<PAGE>

                                                                   Exhibit 10.69

         RECORDED

Federal Aviation Administration                           DUPLICATE ORIGINAL
Date 12/17/96    Time 9:09 AM
Conveyance Number LL 12114
By /s/ [ILLEGIBLE]
   ----------------------------
       Conveyances Examiner



                            AIRCRAFT LEASE AGREEMENT

                                   dated as of

                                December 13, 1996

                                     between

                                 BANK OF HAWAII,

                                                 LESSOR

                                       and

                              ALOHA AIRLINES, INC.,

                                                 LESSEE


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                            AIRCRAFT LEASE AGREEMENT



                  THIS AIRCRAFT LEASE AGREEMENT, made as of this 13th day of
December, 1996 (the "Lease"), by and between BANK OF HAWAII, a banking
corporation formed under the laws of Hawaii ("LESSOR"), and ALOHA AIRLINES,
INC. a corporation formed under the laws of Hawaii ("LESSEE").

                  WHEREAS, LESSEE desires to lease the Aircraft (as hereinafter
defined) from LESSOR and LESSOR is willing to lease the Aircraft to LESSEE, in
accordance with and subject to the terms and conditions of this Lease.

                  NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which is acknowledged by the parties hereto, LESSOR
and LESSEE agree as follows:

                                    SECTION 1

                                   DEFINITIONS

                  The following terms shall have the following respective
meanings for all purposes of this Lease and shall be equally applicable to
both the singular and the plural forms of the terms herein defined. Any
agreement referred to below shall mean such agreement, as amended,
supplemented and modified from time to time:

                  "ACQUISITION COST" means (i) LESSOR's cost to purchase the
Aircraft, plus (ii) all sales and excise taxes paid by LESSOR on, or with
respect to the acquisition of the Aircraft, plus (iii) all costs and expenses
approved and paid by LESSOR in connection with the delivery of the Aircraft.

                  "ACT" shall mean Subtitle VII of Title 49 of the United States
Code and the rules and regulations promulgated thereunder, as amended from
time to time.

                  "AFFILIATE" shall mean, with respect to any Person, any other
Person which, directly or indirectly, controls or is controlled by or is under
common control with such Person.

                  "AGREED VALUE" with respect to war risks and all risks
insurance shall mean Twelve Million (US$12,000,000) Dollars with respect to
the hull (including all engines installed thereon).

                  "AIRGROUP" shall mean Aloha Airgroup, Inc., a corporation
formed under the laws of Hawaii.

                  "AIR AUTHORITY" shall mean the United States Federal Aviation
Administration, or any predecessor or successor thereto


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                                                                           2

having jurisdiction over the registration, use, operation and maintenance of
the Aircraft.

                  "AIR CARRIER" shall mean a citizen of the United States (as
defined in 40102 of Title 49 of the United States Code) holding an air carrier
operating certificate issued by the Secretary of Transportation of the United
States pursuant to chapter 447 of Title 49 of the United States Code for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of
cargo.

                  "AIRCRAFT" shall mean the Airframe, together with the two (2)
Engines (or any Replacement Engine substituted for either of such Engines
hereunder), all as more particularly described on Exhibit "A" hereto, whether
or not any of such initial or Replacement Engines may, from time to time, be
installed on such Airframe or may be installed on any other airframe or any
other aircraft.

                  "AIRCRAFT DOCUMENTS" shall mean the items identified in
Exhibit "B" hereto.

                  "AIRFRAME" means (i) the Boeing model 737-230ADV aircraft
(excluding Engines or engines from time to time installed thereon), bearing
United States registration no. N823AL and manufacturer's serial no. 23154, and
(ii) any and all Parts, so long as the same shall be incorporated in such
Airframe, and any and all Parts removed from such Airframe, so long as title
to such Parts shall remain vested in LESSOR in accordance with the terms of
Section 8(A).

                  "APPROVED INSURER" shall mean any reputable and financially
sound insurance company or insurance broker, in the U.S., London, French,
German or Japanese insurance markets, that provides or confirms the existence
of any insurance required under this Lease.

                  "AUTHORIZED MAINTENANCE PERFORMER" shall mean LESSEE, Air New
Zealand (Christ Church), Sabre Tech (Arizona), Pemco (Alabama), Tramco
(Washington), Evergreen Air Center, Inc. (Arizona), Mobile Aerospace
(Alabama), Greenwich Air Services (Florida), TIMCO (North Carolina) or such
other FAA certified maintenance performer of comparable quality and reputation
to that of any of the above listed entities, and which is approved in advance
by Lessor.

                  "BASE TERM" means the period commencing on the Effective Date
and expiring on the Expiration Date.

                  "BASE RATE" shall mean, at any time, the primary index rate
(the "Index Rate") established by the Bank of Hawaii from time to time in good
faith in the ordinary course of its business and with due consideration of the
money market, and published by intrabank circular letters or memoranda for the
guidance of its loan officers in pricing all of the Bank of Hawaii's loans in
respect of which the interest rate floats with or above the Base Rate;
provided that if the Index Rate is discontinued and replaced by a comparable
rate, the comparable rate shall be substituted in


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                                                                           3

place of the discontinued Index Rate.

                  "BASIC RENT" shall mean One Hundred Thirty Two
Thousand(US$132,000) Dollars per month during the Base Term.

                  "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or day on which banks are required or authorized to close in Honolulu,
Hawaii.

                  "CAPITAL LEASE" shall mean any lease of any property (whether
real, personal or mixed) which, in conformity with generally accepted
accounting principles, is or should be accounted for as a Capital Lease on a
balance sheet.

                  "CASH FLOW" shall mean LESSEE's net cash provided by operating
activities, as determined in accordance with generally accepted accounting
principles, consistently applied, adjusted for interest paid during such
period, calculated on a rolling twelve month basis and computed at the end of
each calendar quarter, with the first computation being made as of the
calendar quarter ending March 31, 1997.

                  "CERTIFICATE OF ACCEPTANCE" shall mean the written certificate
of LESSEE, in substantially the form of Exhibit "C" hereto, pursuant to which
LESSEE accepts delivery of the Aircraft and confirms that the Aircraft is in
the condition required by this Lease.

                  "CODE" means the Internal Revenue Code of 1986, as amended and
  as may hereafter be amended, and the rules and regulations promulgated
  pursuant thereto.

                  "COMPENSATION" shall have the meaning set forth in Section
12(D).

                  "COMPONENT INVENTORY" shall have the meaning set forth in
Section 3(D) hereof.

                  "COVERED MAINTENANCE" shall have the meaning set forth in
Section 7(D)(iii) hereof.

                  "CYCLE" shall mean one takeoff and landing of the Aircraft.

                  "DEBT SERVICE" shall mean the sum of regularly scheduled
principal payments, interest payments and payments under Capital Leases made
by LESSEE, calculated on a rolling twelve months basis and computed at the end
of each calendar quarter, with the first computation being made as of the
calendar quarter ending March 31, 1997.

                  "DEFAULT" shall mean an event which, with the lapse of time,
the giving of notice, or both, would constitute an Event of Default.


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                                                                           4

                  "DELIVERY LOCATION" shall mean Frankfurt, Germany.

                  "DOLLARS" or "$" shall mean the legal currency of the United
States of America.

                 "DOT" shall mean the United States Department of Transportation
or any governmental person, agency or authority succeeding to the functions of
such Department of Transportation.

                  "EFFECTIVE DATE" shall mean the date on which LESSEE signs and
delivers to LESSOR Lease Supplement No. 1 to this Lease.

                 "ENGINE" means (i) on the Effective Date, each of the two (2)
Pratt & Whitney model JT8D-15 engines, bearing manufacturer's serial nos.
687358 and 702982, respectively, whether or not from time to time installed on
the Airframe or installed on any other airframe or any other aircraft, (ii)
within six (6) months of the Effective Date, each of the two (2) Pratt &
Whitney model JT8D-9A engines identified on a Lease Supplement to this Lease,
whether or not from time to time installed on the Airframe or installed on any
other airframe or any other aircraft, and (iii) any Replacement Engine, whether
or not from time to time installed on the Airframe or any other airframe or any
other aircraft, together, in each case, with any and all Parts incorporated in
such Engine and any and all Parts removed from such Engine, so long as title to
such Parts shall remain vested in LESSOR in accordance with the terms of
Section 8(A). At such time as a Replacement Engine shall be substituted
hereunder and the Engine for which the substitution is made shall be released,
such Replacement Engine shall constitute an Engine hereunder and such replaced
Engine shall cease to be an Engine hereunder. The term "Engines" means, as of
any date of determination, all Engines leased hereunder.

                 "ENGINE MANUFACTURER" means United Technologies Corporation,
Pratt & Whitney Group, Commercial Products Division, a Delaware corporation, in
its capacity as manufacturer of the Engines, and its successors and assigns.

                  "EQUIPMENT CHANGE" shall have the meaning set forth in Section
8(C) hereof.

                  "EVENT OF DEFAULT" shall have the meaning set forth in Section
18 hereof.

                 "EVENT OF LOSS" shall mean, with respect to the Aircraft,
Airframe or any Engine, any of the following events with respect to such
property: (i) loss of such property due to destruction, damage beyond repair or
rendition of such property unfit for normal use by LESSEE by any cause
whatsoever, or any damage to such property which results in an insurance
settlement with respect to such property on the basis of a total loss or a
constructive total loss or a compromised total loss; (ii) the disappearance,
loss, theft, hijacking or condemnation, of such property for a period in excess
of thirty (30) consecutive days; (iii) the confiscation or seizure of, or
requisition of use or title of such property for a period in excess of sixty
(60) consecutive days; or (iv) any


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                                                                           5

divestiture of title to an Engine treated as an Event of Loss pursuant to
Section 12(B) or any other provision hereof. An Event of Loss with respect to
the Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe which constitutes a part of the Aircraft.

                  "EXPIRATION DATE" shall mean Dec. 12, 2004.

                   "FAA" shall mean the Federal Aviation Administration of the
DOT or any governmental person, agency or other authority succeeding to some
or all of the functions of the Federal Aviation Administration.

                   "FAR" shall mean the United States Federal Aviation
Regulations currently in effect or as hereafter amended or modified.

                  "FIXED CHARGES COVERAGE RATIO" shall mean Cash Flow divided by
Debt Service.

                   "FLIGHT HOUR" shall mean each hour or fraction thereof
elapsed from the moment the wheels of the Aircraft leave the ground through
the moment the wheels of the Aircraft touch down upon the ground.

                   "GOVERNMENTAL ENTITY" shall mean and include: (i) any
national government and any political subdivision thereof or local
jurisdiction therein; (ii) any board, commission, department, division, organ,
instrumentality, court or agency of the foregoing, however constituted; and
(iii) any association, organization or institution of which any of the
foregoing is a member, or to whose jurisdiction any of the foregoing is
subject, or in whose activities any of the foregoing is a participant, but
only to the extent that any such association, organization or institution has
jurisdiction over the Aircraft or its operations.

                   "HUSHKIT" shall mean one (1) shipset of Nordam high gross
weight hushkits installed on the Aircraft on the Effective Date.

                   "INDEMNITEE" means LESSOR, and its respective successors and
permitted assigns and its respective directors, officers, shareholders,
members and employees.

                   "JETZ VENTURES" shall mean Jetz Ventures Inc.

                   "LAW" shall mean and include: (i) any statute, decree,
constitution, regulation, order or other directive of any Governmental Entity;
(ii) any treaty, pact, compact or other agreement to which any Governmental
Entity is a signatory or party; (iii) any judicial or administrative
interpretation or application of any of the foregoing; and (iv) any amendment
or revision of any of the foregoing.

                   "LEASE," "THIS LEASE," "THIS AGREEMENT," "HEREBY," "HEREIN,"
"HEREOF," "HEREUNDER" or other like words shall mean this Aircraft Lease
Agreement, as the same may be supplemented or


<PAGE>

                                                                           6

amended, in writing, from time to time.

                 "LEASE DOCUMENTS" shall mean this Lease, each Lease Supplement,
the Certificate of Acceptance and the Power of Attorney.

                 "LEASE SUPPLEMENT" means a supplement to this Lease,
substantially in the form attached as Exhibit "D" hereto, subjecting the
property described therein to this Lease.

                  "LESSEE'S ADDRESS" shall mean 371 Aokea Street, Honolulu,
Hawaii 96819; Attn.: Senior Vice President and CFO; Telefax No.: 808-833-3100.

                  "LESSOR'S ADDRESS" shall mean 130 Merchant Street, Bancorp
Tower, 19th Floor, Honolulu, Hawaii 96813 Attn.: Janis Okamoto Telefax
808-526-0964.

                 "LESSOR'S LIENS" means the Liens of any Person claiming by,
through or under LESSOR, which arises as a result of (i) claims by or against
any such Person not related to, or expressly permitted by, the Lease, (ii) any
act or omission of any such Person which is not expressly permitted by the
Lease, (iii) taxes or expenses imposed by or against any such Person (or the
consolidated group of taxpayers of which it is a member) for which LESSEE is
not obligated to indemnify pursuant to Section 11, or (iv) claims by or against
any such Person arising out of any transfer by such Person of its interest in
the Aircraft, other than a transfer resulting from LESSOR's exercise of
remedies while an Event of Default has occurred and is continuing pursuant to
Section 19.

                 "LIEN" shall mean any mortgage, pledge, lien, encumbrance,
security interest or other claim affecting the title to, or any interest in,
property.

                 "LUFTHANSA" shall mean Deutsche Lufthansa Aktiengesellschaft.

                 "MAINTENANCE PROGRAM" shall mean LESSEE's FAA approved Part 121
maintenance program or the Air Authority FAR Part 121 approved maintenance
program of an approved sublessee, covering scheduled maintenance,
condition-monitored maintenance and on-condition maintenance of airframe,
engines and components of the Aircraft, including, but not limited to,
servicing, testing, preventive maintenance, repairs, structural inspections,
system checks, overhauls, approved modifications, service bulletins,
engineering orders, airworthiness directives, corrosion control inspections and
treatments.

                 "MANUFACTURER" shall mean The Boeing Company, a Washington
corporation, in its capacity as manufacturer of the Airframe, and its
successors and assigns.

                  "MINIMUM LIABILITY COVERAGE" shall mean Three Hundred Fifty
Million(US$350,000,000) Dollars per occurrence.


<PAGE>

                                                                           7

                  "OFFICER'S CERTIFICATE" shall mean a certificate signed by the
chairman, the president, any vice president, the treasurer, any assistant
treasurer, the secretary or any assistant secretary of the Person providing
such certificate.

                  "OVERDUE RATE" shall mean a floating rate per annum equal to
the Base Rate, plus six percentage points (6%).

                  "PARTS" means all appliances, parts, instruments, avionics,
appurtenances, accessories, furnishings and other equipment or components, of
whatever nature (other than complete Engines) and other than removable Parts,
along with any seats and galleys leased from third parties, which are, from
time to time, incorporated in the Airframe or any Engine, or so long as title
to such Parts shall remain vested in LESSOR, in accordance with Section 8(A)
hereof, after removal from the Airframe or any Engine.

                  "PERMITTED LIENS" shall mean, with respect to the Aircraft,
the Airframe or any Engine (a) the respective rights of the parties under this
Lease and each Lease Supplement; (b) LESSOR's Liens; (c) liens for taxes,
assessments or other governmental charges either not yet due or being contested
in good faith by appropriate proceedings, so long as such proceedings do not
involve any material danger of the sale, forfeiture or loss of the Aircraft,
the Airframe or any Engine and provided that with respect to such liens,
assessments or governmental charges, LESSEE has provided for adequate reserves,
as determined in accordance with generally accepted accounting principles, to
satisfy in full the amount of such lien plus interest and penalties thereon, or
has posted a bond, issued by a bonding or insurance company reasonably
acceptable to LESSOR, and in an amount sufficient to satisfy in full the amount
of such lien plus interest and penalties thereon; (d) materialmen's,
mechanic's, worker's, repairer's, employee's or other like liens for amounts,
the payment of which is either not yet delinquent for more than thirty (30)
days or is being contested in good faith by appropriate proceedings, so long as
such proceedings do not involve any material danger of the sale, forfeiture or
loss of the Aircraft, the Airframe or any Engine and so long as LESSEE has
provided for adequate reserves, as determined in accordance with generally
accepted accounting principles, to satisfy in full the amount of such lien plus
interest and penalties thereon, or has posted a bond, issued by a bonding or
insurance company reasonably acceptable to LESSOR, and in an amount sufficient
to satisfy in full the amount of such lien plus interest and penalties thereon;
(e) liens arising out of any judgment or award, unless the judgment secured
shall not, within thirty (30) days after entry thereof, have been discharged or
vacated or execution thereof stayed pending appeal or shall not have been
discharged, vacated or reversed within thirty (30) days after the execution of
such stay, and provided such lien presents no material danger of the sale,
forfeiture or loss of the Aircraft, the Airframe or any Engine or of LESSOR's
interest therein and so long as LESSEE has provided for adequate reserves, as
determined in accordance with generally accepted accounting principles, to
satisfy in full the amount of such lien plus interest and penalties


<PAGE>

                                                                           8

thereon, or has posted a bond, issued by a bonding or insurance company
reasonably acceptable to LESSOR, and in an amount sufficient to satisfy in
full the amount of such lien plus interest and penalties thereon.

                  "PERSON" shall mean and include any individual, corporation,
limited liability company, partnership, limited liability partnership, firm,
joint venture, trust, unincorporated organization, association, Governmental
Entity, or any organization or association of which any of the foregoing is a
member or participant.

                  "POWER OF ATTORNEY" shall mean that certain power of attorney
from LESSEE to LESSOR, to be executed in the form attached hereto as Exhibit
"E", pursuant to which LESSEE designates LESSOR as attorney-in-fact to do all
things which LESSEE could do under this Lease in the event LESSEE fails to
fulfill any of its obligations hereunder, including but not limited to,
terminating this Lease and LESSEE's interest herein.

                  "RENT" shall mean Basic Rent and Supplemental Rent.

                  "RENT Date" shall mean each date on which a payment of Basic
Rent is due. The first Rent Date shall be the Effective Date and each
subsequent Rent Date shall be the corresponding date in each consecutive month
during the Base Term. If a Rent Date shall in any month not be a Business Day,
then the Rent Date shall be the immediately following Business Day.

                  "REPLACEMENT ENGINE" shall have the meaning set forth in
Section 12(B) hereof.

                  "RETURN LOCATION" shall mean LESSEE's maintenance facilities
in Honolulu, Hawaii or such location in the western continental United States,
as LESSOR shall designate (provided that facilities exist at such location
designated by LESSOR so as to permit the performance of a boroscope inspection
and engine power assurance run), or such other location as LESSOR and LESSEE
shall agree upon. In the event LESSOR directs LESSEE to return the Aircraft in
the western continental United States, LESSOR shall pay LESSEE's ferry costs
(including the cost of fuel, which cost to LESSOR shall be the same cost as
charged to LESSEE at the point of fueling) from Honolulu to such location
(unless the Aircraft is being returned due to the occurrence of an Event of
Default).

                  "RETURN OCCASION" shall have the meaning set forth in Section
17(A) hereof.

                  "SUPPLEMENTAL RENT" shall mean all amounts, liabilities and
obligations (other than Basic Rent) which LESSEE assumes or agrees to pay to
LESSOR or any other Person hereunder, including, without limitation, all
amounts required to be paid by LESSEE under its indemnification pursuant to
Section 14 hereof.

                  "TAXES" shall mean any and all sales, withholding, use,
excise, personal property, ad valorem, value added, stamp, interest


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                                                                           9

equalization, taxes levied upon LESSEE's income, gross levies, customs or
other duties, or other charges of any nature, together with any penalties,
fines or interest thereon imposed, levied or assessed by, or otherwise payable
to, any Governmental Entity. Excluded from this definition shall be (i) any
taxes imposed by any taxing authority within the jurisdiction of the Delivery
Location, (ii) any taxes based on or measured by the gross or net income of
LESSOR or any Indemnitee (including, without limitation, any franchise tax,
any capital gains tax, any minimum or alternative minimum tax and any taxes
measured on or by any items of tax preference), and (iii) the Hawaii Capital
Goods Excise Tax and Hawaii General Excise Tax, or any successor thereto,
assessed by the State of Hawaii on the sale of goods or services.

                                    SECTION 2

                                LEASE OF AIRCRAFT

                  LESSOR hereby agrees to lease the Aircraft to LESSEE and
LESSEE hereby agrees to lease the Aircraft from LESSOR pursuant to the
provisions of this Lease.

                                    SECTION 3

                          DELIVERY AND ACCEPTANCE; TERM

                  (A) DATE OF DELIVERY. LESSEE shall take delivery of the
Aircraft and Aircraft Documents and execute and deliver to Lessor Lease
Supplement No. 1 to this Lease on the Effective Date on not less than five (5)
days' prior written notice from LESSOR to LESSEE.

                  (B) PLACE OF DELIVERY AND ACCEPTANCE. The Aircraft and
Aircraft Documents shall be delivered to and accepted by LESSEE at the
Delivery Location, unless LESSOR and LESSEE otherwise agree in the execution
of this Lease.

                  (C) CASUALTY TO AIRCRAFT PRECEDING DELIVERY. In the event that
an Event of Loss occurs with respect to the Aircraft prior to the Effective
Date hereof, this Lease shall thereupon terminate and neither LESSOR nor
LESSEE shall have any further obligation to the other hereunder.

                  (D) ACCEPTANCE OF AIRCRAFT. The Aircraft to be leased
hereunder shall be delivered to LESSEE in its "AS IS," "WHERE IS" condition,
SUBJECT TO EACH AND EVERY DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET
FORTH IN SUBSECTION 6(A)HEREOF, except that the Aircraft shall comply with
the conditions set forth on Exhibit "F". LESSEE shall indicate and confirm
its acceptance of the Aircraft by delivery to LESSOR of a (i) Lease
Supplement, and (ii) Certificate of Acceptance, dated on the Effective Date.
At or

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                                                                           10

preceding the time of acceptance of the Aircraft, LESSOR shall deliver to
LESSEE a written equipment inventory of the Aircraft, prepared by LESSOR (the
"Component Inventory") or Lufthansa.

                  (E) TERM OF LEASE. The term of this Lease, as to the Aircraft,
shall be for the Base Term.

                                    SECTION 4

                              CONDITIONS PRECEDENT

                  (A) CONDITIONS PRECEDENT TO LESSOR'S OBLIGATIONS. LESSOR's
obligation to lease the Aircraft hereunder to LESSEE shall be subject to the
receipt by LESSOR or the performance or occurrence, on or before the Effective
Date (or such other date as provided for herein), of the following from
LESSEE, all of which shall be satisfactory in form and substance to LESSOR:

                  (1) Certified copy of a resolution of LESSEE's Board of
Directors, certified by an officer of LESSEE, authorizing the entering into
and performance of this Lease together with an incumbency certificate as to
the person or persons authorized to execute and deliver this Lease and the
other Lease Documents on behalf of LESSEE;

                  (2) Certified copy of LESSEE's articles or certificate of
incorporation and by-laws certified by an officer of LESSEE;

                  (3) A favorable opinion of counsel to LESSEE, dated the
Effective Date, addressed to LESSOR, and which opinion shall opine, among
other things, that the Lease and all of the terms thereof constitutes the
valid and binding obligation of LESSEE enforceable in accordance with its
terms and that the interests of LESSOR in the Aircraft and this Lease are
fully protected and perfected;

                  (4) A copy of LESSEE's air carrier operating certificate, as
issued by the Secretary of Transportation of the United States pursuant to
Chapter 47 of Title 49 of the United States Code for aircraft capable of
carrying ten or more individuals or 6,000 pounds or more of cargo, duly
certified as being true, correct, accurate and complete by an officer of
LESSEE;

                  (5) The LESSOR shall be satisfied that all necessary licenses
and permits for the exportation of the Aircraft from Germany and the
importation of the Aircraft into United States have been obtained by LESSEE
and remain valid and in full force and effect and that any applicable customs
duties, stamp duties and all other Taxes, if any, shall have been paid by
LESSEE as a consequence of the importation of the Aircraft, the entering into
of this Lease, the performance of the terms of this Lease and the leasing of
the Aircraft;

                  (6) An Officer's Certificate of LESSEE, dated as of the
Effective Date, stating that:


<PAGE>

                                                                           11

                           (a) The representations and warranties contained in
                 Subsection 6(C) hereof are true and accurate on and as of such
                 date as though made on and at such time (except to the extent
                 that such representations and warranties relate solely to an
                 earlier date); and

                           (b) No event has occurred and is continuing, or would
                 result from the leasing of the Aircraft, which constitutes a
                 Default or an Event of Default or would constitute a Default or
                 an Event of Default with the giving of notice or the passage of
                 time or both;

                  (7) Not less than three (3) Business Days prior to the
Effective Date, certificates and a broker's undertaking letter, signed by an
Approved Insurer(s), as to due compliance with the insurance provisions of
Section 13 hereof with respect to the Aircraft;

                  (8) The Power of Attorney;

                  (9) A written statement, on the letterhead of LESSEE, for
presentation to the export control authority of the Federal Republic of Germany
(Bundesamt fur Wirtschaft) that neither the Aircraft nor parts thereof nor any
spare parts, if any, delivered to the LESSEE shall directly or indirectly be
sold, leased, re-leased, assigned, transferred, conveyed or in any manner
disposed of in or to any country other than the United States of America
without due prior written consent of the Bundesamt fur Wirtschaft, except to
Australia, Austria, Belgium, Luxembourg, Denmark, France, Greece, Great
Britain, Ireland, Italy, Switzerland or Turkey; and

                  (10) Such other documents which LESSOR or its counsel may
reasonably require.

                  (B) CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS. LESSEE's
obligation to lease the Aircraft hereunder from LESSOR shall be subject to the
receipt by LESSEE or the performance or occurrence, on or before the Effective
Date (or such other date as provided for herein), of the following from LESSOR,
all of which shall be satisfactory in form and substance to LESSEE:

                  (1) The Aircraft shall be in the condition required by Exhibit
"F" hereto;

                  (2) The Aircraft shall be registered in the United States in
the name of LESSOR;

                  (3) Lufthansa shall have provided to LESSEE, on a reasonably
timely basis prior to the Effective Date, such information as LESSEE shall
reasonably require in connection with obtaining all necessary licenses, permits
and authorizations for the exportation of the Aircraft from Germany and the
importation of the Aircraft to the United States; and

                  (4) LESSOR shall have tendered the Aircraft to LESSEE for
delivery not later than February 6, 1997.


<PAGE>

                                                                           12

                                    SECTION 5

                          RENT AND MAINTENANCE RESERVES

                  (A) RENT. LESSEE covenants and agrees to pay to LESSOR, or to
any of LESSOR's assigns designated to LESSEE in writing by LESSOR, the Rent.

                           (1) BASIC RENT. The Basic Rent shall be paid by
                  LESSEE to LESSOR in respect of the Aircraft, in advance, on
                  each Rent Date. The first payment of Basic Rent shall be paid
                  by LESSEE to LESSOR on the Effective Date.

                           (2) SUPPLEMENTAL RENT. LESSEE agrees to pay to
                  LESSOR, or to whomsoever shall be entitled thereto, any and
                  all Supplemental Rent promptly as the same shall become due
                  and owing, and in the event of any failure on the part of
                  LESSEE to pay any Supplemental Rent, LESSOR shall have all
                  rights, powers and remedies provided for in this Lease or by
                  Law or equity or otherwise in the case of nonpayment of Basic
                  Rent. LESSEE will also pay to LESSOR, on demand, as
                  Supplemental Rent, to the extent permitted by applicable Law,
                  interest at the Overdue Rate on any part of any installment of
                  Basic Rent not paid when due for the period from and including
                  the Rent Date to and including the date of actual payment in
                  full, and on any Supplemental Rent not paid when due or
                  demanded by LESSOR for any period for which the same shall be
                  overdue.

                  (B) FORM OF PAYMENT. Payment of Rent and any other payments
due under this Lease, shall be made in Dollars in immediately available funds
to LESSOR or its assignee at such address and account as LESSOR may specify in
writing. Payment shall be made on the Rent Date, or the Business Day
thereafter if the Rent Date is not a Business Day, so as to reach LESSOR or
its designated depository not later than 3:00 p.m. Hawaii time, on the Rent
Date or the Business Day thereafter, as the case may be.

