COLLATERAL MAINTENANCE AGREEMENT

                                     BETWEEN

                           CONTINENTAL AIRLINES, INC.

                                       AND

                           MBIA INSURANCE CORPORATION

                          dated as of December 6, 2002

                                   relating to

                      Floating Rate Secured Notes due 2007

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                                TABLE OF CONTENTS

                                                                            PAGE

ARTICLE 1   DEFINITIONS AND RULES OF CONSTRUCTION..............................1

   Section 1.1   Definitions...................................................1

   Section 1.2   Rules of Construction.........................................1

ARTICLE 2   REPORTS REGARDING THE COLLATERAL...................................1

   Section 2.2   Semiannual Appraisal..........................................2

   Section 2.3   Quarterly Reports.............................................3

   Section 2.4   Special Reports...............................................3

   Section 2.5   Information from the Trustee..................................4

   Section 2.6   Independent Appraiser.........................................4

ARTICLE 3   COLLATERAL REQUIREMENTS............................................4

   Section 3.1   Maintenance of Collateral Ratio and Rotable Ratio.............4

   Section 3.2   Certain Limitations Regarding the Collateral..................6

   Section 3.3   Fleet Reduction...............................................7

   Section 3.4   Liens.........................................................7

   Section 3.5   Maintenance...................................................7

   Section 3.6   Possession....................................................8

   Section 3.7   Inspection....................................................9

   Section 3.8   The Company's Obligation to Insure............................9

ARTICLE 4   MISCELLANEOUS.....................................................10

   Section 4.1   Benefits of Agreement Restricted.............................10

   Section 4.2   Appraiser's Certificate......................................10

   Section 4.3   Notices; Waiver..............................................10

   Section 4.4   Amendments, Etc..............................................11

   Section 4.5   No Waiver....................................................11

   Section 4.6   Successors and Assigns.......................................11

   Section 4.7   Governing Law................................................12

   Section 4.8   Effect of Headings...........................................12

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                                                                            PAGE

   Section 4.9   Counterpart Originals........................................12

   Section 4.10  Severability.................................................12

APPENDIX I   - DEFINITIONS
APPENDIX II  - FORM OF APPRAISAL COMPLIANCE REPORT
APPENDIX III - FORM OF NONAPPRAISAL COMPLIANCE REPORT
APPENDIX IV  - INSURANCE

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                        COLLATERAL MAINTENANCE AGREEMENT

     COLLATERAL  MAINTENANCE  AGREEMENT,  dated as of December 6, 2002,  between
0CONTINENTAL  AIRLINES,  INC., a Delaware corporation (the "COMPANY"),  and MBIA
INSURANCE CORPORATION, a New York insurance company (the "POLICY PROVIDER").


                                 R E C I T A L S

     WHEREAS,  the Company,  the Trustee,  the Policy Provider and the Liquidity
Provider  have  entered  into  the  Indenture  providing  for  the  issuance  of
$200,000,000  aggregate  principal  amount  of the  Securities,  and the  Policy
Provider has issued the Policy under which the Trustee may make drawings to make
certain payments with respect to the Securities;

     WHEREAS,  in order to secure  the  payment of the  principal  amount of and
interest on the  Securities  and all other  Obligations of the Company under the
Indenture,  the Securities and the other  Operative  Documents,  the Company has
granted a  security  interest  in the Spare  Parts  Collateral  pursuant  to the
Security Agreement; and

     WHEREAS,  the  Company  and the Policy  Provider  wish to set forth  herein
certain additional agreements with respect to the Spare Parts Collateral.

     NOW, THEREFORE,  in consideration of the premises and other benefits to the
Company,  the  receipt and  sufficiency  of which are hereby  acknowledged,  the
Company and the Policy Provider agree as follows:


                                    ARTICLE 1

                      DEFINITIONS AND RULES OF CONSTRUCTION

     Section 1.1  DEFINITIONS.  Capitalized  terms used above or hereinafter and
not otherwise  defined herein shall have the meanings  ascribed to such terms in
Section 1 of the Definitions Appendix attached hereto as Appendix I, which shall
be part of this Agreement as if fully set forth in this place.

     Section  1.2  RULES OF  CONSTRUCTION.  The rules of  construction  for this
Agreement are set forth in Section 2 of the Definitions Appendix.


                                    ARTICLE 2

                        REPORTS REGARDING THE COLLATERAL

     Section 2.1 ANNUAL APPRAISAL. So long as the Securities are Outstanding, by
the fifth  Business  Day of  February in 2004 and by the fifth  Business  Day of
February of each year thereafter, the Company shall furnish the Policy Provider

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and the Trustee an Independent  Appraiser's Certificate signed by an Independent
Appraiser,  dated as of a date between the  preceding  January 15 and February 1
(inclusive).  Each such Independent  Appraiser's Certificate shall state, in the
opinion of such Independent Appraiser, based upon use of the Annual Methodology,
the following:

     (a)  the Fair Market Value of the Collateral (excluding any Cash Collateral
          and, for the avoidance of doubt, any Excluded Parts) as of a specified
          date within 30 days (or,  if an  Independent  Appraiser's  Certificate
          signed by such Independent Appraiser has not previously been delivered
          to the Policy  Provider  pursuant to this Agreement or in the Offering
          Memo,  60 days)  (the  "PERMITTED  DAYS")  preceding  the date of such
          Certificate (the "ANNUAL VALUATION DATE");

     (b)  the Fair Market Value of the Rotables and of the Expendables  included
          in the  Collateral as of the  applicable  Annual  Valuation  Date (and
          shall separately state the quantity of such Rotables and Expendables);
          and

     (c)  the Fair Market Value of the Serviceable  Parts and the  Unserviceable
          Parts included in the Collateral as of the applicable Annual Valuation
          Date.

     Each annual Independent  Appraiser's Certificate shall be accompanied by an
Appraisal  Compliance  Report  determined as of the applicable  Annual Valuation
Date.  The Appraisal  Compliance  Report shall set forth the  calculation of the
Collateral  Ratio and the Rotable  Ratio  based on the Fair Market  Value of the
Collateral  and  the  Rotables  set  forth  in  such   Independent   Appraiser's
Certificate,  the Fair Market Value of Cash  Collateral  held by the  Collateral
Agent,  and the principal amount of the Securities  Outstanding,  each as of the
applicable  Annual  Valuation  Date. Upon written request of the Policy Provider
given to the Company  within twenty  Business Days after  delivery to the Policy
Provider of an annual  Independent  Appraiser's  Certificate  under this Section
2.1,  the  Company  shall  furnish  to the Policy  Provider  (with a copy to the
Trustee) a recent Parts Inventory  Report and a report showing the percentage of
the average cost of the Pledged Spare Parts located at each Company  facility as
of the same date as the date of such Parts Inventory Report.

     Section  2.2   SEMIANNUAL   APPRAISAL.   So  long  as  the  Securities  are
Outstanding,  by the  fifth  Business  Day of  February  in 2003,  by the  fifth
Business  Day of August in 2003 and by the fifth  Business Day of August in each
year  thereafter,  the Company shall furnish the Policy Provider and the Trustee
an Independent Appraiser's Certificate signed by an Independent Appraiser, dated
as of a date between the preceding January 15 and February 1 (inclusive), in the
case of such Certificate due in February 2003 (the "FEBRUARY 2003 CERTIFICATE"),
or the  preceding  July 15 and August 1  (inclusive),  in the case of such other
Certificates.  Each such semiannual  Independent  Appraiser's  Certificate shall
state, in the opinion of such Independent  Appraiser,  based upon the use of the
Semiannual Methodology, the following:

     (a)  the Fair Market Value of the Collateral (excluding any Cash Collateral
          and, for the avoidance of doubt, any Excluded Parts) as of a specified
          date within the Permitted Days preceding the date of such  Certificate
          (the "SEMIANNUAL VALUATION DATE");

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     (b)  the Fair Market Value of the Rotables and of the Expendables  included
          in the Collateral as of the applicable  Semiannual Valuation Date (and
          shall separately state the quantity of such Rotables and Expendables);
          and

     (c)  the Fair Market Value of the Serviceable  Parts and the  Unserviceable
          Parts  included  in the  Collateral  as of the  applicable  Semiannual
          Valuation Date.

     Each semiannual Independent Appraiser's Certificate shall be accompanied by
an  Appraisal  Compliance  Report  determined  as of the  applicable  Semiannual
Valuation Date, except that no Appraisal  Compliance Report shall be required to
accompany the February 2003  Certificate,  and the Maximum  Collateral Ratio and
Minimum  Rotable  Ratio  requirements  shall not be required to be  satisfied in
connection with the February 2003 Certificate.  The Appraisal  Compliance Report
provided with the semiannual Independent Appraiser's Certificate shall set forth
the calculation of the Collateral  Ratio and the Rotable Ratio based on the Fair
Market  Value of the  Collateral  and  Rotables  set  forth in such  Independent
Appraiser's  Certificate,  the Fair Market Value of Cash  Collateral held by the
Collateral Agent, and the principal amount of the Securities  Outstanding,  each
as  of  the  applicable  Semiannual  Valuation  Date,  PROVIDED  that  the  Cash
Collateral  deposited by the Company with the Security Agent on the Closing Date
shall be excluded from the calculation of the Collateral Ratio and Rotable Ratio
in connection  with the  Independent  Appraiser's  Certificate  due by the fifth
Business Day of August,  2003,  for purposes of Article 3 of this Agreement (but
not for purposes of Section 7.03 of the Security Agreement).

     Section 2.3 QUARTERLY  REPORTS.  So long as the Securities are Outstanding,
within ten Business Days after each May 1 and November 1, commencing with May 1,
2003,  the  Company  shall  furnish  the  Policy  Provider  and  the  Trustee  a
Nonappraisal  Compliance  Report  determined  as of such May 1 or November 1, as
applicable, or any date during such ten Business Day period thereafter.

     Section 2.4 SPECIAL  REPORTS.  The Policy  Provider  may (i) if the Company
defaults in any of its  obligations  with respect to indebtedness of the Company
in an outstanding  principal amount greater than  $100,000,000  which results in
the  acceleration of the Company's  obligation to pay such  indebtedness in full
prior to its stated  final  maturity  date,  at any time prior to the payment of
such indebtedness or the reversal of such  acceleration,  or (ii) if an Event of
Default occurs,  at any time while such Event of Default is continuing,  request
by written notice to the Company that the Company furnish to the Policy Provider
(with a copy to the Trustee) a special Independent Appraiser's Certificate.  Any
such special Independent  Appraiser's Certificate shall state, in the opinion of
such  Independent  Appraiser,  based  upon use of the  Annual  Methodology,  the
following:

     (a)  the Fair Market Value of the Collateral (excluding any Cash Collateral
          and, for the avoidance of doubt, any Excluded Parts) as of a specified
          date within the Permitted Days preceding the date of such  Certificate
          (the "SPECIAL VALUATION DATE" and, together with each Annual Valuation
          Date and Semiannual Valuation Date, the "VALUATION DATES");

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     (b)  the Fair Market Value of the Rotables and of the Expendables  included
          in the  Collateral as of the  applicable  Special  Valuation Date (and
          shall separately state the quantity of such Rotables and Expendables);
          and

     (c)  the Fair Market Value of the Serviceable  Parts and the  Unserviceable
          Parts  included  in  the  Collateral  as  of  the  applicable  Special
          Valuation Date.

     The  Company  shall  furnish  to the  Policy  Provider  (with a copy to the
Trustee)  any  such  requested  special  Independent   Appraiser's   Certificate
reasonably   promptly  after  receipt  of  such  request.   Notwithstanding  the
foregoing,  the Company  shall not be obligated  (i) to furnish any  Independent
Appraiser's Certificate under this Section 2.4 during the Section 1110 Period or
(ii)  to  deliver  pursuant  to  this  Article  2  an  Independent   Appraiser's
Certificate more than twice in any six month period. Upon written request of the
Policy  Provider given to the Company within twenty Business Days after delivery
to the Policy Provider of a special  Independent  Appraiser's  Certificate under
this Section 2.4, the Company shall furnish to the Policy  Provider (with a copy
to the  Trustee)  a recent  Parts  Inventory  Report  and a report  showing  the
percentage  of the  average  cost of the  Pledged  Spare  Parts  located at each
Company facility as of the same date as the date of such Parts Inventory Report.

     Section 2.5  INFORMATION  FROM THE  TRUSTEE.  The Fair Market  Value of any
Investment  Securities  included  in the Cash  Collateral  for  purposes of this
Agreement  shall be  determined  by the  Trustee in  accordance  with  customary
financial  market  practices.  The  Trustee  shall  inform  the  Company  of the
principal amount of the Securities  Outstanding and the Fair Market Value of any
Investment  Securities  included  in the  Collateral,  in  each  case  as of any
Valuation  Date or for purposes of Section  3.1,  promptly  after the  Company's
request for such information.

     Section 2.6 INDEPENDENT APPRAISER.  If the Policy Provider has a reasonable
basis for  concluding  that the  performance of the  Independent  Appraiser that
executed the most recent Independent  Appraiser's Certificate delivered pursuant
to Article 2 was not  satisfactory,  the Policy  Provider may designate  another
Independent  Appraiser to perform the next required appraisal under this Article
2 by written  notice given to the Company  within 90 days after the date of such
most recent  Independent  Appraiser's  Certificate.  The Company  shall use such
other  Independent  Appraiser  designated  by the Policy  Provider  for the next
appraisal  unless it gives the  Policy  Provider  written  notice of  reasonable
objection to the use of such other Independent Appraiser.


