The airline was established and started operations in September 1976 as Lao Aviation. The name was changed to Lao Airlines in early 2003. It is wholely owned by the Government of Laos.

Flying mainly to small airfields in mountainous, tropical Laos, the airline acquired a not-too-favourable reputation for safety, several flights being lost over the years. Lately, with better aircraft and airfields, this reputation has been overcome. Reliability is still to come up to international standards, however.

The main characteristics of this airline are similar to SriLankan Airlines, which is partially owned by Emirates. This airline has a 60% of share owned by China Yunnan Airlines