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USA. After more than 25 years in the market, inflight retailer SkyMall has gone bankrupt, with parent company Xhibit Corp citing the highly competitive industry and increased use of electronic devices and Wi-Fi on planes as key factors behind declining sales.
Last week, Xhibit Corp – and its wholly-owned subsidiaries including SkyMall – filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code to pay creditor claims against the company which it estimates are around US$12 million.
Xhibit Corp also intends to seek approval from the Bankruptcy Court to sell the SkyMall online retail business and “substantially all other assets”, engaging CohnReznick Capital Market Securities, LLC, to advise on the sale, subject to approval.
In a press release, Xhibit Corp CFO and Acting CEO Scott Wiley said: “We are extremely disappointed in this result and are hopeful that SkyMall and the iconic “˜SkyMall’ brand find a home to continue to operate as SkyMall has for the last 25 years.”
According to court documents, SkyMall revenue, excluding SkyMall Ventures LLC, dropped from US$33.7 million in 2013 to US$15.8 million in the first 9 months of 2014. Earlier this month the retail catalogue business was suspended, with the company terminating nearly a third of its approximately 150 employees.
Throughout the fourth quarter of 2014, SkyMall attempted to obtain additional operating capital but was “unable to attract the necessary working capital on terms or in amounts sufficient to meaningfully address its liquidity needs”. Delta Air Lines also terminated its contract with SkyMall effective 30 November, 2014, while Southwest Airlines will no longer carry the SkyMall catalogue from 1 April, 2015.
In the bankruptcy filing, Wiley listed several contributing factors to the “financial and operational difficulties confronting SkyMall”, including strong industry competitors, a decrease in discretionary spending, third-party vendors, pricing strategies and the increased prevalence of electronic devices and Wi-Fi on planes.
He remarked: “The direct marketing retail industry is crowded, rapidly evolving and intensely competitive. Because SkyMall historically did not narrowly tailor its product offerings, SkyMall faced well-established competitors in every market vertical, as well as competition from significant, broad-based e-commerce providers.
“Many of SkyMall’s competitors have greater, or vastly greater, resources, longer histories, more customers, and higher brand recognition. These competitors have often secured better terms from vendors, adopted more aggressive pricing, and devoted more resources to technology, infrastructure, fulfilment, and marketing.”
The full documents are available here.
