The airline was established in 1991 by the merger of two small domestic scheduled airlines, Arnarflug innanlands hf. and Flugtak. In 1994, the airline began overnight parcel services to East Midlands Airport using a Fairchild Metro aircraft. The airline took delivery of its first ATR-42 in 1996. In 1997, the airline became a jet operator with the delivery of its first Boeing 737-200QC which was used for passenger and freight services.
Islandsflug's first widebody aircraft, an Airbus A310, was delivered in 2001, making the airline the first Airbus operator in Iceland.[1]
On 23 June 2004 a Dornier 228 registered TF-ELH belly landed at Sigluförður Airport, due to pilot error. The only people aboard were the 2 pilots, who escaped unharmed.
