Icelandair is the main airline of Iceland and is part of the Icelandair Group. Its hub is Keflavik International Airport, Reykjavik.
Icelandair traces its roots back to 1937, when Flugfélag Akureyrar was founded. Flight operations started in 1938. The company was re-launched in 1940 as Flugfélag Íslands, which translates as Flight Company of Iceland. For international purposes, the name Iceland Airways was adopted. Until the late 1960s, Flugfélag concentrated mostly on domestic flights, where it initially faced fierce competition from Loftleiðir, another airline which had been founded in 1944. When Loftleiðir pulled out of the domestic market in 1952 to fully concentrate on international flights, Flugfélag became the main domestic carrier of the country. In the 1950s, Flugfélag began to use the Icelandair branding for its international flights.
The government of Iceland initiated a attempt to merge the two airlines, which could be realized in 1973. At the time of the merger, two thirds of the passenger traffic of the airline were international transatlantic crossings. In 1979, Flugfélag bought all of Loftleiðir’s assets in Flugleiðir, and the airline became known by today’s Icelandair. The company’s business grew on a reputation as a “backpacker airline”, similar to Loftleiðir, which had been referred to as “Hippie Airline” since the late 1960s.
In 1997 the domestic operations of Icelandair were combined with small airline Nordurflug to form the Air Iceland subsidiary.