The UK Civil Aviation Authority said it will review how airlines are handling refunds during the coronavirus pandemic.
A statement said the body would consider if any action should be taken to ensure that consumer rights are protected.
The aviation watchdog last week warned airlines they are legally required to provide refunds to customers who had their flights cancelled because of the coronavirus.
The Competition & Markets Authority is also currently looking into the situation, with passengers increasingly frustrated at offers of vouchers and long delays in getting cash back.
Under the law, consumers are entitled to receive a refund for their cancelled flights, despite the challenges the industry is currently facing.
“We support airlines offering consumers vouchers and rebooking alternatives where it makes sense for the consumer,” explained a CAA statement.
“But it is important that consumers are given a clear option to request a cash refund without unnecessary barriers.
“We expect airlines to provide refunds for cancelled flights as soon as practically possible, while appreciating there are operational challenges for airlines in the current circumstances.”
The move was welcomed by consumer rights organisation Which? Travel.
Rory Boland, editor of Which? Travel, said: “We know that airlines are breaking the law on issuing refunds, leaving hundreds of thousands of passengers still out of pocket and holiday firms without the cash they need to give customers their money back.
“Weeks have passed since Which? found major airlines are failing to refund passengers and the situation has hardly improved, so we would expect the CAA to act swiftly and take strong action against any airlines denying refunds or dragging their heels about giving customers their money back.
“To restore trust in the travel industry, the government must step in with support for airlines and holiday firms that may struggle to meet their legal obligations to their customers due to the coronavirus crisis.”