                                    ARTICLE 3

                             COLLATERAL REQUIREMENTS

     Section 3.1 MAINTENANCE OF COLLATERAL RATIO AND ROTABLE RATIO.

     (a) If the Collateral  Ratio,  as most recently  determined  pursuant to an
Appraisal  Compliance  Report, is greater than the Maximum Collateral Ratio, the
Company shall within 90 days after the date of the Appraisal  Compliance  Report
setting forth the calculation of such Collateral Ratio:

<PAGE>

          (i) subject additional  Qualified Spare Parts (the "ADDITIONAL PARTS")
     to the Lien of the Security Agreement in accordance with Section 3.1(c);

          (ii) grant a security interest to a Collateral Agent in other property
     to  secure  the  Obligations  for  the  benefit  of  the  Holders  and  the
     Indemnitees, PROVIDED that the Company shall have received, with respect to
     the use for purposes of this Section 3.1(a) of such  additional  collateral
     and  the  applicable  Collateral  Agreement,  (x)  approval  of the  Policy
     Provider and (y) Rating Agency Confirmation;

          (iii)  provide  additional  cash and/or  Investment  Securities to the
     Collateral  Agent  under  the  Security  Agreement,  PROVIDED  that  if the
     Continental Cash Balance as of the applicable  Valuation Date was less than
     $600,000,000,   then  the  amount  of  Cash  Collateral   included  in  the
     Collateral,  after giving  effect to the action taken  pursuant to Sections
     3.1(a) and 3.1(b) with  respect to such  Valuation  Date,  shall not exceed
     $20,000,000;

          (iv) deliver Securities to the Trustee for cancellation;

          (v) redeem some or all of the Securities  pursuant to Article 4 of the
     Indenture; or

          (vi) any combination of the foregoing;

such that, the Collateral  Ratio, as  recalculated  giving effect to such action
taken  pursuant to this Section 3.1(a) and, in the case of clauses (i), (ii) and
(iii) of this Section 3.1(a), using the Fair Market Value of any such additional
Collateral  determined  pursuant  to Section  3.1(d)  (but  otherwise  using the
information used to determine the Collateral  Ratio as most recently  determined
pursuant to Article 2), would not be greater than the Maximum Collateral Ratio.

     (b) If the  Rotable  Ratio,  as most  recently  determined  pursuant  to an
Appraisal Compliance Report, is less than the Minimum Rotable Ratio, the Company
shall within 90 days after the date of the Appraisal  Compliance  Report setting
forth the calculation of such Rotable Ratio:

          (i) subject  additional  Rotables (the  "ADDITIONAL  ROTABLES") to the
     Lien of the Security Agreement in accordance with Section 3.1(c);

          (ii)  provide  additional  cash and/or  Investment  Securities  to the
     Collateral  Agent  under  the  Security  Agreement;  PROVIDED  that  if the
     Continental Cash Balance as of the applicable  Valuation Date was less than
     $600,000,000,   then  the  amount  of  Cash  Collateral   included  in  the
     Collateral,  after giving  effect to the action taken  pursuant to Sections
     3.1(a) and 3.1(b) with  respect to such  Valuation  Date,  shall not exceed
     $20,000,000;

          (iii) deliver Securities to the Trustee for cancellation;

          (iv) redeem some or all of the Securities pursuant to Article 4 of the
     Indenture; or

<PAGE>

          (v) any combination of the foregoing.

such that, the Rotable Ratio, as recalculated giving effect to such action taken
pursuant to this Section 3.1(b) and, in the case of clauses (i) and (ii) of this
Section 3.1(b),  using the Fair Market Value of any such  additional  Collateral
determined  pursuant to Section 3.1(d) (but otherwise using the information used
to determine the Rotable Ratio as most recently  determined  pursuant to Article
2), would not be less than the Minimum Rotable Ratio.

     (c) In order to comply with  Section  3.1(a)(i) or  3.1(b)(i),  the Company
shall (i) add one or more locations as Designated  Locations pursuant to Section
4.02(b) of the Security  Agreement,  in which case the Qualified  Spare Parts or
Rotables,  as the case may be, at such new Designated  Locations,  to the extent
not included in the Pledged Spare Parts on the preceding  Valuation Date,  shall
be deemed  Additional Parts or Additional  Rotables,  as the case may be; and/or
(ii) add to a Designated Location Qualified Spare Parts or Rotables, as the case
may be, that were not included as Pledged Spare Parts on the preceding Valuation
Date, which shall be deemed Additional Parts or Additional Rotables, as the case
may be.

     (d) In connection with the provision of additional  Collateral  pursuant to
clause  (i) or (ii) of Section  3.1(a) or  Section  3.1(b),  the  Company  shall
furnish to the  Policy  Provider  (with a copy to the  Trustee)  an  Independent
Appraiser's  Certificate signed by an Independent Appraiser,  dated as of a date
after  the  most  recent  Valuation  Date,  stating,  in  the  opinion  of  such
Independent  Appraiser,  the Fair  Market  Value of such  additional  Collateral
(other than Cash Collateral), as of a date not earlier than 60 days prior to the
date of such Independent  Appraiser's Certificate (but not earlier than the most
recent  Valuation Date) and using, in the case of Additional Parts or Additional
Rotables, the Annual Methodology.

     (e) If the Company shall have provided Cash Collateral  pursuant to Section
3.1(a)(iii) or Section  3.1(b)(ii) (the "TEMPORARY CASH  COLLATERAL"),  it shall
within 90 days after providing such Temporary Cash Collateral (i) in the case of
Section   3.1(a)(iii),   take  additional  action  pursuant  to  Section  3.1(a)
(excluding the right to provide Cash Collateral) to cause the Collateral  Ratio,
calculated to exclude such Temporary Cash Collateral, not to be greater than the
Maximum  Collateral  Ratio  and (ii) in the  case of  Section  3.1(b)(ii),  take
additional  action  pursuant to Section  3.1(b)  (excluding the right to provide
Cash  Collateral)  to cause  the  Rotable  Ratio,  calculated  to  exclude  such
Temporary Cash Collateral, not to be less than the Minimum Rotable Ratio.

     Section 3.2 CERTAIN LIMITATIONS REGARDING THE COLLATERAL. During any period
commencing  on the  Closing  Date  or the  date  of an  Independent  Appraiser's
Certificate  delivered pursuant to Article 2 through the date preceding the date
of the next Independent  Appraiser's Certificate delivered pursuant to Article 2
(each, an "APPLICABLE  PERIOD"),  the Company agrees that, as of any date during
an Applicable Period,  the aggregate  Appraised Value of all Pledged Spare Parts
(x) previously  during such Applicable  Period sold,  transferred or disposed of
(excluding any such transaction  pursuant to Section 4.02(a)(ii) of the Security
Agreement and Pledged Spare Parts deemed sold pursuant to the proviso in Section
3.6(a)  of  this  Agreement  as to  which  the  Company  has  reacquired  title)
(collectively,  "SALES")  shall  not  exceed  2% of the  Appraised  Value of the
Collateral,  (y) then subject to leases to  Permitted  Lessees or loans to other
Persons (together, "LOANS") shall not exceed 2% of the Appraised Value of the

<PAGE>

Collateral  or  (z)  previously  during  such  Applicable  Period  moved  from a
Designated  Location to a location not a Designated  Location  (excluding  those
permitted  under Sections  4.02(a)(i) of the Security  Agreement and clauses (i)
and (ii) of Section 3.6(a) of this  Agreement)  ("MOVES") shall not exceed 2% of
the Appraised Value of the Collateral.

     Section 3.3 FLEET REDUCTION.  If at any time after the Closing Date so long
as any Securities are  Outstanding  the total number of Aircraft of any Aircraft
Model (as defined below) in the Company's  in-service fleet during any period of
60  consecutive  days is less than the Specified  Minimum (as defined below) for
such Aircraft Model (other than due to  restrictions  on operating such Aircraft
imposed by the FAA or any other instrumentality or agency of the United States),
then within 90 days after such  occurrence  the Company shall redeem  Securities
pursuant to Article 4 of the Indenture or deliver  Securities to the Trustee for
cancellation,  or a  combination  of the  foregoing,  in an aggregate  principal
amount not less than the principal  amount of the Securities  Outstanding at the
end of such 60 day period multiplied by a fraction, the numerator of which shall
be the  Appraised  Value of the  Pledged  Spare Parts that are  appropriate  for
incorporation in, installation on, attachment or appurtenance to, or use in only
Aircraft of such Aircraft Model or Engines  utilized only on such Aircraft,  and
the  denominator of which shall be the Appraised  Value of the  Collateral.  For
purposes of this Section  "AIRCRAFT MODEL" shall mean each of the four models or
groups of models of Aircraft  set forth below and  "SPECIFIED  MINIMUM"  for any
Aircraft  Model  shall  mean the  number of  Aircraft  set forth  opposite  such
Aircraft Model below:

         AIRCRAFT MODEL                             SPECIFIED MINIMUM

1.       Boeing 737-700, Boeing
         737-800 and Boeing 737-900
         Aircraft                                   63 Aircraft

2.       Boeing 757-200 and
         Boeing 757-300
         Aircraft                                   23 Aircraft

3.       Boeing 767-200 and
         Boeing 767-400 Aircraft                    13 Aircraft

4.       Boeing 777-200 Aircraft                     9 Aircraft

     Section 3.4 LIENS.  The Company  will not  directly or  indirectly  create,
incur,  assume or suffer to exist any Lien on or with respect to the Spare Parts
Collateral,  title  to any of the  foregoing  or  any  interest  of the  Company
therein, except Permitted Liens. The Company shall promptly, at its own expense,
take such action as may be necessary to duly discharge (by bonding or otherwise)
any such Lien other than a Permitted Lien arising at any time.

     Section 3.5 MAINTENANCE. The Company:

     (a) shall  maintain,  or cause to be  maintained,  at all times the Pledged
Spare  Parts in  accordance  with all  applicable  Laws issued by the FAA or any
other  Governmental  Entity  having  jurisdiction  over the  Company or any such
Pledged  Spare  Parts,   including   making  any   modifications,   alterations,
replacements and additions necessary therefor;

<PAGE>

     (b) shall maintain, or cause to be maintained,  all records, logs and other
materials required by the FAA or under the Federal Aviation Act to be maintained
in respect of the Pledged Spare Parts and shall not modify its record  retention
procedures  in respect of the  Pledged  Spare Parts if such  modification  would
materially diminish the value of the Pledged Spare Parts, taken as a whole; and

     (c) shall maintain,  or cause to be maintained,  the Pledged Spare Parts in
good working  order and  condition  and shall  perform all  maintenance  thereon
necessary for that  purpose,  excluding (i) Pledged Spare Parts that have become
worn out or unfit for use and not reasonably repairable or become obsolete, (ii)
Pledged  Spare Parts that are not required for the Company's  normal  operations
and  (iii)  Expendables  that  have  been  consumed  or  used  in the  Company's
operations.

     Section 3.6 POSSESSION.

     (a) Without the prior written consent of the Policy  Provider,  the Company
will not sell,  lease,  transfer or  relinquish  possession of any Pledged Spare
Part to anyone  other than the grant of the  security  interest to the  Security
Agent pursuant to the Security Agreement,  except as permitted by the provisions
of Sections  3.2 and 3.6 of this  Agreement  and  Sections  4.02 and 4.03 of the
Security  Agreement  and except  that the Company  shall have the right,  in the
ordinary  course of business,  (i) to transfer  possession  of any Pledged Spare
Part  to  the  manufacturer  thereof  or any  other  organization  for  testing,
overhaul,  repairs,  maintenance,  alterations or modifications or to any Person
for the  purpose of  transport  to any of the  foregoing  or (ii) to subject any
Pledged Spare Part to a pooling,  exchange,  borrowing or maintenance  servicing
agreement  arrangement customary in the airline industry and entered into in the
ordinary course of business;  PROVIDED,  HOWEVER, that if the Company's title to
any such  Pledged  Spare  Part shall be  divested  under any such  agreement  or
arrangement,  such divestiture shall be deemed to be a Sale with respect to such
Pledged Spare Part subject to the provisions of Section 3.2.

