In March 1940, the company moved to Reykjavík and changed its name to Flugfélag Íslands. The Chairman of the new company was Bergur G. Gíslason, and a newly qualified pilot, Örn Ó. Johnson, was appointed Managing Director. Johnson would later control Icelandic air transportation for many years. The new company struggled during its first years.
In 1941, TF-ÖRN was badly damaged, and with. parts being hard to come by, those from the old aircraft were used in building a new plane. However, the new aircraft became out of commission a year later, just a few days after its maiden flight. The company then bought another aircraft in 1940 and named it Haförninn, which was later damaged in December 1943.