To quash the rumours, CWL, Flybe, the WG and all other parties know the line between legal and illegal. This is firmly legal, and the 'subsidy' is not effectively a traditional subsidy so to speak. This is exactly the same as many mechanisms used throughout the entire EU that FR, EZY and other major carriers have adopted in order to help routes become viable.
To stress, its firmly legal and i wish both Flybe and CWL all the best with this !