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Aviation History
1975
1975 - 1815.PDF
FLIGHT International. 11 September /97J 365 Two airlines merged into two Can two airlines get the economic benefits of a merger while preserving their separate identities and goodwill? Loftleidir and Icelandair tried to do that two years ago by forming a new holding company, Flugleidir HF. WARREN GOODMAN reports from Reykjavik. U NTIL two years ago, Iceland, a country of only 225,000 inhabitants, had two airlines. Loftleidir, sometimes known in the English-speaking world as Icelandic Airlines, was the international carrier and Flugfelag Islands (Ice landair) the domestic carrier. But Icelandair, in addition to its domestic routes, was operating to the Faroe Islands, Glasgow, London and Scandinavia all year round, with additional summer routes to Greenland and Frankfurt. Loftleidir was operating between various points in the United States and the UK and Europe, with most flights stopping in Reykjavik en route. As a result, the two com panies were competing with each other, mainly on the routes to Scandinavia. As the airline approached its second anniversary, Orm O. Johnson, former head of Icelandair and now executive director and chairman of the executive committee of Flugleidir HF, told Flight how the new company came to be formed. "As is often the case with stiff competition, we had excess capacity on the Scandinavian routes and it was hurting both of us. Both companies had had their heyday and we were beginning to run into difficulties. Icelandair supported the domestic services with the profits from the overseas services. Loftleidir was running into difficulties on the North Atlantic. So we were in a marginal financial position." Privately owned, Loftleidir was headed by Alfred Eliasson, one of the three RCAF veterans who had founded the company in 1944. Icelandair was also a private com pany, but the Government of Iceland held 13 per cent of the stock. Both companies operated under authority granted by the Aeronautics Board of Iceland, Johnson explains, and the board "insisted that we should cease the competition on the Scandinavia run. They forwarded a resolution to the Minister of Communications, who ordered the two companies to try to reach an agreement on the Scandinavia run or the government would divide the routes between the two companies." This order was issued in November 1972 and the merger of the two airlines into a new holding company, Flugleidir HF, became effective on August 1, 1973. The National Bank of Iceland would name a three-man committee to Heading, Icelandair flies five Fokker-VFW F.27s on domestic routes; Loftleidir's equipment is four leased DC-8-63s
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