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Cease-Fire Fails; Palestinian View; FAA Restricts Flights Over Iraq; IAG CEO Speaks About MH17; US Markets Down Slightly; European Markets Fall; Investors on Edge; US Jobs Report; Optimism in US Labor Market

Aired August 1, 2014 - 16:00   ET



RICHARD QUEST, HOST: It's another down day on the markets. Not as bad as yesterday, but still off nearly half of one percent, in what's been

globally a trying and troubling day. The mark -- we're going to get a final one. The market is closed, and it is Friday, it's August the 1st.

Tonight, as the region lurches into crisis, the UN representative of Israel and Palestine will both be joining me in this studio in this hour.

Also on the program, an outrage and a disgrace. Willie Walsh tells me airlines must prevent another MH17 disaster.

And fear stalks the marketplace. Traders hit the sell button for a second day in a row.

It may be Friday. I'm Richard Quest, and of course, I still mean business.

Good evening. Ninety minutes. That's how long the humanitarian cease-fire between Israel and Hamas lasted on Friday morning before it

spiraled into a bloodbath. Israeli Defense Forces say two soldiers are dead after a brutal attack by Hamas in Rafah. Officials claimed a third

soldier has been captured. Hamas denies capturing the lieutenant.

Palestinian sources are reporting shelling in Rafah around the same time. Well, whoever started it and whatever the facts are, 62 people were

killed and 350 have been wounded, according to Gaza health officials. The United Nations cannot confirm who broke the truce. Each side is blaming

the other.

Tonight on QUEST MEANS BUSINESS, you're going to hear both perspectives. I'll be speaking to Riyad Mansour, the United Nations

permanent observer to Palestine, and that'll be in just a moment. And later in the our, the Israeli ambassador to the United Nations, Ron Prosor.

The gentlemen graciously join me as their schedules permit amidst the growing conflict. So, the order in which you're going to see them tonight

is entirely dependent -- or it was dependent upon schedules and who was available when.

First, to Sara Sidner, who joins me now, live from the Israel-Gaza border. By any definition, Sara, what happened today is just out of the

realms of -- some people said they expected the cease-fire to last no longer, but the fact that it just collapsed so quickly. What do we make of

it now tonight?

SARA SIDNER, CNN INTERNATIONAL CORRESPONDENT: Well, I think it wasn't a surprise so much to those here in the region, and partly that is because

when the cease-fire was agreed upon, there was a caveat in that cease-fire, Israel insisting that it had to be able to continue going about trying to

get rid of those tunnels, to totally blow them up and get rid of them.

Meaning that Israeli soldiers would still be in Gaza, and a lot of people, when they saw that condition -- and that was agreed to by Hamas,

according to officials -- they thought, you know what? This just may not hold when you have Israeli soldiers inside of Gaza. And indeed, it seems

that is what happened. It was up for about an hour and a half, and then it completely collapsed.

There is talk that people are hoping -- diplomatic officials are hoping that this can be salvaged somehow, but not tonight. We have heard

the sounds of war starting up again. Very, very loud booms, many, many of them. And also the sound of artillery, the sound of rocket fire. And we

know that both sides are firing upon each other tonight.

Certainly, there is a huge concern, as you might imagine, for the humanitarian situation in Gaza. They are without power. And I want to

give you a look at what that means. If you look to the left of me, we are in the dark here, it is nighttime. But you can see the twinkle of lights

to the left of me.

To the right of me, it's dark. And this is Gaza. The other side is Israel. So, it gives you some sense of what's going on there.

QUEST: Right.

SIDNER: But we can tell you, a lot of people are very, very fearful tonight as to what is going to happen. It's certainly the sounds of war

ratcheting up yet again.

QUEST: Sara, I need to ask you briefly, the captured Israeli soldier -- Israel says Hamas has captured, Hamas says they know nothing about this.

What do we know tonight?

SIDNER: We only know what we're hearing from them, and there's a lot of conjecture as to what that might mean. Does it mean that -- there are

other groups, of course, in Gaza that could be responsible for capturing one of the Israeli soldiers. His name is Hadar Goldin. He's 23 years old,

a second lieutenant in the Israeli army. Could it be Islamic Jihad?

QUEST: Right.

SIDNER: Could it be one of the many other groups that exist -- militant groups that exist in Gaza? Or is Hamas playing games? Do they

have him and trying to get him to a secretive place? Nobody knows.

What we only know is what we're hearing from both sides, and that is Hamas absolutely denying that they have captured -- that anyone has

captured anyone, and Israel saying indeed, their soldier has been captured.

But to be clear, Richard, Israel did not say Hamas was responsible for capturing them specifically. They said Palestinian militants were

responsible for capturing and killing Israeli soldiers at the tunnels in Rafah.

So, we do not have a specific either from Israel, but certainly as a whole, we heard from President Obama, who talked about the fact that they

blame Hamas just generally no matter who took those soldiers, because Hamas is the government in Gaza responsible for what happens there. Richard?

