advertising expense

that the two companies won't have to do because we're a combined company. We'll still continue to advertise quite a bit, but not to the same extent

that we were previously, as well as a foregone new head addition. So both of us have 100s of open heads of jobs that we're trying to fill, and as a

combined company we won't have to grow headcount quite as much. It'll come from other places as well in terms of shared services. We'll announce all

that closer to closing. But in 2016 we think we can save $100 million together in cost avoidances.

LAKE: You just said that this is an immature market. Where do you see the growth and would you consider expanding internationally through an


RASCOFF: Well, the U.S. is a huge market on its own -- $12 billion in agent advertising, agent and other real estate professional advertising.

We've certainly thought a lot about going internationally although we feel like we have a lot of work left here to do in the U.S. This is our ninth

acquisition as a company, it surely won't be our last. So, we'll certainly look at international opportunities but I do feel like we have a lot of

work left to do here in the U.S.

LAKE: You just mentioned the housing market - it's such a source of pain for people still. We're still looking at people that're underwater.

What do you think the state of the U.S. housing market is? How healthy do you think it is?

RASCOFF: Well, it's a very complicated question because it's a local question. So, nationwide, home values are appreciating about 5 percent

year over year, and Zillow forecasts 3 to 4 percent depreciation over the next 12 months. But that really paints an overly simplistic picture. The

real picture is painted at the individual level - at the individual neighborhood level even. So you have some parts of the country like the

Bay area or Manhattan where home values are appreciating almost 20 percent year over year, then you have other parts of the country like much of the

Midwest or parts of Florida where home values are really not appreciating at all anymore. So, it's particular to each local area now.


LAKE: Virgin America, the airline partly owned by British billionaire Richard Branson is planning an initial public offering in the U.S. The

company just recently posted a full year profit for the first time since the airline launched back in 2007, but it still saw a first quarter loss.

Despite that, Virgin America says it sees strong potential for growth. The company's regulatory filing did not mention how many shares are on offer or

which exchange it will list on. This is "Quest Means Business." We'll have more after the break.