     (b) So long as no Event of Default shall have  occurred and be  continuing,
the Company may enter into a lease with respect to any Pledged Spare Part to any
U.S.  Air  Carrier  that is not  then  subject  to any  bankruptcy,  insolvency,
liquidation,  reorganization,  dissolution  or similar  proceeding and shall not
have  substantially  all of its property in the  possession  of any  liquidator,
trustee,  receiver or similar person (a "PERMITTED LESSEE").  In the case of any
such lease, the Company will include in such lease appropriate  provisions which
(t) make such lease expressly subject and subordinate to all of the terms of the
Security  Agreement,  including  the rights of the Security  Agent to avoid such
lease in the exercise of its rights to  repossession  of the Pledged Spare Parts
under the Security  Agreement;  (u) require the Permitted  Lessee to comply with
the terms of Section 3.8; and (v) require that the Pledged  Spare Parts  subject
thereto be used in accordance with the  limitations  applicable to the Company's
use,  possession  and  location of such  Pledged  Spare  Parts  provided in this
Agreement and the Security Agreement (including,  without limitation,  that such
Pledged  Spare  Parts  be kept at one or more  Designated  Locations),  it being
understood  that such  Permitted  Lessee  shall be entitled to  incorporate  in,
install on, attach or make  appurtenant  to, or use in, any Aircraft,  Engine or
Appliance  leased to, or owned by, such Permitted Lessee (whether or not subject
to any Lien) any Pledged Spare Part subject  thereto,  free from the Lien of the
Security Agreement.  No lease permitted under this Section shall be entered into
unless (w) the Company shall provide written notice to the Policy Provider and

<PAGE>

the Trustee (promptly after entering into any such lease); (x) the Company shall
furnish to the Policy Provider (with a copy to the Trustee) evidence  reasonably
satisfactory to the Policy  Provider that the insurance  required by Section 3.8
remains in  effect;  (y) all  necessary  documents  shall have been duly  filed,
registered  or  recorded  in such  public  offices as may be  required  fully to
preserve the first priority  security  interest  (subject to Permitted Liens) of
Security Agent in the Pledged Spare Parts;  and (z) the Company shall  reimburse
the Policy Provider for all of its reasonable  out-of-pocket  fees and expenses,
including,  without  limitation,  reasonable fees and  disbursements of counsel,
incurred by the Policy  Provider in  connection  with any such lease.  Except as
otherwise  provided herein and without in any way relieving the Company from its
primary  obligation for the performance of its obligations  under this Agreement
and the  Security  Agreement,  the Company may in its sole  discretion  permit a
lessee to  exercise  any or all rights  which the  Company  would be entitled to
exercise  under  Sections  3.4 through 3.8,  inclusive,  of this  Agreement  and
Article 4 of the  Security  Agreement,  and may cause a lessee to perform any or
all of the Company's  obligations under Sections 3.4 through 3.8, inclusive,  of
this Agreement and Article 4 of the Security Agreement,  and the Policy Provider
agrees to accept (and to direct the  Security  Agent to accept)  actual and full
performance thereof by a lessee in lieu of performance by the Company.

     Section 3.7 INSPECTION.

     (a) At all  reasonable  times,  the  Policy  Provider  and  its  authorized
representatives  (the  "INSPECTING  PARTIES")  may (not more than once  every 12
months unless an Event of Default has occurred and is continuing,  in which case
such inspection  right shall not be so limited)  inspect the Pledged Spare Parts
(including without limitation, the Spare Parts Documents).

     (b) Any inspection of the Pledged Spare Parts hereunder shall be limited to
a visual inspection and shall not include the  disassembling,  or opening of any
components,  of any Pledged Spare Part, and no such  inspection  shall interfere
with the Company's or any Permitted Lessee's  maintenance and use of the Pledged
Spare Parts.

     (c) With respect to such rights of  inspection,  the Policy  Provider shall
not have any duty or  liability  to make,  or any duty or liability by reason of
not making, any such visit, inspection or survey.

     (d) Each  Inspecting  Party shall bear its own expenses in connection  with
any such  inspection,  PROVIDED that the Company shall  reimburse the Inspecting
Party for its  reasonable  out-of-pocket  expenses in  connection  with any such
inspection  during the  continuance  of an Event of Default,  except  during the
Section 1110 Period.

     Section 3.8 THE COMPANY'S  OBLIGATION  TO INSURE.  The Company shall comply
with, or cause to be complied with, each of the provisions of Appendix IV, which
provisions  are hereby  incorporated  by this  reference as if set forth in full
herein.  Nothing in this  Section  shall limit or prohibit  (a) the Company from
maintaining  the policies of insurance  required  under  Appendix IV with higher
limits than those  specified  in Appendix  IV, or (b) the Policy  Provider,  the
Trustee or the Security Agent from obtaining  insurance for its own account (and
any proceeds payable under such separate  insurance shall be payable as provided
in the policy relating thereto); PROVIDED, HOWEVER, that no insurance may be

<PAGE>

obtained  or  maintained  that would  limit or  otherwise  adversely  affect the
coverage of any  insurance  required to be obtained or maintained by the Company
pursuant to Section 3.8 and Appendix IV.


                                   ARTICLE 4

                                 MISCELLANEOUS

     Section 4.1 BENEFITS OF AGREEMENT RESTRICTED.  Subject to the provisions of
Section 4.6 hereof,  nothing in this Agreement or the other Operative Documents,
express or implied, shall give or be construed to give to any Person, other than
the parties hereto,  any legal or equitable  right,  remedy or claim under or in
respect of this Agreement or under any covenant,  condition or provision  herein
contained, all such covenants, conditions and provisions, subject to Section 4.6
hereof,  being for the sole  benefit of the parties  hereto,  PROVIDED  that the
Trustee  is an  intended  third-party  beneficiary  of  each  provision  of this
Agreement that expressly grants it a right to receive certain documents that are
provided to the Policy Provider and of the last sentence of Section 4.6, and the
Trustee and the Security  Agent each is an intended  third-party  beneficiary of
each  provision  of Section  3.8 and  Appendix  IV that  expressly  refers to it
(collectively, the "TRUSTEE PROVISIONS") (it being understood that the Company's
obligation to deliver a document to the Policy  Provider and the contents of any
such document are not Trustee  Provisions,  and such  provisions  referred to in
this parenthetical may be amended, supplemented or waived without the consent of
the Trustee or the  Security  Agent,  PROVIDED  that the right of the Trustee to
receive a copy of such document if it is required to be delivered to the Trustee
or the Security Agent is a Trustee Provision).

     Section  4.2  APPRAISER'S   CERTIFICATE.   Unless  otherwise   specifically
provided, an Independent Appraiser's Certificate shall be sufficient evidence of
the Appraised Value and Fair Market Value of any property under this Agreement.

     Section 4.3 NOTICES; WAIVER. Any request, demand, authorization, direction,
notice,  consent,  waiver  or  other  document  provided  or  permitted  by this
Agreement to be made upon, given or furnished to, or filed with

     (a) the Company  shall be  sufficient  for every  purpose  hereunder  if in
writing and sent by personal delivery, by telecopier, by registered or certified
mail or by nationally recognized overnight courier,  postage or courier charges,
as the case may be, prepaid, to the Company at:

             Continental Airlines, Inc.
             1600 Smith Street
             Houston, Texas  77002
             Attention:  Treasurer
             Telecopier No.:  (713) 324-2447

     (b) the Policy Provider shall be sufficient for every purpose  hereunder if
in writing  and sent by personal  delivery,  by  telecopier,  by  registered  or
certified mail or by nationally recognized overnight courier, postage or courier
charges, as the case may be, prepaid, to the Policy Provider at:

<PAGE>

             MBIA Insurance Corporation
             113 King Street
             Armonk, New York  10504
             Attention:      Insured Portfolio Management, Structured Finance
             Telecopier No.: (914) 765-3163

     (c) the Trustee or the Security Agent shall be sufficient for every purpose
hereunder  if in  writing  and sent by  personal  delivery,  by  telecopier,  by
registered or certified  mail or by  nationally  recognized  overnight  courier,
postage or courier  charges,  as the case may be,  prepaid to the Trustee or the
Security Agent at:

             Wilmington Trust Company
             Rodney Square North
             1100 North Market Street
             Wilmington, Delaware  19890
             Attention:  Corporate Trust Administration

             Telecopier No.: (302) 651-8882

or to any of the  above  parties  at any  other  address  or  telecopier  number
subsequently  furnished  in  writing by it to each of the other  parties  listed
above.  Any such  delivery  shall be deemed  made on the date of  receipt by the
addressee of such delivery or of refusal by such addressee to accept delivery.

     Section 4.4 AMENDMENTS, ETC. This Agreement may be amended or supplemented,
and compliance  with any obligation in this Agreement may be waived,  by written
instrument  executed by the Company and the Policy  Provider,  PROVIDED that the
Trustee  Provisions,  insofar as they relate to the rights of the Trustee or the
Security Agent,  may not be amended,  supplemented or waived without the written
consent of the Trustee or the Security Agent, as the case may be.

     Section  4.5 NO WAIVER.  No failure on the part of the Policy  Provider  to
exercise,  and no delay in  exercising  any right  hereunder  shall operate as a
waiver thereof;  nor shall any single or partial exercise of any right hereunder
preclude  any other or further  exercise  thereof or the  exercise  of any other
right.  Failure by the Policy Provider at any time or times hereafter to require
strict performance by the Company with any of the provisions,  warranties, terms
or conditions  contained herein shall not waive, affect or diminish any right of
the Policy Provider at any time or times hereafter to demand strict  performance
thereof,  and such right shall not be deemed to have been  modified or waived by
any course of conduct or knowledge of the Policy Provider or any agent,  officer
or employee of the Policy Provider.

     Section 4.6 SUCCESSORS AND ASSIGNS.  This Agreement and all  obligations of
the Company hereunder shall be binding upon the successors and permitted assigns
of the Company,  and shall,  together with the rights and remedies of the Policy
Provider  hereunder,  inure  to the  benefit  of the  Policy  Provider  and  its
successors and assigns.  The interest of the Company under this Agreement is not
assignable and any attempt to assign all or any portion of this Agreement by the
Company shall be null and void except for an assignment in connection with a

<PAGE>

merger,  consolidation or conveyance,  transfer or lease of all or substantially
all the Company's assets permitted under the Indenture. Upon the occurrence of a
Policy Provider Default, all rights and obligations of the Policy Provider under
this Agreement shall automatically,  without any notice, demand or other action,
be assigned to and assumed by the Trustee, and the Trustee shall take or refrain
from taking  action  under this  Agreement at the  direction of the  Controlling
Party.

     Section 4.7 GOVERNING LAW. THIS  AGREEMENT IS BEING  DELIVERED IN THE STATE
OF NEW YORK.  THIS  AGREEMENT  SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

     Section 4.8 FFECT OF  HEADINGS.  The Article and Section  headings  and the
Table of Contents contained in this Agreement have been inserted for convenience
of reference only, and are and shall be without  substantive  meaning or content
of any kind whatsoever and are not a part of this Agreement.

     Section 4.9 COUNTERPART  ORIGINALS.  This Agreement may be signed in two or
more counterparts,  each of which shall be deemed an original,  but all of which
shall together  constitute one and the same  agreement.  Delivery of an executed
counterpart  of a  signature  page to this  Agreement  by  telecopier  shall  be
effective as delivery of an original executed counterpart of this Agreement.

     Section 4.10 SEVERABILITY.  The provisions of this Agreement are severable,
and if any clause or provision shall be held invalid,  illegal or  unenforceable
in  whole  or  in  part  in  any   jurisdiction,   then   such   invalidity   or
unenforceability   shall  affect  in  that  jurisdiction  only  such  clause  or
provision,  or part  thereof,  and shall not in any manner affect such clause or
provision  in any other  jurisdiction  or any other  clause or provision of this
Agreement in any jurisdiction.




                            [SIGNATURE PAGE FOLLOWS]



<PAGE>

     IN WITNESS  WHEREOF,  the parties  have caused  this  Agreement  to be duly
executed and delivered all as of the date first above written.



                                          CONTINENTAL AIRLINES, INC.



                                          By:
                                             --------------------------------
                                             Name:
                                             Title:




                                          MBIA INSURANCE CORPORATION



                                          By:
                                             --------------------------------
                                             Name:
                                             Title:



<PAGE>



                                   Appendix I

                              DEFINITIONS APPENDIX


SECTION 1.  DEFINED TERMS.

     "ACCELERATION" means, with respect to the amounts payable in respect of the
Securities issued under the Indenture, such amounts becoming immediately due and
payable  pursuant to Section 7.2 of the Indenture.  "ACCELERATE",  "ACCELERATED"
and "ACCELERATING" have meanings correlative to the foregoing.

     "ACCRUED INTEREST" is defined in Section 3.6(a) of the Indenture.

     "ADDITIONAL  PARTS" is  defined  in  Section  3.1(a)(i)  of the  Collateral
Maintenance Agreement.

     "ADDITIONAL  ROTABLES" is defined in Section  3.1(b)(i)  of the  Collateral
Maintenance Agreement.

     "ADVANCE" means any Advance as defined in the Liquidity Facility.

     "AFFILIATE"  of any specified  Person means any other  Person,  directly or
indirectly,  controlling  or  controlled  by or under direct or indirect  common
control  with  such  specified  Person.  For the  purposes  of this  definition,
"CONTROL"  when used with  respect to any  Person  means the power to direct the
management and policies of such Person, directly or indirectly,  whether through
the  ownership of voting  securities,  by contract or  otherwise;  and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.

     "AGENT"  means any  Registrar,  Paying Agent or  co-Registrar  or co-Paying
Agent.

     "AGENT MEMBERS" is defined in Section 2.5(a) of the Indenture.

     "AIRCRAFT" means any contrivance  invented,  used, or designed to navigate,
or fly in, the air.

