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

Boeing has reached a tentative labor contract proposal that could offer more than $1 billion in wage increases over the next four years, according to analysts.

Approximately 33,000 workers will vote on the proposal on Wednesday, following a month-long strike that halted production of key models, including the popular 737 MAX narrow-body jets.

The vote comes just as Boeing is set to release its third-quarter financial results, where it is expected to report a significant loss. Despite this, Boeing's shares rose 3% on Monday, fueled by hopes of an end to the strike.

"We view the proposal as a positive step," said Ben Tsocanos, aerospace director at S&P Global, in an email to Reuters. "Resolving the strike quickly is essential for improving the company’s financial position and maintaining its credit rating."

Contract Details

The new agreement, announced Saturday, offers a 35% wage increase over four years, a $7,000 ratification bonus, a revived incentive plan, and enhanced 401(k) retirement contributions, including a one-time $5,000 deposit and up to 12% in employer contributions.

Workers to Vote Wednesday

The agreement was reached after weeks of contentious negotiations between Boeing and the International Association of Machinists and Aerospace Workers (IAM) union. The union leadership had faced backlash from members after endorsing Boeing’s initial offer, which was rejected by most workers.

Although the new proposal improves on the previous offer, it still falls short of the 40% wage increase initially demanded by the machinists' union.

The IAM stopped short of endorsing the latest proposal but told workers on Saturday that "it is worthy of your consideration."

Matthew Akers from Wells Fargo, who holds a rare pessimistic view on Boeing stock, expressed doubts about the proposal’s approval.

"Our analysis of over 1,000 online comments shows a more favorable view, but it may still not be enough to pass," Akers wrote in a note.

Seth Seifman from J.P. Morgan estimated that Boeing’s wage-related costs could rise by more than $1 billion, while Jefferies analyst Sheila Kahyaoglu projected these expenses to be around $1.3 billion.

Challenges Ahead

Even if workers ratify the agreement, Boeing will need to restore production levels swiftly after the strike.

"Historically, after Boeing strikes, it takes between six to 12 months to return production rates to pre-strike levels," RBC Capital Markets analysts noted. "Additionally, the strike's impact on an already strained supply chain remains uncertain."

In a separate labor development, about 5,000 workers at Textron’s Wichita, Kansas, facilities are set to return to work after approving a five-year contract that includes a 31% wage increase.