Refund vs compensation for flights: what's the difference?

28 March 2026

Refund vs compensation for flights: what’s the difference?

Flight cancelled, three hours of delay, and you start searching online for “flight refund”. The problem is that the word “refund” is used to mean very different things, and confusing them can cost you hundreds of euros. In reality, EU regulation EC 261/2004 provides two distinct forms of protection: the refund and the compensation. They’re different things, have different rules and — crucially — in many cases you can get both.

What a refund is

A refund is the return of what you paid for the airline ticket. Nothing more, nothing less. If you paid 120 euros for a Rome-Barcelona flight and that flight is cancelled without an alternative being offered, the airline owes you 120 euros back.

The refund is governed by Article 8 of Reg. EC 261/2004 and is owed when:

• The flight is cancelled and you don’t accept the alternative flight proposed by the airline (or none is proposed)
• The delay exceeds 5 hours and you decide not to travel
• You’re denied boarding and give up the trip

The refund must be made within 7 days and must be in cash (bank transfer, credit card, cheque). The airline can offer you a voucher, but you have the right to refuse and request cash.

What compensation is

Compensation (or lump-sum indemnity) is damages for the inconvenience suffered. It has nothing to do with the ticket price: it’s a fixed amount established by European law that is owed regardless of how much you paid for the flight.

The amounts, defined by Article 7 of the regulation, are:

This means that if you bought a Milan-London flight for 29 euros and it arrives 3 hours late, you’re entitled to 250 euros in compensation — nearly nine times the ticket price. This is one of the reasons airlines don’t publicise this right much.

Compensation is owed when:

• The flight was cancelled with less than 14 days’ notice
• The flight arrived with a delay of at least 3 hours (Sturgeon and Nelson judgments of the CJEU)
• You were denied boarding due to overbooking

The difference in a diagram

Here’s the key point: refund and compensation are independent of each other. You can be entitled to one, the other, or both.

The most common (and most misunderstood) case

The most frequent scenario is this: the flight is cancelled, the airline puts you on the next flight departing 4 hours later, and you arrive at your destination with a delay. In this case:

• You’re not entitled to a refund — because you flew and arrived at your destination
• You are entitled to compensation — because the cancellation happened with less than 14 days’ notice

Many passengers think: “I flew, so I’m not entitled to anything.” Wrong. Compensation is owed for the inconvenience, not for not having flown.

The most financially advantageous case

The best scenario (so to speak) financially is: flight cancelled at the last minute, no alternative available, you decide not to travel. In this case you’re entitled to:

• Full ticket refund (Art. 8)
• Lump-sum compensation of 250, 400 or 600 euros (Art. 7)
• Reimbursement of extra expenses incurred (meals, hotel, transport — Art. 9)

For a low-cost flight costing 50 euros, you could receive over 300 euros between refund and compensation.

When you’re NOT entitled to compensation

Compensation is not owed when the disruption is caused by extraordinary circumstances:

• Extreme weather conditions (not just bad weather — conditions that make the flight impossible)
• Airspace closure
• Security risks
• Air traffic controller strikes (but not strikes by airline staff)
• Medical emergencies
• Political instability

The airline must prove that the circumstance was extraordinary and that it took all reasonable measures to avoid the disruption. If it can’t prove this, compensation is owed.

Common mistakes to avoid

1. Accepting a voucher thinking it’s the compensation

Many airlines offer travel vouchers after a cancellation, presenting them as “the compensation”. They’re not. A voucher is a form of refund (and not even the correct one, since you’re entitled to cash). EU261 compensation is an additional amount.

2. Not claiming because “the flight was cheap”

The ticket price is irrelevant. Compensation is fixed and owed even for a 1-euro flight.

3. Requesting only the refund and forgetting the compensation

In your complaint letter, explicitly request both the refund (if applicable) and the compensation. If you only ask for one, you might lose the other. For a ready-to-use letter template, read our complaint template guide.

4. Giving up because “they won’t pay anyway”

Airlines are legally obliged. If they don’t pay voluntarily, there are tools to make them: national enforcement bodies, the EU ODR platform, small claims court. The vast majority of well-documented claims are resolved positively.

In summary

• Refund = they give you back what you paid (ticket price)
• Compensation = they pay you for the inconvenience (250, 400 or 600 euros, regardless of ticket price)
• You can get both in the same case
• Don’t accept vouchers if you want cash
• Always request both in your complaint letter

For more on your rights, see our EU261 regulation guide.

Sources

• Reg. EC 261/2004
• European Commission - Air Passenger Rights

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