International Airlines Group (IAG) is reportedly on the verge of forcing subsidiary Aer Lingus to shrink due to lack of profitability… even though the airline recently reported its second-best financial results in history, and the margins are among the best in the industry. Is this just a logical way to maximize ROI, or is this pure greed?
Aer Lingus may cut routes & staff to boost margins
IAG is the parent company of British Airways, Iberia, Aer Lingus, and Vueling, and while it’s not exactly known for its focus on passenger experience, it is known for being profitable.
The airline group has set a medium-term operating margin target of 12-15% for all of its subsidiary airlines. Achieving that benchmark is considered mandatory for the parent company to continue fleet investment and network support. I think it’s important to emphasize just how good those margins are. Delta is known for being extremely profitable, but the airline had a margin of under 10% last year.
In 2025, Aer Lingus reported a profit of €282 million on €2.5 billion of revenue, so that’s a margin of 11.1%. Globally that would be considered exceptional, but it’s not enough for the parent company. As a result, IAG is expected to soon announce significant cuts to Aer Lingus’ network and workforce.
Willie Walsh, the former CEO of Aer Lingus, British Airways, and IAG (in that order), has even suggested that the airline might not have a future unless it reinvents itself. Current IAG CEO Luis Gallego, has even reportedly said the following:
“It is clear that existing transformation efforts are not enough. The airline will need to take decisive actions to restore financial performance and ensure it is positioned to deliver in line with the group’s 12 per cent to 15 per cent operating margin.”
Is IAG greedy, or simply logically disciplined?
On the one hand, I can understand where IAG is coming from. I mean, the company is publicly traded, sets a certain profit target, and if that’s not achieved, it wants to make changes until that margin is achieved.
Admittedly I think Aer Lingus faces some unique challenges. Dublin isn’t exactly a high yield market, and on short haul flights, the airline faces a massive amount of competition from Ryanair.
At the same time, this just strikes me as being absurdly greedy, and reflects what a cutthroat airline group IAG is, even for a company performing well. Let’s just put this into perspective. Aer Lingus had a margin of 11.1% in 2025. As a point of comparison, Lufthansa Group’s carriers had margins ranging from 0.9% to 9.3%. So Lufthansa Group’s highest margin subsidiary had lower margins than IAG’s lowest margin subsidiary. 
IAG is just known for being a cutthroat company, including with labor. The airline is ruthless in a way I don’t really respect, where it’ll cut anything to improve margins, even if it’s terrible for customers or employees.
I also think there’s a bit of a “chicken or egg” situation here. Of the subsidiaries, Aer Lingus gets by far the least investment from IAG in terms of new planes, new products, passenger experience, etc. The airline blames that lack of investment on lackluster margins, but also, maybe the margins not being a bit higher are due to those lack of investments?
Also, I think IAG is kind of overlooking the strategic importance of having major hubs, and a multi-carrier strategy, even if it’s just to keep competitors out. I certainly don’t think that shrinking massively will help Aer Lingus’ margins, so if that’s the case, does the airline group just want to shut down Aer Lingus? Does that make sense, for an airline that has great margins, at least competitively? I’m sure Air France-KLM or Lufthansa Group would be delighted to take over Aer Lingus.
Anyway, I don’t know what to think, other than that it’s kind of wild that an airline with industry leading margins is potentially going to be forced to downsize because the margins aren’t good enough.
Bottom line
IAG is preparing to downsize Aer Lingus, because the airline is just shy of the airline group’s 12-15% profit margin goal. The argument is that IAG can’t afford to continue to invest in airlines unless they reach those profit goals, and the 11%+ return at Aer Lingus just doesn’t cut it.
I get the idea of investing in the most profitable parts of a business, but this just strikes me as either misguided or greedy.
What do you make of the situation at Aer Lingus?