                  (C) RENT NOT REDUCED BY TAXES. LESSEE agrees that each payment
of Rent pursuant to this Lease shall be free of all Taxes and, in the event
that any Taxes are imposed, levied, assessed by, or otherwise payable with
respect to or arising out of the leasing or operation of the Aircraft by
LESSEE, LESSEE shall pay such amounts as are necessary to enable LESSOR and
each assignee of LESSOR to whom payments of Rent are to be made by LESSEE, to
receive each payment of Rent hereunder, under any circumstances and in any
event, in the full amounts required hereunder on an aftertax basis, without
any reduction whatsoever.

                  (D) MAINTENANCE RESERVE. Provided Airgroup meets the Credit
Standards, then LESSEE shall not be required to pay Reserves for any period
for which Reserves would otherwise be payable, as


<PAGE>

                                                                           13

provided below. Airgroup shall be deemed to have satisfied the Credit
Standards provided Airgroup maintains (1) a Fixed Charges Coverage Ratio equal
to not less than 1.05, calculated on a rolling twelve month basis and (2) a
minimum tangible net worth (tangible net worth being determined in accordance
with Generally Accepted Accounting Principles, consistently applied) of
$4,000,000, calculated on a rolling twelve month basis and computed at the end
of each calendar quarter, with the first computation being made as of the
calendar quarter ending March 31, 1997.

                  Commencing as of the calendar quarter ending March 31, 1997,
and for each calendar quarter thereafter (each such date a "Review Date")
during the Base Term, if LESSEE failed to meet the Credit Standards as
calculated on a rolling twelve month basis, LESSEE shall pay to LESSOR
Reserves on account of the operation for the Aircraft for each subsequent
month following the Review Date on which it was determined that LESSEE failed
to meet the Credit Standards up through and including the next Review Date on
which it is determined that LESSEE meets the Credit Standards, in an amount
equal to Two Hundred Forty Five (US$245.00) Dollars per each Flight Hour
incurred on the Aircraft in the previous calendar month, which amount shall be
allocated at Seventy Five (US$75.00) Dollars per Flight Hour for the Airframe
(the "Airframe Reserve"), Seventy (US$70.00) Dollars per Engine for each
Engine Flight Hour (the "Engine Reserve"), Twenty ($20.00) Dollars per Flight
Hour for the landing gear (the "Landing Gear Reserve") and Ten ($10.00)
Dollars per Flight Hour for the APU (the "APU Reserve") (each a "Reserve" and
collectively, the "Reserves"). All Reserves to be paid by LESSEE to LESSOR
shall be paid in arrears, not later than ten (10) days following the last day
of the month for which the Reserves payment was calculated except the Reserve
payment for the month immediately preceding the date of the Return Occasion
(as defined in Section 17(A)) shall be paid on the date of the Return
Occasion. All Reserves paid by LESSEE to LESSOR will be held by LESSOR and
shall be disbursed by LESSOR (or LESSOR shall cause the same to be disbursed)
only to pay for Covered Maintenance pursuant to Section 7(D) hereof.

                  (E) NET LEASE, LESSEE'S OBLIGATIONS; NO SETOFF; COUNTERCLAIM,
ETC. This is a net operating lease. It is the intent of the parties hereto
that this Lease be a "true lease" and a lease for United States federal income
tax purposes. LESSEE acknowledges and agrees that it has no interest herein
other than that of a lessee. Except as otherwise provided herein, LESSEE's
obligation to pay all Rent payable hereunder shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, (i) any Taxes (other than Taxes applicable to
said Rent for which LESSEE has no indemnification obligation under Section 11
hereof), any setoff, counterclaim, recoupment, defense or other right which
LESSEE may have against LESSOR; (ii) any defect in the title, airworthiness,
condition, design, operation or fitness for use of, or any damage to or loss
or destruction of, the Aircraft, Airframe or any Engine, or any interruption
or cessation in the use or possession thereof by LESSEE for any reason
whatsoever; (iii) any insolvency, bankruptcy, reorganization or similar
proceedings by or against


<PAGE>

                                                                           14

LESSEE; (iv) any restriction, prevention or curtailment of, or Interference
with, any use of the Aircraft, Airframe or any Engine; (v) any invalidity or
unenforceability or disaffirmance of this Lease or any provision hereof,
whether against or by LESSEE or otherwise; or (vi) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
The foregoing provisions shall not be construed as a waiver by LESSEE of any
right to bring a separate action against LESSOR to recover amounts allegedly
due from LESSOR to LESSEE.

                                    SECTION 6

                         REPRESENTATIONS AND WARRANTIES

                  (A) DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH
HEREIN TO THE CONTRARY, LESSOR HAS NOT MADE AND SHALL NOT BE DEEMED TO HAVE
MADE, BY VIRTUE OF HAVING LEASED THE AIRCRAFT UNDER THIS LEASE, AND LESSOR
HEREBY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO
AIRWORTHINESS, VALUE, CONDITION, COMPLIANCE WITH SPECIFICATIONS, DURABILITY,
RELIABILITY, DESIGN, OPERATION, MERCHANTABILITY, OR FITNESS FOR USE OR
PARTICULAR PURPOSE OF THE AIRCRAFT, OR ANY PART THEREOF, AS TO THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, OR AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT, OR ANY PART THEREOF, OR AS TO ANY
OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT
TO THE AIRCRAFT, OR ANY PART THEREOF, INCLUDING, WITHOUT LIMITATION, ANY
LIABILITY IN CONTRACT, TORT, OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE,
STRICT LIABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE OR
DEALING OR USAGE OR TRADE, OR LOSS OR INTERRUPTION OF USE, PROFIT, OR BUSINESS,
OR OTHER CONSEQUENTIAL DAMAGES; AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES,
AND DISCLAIMS EXPECTATION OF OR RELIANCE UPON ANY SUCH WARRANTY OR WARRANTIES.

                  As an exception to the foregoing, LESSOR represents and
warrants that, on the Effective Date:

                          (1) LESSOR shall have the lawful right to lease the
                 Aircraft to LESSEE in accordance with the terms of this Lease;

                          (2) LESSOR is a Hawaii banking corporation and has the
                 corporate and banking power and authority to enter into and
                 perform its obligations under this Lease and all other Lease
                 Documents to which LESSOR is a party; and

                          (3) This Lease and all other Lease Documents to which
                 LESSOR is a party have been duly entered into and delivered by
                 LESSOR and constitutes a valid, legal and binding obligation of
                 LESSOR, enforceable in accordance with its terms, except as
                 such enforceability may be limited by bankruptcy, moratorium,
                 reorganization and similar Laws and by general principles of
                 equity, whether considered in a proceeding at Law or in equity.


<PAGE>

                                                                           15

                           THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE
                  PRECEDING EXCEPTION CLAUSE CONSTITUTE THE SOLE EXCEPTION TO
                  THIS SUBSECTION 6(A) AND IS EXCLUSIVE AND IN LIEU OF ALL OTHER
                  REPRESENTATIONS AND WARRANTIES OF LESSOR EXPRESS OR IMPLIED.

                   (B) MANUFACTURER'S WARRANTIES. So long as no Event of Default
under this Lease has occurred and is continuing, LESSOR agrees to assign or
otherwise make available to LESSEE such rights as LESSOR may have, if any,
under any warranty, express or implied, with respect to the Aircraft made by
the Manufacturer, Engine Manufacturer, any subcontractor or supplier thereof,
to the extent that the same may be assigned or otherwise made available to
LESSEE and, to the extent that the same may not be assigned or otherwise made
available to LESSEE, LESSOR agrees to exert its reasonable efforts, at
LESSEE's sole cost and expense, to enforce such rights as LESSOR may have with
respect thereto for the benefit of LESSEE; provided, however, that upon an
Event of Default all such rights shall, without further action or notice,
immediately revert to LESSOR, including all claims thereunder, whether or not
perfected; provided that notwithstanding any provision in this Lease to the
contrary, LESSEE agrees that the LESSOR shall have the right to assert and
prosecute all of LESSOR's claims with respect to any and all such warranties
and to receive and keep all payments in respect of such claims solely for
LESSOR's account to the extent that such claims of LESSOR do not conflict and
are not inconsistent with the LESSEE's claims in respect thereof as to which
LESSEE has asserted or notified LESSOR in writing that LESSEE will assert.

                   (C) LESSEE'S REPRESENTATIONS AND WARRANTIES. LESSEE
represents and warrants, as of the Effective Date, and all such
representations and warranties being continuing, that:

                        (1) LESSEE is a corporation duly organized and existing
in good standing under the Laws of Hawaii and has the corporate power and
authority to carry on its business as presently conducted and to perform its
obligations under this Lease and the other Lease Documents;

                        (2) LESSEE is not a Governmental Entity or government
owned or controlled and neither LESSEE or its properties is immune from the
jurisdiction of any court or from any legal process (whether through service
or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) nor does it have the defense of sovereign immunity or
similar defense available to it in any legal action or proceeding;

                        (3) LESSEE is a citizen of the United States (as defined
in 40102 of Title 49 of the United States Code) holding an air carrier
operating certificate issued by the Secretary of Transportation of the United
States pursuant to chapter 447 of Title 49 of the United States Code for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of
cargo;

                        (4) At the time of delivery of the Aircraft to LESSEE,
the Aircraft will be eligible for U.S. registration


<PAGE>

                                                                           16

(assuming LESSOR meets the citizenship requirements for registration of an
Aircraft as set forth in the FAR's) and may be operated by LESSEE in
accordance with all applicable Hawaii and Federal Aviation rules and
regulations notwithstanding the fact, among other things, that the Aircraft
will now be operated in the United States (not having previously been operated
in the United States), will be added to the U.S. aircraft registry and the
Aircraft will not meet the Stage III noise regulations set forth in FAR Part
36;

                        (5) In the event LESSEE files a petition for relief
under Chapter 11 of the United States Bankruptcy Code, as amended, or has such
a petition filed against it, LESSOR will be entitled to the rights provided to
a "lessor" under the provisions of 11 U.S.C. Section 1110(a)(1) and LESSEE
will not oppose and will consent to any motion made by LESSOR under said
Section 1110 to take possession of the Aircraft pursuant to the provisions
thereof;

                        (6) This Lease and all other Lease Documents to which
LESSEE is a party have been duly authorized by all necessary corporate action
on the part of LESSEE, do not require any approval of the stockholders of
LESSEE (or if such approval is required, such approval has been obtained), and
neither the execution and delivery hereof nor the consummation of the
transactions contemplated hereby nor compliance by LESSEE with any of the
terms and provisions hereof will contravene any Law applicable to LESSEE or
result in any breach of, or constitute any default under, or result in the
creation of, any lien, charge or encumbrance upon any property of LESSEE under
any indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, bank loan or credit agreement, corporate charter or by-law, or other
agreement or instrument to which LESSEE is a party or by which LESSEE or its
properties or assets may be bound or affected;

                        (7) LESSEE has received or has complied with every
necessary consent, approval, order, or authorization of, or registration with,
or the giving of prior notice to, any Governmental Entity having jurisdiction
with respect to the use and operation of the Aircraft and the execution and
delivery of this Lease and all other Lease Documents to which LESSEE is a
party or the validity and enforceability hereof and thereof;

                        (8) This Lease and all other Lease Documents to which
LESSEE is a party have been duly entered into and delivered by LESSEE and
constitutes a valid, legal and binding obligation of LESSEE, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, reorganization, moratorium or other similar Laws and by general
principles of equity, whether considered in a proceeding at Law or in equity;

                        (9) There are no suits or proceedings pending, or to the
knowledge of LESSEE, threatened against or affecting LESSEE or its properties,
which may have a material adverse effect on the financial condition or
business of LESSEE or upon LESSEE's ability to perform its obligations
hereunder;

                           (10)     LESSEE has filed or caused to be filed all


<PAGE>

                                                                           17

material tax returns which are required to be filed by LESSEE and has paid or
caused to be paid all Taxes shown to be due or payable on said returns or on
any assessment received by LESSEE, except those the validity of which is
contested by LESSEE in good faith by appropriate proceedings duly instituted
and diligently prosecuted;

                        (11) It is not necessary or advisable under any
applicable Law in order to ensure the validity, effectiveness and
enforceability of this Lease that this Lease or any other instrument relating
thereto be filed, registered or notarized or that any other action be taken,
other than the filing and registration of this Lease with the FAA and filing
of UCC-1 financing statements with the Bureau of Conveyances of the State of
Hawaii;

                        (12) Except for the registrations and filings described
in (11) above, no other filing or registration of any instrument or document
is necessary under any applicable Law in order to protect LESSOR'S title to
and ownership of the Aircraft and interest in this Lease;

                        (13) Neither the payment of Rent nor the payment of any
other amount required under this Agreement is subject to deduction or
withholding under any applicable Law;

                        (14) No Default or Event of Default has occurred and is
continuing;

                        (15) The obligations of LESSEE to make payments
hereunder will rank at least PARI PASSU in right of payment with all other
unsecured, unsubordinated obligations of LESSEE;

                        (16) LESSEE has furnished to LESSOR copies of Airgroup's
audited consolidated financial statements as of December 31, 1995, as
certified by Airgroup's independent certified public accountants, and
uncertified quarterly consolidated financial statements of Airgroup for the
quarter ending March 31, 1996, and in each instance prepared in accordance
with generally accepted accounting principles, consistently applied. Such
financial statements present a true and accurate view of the financial
condition of LESSEE and Airgroup, respectively, as of the date of such
financial statements. Since the date of such financial statements, no material
adverse change has occurred in LESSEE's or Airgroup's financial condition or
their results of operations, and nothing has occurred that can reasonably be
expected to have a material adverse effect on the ability of LESSEE and
Airgroup to carry on their respective businesses and operations and for LESSEE
to perform its obligations under this Lease;

                        (17) Neither the financial statements of Airgroup nor
any other material document furnished by or on behalf of LESSEE or Airgroup to
LESSOR in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained in this Lease not misleading.
LESSEE knows of no fact that materially adversely affects or, so far as LESSEE
can now reasonably foresee, will materially adversely affect the business,
financial condition,


<PAGE>

                                                                           18

operations or properties of LESSEE or the ability of LESSEE to perform its
obligations under the Lease Documents; and

                        (18) Airgroup owns one hundred percent (100%) of the
issued and outstanding stock of LESSEE.

                  (D) NOTIFICATION. During the Term of this Lease, at the end of
each calendar quarter, LESSEE shall send an officer's certificate to LESSOR
notifying LESSOR of any condition that materially changes the content of any
of the representations and warranties made as of the Effective Date under
Section 6(C) hereof or certifying that there has been no such change.

                                    SECTION 7

              POSSESSION, USE, MAINTENANCE, TITLE AND REGISTRATION

                  (A) POSSESSION. Except as expressly provided in Subsection
8(B) and Section 22, LESSEE shall not transfer possession of the Aircraft or
any Engine or part thereof to any Person without the prior written consent of
LESSOR, which consent shall not be unreasonably withheld, provided that, so
long as no Default or Event of Default or event which would constitute an
Event of Default with the giving of notice or lapse of time, or both, shall
have occurred and be continuing and so long as LESSEE shall comply with the
provisions of Section 13 hereof, LESSEE may, so long as the action to be taken
shall not deprive LESSOR of any of its title to and interest in the Aircraft,
the Airframe or any Engine and shall not adversely affect the registration of
the Aircraft under the Laws of the United States, without the prior written
consent of LESSOR, deliver possession of the Aircraft, the Airframe or any
Engine or other Part thereof to the Manufacturer, the Engine Manufacturer or
Authorized Maintenance Performer, as appropriate, for testing, service,
repair, maintenance or overhaul work on the Aircraft, the Airframe, any Engine
or Part, or for alterations, modifications, or additions thereto, to the
extent required or permitted by the terms of Subsection 7(D) hereof.

                  (B) USE. LESSEE shall use the Aircraft solely in commercial
passenger carrying operations in accordance with all Laws applicable to it and
shall not use or permit the Aircraft to be used for any purpose for which the
Aircraft is not designed or reasonably suited. LESSEE shall not use or permit
the use of the Aircraft for the carriage of (i) whole animals, living or dead,
except in cargo compartments according to International Air Transport
Association ("I.A.T.A.") regulations and except domestic pet animals carried
in suitable containers to prevent the escape of any fluids and to ensure the
welfare of the animal, (ii) acids, toxic chemicals, other corrosive materials,
explosives, nuclear fuels, nuclear wastes or any other nuclear assemblies
except as permitted for passenger aircraft under the "Restriction of Goods"
schedule issued by I.A.T.A. from time to time, or (iii) any other goods,
materials or items of cargo that would not be adequately covered by the
insurance required or obtained pursuant to this Lease.


<PAGE>

                                                                           19

                  (C) LAWFUL INSURED OPERATIONS. LESSEE shall not permit the
Aircraft to be maintained, used, or operated in violation of any Law of any
Governmental Entity having jurisdiction, or contrary to the Manufacturer's or
Engine Manufacturer's operating manuals and instructions, or in violation of
any airworthiness certificate, license, or registration relating to the
Aircraft issued by the FAA or any other Governmental Entity having
jurisdiction, unless the validity thereof is being contested in good faith and
by appropriate proceedings duly instituted and diligently prosecuted, but only
so long as such proceedings will not result in the sale, forfeiture, loss of
valid insurance coverage upon, or loss of, the Aircraft, the Airframe, any
Engine or any Part. LESSEE shall comply with the foregoing, at its sole cost
and expense, and shall maintain the Aircraft in proper condition for operation
under such Laws. LESSEE agrees not to operate the Aircraft, or to permit or
suffer the Aircraft to be operated, within or into any geographic area:

                        (1) unless the Aircraft is at all such times covered by
          insurance as required by the provisions of Section 13 hereof;

                        (2) contrary to the terms of such insurance as required
          by the provisions of Section 13 hereof; and

                        (3) in violation of any Law, rule, order or regulation
          of any Governmental Entity.

LESSEE shall deliver to LESSOR such documents and assurances as LESSOR may
request under the provisions of Section 16 hereof to evidence compliance with
the foregoing.

                  (D) MAINTENANCE.

                        (i) LESSEE, at its own cost and expense, shall:

                             (a) service, repair, maintain, overhaul, test, or
          cause the same to be done to the Aircraft so as to keep the Aircraft
          in as good operating condition as when delivered to LESSEE hereunder,
          ordinary wear and tear excepted, and such operating condition as
          required by the Maintenance Program and as may be necessary to enable
          the airworthiness certification of the Aircraft to be maintained in
          good standing at all times under the applicable rules and regulations
          of the FAA;

                             (b) perform all routine and non-routine services,
          checks and corrosion control and inspections, including any structural
          inspections requirements (SSID's) and "A", "B", "C" or "D" checks (or
          the equivalent thereof) required by the Maintenance Program, the
          Manufacturer or the Air Authority;

                             (c) maintain, in accordance with FAR Part 121, all
          records, logs and other materials required by


<PAGE>

                                                                           20

          applicable Laws of any Governmental Entity and the Air Authority to be
          maintained in respect of the Aircraft, including but not limited to
          serviceable component tags required by the Air Authority;

                             (d) throughout the Base Term of this Lease, at the
          end of each calendar quarter, provide LESSOR with a written projection
          of the next scheduled commencement date of each "C" or "D" check to be
          performed on the Aircraft and each scheduled engine overhaul and the
          location where such checks and overhauls are scheduled to be
          performed;

                             (e) designate representatives to coordinate with
          LESSOR or LESSOR's representatives on maintenance and warranty
          matters;

               (ii) All maintenance of the Aircraft and Engines shall be
performed by the Authorized Maintenance Performer.

               (iii) (A) "Covered Maintenance" means, at any time, the D check
for the Airframe, the scheduled heavy maintenance check or hot section
inspection for the engine, the scheduled overhaul for the landing gear and the
scheduled heavy maintenance check or hot section inspection for the APU,
respectively, pursuant to the Maintenance Program. Excluded from Covered
Maintenance shall be overhaul or repairs caused by F.O.D, operational
mishandling or by events that can be insured against. The cost of Covered
Maintenance shall be limited to the actual cost of replacement parts plus the
cost of the associated labor at LESSEE's in-house labor rates if the work is
performed by LESSEE, or at third-party costs charged to LESSEE if the work is
performed by third parties, and shall in no event include, late charges,
interest, mark-ups or premium charges by LESSEE or other similar amounts.

                     (B) Unless an Event of Default shall have occurred and be
continuing, to the extent that LESSEE has paid Reserves pursuant to the terms
of this Lease and such Reserves have not previously been disbursed by LESSOR
in accordance with the terms hereof, the LESSOR shall pay to the LESSEE,
within five (5) Business Days after receipt of:

                             (a) an Officer's Certificate stating:

                                 (1) that Covered Maintenance has been performed
                     on the Airframe, Engines, APU or landing gear,
                     respectively, and the cost thereof, or

                                 (2) that advance payments are required by a
                     third-party Authorized Maintenance Performer under a
                     contract covering any such work, and the amount of such
                     payments; and

                             (b) appropriate documentation with respect to
                     such work or payments,

an amount equal to the actual cost of such work or such advance payment, as
the case may be, up to the amount of the then


<PAGE>

                                                                           21

unutilized Airframe Reserves for such Covered Maintenance on the Airframe, up
to the amount of the then unutilized Engine Reserves for such Covered
Maintenance on the Engines, up to the amount of the then unutilized APU
Reserves for such Covered Maintenance on the APU and up to the amount of the
then unutilized Landing Gear Reserves for such Covered Maintenance on the
landing gear; PROVIDED, HOWEVER, that (i) at no time shall the amount of any
Reserve to be made available by LESSOR for Covered Maintenance exceed the
aggregate amount remaining in such Reserve as of the date the Covered
Maintenance was completed, and (ii) all Reserves (including but not limited to
the Reserves for each Engine) shall be kept segregated and, except as
expressly provided below, LESSEE may only draw upon the Reserves specifically
allocated to the item on which Covered Maintenance was performed. Upon the
termination of this Lease for any reason whatsoever (including, without
limitation, the occurrence of an Event of Default), any amounts paid to LESSOR
as Reserves and not used to reimburse LESSEE for Covered Maintenance shall be
retained by LESSOR free and clear of any claim by LESSEE. Notwithstanding the
foregoing, but subject to the condition precedent that no Event of Default has
occurred and is continuing, in the event that LESSEE performs or is required
to perform Covered Maintenance on the Airframe, either Engine, the APU or the
landing gear, as the case may be, in order to meet in full, on the Expiration
Date, the return conditions set forth herein, and the allocated Reserve amount
for such item is insufficient to pay in full the cost of the Covered
Maintenance for such item, then in any such event, and only in such event,
LESSEE shall be entitled to draw upon and receive from the other Reserves then
held by LESSOR, that amount equal to the difference between the actual cost of
the Covered Maintenance and the amount that was allocated in the Reserves for
such item. Further, so long as no Event of Default has occurred and is
continuing, in the case of a return of the Aircraft on the Expiration Date
where a financial adjustment is due to LESSOR with respect to an item where
Reserves have been paid, LESSEE may draw upon the Reserves then held by LESSOR
and use same solely toward satisfaction of such financial adjustment
obligation.

                             (f) LESSEE agrees that it will not discriminate
                     against the Aircraft (as compared to other aircraft of the
                     same type owned or operated by LESSEE) in the operation,
                     use and performance of maintenance, including, but not
                     limited to, in contemplation of the expiration or
                     termination of this Lease with respect to the maintenance
                     of the Aircraft (including, but not limited to, the
                     substitution or replacements of Parts other than where the
                     failure to replace Parts would result in LESSEE failing to
                     meet the return conditions for the Aircraft set forth
                     herein). The foregoing shall not be deemed to be a
                     prohibition on LESSEE's withdrawing the Aircraft from
                     revenue service in order to prepare the Aircraft for return
                     to LESSOR upon the expiration or termination of this Lease
                     nor shall the foregoing be deemed to expand LESSEE's
                     obligations beyond those set forth in any specific return
                     provision set forth herein.

                             (E) AIRWORTHINESS DIRECTIVES; SERVICE BULLETINS.


<PAGE>

                                                                           22

                                  (i) If the FAA, the Air Authority, the
Manufacturer or the Engine Manufacturer, or the manufacturer of any Parts,
publishes an airworthiness directive, mandatory service bulletin or mandatory
modification after the commencement date of this Lease or already has
published such airworthiness directive, mandatory service bulletin or a
mandatory modification which modification is required to be completed or
terminated during the Base Term or at any time during the ninety (90) day
period following the end of the Base Term or the termination of this Lease,
LESSEE shall take all such action as is necessary to comply with such
airworthiness directive, mandatory service bulletin or mandatory modification
prior to the return of the Aircraft by LESSEE to LESSOR and shall, except as
hereinafter stated, bear the entire expense thereof. As an exception to the
foregoing, LESSOR agrees that it will reimburse LESSEE fifty percent (50%) of
the cost (labor and material at the cost actually incurred by LESSEE without
premium, mark-up, surcharge or interest expense) in excess of One Hundred
Thousand Dollars (US$100,000) for each airworthiness directive accomplished
during the last twenty four (24) months of the Base Term, and one hundred
percent (100%) of the costs for each airworthiness directive and service
bulletin which are accomplished by LESSEE and fall due within ninety (90)days
after the Expiration Date; provided, however, that LESSOR shall have no
obligation to reimburse LESSEE for airworthiness directives and service
bulletins accomplished by LESSEE and which fall due within ninety (90) days
after the Expiration Date unless LESSEE had prior to accomplishing such
airworthiness directive or service bulletin received written authorization
from LESSOR to accomplish same. LESSOR shall pay to LESSEE its share, if any,
of the cost of complying with airworthiness directives performed by LESSEE,
within ten (10) Business Days of receipt from LESSEE of evidence reasonably
satisfactory to LESSOR that the airworthiness directive has been fully and
satisfactorily complied with.

                                  (ii) LESSEE shall comply with all applicable
mandatory service, maintenance, repair and overhaul regulations, directives
and instructions of the FAA, the Air Authority, the Manufacturer, the Engine
Manufacturer and the manufacturer of all Parts and shall bear the entire
expense thereof except as provided in (i) above.

                        (F) TITLE, REGISTRATION, PERFECTION AND INSIGNIA.
LESSEE acknowledges and agrees that title to the Aircraft shall
remain vested in LESSOR during the Base Term in accordance with the terms of
this Lease. The Aircraft shall, at all times during the Base Term, be
registered in the United States in the name of LESSOR or such Person as LESSOR
may designate, in accordance with the Laws of United States. LESSEE agrees
that it shall take no action which shall cause the Aircraft to cease to be so
registered in the name of LESSOR under the applicable Laws of United States.
Unless otherwise requested, within fifteen (15) days of the Effective Date,
LESSEE shall fasten or cause to be fastened in the cockpit, in a location
reasonably adjacent to and not less prominent than the airworthiness
certificate for such Aircraft and on each Engine, an insignia plate supplied
by LESSEE and in the form set forth in


<PAGE>

                                                                           23

Exhibit "G" hereto or in any other form subsequently designated by LESSOR to
LESSEE.

                        LESSEE will not allow the name of any Person to be
placed on the Aircraft or any Engine as a designation that might be
interpreted as a claim of ownership; provided, however, that LESSEE may cause
the Aircraft to be lettered in an appropriate manner for convenience of
identification of the interest of LESSEE therein, including but not limited
to, the customary livery of LESSEE.

                        (G) MAINTENANCE REPORTS AND RECORDS. During the Term,
LESSEE shall:

                             (a) provide maintenance information and reporting
                        requirements to LESSOR and any other party so designated
                        by LESSOR including but not limited to: (i) written
                        notification at the end of each calendar quarter with
                        respect to the issuance during such calendar quarter of
                        any airworthiness directive or service bulletin, and
                        written notification, as promptly as possible, of any
                        legal requirement materially affecting the use,
                        operation or maintenance of the Aircraft, Airframe,
                        Engines or Parts; (ii) quarterly written projections of
                        scheduled Airframe, Engine, landing gear and APU heavy
                        maintenance; (iii) prompt written notification of damage
                        to the Aircraft, Airframe, Engines or Parts where the
                        estimated cost of repair is in excess of $500,000 in the
                        aggregate; (iv) promptly upon the request of LESSOR,
                        written notification of Engine removals, exchanges or
                        foreign object damage (said report to include details of
                        circumstances and plan of action to repair); (v) reports
                        of Flight Hours and Cycles on a monthly basis; (vi)
                        promptly upon the request of LESSOR, a report of all
                        service bulletins completed; and (vii) promptly upon the
                        request of LESSOR, copies of all material reports sent
                        to the Air Authority or any other Governmental Entity
                        concerning the Aircraft.

