For the past few weeks, the CrowdStrike (NASDAQ:CRWD) outage dominated the headlines. So, what exactly happened with the CrowdStrike outage?
CrowdStrike is a Texas-based cybersecurity company that develops software to help other companies recognize and block hacks. CrowdStrike’s Falcon software is widely used by Fortune 500 companies in industries ranging from banking to the airline industry. Many of these companies have CrowdStrike software installed on their Windows machines to protect the organization from malware and cybersecurity threats.
However, the problem arose on Friday, July 19, when CrowdStrike faced a major disruption during a software update, causing 8.5 million Windows machines with its system to crash. The outage could hurt Fortune 500 companies as much as $5.4 billion.
The airline industry might be the most obvious victim of all the industries affected by the global IT outage. Below are the three airline stocks hit by the global cybersecurity company failure.
Delta (DAL)
As the largest commercial airline in the world, Delta (NYSE:DAL) correspondingly experienced one of the worst losses of the CrowdStrike Outage. Since July 19, Delta has canceled more than 5,500 flights, accounting for two-thirds of the cancellations caused by the outage. The following Monday after the initial crash was especially the worst day for Delta. The airline company was responsible for almost all the flight cancellations issued that day.
Delta took a huge hit by the outage because nearly half of its IT systems are Windows-based. Analysts from Citigroup have already cut Delta’s estimated third-quarter earnings per share by 60 cents. Wall Street is anticipating as much as a half-billion dollar loss in profit for Delta this quarter. It will be interesting to see how much of the actual losses will be reflected in its third-quarter earnings.
Air France-KLM (AFLYY)
As the fourth-largest European carrier, Air France-KLM (OTCMKTS:AFLYY) has hub airports in Europe. While its effects are not as serious as U.S.-based carriers, Air France KLM experienced one of the most major losses from the international IT crash. This is because Amsterdam is one of the largest hub airports in Europe, and Air France-KLM has a presence in major cities such as Paris and Amsterdam.
According to Chief Financial Officer Steven Zaat, the French carrier is expected to take a $10 million loss following the CrowdStrike outage. Most of the losses came from Transavia, a Dutch-based low-cost airline owned by Air-France-KLM, and KLM, the flag carrier of the Netherlands that is a subsidiary of Air France-KLM. Air France was mostly free from major cancelation or delay compensation losses. Air France-KLM became one of the first airline companies to disclose its predicted losses to the public.
United Airlines (UAL)
United Airlines (NASDAQ:UAL) has a track record of being problematic in the airline industry. Recently, it has faced unfortunate losses from both controllable and uncontrollable events. In the first quarter, United reported a $124 million loss due to problems with its Boeing (NYSE:BA) 737 Max 9 jets.
While not as bad as Delta, United Airlines was certainly affected by the CrowdStrike outage. Like many competitors, United also has CrowdStrike software installed in its Windows machines.
On the day and weekend of the outage, United had to cancel almost 1,500 flights, but fortunately, by the following Monday, the airline company was able to significantly lower the cancellation number to less than 70 flights.
By Tuesday, canceled flights only accounted for 1% of all scheduled flights. Even though United Airlines’ losses are not as bad as Delta’s, investors should seriously consider exiting their positions in the stock.
On the date of publication, Andy Kim did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in CRWD.