As it was originally conceived before it was butchered by the ECJ -- which is composed of judges who know nothing about commercial aviation or apparently mechnics -- this was intended to make carriers maintain reasonable schedules and to keep their aircraft in proper flying condition. This, cancellation (delay) compensation would be payable unless there was an "extraordinary circumstance." Fair enough.
But, the ECJ has made it essentially impossible for an air carrier, no matter how well it maintains its aircraft, to claim an "extraordinary circumstance." That is contrary to the stated intent of the Regulation and is hardly consumer friendly.
Switzerland is not a Member State, but has adopted the Regulation into its national law. Swiss courts have wisely not adopted the ECJ silliness and the Regulation is applied in a common-sense manner.
A study completed last year suggests that less than 10% of eligible passengers claim compensation and that less than 2% of the total eligible amount is actually paid out.
If the costs of EC 261/2004 were increased 50-fold, e.g., that 100% of eligible claims were made and paid, the cost to carriers would be exorbitant and fares would dramatically rise. Moreover, because EU carriers are required to pay compensation for flights to and from the EU, while non-EU carriers pay only on departure from the EU, EU carriers would be at a substantial economic disadvantage.
If the ultimate goal of the Regulation was to cause carriers to operate according to their published schedules, after 13 years, there is no evidence that flights covered by the Regulation operate in a more timely manner than those which are not. US, Canadian & Japanese carriers operate roughly at the same on-time percentage as EU carriers.