I’ve had this happen several times. It appears standard practice, and in fact several websites about flight compensations talk about it.
Essentially, they are offering you a deal and you are free to accept or reject it.
Most websites advise against it. Unlike cash, this voucher is not only tied to one airline, it can also have a expiration date. If you know for certain that you will be flying with this airline again in the near future, the voucher can be beneficial as it is usually in an amount higher than the compensation set in the law. However, in general you should take the cash instead and yes, you absolutely can demand cash instead.
Regulation (EC) No 261/2004 of the European Parliament has this laid out crystal clear:
- The compensation referred to in paragraph 1 shall be paid in cash, by electronic bank transfer, bank orders or bank cheques or, with the signed agreement of the passenger, in travel vouchers and/or other services.
Credit:stackoverflow.com‘