By Alison Lambert and David Shepardson
Boeing Co said Sunday it has reached a tentative agreement with a union representing more than 32,000 workers in the U.S. Pacific Northwest, in a deal that could help avert a potential strike that could begin on Sept. 13.
The proposed four-year deal, which includes a 25% overall pay raise and a commitment to build the next commercial jet in the Seattle area, is an early win for new Boeing (NYSE:BA) CEO Kelly Ortberg, who took over last month.
The deal also includes 12 weeks of paid paternity leave, improved job security, enhanced retirement benefits and other perks. Boeing workers at factories near Seattle and Portland, represented by the International Association of Machinists and Aerospace Workers, must approve the deal on Thursday.
“As part of the contract, our team in the Puget Sound region will build Boeing’s next new airplane,” Boeing Commercial Airplanes CEO Stephanie Pope said in a letter to employees. “This will align with our other leading models, which means job security for generations to come.”
An acceptable deal would secure labor peace for Boeing at a time when the planemaker is burning through cash and trying to ramp up production of its best-selling 737 Max to a target rate of 38 planes a month by the end of the year. It also avoids a strike that could have made Boeing a focal point in the 2024 presidential election.
Boeing is facing a quality crisis and scrutiny from regulators and customers, after a January incident when a door seal on a new Max jet nearly blew out. Alaska Airlines (NYSE:) A jet aircraft in flight.
Although the union had demanded a 40% increase in its first full negotiations with Boeing in 16 years, it has made other big gains, such as gaining significant input into safety and the quality of the production system.
“While there is no way to achieve success on every single item, we can honestly say that this proposal is the best contract we have ever negotiated in our history,” the IAM union, which represents Boeing workers, said in a statement.
Boeing has agreed to build its next commercial airplane program in the U.S. Pacific Northwest if it launches within the term of the agreement, as long as the deal is ratified by members by Thursday. It’s not clear when Boeing will launch its next plane.
Aerospace analyst Richard Aboulafia said thinking about Boeing’s future programs, along with improving labor relations, should be priorities for Ortberg, a former Rockwell Collins (NYSE:) executive who moved to Seattle to head the company.
“Changing the culture starts with a different attitude towards work and towards the future through developing new products,” Abu Al-Afia said on Sunday.
Members of President Joe Biden’s administration have been monitoring the talks, with Labor Secretary Julie Su last week urging both sides in an interview with Reuters to get a “fair contract.”
A source familiar with the matter said Su spoke with Ortberg and local union president John Holden.
Boeing workers, who produce Boeing’s 777 and 767 widebody jets as well as the Max, voted to strike in July.
The Federal Aviation Administration, which in January barred Boeing from increasing production of its best-selling 737 Max jet after a door-panel explosion incident, has stepped up oversight of Boeing. FAA Administrator Mike Whitacre is scheduled to visit Seattle later this month to meet with Ortberg and get an update on the planemaker’s quality improvement plans.