Tougher competition that cost the KCRC 2 per cent of its market share in cross-boundary traffic and higher operating expenses helped to narrow the railway's profit margin last year despite a surge in passenger numbers. The corporation's annual report, released yesterday, shows that net profit fell from $513 million in 2004 to $317 million last year, in contrast to a $331 million rise in revenue from its main rail services. Although the number of passengers using the East Rail, West Rail, Light Rail, intercity through train and bus services has risen from 495 million in 2004 to 556.1 million, the enormous costs of the Ma On Shan Rail Link and the Tsim Sha Tsui Extension Line offset the extra revenue. Kowloon-Canton Railway Corporation chairman Michael Tien Puk-sun said new accounting standards put an added burden on the figures by doubling the amount of depreciation charges. 'I have to acknowledge up front that the corporation was fortunate to achieve a net profit of $317 million for 2005,' he said in the report. Chief executive Samuel Lai Man-hay and the eight senior managers all faced pay cuts last year in light of a nearly 8 per cent rise in operation costs, attributed mainly to spiralling repair and maintenance expenses and spares used after fractures were found in East Rail train components in December. Mr Lai was hit hardest with his annual income cut 9 per cent from $5.4 million to $4.91 million. The future of KCRC's market share in cross-boundary traffic continues to be threatened by road operators, shrinking from 61 per cent in 2004 to 59 per cent last year. Mr Tien believed the opening of the spur line to Lok Ma Chau in 2007 would help although the Shenzhen Western Corridor across Deep Bay, which would go into service about the same time, promised to bring new challenges.