In this article, Jonathan Branton and Alexander Rose consider the Cardiff Airport Subsidy Control case and whether we are now likely to see more legal challenges emerge within the airport and aviation sector, which has been the subject of frequent cases in EU State aid law.
Background
Subsidy Control law regulates the transfer of public sector funds and resources with the aim of ensuring that the UK's international commitments in respect of subsidies are honoured while enabling government to intervene in the economy when appropriate to do so, but also to ensure that subsidies do not unduly distort competition or investment within the United Kingdom.
UK Subsidy Control law is a challenge regime, whereby an interested party must litigate for a subsidy to be found to be unlawful after it has been given. Challenges from competitors can only be brought within a short timeframe, which can be as little as one month. This differs significantly from the EU State aid law regime where the European Commission may proactively seek to recover subsidies up to ten years after the award was made.
Large subsidies under the UK Subsidy Control regime must be referred to the Competition and Markets Authority ("CMA") for review prior to award. Since the UK's Subsidy
Control regime came into full force on 4 January 2023, only five aviation subsidies have been of sufficient scale to be referred to the CMA for review.
Airports and aviation subsidies that have been considered by the CMA
Dundee
The first referral was made by Dundee City Council in September 2023. It related to a proposed £6,216,255 subsidy to Loganair Limited towards the costs of running a scheduled air service between Dundee Airport and a London airport. The measure was considered against the requirements of Section 28 of the Act (for subsidies to air carriers for the operation of routes) and 29 of the Subsidy Control Act 2022 for designated services of public economic interest (SPEI) subsidy awards. The Competition and Markets Authority criticised the application of Principles A, B, D and F in its report.
Cardiff
The second referral was made by the Welsh Government on 21 August 2024 and related to a proposed £205.2m subsidy to Cardiff International Airport, which will be used to expand the freight offering, terminal building upgrades as well as "air route development in the form of incentive payments to existing and new airlines to expand their operations". The Competition and Markets Authority criticised the application of Principles B, C, D and F in its report.
Two nearby airports, Birmingham and Bristol raised concerns about the proposal citing "a risk of substantial distortion to competition and investment from the subsidy" whereas "Gloucestershire Airport did not see any negative effects for its business given the scope of the proposal, geography and its current operating model". The press reported on Bristol Airport's "deep concern" about the Welsh Government's proposal for Cardiff International Airport.
On 4 April 2025 a notice appeared in the national subsidy database to confirm the subsidy had been awarded and on 9 July 2025, the Welsh Government published a Written Statement in which it confirmed that "on 25 June, the Welsh Government received notice that Bristol Airport is challenging the decision of the Welsh Ministers by way of an appeal to the Competition Appeal Tribunal (CAT). A summary of the principal grounds of the legal challenge will be published on the CAT website https://www.catribunal.org.uk/ in due course. The Welsh Government will defend this legal challenge. Cardiff Airport is of vital importance to the economy of the South Wales region – with thousands of jobs stemming from the airport and the economic ecosystem supported by it."
Doncaster
On 6 December 2024, the CMA accepted a referral from the City of Doncaster Council in respect of a proposed subsidy of up to £89.7m to Fly Doncaster Limited (a 100% owned Council subsidiary), in order to reopen Doncaster Sheffield Airport, which closed in 2022 after its owners declared it was no longer viable.
The CMA's report was published on 22nd January 2025. The report was criticial, raising concerns around the approach taken to Principles A, B, D, F and G, while third parties questioned the proportionality of the Subsidy. Eight third party submissions were reported to have been received, including from Leeds Bradford Airport which said that "achieving passenger volumes at or above previous levels seen by the Airport would be difficult, and that the level of the proposed Subsidy was unlikely to lead to a viable airport over the longer term" whilst Regional & City Airports said "additional subsidy is likely to be required given the Airport’s historical financial performance".
Derry
On 10 December 2024, Derry City and Strabane District Council referred a proposed subsidy of up to £20.7 million to CODA (Operations) Limited, operator of the City of Derry Airport and 100% Council-owned subsidiary. The measure is directed towards the costs of delivering a Service of Public Economic Interest (SPEI) at the airport, which is located in one the most geographically remote parts of Northern Ireland. On 24 January 2025, the CMA published a positive report, only suggesting updates to some aspects of historical information used for the purposes of satisfying Principles C and F.
