The MH17 Blame Game (7/18)

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July 18 (Bloomberg) -- Full episode of "Bloomberg West." Guests: FlightAware CEO Daniel Baker, Yo CEO Or Arbel and 8200 EISP founder Inbal Ariel. (Source: Bloomberg)

Live from pier three in san francisco, welcome to "bloomberg west." i'm emily chang.

One day after a missile shotgun -- shot down malaysia airlines flight 17 over eastern ukraine killing 298 people, president obama says this outrageous act of unspeakable proportions underscores the need for peace and security in ukraine.

Evidence indicates the plane was shot down by a surface-to-air missile that was launched from an area controlled by russian backed separatists inside ukraine.

We also know this is not the first time a plane has been shot down in eastern ukraine.

The president also says there is no question russia has been lending support to the rebels and warns of more sanctions unless russia stopped training and arming them.

He also calls for all parties to allow a fair investigation of the crash which the president says killed at least one known american citizen.

Bloomberg correspondent peter cook joins us now from d.c. the president stopped short of blaming russia so far.

He walked up to the line but did not cross it in his comments a short time ago, calling it an outrage and calling for an immediate cease-fire in the ukraine and calling for a credible international investigation to get to the crash site, and for the evidence not to be tampered with in any way.

He believes that russia bears some responsibility here and he put the onus on president putin to do more to de-escalate the crisis, bring tensions down, saying he has the capability to do it.

If mr.

Putin makes a decision that we are not going to allow heavy armaments and the flow of fighters into ukraine across the ukrainian-russian border, then it will stop.

The president pointing out that the united states at this point believe this was a missile fired from a russian missile system but not clear who had their hands on the trigger, exactly where it was launched from.

The president made the suggestion that we might get those details over a period of time.

24 hours, 72 hours maybe, maybe a week or a month, but he certainly believes the details will come out.

Should we expect the u.s. to ratchet up sanctions again, and how much pressure is therefore that?

The president has made clear he is willing to take those steps if necessary.

It is clear from his comments today, his message that this is a wake-up call for europe and the rest of the world, that he would like the european to take the lead.

There has been a gap in terms of what the europeans has imposed in terms of sanctions and what the u.s. has done.

I think the u.s. would like to see the europeans take the lead.

Obviously, they suffered the biggest loss.

More than 100 dutch and german citizens aboard this flight.

The president would like to see the europeans take the lead on this but of course it is difficult because of the economic ties with russia.

Hillery clinton said the same, that the europeans should take more responsibility, when she spoke with charlie rose.

What about congress, what kind of pressure from congress is the resident facing?

He is facing some criticism from republicans who say that he should've been more aggressive and imposing tougher sanctions.

There are now some that are calling for the president to provide more military support to the ukrainian government.

Not boot on the ground but maybe some technical expertise going forward.

It is not clear that that push from republicans in congress will get the president to move all that much.

He wants more facts on the ground before the u.s. makes any change in their position, certainly with regard to military support.

How much can the fbi and ntsb do in this investigation?

We spoke with former chair deborah hearst men, and she said there are protocols for this even though it is in a foreign country, in a war zone.

Several rules and protocols need to be followed.

We got word that he ntsb and fbi are both sending teams to the crash site.

It's an open question.

Certainly, some of the best respected accident investigators in the world today, but this is a war zone, questions about whether the evidence has been tampered with, who is in possession of the black boxes.

Certainly they can be helped -- helpful, but at the end of the day we pretty much know why , the plane came down.

It came down from a missile.

Not sure what the investigators will be able to tell us.

President putin of russia has his own theories about what happened and all seem to be but the obvious theory.

How does that play into this situation?

This is president putin today, again making the claim that he is a peacemaker, that he is the one calling for all of the science to de-escalate the -- sides to de-escalate crisis, that the ukrainian government need to do more to de-escalate the crisis, and that the responsibility is over the government for loving this to -- allowing this to happen on ukrainian soil.

