What We Learned This Week

Cheap isn’t Defensible: Spirit Airlines is reportedly exploring bankruptcy options following its failed merger with JetBlue earlier this year. This development, while unfortunate, is hardly surprising given the company’s over $1 billion in debt coming due within a year and its inability to turn a profit since before the pandemic. Whether through bankruptcy or an out-of-court restructuring with bondholders, Spirit is facing some difficult decisions. The airline’s trajectory highlights the broader challenges of the airline industry: intense competition, volatile costs, and selling what is effectively a commodity—air travel.

Spirit’s strategy of targeting budget-conscious leisure travelers by offering ultra-low-cost fares worked well for a while, especially when major carriers focused on higher-margin business travelers. However, the pandemic shifted the landscape, as business travel never fully recovered and larger airlines began targeting leisure travelers with competitive rates and more extensive network benefits. This eroded Spirit’s price advantage, leaving them struggling with rising costs and increased competition. In an attempt to pivot, Spirit began offering more amenities to attract additional revenue, but in doing so, they lost the niche that once set them apart. This is a reminder of how critical it is for companies to have a sustainable competitive advantage—if they can't defend it, larger players will inevitably take their place.

Platinum Bars at Costco: Costco has expanded its lineup of precious metals, adding 1 oz platinum bars to its offerings alongside gold bars and silver coins. Priced at $1,089.99, these bars are available exclusively on the company’s website. Costco's introduction of gold bars in 2023 was met with overwhelming demand, selling out in hours despite a two-bar-per-customer limit. At peak, it's estimated that Costco was moving over $200 million in gold bars monthly.

This speaks volumes about the trust and loyalty Costco members have in the brand to deliver quality and value, even in niche markets like precious metals. Traditionally, investing in gold and platinum can feel complex and unapproachable, but Costco’s trusted platform has made it easier for everyday consumers to participate. While these bars won’t significantly impact the company's financials (as they're sold with minimal markup), they enhance the shopping experience and reinforce the brand's reputation for offering unique and exciting finds. It's another example of why Costco remains one of the most fascinating retailers to watch.

Google Breakup Chatter Intensifies: The big headline in tech this week is the DOJ's preliminary recommendations following its earlier declaration that Google holds a monopoly in search. Among the proposed remedies is the potential breakup of the company—a move reminiscent of the case against Microsoft in the '90s.

While this scenario has grabbed most of the headlines, it’s far from a likely outcome. Legal experts suggest that the more probable remedy would be ending Google’s exclusive search agreements, such as its multibillion-dollar deal with Apple to make Google the default search engine on iPhones. This could result in users being prompted to choose their default search browser, shaking up the competitive landscape. However, these are just preliminary recommendations, with the judge not expected to rule until August 2025, and any decision would likely be followed by appeals, dragging the process out for years. For now, the "Google breakup" headlines should be taken with a grain of salt. The company is more likely to face legal distractions that tie up resources without any immediate or drastic impact.