The Competition Appeal Tribunal's (CAT) April 2026 judgment in Bristol Airport Limited v Welsh Ministers is probably the most significant ruling yet on the Subsidy Control Act 2022 (the Act).

Overview

It resolves a fundamental question that public authorities have faced since the Act came into force: how will the Competition and Appeals Tribunal (the Tribunal) approach a case where a public authority’s application of the subsidy control principles is being challenged?

The answer, the Tribunal confirmed, is that a challenger has to clear a high threshold in such cases and evidence that the decision is irrational in a traditional judicial review sense. This continues the theme of cases to date under the regime which have all been determined in favour of the applicable public authority.

In addition to confirming the position in relation to the subsidy control principles, the judgment also confirms the position in relation to providing subsidies to ailing or insolvent companies. 

The facts in brief

The Welsh Ministers took their subsidy decision on 31 March 2025. The specific policy objective was to address equity issues of social and economic disadvantage in South Wales by growing the economic activity associated with Cardiff Airport and maximising the connected benefits linked to the wider aviation and aerospace sectors in the region. 

The subsidy totalling £205 million was structured in two packages: 

• Package 1 (£105.2 million) for non-passenger business development, covering maintenance, repair and overhaul facilities, aircraft hangar construction, cargo and infrastructure improvements; and 
• Package 2 (£100 million) for commercial passenger air route development, providing incentive payments to airlines to expand routes flying in and out of Cardiff Airport. 

Cardiff International Airport (CIAL) has a long history: established in 1942 as RAF Rhoose, it was privatised in 1995 and passed through several owners. Under its last private owners, the airport suffered significant commercial decline with passenger numbers falling from approximately two million in 2007 to one million in 2012. The Welsh Government purchased CIAL in March 2013 with a policy objective of stabilising and growing the airport for the economic benefit of Wales. 

The Covid-19 pandemic caused severe damage. By August 2021, passenger volumes were 90.7% below pre-pandemic levels. In February 2021, the Welsh Government approved a £42.6 million debt write-off and a matching £42.6 million grant as a rescue and restructuring subsidy. In December 2023, the Welsh Government approved a £15 million Standby Credit Facility, later increased in July 2024 to £33 million; the Extended Standby Credit Facility (ESCF). The ESCF provided liquidity support to the airport ahead of the long-term subsidy package. 

Bristol Airport, the applicant, (referred to as Bristol in this article) describes itself as the primary gateway to the South-West of England and South Wales, handling 10 million passengers in 2024 and supporting around 30,000 jobs in the wider region. Bristol challenged the Welsh Ministers' subsidy decision before the Tribunal, arguing it was unlawful on four grounds.

The grounds of challenge

Bristol advanced four grounds, each targeting a different aspect of the decision:

1. Ground 1: CIAL's financial position: Bristol's argument was that, as at the date of the decision, CIAL was "ailing or insolvent" within the meaning of section 24(1)(a) of the Act, and that the Welsh Ministers either failed to recognise this fact or did not give it proper consideration. 
2. Ground 2: Sections 19 and 20 are an exclusive route: Bristol argued that sections 19 and 20 of the Act provide the only lawful route for subsidies to enterprises that are ailing or insolvent. 
3. Ground 3: Failure to apply the subsidy control principles correctly: Bristol also argued that the Welsh Ministers failed in a number of respects to apply the statutory subsidy control principles properly. This covered Principles A (policy objective), E (appropriateness), C (change in economic behaviour) and B, F and G (proportionality, minimising negative effects, and the overall balance of benefits and harms).
4. Ground 4: Section 28 (subsidies to air carriers): Bristol argued that section 28 provides a bespoke regime for any subsidy provided to airlines for the operation of air services, and that no consideration had been given by the Welsh Ministers to this provision. 

The Tribunal's conclusions

Ground 2: The scope of sections 19 and 20

The Tribunal dealt with the statutory interpretation question first. The Tribunal agreed that the natural and ordinary meaning of the words in section 19 (which applies to "[a] subsidy for rescuing an ailing or insolvent enterprise") limits the prohibition to a particular type of subsidy, one whose purpose is rescue. The prohibition is therefore determined by reference to the purpose of the subsidy, not by the financial condition of the beneficiary. 

