AIRCRAFT LEASE AGREEMENT

                            Dated as of May 25, 2000

                                     BETWEEN

                             FRONTIER AIRLINES, INC.

                                    as LESSEE

                                       and

                     INTERNATIONAL LEASE FINANCE CORPORATION

                                    as LESSOR

     Aircraft Make and Model:                              Used Boeing B737-300

     Aircraft Manufacturer's Serial Number:                26293

     Aircraft Registration Mark:                           Per Exhibit E

     Make and Model of Engines:                            CFM56-3C1

     Serial Numbers of Engines:                            724885 and 724886

                               USED AIRCRAFT NO. 1


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                                TABLE OF CONTENTS

ARTICLE 1    SUMMARY OF TRANSACTION............................................2
      1.1    Description of Aircraft...........................................2
      1.2    Scheduled Delivery Date and Location..............................2
      1.3    Initial Lease Term................................................2
      1.4    Lease Extension Option............................................2
      1.5    Security Deposit..................................................2
      1.6    Transaction Fee...................................................2
      1.7    Rent During Initial Lease Term....................................2
      1.8    Rent During Lease Extension Term..................................3
      1.9    Reserves..........................................................3
      1.10   Country of Aircraft Registration..................................3
      1.11   Maintenance Program...............................................3
      1.12   Agreed Value of Aircraft..........................................3
      1.13   LESSOR's Bank Account.............................................3

ARTICLE 2    DEFINITIONS.......................................................4
      2.1    General Definitions...............................................4
      2.2    Specific Definitions..............................................9

ARTICLE 3    PLACE AND DATE OF DELIVERY.......................................11
      3.1    Place of Delivery................................................11
      3.2    Scheduled Delivery Date..........................................11
      3.3    No LESSOR Liability..............................................11
      3.4    Total Loss of Aircraft prior to Delivery.........................11
      3.5    Cancellation for Delay...........................................11

ARTICLE 4    LEASE TERM AND EXTENSION OPTION..................................12
      4.1    Initial Lease Term...............................................12
      4.2    Lease Extension Option...........................................12
      4.3    "Lease Term" and "Expiration Date"...............................12
      4.4    "Termination Date"...............................................12

ARTICLE 5    SECURITY DEPOSIT, TRANSACTION FEE, RENT, RESERVES AND
             OTHER PAYMENTS...................................................14
      5.1    Security Deposit.................................................14
      5.2    Transaction Fee..................................................14
      5.3    Rent.............................................................14
      5.4    Reserves.........................................................15
      5.5    LESSOR's Bank Account............................................16
      5.6    Default Interest.................................................16
      5.7    No Deductions or Withholdings....................................17
      5.8    Value Added Taxes................................................17
      5.9    Wire Transfer Disbursement Report................................17
      5.10   Net Lease........................................................17
      5.11   LESSOR Performance of LESSEE Obligation..........................18
      5.12   Consideration for Rent and other Amounts.........................19

ARTICLE 6    DELIVERY CONDITION AND INSPECTION OF AIRCRAFT....................20
      6.1    LESSEE Selection of Aircraft.....................................20
      6.2    Condition at Delivery............................................20
      6.3    LESSEE Inspection of Aircraft at Delivery........................20
      6.4    Delivery of Aircraft to LESSEE...................................20
      6.5    LESSEE Acceptance of Aircraft....................................20

ARTICLE 7    PRE-DELIVERY, DELIVERY AND POST-DELIVERY DOCUMENTARY
             AND OTHER REQUIREMENTS...........................................21
      7.1    Pre-Delivery Requirements........................................21
      7.2    LESSOR's Pre-Delivery Requirements...............................21
      7.3    Delivery Requirements............................................22
      7.4    Post-Delivery Requirements.......................................23

ARTICLE 8    DISCLAIMERS......................................................24
      8.1    "As Is, Where Is"................................................24
      8.2    Waiver of Warranty of Description................................24
      8.3    LESSEE Waiver....................................................25
      8.4    Conclusive Proof.................................................25
      8.5    No LESSOR Liability for Losses...................................25
      8.6    No Liability to Repair or Replace................................26
      8.7    No Waiver........................................................26

ARTICLE 9    MANUFACTURERS' AND VENDORS' WARRANTIES...........................27
      9.1    Warranties.......................................................27
      9.2    Non-Assignable Warranties........................................27
      9.3    Reassignment.....................................................27
      9.4    Warranty Claims..................................................27

ARTICLE 10   OPERATION OF AIRCRAFT............................................28
      10.1   Costs of Operation...............................................28
      10.2   Compliance with Laws.............................................28
      10.3   Training.........................................................28
      10.4   No Violation of Insurance Policies...............................28
      10.5   Flight Charges...................................................28

ARTICLE 11   SUBLEASES........................................................29
      11.1   No Sublease without LESSOR Consent...............................29
      11.2   LESSOR Costs.....................................................29
      11.3   Any Approved Sublease............................................29
      11.4   Assignment of Sublease...........................................30
      11.5   Continued Responsibility of LESSEE...............................30

ARTICLE 12   MAINTENANCE OF AIRCRAFT..........................................31
      12.1   General Obligation...............................................31
      12.2   Specific Obligations.............................................31
      12.3   Replacement of Parts.............................................33
      12.4   Removal of Engines...............................................34
      12.5   Pooling of Engines and Parts.....................................34
      12.6   Installation of Engines on other aircraft........................34
      12.7   Engine Thrust Rating.............................................35
      12.8   Modifications....................................................35
      12.9   Performance of Work by Third Parties.............................37
      12.10  Reporting Requirements...........................................37
      12.11  Information Regarding Maintenance Program........................37
      12.12  LESSOR Rights to Inspect Aircraft................................37

ARTICLE 13   USE OF RESERVES..................................................38
      13.1   Airframe Reserves................................................38
      13.2   Engine Reserves..................................................38
      13.3   Landing Gear Reserves............................................39
      13.4   Reimbursement....................................................39
      13.5   Reimbursement Adjustment.........................................39
      13.6   Costs in Excess of Reserves......................................40
      13.7   Reimbursement after Termination Date.............................40

ARTICLE 14   TITLE AND REGISTRATION...........................................41
      14.1   Title to the Aircraft During Lease Term..........................41
      14.2   Registration of Aircraft.........................................41
      14.3   Filing of this Lease.............................................41
      14.4   Evidence of Registration and Filings.............................41

ARTICLE 15   IDENTIFICATION PLATES............................................42
      15.1   Airframe Identification Plates...................................42
      15.2   Engine Identification Plates.....................................42

ARTICLE 16   TAXES............................................................43
      16.1   General Obligation of LESSEE.....................................43
      16.2   Exceptions to Indemnity..........................................43
      16.3   After-Tax Basis..................................................44
      16.4   Timing of Payment................................................45
      16.5   Contests.........................................................45
      16.6   Refunds..........................................................45
      16.7   Cooperation in Filing Tax Returns................................45
      16.8   Survival of Obligations..........................................45

ARTICLE 17   INDEMNITIES......................................................46
      17.1   General Indemnity................................................46
      17.2   Exceptions to General Indemnities................................47
      17.3   After-Tax Basis..................................................48
      17.4   Timing of Payment................................................48
      17.5   Subrogation......................................................48
      17.6   Notice...........................................................48
      17.7   Refunds..........................................................48
      17.8   Defense of Claims................................................48
      17.9   Survival of Obligation...........................................49

ARTICLE 18   INSURANCE........................................................50
      18.1   Categories of Insurance..........................................50
      18.2   Write-back of any Date Recognition Exclusion.....................50
      18.3   Insurance for Indemnities........................................50
      18.4   Insurance required by Manufacturer...............................50
      18.5   Renewal..........................................................50
      18.6   Assignment of Rights by LESSOR...................................50
      18.7   Other Insurance..................................................51
      18.8   Information......................................................51
      18.9   Currency.........................................................51
      18.10  Grounding of Aircraft............................................51
      18.11  Failure to Insure................................................51
      18.12  Reinsurance......................................................51
      18.13  Limit on Hull in favor of LESSEE.................................52

ARTICLE 19   LOSS, DAMAGE AND REQUISITION.....................................53
      19.1   Definitions......................................................53
      19.2   Notice of Total Loss.............................................54
      19.3   Total Loss of Aircraft or Airframe...............................54
      19.4   Surviving Engine(s)..............................................55
      19.5   Total Loss of Engine and not Airframe............................55
      19.6   Other Loss or Damage.............................................56
      19.7   Copy of Insurance Policy.........................................57
      19.8   Government Requisition...........................................57
      19.9   LESSOR Retention of Reserves; Return of Security Deposit
             and Prepaid Rent.................................................57

ARTICLE 20   REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE..............59
      20.1   Representations and Warranties...................................59
      20.2   Covenants........................................................60

ARTICLE 21   REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSOR..............63
      21.1   Representations and Warranties...................................63
      21.2   Covenant of Quiet Enjoyment......................................64

ARTICLE 22   FINANCIAL AND RELATED INFORMATION................................65

ARTICLE 23   RETURN OF AIRCRAFT...............................................66
      23.1   Date of Return...................................................66
      23.2   Technical Report.................................................66
      23.3   Return Location..................................................66
      23.4   Full Aircraft Documentation Review...............................66
      23.5   Aircraft Inspection..............................................66
      23.6   Certificate of Airworthiness Matters.............................67
      23.7   General Condition of Aircraft at Return..........................68
      23.8   Checks Prior to Return...........................................70
      23.9   Engine Return Requirements.......................................71
      23.10  Hour/Cycle/Calendar Time Requirements............................73
      23.11  Like for Like....................................................74
      23.12  Export and Deregistration of Aircraft............................74
      23.13  LESSEE's Continuing Obligations..................................74
      23.14  Airport and Navigation Charges...................................75
      23.15  Return Acceptance Certificate....................................75
      23.16  Indemnities and Insurance........................................76
      23.17  Civil Reserve Air Fleet..........................................76

ARTICLE 24   ASSIGNMENT.......................................................78
      24.1   No Assignment by LESSEE..........................................78
      24.2   Sale or Assignment by LESSOR.....................................78
      24.3   LESSOR's Lender..................................................78
      24.4   LESSEE Cooperation...............................................78
      24.5   Protections......................................................79

ARTICLE 25   DEFAULT OF LESSEE................................................80
      25.1   LESSEE Notice to LESSOR..........................................80
      25.2   Events of Default................................................80
      25.3   LESSOR's General Rights..........................................82
      25.4   Deregistration and Export of Aircraft............................82
      25.5   LESSEE Liability for Damages.....................................82
      25.6   Waiver of Default................................................83
      25.7   Present Value of Payments........................................83
      25.8   Use of "Termination Date"........................................84
      25.9   LESSEE's Remedies................................................84
      25.10  Waiver of Consequential Damages..................................84

ARTICLE 26   NOTICES..........................................................85
      26.1   Manner of Sending Notices........................................85
      26.2   Notice Information...............................................85

ARTICLE 27   GOVERNING LAW AND JURISDICTION...................................86
      27.1   California Law...................................................86
      27.2   Non-Exclusive Jurisdiction in California.........................86
      27.3   Service of Process...............................................86
      27.4   Prevailing Party in Dispute......................................86
      27.5   Waiver...........................................................86

ARTICLE 28   MISCELLANEOUS....................................................87
      28.1   Transportation of Personnel......................................87
      28.2   Press Releases...................................................87
      28.3   Power of Attorney................................................87
      28.4   LESSOR Performance for LESSEE....................................87
      28.5   LESSOR's Payment Obligations.....................................87
      28.6   Application of Payments..........................................87
      28.7   Usury Laws.......................................................87
      28.8   Delegation by LESSOR.............................................88
      28.9   Confidentiality..................................................88
      28.10  Rights of Parties................................................88
      28.11  Further Assurances...............................................88
      28.12  Use of Word "including"..........................................89
      28.13  Headings.........................................................89
      28.14  Invalidity of any Provision......................................89
      28.15  Time is of the Essence...........................................89
      28.16  Amendments in Writing............................................89
      28.17  Counterparts.....................................................89
      28.18  Delivery of Documents by Fax.....................................89
      28.19  Entire Agreement.................................................89
      28.20  Expenses.........................................................90

EXHIBIT A    AIRCRAFT DESCRIPTION.............................................92
EXHIBIT B    CONDITION AT DELIVERY............................................93
EXHIBIT C    CERTIFICATE OF INSURANCE.........................................99
EXHIBIT D    BROKERS' LETTER OF UNDERTAKING..................................106
EXHIBIT E    ESTOPPEL AND ACCEPTANCE CERTIFICATE.............................108
EXHIBIT F    OPINION OF COUNSEL..............................................110
EXHIBIT G    FORM OF POWER OF ATTORNEY.......................................111
EXHIBIT H    ASSIGNMENT OF RIGHTS (AIRFRAME).................................113
EXHIBIT I    ASSIGNMENT OF RIGHTS (ENGINES)..................................118
EXHIBIT J    RETURN ACCEPTANCE RECEIPT.......................................122
EXHIBIT K    MONTHLY REPORT..................................................132
EXHIBIT L    AIRCRAFT DOCUMENTATION..........................................135
EXHIBIT M    TECHNICAL EVALUATION REPORT.....................................137




<PAGE>





                            AIRCRAFT LEASE AGREEMENT

THIS AIRCRAFT LEASE AGREEMENT is made and entered into as of May 25, 2000.

         BETWEEN:

     FRONTIER AIRLINES, INC., a Colorado corporation whose address and principal
place of  business is at 12015 East 46th  Avenue,  Suite 200,  Denver,  Colorado
80239 ("LESSEE") and

     INTERNATIONAL  LEASE FINANCE  CORPORATION,  a California  corporation whose
address and  principal  place of  business is at 1999 Avenue of the Stars,  39th
Floor, Los Angeles, California 90067, United States of America ("LESSOR").

         The subject  matter of this Lease is one (1) used B737-300  aircraft as
more  particularly  described on Exhibit A attached hereto.  In consideration of
and subject to the mutual  covenants,  terms and  conditions  contained  in this
Lease, LESSOR hereby agrees to lease to LESSEE and LESSEE hereby agrees to lease
from LESSOR the aircraft and the parties further agree as follows:


<PAGE>




         ARTICLE 1             SUMMARY OF TRANSACTION


         The following is a summary of the lease transaction  between LESSEE and
LESSOR.  It is set forth for the convenience of the parties only and will not be
deemed in any way to amend,  detract  from or simplify the other  provisions  of
this Lease.

1.1             Description of Aircraft

                One used  Boeing  B737-300   aircraft  with  two  (2)  installed
                CFM56-3C1 engines, all as more particularly described on Exhibit
                A hereto 1.2 Scheduled Delivery Date and Location

1.2             Scheduled Delivery Date and Location

                On or about May 31,  2000 at the TIMCO  maintenance facility  at
                Greensboro, North Carolina.

1.3             Initial Lease Term

                       32 months

1.4             Lease Extension Option

                       One (1) Lease extension option of seven (7) months

1.5             Security Deposit

                       *

1.6             Transaction Fee

                       *

1.7             Rent During Initial Lease Term

                       *


1.8             Rent During Lease Extension Term

                       *

1.9             Reserves

                       *

1.10            Country of Aircraft Registration

                       United States

1.11            Maintenance Program

                       LESSEE's Maintenance Program

1.12            Agreed Value of Aircraft

                       *

1.13            LESSOR's Bank Account


                       *


<PAGE>



         ARTICLE 2             DEFINITIONS


         Except where the context otherwise  requires,  the following words have
the  following  meanings for all  purposes of this Lease.  The  definitions  are
equally  applicable to the singular and plural forms of the words. Any agreement
defined  below  includes each  amendment,  modification,  supplement  and waiver
thereto in effect from time to time.

2.1      General Definitions.


                "Aircraft"  means the  Aircraft  described  on Exhibit A hereto,
including  the  Airframe,  two (2) Engines,  Parts and  Aircraft  Documentation,
collectively.  As the context  requires,  "Aircraft" may also mean the Airframe,
any  Engine,   any  Part,  the  Aircraft   Documentation  or  any  part  thereof
individually.  For  example,  in the  context  of  return  to  LESSOR  the  term
"Aircraft"  means  the  Airframe,  Engines,  Parts  and  Aircraft  Documentation
collectively,  yet in the context of LESSEE not creating any Security  Interests
other than Permitted Liens on the Aircraft, the term "Aircraft" means any of the
Airframe, any Engine, any Part or the Aircraft Documentation individually.

                "Aircraft  Documentation"  means  all  (a) log  books,  Aircraft
records,  manuals and other documents  provided to LESSEE in connection with the
Aircraft,  (b) documents  listed in Exhibits E and L and (c) any other documents
required  to be  maintained  during  the Lease Term by the  Aviation  Authority,
LESSEE's Maintenance Program and this Lease.

                "Airframe"  means  the  airframe  listed  in  the  Estoppel  and
Acceptance  Certificate  executed at Delivery  together with all Parts  relating
thereto (except Engines or engines).

                "Airframe  Warranty  Assignment"  means the Assignment of Rights
(Airframe)  to be entered into between  LESSOR and LESSEE in the form of Exhibit
H.

                "Airworthiness  Directives"  or "ADs"  means  all  airworthiness
directives (or equivalent) of the FAA and the Aviation  Authority  applicable to
the Aircraft.

                "APU" means the auxiliary power unit of the Aircraft.

                "Aviation  Authority"  means  the FAA or any  Government  Entity
which under the Laws of U.S.  from time to time has control over civil  aviation
or the  registration,  airworthiness  or  operation  of  aircraft in U.S. If the
Aircraft is registered in a country  other than the U.S.,  "Aviation  Authority"
means the agency which regulates civil aviation in such other country.

                "Aviation  Documents" means any or all of the following which at
any time may be  obtainable  from the Aviation  Authority:  (a) if  required,  a
temporary  certificate of airworthiness from the Aviation Authority allowing the
Aircraft  to be  flown  after  Delivery  to the  State of  Registration,  (b) an
application for  registration of the Aircraft with the appropriate  authority in
the State of Registration,  (c) the certificate of registration for the Aircraft
issued by the State of Registration, (d) a full certificate of airworthiness for
the Aircraft  specifying  transport category  (passenger),  (e) an air transport
license,  (f) an air operator's  certificate,  (g) such  recordation of LESSOR's
title to the  Aircraft  and  interest in this Lease as may be  available  in the
State of Registration and (h) all such other authorizations, approvals, consents
and  certificates  in the State of  Registration  as may be  required  to enable
LESSEE lawfully to operate the Aircraft.

                "Basic  Engine"  means those units and  components of the Engine
which are used to induce and convert  fuel/air  mixture  into  thrust/power;  to
transmit  power to the fan and accessory  drives;  to supplement the function of
other defined systems external to the Engine; and to control and direct the flow
of internal  lubrication,  plus all essential  accessories as supplied by Engine
manufacturer. The nacelle, installed components related to the Aircraft systems,
thrust reversers, QEC and the primary flight nozzle are excluded.

                "Business  Day" means a day other  than a Saturday  or Sunday on
which the banks in New York City are open for the transaction of business of the
type required by this Lease.

                "Certificated  Air  Carrier"  means any Person  (except the U.S.
Government)  that is a "citizen of the United  States of America" (as defined in
Section  40102 of Title 49 of  U.S.C.)  and  holding  a  Certificate  of  Public
Convenience  and Necessity  issued under Section 41102 of Title 49 of U.S.C.  by
the Department of Transportation or any predecessor or successor agency thereto,
or, in the event such  certificates  shall no longer be  applicable,  any Person
(except  the U.S.  Government)  that is a citizen  of the U.S.  (as  defined  in
Section 40102 of Title 49 of the U.S.C.) and legally  engaged in the business of
transporting  for hire  passengers  or cargo by air  predominantly  to,  from or
between points within the U.S., and, in either event,  operating  commercial jet
aircraft  capable of carrying ten or more individuals or 6,000 pounds or more of
cargo, which also is certificated.

                "Creditor" means any lessor,  owner, bank, lender,  mortgagee or
other Person which is the owner of or has any interest in an aircraft  engine or
aircraft operated by LESSEE.

                "Creditor  Agreement" means the applicable  agreement  between a
Creditor and LESSEE or between  Creditors  pursuant to which such Creditor owns,
leases or has an interest  in either an aircraft  operated by LESSEE on which an
Engine may be installed  or in an aircraft  engine which may be installed on the
Airframe.

                "Default"  means any event  which,  upon the giving of notice or
the lapse of time would constitute an Event of Default.

                "Delivery"  means the  delivery of the  Aircraft  from LESSOR to
LESSEE pursuant to Article 6.4.

                "Delivery Date" means the date on which Delivery takes place.

                "Dollars" and "$" means the lawful currency of the U.S.

                "Engine"  means (a) each of the engines  listed on the  Estoppel
and Acceptance  Certificate;  (b) any replacement  engine acquired by LESSOR and
leased to LESSEE  pursuant to Article 19.5  following a Total Loss of an Engine;
and  (c) all  Parts  installed  in or on any of such  engines  at  Delivery  (or
substituted, renewed or replacement Parts in accordance with this Lease) so long
as title thereto is or remains vested in LESSOR in accordance  with the terms of
Article 12.3.

                "Engine  Warranty  Assignment"  means the  Assignment  of Rights
(Engines) to be entered into between LESSOR and LESSEE in the form of Exhibit I.

                "Estoppel  and  Acceptance   Certificate"   means  that  certain
estoppel and  acceptance  certificate in the form of Exhibit E pursuant to which
LESSEE accepts Delivery of the Aircraft.

                "Event  of  Default"  means  any of the  events  referred  to in
Article 25.2.

                "FAA"  means  the  Federal   Aviation   Administration   of  the
Department of Transportation or any successor thereto under the Laws of the U.S.

                "FARs" means the U.S. Federal Aviation  Regulations  embodied in
Title 14 of the U.S. Code of Federal Regulations,  as amended from time to time,
or any successor regulations thereto.

                "Geneva  Convention"  means the Convention on the  International
Recognition  of Rights in  Aircraft  signed in Geneva,  Switzerland  on June 19,
1948.

                "Government  Entity"  means  any (a)  national,  state  or local
government, (b) board, commission, department, division, instrumentality, court,
agency or political  subdivision  thereof and (c)  association,  organization or
institution of which any of the entities  listed in (a) or (b) is a member or to
whose jurisdiction any such entity is subject.

                "Landing  Gear" means the installed  main and nose landing gear,
components and their associated actuators, side braces and parts.

                "Law" means any (a) statute, decree,  constitution,  regulation,
order or any directive of any Government  Entity,  (b) treaty,  pact, compact or
other  agreement to which any Government  Entity is a signatory or party and (c)
judicial  or  administrative   interpretation  or  application  of  any  of  the
foregoing.

                "Lease" means this Aircraft Lease  Agreement,  together with all
Exhibits hereto.

                "LESSOR's Lien" means any Security Interest created by LESSOR or
otherwise  arising  solely as a result of any act or  omission  of LESSOR or any
Person claiming by or through LESSOR.

                "LESSOR's Taxes" means any Taxes referred to in Article 16.2.

                "Maintenance  Program"  means  LESSEE's  maintenance  program as
approved by the Aviation  Authority or such other maintenance  program as LESSOR
may, in its reasonable discretion, accept in writing.

                "Manufacturer" means The Boeing Company.

                "MPD"  means the  Maintenance  Planning  Document  published  by
Manufacturer   and   applicable   to  the   Aircraft.   With   respect   to  the
hour/cycle/calendar time limitation of Parts and inspections,  references to the
MPD mean the most restrictive limitation set forth therein.

                "Operative  Documents" means this Lease,  the Airframe  Warranty
Assignment,   the  Engine  Warranty  Assignment,  the  Estoppel  and  Acceptance
Certificate  and any Side Letter or other document or agreement  entered into on
or after the date hereof  between  LESSEE and LESSOR  relating to the leasing of
the Aircraft hereunder or the transactions contemplated hereby.

                "Overhaul"  means the full  reconditioning  of the Aircraft,  an
Engine,  APU,  Landing  Gear,  module or Part, as the case may be, in which such
equipment  has been  fully  disassembled;  cleaned;  thoroughly  inspected;  and
returned to the highest  standard  specified  by the  applicable  manufacturer's
manual.

                "Part"  means any part,  component,  appliance,  system  module,
engine  module,  accessory,  material,  instrument,   communications  equipment,
furnishing,  LESSEE-furnished or LESSOR-purchased  equipment,  the APU, or other
item of equipment  (other than  complete  Engines or engines) for the time being
installed  in or attached to the Airframe or any Engine,  or which,  having been
removed from the Airframe or any Engine, remains the property of LESSOR.

                "Permitted   Lien"  means  (a)  LESSOR's  Liens;   (b)  Security
Interests  arising in the ordinary course of LESSEE's  business for Taxes either
not yet assessed or, if assessed,  not yet due or being  contested in good faith
in accordance  with Article 16.5 or (c)  materialmen's,  mechanics',  workmen's,
repairmen's, employees' liens or similar Security Interests arising by operation
of Law after the Delivery Date in the ordinary  course of LESSEE's  business for
amounts  which are  either not yet due or are being  contested  in good faith by
appropriate proceedings (and for which adequate reserves have been made or, when
required  in  order  to  pursue  such  proceedings,  an  adequate  bond has been
provided)  so long as such  proceedings  do not  involve  any  danger  of  sale,
forfeiture or loss of the Aircraft.

                "Permitted  Sublessee"  has  the  meaning  ascribed  thereto  in
Article 11.1.1.

                "Permitted Transferee" means any Person who:

               (a)  is a "citizen  of the  United  States" as defined in Section
                    40102 of Title 49 of the U.S.C. with the requisite power and
                    authority  to enter  into  and  carry  out the  transactions
                    contemplated by this Lease;

               (b)  is not,  and is not  affiliated  with,  a  Certificated  Air
                    Carrier;

               (c)  enters  into a binding  agreement  with  LESSEE  pursuant to
                    which it agrees  to be bound by the terms of this  Lease and
                    agrees  to  perform  all  of  the   obligations   of  LESSOR
                    hereunder; and

               (d)  is  either  (i) a U.S.  bank,  insurance  company  or  other
                    financial  institution  with a consolidated  net worth of at
                    least  $*,  (ii)  a  corporation  which  has  (or a  general
                    partnership  whose general partners have) a consolidated net
                    worth of at least $* and  which is a  sophisticated  entity,
                    experienced  in  participating  as  an  equity  investor  in
                    commercial aircraft leases, (iii) the trustee or agent of an
                    aircraft income or similar fund;  provided that such trustee
                    or agent has a consolidated net worth of at least $* or (iv)
                    such other Person as LESSEE shall  approve in writing,  such
                    approval not to be unreasonably withheld or delayed.

                "Person" means any individual, firm, partnership, joint venture,
trust, corporation,  Government Entity, committee,  department, authority or any
body, incorporated or unincorporated,  whether having distinct legal personality
or not.

                "Prime  Rate"  means  the  rate of  interest  from  time to time
announced by Chase  Manhattan Bank in New York as its prime  commercial  lending
rate.

                "Prior Lessee" means Pro Air, Inc.

                "Security  Interest" means any encumbrance or security interest,
however and  wherever  created or arising  including  (without  prejudice to the
generality of the foregoing) any right of ownership, security, mortgage, pledge,
charge,   encumbrance,   lease,   lien,   statutory   or  other  right  in  rem,
hypothecation,  title retention,  attachment, levy, claim or right of possession
or detention.

                "State of  Registration"  means U.S.  or such  other  country or
state of registration of the Aircraft as LESSOR may, in its absolute discretion,
approve in writing.

                "U.S." means the United States of America.

2.2             Specific Definitions.    The following  terms are defined in the
Articles referenced below:

            Terms                                                  Article

           Agreed Value                                            19.1
           Airframe Reserves                                       5.4.1
           CRAF                                                    23.17.1
           CRAF Program Requisition Period                         23.17.1
           Default Interest                                        5.6
           Delivery Location                                       3.1
           Engine Reserves                                         5.4.1
           Expenses                                                17.1
           Expiration Date                                         4.3
           Extension Lease Term                                    4.2.1
           ndemnitees                                              17.1
           Initial Lease Term                                      4.3
           Landing Gear Reserves                                   5.4.1
           Lease Term                                              4.3
           LESSOR's Assignee                                       24.2.1
           LESSOR's Bank                                           5.5
           LESSOR's Lender                                         24.3
           Modification                                            12.8.1
           Net Total Loss Proceeds                                 19.1
           Outside Delivery Date                                   3.5
           Passenger Service Equipment                             12.8.1
           Rent                                                    5.3.1
           Reserves                                                5.4.1
           Scheduled Delivery Date                                 3.2
           Security Deposit                                        5.1.1
           Taxes                                                   16.1
           Termination Date                                        4.4
           Total Loss                                              19.1
           Total Loss Date                                         19.1
           Total Loss Proceeds                                     19.1
           Transaction Fee                                         5.2

<PAGE>




         ARTICLE 3            PLACE AND DATE OF DELIVERY

3.1  Place of  Delivery.1  Place of  Delivery.1  Place  of  Delivery.1  Place of
Delivery.  LESSOR will deliver the  Aircraft to LESSEE at the TIMCO  maintenance
facility at  Greensboro,  North Carolina or such other place as may be agreed in
writing between the parties (the "Delivery Location").

3.2 Scheduled  Delivery  Date.2  Scheduled  Delivery Date.2  Scheduled  Delivery
Date.2  Scheduled  Delivery Date. As of the date of this Lease,  Delivery of the
Aircraft  from LESSOR to LESSEE is  scheduled to occur on or about May 31, 2000.
LESSOR will notify  LESSEE from time to time and in a timely manner of the exact
date on which LESSOR  expects  Delivery to take place (the  "Scheduled  Delivery
Date").

3.3 No LESSOR  Liability.3 No LESSOR Liability.3 No LESSOR Liability.3 No LESSOR
Liability.  LESSOR  will not be liable for any loss or  expense,  or any loss of
profit,  arising  from any delay or failure in  Delivery  to LESSEE  unless such
delay or failure  arises as a direct  consequence  of the willful  misconduct of
LESSOR.

3.4 Total Loss of Aircraft  prior to Delivery.4  Total Loss of Aircraft prior to
Delivery.4  Total Loss of Aircraft  prior to  Delivery.4  Total Loss of Aircraft
prior to  Delivery.  If a Total Loss of the  Aircraft  occurs prior to Delivery,
neither  party will have any further  liability  to the other except that LESSOR
will return to LESSEE the Security  Deposit in accordance with Article 5.1.3 and
any prepaid Rent, whereupon this Lease shall terminate.

3.5 Cancellation for Delay.5  Cancellation for Delay.5  Cancellation for Delay.5
Cancellation  for Delay.  Promptly  after LESSOR becomes aware that a delay will
cause Delivery to be delayed beyond June 15, 2000 (the "Outside Delivery Date"),
LESSOR will notify  LESSEE.  By written  notice given within *(*) days after the
first to occur of (i) LESSEE's receipt of such LESSOR notice or (ii) the Outside
Delivery Date,  either party may by written notice to the other party  terminate
this Lease and this Lease will  terminate on the date of receipt of such notice.
In the event of such termination,  neither party will have any further liability
to the other party except that LESSOR will return to LESSEE the Security Deposit
in  accordance  with Article  5.1.3 and any prepaid Rent. If neither party gives
notice  of  termination  within  such * (*) day  period,  then  the  period  for
termination  shall be deemed to be extended  for an  additional * (*) days after
the expiration of such * (*) day period. In the event that neither party gives a
notice of termination within such * (*) day period, the Lease will automatically
terminate upon the  expiration of such period,  and LESSOR will return to LESSEE
the Security Deposit and any prepaid Rent as provided above.


<PAGE>





         ARTICLE 4            LEASE TERM AND EXTENSION OPTION

4.1 Initial  Lease Term The term of leasing of the Aircraft will commence on the
Delivery  Date and  continue  for an initial  Lease  term of * (*)  months  (the
"Initial Lease Term").

4.2 Lease Extension Option

4.2.1 So long as no  payment  Default or Event of Default  has  occurred  and is
continuing  hereunder  on  the  date  of  exercise  of  the  option  or  on  the
commencement  date of the  extension  lease term with  respect  to such  option,
LESSEE  will have one (1) option to extend the term of the Lease for a period of
* (*) months (the "Extension Lease Term").

4.2.2 In order to exercise its option, LESSEE must give written notice to LESSOR
not less than * (*) months prior to the  then-existing  Expiration  Date of this
Lease. Any notice given by LESSEE in accordance herewith will be irrevocable.

