Actually, the rights that passengers have are clearly defined under EU Regulation 261/2004. Actually, because some airlines interpret these very specifically. On November 22, 2023, the Federal Court of Justice again ruled that in the event of irregularities, passengers have the right to a replacement flight at the earliest possible date.
It is common practice for many airlines to refuse rebooking to other airlines and/or other alliances. Only your own flights would be considered. This is illegal, as the European Court of Justice and the Austrian Supreme Court, among others, have already decided in several cases.
The German Federal Court of Justice had to deal with a flight that was canceled at the beginning of 2020 due to a severe weather warning. The plaintiffs wanted to fly from Keflavik to Munich. The rebooking to a flight connection that would have taken place on the same day - after the storm, mind you - was refused. Instead, the travelers had to stay in Iceland for two more days.
The airline was of the opinion that it would have made no sense at all if the flight had been rebooked on the same day, as an arrival delay of three hours could not have been avoided. Citing exceptional circumstances (storms), compensation payments were also refused. Another argument: Only those that would allow an arrival less than three hours late would be considered for replacement flights.
With this argument, the airline prevailed in the lower courts. But the plaintiffs didn't give up and went to the Federal Court of Justice. He sees the matter completely differently and has decided in favor of the passengers. The decisive factor in the decision was that the carrier demonstrably did not offer replacement transport at the earliest possible point. This means that the airline is obliged to pay the compensation in accordance with EU Regulation 261/2004 despite exceptional circumstances.