A new budget airline which began flying from Coventry airport this week could be grounded by a legal challenge from planning inspectors, who say its temporary terminal is an illegal construction.

Thomsonfly, a low-cost offshoot from Thomson Holidays, has taken the concept of no-frills travel to a new extreme by launching international flights from a prefabricated "shed" at the freight airport, which offers no other passenger services and has no bus or rail links.

It is offering seats for as little as £19.99 to destinations including Marseille, Nice, Rome and Jersey, marketing Coventry as "West Midlands International Airport" - despite opposition from local residents.

However, just hours after the airline's first flight, Warwick's Labour-controlled district council announced it was applying to the high court for an injunction to halt use of the airport's departure lounge.

A court order is likely to take weeks and could be further delayed if Thomsonfly appeals. The council said it could take two months to halt the airline's operations.

The airline has not applied for planning permission for passenger flights, preferring to rely on a loophole which permits the construction of any structure on the airport of less than 500 square metres without special approval.

To stay within the floorspace limit, it has removed the stairs to the terminal's first floor and taken a series of piers out of use.

Thomsonfly's spokesman, Russell Ison, described the terminal as a "temporary modular building" but insisted that it was fully equipped with facilities.

He said: "We did extensive market research prior to launching from here. We found there was an unmet need for low-fare operations from the West Midlands region but we wouldn't have been able to operate from Birmingham airport with the same low fares."

Thomsonfly bought the airport in December, becoming the first low-cost carrier to own its base.

Local residents suggested that the real attraction of the airport to Thomsonfly was that it has no restriction on night flights. They pointed out that the location had poor transport links, with no bus or train services. There is no on-site car park, with passengers coached in through a park-and-ride scheme.

Warwick district council said it had received 2,500 letters from the public expressing concern. The authority has written to the deputy prime minister, John Prescott, asking for his intervention.

Friends of the Earth has accused Thomsonfly of damaging ancient woodland by chopping the tops off trees in nearby Willenhall Woods.