British Airways has promised to rebook or refund all 70,000 passengers caught up in today’s flight cancellations, but tonight warned that it was unlikely to pay cash compensation.

BA said that those whose flights were cancelled could rebook on another BA flight, either to their original destination or to an alternative destination, subject to availability. If passengers did not now wish to travel they could claim a refund.

But the airline dashed the hopes of those who expected that the trauma of 24 hours sleeping on the floor of Heathrow airport would mean a cash payout.

On a sliding scale of damages fixed by the European directive on passengers' rights which came into force in February, airlines are liable to pay up to a maximum of £600 in compensation to air passengers who are delayed for more than four hours.

But airlines can refuse to pay out if the delay is caused by exceptional circumstances which are deemed to be beyond their control.

"It is not something that we have looked at in any great detail, but a walk-out by staff that is an unballoted action would, I imagine, come under the heading of exceptional circumstances," a BA spokeswoman told Times Online tonight.

"Compensation is not a priority for us at the moment. I don't think BA has looked at it in any level of detail. Our priority is to get passengers up in the air."

BA defended what it had already done for stricken customers. "We put 4,000 people up in hotels in London and across southern England last night and we also arranged for passengers abroad to be accommodated," said the spokeswoman.

"We are also trying to get people away on flights with other airlines but it is a very busy time of the year and this is not easy.

"We are so, so sorry about all this. We are doing all we can. We have become embroiled in a dispute not of our making."

Earlier, the airline had suggested that compensation might be considered on a case by case basis, but as industry analysts warned of the rocketing costs of the dispute, tonight BA seemed to have hardened its line.

The dispute is likely to cost the company up to £40 million. Paying an average of £300 to each stranded customer would add a further £20 million to the bill.

Last week, before the latest crisis, the Air Transport Users' Council (AUC) warned that airlines were misinterpreting the new EU rules on compensation, and referring almost all passengers to the "vague" clause that exonerates carriers from blame on the basis of extraordinary circumstances.

Airlines had been classing technical faults, operational problems and crew shortages as "extraordinary", and had been refusing to pay compensation, according to AUC spokesman James Fremantle. The result had been a sevenfold increase in complaints to the AUC - 4,000 so far this year, with 90 per cent relating to the new EU compensation rules.

"We're disappointed with the airlines ," said Mr Fremantle. "They are hardly paying out in any circumstances. They refer to almost anything as 'extraordinary'. It's hard to find an excuse that has not been branded as 'extraordinary'. It's their way around the rules."

But unfortunately for the stranded passengers at Heathrow, it is understood that airport strikes that do not involve airline staff are regarded as one of the genuine exceptions to the rules. Other events deemed to qualify as exceptional circumstances are bad weather, security alerts and air-traffic control problems.

The AUC believes that passengers need to start taking airlines to court under the EU legislation to create precedents so that judges can decide what exactly is meant by the clause, which reads in full as "extraordinary circumstances which could not be avoided even if all measures have been taken".

Mr Fremantle said: "The problem is that nobody has done this yet as it could be costly if you lost the case. And we can't investigate every case on behalf of passengers -we simply don't have the resources."

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