<PAGE>
                                                                   EXHIBIT 10.50

--------------------------------------------------------------------------------
THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. TO THE EXTENT,
IF ANY, THAT THIS LEASE AGREEMENT CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS
DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION), NO SECURITY INTEREST IN THIS LEASE AGREEMENT MAY BE CREATED
THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL
EXECUTED COUNTERPART CONTAINING THE RECEIPT EXECUTED BY LESSOR OR, IF LESSOR HAS
ASSIGNED ITS RIGHTS TO A THIRD PARTY IN ACCORDANCE WITH THIS LEASE AGREEMENT,
SUCH THIRD PARTY ON THE SIGNATURE PAGE OF THIS LEASE AGREEMENT.
--------------------------------------------------------------------------------

                            DATED: JANUARY 15, 1997


                            ACG ACQUISITION VIII LLC

                                    (Lessor)

                                    - and -

                              ALOHA AIRLINES, INC.

                                    (Lessee)

                        --------------------------------
                               LEASE AGREEMENT 802
                                 - relating to -
                            Boeing 737-2S5C Aircraft
                         Manufacturers Serial No: 22148
                          U.S. Registration Mark N802AL
                        --------------------------------

                        FELTMAN, KARESH, MAJOR & FARBMAN,
                          Limited Liability Partnership
                               Carnegie Hall Tower
                              152 West 57th Street
                            New York, New York 10019


                                                          RECORDED

                                              Federal Aviation Administration

                                              Date  1-27-97      Time  4:10 PM
                                                   ---------           -------

                                              Conveyance Number  TT008434
                                                               ------------

                                              By /s/       [Illegible]
                                                      --------------------


<PAGE>


                               TABLE OF CONTENTS

<Table>
<Caption>
CLAUSE                                                                                             PAGE
------                                                                                             ----
<S>                                                                                                  <C>
1.     DEFINITIONS and INTERPRETATION ................................................................1
       1.1   Definitions .............................................................................1
       1.2   Interpretation .........................................................................13

2.     REPRESENTATIONS and WARRANTIES................................................................14
       2.1   Lessee's Representations and Warranties ................................................14
       2.2   Lessee's Further Representations and Warranties ........................................15
       2.3   Repetition .............................................................................16
       2.4   Lessor's Representations and Warranties ................................................17
       2.5   Repetition .............................................................................18

3.     CONDITIONS PRECEDENT..........................................................................18
       3.1   Lessor's Documentary Conditions Precedent ..............................................18
       3.2   Lessor's Other Conditions Precedent ....................................................19
       3.3   Lessor's Waiver ........................................................................19
       3.4   Lessee's Conditions Precedent ..........................................................20
       3.5   Lessee's Waiver ........................................................................20

4.     COMMENCEMENT..................................................................................20
       4.1   Leasing.................................................................................20
       4.2   Delivery................................................................................21
       4.3   Acceptance and Risk.....................................................................21

5.     PAYMENTS......................................................................................21
       5.1   Security Deposit; Letter of Credit .....................................................21
       5.2   Rental Periods .........................................................................23
       5.3   Basic Rent .............................................................................23
       5.4   Payments ...............................................................................24
       5.5   Gross-up ...............................................................................24
       5.6   Taxation ...............................................................................24
       5.7   Information ............................................................................25
       5.8   Taxation of Indemnity Payments .........................................................25
       5.9   Default Interest .......................................................................26
       5.10  Contest ................................................................................26
       5.11  Absolute ...............................................................................27

6.     MANUFACTURER'S WARRANTIES.....................................................................28
</Table>


                                      -i-
<PAGE>


                               TABLE OF CONTENTS
                                   continued
<Table>
<Caption>
CLAUSE                                                                                             PAGE
------                                                                                             ----
<S>                                                                                                  <C>
       6.1   Assignment .............................................................................28
       6.2   Proceeds ...............................................................................29
       6.3   Parts ..................................................................................29
       6.4   Agreement ..............................................................................29

7.     LESSOR'S COVENANTS and DISCLAIMERS............................................................30
       7.1   Quiet Enjoyment ........................................................................30
       7.2   Maintenance Contribution ...............................................................30
       7.3   Registration and Filings ...............................................................31
       7.4   Agreed Maintenance Performers ..........................................................31
       7.5   Exclusion ..............................................................................31
       7.6   Lessee's Waiver ........................................................................32
       7.7   Lessee's Confirmation ..................................................................32

8.     LESSEE'S COVENANTS............................................................................32
       8.1   Duration ...............................................................................32
       8.2   Information ............................................................................32
       8.3   Lawful and Safe Operation ..............................................................34
       8.4   Taxes and Other Charges ................................................................36
       8.5   Sub-Leasing ............................................................................36
       8.6   Inspection .............................................................................37
       8.7   Protection of Title ....................................................................37
       8.8   General ................................................................................38
       8.9   Records ................................................................................39
       8.10  Registration and Filings ...............................................................39
       8.11  Maintenance and Repair .................................................................40
       8.12  Removal of Engines and Parts ...........................................................41
       8.13  Installation of Engines and Parts ......................................................42
       8.14  Non-Installed Engines and Parts ........................................................44
       8.15  Pooling of Engines and Parts ...........................................................45
       8.16  Equipment Changes ......................................................................45
       8.17  Title to Engines and Parts .............................................................46
       8.18  Third Parties ..........................................................................46

9.     INSURANCE.....................................................................................46
       9.1   Insurances..............................................................................46
</Table>


                                     -ii-


<PAGE>


                               TABLE OF CONTENTS
                                   continued

<Table>
<Caption>
CLAUSE                                                                                             PAGE
------                                                                                             ----
<S>                                                                                                  <C>
       9.2   Requirements ...........................................................................47
       9.3   Insurance Covenants ....................................................................47
       9.4   Failure to Insure ......................................................................48
       9.5   Continuing Indemnity ...................................................................49
       9.6   Application of Insurance Proceeds ......................................................49

10.    INDEMNITY.....................................................................................50
       10.1  General.................................................................................50
       10.2  Mitigation..............................................................................51
       10.3  Duration................................................................................52

11.    EVENTS OF LOSS................................................................................52
       11.1  Total Loss..............................................................................52
       11.2  Requisition.............................................................................53

12.    RETURN OF AIRCRAFT............................................................................54
       12.1  Redelivery .............................................................................54
       12.2  Final Checks ...........................................................................54
       12.3  Final Inspection .......................................................................55
       12.4  Non-Compliance .........................................................................56
       12.5  Export Documentation ...................................................................56
       12.6  Acknowledgment .........................................................................57
       12.7  Maintenance Program ....................................................................57
       12.8  Storage ................................................................................57

13.    DEFAULT.......................................................................................58
       13.1  Events..................................................................................58
       13.2  Rights..................................................................................62
       13.3  Export..................................................................................62
       13.4  Default Payments........................................................................63

14.    ASSIGNMENT and TRANSFER ......................................................................64
       14.1  No assignment by Lessee ................................................................64
       14.2  Lessor Assignment ......................................................................64
       14.3  Grants of Security Interests ...........................................................66
       14.4  Sale and Leaseback by Lessor ...........................................................68
</Table>

                                    -iii-


<PAGE>


                               TABLE OF CONTENTS
                                   continued

<Table>
<Caption>
CLAUSE                                                                                             PAGE
------                                                                                             ----
<S>                                                                                                  <C>
       14.5  Further Acknowledgments ................................................................68
       14.6  Certain Protections for Lessee's Benefit ...............................................68

15.    MISCELLANEOUS.................................................................................69
       15.1  Waivers, Remedies Cumulative............................................................69
       15.2  Delegation .............................................................................69
       15.3  Appropriation ..........................................................................69
       15.4  Currency Indemnity .....................................................................69
       15.5  Payment by the Lessor ..................................................................70
       15.6  Severability ...........................................................................70
       15.7  Remedy .................................................................................70
       15.8  Expenses ...............................................................................70
       15.9  Time of Essence ........................................................................71
       15.10 Notices ................................................................................71
       15.11 Law and Jurisdiction ...................................................................72
       15.12 Sole and Entire Agreement ..............................................................73
       15.13 Indemnities ............................................................................73
       15.14 Counterparts ...........................................................................73
       15.15 Confidentiality ........................................................................74

SCHEDULES

       1. Aircraft Specification                                                                     76
       2. Certificate of Acceptance 802                                                              80
       3. Operating Condition at Redelivery                                                          84
       4. Insurance Requirements                                                                     89
       5. Form of Legal Opinion                                                                      94
       6. Form of Letter of Credit                                                                   95
       7. Form of Semi-Annual Status Report                                                          96
</Table>


                                     -iv-


<PAGE>


THIS LEASE AGREEMENT is made the 15th day of January, 1997

BETWEEN:

(1)     ACG ACQUISITION VIII LLC, a Delaware limited liability company, having
        its principal place of business at Three Stamford Landing, 46
        Southfield Avenue, Stamford, Connecticut 06902, U.S.A. (the "LESSOR"),
        and

(2)     ALOHA AIRLINES, INC., a Delaware corporation having its principal place
        of business at 371 Aokea Street, Honolulu, Hawaii 96819 (the "LESSEE").

WHEREAS:

(A)     The Aircraft has previously been owned and operated by the Lessee.

(B)     Pursuant to a Purchase Option Agreement 802, dated as of September 26,
        1996, between Lessee, as seller, and Lessor, as buyer (the "Purchase
        Agreement"), Lessor has exercised its option to purchase the Aircraft
        from Lessee, and Lessor has agreed to lease the Aircraft to the Lessee
        with effect from the purchase of the Aircraft upon and subject to the
        covenants, terms and conditions set out in this Agreement.

NOW IT IS HEREBY AGREED as follows:

1.      DEFINITIONS AND INTERPRETATION

1.1     DEFINITIONS

        In this Agreement the following expressions shall, unless the context
        otherwise requires, have the following respective meanings:

        ACTUAL COST             as it applies to any maintenance work on the
                                Aircraft means 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 or other similar amounts.

        AFFILIATE               in relation to any person, any other person
                                controlled directly or indirectly by that
                                person, any other person that controls directly
                                or indirectly that person or any other person
                                under common control with that person. For this
                                purpose "control" of any entity or person


                                     - 1 -
<PAGE>


                                means ownership of a majority of the voting
                                power of the entity or person.

AGREED MAINTENANCE PERFORMER    the Lessee or any other reputable maintenance
                                organization that is (i) experienced in
                                maintaining aircraft and/or engines of the same
                                type as the Aircraft and the Engines, (ii) duly
                                certificated by the FAA under FAR Part 145, and
                                (iii) not objected to by Lessor pursuant to
                                Clause 7.4.

AGREED MAINTENANCE PROGRAM      the Lessee's current Maintenance Program, as the
                                same may be amended from time to time in
                                accordance with this Agreement.

AGREED VALUE                    $6,000,000.

AIRCRAFT                        the aircraft described in Part 1 of Schedule I
                                (which term includes, where the context admits,
                                a separate reference to all Engines, Parts and
                                Aircraft Documents).

AIRCRAFT DOCUMENTS              the documents, data and records identified in
                                Part 2 of Schedule I and all additions,
                                renewals, revisions and replacements from time
                                to time made in accordance with this Agreement.

AIRFRAME                        the Aircraft, excluding the Engines and the
                                Aircraft Documents.

APU                             (i) the auxiliary power unit listed in Schedule
                                1, (ii) any and all Parts, so long as such Parts
                                are incorporated in, installed on or attached to
                                such auxiliary power unit or so long as title to
                                such Parts is vested in the Lessor in accordance
                                with the terms of Clause 8.17(a) after removal
                                from such auxiliary power unit, and (iii)
                                insofar as the same belong to Lessor, all
                                substitutions, replacements or renewals from
                                time to time made in or to such auxiliary power
                                unit or to any of the Parts referred to in
                                clause (ii) above, as required or permitted
                                under this Agreement.

APPRAISAL PROCEDURE             shall mean, with respect to any amount to be
                                determined, the amount mutually agreed by Lessor


                                     - 2 -
<PAGE>

                                and Lessee or, if Lessor and Lessee are unable
                                to agree upon any such amount to be determined,
                                the average of the amounts determined by three
                                FAA-approved service centers in the continental
                                United States, one such service centers
                                appointed by Lessor, one by Lessee and one by
                                their appointed service centers, except that if
                                any party fails to appoint a service center the
                                Manufacturer or the Engine Manufacturer
                                (whichever is appropriate) shall be deemed
                                appointed.

ASSIGNMENT                      any present or future assignment by the Lessor
                                in favor of the Lender of the Lessor's rights
                                under this Agreement as security for its
                                obligations to the Lender.

AVIATION AUTHORITY              the FAA or (if the State of Registration ceases
                                to be the United States of America) the
                                authority and/or Government Entity and/or agency
                                which, under the laws of the State of
                                Registration, from time to time (a) has control
                                or supervision of civil aviation; or (b) has
                                jurisdiction over registration, airworthiness or
                                operation of the Aircraft.

BASIC RENT                      all amounts payable pursuant to Clause 5.3.

BUSINESS DAY                    a day (other than a Saturday or Sunday) on which
                                business of the nature required by this
                                Agreement is carried out in Stamford,
                                Connecticut and the State of Incorporation or,
                                where used in relation to payments, on which
                                banks are open for business in New York, New
                                York and Honolulu, Hawaii.

CERTIFICATE OF ACCEPTANCE       a certificate in the form of Schedule 2 to be
                                completed and executed by the Lessee on
                                Delivery.

CYCLE                           one take-off and landing of an airframe.

DAMAGE NOTIFICATION THRESHOLD   $500,000.

DEFAULT                         any Event of Default and any event which with
                                the giving of notice, lapse of time,
                                determination of materiality or fulfilment of
                                other condition or any


                                     - 3 -
<PAGE>


                                combination of the foregoing would constitute an
                                Event of Default.

DELIVERY                        the deemed delivery of the Aircraft to the
                                Lessee in accordance with the terms of this
                                Agreement.

DELIVERY DATE                   the date on which Delivery takes place.

DELIVERY LOCATION               a location selected by Lessee and reasonably
                                acceptable to Lessor.

DOLLARS AND $                   the lawful currency of the United States of
                                America.

ENGINE                          whether or not installed on the Aircraft:

                                (a) each engine of the manufacture, model and
                                    serial number specified in Part 1 of
                                    Schedule 1 and having 750 or more rated
                                    take-off horsepower, title to which shall
                                    belong to the Lessor; or

                                (b) any engine which replaces that engine, title
                                    to which passes to the Lessor in accordance
                                    with Clause 8.17(a);

                                and in each case includes all modules and Parts
                                from time to time belonging to, installed in or
                                appurtenant to that engine but excludes any
                                engine replaced in accordance with Clause
                                8.13(a) title to which has, or should have,
                                passed to the Lessee in accordance with Clause
                                8.17(c) pursuant to this Agreement.

ENGINE LOSS DATE                the relevant date determined in accordance with
                                the definition of "Total Loss Date" as if that
                                definition applied to an Engine Loss.

ENGINE MANUFACTURER             the Pratt & Whitney Division of United
                                Technologies Corporation.

EVENT OF DEFAULT                an event specified in Clause 13.1.


                                     - 4 -
<PAGE>


EXPIRY DATE                     the day preceding the fifth anniversary of the
                                date of the Purchase Agreement or if earlier the
                                date on which:

                                (a) the Aircraft has been redelivered in
                                    accordance with this Agreement and all
                                    obligations of Lessee have been satisfied;
                                    or

                                (b) the Lessor receives the Agreed Value
                                    following a Total Loss and any other amounts
                                    then due and owing in accordance with this
                                    Agreement.

FAA                             the United States Federal Aviation
                                Administration, the Department of
                                Transportation, the Administrator of the Federal
                                Aviation Administration or any person or
                                Government Entity succeeding to the functions
                                thereof.

FAR                             the Federal Aviation Regulations for the time
                                being in force, issued by the FAA pursuant to
                                the Federal Aviation Law and published in Title
                                14 of the Code of Federal Regulations.

FEDERAL AVIATION LAW            Title 49 of the United States Code, as amended,
                                or any successor statutory provisions and the
                                regulations promulgated under such provisions.

FINANCIAL INDEBTEDNESS          any indebtedness in respect of:

                                (a) moneys borrowed;

                                (b) any liability under any debenture, bond,
                                    note, loan stock, acceptance credit,
                                    documentary credit or other security;

                                (c) the acquisition cost of any asset to the
                                    extent payable before or after the time of
                                    acquisition or possession; or

                                (d) the capitalized value (determined in
                                    accordance with accounting practices
                                    generally accepted in the State of
                                    Incorporation) of obligations under finance
                                    leases; or


                                     - 5 -
<PAGE>


                                (e) any guarantee, indemnity or similar
                                    assurance against financial loss of any
                                    person in respect of the above.

FLIGHT HOUR                     each hour or part thereof (rounded up to one
                                decimal place) elapsing from the moment the
                                wheels of an airframe leave the ground on take
                                off until the moment the wheels of such airframe
                                next touch the ground.

GAAP                            generally accepted accounting principles as in
                                effect from time to time and, subject to changes
                                in such principles from time to time,
                                consistently applied in accordance with the past
                                practices of a person.

GOVERNMENT ENTITY               (a) any national government, political
                                    subdivision thereof or local jurisdiction
                                    therein;

                                (b) any instrumentality, board, commission,
                                    court, or agency of any thereof, however
                                    constituted; and

                                (c) any association, organization, or
                                    institution of which any of the above is a
                                    member or to whose jurisdiction any thereof
                                    is subject or in whose activities any of the
                                    above is a participant.

HABITUAL BASE                   the State of Hawaii or, subject to the prior
                                written consent of the Lessor and Lender, any
                                other state, province or country in which the
                                Aircraft is for the time being habitually based.

INDEMNITEES                     each of the Lender and the Lessor, including
                                any of their respective successors and
                                assigns, shareholders, Affiliates, partners,
                                contractors, directors, officers, servants,
                                agents and employees.

IRS                             the Internal Revenue Service of the Department
                                of the Treasury of the United States of America.

LANDING GEAR                    the landing gear assembly of the Aircraft
                                excluding the wheels and brake units.


                                     - 6 -
<PAGE>


LENDER                          FINOVA Capital Corporation, a Delaware
                                corporation, and any other person or
                                persons that may from time to time refinance
                                the Aircraft for the Lessor and/or for whose
                                benefit a security interest in respect of the
                                Aircraft and/or this Agreement is granted by
                                the Lessor.

LESSEE INSTALLED PART           means passenger seats, overhead bins and galleys
                                title to which is held by Lessee subject to a
                                Security Interest in favor of an unrelated
                                third party or title to which is held by an
                                unrelated third party and such Part is leased or
                                conditionally sold to Lessee.

LESSOR LIEN                     (a) the Mortgage and any other
                                    security interest whatever from time to time
                                    created by or arising through the Lessor
                                    and/or the Lender in connection with the
                                    financing or refinancing of the Aircraft;

                                (b) any other security interest in respect of
                                    the Aircraft that results from  acts or
                                    omissions of, or claims against, the
                                    Lessor and/or the Lender not  related to
                                    the operation of the Aircraft or the
                                    transactions contemplated by  or
                                    permitted under this Agreement; and

                                (c) liens in respect of the Aircraft for
                                    Lessor Taxes.

LESSOR TAXES                    (a) Taxes imposed as a direct result of
                                    activities of the Lessor and/or the Lender
                                    in the jurisdictions imposing the liability
                                    unrelated to the Lessor's and/or the
                                    Lender's dealings with the Lessee
                                    pursuant to this Agreement or to the
                                    transactions contemplated by this
                                    Agreement or the operation of the
                                    Aircraft by the Lessee;

                                (b) Taxes imposed on the income, profits or
                                    gains of the Lessor and/or the Lender by any
                                    Federal Government Entity in the United
                                    States of America or by any Government
                                    Entity of the States of Delaware and/or
                                    Connecticut or by any Government Entity
                                    in any other jurisdiction Where the
                                    Lessor and/or the Lender is liable for


                                     - 7 -
<PAGE>


                                    such Taxes but only to the extent that such
                                    liability has or would have arisen in the
                                    absence of the transactions contemplated by
                                    this Agreement;

                                (c) Taxes imposed with respect to any period
                                    commencing or event occurring before the
                                    date of this Agreement or after the
                                    Expiry Date and unrelated to the Lessor's
                                    and/or the Lender's dealings with the
                                    Lessee pursuant to this Agreement or to
                                    the transactions contemplated by this
                                    Agreement;

                                (d) Taxes imposed as a direct result of the
                                    sale or other disposition of the
                                    Aircraft, unless such sale or disposition
                                    occurs as a consequence of an Event of
                                    Default;

                                (e) Taxes imposed by a taxing jurisdiction
                                    for a particular tax period in which none
                                    of the following is true for that tax
                                    period (i) the operation, registration,
                                    location, presence or use of the
                                    Aircraft, the Airframe, any Engine or any
                                    Part thereof in such jurisdiction, (ii)
                                    the place of incorporation, commercial
                                    domicile or other presence in such
                                    jurisdiction of the Lessee, any sublessee
                                    or any user of or person in possession of
                                    the Aircraft, the Airframe, any Engine or
                                    any Part thereof in such jurisdiction, or
                                    (iii) any payments made under this
                                    Agreement and related documents being
                                    made from such jurisdiction;

                                (f) Taxes to the extent caused by the gross
                                    negligence or intentional or willful
                                    misconduct of Lessor or Lender;

                                (g) Taxes to the extent caused by a failure
                                    by Lessor or Lender to furnish i a timely
                                    manner notice or information which it is
                                    required to furnish to Lessee by the
                                    terms of this Agreement; and


                                     - 8 -
<PAGE>


                                (h) Taxes based on or measured by the value
                                    or principal amount of indebtedness
                                    incurred by Lessor with respect to or
                                    secured by a Security Interest on the
                                    Aircraft, the Airframe, any Engine or any
                                    interest therein.

LETTER OF CREDIT                an irrevocable standby letter of credit, in the
                                form set out in Schedule 6 or otherwise in form
                                and substance reasonably satisfactory to the
                                Lessor, to be issued (at the Lessee's option) in
                                favor of the Lessor by a reputable bank in the
                                United States of America reasonably acceptable
                                to the Lessor for the payment of the Security
                                Deposit.

MAINTENANCE PROGRAM             an Aviation Authority approved maintenance
                                program for the Aircraft encompassing scheduled
                                maintenance, condition monitored maintenance
                                and/or on-condition maintenance of Airframe,
                                Engines and Parts, including servicing, testing,
                                preventative maintenance, repairs, structural
                                inspections, system checks, overhauls, approved
                                modifications, service bulletins, engineering
                                orders, airworthiness directives, corrosion
                                control, inspections and treatments.

MAJOR CHECKS                    any C-Check, multiple C-Check, D-Check or annual
                                heavy maintenance visit or segment thereof
                                suggested for commercial aircraft of the same
                                model as the Aircraft by its manufacturer
                                (however denominated) as set out in the Agreed
                                Maintenance Program.

MANUFACTURER                    The Boeing Company, a Delaware corporation with
                                a place of business in Seattle, Washington.

MINIMUM LIABILITY COVERAGE      $300,000,000 on each occurrence.

MORTGAGE                        the first priority aircraft chattel mortgage
                                and security agreement to be granted by the
                                Lessor as debtor to the Lender as secured
                                party, whereby the Lessor will grant to the
                                Lender a first priority security interest in
                                the Aircraft and its right, title and
                                interest in this Agreement.


                                     - 9 -
<PAGE>


PARENT                          Aloha Airgroup, Inc., a Hawaii corporation and
                                the sole stockholder of Lessee.

PART                            whether or not installed on the Aircraft:

                                (a) any component, furnishing or equipment
                                    (other than a complete Engine) furnished
                                    with, installed on or appurtenant to the
                                    Airframe and Engines on Delivery; and

                                (b) any other component, furnishing or
                                    equipment (other than a complete Engine)
                                    title to which has, or should have,
                                    passed to the Lessor pursuant to the
                                    Purchase Agreement or Clause 8.17(a),

                                but excludes any such items title to which
                                has, or should have, passed to the Lessee
                                pursuant to Clause 8.17(c) and any Lessee
                                Installed Part.

PERMITTED LIEN                  (a) any lien for Taxes not assessed or, if
                                    assessed, not yet due and payable, or being
                                    contested in good faith by appropriate
                                    proceedings;

                                (b) any lien of a repairer, mechanic, carrier,
                                    hangar keeper, unpaid seller or other
                                    similar lien arising in the ordinary course
                                    of business or by operation of law in
                                    respect of obligations which are not
                                    overdue in accordance with applicable law
                                    (or, if applicable, generally accepted
                                    accounting principles and practices in
                                    the relevant jurisdiction) or are being
                                    contested in good faith by appropriate
                                    proceedings; and

                                (c) any Lessor Lien;

                                but only if, in the case of (a) and (b):
                                (i) adequate reserves have been provided by
                                the Lessee for the payment of the Taxes
                                or obligations in accordance with
                                generally accounting principles and
                                practices in the relevant jurisdiction;
                                and (ii) such proceedings, or the
                                continued existence of the Lien, do not
                                give rise to any, reasonable likelihood
                                of the sale, forfeiture or


                                     - 10 -
<PAGE>


                                other loss of the Aircraft or any interest
                                therein or of criminal liability on the
                                Lessor or any Lender.

REDELIVERY LOCATION             Honolulu, Hawaii or an airport in one of the
                                States on the West Coast of the United States
                                of America, as agreed by Lessor and Lessee
                                before the Expiry Date.

RENT                            collectively, all Basic Rent and all
                                Supplemental Rent.

RENTAL PERIOD                   each period ascertained in accordance with
                                Clause 5.2.

RENT DATE                       the Delivery Date and the 26th day of each
                                calendar month during the Term.

SECURITY DEPOSIT                the amount of $227,000.

SECURITY INTEREST               any mortgage, charge, pledge, lien, assignment,
                                hypothecation, right of set-off, or any
                                agreement or arrangement having the effect of
                                creating a security interest, other than a
                                Permitted Lien.

STATE OF INCORPORATION          State of Delaware.

STATE OF REGISTRATION           United States of America.

SUBSIDIARY                      (a) in relation to any reference to accounts,
                                    any company wholly or partially owned by
                                    Parent, including the Lessee, whose
                                    accounts are consolidated with the
                                    accounts of the Parent in accordance with
                                    accounting principles generally accepted
                                    under accounting standards of the State
                                    of Incorporation; and

                                (b) for any other purpose, an entity from time
                                    to time:

                                    (i)  of which another has direct or indirect
                                         control or owns directly or indirectly
                                         more than 50% of the voting share
                                         capital; or


                                      -11-


<PAGE>


                                    (ii) which is a direct or indirect
                                         subsidiary of another under the
                                         laws of the jurisdiction of its
                                         incorporation.

SUPPLEMENTAL RENT               all amounts, liabilities and obligations (other
                                than Basic Rent) which Lessee assumes or
                                agrees to pay under this Agreement to Lessor
                                or any other person, including payment of the
                                Security Deposit, other deposits, indemnities
                                and the Agreed Value.

TAXES                           all present and future taxes, levies, imposts,
                                duties or charges in the nature of taxes,
                                whatever and wherever imposed, including
                                customs duties, value added taxes or similar
                                taxes and any franchise, transfer, sales,
                                use, business, occupation, excise, personal
                                property, stamp or other tax or duty imposed
                                by any national or local taxing or fiscal
                                authority or agency, together with any
                                withholding, penalties, additions to tax,
                                fines or interest thereon or with respect
                                thereto.

TERM                            the period commencing on the Delivery Date and
                                ending on the Expiry Date.

TOTAL LOSS                      with respect to the Airframe:

                                (a) the actual, arranged or constructive total
                                    loss of the Airframe (including any
                                    damage to the Airframe which results in
                                    an insurance settlement on the basis of a
                                    total loss, or requisition for use or
                                    hire which results in an insurance
                                    settlement on the basis of a total loss);

                                (b) the Airframe being destroyed, damaged
                                    beyond repair or permanently
                                    rendered unfit for normal use for
                                    any reason whatsoever;

                                (c) the requisition of title, or other
                                    compulsory acquisition, capture, seizure,
                                    deprivation, confiscation or detention
                                    for any reason of the Airframe by the
                                    government of the State of Registration
                                    (whether DE JURE or DE FACTO), but
                                    excluding requisition for use or hire not
                                    involving requisition of title; or


                                     -12-


<PAGE>


                                (d) the hi-jacking, theft, condemnation,
                                    confiscation, seizure or requisition for
                                    use or hire of the Airframe which
                                    deprives any person permitted by this
                                    Agreement to have possession and/or use
                                    of the Airframe of its possession and/or
                                    use for more than 60 consecutive days.

TOTAL LOSS DATE                 (a) in the case of an actual total loss, the
                                    actual date on which the loss occurs or,
                                    if such date is unknown, the day on which
                                    the Aircraft was last heard of;

                                (b) in the case of any of the events
                                    described in sub-paragraph (a) of the
                                    definition of "Total Loss" (other than an
                                    actual total loss), the earlier of  (i)
                                    30 days after the date on which notice
                                    claiming such total loss is given  to the
                                    relevant insurers, and (ii) the date on
                                    which such loss is admitted or
                                    compromised by the insurers;

                                (c) in the case of any of the events
                                    described in sub-paragraph (b) of the
                                    definition of "Total Loss", the date on
                                    which such destruction, damage or
                                    rendering unfit occurs;

                                (d) in the case of any of the events
                                    described in sub-paragraph (c) of the
                                    definition of "Total Loss", the date on
                                    which the relevant requisition of title
                                    or other compulsory acquisition, capture,
                                    seizure, deprivation, confiscation or
                                    detention occurs;

                                (e) in the case of any of the events
                                    described in sub-paragraph (d) of the
                                    definition of "Total Loss", the expiry of
                                    the period of 60 days referred to in such
                                    sub-paragraph (d);

                                and, in each case, the Total Loss shall be
                                deemed to have occurred at noon Greenwich
                                Mean Time on such date.

1.2     INTERPRETATION


                                     -13-


<PAGE>

        (a)  In this Agreement, unless the contrary intention is stated, a
             reference to:

             (i)   each of "THE LESSOR", "THE LESSEE", "THE LENDER" or any
                   other person includes without prejudice to the provisions
                   of this Agreement any successor in title to it and any
                   permitted assignee;

             (ii)  words importing the plural shall include the singular and
                   vice versa;

             (iii) the term "including", when used in this Agreement, means
                   "including without limitation" and "including but not
                   limited to".

             (iv)  any document shall include that document as amended,
                   novated or supplemented;

             (v)   a law (1) includes any statute, decree, constitution,
                   regulation, order, judgment or directive of any Government
                   Entity; (2) includes any treaty, pact, compact or other
                   agreement to which any Government Entity is a signatory or
                   party; (3) includes any judicial or administrative
                   interpretation or application thereof; and (4) is a
                   reference to that provision as amended, substituted or
                   re-enacted; and

             (vi)  a Clause or a Schedule is a reference to a clause of or a
                   schedule to this Agreement.

         (b)  The headings in this Agreement are to be ignored in construing
              this Agreement.

2.       REPRESENTATIONS AND WARRANTIES

2.1      LESSEE'S REPRESENTATIONS AND WARRANTIES

         The Lessee represents and warrants to the Lessor as follows:

         (a)  STATUS: The Lessee is a corporation duly organized, validly
              existing and in good standing under the laws of the State of
              Incorporation, has the corporate power to own its assets and
              carry on its business as it is being conducted and is (or will
              at the relevant time be) the holder of all necessary air
              transportation licences required in connection therewith and
              with the use and operation of the Aircraft.

         (b)  POWER AND AUTHORITY: The Lessee has the corporate power to enter
              into and perform, and has taken all necessary corporate action to
              authorize the entry into, performance and delivery of, this
              Agreement and the transactions contemplated by this Agreement.

         (c)  LEGAL VALIDITY: This Agreement constitutes the Lessee's legal,
              valid and binding obligation.


                                     -14-


<PAGE>


         (d)  NON-CONFLICT: The entry into and performance by the Lessee of,
              and the transactions contemplated by, this Agreement do
              not and will not:

              (i)   conflict with any laws binding on the Lessee;

              (ii)  conflict with the constitutional documents of the Lessee; or

              (iii) conflict with or result in default under any document which
                    is binding upon the Lessee or any of its assets, or result
                    in the creation of any Security Interest over any of its
                    assets.

         (e)  AUTHORIZATION: All authorizations, consents and registrations
              required by, and all notifications to be given by, the Lessee
              in connection with the entry into, performance, validity and
              enforceability of, this Agreement and the transactions
              contemplated by this Agreement have been (or will on or before
              Delivery have been) obtained, effected or given (as
              appropriate) and are (or will on their being obtained or
              effected be) in full force and effect.

         (f)  NO IMMUNITY:

              (i)   The Lessee is sub ject to civil commercial law with respect
                    to its obligations under this Agreement.

              (ii)  Neither the Lessee nor any of its assets is entitled to any
                    right of immunity and the entry into and performance of
                    this Agreement by the Lessee constitute private and
                    commercial acts.

         (g)  FINANCIAL STATEMENTS: the audited consolidated financial
              statements of the Parent and its Subsidiaries most
              recently delivered to the Lessor:

              (i)   have been prepared in accordance with accounting principles
                    and practices generally accepted and consistently applied in
                    the State of Registration; and

              (ii)  fairly present the consolidated financial condition of the
                    Parent and its Subsidiaries as at the date to which they
                    were drawn up and the consolidated results of operations
                    of the Parent and its Subsidiaries for the periods covered
                    by such statements.

2.2     LESSEE'S FURTHER REPRESENTATIONS AND WARRANTIES

        The Lessee further represents and warrants to the Lessor that:


                                     -15-



<PAGE>

     (a)  NO DEFAULT: No Event of Default has occurred and is continuing or
          might reasonably be expected to result from the entry into or
          performance of this Agreement.

     (b)  REGISTRATION:

          (i)  It is not necessary or advisable under the laws of the State
               of Incorporation, the State of Registration or the Habitual
               Base in order to ensure the validity, effectiveness and
               enforceability of this Agreement, the Mortgage or the
               Assignment or to establish, perfect or protect the property
               rights of the Lessor or the Lender in the Aircraft, any Engine
               or Part that this Agreement or any other instrument relating
               thereto be filed, registered or recorded or that any other
               action be taken or, if any such filings, registrations,
               recordings or other actions are necessary, the same have been
               effected or will have been effected on or before Delivery.

          (ii) Under the laws of the State of Incorporation, the State of
               Registration and the Habitual Base the property rights of the
               Lessor and the Lender (pursuant to the Mortgage) in the
               Aircraft have been fully established, perfected and protected
               and this Agreement will have priority in all respects over the
               claims of all creditors of the Lessee, with the exception of
               such claims as are mandatorily preferred by law and not by
               virtue of any contract.

     (c)  LITIGATION: No litigation, arbitration or administrative
          proceedings are  pending or, to the Lessee's knowledge,
          threatened against the Lessee which, if adversely determined,
          would have a material adverse effect upon its financial
          condition or business or its ability to perform its
          obligations under this Agreement.

     (d)  PARI PASSU: The obligations of the Lessee under this Agreement rank
          at least PARI PASSU with all other present and future unsecured and
          unsubordinated obligations (including contingent obligations) of
          the Lessee, with the exception of such obligations as are
          mandatorily preferred by law and not by virtue of any contract.

     (e)  TAXES: The Lessee has delivered all necessary returns and payments
          due to the tax authorities in the State of Incorporation, the State
          of Registration and the Habitual Base and is not required by law to
          deduct or withhold any Taxes from any payments under this Agreement.

2.3  REPETITION

     The representations and warranties in Clause 2.1 and Clause 2.2 will
     survive the execution of this Agreement. The representations and
     warranties contained in Clause 2.1 and Clause 2.2 (other than Clause
     2.2(c) above) will be deemed to be repeated by the Lessee on Delivery
     with reference to the facts and circumstances then existing. The
     representations and


                                     -16-
<PAGE>

     warranties contained in Clause 2.1 will be deemed to be repeated by the
     Lessee on each Rent Date as if made with reference to the facts and
     circumstances then existing.

2.4  LESSOR'S REPRESENTATIONS AND WARRANTIES

     The Lessor represents and warrants to the Lessee that:

     (a)  STATUS: The Lessor is a limited liability company duly formed and
          validly existing under the laws of Delaware and has the power to
          own its assets and carry on its business as it is now being
          conducted.