QUEST: Sara Sidner joining us this evening from the Israeli-Gaza border. Sara, thank you.

Now, the United Nations permanent observer to Palestine, Riyad Mansour, joins me here in the studio. Good evening, Ambassador.


QUEST: Thank you for taking time in what I know is busy times.

MANSOUR: Thank you for inviting me.

QUEST: There's much to cover, and I really do not want to get into who broke the cease-fire in which order, because I think that will get us

nowhere. You'd probably agree, it'll go backwards and forwards. So, let's start with, first of all, this question of the captured soldier. Can you

tell me anything about this tonight?

MANSOUR: No, I cannot. But let me also say that the fact that you have a cease-fire and the Israeli occupying army in the Gaza strip and

insisting to conduct operations inside Gaza is a recipe of frictions and confrontation.

QUEST: But that was agreed to by --

MANSOUR: I agree.

QUEST: That was agreed to. That was in the cease-fire agreement.


QUEST: So, you knew what you were getting into with that.

MANSOUR: It was agreed to, yes, but I'm just explaining to you, when you have a large contingent of the Israeli army inside the Gaza strip and

conducting operations, and then it is very possible that you will have confrontation.

But be that as it may, what we need is to put an end to this onslaught against the Palestinian civilian population in the Gaza strip. Because

after what happened this morning, those who are suffering the most are the civilian population in the Gaza strip.

We have close -- you said 60-some, but according to our statistics, there's an excess of 170 of them in Rafah alone that were killed today

after the cease-fire, and hundreds injured. We need to allow the cease- fire to be put in place.

QUEST: Right.

MANSOUR: We were hopeful yesterday.

QUEST: What will it take to get that cease-fire back, even -- clearly tonight it's not possible. But what will it take to get that cease-fire

back in action, on track?

MANSOUR: From our side, all Palestinian groups and President Abbas is reiterating our position that we honor and respect the 72-hour cease-fire.

We want it to be put in place and to be observed.

And he formed a large delegation of 12 Palestinian leaders to be dispatched to Cairo, and there will be in Cairo, and they will be in Cairo

early tomorrow, and they will begin the negotiation, hopefully with an Israeli delegation, if they are there under the auspices of the Egyptians.

QUEST: So, to be clear, a Palestinian delegation, including Hamas?


QUEST: Is going to Egypt for negotiation?


QUEST: Now, are these wider negotiations, or are these negotiations on a contained cease-fire, if you like?

MANSOUR: Well, they will be negotiating with Israel though the Egyptians to make this humanitarian cease-fire to become a long-lasting

cease-fire, and then to begin in the discussion of dealing with the root causes of this conflict, mainly lifting the siege against the Palestinian

people in the Gaza strip.

QUEST: Can the Palestinian Authority give Israel the guarantee that Israel seeks that rockets will not be fired from the territory into Israel?

Regardless of what Israel might do, let's just start with that. Because I'll be talking to the Israeli ambassador in a moment, and I'll be putting

the other point of view. But from your point of view, ambassador, can the Authority give that guarantee?

QUEST: Well, first, you're asking the wrong question. What we are asking, can Israel guarantee for us the protection of the civilian

population? The 1.8 million of them --


QUEST: That's a chicken and egg.

MANSOUR: -- in the Gaza strip.

QUEST: This is chicken and egg, isn't it?

MANSOUR: Well, for us, we are the ones who are suffering the most. We have about 10,000 killed and injured, 80 percent of them or more are

civilians, half of them are children. So, what do you expect us to do? 240,000 displaced people are in UNRWA schools, and hundreds of thousands of

other displaced are in other places in the Gaza strip. Where should they go?

QUEST: If you ask some people, they will say -- and this isn't a view that I would subscribe to, but I'm giving it to you -- what you hear people

say is that in many ways, this is a battle that both Hamas and Israel want, and that for whatever individual purposes the two sides have, they want to

see this battle through. Do you give any credit to this?

MANSOUR: The Palestinian people, especially those in Gaza, want a cease-fire. They want quietness, they want the lift of the siege, they

want to go back to a normal life, they want the opening of the crossings, they want to access the sea, to be able to fish and to eat. They want to

live honorably --


QUEST: But does Hamas want this battle against Israel?

MANSOUR: I don't know who wants what, but I'm telling you what the Palestinian people in the Gaza strip want, and also I am happy that

President Abbas was able to broker a deal, an agreement, with all political groups, including Hamas, to go to Egypt to negotiate to the continuation of

the humanitarian cease-fire and to make it a longer cease-fire and to move in the direction of dealing with the root causes of this problem.

QUEST: Ambassador, as we come to an end -- and thank you for coming to talk to me -- but you must admit, and again, I'll be talking to the

Israeli side a little later, it's pretty shocking, isn't it, that it only took 90 minutes for this constructed cease-fire to literally blow up in

everyone's faces?

