Delta Promises To End The Year On A Strong Note

On Thursday, Delta Airlines Inc DAL disappointed with its fourth quarter sales guidance after a historic technology outage that took place suddenly during summer, and for which CrowdStrike Holdings Inc CRWD and Microsoft Corporation MSFT were responsible for. However, thanks to strong end-of-year holidays demand, Delta still expects to grow its earnings during the fourth quarter despite also seeing election uncertainty briefly deterring air travel. 

Third quarter highlights

For the quarter ended on September 30th, Delta already revealed the CrowdStrike outage wiped out $380 million in revenue and amounted to a 45-cent hit to earnings as it struggled to recover. The recovery took thousands of Microsoft Windows machines offline, and resulted in thousands of cancelled flights. Hurricane Helene additionally disrupted flight plans, taking away another 3 cents from profit.

Revenue grew 1.2 % to $15.68 billion but adjusted revenue amounted to $14.59 billion, with LSEG expecting $14.67 billion. Despite the setbacks, net income grew 15% YoY to $1.27 billion. Adjusted earnings of $1.50 per share were below LSEG's estimate of $1.52 per share. 

Fourth quarter outlook

Supported by resilient travel demand and strong bookings for the holidays, the Atlanta-based airline expects revenue to rise between 2% and 4%, with the guidance including a 1 point revenue hit from lower demand before and after the November 5th U.S. presidential election.

Delta guided for fourth-quarter earnings between $1.60 and $1.85 a share. Excluding the CrowdStrike impact, Delta still sees full-year adjusted earnings coming in between $6 and $7 a share.

Delta is going after CrowdStrike and Microsoft.

CEO Ed Bastian also added that Delta is seeking compensation from both CrowdStrike and Microsoft from the outage. To pursue potential damages from CrowdStrike and Microsoft, Delta hired a prominent attorney David Boies. Due to the historic mass outage of Microsoft systems, airlines were hit especially hard, with Delta being hit the hardest, having to deal with more than 176,000 refund or reimbursement requests after having cancelled almost 7,000 flights. 

The latest report shows Delta was in for a slow recovery from the sudden summer disruption that was one for the books, knocking down its third quarter earnings by as much as 26%. But through the earnings release, Bastian affirmed that Delta is well positioned to finish the year on a strong note as it remains on track to report one of the most profitable fourth quarter thanks to improved pricing and strong holiday bookings. 

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