It's an argument that he has continued to make during this crisis.

If the evidence points to at a minimum that this was a russian system given to the separatist, or perhaps the administration has not ruled out the possibility that russians directly aided in the actual execution of this missile strike from the ground.

The president earlier emphasized the importance of having an objective investigation.

Take a listen to what he had to say.

We do not have time for propaganda or games.

We need to know exactly what happened and everybody needs make sure that we are holding accountable those who committed this outrage.

At this point, peter, how confident is the white house that we will get an objective investigation?

I think they have real questions about it, which is why not only the president but his ambassador samantha power putting a line in the sand today that there needs to be a credible international investigation on the ground, they need access to the crash site, which has already potentially been compromised, evidence perhaps tampered with.

Questions about what that investigation will result in.

At a minimum, certainly asking for the russians not to interfere.

Questions about where those black boxes are going and who is in possession of them right now.

Peter cook, thank you for the update.

Coming up, we will speak with ryan chilcote in ukraine.

He is on the ground in kiev.

He spoke with the ukrainian prime minister.

? welcome back to "bloomberg west." i'm emily chang.

Back to our top story, the crashing of malaysian flight 17. the plane was last tracks just over the ukrainian border in the northwestern part of the country according to flight aware a , global data services company has offered some data about the flight.

Cory johnson is with me in the studio.

Joining me from houston is the ceo of flightaware.

As soon as this happened, we were looking at the l2 at the time, -- altitude at the time that it disappeared.

Are you working with investigators, are they asking you for information?

We have had a lot of requests for this information and some of it comes from governments abroad and in the u.s. operating these facilities around the world but we also operate ground stations which reinstall all over the -- we install all over the world with antennas to receive data directly from aircraft.

Whenever there is any accident, when we can provide data, we get it out there.

On the website you can see typically three or four positions a minute that allows us to draw a smooth map that shows an accurate flight track.

However, sometimes we have up to three or four positions a second that is not available on the website.

When people participating in any kind of analysis or investigation or research that requires the data, we make it available to them.

In this case, the flight was largely routine so we suddenly stop receiving the data.

On that note, some have been looking at your maps, saying that maybe mh-17 took a different route than planned, took a turn over poland that took it over eastern ukraine when originally it was supposed to fly over western ukraine and not the volatile area.

We have looked a lot at the flights operated by malaysia and other carriers.

Certainly, there are changes every day is on the route to air traffic controllers in other countries want, certainly within ukraine as well.

So they are connecting those waypoints to make a flight plan from their origin to destination.

That changes even within a route that you have planned or have been cleared to fly, there are deviations that take -- that can take place.

Whether that is due to the weather, other aircraft that the air traffic controllers are separating.

It is not uncommon for an aircraft to deviate laterally or vertically from the flight i am.

-- the filed flight plan.

In the case of this flight, there were other commercial airlines that were within 100 miles, within 75 miles of that particular flight.

So in this case, there may have been some deviation that is normal, but there were other aircraft in that area.

I do not know that it is necessarily a case of a mistake made about the route, in so far as they were intending to fly around it and didn't. clearly, this is just wrong place, wrong time.

I think any other flight could have been a victim of this had they been in the wrong place at the wrong time.

To that point, we can see the current flight, mh-17, still using that flight number.

As with other carriers, i wonder, is it ridiculous to look at the business aspect and fuel costs and the fact that they took a shorter route even though it put them in greater danger?

Is fuel cost an issue?

I think we may have lost him.

Let me ask you again if you can hear me.

Fuel costs.

Is that an issue -- we're still working on fixing that.

It's an interesting issue because a lot of carriers have been avoiding the area.

There is a no-fly zone below 32,000 feet.

This was 33,000 feet.

There is a no-fly zone and a common sense zone.

I would be curious because he said flights can never veer off their path at any given time, but i would like to see historically, mh-17, and how , often it veered off that path and went over eastern ukraine.

