The company behind the in-flight catalog SkyMall filed for bankruptcy protection, a victim of evolving rules and technology that now lets airline passengers keep their smartphones and tablets powered up during flight.
After 25 years selling quirky products like a Darth Vader toaster or a paper towel holder with USB ports, SkyMall LLC is seeking a court supervised sale of its assets, according to papers filed Thursday with the U.S. Bankruptcy Court in Phoenix.
“We are extremely disappointed in this result and are hopeful that SkyMall and the iconic ‘SkyMall’ brand find a home to continue to operate,” acting Chief Executive Scott Wiley said in a statement Friday.
The company, which started in 1989, fully suspended its retail catalog operation Jan. 16, and laid off 47 of its 137 employees, according to court papers. SkyMall’s parent company Xhibit Corp. , which acquired the business in 2013, is also seeking Chapter 11 protection.
Mr. Wiley cited a “crowded, rapidly evolving and intensely competitive” retail environment as the reason for the quarterly publication’s recent struggles. “With the increased use of electronic devices on planes, fewer people browsed the SkyMall in-flight catalog,” he said.
The catalog can often be found in the seat pockets on many domestic flights, but airlines have been cutting back. Delta Air Lines ended its contract with SkyMall in November, court papers said, and Southwest Airlines informed the company in December that it would stop carrying the catalog later this year. “We saw a decline in customer use of the publication,” a Delta spokesman said.
The increase in the number of airlines providing Internet access “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,” Mr. Wiley said.
The SkyMall retailing business had revenue of about $33.7 million in 2013, but only $15.8 million for the nine months ended Sept. 28, 2014.
SkyMall named Delta Air Lines , American Airlines and US Airways as its largest unsecured creditors. In its bankruptcy petition, the company listed assets between $1 million and $10 million and said in court papers that its total liabilities are about $12 million.
The company doesn’t have a buyer lined up, but Mr. Wiley said SkyMall is hoping to sell its business as a going concern and will attempt to “sustain their scaled-down business operations as a going concern” during the sale process. An auction will be held on or about March 24, Mr. Wiley said, and any sale of SkyMall’s assets will close in April.
Richard Jaffe, a retail analyst at Stifel Nicolaus & Co., said the problems facing catalog-based businesses aren’t unlike the challenges brick-and-mortar retailers face now that consumers can access thousands of stores online. “I don’t think [SkyMall] had a compelling identity,” he said. “It’s all over the place; it has no real point or mission.”
SkyMall has changed hands numerous times over past 25 years. Investor Jahm Najafi ’s Phoenix-based private-equity firm purchased SkyMall in 2012 from Spire Capital and the Las Vegas-based Greenspun family. The following year Mr. Najafi merged SkyMall into the online advertising business Xhibit. As of May 2013, the combined company, including its debt, was valued at approximately $200 million, according to regulatory filings. Representatives for Mr. Najafi couldn’t be reached for comment.
If a bankruptcy deal doesn’t happen, some fliers will be sad to see the seller of the $2,250 life-size Bigfoot Garden Yeti statue and Litter Robot, a $339.99 self-cleaning cat litter box, go the way of other now-defunct retailers. Many of the products, however, can be purchased online from Amazon.com and other vendors.
Frequent flier Ricky Cadden, a digital marketer in the travel industry, said he would miss flipping through SkyMall on flights. “You sit on a plane, and you expect to see a SkyMall catalog,” he said. “I loved looking for the stuff that you could only find in SkyMall.”
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