Icelandair is the flag carrier of Iceland, with its corporate head office on the property of Reykjavík Airport in the capital city Reykjavík. It is part of the Icelandair Group and operates to destinations on both sides of the Atlantic Ocean from its main hub at Keflavík International Airport. The geographical position of Iceland is convenient for one-stop transatlantic flights, which is one pillar of the airline's business strategy, along with traffic to, from, and within the country.
History
Flugfélag Íslands in the early decades
Icelandair traces its roots back to 1937, when Flugfélag Akureyrar was founded in Akureyri on the north coast of Iceland. Flight operations started in 1938 with a single Waco YKS-7 configured as a floatplane. In 1939 the airline was grounded when this aircraft was destroyed in a capsizing accident. The company moved to Reykjavík, where it acquired another Waco aircraft and was relaunched in 1940 as Flugfélag Íslands, which translates as Flight Company of Iceland. Previously, two unrelated airlines of the same name had existed in the country (from 1919 to 1920, and between 1928 and 1931). For international purposes, the name Iceland Airways was adopted.
The fleet was expanded with a Beechcraft Model 18 in 1942; and with two De Havilland Dragon Rapides and a Consolidated PBY Catalina in 1944, the latter being the first ever aircraft registered in Iceland to be flown to Iceland by an Icelandic crew from North America. On 11 July 1945, this aircraft operated the first commercial flight over the Atlantic Ocean for the airline, which led from Reykjavík to Largs in Scotland, with four passengers and four crew members on board. Regular flights to Prestwick Airport in Scotland and Copenhagen in Denmark, using Consolidated B-24 Liberator aircraft leased from Scottish Airlines were launched in 1946.
In the same year, the comfort and performance of domestic flights in Iceland could be improved with the introduction of the Douglas DC-3. A total of six were purchased, which remained in service with the airline until 1972. Until the late 1960s, Flugfélag concentrated mostly on domestic flights, where it initially faced fierce competition from Icelandic Airlines, another airline which had been founded in 1944. When a merger proposal from the Icelandic government was rejected by the two airlines, the domestic routes were split among them as a measure to ease competition. 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.
International services stayed part of the business model of Flugfélag, though to a far lesser extent compared to Loftleiðir. In 1948, the Douglas DC-4 was introduced on those routes, and in 1957 two new Vickers 759 Viscounts were acquired, the first turboprop airliners to be operated by an Icelandic airline. In the 1950s, Flugfélag began to use the 'Icelandair' branding for its international flights.
In 1967, Flugfélag was the first Icelandic airline to join the jet age, when a Boeing 727-100 dubbed Gullfaxi was put into service. Another 727 was acquired in 1971, and the aircraft type was operated until 1990. In 2008, the cockpit section of Gullfaxi was put on display at the Akureyri Aviation Museum.
Loftleiðir
Another company, Loftleiðir, called Icelandic Airlines internationally, had been formed in 1944 by three young pilots returning from their flight training in Canada. Their company, whose name roughly means "Skyways", concentrated on Icelandic domestic air services for the first few years. The first aircraft used were two Stinson Reliants, and then a Grumman G-21 Goose amphibious aircraft.
At first, Loftleiðir, like Flugfélag Íslands, concentrated on domestic air services. Loftleiðir began scheduled international operations in 1947.
By 1952, the Icelandic authorities were very worried that fierce competition between both Icelandic airlines would ruin both companies, and attempted to force a merger between them. This did not happen at the time, but instead the authorities split up the domestic routes between the two airlines. As a result, Loftleiðir ceased domestic flights in Iceland entirely, concentrating instead on international flights. Loftleiðir's pioneering low-fare services across the North Atlantic then commenced in 1953. In a way, Loftleiðir can even be considered a sort of precursor of the low-cost carriers that started popping up all over the globe in the 1970s, in particular the long-haul budget carrier like Norwegian Air Shuttle. This made it a popular airline for travel between Europe and North America.