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Delta Air Lines to Seek Compensation After IT Outage, CRWD Stock Drops
Delta Air Lines has hired prominent attorney David Boies to pursue potential damages from CrowdStrike and Microsoft.
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Delta Air Lines (NYSE: DAL) is taking decisive action following a catastrophic IT outage earlier this month that caused widespread disruptions across the airline industry. The carrier has hired prominent attorney David Boies to pursue potential damages from tech giants CrowdStrike (NASDAQ: CRWD) and Microsoft (NASDAQ: MSFT), signaling a significant legal battle ahead.
The move comes as Delta grapples with the financial fallout from the incident, which led to thousands of flight cancellations and left passengers stranded worldwide.
Delta Seeks $350 Million to $500 Million in Compensation for IT Outage
On July 19, 2024, a software update from cybersecurity firm CrowdStrike triggered a historic outage of Microsoft systems, affecting millions of computers across various industries. Airlines were particularly hard hit, with Delta experiencing the brunt of the impact.
The outage cost Delta an estimated $350 million to $500 million, prompting the airline to seek compensation for its losses.
Delta has enlisted David Boies, chairman of Boies Schiller Flexner, to spearhead its legal efforts. While no lawsuit has been filed yet, the airline’s intent to pursue damages from both CrowdStrike and Microsoft is clear. The incident has left Delta dealing with over 176,000 refund or reimbursement requests after nearly 7,000 flight cancellations.
CrowdStrike Shares Take a Hit as Delta Gears Up for Legal Fight
The news of Delta’s potential legal action has sent ripples through the tech sector. CrowdStrike’s shares fell as much as 5% in extended trading following the announcement. The cybersecurity firm had already lost almost a quarter of its value in the two trading days following the outage.
This case could set a precedent for other affected companies to seek damages, potentially leading to increased scrutiny of software updates and their impacts across industries.
Insurance startup Parametrix estimated that the incident resulted in a total loss of $5.4 billion for Fortune 500 companies, not including Microsoft itself. The Department of Transportation has launched an investigation into Delta’s handling of the disruptions, adding another layer of complexity to the situation.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
