Washington state set to build Boeing 777X


* Boeing, main workers' union reach provisional agreement

* Machinists would need to approve a long-term work contract

* State governor calls for passing legislation extendingBoeing financial incentives

By Alwyn Scott and Bill Rigby

NEW YORK/SEATTLE, Nov 5 (Reuters) - Boeing Co is setto build key parts of its newest jet, the 777X, in the Seattlearea providing Washington state passes legislation extendingfinancial incentives for the plane maker and Boeing machinistsapprove a long-term work contract.

A provisional agreement between Boeing and its main workers'union paving the way for a deal was announced by WashingtonGovernor Jay Inslee in Olympia on Tuesday, likely ending one ofthe most keenly awaited decisions in global aerospace.

Inslee called for a special state legislative sessionbeginning on Thursday to approve a transportation packageextending tax breaks for Boeing and improvements to stateinfrastructure.

"If we can do this in the next seven days, we can be certainthat Washington's aerospace future will be as bright as itspast," said Inslee at a press conference that was webcast fromthe state capital.

Boeing welcomed the agreement with the union.

"This is important to everyone with a stake in Boeing -including our employees, the community and our customers," saidRay Conner, head of Boeing's commercial airplanes unit, in astatement. "We look forward to the ratification (of thecontract) and a long successful future as the global leader inaerospace."

The agreement is crucial to the Seattle area, which isincreasingly competing with non-unionized workers in southernstates where wages are lower.

Inslee said he spoke with officials from Boeing and themachinists union earlier on Tuesday, who told him that they hadreached a tentative labor agreement to be voted on next week.

The machinists union said its members will vote on aproposal guaranteeing that fuselages and wings for Boeing's new777X jet will be built by union members in the Puget Soundregion.

In exchange for keeping the work in Boeing's traditionallabor base, the machinists' union must ratify a new eight-yearcontract expiring in 2024 that includes $10,000 signing bonusesfor all workers, and would make changes to the pension plan. Itwould also halt additions to workers' pensions and set up adifferent retirement plan funded by the company, the union said.

Three sources close to the matter cautioned that details ofthe agreement remain subject to change. But it provides "a path"to bring the program to the state, one of the sources said. Thesources spoke on condition of anonymity because details of thediscussions are still confidential.

Inslee's proposed transportation package - which must passbefore Boeing agrees to locate 777X work in the state - includesthe extension of all commercial airplane tax incentives until2040 and expansion of current tax exemptions on construction ofcertain aerospace buildings to include all commercial airplanesand suppliers of wings and fuselages.

Reuters reported on Monday that Boeing was in advanced talkswith its machinists' union to assemble the 777X and build itswings in the Seattle area, according to several people familiarwith the negotiations.

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