Boeing reaches deal with union to avoid strike

New York (CNN) — Boeing and the Machinists union, which represents 33,000 of its employees on the West Coast, have reached a tentative deal that could avoid a strike that had been set to start this Friday.

Before it will take effect, the deal would need the approval of the rank-and-file union members who build commercial jets. But leadership of the union praised the tentative deal and said it achieved the union’s goals.

“You sent us here to stand strong for your priorities, and we are proud to have done so,” the International Association of Machinists and Aerospace Workers said Sunday in a statement on its official website.

Boeing said the agreement provides raises totaling 25% over the four-year life of the contract, improved contributions to 401(k) plans, reduced employee contributions for health insurance and increased time off.

The deal represents Boeing’s biggest pay raise for union members.

“We’ve heard what’s important to you for the new contract. And we have reached a tentative agreement with the union on a historic offer that takes care of you and your family,” Stephanie Pope, CEO of Boeing’s commercial airplane unit, said in a statement.

The deal also includes increased job security for union members with a promise to build the next new airplane at one of the union-represented plants in the Puget Sound region. Boeing has one nonunion plant in South Carolina, where it builds the 787 Dreamliner. In the last two contract agreements with Boeing, the union had to accept concessions such as an end to a traditional pension plan and increased employee contributions to health care, in turn for the company dropping a threat to build the then-planned 737 Max and the 777X jets at new nonunion plants.

The contract covers production workers who build Boeing’s commercial jets at three factories in the Seattle area, as well as about 1,200 workers at a Boeing’s parts plant in Portland, Oregon. The rank-and-file members will have the chance to vote Thursday on the tentative agreement and a no vote could possibly lead to a strike. That has happened in some recent labor agreements at other companies, but the union leadership is recommending that members vote in favor of the agreement.

Years of problems at Boeing

Boeing has had a series of setbacks over the last five years, starting with a 20-month grounding of its best-selling plane, the 737 Max, in 2019 and 2020, following two fatal crashes tied to a design flaw in the plane.

In addition, Boeing’s revenue plunged during the pandemic as a sharp drop in air travel caused massive losses for its airline customers. And in January, a door plug blew off a 737 Max flown by Alaska Airlines 10 minutes into a flight. While no one was killed in the incident, it brought new attention to quality and safety problems at Boeing, especially after it was determined that the plane in question had left a factory without the four bolts needed to keep the door plug in place.

The many problems at Boeing had resulted in the company reporting core operating losses totaling $33.3 billion since the grounding of the Max in 2019. Forecasts are that losses will continue through the rest of this year. Boeing is in danger of having its debt downgraded to junk bond status due to the massive increase in borrowing to cover the losses during that time.

This is a stark contrast to the financial conditions of some other major companies that reached lucrative union deals last year, such as UPS, General Motors, Ford and Stellantis. Those companies had reported record earnings ahead of those talks.

Union had upper hand in talks

But Boeing’s problems meant it was in no position to deal with striking workers for the first time in 16 years.

“Financially, the company finds itself in a tough position due to many self-inflicted missteps,” Jon Holden and Brandon Bryant, the presidents of the two union locals at Boeing, said in a message to members Sunday. “Finally, in a position of great leverage, we used every ounce of power we could to go after everything you said was important. We did not get everything we wanted, but you all can be proud of your strength, solidarity, and unity because you have achieved the best contract we have ever had.”

Company executives had conceded the union’s leverage in talks heading into the final round of negotiations. Former CEO Dave Calhoun had told investors in July that Boeing’s intention was to avoid a strike and seemed to signal the company was willing to go to great lengths to avoid a work stoppage.

“We know wage asks will be big,” Calhoun said. “We’re not afraid to treat our employees well in this process. So, we’re just going to work as hard as we can not to have a strike.”

His successor, Kelly Ortberg, who started the job on August 8, issued a statement in his first week that he wanted to “reset” relations with the union after meeting with their leadership.

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This story has been updated with additional information