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The CrowdStrike (CRWD) outage that began on July 19 and lasted for five days created plenty of turbulence in Q3 for Delta Air Lines (DAL), which missed quarterly EPS expectations for the second quarter in a row. Specifically, the outage created a $380 mln headwind to revenue while cutting into DAL's EPS by $0.45 due to customer refunds for canceled flights and increased crew-related costs. However, since DAL already telegraphed that its Q3 results took a sizable hit from this event when it lowered its guidance on September 12, the quarterly estimates should have mostly reflected the negative impacts.

Furthermore, the company's Q4 revenue guidance for growth of 2-4% fell short of expectations, adding to the disappointment, as CEO Ed Bastian disclosed that there's some weakness in bookings around the U.S. elections in November. 

• In terms of DAL's mixed Q3 results, the 5.7% yr/yr increase in non-fuel CASM is one metric that stands out. On September 12, the company guided for an increase of approximately 5.5%, so non-fuel expenses came in slightly higher than it projected, playing a role in the small EPS miss. On its own, the CRWD outage was responsible for a 3.2% jump in non-fuel CASM.
• Unit revenue is another metric that has garnered plenty of attention lately. After a couple of years of adding capacity to meet the robust demand for travel, an imbalance in supply and demand formed as that demand cooled this year, putting downward pressure on fare prices. That trend continued in Q3 as adjusted total unit revenue (TRASM) decreased by 3.6% yr/yr, including a 1.1 point impact from the outage.
• The good news, though, is that DAL commented that supply growth continued to rationalize and that in September, both domestic and transatlantic unit revenue growth turned positive. On the topic of DAL's transatlantic business, which saw a 3% drop in Q3 revenue, the company noted that trends are improving as Paris demand rebounds in the wake of the Olympics.
• This combination of a rebalancing of supply and demand, improving demand in highly profitable international flights, and more normalized costs in Q4, positions DAL favorably for an upswing in profitability. In fact, the company is anticipating Q4 operating margin of 11-13%, up from the 9.4% achieved in Q3, with pre-tax profit growing 30% yr/yr to $1.4 bln.

As the first major airline to report Q3 earnings, DAL's results provide a gauge for what to expect in the coming weeks when competitors United Airlines (UAL), American Airlines (AAL), and Southwest Air (LUV) issue their results. Outside of the impacts from the CRWD outage -- which didn't affect LUV's operations -- business conditions in Q3 remained similar to that of Q2 as an oversupply of seats put downward pressure on unit revenue. The tables do appear to be turning, though, as DAL and other carriers ratchet capacity lower, setting the stage for stronger profits in Q4 and into 2025.