The decision is the first sign that the dispute has directly affected ties between the neighbouring countries, and follows criticism last week by Singapore over the naming of the frigate, which it said risked reopening "old wounds."
A Singapore Defence Ministry statement said Indonesia's armed forces commander and other top officials had informed it that they would not attend the show, which began today.
It didn't give a reason. Indonesia's Jupiter Aerobatic Team will perform at the show as planned, the Indonesian air force said.
Indonesia named a refurbished frigate the KRI Usman Harun, after the two commandos, Usman Haji Mohamed Ali and Harun Said. The two men were sent by Indonesia to bomb an office in what is now Orchard Road in 1965 as part of President Sukarno's "confrontation" policy with the Federation of Malaysia, which at that time included Singapore.
The bombing, part of a wave of low-level attacks against the state, killed three people and wounded many more. The two commandos were arrested and executed a few years later.
The bombing severely affected ties, which only got back to normal in 1973, when Singapore Prime Minister Lee Kuan Yew visited Jakarta and paid his respects at the two men's graves. Indonesian officials have defended the decision to name the ship after the men.
Coordinating Minister for Political and Security Djoko Suyanto said Indonesia has its own procedures in deciding whether someone is regarded a hero or not.
Nationalists in the Indonesian media have supported the name, but an editorial in the English-language Jakarta Post said on Saturday that the move was "insensitive" and those behind it must have known it would cause offence.
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