Late in 1972, the government decided to enforce the merger of Loftleidir Icelandic and Icelandair and a committee was appointed to oversee unification discussions. There was disagreement about some aspects of the merger but the companies' operations were now so uncertain that most people admitted the economic sense of the merger.
The two airlines reached agreement on April 11, 1973, and Flugleidir was established on July 20 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.