     "ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market
Value of the Spare Parts Collateral,  taking at least the following actions: (i)
reviewing the Parts  Inventory  Report  prepared as of the applicable  Valuation
Date;  (ii) reviewing the  Independent  Appraiser's  internal value database for
values  applicable  to  Qualified  Spare  Parts  included  in  the  Spare  Parts
Collateral; (iii) developing a representative sampling of a reasonable number of
the different Qualified Spare Parts included in Spare Parts Collateral for which
a  market  check  will  be  conducted;  (iv)  checking  other  sources,  such as
manufacturers,  other airlines,  U.S.  government  procurement  data and airline
parts  pooling  price  lists,  for  current  market  prices of the sample  parts
referred to in clause (iii);  (v)  establishing  an assumed ratio of Serviceable
Parts to  Unserviceable  Parts as of the  applicable  Valuation  Date based upon
information  provided  by the Company and the  Independent  Appraiser's  limited
physical  review of the Spare  Parts  Collateral  referred  to in the  following

<PAGE>

clause (vi);  (vi) visiting at least two locations  selected by the  Independent
Appraiser  where the Pledged  Spare  Parts are kept by the  Company  (neither of
which was visited for purposes of the last appraisal under Section 2.1 or 2.2 of
the Collateral Maintenance Agreement,  whichever was most recent), PROVIDED that
at least one such location shall be one of the top three  locations at which the
Company keeps the largest  number of Pledged  Spare Parts,  to conduct a limited
physical  inspection of the Spare Parts  Collateral;  (vii) conducting a limited
review of the inventory  reporting system applicable to the Pledged Spare Parts,
including  checking  information  reported  in such system  against  information
determined through physical inspection pursuant to the preceding clause (vi) and
(viii)  reviewing a sampling of the Spare Parts Documents  (including  tear-down
reports).

     "ANNUAL  VALUATION  DATE"  is  defined  in  Section  2.1 of the  Collateral
Maintenance Agreement.

     "APPLIANCE"  means  an  instrument,   equipment,   apparatus,  a  part,  an
appurtenance,  or an accessory  used,  capable of being used,  or intended to be
used,  in operating or  controlling  Aircraft in flight,  including a parachute,
communication  equipment,  and  another  mechanism  installed  in or attached to
Aircraft during flight, and not a part of an Aircraft, Engine, or Propeller.

     "APPLICABLE MARGIN" means 0.90%.

     "APPLICABLE PERIOD" is defined in Section 3.2 of the Collateral Maintenance
Agreement.

     "APPRAISAL  COMPLIANCE  REPORT" means,  as of any date, a report  providing
information  relating to the  calculation  of the  Collateral  Ratio and Rotable
Ratio, which shall be substantially in the form of Appendix II to the Collateral
Maintenance Agreement.

     "APPRAISED  VALUE" means,  with respect to any Collateral,  the Fair Market
Value of such Collateral as most recently  determined pursuant to (i) the report
attached  as  Appendix  II to the  Offering  Memo  or  (ii)  Article  2 and,  if
applicable, Section 3.1 of the Collateral Maintenance Agreement.

     "AVAILABLE AMOUNT" means, as of any date, the Maximum Available  Commitment
(as defined in the Liquidity Facility) on such date.

     "AVOIDED PAYMENT" has the meaning assigned to such term in the Policy.

     "BANKRUPTCY  CODE"  means the  United  States  Bankruptcy  Code,  11 U.S.C.
Section 101 ET SEQ.

     "BOARD OF  DIRECTORS"  means the Board of  Directors  of the Company or any
committee  of such board  duly  authorized  to act in respect of any  particular
matter.

     "BREAK AMOUNT" means, as of any date of payment, redemption or acceleration
of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the  Applicable  Date pursuant to
the formula set forth  below;  PROVIDED,  HOWEVER,  that no Break Amount will be
payable (x) if the Break Amount, as calculated pursuant to the formula set forth
below,  is equal to or less than zero or (y) on or in respect of any  Applicable

<PAGE>

Date that is an Interest  Payment Date (or, if such an Interest  Payment Date is
not a Business Day, the next succeeding Business Day)

          Break Amount = Z-Y

          Where:

          X = with respect to any applicable Interest Period, the sum of (i) the
              amount of the outstanding  principal amount of such Note as of the
              first  day  of the  then  applicable  Interest  Period  plus  (ii)
              interest  payable  thereon during such entire  Interest  Period at
              then effective LIBOR.

          Y = X,  discounted  to  present  value  from  the last day of the then
              applicable  Interest  Period to the  Applicable  Date,  using then
              effective LIBOR as the discount rate.

          Z = X,  discounted  to  present  value  from  the last day of the then
              applicable  Interest Period to the Applicable  Date,  using a rate
              equal to the applicable London interbank offered rate for a period
              commencing  on the  Applicable  Date and ending on the last day of
              the then applicable  Interest Period,  determined by the Reference
              Agent as of two Business Days prior to the Applicable  Date as the
              discount rate.

     "BUSINESS DAY" means any day that is a day for trading by and between banks
in the London interbank  Eurodollar  market and that is other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close in
Houston,  Texas, New York, New York, or, so long as any Security is outstanding,
the city and state in which the Trustee maintains its Corporate Trust Office or,
solely with  respect to draws under any Policy,  the city and state in which the
office of the Policy  Provider at which notices,  presentations,  transmissions,
deliveries and  communications  are to be made under the Policy is located,  and
that,  solely with  respect to draws  under the  Liquidity  Facility,  also is a
"Business Day" as defined in the Liquidity Facility.

     "CAPPED INTEREST RATE" means a rate per annum equal to 12%.

     "CASH COLLATERAL" means cash and/or Investment  Securities  deposited or to
be deposited with the Collateral Agent or an Eligible Institution and subject to
the Lien of any Collateral Agreement.

     "CASH COLLATERAL  ACCOUNT" means an Eligible Deposit Account in the name of
the Trustee maintained at an Eligible Institution, which shall be the Trustee if
it shall so qualify,  into which all amounts drawn under the Liquidity  Facility
pursuant  to  Section  3.5(c),  3.5(d)  or  3.5(i)  of the  Indenture  shall  be
deposited.

     "CITIZEN OF THE UNITED STATES" is defined in 49 U.S.C.ss. 40102(a)(15).

     "CLEARING  AGENCY" means an organization  registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.

<PAGE>

     "CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg.

     "CLOSING DATE" means the Issuance Date.

     "CODE" means the Internal Revenue Code of 1986, as amended.

     "COLLATERAL"  means the Spare Parts  Collateral and all other collateral in
which the Collateral  Agent has a security  interest  pursuant to the Collateral
Agreements.

     "COLLATERAL  AGENT" means the Trustee in its capacity as Security  Agent or
as agent on behalf of the Holders under any other Collateral Agreement.

     "COLLATERAL AGREEMENT" means the Security Agreement and any agreement under
which a security interest has been granted pursuant to Section 3.1(a)(ii) of the
Collateral Maintenance Agreement.

     "COLLATERAL   MAINTENANCE   AGREEMENT"  means  the  Collateral  Maintenance
Agreement,  dated as of the date of the  Indenture,  between the Company and the
Policy Provider.

     "COLLATERAL  RATIO" shall mean a percentage  determined by dividing (i) the
aggregate  principal amount of all Securities  Outstanding  minus the sum of the
Cash  Collateral  held by the Collateral  Agent by (ii) the Fair Market Value of
all Collateral (excluding any Cash Collateral),  as set forth in the most recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance  Agreement,  as supplemented pursuant to Section
3.1 of the Collateral Maintenance Agreement, if applicable.

     "COLLECTION  ACCOUNT" means the Eligible Deposit Account established by the
Trustee  pursuant to Section 8.13 of the Indenture  which the Trustee shall make
deposits in and withdrawals from in accordance with the Indenture.

     "COMPANY"  means the party named as such in the Indenture or any obligor on
the  Securities  until a successor  replaces it  pursuant to the  Indenture  and
thereafter means the successor.

     "CONSENT PERIOD" is defined in Section 3.5(d) of the Indenture.

     "CONTINENTAL  BANKRUPTCY EVENT" means the occurrence and continuation of an
Event of Default under Section 7.1(d), (e) or (f) of the Indenture.

     "CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash
equivalents  that would have been shown on the balance sheet of Continental  and
its  consolidated  subsidiaries  prepared  in  accordance  with  GAAP  as of any
Valuation  Date,  plus (b) the amount of marketable  securities  that would have
been  reflected on such balance  sheet which had, as of such  Valuation  Date, a
maturity  of less than one year and which,  but for their  maturity,  would have
qualified to be reflected on such balance sheet as cash equivalents.

     "CONTROLLING  PARTY" means the Person  entitled to act as such  pursuant to
the terms of Section 3.8 of the Indenture.

<PAGE>

     "CORPORATE  TRUST  OFFICE" when used with respect to the Trustee  means the
office  of the  Trustee  at which at any  particular  time its  corporate  trust
business  is  administered  and  which,  at the  Closing  Date,  is  located  at
Wilmington  Trust  Company,  as Trustee,  Rodney  Square North 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration.

     "DEBT  BALANCE"  means  110% of the  principal  amount  of the  Outstanding
Securities.

     "DEBT RATE" means a rate per annum equal, in the case of the first Interest
Period, to 2.32% and, in the case of any subsequent  Interest Period,  LIBOR for
such Interest Period, as determined  pursuant to the Reference Agency Agreement,
plus the Applicable  Margin,  PROVIDED that, solely in the event no Registration
Event (as defined in the Registration  Rights  Agreement)  occurs on or prior to
the 210th day after the Closing  Date,  the Debt Rate shall be  increased  by an
additional margin equal to 0.50% per annum, from and including such 210th day to
and  excluding  the  earlier  of (i) the date on which such  Registration  Event
occurs and (ii) the date on which there ceases to be any Registrable  Securities
(as defined in the Registration Rights Agreement)); or if the Shelf Registration
Statement (as defined in the  Registration  Rights  Agreement) (if it is filed),
after being  declared  effective by the SEC,  ceases to be effective at any time
during  the period  specified  by Section  2(b)(B)  of the  Registration  Rights
Agreement for more than 60 days, whether or not consecutive, during any 12-month
period,  the Debt Rate shall be increased by an additional margin equal to 0.50%
per annum from and including the 61st day of the applicable 12-month period such
Shelf Registration Statement ceases to be effective to and excluding the date on
which the Shelf Registration  Statement again becomes effective (or, if earlier,
the end of the period  specified by Section 2(b)(B) of the  Registration  Rights
Agreement),  PROVIDED that the additional margin added to the Debt Rate pursuant
to the preceding proviso shall never exceed 0.50% at any time,  PROVIDED FURTHER
that,  if a default in the payment of interest on the  Securities  occurs and is
continuing on any Interest  Payment Date,  then the Debt Rate  applicable to the
Interest Period ending on such Interest Payment Date shall not exceed the Capped
Interest  Rate,  except that for  purposes  of any  payment  made by the Company
intended to cure such default, this proviso shall not apply.

     "DEFAULT"  means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.

     "DEFINITIONS  APPENDIX" means the Definitions Appendix attached as Appendix
I to the Indenture and constituting a part of the Indenture.

     "DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture.

     "DESIGNATED LOCATIONS" means the locations in the U.S. designated from time
to time by the Company at which the Pledged  Spare Parts may be maintained by or
on behalf of the Company,  which  initially  shall be the locations set forth on
Schedule 1 to the Security Agreement and shall include the additional  locations
designated by the Company pursuant to Section 4.04(d) of the Security Agreement.

     "DESIGNATED REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.

<PAGE>

     "DISTRIBUTION  DATE"  means (i) each  Scheduled  Payment  Date  (and,  if a
Payment  required to be paid to the Trustee for  distribution  on such Scheduled
Payment Date has not been so paid by 12:30 p.m.,  New York time,  in whole or in
part, on such Scheduled Payment Date, the next Business Day on which the Trustee
receives some or all of such Payment by 12:30 p.m., New York time,  except for a
defaulted  payment  of  interest  that is not paid  within  five days  after the
Scheduled  Payment Date therefor),  (ii) each day established for payment by the
Trustee pursuant to Section 7.10, (iii) the  Non-Performance  Payment Date, (iv)
the Final Legal  Maturity  Date, (v) the Election  Distribution  Date,  (vi) the
Policy Election  Distribution Date, (vii) the date established as a Distribution
Date pursuant to Section  3.6(f) of the Indenture and (viii) solely for purposes
of payments to be made by the Policy Provider  pursuant to Section 3.6(d) of the
Indenture  and not for purposes of any other payment or  distribution  under the
Indenture, the date established for such payment in accordance with the Policy.

     "DOWNGRADE DRAWING" is defined in Section 3.5(c) of the Indenture.

     "DOWNGRADE  EVENT" has the meaning  assigned to such term in Section 3.5(c)
of the Indenture.

     "DOWNGRADED FACILITY" is defined in Section 3.5(c) of the Indenture.

     "DRAWING"  means an Interest  Drawing,  a Final  Drawing,  a  Non-Extension
Drawing or a Downgrade Drawing, as the case may be.

     "DTC" means The Depository Trust Company, its nominees and their respective
successors.

     "ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture.