4.3  "Lease  Term" and  "Expiration  Date".3  LeaseTerm  and  ExpirationDate24.3
LeaseTerm and ExpirationDate.3 LeaseTerm and ExpirationDate.  "Lease Term" means
the term of leasing  commencing  on the  Delivery  Date and  terminating  on the
Expiration Date. "Expiration Date" means the date on which LESSEE is required to
redeliver the Aircraft to LESSOR in the condition  required by this Lease on the
last  day  of  the  Initial  Lease  Term  or  Extension  Lease  Term,  if and as
applicable.

4.4 "Termination  Date" This Lease may in fact terminate on any of the dates set
forth below:

(a)  the Expiration Date,  provided LESSEE returns the Aircraft to LESSOR on the
     Expiration Date in the condition required by Article 23; or

(b)  a date earlier than the Expiration Date, if:

     (i)  there is a Total Loss of the  Aircraft  prior to Delivery  pursuant to
          Article 3.4;


     (ii) cancellation of this Lease occurs pursuant to Article 3.5;

     (iii)there is a Total Loss of the  Aircraft  and  payment is made to LESSOR
          in accordance with Article 19.3; or


     (iv) an Event of Default  occurs and LESSOR  repossesses  the  Aircraft  or
          otherwise terminates this Lease pursuant to Article 25.3.

(c)  a date later than the Expiration Date, if:

     (i)  LESSEE fails to return the Aircraft in the condition  required by this
          Lease on the Expiration Date in accordance with Article 23; or

     (ii) an Event of Default  occurs and LESSOR  repossesses  the  Aircraft  or
          otherwise terminates this Lease pursuant to Article 25.3.

The "Termination Date" is the date on which this Lease terminates because one of
the above has occurred.


<PAGE>






 ARTICLE 5 SECURITY DEPOSIT, TRANSACTION FEE, RENT, RESERVES AND OTHER PAYMENTS

5.1 Security Deposit.


5.1.1 *

5.1.2 The Security Deposit may be commingled with LESSOR's general funds and any
interest earned on such Security  Deposit will be for LESSOR's  account.  If the
Security  Deposit is reduced below the required  amount by  application  to meet
LESSEE's  unperformed  obligations  under this Lease,  LESSEE will replenish the
Security  Deposit  within  ten (10) days after  LESSOR's  demand  therefor.  The
Security  Deposit  will serve as security for the  performance  by LESSEE of its
obligations under this Lease and any other agreements  between LESSEE and LESSOR
relating to aircraft, engines, aircraft equipment or the extension of credit and
may be applied by LESSOR upon the occurrence of an Event of Default hereunder or
of an event of default by LESSEE under any such other agreements.

5.1.3 Upon  termination of this Lease in accordance  with Article 4.4 other than
if an Event of Default has  occurred  and is  continuing,  LESSOR will return to
LESSEE the  amount of the  Security  Deposit  then held by LESSOR (so long as no
default by LESSEE  exists under any other  agreement  between  LESSEE and LESSOR
relating to aircraft,  engines or aircraft  equipment or the extension of credit
by LESSOR to LESSEE in which case  LESSOR  will be  entitled  to set off amounts
owing to it),  without  interest,  less an amount  determined to be a reasonable
estimate of the costs, if any, which LESSOR will incur to remedy any unperformed
obligations  of  LESSEE  under  this  Lease,  including  the  correction  of any
discrepancies  from the  required  condition  of the  Aircraft  on return of the
Aircraft.

5.2 Transaction Fee. *


5.3 Rent

5.3.1 *

5.3.2 *

5.4 Reserves

5.4.1 *

5.4.2 The  amount of the  Engine  Reserves  set  forth in  Article  5.4.1 may be
increased  by LESSOR  in the event of an  increase  in the  thrust  rating of an
Engine in accordance with Article 12.7.

5.4.3 Such Reserves will be paid on or before the 10th day of the calendar month
next  following the month in which the Delivery Date occurs and on or before the
10th day of each  succeeding  calendar  month for  flying  performed  during the
calendar month prior to payment.  All Reserves for flying  performed  during the
month in which the Termination Date occurs will be paid on the Termination Date,
unless otherwise agreed by the parties.

5.4.4 No interest  will accrue or be paid at any time to LESSEE on such Reserves
and, subject to LESSOR's  obligations under Article 13, LESSOR may commingle the
Reserves with LESSOR's general funds.

5.5  LESSOR's  Bank  Account *

or to such other  bank  account  as LESSOR  may from time to time  designate  by
written  notice  ("LESSOR's  Bank").  When it is  stated in this  Lease  that an
installment  of the Security  Deposit,  the monthly Rent,  Reserves or any other
payment is due or must be paid or made by LESSEE by a specific  date,  then such
payment  actually  must be received by LESSOR's  Bank on or before such specific
date, even if, in order for such payment to be received by LESSOR's Bank by such
specific  date,  LESSEE must initiate the wire  transfer  prior to such specific
date.

5.6 Default Interest *

5.7  No  Deductions  or   Withholdings.7  No  Deductions  or  Withholdings.7  No
Deductions or  Withholdings.7  No Deductions  or  Withholdings.  All payments by
LESSEE under this Lease, including the Security Deposit,  Transaction Fee, Rent,
Reserves, Default Interest, fees, indemnities or any other item, will be made in
full  without  any  deduction  or  withholding  whether in  respect of  set-off,
counterclaim,  duties,  or Taxes (as defined in Article 16) imposed in the State
of Registration or any jurisdiction  from which such payments are made except to
the  extent  otherwise  required  by Law,  in which  event  LESSEE  will pay any
additional  amount  such  that the net  payment  received  by  LESSOR  after any
required  deduction  or  withholding  equals the amount that  LESSOR  would have
received if such withholding had not been required;  provided,  however, that if
LESSEE pays any such additional  amount to compensate for the withholding of any
LESSOR  Taxes,  LESSOR shall pay to LESSEE  promptly  after  receipt of LESSEE's
written  request   therefor  (which  request  shall  include  a  description  in
reasonable  detail of the  LESSOR  Taxes  involved  and the  calculation  of the
amounts to be paid) such  amounts as are  necessary  so that the net  additional
amounts received by LESSOR under this Article 5.7 do not exceed the amounts that
LESSOR  would have  received  if no amounts in respect of LESSOR  Taxes had been
required to be withheld or deducted by LESSEE.

5.8 Value Added Taxes.  The Rent and other amounts  payable by LESSEE under this
Lease are exclusive of any value added tax, turnover tax or similar tax or duty.

5.9 Wire Transfer Disbursement Report.9 Wire Transfer Disbursement Report.9 Wire
Transfer Disbursement Report.9 Wire Transfer Disbursement Report. At the time of
each Rent or other  payment,  LESSEE will advise LESSOR in writing of the amount
of the payment  being made by LESSEE and the  allocation  of such payment to the
Security  Deposit,   Rent,   Reserves,   Default  Interest  and  other  charges.
Notwithstanding  the  allocation set forth in LESSEE's  report,  in the event an
Event of Default has occurred and is  continuing  under this Lease,  LESSOR will
have complete discretion to allocate LESSEE's payments as LESSOR determines.

5.10 Net Lease

5.10.1 This Lease is a net lease and  LESSEE's  obligation  to pay Rent and make
other payments in accordance with this Lease will be absolute and  unconditional
under any and all  circumstances  and regardless of other events,  including the
following:

               (a)  any right of set-off,  counterclaim,  recoupment, defense or
                    other right  (including  any right of  reimbursement)  which
                    LESSEE may have against LESSOR, Prior Lessee,  Manufacturer,
                    the Engine  manufacturer or any other person for any reason,
                    including any claim LESSEE may have for the foregoing;

               (b)  unavailability  or  interruption  in use of the Aircraft for
                    any  reason,   including  a   requisition   thereof  or  any
                    prohibition  or  interference   with  or  other  restriction
                    against  LESSEE's  use,   operation  or  possession  of  the
                    Aircraft (whether by Law or otherwise), any defect in title,
                    airworthiness,  merchantability,  fitness  for any  purpose,
                    condition, design, specification or operation of any kind or
                    nature of the Aircraft,  the  ineligibility  of the Aircraft
                    for any  particular use or trade or for  registration  under
                    the Laws of any jurisdiction or Total Loss of the Aircraft;

               (c)  insolvency,   bankruptcy,    reorganization,    arrangement,
                    readjustment    of    debt,    dissolution,     liquidation,
                    receivership,  administration  or similar  proceedings by or
                    against  LESSOR,  LESSEE,  Prior Lessee,  Manufacturer,  the
                    Engine manufacturer or any other Person;

               (d)  invalidity or  unenforceability or lack of due authorization
                    of or other  defect in this  Lease;  (e) failure or delay on
                    the part of any party to perform its obligations  under this
                    Lease; or

               (f)  any other circumstance which but for this provision would or
                    might  have the  effect of  terminating  or in any other way
                    affecting any obligation of LESSEE hereunder.

5.10.2  Nothing in Article 5.10 will be construed to limit  LESSEE's  rights and
remedies in the event of LESSOR's  breach of its warranty of quiet enjoyment set
forth in Article  21.2 or to limit  LESSEE's  rights and remedies to pursue in a
court of law any claim it may have against LESSOR or any other Person; provided,
however, that LESSEE will have no obligation to pay Rent as aforesaid, except in
respect  of Rent  accrued  at the time,  for the  number of days that  LESSEE is
deprived of the  possession  and use of the Aircraft as the result of the breach
by LESSOR of its warranty of quiet enjoyment obligations set forth Article 21.2.


5.11 LESSOR  Performance of LESSEE  Obligation.11  LESSOR  Performance of LESSEE
Obligation.11  LESSOR Performance of LESSEE  Obligation.11 LESSOR Performance of
LESSEE Obligation. If LESSEE fails to make any payment due under this Lease to a
third  party in  connection  with the  Aircraft  or fails to  perform  any other
obligation required under this Lease, LESSOR may (but is not required to) at its
election and without  waiver of its rights  perform such  obligation  and/or pay
such amount. Within five (5) Business Days after written notice to LESSEE of the
amount  paid by LESSOR on behalf of LESSEE,  LESSEE  will  repay such  amount to
LESSOR  together with Default  Interest.  Such payment to LESSOR will constitute
additional Rent payable by LESSEE to LESSOR hereunder. Any payment,  performance
or compliance  by LESSOR of a LESSEE  obligation  hereunder  will not affect the
occurrence or continuance of a Default or Event of Default, as the case may be.

5.12  Consideration  for Rent and other  Amounts.12  Consideration  for Rent and
other Amounts.12  Consideration for Rent and other Amounts.12  Consideration for
Rent and other  Amounts.  The  amount of the Rent and other  payments  contained
herein are in consideration of LESSEE's waiver of warranties and indemnities set
forth in  Articles  8 and 17,  respectively,  and the other  provisions  of this
Lease.


<PAGE>





         ARTICLE 6            DELIVERY CONDITION AND INSPECTION OF AIRCRAFT

6.1 LESSEE  Selection  of  Aircraft.1  LESSEE  Selection  of  Aircraft.1  LESSEE
Selection of Aircraft.1 LESSEE Selection of Aircraft. LESSEE COVENANTS TO LESSOR
THAT LESSEE HAS USED ITS OWN JUDGMENT IN SELECTING  THE AIRCRAFT AND HAS DONE SO
BASED ON ITS SIZE,  DESIGN AND TYPE.  LESSEE  ACKNOWLEDGES  THAT LESSOR IS NOT A
MANUFACTURER, REPAIRER OR SERVICING AGENT OF THE AIRCRAFT.

6.2  Condition at  Delivery.2  Condition at  Delivery.2  Condition at Delivery.2
Condition at Delivery.  LESSOR has advised  LESSEE that at Delivery the Aircraft
will be as set forth in Exhibit A and in the  condition  set forth in Exhibit B.
To the extent that at Delivery  there are  non-substantial  or minor  deviations
from the condition set forth in Exhibit B which do not affect the  airworthiness
of the Aircraft,  LESSEE will  nonetheless  accept the Aircraft  subject to such
deviations  and LESSEE and LESSOR will  mutually  agree to either (i) adjust the
return  conditions of the Aircraft set forth in Article 23  accordingly  or (ii)
arrange for LESSOR to reimburse  LESSEE for the reasonable cost of rectification
of such deviations.

6.3 LESSEE Inspection of Aircraft at Delivery.3 LESSEE Inspection of Aircraft at
Delivery.3  LESSEE  Inspection  of Aircraft at Delivery.3  LESSEE  Inspection of
Aircraft at  Delivery.  LESSEE will have the ground  inspection  and  acceptance
flight  rights set forth in  Exhibit B.  LESSEE  acknowledges  that,  as between
LESSEE  and  LESSOR,  in  accepting  the  Aircraft  LESSEE is relying on its own
inspection  and  knowledge of the Aircraft in  determining  whether the Aircraft
meets the requirements of this Lease.

6.4 Delivery of Aircraft to LESSEE.4  Delivery of Aircraft to LESSEE.4  Delivery
of Aircraft to LESSEE.4 Delivery of Aircraft to LESSEE. Subject to LESSEE having
performed all of the conditions  precedent to Delivery set forth herein,  LESSOR
will deliver the Aircraft to LESSEE at the Delivery Location.  Provided that the
Aircraft is in the  condition  required by Article  6.2,  upon the tender of the
Aircraft by LESSOR to LESSEE,  LESSEE will accept the Aircraft by executing  and
delivering to LESSOR the Estoppel and Acceptance Certificate, whereupon Delivery
will be deemed to have  occurred for all purposes  under this Lease,  including,
but not  limited  to,  the  commencement  of  LESSEE's  obligation  to pay  Rent
hereunder.

6.5 LESSEE  Acceptance of  Aircraft.5  LESSEE  Acceptance  of Aircraft.5  LESSEE
Acceptance of Aircraft.5 LESSEE  Acceptance of Aircraft.  If LESSEE fails to (a)
comply with the  conditions  contained  in  Articles  7.1 and 7.3 so as to allow
Delivery to take place on the  Scheduled  Delivery  Date or (b) take delivery of
the Aircraft  when  properly  tendered  for delivery by LESSOR in the  condition
required  hereunder,  LESSEE will  indemnify  LESSOR for all costs and  expenses
incurred by LESSOR as a result thereof.


<PAGE>





 ARTICLE 7      PRE-DELIVERY, DELIVERY AND POST-DELIVERY DOCUMENTARY AND OTHER
                REQUIREMENTS

7.1  Pre-Delivery  Requirements.  LESSEE  will  deliver  to  LESSOR  each of the
following prior to the Scheduled Delivery Date of the Aircraft:

               (a)  copies of resolutions of the Board of Directors of LESSEE or
                    other written evidence of appropriate corporate action, duly
                    certifying  and   authorizing  the  lease  of  the  Aircraft
                    hereunder and the  execution,  delivery and  performance  of
                    this Lease,  together with an incumbency  certificate  as to
                    the person or persons  authorized  to  execute  and  deliver
                    documents on behalf of LESSEE hereunder; and

               (b)  an opinion of counsel in the form and  substance  of Exhibit
                    F.

               (c)  a   Certificate   of  Insurance   and  Brokers'   Letter  of
                    Undertaking  in the form and  substance of Exhibits C and D,
                    respectively,  from LESSEE's  insurance  brokers  evidencing
                    insurance of the Aircraft in accordance with this Lease from
                    the Delivery Date;

               (d)  a copy of LESSEE's Air Operator's Certificate;

               (e)  a power of attorney empowering LESSEE's representative,  who
                    may be an  officer  or  employee  of  LESSEE,  to accept the
                    Aircraft on behalf of LESSEE;

               (f)  a power of attorney in the form of Exhibit G; and
                                                                  -

               (g)  such other documents as LESSOR may reasonably request.
7.2 LESSOR's Pre-Delivery  Requirements.2  LESSOR's Pre-Delivery  Requirements.2
LESSOR's  Pre-Delivery   Requirements.2   LESSOR's  Pre-Delivery   Requirements.
LESSEE's  obligation to accept  delivery of and lease the Aircraft  hereunder is
subject to satisfaction of the following conditions precedent:

                (a) LESSOR  shall  tender the  Aircraft  including  the Aircraft
                Documentation  to LESSEE at the Delivery  Location in accordance
                with Article 6.2;

                (b) The Aircraft  shall be registered in the U.S. in the name of
                LESSOR  and  the  Aircraft  shall  have a valid  Certificate  of
                Airworthiness and shall be in the condition required in order to
                meet the  operating  requirements  of FAR Part 121;  and (c) All
                Airworthiness  Directives which are issued prior to the Delivery
                Date and which require compliance (either by means of repetitive
                inspections,  modifications  or  terminating  action)  prior  to
                Delivery or within one (1) year after  Delivery will be complied
                with  on  a   terminating   action   basis  at  LESSOR's   cost;
                Airworthiness  Directives which do not have a terminating action
                will be  accomplished  at the  highest  level of  inspection  or
                modification possible.

7.3 Delivery  Requirements.  On the Delivery Date of the  Aircraft,  each of the
following will occur:

7.3.1 If not  previously  done,  LESSEE  will pay to LESSOR  the  first  monthly
installment of Rent in accordance with Article 5.3.2;

7.3.2  LESSEE will  execute and deliver to LESSOR the  Estoppel  and  Acceptance
Certificate covering the Aircraft and dated the Delivery Date.

7.3.3 LESSEE will deliver a certificate  signed by an officer of LESSEE  stating
all of the following:

                (a) the representations  and warranties  contained in Article 20
                are true and accurate on and as of the  Delivery  Date as though
                made on and as of such  date  (except  to the  extent  that such
                representations  and  warranties  relate  solely  to an  earlier
                date); and

                (b) no Default has  occurred  and is  continuing  or will result
                from LESSEE's lease of the Aircraft hereunder.

7.3.4 LESSEE's counsel will deliver an opinion  confirming the matters set forth
in the opinion of counsel  described in Article 7.1 and advising that all filing
and other  requirements  described  in the earlier  opinion of counsel have been
met.

7.3.5 If any Creditor Agreement provides or contemplates that such Creditor will
obtain any right,  title or interest  in an Engine  which is  installed  on such
Creditor's  aircraft,  prior to placing the Engine on such  Creditor's  aircraft
LESSEE  will  deliver to LESSOR an  engines  cooperation  agreement  in form and
substance  acceptable  to  LESSOR  which is  executed  by  LESSEE  and  LESSEE's
Creditors (as defined therein).

7.4  Post-Delivery  Requirements.4  Post-Delivery  Requirements.4  Post-Delivery
Requirements.4  Post-Delivery  Requirements.  Within  fourteen  (14) days  after
Delivery,  if not  previously  provided,  LESSOR will  deliver to LESSEE (a) the
Airframe  Warranty  Assignment  duly  executed  by LESSOR  and  acknowledged  by
Manufacturer and (b) the Engine Warranty Assignment duly executed by LESSOR.


<PAGE>




         ARTICLE 8            DISCLAIMERS


                LESSOR HAS  COMMITTED  TO LESSEE THAT ON THE  DELIVERY  DATE THE
AIRCRAFT  WILL BE IN THE  CONDITION  REQUIRED BY EXHIBIT B. SUCH  COMMITMENT  OR
COVENANT  ON THE PART OF LESSOR  EXPIRES AND THE  DISCLAIMERS  SET FORTH IN THIS
ARTICLE 8 APPLY UPON  LESSEE'S  ACCEPTANCE  OF THE AIRCRAFT AND EXECUTION OF THE
ESTOPPEL AND ACCEPTANCE CERTIFICATE. AFTER SUCH TIME, THEN AS BETWEEN LESSOR AND
LESSEE:

8.1 "As Is,  Where  Is".1  AsIs,WhereIs.1  AsIs,WhereIs.1  AsIs,WhereIs.  LESSEE
AGREES THAT IT IS LEASING THE AIRCRAFT "AS IS, WHERE IS". LESSEE UNCONDITIONALLY
ACKNOWLEDGES AND AGREES THAT NEITHER LESSOR NOR ANY OF ITS OFFICERS,  DIRECTORS,
EMPLOYEES OR REPRESENTATIVES  HAVE MADE OR WILL BE DEEMED TO HAVE MADE ANY TERM,
CONDITION,  REPRESENTATION,  WARRANTY  OR COVENANT  EXPRESS OR IMPLIED  (WHETHER
STATUTORY OR  OTHERWISE)  AS TO (a) THE  CAPACITY,  AGE,  AIRWORTHINESS,  VALUE,
QUALITY,  DURABILITY,  CONFORMITY TO THE PROVISIONS OF THIS LEASE,  DESCRIPTION,
CONDITION (WHETHER OF THE AIRCRAFT, ANY ENGINE, ANY PART THEREOF OR THE AIRCRAFT
DOCUMENTATION),   DESIGN,  WORKMANSHIP,  MATERIALS,  MANUFACTURE,  CONSTRUCTION,
OPERATION,  DESCRIPTION,  STATE, MERCHANTABILITY,  PERFORMANCE,  FITNESS FOR ANY
PARTICULAR  USE OR PURPOSE  (INCLUDING  THE ABILITY TO OPERATE OR  REGISTER  THE
AIRCRAFT  OR USE THE  AIRCRAFT  DOCUMENTATION  IN ANY OR ALL  JURISDICTIONS)  OR
SUITABILITY  OF THE  AIRCRAFT OR ANY PART  THEREOF,  OR THE ABSENCE OF LATENT OR
OTHER  DEFECTS,  WHETHER OR NOT  DISCOVERABLE,  KNOWN OR  UNKNOWN,  APPARENT  OR
CONCEALED,  EXTERIOR OR  INTERIOR,  (b) THE ABSENCE OF ANY  INFRINGEMENT  OF ANY
PATENT,  TRADEMARK,  COPYRIGHT OR OTHER  INTELLECTUAL  PROPERTY RIGHTS,  (c) ANY
IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE,  COURSE OF DEALING OR USAGE
OF TRADE OR (d) ANY OTHER REPRESENTATION OR WARRANTY,  EXPRESS OR IMPLIED,  WITH
RESPECT TO THE AIRCRAFT OR ANY PART THEREOF,  ALL OF WHICH ARE HEREBY  EXPRESSLY
EXCLUDED AND EXTINGUISHED EXCEPT AS EXPRESSLY PROVIDED IN ARTICLE 21 HEREOF.

8.2 Waiver of Warranty  of  Description.2  Waiver of  Warranty of  Description.2
Waiver of  Warranty of  Description.2  Waiver of  Warranty  of  Description.  IN
CONSIDERATION  OF (a) LESSEE'S RIGHTS  HEREUNDER TO INSPECT THE AIRCRAFT AND (b)
LESSOR'S  ASSIGNMENT  TO LESSEE OF ANY EXISTING  AND  ASSIGNABLE  WARRANTIES  OF
MANUFACTURER  AND  THE  ENGINE  MANUFACTURER,  LESSEE  HEREBY  AGREES  THAT  ITS
ACCEPTANCE  OF THE  AIRCRAFT AT DELIVERY AND ITS  EXECUTION  AND DELIVERY OF THE
ESTOPPEL AND ACCEPTANCE  CERTIFICATE  CONSTITUTE LESSEE'S WAIVER OF THE WARRANTY
OF DESCRIPTION, ANY CLAIMS LESSEE MAY HAVE AGAINST LESSOR BASED UPON THE FAILURE
OF THE AIRCRAFT TO CONFORM WITH SUCH  DESCRIPTION  AND ANY AND ALL RIGHTS IT MAY
HAVE TO THE REMEDIES SET FORTH IN SECTIONS 10508 THROUGH 10522 OF THE CALIFORNIA
COMMERCIAL  CODE.  EVEN IF AT ANY TIME THE FAILURE OF THE AIRCRAFT TO CONFORM TO
SUCH DESCRIPTION SUBSTANTIALLY IMPAIRS THE VALUE AND UTILITY OF THE AIRCRAFT AND
EITHER (i) LESSEE  ACCEPTED THE AIRCRAFT BASED ON A REASONABLE  ASSUMPTION  THAT
THE NONCONFORMITY  WOULD BE CURED AND IT WAS NOT SEASONABLY CURED OR (ii) LESSEE
ACCEPTED  THE  AIRCRAFT  WITHOUT  DISCOVERING  THE  NONCONFORMITY  BUT  LESSEE'S
ACCEPTANCE OF THE AIRCRAFT WAS REASONABLY INDUCED EITHER BY LESSOR'S  ASSURANCES
OR BY THE  DIFFICULTY  OF  DISCOVERING  ANY DEFECT PRIOR TO  ACCEPTANCE,  LESSEE
AGREES NOT TO LOOK TO LESSOR FOR DAMAGES OR RELIEF ARISING OUT OF THE FAILURE OF
THE AIRCRAFT TO CONFORM TO SUCH DESCRIPTION.

8.3 LESSEE Waiver.3 LESSEE Waiver.3 LESSEE Waiver.3 LESSEE Waiver. LESSEE hereby
waives as between  itself and  LESSOR  and  agrees not to seek to  establish  or
enforce  any rights and  remedies,  express or  implied  (whether  statutory  or
otherwise)  against  LESSOR  or the  Aircraft  relating  to  any of the  matters
mentioned in Articles 8.1 or 8.2 and the leasing thereof by LESSOR to LESSEE.

8.4 Conclusive  Proof.4  Conclusive Proof.4 Conclusive Proof.4 Conclusive Proof.
DELIVERY BY LESSEE TO LESSOR OF THE ESTOPPEL AND ACCEPTANCE  CERTIFICATE WILL BE
CONCLUSIVE  PROOF AS BETWEEN LESSOR AND LESSEE THAT LESSEE'S  TECHNICAL  EXPERTS
HAVE  EXAMINED AND  INVESTIGATED  THE  AIRCRAFT,  INCLUDING  THE ENGINES AND THE
AIRCRAFT  DOCUMENTATION AND THAT EACH IS IN THE CONDITION REQUIRED HEREUNDER AND
WITHOUT DEFECT,  EXCEPT AS SPECIFICALLY SET FORTH IN SUCH CERTIFICATE,  (WHETHER
OR NOT  DISCOVERABLE  AT DELIVERY)  AND OTHERWISE IN EVERY WAY  SATISFACTORY  TO
LESSEE.

8.5 No LESSOR  Liability for Losses.5 No LESSOR Liability for Losses.5 No LESSOR
Liability for Losses.5 No LESSOR Liability for Losses. LESSEE agrees that LESSOR
will not be liable to LESSEE,  any sublessee or any Person,  whether in contract
or tort and however  arising,  for any cost,  loss or damage  (consequential  or
otherwise)  arising out of the condition of the Aircraft,  whether or not due in
whole or in part to an act or  omission or the active or passive  negligence  of
LESSOR.

8.6 No  Liability  to Repair or Replace.6 No Liability to Repair or Replace.6 No
Liability to Repair or Replace.6 No Liability to Repair or Replace.  LESSOR will
not be liable for any expense in repairing or replacing any item of the Aircraft
or be liable to supply  another  aircraft or any item in lieu of the Aircraft or
any Part  thereof  if the  same is  lost,  confiscated,  damaged,  destroyed  or
otherwise rendered unfit for use.

8.7 No Waiver  Nothing  in this  Article 8 or  elsewhere  in this  Lease will be
deemed to be a waiver by LESSEE of any rights it may have against  Manufacturer,
the Engine manufacturer or any other Person.


<PAGE>



         ARTICLE 9            MANUFACTURERS' AND VENDORS' WARRANTIES


9.1 Warranties.1 Warranties.1  Warranties.1 Warranties.  Effective upon Delivery
LESSOR will  assign to LESSEE for the  duration of the Lease Term the benefit of
all warranties and indemnities  given to LESSOR by  Manufacturer  and the Engine
manufacturer  pursuant  to the  Airframe  Warranty  Assignment  and  the  Engine
Warranty  Assignment,  respectively.  Effective on the Delivery  Date, all other
assignable vendor warranties with respect to the Aircraft are hereby assigned by
LESSOR to LESSEE.

9.2  Non-Assignable   Warranties.2  Non-Assignable  Warranties.2  Non-Assignable
Warranties.2  Non-Assignable  Warranties.  To the extent  that any  warranty  or
indemnity  given to  LESSOR by  Manufacturer  and  others  with  respect  to the
Aircraft  cannot be  assigned,  LESSEE  will be  entitled to take such action to
enforce such  warranty or indemnity in the name of LESSOR  against  Manufacturer
and such other parties as LESSEE sees fit, but subject to LESSEE first  ensuring
that LESSOR is  indemnified  and secured to  LESSOR's  satisfaction  against all
losses,  damage,  costs, expenses and liabilities thereby incurred or reasonably
likely to be incurred.

9.3   Reassignment.3   Reassignment.3   Reassignment.3   Reassignment.   On  the
Termination  Date, the benefit of any warranty assigned by LESSOR to LESSEE will
be reassigned  automatically  to LESSOR or its designee.  LESSEE's  rights under
such warranties  (including  LESSEE's  claims and rights to payment  thereunder)
will  revert  to  LESSOR  during  any  period  in which an Event of  Default  is
continuing.  LESSEE  at its own cost and  expense  will do all such  things  and
execute such documents as may be reasonably required for this purpose.

9.4 Warranty Claims. LESSEE will diligently and promptly pursue any valid claims
it may have against  Manufacturer  and others under such warranties with respect
to the Aircraft and will provide notice of the same to LESSOR.


<PAGE>





         ARTICLE 10           OPERATION OF AIRCRAFT


10.1 Costs of  Operation.1  Costs of Operation.1  Costs of Operation.1  Costs of
Operation.  LESSEE will pay all costs  incurred in the operation of the Aircraft
during the Lease Term,  for profit or  otherwise,  including the costs of flight
crews, cabin personnel, fuel, oil, lubricants,  maintenance, insurance, storage,
landing and navigation fees, airport charges,  passenger service and any and all
other expenses of any kind or nature, directly or indirectly, in connection with
or related to the use, movement and operation of the Aircraft.  The obligations,
covenants and liabilities of LESSEE under this paragraph arising prior to return
of  the   Aircraft   to  LESSOR   will   continue  in  full  force  and  effect,
notwithstanding the termination of this Lease or expiration of the Lease Term.

10.2  Compliance  with  Laws.2  Compliance  with Laws.2  Compliance  with Laws.2
Compliance with Laws. Except as expressly provided in this Lease,  LESSEE agrees
throughout  the Lease Term to maintain  operational  control of the Aircraft and
use the Aircraft in accordance with applicable Laws of the State of Registration
and of any country,  state,  territory or municipality into or over which LESSEE
may operate.  LESSEE will not employ, suffer or cause the Aircraft to be used in
any  business  which is  forbidden  by Law or in any manner  which may render it
liable to condemnation,  destruction, seizure, or confiscation by any authority.
LESSEE will not permit the Aircraft to fly to any airport or country if so doing
would cause  LESSEE to be in violation  of any Law  applicable  to LESSEE or the
Aircraft.

10.3  Training.  LESSEE will not use the Aircraft for testing or for training of
flight  crew  members  other than  LESSEE  crew  members and it will not use the
Aircraft for training any more than it utilizes for training the other  B737-300
aircraft in its fleet.

10.4 No Violation of Insurance  Policies.4 No Violation of Insurance  Policies.4
No Violation of Insurance Policies.4 No Violation of Insurance Policies.  LESSEE
will not use or permit the  Aircraft to be used in any manner or for any purpose
which is not covered by the insurance  policies  LESSEE is required to carry and
maintain  as set  forth in this  Lease.  LESSEE  will not carry any goods of any
description  excepted  or  exempted  from such  policies  or do any other act or
permit to be done anything  which could  reasonably be expected to invalidate or
limit any such insurance policy.

10.5 Flight Charges.5  Flight Charges.5 Flight Charges.5 Flight Charges.  LESSEE
will pay promptly when due all enroute  navigation  charges,  navigation service
charges and all other  charges  payable by LESSEE for the use of or for services
provided  at any  airport,  whether  in  respect  of the  Aircraft  or any other
aircraft of LESSEE,  and will  indemnify and hold LESSOR  harmless in respect of
the same. This indemnity will continue in full force and effect  notwithstanding
the  termination or expiration of the Lease Term for any reason or the return of
the Aircraft.


<PAGE>





         ARTICLE 11           SUBLEASES

11.1 No Sublease  without LESSOR  Consent.1 No Sublease without LESSOR Consent.1
No Sublease without LESSOR Consent.1 No Sublease without LESSOR Consent.  LESSEE
WILL  NOT  SUBLEASE  OR  PART  WITH  POSSESSION  OF  THE  AIRCRAFT  (EXCEPT  FOR
MAINTENANCE  AND REPAIR) AT ANY TIME WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR
(NOT  TO BE  UNREASONABLY  WITHHELD  OR  DELAYED)  EXCEPT  FOR A  SUBLEASE  TO A
PERMITTED SUBLESSEE PRE-APPROVED IN ARTICLE 11.1.1 BELOW, AND IN ACCORDANCE WITH
SUCH  REQUIREMENTS  AS MAY FROM TIME TO TIME BE AGREED IN WRITING BETWEEN LESSOR
AND  LESSEE.  The wet  leasing of the  Aircraft  during the Lease Term (in which
LESSEE and its crews retain  operational  control of the  Aircraft)  will not be
considered a sublease of the Aircraft.

