Recession and layoffs1979
The merger process was near completion by the start of the 1980s. However, an economic recession brought a steep drop in passenger numbers, along with a sharp rise on oil prices and increasing competition. Icelandair needed to take preventive action; schedules were drastically cut and unfortunately staff were laid off. But even that was not enough.
The company asked the governments of Luxembourg and Iceland to subsidise its operation. Assistance was granted, but the Icelandic government imposed a range of requirements. Among them was the stipulation that the Treasury would acquire a 20% share in Icelandair and two seats on the company's Board of Directors. The financial scene calmed down a few years later and Icelandair repurchased the share from the State in 1985.