     "ELIGIBLE  ACCOUNT"  means an account  established  by and with an Eligible
Institution at the request of the Security Agent, which institution  agrees, for
all  purposes  of the New York UCC  including  Article 8 thereof,  that (a) such
account shall be a "securities  account" (as defined in Section 8-501 of the New
York UCC), (b) such  institution is a "securities  intermediary"  (as defined in
Section  8-102(a)(14)  of the New York UCC), (c) all property  (other than cash)
credited to such account shall be treated as a "financial  asset" (as defined in
Section  8-102(9)  of the New York UCC),  (d) the  Security  Agent  shall be the
"entitlement  holder"  (as  defined in Section  8-102(7) of the New York UCC) in
respect of such account,  (e) it will comply with all entitlement  orders issued
by the Security  Agent to the  exclusion  of the  Company,  (f) it will waive or
subordinate  in  favor of the  Security  Agent  all  claims  (including  without
limitation,  claims by way of  security  interest,  lien or right of  set-off or
right of recoupment),  and (g) the "securities intermediary jurisdiction" (under
Section 8-110(e) of the New York UCC) shall be the State of New York.

     "ELIGIBLE  DEPOSIT  ACCOUNT" means either (a) a segregated  account with an
Eligible  Institution or (b) a segregated trust account with the corporate trust
department of a depository  institution  organized  under the laws of the United
States of America or any one of the states  thereof or the  District of Columbia
(or any U.S. branch of a foreign bank), having corporate trust powers and acting
as trustee for funds deposited in such account, so long as any of the securities
of such depository  institution has a long-term  unsecured debt rating or issuer
credit  rating,  as the  case  may  be,  from  Moody's  of at  least  A-3 or its

<PAGE>

equivalent.  An Eligible  Deposit  Account may be maintained  with the Liquidity
Provider so long as the Liquidity Provider is an Eligible Institution;  provided
that such  Liquidity  Provider  shall have  waived  all  rights of  set-off  and
counterclaim with respect to such account.

     "ELIGIBLE  INSTITUTION"  means (a) the  Security  Agent or (b) a depository
institution  organized under the laws of the United States of America or any one
of the states  thereof or the  District  of  Columbia  (or any U.S.  branch of a
foreign  bank),  which has a long-term  unsecured  debt rating or issuer  credit
rating, as the case may be, from Moody's of at least A-3 or its equivalent.

     "ELIGIBLE   INVESTMENTS"  means  (a)  investments  in  obligations  of,  or
guaranteed  by,  the U.S.  Government  having  maturities  no later than 90 days
following the date of such investment, (b) investments in open market commercial
paper of any  corporation  incorporated  under the laws of the United  States of
America or any state thereof with a short-term  unsecured  debt rating issued by
Moody's of at least P-1 and a short-term issuer credit rating issued by Standard
& Poor's of at least A-1 having  maturities no later than 90 days  following the
date of  such  investment  or (c)  investments  in  negotiable  certificates  of
deposit, time deposits,  banker's acceptances,  commercial paper or other direct
obligations of, or obligations  guaranteed by,  commercial banks organized under
the laws of the United  States or of any political  subdivision  thereof (or any
U.S.  branch of a foreign  bank)  with a  short-term  unsecured  debt  rating by
Moody's of at least P-1 and a  short-term  issuer  credit  rating by  Standard &
Poor's of at least A-1,  having  maturities no later than 90 days  following the
date of such investment;  PROVIDED,  HOWEVER,  that (x) all Eligible Investments
that are bank  obligations  shall be  denominated in U.S.  dollars;  and (y) the
aggregate  amount  of  Eligible  Investments  at any  one  time  that  are  bank
obligations  issued by any one bank shall not be in excess of 5% of such  bank's
capital surplus;  PROVIDED FURTHER that any investment of the types described in
clauses (a),  (b) and (c) above may be made  through a  repurchase  agreement in
commercially  reasonable  form  with  a  bank  or  other  financial  institution
qualifying as an Eligible  Institution  so long as such  investment is held by a
third party  custodian  also  qualifying  as an Eligible  Institution;  PROVIDED
FURTHER,  HOWEVER,  that in the  case of any  Eligible  Investment  issued  by a
domestic branch of a foreign bank, the income from such investment shall be from
sources within the United States for purposes of the Code.  Notwithstanding  the
foregoing,  no  investment  of the types  described in clause (b) above which is
issued or guaranteed by the Company or any of its Affiliates,  and no investment
in the  obligations  of any one  bank in  excess  of  $10,000,000,  shall  be an
Eligible  Investment  unless written  approval has been obtained from the Policy
Provider and a Ratings Confirmation shall have been received with respect to the
making of such investment.

     "ENGINE"  means an  engine  used,  or  intended  to be used,  to  propel an
Aircraft, including a part, appurtenance,  and accessory of the Engine, except a
Propeller.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time

     "EUROCLEAR"  means Euroclear Bank  S.A./N.V.,  as operator of the Euroclear
System.

     "EVENT OF DEFAULT" is defined in Section 7.1 of the Indenture.

<PAGE>

     "EVENT OF LOSS" means (i) the loss of any of the Pledged  Spare Parts or of
the use thereof due to destruction,  damage beyond repair or rendition of any of
the  Pledged  Spare  Parts  permanently  unfit  for  normal  use for any  reason
whatsoever (other than the use of Expendables in the Company's operations); (ii)
any damage to any of the Pledged  Spare  Parts  which  results in the receipt of
insurance  proceeds  with respect to such Pledged Spare Parts on the basis of an
actual  or  constructive  loss;  or (iii) the loss of  possession  of any of the
Pledged Spare Parts by the Company for ninety (90)  consecutive days as a result
of the theft or disappearance of such Pledged Spare Parts.

     "EXCHANGE ACT" means the  Securities  Exchange Act of 1934, as amended from
time to time.

     "EXCHANGE  FLOATING  RATE  SECURED  NOTES DUE 2007" is  defined  in Section
2.1(a) of the Indenture.

     "EXCHANGE OFFER" means the exchange offer which may be made pursuant to the
Registration  Rights  Agreement to exchange  Initial  Certificates  for Exchange
Certificates.

     "EXCHANGE OFFER  REGISTRATION  STATEMENT" means the registration  statement
that,  pursuant to the Registration  Rights  Agreement,  is filed by the Company
with the SEC with  respect to the  exchange of Initial  Securities  for Exchange
Securities.

     "EXCHANGE  SECURITIES"  means the securities  substantially  in the form of
Exhibit  A to the  Indenture  issued  in  exchange  for the  Initial  Securities
pursuant to the Registration Rights Agreement and authenticated  pursuant to the
Indenture.

     "EXCLUDED  PARTS" means Spare Parts and Appliances held by the Company at a
location not a Designated Location.

     "EXPENDABLES" means Qualified Spare Parts other than Rotables.

     "EXPENSES" means any and all  liabilities,  obligations,  losses,  damages,
settlements,   penalties,   claims,   actions,   suits,   costs,   expenses  and
disbursements (including, without limitation,  reasonable fees and disbursements
of legal counsel,  accountants,  appraisers,  inspectors or other professionals,
and costs of investigation).

     "FAA"  means the  Federal  Aviation  Administration  or similar  regulatory
authority established to replace it.

     "FAA FILED DOCUMENTS" means the Security Agreement.

     "FACILITY OFFICE" means, with respect to any Liquidity Facility, the office
of the Liquidity Provider  thereunder,  presently located at 1585 Broadway,  New
York, New York 10036, or such other office as such Liquidity  Provider from time
to time  shall  notify  the  Trustee  as its  "Facility  Office"  under any such
Liquidity  Facility;  provided that such Liquidity Provider shall not change its
Facility Office to another  Facility Office outside the United States of America
except in accordance  with  Sections  3.01,  3.02 or 3.03 of any such  Liquidity
Facility.

<PAGE>

     "FAIR MARKET VALUE" means, with respect to any Collateral,  its fair market
value  determined  on the basis of a  hypothetical  sale  negotiated in an arm's
length free market  transaction  between a willing and able seller and a willing
and able  buyer,  neither  of whom is  under  undue  pressure  to  complete  the
transaction,  under then current market conditions,  provided that cash shall be
valued at its Dollar amount.

     "FEDERAL   AVIATION  ACT"  means  Title  49  of  the  United  States  Code,
"Transportation",  as amended from time to time, or any similar  legislation  of
the United States enacted in substitution or replacement thereof.

     "FEE  LETTERS"  means,  collectively,  (i) the Fee  Letter  dated as of the
Closing Date between the Trustee and the initial Liquidity Provider with respect
to the initial  Liquidity  Facility and (ii) any fee letter entered into between
the Trustee and any Replacement Liquidity Provider in respect of any Replacement
Liquidity Facility.

     "FINAL DRAWING" is defined in Section 3.5(i) of the Indenture.

     "FINAL LEGAL MATURITY DATE" means December 6, 2009.

     "FINAL ORDER" has the meaning assigned to such term in the Policy.

     "FINAL SCHEDULED PAYMENT DATE" means December 6, 2007.

     "FINANCING  STATEMENTS"  means,  collectively,  UCC-1 financing  statements
covering  the Spare Parts  Collateral,  by the Company,  as debtor,  showing the
Security  Agent as secured  party,  for filing in Delaware,  Guam and each other
jurisdiction that, in the opinion of the Security Agent, is necessary to perfect
its Lien on the Spare Parts Collateral.

     "GAAP" means generally accepted accounting  principles in the United States
of America as in effect as of the Closing Date, including those set forth in (i)
the  opinions  and  pronouncements  of the  Accounting  Principles  Board of the
American  Institute  of  Certified  Public  Accountants,   (ii)  statements  and
pronouncements  of the Financial  Accounting  Standards Board,  (iii) such other
statements  by such other  entity as  approved by a  significant  segment of the
accounting  profession  and (iv) the rules and  regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic  reports required to be filed pursuant to Section 13 of the Exchange
Act,  including  opinions and  pronouncements in staff accounting  bulletins and
similar written statements from the accounting staff of the SEC.

     "GLOBAL EXCHANGE SECURITY" is defined in Section 2.1(f) of the Indenture.

     "GLOBAL SECURITIES" is defined in Section 2.1(d) of the Indenture.

     "GOVERNMENT  ENTITY"  means (a) any federal,  state,  provincial or similar
government,  and any  body,  board,  department,  commission,  court,  tribunal,
authority,  agency or other  instrumentality of any such government or otherwise
exercising any executive,  legislative,  judicial,  administrative or regulatory
functions  of  such  government  or  (b)  any  other  government  entity  having
jurisdiction over any matter contemplated by the Operative Documents or relating

<PAGE>

to the observance or performance of the obligations of any of the parties to the
Operative Documents.

     "HOLDER" or  "SECURITYHOLDER"  means the Person in whose name a Security is
registered on the Registrar's books.

     "INDEMNITEE" means (i) WTC, the Trustee and the Collateral Agent, (ii) each
separate or  additional  trustee or  security  agent  appointed  pursuant to the
Indenture, (iii) each Liquidity Provider, (iv) the Policy Provider, and (v) each
of the respective directors, officers, employees, agents and servants of each of
the persons described in clauses (i) through (iv) inclusive above.

     "INDENTURE"  means the  Indenture  dated as of December 6, 2002,  among the
Company, the Trustee, the Liquidity Provider and the Policy Provider under which
the Securities are issued.

     "INDENTURE  DISCHARGE  DATE"  means  the  date  of the  termination  of the
effectiveness  of the  Indenture  pursuant to Section  9.1(a)  thereof  (without
giving effect to Section 9.1(b) thereof).

     "INDENTURE TRUSTEE" means the Trustee.

     "INDEPENDENT APPRAISER" means Simat, Helliesen & Eichner, Inc. or any other
Person (i) engaged in a business which includes  appraising  Aircraft and assets
related to the operation and  maintenance of Aircraft from time to time and (ii)
who does not have any  material  financial  interest  in the  Company and is not
connected  with the Company or any of its  Affiliates  as an officer,  director,
employee, promoter, underwriter, partner or person performing similar functions.

     "INDEPENDENT  APPRAISER'S  CERTIFICATE"  means a  certificate  signed by an
Independent  Appraiser  and  attached  as Appendix  II to the  Offering  Memo or
delivered  thereafter  pursuant  to Article 2 or Section  3.1 of the  Collateral
Maintenance Agreement.

     "INITIAL CASH COLLATERAL" shall mean cash in the amount of $13,056,950.

     "INITIAL FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a)
of the Indenture.

     "INITIAL PURCHASER" means Morgan Stanley & Co. Incorporated.

     "INITIAL SECURITIES" mean the securities issued and authenticated  pursuant
to the Indenture and substantially in the form of Exhibit A thereto,  other than
the Exchange Securities.

     "INSTITUTIONAL ACCREDITED INVESTOR" means an institutional investor that is
an "accredited  investor"  within the meaning set forth in Rule 501(a)(1),  (2),
(3) or (7) of Regulation D under the Securities Act.

     "INTEREST DRAWING" is defined in Section 3.5(a) of the Indenture.

     "INTEREST  PAYMENT DATE" means March 6, June 6,  September 6 and December 6
of each year so long as any Security is Outstanding  (commencing March 6, 2003),

<PAGE>

PROVIDED that if any such day is not a Business Day, then the relevant  Interest
Payment Date shall be the next succeeding Business Day.

     "INTEREST  PERIOD" means (i) in the case of the first Interest Period,  the
period  commencing  on (and  including)  the  Closing  Date and  ending  on (but
excluding) the first  Interest  Payment Date following such date and (ii) in the
case  of  each  subsequent  Interest  Period,  the  period  commencing  on  (and
including) the last day of the immediately preceding Interest Period, and ending
on (but excluding) the next Interest Payment Date.

