Delta sees $500 million hit from catastrophic system outage

Delta Air Lines Inc. is bracing for a $500 million negative impact from the technology breakdown this month that led to thousands of canceled flights and tarnished the carrier’s reputation.

The company revealed the financial assessment Wednesday in a statement, saying it has hired the law firm of prominent attorney David Boies. CNBC earlier reported that Delta plans to seek damages from the disruption, citing comments from Chief Executive Officer Ed Bastian.

The figure, in line with Wall Street’s expectations, highlights the costly impact from the outage that upended Delta’s operations for days, left passengers stranded and prompted a federal investigation of the carrier. Analysts at Citigroup already reduced estimates for Delta’s earnings before interest and taxes in the current quarter by about $500 million.

An errant software update from CrowdStrike Holdings Inc. earlier this month led to widespread outages of Microsoft Corp. systems, disrupting industries across the globe. While many airlines were able to recover fairly quickly, Delta’s cancellations extended into the middle of the following week.

The company’s longer recovery stemmed from the outage’s effects on an internal system used to process changes to many flights and their crews. That created a cascading effect, leaving Delta unable to get its crews and planes fully aligned.

The US Department of Transportation last week opened an investigation of the carrier’s handling of the breakdown. Melius Research has said the carrier is likely to face a fine from that probe in addition to profit impacts.

Delta’s shares rose less than 1% at 9:32 a.m. in New York. CrowdStrike shares were little changed.