Skift Take
Delta’s bottom line is taking a hit from the CrowdStrike outage as it seeks legal recourse for a meltdown that led to thousands of flight disruptions.
Key Points
Summary
Delta Air Lines has cut its third-quarter revenue forecast following a significant IT outage caused by a CrowdStrike software update, leading to thousands of flight cancellations. The outage resulted in a $380 million revenue loss and $170 million in expenses for Delta, which has also faced criticism and a Department of Transportation investigation for its customer service response. Despite these challenges, Delta expects lower fuel costs and positive revenue growth in the coming months, while engaging in legal disputes with CrowdStrike and Microsoft over the incident.
Delta Air Lines cut its third-quarter revenue forecast due to the CrowdStrike outage that caused the carrier to cancel thousands of flights.
The airline now expects its revenue to be flat or up 1% for the quarter. Previous guidance had revenues up between 2% and 4%.
A software update from CrowdStrike on July 19 spurred a massive IT outage that affected industries ranging from airlines to healthcare. As a result, airlines worldwide canceled thousands of flights.
However, Delta took much longer to recover than its competitors. During the meltdown, customers also complained about how they hadn’t been offered refunds, reimbursements for hotel accommodations or meal vouchers. The Department of Transportation is currently investigating Delta’s customer service response to the meltdown.
Delta said it expects the outage to cost it $380 million in lost revenue and $170 million in expenses.
Despite the impact on revenue, Delta’s forecast was otherwise rosy as it anticipates lower fuel costs and positive revenue growth in September for domestic and transatlantic flights.
The forecast comes as JetBlue, Frontier Airlines and Alaska Airlines have also reported lower fuel costs and an uptick in revenue.
The Blame Game
Since the meltdown, Delta has been in a legal blame game with lawyers at Microsoft and CrowdStrike. The carrier hired prominent attorney David Boies to potentially seek damages for the outage.
CrowdStrike’s lawyer claimed the Delta refused to accept its offer of onsite help during the meltdown. Microsoft said it believed Delta has not “modernized its IT infrastructure,” which was why the airline took longer to bounce back.
However, Delta has refuted some of those claims. The carrier said CrowdStrike’s offer was “unhelpful and untimely.” Boies wrote that CrowdStrike’s offer came four days into the meltdown and at that point Delta had already restored most of its critical systems.
CrowdStrike CEO George Kurz told CNBC on August 29 that he wanted to “come to a resolution” on the matter.
“Delta’s a customer, and like any customer, you want to try to get this resolved, in the most expeditious way, and we’re certainly willing and open to do that,” Kurz said.
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Tags: delta air lines, earnings, jet stream, microsoft
Photo credit: Atlanta-based Delta Air Lines cut its revenue outlook. Delta Air Lines