Delta Air Lines, one of the world's leading airlines, recently experienced a significant setback due to a technology outage caused by CrowdStrike, a cybersecurity firm.
The incident, which also involved Microsoft, resulted in a loss of approximately half a billion dollars for the airline, according to Delta CEO Ed Bastian. The CEO made this revelation during a televised interview, expressing his intention to seek redress from both CrowdStrike and Microsoft for the financial damage suffered by his company.
As reported by American Military News, Bastian explained that Delta was the most affected among airlines because it heavily relies on both CrowdStrike and Microsoft. The outage, which occurred on July 19, was the result of a faulty security update from CrowdStrike, affecting users of Microsoft applications worldwide. "So we got hit the hardest in terms of the recovery capability," Bastian stated during his appearance on CNBC's Squawk Box show.
The financial loss, according to Bastian, includes lost revenue and daily compensation to customers and hotel costs amounting to tens of millions of dollars. The outage led to the cancellation of over 6,000 flights, leaving hundreds of thousands of passengers stranded and thousands stuck in airports globally. Even after restoring its systems, Delta's crew tracking system remained overloaded and dysfunctional.
The incident has not only tarnished Delta's reputation as a reliable global airline but also prompted an investigation by the U.S. Department of Transportation into the airline's treatment of customers. In response, Delta, based in Atlanta, has engaged the services of law firm Boies Schiller Flexner to pursue potential claims against Microsoft and CrowdStrike.
Bastian expressed his frustration with the situation, stating, "You can't come into a mission critical 24/7 operation and tell us we have a bug." He further revealed that Delta had to physically reset more than 40,000 servers, which did not all return to their original state. "We're looking to make certain that we get compensated, however they decide to, for what they cost us," Bastian added.
However, seeking compensation might not be straightforward. Jeffrey Vagle, an assistant professor of law at Georgia State University with expertise in cybersecurity law, explained that standard software license agreements often protect software makers from much of the liability for outages. Despite this, Vagle suggested that Delta might not necessarily be looking to win in court, but to force a settlement, as CrowdStrike would likely want to avoid further negative publicity.
Ifeoma Ajunwa, an Emory Law Professor, also raised the question of negligence and whether CrowdStrike could have foreseen and prevented the event. She noted that large companies usually have insurance for financially debilitating disruptions, but such insurance might not cover foreseeable events. As such, Delta might be seeking a court ruling to determine if the event was unforeseeable and therefore covered by insurance.
Ajunwa also suggested that companies need to rethink their operations to prevent such incidents, especially as they become foreseeable and might not be covered by insurance. She pointed out that many functions previously performed by humans are now automated, increasing the likelihood of such incidents. "What sort of safeguards, what sort of redundancy do they want to build into the system, such that when this happens it doesn't cripple the whole airline infrastructure?" Ajunwa asked.
In the meantime, Delta is under pressure to improve its treatment of passengers whose flights were disrupted during and after the outage. U.S. Transportation Secretary Pete Buttigieg has written to Bastian and other airline CEOs, emphasizing the need for airlines to comply with refund requirements stipulated in the Federal Aviation Administration Reauthorization Act passed in May.
He reminded airlines of their obligation to clearly inform passengers of their right to a cash refund when their flight is canceled or significantly changed, and they do not wish to be rebooked.
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