11.1.1  LESSEE may sublease the Aircraft  without  LESSOR's  prior consent to an
operator based in the U.S. which is then currently a lessee of LESSOR,  provided
such operator is not then in default under the aircraft lease agreement  between
such  operator and LESSOR  ("Permitted  Sublessee").  Any such  sublease will be
subject to the  provisions  of this  Article 11,  including  the  provisions  of
Article 11.2 below.

11.2 LESSOR Costs.2  LESSOR  Costs.2  LESSOR  Costs.2 LESSOR Costs.  LESSEE will
indemnify LESSOR on demand for all reasonable and actual out-of-pocket  expenses
(including  legal fees) incurred in connection  with LESSOR's  assessment of the
subleasing  proposal  (whether  or not  LESSOR's  consent  to such  sublease  is
ultimately  given),  review of the sublease  documentation and implementation of
the sublease.

11.3 Any Approved Sublease.3 Any Approved Sublease.3 Any Approved Sublease.3 Any
Approved Sublease. Any sublease to a Permitted Sublessee, and any other sublease
approved by LESSOR will be for a term no greater than the  remaining  Lease Term
and contain provisions  consistent with this Lease protecting  LESSOR's title to
the  Aircraft,   providing   appropriate  LESSOR   indemnities,   regarding  the
maintenance  and repair  standards for the Aircraft,  concerning  the insurances
which will be carried by the sublessee and the circumstances  which constitute a
Total Loss of the Aircraft. Any such sublease will be subject and subordinate to
this Lease. In its sole discretion,  LESSOR may require an opinion of counsel in
connection  with  such  sublease,  including  LESSOR's  right to  repossess  the
Aircraft in the event of an Event of Default  hereunder  or under the  sublease.
LESSEE  will not amend  the terms of any  approved  sublease  without  the prior
written   consent  of  LESSOR,   which  will  not  be   unreasonably   withheld.
Notwithstanding  the  foregoing,  LESSOR agrees that even if an Event of Default
has  occurred and is  continuing  hereunder,  so long as the approved  sublessee
fully performs all of the obligations of LESSEE hereunder and agrees to do so on
a going  forward  basis  and  there is no risk to  LESSOR  of an  impairment  to
LESSOR's unencumbered title to the Aircraft, LESSOR will not interfere with such
sublessee's quiet use and enjoyment of the Aircraft.

11.4 Assignment of Sublease. Any approved sublease will be assigned to LESSOR as
security. LESSEE will deliver the original counterpart of the sublease to LESSOR
and make any filings necessary to protect LESSOR's security interest.

11.5 Continued  Responsibility of LESSEE.5 Continued  Responsibility of LESSEE.5
Continued  Responsibility of LESSEE.5 Continued Responsibility of LESSEE. LESSEE
will continue to be responsible for  performance of its  obligations  under this
Lease during any period of sublease.


<PAGE>



         ARTICLE 12           MAINTENANCE OF AIRCRAFT


12.1 General Obligation

12.1.1 During the Lease Term and until the Aircraft is returned to LESSOR in the
condition  required  by this  Lease,  LESSEE  alone has the  obligation,  at its
expense, to maintain and repair the Aircraft,  Engines, and all of the Parts (a)
in accordance with the Maintenance Program, (b) in accordance with the rules and
regulations of the Aviation  Authority,  (c) in accordance  with  Manufacturer's
type  design,  (d) in  accordance  with any other  regulations  or  requirements
necessary  in order to maintain a valid  Certificate  of  Airworthiness  for the
Aircraft and meet the  requirements  at all times during the Lease Term and upon
return of the  Aircraft  to LESSOR for  issuance  of a Standard  Certificate  of
Airworthiness  for transport  category  aircraft issued by the FAA in accordance
with FAR Part 21 (except  during those  periods when the Aircraft is  undergoing
maintenance  or repairs as required or permitted by this Lease and to the extent
in conflict with the requirements of the Aviation Authority) and (e) in the same
manner and with the same care as used by LESSEE with respect to similar aircraft
and engines operated by LESSEE and without in any way discriminating against the
Aircraft.

12.1.2 No Engine will remain in an  unserviceable  condition for more than three
(3) months.

12.1.3 LESSEE will not enter into any Engine  maintenance  cost per flight hour,
power-by-the-hour  or similar  agreement with Engine  manufacturer  or any other
Engine  maintenance  facility or  organization  without  LESSOR's  prior written
consent, which consent shall not be unreasonably withheld or delayed.

12.2 Specific  Obligations.  Without limiting  Article 12.1,  LESSEE agrees that
such maintenance and repairs will include but will not be limited to each of the
following specific items:

                (a)    performance in accordance with the Maintenance Program of
                all routine and non-routine maintenance work;

                (b)   incorporation   in  the  Aircraft  of  all   Airworthiness
                Directives, all alert service bulletins of Manufacturer,  Engine
                manufacturer   and  other  vendors  or  manufacturers  of  Parts
                incorporated  on the  Aircraft and any service  bulletins  which
                must be  performed in order to maintain  the  warranties  on the
                Aircraft, Engines, and Parts;

                (c) incorporation in the Aircraft of all other service bulletins
                of Manufacturer, the Engine manufacturer and other vendors which
                LESSEE  schedules to adopt within the Lease Term for the rest of
                its B737  aircraft  fleet.  It is the intent of the parties that
                the  Aircraft  will  not be  discriminated  against  in  service
                bulletin  compliance  (including  method of compliance) or other
                maintenance  matters  compared  with the rest of  LESSEE's  B737
                aircraft fleet. LESSEE will not discriminate against the Engines
                with respect to Overhaul build standards and  life-limited  part
                replacements;

                (d) incorporation in the Maintenance Program for the Aircraft of
                a corrosion  prevention  and control  program as  recommended by
                Manufacturer,  the  Aviation  Authority  and  the  FAA  and  the
                correction  of  any   discrepancies   in  accordance   with  the
                recommendations   of  Manufacturer  and  the  Structural  Repair
                Manual.  In  addition,  all  inspected  areas  will be  properly
                treated with corrosion inhibitor as recommended by Manufacturer;

                (e) maintaining in English and keeping in an up-to-date status
                the records and historical documents set forth in Exhibit L;

                (f)  maintaining   historical  records,   in  English,   for  on
                condition, condition-monitored, hard time and life-limited Parts
                (including  tags from the  manufacturer of such Part or a repair
                facility  which evidence that such Part is new or overhauled and
                establish  authenticity,  total time in  service  and time since
                overhaul  for such Part),  the hours and cycles the Aircraft and
                Engines operate and all maintenance and repairs performed on the
                Aircraft; and

                (g)  properly   documenting  all  repairs,   Modifications   and
                alterations   and  the  addition,   removal  or  replacement  of
                equipment,  systems or components  in accordance  with the rules
                and  regulations of the Aviation  Authority and reflecting  such
                items in the Aircraft Documentation. In addition, all repairs to
                the Aircraft will be  accomplished in accordance with either (i)
                Manufacturer's  Structural Repair Manual (or FAA-approved Repair
                Approval  Sheets)  or (ii)  FAA-approved  data (such as FAA Form
                8110 or equivalent).  All  Modifications and alterations will be
                accomplished in accordance with  FAA-approved  data (such as FAA
                Form 8110 or equivalent).

12.3 Replacement of Parts

12.3.1  LESSEE,  at its own cost and expense,  will  promptly  replace all Parts
which may from time to time become worn out, lost,  stolen,  destroyed,  seized,
confiscated, damaged beyond repair or rendered unfit or beyond economical repair
(BER) for use for any reason.  In the ordinary course of  maintenance,  service,
repair,  overhaul or testing,  LESSEE may remove any Part  provided  that LESSEE
replaces such Part as promptly as practicable. All replacement Parts will (a) be
free and clear of all Security Interests (except Permitted Liens) of any kind or
description,  (b) be in airworthy  condition and of at least  equivalent  model,
service bulletin and  modification  status and have a value and utility at least
equal to the Parts replaced,  assuming such replaced Parts were in the condition
and repair  required to be maintained by the terms hereof and (c) have a current
"serviceable  tag" of the  manufacturer or maintenance  facility  providing such
items to LESSEE,  indicating that such Parts are new, serviceable or Overhauled.
So long as a substitution meets the requirements of the Maintenance  Program and
the Aviation Authority,  LESSEE may substitute for any Part a part that does not
meet the  requirements  of the foregoing  sentence if a complying Part cannot be
procured or installed  within the  available  groundtime  of the Aircraft and as
soon as practicable the noncomplying part is removed and replaced by a complying
Part.  With respect to  replacement  modules in an Engine,  LESSEE will use best
reasonable  efforts to ensure  that any  replacement  module  will not have been
previously  operated at a higher thrust rating than the replaced module provided
that in all  circumstances  life-limited  Parts in such replacement  module will
have no less life remaining than the life-limited Parts in the replaced module.

12.3.2  All Parts  removed  from the  Airframe  or any  Engine  will  remain the
property of LESSOR and subject to this Lease no matter where located, until such
time as such Parts have been replaced by Parts (which have been  incorporated or
installed  in or  attached  to the  Airframe  or such  Engine)  which  meet  the
requirements for replacement Parts specified above and title to such replacement
Parts has passed to LESSOR under the Laws of the State of  Registration  and lex
situs. To the extent  permitted by the Laws of the State of Registration and the
lex situs it is the intent of LESSOR and LESSEE  that  without  further  act and
immediately  upon any  replacement  Part  becoming  incorporated,  installed  or
attached  to the  Airframe  or an  Engine  as above  provided,  (a) title to the
removed  Part will  thereupon  vest in  LESSEE,  free and clear of all rights of
LESSOR, (b) title to the replacement Part will thereupon vest in LESSOR free and
clear of all rights of LESSEE (other than LESSEE's  rights under this Lease) and
(c) such  replacement Part will become subject to this Lease and be deemed to be
a Part  hereunder  to the same extent as the Parts  originally  incorporated  or
installed in or attached to the Airframe or such Engine.

12.4 Removal of Engines

12.4.1  If an Engine is  removed  for  testing,  service,  repair,  maintenance,
Overhaul work,  alterations or  modifications,  title to such Engine will at all
times remain vested in LESSOR.

12.4.2  LESSEE will be entitled to remove any of the Engines  from the  Aircraft
and install  another  engine or engines on the  Aircraft,  provided  that LESSEE
complies with each of the following obligations:

                (a) the  insurance  requirements  set  forth  in  Article 18 and
                Exhibit C are in place;


                (b) LESSEE ensures that the identification plates referred to in
                Article  15 are not  removed  from any Engine  upon such  Engine
                being detached from the Aircraft; and

                (c)  title to the  Engine  remains  with  LESSOR  free  from all
                Security  Interests  (except  Permitted Liens) regardless of the
                location of the Engine or its  attachment to or detachment  from
                the Aircraft.

12.5  Pooling of Engines and Parts.5  Pooling of Engines and Parts.5  Pooling of
Engines and Parts.5 Pooling of Engines and Parts. LESSEE may subject the Engines
and  Parts  to  normal   interchange  or  pooling  agreements  with  responsible
international  scheduled  commercial  air  carriers  customary  in  the  airline
industry and entered into by LESSEE in the ordinary  course of its business with
respect  to its  entire  B737  fleet so long as (a) in the case of pooling of an
Engine,  such  Engine is  returned  to LESSEE  within  four (4)  months,  (b) no
transfer  of title to the  Engine  occurs,  (c) all  other  terms of this  Lease
continue to be observed with respect to the Engines or Parts,  including but not
limited  to  Articles  8, 10,  12,  14,  15,  16,  17, 18 and 19 and (d)  LESSEE
continues to be fully  responsible  to LESSOR for the  performance of all of its
obligations hereunder.

12.6  Installation  of Engines on other  aircraft.6  Installation  of Engines on
other  aircraft.6  Installation of Engines on other  aircraft.6  Installation of
Engines on other aircraft. Any Engine removed from the Aircraft may be installed
on another aircraft in LESSEE's fleet which utilizes engines of the same type as
the Engine only if one of the situations described in this Article 12.6 exists:

12.6.1  LESSEE or LESSOR has title to such other  aircraft free and clear of all
Security Interests (except Permitted Liens).

12.6.2 LESSEE,  LESSOR and all of the Creditors of LESSEE of such aircraft enter
into  an  engines  cooperation   agreement  in  form  and  substance  reasonably
acceptable  to LESSOR in which  each party  agrees to  recognize  one  another's
rights in the engines.  LESSEE will  reimburse  LESSOR and  LESSOR's  Lender for
their reasonable  attorneys' fees and costs in negotiating and finalizing engine
cooperation agreement arrangements with LESSEE and its Creditors.

12.6.3  Such other  aircraft  is subject to a Creditor  Agreement  (but no other
Security  Interests  except  Permitted  Liens)  which by its terms  expressly or
effectively  states that such Creditor and its  successors  and assigns will not
acquire  any right,  title or  interest  in any Engine by reason of such  Engine
being installed on such aircraft. LESSEE hereby agrees that if LESSOR's title to
an Engine is in fact impaired under any such Creditor Agreement, such impairment
will be deemed to be a Total Loss of such Engine and the  provisions  of Article
19.5  will  apply.  To the  extent  another  Creditor  Agreement  contains  such
provisions,  then LESSOR  hereby  agrees for the benefit of the Creditor of such
Creditor  Agreement  that  neither  LESSOR nor its  successors  or assigns  will
acquire or claim any right,  title or interest in any engine in which  LESSEE or
another  Creditor has an interest as a result of such engine being  installed on
the Airframe.

12.7 Engine Thrust Rating.7 Engine Thrust Rating.7 Engine Thrust Rating.7 Engine
Thrust  Rating.  If an Engine is  utilized  by LESSEE on the  Aircraft or on any
other  airframe  (or if the Engine is utilized by any  sublessee or user under a
pooling  arrangement  in accordance  with this Lease) at a thrust rating greater
than the  thrust  rating set forth in Exhibit A,  LESSEE  will  promptly  notify
LESSOR  and the  Engine  Reserves  amounts  set forth in  Article  5.4.1 will be
increased in an amount  proportional to the accelerated rate of deterioration of
the Engine resulting from the increased thrust rating.

12.8 Modifications

12.8.1 *

12.8.2 LESSOR may review LESSEE's proposed designs, plans,  engineering drawings
and  diagrams,  and flight and  maintenance  manual  revisions  for any proposed
Modification.  If requested by LESSOR,  LESSEE will furnish  LESSOR (at LESSEE's
expense) with such documents in final form and any other  documents  required by
Law, as a result of such  Modification.  All  Modifications  incorporated on the
Aircraft will be properly documented in the Aircraft  Documentation and be fully
approved by the Aviation Authority.

12.8.3  Notwithstanding  any other provision of this Lease, no Modification will
be made which has the effect of decreasing  the utility or value of the Aircraft
or invalidating any warranty applicable to the Aircraft.

12.8.4 No Modification  will be made by LESSEE if an Event of Default exists and
is continuing hereunder.

12.8.5 Unless otherwise agreed by LESSOR in writing, all permanent or structural
Modifications   will  forthwith  become  a  part  of  the  Aircraft  and  LESSEE
relinquishes to LESSOR all rights and title thereto.  However, all (i) temporary
and  non-structural  Modifications  and (ii) all Passenger  Service Equipment so
long as such equipment can be removed  without  causing  material  damage to the
Aircraft,  will remain the  property  of LESSEE  and,  at  LESSOR's  request and
LESSEE's  cost,  will be  removed  from  the  Aircraft  prior to  return  of the
Aircraft, with LESSEE restoring the Aircraft to the condition it was in prior to
the  Modification  or installation  of Passenger  Service  Equipment in a manner
cosmetically  acceptable  to  LESSOR.  Notwithstanding  the  foregoing,  no such
removal will be permitted  without LESSOR's  permission during the occurrence of
an Event of Default hereunder and immediately upon the occurrence of an Event of
Default  hereunder,  without the  requirement of any further act or notice,  all
right,  title and interest in such Modifications and Passenger Service Equipment
will immediately vest in LESSOR;  provided however, that in the event of such an
Event of Default,  with respect to any Passenger Service Equipment,  LESSOR will
use  commercially  reasonable  efforts to reach  agreement  with any  vendors or
suppliers  holding title to the Passenger  Service Equipment in order to protect
the mutual interests of LESSOR and such parties.

12.8.6  LESSOR  will  bear no  liability  for the cost of  Modifications  of the
Aircraft whether in the event of grounding or suspensions of  certification,  or
for any other cause.

12.9  Performance  of Work  by  Third  Parties.9  Performance  of Work by  Third
Parties.9  Performance of Work by Third  Parties.9  Performance of Work by Third
Parties. Whenever maintenance and repair work on the Aircraft or Engines will be
regularly  performed  by a Person  other than  LESSEE,  such  Person  will be an
FAA-authorized repair station.

12.10 Reporting Requirements.

12.10.1  Commencing  with a report  furnished ten (10) days after the end of the
calendar month in which Delivery occurs, LESSEE will furnish to LESSOR a Monthly
Report in English in the form attached  hereto as Exhibit K. Each Monthly Report
will be  furnished  within ten (10) days after the end of each  calendar  month,
except  that the  Monthly  Report  pertaining  to the last month (or any portion
thereof) of the Lease Term will be furnished to LESSOR on the Termination Date.

12.10.2 Commencing with the second scheduled "C" check for the Aircraft,  LESSEE
will provide LESSOR with a Technical  Evaluation  Report for the Aircraft in the
form and substance of Exhibit M, as revised.  Such Technical  Evaluation  Report
will be furnished  within three (3) Business Days after the  completion of every
second "C" check performed  during the Lease Term and at other times  reasonably
requested by LESSOR.

12.11 Information Regarding Maintenance Program. LESSEE will provide LESSOR with
a copy of or information  regarding the Maintenance Program for the Aircraft, as
reasonably requested by LESSOR.

12.12 LESSOR Rights to Inspect  Aircraft.12 LESSOR Rights to Inspect Aircraft.12
LESSOR  Rights to Inspect  Aircraft.12  LESSOR  Rights to Inspect  Aircraft.  On
reasonable notice,  LESSOR and/or its authorized agents or representatives  will
have the right to inspect the Aircraft and Aircraft Documentation. LESSOR agrees
that such  requests will be  coordinated  with LESSEE so as to cause the minimum
practical  disturbance to LESSEE's operation or its personnel.  LESSEE agrees to
cooperate  with  LESSOR  in  making  the  Aircraft  and  Aircraft  Documentation
available to such authorized  technical teams.  LESSOR will have no duty to make
any such  inspection and will not incur any liability or obligation by reason of
(and  LESSEE's  indemnity   obligations   pursuant  to  Article  17  will  apply
notwithstanding)  not making any such  inspection or by reason of any reports it
receives or any reviews it may make of the Aircraft records.


<PAGE>




         ARTICLE 13           USE OF RESERVES

13.1  Airframe  Reserves.1  Airframe  Reserves.1  Airframe  Reserves.1  Airframe
Reserves.  The Airframe Reserves payable by LESSEE hereunder will be retained by
LESSOR as LESSEE's contribution toward payment of the cost of performance of the
"C7"inspection and the 22,400 flight hour structural  inspection of the Aircraft
pursuant to the MPD. LESSEE and LESSOR  acknowledge and agree that such "C7" and
22,400 flight hour structural  inspection  tasks will not be due to be performed
until after return of the  Aircraft by LESSEE.  As a result,  the parties  agree
that the Airframe  Reserves are not  reimburseable  to LESSEE hereunder and that
LESSOR will retain all Airframe Reserves paid by LESSEE;  provided,  however, in
the event of the Total Loss of the Aircraft, fifty percent (50%) of the Airframe
Reserves held by LESSOR will be retained by LESSOR and the remaining  portion of
such Reserves will be paid to LESSEE in accordance with Article 19.9.

13.2 Engine Reserves

13.2.1  Subject to the  limitations  set forth in Article  13.2.2,  LESSOR  will
reimburse  LESSEE from the Engine  Reserves for the actual cost  associated with
performance  restoration,  the  replacement  of life limited  Parts or permanent
repair of on-condition  Parts in the Basic Engine during  completed  Engine shop
visits (i.e.  heavy  maintenance  visits)  requiring  off-wing  teardown  and/or
disassembly,  with work performed for all other causes excluded, including those
causes set forth in Article 13.5. Subject to Article 16.1 and excluding exchange
fees and handling,  packaging and shipping charges,  reimbursement for an Engine
will be made up to the amount in the Engine  Reserves  applicable to such Engine
at the time of removal of such Engine.

13.2.2  Twenty-three  percent  (23%) of the per hour Engine  Reserve  payable by
LESSEE for an Engine will be designated and will be reimbursable  solely for the
replacement  of life limited  parts in such Engine.  With respect only to Engine
Reserves applicable to performance restoration of an Engine,  reimbursement will
be  further  limited as to each  module of such  Engine in  accordance  with the
following  percentages of the remaining  total amount in the Engine Reserves for
such Engine:

18%  Fan & Accessory Gearbox
22%  High Pressure Compressor Module
44%  High Pressure Turbine Module
16%  Low Pressure Turbine Module

13.2.3 LESSEE will not enter into any Engine  maintenance  cost per flight hour,
power-by-the-hour  or similar  agreement with Engine  manufacturer  or any other
Engine  maintenance  facility or  organization  without  LESSOR's  consent which
consent shall not be unreasonably withheld or delayed.

13.3 Landing Gear  Reserves.3  Landing Gear  Reserves.3  Landing Gear Reserves.3
Landing  Gear  Reserves.  LESSOR will  reimburse  LESSEE  from the Landing  Gear
Reserves  for the actual  cost of an Overhaul  of the  Landing  Gear,  up to the
amount remaining in the Landing Gear Reserves, with work performed for all other
causes excluded, including those causes set forth in Article 13.5.

13.4  Reimbursement.  LESSEE will be entitled to  reimbursement  from the Engine
Reserves  and the Landing  Gear  Reserves  after the work is  completed  and the
Engine or Landing Gear has left the repair  agency,  by submitting  invoices and
proper documentation within six (6) months after completion of the work. For the
Engine,  proper  documentation  includes a description of the reason for removal
(if removed),  a shop teardown  report,  a shop findings  report if an Engine is
removed  (or  an  equivalent  report  if an  Engine  is  not  removed),  a  full
description of the workscope and complete disk records for the Engine both prior
to and after the repair. Both the invoice supplied by the Engine repair facility
and that  submitted  by LESSEE to LESSOR  with  respect to an Engine  will state
whether or not credits were provided due to life remaining on any removed Engine
Parts and the amount of any such credits will be itemized. For the Landing Gear,
proper  documentation  includes the total calendar time, hours and cycles on the
Landing  Gear  both  prior to and  after the  Overhaul,  a copy of the  complete
Overhaul  report which includes a life limited  component list and a description
of all work performed on the Landing Gear assembly.

13.5  Reimbursement   Adjustment.5   Reimbursement   Adjustment.5  Reimbursement
Adjustment.5  Reimbursement  Adjustment. By way of example, among the exclusions
from reimbursement are those items resulting from repairs covered by LESSEE's or
a third  party's  insurance,  (deductibles  being for the  account of LESSEE) or
warranties or required as a result of an Airworthiness Directive, manufacturer's
service  bulletin,  faulty  maintenance or  installation,  improper  operations,
misuse,  neglect,  accident,  incident,  ingestion,  or other accidental  cause.
Reimbursement  from the Reserves will not be available for the APU, quick engine
change (QEC) Parts, thrust reversers, or any of their associated components. All
invoices  subject to  reimbursement  from LESSOR will be reduced (by  adjustment
between  LESSEE and LESSOR  retroactively  if necessary)  by the actual  amounts
received  by LESSEE on account of such work from  responsible  third  parties or
other  sources,   such  as  insurance   proceeds,   manufacturer's   warranties,
guarantees, concessions and credits (including, with respect to Engines, credits
due to life remaining on any removed Engine Parts).

13.6 Costs in Excess of Reserves.6 Costs in Excess of Reserves.6 Costs in Excess
of  Reserves.6  Costs in Excess of  Reserves.  LESSEE  will be  responsible  for
payment of all costs in excess of the amounts  reimbursed  hereunder.  If on any
occasion  the balance in the Engine  Reserves  or Landing  Gear  Reserves  for a
particular  Engine or Landing  Gear (at the time of  removal,  in the case of an
Engine or the Landing Gear) is insufficient to satisfy a claim for reimbursement
in respect of such Engine or the Landing Gear, as applicable,  the shortfall may
not  be  carried   forward  or  made  the  subject  of  any  further  claim  for
reimbursement.

13.7  Reimbursement  after Termination  Date.7  Reimbursement  after Termination
Date.7  Reimbursement  after Termination Date.7  Reimbursement after Termination
Date.  LESSEE may not  submit  any  invoice  for  reimbursement  from the Engine
Reserves or Landing Gear Reserves after the Termination  Date unless on or prior
to such date LESSEE has notified LESSOR in writing that such outstanding invoice
will be submitted after the Termination Date and the anticipated  amount of such
invoice.  So long as LESSEE has provided such notice to LESSOR,  LESSEE may then
submit  such  outstanding  invoice at any time  within six (6) months  after the
Termination Date. In the event of the Total Loss of the Aircraft,  fifty percent
(50%) of the unreimbursed Reserves held by LESSOR will be retained by LESSOR and
the remaining  portion of the Reserves will be paid to LESSEE in accordance with
Article 19.9.


<PAGE>


         ARTICLE 14           TITLE AND REGISTRATION

14.1 Title to the Aircraft  During  Lease  Term.1  Title to the Aircraft  During
Lease  Term.1  Title to the  Aircraft  During Lease Term.1 Title to the Aircraft
During Lease Term.  Title to the Aircraft  will be and remain  vested in LESSOR.
LESSOR and LESSEE  intend this Lease to be a "true  lease".  LESSEE will have no
right, title or interest in the Aircraft except as provided in this Lease.

14.2  Registration  of Aircraft.2  Registration  of Aircraft.2  Registration  of
Aircraft.2  Registration  of Aircraft.  LESSOR at its sole cost and expense will
register and maintain  registration of the Aircraft in the name of LESSOR at the
register of aircraft in the State of  Registration.  LESSEE will  cooperate with
LESSOR  and will from time to time take all other  steps  then  required  by Law
(including  the Geneva  Convention if  applicable)  or as LESSOR may  reasonably
request to protect and perfect LESSOR's  interest in the Aircraft and this Lease
in the State of  Registration  or in any other  jurisdictions  in or over  which
LESSEE may operate the Aircraft.

14.3 Filing of this Lease.3 Filing of this Lease.3 Filing of this Lease.3 Filing
of this  Lease.  To the  extent  permitted  by Law and in  accordance  with  the
requirements  of the Law from time to time,  LESSEE at its sole cost and expense
will cause this Lease to be kept,  filed,  recorded and refiled or rerecorded in
the State of Registration and in any other offices necessary to protect LESSOR's
rights hereunder as reasonably requested by LESSOR.

14.4  Evidence  of  Registration  and  Filings.4  Evidence of  Registration  and
Filings.4  Evidence of Registration  and Filings.4  Evidence of Registration and
Filings. As LESSOR may reasonably request from time to time, LESSEE will furnish
to LESSOR an opinion of counsel or other  evidence  reasonably  satisfactory  to
LESSOR of the registrations and filings required hereunder.


<PAGE>




         ARTICLE 15           IDENTIFICATION PLATES

               LESSOR will affix and LESSEE  will at all times  maintain on the
Airframe and each Engine the  identification  plates  containing  the  following
legends or any other legend reasonably requested by LESSOR in writing:

15.1          Airframe Identification Plates.

              Location:             One to be affixed to the Aircraft structure
                                     above the  forward  entry door  adjacent to
                                     and  not  less   prominent   than  that  of
                                     Manufacturer's  data plate and another in a
                                     prominent place on the flight deck.

              Size:                 No smaller than 4" x 6".

              Legend:               "THIS AIRCRAFT IS OWNED BY INTERNATIONAL
                                     LEASE FINANCE CORPORATION.
                                     MANUFACTURER'S SERIAL NO:    26293
                                     OWNER'S ADDRESS:
                                     INTERNATIONAL LEASE FINANCE CORPORATION
                                     1999 Avenue of the Stars, 39th Floor
                                     Los Angeles, California 90067
                                     United States of America
                                     Fax:     (310) 788-1990"

15.2            Engine Identification Plates.

               Location:             The legend on the plate must be no less
                                     prominent than the Engine data plate and
                                     must be visible.

               Size:                 No smaller than 2" x 6".
                                     "THIS ENGINE IS OWNED BY INTERNATIONAL
                                     LEASE FINANCE CORPORATION, LOS ANGELES,
                                     CALIFORNIA, USA."




<PAGE>


         ARTICLE 16           TAXES

16.1 General  Obligation  of LESSEE.1  General  Obligation  of LESSEE.1  General
Obligation  of LESSEE.1  General  Obligation  of LESSEE.  Except as set forth in
Article 16.2,  LESSEE agrees to pay promptly when due, and to indemnify and hold
harmless  LESSOR on a full indemnity  basis from,  all license and  registration
fees and all taxes,  fees,  levies,  imposts,  duties,  charges,  deductions  or
withholdings  of any  nature  (including  without  limitation  any value  added,
franchise,  transfer,  sales, gross receipts, use, business,  excise,  turnover,
personal property, stamp or other tax) together with any assessments, penalties,
fines,  additions  to tax or  interest  thereon,  however  or  wherever  imposed
(whether  imposed  upon  LESSEE,  LESSOR,  on all or part of the  Aircraft,  the
Engines or otherwise),  by any Government Entity or taxing authority in the U.S.
(including without limitation the City or County of Los Angeles), or any foreign
country or by any international taxing authority, upon or with respect to, based
upon or measured by any of the following (collectively, "Taxes"):

               (a)  the Aircraft, Engines or any Parts;

               (b)  the  use,  operation  or  maintenance  of  the  Aircraft  or
                    carriage of passengers or freight during the Lease Term;

               (c)  this Lease,  the  payments due  hereunder  and the terms and
                    conditions hereof; and

               (d)  the  ownership,   financing,  delivery,  import  or  export,
                    return,  sale,  payment  of  Total  Loss  Proceeds  or other
                    disposition of the Aircraft.

16.2  Exceptions to Indemnity.  The indemnity  provided for in Article 16.1 does
not extend to any of the following Taxes  (hereinafter  referred to as "LESSOR's
Taxes"):

               (a)  Taxes imposed by the U.S. or by any state within the U.S. on
                    the net income, profits or gains, gross receipts, capital or
                    net worth of LESSOR;

               (b)  Taxes  attributable  to the period,  or an event  occurring,
                    prior to Delivery or after  return of the Aircraft to LESSOR
                    in accordance with this Lease;

               (c)  Taxes  attributable  to LESSOR's gross  negligence,  willful
                    misconduct or breach of this Lease;

               (d)  Taxes which LESSEE is contesting in good faith in accordance
                    with Article 16.5;

               (e)  Taxes  imposed by any country other than the U.S. on the net
                    income,  gross receipts,  capital or net worth of LESSOR but
                    only to the  extent  that (i) such Taxes were not in any way
                    connected  with,  due  to or  arising  out  of  this  Lease,
                    LESSEE's business operations or office locations in any such
                    country or LESSEE's  use and  operation  of the Aircraft and
                    (ii)  such  Taxes  would  be  otherwise  payable  by  LESSOR
                    notwithstanding this Lease,  LESSEE's business operations or
                    office  locations  in any such  country or LESSEE's  use and
                    operation of the Aircraft;

               (f)  excess  Taxes  imposed as a result of LESSOR's  voluntary or
                    involuntary  transfer or other  disposition of the Aircraft,
                    Engines  or any Parts or this Lease  (except a  transfer  or
                    sale resulting directly from LESSEE's Default) provided that
                    LESSEE remains  responsible for payment of any Taxes and the
                    specific  amount  of such  Taxes  that it  would  have  been
                    required to indemnify for had such  voluntary or involuntary
                    transfer not occurred;

               (g)  Taxes consisting of any interest,  penalties or additions to
                    tax imposed on LESSOR as a result, in whole or in part, of a
                    failure  of  LESSOR  to file  any Tax  return  properly  and
                    timely,  unless such failure  shall be caused by the failure
                    of LESSEE to fulfill any obligations of LESSEE under Section
                    16.7 with respect to such Tax return; or

               (h)  Taxes  resulting  from,  or that would not have been imposed
                    but for,  any  LESSOR's  Lien  arising as a result of claims
                    against, or acts or omissions of, or otherwise  attributable
                    to, LESSOR or any related party.