IAG management is directly to blame for stripping away the Irish airline's long-range potential by reallocating its original Airbus A350 wide-body orders to Spanish sister carrier Iberia.The Original Strategy: In 2008, the Irish airline ordered nine wide-body A350-900s to build a diversified global network and capture year-round international traffic.IAG Management Intervention: Following the 2015 takeover, IAG centralized fleet planning and systematically transferred those A350 orders away from the Irish airline to favor corporate group synergies.Loss...
IAG management is directly to blame for stripping away the Irish airline's long-range potential by reallocating its original Airbus A350 wide-body orders to Spanish sister carrier Iberia.The Original Strategy: In 2008, the Irish airline ordered nine wide-body A350-900s to build a diversified global network and capture year-round international traffic.IAG Management Intervention: Following the 2015 takeover, IAG centralized fleet planning and systematically transferred those A350 orders away from the Irish airline to favor corporate group synergies.Loss of Global Network: Deprived of these long-range wide-bodies, the carrier lost the technical ability to efficiently launch routes into deep global markets like Asia or Africa.The Transatlantic Trap: Instead of the A350s, IAG substituted smaller, narrow-body A321LRs, locking the carrier into a hyper-focused, heavily exposed North American corridor.Severe Winter Seasonality: While the narrow-bodies are highly efficient for peak summer transatlantic travel, they lack the global flexibility required to weather winter slumps when U.S. demand dries up.The Management Irony: Despite the fact that IAG’s own fleet cuts left the Irish airline physically unable to diversify its network, IAG leadership now publicly blames the carrier for seasonal winter losses.
Asset stripped and the sell-off is imminent.
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self interest.
Let the airlines do their jobs. They let you do yours.
Adam Smith isn't wrong about self-interest. You're just selectively applying it to the benefit of those at the top, and no one else. The rational self-interest of the 5,000+ people who actually run Aer Lingus is to protect their livelihoods from a manufactured crisis, not roll over so IAG executives can juice their bonuses. If management actually did their jobs, they’d invest those record profits back into the airline instead of picking a fight with...
Adam Smith isn't wrong about self-interest. You're just selectively applying it to the benefit of those at the top, and no one else. The rational self-interest of the 5,000+ people who actually run Aer Lingus is to protect their livelihoods from a manufactured crisis, not roll over so IAG executives can juice their bonuses. If management actually did their jobs, they’d invest those record profits back into the airline instead of picking a fight with the workforce that earned them.
If you want an airline that screws the pax but makes money: hire an Irishman or a German.
If you want an airline that delights the pax and makes money: hire a Singaporean.
If you want an airline that screws the pax and loses money: hire an American.
And would somebody please give @1990 a handjob? He's on edge. Again.
Oof. Prejudiced and oversimplified, but still better than what you usually say to me...
Which has the best customer experience? IAG, Air France/KLM, Lufthansa group.
Aer Lingus offers the cheapest OW TATL rates so eliminating it as a competitor is important for BA.
Both airlines are owned by the parent company International Airlines Group (IAG)… sure, they “compete” on TATL but like “eliminating” each other would be like pitting your offspring against each other… Also, this isn’t Highlander… (“There can only be one!”)
i would say karma is a bitch they could have made manchester work i would not fly with them again
For decades I have been amazed at how much more the Americans know about the politics of Ireland, North and South. They think they know more about the religious tensions in the province and not forgetting the UK’s relationship therein. Also, when it comes to the devils in Brussels, Americans believe that the EU is always right and the UK public does not know what is best for us.
Balderdash, you yanks have so...
For decades I have been amazed at how much more the Americans know about the politics of Ireland, North and South. They think they know more about the religious tensions in the province and not forgetting the UK’s relationship therein. Also, when it comes to the devils in Brussels, Americans believe that the EU is always right and the UK public does not know what is best for us.
Balderdash, you yanks have so many misconceptions and assumptions about this Aer Lingus subject, as to render the majority of your comments invalid. You cannot compare your three star airlines and business practices with the AGI four star airlines and airline services.
