Delta expects $380 million impact on third quarter from IT outage

Delta Air Lines said it expects third quarter revenues to be impacted by around $380 million following the global IT outage that rocked airlines' operations on July 19, 2024. The airline is seeking to recover a total of at least $500 million in damages from Microsoft and the cybersecurity software firm CrowdStrike linked to the outage. The software issue stemmed from a ""defect found in a single content update for Windows hosts,"" said the cybersecurity company's CEO and president George Kurtz. was a result of cybersecurity software CrowdStrike. ""For the September quarter, the direct revenue impact of incident is estimated to be $380 million, primarily driven by refunding customers for cancelled flights and providing customer compensation in the form of cash and SkyMiles,"" the airline read in a stock filing dated August 8, 2024. The damages consisted of the direct impact as well as the $170 million impact related to non-fuel expenses, largely due to customer expense reimbursements and crew-related costs. In addition, it estimated fuel costs to be $50 million lower as a result 7,000 flight cancellations, thus totalling $500 million in damages. ""An operational disruption of this length and magnitude is unacceptable, and our customers and employees deserve better,"" said Delta CEO Ed Bastian. In a letter obtained by multiple outlets, Microsoft's lawyer Mark Cheffo of Decher said the technology company had ""jumped in and offered to assist Delta at no charge"" and claimed the airline had repeatedly ""turned down"" the offer. CrowdStrike's lawyers Quinn Emanuel also sent a letter to Delta's representative David Boies of Boies Schiller Flexner, seen by Airline Economics, reiterated this claim. The letter stated that CrowdStrike's CEO had ""personally reached out"" to Bastian to offer onsite assistance, but had ""received no response"". Quinn Emanuel's Michael Carlinsky said CrowdStrike ""reiterates its apology to Delta"" and that is ""highly disappointed by Delta's suggestion that CrowdStrike acted inappropriately and strongly rejects any allegations that it was grossly negligent or committed wilful misconduct"". Carlinsky added: ""CrowdStrike hopes Delta reconsiders its approach and agrees to work cooperatively with CrowdStrike going forward."" However, Boies responded to Carlinsky in conjunction with the stock filing on August 8, 2024, refuting the claim of multiple offers of assistance. Boies claimed that Kurtz made only a ""single offer of support to Ed Bastian"" four days after the outage on July 22, which he said was ""unhelpful and untimely"". The scathing letter said CrowdStrike's apology was marred by ""misstatements and attempts to shift blame"" onto Delta, as well as trying to ""minimise the international damage"" the outage had caused. ""Rather than continuing to try to evade responsibility, I would hope that CrowdStrike would immediately share everything it knows,"" Boies said in his letter. ""It will all come out in litigation anyway."" He concluded that the cybersecurity company ""must accept real responsibility"" and compensate the airline if it ""genuinely seeks to avoid a lawsuit"".