MANSOUR: I agree. We were hopeful last night when we thought that there is an agreement by everyone to have a cease-fire. It is very

unfortunate that it did not last that long.

But let me also say that Israel and Hamas had a cease-fire that was put in place for two years, and it held for two years. But unfortunately,

we see this last round of attacks against our people in the Gaza strip, and the political objective of Israel is to try to destroy the national

consensus government of the state of Palestine.

QUEST: And to confirm, you can't tell me anything tonight about the captured Israeli soldier?

MANSOUR: No. I don't have any information.

QUEST: Ambassador, thank you.

MANSOUR: Thank you very much.

QUEST: Thank you, sir.


QUEST: Thank you. Thank you. Now, later in this hour, I'll be speaking to the Israeli ambassador to the United Nations, Ron Prosor.

And when we come back after a break, there was no reason, there was no excuse, and there's certainly no justification for what happened. The

words of Willie Walsh, the boss of British Airways and Iberia. He tells me what needs to change to make sure MH17 never happens again. Good evening.


QUEST: The United States Federal Aviation Administration is taking precautions as violence rages in Iraq. It says all US planes traveling

over the country must fly higher than 30,000 feet. The FAA's also prohibiting flights in and out of two Kurdish cities, Erbil and


It all comes in the wake of the MH17 disaster that, of course, in two weeks since the passenger plane was shot down from the sky over eastern

Ukraine by a surface-to-air missile.

And the debate rages royally over what should happen in the aviation industry, not only in these most extreme disastrous cases, like MH17, but

also places like Iraq, Afghanistan, Syria, and other places which could be deemed too dangerous to overfly. Some would even suggest, perhaps, Tel

Aviv, as we saw last week.

The chief executive of British Airways and Iberia, IAG, the parent group, has condemned the tragedy and says Malaysia Airlines should not be

blamed for flying over Ukraine. Willie Walsh, who presides over three carriers, said the current system of declaring safe routes needed changing,

but not scrapping. In the first part of our interview, he gave me his reaction to MH17.


WILLIE WALSH, CEO, INTERNATIONAL AIRLINES GROUP: What happened to MH17 was a disgrace. It should not have happened. I'm outraged. I know

I've heard you express outrage about it. It was a clearly identifiable civilian aircraft flying in open airspace. There was no reason, no excuse,

no justification what happened. And we need to remember that. We should not blame Malaysian. It was not their fault.

What we do as an airline and as an airline group, is undertake risk assessment. We do it independently into three of our major airlines. And

it's important that you do it independently, because the environment you're operating in is different, the operating procedures can be different, the

aircraft can be different.

What we do then within the group is ensure that we share the information that we're using to assess risk, so that everybody understands

what we're doing. And I think that's where the industry can improve.

I've heard Tim Clark, the president of Emirates, being interviewed by you, and he made that point very forcibly and correctly. And I think we're

looking to IATA to play a role, because we have a structure there, and we have people there.

What we're not asking for -- and this is important -- we're not asking IATA to conduct the risk assessment. We believe that the individual

airlines need to continue to do that. And just because one airline --

QUEST: Right, right.

WALSH: -- decides to fly somewhere and another airline decides not to, it doesn't mean that one airline is right and the other is wrong,

because the circumstances for each of the airlines can be different.

QUEST: No, it doesn't mean one airline's right and one's wrong, but when you get one authority, for example, the FAA, saying -- prohibiting

flying to Tel Aviv, you get the European regulator saying strongly recommends that you don't fly to Tel Aviv.

You get Lufthansa saying they're not, you got IAG saying they will. It creates a confusion, surely, for the traveling public, which is at best


WALSH: I agree with you. It just created a confusion. But there are differences, and what is confusing for the traveling public is they don't

understand the difference between the various regulatory authority.

So, the FAA can direct US airlines not to fly in a certain area. EASA cannot. So, EASA issued a recommendation, but EASA has made clear that

they do not have the capability or, indeed, the information to make assessments based on security.

QUEST: Right. Right.

WALSH: They're not structured to do that. So, we need to be clear that what has been in place, Richard, for many, many years, since the

Chicago Convention, works generally very well. It can always be improved.

And the tragic events of Malaysian 17, MH17, shows to us that one of the things that can be improved is the sharing of information so that

everybody has access to the same information, where it's possible to do so.


QUEST: Willie Walsh. And you'll hear more from Willie Walsh later on.

The US markets avoided a major sell-off on Friday, but don't be fooled, and certainly it's not necessarily safe. Investors are very much

on edge. The animal spirits are driving the markets. We'll talk about what they need to put them at bay, after the break. QUEST MEANS BUSINESS.



QUEST: The markets felt their own numbers look down nearly 70 points, off the best part of half a percent, well and truly under 17,000 now. A

month -- new month brought a small reversal of fortune to the US markets. This is the way it traded.