16.3 After-Tax Basis. The amount which LESSEE is required to pay with respect to
any Taxes  indemnified  against  under  Article 16.1 is an amount  sufficient to
restore LESSOR on an after-tax basis to the same position LESSOR would have been
in had such Taxes not been incurred.  If LESSOR determines in good faith that it
has  realized a Tax  benefit (by way of  deduction,  credit or  otherwise)  as a
result of any payment for which  LESSEE is liable  under  Section 5.7 or 16.1 of
this  Lease,  and  such  benefit  was  not  previously  taken  into  account  in
calculating  the amount of such payment on an after-tax basis in accordance with
the  immediately  preceding  sentence of this Article  16.3,  LESSOR will pay to
LESSEE an amount that is  reasonably  sufficient  to ensure that LESSOR is in no
better an after-tax position than it would have been in if the event giving rise
to LESSEE's liability for payment had not occurred.

16.4 Timing of  Payment.4  Timing of  Payment.4  Timing of  Payment.4  Timing of
Payment.  Any amount payable to LESSOR  pursuant to this Article 16 will be paid
within ten (10) days after  receipt of a written  demand  therefor  from  LESSOR
accompanied by a written statement describing in reasonable detail the basis for
such indemnity and the computation of the amount so payable  provided,  however,
that such amount need not be paid by LESSEE prior to the earlier of (a) the date
any Tax is payable to the appropriate  Government  Entity or taxing authority or
(b) in the case of amounts which are being  contested by LESSEE in good faith or
by LESSOR pursuant to Article 16.5, the date such contest is finally resolved.

16.5 Contests.5  Contests.5 Contests.5 Contests. If claim is made against LESSOR
for Taxes  with  respect to which  LESSEE is liable  for a payment or  indemnity
under this Lease,  LESSOR will  promptly  give LESSEE  notice in writing of such
claim provided,  however,  that LESSOR's failure to give notice will not relieve
LESSEE of its obligations  hereunder unless such failure  materially  impairs or
precludes  LESSEE's  ability to contest  the claim.  So long as (a) a contest of
such Taxes does not involve any material risk of the sale, forfeiture or loss of
the Aircraft or any  interest  therein,  (b) if LESSOR so  requests,  LESSEE has
provided  LESSOR with an opinion of  independent  tax counsel  that a reasonable
basis exists for contesting such claim and (c) adequate  reserves have been made
for such Taxes or, if required, an adequate bond has been posted, then LESSOR at
LESSEE's written request will in good faith,  with due diligence and at LESSEE's
expense,  contest (or permit  LESSEE to contest in the name of LESSEE or LESSOR)
the validity, applicability or amount of such Taxes.

16.6 Refunds. Upon receipt by LESSOR of a refund of all or any part of any Taxes
(including  any  deductions  or  withholdings  referred to in Article 5.7) which
LESSEE has paid, LESSOR will promptly pay to LESSEE the net amount of such Taxes
refunded.

16.7  Cooperation  in Filing Tax Returns.7  Cooperation  in Filing Tax Returns.7
Cooperation in Filing Tax Returns.7  Cooperation  in Filing Tax Returns.  LESSEE
and LESSOR will cooperate with one another in providing information which may be
reasonably  required to fulfill  each  party's tax filing  requirements  and any
audit information request arising from such filing.

16.8 Survival of Obligations.  The indemnity obligations and other agreements of
LESSEE as set forth in this Article 16 will survive the Termination Date.


<PAGE>

         ARTICLE 17           INDEMNITIES

17.1  General   Indemnity.1  General  Indemnity.1  General  Indemnity.1  General
Indemnity.  Except as set forth in Article 17.2 and Article 28.20, LESSEE agrees
to indemnify and hold harmless  LESSOR and its officers,  directors,  employees,
agents  and   shareholders   (individually   an  "Indemnitee"  and  collectively
"Indemnitees")  from  any and all  liabilities,  obligations,  losses,  damages,
penalties,  claims, actions, suits, costs, disbursements and expenses (including
legal fees, costs and related expenses) of every kind and nature, whether or not
any of the transactions contemplated by this Lease are consummated (collectively
"Expenses"),  which  are  imposed  on,  incurred  by  or  asserted  against  any
Indemnitee  and which are in any way relating to, based on or arising out of any
of the following:

               (a)  this Lease or any transactions contemplated hereby;

               (b)  the operation,  possession,  use, non-use, control, leasing,
                    subleasing,   maintenance,   storage,   overhaul,   testing,
                    inspections or acceptance flights at return of the Aircraft,
                    any Engine, or any Part during the Lease Term by LESSEE, any
                    sublessee or any other Person, whether or not the same is in
                    compliance with the terms of this Lease,  including  without
                    limitation  claims  for  death,  personal  injury,  property
                    damage, other loss or harm to any Person and claims relating
                    to any  Laws,  including  without  limitation  environmental
                    control, noise and pollution laws, rules or regulations;

               (c)  the manufacture,  design, acceptance,  rejection,  delivery,
                    return,  sale  after an Event of  Default,  import,  export,
                    condition,  repair,  modification,   servicing,  rebuilding,
                    enforcement  of  warranties  whether in LESSOR's or LESSEE's
                    name,  customer and product support provided by Manufacturer
                    and    other    vendors,    airworthiness,     registration,
                    reregistration,   performance,  sublease,   merchantability,
                    fitness  for  use,   substitution   or  replacement  of  the
                    Aircraft,  Engine,  or any Part  under  this  Lease or other
                    transfer of use or possession of the  Aircraft,  Engine,  or
                    any  Part,   including   under  a  pooling  or   interchange
                    arrangement,  including without  limitation latent and other
                    defects,  whether or not discoverable and patent,  trademark
                    or copyright infringement;

               (d)  any  non-compliance by LESSEE with any term of this Lease or
                    the falsity or inaccuracy of any  representation or warranty
                    of LESSEE set forth herein;

               (e)  the   prevention   or  attempt  to   prevent   the   arrest,
                    confiscation,  seizure,  taking  in  execution,  impounding,
                    forfeiture or detention of the Aircraft,  or in securing the
                    release of the Aircraft; or

               (f)  as a consequence  of any Default in payment by LESSEE of any
                    sum to be paid by LESSEE  when due under  this  Lease or any
                    other Default by LESSEE in the due and punctual  performance
                    of its obligations under this Lease.

The  foregoing  indemnity by LESSEE is intended to include and cover any Expense
to which an Indemnitee may be subject (in contract,  tort,  strict  liability or
under any other theory)  regardless of the negligence,  active or passive or any
other type, of such Indemnitee, so long as such Expense does not fall within any
of the exceptions listed in Article 17.2.

17.2 Exceptions to General  Indemnities.  The indemnity  provided for in Article
17.1 will not extend to Expenses of any Indemnitee to the extent  resulting from
or arising out of any of the following:

               (a)  Expenses  which LESSEE and LESSOR  mutually agree or, absent
                    mutual agreement, are judicially determined to have resulted
                    from the willful misconduct of such Indemnitee;

               (b)  Expenses  which LESSEE and LESSOR  mutually agree or, absent
                    mutual   agreement,   are   judicially   determined   to  be
                    attributable to incidents, accidents or occurrences prior to
                    the Delivery  Date,  but only where both the act or omission
                    which gave rise to the incident,  accident or occurrence and
                    the incident,  accident or occurrence  itself occurred prior
                    to the Delivery Date;

               (c)  Expenses  which LESSEE and LESSOR  mutually agree or, absent
                    mutual   agreement,   are   judicially   determined   to  be
                    attributable  to  acts  or  events  which  occur  after  the
                    Termination Date and return of the Aircraft to LESSOR in the
                    condition required  hereunder,  but in any such case only to
                    the extent not attributable to acts or omissions of LESSEE;

               (d)  Expenses  representing Taxes, it being acknowledged that the
                    terms of Article 16 apply exclusively to LESSEE's  indemnity
                    obligations with respect to Taxes;

               (e)  Expenses  due to the  breach by LESSOR  of its  covenant  of
                    quiet enjoyment pursuant to Article 21.2;

               (f)  Expenses related to LESSOR Taxes or a LESSOR's Lien; or

               (g)  Expenses that LESSOR has expressly  agreed to pay under this
                    Lease.

17.3 After-Tax  Basis.3 After-Tax Basis.3 After-Tax Basis.3 After-Tax Basis. The
amount  which  LESSEE  will be  required  to pay  with  respect  to any  Expense
indemnified  against under Article 17.1 will be an amount  sufficient to restore
the  Indemnitee,  on an after-tax  basis,  to the same position such  Indemnitee
would have been in had such Expense not been incurred.

17.4 Timing of  Payment.4  Timing of  Payment.4  Timing of  Payment.4  Timing of
Payment.  It is the intent of the  parties  that each  Indemnitee  will have the
right to  indemnification  for Expenses hereunder as soon as a claim is made and
as soon as an Expense is incurred,  whether or not such claim is meritorious and
whether or not liability is established  (but subject to Article  17.8).  LESSEE
will pay an Indemnitee for Expenses  pursuant to this Article 17 within ten (10)
days after receipt of a written demand therefor from such Indemnitee accompanied
by a  written  statement  describing  in  reasonable  detail  the basis for such
indemnity and reasonable proof of such Expenses incurred.

17.5  Subrogation.  Upon the payment in full of any  indemnity  pursuant to this
Article 17 by LESSEE,  LESSEE will be subrogated to any right of the  Indemnitee
in respect of the matter against which such indemnity has been made.

17.6 Notice.6  Notice.6  Notice.6  Notice.  Each Indemnitee and LESSEE will give
prompt  written notice one to the other of any liability of which such party has
knowledge for which LESSEE is, or may be,  liable under  Article 17.1  provided,
however,  that failure to give such notice will not  terminate any of the rights
of  Indemnitees  under this Article 17 except to the extent that LESSEE has been
materially prejudiced by the failure to provide such notice.

17.7  Refunds.  If any  Indemnitee  obtains a recovery of all or any part of any
amount which LESSEE has paid to such  Indemnitee,  such Indemnitee will promptly
pay to LESSEE the net amount recovered by such Indemnitee.

17.8  Defense of  Claims.8  Defense of Claims.8  Defense of Claims.8  Defense of
Claims.  Unless an Event of Default has occurred and is  continuing,  LESSEE and
its insurers will have the right (in each such case at LESSEE's sole expense) to
investigate or, provided that LESSEE or its insurers have not reserved the right
to dispute  liability with respect to any insurance  policies  pursuant to which
coverage is sought,  defend or  compromise  any claim  covered by insurance  for
which  indemnification  is sought  pursuant to Article 17.1 and each  Indemnitee
will  cooperate with LESSEE or its insurers with respect  thereto.  If LESSEE or
its insurers are retaining  attorneys to handle such claim, such counsel must be
reasonably  satisfactory to the  Indemnitees.  If not, the Indemnitees will have
the right to retain counsel of their choice at LESSEE's expense.

17.9 Survival of Obligation.9  Survival of Obligation.9 Survival of Obligation.9
Survival of Obligation.  Notwithstanding anything in this Lease to the contrary,
the provisions of this Article 17 will survive the Termination Date and continue
in full force and effect  notwithstanding  any breach by LESSOR or LESSEE of the
terms of this  Lease,  the  termination  of the lease of the  Aircraft to LESSEE
under this Lease or the repudiation by LESSOR or LESSEE of this Lease.


<PAGE>



         ARTICLE 18           INSURANCE


18.1  Categories  of  Insurance.1   Categories  of  Insurance.1   Categories  of
Insurance.1  Categories  of Insurance.  Throughout  the Lease Term and until the
Termination  Date LESSEE will,  at its own expense,  effect and maintain in full
force and effect the types of  insurance  and  amounts of  insurance  (including
deductibles)  described in Exhibit C through such brokers and with such insurers
as may be approved by LESSOR, such approval not to be unreasonably  withheld, in
London or New York or such other  insurance  markets as mutually  agreed upon by
the parties.

18.2  Write-back  of any Date  Recognition  Exclusion.2  Write-back  of any Date
Recognition   Exclusion.2   Write-back  of  any  Date  Recognition   Exclusion.2
Write-back  of any Date  Recognition  Exclusion.  In the event  any of  LESSEE's
insurances  (either the primary  insurance or the reinsurance)  contain any date
recognition  exclusion  clause or similar  clause  excluding from such insurance
coverage  damage to any property  (including the Aircraft) or death or injury to
any person on account of  accidents,  incidents  or  occurrences  caused by date
recognition or other Year 2000-related problems,  LESSEE at its cost will obtain
for the benefit of itself and LESSOR the  broadest  write-back  available in the
U.S. insurance market with respect to such exclusion.

18.3  Insurance  for  Indemnities.3  Insurance for  Indemnities.3  Insurance for
Indemnities.3  Insurance for Indemnities.  The insurance  referred to in Article
18.1 will in each case include and insure (to the extent of the risks covered by
the policies)  the  indemnity  provisions of Article 17 and LESSEE will maintain
such insurance of the  indemnities  for a minimum of two (2) years following the
Termination Date.

18.4 Insurance  required by Manufacturer.4  Insurance required by Manufacturer.4
Insurance required by Manufacturer.4 Insurance required by Manufacturer.  During
the Lease Term,  LESSEE will carry the  insurance  required by  Manufacturer  in
connection  with LESSOR's  assignment of  Manufacturer's  warranties and product
support to LESSEE.

18.5 Renewal.5 Renewal.5 Renewal.5 Renewal. Not less than five (5) Business Days
before the expiration or termination date of any insurance  required  hereunder,
LESSEE will provide LESSOR with fax confirmation from LESSEE's insurance brokers
that renewed  certificates of insurance evidencing the renewal or replacement of
such  insurance and complying  with Exhibit C will be issued on the  termination
date of the prior certificate.  Within seven (7) days after such renewal, LESSEE
will furnish its brokers' certificates of insurance to LESSOR.

18.6  Assignment  of  Rights  by  LESSOR.6  Assignment  of  Rights  by  LESSOR.6
Assignment  of Rights by  LESSOR.6  Assignment  of Rights by  LESSOR.  If LESSOR
assigns all or any of its rights  under this Lease as permitted by this Lease or
otherwise  disposes  of any  interest  in the  Aircraft  to any other  Person as
permitted by this Lease,  LESSEE will,  upon  request,  procure that such Person
hereunder  be added as loss payee  and/or  additional  assured  in the  policies
effected  hereunder  and enjoy the same rights and  insurance  enjoyed by LESSOR
under such policies. LESSOR will nevertheless continue to be covered by LESSEE's
third party liability insurance policies.

18.7 Other  Insurance.7  Other  Insurance.7  Other  Insurance.7 Other Insurance.
LESSOR  may from time to time by notice to  LESSEE  require  LESSEE at  LESSEE's
expense to effect such other  insurance or such  variations  to the terms of the
existing insurance as may then be customary in the airline industry for aircraft
of the same  type as the  Aircraft  and at the time  commonly  available  in the
insurance market.

18.8  Information.  LESSEE will provide LESSOR with any  information  reasonably
requested by LESSOR from time to time  concerning the insurance  maintained with
respect to the Aircraft or in  connection  with any claim being made or proposed
to be made thereunder.

18.9 Currency.  All proceeds of insurance pursuant to this Lease will be payable
in Dollars except as may be otherwise agreed by LESSOR.

18.10 Grounding of Aircraft.10 Grounding of Aircraft.10 Grounding of Aircraft.10
Grounding of Aircraft.  If at any time any of the insurance required pursuant to
this  Lease will cease to be in full force and  effect,  LESSEE  will  forthwith
ground  the  Aircraft  and keep the  Aircraft  grounded  until such time as such
insurance is in full force and effect again.

18.11 Failure to Insure.11  Failure to Insure.11 Failure to Insure.11 Failure to
Insure.  If at any time LESSEE fails to maintain  insurance in  compliance  with
this  Article  18,  LESSOR  will  be  entitled  but not  bound  to do any of the
following  (without  prejudice  to any other rights which it may have under this
Lease by reason of such failure):

               (a)  to pay any premiums  due or to effect or maintain  insurance
                    consistent with the terms of this Lease or otherwise  remedy
                    such failure in such manner as LESSOR considers  appropriate
                    (and LESSEE will upon  demand  reimburse  LESSOR in full for
                    any amount so expended in that connection); or

               (b)  at any time while such failure is continuing, to require the
                    Aircraft  to remain at any  airport or (as the case may be),
                    if allowed by  applicable  Law  proceed to and remain at any
                    airport within the  continental  U.S.  designated by LESSOR,
                    until  such  failure  is  remedied  to  LESSOR's  reasonable
                    satisfaction.

18.12  Reinsurance.  Any  reinsurance  will be maintained  with  reinsurers  and
brokers reasonably  acceptable to LESSOR.  Such reinsurance will contain each of
the  following  terms  and will in all  other  respects  (including  amount)  be
reasonably satisfactory to LESSOR:

               (a)  the same terms as the original insurance;

               (b)  a cut-through and assignment clause reasonably  satisfactory
                    to LESSOR; and

               (c)  payment  will be made  notwithstanding  (i) any  bankruptcy,
                    insolvency,   liquidation  or  dissolution  of  any  of  the
                    original  insurers  and/or (ii) that the  original  insurers
                    have made no payment under the original insurance policies.

18.13 Limit on Hull in favor of  LESSEE.13  Limit on Hull in favor of  LESSEE.13
Limit on Hull in favor of LESSEE.13 Limit on Hull in favor of LESSEE. LESSEE may
carry hull all risks or hull war and allied  perils on the Aircraft in excess of
the Agreed Value (such Agreed Value being  payable to LESSOR) only to the extent
such excess  insurance  which would be payable to LESSEE in the event of a Total
Loss does not  exceed  ten  percent  (10%) of the  Agreed  Value and only to the
extent that such additional insurance will not prejudice the insurances required
herein or the  recovery  by LESSOR  thereunder.  LESSEE  agrees that it will not
create or permit to exist any liens or encumbrances over the insurances,  or its
interest therein, except as constituted by this Lease.


<PAGE>



         ARTICLE 19           LOSS, DAMAGE AND REQUISITION

Throughout the Lease Term and until the Termination  Date,  LESSEE will bear all
risk of loss, theft, damage and destruction to the Aircraft.

19.1 Definitions. In this Article 19 and throughout this Lease:

                "Agreed Value" *
                 ------------

                "Net Total Loss Proceeds" means the Total Loss Proceeds actually
received  by  LESSOR   following  a  Total  Loss,   less  any  legal  and  other
out-of-pocket  expenses,  taxes or duties  incurred by LESSOR in connection with
the collection of such proceeds.

                "Total  Loss"  means any of the  following  in  relation  to the
Aircraft, Airframe or any Engine, and "Total Loss Date" means the date set forth
in parenthesis after each Total Loss:

                (a)   destruction,   damage  beyond  repair  or  being  rendered
                permanently  unfit for normal use for any reason  (the date such
                event occurs or, if not known,  the date on which the  Aircraft,
                Airframe or Engine was last heard of);

                (b) actual or  constructive  total loss (including any damage to
                the Aircraft  which  results in an insurance  settlement  on the
                basis of a total  loss)  (the  earlier  of the date on which the
                loss  occurs  or thirty  (30)  days  after the date of notice to
                LESSEE's brokers or insurers claiming such total loss);

                (c)  requisition  of  title,  confiscation,  forfeiture  or  any
                compulsory acquisition or other similar event (the date on which
                the same takes effect);

                (d) sequestration,  detention,  seizure or any similar event for
                more than  sixty (60)  consecutive  days or  one-hundred  eighty
                (180)  consecutive  days if the  Aircraft is located in the U.S.
                for  such  entire  period  (the  earlier  of the  date on  which
                insurers  make  payment on the basis of a total loss or the date
                of expiration of such period);

                (e)  requisition  for use for more than one hundred eighty (180)
                consecutive  days,  except  as set  forth in  Article  19.8 (the
                earlier of the date on which the  insurers  make  payment on the
                basis of a total loss or the date of expiration of such period);
                or

                (f) in the case of an  Engine,  the event  described  in Article
                12.6.3 (the date on which the same takes effect).

                "Total Loss Proceeds" means the proceeds of any insurance or any
compensation or similar payment arising in respect of a Total Loss.

19.2 Notice of Total  Loss.LESSEE  will notify LESSOR in writing  within two (2)
Business Days after a Total Loss Date of the Aircraft, Airframe or any Engine.

19.3 Total Loss of Aircraft or  Airframe.  If the Total Loss of the  Aircraft or
Airframe occurs during the Lease Term, the following will occur:

19.3.1 After the Total Loss Date and until receipt by LESSOR of the Agreed Value
and all other  amounts  then due under this Lease,  LESSEE will  continue to pay
Rent and the parties will perform,  to the extent  possible,  all of their other
obligations under this Lease.

19.3.2 On the date which is the earlier of the following dates:

               (a)  the date on which the Total Loss Proceeds of the Aircraft or
                    the Airframe are paid by LESSEE's insurance  underwriters or
                    brokers and

               (b)  the date which  falls  forty-five  (45) days after the Total
                    Loss Date,

                LESSEE will pay to LESSOR an amount equal to the sum of:

               (a)  the Agreed Value and

               (b)  all other amounts then due under this Lease,

                less an amount equal to the Net Total Loss Proceeds  received by
LESSOR by such date.

19.3.3  LESSOR will apply the Net Total Loss  Proceeds and any amounts  received
from LESSEE pursuant to Article 19.3.2 as follows:

               (a)  first, in discharge of any unpaid Rent and any other amounts
                    accrued and unpaid up to the date of LESSOR's receipt of the
                    Agreed Value;

               (b)  second, in discharge of the Agreed Value; and

               (c)  third, payment of the balance, if any, to LESSEE.

19.3.4 Upon receipt by LESSOR of all monies  payable by LESSEE in Article  19.3,
this Lease will terminate except for LESSEE's  obligations  under Articles 10.5,
16 and 17 which survive the Termination Date.

FOR  AVOIDANCE OF DOUBT,  THE AGREED  VALUE OF THE  AIRCRAFT  WILL BE PAYABLE TO
LESSOR  PURSUANT TO THIS ARTICLE  19.3 WHEN A TOTAL LOSS OF THE AIRFRAME  OCCURS
EVEN IF THERE HAS NOT BEEN A TOTAL LOSS OF AN ENGINE OR ENGINES.

19.4 Surviving Engine(s).4 Surviving Engine(s).4 Surviving Engine(s).4 Surviving
Engine(s). If a Total Loss of the Airframe occurs and there has not been a Total
Loss of an Engine or Engines,  then,  provided no Default  has  occurred  and is
continuing, at the request of LESSEE (subject to agreement of relevant insurers)
and on receipt of all monies due under Article 19.3 and payment by LESSEE of all
airport,  navigation and other charges on the Aircraft, LESSOR will transfer all
its right, title and interest in the surviving  Engine(s) to LESSEE, but without
any responsibility, condition or warranty on the part of LESSOR other than as to
freedom from any LESSOR's Lien.

19.5 Total Loss of Engine and not Airframe.

19.5.1 Upon a Total Loss of any Engine not  installed on the Airframe or a Total
Loss of an Engine  installed on the  Airframe not  involving a Total Loss of the
Airframe, LESSEE will replace such Engine as soon as reasonably possible by duly
conveying to LESSOR  title to another  engine (a) free and clear of all Security
Interests (except Permitted Liens) of any kind or description,  (b) in airworthy
condition and of the same or improved model,  service  bulletin and modification
status  and  having a value  and  utility  at least  equal to the  Engine  which
sustained  the  Total  Loss,  (c) not older (by  reference  to serial  number or
manufacture  date)  than  the  older  of the two  Engines  (on  the  date of the
replacement)  delivered  by LESSOR to LESSEE with the  Aircraft on the  Delivery
Date,  and (d) in the same or better  operating  condition  as the Engine  which
sustained a Total Loss,  including  time in service,  hours and cycles since new
and hours and cycles available to the next inspection,  Overhaul or scheduled or
anticipated  removal;  provided that with respect to replacement modules in such
other engine,  LESSEE will use best reasonable efforts to ensure that such other
engine will not have been previously operated at a higher thrust rating than the
Engine  which  sustained  the  Total  Loss  and  provided  further  that  in all
circumstances  life-limited  Parts in such replacement  engine will have no less
life remaining  than the  life-limited  Parts in the Engine which  sustained the
Total Loss. Such replacement  engine will be an Engine as defined herein and the
Engine which  sustained  such Total Loss will cease to be an Engine;  whereupon,
subject to  agreement  of relevant  insurers,  LESSOR will  transfer  all of its
right, title and interest in and to the Engine which sustained the Total Loss to
LESSEE,  but without any  responsibility,  condition  or warranty on the part of
LESSOR other than as to title and freedom from any LESSOR's Lien.

19.5.2  LESSEE  agrees  at its own  expense  to take such  action as LESSOR  may
reasonably  request  in order  that  any such  replacement  Engine  becomes  the
property of LESSOR and is leased  hereunder  on the same terms as the  destroyed
Engine.  LESSEE's obligation to pay Rent will continue in full force and effect,
but an amount  equal to the Net Total  Loss  Proceeds  received  by LESSOR  with
respect to such  destroyed  Engine  will,  subject to  LESSOR's  right to deduct
therefrom  any amounts then due and payable by LESSEE under this Lease,  be paid
to LESSEE.

19.6 Other Loss or Damage.

19.6.1  If the  Aircraft  or  any  Part  thereof  suffers  loss  or  damage  not
constituting a Total Loss of the Aircraft or the Airframe or any Engine, all the
obligations of LESSEE under this Lease (including payment of Rent) will continue
in full force.

19.6.2 *

19.6.3 To the extent  insurance  proceeds  received by LESSEE  directly from its
insurers do not cover the cost of such repair work on the Aircraft or Engine and
LESSOR has received  additional  insurance  proceeds from LESSEE's insurers with
respect to such repair work,  LESSOR will  (subject to LESSOR's  right to deduct
therefrom  any  amounts  then due and  payable  by LESSEE  under  this Lease and
submission  by LESSEE of  reasonable  documentation  in support  of such  excess
repair costs) pay to LESSEE  insurance  proceeds  received by LESSOR as and when
such repair work is performed on the Aircraft.

19.7 Copy of Insurance  Policy.7  Copy of Insurance  Policy.7  Copy of Insurance
Policy.7 Copy of Insurance  Policy.  Promptly  after the occurrence of a partial
loss or Total Loss of the  Aircraft or an Engine,  at the request of LESSOR (and
then  only in the  event  reasonably  required  by  LESSOR  in  connection  with
insurance  policies  pursuant to which  coverage is sought)  LESSEE will provide
LESSOR  with a copy of the  relevant  portions  of  LESSEE's  insurance  policy.
LESSEE's  insurance  policy will be  confidential  between LESSOR and LESSEE and
will  not  be  disclosed  by  LESSOR  to  third   parties  other  than  LESSOR's
professional advisors and except as necessary in respect of proceedings relating
to such insurance claim.

19.8 Government  Requisition.8 Government Requisition.8 Government Requisition.8
Government Requisition. If the Aircraft, Airframe or any Engine is requisitioned
for use by any  Government  Entity,  LESSEE will promptly  notify LESSOR of such
requisition.  All of LESSEE's  obligations  hereunder  will  continue as if such
requisition had not occurred. So long as no Event of Default has occurred and is
continuing,  all  payments  received  by LESSOR or LESSEE  from such  Government
Entity will be paid over to or  retained  by LESSEE.  If an Event of Default has
occurred and is continuing,  all payments received by LESSEE or LESSOR from such
Government  Entity may be used by LESSOR to  satisfy  any  obligations  owing by
LESSEE.

19.9 LESSOR  Retention of Reserves;  Return of Security Deposit and Prepaid Rent
 .9 LESSOR Retention of Reserves;  Return of Security Deposit and Prepaid Rent .9
LESSOR  Retention  of Reserves;  Return of Security  Deposit and Prepaid Rent .9
LESSOR Retention of Reserves;  Return of Security Deposit and Prepaid Rent . For
avoidance of doubt, the parties agree that (a) notwithstanding the Total Loss of
the Airframe  and/or Engines LESSOR will retain an amount equal to fifty percent
(50%) of all  Reserves  paid by LESSEE  and not  payable to LESSEE  pursuant  to
Article  13.4,  and (b) in the event of the Total  Loss of the  Airframe  and/or
Engines  upon  receipt by LESSOR of all monies  payable by LESSEE in  accordance
with Article  19.1.3,  and subject to Article 5.1.3,  LESSOR will (i) return the
Security Deposit and any prepaid Rent to LESSEE and (ii) pay to LESSEE an amount
equal to fifty percent (50%) of the Reserves then held by LESSOR.


<PAGE>




         ARTICLE 20         REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE

20.1  Representations  and  Warranties.   LESSEE  represents  and  warrants  the
following  to LESSOR  as of the date of  execution  of this  Lease and as of the
Delivery Date:

20.1.1  Corporate  Status.  LESSEE is a corporation duly  incorporated,  validly
existing and in good  standing  under the Laws of the State of Colorado.  It has
the  corporate  power  and  authority  to carry  on its  business  as  presently
conducted and to perform its obligations hereunder.

20.1.2 Governmental Approvals. No authorization,  approval,  consent, license or
order of,  or  registration  with,  or the  giving  of  notice  to the  Aviation
Authority   or  any  other   Government   Entity  is  required   for  the  valid
authorization,  execution,  delivery  and  performance  by LESSEE of this Lease,
except as will have been duly effected as of the Delivery Date.

20.1.3 Binding.  LESSEE's Board of Directors has authorized LESSEE to enter into
this Lease and the other  Operative  Documents  and to perform  its  obligations
hereunder and thereunder. This Lease and the other Operative Documents that have
been  executed  and  delivered  by LESSEE as of the date of this Lease been duly
executed  and  delivered  by  LESSEE  and  represent  the  valid,   binding  and
enforceable  obligations  of LESSEE except as  enforceability  may be limited by
bankruptcy,  insolvency,   reorganization  or  other  similar  Laws  of  general
application   affecting  the  enforcement  of  creditors'  rights  and  by  such
principles of equity as a court having jurisdiction may impose. When executed by
LESSEE  at  Delivery,  the  same  will  apply  to the  Estoppel  and  Acceptance
Certificate and the other Operative Documents.

20.1.4 No Breach.  The execution and delivery of the  Operative  Documents  that
have been  executed and  delivered  by LESSEE as of the date of this Lease,  the
consummation  by LESSEE of the  transactions  contemplated  under the  Operative
Documents and compliance by LESSEE with the terms and provisions  thereof do not
and will not contravene any Law applicable to LESSEE,  or result in any material
breach of or constitute any material  default under or result in the creation of
any Security  Interest upon any property of LESSEE,  pursuant to any  indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan
or credit agreement,  corporate  charter,  by-law or other material agreement or
instrument  to which LESSEE is a party or by which LESSEE or its  properties  or
assets may be bound or affected.  When executed by LESSEE at Delivery,  the same
will apply to the Estoppel and Acceptance  Certificate  and the other  Operative
Documents.

20.1.5  Filings.  Except for any filing or recording  that may be required under
the U.S.  Federal  Aviation  Administration  and  except for the filing of UCC-1
financing  statements  with the Secretary of State of the State of Colorado,  no
filing or recording of any  instrument or document  (including the filing of any
financial statement) is necessary under the Laws of the State of Registration in
order  for this  Lease to  constitute  a valid  and  perfected  lease of  record
relating to the Aircraft.

20.1.6  Licenses.  LESSEE  holds all  licenses,  certificates  and permits  from
applicable  Government  Entities  in the U.S.  necessary  for the conduct of its
business as a Certificated Air Carrier and performance of its obligations  under
this Lease.

20.1.7 No Suits. There are no suits,  arbitrations or other proceedings  pending
or threatened  before any court or  administrative  agency  against or affecting
LESSEE which, if adversely  determined,  would have a material adverse effect on
the  business,  assets or condition  (financial  or  otherwise) of LESSEE or its
ability to perform under this Lease, except as described in the filings provided
to LESSOR pursuant to Article 22.

20.1.8 Tax Returns.  All necessary  returns have been delivered by LESSEE to all
relevant  taxation  authorities in the  jurisdiction  of its  incorporation  and
LESSEE is not in default in the payment of any taxes due and payable.

