Boeing reaches tentative contract agreement with machinists union

Boeing reached a tentative agreement early Sunday with its machinists union, a deal that could help it avoid a costly and damaging strike as it seeks to recover from a series of crises.

The terms of the deal with the International Association of Machinists and Aerospace Workers District 751 are unprecedented, with a 25% general wage increase for all employees over four years along with a reduction in workers’ health care costs and an increase in the amount Boeing contributes to workers’ retirement plans. But perhaps more significantly, the deal includes a commitment by Boeing that it will build its next aircraft in Washington state.

Both sides hailed the agreement – the first entirely new one since 2008.

“After 16 years, we finally got back to the bargaining table to fight for what you deserve and bargain the full agreement,” the bargaining team wrote in a message to members, recommending that they ratify the deal. “In that time, the world has changed, and so have we.”

The tentative proposal didn’t meet union negotiators all the way in their push for a higher wage increase – 40% – as well as a restoration of the traditional pension plan. But it includes other “quality of life” provisions such as 12 weeks of paid parental leave.

“Negotiations are a give and take, and 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 union’s message said.

A fact sheet provided by Boeing noted that the 25% wage increase would translate to 33% over the life of the contract because of pay bumps that kick in with seniority.

In a statement, Stephanie Pope, president and chief executive of the company’s commercial airplanes division, underscored the contract’s provisions on wages, health care and retirement as well as the commitment to build the next new plane in the Puget Sound region of Washington state.

“This contract deepens our commitment to the Pacific Northwest,” Pope said. “Boeing’s roots are here in Washington … and it’s why we’re excited that, 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.”

A vote on the tentative deal is scheduled for Thursday. Workers could still reject the proposal, but the agreement includes several incentives to seal ratification before midnight on the day of the vote, when the current contract is set to expire. Those include a one-time $3,000 bonus and the guarantee that Boeing will build its next aircraft in the Puget Sound region.

If ratified, the new deal would be a significant achievement for Kelly Ortberg, the former CEO of Rockwell Collins, who took over as Boeing’s new chief executive last month and pledged a new approach to labor and management relations. The two sides had been negotiating for months before that, but analysts said his arrival could help ease some of the tension that had built up between the union and the company’s previous leadership.

Securing a deal will be costly for the company, but it’s still potentially less damaging than a prolonged walkout. An agreement may also smooth long-standing tensions between employees and management, allowing both sides to focus on building airplanes.

“This seems reasonable and gets Boeing back to focusing on airplane builds and not labor management,” said George Ferguson, a senior aerospace analyst with Bloomberg Intelligence.

Just last week, it seemed the two sides were still far apart. In a message to members on Wednesday, IAM’s bargaining committee wrote that they remained “locked in a battle over wages, retirement, medical, work-life balance, and job security.”

IAM District 751 is Boeing’s largest employee union, representing more than 33,000 workers. The last agreement followed a two-month strike that Wall Street analysts estimated cost the company more than $2 billion in profits. Boeing reopened negotiations on that contract twice – in 2011 and in 2013 – and won significant concessions from workers, including increasing the amount employees pay for health care and ending the traditional pension program. In exchange, it agreed to keep airplane production in Washington state.

The deal comes as the company is struggling financially amid several crises in its commercial aircraft and space divisions. It’s the target of multiple federal investigations in connection with the midair blowout early this year aboard an Alaska Airlines jet that raised questions about its quality oversight and manufacturing systems. Transcripts of interviews with Boeing employees and contractors released last month as part of a recent National Transportation Safety Board hearing into the Alaska Airlines accident painted a picture of a chaotic factory environment where workers struggled to meet production targets, in part because of supply-chain shortages and rework needed on defective fuselages that arrived at its Renton, Washington, factory.

The Federal Aviation Administration has capped the number of 737 Max jets the company can produce until it proves it has met safety and manufacturing milestones – a significant move given that the 737 Max is Boeing’s best-selling jetliner.

Aircraft deliveries are key to Boeing’s bottom line, and the production slowdown has hit the company’s finances. Boeing reported a second-quarter net loss of $1.4 billion, more than triple that of a year earlier. Revenue was $16.8 billion for the second quarter of 2024, down 14% from the same quarter last year.

Given the key roles of IAM 751 members in assembling and inspecting 737 Max and 777 aircraft, even a brief walkout would put the company further behind in its efforts to get planes to customers, analysts say. A lengthy work stoppage would also have a trickle-down effect on suppliers and local businesses that rely on Boeing workers for their livelihood. Unlike other aviation workers, such as pilots or flight attendants, who can’t legally strike under U.S. law unless federal mediators determine further negotiations are fruitless, machinists can walk off the job.

The negotiations have come at a time when workers, particularly in the aerospace industry, have notched significant victories at the bargaining table. Last year, American Airlines pilots won a 46% raise, while flight attendants at Southwest Airlines approved a deal that bumped pay by more than 20%.

Meanwhile, IAM members at Spirit AeroSystems, a key supplier that is being reacquired by Boeing, won a 23.5% pay raise over the life of the contract and other concessions, including the elimination of mandatory overtime on weekends, during negotiations last summer. But they only secured those wins after they staged a six-day walkout.

Given those agreements, Boeing needs to come close to matching the union’s demands on wages to reach a deal, analysts say. The negotiations also are being closely watched by other Boeing unions, including members of IAM District 837, which represents workers at Boeing plants in St. Louis, whose contract expires next year.