But if you look overall and at the way that the day moved forward, that's how the day has gone so far. The Dow bounced back from very early,

much heavier losses. I do need to show you how it's been doing year-to- date so far. Let's just show you the three months.

You see a sharp rise. But this falling off -- let's go to six months, and another very sharp fall-off. So, a steep climb, but we're almost back

to where we were at the beginning of the year, which is clearly rather disappointing news for investors.

What's driving it? What is it? It's fear and it's rampant following Friday's 300-point drop. CNN Money's Fear and Greed index looks at the

emotions driving the market. It measures volatility, momentum, demands for safe haven investments.

Now, a month and a half ago, when the market was rocketing up to 17,000, well, there we had extreme greed, 95 on the barometer. Once MH17

was shot down, it went completely the opposite way. We went into fear.

Now, today, the level has hit the worst levels in some three years. We have in just a month or so, gone from extreme greed to extreme fear.

European markets all closed in the red. Banco Espirito Santo, BF shares halted in Lisbon after a 40 percent drop. The shares fell 42 percent after

a sharp loss. The main Portuguese market was down 3 percent.

We need to put all this into perspective: fear, greed, and of course, the Dow. Joining me now is Alan Valdes. He is the director of floor

trading at DME Securities.


QUEST: Good to see you. We have so many issues. Russian sanctions, Gaza-Palestine, Argentina debt default. Even European potential of

deflation. Fear is back.

VALDES: Oh, no question about it. And you're right, normally we'll get one problem a week. This week, we were busted with Argentina, with

European problems, with the Gaza, with American numbers. So, overall, it's a lot of fear out there.

But greed, also, because you remember, yesterday was July 31st, so a lot of traders said hey, I'm locking in my profits, I'm taking off for

August, I don't know what's ahead, I'm taking the month hold, I'll be back in September.

QUEST: Surely they don't still do that --


VALDES: Yes, they still do that.

QUEST: -- in the internet age?

VALDES: Yes, they hold back.

QUEST: I thought that was for sort of men of a certain age like you and me.


VALDES: Yes, right, that's absolutely right. But no, they still -- they back off. So, a lot of traders are getting out of their positions,

locking in those profits that they have, because they were off the all-time high. Even that, even though we're off the highs, we're only 3 percent

below the all-time high in the S&P.

QUEST: OK, so of all the risks that are out there, which one worries you most?

VALDES: I'll be honest with you, it's the deflationary prospects out of Europe.

QUEST: What?

VALDES: They're our biggest trading partners. If they go into deflation, selling our merchandise overseas is going to become much harder.

You'll see more layoffs. It'll have ramifications over here in America.

QUEST: Even more than, say, Russian sanctions? Because that dispute and that battle is getting nasty, and it promises to get worse.

VALDES: I think it has more effect in Europe than it does here. The sanctions really aren't affecting America that much, but I think oil and

gas in Europe come this fall and winter could be problematic over there. You could see that push them into a recession.

QUEST: The Fed in all of this, the Fed basically said this week that it -- I forget the exact formula of words they used, but a considerable

length of time --


QUEST: -- in plain speak. Rates aren't going up even after tapering comes to an end. How much of this market is just being buoyed up by cheap


VALDES: Oh, without a doubt. I think the last four years has been that cheap money's been fueling this rally. The Fed's putting $85 billion

a month in two years ago, last year, and now, cheap money's still going up.

And like you said, that jobs number today, wasn't a horrible number, it wasn't a great number, but it keeps the Fed in check. They're not going

to raise interest rates, like you said, anytime soon. There's no other game in town.

QUEST: You see, but that's the -- that's the dilemma. The jobs report, on one side, as we're going to talk about in just a second, the

jobs report, but you've got the GDP report.

VALDES: I know, up 4 percent.

QUEST: Right!

VALDES: I mean, it's a great number, you're 100 percent right. But I think the Fed looks at that labor number more than anything else.

QUEST: Right. Good to see you.

VALDES: Thank you, Richard.

QUEST: Thank you very much. Now, stocks were helped by that job report. It showed the world's biggest economy is hitting its stride,

209,000 jobs July. Disappointing after a much stronger number in June. Economists still call it respectable. Unemployment rate, just a slight

advance, 6.2. It's not bad news. The rise was due to more people entering the workforce.

It all creates an improved sentiment. Americans most confident in ability to find good jobs than any time since 2007. Alison Kosik spoke to

the chairman of President Obama's Council of Economic Advisors, Jason Furman, who says he likes where the trend is pointing.



JASON FURMAN, CHAIRMAN, PRESIDENT'S COUNCIL OF ECONOMIC ADVISORS: This is the sixth month in a row that we've seen over 200,000 jobs created.

That's the longest such streak since the late 1990s. So, we think this, together with the range of other indicators, like GDP earlier this week, is

clear evidence of a economy that's strengthening.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: But there are many people saying this is a mediocre economy, considering we're five years out of the

recession and this is the best that we've got?

