A modulating fan air diverter and annular air-oil cooler for a gas turbine engine located in the inner fixed structure adjacent to the core cowl is provided. The fan air diverter modulates between an open position, corresponding to maximum fan nozzle area and airflow through the air-oil cooler, and a closed position, corresponding to minimum fan nozzle area and airflow through the air-oil cooler. As such, the device is capable of supporting dual functions of engine heat management as well as engine performance and fan stability.