On 18 September 2007 the Company signed a purchase agreement for the acquisition of the Czech airline Travel Service, the largest private airline in the Czech Republic. Travel Service operates charter flights to and from Prague and Budapest and also owns and operates the low cost airline Smart Wings. According to the agreement Icelandair Group hf. will purchase the shares in two stages, 50% of the shares in 2007 and 50% during 2008.  According to the purchase agreement the sellers have option to buy 20% of the shares at the completion date in 2008.  The sellers have to give notice to the buyer on or before 31 May 2008 if they are going to buy back the 20% share.              
             
The 50% share in Travel Service acquired in 2007 was acquired through the holding company, Lerox CZ s.r.o. which was 100% owned by Icelandair Group hf. at year-end 2007.  The 50% share of Travel Service is accounted for using the equity method within Lerox CZ s.r.o. for the two last months of the year.  The acquisition date of Lerox CZ s.r.o. was determined as 1 November 2008.  Travel Service is not consolidated with Lerox CZ s.r.o. in the year 2007 since control was not in place at year-end 2007.  The acquisition price for Lerox CZ s.r.o. amounted to ISK 960 million including transaction cost of ISK 104 million.            
             
Business combination in 2006            
             
During 2007 the purchase price allocation for 2006 business combination was finalised.  Some minor adjustments were made to the provisional purchase price allocation in 2006.