Reykjavík 7 December 2010 Icelandair Group hf. (the “Company”) Board of Directors announced on 17 November 2010 its intention to increase the share capital in the Company by between 500 million to 1,059 million shares in a public share offering (the “Offering”) by issue of new shares (the “New Shares”). If fewer than 500 million subscriptions will be received the Company will not issue new shares. The offer period is from 10.00 am on 8 December 2010 until 4.00 pm on 23 December 2010. The Company will publish a Prospectus on 7 December 2010 comprising of a Registration Document dated 28 October, a Summary and a Securities Note dated 7 December 2010. The Prospectus will be accessible on the Company's website, www.icelandairgroup.is, and printed copies will also be available for viewing at the Company's main office at Reykjavíkurflugvöllur, 101 Reykjavík, for 12 months after publication. The Company´s Board of Directors has now completed in detail the terms and conditions of the Offering. The share price in the Offering is ISK 2.5 per share. The New Shares can only be paid with cash in ISK. The New Shares are all of the same class and bear the same rights and are identical to the existing shares in Icelandair Group. The New Share issue will be allocated in three tranches: 1.Icelandair Group shareholders as registered at the end of 17 November 2010 (record date) with the Icelandic Securities Depository, the ex-date is 15 November 2010, have a pre-emptive right to purchase 799,000,000 New Shares in this offering. Should demand for shares be less than the number of reserved shares, the outstanding shares will be transferred from this tranche and disbursed directly to the general public tranche. Shareholders shall subscribe for shares in the Offering electronically through a subscription form on Íslandsbanki's website, www.isb.is. Every shareholder will be sent a letter via general mail on 7 December 2010 containing information about the nominal value and rate of the shares to the shareholder is entitled to, respite for subscription and terms of payment. The letter contained a username and password which is a requirement for identification when logging in to the subscription form on Íslandsbanki's website. If a shareholder who wishes to participate does not receive a username and password he or she can contact Íslandsbanki through phone number +354 440 4920. The New Shares will be disbursed in conformity with Act No. 2/1995 on Public Limited Companies and the Company's Article of Association. The New Shares will be disbursed in conformity with Act No. 2/1995 on Public Limited Companies and the Company's Article of Association. If a shareholder does not exercise his or her pre-emptive rights in full, other shareholders shall be entitled to increase their subscription. Shareholders who wish to subscribe to unused subscription rights can do so by subscribing to more than they are entitled to and the allocation will be proportional according to their registered holding as registered on 17 November 2010 with the Icelandic Securities Depository. If New Shares that are allocated will contain fragments they will be rounded downwards. 2.All employees of Icelandair Group and its subsidiaries, except Bluebird Cargo ehf. and SmartLynx AOC, as of 31 October 2010 have a preference right to purchase 160,000,000 New Shares in this offering. Should demand for shares be less than the number of reserved shares, the outstanding shares will be transferred from this tranche and disbursed directly to the general public tranche. Employees of Icelandair will access a link to Íslandsbanki website, through Icelandair's Group intranet where they can fill out a subscription form. Each employee has an individual access via the Icelandair intranet. 3.The general public in Iceland will be offered 100,000,000 New Shares plus any outstanding shares from the other two tranches. Participation in the offering is available to individuals or legal entities holding an Icelandic ID Number, if not prohibited by law. Employees of Íslandsbanki are in general allowed to take part in the offer to the general public but their participation is restricted to the first three hours from the opening of the offering on 8 December 2010. Subscription for shares in the offering shall be made electronically via a subscription form on Íslandsbanki's website, www.isb.is. A decision on allocation of the New Shares to the general public and employee tranches will be made by Icelandair Group's Board of Directors in a meeting following the expiration of the offer period. The Board of Directors reserves the right to reject subscriptions in full or in part at its sole and unfettered discretion. The results of the share offering will be made public on 30 December 2010. The announcement will include the aggregate number of New Shares which were subscribed for and the aggregate number of participants and how many subscriptions were received for each tranche in the share offering along with the Company's Board of Directors decision in regards to allocation of the New Shares. An invoice will be sent to subscribers who will be allocated New Shares on 30 December 2010 via their online bank, or general mail if they specifically choose so on the subscription form. Those subscribers who do not receive an invoice will not be allocated New Shares in the Company. No further notification will be made regarding allocation of New Shares. The Board of Directors expects the New Shares to be admitted to trading on NASDAQ OMX Iceland main market no later than 11 January 2011. The due date for the invoice is 6 January 2011. For any shares unpaid on the due date Icelandair Group's Board of Directors may either collect payment with penalty interest (according to Article 6 of Act No. 38/2001) and costs, or cancel the subscription of the shares in question and allocate those shares to a third party without notice or notification to subscribers.