Let me ask you then, dan, could fuel costs been a reason for them to take this route?

No, i do not think that is something that airlines do.

Fuel costs are the largest expense that airlines have and they are working to optimize their flight plans all the time both the lateral flight path as , well as climbs and dissents to -- descends to minimize cost.

This is not a circumstance where airlines are weighing risk.

There is no question safety is always the number one priority.

Dispatchers who are generally the ones planning the flights, have a lot of authority to say this is the most direct route, but there is a thunderstorm that is predicted to be there.

So we are going to send in hundreds of miles away.

That is very typical.

Dispatchers and pilots both have the authority to make adjustments to flight paths to ensure a safe outcome of the flight.

Certainly, there were mistakes made, and it was probably a larger industry issue that this was not restricted airspace that airlines were deviating around, but it is very unlikely that the people planning this particular flight were aware of this conflict and decided to fly through it purely for a fuel savings.

Have you looked at the flight path of mh-17 over the last several days and months, and how different yesterday's flight path, or similar it was to that?

We have looked at it and we see similar flight paths.

We have some divergences due to airspace, particularly in europe, which is very complicated.

There are a lot of changes in how air traffic controllers want flight to be routed through europe, incredibly dense airspace.

Because this originated in northwest europe, it had to fly to a lot of european airspace, so it could have entered the ukrainian area at a lot of different points.

That was the big impact that we saw, the point that it entered ukraine, and then we saw the similar flights day after day.

Not just with malaysian airlines, but with other carriers as well.

What does this mean for your business and for flightaware?

The visibility you are getting now is greater.

I first found your site from a guy in the cia.

We were looking out the window of a plane and he whipped out your app.

What does this do for your business, how does this change or growth and so on?

We are in the business to help aviation companies and consumers, whether it is passengers or anyone.

Certainly, this type of attention has raise the awareness from the standpoint of airline passengers tracking this flight or any other flight.

We see it as an opportunity to leverage our technology and be data brokers.

We are taking in this information from different governments and from our own sources and trying to convey that information to airlines so that they can make smarter decisions.

Maybe that can involve restricted airspace, give people a better sense of what other airlines are doing on routing.

If we can aggregate that information and display it in a way that is useful, we can be part of the solution for flight landing and ensuring that aircraft has what is the safest and most efficient route, not efficiently -- not only focusing on war zones, as it is a rare event, but in terms of the weather, turbulence, all can it -- in terms of volcanic ash issues.

If you can aggregate all of this combined information, and then the industry can come together and collaborate by aggregating this information, we think we can provided to people so that they can make it or decisions from that.

Dan baker of flightaware, thank you for bringing us your side of the story.

Interesting to hear the work you are doing.

With conflict escalating in gaza, how is israel's ground invasion impacting the start of nations growing tech community?

We spoke to one entrepreneur on the ground.

? welcome back to "bloomberg west." for more on what's happening on the ground in the ukraine following the crash of malaysian flight 17, i want to bring in ryan chilcote who is with us from kiev.

You just finished an interview with ukrainian prime minister.

What's the most important thing he had to say?

A bit of a breakthrough on the ground at the crash site itself.

That he focus right now, recovering the bodies of those 290 people killed in the crash.

The prime minister told me two hours ago they were finally able to work on an agreement with the rebels controlling that crash site, to allow them safe access into it and to allow observers from the security watchdog for europe in as well.

This is not a normal crash site where you have a national body of aviation experts working the scene, or even an international body.

It's in the middle of a giant war where people are fighting on all sides.

Up until now, only the separatists have been there.

They are in there looking for the black boxes.

There have been discussion about whether they were ferreted off to russia by the rebels.

He says he simply does not know right now.

It is very grim stuff.

298 people killed.

Their bodies -- i hate to even describe it -- spread out over a 10 mile space.

This plain was 33,000 feet in the air.

