The International Association of Machinists and Aerospace Workers (IAM) union members at aerospace and defense giant Boeing Co. (BA) ratified Thursday the four-year national labor contract extension, with about 74 percent of voting members voting in favor of the deal. The deal extends the Machinists' contract to September 2016.
The tentative agreement was reached between Boeing and the IAM on November 30 which covers about 31,000 IAM-represented Boeing employees. The voting on the contract took place on late Wednesday, and the agreement was ratified overwhelmingly by IAM members working at Boeing sites in Washington, Oregon, and Kansas.
The agreement also calls for 2 percent annual wage increases, plus cost-of-living adjustments, an incentive program intended to pay bonuses between 2 and 4 percent., a contract ratification bonus of $5,000 for each member, and improvements in the pension program, with an increase in workers share of health insurance costs. Boeing confirmed that the one-time ratification bonus of $5,000 will be paid to employees on December 15.
The agreement also establishes a Boeing-IAM Joint Council for both of them to regularly discuss issues including workforce, market, competition and performance.
"It reflects an effort on the part of the company and the union to find a better way to work together and achieve common ground. It's a balanced agreement that makes us more competitive and ensures that the 737 - the best single-aisle airplane in the world - continues to be built by the people who know how to do it best," said Jim Albaugh, president and CEO of Boeing Commercial Airplanes.
For Boeing, the agreement provides it the prospect of reliable and uninterrupted aircraft production through September 2016. The company will also save health care costs, with the proposed increases in share workers pay toward their health benefits, and by encouraging union members to enroll in wellness programs.
According to the deal, IAM has most importantly got a commitment from Boeing on maintaining its 737 MAX passenger jet manufacturing in Washington state in Puget Sound region. Boeing announced last week that it would maintain 737 MAX production at the existing Renton facility if the tentative labor agreement was ratified by the IAM members.
In return, IAM has agreed to drop its high-profile National Labor Relations Board complaint against Boeing made in April over shifting some work of its 787 production to a nonunion plant in South Carolina.
The 737 MAX is a new engine variant of the single-aisle Boeing 737 and builds on the strengths of the next-generation 737. The aircraft is powered by the CFM International LEAP 1-B engines. The jet is expected to enter service in 2017, and have received more than 700 commitments from customers for the 737 MAX.
In July, Boeing decided to revamp the top-selling 737 instead of building an all-new aircraft. The revamped 737 MAX is designed to compete with the Airbus A320neo in the narrow-body single-aisle aircraft segment. The Paris Air Show held earlier in the year clearly indicated that the ever-increasing fuel costs has tilted customers' preference towards more fuel-efficient aircraft.
BA closed Thursday's regular trading session at $70.17, down $0.43 or 0.51 percent on a volume of 6.04 million shares, higher than the three-month average volume of 5.96 million shares.
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