Late in 1972, the government decided to enforce the merger of Loftleidir Icelandic and Icelandair. A committee was appointed to oversee unification discussions. Although there was disagreement about some aspects of the merger, the companies’ operations were now so perilous that most people admitted the economic sense of the amalgamation.

The two airlines reached agreement on 11 April 1973, and Flugleidir was established on 20 July of the same year. Örn Ó. Johnson and Alfred Elíasson were appointed to manage the new company, and Sigurdur Helgason joined them a year later. Sigurdur had been Managing Director of Loftleidir Icelandic in the USA.