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?
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.
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.
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.
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.
How can a small airline have the same margin as a large airline? Are they stupid?
Overheard etc is in no relation