Chinese airlines, which are set to gain from the National Day travel peak, started the year's fourth financial quarter with another piece of good news - lower jet fuel prices.

The price of jet fuel on the Chinese mainland dropped yesterday to 7,750 yuan (US$1,132) a ton, nearly 7 percent lower than in the last quarter.

The price adjustment was announced by the National Development and Reform Commission and the Civil Aviation Administration of China.

Staring last year, regulators have adjusted China's domestic jet fuel prices to track fluctuations in the international market.

Zhang Wei, an industry expert who woks for the popular Chinese travel Website Ctrip.com, said the cut resulted from a price drop in the global crude oil market.

"Investors are worried that demand for crude oil is becoming weak, which brings down the price. For the aviation industry, domestically and globally, lower oil prices might mean a turning point," Zhang said.

Fuel accounts for about 50 percent of all operating costs at Chinese airlines, putting great financial pressure on carriers.

Since this year, the country's jet fuel price was raised three times: by 210 yuan a ton in January, 1,500 yuan in June and 720 yuan in July. In the second quarter, China cut domestic jet fuel prices by 80 yuan per ton.

On July 8, when China Aviation Oil, the country's quasi-monopoly jet fuel supplier, raised the fuel price by 720 yuan a ton, Chinese airlines were paying 39 percent more than at the end of 2007.

On the plus side, Chinese airlines are expecting high traffic volume during the National Day holiday, which began on Monday and runs through Sunday.

Even with the soaring fuel costs, three major Chinese airlines - Air China, China Eastern Airlines and China Southern Airlines - were profitable in the first half thanks to huge exchange-rate gains.

Total exchange-rate earnings exceeded 6.4 billion yuan in the first half. These gains were about triple the first-half net profits of the three carriers, which totaled 2.16 billion yuan.

From January to June, the yuan appreciated 6.5 percent against the US dollar, nearly equivalent to last year's total growth in value.

The three airlines hold massive dollar-denominated liabilities, but the strengthening yuan cut the burden of these exposures, including aircraft purchases.