International Airlines Group (IAG) is 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?
I first wrote about how these changes were rumored several weeks back, and they’re now official. Aer Lingus will be cutting three transatlantic routes in the coming months, and up to 500 people are expected to lose their jobs.
Aer Lingus cutting 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 forcing 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, recently 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.”
This wasn’t just a rumor, but is now official, and we have the details of what will be changing:
- Aer Lingus expects to cut up to 500 jobs, of its total of 6,000 employees, as it reduces roughly 6% of its flight capacity
- Even beyond the jobs that are cut, I imagine Aer Lingus will be looking for more concessions from employees, because “the more cost efficient and productive the airline is, the more it will be able to fulfil its network and growth ambition”
- In the coming months, Aer Lingus will cut its routes from Dublin (DUB) to Denver (DEN), Las Vegas (LAS), and Minneapolis (MSP), with Seattle (SEA) becoming a seasonal destination
- As of the summer of 2027, there will be a reduction in the use of two Airbus A330 and four Airbus A320 aircraft; it’s not clear if those are being retired, sent to another subsidiary (like Iberia or LEVEL), or what
Of course Aer Lingus CEO Lynne Embleton knows who she works for, and is trying to spin this as a positive, even though I can’t imagine she’s very happy about it:
“Our accelerated transformation aims to set Aer Lingus up for the future; to ensure the airline is a strong investment case and able to weather the turbulence in our industry. An efficient cost base, coupled with investment in our customer experience will enable Aer Lingus to fulfil its ambition to be the airline of choice connecting Europe with North America, support future growth and continue to provide connectivity and significant economic contribution to Ireland.”
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 (very high) 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 company that fights over every cent, 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 being forced to downsize because the margins aren’t good enough.
Bottom line
IAG is starting the process of downsizing 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.
We’re now going to see Aer Lingus cut up to 500 jobs, and also start to cut routes, with three long haul routes being cut altogether, and one being made seasonal. Next summer, we’ll see reduction in the use of two A330s and four A320s.
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?