Boeing’s shares rise after tentative labor deal that could avert major strike

(Reuters) – Boeing (NYSE:) shares rose 3% in U.S. premarket trading on Monday after the planemaker reached a tentative deal with a union in the U.S. Pacific Northwest that could avoid a possible crippling strike later this week.

If approved, the proposed four-year contract, which includes a general wage increase of 25% and a commitment to build the next commercial plane in the Seattle area, is an important win for Kelly Ortberg, who took over as Boeing CEO last month.

The International Association of Machinists and Aerospace Workers (IAM), which represents 32,000 workers, called it the best contract it had ever negotiated. The contract will be put to vote on Thursday.

With “IAM leaders unanimously recommending a vote to accept the proposal, the deal is unlikely to be rejected,” Jefferies analyst Sheila Kahyaoglu said in a note.

That would mark a win for Boeing as it tries to restore investor and customer faith, navigate regulatory scrutiny and bump production of its 737 MAX after a door plug on a near-new MAX blew off a jetliner while in mid-air in early January.

Since that incident, Boeing’s stock price has cratered 37%, compared to a 7.7% rise in the blue-chip Dow index.

The labor deal, which is the Seattle-area workers’ first full new contract in 16 years, also includes better retirement benefits and gives the union greater input in the safety and quality of the production system, one of Ortberg’s mandates.

Workers can strike as early as Friday, Sept. 13, if they reject the contract.

The wage increase is likely to set Boeing back by $900 million over four years, compared to Jefferies’ initial estimate of $1.1 billion, Kahyaoglu said.