The Tribunal found it significant that, if Parliament had intended to capture all subsidies to ailing or insolvent enterprises, sections 19 and 20 could easily have achieved this using the word "to" instead of the words "for rescuing" or "for restructuring". The deliberate use of different language in different provisions showed that the choice of words was purposeful. 

The Tribunal concluded that the overall scheme of the Act is to control subsidies by reference to compliance with the principles, with ancillary prohibitions (of which sections 19 and 20 are one example) that apply in carefully specified circumstances. Parliament intended to permit an ailing or insolvent enterprise to receive a subsidy that complies with the principles, where sections 19 and 20 do not apply because the purpose of the subsidy is not rescue or restructuring. 

The Tribunal also considered whether the UK regime must mirror the EU approach to State aid. It found that there is no presumption that the approach of the EU to State aid will be exactly replicated in the Act, and that if the parties to the Trade and Cooperation Agreement had wished to replicate the EU approach they could easily have done so in clear terms. Parliamentary debate materials were examined and confirmed that there was a deliberate decision to move to a regime that differed in certain respects from EU State aid law, owing to perceived problems with the EU approach, and that the definition of "ailing or insolvent" applies only to the giving of rescue and recovery subsidies. 

Ground 1: Was CIAL ailing or insolvent?

The Tribunal held that the correct approach was to assess CIAL's factual position absent the subsidy, which meant looking at what the facts were on the day before the subsidy was granted (namely, that CIAL had access to the ESCF).

Bristol's reliance on certain expert reports (notably a report from Ernst Young) fell considerably short of showing that CIAL would almost certainly go out of business in the short or medium term. The EY report gave no indication of any going concern concerns arising within more than eighteen months. The Welsh Ministers had therefore acted rationally in concluding that CIAL was not ailing or insolvent and had provided adequate reasons for that conclusion.

Ground 3: The Subsidy Control principles

The Tribunal rejected all of Bristol's challenges to how the Welsh Ministers applied the principles, applying the established judicial review standard of irrationality throughout.

On Principle A

The policy objective stated in the Assessment (which was to grow the regional economic activity associated with the airport and maximise the potential benefits linked to the wider aviation and aerospace sectors) was clear and legitimate. Bristol's argument that the "real" purpose was the preservation of the airport was not supported by the evidence. 

On Principle E

Bristol’s argument was that whilst different options had been considered in relation to financing CIAL, they had not been done so properly. Bristol in particular relied on two primary points a) the Respondent ignored a recommendation from EY in December 2024 that the option of sale to a private investor should be explored further; and b) the Respondent placed too much weight on the views of CIAL as to the viability of certain options. The Tribunal held in both instances irrationality was not established.

The Assessment did consider divestment of CIAL and referenced the EY report and went onto reason why it was not recommended at this stage (and thus there was no irrationality). It also concluded it was not irrational to place weight on the views of CIAL in the circumstances set out in the assessment because some options would require CIAL approval legally to enact, and that approval would not be forthcoming (and hence this was rational to take into account).

On Principle C

The role of Low Cost Carrier traffic in Package 2 was to provide a base level of passenger traffic and thereby allow the airport to operate at greater scale, providing employment and economic benefit. This was an approach the Tribunal found was expressly considered and not irrational. It was also obvious that the subsidy would result in a change in CIAL's economic behaviour by providing it with the means to make incentive payments to airlines, which it would otherwise not be able to do.

There is also another interesting point within this analysis; the Tribunal confirmed that when conducting a CMO assessment it is permissible to take into account the fact a subsidy has been given to the entity providing the onward funding within the CMO analysis.

In this particular case the point was whether CIAL’s agreements with low cost carriers could in principle satisfy the CMO principle due to the fact CIAL were being given a subsidy to fund these costs in the first place.

The CAT stated:

This implies the appropriate comparator is a private investor in the position of CIAL who has received a subsidy in order to fund the relevant transactions.

On Principles B and F

The Assessment expressly recognised that the market operator most likely to experience distortive effects from the subsidy would be Bristol Airport and did consider the potential impact on Bristol in come detail. As a result, the Tribunal found nothing in Bristol's complaint that would justify a finding of irrationality on the part of the Welsh Ministers. 

