Once one of the fastest-growing Indonesian airlines, Adam Air has halted all operations after running into financial trouble and losing its licence amid safety concerns.

The carrier ceased operations on 18 March after the Indonesian government ordered it to ground its remaining aircraft due to shortcomings in its operational, training and maintenance procedures.

It was told it could seek permission to operate again within three months after addressing the concerns, but president director Adam Suherman told Flight International that it was unclear whether it would fly again.

"That is for all the shareholders to decide," he says.

But he adds: "I am quite grateful for the order to ground the airline as it is probably for the best. Because of the financial troubles the morale of the staff has been very bad and that could be a problem for safety."

The government's grounding order came just over a week after a Boeing 737-400 was badly damaged in a landing incident at Batam. It was the latest in a string of incidents and accidents that the airline had faced over the previous 15 months, the first of which was a fatal crash in January 2007.

Adam Air had in recent months been falling further into financial trouble and its shareholders began to bicker in the weeks before the Batam landing incident. Days after the incident it became clear just how dire its financial state was, when nearly half of its fleet of 21 remaining Boeing 737s was grounded by lessors for payment defaults.

It was also facing shutdown at midnight on 20 March for failure to meet insurance payments, Suherman admits. He adds that most of the aircraft that it was forced to ground for missed leased payments were from GE Commercial Aviation Services and CIT. Flight's ACAS database shows that all but one of its aircraft were leased.

The carrier was established by Suherman's family and last year a consortium headed by Indonesian investment group Bhakti Investama acquired 50%. Soon after the Batam accident the Bhakti Investama group announced publicly that it planned to withdraw from the airline, although Suherman claims his family never received any official notice that it wished to do so.

Source: Flight International