Delta Loudly Leads Companies Smarting from CrowdStrike Outage

July 19, 2024, will forever be known around Times Square as the day the digital ads died. No matter where they went, tourists were haunted by blank video screens where images of the latest blockbuster movies and skincare products once illuminated the New York landmark. The culprit was CrowdStrike, the information technology services provider responsible that day for network outages around the world.

CrowdStrike took responsibility for the mishap the day it occurred, revealing that the disruption happened because of a faulty Windows software update it sent to customers. After scrambling to restore customers’ systems, CrowdStrike apologized publicly for the mishap. At least a few of the affected companies – as well as consumers – have deemed those apologies less than adequate. Some law firms are even reminding investors that a securities class action lawsuit has been filed against CrowdStrike; the lead plaintiff deadline is September 30, 2024.

A search for CrowdStrike-related disclosures using the Intelligize platform turned up mentions of the now-infamous outage in recent SEC filings from several companies. They addressed the challenges and losses resulting from disruptions to banking services, emergency call centers and airline operations lasting for days.

The squeakiest wheel among the CrowdStrike critics is currently Delta Airlines, which took a significant hit to its reputation and bottom line because of the tech breakdown. In a Form 8-K filed with the Securities and Exchange Commission on August 8, Delta said the outage caused 7,000 cancelled flights over five days at a cost of roughly $500 million. It also announced it is pursuing legal claims against CrowdStrike and Microsoft, developer of the Windows software, to recover damages caused by the disruption.

For their parts, CrowdStrike and Microsoft vowed to fight back. The two tech companies argue that Delta’s outdated IT infrastructure was responsible for the thousands of cancellations and delays, which continued well after other competitors had resumed operations. In a sign Delta means business, the airline has hired storied litigator David Boies, who represented Democratic presidential candidate Al Gore in the 2000 election dispute, to spearhead the legal action. Boies fired off a letter to CrowdStrike claiming “there is no basis – none – to suggest that Delta was in any way responsible for the faulty software that crashed systems around the world.”

Not surprisingly, some of Delta’s competitors in the travel industry mentioned the headaches caused by the CrowdStrike outage, even though they used less inflammatory language to describe their problems. For example, Spirit Airlines said in a filing submitted August 1 that the event forced it to cancel nearly 500 flights at an expense of $7.2 million. Frontier Airlines also cited the incident in a quarterly financial report. Hawaiian Airlines indicated the CrowdStrike outage illustrated the way in which proper functioning of information network systems has increased in importance as a risk factor.

As more issuers file financial statements in the coming weeks and months, the effects of the CrowdStrike outage will undoubtedly appear even more widespread. For now though, the line for companies seeking damages from CrowdStrike for the disruption starts behind Delta.