Until the mid 1980s, the runway was a grass strip. This was replaced by a hard surface runway with temporary buildings. The airport started operations in 1986 and was developed with funds and assistance from the Government of Ireland, private investors, Donegal County Council, the International Fund for Ireland and the European Regional Development Fund. In the 1990s the runway was extended to 1500 m and a new terminal building with modern navigational aids and equipment was added.
Aer Arann remains the only scheduled airline currently using the airport. They receive public service obligation funding from the Irish Government to subsidise the route to Dublin, a contract that was renewed in 2008. On 21 February 2007, the Irish Government announced that it would be giving -3.8 million to the airport in capital grant money.
VLM Airlines operate seasonal charter flights to Rotterdam between April and September every year.
Aer Arann announced in June, 2009 that it would be providing new connections to Cork from Donegal Airport via Dublin Airport. This was since dropped in March 2010 when Aer Arann reduced their Cork-Dublin service to once-daily (except Saturdays).
In February 2010, it was announced that Aer Arann would be suspending services between Carrickfinn and Glasgow Prestwick, and re-launching the service from Carrickfinn to Glasgow International at Abbotsinch.
Intermittently, non-scheduled helicopter flights to service a variety of (mobile) offshore hydrocarbon installations use the airport. This service is likely to expand in the future, requiring additions to the passenger-processing areas, technical and hangar services.