Boeing and its largest union said Sunday they reached agreement on a new contract that, if ratified, will avoid a strike that threatened to shut down aircraft production by the end of the coming week.

Boeing said 33,000 workers represented by the International Association of Machinists and Aerospace Workers would get pay raises of 25% over the four-year contract, with average wages rising 33% due to seniority step increases. That is less than the 40% the union had demanded during negotiations.

But the company agreed with a key union demand to build its next plane in Washington state, presumably by union members.

Workers also would get $3,000 lump sum payments and a lower share of health care costs, Boeing said. The company would make new 401(k) contributions of up to $4,160 per employee, but the union would not achieve its demand to restore a defined-benefit pension plan that was eliminated in 2014.

“Negotiations are a give and take, and although there was no way to achieve success on every single item, we can honestly say that this proposal is the best contract we’ve negotiated in our history,” Jon Holden, president of IAM District 751, the machinists’ union outpost at Boeing, said in a statement posted on the union website.

The union's bargaining committee is recommending that members ratify the contract, Holden said.

The president of Boeing’s commercial airplanes division, Stephanie Pope, said Sunday in a video for employees that the proposed contract includes the company’s largest-ever general wage increase. She said the promise to build Boeing’s next new airliner in the Puget Sound area means job security for generations to come.

The proposed contract is contingent on union members ratifying before midnight Thursday Pacific time, after which the union was threatening to strike.

The union has scheduled a two-part election for Thursday, with workers voting whether to accept the contract, and whether to authorize a strike if they reject the offer. Voting will occur at about a half-dozen locations in Washington state and one in California.

A strike would have added to the headwinds facing Boeing, which is hurtling toward a sixth straight money-losing year and just hired a new CEO to turn things around.

The new chief executive, Kelly Ortberg, will try to reverse $27 billion in losses since the start of 2019. His assignment includes fixing problems in Boeing’s aircraft-manufacturing process, gaining regulatory approval for the long-delayed 777X jumbo jet, limiting damage from over-budget government contracts, paying down $45 billion in net debt, and absorbing Spirit AeroSystems, the money-losing key supplier that Boeing just bought for $4.7 billion.

Ortberg has sounded conciliatory toward the machinists' union.

“He understands that they are basically contentious relationships with the union, and he wants to make those relationships better,” TD Cowen aerospace analyst Cai von Rumohr said.

A walkout at Boeing would not affect consumers, but it would shut down Boeing's airplane production cut off needed cash. Von Rumohr said aircraft makers typically get about 60% of the purchase price on delivery, “so not delivering planes has a massive impact on your cash in-flow, and your costs probably continue on.”

An eight-week strike in 2008, the longest at Boeing since a 10-week walkout in 1995, cost the company about $100 million a day in deferred revenue.

Before the tentative agreement was announced, Jefferies aerospace analyst Sheila Kahyaoglu estimated that a strike would cost the company about $3 billion based on the 2008 strike plus inflation and current airplane-production rates.

Boeing is in far worse financial shape than it was in 2008. The company has lost $27 billion since the start of 2019, around the time that its best-selling plane, the 737 Max, was grounded worldwide after the crashes in Indonesia and Ethiopia. Revenue is down, debt is up.

Boeing’s greatest strength is that is remains one of the world’s two leading manufacturers of airline jets, forming a duopoly with Europe’s Airbus. Boeing has a huge backlog of orders, which it values at more than $500 billion.