Operations were becoming difficult for the Icelandic airlines with intense competition, especially in the Nordic countries. In 1970 it became clear that some sort of government assistance was necessary to keep the industry aloft.
Various partnership and merger proposals were put forward, but getting the two airlines to meet proved difficult. They finally agreed to formal talks late in 1971 , which dragged on into the summer of the following year, with little result. The matter was then passed into the hands of the Icelandic government.