In this paper, the stability of core–annular flows consisting of two immiscible fluids in a cylindrical tube with circular cross-section is examined. Such flows are important in a wide range of industrial and biomedical applications. For example, in secondary oil recovery, water is pumped into the well to displace the remaining oil. It is also of relevance in the lung, where a thin liquid film coats the inner surface of the small airways of the lungs. In both cases, the flow is influenced by a surface-tension instability, which may induce the breakup of the core fluid into short plugs, reducing the efficiency of the oil recovery, or blocking the passage of air in the lung thus inducing airway closure. We consider the stability of a thin film coating the inner surface of a rigid cylindrical tube with the less viscous fluid in the core. For thick enough films, the Rayleigh instability forms a liquid bulge that can grow to eventually create a plug blocking the tube. The analysis explores the effect of an oscillatory core flow on the interfacial dynamics and particularly the nonlinear stabilization of the bulge. The oscillatory core flow exerts tangential and normal stresses on the interface between the two fluids that are simplified by uncoupling the core and film analyses in the thin-film high-frequency limit of the governing equations. Lubrication theory is used to derive a nonlinear evolution equation for the position of the air–liquid interface which includes the effects of the core flow. It is shown that the core flow can prevent plug formation of the more viscous film layer by nonlinear saturation of the capillary instability. The stabilization mechanism is similar to that of a reversing butter knife, where the core shear wipes the growing liquid bulge back on to the tube wall during the main tidal volume stroke, but allows it to grow back as the stoke and shear turn around. To be successful, the leading film thickness ahead of the bulge must be smaller than the trailing film thickness behind it, a requirement necessitating a large enough core capillary number which promotes a large core shear stress on the interface. The core capillary number is defined to be the ratio of core viscous forces to surface tension forces. When this process is tuned correctly, the two phases balance and there is no net growth of the liquid bulge over one cycle. We find that there is a critical frequency above which plug formation does not occur, and that this critical frequency increases as the tidal volume amplitude of the core flow decreases.