South African Airways (SA, Johannesburg O.R. Tambo) will undergo a "radical restructuring process which will ensure its financial and operational sustainability," South Africa's Department for Public Enterprises (DPE) said in a media statement issued on December 2.

The statement acknowledges that the carrier has "been through difficult challenges over the years, and more particularly in past few weeks" and that the recent strike by The National Union of Metal Workers of South Africa (NUMSA) and the South African Cabin Crew Association (SACCA) had "caused immense damage to the reputation, operations, and the deterioration of the finances of SAA."

It continued by saying that the South African government was committed to making SAA viable, and was considering various options to resolve the airline's problems, but it also said that "SAA cannot continue in its current form" and that "there is no other way forward."

To guarantee its short-term future, the statement suggests that discussions have been held with lenders to secure "the necessary funds to cover the operational and structural transition."

This restructuring news comes just after reports in South African newspaper The Sunday Times at the weekend suggested that the proposed joint venture (JV) between SAA and Ethiopian Airlines (ET, Addis Ababa) has now been sidelined.

Originally presented to the SAA board in the summer, the plan proposed a strategic partnership with Africa's largest airline, which would have seen a consolidation of the carrier's network and employees. It also stated that there was a significant opportunity "to grow the West Africa hub together where traffic throughout Africa is consolidated, before connecting to the US and Canada."

In October, Ethiopian Airlines' Chief Executive Officer Tewolde Gebremariam said the carrier was also interested in a stake in SAA, when speaking to Bloomberg. “We are interested in supporting South African Airways.” If South Africa asked Ethiopian to buy a stake, “we would consider it,” he added.

SAA received a further blow to its already precarious position on November 29, when two large South African travel insurance companies stopped covering tickets issued by the airline against insolvency. Santam’s Travel Insurance Consultants said it had stopped its travel supplier insolvency benefit for SAA flights. The company that administers Hollard Travel Insurance also excluded the airline from its travel supplier insolvency coverage, citing SAA's troubled finances.

In contrast, Bryte Insurance’s said it had reversed its position on SAA and would cover its flights against insolvency. Australian agency Flight Centre Travel Group indicated that it would stop selling SAA tickets.

These moves by insurance companies and travel agencies will doubtlessly hurt the carrier's ticket sales and in turn impact on its ongoing cash flow crisis.