The best argument against regulation is that flying is safe enough that a drop in standards would be acceptable. To be frank I don't worry about the poor record of Indonesian carriers because I know they're still far safer than the ferries.
But you know that the average man on the street isn't going to buy a copy of Which before buying a budget airline ticket. Particularly if there is only one company flying the route he wants. And will the company subdivide its published accounts into 'cosmetic' and 'substantive' maintenance so that 'Which' can make a more informed decision than him anyway?
Car manufacturers provide lots of good case studies of public pressure failing to ensure minimal safety standards, particularly for pedestrians.
In the absence of regulation the only people enforcing minimum standards might be insurance companies.