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Delta's flight disruptions hit its premium brand image
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Delta's flight disruptions hit its premium brand image
Jul 25, 2024 2:25 AM

CHICAGO, July 25 (Reuters) - Among the big U.S.

carriers, Delta Air Lines ( DAL ) has assiduously built a

reputation as a premium airline, touting its punctual and

reliable operations relative to peers. But over the last several

days, its brand image has been dented.

Following a global cyber outage, the Atlanta-based airline

has been the slowest among major U.S. carriers to recover. Since

last Friday, Delta has canceled more than 6,000 flights, leaving

hundreds of thousands of travelers stranded. Analysts estimate

the hit to its bottom line could be in the hundreds of millions.

Delta's issues are the latest in a series of unexpected

problems that have hit individual U.S. airlines over the last

few years.

United Airlines bore the brunt of weather

disruptions last year around the July Fourth holiday weekend.

Southwest Airlines ( LUV ) suffered an operational meltdown

around the Christmas holidays in 2022 that upended travel plans

for 2 million customers.

Prior to the cyber outage, Delta's reputation was strong,

with aviation analytics firm Cirium and consultancy OAG ranking

it as the most punctual airline in North America in both 2024

and 2023.

"That (premium) image has now taken a hit," said Conor

Cunningham, an analyst at Melius Research, adding the

disruptions would result in a hit of at least $350 million to

its operating margin in the September quarter.

Citi analyst Stephen Trent said flight cancellations and

delays would reduce Delta's third-quarter and full-year earnings

by 60 cents a share each.

Delta currently expects adjusted profit between $1.70 and

$2.00 per share in the September quarter. The company has not

yet quantified the financial impact of the disruptions and

declined a request for comment.

In an interview last year, Delta CEO Ed Bastian said running

a reliable operation was the central tenet of its strategy to

woo travelers willing to pay for something other than just a

seat.

Delta attributed its problems to a faulty software update by

global cybersecurity firm CrowdStrike, which it said left about

60% of its most critical applications inoperable.

The airline said its crew tracker application, which

ensures all flights have a full crew in the right place at the

right time, required the most time and manual support to

synchronize.

The operational issues have left some of its loyal customers

feeling frustrated and let down.

"For the last decade I've flown first class @Delta for every

single flight," wrote Jason Helmes on social media platform X.

"Never again. Y(ou) all just lost a customer for life."

It took Southwest ( LUV ) about two quarters to recover from the

so-called "bookaway effect" after the December 2022 holiday

meltdown that led a lot of travelers to switch to other

airlines. Some industry analysts say the meltdown's impact

lingered through all of 2023.

In a blog post, Bastian - who flew to the Paris Olympics on

Wednesday where Delta is a U.S. team sponsor - apologized to

customers and said Delta would resume normal operations on

Thursday. But some of its customers are asking how other major

carriers were able to recover far more quickly.

"I think the problem runs deeper," said Scott Spencer,

president at digital engineering services firm Ascendion, who

has been flying with Delta for 25 years. "My understanding is

that Delta's crew scheduling software was down as a result of

increased loads."

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