* SAS capacity, yield grew in February
* SAS reducing capacity due to falling demand
* Has dropped 2020 forecast
* Fears demand drop will extend to summer season (Adds detail, background, shares)
STOCKHOLM, March 6 (Reuters) - Sweden-based airline SAS said the coronavirus outbreak had a limited impact on its traffic in February, but repeated on Friday that it was cutting routes and capacity as demand drops.
"Due to the outbreak, SAS notes a reduced demand going forward," it said after reporting that total capacity (available seat kilometers or ASK) and revenue passenger kilometers (RPK) grew 1.4% and 0.5% respectively from a year earlier.
Currency-adjusted unit revenue grew 1.1%, and passenger yield 2.2%, it said in a statement.
"Passenger growth, unit revenues and passenger yield showed good development in February as COVID-19 had a limited impact," it said.
Like other airlines, SAS has seen its shares hit this year by uncertainty and falling demand due to the coronavirus spread.
"To mitigate some of the negative financial effects, SAS reduces long- and short haul network capacity on routes with low forward booking," it said.
On Tuesday, SAS cancelled flights to northern Italy and Hong Kong and withdrew its financial forecast for the year after the outbreak hit demand.
SAS shares were down 3% at 1020 GMT, in line with the wider market in Stockholm and bringing their fall for the year to date to 44%.
"Overall, even if we have a drop in Chinese flights in February, I still see a positive effect on revenues compared to February last year, but also remember we have a day extra more due to the leap year," said Sydbank analyst Jacob Pedersen.
The epidemic could cost passenger airlines up to $113 billion in revenue this year, an industry body warned this week as airlines cancel flights and warn on profits.
Finland's Finnair, which has a strong focus on Asia, posted its first drop in demand in years on Friday while on Thursday the other main Nordic rival to SAS, Norwegian Air , scrapped its 2020 forecast.
(Reporting by Anna Ringstrom; additional reporting by Colm Fulton, Editing by Johan Ahlander and Alexander Smith)