On Principle G, the balancing exercise required by this principle is an inherently judgemental one involving a multifactorial assessment with many uncertain elements. Bristol's criticisms demonstrated nothing more than disagreement with the Welsh Ministers' conclusions. 

Ground 4: Section 28 and air carriers

Section 28 of the Act restricts subsidies being given to air carriers for the operation of routes unless prescribed circumstances apply. Bristol argued the funding within package 2 which was being made available for CIAL to incentivise route carriers fell within scope of the S28 prohibition. The Tribunal held this was not the case. The subsidy had been granted to CIAL, which is not an air carrier.

While CIAL was expected to make payments to air carriers under Package 2, those payments were required by the Grant Agreement to comply with the Commercial Market Operator (CMO) Principle, meaning they would not constitute subsidies under the Act at all. As a matter of plain wording, section 28 applies only where a subsidy (as defined in the Act) is made to an air carrier, and there was nothing in the Act to suggest the section should be read more broadly. Bristol's challenge on this ground therefore failed.

Key takeaway points for public authorities

The judgement was well reasoned and clear and it provides useful guidance on several aspects of subsidy control law. 

1. Sections 19 and 20 of the Act are triggered by purpose, not financial condition

Although unsurprising, it is helpful to have confirmation that the rescue and restructuring prohibitions in sections 19 and 20 are engaged only where the purpose of the subsidy is rescue or restructuring. If the purpose is a legitimate policy objective, such as addressing an identified equity rationale, sections 19 and 20 do not apply, even if the beneficiary has a troubled financial history. Public authorities should focus on clearly documenting the genuine purpose of the proposed subsidy from the outset. 

2. Purpose of the subsidy must be clearly and honestly articulated

The Tribunal scrutinised the Welsh Government's stated policy objective closely. It confirmed that the objective must be genuine and evidenced, not a post-hoc rationalisation. A well-prepared Assessment of Compliance, supported by independent adviser reports and clear internal documentation, proved decisive in defending the decision.

3. The financial position of the beneficiary remains a relevant, but not determinative, consideration

Even where sections 19 and 20 are not engaged, a beneficiary's financial position is relevant to compliance with the principles. For example, in assessing whether the benefits of the subsidy are likely to be realised. The ESCF, which provided liquidity support to CIAL ahead of the grant decision, was critical to the Welsh Ministers' lawful conclusion that CIAL was not ailing or insolvent. A note within the principles assessment to this effect was referred to by the Tribunal, highlighting the importance of including sufficient explanation and justification within these assessments.

4. Robust, independent expert advice is essential

The Welsh Ministers commissioned detailed advice from Altair Advisory and Grant Thornton, covering aviation market conditions, passenger forecasts, and economic impact analysis. The comprehensiveness of this advice made it very difficult for Bristol to establish irrationality. Public authorities should ensure their assessment process is thorough, supported by independent and appropriately qualified advisers, and fully documented.

6. Irrationality is a high threshold 

Competitors seeking to challenge subsidy decisions face a demanding test. The Tribunal made clear that demonstrating a mere difference of opinion, even one supported by professional evidence, is not enough. For public authorities, this confirms that reasonable and well-documented subsidy decisions will withstand challenge, provided the decision-maker has genuinely applied the principles, considered relevant alternatives, and reached conclusions that fall within the range of reasonable responses.

7. The CMO principle applies even where the transaction is funded by a subsidy

When applying the CMO principle it is permitted to include the fact the party entering into the measure has received a subsidy in order to fund that particular measure when constructing the comparable private operator. This is useful for public authorities to note as it makes clear that CMOP may still be relied upon to evidence a transaction does not constitute a subsidy even if the transaction is only being undertaken by a relevant party because it has received a subsidy. 

Our expertise

This article is intended as a general overview only and does not constitute legal advice. If your organisation is considering granting a subsidy, facing a challenge to an existing decision, or seeking to understand how the Subsidy Control Act 2022 applies to your circumstances, our expert team can provide practical, tailored advice at every stage of the process. Get in touch with our subsidy control team to discuss how we can assist.