FURMAN: The unemployment rate is at 6.2 percent. It came there much faster than anyone projected. As recently as last year, people thought

we'd have to wait until 2017 to see an unemployment rate come down this far. It's happened three years ahead of what people were expecting.

We're not seeing as much wage growth as we'd like to see. We've seen more of it as the economy strengthens, but we'd like to see more still.

KOSIK: What is it going to take to get wages to come up?

FURMAN: Oh, right. Well, as the unemployment rate comes down, that always puts more upward pressure on wages. And over the last year or two,

we have seen faster wage growth than we had seen earlier in the economic expansion.

But I think there's some policy steps we could take as well. We could, for example, be raising the minimum wage. That would mean 28

million workers would get a raise.

We could be investing more in infrastructure, which helps create good jobs. We could be doing more to attract manufacturing jobs to locate here

in the United States, rather than abroad. Those are good jobs. So, there's no one answer to your question. We're going to have to keep doing

a lot.

KOSIK: Do you think next year, Fed raising rates, is the economy ready for that?

FURMAN: Certainly when we do our budget forecast, we build into it that over the next decade, interest rates are going to rise. Interest

rates are unusually low right now, and when we look at the federal deficit and debt -- and the president has a plan to bring the debt down as a share

of the economy -- we're not counting on interest rates staying where they are now. We have them going up.

I think most of the private sector has the same types of expectations as they make their business decisions. And I certainly think we'll have an

economy that's strengthening.


QUEST: Jason Furman, the head of the president's economic advisors. Still to come, Hamas vigorously denies claims it's captured an Israeli

soldier. Israel's ambassador to the United Nations will be with me here in the studio after the break. QUEST MEANS BUSINESS, good evening.


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


The U.N.'s permanent observer of Palestine has told "Quest Means Business" that a Palestinian delegation is traveling to Egypt to negotiate

for a long-term cease fire in Gaza. On Friday the humanitarian cease-fire lasted just 90 minutes and ended in a wave of violence. The United Nations

cannot confirm who broke the truce which is supposed to last 72 hours.

President Obama has called on Hamas or other Palestinian factions to release the captured IDF soldier. Israel's identified the soldier as

Second Lieutenant Hadar Goldin. Hamas denies it captured the soldier, calling the accusation an Israeli story.

Two American citizens with the Ebola virus are to be flown from Liberia to the United States within days. A medical charter plane is en

route to Liberia where one patient will be taken back at a time. They will then be treated at the Emory University Hospital in Atlanta.

A team of experts has found more human remains at the crash site of Malaysia Airlines flight 17 in Eastern Ukraine. The group of 70 Dutch and

Australian experts have made, in their words, "substantial recovery efforts" according to its national monitors. The head of the Dutch

recovery mission says the remains can now be transported to the Netherlands.

So now to the other ambassador who joins us, and Ron Prosor is Israel's ambassador to the United Nations. Sir, welcome.


QUEST: Thanks for joining us this evening.

PROSOR: Thank you for having me.

QUEST: And I will just reiterate to the viewers who may wonder, the order in which the ambassadors and the representatives joined us this

evening was purely on the basis of scheduling - who was doing which interview where and at what time. But, good to see you, sir, thank you.

PROSOR: Thank you for being here.

QUEST: We need to start first of all - discussions over who broke the truce in which order probably are not fruitful at this point because it has

now been broken. So the way forward we need to really focus on. I need to know what you - more you - can tell me about the captive Israeli soldier.

The Palestinian representative said he knew nothing.

PROSOR: OK, the - it is important to note that in the five different cease-fires, Hamas broke each and every one including the ones that he

himself initiated. So factually it is important because at the end of the day, we're trying to move forward and use this humanitarian cease-fire in

order to move into a cease-fire. The Hamas' notion every time we cease, they fire. And that's not exactly conducive to, you know, really having

some negotiations or talks.

QUEST: Who do you believe has captured your soldier?

PROSOR: Well we - it's a fact - know that our soldier has been captured in an area where Hamas control it. And we are now seeking to try

and really get him back. This is something that I think the whole of the State of Israel -- people of Israel -- is looking at and it's something

that is deep in our hearts.

QUEST: And when Hamas said it's an Israeli story, you would say?

PROSOR: What can I say? This is absolutely outrageous. I mean, we used the stories of the 1,001 Nights in this region. Israel invented a

story about a captured and a kidnapped soldier? I mean, Hamas should be seen for what it is. It's a terrorist organization and all this, you know,

free passes Hamas receives with this romantic idea of freedom - they are a terrorist organization, you know, determined to destroy the State of




QUEST: -- if a Palestinian delegation is going to Cairo -


QUEST: -- for negotiations, discussions, cease-fire talks under the auspices of the Egyptian government, can you tell me whether Israel is

still prepared to go for these talks?

