EC 261/2004 does not apply. The ticketing carrier, UA is neither a community (EU) carrier, nor was the flight in question departing from the community (EU).
You know that this is not correct. As you stating rightfully in the next sentence, that OS is an EU airline.
OS is, of course, a community carrier, but the passenger presented himself without a valid ticket for the flight.
Technically he was not in possession of a ticket. I have serious doubts that OS could get away with such a line. The ticket was issued, OS accepted the transportation contract. That is all that counts. The unilateral cancellation of the tickets was not lawful.
OS still had the chance to rectify the situation and has choses not to do so. Too bad. OS has to pay up.
Hey, its not only about EC261/2004. Austrian contract law comes into play (Allgemeines Bürgerliches Gesetzbuch).
Again, there has been a contract in place between the passenger and OS.
OS broke the contract. OS has to pay up.
Whatever happened to the ticket, it is clear from OP's posts that it was UA which cancelled the ticket, whether right or wrong.
Fine, I am not disputing. It is, however, irrelevant to the fact whether OS owes the passenger compensation (either through EC261/2004 or through Austrian contract law).