

Market Analysis
Boeing announced on Sunday that it has reached a tentative agreement with a union representing over 32,000 workers in the U.S. Pacific Northwest, a deal that could prevent a potential strike as soon as Sept. 13.
If approved, the four-year contract, which offers a 25% general wage increase and commits to building the next commercial airplane in the Seattle area, marks a significant achievement for Boeing's new CEO Kelly Ortberg. Ortberg, who took the helm last month, is tasked with addressing quality concerns at the company, and this labor deal could play a critical role in that effort.
This is the first comprehensive labor agreement in 16 years and includes improved retirement benefits as well as increased union input on safety and quality control in production. The union described it as the best contract they have ever negotiated, emphasizing their dedication to producing high-quality aircraft.
Boeing is currently dealing with a quality control crisis and facing scrutiny from regulators and customers. In January, a door plug on a nearly new 737 MAX aircraft detached mid-flight on an Alaska Air jetliner, raising concerns.
The deal requires approval from Boeing factory workers in Seattle and Portland, Oregon, who are represented by the International Association of Machinists and Aerospace Workers (IAM). If the deal fails to secure majority support, it could be rejected. A strike could occur if two-thirds of workers vote in favor of a work stoppage in a subsequent vote.
If ratified on Thursday, the agreement would require Boeing to construct the replacement for the 737 at its Pacific Northwest facilities if the project begins within the contract's term. However, there is no confirmed timeline for when Boeing will announce its next jet.
Boeing and its competitor Airbus are in the early stages of planning replacements for their top-selling single-aisle aircraft, expected to be introduced in the late 2030s.
Boeing's commitment to its Pacific Northwest hub for future models is a shift from previous efforts to diversify production locations, which had caused friction with the IAM.
"This aligns with our other flagship models and ensures job security for generations," said Boeing Commercial Airplanes CEO Stephanie Pope in a message to employees.
Ortberg, facing pressure to improve Boeing's quality standards, also has to address labor relations and the company’s future, according to aerospace analyst Richard Aboulafia. Ortberg, a former executive at Rockwell Collins, relocated to Seattle to lead the company.
"Changing the culture begins with a new approach to labor and future product development," Aboulafia said.
Boeing is also contending with financial difficulties, posting a second-quarter net loss of $1.44 billion in July. Last week, Wells Fargo suggested that Boeing's goal of achieving $10 billion in annual free cash flow may be delayed until 2027-2028, and the company might need to raise $30 billion before launching a new aircraft. Boeing’s net debt currently stands at around $45 billion, according to Wells Fargo analyst Matthew Akers.
If the deal is accepted, it would provide labor stability at a time when Boeing is struggling financially and working to increase production of its 737 MAX to 38 planes per month by the end of the year.
While the union did not secure its initial target of a 40% wage increase, it still praised the agreement.
"Though we couldn’t achieve everything, this proposal represents the best contract in our history," the IAM local representing Boeing workers stated.
This agreement comes as workers across industries are taking advantage of tight labor markets to push for better conditions. Last year, the United Auto Workers union secured a 25% wage increase over four-and-a-half years with the Detroit Three automakers.
The negotiations had garnered attention from the Biden administration, with Acting Labor Secretary Julie Su urging both parties to agree on a "fair contract" in an interview with Reuters last week. Su had reportedly spoken with both Ortberg and IAM local president Jon Holden.
The Boeing workers, who manufacture the 777, 767, and 737 MAX, had voted for a strike mandate in July.
Paraphrasing text from "Reuters" all rights reserved by the original author.