                             (b) LESSEE will, during the Base Term, maintain all
                        records, logs and other materials required to be
                        maintained with respect to the Aircraft by Persons in
                        operational control of the Aircraft under any applicable
                        rules, Laws or regulations and shall supply all such
                        records, logs and other materials to LESSOR or third
                        parties, as reasonably requested, as shall be necessary
                        in order to implement the Maintenance Program and any
                        and all warranties and guarantees that apply to the
                        Aircraft. LESSEE will provide LESSOR with copies of all
                        records of maintenance performed during the Base Term as
                        requested by LESSOR. All such records shall be kept as
                        required under the rules and regulations of the Air
                        Authority and shall be maintained in English.

                                    SECTION 8


<PAGE>

                                                                           24

                       REPLACEMENT OF PARTS: ALTERATIONS,
                           MODIFICATIONS AND ADDITIONS

                  (A) REPLACEMENT OF PARTS. Except as otherwise provided herein,
LESSEE, at its own cost and expense, shall promptly replace all Parts which
may, from time to time, be incorporated or installed in, or attached to, the
Aircraft, the Airframe or any Engine and be an accession thereto, and which
may, from time to time, become lost, stolen, seized, confiscated or
unserviceable. In addition, in the ordinary course of maintenance, service,
repair, overhaul or testing, LESSEE may remove any Parts, provided that LESSEE
shall replace such Parts as promptly as may be practicable. All replacement
Parts shall be free and clear of all Liens, except Permitted Liens, shall meet
all requirements of the Air Authority, and shall be in as good operating
condition as, and have a value and utility at least equal to, the Parts
replaced, assuming such replaced Parts were maintained in the condition
required pursuant to the requirements of this Lease.

                  All Parts owned by LESSOR at any time removed from the
Aircraft shall remain the property of LESSOR, no matter where located, until
such time as such Parts shall be replaced by Parts which have been
incorporated or installed in, or attached to, such Aircraft and which meet the
requirements for replacement Parts specified above. Immediately upon any
replacement Parts becoming incorporated or installed in or attached to the
Aircraft as above provided, and without further act:

                             (1) title to the removed Part shall vest in LESSEE,
                        free and clear of all rights of LESSOR and LESSOR Liens;

                             (2) title to the replacement Parts shall vest in
                        LESSOR, free and clear of all rights of third parties,
                        including, but not limited to, LESSEE; and

                             (3) such replacement Parts shall become subject to
                        this Lease and shall be deemed part of the Aircraft into
                        which such Parts were incorporated or with respect to
                        which such Parts were required, for all purposes hereof
                        to the same extent as the Parts originally incorporated
                        or installed in, or attached or related to such
                        Aircraft.

                  (B) POOLING; ETC.

                        (i) LESSEE may subject the Aircraft or any Engine to
normal interchange agreements customary among major Air Carriers entered into
by the LESSEE in the ordinary course of its business, and may subject any
Engine to pooling arrangements customary among major Air Carriers and entered
into by the LESSEE in the ordinary course of its business.

                        (ii) LESSEE may install an Engine on an airframe owned
by the LESSEE provided such airframe is free and clear of all liens and
encumbrances, except

                             (a) Permitted Liens; and


<PAGE>

                                                                           25

                             (b) the rights of Air Carriers under normal
                        interchange arrangements which are customary among major
                        Air Carriers and which do not contemplate, permit or
                        require the transfer of title to the Airframe or Engines
                        installed thereon.

                        (iii) LESSEE may install an Engine on an airframe leased
to, or purchased by the LESSEE, subject to a lease, conditional sale, trust
indenture or other security agreement, but only if

                             (a) such airframe is clear of all liens and
                        encumbrances, except Permitted Liens and the rights of
                        the parties to the lease, conditional sale, trust
                        indenture or other security agreement covering such
                        airframe; and

                             (b) LESSOR shall have received from the lessor,
                        conditional seller, indenture trustee, or secured party
                        of such airframe, a written agreement (which may be the
                        lease, conditional sale, trust indenture or other
                        security agreement covering such airframe), whereby such
                        lessor, conditional seller, indenture trustee or secured
                        party expressly agrees that neither it nor its
                        successors or assigns will acquire or claim any right,
                        title or interest in any Engine by reason of such Engine
                        being incorporated in such airframe at any time while
                        such Engine is subject to this Lease; and

                             (c) LESSOR, upon request, shall have received from
                        counsel to the LESSEE an opinion, in form and substance
                        satisfactory to LESSOR, to the effect that no creditors
                        of, or bona fide purchasers from, the lessor,
                        conditional seller, indenture trustee or secured party
                        of such airframe will acquire any right, title or
                        interest in such Engine by reason of such Engine being
                        installed on such airframe at any time while such Engine
                        is subject to this Lease. In the event that LESSOR
                        requires an opinion, the cost of such opinion shall be
                        shared equally by LESSOR and LESSEE.

                        (iv) No permitted interchange or pooling agreement,
transfer or other relinquishment of possession permitted hereunder shall
affect the title to, or registration of or effect any transfer of the
Aircraft, Airframe or Engines or shall constitute consent to any action not
permitted to the LESSEE in this Lease.

                        (v) LESSOR agrees, for the benefit of any lessor,
indenture trustee or other secured party to LESSEE, that it will not acquire
or claim any right, title or interest in any engine by reason of such engine
being incorporated in the Airframe at any time while such engine is subject to
a lease, conditional sale, trust indenture, or other security agreement
covering such engine.

                  (C)   EQUIPMENT CHANGES. LESSEE, at its own expense, shall


<PAGE>

                                                                           26

make such alterations and modifications in and additions to the Aircraft
("Equipment Changes") as may be required from time to time to meet the
standards of the Air Authority and of the Governmental Entity in the
jurisdiction of which LESSEE elects to fly the Aircraft and whose approval or
consent is required to permit LESSEE to fly over and/or into any geographical
area with respect to which the Governmental Entity exercises authority. In
addition, the term "Equipment Changes" shall mean modifications to or
additions to the Aircraft that LESSEE, at its own expense, may from time to
time deem desirable in the proper conduct of its business, provided that no
such Equipment Change diminishes the value, utility, condition or
airworthiness of the Aircraft below the value, utility, condition and
airworthiness thereof immediately prior to such Equipment Change, assuming the
Aircraft was then in the condition required to be maintained by the terms of
this Lease, and provided further that LESSEE shall not change the
configuration (other than the seating configuration) of the Aircraft during
the Term hereof unless such configuration is approved by the Manufacturer,
LESSOR and the Air Authority. Any Equipment Change with an estimated cost in
excess of Two Hundred Fifty Thousand (US$250,000) Dollars must be approved in
advance by LESSOR, which approval will not be unreasonably withheld.

                  In connection with the provisions of the preceding paragraph,
LESSOR and LESSEE hereby acknowledge and agree that (1) LESSEE may modify the
cockpit of the Aircraft in order to standardize same with LESSEE's fleet of
Boeing 737-200 aircraft (provided such cockpit standardization is performed in
accordance and complies with, the Maintenance Program and the rules and
regulations of the FAA, in each case to the extent applicable, (2) all Parts
removed from the cockpit of the Aircraft in connection with such cockpit
standardization shall become the property of LESSEE (subject to the provisions
of clause (3) of this sentence) and all Parts installed in the cockpit of the
Aircraft in connection with such cockpit standardization shall become the
property of LESSOR and subject to the terms of this Lease, (3) in connection
with the cockpit standardization the Omega Navigation System (Litton 211) and
the Doppler Radar System (collectively, the "Removed Cockpit Parts") will not
be replaced (and are not required to be replaced) and that such Removed
Cockpit Parts shall be returned to LESSOR upon the completion of such cockpit
standardization and LESSEE shall have no claim, right, title or interest
therein and such Removed Cockpit Parts shall be the property of LESSOR and not
subject to the terms of this Lease, and (4) upon the return of the Aircraft by
LESSEE to LESSOR on a Return Occasion, LESSEE, in its sole discretion, shall
have the right to return the Aircraft with the cockpit configured in LESSEE's
standard configuration for Boeing 737-200 aircraft or in the configuration
that the cockpit was in on the Effective Date. Any and all modifications
contemplated by this paragraph shall be effected at the sole cost and expense
of LESSEE.

                  Title to all Parts incorporated, installed in, attached or
added to the Aircraft as the result of any such Equipment Change shall,
without further act, vest in LESSOR; provided, however, that during the Base
Term LESSEE may remove any such Part if: (1) such Part is in addition to any
Part originally


<PAGE>

                                                                           27

incorporated or installed in or attached to such Aircraft at the time of
delivery thereof hereunder; and (2) such Part is not required by the Air
Authority or the Governmental Entity having jurisdiction to be incorporated,
installed in, attached or added to the Aircraft; and (3) such Part can be
removed from the Aircraft or can be replaced with a part of equal value to the
Part installed upon delivery without diminishing or impairing the value,
utility or airworthiness which the Aircraft would have had at such time, had
such Equipment Change not occurred. Upon the removal by LESSEE of any Part as
above provided, title thereto shall, without further act, vest in LESSEE and
such Part shall no longer be deemed part of the Aircraft from which it was
removed. Any Part not removed from the Aircraft by LESSEE as provided above
prior to a Return Occasion shall remain the property of LESSOR.
Notwithstanding the foregoing provisions of Section 8(C), LESSOR agrees that
LESSEE may install replacement seats and galleys on the Aircraft. If the
replacement seats and galleys are (i) owned by any third party and leased to
LESSEE, (ii) sold to LESSEE subject to a conditional sales contract or other
security interest, or (iii) lease to LESSEE pursuant to a lease which is
subject to a security interest in favor of any third party, then LESSOR will
not acquire or claim, as against such lessor, conditional vendor or secured
party, any right, title or interest in such seats and galleys as the result of
such seats and galleys being installed in the Aircraft; provided, however (a)
that LESSOR's inability to so acquire or claim is subject to the express
condition that such lessor, conditional vendor or secured party shall not
acquire or claim, as against LESSOR, any right, title or interest in the
Aircraft, or any Part other than its interest in such seats or galleys by
reason of such seats or galleys being installed thereon, and (b) that all of
LESSEE's right, title and interest in and to any seats or galleys (but none of
its obligations with respect thereto) not removed by LESSEE within thirty (30)
days after an Event of Default shall, at such time, automatically become the
property of LESSOR and subject to this Lease.

                  Notwithstanding anything set forth herein to the contrary, in
connection with a return of the Aircraft by LESSEE to LESSOR on the Expiration
Date, LESSEE shall be entitled to remove and retain (with title vesting in
LESSEE) the avionics black boxes installed by LESSEE with respect to the TCAS
and windshear detection systems. All wiring installed by LESSEE in connection
with the installation of the TCAS and windshear detection systems shall remain
in the Aircraft and shall be deemed the property of LESSOR.

                  In the event the FAA requires LESSEE to comply with the Stage
III noise regulations set forth in FAR Part 36 and LESSEE cannot obtain an
exemption or deferment for complying, if no Default or Event of Default has
occurred and is continuing, LESSOR will, upon the request of LESSEE, provide
financing to LESSEE for the acquisition of a shipset of Stage III hushkits
suitable for installation on the Aircraft or, at LESSOR's election, provide
such hushkits to LESSEE. Should LESSOR provide financing or the hushkits to
LESSEE as contemplated in the preceding sentence, the Basic Rent will be
adjusted upward so as to fully amortize the financing or the cost of the
hushkits over the remaining term of the Lease based on the amount of the
financing or the cost of the


<PAGE>

                                                                           28

hushkits, as the case may be, and the prevailing interest rates applicable to
an entity with the credit of LESSEE at such time. In the event LESSEE is
required to install hushkits during the last twelve (12) months of the Base
Term in order to meet Stage III noise regulations, LESSEE shall have the
option of either (i) retaining the hushkits at the end of the Base Term
(provided no Default or Event of Default has occurred and is continuing, and
further provided, that LESSEE restores the Aircraft to the condition that it
was in prior to the installation of the hushkits), in which case LESSOR will
transfer title to the hushkits to LESSEE, or (ii) extending the term of the
Lease on terms and conditions mutually acceptable to LESSEE and LESSOR. In the
event LESSEE exercises the option set forth in (ii), LESSEE shall send a
notice to LESSOR not later than one hundred twenty (120) days prior to the end
of the Base Term and LESSOR and LESSEE shall have agreed on the terms and
conditions of such extension not later than sixty (60) days prior to the end
of the Base Term. In the event LESSEE has exercised option (ii), above, and
LESSOR and LESSEE fail to reach an agreement on the terms and conditions for
the extension of the Lease with the time period set forth above, then, in such
event, the Base Term will be deemed to be extended for a one (1) year period
of time from the Expiration Date and all other terms and conditions of this
Lease will remain unchanged, except the amount of Basic Rent which shall be
equal to the greater of (x) the then current fair market rental value for the
Aircraft as of the Expiration Date and (y) the amount of Basic Rent then in
effect immediately prior to the Expiration Date.

                  LESSOR shall bear no liability in respect of, or cost for, any
Equipment Change, grounding of the Aircraft, suspension of certification
thereof, or loss of revenue therefrom.

                  (D) (i) On the Effective Date, the Engines installed on the
Aircraft shall be Pratt & Whitney model JT8D-15 engines (the "-15's") and the
Hushkits will be installed on the Aircraft. Within six (6) months of the
Effective Date, LESSOR shall deliver, or cause to be delivered, to LESSEE's
maintenance base in Honolulu, Hawaii or to such other location designated in
writing by LESSEE, two Pratt & Whitney model JT8D-9A engines (the "-9A's").
LESSEE shall, at its cost and expense (a) remove the -15's and the Hushkits
and ship the -15's (along with all components removed in installing the -9A's)
to such location as Jetz Ventures shall designate and ship the Hushkit to such
location as LESSOR shall designate (in each instance, together with all
records, manuals and logs relating to the -15's and the Hushkits,
respectively) to a location designated by LESSOR, and (b) install the -9A's on
the Aircraft. LESSEE agrees that when installing the -9A's, the mixers from
the -15's will be returned to LESSOR as part of the Hushkit.

(ii) LESSOR and LESSEE agree that the -9A's shall be in the following
condition at the time of delivery of same to LESSEE:

                  (a) the minimum total number of cycles remaining to the next
scheduled overhaul of each -9A shall be equal to the difference between 5,000
and the number of cycles consumed by LESSEE in the operation of the -15 that
the -9A is replacing, but in no event shall any -9A engine have less than
2,500 cycles


<PAGE>

                                                                           29

remaining to the next scheduled overhaul. In the event that LESSEE's
utilization of any -15 engine exceeds 2,500 cycles, LESSEE shall pay to Jetz
Ventures (whom LESSEE understands has agreed to supply the -9A's to LESSOR in
exchange for the -15's in order to enable LESSOR to meet its obligations under
the provisions of this Section 8(D)), with respect to such engine, the dollar
amount obtained by multiplying the number of cycles in excess of 2,500 and
ninety Dollars ($90.00);

                  (b) be in bare Pratt & Whitney QEC configuration;

                  (c) have an FAA serviceable tag from an FAA approved engine
maintenance facility;

                  (d) have a rated take-off horsepower of 750 or more;

                  (e) shall be in compliance with all airworthiness directives
and mandatory service bulletins requiring compliance on such date;

                  (f) be free and clear of all liens and encumbrances and
interests of others;

                  (g) all logs, manuals, historical information on life limited
parts (including, "back to birth" records), technical information and data and
all inspection, modification and overhaul records required to be maintained
with respect thereto under applicable rules and regulations of the FAA and any
other governmental body having jurisdiction shall be in compliance with such
rules and regulations; and

                  (h) have undergone a borescope inspection and maximum power
assurance run to evidence that there are no discrepancies outside of the
limits set under the manufacturer's maintenance manual for such engine. Should
there be any such discrepancies, the party tendering such engines shall cause
same to be corrected or propose a substitute engine that will meet the
requirements of this Section.

(iii) LESSOR and LESSEE agree that the -15's shall meet the same conditions
set forth in sub-paragraphs (b)-(h) of sub-section (ii) above at the time of
delivery of same to Jetz ventures; PROVIDED, HOWEVER, that with respect to
sub-paragraph (c) ABOVE, the -15's may be returned with zero time on the
lowest limiter, but otherwise serviceable, and with respect to sub-paragraph
(g) above, LESSEE's obligation is to return only those items delivered to it
by LESSOR with respect to the -15's as updated by LESSEE in accordance with
the Maintenance Program and applicable FAA rules and regulations.

(iv) Simultaneously with the installation of the -9A's and the removal of the
-15's and the Hushkits, (i) LESSOR and LESSEE shall execute a partial lease
termination for the purpose of releasing the -15's and Hushkit from the terms
of this Lease, (ii) LESSOR and LESSEE shall execute a Lease Supplement to this
Lease for the purpose of subjecting the -9A's to the terms of this Lease,
(iii) LESSEE shall execute and deliver to LESSOR a Delivery Receipt and


<PAGE>

                                                                           30

Acceptance Certificate with respect to the -9A's, (iv) LESSOR shall execute a
Delivery Receipt and Acceptance Certificate with respect to the Hushkit, (v)
LESSOR shall cause Jetz Ventures to execute a Delivery Receipt and Acceptance
Certificate with respect to the - 15's, and (vi) LESSEE and LESSOR shall
execute releases and/or amendments to all UCC financing statement previously
executed and filed to reflect the release of the -15's and the Hushkit and the
inclusion of the -9A's. LESSOR and LESSEE agree that there shall be no
reduction in the amount of Basic Rent PAYABLE BY LESSEE to LESSOR as a result
of the substitution of the -9A's for the -15's and the release of the Hushkits
from the terms of this Lease.

                                    SECTION 9

                        INSPECTION; FINANCIAL INFORMATION

                  (A) During the Base Term, in addition to the information
and reports required to be provided by LESSEE to LESSOR pursuant to Section
7(G) of this Lease, LESSEE shall furnish to LESSOR such additional
information concerning the location, condition, use and operation of the
Aircraft as LESSOR may reasonably request.

                  (B) The right of LESSOR, or its designated representatives, to
inspect the Aircraft during any "C" or "D" check or equivalent (as defined in
the Maintenance Program), performed by or on behalf of LESSEE during the Base
Term, shall be absolute. LESSEE shall also provide LESSOR with maintenance
schedules relating to the Aircraft upon the delivery of the Aircraft to
LESSEE, and from time to time as such maintenance schedules are adjusted or
updated. LESSEE further agrees to provide LESSOR with quarterly written
projections of the scheduled date for "C" and "D" checks, in order to enable
LESSOR to inspect the Aircraft at the time and place such checks occur. During
such checks, LESSEE agrees to allow LESSOR, or its authorized representative,
to inspect any area of the Aircraft which LESSOR requests to inspect which
would normally require inspection during such major checks. LESSEE also shall
permit any Person designated by LESSOR in writing to:

                              (1) visit and inspect the Aircraft, its condition,
                              use and operation, and the records maintained in
                              connection therewith;

                              (2) visit and inspect the properties of LESSEE;

                              (3) discuss the finances and accounts of LESSEE
                              with the principal officers of LESSEE,

all at such times and frequencies as LESSOR, or the assignee of LESSOR, may
reasonably request. Notwithstanding the foregoing or any other right to
inspect granted to LESSOR under this Lease, neither LESSOR nor the assignee of
LESSOR shall have any duty to make any such inspection and neither LESSOR nor
the assignee of LESSOR shall incur any liability or obligation by reason of
not making any such inspection;


<PAGE>

                                                                           31

                                 (4) obtain such other financial information as
                              LESSOR may reasonably request. In this regard,
                              during the Base Term, LESSEE shall deliver to
                              LESSOR annual consolidated financial statements of
                              Airgroup prepared in accordance with generally
                              accepted accounting principles consistently
                              applied and audited by recognized, independent
                              certified public accountants reasonably
                              satisfactory to LESSOR as soon as practicable and
                              in any event within 120 days after the end of
                              LESSEE's fiscal year, as well as quarterly
                              unaudited financial statements of LESSEE,
                              certified as being true, accurate and complete by
                              the chief financial officer of LESSEE, within 60
                              days following the close of each of LESSEE's
                              fiscal quarters; and

                                 (5) inspect LESSEE's Maintenance Program for
                              the Aircraft and make copies and take extracts
                              thereof.

LESSOR hereby agrees that if LESSOR exercises any of the rights listed in
clauses (1) through (5) above, it shall do so in such a manner so as not to
unreasonably interfere with the business and operations of LESSEE.

                  (C) LESSEE shall also furnish any other information or records
on the Aircraft that LESSOR may reasonably request.

                  (D) LESSOR agrees to keep confidential any information
provided to it by LESSEE under the terms of this Lease; provided, however,
that LESSOR shall have no obligation to keep such information confidential (i)
if such information is public information at the time received by LESSOR or
becomes public at the time same is disclosed by LESSOR, (ii) from LESSOR's
attorneys, accountants, auditors and aircraft technical experts, and (iii) if
compelled by court order or the provisions of any Law to disclose same.

                                   SECTION 10

                               COVENANTS OF LESSEE

                  LESSEE represents, warrants, covenants and agrees, in addition
to all other representations, warranties and covenants set forth in this
Lease, that:

                  (A) MAINTENANCE OF CORPORATE EXISTENCE. LESSEE shall preserve
and maintain its existence, valid legal status, and all of its rights,
privileges, and franchises necessary to remain duly incorporated and to
operate as a passenger airline under the Laws of the United States and the
State of Hawaii.

                  (B) PAYMENT OF TAXES. LESSEE shall:

                           (1) Pay or cause to be paid all Taxes imposed, levied
                  or assessed upon LESSEE (or for which LESSEE has


<PAGE>

                                                                           32

                  assumed the obligation pursuant to this Lease) or its income
                  or profits, or upon any property or assets belonging to or
                  used by it, prior to the date on which penalties attach
                  thereto;

                           (2) Pay or otherwise discharge all lawful claims,
                  which, if not paid, might become a Lien or charge upon the
                  property of LESSEE (provided, however, that LESSEE shall not
                  be required to pay any such Taxes or claims, the payment of
                  which is being contested in good faith and by appropriate
                  proceedings and for which adequate reserves have been
                  provided, except that LESSEE will pay or cause to be paid all
                  such Taxes or claims forthwith in the event LESSEE is unable
                  to stay or suspend enforcement or execution of a warrant of
                  restraint or foreclosure of any Liens which attach as security
                  therefor).

                   (C) SALE OF ASSETS, MERGER, ETC. Without the prior written
consent of LESSOR, which consent shall not be unreasonably or arbitrarily
withheld, LESSEE will not sell, lease, assign, transfer or otherwise dispose
of substantially all of its assets, whether now owned or hereafter acquired,
except in the ordinary course of its business as presently conducted and for a
full and adequate consideration, and will not merge or consolidate with or
into, or acquire substantially all of the assets and assume substantially all
of the liabilities of, any corporation or other entity unless the surviving
entity is the LESSEE or the surviving entity assumes this Lease and the
financial condition of LESSEE or the surviving entity after such sale of
assets, merger, consolidation or acquisition is equal to or better than that
of LESSEE immediately prior thereto as LESSOR in its reasonable judgment shall
determine.

                   (D) AIR CARRIER. Throughout the Base Term, LESSEE shall, at
all times, be an Air Carrier in good standing.

                  (E) U.S. CITIZEN. Throughout the Base Term, LESSEE shall, at
all times, be a citizen of the United States as defined in 40102 of Title 49
of the United States Code.

                   (F) AIRWORTHINESS CERTIFICATE. Prior to operating the
Aircraft in revenue service, LESSEE shall provide to LESSOR a copy of the
Certificate of Airworthiness for the Aircraft issued by the Air Authority or
other Governmental Entity having jurisdiction, duly certified as being true,
accurate and complete by an officer of LESSEE.

                   (G) COMMUNICATIONS. LESSEE shall deliver to LESSOR promptly
any communications received by LESSEE from the Air Authority or any
Governmental Entity which materially affects the Aircraft.

                                   SECTION 11

                                      TAXES


<PAGE>

                                                                           33

                  (A) GENERAL TAX INDEMNITY. LESSEE agrees to pay and to
indemnify and hold harmless the Indemnitees from all Taxes against or upon any
of the Indemnitees, LESSEE, the Aircraft, or any part thereof during the Base
Term and arising out of this Lease, or upon the leasing, selling, possession,
use, operation, repair, maintenance, overhaul, settlement of any insurance
claim, or return thereof, or upon any Rent, receipts or earnings arising from
the operation thereof, or upon or with respect to this Lease unless, and to
the extent only that, any such Tax is being contested by LESSEE in good faith
and by appropriate proceedings duly instituted and diligently prosecuted with
adequate reserves having been provided on account thereof and only so long as
such proceedings do not involve any danger of the sale, forfeiture or loss of
the Aircraft. In case any report or return is required to be made with respect
to any obligation of LESSEE under or arising out of this Section 11, LESSEE
shall either make such report or return in such manner as will show the
ownership of the Aircraft in LESSOR and send a copy of such report or return
to LESSOR, or shall notify LESSOR of such requirement and make such report or
return in such manner as shall be satisfactory to LESSOR. If claim is made
against any Indemnitee for any Taxes arising during the term of this Lease,
such Indemnitee shall promptly notify LESSEE. Any such Indemnitee shall, at
LESSEE's expense, take such action as LESSEE may reasonably request in writing
with respect to such asserted liability, and if reasonably requested by LESSEE
and upon the prior payment to such Indemnitee by LESSEE of an amount equal to
such Tax, any payment by an Indemnitee of such Tax shall be made under
protest. If payment is made, the Indemnitee shall, at LESSEE's expense, take
such action as LESSEE may reasonably request to recover such payment and
shall, if requested, permit LESSEE in the Indemnitee's name to file a claim or
prosecute an action to recover such payment. All of the obligations of LESSEE
in this Section 11 with respect to Taxes imposed or accrued before the
expiration or other termination of this Lease shall continue in full force and
effect notwithstanding such expiration or other termination, and are expressly
made for the benefit of, and shall be enforceable by, each Indemnitee. LESSEE
further agrees that, with respect to any payment or indemnity hereunder, such
payment or indemnity shall include any amount necessary to hold the recipient
of the payment or indemnity harmless on an after-tax basis from all Taxes
required to be paid by such recipient with respect to such payment or
indemnity under the Laws of any Governmental Entity. Excluded from the tax
indemnification set forth above are any income taxes assessed or due on an
Indemnitee's net income or any state franchise or similar corporate taxes
payable by an Indemnitee.

                  In the event that during the Base Term a federal value added
tax or consumption tax is enacted and becomes effective which replaces the
federal income tax, LESSOR and LESSEE shall negotiate in good faith a
restructuring of the provisions of this Section 11(A), consistent with the
principles for tax indemnification reflected in this Section 11(A), so as to
achieve substantially the same degree of tax indemnification obligations of
LESSEE as existed prior to the enactment of such federal value added tax or
consumption tax.


