Boeing’s stock (BA.N) saw a 3% increase on Monday, driven by optimism surrounding a potential end to the ongoing strike that has crippled production for over a month.
However, despite the new labour contract proposal unveiled over the weekend, many analysts remain cautious, questioning whether it will gain enough support from the 33,000 workers set to vote on Wednesday. The strike has halted the production of key models, including the popular 737 MAX narrowbody jets, as Boeing prepares to report a significant third-quarter loss.
The new contract offers a 35% wage increase over four years, a $7,000 ratification bonus, a reinstated incentive plan, and enhanced contributions to workers’ 401(k) plans. The improved terms are a marked step forward compared to the previous offer, which was rejected by workers. Despite this, the deal still falls short of the union’s initial demand for a 40% wage increase, leaving doubts about whether it will pass the crucial vote.
Ben Tsocanos, aerospace director at S&P Global, views the proposal as a positive development but notes the urgency in resolving the strike.
“Resolving the strike quickly is key to improving the company’s financial position and supporting the rating,” he told Reuters. Moody’s, another leading ratings agency, declined to comment, though warnings of a potential downgrade linger if the strike extends further.
Wells Fargo’s Matthew Akers holds a bearish stance on Boeing stock and doubts the contract will be ratified. His analysis of more than 1,000 online comments revealed only 20% support for the new proposal, compared to a mere 3% for the prior offer. He noted, however, that online forums like the IAM 751 Reddit thread could harbor negative bias. Other financial analysts, including J.P. Morgan’s Seth Seifman and Jefferies’ Sheila Kahyaoglu, estimate that the wage increases could cost Boeing between $1 billion and $1.3 billion over the contract’s duration.
The International Association of Machinists and Aerospace Workers (IAM) union, which has engaged in weeks of intense negotiations with Boeing, has yet to officially endorse the proposal. Nevertheless, the union leadership informed workers over the weekend that the new deal “is worthy of your consideration.” The union faced backlash earlier when it supported Boeing’s initial offer, which was overwhelmingly rejected by workers.
Even if the contract is accepted, Boeing faces significant challenges in restoring production to pre-strike levels. Analysts from RBC Capital Markets warned that it could take anywhere from 6 to 12 months to recover fully, especially as supply chain issues remain a looming concern. Production of Boeing’s lucrative models, including the 737 MAX and widebody jets like the 767 and 777, remains at a standstill due to the work stoppage.
In related developments, Boeing received a boost on Monday when Emirates Airlines placed an order for five 777F freighters. Meanwhile, Spirit AeroSystems (SPR.N), which furloughed 700 workers last week due to the Boeing strike, saw its shares rise by 3.6%.
However, in a separate labor action, Textron (TXT.N) workers returned to work after accepting a five-year contract with a 31% wage increase. Textron shares dipped 1% amid broader market challenges.
