Talks between Boeing and its biggest union are coming down to the wire – and a possible strike

DALLAS — DALLAS (AP) — Boeing and its largest union are entering the final week of contract negotiations before a strike by more than 30,000 workers who build the planes that carry millions of passengers each year threatens to strike.

A strike would only make the situation worse headwind for Boeingwhich is heading for a sixth consecutive year of loss-making and has just hired someone a new CEO to turn things around.

The regional branch of the International Association of Machinists and Aerospace Workers says the two sides are far apart on wages, health care and job security. The union began by seeking wage increases of more than 40% over three years, though “that’s probably not where we’ll end up,” IAM District 751 President Jon Holden said last week.

The union has scheduled a two-part election for Thursday, with votes at more than a half-dozen locations in Washington state and one in Southern California. Workers will vote on Boeing’s latest contract offer and whether to authorize a strike if it is rejected. A strike could begin Friday morning.

A vote in July to gauge support for a strike passed with 99.99% support, the union said.

“What we’re asking for is reasonable,” Holden said in an interview. “We need to get higher wages to address the very low increases of the last 10 years, the huge inflation and the huge cost shifting to health care. We’re trying to reach an agreement, but (union members) are prepared to take action if we don’t get there.”

Holden said the union has a multimillion-dollar strike fund and he is not afraid to tap into it.

Boeing declined to make an executive available to discuss labor negotiations. A spokesman issued a one-sentence statement.

“We are confident that we can reach an agreement that balances the needs of our employees with the business realities we face as a company,” the statement said.

Boeing’s new CEO, Kelly Ortberg, has tried to take a conciliatory approach to workers. He works in Seattle, to be near the factories where the company builds most of its commercial planes, rather than at its headquarters in Arlington, Virginia. He walked the floors of the 737 Max factory during his first day at work.

“He understands that relations with the union are inherently contentious, and he wants to improve those relations,” said Cai von Rumohr, an aerospace analyst at TD Cowen.

Ortberg already has a long to-do list. The new CEO will try to fix Boeing’s airplane production process, get regulatory approval for the long-delayed 777X jumbo jetlimit the damage from over-budget government contracts, pay down $45 billion in net debt and acquire Spirit AeroSystems, the money-losing major supplier that Boeing just acquired. bought for $4.7 billion.

Ortberg’s toughest task will be to restore Boeing’s reputation for quality, which was shattered after two 737 Max jets have crashed less than five months apart in 2018 and 2019, killing 346 people, and was hit with another major blow when a door plug a Max canceled during an Alaska Airlines flight in January.

Unlike airline strikes, which are very rare, a Boeing strike would have no immediate effect on consumers. It would not result in canceled flights. However, it would halt production and leave Boeing without jets to supply the airlines that have ordered them.

“During a strike, they’re not working on airplanes, they’re not delivering airplanes,” von Rumohr said. Aircraft manufacturers typically get about 60 percent of the purchase price upon delivery, “so not delivering airplanes has a huge impact on your cash flow, and your costs probably continue to flow.”

An eight-week strike in 2008the longest strike at Boeing since a 10-week strike in 1995, cost the company about $100 million a day in deferred revenue.

Meeting the union’s wage demand would cost Boeing $1.5 billion in cash, which is “a small price to pay compared to a strike,” said Sheila Kahyaoglu, an aerospace analyst at Jefferies. In a note to clients, she estimated that a strike would cost the company about $3 billion, a calculation based on the impact of the 2008 strike plus inflation and current aircraft production rates.

Boeing is in a much worse financial situation than it was in 2008. The company has lost $27 billion since the beginning of 2019, around the time its best-selling plane, the 737 Max, was grounded worldwide after crashes in Indonesia and Ethiopia. Revenue has fallen, debt has risen.

Boeing’s greatest strength is that it remains one of the world’s two largest manufacturers of jet aircraft and a duopoly with Europe’s AirbusBoeing has a huge backlog, estimated to be more than $500 billion.

The company’s defense and aerospace arm is a major government contractor, though that business has also struggled. The most recent setback was NASA’s decision to use SpaceX instead of Boeing’s Starliner capsule to fly take two astronauts home of the International Space Station.

Job security has emerged as a key issue in the current negotiations, with the union still furious about job losses at the 787 Dreamlinera large twin-aisle jetliner being assembled by non-union Boeing workers in South Carolina. The IAM wants a guarantee that its members will keep the jobs they have and that the union will represent the workers building Boeing’s next plane.

That plane isn’t even on the drawing board yet, and production could take a decade or more. But it’s vital to IAM because a third of Boeing’s union members — more than 10,000 people — are working on the 737 Max, which the new plane would replace.

The union president said Boeing has been in “free fall” for more than a year and acknowledged that the company faces enormous and costly challenges. Despite that, he said, the union is well positioned to win a strong contract.

“All employers are looking for skilled workers, and we have them,” Holden said. “This company has a huge backlog of over 5,000 aircraft to build and deliver, so we are in high demand right now. That’s our leverage.”