Paul Kaye wants to know why an airline should pay compensation in a case of "volcanic ash", (or other Act of God). The truth is that European Legislation doesn't require 'compensation' to be paid for any event that isn't (& couldn't be) under the airline's control. Passengers are, however, entitled to their money back in the event of a cancellation, as well as support in terms of meals and hotels, & genuine attempts to get them promptly to their destination. This is all at the airline's expense, and applies even in cases of Acts of God. This support might sometimes be called compensation, although it isn't the compensation as defined in Article 7 of Regulation 261/2004.
Airlines not wishing to abide by these rules, which have the power of law within the EU, needn't trade within the EU, and should stick to places with little, if any, consumer protection. My view is simple: If an airline feels that these rules are one-sided, why don't they simply insure against the costs involved? RyanAir, for example, seems to think that passengers should take out such insurance themselves, but it is clearly more sensible for the airlines to bulk insure against these risks. In any case, EU legislation requires the airlines to cover such costs, whether they like it or not. In practice, RyanAir just uses each case to gain more (free) publicity for themselves, but they never mention that aspect, do they?