Despite the impression left by many blasé analysts and investors that Friday’s massive computer outage across the world was now behind us, the story continues to unfold—particularly in one corner of Wall Street: shares in CrowdStrike, the company at the center of the disaster.
This also aligns with a growing price war in North Atlantic summer travel fares, which are falling, cutting profits and setting up some revenue and earnings shocks for the sector over the rest of 2024, contrary to the forecast of rising profits.
It was a CrowdStrike security update around midnight on Thursday to Microsoft-based systems globally that triggered the worst outage reported so far.
CrowdStrike shares fell 11% on Friday, and on Monday, sellers doubled down, causing the shares to fall more than 13%, closing at just over $72 billion.
That’s a fall of $18 billion or more in value over two days. Judging by the continuing flow of social media posts, plenty of people and businesses are still experiencing Microsoft’s so-called blue screen of death, which appears when there is a technical problem in Windows.
Aviation data group OAG said on Monday that the world’s major airlines had canceled 9,650 flights as a result of the outage from Friday when it started to Sunday. The cancellations were not evenly spread across the carriers—Delta was by far the worst affected, canceling 4,675 flights in three days until Sunday, followed by fellow US airlines United (1,706 cancellations), American (860), and Spirit (550).
Of the European carriers, easyJet saw the most cancellations with 469, followed by Lufthansa (281), Ryanair (271), and British Airways (131).
OAG’s data does not show a single cancellation for Emirates over the three days, while US carrier Southwest canceled just 20 flights.
Disruption is still being felt by airlines worldwide as a result of the IT outage, and the number of cancellations will rise as more are reported in the coming days—with Delta, it seems, leading the way.
Delta was reporting problems on the fourth day after the outage and said Monday that it was still restarting its Windows-based systems. The shares lost 3.5% on Monday. However, shares in rivals United and American Airlines were in the green, as was the wider market.
Delta has canceled more than 5,500 flights since the outage started early Friday morning, including at least 700 flights canceled on Monday. Delta and its regional affiliates accounted for about two-thirds of all cancellations worldwide on Monday, including nearly all the ones in the United States.
The airline said it would take “another couple of days” before “the worst is clearly behind us.” Delta's chief information officer also said Monday that the airline was still trying to fix a vital crew-scheduling program.
On July 11, Delta reported solid June quarter financials but hinted that the outlook for the third quarter was looking a little softer. However, it maintained its 2024 guidance as a whole. That will come under pressure as a result of the outage and continuing problems.
Guggenheim Securities downgraded its rating on CrowdStrike shares to neutral from buy on Sunday. Analysts said the stock was still trading at “the highest multiple of recurring revenue across our entire software coverage.”
They said it might take time for CrowdStrike to repair its image, and the fallout will probably hurt signings, the analysts wrote. (Signings are an early estimate of contract value from new and existing customers that can give investors a sense of a company’s potential for revenue generation).
“We still have the utmost respect for the leadership team at CrowdStrike and believe that the company will eventually become even stronger as a result of this incident. If investors have a multi-year horizon, they can ride it out,” Guggenheim's analysts wrote. “However, we find it difficult to tell investors that they need to buy CRWD (shares) right now.”
The problems for Delta and other airlines will feed into growing investor unease about airlines, especially after Ryanair warned of an intensifying price war for the third quarter due to too many seats and price-cutting.
Ryanair warned that airfares during the current busy summer travel season would be “materially lower” than last year as the low-cost carrier reported a plunge in profits.
Ryanair reported a 46% fall in profits in the first quarter of the year, to €360 million ($392 million), despite a 10% rise in the number of passengers.
Shares in the airline were down more than 17% at the close Monday, while other European airlines also saw declines.