     "INVESTMENT  EARNINGS" means investment earnings on funds on deposit in the
Trust  Accounts net of losses and  investment  expenses of the Trustee in making
such investments.

     "INVESTMENT SECURITY" means (a) any bond, note or other obligation which is
a direct obligation of or guaranteed by the U.S. or any agency thereof;  (b) any
obligation  which is a direct  obligation  of or  guaranteed by any state of the
U.S. or any subdivision  thereof or any agency of any such state or subdivision,
and which has the highest rating published by Moody's or Standard & Poor's;  (c)
any commercial  paper issued by a U.S. obligor and rated at least P-1 by Moody's
or A-1 by Standard & Poor's; (d) any money market investment  instrument relying
upon the credit and  backing of any bank or trust  company  which is a member of
the Federal Reserve System and which has a combined capital  (including  capital
reserves  to the extent not  included in  capital)  and  surplus  and  undivided
profits of not less than  $250,000,000  (including the Collateral  Agent and its
Affiliates if such  requirements  as to Federal  Reserve  System  membership and
combined  capital and surplus and undivided  profits are satisfied),  including,
without  limitation,  certificates of deposit,  time and other  interest-bearing
deposits,   bankers'   acceptances,   commercial   paper,   loan  and   mortgage
participation   certificates  and  documented   discount  notes  accompanied  by
irrevocable  letters  of  credit  and  money  market  fund  investing  solely in
securities  backed by the full  faith and credit of the  United  States;  or (e)
repurchase agreements collateralized by any of the foregoing.

     "ISSUANCE DATE" means the date of issuance of the Initial Securities.

     "LAW" means (a) any constitution, treaty, statute, law, decree, regulation,
order,  rule or  directive  of any  Government  Entity,  and (b) any judicial or
administrative  interpretation  or application of, or decision under, any of the
foregoing.

     "LIBOR" has the meaning specified in the Reference Agency Agreement.

     "LIBOR ADVANCE" has the meaning provided in the Liquidity Facility.

     "LIEN" means any mortgage,  pledge, lease, security interest,  encumbrance,
lien or charge of any kind affecting title to or any interest in property.

     "LIQUIDITY  EVENT OF DEFAULT" has the meaning  assigned to such term in the
Liquidity Facility.

     "LIQUIDITY  EXPENSES"  means all Liquidity  Obligations  other than (i) the
principal  amount of any  Drawings  under the  Liquidity  Facility  and (ii) any
interest accrued on any Liquidity Obligations.

<PAGE>

     "LIQUIDITY FACILITY" means, initially, the Revolving Credit Agreement dated
as of the Issuance Date, between the Trustee and the initial Liquidity Provider,
and from and after the replacement of such Revolving Credit  Agreement  pursuant
hereto, the Replacement  Liquidity  Facility  therefor,  if any, in each case as
amended, supplemented or otherwise modified from time to time in accordance with
its terms.

     "LIQUIDITY  GUARANTEE" means the Guarantee Agreement,  dated as of the date
of the Indenture,  providing for the guarantee by the Liquidity Guarantor of the
obligations of the Liquidity Provider under the Liquidity Facility.

     "LIQUIDITY GUARANTOR" means Morgan Stanley.

     "LIQUIDITY  OBLIGATIONS"  means  all  principal,  interest,  fees and other
amounts owing to the Liquidity  Provider under the Liquidity Facility or the Fee
Letter.

     "LIQUIDITY  PROVIDER" means Morgan Stanley Capital Services Inc.,  together
with any Replacement Liquidity Provider which has issued a Replacement Liquidity
Facility to replace any  Liquidity  Facility  pursuant to Section  3.5(e) of the
Indenture.

     "LIQUIDITY PROVIDER REIMBURSEMENT DATE" is defined in Section 3.6(d) of the
Indenture.

     "LOANS" is defined in Section 3.2 of the Collateral Maintenance Agreement.

     "MATERIAL  ADVERSE  CHANGE" means,  with respect to any person,  any event,
condition or circumstance  that  materially and adversely  affects such person's
business  or  consolidated  financial  condition,  or its  ability to observe or
perform  its  obligations,   liabilities  and  agreements  under  the  Operative
Documents.

     "MAXIMUM COLLATERAL RATIO" means 45%.

     "MINIMUM ROTABLE RATIO" means 150%.

     "MOODY'S" means Moody's Investors Service, Inc.

     "MOVES" is defined in Section 3.2 of the Collateral Maintenance Agreement.

     "MSCS" has the meaning specified in the first paragraph of the Indenture.

     "NEW YORK UCC" is defined in Section 1.01 of the Security Agreement.

     "NONAPPRAISAL  COMPLIANCE  REPORT"  means a  report  providing  information
relating  to  compliance  by the  Company  with  Section  3.2 of the  Collateral
Maintenance Agreement,  which shall be substantially in the form of Appendix III
to the Collateral Maintenance Agreement.

     "NON-CONTROLLING  PARTY"  means,  at any time,  the Holders,  the Liquidity
Provider and the Policy Provider,  excluding  whichever is the Controlling Party
at such time.

     "NON-EXTENDED FACILITY" is defined in Section 3.5(d) of the Indenture.

<PAGE>

     "NON-EXTENSION DRAWING" is defined in Section 3.5(d) of the Indenture.

     "NON-PERFORMANCE DRAWING" is defined in Section 3.6(c) of the Indenture.

     "NON-PERFORMANCE  PAYMENT  DATE"  is  defined  in  Section  3.6(c)  of  the
Indenture.

     "NON-PERFORMING"  means,  with respect to any Security,  a Payment  Default
existing thereunder (without giving effect to any Acceleration); PROVIDED, that,
in the event of a bankruptcy  proceeding  under the Bankruptcy Code in which the
Company is a debtor,  any Payment Default  existing at the  commencement of such
bankruptcy proceeding or during the 60-day period under Section 1110(a)(2)(A) of
the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of
the Bankruptcy  Code or as may apply for the cure of such Payment  Default under
Section   1110(a)(2)(B)  of  the  Bankruptcy  Code)  shall  not  be  taken  into
consideration until the expiration of the applicable period.

     "NON-PERFORMING PERIOD" is defined in Section 3.6(c) of the Indenture.

     "NON-U.S.  PERSON" means any Person other than a U.S. person, as defined in
Regulation S.

     "NOTICE OF AVOIDED  PAYMENT"  has the meaning  assigned to such term in the
Policy.

     "NOTICE FOR PAYMENT"  means a Notice of  Nonpayment as such term is defined
in the Policy.

     "OBLIGATIONS" is defined in Section 2.01 of the Security Agreement.

     "OFFERING MEMO" means the Offering  Memorandum,  dated December 2, 2002, of
the Company relating to the offering of the Securities.

     "OFFICER"  means  the  Chairman  of the  Board,  the  President,  any  Vice
President  of any  grade,  the  Chief  Financial  Officer,  the  Treasurer,  any
Assistant Treasurer, the Secretary, any Assistant Secretary or the Controller of
the Company.

     "OFFICERS'   CERTIFICATE"  means  a  certificate  signed  by  two  Officers
satisfying the requirements of Sections 12.4 and 12.5 of the Indenture.

     "OPERATIVE DOCUMENTS" means the Indenture,  the Collateral Agreements,  the
Collateral Maintenance Agreement and the Reference Agency Agreement.

     "OPINION OF COUNSEL"  means a written  opinion from the General  Counsel of
the  Company,  legal  counsel to the  Company or another  legal  counsel  who is
reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with
Sections 12.4 and 12.5 of the  Indenture.  The counsel may be an employee of the
Company. The acceptance by the Trustee (without written objection to the Company
during the fifteen (15) Business Days  following  receipt) of, or its action on,
an opinion of counsel not  specifically  referred  to above shall be  sufficient
evidence that such counsel is acceptable to the Trustee.

<PAGE>

         "OUTSTANDING" or "OUTSTANDING"  when used with respect to Securities or
a Security,  means all Securities theretofore  authenticated and delivered under
the Indenture, except:

          (a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;

          (b) Securities,  or portions thereof,  for whose payment or redemption
money in the necessary amount has been theretofore deposited with the Trustee in
trust for the Holders of such Securities,  PROVIDED that, if such Securities are
to be redeemed,  notice of such  redemption  has been duly given pursuant to the
Indenture or provision therefor satisfactory to the Trustee has been made;

          (c)  Securities  for which payment has been deposited with the Trustee
or any Paying Agent in trust  pursuant to Article 9 of the Indenture  (except to
the extent provided therein); and

          (d)  Securities  which have been paid,  or for which other  Securities
shall have been  authenticated  and delivered in lieu thereof or in substitution
therefor  pursuant to the terms of Section 2.12 of the  Indenture,  unless proof
satisfactory  to the Trustee is presented  that any such  Securities are held by
bona fide purchasers in whose hands the Securities are valid  obligations of the
Company.

     A Security does not cease to be  Outstanding  because the Company or one of
its  Affiliates  holds the  Security;  PROVIDED,  HOWEVER,  that in  determining
whether the Holders of the requisite  aggregate  principal  amount of Securities
Outstanding have given any request, demand,  authorization,  direction,  notice,
consent or waiver under the Indenture or any other Operative  Document,  Section
2.13 of the Indenture shall be applicable.

     "OUTSTANDING AMOUNT" is defined in Section 3.6(b) of the Indenture.

     "OVERDUE  SCHEDULED  PAYMENT" means any Payment of accrued  interest on the
Securities  which  is not in fact  received  by the  Trustee  (whether  from the
Company, the Liquidity Provider,  the Policy Provider or otherwise) on or within
five days after the  Scheduled  Payment Date  relating  thereto and which is not
subsequently  paid in  connection  with the  redemption  or final  maturity of a
Security.

     "PARTS  INVENTORY  REPORT" means,  as of any date, a list  identifying  the
Pledged  Spare Parts by  manufacturer's  part number and brief  description  and
stating the quantity of each such part included in the Pledged Spare Parts as of
such specified date.

     "PAYING AGENT" has the meaning provided in Section 2.8 of the Indenture.

     "PAYMENT"  means (i) any payment of principal of,  interest on, or Premium,
if any,  or Break  Amount,  if any,  with  respect  to the  Securities  from the
Company,  (ii) any payment of interest on the Securities  with funds drawn under
the Liquidity Facility or from a Cash Collateral Account or (iii) any payment of
interest on or principal  of  Securities  with funds drawn under the Policy,  or
(iv) any payment received or amount realized by the Trustee from the exercise of
remedies after the occurrence of an Event of Default.

<PAGE>

     "PAYMENT  DEFAULT"  means a Default  referred  to in Section  7.1(a) of the
Indenture.

     "PAYMENT  DUE RATE"  means  (a) the Debt Rate plus 2% or, if less,  (b) the
maximum rate permitted by applicable law.

     "PERMITTED  DAYS" is defined in Section 2.1 of the  Collateral  Maintenance
Agreement.

     "PERMITTED  LESSEE"  has the  meaning  provided  in  Section  3.6(b) of the
Collateral Maintenance Agreement.

     "PERMITTED LIEN" means (a) the rights of Security Agent under the Operative
Documents;  (b) Liens  attributable  to Security  Agent (both in its capacity as
Security Agent and in its individual  capacity);  (c) the rights of others under
agreements or  arrangements  to the extent  expressly  permitted by the terms of
Section 3.6 of the Collateral Maintenance Agreement;  (d) Liens for Taxes of the
Company (and its U.S. federal tax law consolidated group), either not yet due or
being  contested in good faith by appropriate  proceedings so long as such Liens
and such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Pledged  Spare Parts or the  interest of Security  Agent  therein or
impair  the  Lien of the  Security  Agreement;  (e)  materialmen's,  mechanics',
workers',  repairers',  employees'  or other like Liens  arising in the ordinary
course of business for amounts the payment of which is either not yet delinquent
for  more  than 60 days or is  being  contested  in good  faith  by  appropriate
proceedings,  so long as such  Liens and such  proceedings  do not  involve  any
material risk of the sale,  forfeiture or loss of the Pledged Spare Parts or the
interest of Security Agent therein or impair the Lien of the Security Agreement;
(f) Liens arising out of any judgment or award  against the Company,  so long as
such  judgment  shall,  within  60 days  after  the  entry  thereof,  have  been
discharged or vacated,  or execution thereof stayed pending appeal or shall have
been discharged, vacated or reversed within 60 days after the expiration of such
stay, and so long as during any such 60 day period there is not as a result,  or
any such  judgment or award does not  involve,  any  material  risk of the sale,
forfeiture or loss of the Pledged Spare Parts or the interest of Security  Agent
therein or any impairment of the Lien of the Security  Agreement;  (g) any other
Lien  with  respect  to which the  Company  shall  have  provided  a bond,  cash
collateral  or other  security  adequate in the  reasonable  opinion of Security
Agent.

     "PERSON" means any individual, corporation,  partnership, limited liability
company,  joint  venture,  association,  joint-stock  company,  trust,  trustee,
unincorporated  organization,  government or any agency or political subdivision
thereof or any other entity.

     "PLEDGED  SPARE PARTS" has the meaning set forth in clause (1) of the first
paragraph of Section 2.01 of the Security Agreement.

