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Cowen Analysts Attempt To Quantify The Effect Of Delta's Power Outage

Cowen Analysts Attempt To Quantify The Effect Of Delta's Power Outage - Delta Air Lines Inc. New NYSE:DAL

Delta Air Lines, Inc. DAL 1.54% suffered from an embarrassing system-wide outage last week that affected its entire operations.

Related Link: Delta Deals With System-Wide Outage; Investors Sell The News

Delta quickly fixed the issues which plagued its system, but it is still unclear the financial impact the event will have on its earnings. Cowen and Company's Helane Becker answered this pertinent question in a research report on Monday.

According to Becker, Delta's approximately 2,100 cancelled flights last week and many more cancelled flights could result in an approximate $120 million reduction in operating income. As such, the company is now tracking toward the lower end of its operating margin guidance of 19 to 21 percent.

Long-Term Impact

However, the impact isn't expected to be recognized in just the third quarter; rather, it will be seen over the next four quarters.

Becker added that Delta is likely to maintain its third quarter PRASM (passenger revenue per available seat mile) range of down 4 to 6 percent, but there is a potential revision to the low end of its initial expectation.

Becker stated that Delta has "historically taken great pride" in its operational performance, and now its management team will take a "more humble approach" to addressing its operational performance going forward.

The analyst also expects Delta to quantify the impact when it reports August's traffic metrics (likely out September 2) and may provide an updated third-quarter guidance at Cowen's own Annual Global Transportation Conference (September 7).

Shares remain Outperform rated with an unchanged $55 price target.

At time of writing, shares were up 1.4 percent on the day at $36.86.

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DateFirmActionFromTo
Jul 2016JP MorganMaintainsOverweight
Jul 2016Deutsche BankMaintainsBuy
Jul 2016Evercore PartnersDowngradesBuyHold

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