20.1.9 No Material Adverse Effect.  LESSEE is not in default under any agreement
to which it is a party or by which it may be bound which default if left uncured
would have a material adverse effect on its business, assets or condition.

20.1.10 No Default under this Lease.  At the time of execution of this Lease, no
Default has occurred and is continuing and the financial  statements provided to
LESSOR pursuant to Article 22 fairly present the financial condition of LESSEE.

20.2 Covenants.LESSEE covenants to LESSOR that it will comply with the following
throughout the entire Lease Term:

20.2.1 Licensing.  LESSEE will hold all licenses,  certificates and permits from
applicable  Government  Entities  in the U.S.  necessary  for the conduct of its
business as a Certificated Air Carrier and performance of its obligations  under
this Lease.  LESSEE will advise LESSOR  promptly in the event any such licenses,
certificates or permits are cancelled, terminated, revoked or not renewed.

20.2.2 Information about Suits.  LESSEE will promptly give to LESSOR a notice in
writing of any suit, arbitration or proceeding before any court,  administrative
agency or Government  Entity which, if adversely  determined,  would  materially
adversely  affect  LESSEE's  financial  condition,  affairs,  operations  or its
ability to perform under this Lease provided, however, that compliance by LESSEE
with the  requirements  of Article 22 hereof will be deemed  compliance with the
provisions of this Article 20.2.2.

20.2.3  Restrictions on Mergers.  LESSEE will not consolidate with or merge into
any other corporation or other Person, and will not convey,  transfer,  lease or
otherwise  dispose of all or substantially  all of its assets to any corporation
or other Person, unless:

               (i)  such transaction  shall not have any material adverse effect
                    on the rights of LESSOR  under or in respect of the Lease or
                    the Aircraft;

               (ii) the Person  formed by or  surviving  such  consolidation  or
                    merger or the Person which acquires by conveyance, transfer,
                    lease or other  disposition all or substantially all of such
                    property  and  other  assets:  (A)  shall  be a  corporation
                    organized  and  existing  under the laws of the U. S. or any
                    State thereof or the District of Columbia;  (B)  immediately
                    after giving effect to such transaction, shall have acquired
                    or  succeeded to all or  substantially  all of the assets of
                    LESSEE  (if  such  assets  are  being   transferred)  as  an
                    entirety, and shall have a tangible net worth (determined in
                    accordance with GAAP) of not less than LESSEE's tangible net
                    worth (determined in accordance with GAAP) immediately prior
                    to such  transaction;  (C) shall be a "citizen of the United
                    States" of America as defined in Section  40102(a)(15)(c) of
                    Title 49 of the U.S.C. and a Certificated  Air Carrier;  and
                    (D)  shall   executed   and   deliver  to  LESSOR  (1)  such
                    recordations and filings with any Government Entity and such
                    other   documents  as  shall  be  reasonably   necessary  or
                    advisable in  connection  with such  consolidation,  merger,
                    sale, lease, transfer or other disposition (2) an agreement,
                    in form and  substance  reasonably  satisfactory  to LESSOR,
                    assuming all of LESSEE's obligations under the Lease and the
                    other Operative  Documents without amendment thereto and (3)
                    an officer's certificate to the effect that the requirements
                    of this Section have been satisfied; and

               (iii)no Event of Default  shall have  occurred and be  continuing
                    or shall occur as a result thereof.

20.2.4 Restriction on Relinquishment of Possession. LESSEE will not, without the
prior  consent of LESSOR,  deliver,  transfer or  relinquish  possession  of the
Aircraft except in accordance with Articles 11 and 12.

20.2.5 No  Security  Interests.  LESSEE will not create or agree to or permit to
arise any Security  Interest (other than Permitted  Liens) on or with respect to
the Aircraft,  title thereto or any interest therein.  LESSEE will forthwith, at
its own expense,  take all action as may be reasonably necessary to discharge or
remove any such Security Interest if it exists at any time.

20.2.6  Representations to Other Parties.  LESSEE will not represent or hold out
LESSOR as carrying  goods or  passengers  on the Aircraft or as being in any way
connected or associated with any operation of the Aircraft.

<PAGE>



         ARTICLE 21 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSOR


21.1   Representations   and  Warranties.1   Representations   and  Warranties.1
Representations  and  Warranties.1   Representations   and  Warranties.   LESSOR
represents  and warrants the  following to LESSEE as of the date of execution of
the  Lease and as of the  Delivery  Date and ALL OTHER  WARRANTIES,  EXPRESS  OR
IMPLIED HAVE BEEN WAIVED IN ACCORDANCE WITH ARTICLE 8:

21.1.1  Corporate  Status.  LESSOR is a corporation duly  incorporated,  validly
existing and in good standing under the Laws of the State of California.  It has
the  corporate  power  and  authority  to carry  on its  business  as  presently
conducted and to perform its obligations hereunder.

21.1.2 Governmental Approvals. No authorization,  approval,  consent, license or
order of, or registration  with, or the giving of notice to any U.S.  Government
Entity  is  required  for  the  valid  authorization,  execution,  delivery  and
performance by LESSOR of this Lease.

21.1.3 Binding. This Lease and the other Operative Documents that have been have
been  executed  and  delivered  by LESSEE as of the date of this Lease have been
duly  authorized,  executed  and  delivered by LESSOR and  represent  the valid,
enforceable and binding  obligations of LESSOR except as  enforceability  may be
limited by  bankruptcy,  insolvency,  reorganization  or other  similar  Laws of
general  application  affecting the enforcement of creditors' rights and by such
principles of equity as a court having jurisdiction may impose. When executed by
LESSOR at Delivery, the same will apply to the other Operative Documents.

21.1.4 No Breach.  The execution and delivery of the  Operative  Documents  that
have been  executed and  delivered  by LESSOR as of the date of this Lease,  the
consummation by LESSOR of the transactions  contemplated  therein and compliance
by LESSOR with the terms and  provisions  thereof do not and will not contravene
any Law applicable to LESSOR,  or result in any material breach of or constitute
any material default under any indenture,  mortgage,  chattel mortgage,  deed of
trust,  conditional  sales contract,  bank loan or credit  agreement,  corporate
charter,  by-law or other material  agreement or instrument to which LESSOR is a
party or by which LESSOR or its  properties  or assets may be bound or affected.
When executed by LESSOR at Delivery,  the same will apply to the other Operative
Documents.

21.1.5 Title to Aircraft.  On the Delivery  Date LESSOR will have good and valid
title to the Aircraft.


21.1.6 Citizen of the United  States.  LESSOR is a "citizen of the United States
of America" (as defined in Section 40102 of Title 49 of U.S.C.).

21.1.7  Airframe  and  Engine  Warranty   Assignments.   The  Airframe  Warranty
Assignment  and the Engine  Warranty  Assignment  when executed and delivered by
LESSOR in  accordance  with  Article  7.4  represent  the valid and  enforceable
assignment to LESSEE of the warranties set forth therein.

21.2 Covenant of Quiet  Enjoyment.2  Covenant of Quiet  Enjoyment.2  Covenant of
Quiet  Enjoyment.2  Covenant of Quiet Enjoyment.  So long as no Event of Default
has occurred and is continuing  hereunder,  LESSOR covenants that neither LESSOR
nor any person  lawfully  claiming  through  LESSOR will interfere with LESSEE's
quiet, peaceful use and enjoyment of the Aircraft during the Lease Term.


<PAGE>




         ARTICLE 22           FINANCIAL AND RELATED INFORMATION



         LESSEE agrees to furnish each of the following to LESSOR:

                (a) within  forty-five  (45) days  after the end of each  fiscal
                quarter   of  LESSEE,   three  (3)   copies  of  the   unaudited
                consolidated financial statements (including a balance sheet and
                profit  and  loss  statement)   prepared  for  such  quarter  in
                accordance with generally accepted accounting  principles in the
                U.S.;

                (b) within ninety (90) days after the end of each fiscal year of
                LESSEE, three (3) copies of the audited  consolidated  financial
                statements  (including  a  balance  sheet  and  profit  and loss
                statement)  prepared  as of the  close  of such  fiscal  year in
                accordance with generally accepted accounting  principles in the
                U.S.;

                (c) promptly after distribution, three (3) copies of all reports
                and financial  statements  which LESSEE sends or makes available
                to its stockholders or creditors generally;

                (d)  Technical  Evaluation  Reports  in  conjunction  with every
                second "C" check for the Aircraft and at other times  reasonably
                requested by LESSOR in accordance  with Article  12.10.2 hereof;
                and

                (e) from time to time,  such  other  reasonable  information  as
                LESSOR or LESSOR's Lender may reasonably  request concerning the
                location,  condition,  use and  operation of the Aircraft or the
                financial condition of LESSEE.


<PAGE>



         ARTICLE 23           RETURN OF AIRCRAFT

23.1 Date of Return.1 Date of Return.1  Date of Return.1 Date of Return.  LESSEE
is obligated to return the Aircraft,  Engines,  Parts and Aircraft Documentation
to LESSOR on the Expiration Date,  unless a Total Loss of the Aircraft  occurred
prior to the Expiration  Date and this Lease was terminated  early in accordance
with Article  19.3.  If LESSEE is in Default  hereunder by failing to return the
Aircraft on the  Expiration  Date or if an Event of Default  occurs prior to the
Expiration Date and LESSOR repossesses the Aircraft, the return requirements set
forth in this  Article 23  nonetheless  must be met on the date the  Aircraft is
actually returned to LESSOR or repossessed by LESSOR.

23.2 Technical  Report.2 Technical Report.2 Technical Report.2 Technical Report.
Six (6) months prior to the Expiration Date (and in an updated form at return of
the Aircraft),  LESSEE will provide LESSOR with a Technical Evaluation Report in
the form and substance of Exhibit M, as revised,  and, in addition upon LESSOR's
request,   will  make  copies   available   of  (a)  drawings  of  the  interior
configuration  of the  Aircraft  both as it then  exists and as it will exist at
return,  (b) an  Airworthiness  Directive  status list,  (c) a service  bulletin
incorporation  list, (d) rotable tracked,  hard-time and life limited  component
listings,  (e) a list of  LESSEE-initiated  modifications  and alterations,  (f)
interior material burn certificates,  (g) the Aircraft  Maintenance Program, (h)
the  complete  workscope  for  the  checks,  inspections  and  other  work to be
performed  prior to return,  (i) a list of all no-charge  service  bulletin kits
with respect to the Aircraft which were ordered by LESSEE from  Manufacturer  or
Engine  manufacturer,  (j) current  Engine disk sheets and a description  of the
last shop  visit for each  Engine  and (k) any other  data  which is  reasonably
requested by LESSOR.

23.3 Return  Location.LESSEE  at its expense will return the Aircraft,  Engines,
Parts and Aircraft Documentation to LESSOR at Denver,  Colorado or to such other
airport on  LESSEE's  route  system as may be  mutually  agreed to by LESSEE and
LESSOR.

23.4 Full Aircraft  Documentation  Review.4 Full Aircraft Documentation Review.4
Full Aircraft Documentation Review.4 Full Aircraft Documentation Review. For the
period  commencing  at  least  ten (10)  Business  Days  prior  to the  proposed
redelivery date and continuing  until the date on which the Aircraft is returned
to LESSOR in the condition  required by this Lease,  LESSEE will provide for the
review of LESSOR  and/or its  representative  all of the  Aircraft  records  and
historical  documents described in Exhibit L in one central room at the Aircraft
return location.

23.5 Aircraft Inspection.

23.5.1 During the maintenance checks performed immediately prior to the proposed
redelivery  and  at the  actual  return  of  the  Aircraft,  LESSOR  and/or  its
representatives  will have an opportunity  to conduct a full systems  functional
and  operational  inspection  of the  Aircraft  (and other  types of  reasonable
inspections  based upon the Aircraft type, age, use and other known factors with
respect to the  Aircraft) and a full  inspection  of the Aircraft  Documentation
(including records and manuals),  all to LESSOR's reasonable  satisfaction.  Any
deficiencies  from the Aircraft return condition  requirements set forth in this
Article  23 will be  corrected  by  LESSEE at its cost  prior to the  acceptance
flight described in Article 23.5.2.

23.5.2 Immediately prior to the proposed redelivery of the Aircraft, LESSEE will
carry out for LESSOR  and/or  LESSOR's  representatives  an Aircraft  acceptance
flight in accordance with Manufacturer's  standard flight operation check flight
procedures or, if agreed to in writing by LESSOR,  in accordance with an airline
acceptance flight procedure,  either of which will be for two (2) hours, or such
longer duration as is necessary to perform such check flight procedures.  Flight
costs  and  fuel  will  be  furnished  by and  at the  expense  of  LESSEE.  Any
deficiencies  from the Aircraft return condition  requirements set forth in this
Article  23 will be  corrected  by  LESSEE  at its cost  prior to  return of the
Aircraft.

23.5.3 To the extent that the ground  inspection  and  acceptance  flight extend
beyond  the  Expiration  Date,  the  Lease  Term  will be  deemed  to have  been
automatically  extended  and the  obligations  of  LESSEE  hereunder  (including
Article  23.13.3)  will  continue on a  day-to-day  basis until the  Aircraft is
accepted  by  LESSOR  as  being  in  the  condition  required  hereunder,  which
acceptance  shall be evidenced by LESSOR  executing and delivering to LESSEE the
Return Acceptance Receipt in the form of Exhibit J.

23.6 Certificate of Airworthiness Matters.

23.6.1 The Aircraft will possess a current  Certificate of Airworthiness  issued
by the Aviation Authority for transport category aircraft in accordance with FAR
Part 21 and FAR Part 121 (although this Certificate of  Airworthiness  may later
be  substituted  by the Export  Certificate  of  Airworthiness  or equivalent if
requested by LESSOR pursuant to Article 23.12).

23.6.2 If the Aircraft is registered in a country other than the U.S. at time of
return,  LESSEE  at its cost  will  demonstrate  that  the  Aircraft  meets  the
requirements for issuance of the U.S. Standard  Certificate of Airworthiness for
transport  category aircraft specified in Article 23.6.1 by delivering to LESSOR
at its option either an actual U.S.  Standard  Certificate of Airworthiness  (if
the Aircraft is to be registered  in the U.S.) or a letter  acceptable to LESSOR
signed by an FAA Designated Airworthiness Representative (DAR) or another Person
acceptable  to LESSOR  stating  that the DAR or such  Person has  inspected  the
Aircraft  and  Aircraft  Documentation  (including  records and manuals) and has
found that the Aircraft meets the requirements  for issuance of a U.S.  Standard
Certificate of Airworthiness for transport  category aircraft in accordance with
FAR Part 21 and, in addition, meets the operating requirements of FAR Part 121.

23.6.3 If the Aircraft is to be  registered  in a country other than in the U.S.
after  return  from  LESSEE,  LESSOR  may  in  its  sole  discretion  waive  the
requirements  of Article  23.6.1 and instead  require that LESSEE at its expense
(to the extent  such  expense is no greater  than that which  LESSEE  would have
incurred  pursuant to Article  23.6.1,  with any  additional  expenses being for
LESSOR's  account) put the Aircraft in a condition to meet the  requirements for
issuance of a Certificate of Airworthiness of the Aviation Authority of the next
country  of  register,  provided  that if  solely  as a result  of such work the
Aircraft is returned  after the scheduled  redelivery  date,  LESSEE will not be
liable for  payment of Rent in  respect  of the  period  following  the date the
Aircraft would have been returned  following  completion of the  requirements of
this Article 23, but for the provisions of this Article 23.6.3.

23.7 General Condition of Aircraft at Return.

23.7.1 The Aircraft, Engines and Parts will have been maintained and repaired in
accordance  with the  Maintenance  Program,  the  rules and  regulations  of the
Aviation Authority and this Lease.

23.7.2  Aircraft  Documentation  (including  records and manuals) will have been
maintained in an up-to-date status, in accordance with the rules and regulations
of the Aviation  Authority and the FAA and this Lease and in a form necessary in
order to meet the  requirements  of Article  23.6.2.  The records and historical
documents set forth in Attachment 1 of Exhibit J will be in English.

23.7.3  The  Aircraft  will be in the same  working  order and  condition  as at
Delivery  (subject to the other  provisions of this Article 23,  reasonable wear
and tear from normal flight operations  excepted),  with all pilot discrepancies
and deferred maintenance items cleared on a terminating action basis.

23.7.4  The  Aircraft  will be  airworthy  (conform  to type  design and be in a
condition  for safe  operation),  with all Aircraft  equipment,  components  and
systems  operating  in  accordance  with their  intended  use and within  limits
approved by Manufacturer, Aviation Authority and the FAA.

23.7.5 The interior of the Aircraft  (including  cabin and windows) will be in a
reasonable condition and cosmetically acceptable, with no cracks, tears or rips.

23.7.6 No  special  or unique  Manufacturer,  Engine  manufacturer  or  Aviation
Authority inspection or check requirements which are specific to the Aircraft or
Engines (as opposed to all  aircraft or engines of their  types) will exist with
respect to the Airframe, Engines and Aircraft equipment, components and systems.

23.7.7 All repairs, modifications and alterations to the Aircraft will have been
accomplished in accordance  with the FARs or  Manufacturer's  Structural  Repair
Manual (or FAA-approved data supported by FAA Form 8110-3) for the Aircraft,  as
applicable.

23.7.8 The Aircraft will be returned with  LESSOR's  Engines  installed and with
the same equipment as at Delivery, subject only to those replacements, additions
and Modifications permitted under this Lease.

23.7.9 All  Airworthiness  Directives which are issued during the Lease Term and
require compliance (either by means of repetitive inspections,  modifications or
terminating  action) prior to return of the Aircraft to LESSOR or within one (1)
year after the Termination  Date will have been complied with on the Aircraft on
a terminating action basis at LESSEE's cost.  Airworthiness  Directives which do
not have a  terminating  action will be  accomplished  at the  highest  level of
inspection or modification  possible.  If, after using  commercially  reasonable
efforts, LESSEE is unable to acquire the material, parts or components necessary
to  accomplish  such  Airworthiness  Directive,  LESSEE  will pay to LESSOR upon
return of the Aircraft the  estimated  cost of  terminating  such  Airworthiness
Directive.  If the estimated  cost cannot be mutually  agreed upon by LESSEE and
LESSOR,  LESSEE and LESSOR  will each obtain an  estimate  from a reputable  FAA
approved  maintenance  facility  (unaffiliated  with  LESSEE or LESSOR)  and the
estimated cost will be the average of the two estimates.

23.7.10  The  Aircraft  will  be in  compliance  with  Manufacturer's  Corrosion
Prevention  and  Control  Program  (CPCP)   specified  for  the  model  type  by
Manufacturer.

23.7.11  If  any  waivers,   deviations,   dispensations,   alternate  means  of
compliance,  extensions or carry-overs  with respect to maintenance or operating
requirements,  repairs or  Airworthiness  Directives are granted by the Aviation
Authority or permitted by the Maintenance  Program,  LESSEE at its sole cost and
expense will  nonetheless  perform such  maintenance or operating  requirements,
repairs  or   Airworthiness   Directives   as  if  such   waivers,   deviations,
dispensations,  alternate means of compliance,  or extensions or carry-overs did
not exist;  provided,  however,  that if any  Airworthiness  Directive  has been
deemed  terminated by means of an alternate  means of compliance  that is widely
accepted  by the  international  airline  industry,  such  alternative  means of
compliance will be deemed to satisfy the terms of this Article 23.7.11.


23.7.12 The Aircraft  will be free from any Security  Interest  except  LESSOR's
Liens and no  circumstance  will have so arisen whereby the Aircraft is or could
become  subject to any Security  Interest or right of detention or sale in favor
of the Aviation Authority, any airport authority, or any other authority.

23.7.13 All no-charge vendor and  Manufacturer's  service bulletin kits received
by  LESSEE  for the  Aircraft  but not  installed  thereon  will be on board the
Aircraft as cargo.  At LESSOR's  request,  any other service  bulletin kit which
LESSEE  paid for will also be  delivered  to LESSOR on board the  Aircraft,  but
LESSOR will reimburse  LESSEE for its actual  out-of-pocket  costs for such kit,
unless  LESSEE  purchased  such kit as part of its  implementation  of a service
bulletin on its fleet of aircraft of the same type as the  Aircraft  but had not
yet installed such kit on the Aircraft, in which case such kit will be furnished
free of charge to LESSOR.

23.7.14  The  Aircraft  will be  free of any  leaks  and  any  damage  resulting
therefrom.  All  repairs  will  have  been  performed  on a  permanent  basis in
accordance with the applicable manufacturer's instructions.

23.7.15 The Aircraft fluid  reservoirs  (including  oil,  oxygen,  hydraulic and
water) will be serviced to full and the waste tank serviced in  accordance  with
Manufacturer's instructions. Fuel tanks will be at least as full as at Delivery.

23.7.16 The Aircraft will be painted in LESSEE's livery.

23.8 Checks Prior to Return.  Prior to return of the Aircraft to LESSOR,  LESSEE
at its expense will do each of the following:

23.8.1 Have performed,  by LESSEE or any other FAA-approved repair station,  the
next due "C" check as described in the MPD. LESSEE will also weigh the Aircraft.
Any  discrepancies   revealed  during  such  inspection  will  be  corrected  in
accordance  with  Manufacturer's  maintenance and repair manuals or FAA-approved
data.  LESSEE  agrees to perform  during  such  check any other work  reasonably
required by LESSOR (and not otherwise required under this Lease) and LESSOR will
reimburse LESSEE for such work at LESSEE's preferred customer rates.

23.8.2 Perform an internal and external corrosion  inspection where any evidence
of  corrosion  exists and  correct  any  discrepancies  in  accordance  with the
recommendations  of Manufacturer and the Structural  Repair Manual. In addition,
all inspected areas will be properly treated with corrosion  inhibitor if and as
recommended by Manufacturer.

23.8.3 All  required  external  placards,  signs and  markings  will be properly
attached, free from damage, clean and legible.

23.8.4 Clean the exterior and interior of the Aircraft.

23.8.5 If  reasonably  required  by LESSOR,  repaint the flight deck and replace
placards of the Aircraft.

23.8.6 In  accordance  with Article  23.7.7,  permanently  repair  damage to the
Aircraft that exceeds Manufacturer's limits and replace any non-flush structural
patch  repairs  installed  on  the  Aircraft  with  flush-type  repairs,  unless
Manufacturer does not recommend a flush-type repair.

23.9 Engine Return Requirements.

23.9.1  Immediately  prior to the return of the  Aircraft  to LESSOR,  LESSEE at
LESSEE's expense will perform each of the following on the Engines:

                (a) With  LESSOR or its  representatives  present,  LESSEE  will
                perform  a full  and  complete  hot and cold  section  videotape
                borescope on each Engine and its modules in accordance  with the
                Engine manufacturer's maintenance manual.

                (b)  If the  Engine  historical  and  technical  records  and/or
                condition  trend  monitoring  data of any Engine  (including the
                APU) indicate an  acceleration in the rate of  deterioration  in
                the performance of an Engine,  LESSEE will correct,  to LESSOR's
                reasonable satisfaction, such conditions which are determined to
                be causing such accelerated rate of deterioration.

                (c) With  LESSOR or its  representatives  present,  LESSEE  will
                accomplish a maximum  power  assurance  run and an  acceleration
                check  on  the   Engines.   LESSEE  will   evaluate  the  Engine
                performance  and record the Engine maximum power  assurance test
                conditions and results on the Return Acceptance Receipt.

23.9.2 At return, each Engine will meet all of the following:

                (a) Each Engine will have at least 4,000 hours and 3,000  cycles
                remaining until its next anticipated  removal  regardless of the
                operating  environment of such Engine. In determining whether an
                Engine has at least 4,000 hours and 3,000 cycles remaining until
                its next anticipated removal, the following will be considered:

                    (i)  the Engine  manufacturer's  estimated mean time between
                         removals for engines of the same type as the Engines;

                    (ii) the remaining EGT margin on such Engine; and

                    (iii)the Engine historical and technical records,  borescope
                         inspection,   trend   monitoring,   the  maximum  power
                         assurance run and the acceleration check;

                (b) The  Engine  historical  and  technical  records,  borescope
                inspection,  trend  monitoring,  the maximum power assurance run
                and the  acceleration  check do not reveal any  condition  which
                would cause the Engines or any module to be serviceable  with an
                increased  frequency of inspection or with calendar time, flight
                hour   or   flight   cycle   restrictions   under   the   Engine
                manufacturer's maintenance manual;

                (c) No life  limited  Part of an Engine  will have more hours or
                cycles consumed than such Engine's data plate; and

                (d) Each Part of an Engine which has a hard time limit will have
                at least  3,000  cycles  remaining  to  operate  until  its next
                scheduled  Overhaul.  Each  Part of an  Engine  which has a life
                limit will have at least 3,000 cycles remaining to operate until
                its removal.

LESSEE will correct any  discrepancies in the required  condition of the Engines
set forth in this Article  23.9.2 in accordance  with the  guidelines set out by
the Engine manufacturer. If there is a dispute as to whether an Engine meets the
requirements of this Article 23.9.2,  LESSEE and LESSOR will consult with Engine
manufacturer  and follow Engine  manufacturer's  recommendations  (including the
accomplishment of an Engine test cell operational check) and the manner in which
any  discrepancies  from  the  requirements  of  this  Article  23.9.2  will  be
rectified.

23.10  Hour/Cycle/Calendar  Time  Requirements.  At return, the condition of the
Aircraft will be as follows:

23.10.1 The Aircraft will have not more than  one-hundred  (100) hours  consumed
since  completion  of the last "C" check in accordance  with the MPD  (excluding
hours consumed on the acceptance flight).

23.10.2 The APU will be in serviceable condition.

23.10.3 The  Landing  Gear will be cleared for at least eight (8) months (or one
(1) month if LESSEE exercises its extension  option) of operation until the next
Overhaul or scheduled removal;  provided,  however,  that at LESSOR's request by
notice at least six (6) months prior to the Expiration  Date,  LESSEE will cause
to be performed an Overhaul the Landing Gear prior to return of the Aircraft and
the costs of such Overhaul will be paid as follows: (i) first, by application of
the Landing Gear  Reserves  paid by LESSEE and (ii) second,  the balance will be
paid by LESSOR.

23.10.4 Each Part of the Aircraft  which has a hard time  (hour/cycle)  limit to
Overhaul of less than four  thousand  (4,000)  hours or three  thousand  (3,000)
cycles  will be freshly  overhauled  or replaced  and each Part of the  Aircraft
which has a hard time (hour/cycle)  limit to Overhaul of more than four thousand
(4,000) hours or three thousand  (3,000) cycles will have four thousand  (4,000)
hours and three thousand (3,000) cycles  (whichever is applicable)  remaining to
operate until its next scheduled Overhaul or removal.

23.10.5 Each  life-limited  Part of the Aircraft will have four thousand (4,000)
hours and three thousand (3,000) cycles  (whichever is applicable)  remaining to
operate until its next scheduled removal.

23.10.6 Each Part (excluding Landing Gear) which has a calendar limit (including
emergency  equipment) will have remaining to operate the lesser of the following
calendar  times:  (i) one (1) year from the return of the  Aircraft to LESSOR or
(ii) one hundred percent (100%) of such Part's total approved life.

23.10.7 With respect to all installed Parts as a group,  such Parts will have an
average total time since new no greater than that of the Airframe.

23.10.8  The  Aircraft  Landing  Gear tires and brakes  will have at least fifty
percent  (50%)  life  remaining  until  their  next  Overhaul  (except  for  the
acceptance flight).

23.11  Like  for  Like.11  Like for  Like.11  Like for  Like.11  Like for  Like.
Notwithstanding  anything in this Article 23 to the contrary,  in the event that
at Delivery the Aircraft  did not meet a particular  standard  with respect to a
specific  item set  forth in  Exhibit  B, and such  deficiency  was noted on the
Estoppel and  Acceptance  Certificate,  then LESSEE's  return  obligations  with
respect to such specific item will be modified accordingly so that LESSEE is not
required to return such specific item with greater time  remaining  than existed
at Delivery.

23.12 Export and  Deregistration  of Aircraft.12  Export and  Deregistration  of
Aircraft.12  Export and  Deregistration of Aircraft.12 Export and Deregistration
of Aircraft.  At LESSOR's  request by notice at least fifteen (15) days prior to
the  Expiration  Date,  LESSEE at its cost  (except  as set forth in the  second
sentence  of this  Article  23.12)  will (a)  provide an Export  Certificate  of
Airworthiness  or its equivalent from the State of Registration  for the country
designated by LESSOR,  (b) assist with  deregistration  of the Aircraft from the
register of aircraft in the State of Registration, (c) assist with arranging for
prompt  confirmation  of such  deregistration  to be sent by the registry in the
State of Registration  to the next country of  registration  and (d) perform any
other acts reasonably required by LESSOR in connection with such deregistration.
If  any  Aircraft  work  which  LESSEE  is not  otherwise  required  to  perform
hereunder,  including  engineering,  is  required in order to obtain such Export
Certificate of Airworthiness,  LESSEE will, to the extent  reasonably  possible,
perform  such work and LESSOR  will  reimburse  LESSEE for such work at LESSEE's
preferred customer rates.

23.13 LESSEE's Continuing  Obligations.13 LESSEE's Continuing  Obligations223.13
LESSEE's Continuing Obligations.13 LESSEE's Continuing Obligations. In the event
that LESSEE does not return the Aircraft to LESSOR on the Expiration Date and in
the  condition  required by this  Article 23 for any reason  (whether or not the
reason is within LESSEE's control):

23.13.1 the  obligations  of LESSEE under this Lease will continue in full force
and effect on a day-to-day basis until such return.  This will not be considered
a waiver of LESSEE's Event of Default or any right of LESSOR hereunder.

23.13.2  Until  such  return,  the Agreed  Value will be an amount  equal to the
Agreed  Value on the day the  Aircraft  should  have  been  returned  to  LESSOR
pursuant to this Lease.

23.13.3 LESSEE will fully indemnify  LESSOR on demand for all losses  (including
damages in accordance with Article 25.5(b)), liabilities,  actions, proceedings,
costs and  expenses  thereby  suffered or  incurred by LESSOR and, in  addition,
until  such time as the  Aircraft  is  redelivered  to  LESSOR  and put into the
condition  required by this Article 23,  instead of paying the Rent specified in
Article  5.3,  LESSEE  will pay twice  the  amount of Rent for each day from the
scheduled  Expiration Date until the Termination  Date (the monthly Rent payable
under Article  5.3.1 will be prorated  based on the actual number of days in the
applicable  month).  Payment will be made upon presentation of LESSOR's invoice.
Notwithstanding  the  foregoing,  in the event that the Aircraft is removed from
service by LESSEE and placed in a maintenance  facility for the  performance  of
work required to put the Aircraft into the condition required by this Article 23
and as a result of delays in the  performance  of such work the  Aircraft is not
returned on the Expiration  Date, for a period of up to seven (7) days following
the Expiration Date, LESSEE shall only be responsible for normal Rent. After the
7th day of such period, if LESSEE has not returned the Aircraft to LESSOR in the
condition required by this Lease, LESSEE shall be responsible for twice the Rent
for the period after such 7 day period in accordance with the provisions of this
Article 23.13.3 until the actual Termination Date.

23.13.4  LESSOR may elect,  in its sole and absolute  discretion,  to accept the
return of the Aircraft prior to the Aircraft being put in the condition required
by this Article 23 and  thereafter  have any such  non-conformance  corrected at
such time as LESSOR may deem  appropriate (but within ninety (90) days following
the return of the Aircraft) and at commercial  rates  then-charged by the Person
selected by LESSOR to perform such correction.  Any direct expenses  incurred by
LESSOR for such correction will become  additional Rent payable by LESSEE within
fifteen (15) days following the  submission of a written  statement by LESSOR to
LESSEE,  identifying  the items  corrected and setting forth the expense of such
corrections in reasonable detail.  LESSEE's  obligation to pay such supplemental
Rent will survive the Termination Date.

23.14 Airport and Navigation  Charges.14  Airport and  Navigation  Charges223.14
Airport and Navigation  Charges.14 Airport and Navigation  Charges.  LESSEE will
ensure that at return of the Aircraft any and all airport,  navigation and other
charges  which  give  rise or would if unpaid  give  rise to any lien,  right of
detention, right of sale or other Security Interest in relation to the Aircraft,
Engine or any Part have been paid and  discharged  in full and will at  LESSOR's
request produce evidence thereof satisfactory to LESSOR.

23.15 Return Acceptance  Certificate.15 Return Acceptance  Certificate.15 Return
Acceptance  Certificate.15  Return  Acceptance  Certificate.  Upon return of the
Aircraft  in  accordance  with the terms of this  Lease,  LESSEE  will  promptly
prepare  and  execute  two (2) Return  Acceptance  Certificates  in the form and
substance  of Exhibit J and LESSOR will  countersign  and return one such Return
Acceptance Certificate to LESSEE. In addition,  LESSEE and LESSOR will execute a
Lease Termination for filing with the FAA evidencing termination of this Lease.

