Delta Air Lines faced a colossal $500 million hit due to a major IT outage earlier this month that stranded thousands of passengers. The outage, caused by a flawed software update from CrowdStrike, led to the cancellation of over 4,000 flights and massive daily costs for compensation and hotels. The airline had to manually reset 40,000 servers and now plans to seek damages from CrowdStrike and Microsoft. Delta, known for its top-notch service, is also dealing with a reputation blow and a federal investigation.
The significant IT breakdown that left thousands of customers stranded earlier this month would cost Delta Air Lines $500 million, CEO Ed Bastian announced on Wednesday.
According to Bastian, the sum encompasses not just the money that was lost but also “the tens of millions of dollars per day in compensation and hotels” for five days. The sum is approximately by analysts’ projections. Although a representative for Delta claimed the number of refund and compensation requests it processed was in the “thousands,” the airline could not provide an exact figure reports CNBC.
Following the outage through July 25, which was caused by a faulty CrowdStrike software upgrade and brought thousands of Microsoft systems offline globally, the airline canceled more flights than it had throughout the entire year. According to Bastian, 40,000 servers had to be manually reset by the business.
There were more interruptions following the outage because Delta’s systems for matching flight crews to aircraft couldn’t keep up with the adjustments.
Customers of Southwest Airlines experienced a similar problem when it broke down due to inclement weather during the year-end holidays in 2022. Through their disruption, Delta demonstrated how major disruptions can result from issues with only one of the numerous technology platforms that airlines rely on.
The U.S. Department of Transportation launched an investigation into Delta’s cascading interruptions and consumer response, while other airlines recovered from the CrowdStrike issue more quickly. For an airline that bills itself as a premium offering the best punctuality and profitability ratings among US carriers, the airline’s collapse was exceptional.
Speaking from his trip to Paris last week, Bastian stated on Wednesday on CNBC’s “Squawk Box” that the airline would pursue damages for the inconveniences and that “we have no choice.”
“If you’re going to be having access, priority access to the Delta ecosystem in terms of technology, you’ve got to test the stuff. You can’t come into a mission-critical 24/7 operation and tell us we have a bug,” Bastian said.
Bastian continued, “CrowdStrike has not offered to assist Delta financially to date, other than providing free consulting advice on handling the fallout from the outage.” In an email, a CrowdStrike representative stated that the company “no knowledge of a lawsuit and have no further comment.” A request for comment from Microsoft was not immediately answered.
As CNBC reported earlier this week, Delta has retained renowned lawyer David Boies to pursue damages from CrowdStrike and Microsoft. Boies is well-known for having defended the US government against Microsoft in a historic antitrust lawsuit.
“We have to protect our shareholders. We have to protect our customers, our employees, for the damage, not just to the cost of it, but to the brand, the reputational damage,” Bastian said.
Recently, GreatGameInternational reported that the digital revolution’s fragility was starkly highlighted by the recent CrowdStrike-Microsoft outage, showcasing the risks of our growing reliance on digital systems.
