By Valerie Insinna
(Reuters) -Spirit Aerosystems has reached a tentative four-year contract agreement with the 6,000-member machinists union employed at its Wichita, Kansas plant, the union said Friday in a statement.
The agreement means the company will likely avoid a costly strike that would have rippled through the aircraft supply chain, as Spirit is a key manufacturer for aerospace giant Boeing (NYSE:BA).
The pact is set for a vote on June 21, just a few days before Spirit's current agreement with this branch of the International Association of Machinists and Aerospace Workers union expires on June 24.
"This fair and competitive contract recognizes the important contributions of our factory employees and ensures that Spirit can successfully meet increasing demand for aircraft from customers," Spirit Aerosystems said in an emailed statement.
"We urge our employees to review the contract with their families, and vote 'yes' to allow all of us build a bright future together.”
Spirit’s Wichita production facility is responsible for manufacturing major subassemblies of most Boeing jetliners, including the entire fuselage of Boeing’s lucrative 737 narrowbody aircraft and the forward fuselage of the widebody 787 Dreamliner. '
A slowdown could have impeded Boeing as it tries to recover from ongoing 737 and 787 production glitches. The company is trying to ramp up production to meet end-of-year objectives, bumping output from three to five 787s per month and 31 to 38 single-aisle 737s per month.
A stoppage could have also had a detrimental effect on already-fragile Spirit AeroSystems (NYSE:SPR), which has been responsible for several recent production flaws affecting Boeing jets, including a 737 bracket installation problem.
Those problems could cut Spirit's annual gross profit by $31 million. In May, Spirit said it expects cash burn of about $100 million to $150 million in 2023.
Spirit shares were up 1.4% in Friday afternoon trading. Boeing edged 0.3% higher.
The new agreement includes additional health insurance and retirement benefits, makes overtime on Sunday voluntary, and "up to a compounded 34% average pay increase," the union said in a statement.