Teesside
On 6 June 2025, Tees Valley Combined Authority referred a£12.5m proposed subsidy to Teesside International Airport Limited. The CMA will issue its report on this subsidy on 18 July 2025.
All in all, the Subsidy Control transparency database lists seven subsidies relating to airports and airlines (not including the space flight grant made by the UKSA to Virgin Orbit and those which have only recently received CMA reports). Of these seven subsidies, six relate to airports and only one relates to a subsidy to an airline route.
What does the Cardiff Airport challenge mean in practice?
This is the fourth case brought under the Subsidy Control Act 2022. Durham County Council successfully defended a case against its waste collection services in 2023 and a casechallenging the award of two loans in Greater Manchester was heard in May 2025, but the ruling has yet to be published. A third case, The New Lottery Company Ltd and Others v The Gambling Commission was submitted on 9 June 2025. Therefore, it is clear that competitors are becoming more confident about bringing claims under the Subsidy Control Act 2022.
In terms of the substance of the Cardiff Airport case, until we see the Summary of Appeal published by the Competition Appeal Tribunal it is too early to take a view on the merits of the respective arguments, but it seems likely that the Welsh Government will argue that it has complied with each of the requirements to make an award under the Subsidy Control Principles set out at Schedule 1 of the Subsidy Control Act 2022 and took due account of the CMA's criticisms before doing so, whereas Bristol Airport will argue that there is some deficiency in the assessment, most likely drawing upon the criticisms set out in the CMA report.
Is the EU State aid law regime stricter when it comes to aviation subsidies?
EU State aid law contains a general prohibition on awards of financial assistance regarded to constitute "State aid", requiring that such awards be notified to the European Commission for approval or designed to meet the conditions of a pre-existing State aid block exemption in order to be lawfully awarded. Subsidies may be challenged for ten years from the date the State aid was legally committed.
The European Commission has actively sought to regulate the aviation sector with specific and individual rules, with the Guidelines on aid to airports and airlines explicitly seeking to phase out operating aid (although the 2014 position has been watered down through the 2018 and 2023 communications) and limiting aid for new routes to smaller airports.
The UK regime bears many similarities to the EU's State aid regime. Therefore it has been a source of surprise to many EU lawyers that there has not been an aviation case under the UK's Subsidy Control regime until this point, noting the frequency of cases under EU State aid law.
For example, during the Covid-19 pandemic the European Commission issued notification decisions in respect of over 50 support packages for the aviation sector, approving over €25 billion of State aid. Ryanair alone has lodged more than 15 challenges against State aid decisions in the last ten years. In contrast the UK Subsidy Control regime came into force after the Covid-19 pandemic, so the level and frequency of subsidies has been lower.
Therefore, our view is that the higher number of cases under EU State aid involving airports can be broadly explained by three factors – a surge in subsidies being awarded during the pandemic, a much larger population and resulting number of airports, airlines, and public authorities issuing support) and the requirement for measures to be notified under EU State aid law by default as a sensitive sector.
Furthermore, not all public funding is classed as subsidy. A genuinely commercial investment made by a public sector owner of an airport may be "no subsidy" under the Commercial Market Operator principle, which works in much the same way as the Market Economy Operator Principle in State aid, provided there is supporting evidence to reach such a conclusion. Therefore the lower number of cases under the UK regime is not necessarily evidence that the UK regime is weaker when it comes to such subsidies.
Conclusion
Aviation is an important sector for both the EU and the UK, so was always expected to be one of the subjects discussed when the Trade and Cooperation Agreement is reviewed in 2026. However the announcement of the Cardiff Airport case will give this issue greater impetus.
The UK government will be able to argue that the case shows that the challenge regime offers the effective opportunity for competitors to review decisions.
For public authorities the case is a reminder that any subsidy is capable of challenge and therefore it is necessary to ensure that there is always a thorough audit trail in place whenever a decision is made.
It is also significant that this is apparently the first challenge case which follows a CMA referral and published report. It will be interesting to observe how the handling of CMA comments in a final assessment of the Subsidy Control Principles prior to subsidy award is assessed by the Court.
DWF has a market leading Subsidy Control team which successfully advised on the UK's first Subsidy Control case and many other high profile projects. The Chambers Directory 2025 ranks DWF in tier 1 and describes DWF's competition law team as being "renowned for its strong state aid practice, as well as its knowledge of the new UK subsidy control regime".
