Operations were becoming difficult for the Icelandic airlines. Competition was intense, especially in the Nordic countries, and in 1970 it became clear that some sort of government assistance was necessary to keep the industry aloft.
Various partnership and merger proposals were put forward, but getting the two airlines to meet proved difficult. They finally agreed to formal talks late in 1971. The discussions dragged on into the summer of the following year and came to nothing. The matter now passed into the hands of the government.