Delta expected to take $500 million hit as disruptions start to ease

Delta Air Lines Inc. is expected to take a sizable financial hit this quarter from the system breakdown that led to thousands of canceled flights and prompted a federal investigation of the carrier’s response.

Citigroup cut estimates for Delta’s third-quarter adjusted earnings by 60 cents a share in a new report to $1.37, citing “operational expenses and potential customer compensation costs” from the upheaval of the past few days. Analyst Stephen Trent also cut two profit metrics by about $500 million each.

Conor Cunningham of Melius Research estimated a $350 million impact to operating profit plus a likely fine from the Department of Transportation, which is investigating Delta’s treatment of passengers. The issues have also tarnished Delta’s reputation for offering largely reliable, drama-free service.

“What is more uncertain is the reputational damage Delta’s image may take given the operational issue,” Cunningham said in a note. “It is certainly plausible forward bookings are impacted.”

The financial fallout offers a fresh blow to Delta as flight disruptions begin to ease. Chief Executive Officer Ed Bastian said in a statement Wednesday that cancellations were expected to be “minimal” during the day with operations restored to normal by Thursday.

Delta didn’t immediately return a request for comment on the analysts’ estimates. 

The carrier canceled 511 flights Tuesday, according to tracking service FlightAware.com, bringing its total since Friday’s breakdown to 5,469.

Delta has fared the worst among US carriers, with most other airlines getting back on track over the weekend after an outage Friday caused by CrowdStrike Holdings Inc. disrupted systems across numerous industries worldwide.