Boeing proposal for workers could add more than $1 billion US in wages over 4 years


Boeing has reached a tentative labour contract proposal that could see the company provide more than $1 billion US in wage increases for workers over four years, analysts say. 

About 33,000 workers will vote on the contract proposal on Wednesday after a more than month-long work stoppage, which has halted production of models including its bestselling 737 MAX narrow-body jets.

The vote also coincides with Boeing’s third-quarter results, in which it is expected to report a hefty loss. However, its shares rose three per cent on Monday on hopes of an end to the strike. 

“We view the proposal as a positive step,” Ben Tsocanos, aerospace director at ratings agency S&P Global, said in an email to Reuters. “Resolving the strike quickly is key to improving the company’s financial position and supporting the rating.”

A large airplane sits on the tarmac outside of a building.
A Hainan Airlines Boeing 787 is parked at Cairo International Airport in Egypt on Oct. 17. The 787 is one of the models whose production has been halted by the ongoing Boeing strike. (Amr Abdallah Dalsh/Reuters)

The new contract proposal announced on Saturday includes a 35 per cent pay hike over four years, a $7,000 ratification bonus, a reinstated incentive plan and enhanced contributions to workers’ 401(k) retirement plans, including a one-time $5,000 contribution plus up to 12 per cent in employer contributions.

Workers vote Wednesday

The agreement was reached after weeks of sometimes acrimonious discussions between Boeing and the International Association of Machinists and Aerospace Workers (IAM) union, whose leadership faced fury from some members after endorsing the first offer from Boeing that most workers opposed.

The new wage increase and the ratification bonus are an improvement over the previous offer, but the salary hikes still fall short of a 40 per cent pay rise over four years demanded by the machinists’ union.

The IAM did not explicitly endorse the latest offer but told workers on Saturday “it is worthy of your consideration.”

Wells Fargo’s Matthew Akers, who has a rare pessimistic view on Boeing stock, said the deal may not be ratified.

“Our analysis of over 1,000 online comments implies a more constructive view but still not enough to pass,” Akers wrote in a note.

A crowd of people carry signs that say "On Strike". At the top of the image, red fall leaves are visible from a tree in the distance.
Workers from the International Association of Machinists and Aerospace Workers District 751 hold a march during the Boeing strike in Seattle, Wash., on Oct. 15. (David Ryder/Reuters)

J.P. Morgan’s Seth Seifman estimated the wage hikes might increase Boeing’s costs by more than $1 billion US, while Jefferies analyst Sheila Kahyaoglu expects wage-related expenses at about $1.3 billion.

Even if the new contract is accepted by members, the planemaker still faces the challenge of quickly restoring production to pre-strike levels once workers return.

“Based on our analysis of prior Boeing strikes, it has taken an average of six to 12 months after the conclusion of the strike for production rates to return to pre-strike levels. Moreover, the impact the strike has had on the already fragile supply chain is uncertain,” RBC Capital Markets analysts said.

In a separate labor action, about 5,000 workers were set to return to work at business jet maker Textron’s facilities in Wichita, Kan., after voting to accept a five-year contract providing wage increases of 31 per cent.



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