Nov. 14 (Bloomberg) -- Boeing Co. and the leaders of its second-largest union agreed today to give engineers raises that average 5 percent a year in a four-year contract proposal that would avert a second strike this year if members approve.

Union members will shoulder “a little bit more” of their health-care costs under an improved coverage plan, said Bill Dugovich, a spokesman for the Society of Professional Engineering Employees in Aerospace. Boeing agreed to give the union more input into outsourcing decisions and to keep bringing new employees in a defined-benefit pension rather than the 401(k)- style plan that the company had wanted, he said.

The 20,500 engineers and technical workers will have until Dec. 1, the day their current contract runs out, to study the offer and vote through mail-in ballots. Union leaders said they’ll recommend a “yes” vote on the offer.

Negotiators for Chicago-based Boeing and the union have been in talks in a hotel near the company’s Seattle manufacturing hub since Oct. 29, three days before the 27,000 machinists agreed to end an eight-week strike. That walkout, over job security and compensation, idled factories and cost Boeing more than $10 million a day in profit.

“It’s an agreement that’s the result of extremely hard work by all parties,” Ray Goforth, the executive director of the, said in an interview.

The machinist strike also contributed to a delay of as much as nine months in the new 747-8’s entry into service and pushed the first delivery of the 777 freighter into next quarter rather than this quarter, Boeing said earlier today.

Raise Pool

Boeing said it will set aside a 5 percent pool for the salary increases. Some workers will get more, while all engineers will be guaranteed at least 2 percent a year and technical workers at least 2.5 percent.

“This agreement provides market-competitive pay and benefits that enable us to attract and retain the best talent, remain on the leading edge of technology and continue to win business in uncertain times,” Doug Kight, Boeing’s lead negotiator, said in a statement.

The company also agreed to increase pension payments and overtime rates, the union’s Dugovich said.

The engineers, like the machinists, had sought limits on the use of non-union, temporary workers that Boeing has employed to help control costs while developing and building planes like the 787 Dreamliner. The union wanted Boeing to agree to a set percentage of subcontractors.

Longer Contract

Boeing and the union agreed to set the duration of the contract for four years, instead of three. The engineering group initially sought raises of 10 percent annually through 2011, more vacation days and a restoration of early retiree medical benefits.

The more than 13,000 Boeing engineers in Washington state, Oregon, Utah and California make an average of $88,000 a year now, and the nearly 7,000 technical workers average $67,000. The union calls Boeing an “island of success” in the slumping economy, because of its record profits and unprecedented $276 billion order backlog, and says employees deserve a greater share of the work and the earnings.

Boeing has said any contract improvements must be affordable even if there’s a future slowdown and that it needs outsourcing flexibility to stay competitive.

Engineers have only walked out twice since their union was founded in 1946: for one day in 1993 and for 40 days in 2000.

Labor Strife

The 27,000 machinists, who stopped work Sept. 6, voted Nov. 1 to accept a proposal that included a 15 percent raise over four years, higher pension payments and starting wages, job security for maintenance and parts-delivery workers and the ability to bid for more work that Boeing’s considering outsourcing.

A strike by engineers, who design the planes and oversee their manufacture, would extend jet-delivery delays, hurting airlines worldwide that are counting on newer models to ease fuel consumption. Boeing and its larger rival, Toulouse, France-based Airbus SAS, have about seven years’ worth of aircraft orders to fill.

Boeing fell $2.12, or 4.9 percent, to $41.04 at 4 p.m. in New York Stock Exchange composite trading. The stock has declined 53 percent this year.

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net.

Last Updated: November 14, 2008 23:38 EST