Indonesian budget carrier Adam Air, which has suffered a series of accidents and defaulted on debt payments, has had its flights grounded over safety concerns, a Transport Ministry spokesman said on Tuesday.

Indonesia's Director General of Air Transport had found evidence of potential danger of safety aviation at the airline and operations would be halted from midnight on Tuesday, ministry spokesman Bambang Erfan said.

"They must fix their capability within three months and if not they will have their AOC (Air Operator Certificate) revoked," Erfan added.

Adam Air, which like all other Indonesian airlines has been banned by the European Union because of safety concerns, said on Monday that a leasing firm had seized more than half its fleet of 22 planes after the airline defaulted on payments.

Adam Suherman, the airline's president director, told reporters later that the firm needed a cash injection and faced a deadline later this week over insurance payments or it would have to cease operations temporarily.

PT Bhakti, an investment firm which indirectly owns 50 percent of Adam Air, will sell its stake in the troubled airline back to Suherman, the founding shareholder, for IDR100 billion rupiah (USD$11 million), according to Hotman Paris Hutapea, a lawyer acting for Bhakti.

In January 2007, an Adam Air plane crashed into the sea off Sulawesi island, with all 102 people on board presumed dead.

Bhakti, controlled by businessman Hary Tanoesoedibjo, invested in the airline soon after the disaster, hoping to benefit from a turnaround at the airline.

While the cause of the Adam Air disaster is still under investigation, the budget airline has faced other safety issues.

On March 10, a Boeing 737-400 operated by Adam Air with more than 170 people on board overshot the runway at Batam island airport, causing damage to the plane and injuring five people.

Following that incident, state media reported that Indonesia's transport minister had warned Adam Air that it could be forced to halt its operations after a series of accidents involving the carrier.