     (b)  POWER AND AUTHORITY: The Lessor has the power to enter into and
          perform, and has taken all necessary action to authorize the entry
          into, performance and delivery of, this Agreement and the
          transactions contemplated by this Agreement.

     (c)  LEGAL VALIDITY: This Agreement constitutes the Lessor's legal,
          valid and binding obligation.

     (d)  NON-CONFLICT: The entry into and performance by the Lessor of, and
          the transactions contemplated by, this Agreement do not and will
          not:

          (i) conflict with any laws binding on the Lessor;

          (ii) conflict with the constitutional documents of the Lessor; or

          (iii) conflict with any document which is binding upon the Lessor or
                any of its assets.

     (e)  AUTHORIZATION: So far as concerns the obligations of the Lessor,
          all authorizations, consents, registrations and notifications
          required under the laws of the States of Delaware and New York in
          connection with the entry into, performance, validity and
          enforceability of, and the transactions contemplated by, this
          Agreement by the Lessor have been (or will on or before Delivery
          have been) obtained or effected (as appropriate) and are (or will
          on their being obtained or effected be) in full force and effect.

     (f)  NO IMMUNITY:

          (i)  The Lessor is subject to civil commercial law with respect to
               its obligations under this Agreement.

          (ii) Neither the Lessor nor any of its assets is entitled to any
               right of immunity and the entry into and performance of this
               Agreement by the Lessor constitute private and commercial acts.


                                     -17-
<PAGE>

     (g)  RIGHT TO LEASE: On the Delivery Date, the Lessor shall have the
          right to lease the Aircraft to the Lessee under this Agreement.

2.5  REPETITION

     The representations and warranties in Clause 2.4 will survive the
     execution of this Agreement. The representations and warranties
     contained in Clause 2.4 will be deemed to be repeated by the Lessor on
     Delivery and on each subsequent Rent Date as if made with reference to
     the facts and circumstances then existing.

3.   CONDITIONS PRECEDENT

3.1  LESSOR'S DOCUMENTARY CONDITIONS PRECEDENT

     The Lessor's obligation to lease the Aircraft to the Lessee under this
     Agreement is subject to the receipt of the following by the Lessor from
     the Lessee on or before Delivery in form and substance satisfactory to
     the Lessor, PROVIDED THAT it shall not be a condition precedent to the
     obligations of the Lessor that any document be produced, or action
     taken, which is to be produced or taken by it or any person within its
     control:

     (a)  CONSTITUTIONAL DOCUMENTS: a copy of the constitutional documents of
          the Lessee;

     (b)  RESOLUTIONS: a copy of a resolution of the board of directors of
          the Lessee approving the terms of, and the transactions
          contemplated by, this Agreement, resolving that it enter into this
          Agreement, and authorizing a specified person or persons to execute
          this Agreement and accept delivery of the Aircraft on its behalf;

     (c)  OPINION: an opinion, in the form set out in Schedule 5, in respect
          of the Lessee's obligations under this Agreement issued by
          independent legal counsel acceptable to the Lessor in the State of
          Incorporation;

     (d)  APPROVALS: evidence of the issue of each approval, licence and
          consent which may be required in relation to, or in connection
          with, the performance by Lessee of any of its obligations hereunder;

     (e)  LICENCES: copies of the Lessee's air transport license, air
          operator's certificate and all other licenses, certificates and
          permits required by the Lessee in relation to, or in connection
          with, the operation of the Aircraft;

     (f)  CERTIFICATE: a certificate of a duly authorized officer of the
          Lessee:

          (i) setting out a specimen of each signature referred to in Clause
              3.1(b); and


                                     -18-
<PAGE>

          (ii) certifying that each copy of a document specified in this
               Clause 3.1 is correct, complete and in full force and effect;

     (g)  INSURANCES: certificates of insurance, brokers' undertakings and
          other evidence satisfactory to the Lessor that the Lessee is taking
          the required steps to ensure due compliance with the provisions of
          this Agreement as to insurances with effect on and after Delivery;

     (h)  REGISTRATION: evidence that the Aircraft has been validly
          registered under the laws of the State of Registration and that all
          filings, registrations, recordings and other actions have been or
          will be taken which are necessary to ensure the validity,
          effectiveness and enforceability of this Agreement, the Mortgage
          and the Assignment and to protect the respective rights of the
          Lessor and the Lender in the Aircraft or any Part; and

          (i) GENERAL: such other documents as the Lessor may reasonably
              request.

3.2  LESSOR'S OTHER CONDITIONS PRECEDENT

     The obligation of the Lessor to deliver and lease the Aircraft under
     this Agreement is also subject to the following additional conditions
     precedent:

     (a)  that the representations and warranties of the Lessee under Clauses
          2.1 and 2.2 are correct and would be correct if repeated on
          Delivery;

     (b)  that all payments due to the Lessor under this Agreement on or
          before Delivery, including the first payment of Basic Rent, shall
          have been received by the Lessor;

     (c)  all conditions precedent to the purchase of the Aircraft and the
          Aircraft Documents by the Lessor under the Purchase Agreement shall
          have been satisfied (or waived by the Lessor), the Lessor shall
          have drawn down under its financing facility with the Lender the
          amount required to pay the "Purchase Price" (as defined in the
          Purchase Agreement) due to the Lessee and the Lessee has delivered
          the Aircraft and Aircraft Documents to Lessor pursuant to the
          Purchase Agreement; and

     (d)  the Mortgage shall be in full force and effect.

3.3  LESSOR'S WAIVER

     The conditions specified in Clauses 3.1 and 3.2(a) and (b) are for the
     sole benefit of the Lessor and the Lender and may be waived or deferred
     in whole or in part and with or without conditions by the Lessor. If any
     of those conditions are not satisfied on or before Delivery and the
     Lessor (in its absolute discretion) nonetheless agrees to deliver the
     Aircraft to the


                                     -19-
<PAGE>

     Lessee, the Lessee will ensure that those conditions (other than the
     representation set forth in Clause 2.2(c) being correct on the Delivery
     Date) are fulfilled within one month after the Delivery Date and the
     Lessor may treat as an Event of Default the failure of the Lessee to do
     so.

3.4  LESSEE'S CONDITIONS PRECEDENT

     The Lessee's obligation to accept the Aircraft on lease from the Lessor
     under this Agreement is subject to the satisfaction by the Lessor of the
     following conditions precedent:

     (a)  RESOLUTIONS: the receipt by the Lessee of a copy of resolutions of
          the board of directors of the Lessor approving the terms of, and
          the transactions contemplated by, this Agreement, resolving that it
          enter into this Agreement, and authorizing a specified person or
          persons to execute this Agreement and deliver the Aircraft on its
          behalf;

     (b)  CERTIFICATE: the receipt by the Lessee of a certificate of a duly
          authorized officer of the Lessor:

          (i)  setting out a specimen of each signature referred to in
               sub-clause (a) above; and

          (ii) certifying that the copy of the resolutions referred to in
               sub-clause (a) above is correct, complete and in full force
               and effect;

     (c)  REPRESENTATIONS AND WARRANTIES: that the representations and
          warranties of the Lessor under Clause 2.4 are correct and would be
          correct if repeated on Delivery; and

     (d)  LENDER'S COVENANT OF QUIET ENJOYMENT: the receipt by the Lessee of
          the Lender's Letter of Quiet Enjoyment, duly signed by the Lender.

3.5  LESSEE'S WAIVER

     The conditions specified in Clause 3.4 are for the sole benefit of the
     Lessee and may be waived or deferred in whole or in part and with or
     without conditions by the Lessee. If any of those conditions are not
     satisfied on or before Delivery and the Lessee (in its absolute
     discretion) nonetheless agrees to lease the Aircraft from the Lessor,
     the Lessor will ensure that those conditions are fulfilled within one
     month after the Delivery Date.

4.   COMMENCEMENT

4.1  LEASING

     (a)  The Lessor will lease the Aircraft to the Lessee and the Lessee
          will take the Aircraft on lease in accordance with this Agreement
          for the duration of the Term.


                                     -20-
<PAGE>

     (b)  The Lessor and the Lessee intend that this Agreement constitute a
          "true lease" and a lease for all United States federal income tax
          purposes. The Lessor and the Lessee further intend and agree that
          the Lessor shall be entitled to the full benefits afforded lessors
          of aircraft under 11 U.S.C. Section 1110, as amended.

4.2  DELIVERY

     The Aircraft will be deemed to have been delivered to, and will be
     accepted by, the Lessee at the Delivery Location, or such other location
     as may be agreed, on the Delivery Date immediately following
     satisfaction of the conditions precedent specified in Clauses 3.1, 3.2
     and 3.4 (or their waiver or deferral by the party entitled to grant such
     waiver or deferral).

4.3  ACCEPTANCE AND RISK

     (a)  Immediately following satisfaction of the conditions precedent
          specified in Clauses 3.1, 3.2 and 3.4 (or their waiver or deferral
          by the party entitled to grant such waiver or deferral), the Lessee
          and the Lessor shall forthwith complete Annex 1 to the Certificate
          of Acceptance (specifying the maintenance status of the Airframe,
          Engines, APU and Landing Gear) and the Lessee shall sign and
          deliver to the Lessor the Certificate of Acceptance. Delivery of
          the signed Certificate of Acceptance to the Lessor shall constitute
          deemed delivery of the Aircraft to the Lessee.

     (b)  On and from Delivery, the Aircraft and every Part will be in every
          respect at the sole risk of the Lessee, which will bear all risk
          of loss, theft, damage or destruction to the Aircraft from any
          cause whatsoever.

     (c)  Immediately following Delivery, the Lessor shall file for
          recordation this Lease at the FAA Aircraft Registry together with
          the Mortgage and the Assignment.

5.   PAYMENTS

5.1  SECURITY DEPOSIT: LETTER OF CREDIT

     (a)  SECURITY DEPOSIT: On the date of this Agreement, Lessee shall pay
          the Security Deposit to Lessor. The Security Deposit shall
          constitute additional security for performance by Lessee of its
          obligations under this Agreement, and the following provisions
          shall apply:

          (i)   If an Event of Default occurs and for as long as it
                continues, the Lessor may (but shall not be obligated to)
                apply all or any portion of the Security Deposit in or
                towards satisfaction of any sums due and payable to the
                Lessor under this Agreement or to compensate the Lessor for
                any sums which it may, in its

                                      -21-
<PAGE>

                discretion, advance or expend as a result of any such Event
                of Default. Notwithstanding any such use or application by
                the Lessor, the Lessee shall remain in default under this
                Agreement until the full amount owed by the Lessee, including
                interest accrued thereon pursuant to Clause 5.9, shall have
                been paid to the Lessor. If the Lessor so uses or applies all
                or any portion of the Security Deposit, the Lessee shall
                immediately, on demand of the Lessor, replenish the Security
                Deposit in an amount equal to the amount so used or applied
                within five Business Days after Lessor's demand therefor.

         (ii)   Lessor may commingle the Security Deposit with its general
                funds, and any interest earned on the Security Deposit will
                be for Lessor's account.

         (iii)  The Security Deposit shall be returned to the Lessee within
                five Business Days of (1) redelivery of the Aircraft to the
                Lessor in the condition required by Clause 12 of, and
                Schedule 3 to, this Agreement, (2) receipt by the Lessor of
                the Agreed Value following a Total Loss and all other amounts
                due under Clause 11.1 (b), or (3) at such later time as the
                Lessor is satisfied that the Lessee has irrevocably paid to
                the Lessor all amounts which are at that time outstanding
                under this Agreement; provided always that the Lessor shall
                not be obliged to return the Security Deposit if, at the
                relevant time, a Default shall have occurred and be
                continuing.

     (b)  LETTER OF CREDIT: the Lessee shall be entitled, instead of paying
          the Security Deposit in cash in accordance with sub-clause (a)
          above, to provide the Lessor with the Letter of Credit. In the
          event that the Lessee elects to provide the Letter of Credit, the
          following provisions shall apply:

          (i)   Lessee shall cause the Letter of Credit to be renewed or
                replaced by the issuing bank not later than 10 Business Days
                before the expiration of such Letter of Credit, and shall
                cause the Letter of Credit to remain in effect, as renewed,
                until 90 days after the scheduled Expiry Date.

          (ii)  If an Event of  Default  occurs  and for as long as it
                continues,  the Lessor may (but shall not be obliged to) call
                on the Letter of Credit and use or apply the proceeds in or
                towards  satisfaction  of any sums due and payable to the
                Lessor  under this  Agreement or to  compensate  the Lessor
                for any sums which it may, in its  discretion,  advance or
                expend as a result of any such Event of Default.
                Notwithstanding  any such use or  application  by the Lessor,
                the Lessee  shall  remain in default  under this  Agreement
                until the full amount owed by the Lessee,  including
                interest accrued thereon pursuant to Clause 5.9, shall have
                been paid to the  Lessor.  If the Lessor so uses or applies
                all or any  portion  of the  amount  available  under the
                Letter of Credit, the Lessee shall immediately,  on demand of
                the Lessor,  procure the issue of a new Letter of Credit
                acceptable to the Lessor for


                                     -22-
<PAGE>

                an amount equal to the amount so used or applied, or shall
                pay to the Lessor an amount in cash equal to the amount so
                used or applied to be held pursuant to Clause 5.1(a).

          (iii) The Letter of Credit shall be returned to the Lessee within
                five Business Days of

                (1)   redelivery of the Aircraft to the Lessor in the
                      condition required by Clause 12 of, and Schedule 3 to,
                      this Agreement; or

                (2)   receipt by the Lessor of the Agreed Value following a
                      Total Loss and all other amounts due under Clause
                      11.1(b); or

                in either case, at such later time as the Lessor is satisfied
                that the Lessee has irrevocably paid to the Lessor all
                amounts which are at that time outstanding under this
                Agreement; provided always that the Lessor shall not be
                obliged to return the Letter of Credit if, at the relevant
                time, a Default shall have occurred and be continuing.

5.2  RENTAL PERIODS

     The first Rental Period will commence on the Delivery Date and each
     subsequent Rental Period will commence on the date succeeding the last
     day of the previous Rental Period. Each Rental Period will end on the
     date immediately preceding the next succeeding Rent Date except that if
     a Rental Period would otherwise overrun the Expiry Date, it will end on
     the Expiry Date.

5.3  BASIC RENT

     (a)  TIME OF PAYMENT: the Lessee will pay to the Lessor or its order
          Basic Rent in advance on each Rent Date. Payment must be initiated
          adequately in advance of the Rent Date to ensure that the Lessor
          receives credit for the payment on the Rent Date.

     (b)  AMOUNT: The Basic Rent payable in respect of each Rental Period
          will be as follows:

          (i)   The Basic Rent payable in respect of the first Rental Period
                will be the product of $113,500 multiplied by a fraction (1)
                the numerator of which is the number of days from and
                including the Delivery Date to but excluding the next
                succeeding Rent Date and (2) the denominator of which is the
                number of days in the calendar month immediately preceding
                the calendar month in which such next succeeding Rent Date
                occurs.

          (ii)  The Basic Rent payable in respect of each subsequent Rental
                Period will be the amount of $113,500.


                                       -23-
<PAGE>

5.4  PAYMENTS

     (a)  All payments of Rent by the Lessee to the Lessor under this
          Agreement will be made for value on the due date, for the full
          amount due, in Dollars and in same day funds, settled through the
          New York Clearing House System or such other funds as may for the
          time being be customary for the settlement in New York City of
          payments in Dollars by telegraphic transfer to the account of the
          Lender at Citibank, N.A., New York, New York, ABA No. 021000089,
          Account No. 00067512, reference "Aloha Airlines/N802AL-N804AL".

     (b)  if any Rent or other payment would otherwise become due on a day
          which is not a Business Day, it shall be due on the immediately
          succeeding Business Day.

5.5  GROSS-UP

     (a)  All payments by the Lessee under or in connection with this
          Agreement will be made without offset or counterclaim, free and
          clear of and without deduction or withholding for or on account of
          any Taxes (other than Lessor Taxes that Lessee is compelled by law
          to deduct or withhold).

     (b)  All Taxes (other than Lessor Taxes) in respect of payments under
          this Agreement shall be for the account of the Lessee.

     (c)  If the Lessee is compelled by law to make payment to the Lessor
          under or in connection with this Agreement subject to any Tax and
          the Lessor does not actually receive for its own benefit on the due
          date a net amount equal to the full amount provided for under this
          Agreement (other than Lessor Taxes that Lessee is compelled by law
          to deduct or withhold), the Lessee will pay all necessary
          additional amounts to ensure receipt by the Lessor of the full
          amount (other than Lessor Taxes that Lessee is compelled by law to
          deduct or withhold) so provided for.

5.6  TAXATION

     (a)  The Lessee will on demand pay and indemnify the Lessor and the
          Lender against all Taxes (other than Lessor Taxes) levied or
          imposed against or upon the Lessor, the Lender or the Lessee and
          relating to or attributable to the Lessee, this Agreement or the
          Aircraft directly or indirectly in connection with the importation,
          exportation, registration, ownership, leasing, sub-leasing,
          purchase, delivery, possession, use, operation, repair,
          maintenance, overhaul, transportation, landing, storage, presence
          or redelivery of the Aircraft or any part thereof or any rent,
          receipts, insurance proceeds, income or other amounts arising
          therefrom.


                                      -24-
<PAGE>

     (b)  If the Lessor or the Lender shall, based upon its own reasonable
          interpretation of any relevant laws or regulations, realize any Tax
          savings (by way of refund, deduction, credit or otherwise) in
          respect of any amount with respect to which the Lessee shall have
          made a payment (or increased payment) pursuant to Clause 5.5 or 5.8
          or shall have indemnified the Lessor or the Lender pursuant to
          sub-clause (a) above, or in respect of the occurrence or
          transaction which gave rise to such payment or indemnification, and
          such Tax savings shall not have been taken into account previously
          in calculating any indemnity payment made by the Lessee, then the
          Lessor or the Lender (as the case may be) shall, to the extent that
          it can do so without prejudice to the retention of the relevant
          savings and subject to the Lessee's obligations to repay such
          amount to the Lessor or the Lender (as applicable) if the relevant
          savings are subsequently disallowed or canceled, pay to the Lessee
          such amount as the Lessor or the Lender (as the case may be) shall
          in its opinion have concluded to be the amount of such Tax savings
          (together with, in the case of a refund, any interest received
          thereon); provided however that neither the Lessor nor the Lender
          shall be obliged to make any payment to the Lessee pursuant to this
          sub-clause (b) to the extent that the amount of any Tax savings in
          respect of which such payment is to be made would exceed the
          aggregate amount of all prior payments made by the Lessee to, on
          behalf of or as indemnification of the Lessor or the Lender under
          this Agreement for Taxes less the amount of all prior payments made
          pursuant to this sub-clause (b) in respect of such Tax savings. The
          Lessee acknowledges that nothing contained in this sub-clause (b)
          shall interfere with the right of the Lessor or the Lender to
          arrange its tax affairs in whatsoever proper manner it thinks fit
          (or give the Lessee any right to investigate, or impose any
          obligation on the Lessor or the Lender to disclose, the same) and,
          in particular, neither the Lessor nor the Lender shall be under any
          obligation to claim any Tax savings in priority to any other
          savings available to it; provided, that subject to the foregoing
          Lessor shall use reasonable good faith diligence to realize Tax
          savings as described above.

5.7  INFORMATION

     If the Lessee is required by any applicable law, or by any third party,
     to deliver any report or return in connection with any Taxes, the Lessee
     will duly complete the same and, in particular, will state therein that
     the Lessee is exclusively responsible for the use and operation of the
     Aircraft and for the Taxes (other than Lessor Taxes) arising therefrom,
     and the Lessee will, on request, supply a copy of the report or return
     to the Lessor. If Lessee requires any information or cooperation from
     Lessor or Lender in order to satisfy its obligations as set forth above,
     Lessor and Lender shall promptly furnish such information or cooperation
     as Lessee may reasonably request upon written request by Lessee. If
     actual notice is given by any taxing authority to Lessor that a report
     or return is required to be filed with respect to any Taxes (other than
     Lessor Taxes), the Lessor shall promptly notify Lessee of such required
     report or return.

5.8  TAXATION OF INDEMNITY PAYMENTS


                                    -25-
<PAGE>

     (a)  If and to the extent  that any sums  payable to the Lessor or the
          Lender by the Lessee  under this  Agreement by way of  indemnity
          are  insufficient,  by reason of any Taxes  payable in respect of
          those  sums,  for the Lessor or the Lender to discharge the
          corresponding  liability to the relevant  third party  (including
          any taxation  authority),  or to reimburse  the Lessor or the
          Lender for the cost incurred by it to a third party (including  any
          taxation  authority)  the  Lessee  will pay to the Lessor or the
          Lender (as the case may be) such sum as will,  after the tax
          liability has been fully  satisfied,  leave the Lessor or the
          Lender (as the case may be)  with the same  amount  as it would
          have  been  entitled  to  receive  in the  absence  of that
          liability,  together  with interest on the amount of the deficit at
          the Default Rate in respect of the period commencing  on the date
          on which the payment of taxation  is finally  due until  payment by
          the Lessee  (both before and after judgment).

     (b)  If and to the extent that any sums  constituting  (directly or
          indirectly) an indemnity to the Lessor or the Lender  but paid by
          the Lessee to any  person  other than the Lessor or the Lender are
          treated as taxable in the hands of the  Lessor or the  Lender,  the
          Lessee  will pay to the Lessor or the Lender  such sum as will,
          after the tax  liability has been fully  satisfied,  indemnify the
          Lessor or the Lender to the same extent as it would have been
          indemnified  in the  absence of such  liability,  together  with
          interest  on the amount payable by lessee under this  sub-clause at
          the Default Rate in respect of the period  commencing on the date
          on which the  payment  of  taxation  is  finally  due until
          payment  by the  Lessee  (both  before and after judgment).

5.9  DEFAULT INTEREST

     If the Lessee fails to pay any amount payable under this Agreement on
     the due date, the Lessee will pay on demand from time to time to the
     Lessor or the Lender (as the case may be) interest (both before and
     after judgment) on the amount, from the due date to the day of payment
     in full by the Lessee to the Lessor or the Lender, at the prime rate for
     the time being charged by Citibank, N.A. plus 3.0% (the "DEFAULT RATE").
     All such interest will be compounded monthly and calculated on the basis
     of the actual number of days elapsed and on a 360 day year.

5.10 CONTEST

     If written claim is made against Lessor or Lender for or with respect to
     any Taxes (other than Lessor Taxes), Lessor shall, and shall cause
     Lender to, promptly notify the Lessee. If reasonably requested by the
     Lessee in writing within 30 days after such notification, Lessor shall
     or shall cause Lender to, upon receipt of indemnity satisfactory to
     Lessor or Lender, as the case may be, and at the expense of the Lessee
     (including all costs, expenses, losses, legal and accountants' fees and
     disbursements, penalties and interest), in good faith contest or to the
     extent permissible by law allow Lessee to contest in Lessee's, the
     Lessor's or the Lender's


                                    -26-
<PAGE>

     name, the validity, applicability or amount of such Taxes by either (i)
     resisting payment thereof if practicable and permitted by applicable
     law, or (ii) if payment is made, using reasonable efforts to obtain a
     refund thereof in appropriate administrative and judicial proceedings,
     and in the contest of any such claim by Lessor or Lender, Lessor shall,
     and shall cause Lender to, apprise the Lessee of all material
     developments with respect to such contest, shall forward copies of all
     material submissions made in such contest and shall materially comply in
     good faith with any reasonable request concerning the conduct of any
     such contest; provided, however, the Lessor or the Lender (as the case
     may be) will not be obliged to take any such action:

     (a)  which the Lessor or the Lender (as the case may be) considers, in
          its reasonable discretion, may prejudice it; or

     (b)  which the Lessor or the Lender (as the case may be) reasonably
          considers does not have a reasonable prospect of success; or

     (c)  for which the Lessee has not made adequate provision to the
          reasonable satisfaction of the Lessor or the Lender (as the case
          may be) in respect of the expense concerned; or

     (d)  if such action gives rise to any material likelihood of the
          Aircraft or any interest therein being sold, forfeited or otherwise
          lost or of criminal liability on the part of the Lessor or the
          Lender.

     If Lessor or Lender, in accordance with the foregoing, determines to pay
     such Taxes and seek a refund, Lessee will either pay such Taxes on
     Lessor's or Lender's behalf and pay Lessor or Lender, as the case may
     be, any amount due with respect to such payment or will promptly
     reimburse Lessor for such Taxes. If Lessor shall obtain a refund of all
     or any part of such Taxes paid by the Lessee, Lessor shall pay the
     Lessee the amount of such refund; provided that such amount shall not be
     payable before such time as the Lessee shall have made all payments or
     indemnities to Lessor then due with respect to Taxes and so long as no
     Default has occurred and is continuing. If in addition to such refund
     Lessor shall receive an amount representing interest, attorneys fees or
     any other amount on the amount of such refund, the Lessee shall be paid
     that proportion of such interest, attorneys fees or any other amount
     which is fairly attributable to the Taxes paid by the Lessee prior to
     the receipt of such refund. Lessor and/or Lender shall not enter into a
     settlement or other compromise with respect to, or otherwise concede,
     any claim by a taxing authority on account of Taxes being contested by
     Lessee pursuant to this Clause 5.10 without the written consent of
     Lessee, which consent shall not be unreasonably withheld, unless Lessor
     waives its right and the right of Lender to be indemnified by Lessee
     with respect to such claim (but not with respect to any future claims).

5.11 ABSOLUTE


                                     -27-
<PAGE>

     The Lessee's obligations under this Agreement are absolute and
     unconditional irrespective of any contingency whatever including (but
     not limited to):

     (a)  any right of offset, counterclaim, recoupment, defense or other
          right which either party to this Agreement may have against the
          other;

     (b)  any unavailability of the Aircraft for any reason, including a
          requisition of the Aircraft or any prohibition or interruption of,
          interference with or other restriction against the Lessee's use,
          operation or possession of the Aircraft;

     (c)  any lack or invalidity of title or any other defect in title,
          airworthiness, merchantability, fitness for any purpose, condition,
          design or operation of any kind or nature of the Aircraft for any
          particular use or trade, or for registration or documentation under
          the laws of any relevant jurisdiction, or any Total Loss in respect
          of or any damage to the Aircraft;

     (d)  any insolvency, bankruptcy, reorganization, arrangement,
          readjustment of debt, dissolution, liquidation or similar
          proceedings by or against the Lessor or the Lessee;

     (e)  any invalidity, unenforceability or lack of due authorization of,
          or other defect in, this Agreement; or

     (f)  any other cause which, but for this provision, would or might
          otherwise have the effect of terminating or in any way affecting
          any obligation of the Lessee under this Agreement;

     provided always, however, that this Clause 5.11 shall be without
     prejudice to the Lessee's right to claim damages and other relief from
     the courts in the event of any breach by the Lessor of its obligations
     under this Agreement, or in the event that, as a result of any lack or
     invalidity of title to the Aircraft on the part of the Lessor, the
     Lessee is deprived of its possession of the Aircraft.

6.   MANUFACTURER'S WARRANTIES

6.1  ASSIGNMENT

     Notwithstanding this Agreement and subject to the rights of the Lender
     pursuant to the Assignment, the Lessor will remain entitled to the
     benefit of each warranty, express or implied, and any unexpired customer
     and/or product support given or provided in respect of the Aircraft, any
     Engine or Part by any manufacturer, vendor, maintenance performer,
     subcontractor or supplier. Unless an Event of Default shall have
     occurred and be continuing, the Lessor hereby authorizes the Lessee to
     pursue any claim thereunder in relation to defects affecting the
     Aircraft, any Engine or Part and the Lessee agrees diligently to pursue
     any such


                                     -28-
<PAGE>

     claim which arises at its own cost. The Lessee will notify the Lessor
     promptly upon becoming aware of any such claim. The Lessor will provide
     such assistance to the Lessee in making a claim under any such
     warranties or customer and/or product support as the Lessee may
     reasonably request, and, if requested by the Lessee and at the Lessee's
     expense, will pursue a claim in its own name where the relevant
     manufacturer, vendor, maintenance performer, subcontractor or supplier
     has refused to acknowledge the Lessee's right to pursue that claim.

6.2  PROCEEDS

     Unless an Event of Default shall have occurred and be continuing, all
     proceeds of any such claim as is referred to in Clause 6.1 and which
     exceed $100,000 will be paid direct to the Lender, but if and to the
     extent that such claim relates:

     (a)  to defects affecting the Aircraft which the Lessee has rectified; or

     (b)  to compensation for loss of use of the Aircraft, an Engine or any
          Part during the Term; or

     (c)  to costs incurred by the Lessee in pursuing such claim (whether or
          not proceeds of such claim are payable to the Lessee);

     and provided no Default shall have occurred and be continuing, the
     proceeds will be promptly paid to the Lessee by the Lender but, in the
     case of (a), only on receipt of evidence reasonably satisfactory to the
     Lessor and the Lender that the Lessee has rectified the relevant defect.

6.3  PARTS

     Except to the extent the Lessor otherwise agrees in a particular case,
     the Lessee will procure that all engines, components, furnishings or
     equipment provided by the manufacturer, vendor, maintenance performer,
     subcontractor or supplier as a replacement for a defective Engine or
     Part pursuant to the terms of any warranty or customer and/or product
     support arrangement comply with Clause 8.13(a), are installed on the
     Aircraft promptly and that title thereto vests in the Lessor in
     accordance with Clause 8.17(a). On installation those items will be
     deemed to be an Engine or Part, as applicable.

6.4  AGREEMENT

     To the extent any warranties or customer and/or product support relating
     to the Aircraft are made available under an agreement between any
     manufacturer, vendor, maintenance performer, subcontractor or supplier
     and the Lessee, this Clause 6 is subject to that agreement. However the
     Lessee will:


                                   -29-
<PAGE>

     (a)  pay the proceeds of any claim thereunder that exceed $100,000 to
          the Lender to be applied pursuant to Clause 6.2 and, pending such
          payment, will hold the claim and the proceeds on trust for the
          Lender; and

     (b)  take all such steps as are necessary and requested by the Lessor at
          the end of the Term to ensure the benefit of any of those
          warranties or customer and/or product support which have not
          expired are vested in the Lessor (but subject to the rights of the
          Lender under the Mortgage).

7.   LESSOR'S COVENANTS AND DISCLAIMERS

7.1  QUIET ENJOYMENT

     Provided no Event of Default shall have occurred and be continuing, none
     of the Lessor, its successors and assigns, the Lender or any Person
     claiming by, through or on account of any of such parties will interfere
     with the quiet use, possession and enjoyment of the Aircraft by the
     Lessee.

7.2  MAINTENANCE CONTRIBUTION

     (a)  Provided no Default has occurred and is continuing, upon the
          performance by Lessee of "Qualifying Work" (as hereinafter defined)
          relating to any airworthiness directive, the Lessor will pay to the
          Lessee, by way of contribution to the cost of maintenance of the
          Aircraft, an amount equal to the product of (a) the amount by which
          the Actual Cost of the Qualifying Work for such airworthiness
          directive exceeds $225,000, multiplied by (b) a fraction the
          numerator of which is 60 minus the number of months (rounded to the
          nearest whole number of months) from the date of the completion of
          such Qualifying Work until the scheduled Expiry Date and the
          denominator is 60.

     (b)  "Qualifying Work" means maintenance work performed on the Aircraft
          solely in order to comply fully with airworthiness directives
          issued by the Aviation Authority (whether or not such airworthiness
          directives were issued before or after the Delivery Date) on a
          terminating action basis, and excluding work performed for any
          other purpose, such as compliance with airworthiness directives by
          means of repetitive inspections, recording compliance work in the
          Aircraft Documents and all other maintenance work.

     (c)  The Lessor will be obligated to pay any amount specified in Clause
          7.2(a) within 14 days after submission by the Lessee to the Lessor
          of an invoice and supporting documentation reasonably satisfactory
          to the Lessor evidencing the performance of Qualifying Work for an
          airworthiness directive.


                                       -30-
<PAGE>

7.3  REGISTRATION AND FILINGS

     The Lessor shall, at the Lessor's cost:

     (a)  maintain the registration of the Aircraft with the Aviation
          Authority reflecting (so far as permitted by applicable law) the
          respective interests of the Lessor and the Lender and not do or
          suffer to be done anything which might reasonably be expected to
          adversely affect that registration; and

     (b)  do all acts and things (including making any filing or registration
          with the Aviation Authority or any other Government Entity) as may
          be required following any change In the ownership or financing of
          the Aircraft.

7.4  AGREED MAINTENANCE PERFORMERS

     The Lessor may object to and may exclude any maintenance organization
     (other than Lessee) being included as an "Agreed Maintenance Performer"
     for a valid business reason. The Lessor shall furnish to Lessee in
     writing from time to time a list of all maintenance organizations
     excluded from the definition of "Agreed Maintenance Performer" pursuant
     to the preceding sentence, which list may be amended by Lessor from time
     to time. The Lessor and the Lessee shall consult in good faith regarding
     any organizations on such list from time to time at the request of
     either party.

7.5  EXCLUSION

     THE AIRCRAFT IS ACCEPTED BY THE LESSEE "AS IS, WHERE IS WITH ALL FAULTS"
     AND LESSEE AGREES AND ACKNOWLEDGES THAT, SAVE AS IS EXPRESSLY STATED IN
     THIS AGREEMENT, LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR
     HAS NOT AND WILL NOT BE DEEMED TO HAVE MADE OR GIVEN, ANY CONDITIONS,
     WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE
     AIRCRAFT, INCLUDING BUT NOT LIMITED TO:

     (a)  THE DESCRIPTION, AIRWORTHINESS, MERCHANTABILITY, FITNESS FOR ANY
          USE OR PURPOSE, VALUE, CONDITION, OR DESIGN, OF THE AIRCRAFT OR ANY
          PART; OR

     (b)  ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT, WHETHER
          OR NOT ARISING FROM LESSOR'S NEGLIGENCE, ACTUAL OR IMPUTED (BUT
          EXCLUDING ANY SUCH OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN
          TORT WHICH ARISES FROM LESSOR'S GROSS NEGLIGENCE OR WILFUL
          MISCONDUCT); OR


                                     -31-
<PAGE>

     (c)  ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF OR
          DAMAGE TO THE AIRCRAFT, FOR ANY LIABILITY OF LESSEE TO ANY THIRD
          PARTY, OR FOR ANY OTHER DIRECT, INDIRECT, INCIDENTAL OR
          CONSEQUENTIAL DAMAGES.

7.6  LESSEE'S WAIVER

     LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR, ALL ITS RIGHTS
     IN RESPECT OF ANY CONDITION, WARRANTY OR REPRESENTATION, EXPRESS OR
     IMPLIED, ON THE PART OF LESSOR AND ALL CLAIMS AGAINST LESSOR HOWSOEVER
     AND WHENEVER ARISING AT ANY TIME IN RESPECT OF OR OUT OF THE OPERATION
     OR PERFORMANCE OF THE AIRCRAFT OR THIS AGREEMENT EXCEPT AS IS OTHERWISE
     EXPRESSLY STATED IN THIS AGREEMENT.

7.7  LESSEE'S CONFIRMATION

     LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF CLAUSES 7.5
     AND 7.6 AND ACKNOWLEDGES THAT BASIC RENT AND OTHER AMOUNTS HAVE BEEN
     CALCULATED NOTWITHSTANDING ITS PROVISIONS.

8.   LESSEE'S COVENANTS

8.1  DURATION

     The undertakings in this Clause 8 and in Clause 12 will:

     (a)  except as otherwise stated, be performed at the expense of the
          Lessee; and

     (b)  remain in force until redelivery of the Aircraft to the Lessor in
          accordance with this Agreement and thereafter to the extent of any
          accrued rights of the Lessor in relation to those undertakings.

