Boeing reaches labour deal with 25% pay hike, new plane commitment

Boeing (BA.N), opens new tab said on Sunday it had reached a tentative agreement with a union representing more than 32,000 workers in the US Pacific Northwest, in a deal that could help avert a possible crippling strike as early as Sept. 13.

The proposed four-year agreement, which includes a general wage increase of 25% and a commitment to build the next commercial airplane in the Seattle area, is an early win for new Boeing CEO Kelly Ortberg, who took over last month.

The deal also includes 12 weeks of paid parental leave, improved job security, enhanced retirement benefits and other benefits. It would need to be approved on Thursday by Boeing factory workers near Seattle and Portland represented by the International Association of Machinists and Aerospace Workers (IAM).

“As part of the contract, our team in the Puget Sound region will build Boeing’s next new airplane. This would go along with our other flagship models, meaning job security for generations to come,” said Boeing Commercial Airplanes CEO Stephanie Pope in an employee message.

An accepted deal would secure labour peace for Boeing at a time when the planemaker is burning cash and trying to raise production of its strongest-selling 737 MAX to a target rate of 38 aircraft a month by the year’s end. It also avoids a strike that could have made Boeing a focus point in the 2024 presidential election.

Boeing is wrestling with a quality crisis and faces scrutiny from regulators and customers, after a January incident when a door plug on a near-new MAX blew off an Alaska Air (ALK.N), opens new tab jetliner while in mid-air.

Although the union had asked for a 40% raise in their first full negotiation with Boeing in 16 years, it made other dramatic gains, like obtaining significant input in the safety and quality of the production system.

“Although there was no way to achieve success on every single item, we can honestly say that this proposal is the best contract we’ve negotiated in our history,” the IAM union local representing the Boeing workers said in a statement.

Boeing agreed to produce its next commercial airplane program in the U.S. Pacific Northwest, if launched during the life of the agreement, as long as the deal is ratified by members by Thursday. It was not clear when Boeing would launch its next aircraft.

Thinking about Boeing’s future programs, along with improving labour relations, should be priorities for Ortberg, a former Rockwell Collins executive who moved to Seattle to head the company, said aerospace analyst Richard Aboulafia.

“Changing the culture starts with a different attitude towards labour and towards the future with new product development,” Aboulafia said on Sunday.

The talks had been watched by members of U.S. President Joe Biden’s administration, with labour secretary Julie Su last week urging the sides in an interview with Reuters to get a “fair contract.”

Su had spoken with both Ortberg, a source familiar with the matter said, and union local head Jon Holden.

The Boeing workers, who produce Boeing’s widebody 777 and 767 in addition to the MAX, had voted in favor of a strike mandate in July.

The Federal Aviation Administration, which in January barred Boeing from boosting production of its best-selling 737 MAX plane after the door panel blow-out incident, has boosted oversight of Boeing. FAA Administrator Mike Whitaker is set to visit Seattle later this month to meet Ortberg and get an update on the planemaker’s quality improvement plans.