More than 100 people were feared dead after a military transport plane ploughed into a residential area shortly after take-off in northern Indonesia on Tuesday, in what may be the deadliest accident yet for an air force with a long history of crashes.

"For the moment we know there were 113 people (on board). It looks like there are no survivors," Air Marshal Agus Supriatna told Metro TV in the Sumatra city of Medan, adding that some of the passengers were air force families.

The crash of the aircraft, a C-130B Hercules aircraft that went into service half a century ago, is bound to put a fresh spotlight onIndonesia's woeful air safety record and its ageing planes.

Officials said the plane plunged into a built-up area of Medan, one of Indonesia's largest cities. Eye witnesses said it appeared to explode shortly before it smashed into houses and a hotel.

An official at a nearby hospital who declined to be named said that 55 bodies had been brought in so far.

Black smoke billowed from the wreckage, and crowds of people milling around the area initially hampered emergency services.

"We have been using heavy equipment like earth movers to clear the wreckage of the plane," said Romali, chief of Medan's search and rescue agency, who has only one name.

"We are still evacuating bodies from the rubble and we hope we can finish the operation tonight," he said in an interview.

The plane had been on its way from an air force base in Medan to Tanjung Pinang in Riau Islands off Sumatra. Media said the pilot had asked to return to the base because of technical problems.

"It passed overhead a few times, really low," said Elfrida Efi, a receptionist at the nearby Golden Eleven Hotel.

"There was fire and black smoke. The third time it came by it crashed into the roof of the hotel and exploded straight away," she said by telephone.

Pressure to modernize

According to the Aviation Safety Network, 10 fatal crashes involving Indonesian military or police aircraft have occurred over the last decade. The accidents put under a spotlight the safety record of Indonesia's aviation and its ageing aircraft. Flightglobal, an aviation industry data and news service.

The Indonesian air force has now lost four C-130s, reducing its transport reach in an archipelago that stretches more than 5,000 km (3,000 miles) from its western to eastern tips.

Air force spokesman Dwi Badarmanto said it was unclear what caused the crash and, until it was, eight other C-130Bs would be grounded.

U.S. State Department spokesman John Kirby said the United States stood ready to assist the investigation as needed.

Although Indonesia accounted for nearly one-fifth of defence spending by Southeast Asian countries last year, as a percentage of GDP the amount was the lowest in the region at 0.8 percent, according to Stockholm International Peace Research Institute data.

President Joko Widodo, who took office last year, has said he plans to double military spending to $15 billion by 2020.

The transport plane accident could bring pressure on the president to spend more on modernising the air force.

"This incident shows us that we must renew our aircraft and our military equipment," Pramono Anung, a lawmaker and member of the parliamentary commission overseeing defence, said in an interview.

"The Hercules is already old, many of our other (weapons) systems are already old. As parliament we will support giving more funding to the military so that they can upgrade."