Indonesia Grounds Low-Cost Airline Amid Safety Concerns

JAKARTA, Indonesia – Indonesia's beleaguered low-cost carrier Adam Air has been grounded over safety concerns, the head of air transportation said Tuesday.

The carrier has had a string of accidents over the last two years and is on the verge of bankruptcy after two of its largest shareholders announced plans to pull out. It has recently sliced its number of routes from 52 to 12.

The carrier began operations in 2003 and at its peak had 22 aircraft that flew across Indonesia and daily to Singapore and Malaysia. But accidents and financial problems have recently plagued the airline, one of a surge in carriers in Indonesia over the last 10 years.

Last year, one of its jetliners plunged into the sea from 10,000 feet (3,000 meters), killing all 102 people on board. Another plane broke in half on a hard landing. And last week, a Boeing 737-400 skidded off a runway, injuring five people and badly damaging the aircraft.

Budhi Mulyawan Suyitno, director general for air transportation, said the airline would stop flying as of Wednesday.

"It is no longer allowed to operate any of its aircraft," he said, adding that the Transport Ministry had found its operating and maintenance standards inadequate and training of personnel substandard.

An investigation into last week's accident showed "the pilot had no idea what to do in an emergency situation," he said.

He said Adam Air's operating license would initially be suspended for three months and would be withdrawn for good if there were no improvements by then.

Founder Adam Suherman, whose family owns a 50 percent stake in the company, said he was not surprised by the decision.

It came less than 24 hours after Global Transport Service and Bright Star Perkasa -- the two companies that together control the remaining 50 percent stake -- said they were selling their shares back to the owner. They cited financial mismanagement.

Suherman said this week that Adam Air had defaulted on debt payments to plane leasing companies.

The conflict with the other shareholders had affected the moral of the pilots, Suherman said: "That in turn would affect their performance. It is very dangerous."

Dozens of airlines emerged after Indonesia deregulated its aviation industry in the 1990s, raising concerns that growth has outpaced the supply of trained aviation professionals, regulatory oversight and ground infrastructure.

The government carried out a review of all 20 carriers following a series of accidents last year, including one involving the national carrier Garuda that killed 21. It concluded that none of the airlines met all safety requirements.

The EU has slapped a ban on all Indonesian airlines and the United States warned its citizens that they do not meet international standards.