23.16 Indemnities and Insurance.16  Indemnities and Insurance.16 Indemnities and
Insurance.16   Indemnities   and  Insurance.   The   indemnities  and  insurance
requirements  set  forth in  Articles  17 and 18,  respectively,  will  apply to
Indemnitees  and  LESSOR's   representatives  during  return  of  the  Aircraft,
including  the ground  inspection  and  acceptance  flight.  With respect to the
acceptance flight, LESSOR's representatives will receive the same protections as
LESSOR on LESSEE's Aviation and Airline General Third Party Liability Insurance.

23.17 Civil Reserve Air Fleet.

23.17.1  LESSEE may transfer  possession of the Aircraft to the United States of
America or any  instrumentality  or agency  thereof as part of the Civil Reserve
Air  Fleet  Program   authorized   under  10   U.S.C.ss.9511  et  seq.  (or  any
substantially  similar  program)  ("CRAF  Program") for a period which  includes
(collectively,  the "CRAF Program Requisition  Period") (a) the entire period of
requisition  under the CRAF Program and (b) an  additional  six (6) months after
the expiration of the  requisition  under the CRAF Program.  If the CRAF Program
Requisition  Period extends  beyond the Expiration  Date provided by this Lease,
then the  Lease  will be deemed to  continue  until the end of the CRAF  Program
Requisition  Period at a monthly rental rate equal to the monthly rental rate in
effect at the end of the Lease Term and the Expiration Date will be deemed to be
the end of the CRAF Program Requisition Period. If the Aircraft is requisitioned
under the CRAF Program for a period which  extends  beyond the Lease Term,  then
LESSEE will provide  LESSOR with written  notice of the proposed  redelivery  at
least six (6) months  prior to such  redelivery  date and LESSEE must return the
Aircraft  in the  condition  required by Article 23 on the  redelivery  date set
forth in such written notice.

23.17.2  LESSEE  will  promptly  notify  LESSOR in  writing  in the event of the
requisition  for  use  of  the  Aircraft  under  CRAF  activation  by  the  U.S.
Government.  All of LESSEE's  obligations  under this Lease will continue to the
same extent as if such requisition had not occurred.

23.17.3 Any provisions of this Lease to the contrary  notwithstanding,  if there
is a  requisition  for use of the Aircraft  pursuant to the CRAF Program  and/or
CRAF activation,  LESSOR agrees that LESSEE's insurances  described in Exhibit C
may be supplemented  or replaced by insurances  provided under Title XIII of the
Act,  and/or U.S.  Government  indemnification  (which Title XIII insurances and
indemnification  will be, as to the  Aircraft,  in an  amount  not less than the
Agreed  Value and,  as to all other  insurances,  in amounts not less than those
established  in  Exhibit  C);  provided,   however,   that  LESSEE  will  remain
responsible for full compliance with all the provisions of this Lease, including
Articles  17 and 19,  to the  extent  Title  XIII  and/or  the  U.S.  Government
indemnification do not satisfy LESSEE's obligations under this Lease.

23.17.4 If there is a requisition  for use of the Aircraft  pursuant to the CRAF
Program  and/or CRAF  activation,  there will be no limitation on the geographic
area in  which  the  Aircraft  may be  operated  so long  as,  taken as a whole,
LESSEE's insurance, the Title XIII insurance and/or the indemnification provided
by the U.S. Government fully cover (without any geographic  exclusions) LESSEE's
Exhibit C insurance requirements.

23.17.5 If an Event of  Default  occurs  under  this Lease and LESSOR  elects to
pursue its remedies under Article  25.3(e) to terminate this Lease and repossess
the  Aircraft,  LESSOR will so notify the U.S.  Government  by sending a written
communication with a copy to LESSEE as follows:

                       Headquarters Air Mobility Command
                       AMC Contracting Office -- XOKA
                       Scott Air Force Base, Illinois  62225-5007

23.17.6 So long as no Event of  Default  has  occurred  and is  continuing,  all
payments  received by LESSOR or LESSEE from such Government Entity in connection
with the requisition of the Aircraft under the CRAF Program (except  payments on
account of a Total Loss of the  Aircraft)  will be paid over to or  retained  by
LESSEE.  If an Event of Default has  occurred  and is  continuing,  all payments
received by LESSEE or LESSOR from such Government  Entity in connection with the
requisition  of the  Aircraft  under the CRAF  Program  may be used by LESSOR to
satisfy any obligations owing by LESSEE.

<PAGE>




         ARTICLE 24           ASSIGNMENT


24.1 No  Assignment  by LESSEE.1 No  Assignment  by  LESSEE.1 No  Assignment  by
LESSEE.1 No Assignment by LESSEE. EXCEPT AS EXPRESSLY PERMITTED BY ARTICLE 11 OR
ARTICLE 20.2.3, NO ASSIGNMENT,  NOVATION, TRANSFER, MORTGAGE OR OTHER CHARGE MAY
BE MADE BY LESSEE OF ANY OF ITS RIGHTS WITH RESPECT TO THE  AIRCRAFT,  ENGINE OR
PART OR THIS LEASE.

24.2 Sale or Assignment by LESSOR.

24.2.1 Subject to LESSEE's rights pursuant to this Lease, LESSOR may at any time
and without LESSEE's consent sell,  assign or transfer its rights,  interest and
obligations  hereunder,  under any other Operative Document,  or with respect to
the Aircraft to a Permitted Transferee; provided, however, that no such transfer
shall  materially  increase  LESSEE's  liabilities or  obligations  hereunder or
materially  adversely  affect LESSEE's rights under this Lease.  For a period of
two (2) years after such sale or assignment  and at LESSEE's  cost,  LESSEE will
continue to name LESSOR as an additional  insured under the Aviation and Airline
General Third Party Liability Insurance specified in Exhibit C.

24.2.2 The term  "LESSOR" as used in this Lease means the lessor of the Aircraft
at the time in  question.  In the event of the sale of the Aircraft and transfer
of LESSOR's rights and obligations  under this Lease to a Permitted  Transferee,
such Permitted  Transferee will become "LESSOR" of the Aircraft under this Lease
and  the  transferring  party  (the  prior  "LESSOR")  will be  relieved  of all
liability  to LESSEE under this Lease for  obligations  arising on and after the
date the  Aircraft is sold.  LESSEE will  acknowledge  and accept the  Permitted
Transferee  as the new  "LESSOR"  under this  Lease and will look  solely to the
Permitted Transferee for the performance of all LESSOR obligations and covenants
under this Lease arising on and after the Aircraft sale date.

24.3 LESSOR's  Lender.3  LESSOR's  Lender.3  LESSOR's  Lender.3 LESSOR's Lender.
Subject to LESSEE's  rights  pursuant to this Lease,  LESSOR may at any time and
without LESSEE's  consent grant security  interests over the Aircraft and assign
the  benefit of this  Lease to a lender  ("LESSOR's  Lender")  as  security  for
LESSOR's obligations to LESSOR's Lender.

24.4 LESSEE  Cooperation.4  LESSEE  Cooperation.4  LESSEE  Cooperation.4  LESSEE
Cooperation.  On request by LESSOR, LESSEE will execute all such documents (such
as a consent to a lease assignment  agreement) as LESSOR may reasonably  require
to  confirm   LESSEE's   obligations   under  this  Lease  and  obtain  LESSEE's
acknowledgment  that LESSOR is not in breach of the Lease.  LESSEE will  provide
all other reasonable assistance and cooperation to LESSOR in connection with any
such sale or assignment or the perfection  and  maintenance of any such security
interest,  including,  at  LESSOR's  cost,  making  all  necessary  filings  and
registrations in the State of Registration and providing all opinions of counsel
with respect to matters  reasonably  requested by LESSOR.  LESSOR will reimburse
LESSEE for its reasonable out-of-pocket costs and expenses (including reasonable
legal fees) in reviewing  documents  required by LESSOR and  cooperating  with a
transfer pursuant to this Article 24.

24.5 Protections.

24.5.1  LESSOR will  obtain for the  benefit of LESSEE a written  acknowledgment
from any Permitted  Transferee  or LESSOR's  Lender that, so long as no Event of
Default has occurred and is  continuing  hereunder,  neither such Person nor any
Person  claiming  by,  through  or under such  Person  will not  interfere  with
LESSEE's quiet, peaceful use and enjoyment of the Aircraft.

24.5.2  Wherever  the term  "LESSOR" is used in this Lease in relation to any of
the provisions  relating to disclaimer,  title and  registration,  indemnity and
insurance contained in Articles 8, 14, 17 and 18, respectively,  or with respect
to Article  20.2.6,  the term  "LESSOR"  will be deemed to include any Permitted
Transferee and its lenders, if applicable.  For avoidance of doubt, in the event
of LESSOR's  sale or financing of the  Aircraft,  the  disclaimer  and indemnity
provisions  contained in Articles 8 and 17 will continue to be applicable  after
the sale or assignment to International  Lease Finance  Corporation,  as well as
being applicable to any Permitted Transferee and its lenders.


<PAGE>



         ARTICLE 25           DEFAULT OF LESSEE


25.1  LESSEE  Notice to LESSOR.1  LESSEE  Notice to  LESSOR.1  LESSEE  Notice to
LESSOR.1  LESSEE Notice to LESSOR.  LESSEE will promptly notify LESSOR if LESSEE
becomes aware of the occurrence of any Default.

25.2 Events of Default. *

25.3 LESSOR's  General  Rights.3  LESSOR's  General  Rights.3  LESSOR's  General
Rights.3  LESSOR's  General  Rights.  Upon the occurrence and continuance of any
Event of Default,  LESSOR may do all or any of the  following  at its option (in
addition to such other rights and  remedies  which LESSOR may have by statute or
otherwise but subject to any requirements of applicable Law):

               (a)  terminate this Lease by giving written notice to LESSEE;

               (b)  require  that  LESSEE  immediately  move the  Aircraft to an
                    airport or other location designated by LESSOR;

               (c)  for LESSEE's  account,  do anything  that may  reasonably be
                    required to cure any  default  and  recover  from LESSEE all
                    reasonable costs, including legal fees and expenses incurred
                    in doing so and Default Interest;

               (d)  proceed as appropriate to enforce  performance of this Lease
                    and to recover any damages for the breach hereof,  including
                    the amounts specified in Article 25.5;

               (e)  terminate this Lease by taking possession of the Aircraft or
                    by serving notice requiring LESSEE to return the Aircraft to
                    LESSOR at the location  specified by LESSOR. If LESSOR takes
                    possession  of the  Aircraft,  it may  enter  upon  LESSEE's
                    premises  where the  Aircraft is located  without  liability
                    except  for  the   willful   misconduct   of  LESSOR.   Upon
                    repossession  of the Aircraft,  LESSOR will then be entitled
                    to sell,  lease or  otherwise  deal with the  Aircraft as if
                    this Lease had never been made.  LESSOR  will be entitled to
                    the full benefit of its bargain with LESSEE; or

               (f)  apply all or any  portion of the  Security  Deposit  and any
                    other security deposits held by LESSOR pursuant to any other
                    agreements between LESSOR and LESSEE to any amounts due.

25.4  Deregistration  and  Export of  Aircraft.4  Deregistration  and  Export of
Aircraft.4  Deregistration and Export of Aircraft.4 Deregistration and Export of
Aircraft. If an Event of Default has occurred and is continuing, LESSOR may take
all steps  necessary to deregister  the Aircraft in and export the Aircraft from
the State of Registration.

25.5 LESSEE  Liability for  Damages.5  LESSEE  Liability  for  Damages.5  LESSEE
Liability for Damages.5  LESSEE  Liability for Damages.  Upon the occurrence and
during the continuance of an Event of Default, in addition to all other remedies
available  at law or in equity,  LESSOR has the right to recover from LESSEE and
LESSEE  will pay LESSOR  within two (2)  Business  Days after  LESSOR's  written
demand, all of the following:

                (a) all  amounts  which are then due and  unpaid  hereunder  and
                which  become due prior to the earlier of  LESSOR's  recovery of
                possession of the Aircraft or LESSEE making an effective  tender
                thereof;

                (b)  subject to  LESSOR's  obligations  at Law to  mitigate  its
                damages,  any losses  suffered  by LESSOR  because  of  LESSOR's
                inability to place the Aircraft on lease with another  lessee or
                to  otherwise   utilize  the  Aircraft  on  financial  terms  as
                favorable to LESSOR as the terms hereof or, if LESSOR  elects to
                dispose of the Aircraft,  the funds arising from a sale or other
                disposition  of the Aircraft are not as  profitable to LESSOR as
                leasing the Aircraft in  accordance  with the terms hereof would
                have been (and LESSOR will be entitled to accelerate any and all
                Rent  which  would  have  been due  from  the  date of  LESSOR's
                recovery or repossession of the Aircraft  through the Expiration
                Date);

                (c) all costs associated with LESSOR's  exercise of its remedies
                hereunder,  including  but not  limited to  repossession  costs,
                legal fees, Aircraft storage costs and Aircraft re-lease or sale
                costs;

                (d) any amount of principal,  interest,  fees or other sums paid
                or payable on  account of funds  borrowed  in order to carry any
                unpaid amount;

                (e) any loss, premium,  penalty or expense which may be incurred
                in repaying funds raised to finance the Aircraft or in unwinding
                any  financial  instrument  relating  in  whole  or in  part  to
                LESSOR's financing of the Aircraft;

                (f)   direct   expenses    incurred   by   LESSOR   to   correct
                non-conformance  of  the  Aircraft  with  return  conditions  in
                accordance with Article 23.13.3; and

                (g) an amount sufficient to fully compensate LESSOR for any loss
                of or damage to the Aircraft caused by LESSEE's default.

25.6 Waiver of  Default.6  Waiver of  Default.6  Waiver of  Default.6  Waiver of
Default.  By written  notice to LESSEE,  LESSOR  may at its  election  waive any
Default or Event of Default and its consequences and rescind and annul any prior
notice of termination of this Lease.  The respective  rights of the parties will
then be as they would have been had no Default or Event of Default  occurred and
no such notice been given.

25.7 Present  Value of Payments.7  Present Value of Payments.7  Present Value of
Payments.7 Present Value of Payments. In calculating LESSOR's damages hereunder,
upon an Event of Default  all Rent and other  amounts  which would have been due
hereunder  during the Lease Term if an Event of Default had not occurred will be
calculated on a present value basis using a discounting rate of six percent (6%)
per  annum  discounted  to the  earlier  of the  date on  which  LESSOR  obtains
possession of the Aircraft or LESSEE makes an effective tender thereof.

25.8   Use   of   "Termination   Date".8   Use  of   TerminationDate.8   Use  of
TerminationDate.8  Use of TerminationDate.  For avoidance of doubt, it is agreed
that if this Lease  terminates  and the Aircraft is repossessed by LESSOR due to
an Event of  Default,  then,  notwithstanding  the use of the term  "Termination
Date" in this Lease, the period of the Lease Term and the "Expiration Date" will
be utilized in calculating  the damages to which LESSOR is entitled  pursuant to
Article 25.5. For example,  it is agreed and understood  that LESSOR is entitled
to receive  from  LESSEE  the Rent and the  benefit of  LESSEE's  insurance  and
maintenance of the Aircraft until expiration of the Lease Term.

25.9  LESSEE's  Remedies.9  LESSEE's  Remedies.9  LESSEE's  Remedies.9  LESSEE's
Remedies.  Except as  otherwise  set forth in the  Operative  Documents,  upon a
breach by LESSOR of any of the terms and conditions of this Lease,  LESSEE shall
have all rights available at law or in equity.

25.10 Waiver of Consequential  Damages.10 Waiver of Consequential  Damages225.10
Waiver of Consequential  Damages.10 Waiver of Consequential Damages.  LESSEE and
LESSOR each agree that it shall not be entitled to recover, and hereby disclaims
and  waives  any right  that it may  otherwise  have to  recover,  any  special,
indirect or consequential damages as a result of any breach or alleged breach by
the  other  party  of any  of  the  agreements,  representations  or  warranties
contained in this Lease or the other  Operative  Documents;  provided,  however,
that  nothing  herein  shall be deemed  to  disclaim  or waive  any of  LESSOR's
remedies expressly set forth in Article 25.5(a) through 25.5 (g).


<PAGE>




         ARTICLE 26           NOTICES


26.1 Manner of Sending  Notices.1 Manner of Sending  Notices.1 Manner of Sending
Notices.1 Manner of Sending Notices. Any notice, request or information required
or permissible under this Lease will be in writing and in English.  Notices will
be delivered in person or sent by fax,  letter  (mailed  airmail,  certified and
return receipt requested),  or by expedited delivery addressed to the parties as
set forth in Article 26.2. In the case of a fax,  notice will be deemed received
upon actual  receipt  (and the date of actual  receipt  will be deemed to be the
date set forth on the  confirmation  of receipt  produced  by the  sender's  fax
machine  immediately  after  the fax is sent).  In the case of a mailed  letter,
notice will be deemed  received on the tenth  (10th) day after  mailing.  In the
case of a notice sent by expedited  delivery,  notice will be deemed received on
the date of delivery set forth in the records of the Person  which  accomplished
the  delivery.  If any  notice  is sent by more  than  one of the  above  listed
methods,  notice  will be  deemed  received  on the  earliest  possible  date in
accordance with the above provisions.

               26.2 Notice Information. Notices will be sent:

If to LESSOR:  INTERNATIONAL  LEASE  FINANCE  CORPORATION
               1999  Avenue of the  Stars,  39th  Floor
               Los  Angeles, California 90067, U.S.A.
               Attention:       Legal Department
               Fax:             310-788-1990
               Telephone:       310-788-1999


If to LESSEE:  FRONTIER AIRLINES, INC.
               12015 East 46th Avenue
               Suite 200
               Denver, CO 80239
               Attention:       General Counsel
               Fax:             303-371-7007
               Telephone:       303-371-7400

or to such other  places and numbers as either  party  directs in writing to the
other party.


<PAGE>


         ARTICLE 27           GOVERNING LAW AND JURISDICTION


27.1  California  Law. This Lease is being  delivered in the State of California
and will in all  respects be governed by and  construed in  accordance  with the
Laws of the State of California  (notwithstanding the conflict Laws of the State
of California).

27.2 Non-Exclusive  Jurisdiction in California.2  Non-Exclusive  Jurisdiction in
California.2    Non-Exclusive   Jurisdiction   in   California.2   Non-Exclusive
Jurisdiction  in  California.  As permitted by Section  410.40 of the California
Code  of  Civil  Procedure,   the  parties  hereby  irrevocably  submit  to  the
non-exclusive  jurisdiction  of the  Federal  District  Court  for  the  Central
District of California and the State of California  Superior or Municipal  Court
in Los  Angeles,  California.  Nothing  herein will  prevent  either  party from
bringing suit in any other appropriate jurisdiction.

27.3 Service of Process.3  Service of Process.3  Service of Process.3 Service of
Process.  The parties hereby consent to the service of process (a) out of any of
the courts  referred to above,  (b) in  accordance  with  Section  415.40 of the
California  Code of  Civil  Procedure  by  mailing  copies  of the  summons  and
complaint to the person to be served by air mail,  certified or registered  mail
to the  address  set forth in Article  26.2,  postage  prepaid,  return  receipt
requested or (c) in accordance with the Hague Convention, if applicable.

27.4  Prevailing  Party in Dispute.4  Prevailing  Party in Dispute.4  Prevailing
Party in  Dispute.4  Prevailing  Party in Dispute.  If any legal action or other
proceeding is brought in connection with or arises out of any provisions in this
Lease,  the prevailing party will be entitled to recover  reasonable  attorneys'
fees  and  other  actual  and  reasonable  costs  incurred  in  such  action  or
proceedings.  The prevailing party will also, to the extent  permissible by Law,
be entitled to receive pre- and post-judgment Default Interest.

27.5 Waiver. LESSEE AND LESSOR HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY. LESSEE
AND LESSOR HEREBY  IRREVOCABLY WAIVE ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR  RELATED TO THIS LEASE  BROUGHT IN ANY OF THE COURTS  REFERRED  TO IN ARTICLE
27.2, AND HEREBY FURTHER  IRREVOCABLY WAIVE ANY CLAIM THAT ANY SUCH SUIT, ACTION
OR  PROCEEDING  BROUGHT  IN ANY SUCH COURT HAS BEEN  BROUGHT IN AN  INCONVENIENT
FORUM.


<PAGE>



         ARTICLE 28           MISCELLANEOUS


28.1 Transportation of Personnel.1  Transportation of Personnel.1 Transportation
of Personnel.1  Transportation of Personnel.  LESSEE will provide transportation
to LESSOR's  personnel  on a positive  space basis on the  Aircraft or any other
aircraft  operated by LESSEE for the  purposes of  conducting  business  between
LESSEE and LESSOR.

28.2 Press Releases.  The parties will give copies to one another, in advance if
possible,  of all news, articles and other releases provided to the public media
regarding this Lease or the Aircraft.

28.3  Power of  Attorney.3  Power of  Attorney.3  Power of  Attorney.3  Power of
Attorney.  LESSEE  hereby  irrevocably  appoints  LESSOR as its attorney for the
purpose of putting into effect the intent of this Lease following and during the
continuation of an Event of Default,  including without limitation,  the return,
repossession,  deregistration and exportation of the Aircraft.  To evidence this
appointment, LESSEE has executed the Power of Attorney in the form of Exhibit G.
LESSEE will take all steps required under the Laws of the State of  Registration
to provide such power of attorney to LESSOR.

28.4 LESSOR  Performance  for LESSEE.4  LESSOR  Performance  for LESSEE.4 LESSOR
Performance for LESSEE.4 LESSOR  Performance for LESSEE.  The exercise by LESSOR
of its remedy of performing a LESSEE obligation hereunder is not a waiver of and
will  not  relieve  LESSEE  from  the  performance  of  such  obligation  at any
subsequent  time  or  from  the  performance  of any of  its  other  obligations
hereunder.

28.5 LESSOR's  Payment  Obligations.5  LESSOR's Payment  Obligations.5  LESSOR's
Payment  Obligations.5  LESSOR's Payment  Obligations.  Any obligation of LESSOR
under this Lease to pay or release any amount to LESSEE is conditioned  upon and
will be delayed  until (a) all amounts  then due and payable by LESSEE to LESSOR
under this Lease or under any other  agreement  between LESSOR and LESSEE having
been paid in full and (b) no payment or other material  Default having  occurred
and  continuing  hereunder  at the time such  payment  or  release of payment is
payable to LESSEE.

28.6  Application  of  Payments.6   Application  of  Payments.6  Application  of
Payments.6  Application of Payments. Any amounts paid or recovered in respect of
LESSEE liabilities  hereunder may be applied to Rent, Default Interest,  fees or
any other amount due hereunder in such  proportions,  order and manner as LESSOR
determines.

28.7 Usury Laws.7 Usury  Laws.7 Usury Laws.7 Usury Laws.  The parties  intend to
contract  in strict  compliance  with the usury Laws of the State of  California
and, to the extent applicable, the U.S. Notwithstanding anything to the contrary
in the Operative Documents, LESSEE will not be obligated to pay Default Interest
or other  interest in excess of the maximum  non-usurious  interest  rate, as in
effect from time to time,  which may by  applicable  Law be charged,  contracted
for, reserved,  received or collected by LESSOR in connection with the Operative
Documents. During any period of time in which the then-applicable highest lawful
rate is lower than the Default  Interest rate,  Default Interest will accrue and
be payable at such highest lawful rate;  however, if at later times such highest
lawful rate is greater  than the  Default  Interest  rate,  then LESSEE will pay
Default  Interest at the highest lawful rate until the Default Interest which is
paid by LESSEE  equals the amount of  interest  that would have been  payable in
accordance with the interest rate set forth in Article 5.6.

28.8  Delegation  by  LESSOR.8  Delegation  by LESSOR.8  Delegation  by LESSOR.8
Delegation  by LESSOR.  LESSOR may delegate to any  Person(s)  all or any of the
rights,  powers or discretion vested in it by this Lease and any such delegation
may be made upon such terms and conditions as LESSOR in its absolute  discretion
thinks fit,  provided that no such delegation shall relieve LESSOR of any of its
obligations hereunder.

28.9 Confidentiality.9 Confidentiality.9 Confidentiality.9 Confidentiality.  The
Operative  Documents  and all  non-public  information  obtained by either party
about the other are confidential and are between LESSOR and LESSEE only and will
not be  disclosed  by a party to third  parties  (other than (i) to such party's
auditors or professional advisors, (ii) to potential equity investors or lenders
or (iii) as required in connection  with any filings of this Lease in accordance
with  Article 14 or as  otherwise  required by Law)  without  the prior  written
consent of the other party.  If disclosure is required as a result of applicable
Law,  LESSEE and LESSOR will cooperate  with one another to obtain  confidential
treatment  as to the  commercial  terms and other  material  provisions  of this
Lease.

28.10 Rights of Parties.10  Rights of Parties.10  Rights of Parties.10 Rights of
Parties. The rights of the parties hereunder are cumulative,  not exclusive, may
be exercised as often as each party considers appropriate and are in addition to
its rights under  general  Law. The rights of one party  against the other party
are not  capable  of being  waived or  amended  except by an  express  waiver or
amendment in writing.  Any failure to exercise or any delay in exercising any of
such rights will not operate as a waiver or  amendment of that or any other such
right any defective or partial exercise of any such rights will not preclude any
other or further  exercise  of that or any other such right and no act or course
of conduct or  negotiation  on a party's  part or on its behalf  will in any way
preclude such party from exercising any such right or constitute a suspension or
any amendment of any such right.

28.11 Further  Assurances.11 Further Assurances.11 Further Assurances.11 Further
Assurances. Each party agrees from time to time to do and perform such other and
further acts and execute and deliver any and all such other  instruments  as may
be  required by Law or  reasonably  requested  by the other party to  establish,
maintain or protect the rights and remedies of the requesting  party or to carry
out and effect the intent and purpose of this Lease.

28.12  Use of Word  including.  The  term  "including"  is used  herein  without
limitation.


28.13 Headings.  All article and paragraph  headings and captions are purely for
convenience and will not affect the  interpretation of this Lease. Any reference
to a specific  article,  paragraph or section will be interpreted as a reference
to such article, paragraph or section of this Lease.

28.14 Invalidity of any Provision.14  Invalidity of any Provision.14  Invalidity
of any  Provision.14  Invalidity of any  Provision.  If any of the provisions of
this Lease become  invalid,  illegal or  unenforceable  in any respect under any
Law, the validity,  legality and enforceability of the remaining provisions will
not in any way be affected or impaired.

28.15  Time  is of the  Essence.15  Time  is of the  Essence.15  Time  is of the
Essence.15 Time is of the Essence.  Time is of the essence in the performance of
all  obligations  of the parties  under this Lease and,  consequently,  all time
limitations set forth in the provisions of this Lease will be strictly observed.

28.16 Amendments in Writing. The provisions of this Lease may only be amended or
modified by a writing executed by LESSOR and LESSEE.

28.17  Counterparts.  This  Lease may be  executed  in any  number of  identical
counterparts,  each of which will be deemed to be an original,  and all of which
together  will be deemed to be one and the same  instrument  when each party has
signed and delivered one such counterpart to the other party.

28.18 Delivery of Documents by Fax.18  Delivery of Documents by Fax.18  Delivery
of  Documents by Fax.18  Delivery of  Documents by Fax.  Delivery of an executed
counterpart  of this Lease or of any other  documents  in  connection  with this
Lease by fax will be deemed as effective as delivery of an  originally  executed
counterpart. Any party delivering an executed counterpart of this Lease or other
document by fax will also deliver an originally  executed  counterpart,  but the
failure of any party to deliver an originally executed counterpart of this Lease
or such other  document  will not affect the validity or  effectiveness  of this
Lease or such other document.

28.19  Entire   Agreement.19  Entire  Agreement.19  Entire  Agreement.19  Entire
Agreement.  The Operative Documents  constitute the entire agreement between the
parties  in  relation  to the  leasing of the  Aircraft  by LESSOR to LESSEE and
supersede  all  previous  proposals,  agreements  and  other  written  and  oral
communications in relation hereto. The parties  acknowledge that there have been
no representations,  warranties,  promises, guarantees or agreements, express or
implied, except as set forth herein.

28.20  Expenses.  Each  party  shall  be  responsible  for its own  expenses  in
connection with the drafting, negotiation,  execution and delivery of this Lease
and the other Operative Documents.

<PAGE>




                                                                  SIGNATURE PAGE


                IN WITNESS WHEREOF,  LESSEE and LESSOR have caused this Lease to
be executed by their respective officers as of May 25, 2000.

INTERNATIONAL LEASE
FINANCE CORPORATION                        FRONTIER AIRLINES, INC.


By:                                        By:

Its:                                       Its:


<PAGE>






         EXHIBIT B            AIRCRAFT DESCRIPTION



Aircraft Manufacturer and Model:                          B737-300

Seating Configuration:                                    None*

Manufacturer's Serial Number:                             26293

Registration Mark:                                        N-_____

Engine Manufacturer and Model:                            CFM56-3C1

Engine Serial Numbers:                                    724885 and 724886

Engine Thrust Rating:                                     22,000 pounds

Maximum Gross Takeoff Weight:                             139,500 pounds


                *The  Aircraft is being  delivered to LESSEE  without  seats and
                will be returned to LESSOR without seats.


<PAGE>




         EXHIBIT C            CONDITION AT DELIVERY


         1.     Technical Report

         Prior to the Delivery Date, LESSOR will provide LESSEE with a Technical
         Evaluation  Report in the form and  substance of Exhibit M, as revised,
         and, in addition upon LESSEE's  request,  will make copies available of
         (a) drawings of the interior  configuration  of the Aircraft as it will
         exist at Delivery,  (b) an  Airworthiness  Directive status list, (c) a
         service bulletin incorporation list, (d) rotable tracked, hard-time and
         life limited component listings,  (e) a list of Prior  Lessee-initiated
         modifications and alterations, (f) information regarding Prior Lessee's
         maintenance  program for the Aircraft,  (g) the complete  workscope for
         the  checks,  inspections  and  other  work to be  performed  prior  to
         Delivery,  (h) a list  of all  no-charge  service  bulletin  kits  with
         respect to the Aircraft which were ordered by LESSOR from  Manufacturer
         or  Engine   manufacturer,   (i)  current  Engine  disk  sheets  and  a
         description  of the last shop  visit for each  Engine and (j) any other
         data which is reasonably requested by LESSEE.

         2.     Full Aircraft Documentation Review

         Prior to the Scheduled  Delivery Date and continuing  until the date on
         which the Aircraft is delivered to LESSEE in the condition  required by
         this Exhibit B, LESSOR will provide for the review of LESSEE and/or its
         representative  all of the Aircraft  records and  historical  documents
         described  in Exhibit L in one central  room at the  Aircraft  delivery
         location.

         3.     Aircraft Inspection

(a)      During the  maintenance  checks  performed  prior to  Delivery,  LESSEE
         and/or its  representatives  will have an opportunity to conduct a full
         systems  functional  and  operational  inspection  of the Aircraft (and
         other types of  reasonable  inspections  based upon the Aircraft  type,
         age, use and other known  factors with respect to the  Aircraft)  and a
         full inspection of the Aircraft  Documentation  (including  records and
         manuals),  all to  LESSEE's  satisfaction.  Any  deficiencies  from the
         delivery  condition  requirements  set forth in this  Exhibit B will be
         corrected by LESSOR at its cost prior to Delivery.

(b)      Immediately  prior to the Delivery of the  Aircraft,  LESSOR will carry
         out for LESSEE  and/or  LESSEE's  representatives  one  takeoff and one
         landing  phase.  If LESSEE  identifies  any  discrepancies  immediately
         following such takeoff and landing phase and requests LESSOR to correct
         such  discrepancies  at  LESSOR's  cost,  such  discrepancies  will  be
         corrected.

         4.     Certificate of Airworthiness Matters

         The Aircraft will possess a current Certificate of Airworthiness issued
         by the FAA.

         5.     General Condition of the Aircraft at Delivery

(a)      The Aircraft,  Engines and Parts will have been maintained and repaired
         in accordance with Prior Lessee's maintenance program and the rules and
         regulations of the FAA.

(b)      Aircraft  Documentation  (including records and manuals) will have been
         maintained in accordance with the rules and regulations of the FAA.

(c)      All pilot discrepancies and deferred maintenance items will be  cleared
         on a terminating action basis.

