(Bloomberg) -- Delta Air Lines Inc. is expected to take a sizable financial hit this quarter from the system breakdown that led to thousands of canceled flights and prompted a federal investigation of the carrier’s response.
Citigroup cut estimates for Delta’s third-quarter adjusted earnings by 60 cents a share in a new report to $1.37, citing “operational expenses and potential customer compensation costs” from the upheaval of the past few days. Analyst Stephen Trent also lowered his expectation for earnings before interest and taxes in the period by about $500 million.
The financial fallout offers a fresh blow to Delta as flight disruptions begin to ease. Chief Executive Officer Ed Bastian said in a statement Wednesday that cancellations were expected to be “minimal” during the day with operations restored to normal by Thursday. Delta had scrapped 50 flights as of 12:00 p.m. in New York and displaced baggage was trending down “significantly,” the carrier said in a later statement.
Delta declined to comment on analyst estimates of the financial fallout from the cancellations.
Conor Cunningham of Melius Research estimated a $350 million impact to operating profit plus a likely fine from the Department of Transportation, which is investigating Delta’s treatment of passengers. The issues have also tarnished Delta’s reputation for offering largely reliable, drama-free service.
“What is more uncertain is the reputational damage Delta’s image may take given the operational issue,” Cunningham said in a note. “It is certainly plausible forward bookings are impacted.”
Delta has fared the worst among US carriers after an outage Friday caused by CrowdStrike Holdings Inc. disrupted systems across numerous industries worldwide. Most other airlines got back on track over the weekend.
The carrier canceled 511 flights Tuesday, bringing its total since Friday’s breakdown to 5,469.
Delta’s shares traded down 1.6% at 3:34 p.m. in New York.
(Updates with shares, Delta comments from third paragraph.)
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