Headwinds vs. Tailwinds

There are many words that are used in aviation different from other contexts. For example, while most people use the word taxi to speak about a means of transport, it is often used as a verb that refers to an aircraft moving on the ground under its own power, especially before takeoff or after landing.

Of course, it happens the same the other way around. There are many business terms taken from aviation terminology like using the expression “give more runway” to refer to giving time for business development, or Mach speed to refer to moving the fastest possible to make a deal or launch a product. And of course, there are the words in question, headwinds, and tailwinds.

Ready to learn what headwinds and tailwinds refer to in aviation and how they are used in business terms? Keep reading to discover it.

What are headwinds in aviation?

Headwinds refer to wind pushing the head of an aircraft in aviation. In other words, it is the kind of wind that will work against the flight path by slowing the aircraft down. This is usually negative because it requires more energy for the aircraft to move, thus resulting in higher fuel consumption and increased operational costs. For the passenger, it means the flight will take longer.

What do headwinds mean in business?

In business, headwinds refer to factors creating a negative impact. This negative impact can be in the form of a decline in business growth, investment profits, or revenue. In short, anything that would make businesses unsuccessful could be considered part of the headwinds.

What are tailwinds in aviation?

Tailwind describes exactly the opposite of headwind. Tailwind refers to the wind that works in favor of the aircraft since it blows in the same direction of its flight path, thus pushing the aircraft from its tail and adding to the total speed to make the flight shorter in time. Here, less energy is required, so less fuel is needed than when flying with a headwind.

What do tailwinds mean in business?

As you may expect now, tailwinds in business are the opposite of headwinds. Therefore, we are speaking about market conditions and business situations that create a positive environment when we refer to tailwinds in business.

Hence, when businesses work with tailwinds, they increase growth, generate more revenue, and can get more profits.

What is better headwind or tailwind?

Clearly, the descriptions above tell us that tailwind is always better. However, there are cases when this is not the case.

Planes flying with a tailwind can benefit from the increased speed and reduced fuel consumption.

Yet, during takeoff, a headwind can be more beneficial since it will generate more lift to help the aircraft take-off faster and within a shorter distance. Moreover, the climb path will be steeper, so clearing any obstacles after takeoff will be easier.

Similarly, a headwind will help reduce the amount of runway needed when landing, and the maneuver will be performed at a lower speed.

Now, when it comes to business, these positive effects of a headwind cannot be found. To better illustrate, let’s see the following examples.

Headwinds and tailwinds in stock prices and stock market

The stock market can be a fear and greed machine. Stock market investors measure up the potential of businesses’ growth or decline based mainly based on the news. Therefore, if investors expect some sectors or businesses growth higher, they will put money into it and stock prices will go up. Here we have a tailwind.

Now, headwinds can also be abundant. For example, news of Russia invading Ukraine represented headwinds for the general market since this created uncertainty in many companies’ financial performance.

What’s more, the news that the airspace was closed in those areas created an even stronger headwind for airlines’ stocks. On the other hand, the news of rising petrol prices represented a tailwind for the stocks of oil companies. And this takes us to the next point.

Headwinds and tailwinds for oil companies

Clearly, the most obvious headwinds and tailwinds for oil companies come from the movement of oil prices.

Rising petrol prices represent a tailwind for these companies since they will see an increase in profits without making any changes to their operations. Now lower oil prices will create exactly the opposite, which means it represents a headwind.

Of course, the aviation industry has an inverse correlation because fuel is at the top of their expenses. When the oil price is low, the same happens with the price of fuel. Then, airlines can be more profitable and even the price of their stocks goes up. Therefore, we could say that what oil companies consider a headwind, airlines have it as a tailwind.

Headwinds and tailwinds for corporate development

When it comes to corporate development, the interaction organizations have with governments, individuals and other entities is essential. And many things like regulations, a business model, interest, and exchange rates can have either a positive or a negative impact.

Headwinds could be found in the form of higher inflation which reduces consumer spending and pent up demand for the corporations’ products and services.

An example

McDonald’s faces headwinds if the cost of food supplies increases due to inflation since it means a lower margin for profits and possibly less consumption of their products since they will try to pass on the costs to their customers.

For the aviation industry, tailwinds for corporate development are also related to inflation, interest rates, and consumer spending.

The lower the inflation and the interest rates, the more likely consumers will have money to save and spend on things like travel and entertainment, making the aviation businesses more profitable and capable to increase growth.

Headwinds and tailwinds in personal finance

From the previous point, we can assume that the finances of both a person and a company grow under similar conditions. This can be associated with the fact that a company needs individuals to consume their products and services to help the growth of their revenues.

Therefore, the headwinds and tailwinds are very similar in personal finance: higher inflation and interest rates will represent headwinds, while lower ones will represent tailwinds, among other factors.

Summary of headwinds vs. tailwinds

As there are many forces having an impact when flying a plane forward, there are many factors having an effect on one sector or the other.

Also, what can be positive for one sector, can be negative for another. Using the nautical term as we have so far, what can be a tailwind for the economy of one company, can be a headwind for the economy of the other.

Finally, there are things that will always be considered headwinds or tailwinds, no matter the context. For example, natural disasters will always be headwinds since there is basically nothing positive to take from them.