How SkyMall works and why it went bankrupt.

A Flight Attendant Explains How SkyMall Didn’t Make Its Money From Its Catalog

A Flight Attendant Explains How SkyMall Didn’t Make Its Money From Its Catalog

Moneybox
A blog about business and economics.
Jan. 23 2015 7:41 PM

I Was a Flight Attendant, and I Also Thought SkyMall Was Incredibly Weird

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Screenshot from SkyMall.com

I don’t think SkyMall really cared about selling you all of that stuff.

Jeff Friedrich Jeff Friedrich

Jeff Friedrich is an associate editor at Slate

I never received a SkyMall memo or went to a SkyMall training hour. In the three years I spent working as a flight attendant on Delta Air Lines regional flights from 2011 through 2013, no one ever told me how to help customers who wanted to make a SkyMall purchase.* In the rare instance in which a passenger asked, I said something like, “I think you need to go online or something.”

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I was the closest thing SkyMall could have had to a sales associate, and I knew nothing about the company. This seemed to me like no way to run a business that’s focused on direct retailing. And perhaps it wasn’t, particularly in light of Friday’s news that SkyMall and its parent company Xhibit Corp. had filed for Chapter 11 bankruptcy.

Several boogeyman feature in the story of SkyMall’s decline, according to Xhibit’s filing: more planes with Wi-Fi, more passengers with electronic devices, Amazon and eBay. “The direct marketing retail industry is crowded, rapidly evolving and intensely competitive,” said chief financial officer Scott Wiley in the filing.

But this makes it sound like the SkyMall catalog was the problem, when the truth is that SkyMall (the business) had long since moved on from SkyMall (the catalog). In other words, Skymall had ceased to even be a direct retailing company.

According to Xhibit’s annual report from 2013, the year it acquired SkyMall, 66 percent of SkyMall’s consolidated revenue came from its “loyalty business,” mainly from three partners: Caesars Entertainment, Capital One, and Marriott Rewards. SkyMall wasn’t making most of its money from its catalogs. By 2013, it earned more money by acting as a middle man for credit card companies and other partners: When a credit card holder spends enough money on a card, these reward programs allow you to redeem reward points for magazine subscriptions, cheap electronics, and other junk. SkyMall handled the fulfillment.

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The proximate cause of Skymall’s bankruptcy? Xhibit Corp. is a strange, spammy-seeming company with a history of financial losses. In September 2014, it sold the loyalty business for reasons I can’t easily ascertain from its financial documents. The company used the proceeds to pay down debt.

SkyMall began its loyalty business in 1999. From a 2001 filing by SkyMall Inc., we know that the loyalty business accounted for no more than 15 percent of SkyMall's revenue in 2000. We don’t know exactly what happened to SkyMall from 2001 through 2013, a period during which it was privately held. But what’s happened since the millennium, it seems, is that SkyMall depended less and less on the revenue it made from the catalogs in your seatback, and more and more on revenue from its credit card partnerships.

Maybe that explains why no one trained me to support your SkyMall purchase.

*Correction, Jan. 26, 2015: This post originally misidentified Delta Air Lines as Delta Airlines.