The cuts have been prompted by a continuing decline in domestic air travel and worries that the economy will not emerge from recession until spring next year.
Sir Michael Bishop, chairman, refused to be drawn on how many of British Midland's 2,800-strong workforce would be made redundant, but it is not expected to be as high as 10 per cent.
'If we are going to stay competitive and meet the competition from bigger airlines we have to be mean and lean,' he said.
The cost-cutting measures could also include contracting out services such as cargo haulage and catering.
Although the number of passengers flown rose by 11 per cent in the first half of the year, British Midland's domestic traffic was down by 5 per cent and there has been only a modest improvement in yield. European traffic grew by 25 per cent, helped by the launch of the Heathrow-Brussels service in March. The airline captured nearly 25 per cent of the Brussels market, largely at the expense of Sabena, the Belgian carrier. Sir Michael expected the route to make a profit in its first year.
By next year more than half of the airline's revenue will come from its European short-haul network. However, plans to launch a service from London to Frankfurt this year have been put off until 1993 because of a shortage of take- off and landing slots at Heathrow.
Sir Michael said British Midland had no plans to start operating services between different European countries - an opportunity made possible by the air liberalisation package agreed by European Community transport ministers last month.
He predicted that the measures could lead to a reduction in air fares of up to 25 per cent in the next five years.