The company that produces SkyMall, the in-flight shopping catalog that entices airline travelers with offers for iFetch ball launchers for dogs and mini clap-on alarm clocks, is bracing for a hard financial landing.
SkyMall parent firm Xhibit Corp. (XBTC) and related subsidiaries filed for federal bankruptcy court protection in Phoenix on Friday, citing a funding crisis and seeking a court-supervised sale of their assets.
SkyMall, found in the seat-back pockets on many airline flights, once enjoyed a virtually captive audience of air travelers. No more.
“Historically, the SkyMall catalog was the sole in-flight option for potential purchasers of products to review while traveling,” Xhibit Chief Financial Officer Scott Wiley wrote in a legal declaration filed with the bankruptcy petition.
“With the increased use of electronic devices on planes, fewer people browsed the SkyMall in-flight catalog,” wrote Wiley. “The substantial increase in the number of air carriers which provide Internet access, and the U.S. Federal Aviation Administration’s recent decision to allow the use of electronic devices during take-off and landing, 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.”
The SkyMall business generated approximately $33.7 million in 2012 revenue, and that dwindled to $15.8 million for the nine months that ended Sept. 28, the bankruptcy filings stated.
SkyMall suffered “substantial and increasing operating losses” in recent years, and confronted a “severe liquidity crisis” by the end of December 2014 that raised concern the company would be unable to pay employees or sustain operations with remaining cash reserves, Wiley wrote.
SkyMall opted to seek bankruptcy court protection after an effort to obtain additional operating capital failed, the legal filings stated.
Under the sale process proposed by the debtor companies, marketing of SkyMall assets would begin immediately, an auction would be held on or about March 24 and any sale would close in April. The company would maintain scaled-down operation during the process.
“Because of the substantial risks and uncertainties regarding continued business operations, it is critical that the marketing and sale process is completed within the contemplated time frame,” Wiley wrote. “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.”
SkyMall listed Delta Air Lines, American Airlines and US Airways as its largest unsecured creditors, according to the bankruptcy filing. Delta terminated its contract with SkyMall as of Nov. 30. Southwest Airlines notified the company it would no longer carry the catalog after April 1, the filing added.
A creditors meeting is scheduled for Feb. 24 in Phoenix.
The future of SkyMall had become a topic of speculation during the past year.
It was just this past April, for example, that the Los Angeles Times took an in-depth look at SkyMall, writing: “Analysts warn that SkyMall must modernize or join the Montgomery Ward and Sears catalogs on the scrap heap of retail history.”
With Thursday’s news, it seems that time may have come.
Source: USA TODAY