PROSOR: Well I can say the following - I can say the following that many people put a lot of effort - Secretary of State John Kerry, the United

Nations, the Arab League, Israel, Palestine is to really come over to Cairo - and the Egyptians. And look at the way they act. So in a sense I can't

tell you now, before we really find out what happens with our kidnapped soldier. We gave the - not as international (inaudible) but Hamas - the

chance for humanitarian relief. We really - Hamas has really violated them.

QUEST: Well I understand what you - I hear what you say, --


QUEST: But I'm going to push you if I may -


QUEST: -- with respect, Ambassador on this core question of -


QUEST: -- whether you will go to Cairo? Not you personally - whether Israel will go to Cairo? Is it your understanding that Israel will go

regardless now?

PROSOR: I'm - my understanding is that Prime Minister Netanyahu courageously from set one, day one said yes to every cease-fire and has put

a lot of effort including yesterday and today in order to achieve a cease- fire. And the equation, Richard is really simple. It's going to be quiet in Israel, it's going to be quiet in Gaza. We have nothing in Gaza. We

have less Gaza when I headed Israel's foreign service and never to look back into Gaza. Their own natural resources, no oil to be found in Gaza.

I mean, Israel, all that we want quiet in Israel.

QUEST: Right. And - which - I hear what you say, again, and I'm going to have one more - will you go to Cairo?

PROSOR: Well yesterday we were on the way to Cairo when we had a cease-fire. Now the Israeli cabinet is sitting and talking exactly about

those issues. But in essence, if I want one thing to be left out of this interview - people to remember is that Hamas had five chances of having a

cease-fire, to get relief for the people of Gaza and they decided not to do that.

QUEST: What will it take to get the cease-fire - clearly not tonight - but to get the cease-fire back on track? Your opposite member (ph) says

it will take Israel to stop firing and doing military action into Gaza. I ask you the same question. What will it take to get the cease-fire back on


PROSOR: It's very simple. I mean, look, you don't have to be a rocket scientist to understand that if rockets fly on your head, you're

allowed to defend yourself. In the sense Hamas is shooting and firing 3,100 rockets against Israel, booby-trapping -

QUEST: Right.

PROSOR: -- and using the aid that comes from their (inaudible) to build terror tunnels to --

QUEST: We're now at the stage where there's a disproportionate level of civilian casualties.

PROSOR: That Hamas is responsible for.

QUEST: Well, but the world is watching and saying whatever the rights and wrong here, Israel appears to be heavy-handed.

PROSOR: I disagree. I disagree because Israel - what would you do? I mean, you sit, you're being bombarded with rockets on your head every

day. All you want - how are you going to stop that? Because they're using mosque schools, kindergartens. It's incredible to see the vicinity

yesterday I showed in one of the other shows, you know, a 34 meters and 22 foot 2 elementary schools. This is absolutely incredible what they are



PROSOR: They're using the population as human shields.

QUEST: -- I finish with the question that I've asked both of you to be absolutely, scrupulously thorough in this matter -


QUEST: -- there are cynics and there are those people who say both sides, for their individual reasons - and you've heard this argument - want

this battle because they want this battle to sort this out once and for all. What would you say?

PROSOR: I would say absolutely not. Don't equate Israel, the democratic country, the only one in the Middle East with a terror

organization that has basically decided to destroy the State of Israel. And it's important maybe to read to you just the spokesman of Hamas

yesterday, just to make it perfectly clear here. He says -- Fousie Bayoum (ph) yesterday -- "Anyone with a knife, a club, a weapon or a car and who

does not run down a Jew or who do not kill dozens of Zionists with these means, does not belong to Palestine." Clear vision. We want peace, we

will reach out for peace, but if someone wants to hurt us, we will defend ourself just like any other country.

QUEST: Ambassador, we must leave it there. I thank you.

PROSOR: Thank you.

QUEST: Thank you for taking time to - thank you. And for those who will have been wondering and those who have been watching, put your stop

watches away. We gave both sides pretty much exactly the same amount of time. When we come back after the break, we will turn to one of the

world's most pressing problems. It is the Ebola virus in Western Africa. It's getting worse and it promises to get a great deal worse before it gets



QUEST: The outbreak is moving faster than our efforts to contain it. It's a grave warning from the World Health Organization about the deadliest

epidemic of Ebola in history. At an emergency summit, West African leaders discussed taking extraordinary measures, including making the epicenter of

the outbreak an isolation zone. United States announced it will bring two Americans suffering from the virus in Liberia back to the United States in

the next few days. The director of the CDC says this won't pose a major risk in America. Sanjay Gupta asked him if he could be sure that the

patients in Atlanta wouldn't somehow infect others.


