Icelandair Group's post-tax loss increased by more than 40% to IcKr10.7 billion ($84 million) in 2009.
The company is attributing the result to "excessive leverage", fuel hedge losses at Czech operation Travel Service, and heavy losses and write-offs at Latvian division SmartLynx.
It says its foreign operations have caused "great difficulties" for the group.
But it points out that its main airline operations - flag-carrier Icelandair and Air Iceland - were profitable.
"Both companies are reporting their best annual results in years," says group chief Bjorgolfur Johannsson.
Leasing arm Loftleidir, as well as Bluebird and Iceland Travel, posted net profits.
The company is still restructuring its operations to focus on core business and to reduce an interest burden which, it says, is "too heavy".
Group turnover was up by 11% to IcKr80.3 billion for the year. The company's losses before interest and tax improved to IcKr1.5 billion but its financial costs - notably relating to currency hedging - trebled to IcKr6 billion.
Icelandair Group's cash reserves also halved to IcKr1.9 billion.