- It is filled with flying people.
- It is filled with people flying.
What is the difference of "flying people" and "people flying" in the sentences above?
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This depends a little on what "it" is. What is filled?
If "it" is an airplane, then option 2 would be correct.
If "it" is a world of people with wings, then option 1 would be correct.
"Flying people" uses "flying" in a way that implies that the people are flying (like Superman). "People flying" using "flying" in a way that seems to mean they are flying as in an airplane, and the sentence can easily be extended to say something like "It is filled with people flying from airport to airport."
The second sentence would probably work for either usage with enough context, since the reader will know what type of flight is being described.
In other words, "flying people" is more restricted to describing people flying by themselves (like Superman), whereas "people flying" is open to broader and more common uses such as travelers on airplanes or people moving very rapidly.
The word 'flying" is both a noun and an adjective. You can use it as a noun for people to mean travelling by air such as "They are afraid of flying". "I have done 60 hours of flying".
The flying as an adjective also means being able to move or make flight in the air. You usually use it for birds, machines, things, etc. such as a flying duck, insect, machine, saucer, etc. It's not natural to say a flying man, flying people, though you can use so for people making fake flights. Howevery, you often hear the phrases like a flying doctor (who travels by air to see patients), a flying officer (a post in air force).
As for 'people flying', it's correct and idiomatic, which means people who fly or are flying (travel or are travelling by air). So you should say 'It's filled with people flying.