The High Court has dealt a potentially fatal blow to expansion plans for Coventry Airport.
A judge upheld the Government's decision to reject moves to build a new terminal to take up to two million passengers a year.
Earlier local business and council leaders had expressed the belief that the airport's future success was vital for the economic health and prestige of the region.
The bid to expand the terminal building and attract more flights and passengers was backed by the Coventry Chamber of Commerce and the city council.
West Midlands International Airport Ltd had asked Mr Justice Forbes, sitting in London, to overturn a decision taken last April by Hazel Blears, Secretary of State for Communities and Local Government, blocking the project.
But the judge ruled that the minister's decision was not legally flawed and refused to intervene.
Later the airport's chief executive, Chris Orphanou, said: "We have just been advised of the outcome of the High Court hearing and are naturally disappointed with the result.
"We will now take time to examine the full report and its implications."
No indication was given as to whether there will be an attempt to appeal against the ruling.
During the legal battle, Mr Orphanou warned that if the passenger terminal was not allowed to grow it would be "devastating, not just for us but for the city and the surrounding community."
The High Court case arose out of a Government inspector's decision, following last year's public inquiry, to refuse permission for expansion.
Opposition to the scheme was voiced by environment campaigners, residents and some MPs.
The judge rejected accusations that the Government planners had acted irrationally.