They have now collected 181 of those bodies, so clearly they have a lot of work ahead of them.

President obama talking about a cease-fire.

What did you created prime minister have to say about that?

The prime minister was a bit late to the interview, funny enough, because he was watching president obama's marks live, and i asked him about the idea of a cease-fire, which is something angela merkel is also talking about.

He was pretty cool on the idea.

He said we try to introduce a cease-fire a few weeks ago, the militants did not stop.

He says he does not really see the point to it.

No matter what, they will not introduce a unilateral cease-fire.

It does not look like it is on the cards right now.

What about funding?

I understand the imf is in town, ukraine want more resources.

What's the latest on that?

The imf has agreed to give ukraine $17 billion.

They have given them one trench today and then they will be giving them another half.

That will be over two years.

Today things look ok so far in terms of ukraine meeting up to the expectations of the imf in terms of their commitments, but the imf did say ukraine will probably need more money because of the wars in the east.

That is something the prime minister was also talking about, saying that he reckons this war will cost them $1 billion just in terms of increased military expenditures, he for the end of the year, and then more next year.

That is not even taking into the fact that this is their industrial heartland where the fighting is going on.

Basically the news from ukraine is, it's great to have the $17 billion, but we will need more.

Ryan chilcote on the phone from kiev, thank you so much or the work you are doing on the ground there.

We will be right back with more "bloomberg west." ? it is 26 minutes past the hour which means bloomberg television is on the markets.

Let's get you where stocks ended the day.

It was a powerful rally across the board, the biggest rally since april on the s&p. overall helped by second quarter's sales by google.

They belong to nasdaq.

-- the day really belonged to nasdaq.

You are watching bloomberg west where we focus on technology and the future of his miss.

I am emily chang.

Another major global story we are following.

Israel's ground offensive into the gaza strip aimed at stopping missile attacks from hamas.

Described by many as the startup nation israel's tech committee , has a rich history of involvement.

Driving some of the hottest tech companies.

Cory johnson, editor-at-large, is still with us.

And joining us from tel aviv, we have the founder of 8200. he served that she served as a lieutenant for years.

Thank you for joining us.

What is the atmosphere like in tel aviv right now?

I am mother to three boys and it is not easy.

They have been [inaudible] they are in summer vacation right now, home from school.

The days have been intense and stressful.

But part of the challenge we face is to keep things as usual and keep our lives and business and let our kids now this is something we have to face, hoping for a quieter end of summer.

You hoped we would not get interacted because of the sirens -- interrupted because of the sirens that are going off for you are.

-- where you are.

Israel is home to a lot of tech companies, facebook my amazon, google have offices there.

How does this impact the start -- impacted the tech community and the startup community as you know it?

For other parts of israel, it is usual.

Everyone goes to work.

Things continue as normal.

Some of our colleagues are being called for reserve duty.

This is compensated by others who work for longer hours.

It in terms of business i would not say that there is any impact at all.

The only impact i can tell you about is about foreign visitors or delegations.

Some of them have canceled their trips to israel.

I am surprised given the history of unit 8200 and how many people are involved in signal intelligence.

-- military intelligence.

Are the types of startups that come out of that because it is military intelligence, is there more work happening when this kind of thing is going on in gaza?

People are being [indiscernible] most people when they're finished with their mandatory military service continue in the reserve.

Many of them have been called back to the basis, back to the military to be part of the effort of what is going on.

Also with intelligence units naturally.

Where i work we have a woman who has been called and is not at work.

People who came out of this unit are in diverse industries and touched so many various fields [indiscernible] just a few days ago, we had our demo date where we have startups that pitch their ideas to investors.

During one of the presentations we had a siren and it was amazing to see that.

300 investors in the audience, all came to the event and went to a protected area.

There were no casualties.

We went back and continued our normal presentation.

We have heard so much about the technology of the iron dome, the super-sophisticated protection system.

