'Airlines are notorious'? Using a loophole may sound underhanded, sneaky and nasty - but it means that they are applying the regulation as they interpret it.
The regulatory history of Regulation 261 is a classic case study in what happens when a set of poorly drafted rules are implemeted across multiple jurisdictions have differing systems of consumer laws.
Cash Compensation initially was payable only for denied boarding. Later the regulation was extended to have compensation payable for economic-reason cancellations. Since they couldn't define 'economic-reason' they opted for it applying for almost all cancellations except those outside of the airline's control, the so-called extraordinary circumstances.
The compensation levels were intended to be punitive and dissuasive. The Commission wanted to stop oversales and economic-reason cancellations so they set the compensation amounts at high fixed amounts with no relation to the fare paid (Similar regulations for rail, bus and ferry cancellations provide for compensation at a percentage of the fare paid).
The courts have ignored the regulatory record and have interpreted broadly what is, and what isn't, an extraordinary circumstance as well as decided that not paying compensation for delays is 'unfair'.
So airlines using 'loopholes' to avoid paying punitive and dissuasive compensation amounts is perfectly understandable.
Using click-bait headlines from the tabloids as being factual should be avoided.