TOM FRIEDEN, DIRECTOR, CENTERS FOR DISEASE CONTROL: Ebola is a virus that can be stopped. It can be stopped in the community by control

measures and it can be prevented from spread in hospitals by meticulous infection control. That means you really have to follow every one of the

procedures carefully. Doctors without Borders/MSF has been caring for Ebola patients for many years in outbreaks. They've never had a death in

one of their workers. So there - and that's in work in Africa without the kind of advanced infection control procedures we have here. The stakes are

higher with Ebola, but the risk is no higher. It's a virus that's easily inactivated with standard cleaning solutions in a hospital. I think we

fear it because it's so unfamiliar. But we shouldn't let that unfamiliarity trump our reason about the possibilities, the likelihood,

availability of affective infection control in hospitals throughout the U.S. Ebola's a huge risk in Africa. It's not going to be a huge risk in

the U.S.

DR. SANJAY GUPTA, CHIEF MEDICAL CORRESPONDENT FOR CNN: Yes, and again you know it's clear that the resources are more readily available in the

United States, they're better, but that human element, again, you're knowingly bringing a patient with Ebola into the United States, a virus

that has not been here. And if there is some sort of lapse in the human element of precautions, I mean, how do you - how do you tell your

neighbors? You live here in Atlanta. How do you tell your neighbors and frankly people in the United States that we are 100 percent confident this

isn't going to turn into something more? Even if it isn't a mass outbreak. How can you tell people to be 100 percent confident that someone else won't

die or get sick as a result of this decision?

FRIEDEN: Ebola does not spread by casual contact and it doesn't spread by somebody who's not ill. It spreads when people get sicker and

sicker and sicker - the amount of virus in their body increases and so the risk in Africa is the healthcare workers who are caring for them and in the

burial process. Those are the two things that are driving the outbreaks in Africa. And we can prevent those risks from happening here.


QUEST: Sanjay Gupta talking to the CDC. Jenny Harrison is at the World Weather Center for us this evening. Good evening, ma'am.

JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Evening to you, Richard. I thought I'd better start with weather conditions a little bit

further afield - away from Europe -

QUEST: Woo woo.

HARRISON: -- but in fact something in people this time of year tend to travel of course to find some nice summer weather. So maybe you're

thinking of heading to the Caribbean. Not a bad idea. However, it is that time of year. This is showing you the Atlantic tropical seas and how we

really begin see things really pick up August on through into September, and of course again into October as well. But really August is one of the

peak months for tropical storms and any sort of tropical activity really. And sure enough we've got one now.

The second one of the season, this is Tropical Storm Bertha. There it is to the east of Leeward Islands. It's moving quite swiftly to the west-

northwest, but it does look as if it'll stay as a tropical storm. It might of course increase in strength over the next couple of days. It's pretty

much just skirting most of the islands. It's heading across to the Dominican Republic in about the next 48 hours, and then it'll produce some

very heavy rains across the Bahamas. But it doesn't look at the moment as if it's going to make landfall directly in any land areas in the U.S. So

we'll keep a very close eye of course on its progress. As I say, number two of the season - we've had Arthur, we're on to Bertha - but my goodness,

there's a long list of names to get through before we get to the end of this Atlantic season.

Now meanwhile across in Europe, we've seen some very heavy amounts of rain with the systems, particularly in the southeast of Europe. At the

Commonwealth Games it's the last weekend or the last couple of days this weekend, --really is what I should be saying -Saturday and Sunday. It's

been a good day this Friday for weather. We've seen quite a bit of rain over the last 11 days - nine days now of course. So, 71 countries and

territories are all taking part. This is the forecast as we head through the weekend. So unfortunately, it does look as if it's going to be a wet

weekend. Maybe some brighter spells on Sunday. Let's hope it stays dry for the closing ceremony which is later in the day.

But when it comes to rain, look at these, the totals. These were on Thursday - 218 millimeters into Serbia. Seen some very heavy rain

generally across much of the southeast. That rain will begin to shift away. The next system pushing across though is generally a very unsettled

weather pattern. We've got some scattered showers and thunderstorms and quite a swathe of warnings too across much of Central and Eastern Europe.

But in most cases, Richard, it is at least very warm as we continue into the weekend.

QUEST: Good Lord. What a miserable sort of summer from the weather mistress Harrison.

HARRISON: Oh! Oh, I thought that was quite good. I felt - I felt that was not bad. There's some brighter spells in there. It's lots of

rain, but you're right.

QUEST: A brighter spell.

HARRISON: (LAUGHTER). Have a nice weekend.

QUEST: Thank you very much after that lot. I'll have me galoshes and me umbrella. When we come back, British Airways, Vueling and now Iberia.

Business is looking up for all the airlines of International Airlines Group. In the second part of our interview with Willie Walsh, I asked him

if he's looking to add another bolt to his profitable quiver (ph). Woo!


QUEST: The chief executive of these three airlines - the parent group is IAG - says he's feeling efficient, profitable growth. Now, as a chief

exec, you can't ask for much more than that. IAG reported earnings that are up 55 percent today. And there's been a turnaround in all the airlines

of the group. Iberia first of all has returned to profits since the restructuring. The company's Spanish airline is making money, it posted

profits of more than $21 million dollars. Small to start with, but it will grow.