It has intercepted most of these rocket attacks.

What kinds of things are you exposed to in the 8200 where you're developing the skills to start a technology, what things do you learn in this start up boot camp?

Here is what i can say.

I cannot talk about the essence of the work that i can talk about the skill.

First creativity and out-of-the-box thinking.

Those are words we like to use in general but at 8200 although it is a military organization it produces the best and brightest.

We can generate the best talent.

The dna of the unit is encouraging so young people can be creative in the solutions they think of and be education oriented.

They are encouraged to [indiscernible] and those are two very interesting skills that are demonstrated.

Talking about iron dome i assume that the software engineers that are part of this project when they come out of the military they will bring with them very interesting and significant experience and know-how that could be implemented in a lot of commercial and other business activities.

We have been seeing live shot's of players shooting off over israel.

-- of players shooting off over gaza, i believe.

This happens quite often lately evening.

I am curious about how the rockets and flares impact your life.

It's so hard to believe as someone who lives in a place where this doesn't happen that it doesn't really disrupt your day.

It does this chapter day.

-- disrupt your day.

When you have kids it is different.

You can realize that in israel kids are in summer activities.

They need to -- we need to continue our lives.

Otherwise it will be difficult for the kids to maintain stability.

Whenever you hear an ambulance which sounds like a siren, everyone is alert.

When you go to the protective places we are pretty calm there.

I said to prime minister netanyahu when he talked about relationships between silicon valley.

Maybe talk about how that is changing with what is going on in gaza.

Listen what the prime minister had to say.

I would like to get all the venture capitalist investors and technologists to come to israel and see how they can find not only soulmates but [inaudible] and technologists to cooperate.

Has that relationship changed the offensive, how two companies are connected?

I think the connection is as strong as usual.

My investors and -- the connections remain.

Some people cancelled their current visits.

I am surprised the people who come for business purposes.

We do speak to investors who visit.

Thank you for joining us.

I know it is a scary time and it is great to have your perspective.

The founder and head of 8200. you may have heard of the yo app to greet a friend.

Israelis are using it to warn about incoming rocket strikes.

We speak with the ceo next.

? welcome back to "bloomberg west." i am emily chang.

Remember yo?

The simple messaging app that raised millions of dollars from investors.

It has teamed up with red alert two notify israelis about incoming strikes.

Users get an alert 5290 seconds -- 50-90 seconds before a strike.

Editor-at-large cory johnson is still with us.

How has activity escalated in the last couple of weeks as the conflict has escalated?

It is -- people are subscribing to notifications.

It is mostly escalating in israel.

Developers should use the platform, anyone can use it.

They leverage it.

How does the technology work, how do you know when the rockets strike?

This is the notification platform.

To detect when the rockets attacked, they announce in the website and the red alert developers connect and that is how it works.

You have in -- been there and you have presumably have served as well.

How distracting are you -- is it when you are doing business, does everything ground to a halt.

Obviously the prime minister decided the risk was worth it.

How disruptive is it?

Every one or two hours you get a siren and everyone runs for cover.

You can't really do business.

It is not a way to live.

People cannot live like that.

Currently the situation is only in israel.

Usually it is only in the south.

They cannot go on.

It is starting to bleed into tel aviv.

All the time.

Sirens are on all the time.

What is it about your app, there are others but what is it about yo that is working in israel?


I had a friend who asked me how he could subscribe.

I told him, but i also told him there is an app for that.

He told me i do not want an app, i want a notification.

People like the simplicity.

We have asked this question why has this community blossomed because of -- they're serving in the military, what is it about this community that makes it friendly to check?

-- tech?

It is the military serving and it is such a young country.

The third thing is people have the feeling that they are fighting for their country.

If you do not innovate and initiate you may not have a country to be in.

It's like a survival state.

8200 is a big part of that.

A lot of focus on web security and things like that.

There is a focus on telecom and security.

