If Adam Air does not allay safety concerns within three months, its operating certificate will be permanently revoked.
The airline has experienced a string of serious safety incidents since its launch in 2003 and has recently cut back the number of its routes across Indonesia, Singapore and Malaysia from 52 to 12.
An Adam Air jetliner plunged into the sea off Indonesia's Sulawesi island on New Year's Day last year, killing all 102 people on board.
And the fuselage of another Adam Air jet fractured in two on landing in the eastern Javanese city of Surabaya in February last year, but no one was killed.
March 10, 2008: Adam Air Boeing 737-400 with 175 people on board skids off runway in bad weather on Batam island, damaging the plane and injuring five people
January 1, 2007: Adam Air Boeing 737 crashes into the sea near Makassar, Sulawesi. 102 passengers and crew presumed dead
21 February, 2007: Fuselage of Adam Air 737 fractures during hard landing in the eastern Javanese city of Surabaya, with no deaths
The airline's grounding follows a decision by a private consortium led by PT Bhakti Investama to unload its 50 per cent stake in the airline, citing dissatisfaction with its safety performance.
Adam Air's president, Adam Aditya, told the AFP news agency that he was "not surprised" by the transport ministry's decision.
"We are having an internal problem that could affect our employees' morale and performance and would have a bad impact on our safety efforts."
Asked if the company would attempt to improve its safety standards in the next three months to head off closure, Suherman said: "That depends on the shareholders."
The privately owned carrier, which is one of Indonesia's largest airlines and claims to have carried 20,000 passengers a day last year, was rocked on Monday by claims from two minority shareholders of financial and management irregularities.
|Adam Air passengers have been promised |
refunds on booked trips [Reuters]
Bright Star Perkasa, which holds 31 per cent of the company, and Global Transport Services, with 19 per cent, say Adam Air has been blighted by financial and management irregularities that have affected performance and safety.
Dozens of airlines emerged after Indonesia deregulated its aviation industry in the 1990s, raising concerns that growth outpaced the supply of trained aviation professionals, regulatory oversight and ground infrastructure.
In June last year, the European Union banned all of Indonesia's 51 civilian airlines from its airports on safety grounds.
Jakarta hopes the ban on four companies will be lifted by June.
A Garuda Indonesia passenger jet crashed in flames in the central Java city of Yogyakarta early last year, killing 21 people.
The pilot was accused of manslaughter by ignoring repeated warnings as he approached the runway at Adi Sucipto airport at around 408kph, almost twice the normal landing speed.