*cough* STRAWMAN *cough*
(Very few Americans believe the “EU is always right” … even if EU and UK have better air passenger rights protections than the US.)
Noted 1990, “cough, cough”.
Not even joking, there IS a really bad cough going around NYC these days. Probably yet another variant of covid still lingering among us (Nimbus variant (NB.1.8.1), an Omicron subvariant). Some say, it's like "swallowing glass" or "razor blades"... not pleasant.
@AeroB13a the Tory condescension in your comments here reeks so badly that even Maggie Thatcher would likely argue it makes it hard to take some of what you say seriously. As a dual citizen of the US and UK who has lived in both places but considers himself more Brit and Yank, I'd argue that while EI may be a bit more downstairs than BA's more upstairs paint and cabins, neither are winning any big...
@AeroB13a the Tory condescension in your comments here reeks so badly that even Maggie Thatcher would likely argue it makes it hard to take some of what you say seriously. As a dual citizen of the US and UK who has lived in both places but considers himself more Brit and Yank, I'd argue that while EI may be a bit more downstairs than BA's more upstairs paint and cabins, neither are winning any big global industry awards, similar to the Big 3 in the States. That's something even Yanks can understand! And with recent polling consistently showing that less than 35% of Brits think leaving the EU was smart, well, I guess those "devils" in Brussels have pulled one over not just on the Yanks, but us Brits as well...
This is a sop to the unions. Many of Aer Lingus’ captains are the highest paid in the world due to their legacy contracts.
Nice attempt at carrying-water for management. You’re focused on an outlier. Pilots are often well-paid, most airlines. There’s a much larger workforce than just pilots running an airline.
Aer Lingus beats Swiss, the best performing airline of the Lufty group, but still gets grief? My Dad ran the Aer Lingus Flight Kitchen in the days of 3 Class service with catering in all, admittedly in the days of 3 x B747s and only daily service on the EI105/104 DUB-SNN-JFK route.
Aer Lingus now operates more TATL services per day than it to anyone in previous decades.
For anyone against single aisle...
Aer Lingus beats Swiss, the best performing airline of the Lufty group, but still gets grief? My Dad ran the Aer Lingus Flight Kitchen in the days of 3 Class service with catering in all, admittedly in the days of 3 x B747s and only daily service on the EI105/104 DUB-SNN-JFK route.
Aer Lingus now operates more TATL services per day than it to anyone in previous decades.
For anyone against single aisle TATL travel, live on an island.. connectivity is so important and more direct the better!
DUB is increasingly a reliever hub for LHR on TATL itineraries and helps BA maintain relevance in the UK outside of LHR. It is not surprising that the reliever hub is less profitable, but still making money.
Being in the Pittsburgh market and not wanting a US side international to domestic connection coming back I usually fly BA. Recently aer Lingus also started service to Pittsburgh. Compared to BA aer Lingus’ fares are not competitive.
Living in Dublin I only fly to the USA using EI half the time. I pay only cash, have no status with anyone, but do travel regularly. Aer Lingus just doesn't offer me the best prices, but they fill their flights!
Is it time for collective bargaining again so that they have to pain the devil onto the wall?
Isn't it because Aer Lingus connections cannibalize higher yielding flights from other IAG companies? So this is their way of masking it behind discipline.
That being said 11.1% vs 12% is marginal. It's crazy to force something so drastic for a less than 10% miss.
I agree there may be some of that along with the labor strife. The cannibalization may be less productive use of LHR slots better used by BA - I'm not familiar with caps BA might have or other restrictions that would prevent BA from using them. Or it may be lost connecting pax who would otherwise go through LHR or MAD.
They feel like a Condor to me, with the drips of US/Ireland corporate.
And on the flip side - they may 'put up' with sub optimal things at EI because it dilutes Ryanair.
I can't imagine how a smaller airline, forced to not provide the most profitable TATL class (premium economy), is supposed to match the margins of its larger cousins. This seems mostly motivated by juicing BA margins and pushing down labor costs. I do TATL flights monthly and Aer Lingus just isn't competitive as a product or cost-wise - and that's by design.
