\n
![](\"https:\/\/fortune.com\/img-assets\/wp-content\/uploads\/2024\/09\/GettyImages-1741627302-e1725570890848.jpg?w=2048\")
<\/p>\n [ad_1]
\n<\/p>\n
But while competitors like United and American Airlines<\/a> were able to pick themselves back up only a few days later (United canceled nearly 1,500 flights by comparison), Delta was still scrambling<\/a>. A Thursday note from Bernstein Research illuminates what went so wrong.\u00a0<\/p>\n Delta scuttled about 30% of its flights the weekend of July 19, according to the note, while United canceled about 12%, and American canceled about 5%. The primary reason for this is Delta\u2019s heavy reliance on its Atlanta hub where about 20% of the airlines\u2019 flights transit\u2014the percentage is greater than most major airlines and their respective hubs\u2014which meant Delta travelers with canceled flights were mostly concentrated in a single location.<\/p>\n \u201cWhen you talk about what Atlanta is to Delta\u2019s network, it\u2019s just more important and has more traffic connecting through it than what you see in other networks,\u201d the note\u2019s author and Bernstein senior analyst David Vernon told Fortune<\/em>.\u00a0<\/p>\n The airline also has a higher average number of seats per aircraft than its competitors, Vernon and co-author Justine Laufer argued, meaning it has more passengers to accommodate in times of crisis. Historically, however, more customers relative to other airlines has been a boon<\/a> for Delta. But this time, the airline\u2019s more diverse fleet<\/a> of aircraft made it more challenging to transfer customers to different flights across varying models and manufacturers.<\/p>\n Identifying the rationale underlying Delta\u2019s vulnerability won\u2019t erase its summer hardships. Beyond<\/a> having to eat millions of dollars in losses from canceled flights, Delta has squabled<\/a> with CrowdStrike over who\u2019s to blame for the aftershocks of the outage. Bastian has claimed CrowdStrike did not offer to help the beleaguered airline, which it said was heavily reliant on Microsoft<\/a> and CrowdStrike. The tech companies responded in kind, alleging Delta did not take accountability for its own technological shortcomings and that its competitors leaned more heavily<\/a> on Microsoft and CrowdStrike tech, yet did not experience the same consequences. The airline announced in late August its chief operating officer Michael Spanos would be leaving<\/a> the company, though Spanos reportedly told Bastian his plans to leave before the outage took place. Spanos was appointed<\/a> CEO at Outback Steakhouse\u2019s parent company last month.\u00a0<\/p>\n But to make matters worse for Delta, not only did competitors more easily shrug off the CrowdStrike outage, they may have even benefitted from Delta\u2019s misfortunes. JetBlue Airways<\/a> raised its revenue outlook<\/a> Thursday, citing \u201crevenue uplift from the re-accommodation of customers affected by other airlines\u2019 cancellations,\u201d in addition to streamlined operations and a healthy summer travel season. JetBlue was not heavily impacted<\/a> by the outage.<\/p>\n \u201cAlthough some of the positive adjustment may have been temporary, as the carrier picked up some CrowdStrike-impacted passengers in July, the carrier\u2019s overall update looked encouraging,\u201d Citi analyst Stephen Trent said in a note.<\/p>\n Among the reasons Bernstein\u2019s research cites for Delta\u2019s disproportionate suffering, none of them have to do with the airline being in a technology deficit<\/a> that would foundationally put it as a disadvantage in cases of extenuating incidents like the CrowdStrike outage. Southwest suffered this fate<\/a> in 2022, when the airline canceled almost 17,000 flights after a brutal winter storm, but was unable to recover from the meltdown due to outdated software.<\/p>\n Non-aircraft capital expenditures were high for Delta, making up about 2.25% of its 2023 revenue, compared to the industry average of 2%, the note said. It suggests a sufficient investment in IT\u2014over $1 billion. Though Delta\u2019s wide range of aircraft hurt it during the CrowdStrike outage, it also helped the company maintain a 83.5% on-time rate for its flights, topping its competitors, according to data Bernstein acquired from the Department of Transportation.<\/p>\n Moreover, while Delta\u2019s network and its Atlanta hub were a negative for the airline after the CrowdStrike outage, it ultimately continues to serve as its profit center<\/a>, Vernon argued. \u201cAny airline would chop off its own arm for an Atlanta hub,\u201d he said. The geographic position serves as a major connector between U.S. cities and it resides within a two-hour flight of 80%<\/a> of the U.S. population. It\u2019s the world\u2019s busiest<\/a> airport.\u00a0<\/p>\n Delta\u2019s true test will be how it responds if a similar accident happens again, and how well its long term investments will serve passengers willing to give the airline another shot.<\/p>\n \u201cThat\u2019s a one-time loss of revenue,\u201d Vernon said. \u201cThe question is, will they stay gone, or will they come back? Does the benefit of Delta\u2019s service, does the benefit of Delta\u2019s reward program and quality of the experiences get people to come back?\u201d<\/p>\n<\/div>\nSchadenfreude capitalism<\/h2>\n
Recommended reading:<\/strong>
In our new special issue, a Wall Street legend gets a radical makeover, a tale of crypto iniquity, misbehaving poultry royalty, and more.
Read the stories.<\/a> <\/div>\n