The 2pm incident was confirmed on the Twitter account of "Kelab Penyokong Tentera Udara Diraja Malaysia" @myTUDM.
The two pilots are reportedly safe as they were able to eject themselves from the aircraft on time.
The accident happened when six KT-1B aircraft were crossing the MIEC airspace before the tails of two aircraft grazed each other, a Langkawi Fire and Rescue Department spokesman said.
The two pilots managed to eject themselves from their aircraft. - Photo: Kelab Penyokong Tentera Udara Diraja Malaysia
Meanwhile, Bernama reported that an eyewitness saw the tails of two aircraft collide and emitted fire before the jets crashed.
The eyewitness said he saw one of the two pilots escaped the crash via a parachute.
Another eyewitness told the national news agency that one of the jets crashed in Kedawang and set a house on fire there, but firefighters managed to douse the flames.
The Indonesian aerobatic team is reportedly one of five teams scheduled to put on airshows at LIMA 2015 which will be held from March 17-21.