BEIJING, Mar. 31 -- Korean Air Lines Co, the world's second-largest air cargo carrier, said it flew fewer passengers and carried less cargo in the first two months of the year due to declining domestic demand in South Korea.

    Korean Air flew 3.35 million passengers in January and February, almost 10 per cent fewer than the same two months in 2004, the Seoul-based airline said. It filled 70 per cent of seats with paying passengers during the period, compared with 69.1 per cent last year, it said.

    Korean Air and its smaller rival Asiana Airlines Inc have been losing domestic passengers to a high-speed train that began running last year. The state-owned high-speed train connects South Korea's largest cities, linking Seoul with Busan in the country's southeast and Mokpo in the southwest.

    Korean Air flew 1.55 million passengers domestically in the first two months, 24 per cent fewer than last year. The number of international passengers rose 7.6 per cent in the period to 1.8 million, as more South Koreans flew to Southeast Asia, China and Japan during the Lunar New Year holiday, which was in February this year.

    "Domestic routes are a losing business for Korean Air," said Shin Ji-yoon, an airline analyst at Daewoo Securities Co. "With the high-speed train now, the airline is doing the right thing by reducing the number of domestic routes." He said he maintained his January 19 rating on the stock as "overweight."

    Shares of Korean Air closed 1.5 per cent lower at 19,700 won (US$19.2).

    The number of passengers who took the high-speed train in January grew 9 per cent to 82,000, Shin Gwang-soon, the president of Korea Railroad Corp said on March 25. In the year ending March 31, 2005, about 25 million people are expected to have used the service. He expects 30 per cent more passengers to ride on its high-speed train in fiscal 2006.

    In February, Korean Air carried 1.6 million passengers, 7.7 per cent fewer from a year earlier.

    Passengers flying on domestic routes fell 22 per cent to 749,456 while international passengers increased 9 per cent to 855,950.

    Korean Air handled 301,321 metric tons of cargo in the first two months, an increase of 0.7 per cent. Cargo traffic fell 6.5 per cent in February to 145,962 metric tons.

    The airline filled 72.7 per cent of available cargo space in the first two months of the year, compared with 76.8 per cent in the same period last year.

    (Source: China Daily, by Yunsuk Lim)