EyeWitness News and SABC news quoted CEO Blacky Komani as saying staff were told of the decision on Friday afternoon.
"This afternoon at about 2.30pm, the 1Time board, together with business rescue practitioners, decided to suspend services with effect this afternoon," he told EWN.
"There is nothing else to say; I'm too emotional."
Planes in the air at the time flew back to base. Other scheduled flights remained grounded.
In August, 1Time Holdings filed for business rescue, saying it was "financially distressed", according to a Business Day report.
The firm had about R320-million in short-term debt and had been in negotiations with creditors since March.
Later that month, a business rescue specialist was appointed and the trade union, Solidarity, said that retrenchments had been put off.
The specialist would have drawn up a refinancing and restructuring plan for the company.
The low-cost airline made news headlines this year for engine failures on two different planes.
Earlier this year, another low-cost airline, Velvet Sky, went into liquidation after failing to convince a court it was a candidate for business rescue. – Sapa