The capillary instability that occurs on an annular film lining a tube is studied as a model of airway closure. Small waves in the film can amplify and form a plug across the tube. This dynamical behavior is studied using theoretical models and bench-top experiments. Our model predicts the initial growth rate of the instability and its dependence on surfactant effects. In experiments, an annular film is formed by infusion of water into an initially oil-filled glass capillary tube. The thickness of the oil film varies with the infusion flow rate. The instability growth rate and closure time are measured for a range of film thicknesses. Our theory predicts that a thinner film and higher surfactant activity enhance stability; surfactant can decrease the growth rate to 25% of its surfactant-free value. In experiments, we find that surfactant can decrease the growth rate to 20% and increase the closure time by a factor of 3.8. Functional values of a critical film thickness for closure support the theory that it increases in the presence of surfactant.