(d)      The  Aircraft  will be  airworthy  (conform  to type design and be in a
         condition  for safe  operation  under FAR Part 121),  with all Aircraft
         equipment,  components and systems  operating in accordance  with their
         intended use and within limits approved by Manufacturer and the FAA.

(e)      The interior of the Aircraft (including cabin and windows) will be in a
         reasonable condition and cosmetically acceptable, with no cracks, tears
         or rips.

(f)      No  special  or  unique   Manufacturer,   Engine  manufacturer  or  FAA
         inspection or check  requirements which are specific to the Aircraft or
         Engines  (as opposed to all  aircraft  or engines of their  types) will
         exist with respect to the  Airframe,  Engines and  Aircraft  equipment,
         components and systems.

(g)      All repairs,  modifications  and  alterations to the Aircraft will have
         been  accomplished  in  accordance  with  the  FARs  or  Manufacturer's
         Structural  Repair Manual (or  FAA-approved  data supported by FAA Form
         8110-3) for the Aircraft, as applicable.

(h)      All  Airworthiness  Directives  which are issued  prior to the Delivery
         Date and require compliance (either by means of repetitive inspections,
         modifications or terminating  action) prior to Delivery of the Aircraft
         to LESSEE or within one (1) year after the Delivery Date will have been
         complied with on the Aircraft on a terminating action basis at LESSOR's
         cost.  Airworthiness  Directives which do not have a terminating action
         will be accomplished at the highest level of inspection or modification
         possible.

(i)      The  Aircraft  will  be in  compliance  with  Manufacturer's  Corrosion
         Prevention and Control  Program (CPCP)  specified for the model type by
         Manufacturer.

(j)      If  any  waivers,   deviations,   dispensations,   alternate  means  of
         compliance,  extensions or  carry-overs  with respect to maintenance or
         operating  requirements,   repairs  or  Airworthiness  Directives  were
         granted by the FAA or permitted by Prior Lessee's  maintenance program,
         such  maintenance or operating  requirements,  repairs or Airworthiness
         Directives  will have been  performed as if such  waivers,  deviations,
         dispensations,   alternate  means  of  compliance,   or  extensions  or
         carry-overs did not exist.

(k)      The  Aircraft  will be free of  fuel,  oil  and  hydraulic  leaks.  Any
         temporary  fuel  leak  repairs  will have been  replaced  by  permanent
         repairs.

(l)      The Aircraft fluid  reservoirs  (including oil,  oxygen,  hydraulic and
         water)  will  be  serviced  to full  and the  waste  tank  serviced  in
         accordance with Manufacturer's instructions.

(m)      The Aircraft will be fully fueled.

(n)      The Aircraft will be painted in the livery of Prior Lessee.

         6.     Checks Prior to Delivery

         Prior to Delivery of the Aircraft to LESSEE,  the  following  will have
         been performed:

(a)      A full and complete  zonal,  systems and  structural  check ("C" or its
         equivalent)  and  the  corresponding  lower  checks  ("A"  and  "B"  or
         equivalent) at an  FAA-approved  repair station in accordance  with the
         MPD  sufficient to clear the Aircraft  until the next full and complete
         zonal, systems and structural check. Any discrepancies  revealed during
         such  inspection  will be corrected in accordance  with  Manufacturer's
         maintenance and repair manuals or FAA-approved data.

(b)      All required  external  placards,  signs and markings  will be properly
         attached, free from damage, clean and legible.

(c)      Cleaning the exterior and interior of the Aircraft.

(d)      If  reasonably  required  by  LESSEE,  repainting  the  interior of the
         Aircraft, including flight deck, and replace placards.

(e)      In accordance with Manufacturer's Structural Repair Manual, permanently
         repairing  damage to the Aircraft that exceeds  Manufacturer's  limits.
         Any non-flush  structural patch repairs  installed on the Airframe will
         be replaced  with  flush-type  repairs if such  flush-type  repairs are
         available unless it is unreasonable to install a flush-type repair.

         7.     Condition of the Engines At Delivery

(a)      Prior to Delivery of the Aircraft to LESSEE, the following checks of
         the Engines will have been performed:

                (i) With LESSEE or its representatives present, performance of a
                full and complete hot and cold  section  videotape  borescope on
                each  Engine  and its  modules  in  accordance  with the  Engine
                manufacturer's maintenance manual.

                (ii) If the  Engine  historical  and  technical  records  and/or
                condition  trend  monitoring  data of any Engine  (including the
                APU) indicate an  acceleration in the rate of  deterioration  in
                the performance of an Engine,  LESSOR will correct,  to LESSEE's
                satisfaction, such conditions which are determined to be causing
                such accelerated rate of deterioration.

                (iii) With LESSEE or its  representatives  present,  LESSOR will
                accomplish a maximum  power  assurance  run and an  acceleration
                check  on  the   Engines.   LESSEE  will   evaluate  the  Engine
                performance  and record the Engine maximum power  assurance test
                conditions and results on the Estoppel and Acceptance Receipt.

(b)      Each Engine will meet all of the following:

                (i) Each Engine will have at least 4,000 hours and 3,000  cycles
                remaining until its next anticipated  removal  regardless of the
                operating  environment of such Engine. In determining whether an
                Engine has at least 4,000 hours and 3,000 cycles remaining until
                its next anticipated removal, the following will be considered:

                       (1)    the  Engine  manufacturer's  estimated  mean  time
                              between removals for engines of the same  type  as
                              the Engines;

                       (2)    the remaining EGT margin on such Engine; and

                       (3)    the Engine  historical   and  technical   records,
                              borescope  inspection,   trend   monitoring,   the
                              maximum power assurance run and  the  acceleration
                              check;

                (ii) the Engine  historical  and  technical  records,  borescope
                inspection,  trend  monitoring,  the maximum power assurance run
                and the  acceleration  check do not reveal any  condition  which
                would cause the Engines or any module to be serviceable  with an
                increased  frequency of inspection or with calendar time, flight
                hour   or   flight   cycle   restrictions   under   the   Engine
                manufacturer's maintenance manual;

                (iii) No life  limited Part of an Engine will have more hours or
                cycles consumed than such Engine's data plate; and

                (iv)  Each Part of an Engine  which has a hard time  limit  will
                have at least 3,000 cycles  remaining to operate  until its next
                scheduled  Overhaul.  Each  Part of an  Engine  which has a life
                limit will have at least 3,000 cycles remaining to operate until
                its removal.

         LESSOR will correct any discrepancies in the required  condition of the
         Engines set forth in this Exhibit B in accordance  with the  guidelines
         set out by the Engine manufacturer. If there is a dispute as to whether
         an Engine meets the  requirements  of this Exhibit B, LESSEE and LESSOR
         will consult with Engine manufacturer and follow Engine  manufacturer's
         recommendations  (including the  accomplishment  of an Engine test cell
         operational  check) and the manner in which any discrepancies  from the
         requirements of this Exhibit B will be rectified.

         8.     Hour/Cycle/Calendar Times At Delivery

         The  condition of the Aircraft and  installed  systems upon Delivery to
         LESSEE will be as follows:

(a)      The Aircraft will have no more that fifteen  (15) months consumed since
         the last 24,000 Hour Structural Check.

(b)      The Aircraft will have not more than  one-hundred  (100) hours consumed
         since the last "C" check or its equivalent in accordance with the MPD.

(c)      The APU will be in serviceable condition.

(d)      The Landing Gear will be cleared for four thousand five hundred (4,500)
         cycles/hours  (depending  on Prior  Lessee's  maintenance  program)  of
         operation until the next Overhaul or scheduled removal.

(e)      Each Part of the Aircraft which has a hard time  (hour/cycle)  limit to
         Overhaul of less than four  thousand  (4,000)  hours or three  thousand
         (3,000) cycles will be freshly  overhauled or replaced and each Part of
         the Aircraft  which has a hard time  (hour/cycle)  limit to Overhaul of
         more than four thousand  (4,000) hours or three thousand (3,000) cycles
         will have four thousand (4,000) hours and three thousand (3,000) cycles
         (whichever is applicable) remaining to operate until its next scheduled
         Overhaul or removal.

(f)      Each  life-limited Part of the Aircraft will have four thousand (4,000)
         hours and three  thousand  (3,000)  cycles  (whichever  is  applicable)
         remaining to operate until its next scheduled removal.

(g)      Each Part which has a calendar limit (including emergency equipment and
         excluding Landing Gear which is addressed in paragraph 8(d) above) will
         have remaining to operate the lesser of the following  calendar  times:
         (i) one (1) year from the  Delivery  Date of the  Aircraft to LESSEE or
         (ii) one hundred percent (100%) of such Part's total approved life.

(h)      With respect to all installed Parts as a group, such Parts will have an
         average total time since new no greater than that of the Airframe.

(i)      The  Aircraft  Landing  Gear tires and brakes  will have at least fifty
         percent (50%) life remaining until their next Overhaul  (except for the
         acceptance flight).


<PAGE>





         EXHIBIT D            CERTIFICATE OF INSURANCE


[Refer to Aircraft Lease  Agreement  dated as of May 25, 2000 between LESSEE and
LESSOR  (the  "Lease").  If  applicable,  insurance  certificates  from both the
insurers and reinsurers will be provided. If there is a LESSOR's Lender, include
references to it where appropriate after references to LESSOR.]

To:      INTERNATIONAL LEASE FINANCE CORPORATION ("LESSOR")

         1999 Avenue of the Stars, 39th Floor
         Los Angeles, California 90067
         United States


Re:       FRONTIER AIRLINES, INC.
          ("LESSEE")
          Boeing B737-300
          Manufacturer's Serial No.:         26293
          Registration Mark:                 N-_____ (the "Aircraft")

         The  following   security  has  subscribed  to  the  insurance   and/or
reinsurance policies:

         [LIST COMPANIES & PERCENTAGES]

         THIS IS TO CERTIFY THAT, as Insurance  Brokers,  we have effected Fleet
Insurance  in respect of aircraft  owned or operated  by LESSEE  (including  the
Aircraft) as specified below.

                             AIRCRAFT HULL ALL RISKS

COVERING: *

DEDUCTIBLES: *

GEOGRAPHICAL COVERAGE: Worldwide.


               AVIATION AND AIRLINE GENERAL THIRD PARTY LIABILITY

COVERING: *

GEOGRAPHICAL LIMITS: Worldwide.


                           HULL WAR AND ALLIED PERILS

COVERING:*

DEDUCTIBLE: *

GEOGRAPHICAL LIMITS: Worldwide.



                      AIRCRAFT SPARES ALL RISKS INSURANCE

COVERING: *

DEDUCTIBLE: *.

GEOGRAPHICAL COVERAGE: Worldwide.


                       INSURANCE REQUIRED BY MANUFACTURER

         LESSEE will carry the insurance  required by Manufacturer in connection
with LESSOR's  assignment of  Manufacturer's  warranties and product  support to
LESSEE.

                              CONTRACTUAL INDEMNITY

         LESSEE has insurance  coverage for the indemnities  agreed to by LESSEE
pursuant  to  Article  17 of the Lease to the extent  provided  in the  relevant
policies.

                        PERIOD OF COVERAGE (ALL POLICIES)

         From Delivery Date of Aircraft to [EXPIRATION DATE]

         It is further  certified  that LESSOR has an interest in respect of the
Aircraft under the Lease.  Accordingly,  with respect to losses occurring during
the period from the  Effective  Date until the expiry of the  Insurance or until
the expiry or agreed termination of the Lease or until the obligations under the
Lease are terminated by any action of the Insured or LESSOR and in consideration
of the  Additional  Premium it is confirmed  that the Insurance  afforded by the
Policy is in full force and effect and it is further  agreed that the  following
provisions are specifically endorsed to the Policy.

         1.     UNDER THE HULL (ALL  RISKS AND HULL WAR AND  ALLIED  RISKS)  AND
         AIRCRAFT SPARES INSURANCES

                (a)    *

                (b)    *

                (c)  Insurers  have no right to replace the  Aircraft on a Total
         Loss (arranged, constructive or otherwise).

                (d) Insurers recognize that LESSEE and LESSOR have agreed that a
         Total  Loss  of the  Airframe  will  constitute  a  Total  Loss  of the
         Aircraft.

                (e) In the event of Total Loss of the Aircraft,  Insurers  agree
         to pay LESSOR all  amounts up to the Agreed  Value  based  solely  upon
         LESSOR's  (not  LESSEE's)   execution  of  the   appropriate   form  of
         release/discharge  document.  LESSOR may sign any  required  release in
         lieu of the  Insured in the event of a Total Loss,  Constructive  Total
         Loss or Arranged Total Loss.

                (f) "Cut-through clause":  Insurers confirm that in the event of
         any claim arising under the hull  insurances,  the  Reinsurers  will in
         lieu of  payment  of the  Insurers,  its  successors  in  interest  and
         assigns,  pay to the person named as sole loss payee under the original
         insurances that portion of any loss due for which the Reinsurers  would
         otherwise be liable to pay the Insurers  (subject to proof of loss), it
         being  understood  and agreed that any such  payment by any  Reinsurers
         will  fully  discharge  and  release  such  Reinsurer  from any and all
         further liability in connection therewith and provide for payment to be
         made  notwithstanding  (i) any bankruptcy,  insolvency,  liquidation or
         dissolution  of the Insurers  and (ii) that the  Insurers  have made no
         payment under the original insurance policies.

                (g) Insurers confirm that under the insurance  policies,  if the
         Insured  installs  an engine  owned by a third  party on the  Aircraft,
         either  (i) the hull  insurance  will  automatically  increase  to such
         higher  amount  as is  necessary  in order  to  satisfy  both  LESSOR's
         requirement  to receive the Agreed  Value in the event of a Total Loss,
         Constructive  Total Loss or Arranged Total Loss and the amount required
         by the third party engine owner, or (ii) separate additional  insurance
         on  such  engine  will  attach  in  order  to  satisfy  separately  the
         requirements of the Insured to such third party engine owner.

         2.     UNDER THE LEGAL LIABILITY INSURANCE

                (a) Subject to the provisions of this Endorsement, the Insurance
         will  operate in all  respects as if a separate  Policy had been issued
         covering  each party insured  hereunder,  but this  provision  will not
         operate to include any claim  arising  howsoever  in respect of loss or
         damage to the Aircraft  insured  under the Hull or Spares  Insurance of
         the  Insured.  Notwithstanding  the  foregoing  the total  liability of
         Insurers in respect of any and all Insureds  will not exceed the limits
         of liability stated in the Policy.

                (b) The Insurance provided hereunder will be primary and without
         right of  contribution  from any other insurance which may be available
         to LESSOR.

         3.     UNDER ALL INSURANCES

                (a) LESSOR,  its  successors  and assigns,  and (with respect to
         Aviation and Airline General Third Party Liability only) its directors,
         officers and employees for their respective  rights and interests,  are
         included as Additional Insureds.

                (b) The cover  afforded  to LESSOR by the  Policy in  accordance
         with this  Endorsement  will not be  invalidated by any act or omission
         (including misrepresentation and non-disclosure) of any other person or
         party which  results in a breach of any term,  condition or warranty of
         the Policy  provided  that  LESSOR has not  caused,  contributed  to or
         knowingly condoned the said act or omission.

                (c) LESSOR will have no responsibility  for premium and insurers
         will waive any right of set-off or  counterclaim  against LESSOR except
         in respect of outstanding premium in respect of the Aircraft,  provided
         that Insurer may only set-off for premiums  against the proceeds of the
         hull  insurance for  outstanding  premiums in connection  with hull all
         risks and hull war and allied perils insurance.

                (d) Upon payment of any loss or claim to or on behalf of LESSOR,
         Insurers will to the extent and in respect of such payment be thereupon
         subrogated  to all legal  and  equitable  rights of LESSOR  indemnified
         hereby (but not against LESSOR). Insurers will not exercise such rights
         without  the  consent  of those  indemnified,  such  consent  not to be
         unreasonably  withheld.  At the expense of Insurers  LESSOR will do all
         things  reasonably  necessary to assist the  Insurers to exercise  said
         rights.

                (e) Except in  respect  of any  provision  for  Cancellation  or
         Automatic  Termination  specified  in the  Policy  or  any  endorsement
         thereof,  cover provided by this  Endorsement  may only be cancelled or
         materially  altered in a manner  adverse to LESSOR by the giving of not
         less than thirty (30) days notice in writing to LESSOR.  Notice will be
         deemed to commence  from the date such notice is given by the Insurers.
         Such notice will NOT,  however,  be given at normal  expiry date of the
         Policy or any endorsement.

         4.     EXCEPT  AS  SPECIFICALLY VARIED OR PROVIDED BY THE TERMS OF THIS
         CERTIFICATE

                (a)  LESSOR  IS  COVERED BY THE  POLICY  SUBJECT  TO ALL  TERMS,
         CONDITIONS,   LIMITATIONS,   WARRANTIES,  EXCLUSIONS  AND  CANCELLATION
         PROVISIONS THEREOF.

                (b) THE POLICY WILL NOT BE VARIED BY ANY PROVISIONS CONTAINED IN
         THE LEASE WHICH PURPORT TO SERVE AS AN  ENDORSEMENT OR AMENDMENT TO THE
         POLICY.

         SUBJECT (save as  specifically  stated in this  Certificate)  to policy
terms, conditions, limitations and exclusions.

                                Yours faithfully,

                                                [BROKERS]


<PAGE>



         EXHIBIT E            BROKERS' LETTER OF UNDERTAKING


To:             INTERNATIONAL LEASE FINANCE CORPORATION
                1999 Avenue of the Stars, 39th Floor
                Los Angeles, California 90067
                United States

Date:                                                             Our Ref:

Re:       FRONTIER AIRLINES, INC.
          ("LESSEE")
          B737-300
          Manufacturer's Serial No.:         26293
          Registration Mark:                 N-_____ (the "Aircraft")


Dear Sirs:

         We confirm that insurance has been effected for the account of [LESSEE]
(the "Operator")  covering all aircraft owned or operated by them, including the
above-referenced  aircraft (the "Aircraft").  [Also confirm, if applicable,  the
amount of any hull all risks or hull war and allied perils on the Aircraft which
LESSEE is carrying in excess of the Agreed Value (which excess  insurance  would
be payable to LESSEE). Such excess insurance may not exceed ten percent (10%) of
the Agreed Value.]

         Pursuant  to   instructions   received   from  the   Operator   and  in
consideration of your approving the arrangement of the Operator's "Fleet Policy"
(under which the above-referenced  Aircraft is insured) through the intermediary
of ourselves  as Brokers in  connection  with the  insurance  (the  "Insurance")
mentioned  in our  Certificate  of  Insurance  (Reference  No. [ ] dated [ ] and
attached hereto), we undertake as follows:

         1. In  relation  to the Hull and War  Risks  Insurance  to hold to your
order the insurance  Slips or Contracts and any Policies  which may be issued or
any policies  substituted  (with your consent) therefor (but only insofar as the
same  relate to the  Aircraft  only) and the  benefit  of the Hull and War Risks
Insurance  thereunder,  but  subject to our  requirements  to operate  the Fleet
Policy insofar as it relates to any other aircraft insured thereunder.

         2. To advise you of any of the following:

                (a) If any insurer  cancels or gives notice of  cancellation  of
         any of the  Insurance at least thirty (30) days (or such lesser  period
         as may be available in the case of War and Allied  Perils)  before such
         cancellation is to take effect in respect of the Aircraft.

                (b)  Of  any  act  or  omission  or  of  any  event   (including
         non-payment  of premium) of which we have knowledge or are notified and
         which might invalidate or render  unenforceable in whole or in part any
         of the Insurance, insofar as the same relate to the Aircraft.

                (c) If we do not receive instructions to renew all or any of the
         Insurance at least thirty (30) days prior to their expiration.

                (d) If any of the  Insurance  are not  renewed on the same terms
         (save as to premium and period of cover and as you might otherwise have
         notified  us to be  acceptable  to you)  seven (7) days prior to expiry
         thereof.

         The above undertakings are given subject to our continuing  appointment
for the time being as Insurance Brokers to the Operator.

         We also undertake to advise you if we cease to be Insurance  Brokers to
the Operator.

                                Yours faithfully,


<PAGE>



         EXHIBIT F            ESTOPPEL AND ACCEPTANCE CERTIFICATE

FRONTIER AIRLINES,  INC.  ("LESSEE"),  a corporation  organized under the lereby
agree as follows:

         1. LESSEE and INTERNATIONAL LEASE FINANCE CORPORATION,  as LESSOR, have
entered into an Aircraft Lease Agreement  dated as of May 25, 2000  (hereinafter
referred to as the  "Lease").  Words used herein  with  capital  letters and not
otherwise defined will have the meanings set forth in the Lease.

         2. LESSEE has this ____ day of __________, ____ (Time:  __________)  at
____________________ received from LESSOR possession of:

                (a) One (1)  Boeing  B737-300  aircraft  bearing  Manufacturer's
         serial  number  26293 and  United  States  registration  mark  N-_____,
         together with two (2) CFM56-3C1 engines bearing  manufacturer's  serial
         numbers 725885 and 724886 (each of which has 750 or more rated take-off
         horsepower), all in airworthy condition.

                (b)  All  Aircraft   Documentation,   including  the  usual  and
         customary manuals,  logbooks, flight records and historical information
         regarding the Aircraft, Engines, and Parts.

         3. All of the foregoing has been delivered on the date set forth  above
pursuant to the terms and provisions of the Lease.

         4. The amount of fuel on board at Delivery is __________  (circle  one)
pounds/kilos (________ gallons).

         5. The Aircraft, Engines, Parts and Aircraft Documentation as described
in the Lease have been fully examined by LESSEE and,  except as set forth in the
attached  Discrepancies  List,  have been  received  and accepted by LESSEE in a
condition fully  satisfactory to LESSEE and in full conformity with the Lease in
every respect.

         6. The Lease is in full force and  effect,  LESSOR has fully,  duly and
timely  performed all of its obligations of every kind or nature  thereunder and
LESSEE has no claims,  offsets,  deductions,  set-off or defenses of any kind or
nature in connection with the Lease.

         7. LESSEE has obtained all required permits,  authorizations,  licenses
and fees of the State of Registration or any Government Entity thereof necessary
in order for LESSEE to operate  the  Aircraft as  permitted  by the terms of the
Lease.

                              Dated on the date set forth above

                                  FRONTIER AIRLINES, INC.


                                  By:

                                  Title:



<PAGE>





         EXHIBIT G            OPINION OF COUNSEL
                                 [SEE ATTACHED]




<PAGE>



         EXHIBIT H            FORM OF POWER OF ATTORNEY


FRONTIER AIRLINES,  INC. ("Frontier") hereby irrevocably appoints  INTERNATIONAL
LEASE FINANCE CORPORATION  ("ILFC") of 1999 Avenue of the Stars, 39th Floor, Los
Angeles, California 90067, U.S.A. as Frontier's true and lawful attorney so that
ILFC may take any of the following  actions in the name of and for Frontier with
respect to the Boeing B737-300  aircraft  bearing  manufacturer's  serial number
26293 (the "Aircraft")  leased by ILFC to Frontier pursuant to an Aircraft Lease
Agreement dated as of May 25, 2000 (the "Lease"):

         1. Pursuant to  the Lease,  Frontier has  procured  and is  maintaining
insurances for the Aircraft. ILFC has been named sole loss payee on the all risk
hull and war risk  insurances for the Aircraft.  In the event of a total loss or
constructive  total loss of the Aircraft,  ILFC is entitled to receive insurance
proceeds  in an amount  equal to:  US$*.  ILFC may take all  action and sign all
documents otherwise required to be performed by Frontier, including execution on
behalf of Frontier of an  appropriate  form of  discharge/release  document,  in
order for ILFC to collect such insurance proceeds.

         2. In the exercise of the rights of ILFC under the Lease to recover the
Aircraft from Frontier and United States after  termination  of the Lease due to
an Event of Default under the Lease or for  termination  of the Lease due to any
other  reason,  ILFC may take all action  otherwise  required to be performed by
Frontier  before the  authorities  and courts in United States in order to cause
the  Aircraft to be  repossessed  by ILFC,  deregistered  from the U.S.  Federal
Aviation Administration and exported from the United States.

         3. In the exercise of the rights  mentioned in paragraphs 1 and 2, ILFC
may make any declarations or statements and sign any public or private documents
which may be considered necessary or appropriate.

         4. ILFC may delegate the powers conferred  hereby, in whole or in part,
to any  individual(s),  including  but not limited to employees of ILFC or legal
counsel in United States.

         ILFC is empowered to determine in its sole  discretion when to exercise
the powers  conferred upon ILFC pursuant to this Power of Attorney.  Any person,
agency or company relying upon this Power of Attorney need not and will not make
any  determination  or  require  any court  judgment  as to  whether an Event of
Default has occurred  under the Lease or whether the Lease has been  terminated.
Frontier  hereby  waives  any  claims  against  (a)  any  person  acting  on the
instructions  given by ILFC or its  designee  pursuant to this Power of Attorney
and (b) any person designated by ILFC or an officer of ILFC to give instructions
pursuant to this Power of Attorney.  Frontier  also agrees to indemnify and hold
harmless any person, agency or company which may act in reliance upon this Power
of Attorney and pursuant to instructions given by ILFC or its designee.

         This Power of  Attorney  is  irrevocable  until the  Aircraft  has been
returned  to the  possession  of ILFC,  deregistered  and  exported  from United
States.

FRONTIER  AIRLINES has made and delivered this Power of Attorney on _________ in
____________.

                                FRONTIER AIRLINES

                                By:

                                Title:


<PAGE>



         EXHIBIT I            ASSIGNMENT OF RIGHTS (AIRFRAME)


                                                     [DATE]


Boeing Commercial Airplane Group
P.O. Box 3707
Seattle, Washington 98124-2207
Attention:  Vice President-Contracts
            Mail Code 21-34

     Subject: Full Assignment of Rights and  Obligations -  International  Lease
          Finance Corporation as Lessor and Frontier Airlines, Inc. as Lessee of
          Model B737-300 aircraft bearing manufacturer's serial number 26293

Ladies and Gentlemen:

         In connection with International  Lease Finance  Corporation's lease to
Frontier  Airlines,  Inc.  ("Lessee") of a Boeing aircraft (more fully described
below), reference is made to the following documents:

A.   Purchase  Agreement  No.  1500 dated  August 25,  1988  between  The Boeing
     Company  ("Boeing") and International  Lease Finance  Corporation  ("ILFC")
     (the "Boeing  Agreement") under which ILFC purchased a certain Boeing Model
     B737-300   aircraft  bearing   manufacturer's   serial  number  26293  (the
     "Aircraft").

B.   Aircraft  Lease  Agreement  (the  "Lease")  for the  Aircraft  dated  as of
     November __, 1999 between ILFC and Lessee.

         Capitalized  terms used herein  without  definition  will have the same
meaning as in the Boeing Agreement.

         In connection  with ILFC's lease of the Aircraft under the Lease,  ILFC
is  transferring  to Lessee certain rights of ILFC related to the Aircraft under
the Boeing  Agreement.  To accomplish this transfer of rights,  as authorized by
the provisions of the Boeing Agreement:

         1. Lessee  acknowledges  that it has received  copies of the  following
specific  provisions  of the Boeing  Agreement  applicable  to the  Aircraft and
agrees to be bound by and comply with all the terms, conditions, and limitations
contained in such provisions,  including  without  limitation the disclaimer and
release, exclusion of liabilities, indemnity and insurance provisions thereof:

         (a)    Boeing Agreement
                       Article 6 - Excusable Delay
                       6.1    General

                       Article 8 - Assignment, Resale or Lease
                       8.1    Title and Risk with Boeing
                       8.2    Buyer's Indemnification of Boeing; Insurance

                       Article 10 - Assignment, Resale or Lease
                       10.1   No Increase in Boeing Liability
                       10.3   Sale by Buyer after Delivery
                       10.4   Lease by Buyer after Delivery
                       10.5   No Increase in Boeing Liability

                       10.6   Exculpatory or Indemnity Clause  in  Post-delivery
                              Sale or Lease

                       Article 12 - Product Assurance;  Disclaimer and  Release;
Exclusion of Liabilities;  Customer Support;   Indemnification and Insurance (in
its entirety)

                       Article 14 - Contractual Notices and Requests

                       Article 15 - Miscellaneous
                       15.4   Governing Law

         Exhibit B - Product Assurance Document
                Part A Boeing Warranty
                Part B Warranty Repairs and Modifications by Buyer
                Part C Boeing Service  Life  Policy
                Part D Boeing  Indemnity  Against  Patent Infringement
                Part D-1  Boeing  Indemnity   Against  Copyright Infringement
                Part E Supplier  Warranties and Patent  Indemnities
                Part G Boeing Interface Commitment
                Part H General

         Exhibit C-1- Customer Support Document
                Part B Boeing Customer Support Services
                Part D Technical Data and Documents
                Part E Buyer's Indemnification of Boeing and Insurance

         Exhibit E - Buyer Furnished Equipment Provisions Document
                Paragraph 8   Indemnification of Boeing
                Paragraph 9   Patent Indemnity
                Paragraph 10  Definitions
                Paragraph 11  Notice of Claim

         Letter Agreement No. 1500-__ - Seller Purchased Equipment
                Paragraph 6   Buyer's Indemnification of Boeing

         2. Lessee  recognizes  that Boeing's  obligation to provide support and
services to Lessee pursuant to Exhibit C of the Boeing  Agreement is conditioned
on the receipt by Boeing of evidence of  compliance by Lessee with the insurance
requirements  set forth in  paragraph  2 of Part E of Exhibit C or in such other
form as may be satisfactory to Boeing, prior to the commencement of such support
and services.

         3. ILFC reserves to itself all rights, claims and interests it may have
under the Boeing Agreement not expressly assigned to Lessee hereunder. ILFC will
remain  responsible  to Boeing for any amounts with respect to the Aircraft owed
to Boeing under the Boeing Agreement prior to the effective date of this letter,
including any amounts owed by ILFC to Boeing under the specific  portions of the
Boeing  Agreement  referenced  in  paragraph  1 above  based  upon the events or
incidents relating to the Aircraft occurring prior to the effective date of this
letter.

         4. ILFC  hereby  assigns to Lessee the sole  authority  to  exercise in
Lessee's  name all rights and powers of ILFC with respect to the Aircraft  under
the specific  portions of the Boeing Agreement  referenced in paragraph 1 above.
Such  authorization will continue until Boeing receives from ILFC written notice
to the contrary addressed to Boeing's Vice President,  Contracts, P.O. Box 3707,
Seattle, Washington 98124-2207 with a copy to Lessee. Until Boeing receives such
notice,  Boeing will be entitled to deal exclusively with Lessee with respect to
the Aircraft under the specific  portions of the Boeing Agreement  referenced in
paragraph 1 above and, with respect to the rights, powers, duties or obligations
under such portions of the Boeing Agreement, any and all actions taken by Lessee
or agreements entered into by Lessee during the period prior to Boeing's receipt
of such notice will be final and binding on ILFC. In addition,  any payment made
by Boeing as a result of  claims  made by Lessee  will be made to the  credit of
Lessee.

         5. Lessee  hereby  accepts the  authorization  set forth in paragraph 4
above and agrees to be bound by and to comply with all the terms, conditions and
limitations  of the portion of the Boeing  Agreement  referenced  in paragraph 1
above.

         6. This  Assignment  may be signed by the  parties  hereto in  separate
counterparts,  each of which when executed and  delivered  shall be an original,
but all  such  counterparts  shall  together  constitute  but  one and the  same
instrument.

         7. This Assignment shall be governed by,  and  construed  in accordance
with,  the  laws  of  the  State  of  Washington,  including   all   matters  of
construction, validity and performance.

         We  request  that  Boeing,  upon  receipt of this  letter,  acknowledge
receipt  thereof  and the  transfer  of rights set forth  above by  signing  the
acknowledgment   and  forwarding  one  copy  of  this  letter  to  each  of  the
undersigned.

         IN WITNESS  WHEREOF,  the parties  hereto  have caused this  Assignment
Agreement to be duly executed as of the dates written below.

INTERNATIONAL LEASE FINANCE CORPORATION,      FRONTIER AIRLINES, INC., as Lessee
as Lessor and Buyer

By:                                           By:

Its:                                          Its:



Receipt of the above letter is acknowledged and transfer of certain rights under
the Boeing Agreement with respect to the Aircraft is confirmed,  effective as of
this date.

