Boeing and its biggest union have reached a tentative deal covering more than 32,000 workers and averting a possible strike that was set for this week.
The proposed four-year contract was hailed by the union as the best it had ever negotiated. It is also an early win for new Boeing CEO, Robert “Kelly” Ortberg, who is tasked with turning around the struggling planemaker.
As part of the agreement, Boeing has committed to building a replacement for its workhorse 737 at its US Pacific Northwest facilities, if the project is started during the four-year period of the labor contract, though the planemaker has not yet announced the new jet.
Boeing and rival Airbus are in the early stages of drawing up strategies for replacements of their best-selling single-aisle models that are expected to enter service in the late 2030s.
The contract terms include a general wage increase of 25% over four years, below the 40% wage hike demanded by the International Association of Machinists and Aerospace Workers (IAM) union, signaling its recognition of Boeing‘s difficult financial position.
The early agreement is a boost for Boeing as it tries to restore investor and customer faith, navigate regulatory scrutiny and ramp up production of its 737 Max after a door plug on a near-new Max blew off a jetliner while in mid-air in early January.
Since that incident, Boeing’s stock price has cratered 37%, compared to a 7.7% rise in the blue-chip Dow index.
JP Morgan analyst Seth Seifman noted workers could still vote down the deal. There will be two votes on Thursday – one on the contract, which requires 50% to pass, and the second on whether to strike, which requires two-thirds approval.
“Workers have leverage and a highly unscientific sample of views on social media suggests dissatisfaction with the contract terms among some union members,” Seifman added.
A strike authorization vote in July had secured 99.9% approval by workers.
Last year, Boeing’s 737 fuselage supplier Spirit AeroSystems had to temporarily suspend factory production after workers rejected a four-year deal.