     "POLICY"  means MBIA Insurance  Corporation  Financial  Guaranty  Insurance
Policy No. 39753,  issued as of the Closing Date,  as amended,  supplemented  or
otherwise modified from time to time in accordance with its respective terms.

     "POLICY  ACCOUNT"  means the Eligible  Deposit  Account  established by the
Trustee  pursuant to Section  8.13(a) of the  Indenture  which the Trustee shall
make deposits in and withdrawals from in accordance with the Indenture.

<PAGE>

     "POLICY DRAWING" means any payment of a claim under the Policy.

     "POLICY  ELECTION  DISTRIBUTION  DATE" is defined in Section  3.6(c) of the
Indenture.

     "POLICY  EXPENSES"  means all  amounts  (including  amounts  in  respect of
premiums,  fees,  expenses or indemnities)  due to the Policy Provider under the
Policy Provider  Agreement other than (i) any Policy Drawing,  (ii) any interest
accrued on any  Policy  Provider  Obligations,  and (iii)  reimbursement  of and
interest on the Liquidity  Obligations in respect of the Liquidity Facility paid
by the Policy Provider to the Liquidity Provider;  provided that if, at the time
of  determination,  a Policy Provider Default exists,  Policy Expenses shall not
include any indemnity payments owed to the Policy Provider.

     "POLICY FEE LETTER" means the fee letter, dated as of the date hereof, from
the Policy  Provider to Continental  and  acknowledged  by the Trustee,  setting
forth the fees and premiums payable with respect to the Policy.

     "POLICY  PROVIDER" means MBIA Insurance  Corporation,  a New York insurance
company, and its successors and permitted assigns.

     "POLICY  PROVIDER  AGREEMENT"  means the Insurance and Indemnity  Agreement
dated as of the date  hereof  among the  Trustee,  the  Company  and the  Policy
Provider,  as amended,  supplemented or otherwise  modified from time to time in
accordance with its terms.

     "POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following
events:  (a) the  Policy  Provider  fails to make a payment  required  under the
Policy in accordance with its terms and such failure remains  unremedied for two
Business Days  following  the delivery of Written  Notice of such failure to the
Policy  Provider or (b) the Policy  Provider (i) files any petition or commences
any case or proceeding under any provisions of any federal or state law relating
to insolvency, bankruptcy,  rehabilitation,  liquidation or reorganization, (ii)
makes a general  assignment  for the  benefit of its  creditors  or (iii) has an
order for relief  entered  against it under any federal or state law relating to
insolvency,  bankruptcy,  rehabilitation,  liquidation or reorganization that is
final and nonappealable,  or (c) a court of competent jurisdiction, the New York
Department of Insurance or another competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Policy Provider or for all or any material  portion of
its  property  or (ii)  authorizing  the taking of  possession  by a  custodian,
trustee,  agent or receiver of the Policy  Provider (or taking of  possession of
all or any material portion of the Policy Provider's property).

     "POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture.

     "POLICY  PROVIDER  INTEREST  OBLIGATIONS"  means any interest on any Policy
Drawing made to cover any shortfall attributable to any failure of the Liquidity
Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the
Liquidity  Facility in an amount equal to the amount of interest that would have
accrued on such  Interest  Drawing  if such  Interest  Drawing  had been made in
accordance with Section  2.02(e) of the Liquidity  Facility at the interest rate
applicable to such Interest Drawing until such Policy Drawing has been repaid in
full.

<PAGE>

     "POLICY PROVIDER  OBLIGATIONS"  means all  reimbursement and other amounts,
including,  without limitation, fees and indemnities (to the extent not included
in Policy  Expenses),  due to the  Policy  Provider  under the  Policy  Provider
Agreement  but shall not include  any  interest  on Policy  Drawings  other than
Policy Provider Interest Obligations.

     "PREMIUM" means,  with respect to any Security redeemed pursuant to Article
4 of the  Indenture,  the following  percentage of the principal  amount of such
Security:  (i) if redeemed  before the first  anniversary  of the Issuance Date,
1.5%; (ii) if redeemed on or after such first  anniversary and before the second
anniversary of the Issuance  Date,  1.0%; and (iii) if redeemed on or after such
second  anniversary and before the third anniversary of the Issuance Date, 0.5%;
PROVIDED that no Premium shall be payable in connection  with a redemption  made
by the Company to satisfy the Maximum  Collateral Ratio or Minimum Rotable Ratio
requirement pursuant to Section 3.1 of the Collateral Maintenance Agreement.

     "PRIOR FUNDS" means, on any  Distribution  Date, any Drawing paid under the
Liquidity  Facility on such  Distribution  Date and any funds withdrawn from the
Cash Collateral Account on such Distribution Date in respect of accrued interest
on the Securities.

     "PROCEEDS   DEFICIENCY  DRAWING"  is  defined  in  Section  3.6(b)  of  the
Indenture.

     "PROPELLER" includes a part, appurtenance, and accessory of a propeller.

     "PROVIDER  INCUMBENCY  CERTIFICATE"  is defined  in  Section  3.7(b) of the
Indenture.

     "PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.

     "PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by
and between the Initial Purchaser and the Company.

     "QIB" means a qualified institutional buyer as defined in Rule 144A.

     "QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first
paragraph in Section 2.01 of the Security Agreement.

     "RATING  AGENCIES"  means,  collectively,  at  any  time,  each  nationally
recognized  rating agency which shall have been requested by the Company to rate
the Securities and which shall then be rating the Securities. The initial Rating
Agency will be Moody's.

     "RATINGS  CONFIRMATION"  means,  with respect to any action  proposed to be
taken, a written  confirmation from each of the Rating Agencies that such action
would not result in (i) a reduction of the rating for the  Securities  below the
then current rating for the Securities (such rating as determined without regard
to the  Policy)  or  (ii) a  withdrawal  or  suspension  of  the  rating  of the
Securities.

     "RECORD  DATE"  means the  fifteenth  (15th) day  preceding  any  Scheduled
Interest Payment Date, whether or not a Business Day.

<PAGE>

     "REDEMPTION  DATE",  when used with respect to any Security to be redeemed,
means the date fixed for such  redemption  by or pursuant to the  Indenture  and
such Security.

     "REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as
of the Issuance Date, among the Company, WTC, as the reference agent thereunder,
and the Trustee.

     "REGISTER" has the meaning provided in Section 2.8 of the Indenture.

     "REGISTRAR" has the meaning provided in Section 2.8 of the Indenture.

     "REGISTRATION  RIGHTS  AGREEMENT" means the  Registration  Rights Agreement
dated as of  December  6, 2002,  by and  between  the  Company  and the  Initial
Purchaser.

     "REGULATION S" means Regulation S under the Securities Act.

     "REGULATION S DEFINITIVE  SECURITIES"  is defined in Section  2.1(e) of the
Indenture.

     "REGULATION  S  GLOBAL  SECURITY"  is  defined  in  Section  2.1(d)  of the
Indenture.

     "RELEVANT DATE" is defined in Section 3.6(c) of the Indenture.

     "REPLACEMENT  LIQUIDITY  FACILITY"  means an irrevocable  revolving  credit
agreement (or agreements) in  substantially  the form of the replaced  Liquidity
Facility,  including reinstatement  provisions, or in such other form (which may
include a letter of credit) as shall  permit the Rating  Agencies  to confirm in
writing  their  respective  ratings  then in effect for the  Securities  (before
downgrading  of such  ratings,  if any,  as a result of the  downgrading  of the
Liquidity Provider),  and be consented to by the Policy Provider,  which consent
shall not be  unreasonably  withheld  or  delayed,  in a face  amount  (or in an
aggregate face amount) equal to the amount of interest payable on the Securities
(at the Capped  Interest Rate, and without regard to expected  future  principal
payments) on the eight Interest  Payment Dates following the date of replacement
of such Liquidity Facility (or if such date is an Interest Payment Date, on such
day and the seven  Interest  Payment Dates  following the date of replacement of
such Liquidity  Facility) and issued by a Person (or Persons)  having  unsecured
short-term  debt rating or issuer credit  rating,  as the case may be, issued by
the Rating  Agencies  which are equal to or higher  than the  Threshold  Rating.
Without  limitation of the form that a Replacement  Liquidity Facility otherwise
may have pursuant to the preceding  sentence,  a Replacement  Liquidity Facility
for the Securities may have a stated  expiration date earlier than 15 days after
the Final Legal  Maturity Date so long as such  Replacement  Liquidity  Facility
provides for a  Non-Extension  Drawing as  contemplated by Section 3.5(d) of the
Indenture.

     "REQUEST" means a written request for the action therein  specified  signed
on behalf of the Company by any  Officer  and  delivered  to the  Trustee.  Each
Request shall be  accompanied  by an Officers'  Certificate if and to the extent
required by Section 12.4 of the Indenture.

     "REQUIRED  AMOUNT" means,  for any day, the sum of the aggregate  amount of
interest,  calculated at the Capped  Interest Rate, that would be payable on the
Securities on each of the eight successive  Interest  Payment Dates  immediately
following such day or, if such day is an Interest  Payment Date, on such day and
the succeeding  seven Interest  Payment  Dates,  in each case  calculated on the

<PAGE>

basis of the  outstanding  principal  amount of the  Securities on such date and
without regard to expected future payments of principal on the Securities.

     "REQUIRED  HOLDERS" means from time to time the Holders of more than 50% in
aggregate unpaid principal amount of the Securities then Outstanding.

     "RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in
the  corporate  trust  administration  department  of the  Trustee  or any other
officer  customarily  performing  functions  similar to those  performed  by the
Persons who at the time shall be such  officers or to whom any  corporate  trust
matter is referred  because of his or her  knowledge of and  familiarity  with a
particular subject, (ii) with respect to the Liquidity Provider,  any authorized
officer  of the  Liquidity  Provider,  and  (iii)  with  respect  to the  Policy
Provider, any authorized officer of the Policy Provider.

     "RESTRICTED  DEFINITIVE  SECURITIES"  is defined  in Section  2.1(e) of the
Indenture.

     "RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture.

     "RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture.

     "RESTRICTED PERIOD" is defined in Section 2.1(d) of the Indenture.

     "RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture.

     "ROTABLE"  means a  Qualified  Spare  Part that  wears over time and can be
repeatedly restored to a serviceable  condition over a period  approximating the
life of the flight equipment to which it relates.

     "ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair
Market  Value of the  Rotables,  as set  forth in the  most  recent  Independent
Appraiser's  Certificate  delivered by the Company  pursuant to Article 2 of the
Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the
Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal
amount of all Securities  Outstanding  minus the sum of the Cash Collateral held
by the Collateral Agent.

     "RULE 144A" means Rule 144A under the Securities Act.

     "SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement.

     "SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without
giving effect to the proviso to the definition of Interest Payment Date.

     "SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest,
the Interest Payment Date applicable  thereto,  (ii) with respect to any payment
of defaulted  interest,  the payment date established  pursuant to Section 2.16,
(iii)  with  respect to  amounts  due on the  redemption  of any  Security,  the
Redemption Date applicable thereto,  and (iv) with respect to the final maturity
of the Securities, December 6, 2007.

<PAGE>

     "SEC" means the  Securities  and  Exchange  Commission  and any  government
agency succeeding to its functions.

     "SECTION 1110" means Section 1110 of the Bankruptcy Code.

     "SECTION 1110 PERIOD" means the continuous  period of (i) 60 days specified
in Section  1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any,
agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional
period,  if any,  commencing  with the trustee or  debtor-in-possession  in such
proceeding agreeing,  with court approval,  to perform its obligations under the
Operative  Documents  within  such 60 days (or  longer  period  as  agreed)  and
continuing  until such time as such  trustee or  debtor-in-possession  ceases to
fully perform its obligations  thereunder with the result that the period during
which the Collateral Agent is prohibited from  repossessing the collateral under
any Collateral Agreement comes to an end.

     "SECURITIES" means the "Securities",  as defined in the Indenture, that are
issued under the Indenture.

     "SECURITIES  ACT" means the Securities Act of 1933, as amended from time to
time.

     "SECURITY AGENT" means the Trustee acting in the capacity of security agent
on behalf of the Holders under the Security Agreement.

     "SECURITY  AGREEMENT" means the Spare Parts Security  Agreement dated as of
the date of the Indenture between the Company and the Security Agent.

     "SECURITYHOLDER" means any holder of one or more Securities.

     "SEMIANNUAL  METHODOLOGY" means the Annual  Methodology,  excluding actions
referred to in clauses (iii) and (iv) of the definition of Annual Methodology.

     "SEMIANNUAL  VALUATION  DATE" is defined in Section  2.2 of the  Collateral
Maintenance Agreement.

     "SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for
incorporation  in,  installation on,  attachment or appurtenance to or use in an
Aircraft, Engine or other Qualified Spare Part.

     "SHELF REGISTRATION STATEMENT" means the shelf registration statement which
may be  required  to be  filed  by the  Company  with  the SEC  pursuant  to the
Registration  Rights  Agreement,  other  than  an  Exchange  Offer  Registration
Statement.

     "SPARE  PART"  means an  accessory,  appurtenance,  or part of an  Aircraft
(except an Engine or  Propeller),  Engine  (except a Propeller),  Propeller,  or
Appliance,  that is to be  installed  at a later  time in an  Aircraft,  Engine,
Propeller or Appliance.

