Founded in 1976 as the national carrier of the newly established Lao PDR, Lao Airlines was originally known as the Civil Aviation Company and was formed from merger of existing airlines Royal Air Lao and Lao Air Lines. The company became Lao Aviation in 1979 and has operated under that identity right to March this year.

The Lao national carrier initially started life with a mixed fleet of Western aircraft, including the Douglas DC-3 and DC-4, operating on international and domestic routes, as a fleet of helicopters enabling access to the remote regions. Reflecting the country's closer links with its Eastern neighbours, a re-equipment exercise was undertaken in the 1980s, with the fleet then primarily composed of aircraft from China and the Soviet Union. For international services to Bangkok, Hanoi and Phnom Penh these included the Antonov An-24.

The decision to upgrade to the newer generation of European turboprop aircraft being produced by ATR (Avions de Transport Regional) in France was taken in 1994, when the first 50-seat ATR42 entered service with the airline which is removed from the service on 1995 and immediately replacing by a first 70-seat ART72 aircraft and the second on 1999, with both ATRs forming the backbone of the carrier’s fleet for international and major domestic services up to today. These highly reliable aircraft are complemented on routes to remote areas within the country by the Y-7 and Y-12, seating 50 passengers respectively.

Today the Lao Airlines network extends to seven international destinations and 11 locations within the Lao PDR. New routes are planned for the future, including within the CLMV economic zone of Cambodia, Lao PDR. Myanmar and Vietnam, as well as to Hong Kong and Singapore.