Why the CrowdStrike outage hit Delta so hard

But while rivals like United and American Airlines were able to bounce back after just a few days (United canceled nearly 1,500 flights, by comparison), Delta was still struggling. A memo Thursday from Bernstein Research sheds light on what went wrong.

According to the memo, Delta canceled about 30% of its flights the weekend after July 19, while United canceled about 12% and American about 5%. The main reason for this is that Delta relies heavily on its Atlanta hub, which handles about 20% of all airline flights — more than most major airlines and their hubs — meaning Delta’s passengers who canceled flights were often concentrated in one place.

“When you talk about what Atlanta represents to Delta’s network, it’s more important and has more traffic going through it than you see on other networks,” said David Vernon, author of the note and a senior analyst at Bernstein. luck.

Vernon and co-author Justin Laufer also argue that the airline also has a higher average number of seats per aircraft than its competitors, meaning it has more passengers to accommodate in times of crisis. However, historically, it has had a relatively larger number of customers than other airlines. It was a blessing. For Delta, however, this time, the airline has become more Diverse fleet The diversity of aircraft types has made it difficult to transport customers to different flights across different models and manufacturers.

Identifying the rationale behind Delta’s weakness won’t erase its summer woes. In addition to having to bear millions of dollars in losses from flight cancellations, Delta has had to bear additional costs. Opposite With CrowdStrike over who is to blame for the aftershocks of the outage. Bastian alleged that CrowdStrike had not offered assistance to the beleaguered airline, which he said relied heavily on Microsoft and CrowdStrike. The tech companies responded in kind, claiming that Delta had not taken responsibility for its own technological shortcomings and that its competitors had relied on Heavier On Microsoft and CrowdStrike, however, it has not faced the same consequences. The airline announced in late August that Michael Spanos, its chief operating officer, would step down in 2015. I will leave The company, though Spanos informed Bastian of his plans to leave before the outage occurred. Spanos was named CEO of Outback Steakhouse’s parent company last month.

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But what makes matters worse for Delta is that competitors not only ignored the CrowdStrike outage, they may have even profited from Delta’s misfortunes. Raised revenue expectations Thursday, citing “increased revenue from reaccommodating customers impacted by other airlines’ cancellations,” as well as streamlined operations and a healthy summer travel season. JetBlue was Not significantly affected Due to power outage.

“While some of the positive adjustments may have been temporary, as the company pulled back some of the passengers affected by CrowdStrike in July, the overall company update seemed encouraging,” Citi analyst Stephen Trent said in a note.

Of the reasons Bernstein’s research cites for Delta’s disproportionate suffering, none have anything to do with the airline being in trouble. technological deficit This would essentially put it at a disadvantage in the event of a mitigating incident like the CrowdStrike outage. suffered this fate In 2022, the airline canceled nearly 17,000 flights after a severe winter storm, but was unable to recover from the crash due to outdated software.

Non-aircraft capital expenditures were high for Delta, accounting for about 2.25% of its 2023 revenue, compared with the industry average of 2%, according to the note. That points to ample investment in information technology — more than $1 billion. And while Delta’s wide-body fleet hurt it during the CrowdStrike outage, it also helped the company maintain an 83.5% on-time rate for its flights, outperforming its competitors, according to data Bernstein obtained from the Department of Transportation.

Furthermore, while Delta’s network and its Atlanta hub were negatives for the airline after the CrowdStrike outage, it ultimately still serves as its primary hub. profit center“Any airline would cut off its own arm for a hub in Atlanta,” Vernon said. The geographic location serves as a major link between U.S. cities and is a two-hour flight from Atlanta. 80% Of the population of the United States. It is the largest population in the world. Most crowded airport.

The real test for Delta will be how it responds if a similar incident happens again, and how successful its long-term investments in serving passengers willing to give the airline another chance are.

“It’s a one-time loss in revenue,” Vernon said. “The question is, will they stay away or will they come back? Will the benefits of Delta’s service, the benefits of Delta’s rewards program and the quality of the experiences keep people coming back?”

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