Delta on long road back to normal after massive flight cancellations

August 9, 2016 6:27 AM EDT

Passengers check in at a counter of Delta Air Lines in Mexico City, Mexico, August 8, 2016. REUTERS/Ginnette Riquelme

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(Reuters) - Delta Air Lines (NYSE: DAL) faces a "time-consuming process" to restore normal operations and get stranded passengers to their destinations after a power outage caused more than 1,600 flight cancellations over two days, a top executive said on Tuesday.

The events underscore how it can take days for airlines to reboot operations after a brief outage or storm.

"When Delta doesn’t fly aircraft, not only do customers not get to their destination, but flight crews don’t get to where they are scheduled to be," Delta's chief operating officer, Gil West, said on Tuesday in an online posting.

Rebuilding disrupted pilot and crew schedules while remaining in compliance with federal safety rules takes time, he said. There was also continued slowness in the system Delta uses to check in customers, board passengers and dispatch planes, West said.

He did not say when Delta, the No. 2 U.S. airline by passenger traffic, expected to return to normal operations following the power outage in Atlanta, where Delta is headquartered.

Delta has yet to detail the financial impact of the disruption.

Analyst Jim Corridore of S&P Global Market Intelligence estimated that passenger refunds, overtime hours for workers and other costs will likely reduce Delta's operating income by $10 million to $20 million for the third quarter.

In the 2015 third quarter, Delta had net income of $1.3 billion and operating income of $2.2 billion.

The cancellations this week upended the travel plans of tens of thousands of flyers.

Delta could not re-book passengers onto one of its top rivals and the world's largest carrier, American Airlines Group Inc (NASDAQ: AAL), because the two companies ended a ticketing and baggage agreement last year.

Delta said on its website that as of 5:15 p.m. EDT Tuesday it had canceled about 680 flights, while about 2,400 had departed. That's on top of about 1,000 flights it canceled on Monday, stranding passengers at airports around the globe.

The company said it would extend through Tuesday a waiver of fees normally charged when travelers change flights and would provide $200 in travel vouchers to heavily inconvenienced customers.

Delta's problems arose after a switchgear, which helps control and switch power flows like a circuit breaker in a home, malfunctioned for reasons that were not immediately clear, according to Georgia Power, a Southern Co (NYSE: SO) unit that provides electricity to most counties in Georgia.

West added in the posting that after a surge and a loss of power, some critical systems did not switch over to backup supplies as intended.

In the past year, rivals American and Southwest Airlines Co (NYSE: LUV) have also suffered flight disruptions due to data system malfunctions.

Corridore of S&P Global Market Intelligence said Delta's corporate customers were unlikely to stop flying the airline given the problems other carriers have faced and given that Delta has canceled far fewer flights than rivals generally. But explanations were needed.

"We would appreciate first of all a breakdown of what they're spending on IT because that's not really clear to us. We know what planes they're buying," for example, Corridore said.

Shares of Delta were down less than 1 percent at the close of trading.

(Reporting by Jeffrey Dastin in San Francisco and Rachit Vats and Sayantani Ghosh in Bengaluru; Editing by Lisa Von Ahn and Leslie Adler)

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