The British Airways' profits are up 34 percent. The airline will be flying fewer planes than anticipated. It's cutting back capacity this

winter, hoping to avoid overcapacity. It's also, incidentally, seeing profits from its 787s and 8380s.

As for Vueling, the low-cost carrier based in Barcelona. It's the final leg of the stool. It's looking healthy, it made $40 million for IAG.

I spoke to Willie Walsh earlier. I asked him with all the airline group making the best money in years, he's surely pleased.


WILLIE WALSH, CEO, INTERNATIONAL AIRLINES GROUP: Good numbers and solid progress - I'm very pleased. I think the environment is still not as

strong as maybe we had hoped, but we've been able to adapt to reflect the fact of it. It's a little bit weaker than we had hoped it would be, but I

think a very, very strong performance by all three airlines and good progress towards our goals for this year.

QUEST: The costs question is very tricky as I look right down deep into the numbers. Costs have risen, sometimes for understandable reasons

that you are flying more flights to more places. But this cost-containment must still be on your agenda.

WALSH: It is, Richard, but, you know, the costs have risen because we're doing a lot more flying. And the key issue here is that our unit

costs are coming down. So this is efficient profitable growth, and that's the key objective that we had this year. So as we expand the business,

though we're not adding in a lot of support costs to support that expansion, but we're only adding in resources where the resources are

absolutely required. And that's the key to success, and I think we've done it very well.

QUEST: If we look at how you grow the business, because you're forecasting revenue flat for the rest of the year, where do you grow the

business going forward?

WALSH: Well we grow the absolute revenue, but it's the unit revenue we're saying is flat. So what we see is unit revenue flat, but unit costs

decline. So the margin growth comes from the improved efficiency of the airline. And we are growing our network pretty much all areas of the

network and in all three of our airlines - British Airways, Iberia and Vueling. So it's a challenge to keep everything working together. I think

so far this year we've - we have done well. We've had to make adjustments as we've gone through the year and we will continue to make adjustments as

we've said, taking some capacity out in the fourth quarter of this year, because we just see the demand environment to be a bit softer than we had


QUEST: Fascinating, because these are the first sets of results really where you're going - where you're seeing - the benefits of your

investment in new aircraft - 78s and A380s. And although you and I have talked before, the 380 is a challenging aircraft to get economically

correct. When you do get it correct, the benefits cost-wise versus revenue are quite extraordinary.

WALSH: They are. And you're quite right, Richard, the difference between what we've been able to do - and I showed an example when I

presented the results this morning --on Los Angeles we now have two A380s flying between Los Angeles and Heathrow. We used to have three 747s. The

two 380s that we have flying had a seat factor of 99 percent in the month of June. So when you can fill these aircraft, they are fantastic. They

are a big - you know - it's a big airplane to fill and I think some of the airlines that've bought it didn't fully understand that, you know, the real

benefit comes through the higher volumes. But it's certainly working and working very well for us.

QUEST: So you've got the three legs of IAG running smoothly. You must be about to look to put something else in there.

WALSH: Well, fortunately it still only needs three legs, so we're good, safe and secure at the moment.


WALSH: We're always looking if the right opportunity presented itself. You know, we have been asked by some analysts if we would be

prepared to take on an airline that is struggling and restructure it because we clearly demonstrate, you know, we have that ability to

successfully restructure. Our preference has always been to look airlines that are functioning well and bring them into the group and then get

superior performance from them. But if the right opportunity was there, I think we have the ability to expand the group. But we're not actually

looking at anything specific at the moment.


QUEST: Willie Walsh sitting comfortably on a stool with three legs. In this weekend's "Reading for Leading" on the "Best of Quest," (RINGS

BELL) we're all at sea. The boss of one of the biggest cruise operators, Carnival Corporation, says he likes to learn how to avoid the mistakes of


ARNOLD DONALD, CEO, CARNIVAL CORP.: I read "Giants of Enterprise" by Richard Tedlow, and it's the story of a number of giants in industry so as

Andrew Carnegie, Henry Ford, Eastman and so on, and it's a fascinating read. It gives you the mistakes they made as well as the smart moves they

made and a look into their personalities.

QUEST: It's the "Best of Quest" on CNN, 7:30 London time, 8:30 of course in Central Europe. "Profitable Moment" is after the break.


QUEST: Tonight's "Profitable Moment," or perhaps less than totally profitable - risk is back. Just think about it - Russian sanctions, Gaza,

Israel, Ebola West Africa, Argentina debt, Europe deflation and market volatility - the Dow falling under 17,000. Put it all together, it's a

most dangerous time, not only in the world, but to investors. And it's all happening at the quietest time of the year, which of course, is the middle

of August. In other words, hold on to your hats. And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up

to in the hours ahead, (RINGS BELL) I do hope it's profitable. I'll see on Monday in Washington.