     "SPARE PARTS  COLLATERAL" has the meaning  specified in Section 2.01 of the
Security Agreement.

<PAGE>

     "SPARE  PARTS  DOCUMENTS"  has the  meaning  set forth in clause (6) of the
first paragraph of Section 2.01 of the Security Agreement.

     "SPECIAL  DEFAULT"  means a Payment  Default  or a  Continental  Bankruptcy
Event.

     "SPECIAL  RECORD  DATE" has the  meaning  provided  in Section  2.10 of the
Indenture.

     "SPECIAL  VALUATION  DATE" is  defined  in  Section  2.4 of the  Collateral
Maintenance Agreement.

     "STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.

     "STATED  AMOUNT" means the Maximum  Commitment (as defined in the Liquidity
Facility).

     "STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture.

     "SUBORDINATED SECURITIES" is defined in Section 2.18 of the Indenture.

     "SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture.

     "SUPPLEMENTAL  SECURITY  AGREEMENT"  means  a  supplement  to the  Security
Agreement substantially in the form of Exhibit A to the Security Agreement.

     "SUPPORT  DOCUMENTS" means the Liquidity  Facility,  the Policy, the Policy
Provider Agreement and the Fee Letters.

     "TAX" and "TAXES" mean any and all taxes,  fees, levies,  duties,  tariffs,
imposts,  and other  charges of any kind  (together  with any and all  interest,
penalties,  loss, damage,  liability,  expense,  additions to tax and additional
amounts or costs incurred or imposed with respect  thereto) imposed or otherwise
assessed  by the United  States of  America  or by any  state,  local or foreign
government  (or any  subdivision or agency  thereof) or other taxing  authority,
including,  without  limitation:  taxes or other  charges on or with  respect to
income, franchises,  windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment  compensation,  or net worth and  similar  charges;  taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added,  taxes on goods and  services,  gains taxes,  license,  registration  and
documentation fees, customs duties, tariffs, and similar charges.

     "TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity
Facility.

     "THRESHOLD AMOUNT" means $2,000,000.

     "THRESHOLD  RATING" means the  short-term  unsecured  debt rating of P-1 by
Moody's  and A-1 by  Standard  & Poor's;  PROVIDED  that so long as the  initial
Liquidity Provider is the Liquidity  Provider,  the Threshold Rating shall apply
to the Liquidity Guarantor.

<PAGE>

     "TIA"  means  the  Trust  Indenture  Act  of  1939  (15  U.S.  Code  ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that
in the event the TIA is  amended  after such date,  "TIA"  means,  to the extent
required by any such amendment, the TIA as so amended.

     "TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture.

     "TRUST OFFICER" means any officer in the corporate trust  department of the
Trustee,  or any other officer or assistant  officer of the Trustee  assigned by
the Trustee to administer its corporate trust matters.

     "TRUSTEE"  means the party named as such in the Indenture until a successor
replaces it in accordance  with the  provisions of the Indenture and  thereafter
means the successor.

     "TRUSTEE  INCUMBENCY  CERTIFICATE"  is  defined  in  Section  3.7(a) of the
Indenture.

     "TRUSTEE   PROVISIONS"   is  defined  in  Section  4.1  of  the  Collateral
Maintenance Agreement.

     "TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture.

     "UCC"  means the  Uniform  Commercial  Code as in effect in any  applicable
jurisdiction.

     "UNAPPLIED   PROVIDER  ADVANCE"  is  defined  in  the  Liquidity  Facility.

     "UNSERVICEABLE  PARTS" means Pledged  Spare Parts that are not  Serviceable
Parts.

     "U.S." or "UNITED STATES" means the United States of America.

     "U.S. AIR CARRIER" means any United States air carrier that is a Citizen of
the United States holding an air carrier operating  certificate  issued pursuant
to chapter  447 of title 49 of the United  States Code for  aircraft  capable of
carrying 10 or more individuals or 6000 pounds or more of cargo.

     "U.S. GOVERNMENT" means the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.

     "U.S.  GOVERNMENT  OBLIGATIONS"  means direct  obligations (or certificates
representing an ownership  interest in such obligations) of the United States of
America  (including  any agency or  instrumentality  thereof) for the payment of
which the full faith and credit of the United  States of America is pledged  and
which are not callable at the option of the issuer thereof.

     "U.S.  PERSON"  means any Person  described in Section  7701(a)(30)  of the
Code.

     "VALUATION  DATES" is defined in Section 2.4 of the Collateral  Maintenance
Agreement.

     "WARRANTIES"  is  defined in clause  (2) of  Section  2.01 of the  Security
Agreement.

     "WRITTEN  NOTICE" means,  from the Trustee,  the Liquidity  Provider or the
Policy Provider, a written instrument executed by the Designated  Representative

<PAGE>

of such Person.  An invoice  delivered  by the  Liquidity  Provider  pursuant to
Section 3.1 of the Indenture in accordance with its normal invoicing  procedures
shall constitute Written Notice under such Section.

     "WTC" has the meaning specified in the first paragraph of the Indenture.

SECTION 2. RULES OF CONSTRUCTION.  Unless the context  otherwise  requires,  the
following  rules of  construction  shall apply for all purposes of the Operative
Documents  (including  this appendix) and of such  agreements as may incorporate
this appendix by reference.

          (a) In each Operative Document, unless otherwise expressly provided, a
reference to:

     (i)   each of the Company,  the Trustee, the Collateral Agent, the Security
           Agent  or  any  other  person  includes,  without  prejudice  to  the
           provisions of any Operative Document, any successor in interest to it
           and  any  permitted  transferee,  permitted  purchaser  or  permitted
           assignee of it;

     (ii)  words  importing the plural include the singular and words  importing
           the singular include the plural;

     (iii) any  agreement,  instrument  or document,  or any annex,  schedule or
           exhibit  thereto,  or  any  other  part  thereof,  includes,  without
           prejudice  to  the  provisions  of  any  Operative   Document,   that
           agreement,  instrument or document, or annex, schedule or exhibit, or
           part, respectively, as amended, modified or supplemented from time to
           time  in  accordance  with  its  terms  and in  accordance  with  the
           Operative  Documents,  and  any  agreement,  instrument  or  document
           entered into in substitution or replacement therefor;

     (iv)  any  provision  of any Law  includes  any such  provision as amended,
           modified, supplemented,  substituted,  reissued or reenacted prior to
           the Closing Date, and thereafter from time to time;

     (v)   the  words  "Agreement",   "this  Agreement",   "hereby",   "herein",
           "hereto",  "hereof" and  "hereunder" and words of similar import when
           used in any Operative  Document refer to such Operative Document as a
           whole and not to any particular provision of such Operative Document;

     (vi)  the words "including",  "including, without limitation",  "including,
           but not limited to", and terms or phrases of similar import when used
           in any Operative Document,  with respect to any matter or thing, mean
           including, without limitation, such matter or thing; and

     (vii) a "Section",  an "Exhibit", an "Annex", an "Appendix" or a "Schedule"
           in any Operative Document, or in any annex thereto, is a reference to
           a section of, or an exhibit,  an annex, an appendix or a schedule to,
           such Operative Document or such annex, respectively.

<PAGE>

          (b) Each  exhibit,  annex,  appendix  and  schedule to each  Operative
Document is incorporated in, and shall be deemed to be a part of, such Operative
Document.

          (c) Unless otherwise  defined or specified in any Operative  Document,
all   accounting   terms  therein   shall  be  construed   and  all   accounting
determinations thereunder shall be made in accordance with GAAP.

          (d) Headings used in any Operative  Document are for convenience  only
and  shall  not  in any  way  affect  the  construction  of,  or be  taken  into
consideration in interpreting, such Operative Document.

          (e) For  purposes  of each  Operative  Document,  the  occurrence  and
continuance of a Default or Event of Default referred to in Section 7.1(d),  (e)
or (f) of the Indenture  shall not be deemed to prohibit the Company from taking
any action or exercising any right that is  conditioned  on no Special  Default,
Default or Event of Default  having  occurred and be  continuing if such Special
Default,   Default  or  Event  of  Default   consists  of  the   institution  of
reorganization  proceedings  with respect to the Company under Chapter 11 of the
Bankruptcy  Code and the  trustee or  debtor-in-possession  in such  proceedings
shall have agreed to perform its obligations under the Operative  Documents with
the approval of the  applicable  court and  thereafter  shall have  continued to
perform such obligations in accordance with Section 1110.

<PAGE>


                                                              Appendix II to the
                                                Collateral Maintenance Agreement




[Address to Policy Provider and
to the Trustee]

                APPRAISAL COMPLIANCE REPORT UNDER THE COLLATERAL
                              MAINTENANCE AGREEMENT

Ladies and Gentlemen:

     We refer to the Collateral Maintenance Agreement, dated as of December 6,
2002, between Continental Airlines, Inc. (the "COMPANY") and MBIA Insurance
Corporation (the "AGREEMENT"). Terms defined in the Agreement and used herein
have such respective defined meanings. The Company hereby certifies that:

1.   This Compliance Report is accompanied by an Independent Appraiser's
     Certificate (the "RELEVANT APPRAISAL") dated [___________]. The Valuation
     Date for purposes of the Relevant Appraisal was [___________] (the
     "RELEVANT VALUATION DATE").

2.   The following sets forth the calculation of the Collateral Ratio as of the
     Relevant Valuation Date:


                a.    The aggregate principal amount of all
                      Securities Outstanding as of the
                      Relevant Valuation Date                   $[_______]

                b.    The Fair Market Value of the Cash
                      Collateral as of the Relevant Valuation
                      Date                                      $[_______]

                c.    The Fair Market Value of the Collateral
                      (excluding Cash Collateral) as of the
                      Relevant Valuation Date, as set forth
                      in the accompanying Independent
                      Appraiser's Certificate                   $[_______]

                d.    The Collateral Ratio
                      ((a - b) / c)                              [_______]%


<PAGE>

3.   The following sets forth the calculation of the Rotable Ratio as of the
     Relevant Valuation Date:


                 a.    The Fair Market Value of the Rotables
                       as of the Relevant Valuation Date, as
                       set forth in the accompanying
                       Independent Appraiser's Certificate       $[_______]

                 b.    The aggregate principal amount of all
                       Securities Outstanding as of the
                       Relevant Valuation Date                   $[_______]

                 c.    The Fair Market Value of the Cash
                       Collateral as of the Relevant Valuation
                       Date                                      $[_______]

                 d.    The Rotable Ratio
                       (a / b - c)                                [_______]%

4.   The Continental Cash Balance as of the Relevant Valuation Date was
     $[___________].


Dated:  [__________]


                                          Very truly yours,


                                          CONTINENTAL AIRLINES, INC.


                                          By:
                                             --------------------------------
                                             Name:
                                             Title:



<PAGE>


                                                             Appendix III to the
                                                Collateral Maintenance Agreement




[Address to Policy Provider and
to the Trustee]

               NONAPPRAISAL COMPLIANCE REPORT UNDER THE COLLATERAL
                              MAINTENANCE AGREEMENT

Ladies and Gentlemen:

     We refer to the Collateral Maintenance Agreement, dated as of December 6,
2002, between Continental Airlines, Inc. (the "COMPANY") and MBIA Insurance
Corporation (the "AGREEMENT"). Terms defined in the Agreement and used herein
have such respective defined meanings. The Company hereby certifies that:

1.   The most recent Independent Appraiser's Certificate furnished by the
     Company (the "RELEVANT APPRAISAL") [was dated October 31, 2002] [pursuant
     to Article 2 of the Agreement was dated [______________] (the "RELEVANT
     DATE").] The Valuation Date for purposes of the Relevant Appraisal was
     [___________] (the "RELEVANT VALUATION DATE").

2.   The aggregate Appraised Value of all Collateral determined as of the
     Relevant Valuation Date pursuant to the Agreement [, as subsequently
     supplemented pursuant to Section 3.1 of the Agreement,] is $[________].

3.   During the period (the "RELEVANT  PERIOD")  beginning on the [Closing Date]
     [Relevant Date] and ending on [_______] (the "DETERMINATION DATE").

     i)   Sales did not exceed 2% of the Appraised Value of the Collateral, and

     ii)  Moves did not exceed 2% of the Appraised Value of the Collateral.

4.   Loans outstanding on the Determination Date did not exceed 2% of the
     Appraised Value of the Collateral.

5.   Attached hereto as Exhibit 1 is a report that correctly sets forth as of
     the Determination Date the percentage of the average cost of all Pledged
     Spare Parts consisting of Rotables, Expendables and all Pledged Spare Parts
     located at each Company facility.

6.   Attached hereto as Exhibit 2 is a report that correctly sets forth the
     following information as of the Determination Date with respect to each
     Pledged Spare Part model among the 500 Pledged Spare Part models with the
     highest aggregate Appraised Value:

     i)   Manufacturer's part number;

     ii)  the Company's part tracking number;

     iii) part description;

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     iv)  related aircraft model(s);

     v)   classification as Rotable or Expendable;

     vi)  quantity on hand; and

     vii) the Company's average cost.


                                          Very truly yours,


                                          CONTINENTAL AIRLINES, INC.


                                          By:
                                             --------------------------------
                                             Name:
                                             Title:



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                                                              Appendix IV to the
                                                Collateral Maintenance Agreement


                                    INSURANCE

           [OMITTED AS CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]