Spirit AeroSystems union workforce approves new contract, ending strike at Kansas plant

WASHINGTON, June 29 (Reuters) – Spirit AeroSystems (SPR.N) said it would begin resuming operations at its plant in Wichita, Kansas, on Friday, after union workers on Thursday voted to accept a new contract and end a strike that led to a week-long work stoppage.

Following a vote where union employees represented by the International Association of Machinists and Aerospace Workers (IAM) agreed to a four-year deal, Spirit said it would closely coordinate with its suppliers and customers as it fully restarts production on July 5.

The rejection of a previous offer on June 21 sent shockwaves through the aviation industry, as Spirit is a lynchpin for the U.S. aerospace sector, making major aerostructures for American manufacturer Boeing (BA.N) and its European rival Airbus (AIR.PA).

Its Wichita plant is especially critical for Boeing, as workers at the site manufacture the entire body of its bestselling 737 MAX, as well as the forward fuselage of most other Boeing jets. It also produces pylons for the Airbus A220.

The new four-year contract, which union leaders endorsed on Tuesday, includes additional wage increases, allowed employees to keep their current health care plans and eradicated mandatory overtime on the weekends – three features that workers had earmarked as priorities for a deal.

The agreement is a boon for Boeing, which is on the verge of increasing MAX production from 31 jets to 38 jets per month. Boeing Commercial Airplanes CEO Stan Deal said on June 18 the production ramp was set to occur “pretty soon.”

Deal, in a statement to Boeing’s workforce after the contract ratification, said the company continued to assess potential impacts to production or deliveries.

Although Boeing maintains some buffer inventory, analysts had warned a prolonged strike could have forced the company to slow or stop MAX production. Cowen analyst Cai von Rumohr wrote in a June 22 note to clients that a two- to three-week work stoppage could start to impact 737 output.

Michel Merluzeau, director of aerospace market analysis for AIR consulting group, said the agreement “provides some degree of stability” as Boeing looks forward to negotiations with its Seattle-area machinists union next year.

It also resolves a major dilemma for Spirit, which has been under financial pressure and expects to burn cash this year. The company has been the source of several high-profile production defects on Boeing jets, such the incorrect installation of a bracket on the 737’s vertical tail.

Reporting by Valerie Insinna; Editing by Sandra Maler, Nick Zieminski and Jamie Freed

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