                               THE BOEING COMPANY

                               By:

                               Its:

                               Date:


<PAGE>





         EXHIBIT J            ASSIGNMENT OF RIGHTS (ENGINES)


November __, 1999

CFM INTERNATIONAL, INC.
1 Neumann Way, F-17
Cincinnati, Ohio  45215

Attention:      Riv Goldman
                Commercial Contracts -
                Warranty Assignment Administrator

Dear Ms. Goldman:

         Reference is hereby made to that Consent to Assignment made as of April
29, 1988, (the "Consent to Assignment"), by and between CFM INTERNATIONAL,  INC.
("CFMI") and INTERNATIONAL LEASE FINANCE CORPORATION ("ILFC").  Terms defined in
the  Consent  to  Assignment  are used  herein  with the same  meaning as in the
Consent to Assignment.

         As of  November  ___,  1999,  ILFC has  assigned  all of its rights and
interest  in, to and under the Engine  Warranties  to  Frontier  Airlines,  Inc.
("Assignee")  in  connection  with its  lease  to  Assignee  of a used  B737-300
aircraft  (the  "Aircraft")  together  with two (2) CFMI  Model  56-3C1  bearing
Manufacturer's  Serial Numbers 724885 and 724886 (the  "Engines") as of the date
each such Engine was delivered to Assignee.  Such assignment  shall be effective
from  such date  until  ILFC  provides  written  notice to CFMI  (with a copy to
Assignee) that such assignment has been terminated.

         The Assignee has accepted such  assignment and all the  limitations and
liabilities  pertaining to the Engine  Warranties as stated in the provisions of
the GTA listed in Schedule 2 to the Consent to Assignment.

         A copy of the aforesaid assignment is attached hereto.

                                Very truly yours,

                                INTERNATIONAL LEASE FINANCE CORPORATION


By:

Title:


cc:      Ruben M. Cabrera
         Director, Commercial Contracts


<PAGE>


                            ASSIGNMENT OF WARRANTIES

November __, 1999

         In consideration of Frontier  Airlines,  Inc.  ("Lessee")  leasing from
International  Lease  Finance  Corporation  ("ILFC") one (1)  B737-300  aircraft
together with two (2) CFMI Model 56-3C1 engines  bearing  manufacturer's  serial
numbers 724885 and 724886, it is hereby agreed as follows:

1.       ILFC hereby  assigns and  transfers to Lessee all of ILFC's  respective
         rights and  interest  in and to and in and under the Engine  Warranties
         set forth in and subject to the  limitations  and liabilities set forth
         in  Exhibit B  Warranty,  Section X (the  "Engine  Warranties")  of CFM
         International,  Inc. - ILFC General Terms Agreement No. 6-3987 dated 22
         June 1984 (the "GTA")  during the term of such leases so long as Lessee
         is not in default thereunder.

2.       Lessee hereby accepts such assignment including all the limitations and
         liabilities  pertaining  to said  Engine  Warranties  as  stated in the
         provisions  of Exhibit B Warranty,  Section X of the GTA. In  addition,
         any payment made by CFM International,  Inc. as a result of claims made
         by Lessee will be made to the credit of Lessee.

3.       This  Agreement  shall be binding upon and inure to the benefit of each
         of the parties  hereto and their  respective  successors and assigns to
         the extent permitted by the GTA and hereunder.

4.       This  Agreement  shall  be governed by and construed in accordance with
         the laws of the State of California.

5.       This Agreement may be executed in any number of  counterparts,  each of
         which when executed and delivered is an original but all of which taken
         together  constitute  one and the same  instrument  and any  party  may
         execute this Agreement by signing any counterpart.

         IN WITNESS WHEREOF, the authorized representative of the parties hereto
have executed this Agreement as of the day and year first above written.

For and on behalf of                             For  and  on  behalf  of
INTERNATIONAL LEASE FINANCE CORPORATION          FRONTIER AIRLINES, INC.

By:                                              By:


Its:                                             Its:




<PAGE>




         EXHIBIT K            RETURN ACCEPTANCE RECEIPT


Date:

     1.  FRONTIER  AIRLINES,  INC. as LESSEE,  and  INTERNATIONAL  LEASE FINANCE
CORPORATION,  as LESSOR,  have ------ entered into an Aircraft  Lease  Agreement
dated as of May 25, 2000 (the "Lease").  Words used herein with capital  letters
and not otherwise defined will have the meanings set forth in the Lease.

     2.  LESSOR has this ____ day of  __________,  ____  (Time:  __________)  at
____________________ received from LESSEE possession of:

                (a) One (1)  Boeing  B737-300  Aircraft  bearing  Manufacturer's
         serial number 26293,  together with two (2) CFM 56-3C1 Engines  bearing
         manufacturer's serial numbers 724885 and 724886, and all Parts attached
         thereto and thereon in an airworthy condition and

                (b)  All  Aircraft   Documentation,   including  the  usual  and
         customary manuals,  logbooks, flight records and historical information
         regarding the Aircraft,  Engines,  and Parts, as listed in the Document
         Receipt attached hereto.

     3. The  Airframe,  Engines,  and Parts had the  following  hours/cycles  at
return:

                (a)    Airframe:

                       Total hours: ________    Total Landings: _________

                       Date last "C" check performed: _________________

                       ______ hours/ ______ cycles since last "C" check

                       Date last "D" check performed: _________________

                       ______ hours/ ______ cycles since last "D" check

                (b)    Engines:

Position    Serial No.     Total Hours      Total Cycles       Hrs/Cycles since
                                                               last shop visit



                                                      Time Remaining to Next
                                                      Life Limited Part Removal

       Part Name                                      Hours             Cycles

         MSN

         MSN

                (c)    APU:    MSN __________

                       Total hours:    __________

                       ______ hours/ ______ cycles since last Overhaul

                       ______ hours/ ______ cycles remaining on APU life-limited
                                            Parts

                (d)    Landing Gears:

Position    Serial No.    Total Hrs/Cycles   Hrs/Cycles since       Date of last
                                             last Overhaul          Overhaul

Nose

Right Main

Left Main

                (e)    Fuel on board at return: ______ (circle one) pounds/kilos
                       (______ gallons)

     4. Other  technical  information  regarding the Aircraft and its components
are  correctly  set forth on the  Technical  Evaluation  Report  (in the form of
Exhibit M) attached hereto. -

     5. With reference to Article 13.7 of the Lease regarding reimbursement from
the Reserves after return of the Aircraft:


                _____        There  are no  claims  for  reimbursement  from the
                             Reserves  which  will be  submitted  after the date
                             hereof.

                or


                _____        Claims for reimbursement  from the Reserves will be
                             submitted after the date hereof for the following:

                Type of Work                  Estimated Invoice Amount






     6. The above  specified  aircraft,  engines  and  documentation  are hereby
accepted by LESSOR subject to correction by LESSEE (or  procurement by LESSEE at
LESSEE's cost) as soon as reasonably possible of the discrepancies  specified in
Attachment 2 hereto.

     7.  Subject to the  following  paragraph,  the  leasing of the  Aircraft by
LESSOR to LESSEE pursuant to the Lease is hereby terminated without prejudice to
LESSEE's continuing  obligations under the Lease including,  without limitation,
paragraph 6 above, paragraph 8 below, and Articles 10.5, 16 and 17.

     8. LESSEE  represents  and  warrants  that during the term of the Lease all
maintenance and repairs to the Airframe and Engines were performed in accordance
with the requirements  contained in the Lease.  LESSEE further confirms that all
of its obligations  under the Lease whether accruing prior to the date hereof or
which survive the  termination  of the Lease by their terms and accrue after the
date  hereof,  will remain in full force and effect  until all such  obligations
have been satisfactorily completed.

     9. This Return  Acceptance  Supplement  is executed  and  delivered  by the
parties in [place].

         IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Return
Acceptance  Receipt to be executed in their respective  corporate names by their
duly authorized representatives as of the day and year first above written.

INTERNATIONAL LEASE FINANCE CORPORATION              FRONTIER AIRLINES, INC.


By:                                                  By:

Its:                                                 Its:

ATTACHMENTS:
1.       List of Aircraft Documentation
2.       List of Loose Equipment
3.       List of Discrepancies
4.       Engine Maximum Power Assurance Test Conditions and Results
5.       Dent and Damage Chart
6.       Form of No Accident/Incident Letter
7.       Technical Evaluation Report (in the form of Exhibit M)


<PAGE>


                    ATTACHMENT 1 TO RETURN ACCEPTANCE RECEIPT

                         LIST OF AIRCRAFT DOCUMENTATION

                                  [INSERT LIST]

 .


<PAGE>


                    ATTACHMENT 2 TO RETURN ACCEPTANCE RECEIPT

                             LIST OF LOOSE EQUIPMENT


<PAGE>


                    ATTACHMENT 3 TO RETURN ACCEPTANCE RECEIPT

                              LIST OF DISCREPANCIES


<PAGE>


                    ATTACHMENT 4 TO RETURN ACCEPTANCE RECEIPT

           ENGINE MAXIMUM POWER ASSURANCE TEST CONDITIONS AND RESULTS


<PAGE>


                    ATTACHMENT 5 TO RETURN ACCEPTANCE RECEIPT

                              DENT AND DAMAGE CHART


<PAGE>


                    ATTACHMENT 6 TO RETURN ACCEPTANCE RECEIPT

                       FORM OF NO ACCIDENT/INCIDENT LETTER


<PAGE>




                            EXHIBIT L MONTHLY REPORT



                              (SEE FOLLOWING SHEET)


<PAGE>




                 MONTHLY AIRCRAFT UTILIZATION AND STATUS REPORT

                                                                     Page 1 of 2
Report Due Date:


To:      INTERNATIONAL LEASE FINANCE CORPORATION           Fax:   (310) 788-1990
         1999 Avenue of the Stars, 39th Floor
         Los Angeles, California 90067, United States
         Attn:  Finance Department

From:        FRONTIER AIRLINES
Contact:                                                   Fax:
AIRCRAFT TYPE:  Boeing B737-300
ENGINE TYPE:    CFM56-3C1                 REGISTRATION:  N-_____
SERIAL NUMBER:  26293                     MONTH OF:
NOTE:    PLEASE RECORD TIME IN HOURS AND MINUTES NOT DECIMALS.

Aircraft Total Time Since New As Of Last Month:    Hours:       Min:
Aircraft Total Time Since New:                     Hours:       Min:
Aircraft Total Cycles Since New:                   Cycles:
Airframe Hours Flown During Month:                 Hours:       Min:
Airframe Cycles/Landings During Month:             Cycles:
Time Remaining to "D" or Heavy Maintenance Check:

                              HOURS OR CYCLES FLOWN x US$ PER HOUR OR = RESERVES
                              DURING MONTH (as        CYCLE (as applicable)
                              applicable)

TOTAL AIRFRAME:                Hrs:               x                   =
TOTAL LANDING GEAR:            Hrs:               x                   =
Original Engine Serial Number: Hrs:       Min:    x                   =
                               Cycles                                 =
Original Engine Serial Number: Hrs:       Min:    x                   =
                               Cycles                                 =
                               -------------------------------------------------
TOTAL AMOUNT OF RESERVES (US$) PAID THIS MONTH:                              US$


<PAGE>




Monthly Aircraft Utilization and Status Report

From:    FRONTIER AIRLINES                                           Page 2 of 2


ENGINE SERIAL NUMBER:                      ENGINE SERIAL NUMBER:
ORIGINAL POSITION:                         ORIGINAL POSITION:
ACTUAL LOCATION:                           ACTUAL LOCATION:
CURRENT THRUST RATING:                     CURRENT THRUST RATING:

                                 HOURS:/MIN:                         HOURS:/MIN:

Total Time Since New As Of Last             Total Time Since New As Of Last
Month:                                      Month:

Total Time Since New:                       Total Time Since New:

Total Cycles Since New:                     Total Cycles Since New:

Hours Flown During Month:                   Hours Flown During Month:

Cycles During Month:                        Cycles During Month:


IMPORTANT:  IF ILFC-OWNED ENGINE IS REMOVED OR INSTALLED ON ANOTHER AIRCRAFT, IT
MUST BE REPORTED MONTHLY ON THIS FORM.


<PAGE>

                                       138



         EXHIBIT M            AIRCRAFT DOCUMENTATION

                               AIRCRAFT RECORDS

 1.   Copies of original Certificates delivered by Boeing
      a.  Airworthiness Certificate for Export
      b.  Radio installation conformity certificate
      c.  Noise limitation certificate
 2.   Copies of original Documents delivered by Boeing:
      a.  Airworthiness Directive Compliance list

      b.  Aircraft inspection report
      c.  Aircraft Definition Report
      d.  Weighing report

 3.   Copies of current Certificates:
      a.  Airworthiness Certificate
      b.  Noise limitation
      c.  Radio license
      d.  Interior material burn certificates
      e.  Certificate of Export
      f.  Aircraft deregistration confirmation
      e.  Aircraft Registration
 4.   Letters signed and stamped by Quality Assurance:
      a.  Current aircraft hours and cycles
      b.  Current engines hours and cycles
      c.  Accident and Incident report
      d.  Summary of Maintenance Program
      e.  AD compliance during the lease term
 5.   Aircraft log books and Aircraft readiness log.
 6.   Aircraft Hard Time (HT) inspection status.
 7.   One year forecast for HT inspection.
 8.   Aircraft Modification status, including service bulletins.
 9.   Last weighing report prior to redelivery.
10.   AD compliance report with original signoffs.
11.   Routine and non-routine job cards of the last "C" and "D" checks.
12.   Past year pilots and maintenance discrepancies.
13.   Major and Minor structural repairs with applicable approvals.
14.   Compass Swing report of the last three years.
15.   Cabin Configuration drawing (LOPA).
16.   Emergency equipment location drawing.
17.   Last X-RAYs

                                 ENGINES RECORDS

 1.   Last test cell run reports.
 2.   Life Limited Parts status and traceability.
 3.   AD compliance report with original signoffs.
 4.   Engine Modification / service bulletin /inspection report and applicable f
 5.   Last heavy maintenance records for each module.
 6.   Engine log books.
 7.   Engine removal history.
 8.   Past year trend monitoring reports.
 9.   Historical borescope reports.
10.   Engine component report.

                                   APU RECORDS

 1.   APU status (FH, FC, limits).
 2.   Life limited Part status and traceability.
 3.   AD compliance with original signoffs.
 4.   Modification status.
 5.   Last heavy maintenance documents.
 6.   APU log books.
 7.   Last test cell report.

                                COMPONENT RECORDS

 1.   Aircraft component inventory.
 2.   Hard time component inventory.
 3.   All serviceable tags.
 4.   Landing Gear status with last overhaul and life limited Part status.
 5.   AD compliance with original signoffs.
 6.   Modification status.


<PAGE>




         EXHIBIT N            TECHNICAL EVALUATION REPORT

                             (SEE FOLLOWING SHEETS)






<PAGE>


                     INTERNATIONAL LEASE FINANCE CORPORATION

                               AIRCRAFT / OPERATOR

                           TECHNICAL EVALUATION REPORT



                                TABLE OF CONTENTS

AIRCRAFT SUMMARY..............................................................1

MAINTENANCE & INSPECTION......................................................2

LANDING GEAR..................................................................4

ENGINES.......................................................................5

AUXILIARY POWER UNIT (APU)....................................................8

PASSENGER CABIN CONFIGURATION (Seating).......................................9

GALLEY PROVISIONS............................................................10

LAVATORIES, AUDIO/ENTERTAINMENT, CARGO, INTERIOR.............................11

HYDRAULIC, FUEL, WEIGHT & BALANCE............................................12

AVIONICS SYSTEMS.............................................................13

INSPECTOR RECORD.............................................................16


<PAGE>




                           AIRCRAFT SUMMARY as of / /






Aircraft Make         Boeing                        Model

FUS No.                                             S/N




MFG Date:


Current Registration:                   Country:

Previous Registration:                   Country:

Annual Utilization:                      Hour/Cycle Ratio:

Total Aircraft Time:                     TAT (Hrs)                 As of (date):

Total Aircraft Cycles:                   TAC (Cyc)

Time Since Last "C" or equivalent Check:     (Hrs)                 (Cyc)

Time Since Last Structural Check:            (Hrs)                 (Cyc)

Engine Make:                                 Model:               Thrust Rating:

Engine:                         1 S/N:                             2 S/N:

TSN:  (Hrs)

CSN:  (Cyc)

         IMPORTANT  NOTE:  THE ENGINE  SERIAL  NUMBERS  SPECIFIED ON THIS REPORT
         REFLECT THE ENGINE SERIAL NUMBERS THAT DELIVERED WITH THE AIRCRAFT.  IF
         THE  ENGINE  SERIAL  NUMBER  HAVE NOT BEEN  FILLED  IN FOR YOU,  PLEASE
         PROVIDE  DATA FOR THE ENGINES  ORIGINALLY  DELIVERED  WITH THE AIRCRAFT
         (LESSOR OWNED ENGINES).


<PAGE>



                           MAINTENANCE PROGRAM GENERAL

Aircraft Maintenance Program Provided By:   [   ]  Operator       [   ] Other:

Program Approved By Authority Of:   [   ]  FAA Approved           [   ] Other:

Repair Station Providing Service:

Repair Station Number:           FAA Approved?:    [   ]  Yes       [   ]  No

Primary Line Maintenance Provided By: [   ]  Operator  [   ]  Contract Service

Reliability Controlled Maintenance Program?:   [   ]  Yes        [   ]   No

Component Tags Available For Controlled Components:  [   ]  Yes       [   ]  No

<TABLE>
<S>                               <C>                               <C>                               <C>
                                  At Aircraft Delivery             Currently Approved By Local       Currently Operated/Maintained
                                                                   Aviation Authority

ETOPS Qualification:                            Minutes                                Minutes                             Minutes

Auto Land Qualification:          CAT I, II, IIIa, IIIb, IIIc      CAT I, II, IIIa, IIIb, IIIc       CAT I, II, IIIa, IIIb, IIIc
(Circle one that applies)


                                            MAINTENANCE & INSPECTION PROGRAM DESCRIPTION

          Check                   Operator's           Calendar           Frequency Hours           Cycles          Number of Phases
                                  Nomenclature

           "C"

           "D" or Structural Program

</TABLE>



<PAGE>



                     MAINTENANCE & INSPECTION PROGRAM STATUS

                             Phase or      Date      Aircraft TAT   Aircraft TAC
                             Equivalent

Next "C" Phase or Equivalent:
                                         /......../
Last "C" Phase or Equivalent:
                                         /......../

Time Remaining to Next Phase:         (Days)         (Hrs)         (Cyc)

Structural Cards Worked During Last "C" Phase?:  [   ]  Yes     [   ]  No

CPCP Cards Worked During Last "C" Phase?:        [   ]  Yes     [   ]  No

Next "D" Phase or Equivalent

Structural:                                                   /......../

Last "D" Phase or Equivalent

Structural:                                                   /......../

Time Remaining to Next Phase:         (Days)         (Hrs)         (Cyc)

CPCP Cards Worked During Last "D" Phase?:        [   ]  Yes     [   ]  No

Next CPCP Phase:                                              /......../

Last CPCP Phase:                                              /......../

Time Remaining to Next Phase:         (Days)         (Hrs)         (Cyc)

Date of Last ATC Transponder Test:  #1                     #2

Date of Last Flight Recorder Check:

Date of Last Aircraft Weighing:


<PAGE>



                                  LANDING GEAR


MLG Tires:           (Size)             (MPH Rating)               (MFG)

NLG Tires:           (Size)             (MPH Rating)               (MFG)

Brake Manufacture:      Type:     [   ] Steel       [   ] Carbon

LEFT MAIN:                   P/N                                   S/N

Last Overhaul:(Date) _____/_____/_____    (Hrs)                 (Cyc)

Agency Performing Service:                                      Cert #

Approved Overhaul Interval:               (Hrs)                 (Cyc)

Present Landing Gear Total Time:          (Hrs)                 (Cyc)

Time Remaining to Next Overhaul:          (Hrs)                 (Cyc)

RIGHT MAIN:       P/N                     S/N

Last Overhaul:(Date) _____/_____/_____    (Hrs)                 (Cyc)

Agency Performing Service:                                      Cert #

Approved Overhaul Interval:               (Hrs)                 (Cyc)

Present Landing Gear Total Time:          (Hrs)                 (Cyc)

Time Remaining to Next Overhaul:          (Hrs)                 (Cyc)

NOSE:            P/N                       S/N

Last Overhaul:(Date) _____/_____/_____    (Hrs)                 (Cyc)

Agency Performing Service:                                      Cert #

Approved Overhaul Interval:               (Hrs)                 (Cyc)

Present Landing Gear Total Time:          (Hrs)                 (Cyc)

Time Remaining to Next Overhaul:          (Hrs)                 (Cyc)

<PAGE>



                                     ENGINES

                           ENGINE MAINTENANCE PROGRAM

Engine Maintenance Program Provided By:

Engine Condition Monitoring Trend Analysis Program?: [   ]  Yes        [   ]  No

Engine Oil Type:


Engine(s) operated at INCREASED or DECREASED Thrust Rating;  Program limitations
& required Mods. to operate at designated thrust rating














<PAGE>



                              ENGINE SPECIFICATIONS
                                 ENGINE NUMBER 1


Engine Make:      Model:                               S/N:

Date of Mfg:      Total Time:        (Hrs)                    (Cyc)

Time Since Last Performance Restoration Visit:  (Visit Date)    (Hrs)      (Cyc)

Time Since Last Shop Visit:                     (visit Date)    (Hrs)      (Cyc)

Test Cell EGT Margin:

Work Scope of Last Shop Visit:

Agency Performing Service:

Agency FAA Approved?: [   ]  Yes        [   ]  No            Cert. #:

1st LIMITER*  Part Name:

              Allowable Life/Insp Limit:  (Hrs)                           (Cyc)

              Total Component Time:       (Hrs)                           (Cyc)

              Time Remaining:             (Hrs)                           (Cyc)

2nd LIMITER*  Part Name:

              Allowable Life/Insp Limit:  (Hrs)                           (Cyc)

              Total Component Time:       (Hrs)                           (Cyc)

              Time Remaining:             (Hrs)                           (Cyc)

*Provide a copy of a current Disk Sheet for all modules.


<PAGE>



                              ENGINE SPECIFICATIONS
                                 ENGINE NUMBER 2


Engine Make:      Model:                               S/N:

Date of Mfg:      Total Time:        (Hrs)                    (Cyc)

Time Since Last Performance Restoration Visit:  (Visit Date)    (Hrs)      (Cyc)

Time Since Last Shop Visit:                     (visit Date)    (Hrs)      (Cyc)

Test Cell EGT Margin:

Work Scope of Last Shop Visit:

Agency Performing Service:

Agency FAA Approved?: [   ]  Yes        [   ]  No            Cert. #:

1st LIMITER*  Part Name:

              Allowable Life/Insp Limit:  (Hrs)                           (Cyc)

              Total Component Time:       (Hrs)                           (Cyc)

              Time Remaining:             (Hrs)                           (Cyc)

2nd LIMITER*  Part Name:

              Allowable Life/Insp Limit:  (Hrs)                           (Cyc)

              Total Component Time:       (Hrs)                           (Cyc)

              Time Remaining:             (Hrs)                           (Cyc)

*Provide a copy of a current Disk Sheet for all modules.


<PAGE>



                              AUXILIARY POWER UNIT

APU Make:            Model:                        S/N:

Date of Mfg:         Total Time: (Hrs)                                 (Cyc)

APU Times Are Recorded By:  [ ] APU Clock or [ ] A/C Time      Ratio _____:_____

Time Between Overhaul:                       (Hrs)                      (Cyc)

Time @ Last Hot Section   (Date)             (Hrs)                      (Cyc)
Refurbishment:

Time @ Last Overhaul:     (Date)             (Hrs)                      (Cyc)

Time @ Last Shop Visit:   (Date)             (Hrs)                      (Cyc)

Work Scope:

Agency Performing Service:      Location:                        Cert. #:

Agency FAA Approved?:                [   ]  Yes    [   ]  No    APU Oil Type:

1st LIMITER Part Name:

         Allowable Life/Insp Limit:           (Hrs)                      (Cyc)

         Total Component Time:                (Hrs)                      (Cyc)

         Time Remaining:                      (Hrs)                      (Cyc)

2nd LIMITER Part Name:

         Allowable Life/Insp Limit:           (Hrs)                      (Cyc)

         Total Component Time:                (Hrs)                      (Cyc)

         Time Remaining:                      (Hrs)                      (Cyc)


<PAGE>



                          PASSENGER CABIN CONFIGURATION

                              SEATING CONFIGURATION


Present Configuration Occupancy:           No. of Handicap Seats Installed:

Passenger Exit Door Configuration:

Air Stairs:           Installed / Partial Provision/ Full Provision (Circle One)

FIRST CLASS.

Pax Qty:                  Seat Mfg:                  Model:                 P/N:

Seats Fireblocked?           [   ]  Yes      [   ]  No       Color:

16 G Seat Installation:      [   ]  Yes      [   ]  No

BUSINESS CLASS

Pax Qty:                  Seat Mfg:                  Model:                 P/N:

Seats Fireblocked?           [   ]  Yes      [   ]  No       Color:

16 G Seat Installation:      [   ]  Yes      [   ]  No

COACH CLASS

Pax Qty:                  Seat Mfg:                  Model:                 P/N:

Seats Fireblocked?           [   ]  Yes      [   ]  No       Color:

16 G Seat Installation:      [   ]  Yes      [   ]  No

Provisions for Life Vests Under Seats?:               [   ]  Yes    [   ]  No

Entertainment Controls(PCU) Installed?:               [   ]  Yes    [   ]  No

Manufacturer:   Part Number:

Emergency Escape Path Lighting:  [   ]  Floor Mounted         [   ] Seat Mounted

Configuration Drawing Number:   Source:

Engineering Order / Installation Document:

Installation FAA Approved?:      [   ]  Yes     [   ]  No    Method of Approval:


<PAGE>



                                GALLEY PROVISIONS

GALLEY's ARE (Check one): (___) Atlas Standard (___) KSSU Standard  (____) Other

GALLEY LOCATION     MANUFACTURER      MODEL NUMBER      PART NUMBER    EQUIPPED
                                                                      WaterPower


 1.                                                                   [ ]    [ ]

 2.                                                                   [ ]    [ ]

 3.                                                                   [ ]    [ ]

 4.                                                                   [ ]    [ ]

 5.                                                                   [ ]    [ ]

 6.                                                                   [ ]    [ ]

 7.                                                                   [ ]    [ ]

 8.                                                                   [ ]    [ ]

 9.                                                                   [ ]    [ ]

10.                                                                   [ ]    [ ]

NOTE:  Galley  Locations  per Spec or LOPA  drawing  i.e.,  G1,  G2 etc.  Galley
Location numbers above correspond to the numbers below.

   OVENS   BUN WARMERS   REFER   CHILLERS  COFFEE  WATER    HOT   HOT    BEV
                         UNITS             MAKERS BOILERS   JUGS  CUPS   JUGS
 1.

 2.

 3.

 4.

 5.

 6.

 7.

 8.

 9.

10.



<PAGE>



                                   LAVATORIES


Number of Lavatories:      Handicap Provisions?:     [   ]  Yes     [   ]  No

Locations:

                     IN-FLIGHT AUDIO & ENTERTAINMENT SYSTEM


Boarding Music:                                      [   ]  Yes     [   ]  No

Auto Evac & Warning:                                 [   ]  Yes     [   ]  No

Pre-Recorded Announcement:                           [   ]  Yes     [   ]  No

Passenger Entertainment (Audio):                     [   ]  Yes     [   ]  No

Passenger Entertainment (Video):                     [   ]  Yes     [   ]  No

VTR Format:          [   ] VHS            [   ]Hi-8               [   ] Other
[   ]  Projector     [   ]  PSU Monitor   [   ]  Isle Monitor     [   ]  In-Seat
(Check All That Apply)

Passenger En-Route Information Display:              [   ]  Yes      [   ]  No

Telephone:         [   ]  Yes    [   ]  No     [   ] Leased     [   ] Owned

Satellite:         [   ]  Yes    [   ]  No


                                CARGO COMPARTMENT


Cargo Loading System Installed:                      [   ]  Yes     [   ]  No

Smoke\Fire Detection System installed:               [   ]  Yes     [   ]  No

Fire Suppression System installed:                   [   ]  Yes     [   ]  No


                                 INTERIOR COLORS


Interior Color Scheme:             Carpets:                  Curtains:

                            PLACARDS & LIGHTED SIGNS


English?:    [   ]  Yes    [   ]  No   Bi-Lingual?:    [   ]  Yes   [   ]  No

First Language:                        Second Language:


<PAGE>



                                HYDRAULIC SYSTEM


Type of Hydraulic Fluid Used:                           (MFG):


                                   FUEL SYSTEM


Total Fuel Capacity:      U.S. gallons  [    ] lbs or [   ] kilos

Number of Tanks:          Auxiliary Tanks Installed?:    [    ] Yes   [    ] No

Auxiliary Tank Capacity:  U.S. gallons  [    ] lbs or [    ] kilos

Fuel Instrumentation / Calibration:   [     ]   U.S. pounds [     ]   kilograms


                                WEIGHT & BALANCE


Has Aircraft Been Modified For Increased Gross Weight by Current Lessee?:
[   ] Yes     [   ] No

From         MTOGW          To                   MTOGW

Weight & Balance Manual Document No.:                       Rev:

For the below weights specify AFM approved limits:


                                                       POUNDS            KILOS

Maximum Takeoff Gross Weight:           (MTOGW)                    /

Maximum Taxi Weight:                     (MTW)                     /

Maximum Landing Weight:                  (MLW)                     /

Manufacturer's Empty Weight:             (MEW)                     /

Maximum Zero Fuel Weight:               (MZFW)                     /

Operational Empty Weight:                (OEW)                     /


<PAGE>



                                AVIONICS SYSTEMS

                                 22 AUTO FLIGHT


   QTY      COMPONENT                     MANUFACTURER     MODEL or PART NUMBER

            FMGC - Flight Management & Guidance
            Computer:

            FAC - Flight Augmentation Computer:

            FCU - Flight Control Unit:

            MCDU - Multipurpose Control Display Unit:


                                23 COMMUNICATIONS


   QTY      COMPONENT             MANUFACTURER              MODEL or PART NUMBER

            CIDS Director - Cabin
            Intercommunications Data System

            HF Transceiver:

            VHF Transceiver:

            Cockpit Voice Recorder:

            PRAM Tape Reproducer (Pre-Recorded PAX Address):

            MPES Tape Reproducer (Audio
            Entertainment):

            Tape Reproducer (Video Entertainment):

            Audio management unit/SELCAL Decoder:

            ACARS Management Unit:

            RMP - Radio Management Panel:







                          AVIONICS SYSTEMS (continued)

                           27 FLIGHT CONTROL COMPUTER


   QTY      COMPONENT             MANUFACTURER              MODEL or PART NUMBER

            ELAC - Elevator/Aileron Computer:

            SFCC - Slat/flap Control Computer:

            SEC - Spoiler/Elevator Computer:

            FCDC - Flight Control Data Concentrator:


                           31 INDICATING AND RECORDING


   QTY      COMPONENT             MANUFACTURER              MODEL or PART NUMBER

            Multifunction Printer:

            DFDR - Flight Data Recorder:

            FDIU - Digital Flight Data Interface
            Unit:

            Accelerometer:

            FWC - Flight Warning Computers:

            Windshear Activated:  Yes / No


            QAR - Quick Access Recorder:

            AIDS - Aircraft Integrated Data System:

ELECTRONI INSTRUMENT SYSTEM (EIS)

            PFD - Primary Flight Display:

            ND - Navigation Display:

            SDACS - System Data Acquisition
            Concentrators:

            Display Management Computers:

            EWD - Engine/Warning Display:


            SD - System Display:

            CFDIU - Centralized Fault Display
            Interface:


                                  34 NAVIGATION


   QTY      COMPONENT             MANUFACTURER              MODEL or PART NUMBER

            ADIRU - Air Data/Intertial Reference System:

            DME - Distance Measuring Equipment
            Interrogators:

            VHF VOR/Marker Beacon Receiver:

            VHF ILS Receiver:

            DDRMI - Digital Distance & Radio
            Magnetic Indicator:

            Radio Altimeter Transceiver:

            Weather Radar Transceiver:

            TCAS - Traffic Alert and Collision
            Avoidance System Computer:

            ATC - Air Traffic Control System
            Transponder:

            Microwave Landing Receiver:

            GPWS - Ground Proximity Warning System:

            ADF - Automatic Direction Finder
            Receiver:



<PAGE>



                                INSPECTOR RECORD


INSPECTED BY:                     DATE:

OPERATOR:                         REGISTERED OWNER:

ADDRESS OF OPERATOR:

CONTACT (Name/Title):

TELEPHONE:                        TELEFAX:

Email Address:

Department Contact           Name          Phone        Fax          Email

Quality Control:

Power Plant Engineering:

Maintenance
Programs/Planning: