Delta considers legal action post CrowdStrike outage: CNBC

Delta Air Lines (DAL) continues to deal with the aftermath of the global CrowdStrike (CRWD) outage. According to CNBC reports, Delta may be seeking damages and compensation from CrowdStrike as a result. Citi managing director Steve Trent joins Morning Brief to discuss this development.

Trent estimates Delta likely spent $80,000 per canceled flight to cover hotels, alternative flights, and meals for affected customers.

Regarding Delta's reported plan to take legal action, Trent states: "It's possible that depending on the outcome of that, you could see some material benefit that pushes closer to that $80,000 per canceled flight, but at this juncture, it's way too early to tell."

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This post was written by Angel Smith

Video Transcript

Steve.

I want to turn our attention now to the latest headlines that we're getting out of Delta because you were out with a recent report talking about the potential damage or potential hit Delta could see to its profit as a result of the outage from crowd strike.

There are reports out this morning that Delta could potentially be seeking damages here from crowd strike and from Microsoft over that outage.

Curious just how much that could potentially offset some of the hit that we could see and and given the fact that we are now over a week out from that outage, would your initial estimate or guess there consistent with what you see it being in terms of up to that 500 million, I believe, uh, hit that we could see to Delta's profit.

Yeah, absolutely.

So we based our, uh, data in that report from a similar outage, Um, a smaller outage, but a similar outage that they had in August of 2018, where it was roughly 2300 cancelled flights, uh, that amounted to 100 and $50 million pre tax charge worked out to roughly $65,000 charge uh, per cancellation.

And this note we recently did.

We were expecting 6500 cancellations, so it looks like it didn't come quite that bad.

Uh, but there's been a whole bunch of seat ma across inflation over the last several years.

Delta is more generous in providing, uh, compensation meals and hotel stays for, uh, people on cancelled flights.

So we thought $80,000 per cancellation, it could go a bit north of that number.

Uh, when one sees, um, all of the inputs.

Um, now, this stuff that's coming out about the lawsuit, um, and going after a crowd strike, it's possible that, uh, depending on the outcome of that, you could see some, uh, material benefit that pushes closer to that $80,000 per cancelled flight.

But at this juncture, I'd say it's way too early to tell.

You know, we don't know what the time frame is gonna be on on the legal dispute.

Uh, among other factors.

All right, Steve Trent.

Always great to have you.

Thanks so much for coming in studio here with us.

A city's managing director and equity analyst.

Thanks, Steve.

Thank you.