Spirit AeroSystems Holdings Inc. and its largest union reached an agreement on a new contract, potentially ending a strike that’s largely halted its production and threatens to disrupt output for customers Boeing Co. and Airbus SE.
The latest terms were forged after a weekend of mediated talks, the International Association of Machinists and Aerospace Workers said Tuesday, urging its rank-and-file members to ratify the new proposal during a vote on June 29.
Workers had rejected an earlier agreement, bucking union leaders, and overwhelmingly approved a strike.
The new agreement addresses many of the concerns from the previous deal, the union said, and includes wage increases, maintenance of health benefits and a ban on mandatory overtime.
Spirit’s shares rose 1.74% after the close of regular trading in New York. Boeing gained 1.04%.
Production has been at a standstill at the Wichita, Kansas-based aerospace manufacturer since about 6,000 Machinists voted to strike on June 22. Cash-strapped Spirit stands to lose about $100 million in revenue for each week of the work stoppage, according to Jefferies analyst Sheila Kahyaoglu.
Spirit, which was spun out of Boeing in 2005, is the world’s largest independent supplier of airplane structures. The company builds about 70% of the airframe for Boeing’s cashcow 737, sending the hulls via rail to its Seattle-area factories. It also manufactures key components for all of Boeing’s 7-series commercial jets, including the 787 Dreamliner, as well as Airbus’s A220.
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The Machinists union has a history of activism in Wichita stemming from the days when Spirit’s members were on the same contract as Boeing’s Seattle-area factory workers. Both sets of IAM members struck for 57 days in 2008, 28 days in 2005 and 69 days in 1995.
The strike vote this month ended 15 years of labor peace for US aerospace manufacturers, and hit just as Boeing is preparing to step up production of its 737 Max. Returning the narrowbody jet to pre-pandemic levels is the cornerstone to Chief Executive Officer Dave Calhoun’s target of generating $10 billion in free cash flow by mid-decade and paying down the company’s $55 billion debt.
The workhorse Max is also a critical source of revenue for Spirit. Two rate increases planned for later this year represent the manufacturer’s “primary opportunity to generate incremental cash,” JPMorgan Chase & Co. analyst Seth Seifman wrote in a June 22 report.