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Chinese airline sees passenger slump amid tensions with South Korea

BEIJING (Reuters) - China's Xiamen Airlines said it has seen passenger numbers fall by up to a fifth on flights to South Korea since a recent flare up in diplomatic tensions between the two countries.

The tensions are over the deployment of a U.S. missile system outside Seoul, which China has urged South Korea to halt.

Xiamen Airlines' Chairman Che Shanglun said on Thursday that the carrier was seeing Chinese travellers cancel or postpone trips to South Korea.

The airline, majority owned by China's largest carrier by passenger numbers China Southern Airlines , flies daily to Seoul and Jeju Island in South Korea.

"We haven't reduced flights, but passenger numbers have fallen ... by about 10-20 percent daily," Che told reporters on the sidelines of China's annual meeting of parliament.

"Some people are automatically thinking, the current situation is not good, there is discrimination there against us, so we shouldn't go ... The recent actions of (the South Korean government) have hurt many Chinese citizens."

The Chinese are by far the biggest spenders in South Korea's tourism industry, propping up the world's biggest duty free market which generates about $8 billion in annual sales.

But tourism has been hit as relations between the two countries have deteriorated over the U.S. military's deployment of its advanced Terminal High Altitude Area Defense (THAAD) anti-missile system to South Korea.

The diplomatic stand-off deepened last week when South Korea's Lotte Group approved a land swap with the government that will enable South Korean authorities to deploy the controversial U.S. missile defence system.

Che did not specify when passenger volumes had begun to tumble, saying only that it was "recently" as the debate over the use of land owned by Lotte Group grew.

Since the deployment was announced, South Korean companies in China have reported cyber attacks, store closures and fines. State-controlled media in China has called for a boycott of South Korean goods and services.

Several of South Korea's biggest news outlets also cited unidentified sources as saying Chinese government officials were telling tour operators to stop selling trips to the country.

Che, however, said that the political tensions were not affecting its relationships with South Korean airlines. Xiamen Airlines is part of global airline alliance SkyTeam which also includes Korean Air .

Xiamen Airlines and its subsidiaries carried 12.7 million passengers in the first half of 2016, according to latest data, or 23 percent of China Southern's total passengers.

(Reporting by Brenda Goh; Editing by Susan Fenton)