8.2  INFORMATION

     The Lessee shall:

     (a)  furnish to the Lessor, with a copy to the Lender:

          (i)   within 60 days after the last day of the first three fiscal
                quarters of each fiscal year of the Parent, unaudited
                consolidated quarterly financial statements of the Parent
                prepared for such quarter, including a consolidated balance
                sheet of the Parent and its Subsidiaries as of the last day
                of such quarter and consolidated

                                    -32-
<PAGE>

                statements of income and retained earnings for such fiscal
                quarter and on a comparative basis figures for the
                corresponding period of the immediately preceding fiscal
                year, all in reasonable detail, each such statement to be
                certified in a certificate of Lessee's chief financial
                officer or chief accounting officer as fairly presenting the
                financial position and the results of operations of the
                Parent as at its date and for such quarter (subject to
                year-end audit adjustments) and as having been prepared in
                accordance with GAAP;

        (ii)    as soon as available but not in any event later than 120 days
                after the last day of each fiscal year of the Parent, audited
                consolidated financial statements of the Parent prepared for
                such year, including a consolidated balance sheet of the Parent
                and its Subsidiaries as of the last day of such year,
                consolidated statements of income and retained earnings of the
                Parent and its Subsidiaries for such fiscal year, a
                consolidating balance sheet of the Lessee and its Subsidiaries
                as of the last day of such year and consolidating statements of
                income and retained earnings of the Lessee and its Subsidiaries
                for such fiscal year and in all cases on a comparative basis
                figures for the immediately preceding fiscal year, all in
                reasonable detail, each prepared in accordance with GAAP and
                certified without qualification by Coopers & Lybrand or another
                of the largest national firms of independent certified public
                accountants as fairly presenting the financial position and the
                results of operations of Lessee and its Subsidiaries at the end
                of and for such fiscal year and as having been prepared in
                accordance with GAAP;

         (iii)  in lieu of the financial statements referred to in
                sub-clauses (i) and (ii) above, any Quarterly Reports on Form
                10-Q and Annual Report on Form 10-K for the respective
                periods filed by the Parent pursuant to and in accordance
                with the Securities Exchange Act of 1934, as amended;

         (iv)   concurrently with the financial statements furnished pursuant
                to Clauses 8.2(a)(i) and (ii) above, an officer's certificate
                signed by the chief financial officer or chief accounting
                officer of Lessee certifying to the best knowledge after due
                inquiry of such officer that no Default occurred during the
                period covered by such financial statements and no Default
                exists on the date of such officer's certificate or, if a
                Default occurred or exists, stating that fact and specifying
                the nature and period of existence of such Default and the
                actions Lessee took or proposes to take with respect to such
                Default;

         (v)    at the same time as it is issued to the creditors of the
                Lessee, a copy of each notice or circular issued to the
                Lessee's creditors as a group; and

         (vi)   on request from time to time such other information regarding
                the Lessee and its business and affairs as the Lessor may
                reasonably request;


                                    -33-
<PAGE>

     (b)  on request, inform the Lessor as to the current serial numbers of
          the Engines and any engine installed on the Airframe;

     (c)  promptly furnish to the Lessor all information which the Lessor
          from time to time reasonably requests regarding the Aircraft, any
          Engine or any Part and its use, location and condition, including
          the hours available on the Aircraft and any Engine until the next
          scheduled check, inspection, overhaul or shop visit, as the case
          may be;

     (d)  on request, furnish to the Lessor evidence reasonably satisfactory
          to the Lessor that all Taxes and charges incurred by the Lessee
          with respect to the Aircraft have been paid and discharged in full;

     (e)  provide to the Lessor, within 15 days following the end of June and
          December of each calendar year during the Term, or upon reasonable
          request by Lessor, a monthly report on the Aircraft in the form set
          out in Schedule 7 or such other form as the Lessee may select
          providing substantially the same information;

     (f)  promptly notify the Lessor of

          (i)   any Total Loss, any loss of an Engine, any theft of the
                Airframe or any Engine, any damage to the Aircraft if the
                potential cost of repair may reasonably be expected to exceed
                the Damage Notification Threshold, or any modification to the
                Aircraft if the potential cost may reasonably be expected to
                exceed the Damage Notification Threshold;

          (ii)  any claim or other occurrence likely to give rise to a claim
                under the Insurances (but, in the case of hull claims only,
                in excess of the Damage Notification Threshold) and details
                of any negotiations with the insurance brokers over any such
                claim; and

          (iii) any litigation, arbitration or administrative proceedings
                that are pending or, to the Lessee's knowledge, threatened
                against the Lessee which, if adversely determined, would have
                a material adverse effect upon its financial condition or
                business or its ability to perform its obligations under this
                Agreement.

8.3  LAWFUL AND SAFE OPERATION

     The Lessee shall:

     (a)  comply with the law for the time being in force in any country or
          jurisdiction in which the Aircraft is being operated which is
          applicable to the Aircraft or the use and operation of the Aircraft;


                                    -34-
<PAGE>

     (b)  not use the Aircraft in any manner contrary to any recommendation
          of the Aviation Authority or the manufacturers of the Aircraft, any
          Engine or any Part or any rule or regulation of the Aviation
          Authority or for any purpose for which the Aircraft is not designed
          or reasonably suitable;

     (c)  ensure that the crew and engineers employed by it in connection
          with the operation and maintenance of the Aircraft have the
          qualifications and hold the licences required by the Aviation
          Authority and applicable law;

     (d)  use the Aircraft solely in commercial or other operations for which
          the Lessee is duly authorized by the Aviation Authority and
          applicable law;

     (e)  not knowingly use the Aircraft (or use it when the Lessee ought
          reasonably to have known that it was being so used) for the
          carriage of:

          (i)   whole animals, living or dead, except in the cargo
                compartments according to I.A.T.A. regulations, and except
                domestic pet animals carried in a suitable container to
                prevent the escape of any liquid and to ensure the welfare of
                the animal;

          (ii)  acids, toxic chemicals, other corrosive materials,
                explosives, nuclear fuels, nuclear wastes or any nuclear
                assemblies or components, except as permitted for cargo
                aircraft under the "Restriction of Goods" schedule issued by
                I.A.T.A. from time to time and provided that all the
                requirements for packaging or otherwise contained therein are
                fulfilled;

          (iii) any other goods, materials or items of cargo which could
                reasonably be expected to cause damage to the Aircraft and
                which would not be adequately covered by the Insurances; or

          (iv)  any illegal item or substance;

     (f)  not utilize the Aircraft for purposes of training, qualifying or
          re-confirming the status of cockpit personnel except for the
          benefit of the Lessee's cockpit personnel, and then only if the use
          of the Aircraft for such purpose is not disproportionate to the use
          for such purpose of other aircraft of the same type operated by the
          Lessee;

     (g)  not (other than for bona fide safety reasons) cause or permit the
          Aircraft to proceed to, or remain at, any location which is for the
          time being the subject of a prohibition order (or any similar order
          or directive) by:

          (i)   any Government Entity of the State of Registration or the
                Habitual Base; or


                                    -35-

<PAGE>


          (ii)  any Government Entity of the country in which such location is
                situated; or

          (iii) any Government Entity having jurisdiction over the Lessor, the
                Lender or the Aircraft;

     (h)  obtain and maintain in full force all certificates, licences,
          permits and authorizations required for the use and operation of
          the Aircraft for the time being, and for the making of payments
          required by, and the compliance by the Lessee with its other
          obligations under, this Agreement.

8.4  TAXES AND OTHER CHARGES

     The Lessee will promptly pay:

     (a)  all licence and registration fees, Taxes (other than Lessor Taxes)
          and other amounts of any nature imposed by any Government Entity
          that are imposed on the Lessee or for which the Lessee is
          responsible under this Agreement with respect to the Aircraft,
          including the purchase, ownership, delivery, leasing, possession,
          use, operation, return, sale or other disposition of the Aircraft;
          and

     (b)  all rent, fees, charges, Taxes (other than Lessor Taxes) imposed on
          the Lessee and other amounts in respect of any premises where the
          Aircraft or any Part thereof is located from time to time during
          the Tenn;

     except to the extent that such payment is being  contested in good faith
     by appropriate  proceedings in accordance with Clause 5.10.

8.5  SUB-LEASING

     (a)  Subject to sub-clause (b) below, the Lessee will not, without the
          prior written consent of the Lessor and the Lender (such consent
          not to be unreasonably withheld), sub-lease, "wet lease" or
          otherwise part with possession of the Aircraft, the Engines or any
          Part except that the Lessee may part with possession:

          (i)   so long as no Default or Event of Default has occurred and is
                continuing, with respect to the Aircraft, the Engines or any
                Part to the relevant manufacturers for testing or similar
                purposes or to an Agreed Maintenance Performer for service,
                repair, maintenance or overhaul work or for alterations,
                modifications or additions to the extent required or
                permitted by this Agreement; and

          (ii)  with respect to an Engine or Part, as expressly permitted by
                this Agreement.

                                     -36-


<PAGE>


          (b)  The Lessor's consent shall not be required in relation to a
          "wet lease" or charter of the Aircraft in which operational control
          of the Aircraft remains with the Lessee at all times, provided the
          Aircraft remains registered with the Aviation Authority.

8.6  INSPECTION

     (a)  The Lessor, the Lender and any person designated by the Lessor or
          the Lender may at any time visit, inspect and survey the Aircraft,
          any Engine or any Part and for such purpose may, subject to any
          applicable Aviation Authority regulation, travel on the flight deck
          as observer.

     (b)  The Lessor and the Lender shall bear its own costs and expenses in
          connection with any such visit, inspection or survey unless the
          visit, inspection or survey discloses that the Lessee is in breach
          of its material obligations under this Agreement, in which case
          such costs and expenses shall be paid by the Lessee on demand.

     (c)  The Lessor shall:

          (i)   have no duty to make, or liability arising out of, any such
                visit, inspection or survey; and

          (ii)  so long as no Default has occurred and is continuing, not
                exercise such right other than on reasonable notice and so as
                not to disrupt unreasonably the maintenance or operation of the
                Aircraft.

8.7  PROTECTION OF TITLE

     The Lessee shall:

    (a)   not do or knowingly permit to be done or omit or knowingly permit
          to be omitted to be done any act or thing which might reasonably be
          expected to jeopardize the respective rights, title and interest of
          the Lender as mortgagee of the Aircraft and assignee of this
          Agreement or the Lessor as owner of the Aircraft and lessor under
          this Agreement or the validity, enforceability or priority of the
          Mortgage and the Assignment;

     (b)  on all occasions when the ownership of the Aircraft, any Engine or
          any Part is relevant, make clear to third parties that title is
          held by the Lessor and is subject to the Mortgage;

     (c)  not at any time:

          (i)   represent or hold out the Lessor or the Lender as carrying goods
                or passengers on the Aircraft or as being in any way connected
                or associated with any operation or

                                     -37-


<PAGE>


                carriage (whether for hire or reward or gratuitously) which may
                be undertaken by the Lessee; or

          (ii)  pledge the credit of the Lessor or the Lender;

     (d)  ensure that there is always affixed, and not removed or in any way
          obscured, a fireproof plate (having dimensions of not less than 6
          in. x 4 in.) in a reasonably prominent position on the Aircraft and
          on each Engine stating:

                     "This Aircraft/Engine is owned by ACG Acquisition
                     VIII LLC, is leased to Aloha Airlines, Inc. and is
                     subject to a mortgage and security agreement in favor
                     of FINOVA Capital Corporation. It may not be operated
                     by any other person without the prior written consent
                     of ACG Acquisition VIII LLC and FINOVA Capital
                     Corporation.";

     (e)  not create or permit to exist any Security Interest upon the
          Aircraft, any Engine or any Part;

     (f)  not do or permit to be done anything which may reasonably be
          expected to expose the Aircraft, any Engine or any Part to penalty,
          forfeiture, impounding, detention, appropriation, damage or
          destruction and, without prejudice to the foregoing, if any such
          penalty, forfeiture, impounding, detention, appropriation, damage
          or destruction occurs, give the Lessor notice and use its best
          efforts to procure the immediate release of the Aircraft, such
          Engine or such Part, as the case may be;

     (g)  not abandon the Aircraft, the Engine or any Part;

     (h)  pay and discharge or cause to be paid and discharged when due and
          payable or make adequate provision by way of security or otherwise
          for all debts, damages, claims and liabilities which have given or
          might reasonably be expected to give rise to a Security Interest
          over or affecting the Aircraft, any Engine or any Part; and

     (i)  not attempt, or hold itself out as having any power, to sell, lease
          or otherwise dispose of the Aircraft, any Engine or any Part other
          than as expressly permitted by this Agreement.

8.8  GENERAL

     The Lessee will:

     (a)  not make any substantial change in the nature of the business in
          which it is engaged if such change, in the reasonable opinion of
          the Lessor, might reasonably be expected to

                                     -38-


<PAGE>


          have a material adverse effect on the Lessee's performance of its
          obligations under this Agreement;

     (b)  preserve its corporate existence, and will not merge or consolidate
          with any person unless the successor person resulting from such
          merger or consolidation (the "SUCCESSOR"):

          (i)   is the Lessee or an Affiliate incorporated in the State of
                Incorporation or another State of the United States of
                America;

          (ii)  shall have a net worth immediately after such merger or
                consolidation of not less than the Lessee's net worth
                immediately prior thereto;

          (iii) shall be authorized under applicable law to perform the
                Lessee's obligations under this Agreement to the same extent
                as the Lessee;

          (iv)  shall deliver to the Lessor an agreement in form and
                substance reasonably satisfactory to the Lessor containing an
                assumption by the Successor of the Lessee's representations
                and warranties under this Agreement, together with the due
                and punctual performance of all the Lessee's obligations
                under this Agreement; and

          (v)   shall deliver to the Lessor an opinion of counsel reasonably
                satisfactory in form and substance to the Lessor to the
                effect that the agreement referred to in subclause (iii)
                above constitutes the Successor's legal, valid and binding
                obligations; and

     (c)  ensure that no change will occur in the Habitual Base of the
          Aircraft without the prior written consent of the Lessor.

8.9  RECORDS

     The Lessee shall procure that accurate, complete and current records of
     all flights made by, and all maintenance carried out on, the Aircraft
     (including, in relation to each Engine and Part subsequently installed,
     before the installation) are kept in English, and shall keep the records
     in such manner as the Aviation Authority may from time to time require.
     The records will form part of the Aircraft Documents.

                                     -39-


<PAGE>


8.10 REGISTRATION AND FILINGS

     The Lessee shall:

     (a)  not do anything that might reasonably be expected to adversely
          affect the registration of the Aircraft with the Aviation Authority
          reflecting (so far as permitted by applicable law) the respective
          interests of the Lessor and the Lender;

     (b)  do all acts and things (including making any filing or registration
          with the Aviation Authority or any other Government Entity) and
          executing and delivering all documents (including any amendment of
          this Agreement) as may be required by the Lessor following any
          modification of the Aircraft, any Engine or any Part or the
          permanent replacement of any Engine or Part in accordance with this
          Agreement, so as to ensure that the respective rights of the Lessor
          and the Lender under this Agreement apply with the same effect as
          before.

8.11 MAINTENANCE AND REPAIR

     The Lessee shall:

     (a)  keep the Aircraft airworthy in all respects and in good repair and
          condition;

     (b)  advise the Lessor and Lender in writing of all material changes to
          the Agreed Maintenance Program;

     (c)  maintain the Aircraft in accordance with the Agreed Maintenance
          Program through Agreed Maintenance Performers and perform (at the
          respective intervals provided in the Agreed Maintenance Program)
          all Major Checks;

     (d)  maintain the Aircraft in accordance with FAR Part 121 and any other
          rules and regulations of the Aviation Authority as are applicable
          to aircraft of the same type as the Aircraft operated by United
          States of America air carriers, subject to the special exemptions
          permitted Lessee regarding compliance with the Airport Noise and
          Capacity Act of 1990, as amended, and the regulations promulgated
          by the FAA thereunder;

     (e)  comply with all mandatory inspection and modification requirements,
          airworthiness directives and similar requirements applicable to the
          Aircraft, any Engine or Part having a compliance date during the
          Term and that are required by the Aviation Authority;

     (f)  comply with all alert service bulletins issued by any manufacturer
          of the Aircraft, Engines or Parts, and comply (including scheduling
          complying work and then performing such work on schedule) with all
          other service bulletins issued by any such

                                     -40-


<PAGE>

          manufacturer if and to the extent that the Lessee brings or
          schedules to bring in compliance at least one-half of the
          applicable aircraft it operates (excluding for purposes of such
          calculation aircraft acquired from unrelated third parties that
          already comply with such other service bulletins);

     (g)  comply with all applicable laws and the regulations of the Aviation
          Authority and any other aviation authorities with jurisdiction over
          the Lessee or the Aircraft, any Engine or Part that relate to the
          maintenance, condition, use or operation of the Aircraft or require
          any modification or alteration to the Aircraft, any Engine or Part;

     (h)  maintain in good standing a current U.S. Standard Transport
          Category Certificate of Airworthiness for the Aircraft issued by
          the Aviation Authority in accordance with FAR Part 21 except when
          the Aircraft is undergoing maintenance, modification or repair
          required or permitted by this Agreement and shall from time to time
          provide to the Lessor a copy on request;

     (i)  if required by the Aviation Authority, maintain a current
          certification as to maintenance issued by or on behalf of the
          Aviation Authority in respect of the Aircraft and shall from time
          to time provide to the Lessor a copy on request;

     (j)  maintain the Engines with respect to overhaul build standards and
          disc replacements at a level which is consistent with the level
          applied by the Lessee in relation to other engines of the same type
          as the Engines in its fleet, provided, however, Lessee may maintain
          the Engines with respect to overhaul build standards and disc
          replacements in such manner as to achieve minimal compliance with
          return conditions;

     (k)  maintain the Engines and the APU in a "on condition" program as set
          forth in the respective manufacturer's maintenance planning
          document; and

     (l)  subject to Clause 11.1(c), procure promptly the replacement of
          any Engine or Part which has become time, cycle or calendar
          expired, lost, stolen, seized, confiscated, destroyed, damaged
          beyond repair, unserviceable or permanently rendered unfit for use,
          with an engine or part complying with the conditions set out in
          Clause 8.13(a).

8.12 REMOVAL OF ENGINES AND PARTS

     The Lessee will ensure that no Engine or Part installed on the Aircraft is
     at any time removed from the Aircraft other than:

     (a)  if replaced as expressly permitted by this Agreement; or

     (b)  if the removal is of an obsolete item and is in accordance with the
          Agreed Maintenance Program; or

                                     -41-


<PAGE>


     (c)  pursuant to, and in accordance with, Clause 8.15; or

     (d)  (i)   during the course of maintaining, servicing, repairing,
                overhauling or testing that Engine or the Aircraft, as the case
                may be; or

          (ii)  as part of a normal engine or part rotation program; or

          (iii) for the purpose of making such modifications to the Engine or
                the Aircraft, as the case may be, as are permitted under this
                Agreement,

          and then in each case only if it is reinstalled or replaced by an
          engine or part complying with Clause 8.13(a) as soon as practicable
          and in any event no later than the Expiry Date.

8.13 INSTALLATION OF ENGINES AND PARTS

     (a)  The Lessee will ensure that, except as permitted by this Agreement,
          no engine or part is installed on the Aircraft unless:

          (i)   in the case of an engine, it is an engine of the same model
                as, or an improved or advanced version of the Engine it
                replaces (provided, in the case of an improved or advanced
                version, it can be installed and operated on the Airframe
                without modification of the Airframe or the engine, whether
                or not the other installed Engine is also such an improved
                or advanced version), which has attached to it a current
                "serviceable tag" issued by the manufacturer or supplier
                indicating that the engine is new, serviceable or overhauled,
                and the Lessee shall retain all such tags;

          (ii)  in the case of a part, it is in as good operating condition,
                is of the same interchangeable modification status as the
                replaced Part and has attached to it a current "serviceable
                tag" issued by the manufacturer or supplier indicating that
                the part is new, serviceable or overhauled, and the Lessee
                shall retain all such tags;

          (iii) in the case of a part, it has become and remains the property
                of the Lessor free from Security Interests and on
                installation on the Aircraft will, without further act, be
                subject to this Agreement and to the security interest
                created by the Mortgage, in which case title to the removed
                part shall automatically become vested in Lessee without
                further action or warranty on the part of Lessor except that
                such Part shall be free of Lessor Liens; and

          (iv)  in each case, the Lessee has full details as to its source
                and maintenance records.

                                     -42-


<PAGE>


     (b)  If no Default has occurred which is continuing, the Lessee will be
          entitled to install any engine or part on the Aircraft by way of
          replacement notwithstanding Clause 8.13(a) if:

          (i)   there is not available to the Lessee at the time and in the
                place that engine or part is required to be installed on the
                Aircraft a replacement engine or part complying with the
                requirements of Clause 8.13(a);

          (ii)  it would result in an unreasonable disruption of the
                operation of the Aircraft or the business of the Lessee to
                ground the Aircraft until an engine or part complying with
                Clause 8.13(a) becomes available for installation on the
                Aircraft; and

          (iii) as soon as practicable after installation of the same on the
                Aircraft but, in any event, no later than the earlier of (1)
                60 days after such installation and (2) the Expiry Date, the
                Lessee removes any such engine or part and replaces it with
                the Engine or Part replaced by it or by an engine or part
                complying with Clause 8.13(a).

     (c)  If no Default has occurred which is continuing, the Lessee will be
          entitled to install Lessee Installed Parts on the Airframe by way of
          replacement notwithstanding Clause 8.13(a)(iii) so long as:

          (i)   the terms of any lease, conditional sale agreement or
                security agreement, as the case may be, covering such Lessee
                Installed Part will not have the effect of prejudicing the
                title and interest of the Lessor in and to the Aircraft
                (including its Engines and Parts) or the interest of the
                Lender in respect thereof under the Mortgage;

          (ii)  the secured party, lessor or conditional vendor, as the case
                may be, of such Lessee Installed Part has confirmed and
                acknowledged in writing (which such confirmation and
                acknowledgment may be contained in the lease, conditional
                sale agreement or security agreement) to the Lessor and the
                Lender, in form and substance satisfactory to the Lessor,
                that it will recognize the respective rights, title and
                interest of the Lessor and the Lender in and to the Aircraft
                (including its Engines and Parts) and that it will not seek
                to exercise any rights whatever in relation thereto; and

          (iii) before the Expiry Date the Lessee removes any such Lessee
                Installed Part and replaces it with the Part replaced by it
                or by another part, in either case complying with Clause
                8.13(a).

     (d)  The Lessor agrees, for the benefit of the Lessee and any mortgagee or
          holder of any other Security Interest in any engine (other than an
          Engine) or Lessee Installed Part

                                     -43-


<PAGE>

          owned by the Lessee, any lessor of any engine (other than an Engine
          leased to the Lessee) or Lessee Installed Part and any conditional
          vendor of any engine (other than an Engine purchased by the Lessee
          subject to a conditional sale agreement or any other security
          agreement) or Lessee Installed Part, that no right, title to or
          interest in any such engine or Lessee Installed Part shall be
          exercised or asserted by the Lessor and the Lessor acknowledges and
          confirms that it will not acquire any right, title or interest to
          or in any such engine or Lessee Installed Part as a result of its
          installation on the Airframe.

8.14 NON-INSTALLED ENGINES AND PARTS

     (a)  The Lessee shall ensure that any Engine or Part which is not
          installed on the Airframe (or any other airframe as permitted by
          this Agreement) is, except as expressly permitted by this
          Agreement, properly and safely stored and kept free from Security
          Interests, with insurance thereon complying with the requirements
          of this Agreement.

     (b)  Notwithstanding sub-clause (a), the Lessee shall be permitted, if
          no Default has occurred and is continuing, to install any Engine on
          an airframe and any Part on an airframe or engine:

          (i)   owned and operated by the Lessee free from Security Interests;

          (ii)  leased or hired to the Lessee pursuant to a lease or
                conditional sale agreement on a long-term basis and on terms
                whereby the Lessee has full operational control of that
                aircraft or engine; or

          (iii) acquired or financed by the Lessee and operated by the Lessee
                on terms that ownership of that aircraft or engine, as the
                case may be, pursuant to a lease, conditional sale agreement
                or Security Interest is vested in or held by any other person;

          provided that in the case of (ii) and (iii):

          (1)   the terms of any such lease, conditional sale agreement or
                Security Interest will not have the effect of prejudicing the
                title and interest of the Lessor in and to that Engine or
                Part or the interest of the Lender in respect thereof under
                the Mortgage; and

          (2)   the lessor under such lease, the seller under such
                conditional sale agreement or the secured party of such
                Security Interest, as the case may be, has confirmed and
                acknowledged in writing (which such confirmation and
                acknowledgment may be contained in the lease, conditional
                sale agreement or document creating the Security Interest) to
                the Lessor and the Lender, in form and substance satisfactory

                                     -44-


<PAGE>

                to the Lessor, that it will recognize the respective rights,
                title and interest of the Lessor and the Lender to and in
                that Engine or Part and that it will not seek to exercise any
                rights whatever in relation thereto.

8.15 POOLING OF ENGINES AND PARTS

     The Lessee will not enter into nor permit any pooling agreement or
     arrangement in respect of an Engine or Part without the prior written
     consent of the Lessor and the Lender, such consent not to be
     unreasonably withheld in any case where an Engine or Part is leased, let
     on hire or otherwise made available by the Lessee (on terms conferring
     no more than a contractual right IN PERSONAM against the Lessee and not
     a right IN REM against such Engine or Part) pursuant to a pooling
     agreement to which the Lessee is a party and:

     (a)  the other parties to which are reputable, solvent commercial air
          carriers or the manufacturers or suppliers of the Engine or Part
          (or other reputable, solvent organizations whose business includes
          the administration of and participation in such pooling agreements
          or arrangements); and

     (b)  which does not contemplate the transfer of title to the pooled
          Engine or Part; and

     (c)  either provides that the Lessor (or the Lender, as the case may be)
          will be sole loss payee in respect of any loss or damage to the
          Engine or Part, or provides for Lessor to acquire title to a
          substitute engine or part satisfying the conditions set out in
          Clause 8.13(a) if the Engine or Part is destroyed.

8.16 EQUIPMENT CHANGES

     (a)  The Lessee will not make any modification or addition to the
          Aircraft (each an "EQUIPMENT CHANGE"), except for an Equipment
          Change that:

          (i)   is expressly permitted by any other provision of this
                Agreement, or

          (ii)  has the prior written approval of the Lessor and the Lender
                (which approval shall not be unreasonably withheld provided
                the proposed Equipment Change will not, in the reasonable
                opinion of the Lessor and the Lender, diminish the value,
                utility, condition or airworthiness of the Aircraft), except
                for painting or minor cabin interior modifications not
                affecting the structure of the Airframe, any or all of which
                may be made without such prior approval.

     (b)  So long as no Event of Default has occurred and is continuing, the
          Lessee may remove any Equipment Change if it can be removed from
          the Aircraft without diminishing or impairing the value, utility,
          condition or airworthiness of the Aircraft.

                                     -45-


<PAGE>


8.17 TITLE TO ENGINES AND PARTS

     (a)  Title to all engines and parts  installed on the Aircraft,  whether
          by way of replacement as the result of an Equipment  Change or
          otherwise  (except those  installed  pursuant to Clause  8.13(b) or
          Clause 8.15) will on installation,  without  further  act,  vest in
          the  Lessor  subject to this  Agreement  free and clear of all
          Security  Interests.  The Lessee will at its own  expense  take all
          such steps and  execute,  and procure the execution  of, all such
          instruments  that are  necessary to ensure that title so passes to
          the Lessor and is subject to the Security  Interest created by the
          Mortgage  according to all applicable laws. At any time when
          requested  by the  Lessor,  the  Lessee  will  provide  evidence
          to  the  Lessor's  reasonable  satisfaction (including  the
          provision,  if  required,  to the  Lessor of one of more legal
          opinions)  that title has so passed to the Lessor and is subject to
          the Security Interest created by the Mortgage.

     (b)  The Lessor may require the Lessee to remove any Equipment Change
          and to restore the Aircraft to its condition prior to that
          Equipment Change.

     (c)  Except as referred to in Clause 8.16(b), any Engine or Part at any
          time removed from the Aircraft will remain the property of the
          Lessor until a replacement has been made in accordance with this
          Agreement and until title to that replacement has passed, according
          to applicable laws, to the Lessor subject to this Agreement free of
          all Security Interests, whereupon title to the Engine or Part will,
          provided no Default has occurred and is continuing, pass to the
          Lessee free of Lessor Liens.

8.18 THIRD PARTIES

     The Lessee shall procure that no person having possession of the
     Aircraft during the Term (other than the Lessor or the Lender) will act
     in any manner inconsistent with the Lessee's obligations under this
     Agreement and that all such persons shall comply with those obligations
     as if references to "Lessee" included a separate reference to those
     persons.

9.   INSURANCE

9.1  INSURANCES

     The Lessee will maintain in full force and effect during the Term
     insurances in respect of the Aircraft in form and substance reasonably
     satisfactory to the Lessor (the "INSURANCES") through such brokers and
     with such insurers and having such deductibles and being subject to such
     exclusions as are usual and customary in the worldwide aviation
     insurance marketplace for air carriers operating similar equipment who
     are similarly situated with Lessee. The Insurances will be effected
     either on a direct basis with insurers of recognized standing who
     normally participate in aviation insurances in the leading international
     insurance markets and led by reputable underwriters approved by the
     Lessor and the Lender,

                                     -46-


<PAGE>


     such approval not to be unreasonably withheld. The Lessor acknowledges
     and confirms that the current deductibles and exclusions, together with
     the existing brokers and insurers, in respect of the insurances
     maintained by Lessee on the date of the Purchase Agreement are
     acceptable to it and the Lender.

9.2  REQUIREMENTS

     The Lessor's current requirements as to required Insurances are as
     specified in this Clause and in Part I of Schedule 4. Except for the
     amount of the Agreed Value, the Minimum Liability Coverage and the
     deductible under Lessee's hull and war risk insurance policies, the
     Lessor may from time to time stipulate such other requirements for the
     Insurances as the Lessor reasonably considers necessary to ensure that
     the scope and level of cover is maintained in accordance with the then
     prevailing industry practice in relation to aircraft of the same type as
     the Aircraft and in relation to operators of similar standing to the
     Lessee. In the event that the Lessor proposes any such stipulation, it
     shall notify the Lessee accordingly and the Lessor and/or its brokers
     will then consult in good faith with the Lessee and the Lessee's brokers
     (as for the time being approved by the Lessor) with regard to such
     proposed stipulation. If, following the consultation, the Lessor is
     satisfied that the stipulation should be made, the Lessee shall then
     comply with the stipulated requirements.

9.3  INSURANCE COVENANTS

     The Lessee shall:

     (a)  ensure that all legal requirements as to insurance of the Aircraft,
          any Engine or any Part that may from time to time be imposed by the
          laws of the State of Registration or any jurisdiction to, from or
          over which the Aircraft may be flown, in so far as they affect or
          concern the operation of the Aircraft, are complied with and, in
          particular, those requirements compliance with which is necessary
          to ensure that:

          (i)   the Aircraft does not become subject to detention or forfeiture;

          (ii)  the Insurances remain valid and in full force and effect; and

          (iii) the interests of the Indemnitees in the Insurances and the
                Aircraft or any Part are not thereby prejudiced;

     (b)  not use, cause or permit the Aircraft, any Engine or any Part to
          be used for any purpose or in any manner not covered by the
          Insurances or outside any geographical limit imposed by the
          Insurances;

     (c)  comply with the terms and conditions of each policy of the
          Insurances and not do, consent or agree to any act or omission that:

                                     -47-


<PAGE>


          (i)   invalidates or may reasonably be expected to invalidate the
                Insurances;

          (ii)  renders or may reasonably be expected to render void or voidable
                the whole or any part of any of the Insurances; or

          (iii) brings any particular liability within the scope of an exclusion
                or exception to the Insurances;

     (d)  not take out without the prior written approval of the Lessor any
          insurance in respect of the Aircraft other than those of the type
          required under this Agreement unless relating solely to hull total
          loss, business interruption, engine break-down, profit commission
          and deductible risk;

     (e)  commence renewal procedures at least 30 days prior to the
          expiration of any of the Insurances and provide to the Lessor and
          the Lender:

          (i)   if requested by the Lessor, a written status report of renewal
                negotiations 14 days prior to each expiration date;

          (ii)  telefaxed confirmation of completion of renewal prior to each
                expiration date; and

          (iii) a certificate of insurance and broker's letter of undertaking
                substantially in the form set out in Parts 2 and 3 of
                Schedule 4, detailing the coverage and confirming the insurers'
                agreement to the specified insurance requirements of this
                Agreement within seven days after each renewal date;

     (f)  provide to the Lessor and the Lender copies of those documents
          evidencing the Insurances which the Lessor and the Lender may
          reasonably request;

     (g)  on request, provide to the Lessor and the Lender evidence that the
          Insurance premiums have been paid;

     (h)  not make any modification or alteration to the Insurances material
          and adverse to the interests of any of the Indemnitees;

     (i)  be responsible for any deductible under the Insurances; and

     (j)  provide any other insurance related information, or assistance, in
          respect of the Insurances as the Lessor may reasonably request.

9.4  FAILURE TO INSURE

                                     -48-


<PAGE>


     If the Lessee fails to maintain the Insurances in compliance with this
     Agreement, each of the Indemnitees will be entitled but not obligated
     (without prejudice to any other rights of the Lessor under this Agreement):

     (a)  to pay the premiums due or to effect and maintain insurances
          satisfactory to it or otherwise remedy the Lessee's failure in such
          manner (including to effect and maintain an "owner's interest"
          policy) as it considers appropriate. Any sums so expended by it
          will become immediately due and payable by the Lessee to the Lessor
          on demand (such demand being made as soon as reasonably practicable
          following the incurring of such expenditure), together with
          interest thereon at the Default Rate from the date of expenditure
          by it up to the date of reimbursement by the Lessee (before and
          after any judgment); and

     (b)  at any time while such failure is continuing to require the
          Aircraft to remain at any airport or to proceed to and remain at
          any airport designated by it until the failure is remedied to its
          reasonable satisfaction.

9.5  CONTINUING INDEMNITY

     The Lessor may require the Lessee to effect and to maintain insurance
     after the Expiry Date with respect to its liability under the
     indemnities in Clause 10 for such period as the Lessor may reasonably
     require (but in any event not more than three years) providing for each
     Indemnitee to be named as additional insured. The Lessee's obligation
     under this Clause 9.5 shall not be affected by the Lessee ceasing to be
     lessee of the Aircraft or any of the Indemnitees ceasing to have any
     interest in respect of the Aircraft.

9.6  APPLICATION OF INSURANCE PROCEEDS

     As between the Lessor and the Lessee:

     (a)  All insurance payments, up to the Agreed Value, received as the
          result of a Total Loss occurring during the Term will be paid to
          the Lender.

     (b)  All insurance proceeds in respect of any damage or loss to the
          Aircraft, any Engine or any Part occurring during the Term not
          constituting a Total Loss and involving insurance proceeds in
          excess of the Damage Notification Threshold will be paid to the
          Lender and applied in payment (or to reimburse the Lessee) for
          repairs or replacement property upon the Lessor being reasonably
          satisfied that the repairs or replacement have been effected in
          accordance with this Agreement. Insurance proceeds in amounts below
          the Damage Notification Threshold may be paid by the insurer
          directly to the Lessee. Any balance remaining may be retained by
          the Lessee.

                                     -49-


<PAGE>


     (c)  All insurance proceeds in respect of third party liability will be
          paid to the relevant third party.

     (d)  Notwithstanding Clauses 9.6(a) and (b), if at the time of the
          payment of any such insurance proceeds a Default has occurred and
          is continuing all such proceeds will be paid to or retained by the
          Lender to be applied toward payment of any amounts that may be or
          become payable by the Lessee in such order as the Lessor and the
          Lender see fit or as the Lessor and the Lender may elect. In the
          event that the Lessee remedies any such Default to the reasonable
          satisfaction of the Lessor, the Lessor shall procure that all such
          insurance proceeds then held by the Lender in excess of the amounts
          (if any) applied by the Lessor in accordance with this sub-clause
          (d) shall be paid promptly to the Lessee.

10.  INDEMNITY

10.1 GENERAL

     The Lessee shall defend, indemnify and hold harmless the Indemnitees
     from and against any and all claims, proceedings, losses, liabilities,
     suits, judgments, costs, expenses, penalties or fines (each a "CLAIM")
     regardless of when the same is made or incurred, whether during or after
     the Term (but not before):

     (a)  that may at any time be suffered or incurred directly or indirectly
          as a result of or connected with possession, delivery, performance,
          management, registration, control, maintenance, condition, service,
          repair, overhaul, leasing, sub-leasing, use, operation or return of
          the Aircraft, any Engine or Part (either in the air or on the
          ground) whether or not the Claim may be attributable to any defect
          in the Aircraft, any Engine or any Part or to its design, testing,
          use or otherwise, and regardless of when the same arises or whether
          it arises out of or is attributable to any act or omission,
          negligent or otherwise, of any Indemnitee;

     (b)  that arise out of any act or omission that invalidates or that
          renders voidable any of the Insurances;

     (c)  that may at any time be suffered or incurred as a consequence of
          any design, article or material in the Aircraft, any Engine or any
          Part or its operation or use constituting an infringement of
          patent, copyright, trademark, design or other proprietary right or
          a breach of any obligation of confidentiality owed to any person,

     but excluding any Claim to the extent that:

          (1)  it arises directly as a result of the wilful misconduct or gross
               negligence of an Indemnitee;

                                     -50-


<PAGE>


          (2)  it arises directly as a result of a breach by the Lessor of
               its express obligations under this Agreement or as a result of
               a representation or warranty given by the Lessor in this
               Agreement not being true and correct at the date when, or when
               deemed to have been, given or made;

          (3)  it constitutes a Lessor Tax or Lessor Lien;

           4)  it represents a Tax or loss of tax benefits (the Lessee's
               liabilities for which, to the extent thereof, are set out in
               Clauses 5.5, 5.6 and 5.8);

          (5)  it constitutes a cost or expense that is required to be borne
               by the Lessor in accordance with any other provision of this
               Agreement;

          (6)  it results from any disposition not caused by Lessee of all or
               any part of Lessor's rights, title or interest in or to the
               Aircraft or under this Agreement, unless such disposition
               occurs as a consequence of an Event of Default;

          (7)  it is attributable to an event occurring after the Term unless
               the Claim results from or arises out of an act or omission by
               the Lessee, or any circumstance existing, during the Term; or

          (8)  it is brought after the Term and relates to a claimed patent
               infringement by the Manufacturer.

10.2 MITIGATION

     (a)  The  Lessor  agrees  that it  shall,  as  soon as  reasonably
          practicable  after  it  becomes  aware  of any circumstances  that
          would,  or  would  reasonably  be  expected  to,  become  the
          subject  of a  claim  for indemnification  pursuant  to Clause
          10.1,  notify the Lessee in writing  accordingly.  The Lessor  (and
          any other  Indemnitee  seeking  indemnification,  as the case may
          be) and the Lessee  shall then consult with one another  in good
          faith  in order to  determine  what  action  (if any) may
          reasonably  be taken to avoid or mitigate  such  Claim.  The Lessee
           shall have the right to take all  reasonable  action (on behalf
          and,  if necessary,  in the name of the  Lessor  or such  other
          Indemnitee)  in order to  resist,  defend  or  settle (provided
          such  settlement is accompanied by payment) any claims by third
          parties giving rise to such Claim, provided  always that the Lessee
           shall not be entitled to take any such action  unless  adequate
          provision, reasonably  satisfactory  to the  Lessor and such  other
           Indemnitee,  shall have been made in respect of the third party
          claim and the costs thereof. The Lessee or, if the Claim is covered
          by Lessee's  Insurances,  the Lessee's  insurers  shall be
          entitled  to select any counsel to  represent  it or them,  the
          Lessor and such other  Indemnitee  in connection  with any such
          action,  subject in the case of Lessee to the approval of the
          Lessor and such other Indemnitee

                                     -51-


<PAGE>

          (such approval not to be unreasonably withheld) and any action
          taken by the Lessee shall be on a full indemnity basis in respect
          of the Lessor and such other Indemnitee.

     (b)  Any sums paid by the Lessee to the Lessor or any Indemnitee in
          respect of any Claim pursuant to Clause 10.1 shall be paid subject
          to the condition that, in the event that the Lessor or such
          Indemnitee is subsequently reimbursed in respect of that Claim by
          any other person, the Lessor or such Indemnitee shall, provided no
          Default shall have occurred and be continuing, promptly pay to the
          Lessee an amount equal to the sum paid to it by the Lessee,
          including any interest on such amount to the extent attributable
          thereto and received by the Lessor or such Indemnitee, less any Tax
          payable by the Lessor or such Indemnitee in respect of such
          reimbursement.

10.3 DURATION

     The indemnities contained in this Agreement will survive and continue in
     full force after the Expiry Date.

11.  EVENTS OF LOSS

11.1 TOTAL LOSS

     (a)  PRE-DELIVERY: If a Total Loss occurs prior to Delivery, this
          Agreement will immediately terminate and, except as expressly
          stated in this Agreement, neither party will have any further
          obligation or liability under this Agreement except that the Lessor
          will rebate to the Lessee the Security Deposit (if theretofore paid
          pursuant to Clause 5.1) or, as the case may be, return the Letter
          of Credit to the Lessee.

     (b)  POST-DELIVERY:  If a Total Loss occurs after Delivery,  the Lessee
          will pay the Agreed Value to the Lender no later than 60 days after
          the Total Loss Date (the  "SETTLEMENT  DATE") unless the Aircraft
          is restored to the Lessor or the Lessee within that period (or, in
          the case of a Total Loss coming  within  paragraph (c) of the
          definition of Total Loss and involving the loss of the Lessor's
          title to the Aircraft,  if both the Aircraft and the  Lessor's
          title  thereto are restored to the Lessor or, in the case of the
          Aircraft,  to the Lessee and the Lender's  rights under the
          Mortgage are fully  restored).  The receipt by the Lender of the
          insurance proceeds  in respect of the Total Loss on or prior to the
          Settlement  Date shall  discharge  the Lessee from its  obligation
          to pay the  Agreed  Value to the Lessor  pursuant  to this
          sub-clause (b),  provided  such proceeds are not less than the
          Agreed Value.  In the event that the insurance  proceeds are paid
          initially to the Lessee  and not to the  Lender,  they may be
          retained  by the  Lessee if the Lessee  shall have paid the Agreed
          Value to the Lender,  otherwise  the Lessee  shall pay the Agreed
          Value to the Lender not later than the next Business Day  following
          receipt by the Lessee of such  proceeds.  In the event that the
          Lessee pays the Agreed Value to the Lessor in accordance  with this
          sub-clause (b), the Lessor shall promptly assign to the

                                     -52-


<PAGE>


          Lessee its rights under the Insurances to receive the insurance
          proceeds in respect of the Total Loss to the extent that such
          proceeds shall not have been paid to the Lessee. Subject to the
          rights of any insurers or other third parties, upon irrevocable
          payment in full to the Lessor of that amount and all other amounts
          that may be or become payable to the Lessor under this Agreement,
          the Lessor shall:

          (i)   without recourse or warranty (except as to the absence of
                Lessor Liens), and without further act, be deemed to have
                transferred to the Lessee all of the Lessor's rights to any
                Engines or Parts not installed when the Total Loss occurred,
                all on an "as-is where is" basis, and shall, at the Lessee's
                expense, execute and deliver such bills of sale and other
                documents and instruments as the Lessee may reasonably
                request to evidence (on the public record or otherwise) the
                transfer and the vesting of the Lessor's rights in such
                Engines and Parts in the Lessee, free and clear of all rights
                of the Lessor and any Lessor Liens; and

          (ii)  pay to Lessee, as a rebate of prepaid Basic Rent, and amount
                equal to the product of (1) one month's Basic Rent multiplied
                by (2) a fraction the numerator of which is the number of
                days remaining in the then current Rental Period and the
                denominator of which is the number of days in the then
                current Rental Period.

     (c)  ENGINE LOSS:  Upon the occurrence of an Engine Loss  (including,
          for the avoidance of doubt,  at a time when the Engine is not
          installed on the Airframe) in  circumstances  in which there has
          not also occurred a Total Loss,  the Lessee shall give the Lessor
          and the Lender  written  notice  promptly upon becoming  aware of
          the same and shall (unless the Lessor has received the insurance
          proceeds relating to such Engine Loss),  within 60 days after the
          Engine Loss Date,  convey or cause to be conveyed to the Lessor,
          as  replacement  for such Engine,  title to a replacement  engine
          that is in the same or better  operating  condition,  has the same
          or greater  value and  utility  as the lost  Engine  and that
          complies  with the  conditions  set out in Clause 8.13(a).  The
          Lessee shall,  at the time of such  conveyance,  comply in all
          respects with Clause  8.17(a) so that the  replacement  engine
          becomes an Engine,  whereupon the leasing of the replaced Engine
          the subject of the Engine Loss shall  cease and title to such
          replaced  Engine  shall  (subject  to any  salvage  rights of
          insurers) vest in the Lessee  pursuant to Clause  8.17(c),  free of
          Lessor Liens. If the Lessor or the Lender subsequently  receives
          any insurance  proceeds  relating to such Engine Loss, the Lessor
          shall promptly remit such  proceeds  or cause such  proceeds to be
          remitted  to the  Lessee.  No Engine Loss with  respect to any
          Engine  that is replaced  in  accordance  with the  provisions  of
          this Clause 11.1 (c) shall  result in any increase or decrease in
          Basic Rent or the Agreed Value.

11.2 REQUISITION

     During any requisition for use or hire of the Aircraft, any Engine or
     Part that does not constitute a Total Loss:

                                     -53-


<PAGE>

     (a)  the Basic Rent and Supplemental Rent payable under this Agreement
          will not be suspended or abated either in whole or in part, and the
          Lessee will not be released from any of its other obligations under
          this Agreement (other than operational obligations with which the
          Lessee is unable to comply solely by virtue of the requisition); and

     (b)  so long as no Default has  occurred  and is  continuing,  the
          Lessee  will be  entitled  to any  compensation payable by the
          requisitioning  authority  in respect of the Term.  The Lessee
          will,  as soon as  practicable after the end of any such
          requisition  (with the Term being extended if and to the extent
          that the period of requisition  continues  beyond the scheduled
          Expiry  Date),  cause the Aircraft to be put into the condition
          required by this Agreement.  The Lessor will be entitled to all
          compensation  payable by the  requisitioning authority in respect
          of any change in the  structure,  state or condition of the
          Aircraft  arising during the period of  requisition,  and the
          Lessor will apply such  compensation  in reimbursing the Lessee for
          the cost of complying with its  obligations  under this  Agreement
          in respect of any such change,  but so that, if any Default has
          occurred and is continuing,  the Lessor may apply the  compensation
          in or towards  settlement of any amounts owing by the Lessee under
          this Agreement. All such sums shall be held by the Lender.

12.  RETURN OF AIRCRAFT

12.1 REDELIVERY

     On the Expiry Date or termination of the leasing of the Aircraft under
     this Agreement, the Lessee shall, unless a Total Loss has occurred, at
     its expense, redeliver the Aircraft and Aircraft Documents to the Lessor
     at the Redelivery Location or such other airport as is mutually
     acceptable to Lessor and Lessee in a condition complying with this
     Clause 12 and Schedule 3, free and clear of all Security Interests and
     Permitted Liens (other than the Lessor Liens).

12.2 FINAL CHECKS

     Immediately prior to return of the Aircraft, Lessee shall perform the
     following:

     (a)  Lessee shall  perform (or have  performed  by an Agreed
          Maintenance  Performer)  a full and complete  zonal, systems and
          structural check ("C" or its equivalent),  including the
          corresponding  lower checks ("A" and "B" or equivalent) and any
          other  maintenance and  inspections  tasks that are a part thereof,
          all in accordance with the Agreed  Maintenance  Program.  At
          return,  the  Airframe  will have zero Flight Hours since such "C"
          check,  except for the acceptance flights and the ferry flight to
          the Redelivery  Location.  Lessee will also weigh the Aircraft.
          Any  discrepancies  revealed during such inspection will be
          corrected in accordance with Manufacturer's  maintenance  and
          repair manuals or FAA-approved  data.  Lessee shall also perform
          during such check, to the

                                     -54-


<PAGE>

          extent it is able, any other work reasonably required by Lessor
          (and not otherwise required under this Agreement) so long as such
          work does not prevent Lessee from returning the Aircraft on the
          Expiry Date, and Lessor shall reimburse Lessee for such work at
          Lessee's preferred customer rates.

     (b)  Lessee shall perform (or have performed by an Agreed Maintenance
          Performer) an internal and external corrosion inspection in
          accordance with the manufacturer's corrosion prevention and control
          program ("CPCP") specified for the model type and correct any
          discrepancies in accordance with the recommendations of the
          manufacturer and the manufacturer's structural repair manual
          ("SRM"). In addition, all inspected areas will be properly treated
          with corrosion inhibitor as recommended by manufacturer.

     (c)  If Lessee performed any structural inspections or tasks on a
          sampling basis but did not perform such inspections on the
          Aircraft, such work shall also be performed on the Aircraft.

     (d)  Lessee shall perform a videotape borescope inspection of the low
          pressure and high pressure compressors and the turbine area of the
          Engines. All items beyond the applicable Engine manufacturer's
          maintenance manual limits will be rectified at Lessee's sole cost
          and expense. No Engine win be "on watch" for any reason requiring
          special or out of sequence inspection.

     (e)  In accordance with the applicable maintenance manual, Lessee shall
          perform a maximum power assurance run and condition, acceleration
          and bleed valve scheduling checks on the Engines. Lessee will
          record and evaluate the Engine performance, with Lessor and/or its
          representative entitled to be present. The performance and all
          operating parameters of each Engine will be within the limits
          specified in the Engine manufacturer's maintenance manual.

     (f)  Lessee shall have removed and blended all external and interior
          markings.

     (g)  If the Engine historical and technical records and the condition
          trend monitoring data of any Engine or the APU indicate an abnormal
          acceleration in the rate of deterioration in the performance of
          such Engine or APU, Lessee shall correct such conditions causing
          the accelerated rate of deterioration.

12.3 FINAL INSPECTION

     (a)  During the 15 days prior to redelivery of the Aircraft, the Lessee
          will make the Aircraft available to the Lessor and the Lender for
          inspection ("FINAL INSPECTION") in order to verify that the
          condition of the Aircraft complies with this Agreement. The Final
          Inspection will be long enough to permit the Lessor and the Lender
          to inspect, at their

                                     -55-


<PAGE>

          own cost, the Aircraft Documents, the Aircraft and uninstalled
          Parts and the Engines. The Lessor and the Lender shall attend and
          conduct the Final Inspection diligently and, without limiting their
          right to conduct the full Final Inspection permitted by this
          Agreement, will cooperate with the Lessee in order to complete the
          Final Inspection as soon as reasonably practical.

     (b)  The Lessor and the Lender shall also be entitled, as part of the
          Final Inspection, to require the Lessee to perform an acceptance
          flight of up to three hours at the Lessee's cost (with the Lessor's
          and the Lender's representatives as on-board observers) and such
          further acceptance flights as may be necessary in the event that
          the first or subsequent flights do not confirm that the Aircraft
          complies with the requirements of this Agreement.

     (c)  At the request of Lessor, Lessee shall perform "bridging"
          maintenance procedures for the purpose of standardizing the
          Aircraft to the maintenance program of any subsequent operator of
          the Aircraft; provided, however, that Lessor shall pay to Lessee
          the Actual Cost of all "bridging" procedures that are in excess of
          or not in lieu of the "C" Check to be performed pursuant to Clause
          12.2 and Schedule 3.

12.4 NON-COMPLIANCE

     To the extent that, at the time of Final Inspection, the condition of
     the Aircraft does not comply with this Agreement, the Lessee shall at
     the option of the Lessor and the Lender:

     (a)  immediately rectify-the non-compliance and, to the extent the
          non-compliance extends beyond the Expiry Date, the Term will be
          automatically extended until the non-compliance has been rectified;
          or

     (b)  redeliver the Aircraft to the Lessor and indemnify the Lessor, and
          provide security reasonably acceptable to the Lessor and the Lender
          for that indemnity, against the cost of putting the Aircraft into
          the condition required by this Agreement.

     During any extension of the Term pursuant to sub-clause (a), this
     Agreement will remain in full force and effect, including the obligation
     to pay Basic Rent (which Lessee shall pay on a PER DIEM basis weekly in
     advance); provided, however, that Lessee shall not operate, or permit
     others to operate, the Aircraft after the Expiry Date except for
     acceptance flights pursuant to Clause 12.2 and a ferry flight to the
     Redelivery Location.

12.5 EXPORT DOCUMENTATION

     Upon redelivery and upon request by the Lessor, the Lessee shall (a)
     provide to the Lessor all documents necessary to export the Aircraft
     from the State of Registration (including a valid and subsisting export
     licence for the Aircraft), and (b) provide any documents

                                 -56-
<PAGE>

     requested by the Lessor in connection with, and otherwise cooperate
     with, the deregistration of the Aircraft by the Aviation Authority,
     including causing the Aviation Authority to issue an Export Certificate
     of Airworthiness to a country specified by the Lessor.

12.6 ACKNOWLEDGMENT

     Provided the Lessee has complied with its obligations under this
     Agreement, following redelivery of the Aircraft by the Lessee to the
     Lessor at the Redelivery Location, the Lessor will deliver to the Lessee
     an acknowledgment confirming that the Lessor is satisfied that the
     Aircraft is in the condition required by this Agreement and has been
     redelivered to the Lessor in accordance with this Agreement.

12.7 MAINTENANCE PROGRAM

     (a)  During the 20 day period preceding the scheduled Expiry Date and
          upon the Lessor's request, the Lessee will provide the Lessor or
          its agent reasonable access to the Agreed Maintenance Program and
          the Aircraft Documents in order to facilitate the Aircraft's
          integration into any subsequent operator's fleet. The Lessor agrees
          that it will not disclose the contents of the Agreed Maintenance
          Program to any person or entity except to the extent necessary to
          monitor the Lessee's compliance with this Agreement and/or to
          bridge the maintenance program for the Aircraft from the Agreed
          Maintenance Program to another program after the Expiry Date.

     (b)  Concurrent with providing the Aircraft Documents for Lessor's
          review, Lessee shall provide to Lessor a written summary of all
          sampling programs involving or affecting the Aircraft.

12.8 STORAGE

     If the Lessor so requests, and subject to the availability of the
     requisite space, the Lessee shall park and store the Aircraft at a
     secure storage area, which may be at the Redelivery Location or at any
     other suitable facility of the Lessee selected by the Lessee, wherever
     located (the "STORAGE LOCATION"), on behalf of the Lessor for a period
     not exceeding 30 days from the Expiry Date. During that period the
     Aircraft shall be at the Lessee's risk (save as to any loss or damage
     caused by the Lessor's wilful misconduct or gross negligence), and the
     Lessee shall maintain and store the Aircraft in accordance with the
     respective manufacturer's maintenance planning document and shall insure
     the Aircraft in accordance with a "ground risk only" policy usual and
     customary in the worldwide aviation insurance marketplace. All storage,
     maintenance and insurance costs shall be borne by the Lessee. If the
     Lessor so requests, and subject to the availability of the requisite
     space, the Lessee shall continue to park and store the Aircraft at the
     Storage Location on behalf of the Lessor for a further period not
     exceeding 60 days. During that further period the Aircraft shall be at
     the Lessor's risk (save as to any loss or damage caused by the Lessee's
     wilful misconduct or


                                  -57-
<PAGE>

     gross negligence), but the Lessee shall continue to maintain, store and
     insure the Aircraft in accordance with this Clause 12.8. All reasonable
     storage, maintenance and insurance costs incurred by the Lessee
     (excluding any profit element accruing to the Lessee) during such
     further period shall be reimbursed by the Lessor promptly upon
     presentation of supporting invoices and/or receipts.

13.  DEFAULT

13.1 EVENTS

     Each of the following events will constitute an Event of Default and a
     repudiation of this Agreement by the Lessee:

     (a)  NON-PAYMENT: the Lessee fails to pay any amount payable by it under
          this Agreement within 3 Business Days of the due date for payment;
          or

     (b)  INSURANCE: the Lessee fails to comply with any provision of clause
          9 or any insurance required to be maintained under this Agreement
          is canceled or terminated; or

     (c)  BREACH: the Lessee fails to comply with any other provision of this
          Agreement and, if such failure is, in the reasonable opinion of the
          Lessor, capable of remedy, the failure continues for 30 days after
          notice from the Lessor to the Lessee, PROVIDED HOWEVER that, if
          such failure cannot reasonably be remedied within such 30 day
          period and the Lessee is diligently undertaking all necessary
          remedial action, the 30 day period shall be extended for a further
          15 days; or

     (d)  REPRESENTATION: any representation or warranty made (or deemed to
          be repeated) by the Lessee in this Agreement or in any document or
          certificate furnished to the Lessor pursuant to or in connection
          with this Agreement is or proves to have been incorrect in any
          material respect when made or deemed to be repeated and the
          Lessee's ability to comply with its obligations under this
          Agreement, and/or the Lessor's rights, title and interest to and in
          the Aircraft and/or under this Agreement, are thereby materially
          and adversely affected; or

     (e)  CROSS DEFAULT:

          (i)   any Financial Indebtedness of the Lessee or any of its
                Affiliates that exceeds $500,000 is not paid when due and any
                applicable grace period shall have expired;

          (ii)  the security for any such Financial Indebtedness is enforced; or


                                   -58-
<PAGE>

          (iii) any lease, conditional sale, installment sale or forward
                purchase agreement of the Lessee or any of its Affiliates in
                respect of an aircraft is terminated as a consequence of an
                event of default or termination event (however described);

          provided always, in any such case, it shall not constitute an Event
          of Default under this Agreement:

          (1)   if the relevant Financial Indebtedness constitutes
                non-recourse borrowing or financing; or

          (2)   if the non-payment, acceleration, termination or event in
                question is being contested by the Lessee in good faith and
                on reasonable grounds and any declaration of default,
                termination of agreement or enforcement of security has been
                stayed by a court of competent jurisdiction; or

          (3)   if the non-payment, acceleration, termination or event in
                question is being discussed by the Lessee with its creditors
                in good faith and on reasonable grounds and there has been no
                declaration of default, termination of agreement or
                enforcement of security;

     (f)  APPROVALS: any consent, authorization, licence, certificate or
          approval of or registration with or declaration to any Government
          Entity in connection with this Agreement, including:

          (i)   any authorization required by the Lessee of, or in connection
                with, the execution, delivery, validity, enforceability or
                admissibility in evidence of this Agreement or the
                performance by the Lessee of its obligations under this
                Agreement; or

          (ii)  any airline licence, air transport licence, franchise,
                concession, permit, certificate, right or privilege required
                by the Lessee for the conduct of its business,

          is modified, withheld, revoked, suspended, canceled, withdrawn,
          terminated or not renewed, or otherwise ceases to be in full force
          and is not reissued, reinstated or renewed within 30 DAYS, PROVIDED
          HOWEVER that any such modification, withholding, revocation,
          suspension, cancellation, withdrawal, termination or non-renewal
          shall only constitute an Event of Default if it has a material
          adverse effect on the Lessee's ability to perform its obligations
          under this Agreement or the Lessor's rights, title and interest to
          and in the Aircraft or under this Agreement; or


                                    -59-
<PAGE>

     (g) INSOLVENCY:

         (i)    the Lessee or any of its Affiliates is, or is deemed for the
                purposes of any relevant law to be, unable to pay its debts
                as they fall due or to be insolvent, or admits inability to
                pay its debts as they fall due; or

         (ii)   the Lessee or any of its Affiliates suspends making payments
                on all or any class of its debts or announces an intention to
                do so, or a moratorium is declared in respect of any of its
                indebtedness; or

     (h) BANKRUPTCY AND SIMILAR PROCEEDINGS

         (i)    Lessee shall consent to the appointment of a receiver,
                trustee or liquidator for itself or for a substantial part of
                its property; or

         (ii)   Lessee shall admit in writing its inability to pay its debts
                generally as they become due, or Lessee shall make a general
                assignment for the benefit of creditors; or

         (iii)  Lessee shall file a voluntary petition in bankruptcy or a
                voluntary petition or answer seeking reorganization in a
                proceeding under the 11 U.S.C. Sections 101 ET SEQ. or under
                any other 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 in any such proceeding, or Lessee shall
                by voluntary petition, answer or consent to or seek relief
                under the provisions of any Bankruptcy Laws; or

         (iv)   any order, judgment or decree is entered by a court of
                competent jurisdiction appointing a receiver, trustee or
                liquidator of Lessee or a substantial part of its property,
                or ordering a substantial part of Lessee's property is to be
                sequestered, and instituted or done with the consent of
                Lessee or, if instituted by another person, the order,
                judgment or decree is not dismissed, remedied or relinquished
                within 60 days; or

         (v)    a petition against Lessee in a proceeding under any
                Bankruptcy Laws shall be filed and shall not be withdrawn or
                dismissed within 60 days thereafter, or if, under the
                provisions of any Bankruptcy Laws that may apply to Lessee,
                any court of competent jurisdiction shall assume
                jurisdiction, custody or control of Lessee or of any
                substantial part of its property; or

         (vi)   any step (including petition, proposal or convening a
                meeting) is taken with a view to a composition, assignment or
                arrangement with any creditors of, or the reorganization,
                rehabilitation, administration, liquidation, or dissolution
                of, the


                                   -60-
<PAGE>

                Lessee  or any of  its  Affiliates  or  any  other
                insolvency  proceedings  involving  the  Lessee  or any of
                its Affiliates; or

     (i)  OTHER JURISDICTION: there occurs in relation to the Lessee or any
          of its  Affiliates  any event  anywhere which, in the reasonable
          opinion of the Lessor, corresponds with any of those  mentioned in
          Clause 13.1(h); or

     (j)  UNLAWFUL: it becomes unlawful for the Lessee to perform any of its
          material obligations under this Agreement or this Agreement becomes
          wholly or partly invalid or unenforceable, provided that any such
          partial invalidity or unenforceability shall only constitute an
          Event of Default if it has a material adverse effect on the
          Lessee's ability to perform its obligations under this Agreement or
          the Lessor's rights, title and interest in and to the Aircraft or
          under this Agreement; or

     (k)  SUSPENSION OF BUSINESS: the Lessee or any of its Affiliates
          suspends or ceases to carry on all or a substantial part of its
          business; or

     (l)  DISPOSAL: the Lessee or any of its Affiliates disposes or threatens
          to dispose of all or a material part of its assets, whether by one
          or a series of transactions, related or not, other than pursuant to
          a merger or consolidation as referred to in, and subject to, Clause
          8.8(b) or for the purpose of any other reorganization or
          amalgamation the terms of which have received the previous consent
          in writing of the Lessor; or

     (m)  RIGHTS: the existence, validity, enforceability or priority of the
          rights of the Lessor as owner and lessor in-respect of the Aircraft
          or the rights of the Lender as mortgagee of the Aircraft and
          assignee of this Agreement are challenged by the Lessee or any
          other person claiming by or through the Lessee; or

     (n)  CHANGE OF OWNERSHIP:  any single person or group of persons acquire
          control,  directly or indirectly,  of the Lessee  without the
          previous  consent in writing of the Lessor (which  consent  shall
          not be withheld  unless the Lessor is of the  reasonable  opinion
          that such  acquisition  of control  will have a materially  adverse
          effect on the Lessee's  ability to perform its  obligations  under
          this  Agreement  or the  Lessor's  rights, title and  interest in
          and to the  Aircraft or under this  Agreement),  not  including
          (i) persons  that are currently in control of Lessee,  (ii) spouses
          of such  persons,  (iii) any lineal  ancestor or  descendant of
          such persons,  (iii) any spouse of any person  covered by clause
          (iii),  or (v) a partnership or trust set up for the benefit of
          persons identified in clauses (i) through (iv); or

     (o)  DELIVERY: the Lessee fails to accept delivery of the Aircraft when
          validly tendered pursuant to this Agreement by the Lessor (provided
          that the Lessor shall have satisfied the conditions precedent set
          out in Clause 3.4); or


                                        -61-
<PAGE>

     (p)  ADVERSE CHANGE: any event or series of events occurs which, in the
          reasonable opinion of the Lessor, could be expected to have a
          material adverse effect on the financial condition or operations of
          the Lessee and its Affiliates or on the ability of the Lessee to
          comply with its obligations under this Agreement; or

     (q)  LETTER OF CREDIT: if the Lessee has elected to deliver the Letter
          of Credit in lieu of the Security Deposit pursuant to Clause
          5.1(b), the Letter of Credit ceases for any reason to be in full
          force and effect or is not renewed or replaced before its
          expiration in accordance with Clause 5.1(b) and the Lessee does not
          immediately provide the Lessor with cash in an amount equal to the
          Security Deposit.

13.2 RIGHTS

     If an Event of Default occurs, and for as long as it shall continue, the
     Lessor may at its option (and without prejudice to any of its other
     rights under this Agreement), at any time thereafter:

     (a)  treat such event as a repudiation by the Lessee of its obligations
          under this Agreement and by notice to the Lessee with immediate
          effect terminate the leasing of the Aircraft (but without prejudice
          to the continuing obligations of the Lessee under this Agreement),
          whereupon all rights of the Lessee under this Agreement shall
          cease; and/or

     (b)  proceed by appropriate court action or actions to enforce
          performance of this Agreement or to recover damages for the breach
          of this Agreement; and/or

     (c)  either:

          (i)   take possession of the Aircraft, for which purpose the
                Lessor may enter any premises belonging to, occupied by or
                under the control of the Lessee (for which purpose the Lessee
                hereby grants to the Lessor an irrevocable licence to the
                extent permitted by applicable law) where the Aircraft may be
                located, or cause the Aircraft to be redelivered to the
                Lessor at the Redelivery Location (or such other location as
                the Lessor may require), and the Lessor is hereby irrevocably
                authorized and empowered, to the extent permitted by
                applicable law, to direct pilots of the Lessee or other
                pilots to fly the Aircraft to that airport and will have all
                the powers and authorizations necessary for taking such
                action; or

          (ii)  by serving notice, require the Lessee to redeliver the
                Aircraft to the Lessor at the Redelivery Location (or such
                other location as the Lessor may require).

13.3 EXPORT


                                    -62-
<PAGE>

     If an Event of Default occurs, and for as long as it shall continue, the
     Lessor may sell or otherwise deal with the Aircraft as if this Agreement
     had never been made and the Lessee will, at the request of the Lessor,
     take all steps necessary to export the Aircraft from the country where
     the Aircraft is for the time being situated and any other steps
     necessary to enable the Aircraft to be redelivered to the Lessor in
     accordance with this Agreement. The Lessee hereby irrevocably and by way
     of security for its obligations under this Agreement authorizes and
     empowers the Lessor as its attorney to execute and deliver any
     documentation and to do any act or thing required in connection with the
     foregoing.

13.4 DEFAULT PAYMENTS

     If a Default occurs, the Lessee will indemnify the Lessor on demand
     against any loss, damage, expense, cost or liability which the Lessor
     may sustain or incur directly or indirectly as a result, including:

     (a)  any loss of profit (calculated on an after-tax basis) suffered by
          the Lessor because of the Lessor's inability to place the Aircraft
          on lease with another Lessee on terms as favorable to the Lessor as
          this Agreement or because whatever use, if any, to which the Lessor
          is able to put the Aircraft upon its return to the Lessor, is not
          as profitable (calculated on an after-tax basis) to the Lessor as
          this Agreement would have been but for such Default or
          non-delivery;

     (b)  in the  event  that  the  Aircraft  is sold as a  consequence  of
          the  Lessor's  inability  to  enter  into a satisfactory  lease
          within a  reasonable  period,  the amount (if any) by which (i) the
          aggregate of (1) the net sale  proceeds  (calculated  by
          deducting  the costs of sale  together  with the cost of  preparing
          the Aircraft  for sale and the  repayment of any  outstanding
          indebtedness  in relation to the  financing of the Aircraft)  plus
          (2) the present  value of the  anticipated  after-tax  net income
          to be derived from such net sale  proceeds up to the  scheduled
          Expiry Date,  discounted  on a monthly basis using 9.5% PER ANNUM
          as the discount rate,  are less than (ii) the aggregate of (1) the
          anticipated  net sale proceeds  (computed on the same basis as the
          net sale  proceeds  referred to in (i)(1) above),  assuming  that
          the Aircraft  would have been sold as soon as reasonably
          practicable  following the scheduled  Expiry Date plus (2) the
          present value of the income that would have been  derived from the
          future Basic Rent  payable  until the  scheduled  Expiry Date,
          discounted on a monthly basis using 9.5% PER ANNUM as the discount
          rate;

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

     (d)  any loss, premium, penalty or expense that may be incurred in
          repaying funds raised to finance the Aircraft or in unwinding any
          swap, forward interest rate agreement or other financial instrument
          relating in whole or in part to the Lessor's financing of the
          Aircraft; and


                                  -63-
<PAGE>

     (e)  any loss, cost, expense or liability sustained or incurred by the
          Lessor owing to the Lessee's failure to redeliver the Aircraft on
          the date, at the place and in the condition required by this
          Agreement.

     For the avoidance of doubt, the provisions of Clause 5.8(a) will apply
     to any sums payable by the Lessee pursuant to this Clause 13.4.

14.  ASSIGNMENT AND TRANSFER

14.1 NO ASSIGNMENT BY LESSEE

     The Lessee will not assign or create or permit to exist any Security
     Interest over any of its rights under this Agreement.

14.2 LESSOR ASSIGNMENT

     The Lessor may sell, assign or transfer all or any of its rights under
     this Agreement and in the Aircraft (a "TRANSFER") and the Lessor will,
     other than in the case of an assignment for security purposes, have no
     further obligation under this Agreement following a Transfer but,
     notwithstanding any Transfer, will remain entitled to the benefit of
     each indemnity under this Agreement.

     (a)  In connection with any Transfer, the following conditions shall
          apply:

          (i)   Lessor shall give Lessee written notice of such Transfer at
                least 10 Business Days before the date of such Transfer,
                specifying the name and address of the proposed purchaser,
                assignee or transferee (the "Transferee");

          (ii)  the Transferee will be a person reasonably experienced in
                aircraft leasing (or the Transferee's rights and powers under
                this Agreement shall be exercised on its behalf pursuant to
                an appropriate management agreement by a person having such
                experience);

          (iii) the Transfer will not adversely affect the Lessee's rights
                and interests in the Aircraft and/or this Agreement, nor
                subject the Lessee to any Tax or Claim or any other
                obligation or liability to which it would not have been
                subject had such assignment or transfer not taken place.

          (iv)  the Transferee will be a "citizen of the United States"
                within the meaning of Section 40102(a)(15) of the Federal
                Aviation Law and have full corporate power and authority to
                enter into and perform the transactions contemplated by this
                Agreement on the part of "Lessor";


                                  -64-
<PAGE>

          (v)   on the Transfer date the Lessor and the Transferee shall
                enter into an agreement or agreements in which the Transferee
                confirms that it shall be deemed a party to this Agreement
                and agrees to be bound by all the terms of, and to undertake
                all of the obligations of, the Lessor contained in this
                Agreement;

          (vi)  such Transfer shall not violate any applicable law including
                the Federal Aviation Law, the Federal Aviation Regulations
                and the Securities Act of 1933, as amended; and

          (vii) the Transferee shall provide to Lessee an opinion of its
                regular independent counsel as to the matters set forth in
                sub-clause (iv), as to the legality, validity, binding effect
                and enforceability of the agreement or agreements between
                Lessor and Transferee referred to in sub-clause (v) and as to
                such other matters as were contained in the opinion of
                Lessor's counsel delivered on the Delivery Date.

     (b)  Upon any Transfer, the Transferee shall be deemed Lessor for all
          purposes of this Agreement, each reference in this Agreement to the
          "Lessor" shall thereafter be deemed for all purposes to refer to
          the Transferee, and the transferor shall be relieved of all
          obligations of the "Lessor" under this Agreement arising after the
          time of such Transfer except to the extent attributable to acts or
          events occurring prior to the time of such Transfer.

     (c)  Upon compliance by Lessor and a Transferee with the terms and
          conditions of Clause 14.2(a), Lessee shall at the time of Transfer,
          at the specific written request of Lessor and with Lessor paying
          all of Lessee's out-of-pocket costs and expenses:

          (i)   execute and deliver to Lessor and to such Transferee an
                agreement, in form and substance satisfactory to Lessor,
                Lessee and such Transferee, dated the date of such transfer,
                consenting to such transfer, agreeing to pay all or such
                portion of the Basic Rent and other payments under Us
                Agreement to such Transferee or its designee as such
                Transferee shall direct, and agreeing that such Transferee
                shall be entitled to rely on all representations and
                warranties made by Lessee in this Agreement or in any
                certificate or document furnished by Lessee in connection
                with this Agreement as though such Transferee was the
                original "Lessor";

          (ii)  execute and deliver to Lessor or such Transferee, as the case
                may be, precautionary Uniform Commercial Code financing
                statements or amendments reflecting the interests of such
                Transferee in the Aircraft and this Agreement;

          (iii) deliver to Lessor and to such Transferee a certificate,
                signed by a duly authorized officer or Lessee, dated the date
                of such transfer, to the effect that no Event of


                                    -65-
<PAGE>

                Default has occurred and is continuing or, if one is then
                continuing, describing such Event of Default;

          (iv)  cause to be delivered to Lessor and such Transferee
                certificates of insurance and broker's letter of undertaking
                substantially in the form set out in Parts 2 and 3 of
                Schedule 4, detailing the coverage and confirming the
                insurers' agreement to the specified insurance requirements
                of this Agreement and listing the Lessor and Transferee as
                additional insureds and the Transferee as sole loss payee
                (subject to other direction by the Lender);

          (v)   deliver to Lessor and to such Transferee an opinion of
                Lessee's counsel (which may be Lessee's General Counsel),
                addressed to Lessor and such Transferee to the effect that
                the agreement referred to in sub-clause (i) has been duly
                authorized and executed by Lessee and constitutes the legal,
                valid and binding obligation of Lessee, enforceable against
                Lessee in accordance with its terms (subject to customary
                exceptions), and to the effect that such Transferee may rely
                on the opinion delivered by such counsel or its predecessor
                counsel in connection with this Agreement on the Delivery
                Date with the same force and effect as if such Transferee was
                an original addressee of such opinion when given;

         (vi)   deliver to Lessor and such Transferee information on the
                location of the Airframe and Engines at all times requested
                by Lessor in order to permit the Transfer to take place at a
                time and on a date so as to eliminate or minimize any Taxes
                applicable to the Transfer; and

         (vii)  such other documents as Lessor or such Transferee may
                reasonable request, so long as such documents do not
                adversely affect the rights or obligations of Lessee under
                this Lease or otherwise adversely effect Lessee.

14.3 GRANTS OF SECURITY INTERESTS

     The Lessor shall be entitled at any time after Delivery to grant a
     security interest in the Aircraft or its right, title and interest in
     this Agreement (each, an "ADDITIONAL MORTGAGE") in favor of any person
     (each, an "ADDITIONAL MORTGAGEE"). Any Additional Mortgage may be a
     successor mortgage to the Security Interest granted to the Lender, or
     may be in addition to the Lender's Security Interest and previous
     Additional Mortgages and with a priority senior, equal or subordinate to
     the Lender's Security Interest and previous Additional Mortgages as the
     Lender and previous Additional Mortgagees may permit. In the case of any
     such grant by Lessor of an Additional Mortgage to an Additional
     Mortgagee in all or any portion of Lessor's rights, title and interest
     in and to the Aircraft and this Agreement, Lessee shall promptly, at the
     specific written request of Lessor and with Lessor paying all of
     Lessee's out-of-pocket costs and expenses:


                                     -66-
<PAGE>

     (a)  execute  and  delivery  to Lessor  and to such  Additional
          Mortgagee  an  agreement,  in form and  substance satisfactory  to
          Lessor,  such  Additional  Mortgagee  and  Lessee,  dated  the
          date of the  grant  of such Additional  Mortgage,  (i) consenting
          to such Additional  Mortgage and to any assignment of Lessor's
          rights, title and interest in and to this  Agreement to such
          Additional  Mortgagee  for security  purposes,  (ii) if requested
          by Lessor and  consented to by the previous  payee,  agreeing  that
          Lessee will pay the Basic Rent and  other  payments  under  this
          Agreement  to such  Additional  Mortgagee,  and (iii)  agreeing
          that such Additional  Mortgagee shall be entitled to rely on all
          representations and warranties made by Lessee in this Agreement or
          in any certificate or document  furnished by Lessee in connection
          with this Agreement  Documents as though such Additional Mortgagee
          was originally the "Lessor" or "Lender";

     (b)  execute and deliver to Lessor and such Additional Mortgagee such
          agreements as the Lessor may reasonably require for the purposes of
          effecting all necessary amendments to this Agreement (including
          Clauses 8, 9 and 10 and Schedule 4);

     (c)  execute and deliver to Lessor or such Additional Mortgagee, as the
          case may be, precautionary Uniform Commercial Code financing
          statements or amendments reflecting the assignment of Lessor's
          interests to such Additional Mortgagee;

     (d)  deliver to Lessor and such Additional Mortgagee a certificate,
          signed by a duly authorized officer of Lessee, dated the date of
          the grant of the Additional Mortgage, to the effect that no Event
          of Default has occurred and is continuing or, if one is then
          continuing, describing such Event of Default;

     (e)  cause to be delivered to Lessor and such Additional Mortgagee
          certificates of insurance and broker's letter of undertaking
          substantially in the form set out in Parts 2 and 3 of Schedule 4,
          detailing the coverage and confirming the insurers' agreement to
          the specified insurance requirements of this Agreement, adding such
          Additional Mortgagee as an additional insured and, if requested by
          Lessor and consented to by the previous loss payee, listing such
          Additional Mortgagee as sole loss payee;

     (f)  deliver to Lessor  and such  Additional  Mortgagee  an opinion of
          Lessee's  counsel  (which may be  Lessee's General  Counsel),
          addressed to Lessor and such  Additional  Mortgagee (i) to the
          effect that the agreements referred to in  sub-clauses  (a) and (b)
          have been duly  authorized and executed by Lessee and constitute
          the legal,  valid and binding obligations of Lessee,  enforceable
          against Lessee in accordance with their terms (subject to customary
          exceptions),  and (ii) to the effect that such  Additional
          Mortgagee  may rely on the opinion  delivered  by such  counsel or
          its  predecessor  counsel in  connection  with this  Agreement on
          the Delivery Date with the same force and effect as if such
          Additional  Mortgagee  was an original  addressee of such opinion
          when given; and


                                     -67-
<PAGE>

     (g)  such other documents as Lessor or such Additional Mortgagee may
          reasonably request so long as such documents do not adversely
          affect the rights or obligations of Lessee under this Lease or
          otherwise adversely affect Lessee.

14.4 SALE AND LEASEBACK BY LESSOR

     In addition to the Transfers and grants of security interests permitted
     by Clauses 14.2 and 14.3, Lessor shall be entitled to transfer its
     right, title and interests in and to the Aircraft to any person and
     lease the Aircraft from such person (a "HEAD LESSOR"), and in such event
     Lessor shall retain its rights and obligations as the "Lessor" under
     this Agreement. In the event of such a sale and lease-back by Lessor,
     (a) the Head Lessor shall meet the requirements for a "Transferee" as
     defined in Clause 14.2(a)(ii) above, (b) the Lessor shall be entitled to
     assign its rights in this Agreement to such Head Lessor as security for
     its obligations under the head lease, (c) the Head Lessor shall be
     entitled to grant to one or more purchase money lenders, or to an
     indenture trustee on behalf of such lenders, an Additional Mortgage
     covering the Aircraft and this Agreement, (d) Lessee shall execute and
     deliver to Lessor, such Head Lessor, such Additional Mortgagee and any
     trustees on their behalf, as appropriate, the documents specified in
     Clauses 14.2(c)(i) through (vii) and Clauses 14.3(a) through (g) above,
     and Lessee shall cooperate with Lessor to make such other changes to
     this Lease, such as including such Head Lessor, such Additional
     Mortgagee and the trustees on their behalf as additional insureds and
     "Indemnitees", as Lessor may reasonably request so long as such changes
     do not adversely affect the rights or obligations of Lessee under this
     Lease or otherwise adversely affect Lessee and with Lessor paying all of
     Lessee's out-of costs and expenses.

14.5 FURTHER ACKNOWLEDGMENTS

     Lessee further acknowledges that any Transferee or Additional Mortgagee
     shall in turn have the rights of, and be subject to the conditions to,
     transfer and grants of security interests set forth above in this Clause
     14.

14.6 CERTAIN PROTECTIONS FOR LESSEE'S BENEFIT

     The rights of Lessee under this Agreement shall be superior to the
     rights of any Additional Mortgagee or Head Lessor, and the Lessor shall
     require each Additional Mortgagee and Head Lessor to agree in writing
     with the Lessee that such Additional Mortgagee's and Head Lessor's
     rights in and to the Aircraft shall be subject to the terms of this
     Agreement, including to the Lessee's rights to the quiet use, possession
     and enjoyment provisions contained in this Agreement. Except as
     expressly set forth in this Agreement, no Additional Mortgage or Head
     Lease shall increase the responsibilities, obligations or liabilities of
     the Lessee or deprive the Lessee of any of its rights or privileges
     under this Agreement. The Lessor's obligations to perform the terms and
     conditions of this Lease shall remain in full force and effect
     notwithstanding the creation of any Additional Mortgage or Head Lease.

                                  -68-
<PAGE>

     Lessor shall not create any Additional Mortgage or enter into any Head
     Lease that violates the terms of this Clause 14.6.

15.  MISCELLANEOUS

15.1 WAIVERS, REMEDIES CUMULATIVE

     The rights of either party under this Agreement:

     (a)  may be exercised as often as necessary;

     (b)  are cumulative and not exclusive of that party's rights under any
          law; and

     (c)  may be waived only in writing and specifically.

     Delay in exercising or non-exercise of any such right is not a waiver of
     that right.

15.2 DELEGATION

     The Lessor or the Lender may delegate to any person or persons all or
     any of the trusts, powers or discretions vested in it by this Agreement
     and any such delegation may be made upon such terms and conditions and
     subject to such regulations (including power to sub-delegate) as the
     Lessor or the Lender, respectively, in its absolute discretion thinks
     fit.

15.3 APPROPRIATION

     If any sum paid or recovered in respect of the liabilities of the Lessee
     under this Agreement is less than the amount then due, the Lessor may
     apply that sum to amounts due under this Agreement in such proportions
     and order and generally in such manner as the Lessor may determine.

15.4 CURRENCY INDEMNITY

     (a)  If the Lessor receives an amount in respect of the Lessee's
          liability under this Agreement or if such liability is converted
          into a claim, proof, judgment or order in a currency other than the
          currency (the "CONTRACTUAL CURRENCY") in which the amount is
          expressed to be payable under this Agreement:

          (i)   the Lessee will indemnify the Lessor, as an independent
                obligation, against any loss arising out of or as a result of
                such conversion;

          (ii)  if the amount received by the Lessor, when converted into the
                contractual currency (at the market rate at which the Lessor
                is able on the relevant date to


                                  -69-
<PAGE>

                purchase the contractual currency in New York City with that
                other currency) is less than the amount owed in the
                contractual currency, the Lessee will, forthwith on demand,
                pay to the Lessor an amount in the contractual currency equal
                to the deficit; and

         (iii)  the Lessee will pay to the Lessor on demand any exchange
                costs and Taxes payable in connection with the conversion.

     (b)  The Lessee waives, to the extent permitted by applicable law, any
          right it may have in any jurisdiction to pay any amount under this
          Agreement in a currency other than that in. which it is expressed
          to be payable.

15.5 PAYMENT BY THE LESSOR

     The Lessor will not be obliged to pay any amounts to the Lessee under
     this Agreement so long as any sums which are then due from the Lessee
     under this Agreement remain unpaid and any such amounts which would
     otherwise be due will fall due only if and when the Lessee has paid all
     such sums.

15.6 SEVERABILITY

     If a provision of this Agreement is or becomes illegal, invalid or
     unenforceable in any jurisdiction, that will not affect:

     (a)  the legality, validity or enforceability in that jurisdiction of
          any other provision of this Agreement; or

     (b)  the legality, validity or enforceability in any other jurisdiction
          of that or any other provision of this Agreement.

15.7 REMEDY

     If the Lessee fails to comply with any provision of this Agreement, the
     Lessor may, without being in any way obliged to do so or responsible for
     so doing and without prejudice to the ability of the Lessor to treat the
     non-compliance as a Default, effect compliance on behalf of the Lessee,
     whereupon the Lessee shall become liable to pay immediately any sums
     expended by the Lessor together with all costs and expenses (including
     reasonable legal costs) necessarily incurred in connection therewith.

15.8 EXPENSES

     (a)  The Lessor and the Lessee shall each bear their respective expenses
          (including legal, professional and out-of-pocket expenses) incurred
          or payable in connection with the


                                   -70-
<PAGE>

     (c)  Service Bulletins complied with during Month:




4.   AIRCRAFT DAMAGE OR ENGINE CHANGES:

     Details of any repairs carried out to the Aircraft beyond SRM limits and
     Engine changes, giving reasons for repair or change:




5.   UPCOMING MAINTENANCE CHECKS

     (a)  Maintenance Checks (C segment and above) scheduled or expected to
          be performed on the Airframe during the next 12 months:




     (b)  Scheduled shop visits or heavy maintenance visits scheduled or
          expected to  be performed on the Engines during the next 12 months:




     (c)  Overhauls, or replacements scheduled or expected to be performed on
          the APU or Landing Gear during the next 12 months:






Date: ___________________,_____               CERTIFIED FOR AND ON BEHALF OF
                                              ALOHA AIRLINES, INC.



                                              By: __________________________
                                              Name:
                                              Title:
<PAGE>

                     CERTIFICATE OF ACCEPTANCE 802

     This Certificate of Acceptance 802 is delivered on the date set forth in
     paragraph 1 below by Aloha Airlines, Inc. (the "LESSEE") to ACG
     Acquisition VIII LLC (the "LESSOR") pursuant to Lease Agreement 802,
     dated January 15, 1997, between the Lessor and the Lessee (the
     "AGREEMENT"). Capitalized terms used but not defined in this Certificate
     of Acceptance 802 shall have the meaning given to such terms in the
     Agreement.

1.   DETAILS OF ACCEPTANCE

     The Lessee hereby confirms to the Lessor that the Lessee has at 8:40
     a.m. H.S.T. on this 15th day of January, 1997, over International Water,
     accepted the following, in accordance with the provisions of the
     Agreement and the Annex:

     (a)  Airframe: Boeing 737-2S5C airframe, Manufacturer's Serial No. 22148
          and FAA Registration No. N802AL;

     (b)  Engines: two Pratt & Whitney JT8D-9A Engines, bearing
          Manufacturer's Serial Nos. P656093B and P665630B, each having 750
          or more rated take-off horsepower;

     (c)  All Parts installed on, attached to or appurtenant to the Airframe
          and Engines; and

     (d)  Aircraft Documents as specified in Schedule I - Part 2 of the
          Agreement.

2.   LESSEE'S CONFIRMATION   the Lessee confirms to the Lessor that as at the
     time indicated above, being the time of Delivery:

     (a)  the Lessee's representations and warranties contained in Clauses
          2.1 and 2.2 of the Agreement are hereby repeated;

     (b)  the Aircraft is insured as required by the Agreement; and

     (c)  the Lessee confirms that there have been affixed to the Aircraft
          and the Engines the fireproof notices required by the Agreement.

3.   LESSOR'S CONFIRMATION   the Lessor confirms to the Lessee that, as at the
     time indicated above, being the time of Delivery, the Lessor's
     representations and warranties contained in Clause 2.4 of the Agreement
     are hereby repeated.

<PAGE>

     IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
     Acceptance 802 on the date shown at the beginning of this Agreement.

                                 SIGNED ON behalf of
                                 ACG ACQUISITION VIII LLC



                                 By: /s/ R. Stephen Hannahs
                                     --------------------------
                                 Name:   R. Stephen Hannahs
                                 Title:  Manager



                                 SIGNED ON behalf of
                                 ALOHA AIRLINES, INC.



                                 By: /s/ Brenda F. Cutwright
                                     --------------------------
                                 Name:   Brenda F. Cutwright
                                 Title:  Sr. Vice President Finance &
                                         Planning and CFO



                                 By: /s/ Owen Sekimura
                                     --------------------------
                                 Name:   Owen Sekimura
                                 Title:  Staff Vice President - Finance
                                         & Controller
<PAGE>

                      COLLATERAL ASSIGNMENT OF LEASE
                                 (N802AL)

     THIS COLLATERAL ASSIGNMENT OF LEASE (hereinafter referred to as the
"Agreement"), dated as of January 15, 1997 by and between ACG ACQUISITION
VIII, LLC, a Delaware limited liability company ("Lessor"), and FINOVA
CAPITAL CORPORATION, a Delaware corporation ("Lender"),

                          W I T N E S S E T H :

     WHEREAS, there is in effect a certain Aircraft Lease Agreement dated as
of January 15, 1997 between Lessor and Aloha Airlines, Inc., an Hawaiian
corporation ("Lessee"), which will be filed for recording with the Federal
Aviation together herewith (the "Lease"), pursuant to which Lessor has leased
to Lessee, among other things, one Boeing 737-200 Advanced Aircraft and two
Pratt & Whitney model JT8D-9A jet aircraft engines installed thereon, as more
particularly described in EXHIBIT A attached hereto (the "Flight Equipment");
and

     WHEREAS, Lessor has obtained or will obtain financing from Lender in
order to finance the acquisition by Lessor of the Flight Equipment; and

     WHEREAS, in order to secure the performance by Lessor of its obligations
under that certain Secured Loan Agreement dated as of September 26, 1996
between Lessor, as borrower, and Lender, as lender (the "Loan Agreement") as
the same may hereafter be amended, restated or otherwise modified, and the
other Loan Documents (as defined in the Loan Agreement), Lessor has agreed
to, among other things, assign to Lender all of Lessor's right, title and
interest (but none of its obligations) in and to the Lease, including, but
not limited to, all amounts payable by Lessee to Lessor under the Lease,

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lender hereby agree
as follows:

     1.   DEFINITIONS AND CONSTRUCTION.

     1.1  DEFINITIONS. In this Agreement terms and expressions defined in the
foregoing recitals shall have effect as therein defined, and the following
terms and expressions shall have the meanings ascribed to such terms below.

     "AIRCRAFT" shall mean, collectively, the Airframe and the Engines.

     "AIRFRAME" shall mean the airframe described in EXHIBIT A hereto, any
and all equipment furnished by Lessee and incorporated therein in accordance
with the terms of the Lease, and any and all parts (except Engines) relating
thereto.

<PAGE>


     "ASSIGNED PROPERTY" shall mean, collectively, the Lease and the
Earnings.

     "BUSINESS DAY" shall mean a day on which  national  banks are open for
business  in  Phoenix, Arizona.

     "AGREEMENT" SHALL mean this agreement as from time to time amended and
supplemented in accordance with the terms hereof.

     "CLOSING DATE" shall mean the date on which the Lessor acquires title to
the Aircraft.

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

     "EARNINGS" shall mean all moneys whatsoever from time to time due or
payable to Lessor arising out of the use or operation of the Aircraft
including (but without limiting the generality of the foregoing) all rental
payments, insurance proceeds, security deposits, maintenance reserves and
other monies due to Lessor under the Lease or any other document relating
thereto, including compensation payable to Lessor in the event the Aircraft
is requisitioned for hire, damages for breach of any contract for the
employment of the Aircraft or any documents relating thereto, any amounts
payable in consideration of the termination or variation of any lease or
charter or other such contract and any other earnings whatsoever due or to
become due to Lessor and any proceeds of the foregoing, but excluding in all
cases Excluded Amounts.

     "ENGINES" shall mean, collectively, each of the engines (having 750 or
more rated take off horsepower or the equivalent thereof) described in
EXHIBIT A attached hereto and installed on the Airframe at the time the
Airframe was delivered to Lessee pursuant to the Original Lease, whether or
not from time to time hereafter installed on the Airframe or installed on
other aircraft, (ii) any Replacement Engine, and (ii) any and all parts,
accessories and accessions to any of the foregoing.

     "EVENT OF DEFAULT" shall mean the occurrence of any of the events which
are listed in the Loan Agreement or any of the other Loan Documents and which
are referred to therein as constituting an "Event of Default."

     "EVENT OF LOSS" shall mean, with respect to any item of the Flight
Equipment or any part thereof (a) the actual, constructive, compromised,
arranged or agreed total loss thereof; (b) the destruction or damage beyond
repair of such Flight Equipment or part thereof, or such Flight Equipment or
part thereof being rendered or becoming permanently unfit for normal use for
any reason whatever; (c) the requisition for title, confiscation, restraint,
detention, forfeiture or any compulsory acquisition or seizure or requisition
for hire of such Flight Equipment or part thereof (other than a requisition
for hire for a temporary period not

                                     -2-


<PAGE>


exceeding one hundred and eighty (180) days) by or under the order of any
Government (whether civil, military or DE FACTO) or public or local authority;
or (d) the high-jacking, theft or disappearance, resulting in loss of
possession by Lessor or Lessee for a period of thirty (30) consecutive days
or longer, of such Flight Equipment or part thereof

     "EXCLUDED AMOUNTS" SHALL mean (a) proceeds of public liability insurance
in respect of the Flight Equipment payable as a result of insurance claims
made, or losses suffered, by Lessor, any affiliate of Lessor or any director,
officer, employee, representative or agent of Lessor or any such affiliate to
the extent that such insurance claims made, or losses suffered, do not apply
to Lender, as assignee of Lessor, or to the Flight Equipment, (b) proceeds of
insurance which is maintained with respect to the Flight Equipment by Lessor
or any such affiliate and which insurance is not required under the Loan
Documents, (c) any interest paid or payable on any amounts described in
clauses (a) or (b) of this definition, and (d) the proceeds from the
enforcement of the payment of any amount described in clauses (a) through (c)
of this definition.

     "FEDERAL AVIATION ACT" SHALL mean the Federal Aviation Act of 1958, as
amended, and the rules and regulations promulgated thereunder, as in effect
on the date of this Agreement, and as modified or amended hereafter or any
successor or substituted legislation at the time in effect and applicable.

     "FAA" shall mean the Federal Aviation Administration provided for in the
Department of Transportation Act of 1966, as in effect on the date of this
Agreement and as modified or amended hereafter, or any successor or
substituted governmental authority at the time having jurisdiction over the
Flight Equipment.

     "GOVERNMENT" shall mean any governmental body, or a political
subdivision thereof.

     "Lien" shall mean any mortgage, pledge, lien, charge, encumbrance,
option, security interest or lease (including any conditional sale agreement,
equipment trust agreement, or other title retention agreement) or right or
claim of any person, whether voluntary or involuntary in nature.

     "REPLACEMENT ENGINE" shall mean an engine on the Aircraft on the date of
return of the Aircraft to Lessor pursuant to the Lease, or an engine
replacing an Engine in the event of an Event of Loss with respect to such
Engine, which engine shall be (a) the same model, or an improved model, as
the Engine originally leased hereunder and (b) suitable for installation and
use on the Airframe without materially impairing the value or utility of the
Airframe and having a time to overhaul, time to next shop visit, time to hot
section, modification status, value, condition and utility at least equal to
the Engine it replaces (assuming the Engine so replaced had the time to
overhaul, time to next shop visit, time to hot section, modification status,
value, condition and utility required by the terms hereof

                                     -3-


<PAGE>


immediately prior to being replaced) and which is free of all encumbrances
other than Permitted Liens.

     "SECURED OBLIGATIONS" shall mean the obligations under and as defined in
the Loan Agreement.

     "TAXES" shall mean all present and future taxes whatever, and value added
levies, imposts, duties or charges of any nature wherever imposed, including,
without limitation, value added taxes or similar taxes and any franchise,
transfer, sales, use, business, occupation, excise, personal property, real
property, stamp or other tax imposed by any national or local taxing or
fiscal authority or agency, together with any penalties, additions to tax,
fines or interest thereon.

     1.2  TERMS DEFINED IN UNIFORM COMMERCIAL CODE. All terms used herein
which are defined in the Arizona Uniform Commercial Code (the "Code") shall
have the meanings ascribed to such terms in the Code unless the context in
which such terms are used herein indicates otherwise.

     1.3  TERMS DEFINED IN LOAN AGREEMENT. All capitalized terms used in this
Agreement which are defined in the Loan Agreement shall, unless otherwise
defined herein, have the respective meanings ascribed to such terms in the
Loan Agreement, the applicable provisions of which Loan Agreement are
incorporated herein.

     2.   ASSIGNMENT.

     To secure the payment and performance by Lessor of the Secured
Obligations, Lessor hereby assigns, transfers, conveys and sets over to
Lender, and grants to Lender a security interest in (a) all of Lessor's
right, title and interest in, to and under the Lease (but none of its
obligations thereunder), including, without limitation, the right to collect
all rental payments, income, proceeds (including, but not limited to,
insurance proceeds), awards, revenues and other sums payable by Lessee to
Lessor pursuant to the Lease, (b) all of Lessor's rights under section 1110
of the Bankruptcy Code of the United States or any subsequently enacted
statutes of similar import, with respect to the Flight Equipment, (c) all
right, title and interest of Lessor to collect, hold and apply all security
deposits, maintenance reserves and similar amounts, as provided pursuant to
the terms of the Lease, and (d) all rights of Lessor to enforce Lessor's
rights and remedies under the Lease. Lender agrees that it shall not exercise
any rights of Lender to enforce Lessor's rights and remedies under the Lease
unless and until an Event of Default (as hereinafter defined) has occurred.

     3.   NOTICE OF ASSIGNMENT.

     On or prior to the Closing Date, Lessor shall have delivered to Lessee a
Notice of Assignment of Lease in the form set out in EXHIBIT B attached
hereto and made a part hereof, and Lessor and Lessee shall each have executed
such Notice of

                                     -4-


<PAGE>


Assignment of Lease and returned same to Lender. In the event that the
Aircraft is subject to any sublease by Lessee, Lessor shall, prior to such
sublease becoming effective, have delivered to the sublessee under such
sublease a Notice of Assignment of Lease in substantially the form set out in
EXHIBIT B attached hereto and made a part hereof, and Lessor and such
sublessee shall each have executed such Notice of Assignment of Lease and
returned same to Lender.

     4.   APPLICATION OF EARNINGS.

     The Earnings shall be applied and credited in favor of Lessor in
accordance with the repayment provisions of the Loan Agreement.

     5.   UNDERTAKINGS.

     Lessor hereby covenants and agrees with Lender as follows:

     5.1  DURATION. The undertakings and obligations of Lessor under this
Agreement shall continue in full force and effect from and after the date
hereof and until the payment and performance in full of the Secured
Obligations.

     5.2  PERFORMANCE OF OBLIGATIONS. Lessor shall:

     (a)  perform its obligations under the Lease and each other agreement
made between Lessor and Lessee in respect of the Aircraft and will not
without the prior written consent of Lender rescind, cancel or otherwise
terminate the Lease or any of such other agreements other than as permitted
by the Loan Agreement;

     (b)  promptly notify Lender (i) of any default of which it has knowledge
by Lessor, Lessee or any other Permitted Lessee under the Lease or any other
agreement made in respect of the Aircraft, and (ii) of the Lease or such
other agreement being frustrated or the performance thereof becoming
impossible or substantially different from that contemplated originally by
the parties thereto;

     (c)  institute and maintain all such proceedings as may be necessary to
preserve or protect this Agreement as a valid grant of a security interest in
Lessor's rights in the Assigned Property and each other agreement made in
respect of the Aircraft;

     (d)  not, without the prior written consent of Lender, take or omit to
take any action the taking or omission of which might result in any material
adverse alteration of any of the Lease or any other agreement made in respect
of the Aircraft;

     (e)  not, without the prior written consent of Lender, agree to any
variation, modification or amendment in the terms of the Lease or any other
agreement made in respect of the Aircraft, or release any party thereto from
any of its obligations thereunder, or waive any breach of the obligations of
such party, or

                                     -5-


<PAGE>


consent to any such act or omission of any such party as would otherwise
constitute such breach;

     (f)  not permit any sublease by Lessee of its interest in the Aircraft,
except as expressly permitted under the terms of the Lease as in effect on
the Closing Date;

     (g)  provide written notice to Lender of any sublease or purported
sublease of the Aircraft by Lessee, designating the name and address of such
sublessee and such other information as Lender may reasonably request; and

     (h)  cause counterpart No. 1 of the Lease to be delivered to Lender on
the Closing Date.

     6.   EXERCISE OF REMEDIES.

     6.1  REMEDIES. Following the occurrence and continuation of an Event of
Default under the Loan Agreement and at all times thereafter, Lender shall be
entitled:

     (a)  to exercise any and all rights of Lessor under or in connection
with the Lease or otherwise in respect of the Assigned Property, including
without limitation, any and all rights of Lessor to demand or otherwise
require payment of any amount under, or performance of, any provision of the
Lease;

     (b)  on 10 days' prior written notice to Lessor of any public sale or the
date after which any private sale may occur, to sell to any person all or any
part of Lessor's right, title and interest in and to the Assigned Property
upon such terms as Lender shall determine;

     (c)  collect, receive or compromise and give a good discharge for any
and all monies and claims for monies due and to become due in respect of or
under the Lease; and

     (d)  otherwise put into force and effect all rights, powers and remedies
available to it, at law or otherwise, as assignee of, and holder of a
security interest in, the Assigned Property.

     6.2  NO LIABILITY FOR EXERCISE. To the extent permitted by applicable
law Lender may exercise its power of sale hereunder in such a way as it in
its absolute discretion may determine and, to the extent permitted by
applicable law, Lessor hereby agrees that Lender shall not in any
circumstances be answerable for any loss occasioned by any such sale or
resulting from any postponement thereof; PROVIDED, HOWEVER, that nothing in
this Section 6.2 shall be deemed to release Lender from its obligations and
liabilities arising from Lender's gross negligence or wilful misconduct.

                                    -6-


<PAGE>


     6.3  NO LIABILITY AS ASSIGNEE. To the extent permitted by applicable law
Lender shall not be liable as assignee in respect of the Assigned Property to
account or be liable for any loss upon the realization thereof or for any
neglect or default of any nature whatsoever in connection therewith for which
an assignee of the Assigned Property may otherwise be liable as such;
PROVIDED, HOWEVER, that nothing in this Section 6.3 shall be deemed to
release Lender from its obligations and liabilities arising from Lender's
gross negligence or wilful misconduct.

     6.4  LENDER'S AUTHORITY. Upon any sale by Lender of Lessor's right, title
and interest in and to the Assigned Property, or any part thereof, the
purchaser shall not be bound to see or inquire whether the power of sale of
Lender has arisen, the sale shall be deemed for all purposes hereof to be
within the power of Lender and the receipt of Lender for the purchase money
shall effectively discharge the purchaser who shall not be concerned with the
manner of application of the proceeds of sale or be in any way answerable
therefore.

     7.   POWER OF ATTORNEY.

     Lessor hereby irrevocably appoints and constitutes Lender as its true
and lawful attorney-in-fact with full power (in the name of and on behalf of
Lessor or otherwise) following the occurrence and continuation of an Event of
Default, to demand, compound and give acquittance for any monies or claims
for monies due or to become due, to endorse any check or other instrument or
order in connection therewith and to file any claims or take any action or
institute any proceedings which may seem to Lender to be necessary or
advisable and otherwise to do any and all things which Lessor itself could do
in relation to the Assigned Property. The exercise of such power by Lender
shall not put any person dealing with Lender on inquiry as to whether any
such event has happened nor shall any person be in any way affected by notice
that no such event has happened and the exercise by Lender of such power
shall be conclusive evidence of its right to exercise it.

     8.   LIABILITY UNAFFECTED BY ASSIGNMENT.

     Lessor agrees, to the extent permitted by law, that, notwithstanding the
assignment to Lender of, and the grant to Lender of a security interest in,
the Assigned Property (a) Lender shall not be obliged to make any inquiries
as to the nature or sufficiency of any payment received by Lender under the
Assigned Property or to make any claim or take any other action to collect
any moneys or to enforce any rights and benefits assigned to Lender or to
which Lender may at any time be entitled thereunder, and (b) Lessor shall
remain liable to perform all the obligations of Lessor under the Lease and
Lender shall be under no obligation of any kind whatsoever in respect
thereof, and Lender shall have no liability whatsoever in the event of any
failure by Lessor to perform its obligations thereunder; PROVIDED, that Lender
shall remain obligated to hold and retain any and all Maintenance Reserve
Collateral, and to remit same to Borrower and/or Lessee, in accordance with
the terms of the Loan Agreement applicable thereto.

                                    -7-


<PAGE>


     9.   CONTINUING SECURITY.

     This Agreement and the assignment and security interest granted herein
shall continue in full force and effect until performance in full of the
Secured Obligations.

     10.  FURTHER ASSURANCES.

     Lessor undertakes that it will, from time to time on being required to
do so by Lender, at the cost and expense of Lessor, do, and cause to be done,
all such further acts and/or execute or procure the execution of all such
further documents in a form satisfactory to Lender as Lender may reasonably
consider necessary for giving full effect to this Agreement or securing to
Lender the fun benefit of the rights, powers and remedies conferred upon
Lender in this Agreement.

     11.  FEES AND EXPENSES.

     Lessor shall upon Lender's demand, pay to or reimburse Lender for all
out-of-pocket expenses of Lender incurred in connection enforcement of this
Agreement and the transactions contemplated hereby (including, without
limitation, all expert witness and legal fees and disbursements of Lender's
counsel, including special FAA counsel), and in connection with any actual or
proposed amendments hereof and in connection with the preservation and/or
enforcement of any Lender's rights and interest in the Assigned Property and
in any rights granted to Lender hereunder.

     12.  NOTICES.

     Every notice or demand under this Agreement shall be (a) in writing and
may be given or made by registered mail, return receipt requested or by
internationally recognized overnight courier service, (b) deemed to have been
received in the case of an internationally recognized overnight courier
service or registered mail, upon acknowledgment of receipt or as of the date
on which receipt of such notice delivered by overnight courier or registered
mail is refused or such courier or the U.S. Postal Service advises that such
letter is not deliverable at the address designated in this Section, and (c)
sent, in the case of overnight courier or registered mail, to Lender or to
Lessor, as applicable, at the following addresses, or to such other address
as Lessor or Lender may designate for itself by notice to the other
conforming to the requirements for notice set forth in this Section:

                                     -8-


<PAGE>


     If to Lessor:                        ACG Acquisition Corp. VIII
                                          c/o Aviation Capital Group
                                          3 Stamford Landing
                                          46 Southfield Avenue
                                          Stamford, Connecticut 06902
                                          Attention: Vice President and
                                                     General Counsel

                             and

     If to Lender:                        FINOVA Capital Corporation
                                          1850 North Central Avenue
                                          Phoenix, Arizona 85004
                                          Attention: Vice President-Law
                                                     Transportation Finance

                             and

                                          FINOVA Capital Corporation
                                          1850 North Central Avenue
                                          Phoenix, Arizona 85004
                                          Attention: Vice President-Operations
                                                      Management
                                                      Transportation Finance

A copy of all notices sent to Lender shall be sent to Herriot, Coti & Sugrue,
3200 North Central Avenue, Suite 1910, Phoenix, Arizona 85012, Attention:
Mark R. Herriot, Esq., telefax number 602/222-9725.

     13.  ENTIRE AGREEMENT; AMENDMENTS.

     This Agreement (including all Exhibits hereto) embodies the entire
agreement and understanding between Lessor and Lender relating to the subject
matter hereof and supersedes all prior agreements and understandings relating
hereto and none 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 or therein. This
Agreement may not be changed and no right granted or obligation imposed
hereunder may be waived, except pursuant to an instrument in writing signed
by the party against whom enforcement of any waiver, change, modification or
discharge is sought.

     14.  GOVERNING LAW. JURISDICTION AND VENUE.

     (A) THE OBLIGATIONS OF LESSOR HEREUNDER ARE TO BE PERFORMED IN, AND THIS
AGREEMENT IS EXECUTED, DELIVERED AND ACCEPTED IN, AND THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY, THE LAWS AND DECISIONS OF THE
STATE

<PAGE>



OF ARIZONA, AND BY EXECUTION HEREOF LESSOR, AND BY ACCEPTANCE HEREOF LENDER,
EACH AGREES THAT SUCH LAWS AND DECISIONS OF THE STATE OF ARIZONA SHALL GOVERN
THIS AGREEMENT NOTWITHSTANDING THE FACT THAT THERE MAY BE OTHER JURISDICTIONS
WHICH MAY BEAR A REASONABLE RELATIONSHIP TO THE TRANSACTIONS CONTEMPLATED
HEREBY.

     (B)  LESSOR AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY LESSOR
AND ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF ARIZONA, MARICOPA
COUNTY DIVISION, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA OR, IF LENDER INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING
COURTS, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION, TO THE EXTENT
SUCH COURT HAS JURISDICTION. LESSOR HEREBY EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER
IN ANY OF SUCH COURTS, AND HEREBY AGREES THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO LESSOR AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT
PURSUANT TO THE FURTHER PROVISIONS OF THIS AGREEMENT. LESSOR WAIVES ANY CLAIM
THAT PHOENIX, ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR
AN IMPROPER FORUM BASED ON LACK OF VENUE. THE EXCLUSIVE CHOICE OF FORUM FOR
LESSOR SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT, BY LENDER, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING, BY LENDER, OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE
JURISDICTION, AND LESSOR HEREBY WAIVE THE RIGHT TO COLLATERALLY ATTACK ANY
SUCH JUDGMENT OR ACTION.

     15.  WAIVER OF JURY.

     LESSOR AND LENDER IRREVOCABLY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF THIS AGREEMENT.

     16.  ASSIGNMENT, SUCCESSORS AND ASSIGNS.

     Lender may assign or obtain participations with other Lenders in regard
to its rights hereunder and under the Note and any other Loan Document and in
respect of the Loan, PROVIDED only that no such assignment or participation
shall impose any greater obligation on Lessor than set forth herein or
therein. Lessor shall not assign any rights under this Agreement nor shall
any of Lessor's duties hereunder be assigned or delegable without the prior
written consent of Lender. Nothing contained in this Agreement, express or
implied, is intended to confer upon any person or entity, other than the
parties hereto and their permitted

                                     -10-


<PAGE>


successors in interest and permitted assigns, any rights or remedies under or
by reason of this Agreement unless expressly herein stated to the contrary.
All covenants, representations, warranties and agreements of the parties
contained herein shall, subject to the provisions of the preceding sentence,
be binding upon and inure to the benefit of their respective successors and
permitted assigns.

     17.  CAPTIONS AND SECTION HEADINGS: CONSTRUCTION.

     Captions and paragraph headings used herein are for convenience only and
are not a part of this Agreement and shall not be used in construing it. This
Agreement and all documents executed in connection herewith shall be
construed without regard to the identity of the party which prepared the
same, and no presumption shall arise as a result thereof

     18.  SEVERABILITY.

     In the event that any one or more of the provisions of this Agreement
shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.

     19.  TIME OF THE ESSENCE.

     Time is of the essence with respect to all of the payment and
performance obligations of Lessor hereunder. Time is of the essence with
respect to all of the performance obligations of Lender hereunder.

     20.  COUNTERPARTS.

     This Agreement may be executed in one or more counterparts, each of
which shall constitute an original and, when taken together, all of which
shall constitute one and the same Agreement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                    -11-


<PAGE>


     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers as of the day and year first
above written.

                                  LENDER:
                                  FINOVA CAPITAL CORPORATION

                                  BY:              [ILLEGIBLE]
                                       -------------------------------------
                                  ITS:         GROUP VICE-PRESIDENT
                                       -------------------------------------

                                  LESSOR:
                                  ACG ACQUISITION VIII LLC, a Delaware limited
                                  liability company

                                  BY: -------------------------------------
                                  ITS: ------------------------------------

                                      collateral assignment lease 802


<PAGE>


     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duty executed by their duty OFFICERS AS OF THE DAY and Year first above
written.

                                  LENDER:
                                  FINOVA CAPITAL CORPORATION

                                  BY: -------------------------------------
                                  ITS: ------------------------------------

                                  LESSOR:
                                  ACG ACQUISITION VIII LLC, a Delaware limited
                                  liability company

                                  BY:              [ILLEGIBLE]
                                       -------------------------------------
                                  ITS:               MANAGER
                                       -------------------------------------


<PAGE>


                                      EXHIBIT A

                                         TO

                                ASSIGNMENT OF LEASE
______________________________________________________________________________

                      DESCRIPTION OF AIRFRAME AND ENGINES
______________________________________________________________________________

     The "Flight Equipment" as described in the foregoing Assignment of
Lease shall consist of the following:

          (a)  One (1) Airframe, identified as follows:

               Manufacturer:                      Boeing
               FAA Registration Number:           N802AL
               Manufacturer's Model Number:       737-2S5C
               Manufacturer's Serial Number:      22148

               together with all parts,  equipment and  accessories  thereto
               belonging,  by whomsoever  manufactured,  now owned by ACG
               Acquisition  Corp.  VIII or  hereinafter  acquired  by ACG
               Acquisition  Corp.  VIII  and  installed  in or appurtenant to
               said airframe; and

          (b)  Two (2) Pratt & Whitney JT8D-9A jet aircraft engines,
               identified by manufacturer's serial numbers P656093 and
               P665630, each such engine having 750 or more rated take-off
               horsepower or the equivalent thereof, together with all parts,
               equipment and accessories thereto belonging, by whomsoever
               manufactured, now owned by ACG Acquisition Corp. VIII or
               hereinafter acquired by ACG Acquisition Corp. VIII and
               installed in or appurtenant to any one or more of said engines.

<PAGE>


                                   EXHIBIT B

                         NOTICE OF ASSIGNMENT OF LEASE
                                   (N802AL)

         THIS NOTICE OF ASSIGNMENT OF LEASE ("Agreement"), dated as of
_______________________________, 199__ by  and  among  FINOVA  CAPITAL
CORPORATION,  a  Delaware  corporation ("FINOVA"), ALOHA AIRLINES, INC., an
Hawaii corporation ("Lessee"), and ACG ACQUISITION VIII LLC, a Delaware
limited liability company ("Lessor"),

                                  WITNESSETH:

         WHEREAS, pursuant to that certain Lease Agreement 802 dated as of
even date herewith between Lessor and Lessee (the "Lease"), Lessor has agreed
to lease to Lessee one (1) Boeing 737-2S5C aircraft, together with two (2)
Pratt & Whitney JT8D-9A engines associated therewith, all as more
particularly described in ANNEX I attached hereto (the "Flight Equipment");
and

         WHEREAS, Lessor has obtained or will obtain financing from FINOVA in
order to FINANCE the acquisition by Lessor of the Flight Equipment; and

         WHEREAS, in order to secure the performance by Lessor of its
"Obligations" to Lender, as defined in that certain Secured Loan Agreement
dated as of September 26, 1996 between Lessor and FINOVA (the "Loan
Agreement") as the same may hereafter be amended, restated or otherwise
modified, and the other "Loan Documents" (as defined in the Loan Agreement),
Lessor has granted to FINOVA a security interest in, all of Lessor's right,
title and interest (but none of its obligations) in and to the Lease,
including, but not limited to, all amounts payable by Lessee to Lessor under
the Lease, pursuant to that certain Collateral Assignment of Lease dated as
of even dare herewith between Lessor and FINOVA (the "Assignment of Lease"),

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, FINOVA, Lessor and Lessee hereby
agree as follows:

         1.    ACKNOWLEDGMENT OF LESSEE. Lessee hereby acknowledges and
consents to the assignment, pursuant to the Assignment of Lease, of Lessor's
rights under the Lease to FINOVA, and agrees that such assignment shall not
constitute a default under, or breach of, the Lease.

         2.    PAYMENTS UNDER LEASE. Until FINOVA otherwise directs in
writing, Lessee shall pay to FINOVA, as the same shall become due under the
Lease, all amounts from time to time payable by Lessee under the Lease,
including, without


<PAGE>


limitation, all "Basic Rent" and all "Supplemental Rent" as each such term is
defined in the Lease, which are from time to time payable by Lessee to Lessor
under the Lease. All amounts payable by Lessee shall be paid to the account
at Citibank, N.A., described below;

          BANK:                         Citibank, N.A.
                                        New York, New York,
          ACCOUNT OF:                   FINOVA Capital Corporation
          ACCOUNT NO.:                  000675126
          ABA NO.:                      021000089
          REFERENCE:                    Aloha Airlines/N802AL-N804AL

All such payments shall be made to the appropriate account by wire transfer
of same day funds.

         3.    REPRESENTATIONS. WARRANTIES AND COVENANTS OF LESSEE. Lessee
hereby represents and warrants to FINOVA, and covenants with FINOVA, as
follows:

         (a)   (i) A true, complete and correct copy of the Lease is attached
hereto as ANNEX II, (ii) the Lease is the entire agreement of lease with
respect to the Flight Equipment and the Lease has not been amended, modified
or supplemented, (iii) the "Delivery Date" under the Lease has occurred (or
will occur upon the effectiveness hereof), the Lease is in full force and
effect and Lessee's obligation to pay rent under the Lease has commenced in
accordance with the terms thereof, (iv) there is no event which has occurred
which constitutes or with the giving of notice or passage of time or both
would constitute a default by either parry under the Lease, and (v) there has
been no prepayment of any rent or other sums payable under the Lease;

         (h)   In the event that FINOVA, or any successor to the interest of
FINOVA in the Lease, shall succeed to the rights of Lessor under the Lease by
reason of FINOVA's (or such successor's) exercise of its rights and remedies
with respect to the Lease (FINOVA and such successors, as applicable, being
included within the meaning of the term "Lessor" hereunder), the Lease shall
continue in full force and effect, and Lessee shall perform its obligations
under the Lease for the benefit of FINOVA or such other successor, as
applicable, PROVIDED, however, that nothing herein contained shall impose any
greater or different obligation upon Lessee than SET FORTH IN the Lease;

         (c)   Lessee acknowledges that FINOVA has not made any
representations or warranties of any kind, nature or description in respect
of the Flight Equipment and that FINOVA has not assumed any of Lessor's
duties or obligations under the Lease and Lessee shall continue to look
solely to lessor for the performance and

                                      -2-


<PAGE>

fulfillment of the terms, covenants and conditions on Lessor's part to be
performed under the Lease;

         (d)   In the event of any default by Lessor under the Lease or any
provision thereof, Lessee agrees that, notwithstanding any provision of the
Lease to the contrary, Lessee shall take no action to effect a termination of
the Lease by reason of such default without fast giving FINOVA at least
thirty (30) days' written notice of such default and such proposed
termination, which thirty day period shall commence on the date of receipt
by FINOVA of such notice, during which thirty day period, FINOVA may cure
such default;

         (e)   Lessee shall not amend, or execute any document purporting to
amend, the Lease in any manner without the prior written consent of FINOVA.
With respect to any proposed amendment of the Lease which would (i) reduce
the remaining term of the Lease, (ii) reduce the Basic Rent payable by Lessee
thereunder, (iii) reduce the insurance coverage under the Lease or the
deductible amounts with respect to such insurance, (iv) permit the Flight
Equipment to be registered under the laws of any jurisdiction other than the
United States of America, (v) expand the rights of Lessee to transfer rights
to possession, custody, control or operation of the Flight Equipment, (vi)
reduce Lessee's obligations with respect to the maintenance, storage, repair
or reinstallation of the Flight Equipment or (vii) reduce Lessee's
obligations with respect to the condition of the Flight Equipment upon
termination or expiration of the Lease, FINOVA shall have the right to
provide or withhold such consent in its discretion. With respect to any
proposed amendment of the Lease which is not described in the preceding
sentence, FINOVA Shall not unreasonably withhold its consent to such
amendment;

         (f)   Each notice provided by Lessee to Lessor under the Lease,
shall be simultaneously forwarded to FINOVA by Lessee;

         (g)   FINOVA shall have the right to inspect the Flight Equipment
and the "Aircraft Documents" (as defined in the Lease) in accordance with the
provisions of Section 8.6 of the Lease, as fully and effectually as if each
reference to "Lessor" in such Section were a reference to FINOVA. Such right
of FINOVA to inspect the Flight Equipment AND the Aircraft Documents is
without derogation of the right of Lessor to inspect the Flight Equipment and
the Aircraft Documents in accordance with Section 8.6 of the Lease; and

         (h)   Until all of the "Obligations" are fully paid and discharged by
Borrower, Lessee shall submit to FINOVA, within thirty (30) days following
the receipt by Lessee of FINOVA's written request therefor (which requests
shall not be made more

                                     -3-


<PAGE>


frequently than once in each calendar quarter), an Aircraft Utilization and
Status Report in the form attached hereto as ANNEX III

         4.    NOTICES. All notices (a) to be directed to FINOVA pursuant
hereto shall be directed to FINOVA at the following address, or at such other
address as FINOVA shall specify to Lessee by notice provided in accordance
with this Section:

                              FINOVA Capital Corporation
                              1850 North Central Avenue
                              Phoenix, Arizona 85077 USA
                              Attention: Vice President-Law
                    and
                              FINOVA Capital Corporation
                              1850 North Central Avenue
                              Phoenix, Arizona 85077 USA
                              Attention: Vice President-
                                         Operations Management

and (b) to be directed to Lessee pursuant hereto shall be directed to Lessee
at the following address, or at such other address as Lessee shall specify to
FINOVA by notice provided in accordance with this Section:

                              Aloha Airlines, Inc.
                              371 Aokea Street
                              Honolulu, Hawaii 96819 USA
                              Attention: Chief Financial Officer

         5.    QUIET ENJOYMENT BY LESSEE. BY acceptance  hereof,  FINOVA
agrees that,  provided that no "Event of Default" (as defined in the Lease)
shall have occurred and be continuing, none of FINOVA or any person claiming
by, through or on account of FINOVA will interfere with the quiet use,
possession and enjoyment of the Flight Equipment by Lessee.

         6.    AGREEMENTS OF FINOVA AND LESSEE. FINOVA and Lessee agree as
follows: (a) wherever in the Lease rights are granted to the "Lender," FINOVA
shall be entitled directly to exercise such rights in accordance with the
terms of the Lease and without relying on its rights as a third party
beneficiary; and (b) wherever in the Lease the consent of Lessor is required
but is provided nor to be unreasonably withheld by the Lessor, if the Lessor
requires the consent of FINOVA in such matter, such consent shall not be
unreasonably withheld.

                                      -4-


<PAGE>


         7.    GOVERNING LAW. THIS AGREEMENT HAS BEEN DELIVERED IN, AND SHALL
BE DEEMED TO HAVE BEEN NEGOTIATED AND MADE IN, AND SHALL BE GOVERNED AND
INTERPRETED UNDER THE LAWS OF, THE STATE OF NEW YORK, UNITED STATES OF AMERICA,
APPLICABLE TO AGREEMENTS THEREOF TO BE WHOLLY PERFORMED THEREIN.

         8.    VALIDITY OF AGREEMENT NOT IMPAIRED. Lessee acknowledges and
agrees that FINOVA or its assigns, without affecting the validity of this
Agreement or the rights and obligations of the parties hereunder, may extend
the time of payment of the indebtedness of Lessor to FINOVA, or modify the
terms of such indebtedness or take or release any collateral securing such
indebtedness, Without the consent of or notice to Lessee.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                      -5-

<PAGE>


         IN WITNESS WHEREOF, Lessee and FINOVA have executed this Agreement
as of the date first above written.

                                   ALOHA AIRLINES, INC., Hawaii corporation

                                   BY:______________________________________
                                   ITS:_____________________________________

                                   BY:______________________________________
                                   ITS:_____________________________________

                                   FINOVA CAPITAL CORPORATION, a Delaware
                                   corporation

                                   BY:______________________________________
                                   ITS:_____________________________________

                                   BY:______________________________________
                                   ITS:_____________________________________


                    ACKNOWLEDGMENT AND AGREEMENT OF LESSOR

         THE UNDERSIGNED ACG ACQUISITION VIII LLC, a Delaware limited
liability company, the "Lessor" referred to in the foregoing Notice of
Assignment of Lease, hereby acknowledges the terms thereof and agrees that
(a) to the extent the terms of such Notice of Assignment of Lease are
applicable to Lessor, Lessor SHALL be bound thereby, and (b) Lessor shall not
take any action inconsistent with the provisions of such Notice of Assignment
of Lease.

         IN WITNESS WHEREOF, Lessor has hereunto set its hand.

                                   ACG ACQUISITION VIII LLC, Delaware limited
                                   liability company

                                   BY:______________________________________
                                   ITS:_____________________________________


<PAGE>


                                   ANNEX I

                                     TO

                       NOTICE OF ASSIGNMENT OF LEASE

     The "Flight Equipment" as described in the foregoing Notice of
Assignment of Lease shall consist of the following:

          (a)  One (1) Airframe, identified as follows:

               Manufacturer:                      The Boeing Company
               FAA Registration Number:           N802AL
               Manufacturer's Model Number:       737-2S5C
               Manufacturer's Serial Number:      22148

          together with all parts, equipment and accessories thereto
          belonging, by whomsoever manufactured, now owned by ACG Acquisition
          VIII LLC or hereinafter acquired by ACG Acquisition VIII LLC, and
          installed in or appurtenant to said airframe; and

          (b)  Two (2) Pratt & Whitney JT8D-9A jet AIRCRAFT engines,
          identified by manufacturer's serial numbers P656093 and P665630,
          each such engine having 750 or more rated take-off horsepower or
          the equivalent thereof, together with all parts, equipment and
          accessories thereto belonging, by whomsoever manufactured, now
          owned by ACG Acquisition VIII LLC or hereinafter acquired by ACG
          Acquisition VIII LLC and installed in or appurtenant to any one or
          more of said engines.


<PAGE>


                                   ANNEX II

                                      TO

                         NOTICE OF ASSIGNMENT OF LEASE

______________________________________________________________________________

                                      LEASE
______________________________________________________________________________


<PAGE>


                                  ANNEX III

                                     TO

                       NOTICE OF ASSIGNMENT OF LEASE
______________________________________________________________________________

              FORM OF AIRCRAFT UTILIZATION AND STATUS REPORT
______________________________________________________________________________


<PAGE>

          negotiation, preparation and execution of this Agreement, and shall
          share equally the fees and expenses of special FAA counsel in
          connection with the transactions contemplated by this Agreement.

     (b)  The Lessee shall pay to the Lessor on demand all expenses
          (including legal, professional and out-of-pocket expenses) incurred
          or payable by the Lessor in connection with the granting of any
          waiver or consent under this Agreement.

     (c)  The Lessee will pay to the Lessor on demand all expenses (including
          legal, survey and other costs) payable or incurred by the Lessor in
          contemplation of, or otherwise in connection with, the enforcement
          of or preservation of any of the Lessor's rights under this
          Agreement, or in respect of the repossession of the Aircraft.

     (d)  The Lessor will pay to the Lessee on demand all expenses (including
          legal costs) payable or incurred by the Lessee in contemplation of,
          or otherwise in connection with, the enforcement of or preservation
          of any of the Lessee's rights under this Agreement.

15.9 TIME OF ESSENCE

     The time stipulated in this Agreement for all payments payable by the
     Lessee to the Lessor and for the performance of the Lessee's other
     obligations under this Agreement will be of the essence of this
     Agreement (subject always to any applicable grace period).

15.10 NOTICES

     (a)  All notices and other communications given under or in connection
          with this Agreement shall be in writing (including telefax) and
          shall be deemed to have been received as follows:

          (i)   If sent by  telefax,  at the time of receipt  by the sender
                of a  transmission  report  indicating  that all pages of the
                telefax  transmission  were  properly  transmitted  (unless
                the  recipient  notifies the sender promptly,  or if received
                after 5:30 p.m.  local time, by no later than 10:00 a.m.
                local time the following Business Day, that the transmission
                was incomplete or illegible,  in which case the telefax shall
                be deemed to have been  received  at the time of  receipt  by
                the  sender of a further  clear  transmission  report on
                retransmitting  the telefax),  provided the relevant telefax
                transmission (or  retransmission,  as the case may be) was
                transmitted to the receiver  between 9:00 a.m. and 5:30 p.m.
                local time. If it was  transmitted later,  then it shall be
                deemed to have been  received at 9:00 a.m.  local time on the
                succeeding  Business Day.

          (ii)  In any other case, when delivered to the address specified in
                clause 15.10(b).

                                     -71-


<PAGE>


     (b)  All such notices, requests, demands and other communications shall
          be sent:

          (i)  if to the Lessor, to it at:   c/o Aviation Capital Group Corp.
                                             Three Stamford Landing
                                             46 Southfield Avenue
                                             Stamford CT. 06902
                                             Attention: Managing Director
                                             Telefax No.: 203-967-3287

          with a copy to the Lender at:      1850 North Central Avenue
                                             Phoenix, Arizona 85077
                                             Attention: Vice President-Law--
                                                  Transportation Finance
                                             Telefax No.: 602-207-7551

                                                        -and-

                                             1850 North Central Avenue
                                             Phoenix, Arizona 85077
                                             Attention: Vice President-
                                                  Operations Management--
                                                  Transportation Finance
                                             Telefax No.: 602-207-7551

          (ii) if to the Lessee, to it at:   371 Aokea Street
                                             Honolulu, Hawaii 96819
                                             Attention: Senior Vice President,
                                                  Finance and Planning, and
                                                  Chief Financial Officer
                                             Telefax No.: 1-808-833-3100

          or to such other address or telefax number as shall have been
          notified by one party to the other in the manner set out in this
          Clause 15.10.

15.11 LAW AND JURISDICTION

     (a)  THIS AGREEMENT SHALL, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
          CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY AND
          CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
          APPLICABLE TO CONTRACTS ENTERED INTO IN THE STATE OF NEW YORK BY
          RESIDENTS OF SUCH STATE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
          STATE.

                                     -72-


<PAGE>


     (b)  The  Lessor  and the Lessee  hereby  irrevocably  agree to submit
          to the  non-exclusive  jurisdiction  of the United  States
          District  Court for the Southern  District of New York and the
          Supreme  Court of the State of New York located in the Borough of
          Manhattan,  County of New York (the "AGREED  COURTS") in the event
          of any claims or disputes  arising under this Agreement.  Such
          submission to jurisdiction  shall not be construed so as to limit
          the right of either  party to take  proceedings  against  the other
          in  whatsoever  jurisdiction shall to it seem fit nor shall the
          taking  of  proceedings  in any one or more  jurisdictions
          preclude  the taking of proceedings in any other jurisdiction,
          whether  concurrently or not. Final judgment against Lessor or
          Lessee in any such suit shall be conclusive and may be enforced in
          any other  jurisdiction  by suit on the judgment or as otherwise
          permitted by applicable  law, a certified or true copy of which
          shall be conclusive evidence  of the facts and of the  amount of
          any  indebtedness  or  liability  of Lessor or  Lessee.  Each of
          Lessor and Lessee hereby  irrevocably  waives any objection  which
          it may now or hereafter have to the laying of venue in any suit,
          action or proceeding  brought in any Agreed Court,  and
          irrevocably  waives any claim that any such suit,  action or
          proceeding  brought in any Agreed Court has been  brought in an
          inconvenient forum.

     (c)  THE LESSEE AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY
          JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING, DIRECTLY
          OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATING TO THIS
          AGREEMENT.

     (d)  Without prejudice to any other mode of service, each of the Lessor
          and the Lessee consents to the service of process relating to any
          proceedings involving, directly or indirectly, any matter arising
          out of or relating to this Agreement by U.S. Postal Service
          registered mail (prepaid, return receipt requested) of a copy of
          the process to the Lessee's address identified in Clause 15.1 0(b).

15.12 SOLE AND ENTIRE AGREEMENT

     This Agreement is the sole and entire agreement between the Lessor and
     the Lessee in relation to the leasing of the Aircraft, and supersedes
     all previous agreements in relation to that leasing. The terms and
     conditions of this Agreement can only be varied by an instrument in
     writing executed by both parties or by their duly authorized
     representatives.

15.13 INDEMNITIES

     All rights expressed to be granted to each Indemnitee under this
     Agreement (other than the Lender) are given to the Lessor as agent for
     and on behalf of that Indemnitee.

15.14 COUNTERPARTS

                                     -73-


<PAGE>


     This Agreement may be executed in counterparts each of which will
     constitute one and the same document.

15.15 CONFIDENTIALITY

     Neither the Lessor nor the Lessee shall, without the other's prior
     written consent, communicate or disclose the terms of this Agreement or
     any information or documents furnished pursuant to this Agreement
     (except to the extent that the same are within the public domain) to any
     third party (other than the Lender, any prospective Transferee, any
     material investor in the Parent or creditor in Lessee, Additional
     Mortgagees or Head Lessors, the respective external legal advisers,
     auditors, insurance brokers or underwriters of Lessor, Lessee and such
     parties, and the Airframe and Engine manufacturers); provided however
     that disclosure will be permitted, to the extent required:

     (a)  pursuant to an order of any court of competent jurisdiction; or

     (b)  pursuant to any procedure for discovery of documents in any
          proceedings before any such court; or

     (c)  pursuant to any law or regulation having the force of law; or

     (d)  pursuant to a lawful requirement of any authority with whose
          requirements the disclosing party is legally obliged to comply; or

     (e) in order to perfect any assignment of any assignable warranties.

                       [SIGNATURE PAGE FOLLOWS]

                                     -74-


<PAGE>


IN WITNESS WHEREOF Lessor and Lessee have executed this Lease Agreement 802 on
the date shown at the beginning of this Agreement.

                                   SIGNED on behalf of
                                   ACG ACQUISITION VIII LLC

                                   By: /s/ R. Stephen Hannahs
                                       -------------------------------
                                   Name: R. Stephen Hannahs
                                   Title: Manager


                                   SIGNED on behalf of
                                   ALOHA AIRLINES, INC.

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


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

<PAGE>


IN WITNESS WHEREOF Lessor and Lessee have executed this Lease Agreement 802 on
the date shown at the beginning of this Agreement.


                                   SIGNED on behalf of
                                   ACG ACQUISITION VIII LLC

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


                                   SIGNED on behalf of
                                   ALOHA AIRLINES, INC.

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


                                   By: /s/ Owen Sekimura
                                       -------------------------------
                                   Name: Owen Sekimura
                                   Title: STAFF VICE PRESIDENT -
                                          FINANCE & CONTROLLER



<PAGE>


                                 SCHEDULE 1


                                  PART 1

                          AIRCRAFT SPECIFICATIONS

IDENTIFICATION:

<table>


                   <c>
Aircraft Type         B737-2S5C
Registration          N802AL
Serial Number         22148
Date of Manufacture.  5/80

</table>

WEIGHT DATA:

<table>


                                       <c>
Maximum Taxi Weight                       117,500 lbs.
Maximum Takeoff Weight                    117,500 lbs.
Maximum Landing Weight                    105,000 lbs.
Maximum Zero Fuel Weight                   95,000 lbs.
Fuel Capacity                              5168.7 U.S. Gals.

</table>

AIRFRAME AND INTERIOR EQUIPMENT:

<table>


                   <c>             <c>

Galleys               2               Locations: G-1 forward and G-4 aft
Lavatories            2               Locations: 1 forward and 1 aft
Air Stairs            1               Locations: -- forward and 1 aft
Passenger Seats       114             Locations/Types: 6 first class and 108 economy class
Overhead bins         Standard 60" Heath Techna
Cargo Door            Yes

</table>

ENGINES:

<table>


                   <c>             <c>
Position              No.1            No.2
Type                  JT8D-9A         JT8D-9A
Serial No.            P656093B        P665630B

</table>

APU:

<table>


                   <c>
Model:                GTCP 85-129H
Serial No.            PIOQ484

</table>
                           -76-


<PAGE>


LANDING GEAR:

<table>


                   <c>                        <c>                                <c>
Position              Nose                       Left Main                          Right Main
Type                  65-46200-46                65-46100-38                        65-46100-52
Serial No.            129926B                    [MR01124P6001]                     [MR01713P895]

</table>

MAJOR AVIONICS EQUIPMENT:

<table>


                        <c>                      <c>                        <c>
DESCRIPTION                MANUFACTURER             PART NO.                   QUANTITY

</table>
                          -77-


<PAGE>


                                   PART 2

                              AIRCRAFT DOCUMENTS

MANUALS

<table>


                                      <c>                          <c>
DESCRIPTION                              QUANTITY                     MEDIA

Maintenance Manual                         3                          Microfilm
Wiring Diagrams                            3                          Microfilm
Illustrated Parts Catalog                  3                          Microfilm
Systems Schematics                         3                          Microfilm
Weight & Balance Manual                    1                          Hard Copy
Operations Manual                          1                          Hard Copy
Flight Manual                              1                          Hard Copy
Structural Repair Manual                   1                          Microfilm
Rigging Document                           1                          Hard Copy
</table>

TECHNICAL RECORDS

Certificate of Airworthiness
Maintenance Certificate
Weight & Balance Report
Maintenance Time Control Report
Major Incident/Accident Statement
Summary of AD Status for the engines, components and the airframe
Summary of Service Bulletin Status for the engine, components and
 the airframe
Component Listing including life status
Service Tags

Airframe log books
Flight Logs
Readiness Log
Full records for previous 'A' 'B', 'C' and 'D' Checks

Engine Shop Visit history including disk sheets

Emergency Equipment Listing including location
Cabin Layout Drawing

                           -78-


<PAGE>


RECORDS FOR:

   Last Compass Swing
   Last Altimeters Calibration
   Last ATC Transponder Calibration

                            -79-


<PAGE>


[1996 AIRCRAFT SPECIFICATION WORKSHEET PROVIDED BY ALOHA TO BE INSERTED HERE.]

                               -80-


<PAGE>


                                SCHEDULE 2

                       CERTIFICATE OF ACCEPTANCE 802

     This Certificate of Acceptance 802 is delivered on the date set forth in
     paragraph 1 below by Aloha Airlines, Inc. (the "LESSEE") to ACG
     Acquisition VIII LLC (the "LESSOR") pursuant to Lease Agreement 802,
     dated January _, 1997, between the Lessor and the Lessee (the
     "AGREEMENT"). Capitalized terms used but not defined in this Certificate
     of Acceptance 802 shall have the meaning given to such terms in the
     Agreement.

1.   DETAILS OF ACCEPTANCE

     The Lessee hereby confirms to the Lessor that the Lessee has at   :
       .m. H.S.T. on this      day of January, 1997, at              ,
     accepted the following, in accordance with the provisions of the
     Agreement and the Annex:

     (a)  Airframe: Boeing 737-2S5C airframe, Manufacturer's Serial No. 22148
          and FAA Registration No. N802AL;

     (b)  Engines: two Pratt & Whitney JT8D-9A Engines, bearing
          Manufacturer's  Serial Nos.     and      , each having 750 or more
          rated take-off horsepower;

     (c)  All Parts installed on, attached to or appurtenant to the Airframe
          and Engines; and

     (d)  Aircraft Documents as specified in Schedule 1 - Part 2 of the
          Agreement.

2.   LESSEE'S CONFIRMATION The Lessee confirms to the Lessor that as at the
     time indicated above, being the time of Delivery:

     (a)  the Lessee's representations and warranties contained in Clauses
          2.1 and 2.2 of the Agreement are hereby repeated;

     (b)  the Aircraft is insured as required by the Agreement; and

     (c)  the Lessee confirms that there have been affixed to the Aircraft
          and the Engines the fireproof notices required by the Agreement.

3.   LESSOR'S CONFIRMATION The Lessor confirms to the Lessee that, as at the
     time indicated above, being the time of Delivery, the Lessor's
     representations and warranties contained in Clause 2.4 of the Agreement
     are hereby repeated.

                         -81-


<PAGE>


IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
Acceptance 802 on the date shown at the beginning of this Agreement.

                                    SIGNED on behalf of
                                    ACG ACQUISITION VIII LLC

                                    By: ________________________________
                                    Name:
                                    Title:

                                    SIGNED on behalf of
                                    ALOHA AIRLINES, INC.

                                    By: ________________________________
                                    Name:
                                    Title:

                                    By: ________________________________
                                    Name:
                                    Title:

                            -82-


<PAGE>


                                                                        ANNEX 1

                        MAINTENANCE STATUS AT DELIVERY

                           DATE:            ,19
AIRFRAME TIME:

     Total Flight Hours     [   ]
     Total Cycles           [   ]

AIRFRAME LIMITS:

     Type of Check:
     Check Interval:
     Time Since Last Check:

ENGINE DATA:

<table>

     
                                                    <c>                           <c>
     Position                                               No.1                          No.2
     Type                                                   JT8D-9A                       JT8D-9A
     Serial Number                                          [   ]                         [   ]

     Total Flight Hours:                                    [   ]                         [   ]
     Total Cycles:                                          [   ]                         [   ]
     Flight Hours Since Last Shop Visit:                    [   ]                         [   ]
     Cycles Since Last Shop Visit:                          [   ]                         [   ]
     Flight Hours to Next Hard Limit:                       [   ]                         [   ]
     Cycles to Next Hard Limit:                             [   ]                         [   ]
</table>

APU:

Type:              [   ]
Serial Number:     [   ]

Total Flight Hours:                                     [   ]
Total Cycles:                                           [   ]
Flight Hours Since Last HSI Inspection:                 [   ]
Cycles Since Last HSI Inspection:                       [   ]
Flight Hours Remaining on Turbine and Compressor LLPs:  [   ]
Cycles Remaining on Turbine and Compressor LLPs:        [   ]

                          -83-


<PAGE>


LANDING GEAR LIMITS:

<table>


                            <c>                          <c>                           <c>
Position:                      Nose                         Left                          Right
Overhaul Interval:
Time Since Overhaul:
Time to Next Overhaul:
</table>

                          -84-


<PAGE>


                                    SCHEDULE 3

                        OPERATING CONDITION AT REDELIVERY

On the Expiry Date the Aircraft, subject to fair wear and tear generally, will
be in the condition set out below.

1.   GENERAL CONDITION

     The Aircraft will:

     (a)  be clean by United States airline standards;

     (b)  have installed the full complement of engines and other equipment,
          parts and accessories and loose equipment required under the Agreed
          Maintenance Program and usually installed in the other Boeing
          737-200 aircraft operated by Lessee (together with any additions
          and improvements thereto, or replacements thereof, effected
          pursuant to and in accordance with this Agreement) and be in a
          condition suitable for immediate operation in commercial service;

     (c)  be airworthy, conform to type design and be in a condition for safe
          operation with all equipment, components and systems
          operating in accordance with their intended use and within limits
          established by the  manufacturer and approved by the Aviation
          Authority, and all pilot discrepancies and deferred maintenance
          items cleared on a terminating action basis;

     (d)  have a U.S. Standard Transport Category Certificate of
          Airworthiness issued by the FAA in accordance with FAR Part 21 (or
          if required by the Lessor, a valid export certificate of
          airworthiness with respect to the Aircraft issued by the
          Aviation Authority) and unconditionally meet all FAA
          requirements for immediate operations under FAR Part 121, subject
          to the special exemptions permitted Lessee regarding
          compliance with the Airport Noise and Capacity Act of 1990,
          as amended, and the regulations promulgated by the FAA
          thereunder;

     (e)  comply with the manufacturer's original specification to the extent
          that it so complied on the date of this Agreement and subject
          to any alterations made pursuant to and in accordance with
          this Agreement after such date;

     (f)  have undergone, immediately prior to redelivery, a "C" Check in
          accordance with the Agreed Maintenance Program so that all Airframe
          inspections falling due within the next

                            -85-


<PAGE>


          following  3,000  Flight  Hours of  operation  in  accordance  with
          the  Agreed  Maintenance  Program  have  been accomplished;

     (g)  the Airframe shall have at least 50% of the Flight Hours,  Cycles
          and calendar time (whichever is applicable and,  if more  than one
          are  applicable,  most  limiting)  remaining  until  the next
          block  "D"  check (or equivalent heavy maintenance check) under the
          Agreed Maintenance  Program,  and if the Flight Hours,  Cycles or
          calendar time of the Airframe are less than 50% of the interval
          between "D" checks then the Lessee shall pay to the Lessor an
          amount equal to the product of (i) the number of Flight Hours,
          Cycles or calendar days (whichever is applicable and most
          limiting) by which the Airframe is less than 50% of the interval
          between "D" checks,  multiplied  by (ii) a fraction  (1) the
          numerator  of which is the average cost of a "D" check (including
          routine and non-routine  items) for an airframe similar to the
          Airframe  determined in accordance with the Appraisal  Procedure
          and (2) the  denominator  of which is the number of Flight  Hours,
          Cycles or calendar days (whichever is applicable and most limiting)
          between "D" checks;

     (h)  have had accomplished all outstanding airworthiness directives and
          mandatory orders affecting that model of Aircraft issued by the FAA
          that are due during the Term on a terminating action basis;
          airworthiness directives and mandatory orders that do not have a
          terminating action will be accomplished at the highest level of
          inspection or modification permitted;

     (i)  no special or unique manufacturer inspection or check requirements
          specific to the Aircraft will exist unless there is no terminating
          action available from any source;

     (j)  have installed all applicable vendor's and manufacturer's service
          bulletin kits received free of charge by the Lessee that are
          appropriate for the Aircraft and, to the extent not installed,
          those kits retained by Lessee will be furnished free of charge to
          the Lessor;

     (k)  be free of any system-related leaks;

     (1)  all fluid reservoirs (including fuel, oil, oxygen, hydraulic and
          water) will be full, and the waste tank serviced in accordance with
          the manufacturer's instructions;

     (m)  all fuel tanks will have recently undergone an
          anti-fungus/biological growth contamination laboratory evaluation,
          and any excessive levels of contamination corrected;

     (n)  have an FAA-approved aging aircraft program in operation and
          up-to-date; and

     (o)  have all signs and decals clean, secure and legible.

                           -86-


<PAGE>


2.   PARTS

     (a)  Each life limited or hard time controlled Part, excluding Engine
          Parts, shall have not less than 50% of the number of Flight Hours
          or Cycles (whichever is the more limiting factor) remaining to the
          next scheduled removal in accordance with the Agreed Maintenance
          Program;

     (b)  Each calendar limited Part (including hard time controlled Parts
          with calendar limits) will have 50% of its life or time between
          removals, as the case may be (but not less than 12 months),
          remaining to its next scheduled removal in accordance with the
          Agreed Maintenance Program; and

     (c)  Each "on-condition" and "condition monitored" Part will be
          serviceable in accordance with the Aviation Authority prescribed
          parameters.

3.   ENGINES

     Each engine installed on the Aircraft shall be an Engine and (if not the
     engine installed at Delivery) shall, to the extent not previously
     provided to the Lessor, be accompanied by all documentation the Lessor
     may require to evidence that title thereto is properly vested in the
     Lessor in accordance with Clause 8.17(a) and will:

     (a)  have not more than 4,000 Flight Hours since the last removal under
          the Agreed Maintenance Program, and if an Engine has more than
          3,500 Flight Hours since the last removal then the Lessee shall pay
          to the Lessor an amount equal to the product of (i) the number of
          Flight Hours since the last removal in excess of 3,500, multiplied
          by (ii) a fraction (1) the numerator of which is the average cost
          of the next scheduled removal and overhaul (including routine and
          non-routine items) for an engine similar to such Engine determined
          in accordance with the Appraisal Procedure and (2) the denominator
          of which is the number of Flight Hours between such scheduled
          removals under the Agreed Maintenance Program;

     (b)  have no defect that reduces the Flight Hours of remaining life
          pursuant to manufacturer's or airworthiness requirements until
          overhaul to less than 3,000; and

     (c)  be in a condition that can operate at maximum rated take-off power
          at sea level at a temperature of 28 deg. C.

4.   FUSELAGE, WINDOWS AND DOORS

     (a)  the fuselage will not contain any dents, corrosion or abrasions
          that exceed the prescribed parameters under the SRM and shall be
          free of scab patches and loose, pulled or missing rivets;

                            -87-


<PAGE>


     (b)  the windows will not contain any delamination, blemishes or crazing
          that exceed the prescribed parameters under the Manufacturer's
          maintenance manual and will be properly sealed; and

     (c)  the doors will be free moving, correctly rigged and fitted with
          serviceable seals;

5.   WINGS AND EMPENNAGE

     (a)  leading edges will not contain any damage that exceeds the
          prescribed parameters under the SRM;

     (b)  unpainted cowlings and fairings will be polished; and

     (c)  wings will be free of fuel leaks.

6.   INTERIOR

     (a)  the interior will be fully serviceable and in the configuration as
          at the date of this Agreement;

     (b)  emergency equipment having a calendar life will have a minimum of 1
          year or 100% of its total approved life remaining, whichever is
          less; and

     (c)  curtains, carpets, seat covers and seat cushions will be clean and
          free from stains and worn out (threadbare) areas and will conform
          to FAR fire resistance regulations as applicable to an FAR Part 121
          operator.

7.   COCKPIT

     (a)  fairing panels shall be free of stains and cracks, clean, secure
          and repainted as necessary;

     (b)  floor coverings will be clean and effectively sealed;

     (c)  seat covers will be in good condition, clean and free of stains and
          will conform to FAR fire resistance regulations as applicable to an
          FAR Part 121 operator; and

     (d)  seats will be serviceable, in good condition and repainted as
          necessary.

8.   CARGO COMPARTMENTS

     (a)  panels will be in good condition and effectively sealed;

                         -88-


<PAGE>


     (b)  nets will be in good condition; and

     (c)  the compartments will comply with FAR fire resistance and
          containment regulations as applicable to an FAR Part 121 operator.

9.   LANDING GEAR

     (a)  The installed main and nose landing gear components and their
          associated actuators and parts will be cleared of all inspections
          for not less than 12 months, 3,000 Flight Hours or 3,000 Cycles of
          operation (whichever is more limiting).

     (b)  The  installed  main and nose  landing gear will have at least 50%
          of the full  allotment  of Flight  Hours, Cycles or  calendar  time
          (whichever  is most  limiting)  remaining  until the next
          scheduled  removal for inspection or overhaul under the Agreed
          Maintenance  Program,  and if the Flight Hours,  Cycles or calendar
          time of any Landing Gear is less than 50% of the interval between
          scheduled  removals then the Lessee shall pay to the Lessor an
          amount equal to the product of (i) the number of Flight Hours,
          Cycles or calendar days (whichever is most limiting) by which such
          Landing Gear is less than 50% of the interval  between  scheduled
          removals,  multiplied  by (ii) $4.50 in the case of the main
          Landing Gear and $2.50 in the case of the nose Landing Gear.

     (c)  The tires and brakes will have 50% of the wear, as specified by the
          manufacturer as serviceable limits, remaining until next removal.

     (d)  The landing gear and wheel wells will be clean, free of leaks and
          repaired as necessary.

10.  APU

     (a)  The APU shall be serviceable in accordance with the Approved
          Maintenance Program parameters.

     (b)  The APU shall have not more than 1,500 Flight Hours of operation
          since its last hot section inspection.

11.  CORROSION

     (a)  The Aircraft will be in compliance with the CPCP and will have been
          inspected and treated with respect to corrosion as required by the
          CPCP; and

     (b)  Fuel tanks will be free from contamination and corrosion and a tank
          treatment program will be in operation and up-to-date.

                         -89-


<PAGE>


                                   SCHEDULE 4

                                     PART 1

                          (INSURANCE REQUIREMENTS)

1.   The Insurances required to be maintained are as follows:

     (a)  HULL "ALL RISKS" of Loss or Damage while flying and on the ground
          with respect to the Aircraft for the Agreed Value and with a
          deductible not exceeding $500,000.

     (b)  HULL WAR AND ALLIED PERILS, covering those war risks excluded from
          the Hull "All Risks" Policy to the extent such coverage is
          available from the leading international insurance markets,
          including confiscation and requisition by the State of
          Registration, for the Agreed Value;

     (c)  "ALL RISKS" PROPERTY INSURANCE (INCLUDING WAR AND ALLIED RISK
          except when on the ground or in transit other than by air or sea)
          on all Engines and Parts when not installed on the Aircraft (to the
          extent not covered under the Aircraft hull insurances described in
          paragraphs (a) and (b) above), including Engine test and running
          risks, in an amount equal to replacement value in the case of the
          Engines;

     (d)  AIRCRAFT THIRD PARTY, BODILY INJURY/PROPERTY DAMAGE, PASSENGER,
          BAGGAGE, CARGO AND MAIL AND AIRLINE GENERAL THIRD PARTY  (INCLUDING
          PRODUCTS)  LEGAL  LIABILITY  for a combined  single limit  (Bodily
          Injury/Property Damage) of an amount not less than the Minimum
          Liability  Coverage for the time being in respect of any one
          occurrence  (but,  in respect of products  liability,  this limit
          may be an aggregate  limit for any and all losses  occurring
          during the  currency of the policy,  and in respect of  liability
          arising out of certain offences,  the limit  (within  the said
          combined  single  limit) may be  $25,000,000  in respect of any one
          offence and in the  aggregate,  and cargo and mail legal  liability
          may be subject to a limit of $1,000,000 any one  occurrence);  War
          and Allied Risks are also to be covered under the Policy to the
          extent  available from the leading  international  insurance
          markets.  The Minimum Liability Coverage may be adjusted upwards
          from time to time to such an amount as the Lessor may be advised by
          its insurance  brokers  constitutes  the standard Minimum Liability
          Coverage  applicable to Boeing 737-200 series aircraft operating in
          North America by an airline similarly situated as Lessee. If the
          Lessee disputes any such adjustment,  the matter shall be referred
          to a reputable  independent  insurance  broker in the United
          States of America  appointed  by the Lessor, whose decision, acting
          as expert, shall be conclusive and binding on the Lessee.

2.   All required hull and spares insurance (specified in (1)(a), (b) and (c)
     above), so far as it relates to the Aircraft, will:

                           -90-


<PAGE>


     (a)  provide that any loss will be settled with the Lessee (who
          undertakes to consult with the Lessor and the Lender in regard
          thereto), and any claim that becomes payable on the basis of a
          Total Loss shall be paid in Dollars to the Lender as sole loss
          payee up to the Agreed Value, and loss proceeds in excess of the
          Agreed Value shall be payable to Lessee, with any other claim being
          payable as may be necessary for the repair of the damage to which
          it relates;

     (b)  if separate Hull "All Risks" and "War Risks" insurances are
          arranged, include a 50/50 provision in the terms of Lloyd's
          endorsement AVS 103 or its equivalent; and

     (c)  confirm that the Insurers are not entitled to replace the Aircraft
          in the event of a Total Loss.

3.   All required liability insurances (specified in (1)(d) above) will:

     (a)  include the Lessor, the Lender, their respective successors and
          assigns and their respective shareholders, Affiliates,
          subsidiaries, directors, officers, agents, employees and
          indemnitees as additional assureds for their respective rights and
          interests, warranted (each as to itself only) no operational
          interest; but the coverage provided will not include claims arising
          out of their legal liability as manufacturer, repairer or servicing
          agent of the aircraft or any part thereof;

     (b)  include a severability of interest clause;

     (c)  contain a provision confirming that the policy is primary without
          right of contribution and that the liability of the insurers will
          not be affected by any other insurance of which the Lessor, the
          Lender or the Lessee have the benefit; and

     (d)  accept and insure the indemnity provisions of this Agreement to the
          extent of the risks covered by the relevant policy or policies.

4.   All Insurances will:

     (a)  be in accordance with normal industry practice of persons operating
          similar aircraft in similar circumstances;

     (b)  provide coverage on a worldwide basis subject to those territorial
          exclusions which are usual and customary for carriers similarly
          situated with Lessee in the case of War Risks and Allied Perils
          coverage which are advised to and approved by Lessor, such approval
          not to be unreasonably withheld;

                                   -91-




<PAGE>


     (c)  acknowledge that the insurers are aware that the Aircraft is owned
          by the Lessor and is subject to this Agreement;

     (d)  provide that, in relation to the interests of each of the
          additional assureds, the Insurances will not be invalidated by any
          act or omission of the Insured which results in a breach of any
          terms, conditions or warranty of the policies;

     (e)  provide that the Insurers will waive any rights of recourse and/or
          subrogation against each additional assured to the same extent that
          Lessee has waived or has no rights of recovery against-such
          additional assured in the Lease;

     (f)  provide that the additional assureds will have no obligation or
          responsibility for the payment of any premiums (but reserve the
          right to pay the same should any of them elect to do so) and that
          the Insurers will waive any right of offset or counterclaim against
          the respective additional assureds other than for outstanding
          premiums in respect of the Aircraft, any Engine or Part;

     (g)  provide that, except in the case of any provision for cancellation
          or automatic termination specified in the policies or endorsements
          thereof, the Insurance can only be canceled or materially altered
          in a manner adverse to the additional assureds by giving at least
          30 days' written notice to the Lessor and the Lender, except in the
          case of war risks (or radioactive contamination), for which seven
          days' written notice (or such lesser period as is or may be
          customarily available in respect thereof) will be given; and

     (h)  include a services of suit clause.

                               -92-


<PAGE>


                             [LOGO]
                            SEDGWICK


                                            SCHEDULE 4, PART 2


                                                                  No. AQ-T.B.A.

DATE: January __, 1997

     TO:       FINOVA Capital Corporation ("Lender")
               1850 N. Central Avenue
               P.O. Box 2209
               Phoenix, Arizona 85002-2209

               and

               ACG Acquisition VIII LLC ("Owner"/"Lessor")
               Three Stamford Landing
               46 Southfield Avenue
               Stamford, Connecticut 06902

     Re:  Broker's Report
          Lease Agreement N802AL dated as of January __, 1997
          between ACG Acquisition VIII LLC ("Owner"/"Lessor"), FINOVA
          Capital Corporation ("Lender") and Aloha Airlines, Inc. ("Lessee")
          (the "Lease") regarding One (1) B737-MC Aircraft, Registration Number
          N802AL, Serial Number 22148 including two (2) Pratt 7 Whitney
          JT8D-9A engines, Serial Numbers 656093 and 665630 (the "Engines")
          (hereinafter the "Aircraft")

To Whom It May Concern:

We hereby certify that as the independent aviation insurance brokers duly
appointed by Lessee, and acting on their behalf that, as of this date, the
insurance described in the attached Certificate of Insurance (No. AQ-T.B.A.)
complies with the requirements of the Lease as far as said requirements relate
to the insurance described in said Certificate and that said insurance is in
full force and effect on the Aircraft and that all premiums due as of this
date (per the accounting procedures arranged between Lessee and ourselves)
have been paid.

We also confirm that, as of this date, all such policies of insurance as
described in aid Certificate as are carried by Lessee are in such amounts and
cover such perils and are placed with insurers of recognized reputation and
responsibility in the worldwide aviation insurance marketplace so that the
protection afforded thereby is not less than that which would customarily be
maintained for aircraft of a similar character by corporations engaged in the
same or similar business, similarly situate with Lessee.

The perils, limits of liability, and insurers relating to the above mentioned
insurance policies are more fully described in the attached Certificate of
Insurance, No. AQ-T.B.A.


<PAGE>


                             [LOGO]
                            SEDGWICK


It is our opinion that only an Insured (i.e., the Named Insured and/or the
Additional Insureds) can breach or violate any warranty, condition or
declaration of the policy.

We undertake to advise you:

     1.   promptly of any cancellation or adverse material changes notified
          to us which are proposed to be made in the terms of the insurance;

     2.   upon written application from you not later than thirty (30) days
          prior to the expiration date of said insurance to notify you within
          seven (7) days of the receipt of said application if we have not
          received renewal instructions from Lessee and in the event of our
          receiving instructions to renew, to advise you promptly thereof;

     3.   promptly if premiums are not paid to us by the due date as per the
          accounting procedures between Lessee and ourselves;

     4.   promptly if our appointment as Insurance Broker by Lessee is
          terminated or not timely renewed.

The above is given subject to:

     1.   our continuing appointment for the time being as Insurance Brokers
          to Aloha Airlines, Inc.

     2.   our lien, if any, on the policies referred to in our Certificate of
          Insurance for premiums due under such policies in respect of the
          Aircraft

     3.   Insurers' right of cancellation on default in payment of premiums

     4.   a hull claim proceeds and all premiums are to be collected through
          ourselves as the Insurance Broker for Aloha Airlines, Inc.

This letter shall be governed and construed in all respect in accordance with
the laws of United States of America.

Sincerely,


Paul H. Yelavich
Director


<PAGE>


                             [LOGO]
                            SEDGWICK


                                            SCHEDULE 4, PART 3

                        CERTIFICATE OF INSURANCE                  No. AQ-T.B.A.

This is to verify to:    FINOVA Capital Corporation ("Lender")
                         1850 N. Central Avenue
                         P.O. Box 2209
                         Phoenix, Arizona 95002-2209

                         and

                         ACG Acquisition VIII LLC ("Owner"/"Lessor")
                         Three Stamford Landing
                         46 Southfield Avenue
                         Stamford, Connecticut 06902

that the insurers/underwriters/companies listed below, each for their own part
AND NOT ONE FOR THE OTHER, are providing the following insurance:

NAMED INSURED:           Aloha Airlines, Inc.

NAMED INSURED'S          Honolulu International Airport
ADDRESS:                 P.O. Box 30028
                         Honolulu, HI 96920

INSURANCE COVERAGES:     A)   All Risks (Ground and Flight) Aircraft Hull
                              Insurance (including All Risks Aircraft Spare
                              Parts Insurance)

                         B)   War Risks Aircraft Hull Insurance (including
                              War Risks Spare Parts Insurance) (Coverage
                              amended to include coverage for confiscation by
                              government of registry)

                         C)   Comprehensive Airline Liability Insurance
                              (including, but not limited to: Comprehensive
                              General Liability, Public Liability, Passenger
                              Liability, Personal Injury Liability;
                              Contractual Liability, Passengers' Checked and
                              Unchecked Baggage Liability, Premises,
                              Products, and Completed Operations Liabilities,
                              Ground Hangarkeepers Liability, Cargo Legal
                              including Mail Legal Liability) and the AAU
                              equivalent of AV.-52C (War Risks Liability
                              Clause.)

<PAGE>


                             [LOGO]
                            SEDGWICK


POLICY PERIOD:                November 1, 1996 to November 1, 1997 on both
                              dates at 12:01 A.M.  Local Standard Time at the
                              address of the Named Insured.

GEOGRAPHICAL LIMITS:          Worldwide*

LIMITS OF LIABILITY:     A)   As respects Aircraft Hulls: Agreed Value as
                              stated below, subject to a deductible of
                              US$500,000.00 each and every loss (Deductibles
                              not applicable in the event of Total
                              Loss/Constructive Total Loss/Arranged Total
                              Loss.)

NOTE: AGGREGATE               As respects Aircraft Spare Parts: US$60,000,000.00
LIMITS MAY BE                 any one loss/any one location, US$25,000,000.00
REDUCED DUE TO                any one transit, subject to a deductible of
PAID CLAIMS                   US$10,000.00 any one loss but the applicable
                              aircraft hull deductible stated above shall
                              apply in respect of spare engine running or
                              testing losses.

                         B)   As respects Aircraft Hulls: Agreed Value as
                              stated below. As respects aircraft spares
                              parts: US$60,000,000.00 any one loss/any one
                              location, US$25,000,000.00 any one transit.
                              Subject to an annual aggregate of
                              US$125,000,000.00. Subject to nil deductibles.

                         C)   Combined Single Limit Bodily Injury (including
                              passengers), Property Damage and Personal
                              Injury (Passengers only): US$300,000,000.00 any
                              one occurrence/offense, in the aggregate
                              annually as respects Products, Completed
                              Operations and Personal Injury Liabilities.
                              However, the following sublimits apply as part
                              of and not in addition to the limit stated
                              above.

                              As respects Personal Injury to third parties
                              other than passengers: US$25,000,000.00 any one
                              occurrence any one offense, in the aggregate
                              annually. As respects Cargo Legal Liability:
                              US$1,000,000.00 each occurrence

<PAGE>


                             [LOGO]
                            SEDGWICK


AIRCRAFT INSURED:             One (1) B737-2S5C aircraft, Registration
                              Number: N802AL, Manufacturer's Serial Number:
                              22148, Agreed Value: US$6,000,000 inclusive of
                              two (2) Pratt & Whitney JT8D-9A Engines,
                              Manufacturers Serial Numbers 656093 and 665630
                              (the "Engines") while attached to the Aircraft or
                              removed from the Aircraft, but not replaced
                              (hereinafter, the "Aircraft")

* As respects Coverage B - War Risks Aircraft Hull Insurance, the Geographical
Limits of the policy are:

Worldwide but excluding Africa, Columbia, Peru, Iraq, Afghanistan, Former
Republics of the U.S.S.R. and Yugoslavia.


<PAGE>


                                     [LOGO]
                                    SEDGWICK


                                    SECURITY

                         AS RESPECTS COVERAGES A AND C


<Table>
<Caption>
                                                     QUOTA SHARE
                                                    PARTICIPATION                POLICY
INSURERS                                            (PART OF 100%)               NUMBER
--------                                          -----------------              ------
<S>                                               <C>                            <C>

One or More Member Companies
of Associated Aviation Underwriters                      T.B.A.                   T.B.A.

Certain Underwriters at Lloyds, London
through Sedgwick Aviation Limited                        T.B.A.                   T.B.A.

Certain U.K. Insurance Companies and
Others through Sedgwick Aviation Limited                 T.B.A.                   T.B.A.

La Reunion Aerienne through
La Concorde                                              T.B.A.                   T.B.A.

Insurance Company of North America
Navigators Insurance Company through
Somerset Aviation                                        T.B.A.                   T.B.A.

Assurance France Aviation                                T.B.A.                   T.B.A.

Mutual Marine Office                                     T.B.A.                   T.B.A.

American Home Assurance Company
Through AIG Aviation                                     T.B.A.                   T.B-A.

</Table>


                               SEVERAL LIABILITY NOTICE

The Subscribing insurers' obligations under contracts of insurance to which
they subscribe are several and not joint and are limited solely to the extent
of their individual subscriptions. The subscribing insurers are not
responsible for the subscription of any co-subscribing insurer who for any
reason does not satisfy all or part of its obligations.

LSW 1001 (insurance)

<PAGE>


                                     [LOGO]
                                    SEDGWICK


                                    SECURITY

                            AS RESPECTS COVERAGES B


<Table>
<Caption>
                                                     QUOTA SHARE
                                                    PARTICIPATION                POLICY
INSURERS                                            (PART OF 100%)               NUMBER
--------                                          -----------------              ------
<S>                                               <C>                            <C>

Certain Underwriters at Lloyds,
London through Sedgwick Aviation
Limited                                                  T.B.A.                   T.B.A.

Certain U.K. Insurance Companies
and Others through Sedgwick Aviation
Limited                                                  T.B.A.                   T.B.A.

Navigators Insurance Company
through Somerset Aviation                                T.B.A.                   T.B.A.

Assurance France Aviation                                T.B.A.                   T.B.A.

La Reunion Aerienne through
La Concorde                                              T.B.A.                   T.B.A.

Mutual Marine Office                                     T.B.A.                   T.B.A.

</Table>


                             SEVERAL LIABILITY NOTICE

The subscribing insurers' obligations under contracts of insurance to which
they subscribe are several and not joint and are limited solely to the extent
of their individual subscriptions. The subscribing insurers are not
responsible for the subscription of any co-subscribing insurer who for any
reason does not satisfy all or part of its obligations.

LSW 1001 (Insurance)

<PAGE>


                             [LOGO]
                            SEDGWICK


                            SPECIAL PROVISIONS

Solely as respects coverages A, B and c and solely as respects Lease
Agreement N802AL dated as of January _, 1997 between ACG Acquisition VIII LLC
("Owner"/"Lessor"), FINOVA Capital Corporation ("Lender") and Aloha
Airlines, Inc, ("Lessee") (the "Lease") regarding the Aircraft subject to
policy terms, conditions, limitations, deductibles, warranties and exclusions
the following provisions apply:

I.   SOLELY AS RESPECTS COVERAGES A AND B:

     1.   All losses will be adjusted with Lessee. In the event of a Total
          Loss of the Aircraft, Lender is named as Sole Loss Payee for all
          insurance proceeds up to the Agreed Value (as defined in the
          Lease). With respect to damage or loss not constituting a Total
          Loss of the Aircraft, Lender is named as Sole Loss Payee in respect
          of all insurance proceeds where such insurance proceeds exceed
          US$500,000.00. Such insurance proceeds which are not in excess of
          US$500,000.00 shall be payable solely to Lessee provided that upon
          receipt by Insurers and the Insurance Broker of written notice from
          Lender or Owner Lessor that an Event of Default on the part of
          Lessee has occurred and is continuing, a payments up to the Agreed
          Value will be made to Lender. In all cases, any insurance proceeds
          in excess of the Agreed Value will be payable solely to Lessee.

     2.   Hull All Risks insurers and Hull War Risks and Allied Perils
          insurers agree to a 50/50 claims settlement provision per the terms
          of AVS103 (or its equivalent),

     3.   Underwriters are not entitled to replace the Aircraft in the event
          of a Total Loss of the Aircraft.

II.  SOLELY AS RESPECT COVERAGE C

     1.   Lender, Owner/Lessor and their respective successors and assigns
          and their respective shareholders, affiliates, subsidiaries,
          directors, officers, employees, agents and indemnitees are included
          as Additional Insureds ("the Additional Insureds") as their
          respective interests may appear, warranted no operational interest,
          However, no party shall be included as an Additional Insured as
          respects its legal liability as manufacturer, repairer, supplier or
          servicing agent of the Aircraft or any part thereof.

<PAGE>


                             [LOGO]
                            SEDGWICK


     2.   This insurance is primary without right of contribution from any
          other insurance as may be carried by an Additional Insured.

     3.   Such insurance as is afforded Lessee under the policy applies to
          liability assumed by Lessee under the Lease, specifically Article
          10--INDEMNITY of the Lease, but only to the extent of the coverage
          otherwise afforded under the policy.

     4.   Each of Additional Insureds shall have the same protection as would
          have been available had this policy been issued individually to
          each of them except that this fact shall not in any event increase
          the Insurers' total liability beyond the limits set forth in the
          policy.

III. SOLELY AS RESPECTS COVERAGES A, B AND C:

     1.   Insurers waive their rights to any set-off or counter claim or any
          other deduction, whether by attachment or otherwise, in respect of
          any liability to the Additional Insureds (save in respect of unpaid
          premium in respect of the Aircraft only).

     2.   The Additional Insureds have no responsibility for premiums,
          commissions, assessments or calls (save as is provided for in
          Special Provision III.1).

     3.   Insurers waive their rights of subrogation against the Additional
          Insureds but only to the same extent that Lessee has waived its
          rights of recovery against the Additional Insureds in the Lease.

     4.   In respect of the interests of each Additional Insured, the
          insurance shall not be invalidated by any act or omission by Lessee
          or any other insured. The Additional Insureds are held covered for
          their respective interests notwithstanding any breach or violation
          of any warranty, condition or declaration of the policy by Lessee
          or any other insured. However, such protection as is afforded an
          Additional Insured under this clause will not apply in the event
          such Additional Insured breaches or violates any warranty,
          condition or declaration of the policy, nor does this clause apply
          in the event of exhaustion of policy limits or to losses/claims
          arising from pails specifically excluded from coverage under the
          policies.

<PAGE>


                             [LOGO]
                            SEDGWICK


     5.   In the event of cancellation or material change of the policies by
          Insurers, which would adversely affect the interests of the
          Additional Insureds, Insurers agree that Such cancellation or
          change shall not be effective as to the Additional Insureds until
          thirty (30) days (seven (7) days or such shorter period as may be
          customary in the case of War Risks insurance) after issuance of
          notice thereof to Lender and Owner/Lessor.

     6.   Insurers note the existence of the Lease and acknowledge ACG
          Acquisition VIII LLC as Owner of the Aircraft.

The undersigned has been authorized by the above insurers to issue this
certificate on their behalf the undersigned is not an insurer and has no
liability of any sort under the above policies nor as a result of this
certification. This certificate does not alter, extend or amend any policy
terms, conditions, limitations, deductibles, warranties or exclusions.

DATE OF ISSUE                          SEDGWICK AVIATION, NORTH AMERICA


__________________________________     _________________________________
                                       AUTHORIZED REPRESENTATIVE


<PAGE>


CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW

                                                          SCHEDULE 5


                        , 1997


ACG Acquisition VIII LLC
c/o Aviation Capital Group Corp.
Three Stamford Landing
46 Southfield Avenue
Stamford, Connecticut 06902

FINOVA CAPITAL CORPORATION
1850 North Central Avenue
Phoenix, Arizona 85077

Re:  LEASE AGREEMENT 802 dated as of               , 1997 between
     ACG ACQUISITION VIII LLC ("Lessor") and ALOHA AIRLINES, INC.
     ("Lessee") with respect to one (1) The Boeing Company Model
     737-2S5C Aircraft, bearing manufacturer's serial no. 22148
     and U.S. registration no. N802AL, together with two (2)
     Pratt & Whitney Model JT8D-9A engines bearing engine
     manufacturer's serial nos. P656093B and P665630B (the
     "Aircraft").

Gentlemen:

We are counsel to Aloha Airlines, Inc. in regard to the above-referenced
transaction.

You have asked us to render an opinion in connection with the transactions
governed by the following documents:

    1.     Lease Agreement 802 (as described above) dated as of
                      , 1997 by and between Lessor and Lessee
           ("Lease Agreement");

   2.      Acceptance Certificate dated as of                    , 1997
           executed by Lessee ("Acceptance Certificate"); and

   3.      Acknowledgment and Consent dated as of                 , 1997
           relating to Lessor's assignment of Lease Agreement to
           FINOVA Capital Corporation, as Lender ("Acknowledgment").

The documents listed above collectively referred to as the "Operative
Documents." Except as otherwise expressly stated herein, words and expressions
used herein shall bear the same meanings as defined in the Operative Documents.


A LAW CORPORATION Suite 850, Davies Pacific Center, 841 Bishop Street,
Honolulu, Hawaii 96813 - (808) 522-5133 - Facsimile: (808) 522-5144


<PAGE>


CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW


ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
                    , 1996
Page 2

In rendering the opinions expressed below, we have examined the (a) the
Operative Documents, (b) the Articles of Association and By-Laws of Lessee, (c)
certain certificates executed by officers of Borrower and (d) other documents,
in our judgment and to our knowledge, necessary or appropriate to examine to
enable us to give the opinions expressed below.

Having reviewed the foregoing described documents, and having regard to the
relevant laws of the State of Hawaii and the United States of America, it is
our opinion that:

A.       Lessee (i) is a corporation duly formed, validly existing and in good
         standing under the laws of the State of Hawaii, (ii) is qualified to
         do business in all jurisdictions in which the nature of its business
         or its properties requires it to be qualified, (iii) presently
         maintains its principal place of business and chief executive office
         in Honolulu, Hawaii, (iv) has full power to carry on its business as
         it is now being conducted and to enter into, legally bind itself by,
         and perform its obligations under the Operative Documents and (v) to
         our knowledge and without any inquiry except review of a
         certification as to the following provided by Lessee, has complied
         with all material statutory and other requirements relative to its
         businesses;

B.       To our knowledge and without any inquiry except review of a
         certification as to the following provided by Lessee, (i) all
         consents, resolutions and authorizations necessary or advisable in
         order for Lessee to enter into the Operative Documents and to lease
         the Aircraft in accordance with the terms and conditions of the
         Operative Documents have been obtained, and (ii) no further consents
         or authorizations are necessary for the lease of the Aircraft by
         Lessee pursuant to the provisions of the Operative Documents and for
         the performance by Lessee of all of its obligations pursuant to the
         provisions of the Operative Documents;

C.       The Operative Documents far constitute valid and binding obligations
         of Lessee, enforceable in accordance with their respective terms,
         (ii) are in

A LAW CORPORATION


<PAGE>


CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW


ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
                   , 1996
Page 3


         full force and effect, and (iii) the provisions of the Operative
         Documents with respect to choice of substantive law to govern the
         interpretation and enforcement of such Operative Documents and
         consent to jurisdiction and choice of forum in connection with such
         interpretation and enforcement are legal, valid and binding;
         however, the state and federal courts in the State of Hawaii may not
         apply the procedural law, including without limitation, law relating
         to remedies or provisional remedies, of a non-forum state, such as,
         without limitation, New York and Arizona;

D.       To our knowledge and without any inquiry except review of a
         certification as to the following provided by Lessee, (i) the
         execution and delivery of and the performance of the provisions of the
         Operative Documents and of the transactions contemplated thereby and
         hereby do not contravene in any material respect any applicable law,
         regulation, decree, order, permit or contractual or other
         restriction now existing and binding on Lessee or on any of the
         properties of Lessee, and (ii) the performance of the provisions of
         the Operative Documents in effect on this date, and of the
         transactions contemplated thereby will not contravene in any
         material respect any applicable law, regulation, decree, order or
         permit currently in effect or contractual or other restriction now
         existing and binding on Lessee or on any of the properties of Lessee;

E.       To our knowledge and without inquiry except review of a certification
         as to the following provided by Lessee, (i) there are no outstanding
         judgments against Lessee and (ii) no action, claim, suit or proceeding
         pending or threatened (including, but not limited to, tax liens or tax
         actions) against or affecting Lessee or any of the property of Lessee
         before any court, board of arbitration or administrative agency which
         would likely result in any material adverse change in the business or
         condition (financial or otherwise) of Lessee;

F.       To our knowledge and without inquiry except review of a certification
         as to the following provided by Lessee, Lessee is not in default under
         any agreement to which

A LAW CORPORATION


<PAGE>


CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW


ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
                   , 1996
Page 4

         it is a party or by which it may be bound, nor in default of any kind
         in respect of any financial commitment or obligation (including
         obligations under guarantees) which could have a material adverse
         effect on the ability of Lessee to perform its obligations under the
         Operative Documents nor is there any fact which by giving of notice
         or by lapse of time or otherwise might constitute such default by
         Lessee;

G.       None of the Operative Documents or any other document executed in
         connection with the Operative Documents or contemplated thereby nor any
         filing required or permitted thereunder is subject to any registration
         tax, any stamp duty or similar tax;

H.       To our knowledge and without inquiry except for review of a
         certification as to the following provided by Lessee, Lessee has
         furnished Lessor with consolidated financial statements of Aloha
         Airgroup, Inc., the corporate parent of Lessee, reflecting the
         financial results of Aloha Airgroup, Inc. and its subsidiaries
         (including Lessee) as of               , 199  .

I.       Lessee is (i) a "United States citizen" as that term is used and
         defined in the Federal Aviation Act of 1958, as amended and recodified
         as Title 49 of the United States Code, and (ii) a duly certified
         United States Air Carrier pursuant to the provisions of 14 C.F.R. 121;

J.       To our knowledge and without inquiry except for review of a
         certification as to the following provided by Lessee, no written
         information given by Lessee in relation to the Operative Documents
         contains any misstatement of fact or omits to state a fact which would
         be adverse to the interest of Lessor or which would be necessary to
         make any statement or representation or warranty contained herein or
         therein not misleading;

K.       To our knowledge and without inquiry except for review of a
         certification as to the following provided by Lessee, there has
         occurred no event which, with the giving of notice or lapse of time or
         both, would

A LAW CORPORATION


<PAGE>


CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW


ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
                 , 1996
Page 5

        constitute an Event of Default or Default under the Operative
        Documents;

L.      To our knowledge and without inquiry except for review of a
        certification as to the following provided by Lessee, Lessee does not
        do business under any assumed or trade names;

M.      Except for the filing of appropriate financing statements (UCC-1s) with
        the Bureau of Conveyances, State of Hawaii and the filing of the Lease
        Agreement with the Federal Aviation Administration, no further actions
        are necessary to record or perfect Lessor's interest in the Lease in
        the United States or in the State of Hawaii;

N.      The Operative Documents do not violate any law relating to the
        charging, contracting for or payment or collection of interest or the
        like; and

0.      In the event that 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 Section 1110(a)(1) of
        Title 11 of the United States Code.

The opinion expressed above is qualified to the extent that:

1.      We are members of the Bar of the State of Hawaii and do not hold
        ourselves out as being conversant with, and express no opinion as to,
        the laws of any jurisdiction other than those of the State of Hawaii
        and the United States of America.

2.      The opinions expressed herein are solely for your benefit and may not
        be relied upon in any manner or for any purpose by any other person.

3.      In conducting our examination, we have assumed the genuineness of all
        signatures (other than the signatures of Lessee), the correctness of
        all certificates, the authenticity of all documents submitted to us as
        originals, the conformity to

A LAW CORPORATION


<PAGE>


CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW


ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
                 , 1996
Page 6


        original documents of all documents submitted to us as certified or
        photostatic copies and the authenticity of the originals of such
        copies, and the accuracy and completeness of all records made
        available to us by Lessee. In making our examination of documents
        and instruments, we have assumed that each party to such documents
        and instruments (other than Lessee and its affiliates) has: (i) the
        power and capacity to enter into and perform all its obligations
        under such documents and instruments, (ii) duly authorized all
        requisite action with respect to such documents and instruments, and
        (iii) duly executed and delivered such documents and instruments.

4.      The opinions expressed above are qualified to the extent that (i)
        enforceability of the Operative Documents and transactions contemplated
        thereby may be limited by bankruptcy, insolvency, reorganization,
        moratorium or similar laws of general application from time to time
        affecting the rights of creditors, lessors and secured parties
        generally and providing relief for debtors; and (ii) a particular court
        may refuse to grant certain equitable or legal remedies, including
        without limiting the generality of the foregoing, specific performance
        or foreclosure, with respect to the enforcement of any provisions of
        the Operative Documents.

5.      This opinion letter is limited to the matters stated herein and no
        opinion may be implied or inferred beyond the matters expressly stated
        herein.

6.      The opinions given herein are as of the date hereof and we assume no
        obligation to update or supplement such opinions to reflect any facts
        or circumstances which

A LAW CORPORATION


<PAGE>


CHAR
SAKAMOTO
ISHII
& LUM
-------------------
ATTORNEYS AT LAW


ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
                    , 1996
Page 7

        may hereafter come to our attention or any changes in law which may
        hereafter occur.


