Icelandair Group traces its roots to the year 1937 when a fledgling airline, Flugfélag Akureyrar, was founded at Akureyri on the north coast of Iceland.
In 1943 the company moved its headquarters to the capital, Reykjavík, and changed its name to Flugfélag Íslands, which later assumed the international trade name Icelandair.
Another important milestone was passed in 1944, when three young Icelandic pilots, returning from flight training in Canada, founded Loftleidir, later also known as Icelandic Airlines. Initially, both companies concentrated on Icelandic domestic air services.
However, in 1945 Flugfélag Íslands made its first international flights to Scotland and Denmark. Loftleidir began international operations in 1947, and its pioneering low-fare services across the North-Atlantic commenced in 1953.
In 1973 it was agreed to merge both Flugfélag Íslands and Loftleidir under a new holding company, Flugleidir. In October 1979 Flugleidir assumed all operating responsibilities of its two "parents", and decided to use Icelandair as its international trade name, only retaining the Flugleidir name in the Icelandic domestic market.
On the 50th anniversary of the company in 1987 a breakthrough agreement was signed with the Boeing company to renew the fleet of Icelandair that served international flight with a new route network. A new generation of Boeing jets, Boeing 757-200 and 737-400 replaced the older fleet gradually from 1989 to 1993, and then a single type fleet of Boeing 757 was established in the years preceding 2003.
In January 2003 Flugleidir became a holding company with 11 subsidiaries in the travel an tourist industry in Iceland, Icelandair being the largest subsidiary. In 2005 the name Flugleidir was changed to FL Group. The holding company announced its emphasis on investment. The corporations were divided into groups - the Icelandair Group being one of them.
The board of directors of FL Group announced in Februay 2006 its intention to list Icelandair Group on ICEX. In December 2006 Icelandair Group was listed as ICEAIR on the Iceland Stock Exchange.
On June 3 2007 Icelandair Group celebrated 70 years of operations.
In 2009 Icelandair Group started a financial restructuring, which consisted of debt restructuring through a mix of debt-to-equity conversions and extension of loan maturities. Futhermore, certain non-cor assets were divested. In an addition new equity in amount of ISK 4 billion was issued.
In February 2011 the Company announced that the financial restructuring was completed.