In June 1938 the City of Charlottetown asked the Department of Transport for assistance in developing a municipal airport. Two sites were considered, Upton Airport and a 300 acre property at Sherwood Station on the Brackley Point Road. Because of the lack of space for future expansion at the Upton site, the federal government accepted the Brackley Point Road site. The City purchased the 300 acres in what was known as Central Royalty for $30,000. The City negotiated with the Provincial Government to bear half the cost of the site; the Province agreed to do so on condition that it receive half the profits derived from the airport revenue. The City would operate the airport.

In December 1939, the City Council offered free use of the airport to the Canadian Government for defence purposes until the conclusion of the war. The Government accepted, and on May 1, 1940 the Department of National Defence announced the establishment of No. 5 Bombing and Gunnery School at the Charlottetown Airport under the British Commonwealth Air Training Plan (BCATP). Under the British Commonwealth Air Training Plan, Charlottetown Airport was operated by the Royal Air Force.

The field was officially handed over to the Royal Air Force on June 15, 1941 by which time, three hard surface runways had been constructed. In early 1941 the Airport was established as No. 31 General Reconnaissance School instead of the Bombing and Gunnery School as originally planned. This was changed because local lobster fishermen objected to the bombing range closing valuable lobster grounds on the North Shore between Covehead and St. Peters.

In February 1944 the Royal Canadian Air Force took over from the RAF and the station became known as No. 2 Air Navigation School. This continued until late January 1945 when local politicians were advised that the R.C.A.F. Navigation School at Charlottetown was being transferred to Summerside in February. This was distressing news to City Council, who felt that if the navigation school was transferred to Summerside, they would also lose the civil airport to that city, as there was a good possibility that the Charlottetown Airport would not continue to operate. After much discussion with Defence authorities in Ottawa, Charlottetown had the order rescinded.

On July 7, 1945 the B.C.A.T.P. School at the Charlottetown Airport officially closed. In a little over four years the School had graduated 1200 students. The training had been done in twin engine Anson aircraft. The students were from such places as England, France, Norway, Poland, Australia, New Zealand, United States and Canada. Approximately 200 to 300 air force personnel were on staff, along with 100 civilian workers at the time of the closing.

On February 1, 1946 the Department of Transport took over the Charlottetown Airport from the R.C.A.F. The Department of Transport operated the Charlottetown Airport from 1946 until February 28, 1999 at which time operational and financial responsibility was transferred, under a 60 year lease arrangement, to the Charlottetown Airport Authority Inc.