Aircraft of the IJN engaged and destroyed the Panay, following an order by the Army to destroy 'any and all ships'.
The aircraft found her almost stationary on the Yangtze, and eighteen 130lb bombs were dropped.

The Panay was struck by two 130lb bombs dropped by B4Y light bombers, and was strafed by nine A4N fighter aircraft, before she sank at 15.54.
The Japanese Government paid a huge indemnity of $2M to the American Government a year later.