Ryanair has until 5pm on Friday to sort out compensation for hundreds of thousands of travellers hit by mass flight cancellations or face possible action by the UK's aviation regulator.
The Civil Aviation Authority (CAA) instructed the budget airline to tell passengers they are entitled to be re-routed by another carrier and explain how that will work.
Ryanair must also publicly state it will reimburse expenses for affected customers, according to a letter from the CAA.
In addition, the Dublin-based carrier must commit to helping passengers who chose an unsuitable option as a result of being misled.
It comes after the regulator accused the airline of "not complying with the law" over its handling of the fiasco.
CAA chief executive A ndrew Haines said he was "furious" after Ryanair cancelled an extra 18,000 flights for the winter season on Wednesday - a move that will hit 400,000 customers.
" They are not making it clear to people their entitlement," Mr Haines told BBC Radio 4's Today programme.
"If they follow through on what they are saying, then they would be breaking the law."
A Ryanair internal memo allegedly instructed call centre staff to offer flights with other carriers - provided the price "does not exceed three times the value of the original Ryanair fare".
The document, unearthed by ITV News, was criticised by consumer group Which?.
Managing director Alex Neill said: "Ryanair appears to be plucking figures out of thin air as there is no legal basis for the arbitrary figure they've set.
"The law says passengers must be rerouted and there's no specified limit on cost. This yet again highlights the importance of the action which the Civil Aviation Authority has started.
"It must force Ryanair to immediately change its behaviour and comply with the law."
A Ryanair spokesman said: "We will be meeting with the CAA and will comply fully with whatever requirements they ask us to."
The latest round of cancellations includes several popular routes used by British travellers, such as Stansted to Edinburgh and Glasgow, Gatwick to Belfast, Newcastle to Faro, and Glasgow to Las Palmas.
It adds to mounting anger against Ryanair, which was already coming under heavy fire after cancelling up to 50 flights a day earlier this month.
Ryanair says the cancellations were brought about because of an error with pilot holiday rosters.
Passengers have expressed their frustration with the airline, with many left out of pocket due to a lack of alternative flights and accommodation bookings they can no longer use.
Mr Haines said airline passengers are " well-protected by the law".
He went on: "They are entitled to compensation and if there is a cancellation, they are entitled to be re-routed by other airlines.
"The chief executive of Ryanair (Michael O'Leary) has gone on record and said he is not going to do that. He then issued a clarification.
"But yesterday when they announced 18,000 further cancellations, they failed to follow through on that.
"We are furious they are not complying with the law and they are not giving customers what they are entitled to."
The regulator asked for a meeting with the airline as part of a consultation that will last at least seven days and could take legal action for breaching consumer protection laws.
It says Ryanair has falsely claimed it did not have to re-route passengers on other airlines, particularly when there are no other services available.
The CAA also accused the airline of stopping short of providing details on its obligations to refund additional expenses incurred by passengers as a result of cancellations including for meals, hotels and transfer costs.
It enforces consumer rights for passengers on UK flights under the Enterprise Act, meaning it could take Ryanair to court, where it would face being fined.
However, it has no powers to stop the airline from operating in the UK on the grounds of how it treats passengers.
Ryanair's operating licence is handled by the Irish Aviation Authority.
The airline said the latest reduction in its schedule will ''eliminate all risk of further flight cancellations".