Icelandair, a pioneer of low-cost transatlantic service, will resume low-fare flights between Baltimore/Washington International Airport and Luxembourg in November.

Sigfus Erlingsson, Icelandair's director for the Western Hemisphere, said the new weekly flights will begin Nov. 7, with fares starting at $499 roundtrip. That fare requires the traveler to purchase the ticket 14 days in advance of departure and to stay between seven and 60 days. An unrestricted roundtrip ticket will cost $589.

An unusual aspect of the Icelandair service is the airline's provision of free bus service from the Luxembourg Airport to and from seven cities in West Germany and two cities in Switzerland. In addition, passengers wanting to go to many other European cities can use Icelandair's through-service with Luxair, the national airline of Luxembourg. For instance, London-bound passengers using the two airlines would pay a total roundtrip fare of $583.

The airline, based in Reykjavik, Iceland, first started flying to the United States in 1948 and was commonly known, under its former name of Icelandic Airlines, as the low-fare airline to Europe. Icelandair first started flying out of BWI in the fall of 1978, but discontinued operations there in early 1980 when rising fuel costs and the poor economy forced a cutback in services.

In the last two years, the airline has made a notable recovery, an official said. After losing $15 million in 1979 and $8 million in 1980, it made a small profit in 1981 and expects a profit this year, he said. The airline's return to BWI follows an expansion of its operations in New York and Chicago.

Icelandair will use a 249-seat stretch DC8 on its new flights. Although the flights will be nonstop to Luxembourg, they will make two stops on the way back -- a brief stop in Iceland and a stop in Chicago. An airline spokesman said their BWI and Chicago flights are being combined because it is the "only economical way" to operate through the winter. On the way to Europe, the plane will originate in Chicago.

A second weekly flight, to be added in March, will stop in Iceland on the way to Luxembourg and omit the Chicago return stop.