Air India aims to cut 5 billion rupees ($103 million) per year from its total wage bill of 30 billion rupees.
In a statement the airline attributes the move to difficult market conditions.
It has convened a committee with members from human resources and finance to examine wage agreements, including flying allowances and productivity linked incentives, between management and unions.
The company says it will also consider ways to improve productivity, eliminate restrictive work practices, and reduce wasteful expenditure.
In a separate statement to Air India employees, Arjind Jadhav, Chairman & Managing Director of Air India, notes that all of India's airlines are suffering poor load factors, declining cargo loads, and low yields.
"This is an hour of crisis for all of us," he says. "It is a fight for survival. The survival of our own airline."
Indian Government statistics show the country's domestic passenger market shrunk 11% in May to 3.9 million passengers.
Air India carried just 690,000 domestic passengers for 18% market share. It was well behind rivals Kingfisher with 1 million passengers and Jet Airways/Jetlite with a combined 912,000.
Source: Air Transport Intelligence news