Originally Posted by Crastonts

In this case, AA must pay because the downgrade happened to a passenger departing from an airport (LHR) located in the United Kingdom. Article 3, section 1a: https://www.legislation.gov.uk/eur/2004/261/article/3

Indeed, AA has no obligations under the UK-261 regulation when landing into the UK (say, DFW-LHR).