Delta Air Lines (DAL.US) CEO Ed Bastian recently revealed that the airline is facing $500 million in losses due to a global IT outage, in line with Wall Street estimates. The expected loss covers not only the direct drop in revenue but also millions of dollars in compensation and hotel costs that the airline had to pay during the five-day service disruption.

Earlier, Citigroup (C.US) cut its third-quarter adjusted earnings per share estimate for Delta by 60 cents to $1.37 from $1.93, citing increased operating costs and potential customer compensation costs. Analyst Stephen Trent cut his earnings estimate by about $500 million to reflect the increase in operating costs and potential customer compensation costs.

Conor Cunningham, an analyst at research firm Melius Research, expects the service disruption to have a $350 million impact on Delta's operating profit. The US Department of Transportation is also investigating Delta's customer service failures and could impose fines.

US Transportation Secretary Pete Buttigieg announced on social media last week that the department is investigating Delta's widespread flight cancellations and customer service failures to ensure that the airline complies with the law and takes care of passengers during the ongoing widespread disruptions.

The IT outage was caused by a software glitch at CrowdStrike (CRWD.US), which affected millions of Microsoft (MSFT.US) systems worldwide, leading to Delta cancelling more than 5,000 flights by July 25, more than the total number of cancellations in 2019. In contrast, the three major US airlines - American Airlines (AAL.US), United Airlines (UAL.US) and Southwest Airlines (LUV.US) - canceled fewer than 100 flights on the same day.

However, Delta's problems stemmed from the impact of the power outage on its internal systems, which handle flight and crew changes, causing a domino effect that made it difficult for the airline to quickly return to normal operations. Bastian said the airline was seeking compensation for the outage and emphasized that "we have no choice." He also noted that any company prioritizing technology must undergo adequate testing and cannot have a failure during a critical task that runs all day.

CrowdStrike has not yet offered Delta financial assistance, and a company spokesperson said "we don't know of any litigation." Bastian expressed disappointment, saying that reliability of critical tasks is crucial in the technology ecosystem.