TEHRAN, (Reuters) – Demand for air travel in Iran has soared by 40 percent since it launched rationing of gasoline for motorists in June and domestic ticket prices have been hiked by up to 17 percent, Iranian media reported on Tuesday.

The head of Iran’s Civil Aviation Organisation (CAO) said domestic airlines were still losing money because ticket prices remained below market levels, according to a report by the official IRNA news agency.

CAO Managing Director Hossein Khanlari suggested more Iranians were opting to fly when travelling longer distances after gasoline rationing was implemented on June 27.

In a bid to rein in rising consumption of heavily-subsidised gasoline, the world’s fourth-largest oil producer announced private motorists could only purchase 100 litres of subsidized gasoline per month.

Iran lacks refining capacity and must import large quantities of the fuel, weighing on state coffers and making it potentially vulnerable at a time of increased Western pressure on the Islamic Republic over its nuclear programme.

“Demand for air travel has increased by 40 percent,” Khanlari told IRNA in a report carried by the English-language Iran News, giving no further details about the increase.

“Domestic airline ticket prices have been raised by 15-17 percent,” he said. “Gradually, the CAO will try to bring ticket prices in line with the actual cost.”

Such a large increase in ticket prices may have an impact on inflation in Iran, which is already running at 16-17 percent and is a key concern for many ordinary people.

Iranian officials say consumption and imports of gasoline have dropped sharply, but statistics published on Monday showed gasoline demand rebounded 3.6 percent in the second week of August, but still substantially down from levels seen before rationing was launched.