The Civil Aviation Authority (CAA) said in a letter sent to Ryanair on Wednesday that the airline's CEO Michael O'Leary was wrong to say Ryanair is not legally obliged to re-route customers whose flights had been cancelled.

The letter, from CAA chief executive Andrew Haines, said Ryanair compounded the error on Wednesday when it cancelled a further 18,000 flights without informing customers that they could be re-routed with other airlines if Ryanair could not find suitable flights of its own.

Ryanair also failed to include any information about its obligation to refund additional expenses incurred as a result of the cancellation, for example, meals, hotels, and transfer costs attached to a re-routed flight, the CAA said.

Haines said Ryanair could be failing to comply with the Consumer Protection from Unfair Trading Regulations 2008 by omitting material information that "is likely to cause the average consumer to take a transactional decision he or she would not have taken otherwise."

He asked Ryanair to correct any misleading statements and invited the airline to attend a meeting to resolve the issue, warning that legal action would be taken if it was found to be in breach of consumer laws.

The CAA letter adds to a deepening a crisis that has already seen the budget airline cancel thousands of flights. A pilot rostering error led to the company cancelling thousands of flights from last week, a move which is likely to affect over 700,000 bookings.

Ryanair abandons Alitalia takeover bid

Compounding Ryanair's problems, the airline this week also said it is scrapping plans to buy struggling airline Alitalia in order to eliminate "all management distractions."

The firm said in a statement:

"In order to focus on repairing this rostering problem this winter, Ryanair will eliminate all management distractions starting with its interest in Alitalia.

"We have notified the Alitalia bankruptcy Commissioners that we will not be pursuing our interest in Alitalia or submitting any further offers for the airline."