Passengers whose flights are cancelled may get compensation
New EU rules set compensation at between 250 euros (£173) and 600 euros, depending on the length of the flight.
The new rules will apply to all scheduled and charter flights, including budget airlines.
Airlines have attacked the legislation saying they could be forced to push prices higher to cover the extra cost.
The European Commission is facing two legal challenges - one from the European Low-fare Airlines Association (ELFAA) and the other from the International Air Transport Association (IATA), which has attacked the package as a "bad piece of legislation".
Previously, passengers could claim 150-300 euros if they had been stopped from boarding.
However, only scheduled flight operators were obliged to offer compensation in cases of overbooking and they did not have to offer compensation for flight cancellations.
Deter overbooking
The EU decided to increase passenger compensation in a bid to deter airlines from deliberately overbooking flights.
Overbooking can often lead to "bumping" - when a passenger is moved to a later flight.
When this happens against a passenger's will, airlines will now have to offer compensation.
In addition, if a flight is cancelled or delayed for more than two hours through the fault of the airline, all passengers must be compensated.
The boom in air travel needs to be accompanied by proper protection of passengers' right
Jacques Barrot, vice president of the European Commission
Q&A;: New passenger rights
However, airlines do not have to offer compensation if flights are cancelled or delayed due to "extraordinary circumstances".
Airlines fear that "extraordinary circumstances" may not include bad weather, security alerts or strikes - events which are outside of their control.
All EU-based airlines and operators of flights which take off from the EU will have to adhere to the new compensation regime which came into force on Thursday.
Low-cost airlines have criticised the new compensation levels, arguing that the pay-out could be worth more than the ticket.
"It's a preposterous piece of legislation, we among all airlines are fighting this," Ryanair deputy chief executive Michael Cawley told Radio 4's Today programme.
Grey area
The European Regions Airline Association (ERAA) claims that neither airlines nor consumers were consulted over the changes.
Andy Clarke, ERAA director of air transport, said that the European Commission advice misleads customers as it leads them to believe that airlines could be liable for payouts if flights are delayed because of bad weather.
We reckon [the changes] are going to cost European air passengers... 1.5bn euros, that's over £1bn a year loaded onto European passengers
Andy Clarke, ERAA
Airlines' wings clipped
European Commission spokeswoman Marja Quillinan-Meiland conceded there were "grey areas" but said "these are not as big as the airlines are making out".
In cases of dispute, national enforcement bodies would decide whether the passenger had a case, she said.
New technology means it is easier for airlines to take off and land in bad weather, she added.
The ERAA's Mr Clarke also warned that while airlines would comply with the new rules, the extra costs would be passed onto passengers.
"We reckon it's going to cost European air passengers - not the airlines, the airlines have no money, it has to be paid by passengers - 1.5bn euros, that's over £1bn a year loaded onto European passengers," Mr Clarke said.
"That's basically a transfer of money from passengers whose journeys are not disrupted to passengers whose journeys are disrupted."
On Wednesday, Jacques Barrot, vice president of the European Commission and also Commissioner for Transport, said that the changes were necessary.
"The boom in air travel needs to be accompanied by proper protection of passengers' rights.
"This is a concrete example of how the Union benefits people's daily lives."
The Commission has launched an information campaign in airports and travel agencies to inform airline passengers of their new rights.
Replies to readers' questions from the Air Transport Users' Council will be published as soon as possible.
Airlines have attacked new EU legislation which will force them to pay greater compensation to customers in the event of overbooking, cancellations and delays.

Consumer groups have praised the new rules, which set the level of compensation between €250 and €600 depending on the circumstances and the length of the flight. "This is some comeback for passengers who have been inconvenienced," James Fremantle, industry affairs adviser for the Air Transport Users Council, told Reuters. Before this legislation came into effect, passengers "bumped" from a flight could claim between €150 and €300.

The new rules apply to all scheduled and chartered flights. Previously only scheduled flight operators were obliged to offer compensation in cases of overbooking— they did not have to extend compensation to travellers affected by flight cancellations. Low cost airlines have criticised the new compensation levels arguing that the compensation paid will exceed the price of the ticket.

The effort by the EU is to discourage airlines from deliberately overbooking flights, a practice which has become routine for most major airlines. Overbooking often leads to "bumping", where passengers who cannot be guaranteed a seat are moved to a later flight. In future when this happens airlines will have to offer compensation. Additionally, if flights are cancelled or delayed by more than two hours all passengers must be compensated. This will be the case except in "extraordinary circumstances", the definition of which may or may not include bad weather, security alerts or strikes.

"It's a preposterous piece of legislation, we among all airlines are fighting this," Ryanair deputy chief executive, Michael Cawley told BBC radio 4's Today programme. It has also been claimed that the advice may mislead customers by having them believe that they may be entitled to compensation if flights are delayed due to bad weather.

Marja Quillinan-Meiland, European Commission spokeswoman has said that there are "grey areas" but added "these are not as big as the airlines are making out." Disputed cases would be heard by national enforcement bodies which would decide if there is a case to answer. 

European Regions Airline Association (ERAA) director of air transport Andy Clarke said "we reckon it's going to cost European air passengers – not the airlines, the airlines have no money, it has to be paid by the passengers – 1.5bn euros, that's over £1bn a year loaded onto European passengers. That's basically a transfer of money from passengers whose journeys are not disrupted to passengers whose journeys are disrupted."

These extra costs may also lead to carriers cancelling routes to areas that have been identified as problem destinations. 

The European Low-Fares Association (ELFA) is mounting a legal challenge to the laws. ELFA and International Air Transport Association expect a ruling from the European Court of Justice in fall of 2005, until then airlines have said they will comply with the regulations.