As Delta Air Lines (NYSE: DAL) prepares to release its fourth-quarter earnings on January 10, investors are bracing for the potential impact of inflationary pressures and the fallout from the July 2024 system outage. The consensus revenue estimate is $14.59 billion, representing a 2.6% year-over-year increase, while the consensus EPS estimate is $1.74, indicating a 35.9% year-over-year growth. However, several challenges could affect Delta's financial performance.



Inflationary pressures, particularly in fuel prices, have historically posed a significant challenge for Delta. In 2008, Delta reported a net loss of $11.6 billion, largely due to high fuel prices. While Delta has implemented strategies to mitigate the impact of inflationary pressures, such as hedging fuel prices and improving operational efficiency, investors can expect the airline to continue facing challenges from inflationary pressures in the future.

The July 2024 system outage caused by a CrowdStrike update resulted in around 7,000 flight cancellations over a five-day period, costing Delta approximately $500 million. The outage led to direct revenue losses of $380 million from refunds and customer compensation, as well as additional costs of roughly $170 million. Delta has addressed these costs by seeking compensation from CrowdStrike and Microsoft, as the outage was caused by a CrowdStrike update that affected Microsoft Windows machines. Delta's CEO, Ed Bastian, has stated that the airline is seeking full compensation for the damages incurred during the outage. The company has also filed a lawsuit against CrowdStrike, seeking damages for the incident.

Delta's capacity expansion and revenue growth projections have been impacted by the system outage and inflationary pressures. In the wake of the CrowdStrike-caused global IT outage in July 2024, Delta confirmed costs of around $500 million, which included direct revenue losses of $380 million and additional costs of roughly $170 million. This outage resulted in around 7,000 flight cancellations over a five-day period, significantly affecting Delta's operations and financial performance. Regarding inflationary pressures, Delta has faced challenges due to fuel price instability and limited aircraft deliveries. These factors, combined with the system outage, have contributed to Delta's decision to reiterate its 2024 projection and anticipate a 2025 capacity expansion of 3% to 4% year-over-year, revenue growth of mid-single digits, and a non-fuel unit cost increase of low-single digits year-over-year.

Delta's shares have outperformed EPS predictions 63% of the time and revenue estimates 75% of the time over the past two years. However, revenue projections now show five downward and one upward change, indicating a potential impact on Delta's capacity expansion and revenue growth projections. Despite these challenges, Delta's shares were up 49.6% by 2024, demonstrating the company's resilience and ability to adapt to changing market conditions.



In conclusion, Delta Air Lines faces significant challenges from inflationary pressures and the fallout from the July 2024 system outage. However, the company has demonstrated resilience and adaptability in the face of these challenges, and investors can expect Delta to continue navigating these headwinds as it works to maintain its financial performance. As Delta releases its fourth-quarter earnings, investors will be closely watching for any updates on the company's strategies to mitigate the impact of these challenges and maintain its competitive position in the airline industry.