By Medha Singh and Abhijith Ganapavaram

(Reuters) -Boeing's shares rose 5% before the bell on Monday after the planemaker and its biggest union reached a tentative deal covering more than 32,000 workers, averting a possible strike.

The proposed four-year contract was hailed by the union as the best it had ever negotiated. It is also an early win for new Boeing CEO Kelly Ortberg, who is tasked with turning around the struggling planemaker.

As part of the agreement, Boeing has committed to building a replacement for its workhorse 737 at its U.S. Pacific Northwest facilities, if the project is started during the four-year period of the labor contract, though the planemaker has not yet announced the new jet.

Boeing and rival Airbus are in the early stages of drawing up strategies for replacements of their best-selling single-aisle models that are expected to enter service in late 2030s.

The contract terms include a general wage increase of 25% over four years, below the 40% wage hike demanded by the International Association of Machinists and Aerospace Workers (IAM) union, signaling its recognition of Boeing's difficult financial position.

The wage hikes are tiered with the new and senior workers getting the largest share to boost retention, TD Cowen analyst Cai von Rumohr said in a note.

The financial terms of the labor deal seem acceptable to Boeing, according to J.P.Morgan analyst Seth Seifman.

Jefferies analyst Sheila Kahyaoglu estimated a roughly $900 million hit to cash from the proposed wage increases.

The early agreement is a boost for Boeing as it tries to restore investor and customer faith, navigate regulatory scrutiny and ramp up production of its 737 MAX after a door plug on a near-new MAX blew off a jetliner while in mid-air in early January.

Since that incident, Boeing's stock price has cratered 37%, compared to a 7.7% rise in the blue-chip Dow index.

WORKERS COULD VOTE AGAINST DEAL

J.P.Morgan's Seifman noted workers could still vote down the deal. There will be two votes on Thursday - one on the contract, which requires 50% to pass, and the second on whether to strike, which requires two-thirds approval.

"Workers have leverage and a highly unscientific sample of views on social media suggests dissatisfaction with the contract terms among some union members," Seifman added.

A strike authorization vote in July had secured 99.9% approval by workers.

Last year, Boeing's 737 fuselage supplier Spirit AeroSystems had to temporarily suspend factory production after workers rejected a four-year deal.

"While unlikely, if IAM strikes, we think it's realistic to assume the strike's duration would be in line with the 51 days of the last four walkouts," TD Cowen's von Rumohr added.

He pegged the hit to cash flow from a 50-day strike between $3 billion and $3.5 billion, at a time Boeing is already burning cash due to cost overruns in its defense business and lower 737 MAX production.

(Reporting by Medha Singh and Abhijith Ganapavaram in Bengaluru; Editing by Savio D'Souza and Shounak Dasgupta)