<PAGE>

                                                                           34

                   (B) SPECIAL TAX INDEMNITY. (i) TAX ASSUMPTIONS. In entering
into the Lease and the transactions contemplated hereby, LESSOR has made the
following tax assumptions for the Aircraft (the "Tax Assumptions"):

                            (1) LESSOR is entitled to the benefit of
depreciation for Federal income tax purposes under the Accelerated Cost
Recovery System provided for in Section 168 of the Code and depreciation
deductions for Hawaii state income tax purposes based upon one hundred percent
(100%) of the Acquisition Cost of the Aircraft, and on the basis that the
Aircraft shall have seven year recovery period and property classification,
and that LESSOR shall be entitled to use the method of depreciation and
depreciation convention equal to 200% declining balance method of
depreciation, switching to the straight line method at the point in time that
maximizes the depreciation allowance for LESSOR (the "Recovery Deduction");

                            (2) with respect to the Aircraft, Lessor will be
entitled to the benefit of deductions for Federal and State Of Hawaii income
tax purposes for interest payable with respect to any indebtedness incurred by
LESSOR in connection with any financing by LESSOR of any portion of the
Acquisition Cost of the Aircraft (the "Interest Deduction"); and

                            (3) for each year of the Base Term of the Lease,
including any year in which a Tax Loss (hereinafter defined) occurs, LESSOR
will be subject to tax as follows:

                              (x) for such year up to and including the year in
which such Tax Loss occurs, at a composite Federal and state income tax rate
that is equal to the highest marginal rate (provided that, in computing such
highest marginal rate, there shall be excluded any surcharges to normal
Federal and state income tax rates which are applicable to brackets of income
which are limited as to their upper level, such as but not limited to those
described in the last two sentences of Section 11(a)(1) of the Code, and, it
is understood that surcharges which are applicable to brackets of income which
are not limited as to their upper level shall be included in computing such
highest marginal rate) provided for under the Code and the laws of the State
of Hawaii (the "Highest Composite Marginal Tax Rate") and that is actually in
effect for each such year and assuming that any state tax used in the
calculation of such marginal rate shall be taken as a deduction for purposes
of computing Federal tax so that the Composite Rate is a lower rate than that
obtained by merely adding the state rate to the Federal rate (assuming LESSOR
has received a tax benefit from such deduction), and

                              (y) for such year following the year in which such
Tax Loss occurs, at a composite Federal and state income tax rate that is
equal to the Highest Composite Marginal Tax Rate actually in effect in the
year in which such Tax Loss occurs and which, under the provisions of the Code
and the laws of the State of Hawaii then in effect, is to be applicable to
each such


<PAGE>

                                                                           35

following year.

                   (ii) LESSEE'S TAX REPRESENTATIONS AND WARRANTIES. LESSEE
represents and warrants to LESSOR that:

                      (1) at all times during the Base Term, with respect to the
Aircraft, such Aircraft will not, due to any act or failure to act on the part
of LESSEE, constitute property "used predominantly outside the United States"
or "tax-exempt use property" within the meaning of Sections 168(g)(1)(A),
168(g)(4)(a) and 168(h)(1)(A), respectively, of the Code and Proposed Code
Regulation Section 1.168-2(g)(5)(iii)(A).

                   (iii) INDEMNITY. If by reason of the breach or inaccuracy of
any of LESSEE's representations and warranties set forth in this Section,
LESSOR shall lose the benefit of, or shall not have or shall lose the right to
claim, or shall suffer a disallowance or recapture of, or delay in claiming,
all or any portion of the Recovery Deduction or, if LESSOR finances any
portion of its Acquisition Cost, the Interest Deduction, with respect to the
Aircraft (any such loss, failure to have or loss of the right to claim,
disallowance, recapture, delay in claiming, treatment, or inclusion referred
to in any of the foregoing clauses of this section being hereinafter called a
"Tax Loss"), then a Tax Loss shall be deemed to have occurred and LESSEE shall
on the Rent Date next following written notice by LESSOR to LESSEE that a Tax
Loss has occurred pay to LESSOR an amount sufficient to indemnify LESSOR for
such Tax Loss and penalties, if any thereon, on an after-tax basis.

                  (iv) IDENTIFICATION OF LESSOR. For purposes of this Section,
the term "LESSOR" shall include Lessor's successors and assigns.

                  (v) CONTESTS. If an Indemnitee should receive notice of any
claim by a taxing authority that may result in liability on the part of LESSEE
under Section 11 (B) (iii), such Indemnitee shall promptly notify LESSEE of
such claim and LESSEE and such Indemnitee shall have the same rights and
privileges with respect to such contest of such claim as are described above
in Section 11(A).

                  (C) EXCLUSIONS. Notwithstanding the foregoing provisions of
this Section 11, the LESSEE shall not be required to indemnify for any
liability which occurs directly and primarily as a result of any of the
following events:

                        (1) a failure by an Indemnitee to timely or properly
claim a deduction or other tax benefit, the gross negligence of an Indemnitee
or the failure of an Indemnitee to timely notify LESSEE of a claim against
such Indemnitee by a taxing authority, provided such failure to timely notify
LESSEE has a material adverse affect on LESSEE's rights under this Section 11;

                        (2) the treatment of the Aircraft in 1996 or the year in
which the Base Term (or any extension thereof) expires as used predominantly
outside the United States for purposes of Code


<PAGE>

                                                                           36

Section 168(g)(1)(A), if such treatment would not have occurred but for such
use of the Aircraft outside of the United States prior to or subsequent to the
term of the Lease;

                        (3) an event which occurs after the end of the Base Term
with respect to the Aircraft and the return thereof in accordance with the
Lease; or

                        (4)(a) a material change in the Code, the Income Tax
Regulations promulgated by the United States Treasury Department or a change
in the administrative or judicial interpretations thereof (collectively, a
"Change in Law"), which is enacted, adopted or promulgated and becomes
effective after the Effective Date and during the Base Term; provided,
however, that with respect to such Change in Law, (i) there is no pending
contest, appeal or review process with respect thereto, and (ii) the Internal
Revenue Service has recognized and is enforcing such Change in Law.

                           (b) should a Change in Law occur and become effective
during the Base Term, LESSEE shall have the right to send a notice to LESSOR
(a "LESSEE's Change Notice") advising LESSOR of the Change in Law and LESSEE's
intention not to indemnify LESSOR for those matters which are the subject of
the Change in Law. LESSOR shall have ninety (90) days from the date of the
giving of LESSEE's Change Notice to send LESSEE a notice (the "LESSOR's
Response") advising LESSEE that it either (i) acknowledges and agrees that it
will not be indemnified by LESSEE for those matters which are the subject of
the Change in Law, or (ii) that it has elected to terminate the Lease ninety
(90) days from the date of the giving of the LESSOR's Response. In the event
that LESSOR in the LESSOR's Response has elected option (ii), LESSEE shall
have thirty (30) days from the date of the giving of LESSOR's Response to send
a written notice to LESSOR modifying LESSEE's Change Notice (a "LESSEE
Modification Notice") and agreeing to indemnify LESSOR for those matters which
are the subject of the Change in Law. In the event LESSEE does not give a
LESSEE Modification Notice within said thirty (30) day period, LESSOR shall
have ten (10) days from the end of such thirty (30) day period to send to
LESSEE a notice modifying the LESSOR's Response (a "LESSOR Modification
Notice") and agreeing to option (i) above. In the event that LESSEE has
declined to indemnify LESSOR for those matters which are the subject of the
Change in Law, LESSEE would have no obligation to indemnify for those matters
for the period of time following the giving of LESSEE's Change Notice.

                   (D) TAX SAVINGS OR REFUND. (i) If an Indemnitee shall receive
a refund on account of any Tax for which such Indemnitee was indemnified or
which was advanced by LESSEE, then such Indemnitee shall, and LESSOR shall use
its reasonable efforts to cause such Indemnitee to, promptly pay the amount of
such refund to LESSEE (together with the amount of any interest and attorneys
fees received by such Indemnitee in relation to such refund).

                   (ii) If an Indemnitee, as a result of a loss or expense for
which an indemnity payment has been made pursuant to this Section 11 or as a
result of deferred depreciation deductions or


<PAGE>

                                                                           37

increased basis (i.e., depreciation deductions or basis in any tax year which
are greater than they would have been had the circumstances giving rise to
LESSEE's liability for indemnity not occurred), shall realize an aggregate net
reduction in United States federal income tax or state or local incomes taxes
which such Indemnitee would not have realized but for such loss, expense,
deferred depreciation deductions or increased basis, the Indemnitee shall pay,
and the LESSOR shall cause the Indemnitee to pay, the LESSEE an amount equal
to such aggregate net reduction in United States federal income tax plus any
other tax savings realized by such Indemnitee on account of the same. Any
payment due to the LESSEE from an Indemnitee pursuant to this Section 11 shall
be paid promptly after the Indemnitee actually realizes any such aggregate net
reduction in United States federal income tax or state or local income taxes.
Notwithstanding anything set forth herein to the contrary, in no event shall
any Indemnitee be required to make any payment to LESSEE pursuant to the terms
of this subsection (ii) in excess of the amount of indemnification payments
made by LESSEE to such party pursuant to this Section 11.

(E) HAWAII CAPITAL GOODS EXCISE TAX CREDIT. Without limiting the generality of
the foregoing provisions of this Section 11, the LESSEE acknowledges that, as
between LESSOR and LESSEE, the LESSOR is and will continue to be entitled to
the Hawaii Capital Goods Excise Tax Credit (the "Excise Tax Credit") with
respect to the Aircraft. LESSEE agrees that (i) it will not directly or
indirectly take any action or file any returns or other documents inconsistent
with or which interferes with LESSOR's right to take and have the benefit of
the Excise Tax Credit with respect to the Aircraft, and (ii) that it will file
such returns, take such action and execute such documents as may be reasonably
necessary to facilitate the accomplishment of the intent of this Section 11
(E).

(F) PARTIES ENTITLED TO BENEFITS OF THIS SECTION. In determining the extent of
LESSOR's obligations under this Section 11, there shall be taken into account
the affiliated group of corporations of which LESSOR is presently or may
become a member and which file a consolidated return, the members thereof, and
the following attributes of such group, such members and each of them (which
shall in turn be attributed to LESSOR): (i) knowledge or notice of any Tax
claim as described in Section 11(A) or Section 11(B)(v), (ii) tax refund(s) as
described in Section 11(D)(i), and (iii) net reduction in income taxes as
described in Section 11(D)(ii).

                                   SECTION 12

                                  EVENT OF LOSS

                   (A) EVENT OF LOSS REGARDING THE AIRCRAFT. In the event that
an Event of Loss occurs with respect to the Aircraft, LESSEE shall forthwith
(and, in any event, not later than three (3) days after the occurrence of the
Event of Loss) give LESSOR written notice of such Event of Loss and, not later
than the earlier of: (a) the sixtieth day following the occurrence of such
Event of Loss; or (b) the day of receipt of insurance proceeds in respect of
such Event of Loss; pay to LESSOR or its assignees, in funds of the


<PAGE>

                                                                           38

type specified in Subsection 5(B) hereof, the sum of all unpaid Rent and all
other amounts due hereunder with respect to such Aircraft and which have
accrued through and including the date of payment of the Agreed Value, plus an
amount equal to the Agreed Value. In the event of payment in full of such
Agreed Value, together with all such amounts due or accrued hereunder on or
prior to the date of such payment, the obligation of LESSEE to pay Rent
hereunder shall terminate. On the date of payment of the Agreed Value, LESSOR
shall credit or refund to LESSEE all pre-paid Basic Rent, if any, and all
accrued Reserves.

                          Upon payment of all Rent due and the Agreed Value,
LESSOR shall transfer to LESSEE (subject to the rights of the insurers) all of
LESSOR's right, title, and interest in and to: (i) the Aircraft which sustained
such Event of Loss, as well as all of LESSOR's right, title, and interest in
and to any Engines constituting part of such Aircraft; and (ii) all claims for
damages to such Aircraft and/or Engines, if any, against third Persons arising
from such Event of Loss (unless any insurance carrier requires that such claims
be assigned to it), without any representation, warranty, or recourse of any
kind whatsoever, express or implied, except a warranty that such Aircraft is
free and clear of any Liens, mortgages and encumbrances, other than Liens which
LESSEE is required to discharge hereunder or defects in title resulting from
acts by or claims against LESSEE.

                          In the event of an Event of Loss involving the
Aircraft wherein one or more of the Engines are not attached to the Airframe,
the Aircraft, for purposes of this Section 12(A), shall be deemed to include
all Engines on lease hereunder and LESSOR shall cooperate in transferring title
to such non-attached Engines, free and clear of all LESSOR Liens, to the owner
of the engine attached to the Airframe at the time of the Event of Loss.

                          In the event of an Event of Loss to an airframe
involving an Engine attached to an airframe owned by LESSEE or another party,
such airframe shall be deemed to include the Engine attached thereto and LESSEE
shall promptly transfer title to, or cause the party on whose airframe the
Engine was attached to promptly transfer title to, a Replacement Engine (as
defined below)in accordance with the terms and conditions set forth in Section
12(B).

                  (B) EVENT OF LOSS WITH RESPECT TO AN ENGINE. Upon any Event of
Loss with respect to an Engine not then installed on the Aircraft, or an Event
of Loss with respect to only an Engine installed on the Aircraft not involving
an Event of Loss to the Aircraft, LESSEE shall give LESSOR prompt written
notice thereof and LESSEE shall replace such Engine as soon as reasonably
possible after such Event of Loss by duly conveying to LESSOR, as a replacement
for such Engine, title to another engine owned by LESSEE (a "Replacement
Engine"), which Replacement Engine shall be free and clear of all Liens and
shall have a value and utility at least equal to, and be in as good operating
condition as, the Engine which sustained such Event of Loss (assuming the
Engine which sustained such Event of Loss was maintained in the condition


<PAGE>

                                                                           39

in which LESSEE was required to maintain such Engine pursuant to this Lease).
Such Replacement Engine, after approval and acceptance by LESSOR, shall be
deemed an "Engine" as defined herein. LESSEE agrees to take such action as
LESSOR may reasonably request in order that any such Replacement Engine shall
be duly and properly leased hereunder to the same extent as the Engine subject
to the Event of Loss and shall be titled in LESSOR. Upon request by LESSOR,
LESSEE shall cause to be delivered to LESSOR an opinion of FAA counsel (to be
provided at LESSEE's expense) as to the lien free status of such engine along
with an opinion of FAA counsel that such replacement engine has been made
subject to this Lease. LESSEE's obligation to pay Rent hereunder shall
continue in full force and effect regardless of the occurrence of an Event of
Loss with respect to an Engine, but LESSEE shall be entitled to be reimbursed
by LESSOR the amount of insurance or condemnation proceeds, if any, received
by LESSOR with respect to such Engine. Upon receipt of title by LESSOR to the
Replacement Engine as hereinabove provided, LESSOR shall convey to LESSEE,
free and clear of all Liens (except, subject to the rights of the insurers),
title to the Engine which sustained such Event of Loss.

                  (C) DAMAGE OR REQUISITION NOT CONSTITUTING AN EVENT OF LOSS.
In the event of material damage or requisition of the Aircraft or any Engine
not constituting an Event of Loss, LESSEE shall promptly notify LESSOR in
writing of such damage or requisition and shall remain obligated to make all
payments of Rent in respect of such Aircraft or Engine which may become due
hereunder in the same manner as if such damage or requisition had not occurred
and to perform all other obligations of LESSEE hereunder. All payments at any
time received by LESSEE, or by LESSOR from any Person other than LESSEE in
excess of $500,000 with respect to any such damage or requisition shall be
paid over to, or retained by, LESSOR, and shall be paid to LESSEE upon repair
of the Aircraft or Engine. To the extent that LESSEE has paid Rent and LESSOR
receives a requisition payment for the period of time for which LESSEE had
paid Rent, LESSOR agrees that it shall, as promptly as is reasonably
practicable, pay to LESSEE that amount of the requisition payment received by
it equal to the Rent for such period previously paid to LESSOR by LESSEE.

                  (D) RECEIPT AND APPLICATION OF COMPENSATION. Following an
Event of Loss or an occurrence not constituting an Event of Loss with respect
to which payments, including insurance proceeds, are made by or are due from
any Person (any such payments or proceeds being hereinafter referred to as
"Compensation"), LESSOR shall be entitled to receive, and shall receive, and
LESSEE hereby assigns to LESSOR any right or interest which LESSEE may have or
may hereafter acquire, in such Compensation, to be applied as follows:

                           (1) If such Compensation is received with respect to
                  the Aircraft, so much thereof as shall not exceed the Agreed
                  Value and other amounts due under Subsection 12(A) shall be
                  retained by LESSOR, in reduction of LESSEE's obligation to pay
                  such Agreed Value and other amounts due as was not theretofore
                  paid by LESSEE, or, if such Agreed Value and other amounts
                  have already been paid to LESSOR,


<PAGE>

                                                                           40

                 such Compensation shall be applied to reimburse LESSEE for its
                 payment of such Agreed Value, and may be paid to LESSEE.

                          (2) If such Compensation is received with respect to
                 an Engine under the circumstances described in Subsection
                 12(B), such Compensation shall be held in an account
                 established for LESSOR with a bank or trust company as
                 depository, as designated by LESSOR, such sums to be held,
                 invested and distributed as provided below. All of LESSEE's
                 interest in all moneys and investments standing to the credit
                 of such account are hereby pledged to LESSOR and LESSOR is
                 hereby granted a general lien upon and security interest in all
                 of LESSEE's interest, if any, in all such moneys and
                 investments as security for the performance and payment in full
                 of all of LESSEE's covenants contained in this Lease. The bank
                 or trust company holding such Compensation shall be deemed to
                 be LESSOR's agent for the purpose of perfecting LESSOR's
                 security interest in such sums and shall be notified of, and
                 accept such appointment as agent. If LESSEE shall replace such
                 Engine in accordance with the provisions of Subsection 12(B),
                 LESSOR shall, so long as no Default or Event of Default or
                 event which, with the giving of notice or the passage of time,
                 or both, would constitute a Default or an Event of Default
                 shall have occurred and be continuing, return, or cause to be
                 returned, all moneys and investments then held in such account
                 to LESSEE.

                  (E) PAYMENTS DURING EXISTENCE OF AN EVENT OF DEFAULT. Any
payment referred to in Subsection 12(A),(B),(C) or (D) hereof which is payable
to LESSEE hereunder shall not be paid to LESSEE, or, if previously paid
directly to LESSEE, shall not be retained by LESSEE, if at the time of such
payment a Default or an Event of Default or an event which with the giving of
notice or the passage of time, or both, would constitute a Default or an Event
of Default hereunder shall have occurred and be continuing, but shall be paid
to and retained by LESSOR as security for the obligations of LESSEE under this
Lease until such time as such Default or Event of Default or event which with
the giving of notice or the passage of time, or both, would constitute a
Default or Event of Default shall have been remedied, whereupon such payment
shall be made to LESSEE.

                                   SECTION 13

                                    INSURANCE

                  (A) PUBLIC LIABILITY AND PROPERTY DAMAGE LIABILITY INSURANCE.
LESSEE will carry and maintain in effect, at its own expense, with Approved
Insurers, public liability insurance (including, but not limited to,
contractual liability, and passenger legal liability), and property damage
liability insurance with respect to the Aircraft, in amounts per occurrence of
not less than the Minimum Liability Coverage, or such greater amounts as LESSEE
may carry from time to time on other similar aircraft in its fleet. LESSEE
shall not discriminate against the Aircraft in


<PAGE>

                                                                           41

providing such insurance coverage. Each and any policy of insurance carried in
accordance with this Subsection (A), and each and any policy obtained in
substitution or replacement for any of such policies, (i) shall designate
LESSOR, Jetz Ventures, Lufthansa and the party who conveys title to the -9A's
to Jetz Ventures or directly to LESSOR (the "-9A Vendor") and their respective
officers, directors, shareholders, members, employees, agents and assigns
(collectively, the "Additional Insureds"), as additional insureds as their
interests may appear (but without imposing upon the Additional Insureds any
obligation imposed upon the insured, including, without limitation, the
liability to pay any premiums for any such policies, but LESSOR, Jetz Ventures,
the -9A Vendor and/or Lufthansa shall have the right to pay such premiums if it
shall so elect), and (ii) shall expressly provide that, in respect of the
interests of the Additional Insureds in such policies, the insurance will not
be invalidated by any action or inaction of the LESSEE, and shall insure the
Additional Insureds, regardless of any breach or violation by LESSEE of any
warranty, declaration or condition contained in such policies, (iii) shall
provide that if such insurance is canceled by insurers for any reason
whatsoever, or is adversely changed in any way by insurers with respect to the
interests of the Additional Insureds, or if such insurance is allowed to lapse
for nonpayment of premiums, such cancellation, change or lapse shall not be
effective as to the Additional Insureds for 30 days (seven (7) days or such
shorter period as may be customary in the case of any war risks and allied
perils coverage), in each instance, after the issuance to LESSOR, Jetz
Ventures, the -9A Vendor and Lufthansa of written notice by such insurer or
insurers and/or brokers to LESSOR, Jetz Ventures, the -9A Vendor and Lufthansa
of such prospective cancellation, change or lapse, (iv) shall provide coverage
on a worldwide basis, subject to such territorial exclusions as may be usual
and customary in the worldwide airline insurance industry for airlines
similarly situated with LESSEE, (v) shall provide that, as against the
Additional Insureds, the insurer shall waive any rights of set-off,
counterclaim or any other deduction, whether by attachment or otherwise, and
waives any right of subrogation it may have against the Additional Insureds but
only to the same extent that LESSEE has waived its right of recovery against
the Additional Insureds under the Lease Documents. Each liability policy shall
be primary without right of contribution from any other insurance which may be
carried by LESSOR, Jetz Ventures, the -9A Vendor, Lufthansa or their assigns,
and shall expressly provide that all of the provisions thereof shall operate in
the same manner as if there were a separate policy covering each insured,
provided that such provisions shall not operate to increase the insurer's limit
of liability. No liability policy shall permit any deductible or self-insurance
provision except for baggage and cargo as is customary in the London or U.S.
aviation insurance industry and such other deductibles only with the consent of
the LESSOR, which consent shall not be unreasonably withheld or delayed, which
from time to time LESSEE can demonstrate are standard in comprehensive
liability insurance and, in particular, public liability risks (including,
INTER ALIA, contractual liability and passenger liability coverage) for major
international passenger air carriers in the then current London or U.S.
aviation insurance market.


<PAGE>

                                                                           42

                 (B) HULL WAR RISKS INSURANCE. LESSEE will carry and maintain in
effect with Approved Insurers, at its own expense, hull war risks and allied
perils insurance on the Aircraft (which shall include, but not be limited to, a
disappearance clause and coverage for hijacking, declared or undeclared war and
insurrections, strikes, riots, commotion's or labor disturbances, malicious
acts or acts of sabotage and unlawful seizure or wrongful exercise of control
of the Aircraft in flight by a person on board such Aircraft acting without the
consent of LESSEE) in an amount not less than the Agreed Value or such greater
amounts as LESSOR may request from time to time (and for which LESSOR shall
reimburse LESSEE for its cost of increased premium, if any, for such greater
amounts of insurance) and covering those perils which, from time to time, are
customarily covered by similar insurance maintained by major international
passenger air carriers insuring in the London or U.S. Aviation insurance
market.

                 (C) ALL RISKS HULL INSURANCE. LESSEE, at its own expense, will
maintain in effect with Approved Insurers all risks ground and flight aircraft
hull insurance covering such Aircraft, and fire, transit, spares and extended
all risks coverage insurance with respect to Engines and Parts while not
installed on such Aircraft or an aircraft, which in each case is of the type
maintained by major international passenger air carriers similarly situated to
LESSEE and operating similar aircraft and engines which comprise LESSEE's
fleet. At all times while the Aircraft is subject to this Lease, such insurance
shall be for an amount not less than the Agreed Value or such greater amounts
as LESSOR may request from time to time (and for which LESSOR shall reimburse
LESSEE, at its own cost of increased premium, if any, for such greater amounts
of insurance).

                     Notwithstanding anything above, each and every policy of
insurance obtained and maintained pursuant to Subsection (B) and this
Subsection (C), and each and every policy obtained in substitution or
replacement for any such policies, (i) shall designate LESSOR as owner of the
Aircraft covered thereby, and shall designate LESSOR, or its assigns, as loss
payee, as their respective interests may appear (but without imposing upon
LESSOR or its assigns, any obligation imposed upon the insured, including,
without limitation, the liability to pay any premiums for any such policies,
but LESSOR and/or its assigns shall have the right to pay such premiums if they
shall so elect), (ii) shall expressly provide that, in respect of the interests
of LESSOR or its assigns in such policies, the insurance shall not be
invalidated by any action or inaction of LESSEE and shall insure LESSOR or its
assigns, regardless of any breach or violation of any warranty, declaration or
condition contained in such policies by LESSEE, (iii) shall provide that if
such insurance is canceled for any reason whatsoever, or is adversely changed
in any way with respect to the interest of the LESSOR or its assigns, or if
such insurance is allowed to lapse for nonpayment of premium, such cancellation
change or lapse shall not be effective as to LESSOR or its assigns, for thirty
(30) days (seven (7) days or such shorter period as may be customary in the
case of any war risks or allied perils


<PAGE>

                                                                           43

coverage) after issuance to LESSOR of written notice by such insurer or
insurers of such prospective cancellation, change or lapse, (iv) shall provide
coverage on a worldwide basis, subject to such territorial exclusions as may
be usual and customary in the worldwide airline insurance industry for
airlines similarly situated with LESSEE, (v) shall provide that, as against
the LESSOR or its assigns, the insurer shall waive any rights of set-off,
counterclaim or any other deduction, whether by attachment or otherwise, and
waives any right of subrogation it may have against LESSOR or its assigns but
only to the same extent that LESSEE has waived its right of recovery against
LESSOR or its assigns under the Lease Documents, (vi) shall provide that in
the event of any damage or loss which is an Event of Loss hereunder and which
results in a payment, such payment shall be payable solely and directly to
LESSOR, for the account of all interests, (vii) shall provide that in the
event of any damage or loss which is not an Event of Loss hereunder and which
results in a payment for any one occurrence in excess of $500,000.00, such
payment shall be payable directly to LESSOR, (viii) shall provide that
payments for any one occurrence not in excess of $500,000.00 shall be payable
directly to LESSEE provided there exists no Default or Event of Default by
LESSEE, and (ix) shall provide for a 50/50 claims funding arrangement between
the all risks hull and war risks underwriters.

                        LESSEE shall have the right to carry insurance in excess
of the amounts required hereunder and the proceeds of such excess insurance
shall be payable to LESSEE. Similarly, LESSOR shall have the right to carry
additional and separate insurance for its own benefit at its own expense,
without, however, thereby limiting LESSEE's obligations under this Section 13.

                        LESSEE shall at all times maintain a deductible amount
in its all risks hull and war risks insurance policies which is no more than
Five Hundred Thousand (US$500,000.00) Dollars.

                  (D) APPLICATION OF INSURANCE PROCEEDS NOT IN EXCESS OF
$500,000.00. LESSEE shall be entitled to receive any insurance proceeds not in
excess of Five Hundred Thousand ($500,000.00) Dollars as soon as such funds are
paid by the insurance company and shall promptly receive such additional
insurance proceeds, if any, upon presentation to LESSOR of a vendor's or
LESSEE's invoice, provided that repair work is in progress, replacement parts
are ordered, or such work is complete. All insurance proceeds received by
LESSEE pursuant to this Subsection 13(D) shall be used by the LESSEE
exclusively for the repair of any damage to the Aircraft or Engines on account
of which the insurance proceeds were paid. Any amount referred to in this
Subsection 13(D) which is payable to LESSEE shall not be paid to LESSEE if, at
the time of such payment, any Default or Event of Default shall have occurred
and be continuing or if the amount of the insurance proceeds payable is less
than the estimated total cost of the repairs and LESSEE does not deliver
evidence to LESSOR that such additional amount needed to pay the estimated
total cost of repairs has been paid, but shall be held by LESSOR as security
for the obligations of LESSEE under this Lease and such amount shall be paid to
LESSEE at such time as there shall not be continuing any such Default or Event
of Default.


<PAGE>

                                                                           44

                  (E) APPLICATION IN DEFAULT. Any insurance proceeds referred to
in this Lease which are otherwise payable to LESSEE, or if it has been
previously paid to LESSEE and not yet applied by LESSEE as permitted or
required hereunder, shall be delivered from LESSEE to LESSOR if, at the time of
such payment, a Default or an Event of Default shall have occurred and be
continuing. In such case, all such amounts shall be paid to and held by LESSOR
as security for the obligations of LESSEE hereunder.

                  (F) CERTIFICATES. Not less than three (3) Business Days prior
to the Effective Date, and thereafter on each renewal by the LESSEE of the
insurance required hereby, LESSEE will furnish to LESSOR a certificate
executed and delivered by an Approved Insurer, appointed by LESSEE, describing
in reasonable detail, and in accordance with customary practice, insurance
carried on the Aircraft and certifying that the insurance then maintained on
the Aircraft complies with the terms of this Lease. LESSEE will cause such
Approved Insurer, identified to and reasonably acceptable to LESSOR, to agree
to hold all insurance contracts and slips for the benefit of LESSOR and to
advise LESSOR in writing at least thirty (30) days (seven (7) days in the case
of any war risk and allied perils coverage) prior to the non-renewal,
termination, or cancellation for any reason (including, without limitation,
failure to pay premiums therefor) of any such insurance.

                        In the event LESSEE shall fail to maintain insurance as
herein provided, LESSOR may at its option provide such insurance and, in such
event, LESSEE shall, upon demand, reimburse LESSOR, as Supplemental Rent for
the cost thereof.

                  (G) CHANGES IN INDUSTRY PRACTICE. If there shall be a
fundamental change in the generally accepted industry-wide practice with
respect to the insurance of aircraft (whether relating to all or any of the
types of insurance required to be effected pursuant to the terms of this
Section 13) and, as a consequence thereof, LESSOR shall be of the reasonable
opinion that the insurance required pursuant to the provisions of this Section
13 shall be insufficient to protect the interests of LESSOR, the insurance
requirements set forth in this Section 13 shall be varied as may be mutually
agreed so as to include such additional or varied requirements to be effected
pursuant to the terms of this Section 13, and as so varied, shall provide the
same protection to LESSOR as it would have done had such change in generally
accepted industry-wide practice not occurred. If any such change in generally
accepted industry-wide practice would enable LESSEE, but for the requirements
in this Section 13, to reduce its expenditures in relation to all or any of
the types of insurance required to be effected pursuant to the terms of this
Section 13 without, in the reasonable opinion of LESSOR, prejudicing the
interest of LESSOR, the insurance requirements in this Section 13 shall be
amended to take account of such change in generally accepted industry-wide
practice to the extent required to enable LESSEE to reduce such expenditures,
provided, however, that in no event shall such public liability insurance
coverage set forth in Section 14 be less than Three Hundred Fifty
Million(US$350,000,000) Dollars.


<PAGE>

                                                                           45

                                   SECTION 14

                                 INDEMNIFICATION

                  (A) LESSEE agrees to indemnify, reimburse, defend, protect,
save and hold harmless the Indemnitees from and against any and all claims,
damages, losses, liabilities, demands, suits, judgments, causes of action,
legal proceedings, whether civil or criminal, penalties, fines, other
sanctions, and any costs and expenses in connection herewith, including, but
not limited to, attorney's fees and expenses (any and all of which are
hereafter referred to as "Claims") which in any way may result from, pertain
to, or arise in any manner out of, or are in any manner related to the Aircraft
or this Lease, arising out of events occurring on or subsequent to the
Effective Date through and including the date this Lease terminates and all
obligations of LESSEE have been fully and satisfactorily performed, or the
breach of any representation, warranty or covenant made by LESSEE hereunder,
including, but not limited to, (i) the condition, ownership, manufacture,
delivery, non-delivery, lease, acceptance, rejection, possession, return,
disposition, use, or operation of the Aircraft either in the air or on the
ground; or (ii) any defect in the Aircraft arising from the material or any
articles used therein or from the design, testing, or use thereof or from any
maintenance, service, repair, overhaul, or testing of such Aircraft, regardless
of when such defect shall be discovered (including, but not limited to,
infringement of patent or other right or latent and other defects whether or
not discoverable by LESSEE or LESSOR), whether or not such Aircraft is at the
time in the possession of LESSEE, and regardless of where such Aircraft may
then be located; or (iii) this Lease or any other transaction, approval, or
document contemplated hereby or given or entered into in connection herewith;
provided, however, that LESSEE shall be subrogated to all rights and remedies
which LESSOR may have against the Manufacturer or Engine Manufacturer.

                          LESSEE hereby waives and releases any claim now or
hereafter existing against any Indemnitee, on account of any Claims for or on
account of or arising or in any way connected with injury to or death of
personnel of LESSEE or loss or damage to property of LESSEE or the loss of use
of any property which may result from or arise in any manner out of or in
relation to the leasing, condition, use, or operation of the Aircraft, either
in the air or on the ground during the Base Term hereof, or which may be caused
during such Base Term by any defect in such Aircraft from any material or any
article used therein or from the design or testing thereof, or use thereof or
from any maintenance, service, repair, overhaul, or testing of such Aircraft
regardless of when such defect may be discovered, whether or not such Aircraft
is at the time in the possession of LESSEE, and regardless of the location of
such Aircraft at any such time.

                          Without limitation upon LESSEE's liability under this
Section 14, LESSEE hereby agrees to indemnify, reimburse, defend, protect, save
and hold each Indemnitee harmless from any Claims in any manner imposed upon or
accruing against each Indemnitee because


<PAGE>

                                                                           46

of the manufacture of the Aircraft, any originally manufactured design or
design incorporated prior to the operation of the Aircraft by LESSEE, any
change or alteration of design by LESSEE, or material therein or relating
thereto, because of infringement of patent or any other right. With respect to
any claim for infringement of patent or any other right which is alleged to
have occurred prior to LESSEE leasing the Aircraft, LESSEE's indemnification
obligation with respect to such claims shall be limited to claims that are
asserted during the Base Term of this Lease or any extension thereof. The
foregoing limitation shall not apply to claims for infringement of patent or
any other right which is alleged to have occurred at any time during the Base
Term or any extension thereof regardless of when such claims are asserted.

                  LESSEE hereby agrees, and shall have the right, to assume and
conduct, promptly and diligently, at its sole cost and expense, the entire
defense of any Indemnitee against any such Claims, and any claim, suit, or
action for which any Indemnitee is required to assume liability.

                          LESSOR agrees to give LESSEE prompt notice of any
Claim hereunder following LESSOR's actual knowledge of such Claim. The failure
of LESSOR to give the notice required by this Section 14 of any Claim shall not
constitute a release by LESSOR or the Indemnitees of any obligations of LESSEE
to any Indemnitees in respect of any such Claim, unless LESSEE is materially
adversely affected solely by such failure of LESSOR to give such notice. No
settlement of any Claim by an Indemnitee may be made without the consent of
LESSEE, which consent or withholding of consent shall be promptly noticed to
LESSOR and the Indemnitee seeking indemnification. LESSEE may only withhold
consent to a proposed settlement of a Claim if LESSEE posts a bond issued by a
reputable bonding or insurance company reasonably satisfactory to LESSOR, in an
amount not less than the full amount of the Claim together with interest and
penalties, if any, thereon.

                          The indemnifications contained in this Section 14
shall continue in full force and effect notwithstanding any expiration or other
termination of this Lease and are expressly made for the benefit of and shall
be enforceable by each Indemnitee and their respective successors and assigns.

                  (B) EXCEPTIONS. In no event shall the indemnity provided for
in Section 14(A) extend to any Claim or disbursement of any Indemnitee
resulting from, pertaining to or arising in any manner out of, or in any
manner relating to, the gross negligence or willful misconduct of any
Indemnitee.

                                   SECTION 15

                                      LIENS

                  LESSEE shall not directly or indirectly create, incur, assume,
or suffer to exist any Lien on or with respect to the Aircraft, title thereto,
any interest therein, this Lease or any interest therein, except Permitted
Liens. LESSEE shall promptly,


<PAGE>

                                                                           47

at its own expense, take such action as may be necessary to duly discharge any
Lien (except for Permitted Liens) directly or indirectly created, incurred,
assumed or suffered to exist by LESSEE if the same shall arise at any time
with respect to the Aircraft, title thereto, any interest therein, this Lease
or any interest therein.

                                   SECTION 16

                   PERFECTION OF TITLE AND FURTHER ASSURANCES

                   (A) Except through the action or inaction of LESSOR after due
notice and request having been made upon it, if, at any time, any filing or
recording is reasonably necessary to protect the interest of LESSOR, LESSEE
shall, at its own cost and expense, cause this Lease, any assignment of this
Lease, any security agreement with respect to the Aircraft, financing
statements with respect thereto, and any and all additional instruments which
shall be executed pursuant to the terms hereof, so far as permitted by
applicable Law, to be kept, filed and recorded and to be re-executed, re-filed
and re-recorded at all times in the appropriate office pursuant or in relation
to any Laws of any Governmental Entity, as LESSOR may request, to perfect,
protect, and/or preserve the rights and interests of LESSOR hereunder and in
the Aircraft, and LESSEE shall furnish to LESSOR evidence satisfactory to
LESSOR of each such filing, re-filing, recordation and re-recordation.

                   (B) Without limiting the foregoing, LESSEE shall do or cause
to be done, at LESSEE's cost and expense, any and all acts and things which
may be required under the terms of the Convention on the International
Recognition of Rights in Aircraft ("Mortgage Convention") to perfect and
preserve the title of LESSOR to the Aircraft (assuming, that with respect to
the U.S. registration of the Aircraft, LESSOR meets the citizenship
requirements for such registration) within the jurisdiction of any signatory
which has ratified the Mortgage Convention, as LESSOR may reasonably request.
LESSEE shall also do or cause to be done, at its own expense, any and all acts
and things which may be required under the terms of any other Law involving
any jurisdictions in which LESSEE will operate, or any and all acts and things
which LESSOR may reasonably request to perfect and preserve LESSOR's ownership
rights regarding the Aircraft within any such jurisdiction.

                   (C) LESSEE will not suffer any matter or thing whatsoever
whereby the LESSOR's title in and to the Aircraft may be impaired.

                                   SECTION 17

                         RETURN OF AIRCRAFT AND RECORDS

                   (A) RETURN. On the Expiration Date, or pursuant to Section 19
hereof (such date or event being hereinafter referred to as a "Return
Occasion"), LESSEE, at its own expense, on or prior to the Return Occasion,
shall return such Aircraft to LESSOR at the Return Location or such other
location as may be mutually agreed


<PAGE>

                                                                           48

upon by LESSOR and LESSEE, fully equipped as delivered or modified as provided
hereunder with all required Engines installed thereon.

                  (B) RECORDS. Upon a Return Occasion applicable to the
Aircraft, LESSEE, at its own expense, shall deliver to LESSOR all Aircraft
Documents listed in Exhibit "B", as updated, amended or supplemented along
with such other records and documents in such form as are necessary to qualify
the Aircraft for the issuance, at LESSOR's election, of an Export Certificate
of Airworthiness issued by the Air Authority or the issuance by the FAA of an
FAA Standard Airworthiness Certificate so as to permit operation of the
Aircraft under the Act and FAR Part 121. Such records and manuals shall be
current and shall constitute an accurate representation of the condition of
the Aircraft.

                  (C) CONDITION OF AIRCRAFT. Upon a Return Occasion applicable
to the Aircraft, LESSEE shall return the Aircraft to LESSOR in such condition
so that the Aircraft shall: (1) comply with each and every return condition
requirement set forth in Exhibit "H" hereto; (2) have accomplished all work
necessary to obtain a valid Certificate of Airworthiness for Export or
Standard Airworthiness Certificate (other than (i) having TCAS and windshear
detection systems installed, (ii) complying with Stage III noise requirements,
subject to the provisions of Section 8(C) of this Lease, and (iii) a fresh C
check (however, the Aircraft shall be returned to LESSOR with a fresh B
check)) as LESSOR shall elect, in each case issued by the FAA; and (3) shall
be free and clear of all Liens, except LESSOR's Liens and Liens which may have
existed prior to the Effective Date and were not created by or consented to by
LESSEE.

                  (D) FINAL INSPECTION. Upon or next preceding a Return Occasion
with respect to the Aircraft hereunder, LESSEE shall make such Aircraft
available to LESSOR not less than ten (10) days prior to the date of the
Return Occasion for detailed inspection in order to verify that the condition
of such Aircraft complies with the requirements set forth above (such
inspection being hereinafter referred to as the "Final Inspection"). Such
Final Inspection may be scheduled at an appropriate maintenance facility of
the Authorized Maintenance Performer then performing maintenance of such
Aircraft, pursuant to Subsection 7(D) hereof, and LESSEE shall give LESSOR not
less than ten (10) days' prior written notice of the location and commencement
date of such Final Inspection. The period allowed for the Final Inspection
shall, if necessary, be extended so as to have such duration as to permit the
performance of all of the following, each of which must occur during such
period:

                           (1) a B check performed in accordance with LESSEE's
                  Maintenance Program;

                           (2) the opening, in order to verify any aspect of the
                  condition of any area of the Aircraft which would normally be
                  accessible during the maintenance check being performed, or at
                  LESSOR's request, the opening of any areas of the Aircraft if
                  LESSOR reasonably believes, based


<PAGE>

                                                                           49

                  on prior inspections or other evidence, that opening of such
                  areas would reveal that the Aircraft does not completely
                  comply with the requirements of this Section 17 and
                  Exhibit "H"; and

                           (3) No less than three (3) of LESSOR's
                  representatives shall be permitted to attend each phase of
                  activity required to be conducted during the Final Inspection.
                  A Final Inspection shall commence on or before the date of a
                  Return Occasion with respect to the Aircraft and shall
                  continue on consecutive days until all activity required
                  pursuant to the terms of Exhibit "H" and the above provisions
                  have been concluded. To the extent that any portion of the
                  Final Inspection extends beyond the date of a Return Occasion,
                  the Base Term with respect to the Aircraft undergoing the
                  Final Inspection shall be deemed to be automatically extended
                  (but LESSEE shall have no right to operate the Aircraft during
                  such time except in connection with any required re-delivery
                  test flights), and the LESSEE shall be obligated to continue
                  to insure the Aircraft, in accordance with the provisions of
                  this Lease, and to pay Rent hereunder on a daily basis,
                  calculated at a daily rate equal to 1/15 of the Basic Rent,
                  until the Final Inspection shall have been concluded
                  (provided, however, that LESSEE's shall have no obligation to
                  pay Basic Rent beyond the originally scheduled Expiration Date
                  if the Final Inspection is not completed on or before the
                  Expiration Date due to LESSOR's failure to timely appear for
                  such inspection unless such failure is caused by LESSEE
                  denying access to the Aircraft and/or Aircraft documents at a
                  time when same were to be made available to LESSOR or if
                  LESSEE unreasonably interferes with such Final Inspection by
                  LESSOR). All storage expenses attributable to any extension of
                  the Base Term pursuant to the preceding sentence shall be
                  payable by LESSEE.

                  (E) AIRCRAFT DOCUMENTATION. In order to enable LESSOR to
prepare for its Final Inspection of the Aircraft pursuant to Subsection 17(D)
above, LESSEE agrees to make available at LESSEE's maintenance base to LESSOR,
not later than ten (10) days prior to the commencement of such Final
Inspection, the Aircraft Documents listed in Exhibit "B" hereto, together with
such other documentation regarding the condition, use, maintenance, operation
and history of the Aircraft as LESSOR may reasonably request.

                  (F) LESSEE'S CORRECTION AND SUBSEQUENT CORRECTIONS. To the
extent that the Aircraft, any Engine or any of the Aircraft Documents fails
upon a Return Occasion to conform to any requirement imposed by Section 17
hereof and Exhibit "H", LESSOR may, at its option:

                          (1) continue the Lease in effect in the manner
                 provided for in Subsection 17(D)(3) above with regard to
                 automatic extension with respect to such Aircraft until such
                 time as the nonconforming items are corrected; or


<PAGE>

                                                                           50

                           (2) request LESSEE to pay, and LESSEE shall pay to
                  LESSOR, an amount equal to the amount required (labor and
                  materials) by the then current Authorized Maintenance
                  Performer or any other Person designated by LESSOR, as the
                  case may be, to correct such nonconforming items. Any such
                  amount payable by LESSEE to LESSOR for such correction shall
                  become Supplemental Rent, payable by LESSEE within five (5)
                  days following the submission of a written statement by LESSOR
                  to LESSEE identifying the items corrected or to be corrected
                  and setting forth the expense of such correction. LESSEE's
                  obligation to pay such Supplemental Rent shall survive the
                  passage of the early termination of the Base Term or other
                  termination of this Lease. In addition to the foregoing, but
                  subject to Sections A(ix) and (xi) of Exhibit "H", and under
                  the same payment terms, LESSEE, with regard to any
                  time-limited component installed on such Aircraft which does
                  not satisfy the return condition requirements of this Section
                  17 and Exhibit "H" upon a Return Occasion, shall pay LESSOR,
                  at the time of a Return Occasion, an amount equal to the
                  amount which would be required to be paid to the Person
                  selected by LESSOR for putting such item in such condition.

                   (G) DISPUTE AS TO COMPLIANCE WITH RETURN CONDITIONS. Should
there be any dispute as to whether the Aircraft meets the return conditions,
the matter shall be resolved by an independent knowledgeable aviation
maintenance expert reasonably acceptable to LESSOR and LESSEE.

                                   SECTION 18

                                EVENTS OF DEFAULT

                   Each of the following events shall constitute a Default and
after the applicable grace, notice or cure period, if any, an Event of
Default:

                   (A) LESSEE shall fail to make any payment of Rent when due
under this Lease and such payment shall remain unpaid for a period of three
(3) days from the due date;

                   (B) LESSEE shall fail to carry and maintain insurance on or
with respect to the Aircraft in accordance with the provisions of Section 13
hereof or shall operate the Aircraft or permit the Aircraft to be operated in
violation of any insurance policy required to be provided pursuant to Section
13 hereof;

                   (C) Except as otherwise expressly provided in this Section 18
and Subsection 18(B) above, for which no notice is required, LESSEE shall fail
to perform or observe any covenant, condition or agreement to be performed or
observed by LESSEE under the Lease and such failure shall continue for a
period of thirty (30) days after written notice thereof from LESSOR to LESSEE;


<PAGE>

                                                                           51

                  (D) Any representation or warranty made by LESSEE herein, or
in any notice, certificate or other document furnished by or on behalf of
LESSEE herein to LESSOR or its assigns, shall prove to have been incorrect in
any material respect when made;

                  (E) LESSEE or Airgroup shall consent to the appointment of a
receiver, trustee or liquidator for itself or for a substantial part of its
property, or LESSEE or Airgroup shall admit in writing its inability to pay
its debts generally as they become due, or shall make a general assignment for
the benefit of creditors, or LESSEE or Airgroup shall file a voluntary
petition in bankruptcy or a voluntary petition or answer seeking
reorganization in a proceeding under any Laws dealing with bankruptcy,
insolvency, moratorium or creditors' rights generally (any or all of which are
hereinafter referred to as "Bankruptcy Laws"), or an answer admitting the
material allegations of a petition filed against LESSEE or Airgroup in any
such proceeding, or LESSEE or Airgroup shall by voluntary petition, answer or
consent to or seek relief under the provisions of any Bankruptcy Laws;

                   (F) An order, judgment or decree shall be entered by any
court of competent jurisdiction appointing, without the consent of LESSEE or
Airgroup, as the case may be, a receiver, trustee or liquidator for LESSEE or
Airgroup or any substantial part of its property, or any substantial part of
the property of LESSEE or Airgroup shall be sequestered, and any such order,
judgment, decree or appointment, or sequestration, shall remain in force
undismissed, unstayed or unvacated for a period of sixty (60) days after the
date of entry thereof;

                  (G) A petition against LESSEE or Airgroup in a proceeding
under the Bankruptcy Laws of any Governmental Entity shall be filed and shall
not be withdrawn or dismissed within sixty (60) days thereafter, or if, under
the provisions of any Bankruptcy Laws which may apply to LESSEE or Airgroup,
any court of competent jurisdiction shall assume jurisdiction, custody or
control of LESSEE or Airgroup or of any substantial part of its property, and
such jurisdiction, custody or control shall remain in force unrelinquished,
unstayed or unterminated for a period of ninety (90) days;

                  (H) LESSEE or Airgroup shall be dissolved or liquidated,
terminate its existence or suspend its operations, shall lose any right,
privilege or franchise necessary to maintain its corporate existence, or shall
dispose of all or substantially all of its properties to any Person;

                  (I) LESSEE shall make or permit any assignment or transfer of
this Lease or of possession of the Aircraft other than as permitted hereunder;

                  (J) Any license, permit, certificate, authorization, consent,
approval, notification, registration or filing now or hereafter necessary to
enable LESSEE to perform or comply with its obligations under the Lease shall
fail to be timely issued, granted or made, or shall expire or lapse and shall
not be forthwith


<PAGE>

                                                                           52

renewed or extended or shall be revoked, withdrawn, withheld or adversely
modified, or shall cease to be in full force and effect;

                  (K) All or a substantial part of the properties of LESSEE or
Airgroup shall be condemned, seized or otherwise appropriated for custody or
control, or such property shall be assumed by any Governmental Entity or any
court or other Person purporting to act under the authority of any Governmental
Entity, or LESSEE or Airgroup shall be prevented from exercising normal control
over all or a substantial part of its properties and the events as set forth in
this Subsection 18(K) are not remedied within sixty (60) days after they occur;

                  (L) LESSEE shall fail to pay when due any obligation for the
payment of money in excess of Four Hundred Thousand (US$400,000) Dollars under
any agreement to which LESSEE is a party where such failure would constitute an
event of default thereunder or permit the party to whom such payment was owed
(hereinafter referred to as a "Creditor") to exercise remedies under such
agreement as a result of such non-payment; provided, however, that the
foregoing shall only constitute a Default and not an Event of Default hereunder
for the period of time that the Creditor states in a letter, addressed to and
delivered to LESSOR, that it irrevocably agrees for such period of time to
forebear from the exercise of remedies or the taking of other action against
LESSEE (the "Forbearance Period") as a result of such non-payment of money.
Upon the expiration of the Forbearance Period, unless such period has been
extended by the Creditor (but in no event may the Forbearance Period, in the
aggregate, be greater than sixty (60) days from the original due date for such
payment), unless LESSEE has delivered to LESSOR written confirmation from the
Creditor that it has been paid in full or has otherwise waived its claim
against LESSEE or has otherwise settled with LESSEE, the Default set forth in
this subsection (L) shall automatically and without any further action on the
part of LESSOR be deemed to constitute an Event of Default hereunder;

                  (M) LESSEE shall voluntarily suspend all or substantially all
of its commercial revenue passenger operations, or the franchises, concessions,
permits, licenses, rights or privileges required for the conduct of the
commercial revenue passenger operations of LESSEE shall be revoked, canceled or
otherwise terminated or the free and continued use and exercise thereof
curtailed or prevented, and as a result the principal business activity of
LESSEE shall cease to be that of commercial revenue passenger airline;

                  (N) If for any reason or at any time Airgroup owns less than
seventy percent (70%) of the outstanding voting stock of LESSEE; or

                  (O) An "Event of Default" shall occur and be continuing under
any other lease agreement entered into between LESSOR (or any affiliated or
related entity to LESSOR) and LESSEE.


<PAGE>

                                                                           53

                                   SECTION 19

                                    REMEDIES

                  Upon the occurrence of any Event of Default, and at any time
thereafter so long as the same shall be continuing, LESSOR may, at its option,
declare this Lease to be in default, and at any time thereafter, so long as
LESSEE shall not have remedied any outstanding Event of Default, LESSOR may
exercise one or more of the following remedies with respect to the Aircraft as
LESSOR, in its sole discretion, shall elect, to the extent available and
permitted by, and subject to compliance with, any mandatory requirements of
applicable Law then in effect; PROVIDED, HOWEVER, that upon the occurrence of
any Event of Default specified in paragraphs (E),(F),(G) or (H) of Section 18,
LESSOR shall be entitled automatically, as of the day prior to such
occurrence, to exercise any of the following remedies without declaring this
Lease to be in default or making demand or giving notice or the taking of any
other action:

                  (A) Demand that LESSEE, and LESSEE shall, upon the written
demand of LESSOR, at LESSEE's expense, return the Aircraft and Aircraft
Documents promptly to LESSOR in the manner and condition required by, and
otherwise in accordance with all of the provisions of, Section 17 and Exhibit
"H" hereof; or LESSOR, at its option and to the extent permitted by applicable
Law, may enter upon the premises where all or any part of the Aircraft and
Aircraft Documents are located and take immediate possession of and remove the
same, by summary proceedings or otherwise, all without liability accruing to
LESSOR for or by reason of such entry or taking of possession, whether for the
restoration of damage to property caused by such taking or otherwise;

                  (B) Sell the Aircraft at public or private sale, as LESSOR may
determine, or otherwise dispose of, hold, use, operate, lease to others, or
keep idle the Aircraft, as LESSOR, in its sole discretion, may determine, all
free and clear of any rights of LESSEE and without any duty to account to
LESSEE with respect to such action or inaction, or for any proceeds with
respect thereto;

                  (C) Demand (whether or not LESSOR, pursuant to Subsection
19(B) hereof, may have sold the Aircraft) that LESSEE pay LESSOR, and LESSEE
shall upon such demand pay to LESSOR, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Rent for such Aircraft due after
such payment occurs), any accrued and unpaid Rent for such Aircraft due up to
the time LESSOR demands such payment, plus the amount by which the fair market
value of such Aircraft (assuming the condition of the Aircraft and the
Aircraft Documents fully and satisfactorily meets all of the return conditions
set forth herein and on Exhibit "H") exceeds the net cash proceeds of any sale
of such Aircraft, together with interest at the Overdue Rate on such fair
market value or portion thereof and such unpaid Rent from the date of LESSOR's
demand to the date such payment is made;

                  (D) Proceed by appropriate court action or actions,


<PAGE>

                                                                           54

either at Law or in equity, to enforce performance by LESSEE of the applicable
obligations and covenants of LESSEE under this Lease and to recover damages for
the breach thereof, or to rescind this Lease as to the Aircraft;

                  (E) Terminate this Lease or any of LESSEE's rights hereunder
by written notice, and repossess the Aircraft and Aircraft Documents, provided
such termination shall not release LESSEE from its financial obligations
hereunder or any other obligations hereunder which can be satisfied by the
payment of money (including the payment of money for the performance of
services); or

                  (F) Exercise any and all other rights and remedies provided
for under applicable law whether or not such rights and remedies are
specifically enumerated herein.

                          Further, should the LESSEE fail to return the
Aircraft and Aircraft Documents upon termination of the Lease for any reason
whatsoever except due to an Event of Loss and as set forth in Subsection 17(F),
without prejudice to LESSOR's rights hereunder to demand return of the Aircraft
in the condition required by this Section, LESSEE shall continue to pay Rent to
LESSOR for each day the Aircraft remains in LESSEE's possession at the rate of
1/15 of the monthly Basic Rent then in effect.

                          In addition, LESSEE shall be liable for any and all
unpaid Rent due hereunder before or during the exercise of any of the foregoing
remedies, and for all attorneys' fees, legal expenses and other costs and
expenses incurred by LESSOR, or its respective agents by reason of the
occurrence of any Event of Default or the exercise of LESSOR's remedies with
respect thereto, including all costs and expenses incurred in connection with
the return of the Aircraft, in accordance with the terms of Section 17 and
Exhibit "H" hereof, or with placing such Aircraft in such condition.

                          Except as otherwise expressly provided above, no
remedy referred to in this Section 19 is intended to be exclusive, but each
shall be cumulative and in addition to any other remedy referred to above or
otherwise available to LESSOR under any applicable Law, and the exercise or
commencement of exercising by LESSOR of any one or more of such remedies shall
not preclude the simultaneous or later exercise by LESSOR of any or all such
other remedies. No express or implied waiver by LESSOR of any Default or Event
of Default shall in any way be, or be construed to be, a waiver of any future
or subsequent Default or Event of Default. LESSEE hereby agrees that, except as
provided in this Section 19, any financing profit or savings accruing to LESSOR
by virtue of LESSEE's default and LESSOR's subsequent sale, re-letting, or
award shall in no way reduce, offset or mitigate the damages for which LESSEE
is liable hereunder.

                          To facilitate LESSOR in the termination of this Lease
and the exercise of its remedies upon the occurrence and continuation of an
Event of Default, LESSEE hereby appoints LESSOR as LESSEE's irrevocable agent
and attorney-in-fact, pursuant to the Power of Attorney attached hereto as
Exhibit "E", to execute


<PAGE>

                                                                           55

all documents deemed necessary to release, terminate and void LESSEE's
interest in the Aircraft leased hereunder and to otherwise enable and/or
assist LESSOR in the exercise of its remedies hereunder, and to file said
documents for recordation with the FAA and any other appropriate Governmental
Entity following the occurrence of an Event of Default, where LESSOR, at its
sole discretion, may deem use of such Power of Attorney necessary to effect
any remedy which LESSOR chooses to exercise.

                                   SECTION 20

                                   ALIENATION

                  (A) There shall be no restriction upon LESSOR's right to
assign, sell, transfer, pledge, hypothecate or encumber any interest of LESSOR
(hereinafter referred to generally as "Alienation") to any other Person in the
Aircraft, this Lease and/or the proceeds thereof and hereof, subject to rights
of the LESSEE under the provisions of this Lease and provided that any such
assignment, sale, transfer, pledge, hypothecation or encumbrance does not have
a material adverse affect on LESSEE's obligations hereunder or adversely
affect the registration of the Aircraft or the quiet enjoyment of the LESSEE
therein pursuant to this Lease. To effect or facilitate any such assignment,
sale, transfer, pledge, hypothecation or encumbrance, LESSEE agrees to provide
LESSOR or LESSOR's designee or assignee with such agreements, consents,
conveyances or documents as may be reasonably requested by LESSOR. The
agreements, representations, warranties, covenants, obligations and
liabilities contained herein, including, but not limited to, all obligations
to pay Rent and indemnify LESSOR, are made for the benefit of LESSOR, any
security assignee of LESSOR and their respective successors and assigns,
notwithstanding the possibility that any such Person was not originally a
party to this Lease or may, at the time such enforcement is sought, not be a
party to this Lease.

                  (B) In the case of any Alienation or assignment by LESSOR
pursuant to the provisions of Section 20, LESSEE shall execute and deliver to
LESSOR promptly upon request of LESSOR, any consents or agreements required
for the perfection of such assignment provided that such consent or other
documents does not affect LESSEE's rights under Subsection 21(G) below.

                                   SECTION 21

                                  MISCELLANEOUS

                  (A) SEVERABILITY, AMENDMENT AND CONSTRUCTION. Any provision of
this Lease which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. No term or


<PAGE>

                                                                           56

provision of this Lease may be changed, waived, discharged, or terminated
orally, but only by an instrument in writing expressed to be a supplement to
this Lease, signed by an officer of the party against which the enforcement of
the change, waiver, discharge or termination is sought. This Lease shall
constitute an agreement of lease for the Base Term of the Lease, and nothing
herein shall be construed as conveying to LESSEE any right, title or interest
in the Aircraft, the Airframe, any Engine or Part except as a LESSEE only, for
such Base Term. The headings in this Lease are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof.
Unless the context otherwise requires, all references in this Lease to
designated Sections or other subdivisions hereof are to such designated
Sections or subdivisions; and the words "herein", "hereof", "hereto",
"hereunder", and other words of similar import refer to this instrument as a
whole and not to any particular Section or subdivision. In construing any
provision of this Lease, no account shall be taken as to the party who drafted
same and no presumption shall arise or result therefrom.

                  (B) GOVERNING LAW. This Lease shall in all respects be
governed by, and construed in accordance with, the Laws of the State of Hawaii
with respect to contracts made and to be entirely performed in such State by
residents thereof.

                  (C) ARBITRATION. Any controversy or claim between LESSOR and
LESSEE, arising out of or relating to this Lease shall, at the request of
either LESSOR or LESSEE, be decided by binding arbitration conducted in the
State of Hawaii without a judge or jury, under the auspices of the American
Arbitration Association or Dispute Prevention and Resolution, Inc. in
accordance with Chapter 658 of the Hawaii Revised Statutes and the respective
and applicable rules of the aforementioned organizations. The arbitrator will
apply any applicable statute of limitations and will determine any controversy
concerning whether an issue is arbitrable. Judgments upon the arbitration
award may be entered in any court having jurisdiction. The prevailing
(winning) party will be entitled to recover its reasonable attorney's fees and
costs as determined by the arbitrator. This agreement to arbitrate shall not
limit or restrict the right, if any, of any party to exercise before, during
or following any arbitration proceeding, with respect to any claim or
controversy, self help remedies such as setoff, to foreclose a mortgage or
lien or other security interest in any real or personal property collateral
judicially or by power of sale, or to obtain provisional or ancillary remedies
such as injunctive relief from a court having jurisdiction. Either party may
seek those remedies without waiving the right to submit the controversy or
claim in question to arbitration.

                  (D) NOTICE. Except as otherwise specified herein, all notices,
requests, demands, consents or other communications to, upon or by the
respective parties hereto shall be in the English language and in writing,
sent by international recognized express courier or telefax, and shall be
deemed to have been duly given or made when received by the party if sent by
telefax or when received by the party, if sent by express courier, addressed
to the party to


<PAGE>

                                                                           57

which such notice, request, demand or other communication is required or
permitted to be given or made hereunder, at the LESSEE'S Address or LESSOR'S
Address, as the case may be, or at such other address of which such Person
shall have notified in writing the party giving such notice.

              (E) LESSOR'S RIGHT TO PERFORM FOR LESSEE. If LESSEE fails to make
any payment of Supplemental Rent or fails to perform or comply with any
covenant, agreement or obligation contained herein, LESSOR shall have the
right, but not the obligation, to make such payment or perform or comply with
such agreement, covenant or obligation, and the amount of such payment and the
amount of the reasonable expenses of LESSOR incurred in connection with such
payment or the performance thereof or compliance therewith, together with
interest thereon at the Overdue Rate, shall be deemed Supplemental Rent,
payable by LESSEE upon demand. The taking of any such action by LESSOR
pursuant to this Subsection 21(E) shall not constitute a waiver or release of
any obligation of LESSEE under the Lease, nor a waiver of any Default or Event
of Default which may arise out of LESSEE's nonperformance of such obligation,
nor an election or waiver by LESSOR of any remedy or right available to LESSOR
under or in relation to this Lease.

                  (F) COUNTERPARTS. This Lease may be executed simultaneously in
one or more counterparts, all of which together shall constitute one and the
same Lease. To the extent that this Lease constitutes chattel paper in any
jurisdiction, no security interest herein may be created through the transfer
of possession of any counterpart other than the counterpart marked "Original."
Other than the counterpart of this Lease marked "Original," all other original
executed counterparts of this Lease shall be marked "Duplicate Original."

                  (G) QUIET ENJOYMENT. LESSOR covenants that if, and as long as,
no Event of Default hereunder has occurred and is continuing, LESSEE shall
quietly enjoy the Aircraft without interference by LESSOR or by any Person
claiming by, through or under LESSOR, or by any assignee of LESSOR, and
neither LESSOR nor any Person claiming by, through or under LESSOR, or any
assignee of LESSOR will, as long as no Event of Default hereunder has occurred
and is continuing, take any action which adversely affects the registration of
the Aircraft.

                  (H) BROKERS. LESSOR and LESSEE each agree that there has been
no third party as broker or finder involved in the introduction of LESSOR and
LESSEE with respect to this Lease or the subject matter or negotiation hereof
and each party hereby indemnifies and agrees to hold harmless the other party
from liability for fees, commissions or other claims made upon such other
party due to such claims arising through it.

                   (I) STORAGE OF AIRCRAFT. Upon the expiration or termination
of this Lease, provided that the final maintenance check prior to return is
accomplished at LESSEE's Honolulu maintenance base or the return location is
Honolulu, LESSEE shall provide storage facilities for the Aircraft at a
location where


<PAGE>

                                                                           58

LESSEE has storage facilities for a period not to exceed sixty (60) days (the
"Storage Period"). During the Storage Period, LESSOR shall bear the risk of
loss of the Aircraft and shall pay maintenance, insurance and other costs
(except for the cost of the storage facilities provided by LESSEE) with
respect to the Aircraft. Upon the expiration of the Storage Period, LESSEE
shall cooperate with LESSOR by flying the Aircraft to the Return Location.

                   (J) EXPENSES. Unless otherwise specifically provided for to
the contrary, LESSOR and LESSEE shall each bear their own expenses in
connection with this transaction, including, but not limited to the fees and
expenses of counsel. Notwithstanding the foregoing, LESSOR and LESSEE shall
each be responsible for one-half of the fees and expenses of FAA counsel.

                                   SECTION 22

                              SUBLEASE; ASSIGNMENT

                   (A) LESSEE may sublease the Aircraft to any Air Carrier
provided that (i) such Air Carrier at the time of such subleasing is solvent
and is not in receivership or subject to the jurisdiction of any bankruptcy
court, (ii) that LESSOR has consented to such subleasing, such consent not to
be unreasonably withheld, and (iii) that LESSOR's title in and to the Aircraft
and this Lease remain fully perfected and protected and LESSOR receives
satisfactory legal opinions with respect thereto. LESSEE shall be responsible
for all reasonable costs and expenses incurred by LESSOR in connection with
any subleasing of the Aircraft, including, but not limited to, the reasonable
fees and expenses of counsel to LESSOR.

                   (B) Any sublease consented to by LESSOR shall contain, among
other things, the following terms and conditions:

                          (1) That such sublease is subject to and subordinate
to this Lease;

                          (2) The sublease shall not relieve the LESSEE of its
obligations under this Lease and the LESSEE shall continue to be primarily
liable hereunder;

                          (3) The terms of such sublease shall be no less
favorable to the lessor thereunder than the terms of this Lease; and

                          (4) The rights of the lessor in any Sublease
(including, but not limited to security deposits and maintenance reserves
payable thereunder) shall be assigned to LESSOR.

                          (C) All of LESSEE's obligations hereunder may be
performed by any approved sublessee, provided however that the LESSEE shall not
be released from its obligations hereunder.


<PAGE>

                                                                           59

                      (D) Nothing set forth in this Section 22 shall constitute,
or be deemed to constitute, a consent by LESSOR to the assignment by
LESSEE, in whole or in part, of this Lease or the rights and obligations of
LESSEE thereunder. Any assignment or purported assignment, in whole or in
part of this Lease or the rights and obligations of LESSEE hereunder shall
be null and void and of no force and effect unless the prior written
consent of LESSOR to such assignment had been obtained.

                                   SECTION 23

                                 EXCUSABLE DELAY

                    LESSOR or LESSEE shall not be responsible for, nor be deemed
to be in default under this Lease on account of any delay in delivery of
the Aircraft or commencement of this Lease due to any of the following
causes:

                          (a) acts of God; war, war-like operations,
insurrections or riots; fires, floods, explosions, earthquakes or serious
accidents; epidemics or quarantine restrictions; any act of government,
governmental priorities, allocation regulations or orders affecting
materials, facilities or completed aircraft; strikes or labor troubles
causing cessation, slowdown or interruption of work; or inability after due
and timely diligence to procure materials, accessories or equipment prior
to delivery (including, without limitation, the Aircraft);

                          (b) damage to the Aircraft which can reasonably be
repaired, provided Lufthansa or its agent will promptly perform such repair
work;

                          (c) Lufthansa's delay in delivery of the Aircraft to
LESSOR for whatever reason, including, but not limited to, delay caused by
an aircraft manufacturer's failure to deliver a replacement aircraft on
time; or

                          (d) correction of discrepancies evidenced during the
Delivery Check, ground inspection or demonstration flight of the Aircraft,
provided Lufthansa is promptly and diligently correcting same.

                    Should an excusable delay continue beyond December 31, 1996,
LESSOR and LESSEE shall each have the right to terminate this Lease,
without liability or further obligation to the other.

                                   SECTION 24

                                ENTIRE AGREEMENT

                    This Lease (including all Exhibits hereto) embodies the
entire agreement and understanding between LESSOR and LESSEE relating to
the subject matter hereof and supersedes all prior


<PAGE>

                                                                           60

agreements and understandings relating hereto and neither of the parties
hereto shall be bound by or charged with any oral or written agreements,
representations, warranties, statements, promises or understandings not
specifically set forth herein. This Lease may not be changed and no right
granted or obligation imposed hereunder may be waived orally, but only by
an instrument in writing signed by the party against whom enforcement of
any waiver, change, modification or discharge is sought.



<PAGE>


                                                                            61

                 IN WITNESS WHEREOF, LESSOR and LESSEE, each pursuant to due
corporate authority, have caused this Lease to be executed by their duly
authorized officers as of the day and year first above written.

<Table>
<Caption>

 LESSOR:                                                       LESSEE:

<S>                                                            <C>

 BANK OF HAWAII                                                ALOHA AIRLINES, INC.

 By: /s/ ILLEGIBLE                                             By: /s/ ILLEGIBLE
         ----------                                                    ---------

 Title: EXECUTIVE VICE PRESIDENT                               Title:  SR. VICE PRESIDENT FINANCE &
                                                                             PLANNING AND CFO
        ------------------------                                       ----------------------------

 By: /s/ ILLEGIBLE                                             By: /s/ ILLEGIBLE
         ---------                                                     ---------

 Title: SENIOR VICE PRESIDENT                                  Title:  VICE PRESIDENT PLANNING & DEVELOPMENT
        ---------------------                                          -------------------------------------

</Table>


<PAGE>


                                                                            62

                             EXHIBIT "A"                           (Page 1 of 2)


                                       AIRCRAFT SPECIFICATIONS

<Table>

<S>                                                               <C>

  Model: Boeing 737-230ADV                                         Max. Taxi Wt. 120,000 lbs.
  Serial No. 23154                                                 Max. Gross T.O. Wt. 119,500 lbs.
  Line No.                                                         Max. Landing Wt. 103,000 lbs.
  Reg. No. N823AL                                                  Max. Zero Fuel Wt. 95,000 lbs.
  Date of Mfgr. December, 1984
                                                                   Optrs. Empty Wt. 68,000 lbs.
                                                                   Payload 27,000 lbs.


</Table>
                                 AIRFRAME STATUS

<Table>

<S>                                                                     <C>

  Time as of                                                            Maintenance Program
  Total Hours
  Total Cycles
  Time Since Overhaul
  Time Since Last C Ck                                                  "D" Check -
  Time to Next Overhaul                                                 "C" Check -

</Table>

                                  ENGINE STATUS

<Table>
<Caption>

  Model                                     Serial                 REMAINING                 Limiter

<S>                                         <C>                    <C>                       <C>

  #1. Pratt & Whitney     687358            hrs/ cyc
  JT8D-15
  #2. Pratt & Whitney     702982            hrs/ cyc
  JT8D-15
  APU

</Table>

                                        LANDING GEAR - TIME REMAINING

<Table>

<S>                                 <C>                           <C>                     <C>
  R/H MLG                           hrs                           Nose Gear               hrs
  L/H MLG                           hrs                           L/G TBO                 hrs

</Table>

                                           GENERAL DATA AND COMMENTS

<Table>

<S>                                            <C>                      <C>                                    <C>

  Fuel Capacity/lbs                            34,469 lbs               FAR Part 36 Status                      Stg 3
                                                                        Interior Configuration                  103YC
                                                                                                                4 Galleys
                                                                                                                3 Lavs
                                                                                                                1 Closet

</Table>

<PAGE>


                                                                            63

                                   EXHIBIT "A"                     (Page 2 of 2)

                               AVIONICS INVENTORY


<PAGE>


                                                                            64

                                   EXHIBIT "B"                     (Page 1 of 2)

                             AIRCRAFT DOCUMENTATION

  On the Effective Date, LESSOR shall deliver to LESSEE the Aircraft
  Documentation listed below. All reports and computer documentation produced by
  Lufthansa shall be certified by Lufthansa or Lufthansa Technik.

           A. The following manuals shall be delivered with the Aircraft. Each
  manual shall be current and include all temporary revisions. Each manual shall
  be in the English language.

                    1. FAA-Approved Airplane Flight Manual.

                    2. Weight and Balance Control and Cargo Loading Manual and
  Supplements (load and trim sheet). Include last weigh paperwork and delivery
  equipment list with previous operator running W & B computation sheets.

                    3. Operations Manual and Quick Reference Handbook.
Including Cabin Safety/F/A Manual (PAX A/C).

                    4. Structural Repair Manual.

                    5. Aircraft/Engine/APU Maintenance Manual.

                    6. Boeing Component Overhaul Manuals, including Galley
Manuals (CMM, IPC, OHM).

                    7. Aircraft/Engine/APU Illustrated Parts Catalog (I.P.C.)
  (Operator Customized)

                    8. Wiring Diagram Manual including the following:

                       a.    Equipment List.
                       b.    Standard Practices (Chapter 20).
                       C.    Charts and Graphs (Chapter 91).
                       d.    Hook Up Charts.
                       e.    Splice List.
                       f.    Ground List.
                       g.    Terminal List.

                    9. Engine and APU Overhaul Manuals.

                    10. Current and revised Lufthansa Maintenance Schedule
and (COSL) component, operating and storage limits manual.

<PAGE>


             B. Airworthiness Directives Documentation: The following data
will be provided on the Effective Date. LESSOR shall provide to LESSEE all
records associated with A.D. compliance.

                  1. A single, complete and current A.D. status list of the
airframe, appliances, Engine and APU Airworthiness Directive applicable to
the Aircraft, appliances, Engine and APU. This list shall be consistent with
the preliminary AD status reports received during the initial inspection. The
list shall be in English, typed, certified and signed by authorized quality
assurance representative of Lufthansa.

                  2. LESSOR will provide legible copies of the completion
documentation that accomplish each AD, such documents shall be in English and
in reasonably sufficient detail to show the method of compliance. If the AD
is a repetitive inspection documentation, the last accomplishment is
sufficient. If the original completion documents are not available, LESSOR
shall provide at a minimum a copy of the job card or engineering order that
accomplished the AD plus a certification letter signed by Lufthansa's
airworthiness department stating that the AD in question was accomplished at
a certain time and cycles, date and reference all pertinent support
documentation (ie. engineering order, alternate means of compliance, etc.).

                     However, any AD that was complied with by an alternate
means of compliance must have all original documentation and necessary air
authority approvals.

                  3. Exemptions or deviations granted by the FAA (or
equivalent) to Lufthansa on A.D. compliance, including copy of exemption
request.

                C. Engineering Documentation

                 1. LESSOR shall provide a single, current list, in the
English language (including the ADA list referenced in b. below) of
engineering documentation covering the aircraft as listed below:

                       a. Service Bulletin status based on the Boeing
provided summary of all Boeing service bulletins to the aircraft and
consistent with the "reference only" status report provided during the
initial inspection.

                       b. List of all Lufthansa initiated on-aircraft
modifications consistent with the ADA list covering all Spec 100 ATA
chapters. A current copy, in English, of all engineering orders listed on the
ADA list shall be provided with appropriate certification stamp on the ADA
list.

                       c. major repairs list.

                       d. Supplemental Type Certificate list.


<PAGE>


                                                                            66

                   2. Data package covering all non-manufacturer/
non-FAA-approved repairs or alterations, including the submittal to the LBA
for an approval, if applicable.

                D. Additional Documentation

                   1. Daily airframe time and cycle utilization report.

                   2. Master Minimum Equipment List and Configuration
Deviation List.

                   3. Set of cockpit drawings (full scale preferably).

                   4. Quarterly Reliability Reports for one (1) year.

                   5. Location map of emergency equipment, with description.

                   6. Interior configuration drawings.

                   7. LBA Export Certificate of Airworthiness.

                   8. Evidence of de-registration.

                   9. Passenger/Cargo Equipment List (seats, galleys, lavs,
entertainment, etc.).

                   10. Complete paperwork for last "D" check overhaul and last
"A", "B", and/or "C" check inspections.

                   11. Compass card and F.D.R. calibration documentation.

                   12. Copies of Aircraft registration and Certificate of
Airworthiness.

                   13. All Life records (Lufthansa - Lebenslaufkarte) for the
assemblies and rotable parts installed during the last overhaul for each
nose, left hand and right hand main landing gears.

                E. Individual Aircraft and Engine Records:

                   1. Letter of Declaration for each major aircraft/engine
accident or major incident which shall include complete documentation
reports, if any.

                   2. Major structural damage reports, if any.

                   3. Engine trend monitoring data (1 year minimum provided
the engine was operated with Lufthansa) for each engine installed on the
aircraft.

                   4. Copies of logbook entries for the last twelve (12)
months of operation (at delivery).

                   5. List of open items, watch items, deferred items.


<PAGE>


                                                                            67

                  6. Serviceable/overhaul tags for all life limited parts,
hard time components listed in the rotable components list. The LESSOR and
LESSEE agree that all serviceable overhaul tags for OC (on condition)/CM
(condition monitored) parts listed in the rotable components list for the
last 12 months as at delivery shall be provided to LESSEE by LESSOR on a case
by case basis (up to a maximum of one (1) year after aircraft delivery).

                  7. Listing of Aircraft, Engine and APU components status by
P/N - S/N Description Position TBO - TSI - TSO - TSN, Total Time, next Due
Time, including interpretation keys. (Rotable Component List).

                  8. Engine and APU Logbooks or equivalent reports or
documentation.

                  9. Aircraft and Engine time status at delivery with Serial
No. - total time/total cycles - and times of the last letter check inspection.

                  10. Engine time report and engine on log which shall
include ASB 6038 status for each engine.

                  11. All Engine and APU records, for the last heavy
maintenance shop visit including back to birth history for each engine life
limited part. Exceptions will be acceptable for parts introduced to Lufthansa
before 1993 when back to birth history records was not mandatory; however,
LESSOR shall use its reasonable efforts to assist LESSEE in obtaining full
traceability on these parts, if any.

                  12. Manufacturer's delivery documents for Engines.

                  13. Boeing Electrical Load Analysis documents and data.

                  14. Last power plant test cell run documents for Engines
and APU.

                  15. Documents for boroscope inspection prior to delivery
for current installation for engines (as stated in the Agreement).

                  16. Letter certifying that at the time of delivery of the
aircraft the aircraft is a non-SSID candidate aircraft.

                  17. Operator's Corrosion Control Program. (see Maintenance
Schedule)

                  18. Aircraft Readiness Log (manufacturer's).

                  19. Copies of all applicable Master Changes (M.C.)
performed on each aircraft.

                  20. LBA approvals, Lufthansa certification reports for
major modifications, alterations and repairs which are not covered by
manufacturers service bulletins. For minor modifications not covered by
manufacturers service bulletins, Lufthansa shall provide

<PAGE>


the requested substantiation work. (i.e. certification reports to the extent
required by the LBA).

                  21. Fire blocking status for all seats, interior
fabrics/materials, including burn test documentation and certification. In
accordance with the LBA for all items introduced by Lufthansa.

                  22. Current Aging Aircraft and CPCP Status Report.

                  23. Current list outlining all waiver items/components not
approvable by the FAA.

                  24. Any historical records applicable to the aircraft,
engines or APU that may be available at reasonable effort and within
reasonable time.

                  25. List detailing Lufthansa component shop history for all
components on the rotable components list on a case by case basis (up to a
maximum of one (1) year after aircraft delivery).



<PAGE>

                               EXHIBIT "C"                      (Page 1 of 2)

                            CERTIFICATE OF ACCEPTANCE

               This Certificate of Acceptance is delivered on and as of the date
  set forth below by ALOHA AIRLINES, INC. (hereinafter referred to as "LESSEE")
  to BANK OF HAWAII, (hereinafter referred to as "LESSOR") pursuant to that
  Aircraft Lease Agreement dated as of December __, 1996 between LESSOR and
  LESSEE (hereinafter referred to as the "Agreement"):

               A. DETAILS OF ACCEPTANCE

                    LESSEE hereby indicates and confirms to LESSOR, its
  successors and assigns, that the LESSEE has at _________ o'clock __.M., on
  this day of __________, 1996, at _________, accepted the following in
  accordance with the provisions of the Agreement:

                            1.       (a)      Boeing Model: 737-230ADV

                                     (b)      Manufacturer's Serial No.: 23154

                                     (c)      U.S. Registration Number: N823AL

<Table>
<Caption>

                  Manufacturer and     Manufacturer's      Hours           Cycles
Engine No.        Model Number         Serial Number       Remaining       Remaining
----------        ----------------     --------------      ---------       ---------
<S>               <C>                  <C>                 <C>             <C>
   (1)            Pratt & Whitney      687358
                  JT8D-15

   (2)            Pratt & Whitney      702982
                  JT8D-15
</Table>

   Each of the above-described Engines having 750 or more rated take-off
horsepower or the equivalent thereof.

AIRFRAME

                   Total Time:            hrs.
                   Total Cycles:          Cycles

                   Time Remaining to "C" Check:  hrs.
                   Time Remaining to "D" Check:  hrs.


<PAGE>


                             EXHIBIT "C"                       (Page 2 of 2)


                  B. CONFIRMATION OF UNDERTAKINGS

                    LESSEE confirms that the above described Aircraft and
  Engines have been examined by its duly appointed and authorized
  representative(s), that such Aircraft and Engines conform to the information
  set forth above, that there have been fixed to the Aircraft the markings
  required by the Agreement (or that such markings shall be affixed to the
  Aircraft within fifteen (15) days of the date hereof). LESSEE confirms and
  acknowledges that the date set forth above constitutes the Effective Date, as
  such term is defined in the Agreement, and that LESSEE's execution and
  delivery of this Certificate represents LESSEE's acceptance of the above
  described Aircraft and Engines for all purposes of the Agreement.

                    IN WITNESS WHEREOF, LESSEE has caused this Certificate of
  Acceptance to be executed in its name, by its duly authorized officer(s) or
  representative(s), pursuant to due corporate authority, all as of the date
  written in Section A above.

  LESSEE:  ALOHA AIRLINES, INC.


  By:______________________________________

 Title:____________________________________

 Date:_____________________________________


<PAGE>


                                   EXHIBIT "D"


                              LEASE SUPPLEMENT NO.

                    LEASE SUPPLEMENT NO. __, dated ____________. 1996, between
  ALOHA AIRLINES, INC., a Hawaiian corporation ("LESSEE") and BANK OF HAWAII
  ("LESSOR").

                    LESSOR and LESSEE have heretofore entered into that certain
  Aircraft Lease Agreement dated as of December _, 1996 (herein called the
  "Lease Agreement" and the defined terms therein being hereinafter used with
  the same meaning). The Lease Agreement provides for the execution and delivery
  from time to time of Lease Supplements, each substantially in the form hereof,
  for the purpose of leasing the Aircraft under the Lease Agreement as and when
  delivered to the LESSEE in accordance with the terms thereof.

                    *The Lease Agreement relates to the aircraft and engines
  described below, and a counterpart of the Lease Agreement is attached hereto
  and made a part hereof and this Lease Supplement, together with such
  attachment, is being filed for recordation on the date hereof with the FAA as
  one document.

                    **The Lease Agreement relates to the aircraft and engines
  described below, and a counterpart of the Lease Agreement, attached to and
  made a part of Lease Supplement No. 1 dated _______________ to the Lease
  Agreement, has been recorded by the FAA on 199__ as one document and assigned
  Conveyance No.

                    NOW THEREFORE, in consideration of the premises and other
  good, valuable and sufficient consideration, LESSOR and LESSEE hereby agree as
  follows:



 __________________

 * This language for Lease Supplement No. 1

 ** This language for other Lease Supplements.


<PAGE>


   1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
   LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, the
   following described Boeing Model 737-230ADV aircraft (the "Delivered
   Aircraft"), which Delivered Aircraft as of the date hereof consists of the
   following:

               (i) One Boeing Model 737-230ADV Airframe, bearing U.S.
  registration number N___ ; Manufacturer's serial no._; and

               (ii) Two Pratt & Whitney Model JT8D-15 engines, bearing
  manufacturer's serial nos. and ___, respectively, (each of which engines has
  750 or more rated takeoff horsepower or the equivalent thereof).

  2. The Effective Date of the Delivered Aircraft is the date of this Lease
  Supplement set forth in the opening paragraph hereof.

  3. The Base Term for the Delivered Aircraft shall commence on the Effective
  Date and shall end on , 2004.

  4. LESSEE hereby agrees to pay LESSOR Rent for the Delivered aircraft
  throughout the Base Term (and any extension thereof as provided in the Lease
  Agreement) in accordance with the terms of the Lease Agreement.

  5. LESSEE hereby confirms to LESSOR that the Delivered Aircraft and each
  Engine installed thereon have been accepted by LESSEE for all purposes hereof
  and of the Lease Agreement, as being in the condition that such Delivered
  Aircraft and Engines are required to be in pursuant to the terms of the Lease
  Agreement.

  6. All of the terms and provisions of the Lease Agreement are hereby
  incorporated by reference in this Lease Supplement to the same extent as if
  fully set forth herein.


<PAGE>


                   IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease
   Supplement to be duly executed as of the day and year first above written.

                                        LESSOR

                                        BANK OF HAWAII

                                        By: __________________________________

                                        Title: _______________________________

                                        By: __________________________________

                                        Title: _______________________________



                                        LESSEE

                                        ALOHA AIRLINES, INC.

                                        By: __________________________________

                                        Title: _______________________________

                                        By: __________________________________

                                        Title: _______________________________


<PAGE>


                                   EXHIBIT "E"

                         APPOINTMENT AS ATTORNEY-IN-FACT

               Pursuant to the terms of Subsection 19 of the Lease (as
  hereinafter defined), ALOHA AIRLINES, INC. ("LESSEE") hereby irrevocably
  appoints BANK OF HAWAII ("LESSOR") as its true and lawful attorney-in-fact, to
  act in all respects, do such acts and take such actions as LESSEE could do or
  authorize itself under the Lease with respect to the use, operation,
  maintenance, possession, registration, de-registration and lease termination
  of the Boeing 737-230ADV Aircraft, Serial Number 23154, U.S. Registration No.
  N823AL (the "Aircraft"), which LESSOR has leased to LESSEE by Aircraft Lease
  Agreement dated as of December __, 1996 (the "Lease"). The appointment is made
  as part of and in consideration of the leasing of the Aircraft to LESSEE by
  LESSOR and shall remain in full force and effect until the earlier to occur of
  (i) the date on which all obligations of LESSEE under the Lease shall be fully
  discharged or satisfied, or (ii) __________, 2007.

  Executed this ________ day of December, 1996.

                                     ALOHA AIRLINES, INC.

                                     By: __________________________________

                                     Title: _______________________________


                                     By: __________________________________

                                     Title: _______________________________

                                     Attested by:

                                     ______________________________________
   (PLACE CORPORATE                  Secretary
      SEAL HERE)


<PAGE>


  STATE OF                         )
                                   )   ss.:

  COUNTY OF                )

            On the ____ day of ______________, 199__, before me personally
came   to me known, who, being by me duly sworn, did depose and say that he
resides   at _______________; that he is the ____________ of _____________,
the corporation described in and which executed the   foregoing instrument;
that he knows the seal of said corporation; that the   seal affixed to said
instrument is such corporate seal; that it was so affixed   by order of the
Board of Directors of said corporation, and that he signed his   name thereto
by like order.

                                  ____________________________________________
                                  Notary Public

  [Seal]


<PAGE>


                                   EXHIBIT "F"

  On the Effective Date for the Aircraft, LESSOR shall deliver and LESSEE shall
  accept the Aircraft in an "as is, where is and with all faults" condition
  other than the following conditions to which the Aircraft shall conform:

               (i) be clean to the standards of Lufthansa;

               (ii) be in a condition permitting commercial revenue service
  under the applicable operating regulations of the German Airworthiness
  Authority ("LBA");

               (iii) comply with all airworthiness directives issued by the LBA
  and FAA prior to the Effective Date of the Aircraft which requires compliance
  on or before the Effective Date;

               (iv) have a valid airworthiness certificate for export,
  certifying compliance with the airworthiness requirements of the Federal
  Republic of Germany, issued by the LBA prior to the delivery of the Aircraft;

               (v) be in a normal operating condition with all the Aircraft
  equipment, components and systems functioning in accordance with their
  intended use;

               (vi) be in a configuration as normally flown by Lufthansa in
  scheduled airline revenue service with regard to the fixed installed
  equipment;

               (vii) except for minor items such as emergency equipment, loose
  equipment, electrical and electronic equipment, LESSOR will use its reasonable
  efforts to deliver the Aircraft equipment without Lufthansa's special
  markings;

               (viii) have accomplished all maintenance items except items
  permitted to be deferred in accordance with Lufthansa's procedure for deferred
  items until the next IL2 or D2 check;

               (ix) neutral livery with all of Lufthansa's special exterior
  markings removed or painted over;

               (x) have installed two Pratt & Whitney JT8D-15 engines. LESSOR
  shall deliver each engine with not less than 2,500 engine cycles of remaining
  life until the next scheduled engine removal. Each Engine to be delivered
  hereunder shall be subject to LESSEE's reasonable approval;

               (xi) have undergone a borescope inspection on the engines (at
  LESSEE's sole cost and expense). In the event the borescope inspection
  indicates a discrepancy that is outside the limits set under the
  manufacturer's maintenance manual for the engine, same shall be corrected at
  LESSOR's cost and expense or


<PAGE>


  LESSOR may provide a substitute engine which shall meet the delivery
  conditions for an engine set forth herein;

               (xii) have undergone a power assurance run with LESSEE's
  representatives present to ensure performance of the engines based on the
  Pratt & Whitney maintenance manual;

               (xiii) have one (1) shipset of Nordam high gross weight hushkits
  installed;

               (xiv) have performed a demonstration flight of the airframe in
  accordance with Lufthansa's procedures with up to two representatives of
  LESSEE on board the Aircraft during such flight. Any discrepancies in the
  airframe found during such demonstration flight which are outside the limits
  set forth in Lufthansa's maintenance program found during such demonstration
  flight shall be corrected accordingly;

               (xv) be certified for a maximum taxi gross weight of 120,000lbs.;

               (xvi) have reconfigured the cockpit switches into the Boeing
  standard;

               (xvii) have installed an APU in serviceable condition;

               (xviii) have all gauges converted from the metric system to the
  imperial system; and

               (xix) except with respect to the engines, landing gear and APU,
  have installed hard time components with an average of fifty percent (50%)
  minimum time of remaining life as defined under Lufthansa's LBA approved
  maintenance program with no single component having less than three months of
  remaining life as defined under such program.


<PAGE>


                                   EXHIBIT "G"

                              LEASE IDENTIFICATION

   OWNER:      BANK OF HAWAII

   LESSEE:     ALOHA AIRLINES, INC.




<PAGE>


                                                                            79

                                   EXHIBIT "H"

                                RETURN CONDITIONS

                  A. The Aircraft will be redelivered in accordance with
Section 17 of the Lease and shall be in the following condition:

                       (i) be clean to the standards of major international
airlines;

                       (ii) be in a condition permitting commercial revenue
service under the applicable operating regulations of the Federal Aviation
Administration ("FAA");

                       (iii) comply with all airworthiness directives issued
by the FAA prior to the Return Occasion of the Aircraft which requires
compliance on or before the originally scheduled Return Occasion;

                       (iv) have a valid U.S. Standard Airworthiness
Certificate or a valid Airworthiness Certificate for Export, as LESSOR shall
elect, certifying compliance with the airworthiness requirements of the
United States, issued by the FAA prior to the return of the Aircraft;

                       (v) be in a normal operating condition with all the
Aircraft equipment, components and systems functioning in accordance with
their intended use;

                       (vi) be in the same configuration as at delivery with
regard to the fixed installed equipment;

                       (vii) except for minor items such as emergency
equipment, loose equipment, electrical and electronic equipment, LESSEE will
use its reasonable efforts to deliver the Aircraft equipment without LESSEE's
special markings;

                       (viii) have accomplished all maintenance items
(including, but not limited to having fully accomplished all required
corrosion prevention controls, treatments, repairs and inspections in
accordance with LESSEE's FAA approved CPCP program) except items permitted to
be deferred in accordance with LESSEE's procedure for deferred items until
the next D check;

                       (ix) The Airframe shall be returned fresh from a B
check performed in accordance with LESSEE's Maintenance Program. Further, the
Airframe shall have an equal or greater amount of time remaining as when
delivered to the next scheduled D check, but with respect to the D check
shall in all events have not less than 3,000 flight hours remaining (as
determined under LESSEE's maintenance program) to the next scheduled D check.
In the event that the Aircraft has more or less time remaining to the next D
check than it had remaining on the Effective Date, D Check Compensation shall
be paid in accordance with the following formula and paid by the

<PAGE>

                                                                            80

relevant party in relation to any difference. If the D Check Compensation, as
calculated below, is a positive number, then, so long as no Default or Event
of Default has occurred and is continuing, LESSOR will pay to LESSEE such D
Check Compensation. If the D Check Compensation, as calculated below is a
negative number, then LESSEE will pay to LESSOR such D Check Compensation.

                         (a) D CHECK COMPENSATION. The "D Check Compensation"
shall be calculated as follows:

                              [A1-A2/B] x C

                              "A1" is the total number of Flight Hours/Cycles
(whichever is applicable and the more limiting factor) remaining on the
Aircraft until the next scheduled D check in accordance with LESSEE's FAA
approved maintenance program as of the Return Occasion.

                            "A2" is the total number of Flight Hours/Cycles
(whichever is applicable and the more limiting factor) remaining on the
Aircraft until the next scheduled D check in accordance with LESSEE's FAA
approved maintenance program as of the Effective Date.

                            "B" is the total number of Flight Hours/Cycles
(whichever is applicable and the more limiting factor) between scheduled D
checks in accordance with LESSEE's FAA approved maintenance program.

                            "C" is the cost for the next D check of the
Aircraft in accordance with LESSEE's FAA approved maintenance program as
mutually agreed to by LESSOR and LESSEE (in the event that after a reasonable
period of time LESSOR and LESSEE cannot reach a mutual agreement on the cost
for the next D check, such cost will be established by taking the average of
the price quotes submitted by two (2) reputable FAA approved Airframe
overhaul facilities, one selected by LESSEE and the other selected by LESSOR).

Notwithstanding the foregoing, for the purposes of the calculation of D Check
compensation, "A1" shall not exceed 15,000 Flight Hours.

                  (x) neutral livery with all of LESSEE's special exterior
markings removed or painted over;

                  (xi) have installed two Pratt & Whitney JT8D-9A engines.
LESSEE shall use its reasonable efforts to deliver each engine with not less
than 5,000 engine cycles of remaining life until the next scheduled engine
removal, but in no event shall any engine be delivered with less than 3,000
cycles remaining. In the event that any Engine has more or less time
remaining to the next scheduled overhaul or hot section inspection (as
determined in accordance with LESSEE's FAA approved maintenance program) than
5,000 cycles, Engine Adjustment Compensation for each such Engine shall be
paid in accordance with the following formula and paid by the relevant party
in relation to any difference. If any Engine is

<PAGE>

                                                                            81

returned with greater than 5,000 Cycles to the next scheduled overhaul or hot
section inspection, then LESSOR shall pay Engine Adjustment Compensation to
LESSEE on account of such Engine. If any Engine is returned with less than
5,000 Cycles to the next scheduled overhaul or hot section inspection, then
LESSEE shall pay Engine Adjustment Compensation to LESSOR on account of such
Engine.

                            [A/B] x C

                            "A" is the average cost for an engine overhaul or
hot section inspection, as mutually agreed to by LESSOR and LESSEE (in the
event that after a reasonable period of time LESSOR and LESSEE cannot reach a
mutual agreement on the cost for the engine overhaul or hot section
inspection, such cost will be established by taking the average of the price
quotes submitted by two (2) reputable FAA approved engine overhaul
facilities, one selected by LESSEE and the other selected by LESSOR).

                            "B" is 7,000

                            "C" is the difference between the number of
Cycles remaining to the next overhaul or hot section inspection (whichever is
the most limiting factor) on the Engine as of the Effective Date as
determined under the Engine Manufacturer's maintenance manual and the number
of Cycles remaining to the next overhaul or hot section inspection (whichever
is most limiting factor) on the Engine as of the Return Occasion as
determined under LESSEE's FAA approved maintenance program.

Notwithstanding the foregoing, LESSOR shall have no obligation to compensate
LESSEE for any time to the next scheduled engine overhaul or hot section
inspection in excess of 7,000 Cycles.

                  (xii) have undergone a borescope inspection on the engines
(at LESSOR's sole cost and expense). In the event the borescope inspection
indicates a discrepancy that is outside the limits set under the
manufacturer's maintenance manual for the engine, same shall be corrected at
LESSEE's cost and expense or LESSEE may provide a substitute engine which
shall meet the return conditions for an engine set forth herein;

                  (xiii) have undergone a power assurance run with LESSOR's
representatives present to ensure performance of the engines based on the
Pratt & Whitney maintenance manual;

                  (xiv) have performed a demonstration flight of the Aircraft
in accordance with LESSEE's procedures with up to two representatives of
LESSOR on board the Aircraft during such flight. Any discrepancies in the
Aircraft found during such demonstration flight which are outside the limits
set forth in LESSEE's maintenance program found during such demonstration
flight shall be corrected accordingly;

                  (xv) be certified for a maximum taxi gross weight of
120,000lbs.;

                  (xvi) have installed an APU in serviceable

<PAGE>

                                                                            82

condition;

                  (xvii) have all gauges converted from the imperial system
to the metric system upon LESSOR's request;

                  (xviii) except with respect to the engines, landing gear
and APU, have installed hard time components with an average of fifty percent
(50%) minimum time of remaining life as defined under LESSEE's FAA approved
maintenance program with no single component having less than three months of
remaining life as defined under such program; and

                  (xix) in the event that during the Base Term the Aircraft
was hushkitted to meet Stage III noise regulations (subsequent to the removal
of the Hushkits and return of same to LESSOR as contemplated by Section 8 (D)
of the Lease), LESSEE shall return the Aircraft with such hushkits so
installed so as to be compliance with such regulations (except in the case
where the hushkitting of the Aircraft was accomplished in the last twelve
months of the Base Term and LESSEE has elected not to extend the term of the
Lease but has instead elected to retain title to the hushkits).

<PAGE>

                                                             DUPLICATE ORIGINAL

                             LEASE SUPPLEMENT NO. 1

                                   dated as of
                                December 13, 1996

                                     between

                                 BANK OF HAWAII,

                                                      LESSOR

                                       and

                              ALOHA AIRLINES, INC.,

                                                      LESSEE

<PAGE>

                             LEASE SUPPLEMENT NO. 1

                      LEASE SUPPLEMENT NO. 1, dated December 13,1996, between
ALOHA AIRLINES, INC., a Hawaii corporation ("LESSEE") and BANK OF HAWAII, a
Hawaii banking corporation ("LESSOR").

                LESSOR and LESSEE have heretofore entered into that certain
Aircraft Lease Agreement dated as of December 13, 1996 (herein called the
"Lease Agreement" and the defined terms therein being hereinafter used with
the same meaning). The Lease Agreement provides for the execution and
delivery from time to time of Lease Supplements, each substantially in the
form hereof, for the purpose of leasing the Aircraft under the Lease
Agreement as and when delivered to the LESSEE in accordance with the terms
thereof.

                The Lease Agreement relates to the aircraft and engines
described below, and a counterpart of the Lease Agreement is attached hereto
and made a part hereof and this Lease Supplement, together with such
attachment, is being filed for recordation on the date hereof with the FAA as
one document.

                NOW THEREFORE, in consideration of the premises and other
good, valuable and sufficient consideration, LESSOR and LESSEE hereby agree
as follows:

1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, the
following described Boeing Model 737-230ADV aircraft (the "Delivered
Aircraft"), which Delivered Aircraft as of the date hereof consists of the
following:

                (i) One Boeing Model 737-230ADV Airframe, bearing U.S.
registration number N823AL; Manufacturer's serial no.23154; and

                (ii) Two Pratt & Whitney Model JT8D-15 engines, bearing
manufacturer's serial nos.687358 and 702982, respectively, (each of which
engines has 750 or more rated takeoff horsepower or the equivalent thereof).

2. The Effective Date of the Delivered Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.

3. The Base Term for the Delivered Aircraft shall commence on the Effective
Date and shall end on Dec. 12, 2004.

4. LESSEE hereby agrees to pay LESSOR Rent for the Delivered aircraft
throughout the Base Term (and any extension thereof as provided in the Lease
Agreement) in accordance with the terms of the Lease Agreement.

5. LESSEE hereby confirms to LESSOR that the Delivered Aircraft and each
Engine installed thereon have been accepted by LESSEE for all purposes hereof
and of the Lease Agreement, as being in the condition that such Delivered
Aircraft and Engines are required to be in pursuant to the terms of the Lease
Agreement.

6. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.

<PAGE>

                IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease
Supplement to be duly executed as of the day and year first above written.

                                  LESSOR

                                  BANK OF HAWAII

                                  By: /s/ [ILLEGIBLE]
                                      ----------------------------------------
                                  Title: Executive Vice President
                                         -------------------------------------
                                  By: /s/ [ILLEGIBLE]
                                      ----------------------------------------
                                  Title: Senior Vice President
                                         -------------------------------------

                                  LESSEE

                                  ALOHA AIRLINES, INC.

                                  By: /s/ Brenda F. Cutwright
                                      ----------------------------------------
                                  Title:       SR. VICE PRESIDENT FINANCE &
                                                     PLANNING AND CFO
                                         -------------------------------------
                                  By: /s/ [ILLEGIBLE]
                                      ----------------------------------------
                                  Title: VICE PRESIDENT PLANNING & DEVELOPMENT
                                         -------------------------------------

                                        2

<PAGE>

                          CERTIFICATE OF ACCEPTANCE

                 This Certificate of Acceptance is delivered on and as of the
date set forth below by ALOHA AIRLINES, INC. (hereinafter referred to as
"LESSEE") to BANK OF HAWAII, (hereinafter referred to as "LESSOR") pursuant
to that Aircraft Lease Agreement dated as of December 13, 1996 between LESSOR
and LESSEE (hereinafter referred to as the "Agreement"):

                 A.        DETAILS OF ACCEPTANCE

                           LESSEE hereby indicates and confirms to LESSOR its
successors and assigns that the LESSEE has at 4:15 o'clock P.M., on this 13TH
Day of Dec., 1996, at Frankfurt accepted the following in accordance with the
provisions of the Agreement:

                             1.    (a)     Boeing Model: 737-230ADV
                                   (b)     Manufacturer's Serial No.: 23154
                                   (c)     U.S. Registration Number: N823AL

<TABLE>
<CAPTION>
               Manufacturer and    Manufacturer's     Hours         Cycles
Engine No.     Model Number        Serial Number      Remaining     Remaining
----------     ----------------    --------------     ---------     ---------
   <S>         <C>                 <C>                <C>           <C>
   (1)         Pratt & Whitney     687358             14,727        3,266
               JT8D-15

   (2)         Pratt & Whitney     702982             11,519        2,809
               JT8D-15
</TABLE>

Each of the above-described Engines having 750 or more rated take-off
horsepower or the equivalent thereof.

AIRFRAME

                 Total Time:       hrs. - 26,238
                 Total Cycles:     Cycles - 24,028

                 Time Remaining to "C" Check:     hrs. - July 11, 1997
                 Time Remaining to "D" Check:     hrs.-Nov. 3, 2001

<PAGE>

                                                                   (Page 2 of 2)


                   B. CONFIRMATION OF UNDERTAKINGS

                             LESSEE confirms that the above described
Aircraft and Engines have been examined by its duly appointed and authorized
representative(s), that such Aircraft and Engines conform to the information
set forth above, that there have been fixed to the Aircraft the markings
required by the Agreement (or that such markings shall be affixed to the
Aircraft within fifteen (15) days of the date hereof). LESSEE confirms and
acknowledges that the date set forth above constitutes the Effective Date, as
such term is defined in the Agreement, and that LESSEE's execution and
delivery of this Certificate represents LESSEE's acceptance of the above
described Aircraft and Engines for all purposes of the Agreement.

                          IN WITNESS WHEREOF, LESSEE has caused this
Certificate of Acceptance to be executed in its name, by its duly authorized
officer(s) or representative(s), pursuant to due corporate authority, all as
of the date written in Section A above.



LESSEE: ALOHA AIRLINES, INC.

By: /s/ Brenda F. Cutwright
    -----------------------------------
Title:   SR. VICE PRESIDENT FINANCE
            & PLANNING AND CFO
       --------------------------------
Date: Dec. 13, 1996
      ---------------------------------



By: /s/ [ILLEGIBLE]
    -----------------------------------
Title: VICE PRESIDENT PLANNING & DEVELOPMENT
       --------------------------------
Date: Dec. 13, 1996
      ---------------------------------


                                        2



<PAGE>

ALOHA
------------------------------------------------------------------------------
AIRLINES
                                                        P.O. BOX 30028
                                                        HONOLULU, HAWAII 96820


December 13, 1996

Jetz Ventures, Inc.
9025 Boggy Creek Road Unit 9
Orlando, FL 32824

RE:        Aircraft Lease Agreement dated as of December 13, 1996 between Bank
           of Hawaii ("BOH"), as Lessor, and Aloha Airlines, Inc. ("Aloha"), as
           Lessee ("Lease"), which Lease Agreement relates to one (1) used
           Boeing model 737-230ADV aircraft bearing manufacturer's serial number
           23154 and U.S. registration number N823AL, together with two Pratt
           and Whitney JT8D-15 engines respectively bearing manufacturer's
           serial numbers 687358 and 702982 (collectively, the "Aircraft").

Gentlemen:

Aloha has agreed to enter into the Lease Agreement with BOH and to accept
delivery of the Aircraft in reliance upon the covenants made by Jetz Ventures,
Inc. ("Jetz") set forth herein. Except as otherwise expressly stated herein,
capitalized terms used herein shall have the meanings set forth in the Lease.

1.         With regard to Section 8(D) of the Lease:

           a.       Jetz shall procure, for the account of Lessor, the -9As
                    (which shall conform to the requirements set forth in
                    Section 8(D)(ii) of the Lease and paragragh 1(b) below) and
                    shall cause the -9As to be delivered to the Honolulu
                    International Airport in Honolulu, Hawaii or to such other
                    location designated by Aloha ("Swap Location") within five
                    and one-half (5 1/2) months of the Effective Date; provided
                    however, the specific date


<PAGE>


                    of such delivery within the foregoing time frame shall be by
                    agreement between Jetz and Aloha.

           b.       In addition to complying with the requirements set forth in
                    Section 8(D)(ii) of the Lease, the -9As delivered by Jetz to
                    Aloha pursuant to paragraph l(a) above shall meet the
                    following requirements:

                    (i)      all disks will have back to birth records;

                    (ii)     all airworthiness directives (including without
                             limitation, service bulletin 6038 of airworthiness
                             directive 94-20-01 and LPT containment per service
                             bulletins 6110 and 6131 of airworthiness directive
                             94-20-08) which have come due or which are
                             scheduled to come due within eight (8) months from
                             the date of delivery of the -9As to Aloha pursuant
                             to paragraph 1(b) above shall have been complied
                             with;

                    (iii)    service bulletin 5021 (hot section improvement)
                             shall have been complied with;

                    (iv)     service bulletin 5425 (three 8th stage bleeds)
                             shall have been complied with; and the fuel control
                             shall be part number 743602-3 or a later model;

                     (v)     accessory gearbox shall be the later pinned type
                             mounting without the (Continental) labyrinth seal
                             modifications; and

                    (vi)     each -9A shall have undergone a test cell run with
                             all discrepancies corrected.

                   Provided however, in the event that compliance with Sections
                   1.a.(iii), (iv), (v) or (iv) above causes Jetz to acquire an
                   engine with more cycles than the minimum delivery requirement
                   per Section 8.(D)(ii)(a) of the Lease, then Aloha and Jetz
                   will negotiate in good faith to agree upon a payment by Aloha
                   for such additional cycles.


<PAGE>


          C.        Aloha and Jetz shall cooperate to procure and shall together
                    procure the parts necessary to (i) modify the Aircraft from
                    hushkitted Stage III status to non-hushkitted Stage II
                    status and (ii) convert or replace the thrust reversers so
                    that the Aircraft may accommodate the -9As instead of the
                    -15s ("Parts"). All Parts shall be delivered to the Swap
                    Location within five and one-half (5 1/2) months of the
                    Effective Date. If any Part has not been delivered to the
                    swap location or ordered by Aloha and Jetz pursuant to the
                    first sentence of this subpart by April 13, 1997, Aloha may
                    immediately purchase such Part, with or without consulting
                    Jetz but with a view towards obtaining such Parts at the
                    lowest price reasonably possible under the circumstances.

           d.       Aloha and Jetz shall each bear one-half (1/2) of the cost of
                    all Parts purchased pursuant to Section l(b) above
                    (including Parts purchased pursuant to the last sentence of
                    Section l(b) above).

           e.       Jetz shall reimburse Aloha for one-half (1/2) of the
                    engineering and labor costs to (i) modify the Aircraft from
                    hushkitted Stage III status to non-hushkitted Stage II
                    status and (ii) convert or replace the thrust reversers so
                    that the -9As instead of the -15s may be operated on the
                    Aircraft. For purposes of this Section 1(d), if Aloha
                    performs the foregoing work, Aloha will bill Jetz at Aloha's
                    then prevailing "in-house" labor rate, without markup.

           f.       Note that all such work will be done at the same time to
                    minimize removal of the Aircraft from service (i.e. delivery
                    of the -9As and the Parts must be timed such that work will
                    be done concurrently).

           g.       Aloha agrees to comply with the terms of Section 8(D) of the
                    Lease as they apply to Jetz, including without limitation,
                    the following:


<PAGE>


                    (i)       Aloha shall, at its cost and expense, remove the
                              -15s and the Hushkits and ship the -15s (along
                              with all components removed in installing the
                              -9As) to such location as Jetz shall designate
                              and ship the Hushkits to such location as Lessor
                              shall designate (in each instance, together with
                              all records, manuals and logs relating to the
                              -15s and the Hushkits, respectively);

                    (ii)      Aloha agrees that when installing the -9As, the
                              mixers from the -15As will be returned to Lessor
                              as part of the Huskits; and

                    (iii)     Aloha agrees to pay to Jetz all amounts to which
                              Jetz is entitled pursuant to Section 8(D)(ii)(a)
                              of the Lease.

2.         Jetz will reimburse Aloha for the cost of translating into English
           all engineering orders (including without limitation those described
           in Section C of Appendix B to the Lease) and Airworthiness Directive
           compliance documents (including without limitation those described in
           Section B of Appendix B to the Lease) which are delivered to Aloha in
           German pursuant to the Lease.


<PAGE>


Please sign below to confirm your agreement with the terms of this letter.

Very truly yours,

ALOHA AIRLINES, INC.

By:   /s/ Brenda F. Cutwright
      --------------------------------
Name: BRENDA F. CUTWRIGHT
Its:  SR.VICE PRESIDENT FINANCE &
         PLANNING AND CFO

Approved and agreed:

JETZ VENTURES, INC.

By:   /s/ Richard C. Giles
      --------------------------------
Name: Richard C. Giles
Its:  Director


<PAGE>



                                                             DUPLICATE ORIGINAL

                             LEASE SUPPLEMENT NO. 1

                                   dated as of
                                December 13, 1996

                                     between

                                 BANK OF HAWAII,
                                                     LESSOR

                                      and

                               ALOHA AIRLINES, INC.,
                                                     LESSEE




<PAGE>


                             LEASE SUPPLEMENT NO. 1

     LEASE SUPPLEMENT NO. 1, dated December 13, 1996, between ALOHA AIRLINES,
INC., a Hawaii corporation ("LESSEE") and BANK OF HAWAII, a Hawaii banking
corporation ("LESSOR").

     LESSOR and LESSEE have heretofore entered into that certain Aircraft
Lease Agreement dated as of December 13, 1996 (herein called the "Lease
Agreement" and the defined terms therein being hereinafter used with the same
meaning). The Lease Agreement provides for the execution and delivery from
time to time of Lease Supplements, each substantially in the form hereof, for
the purpose of leasing the Aircraft under the Lease Agreement as and when
delivered to the LESSEE in accordance with the terms thereof.

     The Lease Agreement relates to the aircraft and engines described below,
and a counterpart of the Lease Agreement is attached hereto and made a part
hereof and this Lease Supplement, together with such attachment, is being
filed for recordation on the date hereof with the FAA as one document.

     NOW THEREFORE, in consideration of the premises and other good, valuable
and sufficient consideration, LESSOR and LESSEE hereby agree as follows:

1. LESSOR hereby delivers and leases to LESSEE under the Lease Agreement, and
LESSEE hereby accepts and leases from LESSOR under the Lease Agreement, the
following described Boeing Model 737-230ADV aircraft (the "Delivered
Aircraft"), which Delivered Aircraft as of the date hereof consists of the
following:

     (i) One Boeing Model 737-230ADV Airframe, bearing U.S. registration number
N823AL; Manufacturer's serial no.23154; and

     (ii) Two Pratt & Whitney Model JT8D-15 engines, bearing manufacturer's
serial nos.687358 and 702982, respectively, (each of which engines has 750 or
more rated takeoff horsepower or the equivalent thereof).