There are a lot of types of innovation.

Because there is it necessity for military technology.

I have got to ask you.

More than anything that happened in this age of technology -- for people who cite the bubble, they cite yo.

People said there is this stupid app, pardon me, all it does is send the word "yo" and they make a million dollars.

We have a business plan.

What is it?

It is a notification platform, very simple one.

Everyone can subscribe to something that interests them.

For example red alert and gets , notification.

It is not just an app that says yo.

It is a simple way of communication, the simplest way of communication and that is a new concept.

It has potential and that is what people invested in.

How can anybody argue that that is not important?

It is not.

You're helping to facilitate it.

They can be facilitated to everything.

He can save people's lives.

There are sirens that they can news.

-- that you can use.

But if you get an application, it can help.

People, a lot of people understood the vision.

What is it like for you being here and seeing this happening back home right now?

The situation is concerning.

But we have been through this.

I mean, life goes on.

The prime minister was in silicon valley talking about connections.

You left there to come here.

What do you get out of being here that you couldn't get there ? it is very simple.

It's different types of technology.

Our technology is not very complicated.

It's consumer technology.

It is consumer apps.

The defense technology and military technology, israel is one of the best places in the world.

For consumer apps, san francisco and silicon valley this is the , best place.

Thank you for joining us today.

Coming up, alibaba adds some suspense to its ipo.

They decided to push back its public a view.

-- debut.

We are streaming on your phone, tablet,, and amazon fire tv.

? welcome back.

Investors will wait to buy into the most anticipated public offering.

Chinese commerce giant alibaba has decided to push back its ipo to labor day.

It has been accepted around august 8. a person with knowledge of the matter said alibaba is talking with regulators.

Cory johnson is with us and leslie picker from new york.

Why is it being pushed that, is there a problem?

It has to do with the sec.

The company was expecting to hear back from its latest round of comment next friday.

They must have gotten some indication that they would be a lot more to do and so they had to push it back because they could not fit it all and in the time frame they wanted to get it out.

They had a lot of work to do and that was not feasible with the information given yesterday.

We were told this was gung ho august and the target would be met.

It was aggressive but doable.

It is interesting they felt they could not push this out in the summer.

Is there any suggestion that the market's appetite is not there?

There was a video report that said 77% of capital markets professionals surveyed expect this deal to go well.

There is an overwhelmingly positive response but you can put this against the backdrop of all the hype.

There is -- this gives them some outside control and the structure, many of the other china-related risks.

There are risks that investors need time to study and it is beneficial to have that time to look at it when they are not distracted with summer vacations.

I know how important the number eight is and this was originally scheduled for august 8. are they going to pick an -- a lucky number in september, is it the same that you do not get eight at the front?

Nine is lucky for them.

Eight is considered the date to start trading.

I know there was a lot of back-and-forth between alibaba's advisers and the company.

Can we feasibly get it done during that date?

We cannot so maybe we can push it back.

They will look for another lucky number in september.

Thanks so much.

9-8? 10-8? 2018? i don't know.

Thanks so much.

It is time for the bwest byte.

One number that tells a whole lot.

We had so much tech news, 20% is the number that jumped out yesterday.

It was the tax rate ibm reported in the quarterly announced yesterday.

A year ago it was 22.3. that little adjustment allowed them to the analyst estimates.

-- beat analyst estimates.

If they had the same tax rate as last year, they would have missed the analyst estimate last year.

That was the thing that made you think what the heck is owing on with ibm?

And bill campbell is leaving the board at apple.

And new legend and an old legend in silicon valley leaving post that really made them in both cases.

And meg whitman.

Named chairwoman.

Consolidating power at hewlett-packard.

That is usually bad corporate governance when the chairwoman and ceo are one and the same.

You will be keeping tabs on hp.

You can get the latest headlines all the time on your tablet and at

It's all there.

Gaza, the plane crash, just check out bloomberg.


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