Delta Air Lines is grappling with the financial fallout from a significant IT outage earlier this month, which CEO Ed Bastian disclosed has cost the company $500 million. The disruption, caused by a botched software update from cybersecurity firm CrowdStrike, led to thousands of canceled flights and left passengers stranded, incurring massive costs in lost revenue and customer compensation.
Bastian outlined the severe impact of the outage in an interview with CNBC's "Squawk Box," detailing that the incident, which lasted five days, necessitated the manual reset of 40,000 servers. "The tens of millions of dollars per day in compensation and hotels over this period have resulted in substantial financial damage," he said, emphasizing the broader implications for Delta's operations and reputation.
The IT outage, which started on July 19, mirrored the chaos experienced by Southwest Airlines during the 2022 year-end holidays. Delta's recovery was notably slower due to issues with its crew scheduling systems, which are heavily dependent on Microsoft technology. This delay in synchronizing the systems further exacerbated the airline's ability to contact crew members, leading to prolonged disruptions.
Bastian expressed frustration with the incident, particularly with CrowdStrike's response, which he described as inadequate. "If you're going to have access to the Delta ecosystem, especially in mission-critical operations, you've got to test the stuff. You can't come in and tell us there's a bug," Bastian asserted. Despite the significant disruption, CrowdStrike has not yet offered any financial assistance to Delta, aside from providing free consulting advice.
To address the financial and reputational damage, Delta has engaged prominent attorney David Boies, renowned for his role in the U.S. government's antitrust case against Microsoft, to seek damages from both CrowdStrike and Microsoft. "We have to protect our shareholders, our customers, our employees-not just from the cost, but from the brand and reputational damage," Bastian said.
The Department of Transportation has also launched an investigation into Delta's handling of the outage, following numerous passenger complaints about the airline's customer service during the disruption. This scrutiny adds another layer of complexity to Delta's recovery efforts.
In a bid to mitigate some of the fallout, Delta has offered SkyMiles to affected passengers. However, the long-term impact on customer trust and brand reputation remains a significant concern for the airline, which has prided itself on reliability and on-time performance.
The outage has highlighted vulnerabilities in Delta's IT infrastructure and raised questions about its dependency on third-party technology providers. The incident serves as a stark reminder of the potential risks associated with complex IT systems and the critical importance of robust contingency planning.
As Delta navigates the aftermath of this crisis, the focus will be on restoring operational stability and rebuilding trust with its customers. The legal action against CrowdStrike and Microsoft underscores the airline's determination to hold these companies accountable for the disruption and to seek recompense for the substantial losses incurred.
