Delta Air Lines (DAL) CEO Ed Bastian has just revealed that the airline company is set to face a significant hit to its earnings as a result of a global tech malfunction that left thousands of passengers stranded at airports worldwide.
After Microsoft Windows systems shut down on July 19 due to a botched routine software update from cybersecurity firm CrowdStrike, Delta was forced to cancel over 5,500 flights through July 25 due to the airline’s systems being hit by the incident.
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“Canceling a flight is always a last resort, and something we don't take lightly,” said Bastian in an update on the company’s website on July 21. “The technology issue occurred on the busiest travel weekend of the summer, with our booked loads exceeding 90%, limiting our reaccommodation capabilities. I want to apologize to every one of you who have been impacted by these events.”
To lessen the blow of the cancellations, Delta also offered impacted customers a travel waiver that allowed them to change their itinerary free of charge and also provided them with meal vouchers, transportation and hotel accommodations.
Now, those cancellations are coming back to bite the company where it hurts – in its pockets. In a recent interview on CNBC’s SquawkBox, Bastian said that the company is on par to lose $500 million as a result of the outage.
He claims that the company not only lost revenue, but “tens of millions of dollars per day in compensation and hotels.”
Delta is now suing Microsoft and CrowdStrike for the outage in an effort to protect the airline’s shareholders, customers and employees, and for the cost of damage and reputational harm.
“If you're going to be having priority access to the Delta ecosystem, in terms of technology, you've got to test the stuff,” said Bastian in the interview with CNBC. “You can't come into a mission critical 24/7 operation and tell us we have a bug. It doesn't work.”
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Even though other airlines such as American Airlines, Frontier, and Spirit were also forced to cancel flights due to the CrowdStrike error, Delta was hit the hardest as it canceled the most flights and took longer to return back to normal operations.
The U.S. Department of Transportation even opened an investigation into how Delta handled the outage after it received a “high volume of consumer complaints.”
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Delta's battle with declining profit
A $500 million loss is the last thing Delta needs. In the company’s latest earnings report, which was unveiled on July 11, it revealed that it faced a significant loss in profits during the second quarter of 2024. During the quarter, Delta experienced a 29% decline in net income, when compared to the same quarter in 2023. Its earnings were also $2.36 per share, which was lower than the consensus estimate of $2.37.
Bastian also revealed on July 11 that the company is staring at a $100 million loss due to the Paris Olympics deterring people from traveling to the area.
“Unless you’re going to the Olympics, people aren’t going to Paris...very few are,” said Bastian while speaking to CNBC. “Business travel, you know, other type of tourism is potentially going elsewhere.”
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