Aer Lingus connections are hugely Emerald ATR72 based connections from GB airports to DUB, but its all TATL. Some flights are mainline A320 augmented of course.
But outside of North America EI have no footprint. People in Glasgow, Newcastle etc will never use EI to get to South America (Iberia) or all points east (BA)
Shameless. IAG pockets €282 million in profits, then manufactures a crisis to threaten unions into giving up hard-won labor concessions. (Meanwhile, Lufthansa would kill for an 11% operating margin. But, they, too, would try this, probably.) Thanks for calling it out, Ben.
1990, I do believe that both you and the likes of Walter Mitty Dunn, are ignorant of some very important facts. The situation is that those labour relations which are aberrant to you, are a reaction against regulations imposed upon IAG by the EU Parliament. The purpose of which is to reduce the IAG dominance over the likes of Lufthansa, etc.
No, Aero, IAG is not a victim of a grand EU conspiracy to protect Lufthansa. The EU Parliament does not write laws to force multi-billion-euro holding companies to threaten their own workforce, and every European carrier faces the exact same regulatory framework. (I get that things are still bitter post-Brexit, but let's not invent fan-fiction to excuse corporate greed.)
1990, you have just lost any semblance of credibility which you might have been credited with. If you believe half of the Guardian like propaganda which you have just posed then there really is no hope whatsoever for you sunshine.
A good wind-up though ….
Did you have a specific correction, or just a generalized dissatisfaction with the EU?
good article,
IAG is doing very well financially right now and there is every reason to think that EI is contributing well to it.
you note several huge strategic drags on EI including that the DUB market is not huge or large for a TATL carrier and that much of the intra-Europe flying is highly competitive with Ryanair. OTOH, DUB is at capacity so it would be beyond foolish for any carrier to walk...
good article,
IAG is doing very well financially right now and there is every reason to think that EI is contributing well to it.
you note several huge strategic drags on EI including that the DUB market is not huge or large for a TATL carrier and that much of the intra-Europe flying is highly competitive with Ryanair. OTOH, DUB is at capacity so it would be beyond foolish for any carrier to walk back their size; yields will only grow as there are fewer and fewer opportunities for anyone to grow.
BA has a similar competitive setup but London is, of course, a huge and lucrative market that does manage to keep growing. Like EI, BA has a structural advantage that boosts profits, not unlike what DL does through size in its hubs which boosts its profits. MAD has fewer strategic structural advantages and it is possible that IAG would rather shift growth to IB but I doubt if that is really the answer.
The real answer to why IAG is saying this is likely in your correct assessment of IAG's ruthless labor relations. They are trying to hold the line on labor cost increases and want to paint a bleak picture.
I don't really expect IAG will shrink EI but the lack of growth capacity at DUB and IAG's opportunities elsewhere are likely why IAG wants to paint a bleak picture to limit labor cost increases.
*sigh* Tim, like usual, you're apologizing for a ruthless playbook by management. When a quarter-billion Euros in net profit isn't treated as a buffer to reward the workforce, but as a baseline to exploit them for more, that’s just corporate greed on full display.
nowhere did I excuse or apologize for ruthless management. I explained their strategy which Ben also recognized as a possibility.
and it is noteworthy that DL and Ben made the profit comparision has some of the highest labor costs in the world and also has high margins.
reading what is written as well as what it means could make you a great contributor if you were willing to give up your mantra for actual facts.
Tim, your deflection won't work on me. You're pretending to be 'neutral' and "just explaining the strategy," while, in reality, you're just carrying water for IAG's management. If you were an opportunist, you'd argue that Delta is different (and better!), because they tend to actually offer competitive compensation and do invest in their product (unless you disagree...?)
Just a reminder, Norma Rae, that the widebody pilots at Aer Lingus are among the highest paid employees at the company.
