Domestic Transportation in and around Iceland
Iceland being an island, the only way of reaching it is by air or sea. There are daily scheduled flights to Iceland from mainland Europe and the USA, and most tourists arrive by air. The country´s location in the middle of the North Atlantic makes sea transport less feasible in winter, as the sea can be very rough. Thus sea transport is used for tourism mainly in the summer, and even then it is relatively rare.
Getting around in Iceland is easy during the summer, but can be more challenging during winter months. This is not to say that automobile touring isn't possible, but allowances for weather should be made. Car rental agencies are found in most major towns.
The domestic airlines provide the only reliable form of transport in the winter when snow and ice prohibit most overland travel. In summer, the airlines have daily flights between Reykjavík and most major destinations.
Iceland has no railways and its highway system is the least-developed in Europe. However, Bifreiðastöð Íslands (BSÍ), a collective organization of long-distance bus lines, does a tidy job of covering the country with a feasible, though inconvenient, network. There are also a number of ferry services connecting ports.
With its muddy or rocky roads, steep hills and inclement weather, Iceland is hardly a cyclist's dream. Nevertheless, an increasing number of visitors are trying cycling as a mode of transport. Bikes can be rented in most urban centers, as well as at hotels, hostels, and guesthouses. Local transport includes municipal buses and taxis which can also be hired for sightseeing.
For more information, check out:
Car Rentals in Iceland
Bus Rentals in Iceland
Driving in Iceland
Ferries in Iceland