In March 1940, the company moved to Reykjavík and changed its name to Flugfélag Íslands. Two earlier companies had operated with this name for short periods in 1919-20 and 1928-31.
The Chairman of the new company was Bergur G. Gíslason, and a newly qualified pilot, Örn Ó. Johnson, was appointed Managing Director. The latter was destined to control Icelandic air transport for many years. The new company suffered badly during its first years.
TF-ÖRN was badly damaged in 1941. Parts from the old aircraft were used to build a new plane, but it crashed a year later, just a few days after its maiden flight. The company bought another aircraft in 1940 and named it Haförninn, but it was damaged in December 1943.