Very truly you

CHAR SAKAMOTO ISHII & LUM



Elizabeth Ann Ishii
Lana Proctor Banbury

CC:  Ms. Brenda F. Cutwright
     Mr. James M. King
     Mr. Timothy Ng



A LAW CORPORATION


<PAGE>


                                                                 SCHEDULE: 6

                  IRREVOCABLE STANDBY LETTER OF CREDIT

BENEFICIARY:

ACG Acquisition VIII LLC
c/o Aviation Capital Group Corp.
Three Stamford Landing
46 Southfield Avenue
Stamford, Connecticut 06902

Gentlemen:

     We hereby establish our Irrevocable Standby Letter of Credit No. S/B ____
in your favor, effective                      , 19   , available by your
draft(s) on Fire Hawaiian Bank, International Banking, Honolulu, Hawaii, at
eight for the account of Aloha Airlines, Inc., P. 0. Box 30028, Honolulu.
Hawaii 96820, up to an aggregate amount of U.S. $227,000 (two hundred twenty
seven thousand United States Dollars), accompanied by:

    A statement purportedly signed by a duly authorized officer Of ACG
    Acquisition VIII LLC certifying that "an 'Event of Default' has occurred
    and is continuing under that certain Lease Agreement 802 by and between
    Aloha Airlines, Inc. and ACG Acquisition VIII LLC.

    Payment of amounts drawn under this Letter of Credit shall be made in full,
without any offset or counterclaim whatsoever and free and clear of any
deductions or withholdings. Until all amounts which may be or become payable
to the Lessor or the Lender by the Lessee have been irrevocable paid in full we
shall not by virtue of this Letter of Credit be subrogated to any of the
Lessor's or the Lender's rights or claim in competition with the Lessor or the
Lender against the Lessee.

    It is a condition of this Letter of Credit that it shall be deemed
automatically extended without amendment for an additional period of one (1)
year each from the present or each future expiration date unless at least
thirty (30) days prior to any such expiry date we shall notify you in writing
by certified mail at the above address, tot we elect not to consider this
Letter of Credit renewed for such additional period. Upon receipt of such
notice, you may draw hereunder by means of your draft on us as sight
accompanied by this Letter of Credit and your written certification stating
that "FINOVA Capital Corporation has received a notice of non-renewal from
First Hawaiian Bank to its Letter of Credit No. S/B                  ".

    Partial drawings permitted.

    All drafts must bear the clause "Drawn under Credit No. S/B             of
First Hawaiian Bank, Honolulu, Hawaii dated                   , 19     .

    This Letter cf Credit is transferable only by  Beneficiary. Notice of such
Transfer, if any, must be mailed immediately to First Hawaiian Bank,
International Banking, at P.O. Box 32001 Honolulu, Hawaii 96847.

    All bank charges relating to this Letter of Credit are for the account of
applicant.


<PAGE>


    Alternatively, drawings may be sent via fax to our International Banking at
Fax No. (808) 525-5791, originals to follow by mail. Drawings by fax or by
presentment of original documents must be received by First Hawaiian Bank,
International Banking on or before 3:00 P.M. Hawaii Standard Time on _________
19   , the expiration date or any automatically extended date.

    Except as otherwise expressly stated, this Credit is subject to the
"Uniform Customs and Practice for Documentary Credits" (1993 Revision)
International Chamber of Commerce Publication No. 500.

    We hereby engage with you that all drafts drawn under and in compliance
with the terms of this Credit shall be duly honored upon presentation if drawn
on or before                  , 19   , the expiration date, at our
International Banking counters in Honolulu, Hawaii.

                                               Sincerely,

                                               FIRST HAWAIIAN BANK



_________________________________              _______________________________
       Authorized Signature                           Authorized Signature






<PAGE>


                                 SCHEDULE 7

                     FORM OF SEMI-ANNUAL STATUS REPORT

<TABLE>
<CAPTION>

     AIRCRAFT TYPE                 REG. MARK       SERIAL NO.     MONTH ENDING
     -------------                 ---------       ----------     ------------
     <S>                           <C>             <C>            <C>
     Boeing 737-2S5C                 N802AL          22148        ............

</TABLE>

<TABLE>

<S>       <C>                                     <C>               <C>
1.        AIRCRAFT UTILIZATION:
          --------------------

(a)       Airframe Total Flight Hours             ............................

(b)       Airframe Total Cycles                   ............................

(c)       Airframe Flight Hours for Month         ............................

(d)       Airframe Flight Cycles for Month        ............................


2.        POWERPLANT STATUS:                         No.1              No.2
          -----------------                          ----              ----

(a)       Serial Nos. of Delivered Engines        ..........        ..........

(b)       Serial Nos. of Replacement Engines      ..........        ..........
          (if applicable)

(c)       Serial Nos. of Installed Engines        ..........        ..........
          (if different from (a) or (b) above)

(d)       Current Location of Delivered or        ..........        ..........
          Replacement Engines (as applicable)
          (if not installed on Airframe)

(e)       Total Time Since New of Delivered       ..........        ..........
          or Replacement Engines (as applicable)

(f)       Total Cycles Since New of Delivered     ..........        ..........
          or Replacement Engines (as applicable)


<PAGE>


(g)       Total Flight Hours for the Month for     ..........        ..........
          each Delivered or Replacement Engine
          (as applicable)

(h)       Total Cycles for the Month for each      ..........        ..........
          Delivered or Replacement Engine
          (as applicable)

(i)       Serial No. of Delivered APU              ..........

(j)       Serial No. of Replacement APU            ..........
          (if applicable)

(k)       Serial No. of Installed APU              ..........
          (if different from (a) or (b) above)

(1)       Current Location of Delivered or         ..........
          Replacement APU (as applicable)
          (if not installed on Airframe)

(m)       Total Time Since New of Delivered        ..........
          or Replacement APU (as applicable)

(n)       Total Cycles Since New of Delivered      ..........
          or Replacement APU (as applicable)

(o)       Total Hours for the Month for            ..........
          Delivered or Replacement APU
          (as applicable)

(p)       Total Cycles for the Month for           ..........
          Delivered or Replacement APU
          (as applicable)

3.        ROUTINE CHECKS / A.D. AND S.B. COMPLIANCE:
          -----------------------------------------

(a)       Routine Checks (A and above) performed during Month:

(b)       Airworthiness Directives complied with during Month:

</TABLE>


<PAGE>

                                                      RECORDED
                                          FEDERAL AVIATION ADMINISTRATION
                                          DATE  5-17-01     TIME 8:05 AM
                                               ------------      ---------
                                          CONVEYANCE NUMBER BB34836
                                                            --------------
                                          BY           N. Peck
                                             -----------------------------



                            LEASE AMENDMENT 802 NO. 1


         This Lease Amendment 802 No. 1, dated April 30, 2001 (this
"Amendment"), is between ACG Acquisition VIII LLC ("Lessor") and Aloha Airlines,
Inc. ("Lessee") and relates to the lease documents for one Boeing Model 737-2S5C
aircraft bearing manufacturer's serial number 22148 and U.S. registration mark
N802AL, including two Pratt & Whitney Model JT8D-9A engines bearing
manufacturer's serial numbers P656093B and P665630B, which engines have 750 or
more rated takeoff horsepower (the "Aircraft").

RECITALS:

(1)     Lessor is leasing the Aircraft to Lessee pursuant to Lease Agreement
        802, dated January 15, 1997 (the "Original Lease Agreement"), between
        Lessor and Lessee, as supplemented by Certificate of Acceptance 802,
        dated January 15, 1997, between Lessor and Lessee (the "Acceptance
        Certificate"). The Original Lease Agreement, as supplemented by the
        Acceptance Certificate, is referred to in this Amendment as the Lease
        Agreement.

(2)     The Original Lease Agreement and the Acceptance Certificate were
        recorded by the FAA and were assigned conveyance numbers by the FAA as
        set forth on the attached Schedule 1.

(3)     Lessor and Lessee wish to amend the Lease Agreement to extend the term
        of the Lease Agreement for one year, to amend the monthly rent during
        the extended term, to grant Lessee a further one-year extension option
        and to make certain other changes as set forth in this Amendment.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration the receipt and sufficiency of which are acknowledged, Lessor and
Lessee agree as follows:

1.      DEFINITIONS.

        Capitalized terms used but not defined in this Amendment shall have the
        meanings ascribed to such terms in the Lease Agreement.

2.      AMENDMENT OF LEASE AGREEMENT.

        The Lease Agreement is amended as follows:

        (a)     The definition of "Expiry Date" in Clause 1. 1 of the Lease
                Agreement is amended and restated in its entirety as follows:



                                     - 1 -
<PAGE>


                        "September 25, 2002 or, if extended pursuant to Clause
                        4.1(b), September 25, 2003 or, if earlier than either of
                        those dates, as applicable, the date on which:

                        (a)     the Aircraft has been redelivered in accordance
                                with this Agreement and all obligations of
                                Lessee have been satisfied; or

                        (b)     the Lessor receives the Agreed Value following a
                                Total Loss and any other amounts then due and
                                owing in accordance with this Agreement."

        (b)     The definition of "Lender" in Clause 1.1 of the Lease Agreement
                is amended to delete the words "FINOVA Capital Corporation, a
                Delaware corporation, and".

        (c)     The definition of "Mortgage" in Clause 1. 1 of the Lease
                Agreement and all references to "Mortgage" in the Lease
                Agreement are deleted.

        (d)     The definition of "Security Deposit" in Clause 1.1 of the Lease
                Agreement is amended and restated in its entirety as follows:
                "the amount of $100,000".

        (e)     Clause 4.1(b) of the Lease Agreement is designated Clause
                4.1(c), and a new Clause 4.1(b) is added to the Lease
                Agreement as follows:

                        (b)     By written notice delivered to Lessor on or
                                before December 26, 2001, Lessee may elect to
                                extend the scheduled "Expiry Date" by one year,
                                to September 25, 2003. Except as set forth in
                                the preceding sentence, there shall be no
                                renewals or extensions of the Term.

        (f)     Clause 5.3(b)(ii) of the Lease Agreement is amended and restated
                in its entirety as follows:

                        "(ii)   The Basic Rent payable in respect of each
                                subsequent Rental Period will be (1) for Rental
                                Periods ending on or before September 25, 2001,
                                the amount of $110,000, and (2) for Rental
                                Periods beginning on or after September 26,
                                2001, the amount of $80,000."

        (g)     Clause 5.4(a) of the Lease Agreement is amended and restated in
                its entirety as follows:

                        "(a)    All payments of Rent by the Lessee to the Lessor
                                under this Agreement will be made for value on
                                the due date, for the full amount due, in
                                Dollars and in same day funds, settled through
                                the New York Clearing House System or such other
                                funds as may for the time being be customary for
                                the settlement in New York City of payments in
                                Dollars by telegraphic transfer to the account
                                of the Lessor at Chase

                                     - 2 -
<PAGE>


                                Manhattan Bank, N.A., New York, New York, ABA
                                No. 021000021, Account No. 249-500-335-765."

        (h)     The text of the plates required pursuant to Clause 8.7(d) of the
                Lease Agreement is amended and restated in its entirety as
                follows:

                        "This Aircraft/Engine is owned by ACG Acquisition VIII
                        LLC and is leased to Aloha Airlines, Inc. It may not be
                        operated by any other person without the prior written
                        consent of ACG Acquisition VIII LLC."

        (i)     Clause 15.10(b)(i) of the Lease Agreement is amended and
                restated in its entirety as follows:

                        "(i)    if to Lessor, to it at:
                                c/o Aviation Capital Group Corp.
                                800 Newport Center Drive, Suite 425
                                Newport Beach, California 92660-6309
                                Attention: Managing Director
                                Telefax No.: 949-759-5675

                                with a copy to:
                                Aviation Capital Group Corp.
                                2 Stamford Landing, Suite 295
                                46 Southfield Avenue
                                Stamford, Connecticut 06902
                                Attention: Managing Director
                                Telefax No.: 203-967-3287."

        (j)     Clause 1(g) of Schedule 3 of the Lease Agreement is deleted, and
                the text "[Intentionally Omitted]" is substituted in its place.

        (k)     Clause 3(a) of Schedule 3 of the Lease Agreement is amended to
                add the following text after the word "removal" in the first
                line: "(including removal for a hot section inspection)".

        (1)     Clause 2(a) of Schedule 4, Part 1 of the Lease Agreement is
                amended to delete the words "Lender as sole loss payee" in the
                third line and substitute the words "Lessor as sole loss payee".

3.      RATIFICATION.

        Except as amended in Section 2 above, the Lease Agreement remains in
        full force and effect in accordance with its terms.

4.      LESSEE'S REPRESENTATIONS AND WARRANTIES.


                                     - 3 -
<PAGE>


        Lessee represents and warrants to Lessor as follows:

        (a)     After giving effect to this Amendment, (i) each of the
                representations and warranties set forth in Clauses 2.1 and 2.2
                of the Lease Agreement is true and correct in all respects as if
                made on the date of this Amendment, and (ii) no Default or Event
                of Default exists under the Lease Agreement.

        (b)     Lessee has the power to execute, deliver and perform, and has
                taken all necessary corporate action to authorize the execution,
                delivery and performance of, this Amendment and the other
                agreements, instruments and documents to be executed by it in
                connection with this Amendment. No consent or approval of any
                Person, no consent or approval of any mortgagee, no waiver of
                any Lien or light of distraint or other similar right and no
                consent, license, certificate of need, approval, authorization
                or declaration of, or filing with, any governmental authority,
                bureau or agency is or will be required in connection with the
                execution, delivery or performance by Lessee, or in connection
                with the validity or enforcement against Lessee, of this
                Amendment and the other agreements, instruments and documents
                executed in connection with this Amendment, except for the
                filing of this Amendment for recordation with the aircraft
                registry of the FAA.

        (c)     The execution, delivery and performance by Lessee of this
                Amendment and each of the agreements, instruments and documents
                executed in connection with this Amendment to which it is a
                party will not (i) violate any provision of law, (ii) conflict
                with or result in a breach of any order, writ, injunction,
                ordinance, resolution, decree or other similar document or
                instrument binding on Lessee of any court or governmental
                authority, bureau or agency, domestic or foreign, (iii) conflict
                with or result in a breach of the certificate of incorporation
                or by-laws of Lessee, (iv) create (with or without the giving of
                notice or lapse of time, or both) a default under or breach of
                any agreement, bond, note or indenture to which Lessee is a
                party, by which Lessee is bound or by which any of its
                properties or assets is affected, or (v) result in the
                imposition of any Lien of any nature whatsoever upon any of the
                properties or assets owned by or used in connection with the
                business of Lessee.

        (d)     This Amendment and each of the other agreements, instruments and
                documents executed in connection with this Amendment to which
                Lessee is a party have been duly executed and delivered by
                Lessee and constitute the valid and legally binding agreements
                of Lessee, enforceable in accordance with their respective
                terms, except as such enforcement may be limited by applicable
                bankruptcy, insolvency, reorganization, moratorium, or other
                similar laws, now or hereafter in effect, relating to or
                affecting the enforcement of creditors' rights generally and
                except that the remedy of specific performance and other
                equitable remedies are subject to judicial discretion.



                                     - 4 -
<PAGE>


5.      LESSOR'S REPRESENTATIONS AND WARRANTIES.

        Lessor represents and warrants to Lessee as follows:

        (a)     After giving effect to this Amendment, each of the
                representations and warranties set forth in Clause 2.4 of the
                Lease Agreement is true and correct in all respects as if made
                on the date of this Amendment.

        (b)     Lessor has the power to execute, deliver and perform, and has
                taken all necessary limited liability company action to
                authorize the execution, delivery and performance of, this
                Amendment and the other agreements, instruments and documents to
                be executed by it in connection with this Amendment. No consent
                or approval of any Person, no consent or approval of any
                mortgagee, no waiver of any Lien or right of distraint or other
                similar right and no consent, license, certificate of need,
                approval, authorization or declaration of, or filing with, any
                governmental authority, bureau or agency is or will be required
                in connection with the execution, delivery or performance by
                Lessor, or in connection with the validity or enforcement
                against Lessor, of this Amendment and the other agreements,
                instruments and documents executed in connection with this
                Amendment, except for the filing of this Amendment for
                recordation with the aircraft registry of the FAA.

        (c)     The execution, delivery and performance by Lessor of this
                Amendment and each of the agreements, instruments and documents
                executed in connection with this Amendment to which it is a
                party will not (i) violate any provision of law, (ii) conflict
                with or result in a breach of any order, writ, injunction,
                ordinance, resolution, decree or other similar document or
                instrument binding on Lessor of any court or governmental
                authority, bureau or agency, domestic or foreign, (iii) conflict
                with or result in a breach of the certificate of formation or
                operating agreement of Lessor, (iv) create (with or without the
                giving of notice or lapse of time, or both) a default under or
                breach of any agreement, bond, note or indenture to which Lessor
                is a party, by which Lessor is bound or by which any of its
                properties or assets is affected, or (v) result in the
                imposition of any Lien of any nature whatsoever upon any of the
                properties or assets owned by or used in connection with the
                business of Lessor, except the Lien of the Security Trust
                Agreement.

        (d)     This Amendment and each of the other agreements, instruments and
                documents executed in connection with this Amendment to which
                Lessor is a party have been duly executed and delivered by
                Lessor and constitute the valid and legally binding agreements
                of Lessor, enforceable in accordance with their respective
                terms, except as such enforcement may be limited by applicable
                bankruptcy, insolvency, reorganization, moratorium, or other
                similar laws, now or hereafter in effect, relating to or
                affecting the enforcement of creditors' rights generally and
                except that the


                                     - 5 -
<PAGE>


                remedy of specific performance and other equitable remedies are
                subject to judicial discretion.

6.      GOVERNING LAW.

        This Amendment shall be governed by and construed in accordance with the
        laws of the State of New York applicable to contracts executed in the
        State of New York by residents of such State and to be performed
        entirely within such State.

7.      SUCCESSORS AND ASSIGNS.

        This Amendment shall be binding upon, inure to the benefit of and be
        enforceable by Lessor, Lessee, and their respective successors,
        transferees and assigns. Neither Lessor nor Lessee shall assign or
        delegate its rights and obligations under this Amendment except in
        accordance with an assignment or delegation of its rights and
        obligations under, and in accordance with the terms of, the Lease
        Agreement, and any other purported assignment or delegation shall be
        null and void AB INITIO.

8.      SEVERABLE PROVISIONS.

        The provisions of this Amendment are severable, and if any section or
        provision shall be held invalid or unenforceable in whole or in part in
        any jurisdiction, then such invalidity or unenforceability shall affect
        only such section, provision or part in such jurisdiction and shall not
        in any manner affect such section, provision or part in any other
        jurisdiction or any other section or provision in this Amendment in any
        jurisdiction.

9.      COUNTERPARTS.

        This Amendment may be executed in one or more counterparts, each of
        which shall be deemed an original but all of which together shall
        constitute one and the same Amendment.

10.     EXPENSES.

        Each of Lessor and Lessee shall bear its own expenses, including the
        legal fees and expenses of its counsel, in connection with the
        negotiation, execution and delivery of this Amendment and all other
        documents executed and delivered in connection with this Agreement, and
        Lessor and Lessee shall share equally the legal fees and expenses,
        including filing fees, incurred by [Lytle, Soule & Curlee], special
        counsel for FAA matters.

11.     CHATTEL PAPER COUNTERPART.

        TO THE EXTENT, IF ANY, THAT THE LEASE AGREEMENT, AS AMENDED BY THIS
        AMENDMENT, CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
        UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY


                                     - 6 -
<PAGE>



11.     CHATTEL PAPER COUNTERPART.

        TO THE EXTENT, IF ANY, THAT THE LEASE AGREEMENT, AS AMENDED BY THIS
        AMENDEMENT, CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
        UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO
        SECURITY INTEREST IN THE LEASE AGREEMENT AS AMENDED BY THIS AMENDMENT
        MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OF
        THIS AMENDMENT OTHER THAN THE ORIGINAL COUNTERPART MARKED "CHATTEL PAPER
        COUNTERPART".

                            [SIGNATURE PAGE FOLLOWS]

        IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Amendment
804 No. 1 on the date first above written.

                                             ACG ACQUISITION VIII LLC, as Lessor

                                             By:     "R. STEPHEN HANNAHS"
                                                 -------------------------------
                                             Name:  R. STEPHEN HANNAHS
                                             Title: MANAGER


                                             ALOHA AIRLINES, INC., as Lessee

                                             By: "BRENDA F. CUTWRIGHT"
                                                 -------------------------------
                                             Name:  BRENDA F. CUTWRIGHT
                                             Title: EXECUTIVE VICE PRESIDENT AND
                                                    CHIEF FINANCIAL OFFICER


                                             By: "GLENN R. ZANDER"
                                                 -------------------------------
                                                 Name:  Glenn R. Zander
                                                 Title: President & CEO


                                     - 7 -
<PAGE>


                                   Schedule 1
                          to Lease Amendment 802 No. 1

                              Description of Lease

        Lease Agreement 802 dated January 15, 1997, between ACG Acquisition VIII
LLC as lessor and Aloha Airlines, Inc. as lessee, as supplemented by Certificate
of Acceptance 804 dated January 15, 1997, recorded by the Federal Aviation
Administration on January 27, 1997, as Conveyance No. TT008434.


                                     - 8 -


<PAGE>

                           LEASE AMENDMENT 802 NO. 2

        This Lease Amendment 802 No. 2, dated as of November 9, 2001 (this
"Amendment"), is between ACG Acquisition VIII LLC ("Lessor") and Aloha Airlines,
Inc. ("Lessee") and relates to the lease documents for one Boeing Model 737-2S5C
aircraft bearing manufacturer's serial number 22148 and U.S. registration mark
N802AL, including two Pratt & Whitney Model JT8D-9A engines bearing
manufacturer's serial numbers P656093B and P665630B, which engines have 750 or
more rated takeoff horsepower (the "Aircraft").

RECITALS:

(1)     Lessor is leasing the Aircraft to Lessee pursuant to Lease Agreement
        802, dated January 15, 1997 (the "Original Lease Agreement"), between
        Lessor and Lessee, as supplemented by Certificate of Acceptance 802,
        dated January 15, 1997, between Lessor and Lessee (the "Acceptance
        Certificate") and as amended by Lease Amendment 802 No. 1, dated April
        30, 2001, between Lessor and Lessee ("Amendment No. 1"). The Original
        Lease Agreement, as supplemented by the Acceptance Certificate and
        amended by Amendment No. 1, is referred to in this Amendment as the
        Lease Agreement.

(2)     The Original Lease Agreement, the Acceptance Certificate and Amendment
        No. 1 were recorded by the FAA and were assigned conveyance numbers by
        the FAA as set forth on the attached Schedule 1.

(3)     Lessor and Lessee wish to amend the Lease Agreement to extend the term
        of the Lease Agreement for approximately three months, to amend the
        monthly rent during the remainder of the term and to make certain other
        changes as set forth in this Amendment.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration the receipt and sufficiency of which are acknowledged, Lessor and
Lessee agree as follows:

1.      DEFINITIONS.

        Capitalized terms used but not defined in this Amendment shall have the
        meanings ascribed to such terms in the Lease Agreement.

2.      AMENDMENT OF LEASE AGREEMENT.

        The Lease Agreement is amended as follows:


                                     - 1 -
<PAGE>


        (a)     The definition of "Agreed Value" in Clause 1.1 of the Lease
                Agreement is amended to read "as set forth in Appendix 1".

        (b)     The definition of "Expiry Date" in Clause 1.1 of the Lease
                Agreement is amended and restated in its entirety as follows:

                        "December 25, 2002 or, if extended pursuant to Clause 4.
                        1(b), December 25, 2003 or, if earlier than either of
                        those dates, as applicable, the date on which:

                        (a)     the Aircraft has been redelivered in accordance
                                with this Agreement and all obligations of
                                Lessee have been satisfied; or

                        (b)     the Lessor receives the Agreed Value following a
                                Total Loss and any other amounts then due and
                                owing in accordance with this Agreement."

        (c)     The definitions of "Letter of Credit" and "Security Deposit" in
                Clause 1.1 of the Lease Agreement are deleted in their entirety,
                and all references in the Lease Agreement to such terms shall
                have no force or effect.

        (d)     Clause 4.1(b) of the Lease Agreement is amended and restated
                in its entirety as follows:

                        "(b)    By written notice delivered to Lessor on or
                                before June 26, 2002, Lessee may elect to extend
                                the scheduled "Expiry Date" by one year, to
                                December 25, 2003. Except as set forth in the
                                preceding sentence, there shall be no renewals
                                or extensions of the Term."

        (e)     Clause 5.1 of the Lease Agreement is deleted in its entirety.


        (f)     Clause 5.3(b)(ii) of the Lease Agreement is amended and restated
                in its entirety as follows:

                        "(ii)   The Basic Rent payable in respect of each
                                subsequent Rental Period will be the Basic Rent
                                Amount, as set forth in Appendix 1."

        (g)     The Lease Agreement is amended to add Appendix 1 in the form
                attached to this Amendment as Schedule 2.

3.      APPLICATION OF LETTER OF CREDIT.

        Lessor is holding the Letter of Credit (as defined in the Lease
        Agreement, without giving effect to Section 2(c) above). Lessor and
        Lessee agree that Lessor shall be entitled to present


                                     - 2 -
<PAGE>


        the Letter of Credit to the issuing bank, and that the resulting
        proceeds paid to Lessor shall constitute payment in full for the Basic
        Rent due for the Rental Periods beginning on or after September 26, 2001
        and ending on or before December 25, 2001 under the Lease Agreement, as
        amended by this Amendment. Lessee further agrees (a) notwithstanding the
        effect of this Amendment, Lessor may represent to the bank issuing the
        Letter of Credit that an Event of Default has occurred and may make such
        other statements and representations as are necessary for drawing the
        full amount under the Letter of Credit, and (b) Lessee shall take all
        such actions and grant to Lessor and the issuing bank all such waivers
        of the provisions of the Lease Agreement and the Letter of Credit as are
        necessary for Lessor to draw the full amount under the Letter of Credit.

4.      RATIFICATION.

        Except as amended in Section 2 above, the Lease Agreement remains in
        full force and effect in accordance with its terms.

5.      LESSEE'S REPRESENTATIONS AND WARRANTIES.

        Lessee represents and warrants to Lessor as follows:

        (a)     After giving effect to this Amendment, (i) each of the
                representations and warranties set forth in Clauses 2.1 and 2.2
                of the Lease Agreement is true and correct in all respects as if
                made on the date of this Amendment, and (ii) no Default or Event
                of Default exists under the Lease Agreement.

        (b)     Lessee has the power to execute, deliver and perform, and has
                taken all necessary corporate action to authorize the execution,
                delivery and performance of, this Amendment and the other
                agreements, instruments and documents to be executed by it in
                connection with this Amendment. No consent or approval of any
                Person, no consent or approval of any mortgagee, no waiver of
                any Lien or right of distraint or other similar right and no
                consent, license, certificate of need, approval, authorization
                or declaration of, or filing with, any governmental authority,
                bureau or agency is or will be required in connection with the
                execution, delivery or performance by Lessee, or in connection
                with the validity or enforcement against Lessee, of this
                Amendment and the other agreements, instruments and documents
                executed in connection with this Amendment, except for the
                filing of this Amendment for recordation with the aircraft
                registry of the FAA.

        (c)     The execution, delivery and performance by Lessee of this
                Amendment and each of the agreements, instruments and documents
                executed in connection with this Amendment to which it is a
                party will not (i) violate any provision of law, (ii) conflict
                with or result in a breach of any order, writ, injunction,
                ordinance, resolution, decree or other similar document or
                instrument binding on Lessee of any


                                     - 3 -
<PAGE>


                court or governmental authority, bureau or agency, domestic or
                foreign, (iii) conflict with or result in a breach of the
                certificate of incorporation or by-laws of Lessee, (iv) create
                (with or without the giving of notice or lapse of time, or both)
                a default under or breach of any agreement, bond, note or
                indenture to which Lessee is a party, by which Lessee is bound
                or by which any of its properties or assets is affected, or (v)
                result in the imposition of any Lien of any nature whatsoever
                upon any of the properties or assets owned by or used in
                connection with the business of Lessee.

        (d)     This Amendment and each of the other agreements, instruments and
                documents executed in connection with this Amendment to which
                Lessee is a party have been duly executed and delivered by
                Lessee and constitute the valid and legally binding agreements
                of Lessee, enforceable in accordance with their respective
                terms, except as such enforcement may be limited by applicable
                bankruptcy, insolvency, reorganization, moratorium, or other
                similar laws, now or hereafter in effect, relating to or
                affecting the enforcement of creditors' rights generally and
                except that the remedy of specific performance and other
                equitable remedies are subject to judicial discretion.

6.      LESSOR'S REPRESENTATIONS AND WARRANTIES.

        Lessor represents and warrants to Lessee as follows:

        (a)     After giving effect to this Amendment, each of the
                representations and warranties set forth in Clause 2.4 of the
                Lease Agreement is true and correct in all respects as if made
                on the date of this Amendment.

        (b)     Lessor has the power to execute, deliver and perform, and has
                taken all necessary limited liability company action to
                authorize the execution, delivery and performance of, this
                Amendment and the other agreements, instruments and documents to
                be executed by it in connection with this Amendment. No consent
                or approval of any Person, no consent or approval of any
                mortgagee, no waiver of any Lien or right of distraint or other
                similar right and no consent, license, certificate of need,
                approval, authorization or declaration of, or filing with, any
                governmental authority, bureau or agency is or will be required
                in connection with the execution, delivery or performance by
                Lessor, or in connection with the validity or enforcement
                against Lessor, of this Amendment and the other agreements,
                instruments and documents executed in connection with this
                Amendment, except for the filing of this Amendment for
                recordation with the aircraft registry of the FAA.

        (c)     The execution, delivery and performance by Lessor of this
                Amendment and each of the agreements, instruments and documents
                executed in connection with this Amendment to which it is a
                party will not (i) violate any provision of law, (ii) conflict
                with or result in a breach of any order, writ, injunction,
                ordinance,


                                     - 4 -
<PAGE>


                resolution, decree or other similar document or instrument
                binding on Lessor of any court or governmental authority, bureau
                or agency, domestic or foreign, (iii) conflict with or result in
                a breach of the certificate of formation or operating agreement
                of Lessor, (iv) create (with or without the giving of notice or
                lapse of time, or both) a default under or breach of any
                agreement, bond, note or indenture to which Lessor is a party,
                by which Lessor is bound or by which any of its properties or
                assets is affected, or (v) result in the imposition of any Lien
                of any nature whatsoever upon any of the properties or assets
                owned by or used in connection with the business of Lessor,
                except the Lien of the Security Trust Agreement.

        (d)     This Amendment and each of the other agreements, instruments and
                documents executed in connection with this Amendment to which
                Lessor is a party have been duly executed and delivered by
                Lessor and constitute the valid and legally binding agreements
                of Lessor, enforceable in accordance with their respective
                terms, except as such enforcement may be limited by applicable
                bankruptcy, insolvency, reorganization, moratorium, or other
                similar laws, now or hereafter in effect, relating to or
                affecting the enforcement of creditors' rights generally and
                except that the remedy of specific performance and other
                equitable remedies are subject to judicial discretion.

7.      GOVERNING LAW.

        This Amendment shall be governed by and construed in accordance with the
        laws of the State of New York applicable to contracts executed in the
        State of New York by residents of such State and to be performed
        entirely within such State.

8.      SUCCESSORS AND ASSIGNS.

        This Amendment shall be binding upon, inure to the benefit of and be
        enforceable by Lessor, Lessee, and their respective successors,
        transferees and assigns. Neither Lessor nor Lessee shall assign or
        delegate its rights and obligations under this Amendment except in
        accordance with an assignment or delegation of its rights and
        obligations under, and in accordance with the terms of, the Lease
        Agreement, and any other purported assignment or delegation shall be
        null and void AB INITIO.

9.      SEVERABLE PROVISIONS.

        The provisions of this Amendment are severable, and if any section or
        provision shall be held invalid or unenforceable in whole or in part in
        any jurisdiction, then such invalidity or unenforceability shall affect
        only such section, provision or part in such jurisdiction and shall not
        in any manner affect such section, provision or part in any other
        jurisdiction or any other section or provision in this Amendment in any
        jurisdiction.


                                     - 5 -
<PAGE>


10.     COUNTERPARTS.

        This Amendment may be executed in one or more counterparts, each of
        which shall be deemed an original but all of which together shall
        constitute one and the same Amendment.

11.     EXPENSES.

        Each of Lessor and Lessee shall bear its own expenses, including the
        legal fees and expenses of its counsel, in connection with the
        negotiation, execution and delivery of this Amendment and all other
        documents executed and delivered in connection with this Agreement, and
        Lessor and Lessee shall share equally the legal fees and expenses,
        including filing fees, incurred by Lytle, Soule & Curlee, special
        counsel for FAA matters.

12.     CHATTEL PAPER COUNTERPART.

        TO THE EXTENT, IF ANY, THAT THE LEASE AGREEMENT, AS AMENDED BY THIS
        AMENDMENT, CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
        UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO
        SECURITY INTEREST IN THE LEASE AGREEMENT AS AMENDED BY THIS AMENDMENT
        MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OF
        THIS AMENDMENT OTHER THAN THE ORIGINAL COUNTERPART MARKED "CHATTEL PAPER
        COUNTERPART".

                            [SIGNATURE PAGE FOLLOWS]


                                     - 6 -
<PAGE>


        IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Amendment
802 No. 2 as of the date first above written.

                                             ACG ACQUISITION VIII LLC, as Lessor

                                             By: "BENJAMIN L. JUNG"
                                                --------------------------------
                                             Name: Benjamin L. Jung
                                             Title: Manager



                                             ALOHA AIRLINES, INC., as Lessee

                                             By: _______________________________
                                             Name:
                                             Title:


                                             By: _______________________________
                                             Name:
                                             Title:


                                     - 7 -
<PAGE>

        IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Amendment
802 No. 2 as of the date first above written.

                                          ACG ACQUISITION VIII LLC, as Lessor

                                          By:
                                              ----------------------------------
                                          Name: Benjamin L. Jung
                                          Title: Manager


                                          ALOHA AIRLINES, INC., as Lessee


                                          By: "BRENDA F. CUTWRIGHT"
                                              ----------------------------------
                                          Name: BRENDA F. CUTWRIGHT
                                          Title: EXECUTIVE VICE PRESIDENT & CFO

                                          By: "JAMES M. KING"
                                              ----------------------------------
                                          Name: JAMES M. KING
                                          Title: SENIOR VICE PRESIDENT PLANNING
                                                 AND BUSINESS DEVELOPMENT


                                     - 7 -
<PAGE>


                                   Schedule 1
                          to Lease Amendment 802 No. 2

                              Description of Lease

        Lease Agreement 802, dated January 15, 1997, between ACG Acquisition
VIII LLC as lessor and Aloha Airlines, Inc. as lessee, as supplemented by
Certificate of Acceptance 804 dated January 15, 1997, recorded by the Federal
Aviation Administration on January 27, 1997, as Conveyance No. TT008434.

        Lease  Amendment  802 No.  1, dated April  30, 2001,
between  ACG  Acquisition  VIII LLC as  lessor  and  Aloha
Airlines,   Inc.  as  lessee,   recorded  by  the  Federal
Aviation  Administration on May 17, 2001 as Conveyance No.
BB34836.



                                     - 8 -
<PAGE>



                                   Schedule 2
                          to Lease Amendment 802 No. 2

        [INTENTIONALLY OMITTED AS CONTAINING CONFIDENTIAL INFORMATION]1

                       APPENDIX 1 TO LEASE AGREEEMENT 802

ADDITIONAL DEFINITIONS

In addition to the definitions set forth in Clause 1.1, the following
expressions shall have the following respective meanings in this Agreement:

AGREED VALUE            $5,000,000

BASIC RENT AMOUNT       means (1) for Rental Periods ending on or before
                        September 25, 2001, the amount of $110,000, (2) for
                        Rental Periods beginning on or after September 26, 2001
                        and ending on or before December 25, 2001, the amount of
                        $33,333.33, and (3) for Rental Periods beginning on or
                        after December 26, 2001, the amount of $90,000.


---------------
1 For inclusion on FAA filed copies of this Amendment in lieu of the following
information.


                                     - 9 -