Delta rejects CrowdStrike criticism, sees $500mln hit from cyber outage

CHICAGO/WASHINGTON  - Delta Air Lines said on Thursday it is pursuing legal claims against CrowdStrike and Microsoft after a global outage last month caused mass flight cancellations, disrupting travel plans of 1.3 million customers and costing it at least $500 million.

A software update last month by global cybersecurity firm CrowdStrike triggered system problems for Microsoft customers, including many airlines. The disruptions persisted at Delta even as they subsided the next day at other major U.S. carriers.

The Atlanta-based carrier canceled about 7,000 flights over five days. It also faces an investigation from the U.S. Transportation Department for the disruptions.

"An operational disruption of this length and magnitude is unacceptable, and our customers and employees deserve better," Delta's CEO Ed Bastian said in an SEC filing on Thursday.

The dayslong disruptions have sparked a blame game. Bastian has faulted both CrowdStrike and Microsoft for failing to provide an "exceptional service."

Both the tech companies have rejected Delta's claim that they should be blamed for flight disruptions.

On Sunday, CrowdStrike said it would respond "aggressively" to protect its shareholders, employees, and other stakeholders if Delta filed a lawsuit.

Microsoft has also vowed to defend itself "vigorously," saying its preliminary review suggested that Delta, unlike its competitors, apparently had not modernized its IT infrastructure.

In a letter to CrowdStrike on Thursday, David Boies, who is representing Delta, said the airline was "surprised and disappointed by CrowdStrike's decision to try a 'blame the victim' defense."

"There is no basis -- none -- to suggest that Delta was in any way responsible for the faulty software that crashed systems around the world, including Delta's," Boies wrote.

He said Delta has invested billions of dollars in information technology and attributed the airline's struggle to restore operations to its reliance on CrowdStrike and Microsoft.

A CrowdStrike spokesperson said Delta was pushing a "misleading narrative." "CrowdStrike and Delta's teams worked closely together within hours of the incident," the spokesperson said.

Delta said it expects a direct revenue hit of $380 million from the outage in the current quarter due to refunds to customers for canceled flights and compensation in cash and frequent flyer miles.

The company reported additional expenses of $170 million as a result of customer expense reimbursements and crew-related costs. The flight cancellations, however, are estimated to lower its fuel bill by $50 million, Delta said.

Delta told U.S. lawmakers that CrowdStrike's faulty update "impacted more than half of Delta computers, including many of Delta’s workstations at every airport in the Delta network."

(Reporting by Rajesh Kumar Singh in Chicago and David Shepardson in Washington; Editing by David Gregorio and Diane Craft)