CrowdStrike IT Outage: Impacts on Cargo Operations and Aviation Risks.
July 24, 2024
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Yann Barbarroux
The recent flight disruptions caused by the technology outage (Microsoft and CrowdStrike) have sent ripples through the aviation industry, affecting both passenger and cargo operations.After various communications with industry experts and customers, we decided to shed light on the situation, comparing it to a similar event 18 months ago (January 2023 FAA system outage) and highlighting the evolving nature of these disruptions.
Shifting Landscape: From Cancellations to Delays.
Unlike previous incidents, the current disruption has primarily resulted in delays rather than outright cancellations (except for Delta Airlines). This shift reflects the industry's growing adaptability in managing last-minute issues. The global scale of these disruptions has had far-reaching effects beyond aviation, impacting various sectors of the global economy.
Market Impact at a Glance:
120,000-128,000 flight delays recorded as of July 23rd 2024 (according to FlightAware).
In excess of 10,000 flights cancelled.
8,500,000 devices were affected by the cyber event.
Material increase in air cargo delays (+24% according to Otonomi Air Cargo Index - see below chart), though less severe than passenger flight disruptions.
Global markets affected, including pharmaceuticals and consumer goods.
Cargo Operations: Resilience Amidst Challenges.
The air cargo sector has shown remarkable resilience in the face of these disruptions.
While delays have increased, the overall impact has been less severe compared to passenger flights (more than 46,000 disrupted air transits on Friday 7/19) as noted in our different discussions with customers and partners in the Freight Forwarding and Aviation Cargoliners businesses.
This resilience can be attributed to the industry's experience in handling last-minute trade lanes issues and its ability to adapt quickly to changing circumstances.
Interestingly, despite the widespread nature of the disruption, there has been a notable lack of customer claims following the outage (less than 7% of interrupted logistics services).
This suggests that many stakeholders in the air cargo industry have developed robust contingency plans to navigate such challenges.
Risk Management: Our Approach.
In light of these events, it's crucial to discuss risk management strategies in the freight industry. As a leading provider of risk solutions, we offer valuable insights:
Delay Insurance: We provide delay insurance for air cargo with various trigger times (3, 6, 12 hours) to protect against disruptions affecting air shipments.
Air Cargo Delay Index: Otonomi's proprietary index tracks and analyzes delays, augmenting risk management capabilities and decision-making. See below chart that demonstrates the sharp spikes (+24% vs benchmark) in air freight delay volatility on the back of the recent turmoil.
Education & Awareness: We continuously emphasize the need for proper awareness to our customers regarding IT risks and system failures to improve preparedness and mitigation strategies.
The recent disruptions have had moderate impacts on Otonomi's customers, with some experiencing issues in booking and tracking shipments. However, the nature of the delays didn't trigger immediate claims under their delay insurance policies.
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