Boeing (NYSE: BA) has struck a labor deal with its Seattle-area workers union that may potentially avert a strike that could have begun within this week. While the labor deal takes away the risk of an immediate strike, it does not do much to address the structural and long-term issues that the troubled aircraft maker is facing.

For context, Boeing reached a tentative agreement with over 33,000 workers of its IAM Districts 751 & W24, which the company termed a “historic contract” while presidents of the unions described it as the “best contract we’ve negotiated in our history.”

While most of these employees Washington and Portland, some are also based in California. This is the first full negotiation between these unions and Boeing in 16 long years and as part of the deal, their wages will increase by 25% over the four years of the contract.

“This contract deepens our commitment to the Pacific Northwest. Boeing’s roots are here in Washington. It is where generations of workers have built incredible airplanes that connect the world,” said Stephanie Pope, CEO of Boeing’s commercial airplane unit.

Meanwhile, the deal is still tentative and is subject to a vote scheduled for September 12.

What Does Boeing’s New Labor Deal Mean?

Apart from the wage hike, the new deal promises several other perks for Boeing employees. These include higher retirement contributions by Boeing, lower medical cost share, and better work-life balance.

According to Jefferies’ estimates, the labor deal would cost Boeing $900 million over four years, which is less than the $1.1 billion that the firm was previously modeling. Notably, the labor deal has helped take off the hanging sword of a likely strike which would have been the last thing that Boeing would have wanted at this juncture.

Labor strikes can be costly and last year, the Detroit Big 3 – namely Ford, General Motors, and Stellantis collectively lost billions of dollars amid the United Auto Workers (UAW) strike. Notably, the Biden administration was also monitoring the talks between Boeing and labor unions amid the upcoming elections with the acting US Labor Secretary Julie Su urging both parties to reach a “fair contract.”

IAM meanwhile has taken cognizance of Boeing’s recent woes and in its statement, it said that the company is in a “tough position due to many self-inflicted missteps.” The Union added, “When a plane leaves the factory, it’s our reputation on the line. This proposal helps keep our legacy alive.”

However, while the deal is an incremental positive for Boeing it does not help address some of the other issues that the company is facing.

Boeing’s Safety Woes Continue

Boeing’s troubles began when two new 737 Max jets crashed in quick succession, just a few months apart, between 2018 and 2019, in Indonesia and Ethiopia. After the first crash, Boeing allowed 737 Max planes to fly again even though it didn’t know what caused it, directly leading to a second tragic crash where all 157 people on board were killed.

Earlier this year, the door panel of a 737 Max jet blew off during an Alaska Airlines flight. Later in April, the engine cover on a Southwest Airlines Boeing 737-800 fell off during takeoff. Recently, Boeing said that it is halting the trials of its 777X after finding a crack in its structure.

Boeing’s Starliner program has also been plagued by multiple issues and faced technical difficulties after the blasting off in June, trapping astronauts Butch Wilmore and Suni Williams in the International Space Station. The incident prompted NASA to decide that it would bring the two crewmates on a SpaceX flight instead. Notably, the Starliner program grabbed the bulk of funding from NASA’s Commercial Crew Program and has separately lost over $1.6 billion without much success.

While Boeing replaced its CEO Dave Calhoun with aviation industry veteran Kelly Ortberg last month, the company’s woes are far from over.

Travelers Are Becoming Wary of Flying in Boeing’s Aircrafts

It shouldn’t be surprising to learn that 2 devastating deadly crashes and countless other safety problems in just a few years have damaged Boeing’s reputation. A June survey conducted by digital analytics company Quantum Metric could shed light on how the recurring issues with Boeing aircraft have a psychological impact on flyers.

The survey showed that while a fifth of travelers are doing more research on the aircraft that they may be flying before booking the ticket, 22% said they were limiting their air travel for the rest of this year. More than half – 55% to be precise – said that they have changed the way they book tickets due to the recent developments in the industry.

While the survey did not specifically name Boeing, there are no marks for guessing that the frequent safety-related issues with the company in the duopoly aircraft manufacturing industry, have started to take a toll on the behavior of travelers.

Danielle Harvey, global vice president and head of travel and hospitality strategy at Quantum Metric said that that unlike in the past, travelers are now checking whether they would be flying on a Boeing aircraft. Travel sites like Expedia often allow you to sort flights by the aircraft manufacturer, allowing travelers to choose Airbus flights with ease.

“Our research infers that fliers are doing more research to understand and potentially avoid Boeing aircrafts,” said Harvey.

While Boeing no doubt has a massive safety problem, a new MIT study shows that flying has actually never as safe as it is now. The report said that the risk of a fatality from commercial air travel between 2018-2022 was 1 per every 13.7 million passenger boardings compared to 1 per 7.9 million boardings in 2008-2017. In fact, the safety of commercial airlines has gradually been improving over the decades.

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BA Stock Has Underperformed

Arnold Barnett, an MIT professor and co-author of a new paper said, “the chance of dying during an air journey keeps dropping by about 7 percent annually, and continues to go down by a factor of two every decade.”

However, in the battle of perception – which can have a significant impact on consumers – especially if it is something as crucial as flying, Boeing seems to have lost out. If it has more high-profile disasters in the near future, consumers and airlines may leave Boeing in the dust.

Boeing’s troubles have impacted its price action and with a YTD loss of nearly 40%, it is among the worst-performing S&P 500 stocks this year. Last week, BA stock hit the lowest level since 2022 after Wells Fargo analyst Matthew Akers downgraded the stock to a sell equivalent and slashed his target price by $70 to $119.

In his note, Akers said that Boeing missed a “generational free cash flow opportunity” which he said would have been driven by “ramping production on mature aircraft and low investment need.”

However, production and quality issues have meant that Boeing’s operations are instead burning cash and Akers predicts that the company would need to raise $30 billion in equity by 2026 to make new investments, which would mean equity dilution thereby driving down the company’s per-share earnings.

For now, though, markets are giving a thumbs up to Boeing’s tentative deal with labor unions and the stock is up sharply in today’s price action.