Panama City-based Aeroperlas, which was operating flights under Taca Regional, ceased operations yesterday as it cited a need to "redefine" its business model.
The airline, which had operated out of the Marcos A. Gelabert de Albrook airport, had a fleet of two ATR 42-300 aircraft.
In a statement, Taca Regional said Aeroperlas decided to cease operations following a "thorough trend analysis and present conditions of the Panamanian market".
"Aeroperlas harbours the hope of designing - in the future and in conjunction with the authorities - a new model of operations for the support of the economic, social, and cultural exchange of the Republic of Panama," it said without elaborating on what this new model might be.
The carrier is proceeding with "compensations" for its staff and said refunds will be provided to passengers who had booked travel on the airline.
Aeroperlas began operations in 1969 and had operated to five destinations in Panama before it ceased flights. It transported more than 113,000 passengers in 2011 and 111,000 in 2010, said Taca Regional.
A Taca Regional spokeswoman was not immediately able to say how Aeroperlas' cessation of operations would affect Taca's overall network.