And they only work a maximum of 1,000 hours per year.
Andrew, yes, pilots are often some of the highest paid workers at each airline... thank you for your attention to this matter...
That 1000hrs per year argument is a red herring. That’s a limit for actual flight time. It doesn’t reflect the time pilots spend in work eg, reporting 1.5hrs before the flight, preflight checks, turnarounds, postflight duties, standby duties, training days (at least 8 per year) and other duties. If a pilot flies 1000hrs their duty time would likely be closer to 1400.
The average PAYE worker does about 1500hrs a year when leave, public holidays etc are factored in.
Walter Mitty Dunn replies to 1990 thus ….
“reading what is written as well as what it means could make you a great contributor if you were willing to give up your mantra for actual facts”.
Whenever will you do yourself that which you are asking 1990 to do? A bleeding hypocrite is what you are Walter Mitty Dunn, shocking especially from someone who is a strong believer in the supernatural.
In this case, Tim's original comment strikes me as objective and without a specific bias / judgment towards IAG's behavior. Neither apologizing for / praising, nor demonizing.
It does seem like a reasonable assessment, regardless of how anyone individually feels about those actions and it strikes me as somewhat logical for airline management to take that kind of a tact if they feel they otherwise are constrained on other levers to maintain or improve...
In this case, Tim's original comment strikes me as objective and without a specific bias / judgment towards IAG's behavior. Neither apologizing for / praising, nor demonizing.
It does seem like a reasonable assessment, regardless of how anyone individually feels about those actions and it strikes me as somewhat logical for airline management to take that kind of a tact if they feel they otherwise are constrained on other levers to maintain or improve margins, and have concerns about labor cost diminishing margins.
Again, I'm also not advocating for this approach but I understand it.
jetset, sane-washing corporate greed doesn't make it right. With over a quarter-billion Euros in profit, management isn't "constrained"... they are choosing short-term shareholder returns over their own workforce. Treating this as a passive economic inevitability is how ruthless corporate playbooks get normalized. I think we should care a little more about those who actually make it possible to be 'jet set.' (It's not just shareholders, btw.)
1990, you really have lost it on this topic sunshine. You have the nerve to accuse others of “Corporate Greed” yet ignore U.S. corporations greed, not to mention your Mr ‘rump starting a world recession for U.S. corporate greed.
Wake-up 1990, get real.
Aero, if you follow any of my comments here, or at VFTW and LALF (you’re always welcome to frequent those sites, if you wish), I am staunchly in-favor of holding greedy corporations accountable globally, not just in EU or US. Thankfully, the EU and UK each tend to do a better job protecting consumers and workers from the excesses of corporate greed, but nowhere is perfect.
Jetset or Ben …. that is the question?
I do love a challenge and you rarely fail to offer me one Mr Walter Mitty Dunn.
After much research I find that your economic and network analysis possibly has some merit, however, your labour relations explanation is pure speculation old bean. What is more your dismissal of Madrid in relation to Iberia’s strategic position is the weakest part of the argument.
Aer Lingus is a profitable airline with a distinctive niche position. It...
I do love a challenge and you rarely fail to offer me one Mr Walter Mitty Dunn.
After much research I find that your economic and network analysis possibly has some merit, however, your labour relations explanation is pure speculation old bean. What is more your dismissal of Madrid in relation to Iberia’s strategic position is the weakest part of the argument.
Aer Lingus is a profitable airline with a distinctive niche position. It has strong Ireland to North America traffic, a very useful connecting hub at Dublin Airport, plus U.S. pre-clearance. Furthermore, it benefits from lower operating costs than say British Airways and less overlap with Iberia than you assume.
If you are to be believed, then you are going to have to provide more evidence for us to understand your argument. I know that you have been asked numerous times in the past and have always spectacularly failed. Will this be the time when you finally exceed to another information request?
How can a small airline have the same margin as a large airline? Are they stupid?
Overheard etc is in no relation