There are FAA time limits on the duration of subsidy when the subsidy is paid from airport revenues at Federally-funded airports. You may want to study up on the relevant FAA regs. These regs also restrict how subsidies can be provided; AA as a new route entrant yes, a subsidy to Delta for existing service, no.

'Free market air service' is really an oxymoron. Few industries so heavily rely on public funding and allocation rules: airport terminals, runways, navigation, international treaty rights...