2. The Effective Date of the Delivered Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.

3. The Base Term for the Delivered Aircraft shall commence on the Effective Date
and shall end on Dec. 12, 2004.

4. LESSEE hereby agrees to pay LESSOR Rent for the Delivered aircraft throughout
the Base Term (and any extension thereof as provided in the Lease Agreement) in
accordance with the terms of the Lease Agreement.

5. LESSEE hereby confirms to LESSOR that the Delivered Aircraft and each Engine
installed thereon have been accepted by LESSEE for all purposes hereof and of
the Lease Agreement, as being in the condition that such Delivered Aircraft and
Engines are required to be in pursuant to the terms of the Lease Agreement.

6. All of the terms and provisions of the Lease Agreement are hereby
incorporated by reference in this Lease Supplement to the same extent as if
fully set forth herein.


<PAGE>


     IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease Supplement to
be duly executed as of the day and year first above written.

                                       LESSOR

                                       BANK OF HAWAII

                                       By: /s/  [ILLEGIBLE]
                                           ----------------------------------

                                       Title: EXECUTIVE VICE PRESIDENT
                                              -------------------------------

                                       By: /s/   CWC Curtis W. Chinn
                                           ----------------------------------

                                       Title: SENIOR VICE PRESIDENT
                                              -------------------------------


                                       LESSEE

                                       ALOHA AIRLINES, INC.

                                       By: /s/ Brenda F. Cutwright
                                           ----------------------------------

                                              SR. VICE PRESIDENT FINANCE &
                                       Title: PLANNING AND CFO
                                              -------------------------------

                                       By: /s/   James M. King
                                           ----------------------------------

                                               VICE PRESIDENT PLANNING &
                                       Title:  DEVELOPMENT
                                               ------------------------------




                                        2

<PAGE>




                    IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease
    Supplement to be duly executed as of the day and year first above written.

                                       LESSOR

                                       BANK OF HAWAII

                                       By:___________________________________

                                       Title:________________________________

                                       By:___________________________________

                                       Title:________________________________


                                       LESSEE

                                       ALOHA AIRLINES, INC.

                                       By: /s/ Brenda F. Cutwright
                                           ----------------------------------

                                               SR. VICE PRESIDENT FINANCE &
                                       Title:  PLANNING AND CFO
                                               ------------------------------

                                       By: /s/    James M. King
                                           ----------------------------------

                                                VICE PRESIDENT PLANNING &
                                       Title:   DEVELOPMENT
                                                -----------------------------



                                        2


<PAGE>

                  ASSIGNMENT, ASSUMPTION, AMENDMENT AND CONSENT

                     THIS ASSIGNMENT, ASSUMPTION, AMENDMENT AND CONSENT
   ("Assignment"), dated as of December 26, 1996 is between BANK OF HAWAII
   ("Lessor"), ALOHA AIRLINES, INC., a Hawaii CORPORATION ("ASSIGNOR") AND ALOHA
   AIRLINES, INC., A Delaware corporation ("Assignee").

                                    RECITALS

                     WHEREAS, Lessor and Assignor entered into that certain
   Aircraft Lease Agreement dated as of December 13, 1996, as it may be
   supplemented or amended from time to time (the "Lease"), pursuant to which
   Assignor leased from Lessor one (1) Boeing model 737-230ADV aircraft bearing
   manufacturer's serial number 23154 and registration mark N823AL (the
   "Aircraft");

                     WHEREAS, effective December 26, 1996, Assignor merged
with Assignee, and Assignee emerged as the surviving entity and the
successor in interest to Lessee.

                                    AGREEMENT

                     NOW, THEREFORE, in consideration of these presents and for
   other valuable consideration, the parties agree as follows.

                     1. CERTAIN DEFINED TERMS. Unless otherwise defined herein
   or the context otherwise requires, all capitalized terms used in this
   Assignment shall have the respective meanings assigned to them in the Lease.

                     2. ASSIGNMENT. As of December 26, 1996 (the "Effective
  Date"), the Assignor hereby sells, assigns, transfers and conveys to Assignee
  all of the Assignor's right, title and interest in and to the Lease, as if
  Assignee were the original party to the Lease.

                     3. ASSUMPTION BY ASSIGNEE. Assignee hereby accepts the
  foregoing sale, assignment, transfer and conveyance of all of the Assignor's
  right, title, interest, obligations and liabilities in, to and under the
  Lease to the Assignee and, as of the Effective Date, agrees to assume and to
  be bound by all the terms of, and to undertake all of the obligations of the
  Assignor contained in, the Lease, including without limitation, all such
  obligations existing at or prior to, or attributable to acts or events
  occurring prior to the Effective Date.

                     4. LESSOR AND LENDER CONSENT.

                        (a) Pursuant to Section 22(D) of the Lease, Lessor
  acknowledges and consents to the foregoing sale,


<PAGE>


 assignment, transfer and conveyance of all of the Assignor's right, title,
 interest, obligations and liabilities in, to and under the Lease to the
 Assignee under this Assignment, and acknowledge the rights and obligations of
 the Assignee described in this Assignment.

                        (b) Lessor further acknowledges and agrees that from and
  after the Effective Date Assignee shall be deemed the "Lessee" for all
  purposes of the Lease and each reference in the Lease to the Assignor as
  "Lessee" shall be deemed after the Effective Date for all purposes to refer to
  the Assignee and that, from and after the Effective Date Lessor will perform
  its obligations under the Lease, in all respects as if Assignee were the
  original party to the Lease as "Lessee" thereunder.

                   5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ASSIGNEE.
 Assignee represents and warrants as follows:

                        (a) Assignee is a corporation duly organized in existing
  in good standing under the laws of the state of Delaware and has the corporate
  power and authority to carry on its business as presently conducted and to
  perform its obligations under this Assignment.

                        (b) Assignee is not a Governmental Entity or government
  owned or controlled and neither Assignee or its properties is immune from the
  jurisdiction of any court or from any legal process (whether through service
  or notice, attachment prior to judgment, attachment in aid of execution,
  execution or otherwise) nor does it have the defense of sovereign immunity or
  similar defense available to it in any legal action or proceeding.

                        (c) Assignee is a citizen of the United States (as
  defined in 40102 of Title 49 of the United States Code) holding an air carrier
  operating certificate issued by the Secretary of Transportation of the United
  States pursuant to chapter 447 of Title 49 of the United States Code for
  aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of
  cargo.

                        (d) This Assignment has been duly authorized by all
  necessary corporate action on the part of Assignee, does not require any
  approval of the stockholders of Assignee (or if such approval is required,
  such approval has been obtained), and neither the execution and delivery
  hereof nor the consummation of the transactions contemplated hereby nor
  compliance by Assignee with any of the terms and provisions hereof will
  contravene any Law applicable to Assignee or result in any breach of, or
  constitute any default under, or result in the creation of, any lien, charge
  or encumbrance upon any property of Assignee under any indenture, mortgage,
  chattel mortgage, deed of trust,


<PAGE>


  conditional sales contract, bank loan or credit agreement, corporate charter
  or by-law, or other agreement or instrument to which Assignee is a party or by
  which Assignee or its properties or assets may be bound or affected.

                        (e) Assignee has received or has complied with every
  necessary consent, approval, order, or authorization of, or registration with,
  or the giving of prior notice to, any Governmental Entity having jurisdiction
  with respect to the use and operation of the Aircraft and the execution and
  delivery of this Assignment of the validity and enforceability hereof.

                        (f) This Assignment has been duly entered into and
  delivered by Assignee and constitutes a valid, legal and binding obligation of
  Assignee, enforceable in accordance with its terms, except as enforceability
  may be limited by bankruptcy, reorganization, moratorium or other similar Laws
  and by general principles of equity, whether considered in a proceeding at Law
  or in equity.

                     6. GOVERNING LAW. This Assignment shall governed by the
Laws of the State of Hawaii.

<PAGE>


                   IN WITNESS WHEREOF, the undersigned parties have caused this
 Assignment, Assumption, Amendment and Consent-to be duly executed and delivered
 by their duly authorized officers as of the date first written above.

 ASSIGNOR:                        ALOHA AIRLINES, INC., A HAWAII CORPORATION

                                  By:    /s/  Brenda F. Cutwright
                                        --------------------------------------
                                  Name:        BRENDA F. CUTWRIGHT
                                        --------------------------------------
                                  Title:     SR. VICE PRESIDENT FINANCE &
                                                   PLANNING AND CFO
                                         --------------------------------------


                                  By:    /s/  James M. King
                                        --------------------------------------
                                  Name:       JAMES M. KING
                                        --------------------------------------
                                  Title: VICE PRESIDENT PLANNING & DEVELOPMENT
                                         --------------------------------------


 ASSIGNEE:                        ALOHA AIRLINES, INC., A DELAWARE CORPORATION

                                  By:    /s/  Brenda F. Cutwright
                                        --------------------------------------
                                  Name:        BRENDA F. CUTWRIGHT
                                        --------------------------------------
                                  Title:     SR. VICE PRESIDENT FINANCE &
                                                   PLANNING AND CFO
                                         --------------------------------------


                                  By:    /s/  James M. King
                                        --------------------------------------
                                  Name:       JAMES M. KING
                                        --------------------------------------
                                  Title: VICE PRESIDENT PLANNING & DEVELOPMENT
                                         --------------------------------------


LESSOR:                           BANK OF HAWAII

                                  By:    /s/   Manuel T. Valbuena
                                        --------------------------------------
                                  Name:        MANUEL T. VALBUENA
                                        --------------------------------------
                                  Title:         VICE PRESIDENT
                                         --------------------------------------


                                  By:    /s/  Janis Okamoto
                                        --------------------------------------
                                  Name:       JANIS OKAMOTO
                                        --------------------------------------
                                  Title:        AUTHORIZED SIGNATURE
                                         --------------------------------------




<PAGE>

                                    RECORDED
                          FEDERAL AVIATION ADMINISTRATION
                             DATE 5/6/97  TIME 4:22 PM
                                  ------       -------
                             CONVEYANCE NUMBER S100510
                                               -------
                                BY  /S/ [ILLEGIBLE]
                                   -------------------
                            LEGAL INSTRUMENTS EXAMINER


                             LEASE SUPPLEMENT NO. 2

                    LEASE SUPPLEMENT NO. 2, dated April 9 between ALOHA
  AIRLINES, INC., a Delaware corporation ("LESSEE") and Bank of Hawaii, a
  banking corporation formed under the laws of the State of Hawaii ("LESSOR").

                   LESSOR AND LESSEE have heretofore entered into that certain
 Aircraft Lease Agreement dated as of December 13, 1996 (herein called the
 "Lease Agreement"). The defined terms in the Lease Agreement will hereinafter
 used with the same meaning. The Lease Agreement provides for the execution and
 delivery from time to time of Lease Supplements.

                   The Lease Agreement relates to the aircraft and engines
 described therein, and a counterpart of the Lease Agreement, attached to and
 made a part of Lease Supplement No. 1 dated December 13, 1996 to the Lease
 Agreement, has been recorded by the FAA on December 17, 1996 as one document
 and assigned Conveyance No. LL12114.

                   NOW, THEREFORE, in consideration of the premises and other
 good, valuable and sufficient consideration, LESSOR and LESSEE hereby agree as
 follows:

 1.       LESSOR hereby delivers and leases to LESSEE under the Lease
          Agreement, and LESSEE hereby accepts and leases from LESSOR under the
          Lease Agreement, as of the date hereof, the following described
          engines (the "Replacement Engines"), which consist of the following:

                   Two Pratt & Whitney Model JT8D-9A engines, bearing
                   manufacturer's serial numbers 666671 and 678080,
                   respectively, (each of which engine has 750 or more rated
                   takeoff horsepower or the equivalent thereof).

  2.      LESSEE hereby confirms to LESSOR that the Replacement Engines have
          been accepted by LESSEE for all purposes hereof and of the Lease
          Agreement, as being in the condition that such Replacement Engines are
          required to be in pursuant to the terms of the Lease Agreement. Each
          of the Replacement Engines shall for all purposes hereof and of the
          Lease Agreement be deemed to be an "Engine" as defined in the Lease
          Agreement.

  3.      All of the terms and provisions of the Lease Agreement are hereby
          incorporated by reference in this Lease Supplement to the same extent
          as if fully set forth herein.

  4.      This Lease Supplement No. 2 shall be effective as of the date hereof.


<PAGE>


                   IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease
 Supplement No. 2 to be duly executed as of the day and year first above
 written.

                                        LESSOR

                                        BANK OF HAWAII

                                        By  /s/ James C. Tollefson
                                           --------------------------------
                                           Its Executive Vice President
                                                James C. Tollefson

                                        By  /s/ Curtis W. Chinn
                                           --------------------------------
                                           Its Senior Vice President

                                        LESSEE

                                        ALOHA AIRLINES, INC.

                                        By
                                           --------------------------------
                                           Its

                                        By
                                           --------------------------------
                                           Its

                                        2


<PAGE>


                   IN WITNESS WHEREOF, LESSOR and LESSEE have caused this Lease
 Supplement No. 2 to be duly executed as of the day and year first above
 written.

                                        LESSOR

                                        BANK OF HAWAII

                                        By
                                           --------------------------------
                                           Its

                                        By
                                           --------------------------------
                                           Its

                                        LESSEE

                                        ALOHA AIRLINES, INC.

                                        By  /s/ James M. King
                                           --------------------------------
                                           Its VICE PRESIDENT PLANNING
                                               & DEVELOPMENT

                                        By  /s/ Owen Sekimura
                                           --------------------------------
                                           Its STAFF VICE PRESIDENT -
                                               FINANCE & CONTROLLER


                                        2


<PAGE>

                                                          RECORDED
                                               FEDERAL AVIATION ADMINISTRATION
                                               DATE 5/6/97      TIME 4:18 PM
                                               CONVEYANCE NUMBER    S100509
                                               BY /s/ [ILLEGIBLE]
                                                  ----------------------------
                                                   LEGAL INSTRUMENTS EXAMINER


                               PARTIAL TERMINATION


                   The undersigned hereby certify that the Aircraft Lease
Agreement described in the attached Appendix has terminated with respect to the
Pratt & Whitney model JT8D-15 aircraft engines with manufacturer's serial
numbers 687358 and 702982, respectively, and further certify that said aircraft
engines are no longer subject to the terms thereof.

                    Dated this 9th day of April 1997.

LESSOR:                                LESSEE:

BANK OF HAWAII                         ALOHA AIRLINES, INC.


By   /s/ James C. Tollefson            By
     -------------------------------        -------------------------------
     Its    EXECUTIVE VICE PRESIDENT        Its
            James C. Tollefson


By   /s/ Curtis W. Chinn               By
     -------------------------------        -------------------------------
     Its    SENIOR VICE PRESIDENT           Its
            CURTIS W. CHINN


<PAGE>


                               PARTIAL TERMINATION

                    The undersigned hereby certify that the Aircraft Lease
Agreement described in the attached Appendix has terminated with respect to
the Pratt & Whitney model JT8D-15 aircraft engines with manufacturer's serial
numbers 687358 and 702982, respectively, and further certify that said
aircraft engines are no longer subject to the terms thereof.

                    Dated this 9th day of April, 1997.

LESSOR:                                LESSEE:

BANK OF HAWAII                         ALOHA AIRLINES, INC.


By                               By /s/ James M. King
    ---------------------------     ------------------------------------------
Its                                 Its  VICE PRESIDENT PLANNING & DEVELOPMENT


By                               By /s/ Owen Sekimura
    ---------------------------     ------------------------------------------
Its                                 Its  STAFF VICE PRESIDENT - FINANCE
                                             & CONTROLLER

<PAGE>


                                    APPENDIX

Aircraft Lease Agreement dated as of December 13, 1996, by and between Bank of
Hawaii, as lessor, and Aloha Airlines, Inc., as lessee, as supplemented by and
to which was attached Lease Supplement No. 1 dated December 13, 1996, as
recorded by the Federal Aviation Administration on December 17, 1996, as
Conveyance No. LL12114.



<PAGE>

                                                         RECORDED
                                               Federal Aviation Administration
                                               Date 9-14-98  Time  6:31 AM
                                                    --------      ------------
                                               Conveyance Number JT27908
                                                                 -------------
                                               By  /s/ [illegible]
                                                 -----------------------------


                   FIRST AMENDMENT TO AIRCRAFT LEASE AGREEMENT

                    THIS FIRST AMENDMENT TO AIRCRAFT LEASE AGREEMENT dated as of
  July 1, 1998, between ALOHA AIRLINES, INC., a corporation formed under the
  laws of the State of Delaware ("LESSEE") and BANK OF HAWAII, a banking
  corporation formed under the laws of the State of Hawaii ("LESSOR").

                                    RECITALS

                    WHEREAS, LESSOR AND LESSEE have heretofore entered into that
  certain Aircraft Lease Agreement dated as of December 13, 1996, to which were
  attached Lease Supplement No. 1 dated as of December 13, 1996 and Certificate
  of Acceptance dated as of December 13, 1996, filed together and recorded by
  the Federal Aviation Administration (the "FAA") on December 17, 1996 as
  Conveyance Number LL12114, and further supplemented by Lease Supplement No. 2
  dated as of April 9, 1997 recorded by the FAA on May 6, 1997 as Conveyance
  Number S100510 (herein collectively called the "Lease Agreement" and the
  defined terms therein being hereinafter used with the same meaning); and

                    WHEREAS, the Lease Agreement relates to one (1) The Boeing
  Company 737-230 model airframe, manufacturer's serial number 23154, bearing
  U.S. Registration Number N823AL, together with two (2) Pratt & Whitney JT8D-9A
  model engines, manufacturer's serial numbers 666671 and 678080; and

                    WHEREAS, LESSOR AND LESSEE desire to amend the Lease
  Agreement in the respects, and only in the respects, hereinafter set forth:

                    NOW, THEREFORE, in consideration of the premises and other
  good, valuable and sufficient consideration, LESSOR and LESSEE hereby agree as
  follows:

  1.       The definition of "Cash Flow" as set forth in Section 1 of the Lease
           Agreement shall be amended and restated in its entirety as follows:

           ""Cash Flow" shall mean, with respect to Airgroup, the sum of (a) the
           net income of the Consolidated Group (excluding non-recurring gains
           and losses), PLUS (b) the sum of the following, to the extent
           deducted in determining net income: (i) depreciation and amortization
           allowances, (ii) interest expense (including Payments in Kind and
           imputed interest on Capital Leases), and (iii) deferred taxes, LESS
           (c) the change in the excess of non-cash current assets over current
           liabilities (other than those pertaining to unearned transportation
           revenue and payment of principal, interest or taxes) calculated on a
           rolling four quarters basis and computed at the end of each Quarter."



<PAGE>

  2.       Section 1 shall be amended by the addition of the following
           definition of "Consolidated Group":

           "CONSOLIDATED GROUP" shall mean Airgroup, Lessee and Aloha
           IslandAir, Inc., a Delaware corporation."

   3.      The definition of "Debt Service" as set forth in Section 1 of the
           Lease Agreement shall be amended and restated in its entirety as
           follows:

           "DEBT SERVICE" shall mean, with respect to Airgroup, the sum of
           regularly scheduled principal payments, interest payments and
           payments under Capital Leases made by the Consolidated Group, and
           dividends declared and payable by Airgroup, all calculated on a
           rolling four quarters basis and computed at the end of each Quarter."

   4.      Section 1 shall be amended by the addition of the following
           definition of "Payments in Kind":

           ""PAYMENTS IN KIND" shall mean the issuance of additional
           subordinated debentures by Airgroup in lieu of interest."

   5.      Section 1 shall be amended by the addition of the following
           definition of "Quarter":

           ""QUARTER" shall mean any one of the following three-calendar month
           periods in any calendar year: April 1 to and including June 30; July
           1 to and including September 30; October 1 to and including December
           31; and January 1 to and including March 31."

   6.      All of the terms and provisions of the Lease Agreement are hereby
           incorporated by reference in this First Amendment to Lease Agreement
           to the same extent as if fully set forth herein.

   7.      This First Amendment to Lease Agreement may be simultaneously
           executed in several counterparts, each of which shall be deemed to be
           an original, and all such counterparts together shall constitute but
           one and the same instrument.

   8.      This First Amendment to Lease Agreement shall be effective as of
           July 1, 1998.


                                        2



<PAGE>

                    IN WITNESS WHEREOF, LESSOR and LESSEE have caused this First
  Amendment to Lease Agreement to be duly executed as of the day and year first
  above written.

                                         LESSOR:

                                         BANK OF HAWAII



                                         By:  /s/  [ILLEGIBLE]
                                            ----------------------------------

                                         Title:    Curtis W. Chinn
                                               -------------------------------
                                                   Senior Vice President

                                         By:   /s/  [ILLEGIBLE]
                                            ----------------------------------

                                         Title:   Joseph T. Donalson
                                               ------------------------------
                                                   Senior Vice President


                                         LESSEE:

                                         ALOHA AIRLINES, INC.


                                         By:    /s/ Brenda F. Cutwright
                                            ----------------------------------

                                         Title:  Sr. Vice President
                                                 Finance & Planning and CFO

                                         By:     /s/ James M. King
                                            ----------------------------------

                                         Title:  Vice President
                                                 Planning & Development




                                        3


<PAGE>

                      AMENDMENT TO AIRCRAFT LEASE AGREEMENT

                                    [N823AL]

     This Amendment to the Aircraft Lease Agreement dated as of December 13,
1996 between Bank of Hawaii ("B of H") as lessor and Aloha Airlines, Inc.
("Aloha") as lessee is executed among Wells Fargo Bank Northwest National
Association, not in its individual capacity but solely as owner trustee (the
"Trustee") under an Equipment Trust Agreement dated as of August 23, 2001, for
the benefit of BCI 2001-4, LLC, a Delaware limited liability company ("BCI"),
B of H and Aloha as of this 31st day of October, 2001.

1.   RECITALS

     1.1 On or about December 13, 1996, B of H as lessor and Aloha as lessee
entered into an Aircraft Lease Agreement and Lease Supplement No. 1 to such
Lease Agreement regarding a Boeing model 737-230 ADV aircraft having Federal
Aviation Administration No. N823AL, and manufacturer's serial number 23154. That
Aircraft Lease Agreement, as amended and supplemented to date, is described in
EXHIBIT A attached hereto, and is referred to as the "Lease" in this Amendment.
All capitalized terms not otherwise defined in this Amendment will have the
meanings ascribed in the Lease.

     1.2 The rights of B of H as lessor under the Lease have been assigned to
the Trustee for the benefit of BCI.

     1.3 The parties to the Lease wish to amend the Lease as set forth herein.

     Accordingly, the parties to this Amendment agree as follows:

2.   AMENDMENT TO LEASE

     The Agreed Value of the Aircraft for insurance purposes set forth in
Section 1 to the Lease is amended by the Trust and the Lessee from $12,000,000
to $7,500,000.00.

3.   CONSENT

     B of H, as lender, and BCI consent to amendment of the Lease as specified
herein.

4.   EFFECT OF AMENDMENT

     As amended heretofore and hereby, the Lease will remain in full force and
effect. In the case of any conflict between this Amendment and the Lease, the
terms of this Amendment will control.

5.   FILING WITH THE FAA

     Because this Amendment affects financial terms of the Lease only, this
Amendment is not to be filed with the Federal Aviation Administration.


                                     Page 1

<PAGE>

5.   FILING WITH THE FAA

     Because this Amendment affects financial terms of the Lease only, this
Amendment is not to be filed with the federal Aviation Administration.

     Executed as of this 31st day of October, 2001.


                                    BANK OF HAWAII, a Hawaii corporation

                                    By:       /s/ Ken D. Oishi
                                        ------------------------------------
                                    Printed Name: Ken D. Oishi
                                    Title: Vice President

                                    By:       /s/ Joseph T. Donalson
                                        ------------------------------------
                                    Printed Name: Joseph T. Donalson
                                    Title: Senior Vice President


                                    WELLS FARGO BANK NORTHWEST,
                                    NATIONAL ASSOCIATION, not in its individual
                                    capacity but solely as Owner Trustee under
                                    that certain Equipment Trust Agreement
                                    [N821AL & N823AL] dated as of
                                    August 23, 2001

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


                                    BCI 2001-4, LLC, a Delaware limited
                                    liability company
                                    By: BCI Aircraft Leasing, Inc., an
                                        Illinois corporation, its manager

                                        By:
                                            --------------------------------
                                        Printed Name: Brian N. Hollnagel
                                                      ----------------------
                                        Title: President
                                               -----------------------------


                                     Page 2

<PAGE>

Executed as of this 31st day of October, 2001.

                                    BANK OF HAWAII, a Hawaii corporation

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

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


                                    WELLS FARGO BANK NORTHWEST,
                                    NATIONAL ASSOCIATION, not in its individual
                                    capacity but solely as Owner Trustee under
                                    that certain Equipment Trust Agreement
                                    [N821AL & N823AL] dated as of
                                    August ____, 2001

                                    By:       /s/ Michael D. Hoggan
                                         -----------------------------------
                                    Printed Name: MICHAEL D. HOGGAN
                                                  --------------------------
                                    Title:     ASSISTANT VICE PRESIDENT
                                           ---------------------------------


                                    BCI 2001-4, LLC, a Delaware limited
                                    liability company
                                    By: BCI Aircraft Leasing, Inc., an
                                        Illinois corporation, its manager

                                        By:
                                            --------------------------------
                                        Printed Name: Brian N. Hollnagel
                                                      ----------------------
                                        Title: President
                                               -----------------------------


                                     Page 2

<PAGE>

Executed as of this 31st day of October, 2001.

                                    BANK OF HAWAII, a Hawaii corporation

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

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


                                    WELLS FARGO BANK NORTHWEST,
                                    NATIONAL ASSOCIATION, not in its individual
                                    capacity but solely as Owner Trustee under
                                    that certain Equipment Trust Agreement
                                    [N821AL & N823AL] dated as of
                                    August ____, 2001

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


                                    BCI 2001-4, LLC, a Delaware limited
                                    liability company
                                    By: BCI Aircraft Leasing, Inc., an
                                        Illinois corporation, its manager

                                    By:       /s/ Brian N. Hollnagel
                                         -----------------------------------
                                    Printed Name: Brian N. Hollnagel
                                    Title: President


                                     Page 2
<PAGE>

                                    ALOHA AIRLINES, INC., a Delaware corporation

                                    By:       /s/ Brenda F. Cutwright
                                        ------------------------------------
                                    Printed Name: BRENDA F. CUTWRIGHT
                                                  --------------------------
                                    Title: EXECUTIVE VICE PRESIDENT & CFO
                                           ---------------------------------

                                    By:       /s/ James M. King
                                         -----------------------------------
                                    Printed Name: JAMES M. KING
                                                  --------------------------
                                    Title: SENIOR VICE PRESIDENT PLANNING
                                           AND BUSINESS DEVELOPMENT
                                           ---------------------------------


                                     Page 3

<PAGE>

                                     EXHIBIT A
                           Description of N823AL Lease

LEASE AS TO THE AIRCRAFT

-    Aircraft Lease Agreement dated as of December 13, 1996, between Aloha
     Airlines, Inc., as lessee (the "Lessee") and Bank of Hawaii, as borrower
     (the "Borrower"), as supplemented by Lease Supplement No. 1 dated as of
     December 13, 1996 and Certificate of Acceptance dated as of December 13,
     1996, covering, INTER ALIA, one Boeing model 737-230 ADV airframe,
     manufacturer's serial number 23154, FAA registration number N823AL,
     together with two (2) Pratt & Whitney model JT8D-15 aircraft engines,
     manufacturer's serial numbers 687358 and 702982

-    Partially terminated by Partial Termination dated as of April 9, 1997
     covering, INTER ALIA, two (2) Pratt & Whitney model JT8D-15 aircraft
     engines, manufacturer's serial numbers 687358 and 702982

-    Supplemented by Lease Supplement No. 2 dated as of April 9, 1997 and
     Certificate of Acceptance dated as of April 9, 1997, covering, INTER ALIA,
     one Boeing model 737-230 airframe, manufacturer's serial number 23154, FAA
     registration number N823AL, together with two (2) Pratt & Whitney model
     JT8D-9A aircraft engines, manufacturer's serial numbers 666671 and 678080

-    Amended by First Amendment to Aircraft Lease Agreement dated as of July 1,
     1998

-    Amended by Assignment, Assumption and Amendment of Lease dated as of August
     23, 2001


                                     Page 1