Euro Fails to Keep Gains
FOSTER: Welcome back to you. I'm Max Foster, these are the main news headlines this hour. Former Egyptian president Hosni Mubarak is now in a full coma, according to a government spokesman. His attorney describes Mubarak's condition as very critical. His two sons, Gamal and Alaa have been given permission to be at their father's bedside in prison.</s>FOSTER: Spaniards are protesting their government's request for $155 billion to bail out its bankrupt banks. The protesters want to know why the banks are getting help for their enormous mistakes whilst nothing will go directly to help Spanish people. UN envoy Kofi Annan says he's gravely concerned about the latest reports of violence in Syria, including more new shelling in the flashpoint city of Homs. Opposition groups cited escalating bloodshed all over the country on Monday, with some 61 people reported killed so far. Former British prime minister Gordon Brown testified on Monday before the committee investigating media ethics in the UK. He said one of Rupert Murdoch's newspapers never got his or his wife's permission to run story about their son's medical condition. That's a direct contradiction to testimony from Rebekah Brooks earlier this year.</s>FOSTER: Well, the airline industry's been given a dire outlook for the year ahead. Global profits are staying down and airlines will go bust. That's the warning, given today by the industry group International Air Transport Association. It's especially ominous for European companies. IATA has doubled the forecast loss to more than $1 billion. There are lots of reasons behind the bad news. At top of the list, surging oil prices and the (inaudible) effects of the euro crisis. Well, the euro's biggest regional airlines, Flybe, is feeling the strain today. It announced losses of more than $11 million in the year to March. I asked the CEO, Jim French, to explain why.</s>JIM FRENCH, CEO, FLYBE: The loss this year is about 61/2 million pounds and you know, you usually think that this year the challenge you have seen is the U.K. domestic market, the consumer spend is still being very much restricted. Oil, the annualized cost of oil this year is the highest ever recorded in history, with 12 percent higher than ever before. Departure tax continue to increase and IATA today came out and said that the U.K.'s departure tax is now the highest of any country in the world. So those three things combined made it a real challenge for us this year. But we still grew the business by over 14 percent. The other thing we've got to remember, during this -- in this 61/2 million loss is that there were some very big strategic investments this year. We invested just under 4 million pounds in our first year losses on an airline we acquired in Finland in conjunction with Finncomm. A significant number, 65 million pound turnover business this year, which we're forecasting will grow to about 120 million a year, and then (inaudible) the training academy, of course, opened the new training academy, about another million. So the actual (inaudible) was about a 4 million profit to 1 mission loss.</s>FOSTER: It's interesting, obviously your business is particularly affected by oil and fuel prices, but it seems as there are many businesses being affected more than -- more by oil prices right now than the euro crisis, which is grabbing all of the headlines. Is that true to say, would you say?</s>FRENCH: For us, I would say so, yes. I mean, the crisis in the euro is really southern Europe at the moment, and we have a tiny operation to Spain, really nothing else. We were very (inaudible). And of course the northern operation is, thankfully for us, Norway, Scandinavia and the Baltic region is less exposed. So we've got very little exposure to any concern --</s>FOSTER: But looking ahead, those countries will also be affected if there is an implosion of some sort in the Eurozone. Have you made preparations for that? Are you concerned about that?</s>FRENCH: At the moment, we're seeing -- we haven't seen any significant (inaudible). We have a lot of business routes, European routes serving the U.K. regions. We haven't seen any significant deterioration there. But you're absolutely right. There may well be a deterioration during the course of the year, in which case we'd respond. We have high-frequency operations in there. We can cut frequency, et cetera. But there's no sign at the moment of any significant deterioration.</s>FOSTER: So other British business, it seems, actually you're probably looking more to what's going on in the Middle East right and how that might affect fuel prices.</s>FRENCH: Oil's the big issue. I think it's very interesting that somebody said about 4-6 weeks ago, they want to see oil come back to about $100 a barrel. It's come a little bit below that. We thought for about six months it'll probably come to $100 plus or minus $10. At that level, that's fine for us. So that's going to be stabilized. No, I think that, you know, it's quite interesting, you know, as a regional airline, we see some opportunities coming out. The -- it's quite interesting; Manchester and Birmingham airports are looking to develop now taking some of the overspill from (inaudible) --</s>FOSTER: (Inaudible) growth coming from in regional transport?</s>FRENCH: Well, it's quite interesting. At Manchester, we (inaudible) -- we sort of recalibrated all of our networks into a hub concept. And what's happens, there's (inaudible) having a real hub there with massive (inaudible) from the U.K. through Manchester. The intercontinental carriers from that airport are saying, hey, we can take this speed (ph) from you. Some of the carriers at Heathrow currently who rely upon the feed (ph) at Heathrow are now looking at British Airways, their primary competitor, as the major supplier, and they're now saying, actually, we need an independent feed (ph) and that can be provided by us at Manchester.</s>FOSTER: (Inaudible) happening across Europe, would you say?</s>FRENCH: Well, you've seen this development of a hub strategy, you know, Amsterdam Schiphol was the first, then Charles de Gaulle Frankfurt, Helsinki now. Dubai, I mean, if you look at the services to Dubai from the U.K. now, they are, you know, very considerable number of flights now. So I think that the congestion, the lack of capacity through has been serving these intercontinental European hubs.</s>FOSTER: Interesting perspective there from a regional carrier. Well, all day we've been following the market reaction around the world to Spain's decision to ask for help to stabilize its troubled banking system. We've seen the markets post early gains and then retreat from those rallies later in the session. Let's to Alison Kosik at the New York Stock Exchange. Alison, I guess -- I mean, everyone's just trying to make sense of this, and it's a struggle, isn't it?</s>ALISON KOSIK, CNN BUSINESS CORRESPONDENT: It really is. I mean, you saw that excitement over the bank deal really fizzle out pretty quickly here on Wall Street. Literally within the first hour of trading today, and here's part of the reason why. It's a very narrow solution. It takes care of one problem; it doesn't deal with the broader issues of the European debt crisis. One analyst puts it this way, saying, you know what, there's no growth plan with this. There's no structural reform. And guess what? Spain's economy is still in a lot of trouble. There also are still a lot of questions about how the funds are actually going to be distributed, plus investors are waiting for the next possible bombshell. Greek elections are coming on Sunday. That could ultimately determine whether the country stays in the Eurozone. So maybe it's not too surprising that buying into the market didn't last. Also, remember stocks are coming off the best week of the year. So maybe you're seeing some profit taking as well, Max.</s>FOSTER: Alison, thank you very much. Watching that all week of course. You're watching QUEST MEANS BUSINESS. Coming up, all the latest weather and Warner Brothers brings movie magic to the U.K. for good. We'll go behind the scenes at the new state-of-the-art studios that Harry Potter built.