Wall Street analysts say last week’s global CrowdStrike outage could take a $500 million hit to Delta Air Lines’ current quarter profits.
Citi Research aviation analyst Steven Trent slashed his third-quarter profit forecast for the Atlanta-based airline by more than $500 million due to the meltdown, which is still causing flight delays and cancellations this week.
Citigroup cut its forecast for Delta’s third-quarter earnings per share by 60 cents to $1.37, citing “operating expenses and potential customer compensation costs” incurred during the tech crisis. According to a Bloomberg report:.
Conor Cunningham, director of Melius Research, estimates Delta will take a $350 million hit to operating profits, and the Department of Transportation has launched an investigation and may impose fines on the airline after it canceled more than 5,000 flights during the CrowdStrike outage.
“What is even more uncertain is the extent of reputational damage to Delta’s image given its operational issues,” Cunningham said in the memo. “Future bookings could certainly be impacted.”
Delta Air Lines declined to comment on the expected financial loss.
Flight delays are finally starting to ease after a CrowdStrike outage on Friday caused chaos at airports and left some passengers stranded.
Delta Air Lines CEO Ed Bastian said Wednesday that cancellations for that day are expected to be “minimal” after the airline canceled 828 flights, or 21% of its total scheduled flights, as of 4:15 p.m. ET on Monday, according to FlightAware data.
The airline canceled 48 flights as of 1:30 p.m. ET on Wednesday, or just 1% of its total scheduled flights, according to FlightAware.
While other airlines resumed normal operations shortly after their computers were hit with the “blue screen of death” on Friday, Delta Air Lines was slow to recover, cancelling hundreds of flights each day.
Transportation Secretary Pete Buttigieg said Tuesday the investigation was intended to “make sure airlines are following the law and keeping customers safe during this time of widespread disruption.”
“We will use the full extent of our investigative and enforcement powers to ensure that the rights of Delta customers are protected,” he said.
Delta Air Lines said it was cooperating with the investigation and was “working tirelessly” to care for customers affected by the widespread flight delays.
The second-largest U.S. airline has established itself as a premium airline with few flight incidents and a low risk of cancellations.
But since Friday, passengers have seen multiple flight delays, leaving them frustrated and raising concerns that this could damage Delta’s stellar reputation.
Delta Air Lines shares have fallen about 3% since Friday’s outage.
