Any subsidy offered by government state or federal for an air route service has to be put to tenders first. The most a council will subsidise an operation is via waiving airport fees. Nothing will come close to covering the cost of operating a 737 on those routes. Boeing does not give 737 away to small customers, large airlines will get big bulk discounts for showing loyalty to Boeing and creating trust in the airframe. Even if you got a Max for 'cost' you are still talking about $50+ million USD. You can buy 50 or so older 30 seat turbo-props for that price and flood the regional market properly.
Emirates can do what it likes, its already on a subsidised cost base through poor worker conditions for staff and fuel benefits. Big airlines do some things for profit, others for principle, like fighting charges they don't like, they can act like spoiled kids sometimes. New entrants don't have the capital to waste airframes on loss making, ill fitting routes.