On June 4, South African Airways said that it will ground its 747-400 fleet, divide into seven subsidiaries and cut its management staff by 30% as part of a comprehensive restructuring effort aimed at returning the carrier to profitability.

Two months after CEO Khaya Ngqula vowed to initiate a "full-scale restructuring" program that would respect "no holy cows," he outlined the extent of the changes and claimed that a return to profitability within 12-18 months is possible. "SAA must overhaul its entire business if it wants to survive," he said. It is targeting a revenue improvement/cost reduction of ZAR2.7 billion (US$378 million) by the end of 2008.

Five leased 747-400s and one owned -400 will be grounded as part of a route rationalization in which the carrier will focus less on long-haul international services and more on domestic routes and flights to points on the African continent. "Africa is a key driver of international tourism to [South Africa], delivering about 70% of all arrivals," Ngqula said. "SAA will thus forge strategic alliances with African airlines to grow the airline's network reach [throughout Africa]." He added that it will continue to provide service to other continents via flights to major cities but will drop unprofitable routes, revealing that flights to Paris CDG will end later this year.

SAA said in a statement that it will be "unbundled" into seven "independent subsidiaries operating as profit centers [with] ... their own corporate functions." The company will be "anchored by a full-service passenger airline," it said, emphasizing that domestic passengers still can expect inflight meals. Ngqula said "outside equity partners" could be offered stakes in some of the units, including SAA Cargo.

The company will eliminate about 150 management jobs and is likely to seek job cuts in other areas; it previously has said it would trim about 1,000 workers but declined to release a figure on June 4, citing ongoing talks with labor unions. It plans to implement further cost cuts across the airline and seek operational improvements where possible.

Head of Network Development, Alliances and Aeropolitical Affairs Jason Krause recently said that SAA's revenue numbers "are pretty much in line" but that costs are too high and excessive expenditures need to be "ripped out of the business."