International Airlines Group (IAG) is reportedly about to compel its subsidiary Aer Lingus to reduce its size because of insufficient profitability… despite the fact that the airline recently announced its second-best financial performance in history, with margins ranking among the best in the sector. Is this merely a rational approach to optimize ROI, or is it sheer avarice?
Aer Lingus may reduce routes & personnel to enhance margins
IAG is the parent entity of British Airways, Iberia, Aer Lingus, and Vueling, and while it’s not particularly renowned for prioritizing passenger experience, it is recognized for its profitability.
The airline conglomerate aims for a medium-term operating margin target of 12-15% across all its subsidiary airlines. Achieving this standard is deemed essential for the parent company to sustain fleet investments and support its network. It’s crucial to highlight how impressive those margins are. Delta is acknowledged for its high profitability, yet the airline recorded a margin below 10% last year.
In 2025, Aer Lingus declared a profit of €282 million on €2.5 billion in revenue, resulting in a margin of 11.1%. While that would be regarded as outstanding globally, it falls short for the parent company. Consequently, IAG is anticipated to soon reveal substantial reductions to Aer Lingus’ network and workforce.
Willie Walsh, the previous CEO of Aer Lingus, British Airways, and IAG (in that order), has even indicated that the airline may not have a viable future without reinventing itself. Current IAG CEO Luis Gallego has reportedly stated the following:
“It is evident that current transformation initiatives are inadequate. The airline must undertake decisive actions to restore its financial health and ensure alignment with the group’s 12 percent to 15 percent operating margin.”
Is IAG greedy, or simply logically disciplined?
On one side, I can see IAG’s viewpoint. The company is publicly traded, establishes specific profit targets, and if those targets are unmet, it seeks to implement changes until that margin is realized.
I do think Aer Lingus faces some distinct challenges. Dublin isn’t precisely a high-yield market, and in short-haul operations, the airline encounters considerable competition from Ryanair.
Simultaneously, this seems excessively greedy to me, showcasing just how cutthroat IAG can be, even for a company doing well. To put it in perspective, Aer Lingus had a margin of 11.1% in 2025. In contrast, Lufthansa Group’s airlines had margins varying from 0.9% to 9.3%. Thus, the highest margin subsidiary of Lufthansa Group had lower margins than IAG’s lowest margin subsidiary.
IAG is characterized by its cutthroat business practices, particularly concerning labor. The airline is merciless in a manner I do not find respectable, as it will eliminate anything to boost margins, even at the expense of customers or employees.
Additionally, I believe there’s a certain “chicken or egg” dilemma at play. Among the subsidiaries, Aer Lingus receives the least investment from IAG regarding new aircraft, products, passenger experience, etc. The airline attributes its mediocre margins to this lack of investment; however, might the margin issues partly stem from the absence of those investments?
Furthermore, I think IAG is somewhat neglecting the strategic significance of maintaining major hubs and a multi-carrier strategy, even if merely to deter competitors. I genuinely do not think that a major contraction will enhance Aer Lingus’ margins; thus, if that is true, does the