Citigroup: Delta Air Lines (DAL.US) may lose $500mn due to "blue screen" accident, lowers profit forecast

Wealth reported that Delta Air Lines (DAL.US) is expected to suffer significant financial losses this quarter due to a system failure that resulted in thousands of canceled flights and prompted a government investigation into the airline's response. Citigroup cut its adjusted EPS estimate for Delta by 60 cents to $1.37 in a recent report, citing "operational costs and potential customer compensation costs" from the disruption over the past few days. Citigroup analyst Stephen Trent also cut both profit metrics by about $500 million.

The system failure caused by CrowdStrike Holdings (CRWD.US) on Friday disrupted systems in multiple industries worldwide, including the US airline industry. Delta was the worst hit among the major US carriers, with most other carriers returning to normal operations by the weekend. According to tracking service FlightAware.com, Delta canceled 511 flights on Tuesday, or about 14% of its normal schedule, and has canceled 5,469 flights since Friday.

Conor Cunningham, an analyst at Melius Research, estimated that the disruption would cost the airline $350m in operating profit, and that the US Department of Transportation could also fine the airline for its handling of passengers, which has also damaged Delta's reputation for providing reliable, stable service. "The more uncertain is the reputational damage that Delta's brand may suffer as a result of the operational issues," Cunningham wrote in a report. "Longer term bookings will certainly be affected."

As flight cancellations began to ease, Delta was hit by another setback. The airline's chief executive Ed Bastian said in a statement on Wednesday that cancellations would be "minimal" on Wednesday and would return to normal operations by Thursday.

In contrast, rivals American Airlines (AAL.US), United Continental (UAL.US) and Southwest (LUV.US) canceled fewer than 100 flights on Tuesday. The problem at Delta stemmed from the power outage's impact on internal systems used to handle many of its flights and its crews, which caused a domino effect that prevented the airline from matching crews and planes.