SkyMall, the iconic catalog sitting in the backs of airplane seats, has become the latest company to fall victim to cyberspace.
With airline passengers now surfing the Internet and increasing competition in the overall retail industry, especially online, the Phoenix-based catalog has gone broke.
Phoenix-based SkyMall LLC filed for Chapter 11 on Thursday, proposing to auction off its assets in late March and close the sale in April, according to court papers in the U.S. Bankruptcy Court in Phoenix.
Xhibit Corp., the parent company of SkyMall, and several other of its subsidiaries also filed bankruptcy paperwork.
Until the auction and potential sale of assets, SkyMall hopes to keep scaled-back operations going, but that may change.
"If it appears at any point during the marketing and sale process that continued operation of the scaled-down SkyMall business operations is no longer feasible, the debtors will take the steps necessary to terminate remaining operations,” Scott Wiley, chief financial officer of Xhibit, wrote in a legal declaration filed with the court.
SkyMall was founded 25 years ago by Arizona State Senator Bob Worsley, who is no longer involved with the company.
Since then, the catalog has been an icon for in-flight reading and historically was the sole option offered to passengers in seat-back pockets. It’s become most well-known for its selection of quirky retail items, such as robotic, self-cleaning kitty litter devices and orbital roller skates that move laterally like a skateboard.
But that business model has been eroding in recent years.
“With the increased use of electronic devices on planes, fewer people browsed the SkyMall in-flight catalog,” Wiley wrote.
He noted more airlines are choosing to offer in-flight Internet access and, thanks to a Federal Aviation Administration decision in late 2013, passengers are now allowed to use devices such as smartphones and tablets during take-offs and landings.
The culmination of such changes to aviation practices “resulted in additional competition from e-commerce retailers and additional competition for the attention of passengers, all of which further negatively impacted SkyMall’s catalog sales,” Wiley wrote. “These technology changes and the costs incurred by airlines in carrying a printed SkyMall catalog, have also made the traditional in-flight SkyMall catalog increasingly unattractive to the airlines.”
SkyMall reached a breaking point last year. It tried finding ways to reposition the catalog away from the in-flight business and toward e-commerce, but couldn’t do so because it was facing a “liquidity crisis,” Wiley said.
Revenues plunged from $33.7 million in 2013 to $15.8 million during the first three quarters of 2014. The company fell behind on various payments and almost was unable to pay its employees.
On top of that, two airlines — Delta Air Lines and Southwest Airlines Co. — announced plans that they would soon end their contracts with SkyMall and pull the catalog from seat backs.
A week before filing bankruptcy on Thursday, SkyMall laid off 47 employees, about one third of its total workforce, most of whom worked in the company’s call center, he said.
