It looks like Etihad told my wife her flight was cancelled, when it wasn't, then changed her booking. She didn't even buy an Etihad ticket - what happened?

My wife was due to fly from Abu Dhabi to Toulouse via Munich (AUH-MUC-TLS) in J; the AUH-MUC flight with Etihad, and the MUC-TLS with Lufthansa. The tickets were much cheaper on the Lufthansa website so she bought them there. A few hours before boarding she was told the AUH-MUC flight was cancelled and she was rebooked on AUH-CDG-TLS. She was irritated, to say the least; I think we would all take MUC over CDG especially after a night flight. She obviously also lost the seat she had reserved.

The AUH-MUC departed as scheduled - maybe a few minutes late. As far as I can tell there is no problem with the MUC-TLS flight either. It wasn't a tight connection at all. What happened? Did they just oversell the flight? If so, how do they decide who to bump? Having paid cash for a J flight, I think she expected better.