Boeing shares jump on strike deal hopes, ahead of earnings
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The news: Boeing shares rose by as much as 5.44% on optimism that a new labour contract proposal could end a five-week strike affecting 33,000 workers.
The numbers: The deal offers workers a 35% pay rise over four years, bonuses and retirement plan contributions, with analysts quoted by Reuters estimating it could cost the planemaker over USD1 billion in extra wage-related expenses.
Workers are set to vote on the proposal on Wednesday, the same day Boeing reports Q3 earnings, with the outcome uncertain as union leaders haven't endorsed the offer.
Last month, workers rejected a deal, even when it was backed by labour leaders.
Shares rose as much as 5.44% to USD163.44 ($245.50) each before paring gains to be 3.25% higher at midday.
But even if the strike ends, analysts from RBC Capital said their analysis shows that Boeing's production typically takes 6 to 12 months to recover after a strike.
The context: The strike paused production of Boeing’s highly profitable 737 MAX, as well as its 767 and 777 widebody jets.
The airplane maker is facing the threat of a credit rating downgrade to junk if the strike continues, increasing borrowing costs.
New CEO Kelly Ortberg is working to stabilise the company, cutting its workforce by 10% and readying a refinancing plan worth up to USD25 billion that might also be detailed on Wednesday.
