Indonesia will shut down all airlines that do not have at least 10 planes by 2012, a Transportation Ministry official says.
The new regulation is part of efforts to improve the country's safety record following a string of deadly accidents including a Garuda Indonesia plane crash at Yogyakarta airport in March 2007 that killed 21 people, including five Australians.
The new rules were signed by President Susilo Bambang Yudhoyono earlier this year.
Commercial passenger airliners have three years to meet the requirement, Yurlis Hasibuan, the Transportation Ministry's air certification director told The Associated Press on Monday.
At least five planes must be fully owned by a company and the rest can be leased, he said. Those that can't comply must shut down, merge with other airlines or provide only charter services.
Indonesia started deregulating its airline industry in the late 1990s, bringing cheap air travel to the sprawling island nation.
But weak regulation and poor maintenance have led to fatal accidents that have killed more than 120 people in recent years, prompting the European Union to ban all Indonesian carriers from landing there in 2007.