Flight Disruptions Linger After Outage
Flight delays and cancellations continued well into Monday after a global outage last week involving a CrowdStrike software update that disrupted numerous industries. Several analysts called it one of the largest information technology outages in history.
Airlines reported hundreds of flights canceled, with Delta Air Lines hit particularly hard, three days after the outage first brought down computer systems for several hours in businesses that also included banks, hospitals and media companies. By Monday afternoon, tracking site FlightAware reported nearly 1,000 U.S. flights were canceled, including about 800 for Delta, and 4,400 were delayed.
Delta CEO Ed Bastian said the company was working to restore operations. CrowdStrike executives apologized for global disruptions and said “a significant number” among the more than 8 million devices affected worldwide across multiple industries were back online and operating as normal.
Analysts said disruptions could still linger for days or weeks in industries such as cargo shipping. Patrick Anderson, CEO of consulting firm Anderson Economic Group, told CNN that global business losses from the outage across industries could top $1 billion.
In its own report, S&P Global Ratings said the CrowdStrike outage “highlights the risks to the global IT ecosystem arising from the interdependency of critical systems and software.” The disruption underscores short-term revenue risks and wider-ranging implications for companies, even those that do not directly use CrowdStrike but were affected by third-party vendors and service providers that do, S&P analysts said.
Recession Risks Remain Low
Risks for a U.S. recession remain low despite continued struggles for industries such as housing and manufacturing, according to analysts at Oxford Economics.
“The economy underwhelmed in the first half of the year while it transitioned to a more sustainable pace of growth, which often includes bumps and jitters,” Oxford U.S. Economist Matthew Martin said in a report issued Monday by the research firm. “Our business cycle index weakened but is not consistent with an economy in recession, and the incoming data for June points to a noticeable improvement.”
Martin noted weakness remains concentrated in consumer sentiment and building permits, though neither area warrants concern of an impending recession, Martin said. The latest government data showed reduced building permit activity for single-family housing, and a recent increase for the multifamily category “may not stick amid higher rental vacancies and slower rent growth,” he said.
“Worries about the consumer are overdone, but there are some vulnerabilities,” the economist said. “A deceleration in inflation will support gains in real disposable income and, by extension, consumption while reducing the odds of a significant rise in delinquency rates.”
Several analysts have pointed to slowdowns in employment and inflation among factors making the case for the Federal Reserve to begin cutting its key lending rate later this year. June’s unemployment rate was 4.1%, up from 4% in the prior month; and annual inflation was 3.3%, down from 3.4% for the prior month and well below the peak 9.1% of June 2022.
Tender Greens Adds to Restaurant Struggles
Chapter 11 bankruptcy filings by restaurant chain Tender Greens and its parent company are among the latest in a recent string of similar financial moves by dining and retail chains contending with a slowdown in consumer spending.
The health-oriented Tender Greens and parent firm One Table Restaurant Brands, which also owns the fast-casual Mexican-style Tocaya chain, made separate filings for bankruptcy protection as they restructure finances. Los Angeles-based One Table operates a total of about 40 Tender Greens and Tocaya restaurants, primarily in California, and the company said it is considering a sale in the form of an auction or stalking horse bidder as its restaurants remain open for business.
It is the latest in a series of Chapter 11 filings and restaurant closings this year by dining chains that include Red Lobster, Rubio’s Coastal Grill and Tijuana Flats. Red Lobster has closed nearly 100 restaurants and is looking to get out of additional leases as it seeks a buyer. The bankruptcy court is now considering filings by several creditors that are opposing its debt settlement plans, including landlords and service providers.
Financial restructurings and store closings have also increased in the past year among retail chains involved in discretionary spending categories such as clothing and furniture. Citing sources familiar with deliberations, Bloomberg reported Texas-based furniture retailer Conn’s HomePlus is mulling shutting up to 100 or 40% of its nationwide locations as it considers its own bankruptcy filing amid slowing sales facing much of the furniture industry.
Regional news outlets reported that “store closing” signs have been posted at HomePlus locations in Tucson, Arizona; Wichita Falls, Texas; and Shreveport and Baton Rouge, Louisiana. The company did not immediately respond to a request from CoStar News to comment.