<PAGE>
                                                                EXHIBIT 10.57

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                                 LEASE AGREEMENT

                          dated as of February 22, 2000

                                     between

                        WILLIS LEASE FINANCE CORPORATION,

                                     Lessor

                                       and

                              ALOHA ISLANDAIR, INC.

                                     Lessee

                              -------------------

                          Covering One (1) de Havilland
                               Dash 8-102 Aircraft
                        Manufacturer's Serial Number 026
                          U.S. Registration No. N812PH,
                             Two (2) Pratt & Whitney
                              Model PW 120 Engines
                              Manufacturer's Serial
                            Numbers 120107 and 120142
                                       and
                            Two (2) Hamilton Standard
                               14 SF-7 Propellers,
                              Manufacturer's Serial
                            Numbers 851114 and 890711

=============================================================================

THIS LEASE AGREEMENT HAS BEEN EXECUTED IN COUNTERPARTS. TO THE EXTENT 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 THEREFOR EXECUTED BY THE LESSOR ON THE SIGNATURE PAGE
THEREOF.

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                               TABLE OF CONTENTS
                                                                        Page
                                                                        ----
LEASE AGREEMENT .........................................................  1

SECTION 1.   DEFINITIONS ................................................  1

SECTION 2.   AGREEMENT TO LEASE: TERM ...................................  7
      2.01   LEASING OF AIRCRAFT ........................................  7
      2.02   ACCEPTANCE .................................................  7
      2.03   DELIVERY OF AIRCRAFT .......................................  8
      2.04   TERM .......................................................  8

SECTION 3.   CONDITIONS PRECEDENT .......................................  8
      3.01   CONDITIONS PRECEDENT TO LESSOR'S OBLIGATIONS ...............  8
      3.02   CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS ............... 10

SECTION 4.   LESSEE'S REPRESENTATIONS AND WARRANTIES .................... 11
      4.01   DUE ORGANIZATION, STANDING ETC. ............................ 11
      4.02   OPERATIVE DOCUMENTS ........................................ 11
      4.03   NO CONFLICT; CONSENT ....................................... 12
      4.04   GOVERNMENTAL CONSENTS ...................................... 12
      4.05   NO ADVERSE AGREEMENTS ...................................... 12
      4.06   NO DEFAULTS OR VIOLATIONS .................................. 12
      4.07   LITIGATION ................................................. 12
      4.08   NO EVENT OF DEFAULT ........................................ 13
      4.09   FINANCIAL STATEMENTS ....................................... 13
      4.10   CHIEF EXECUTIVE OFFICE ..................................... 13
      4.11   FILINGS MADE ............................................... 13
      4.12   CERTIFICATE ................................................ 13

SECTION 5.   LESSOR'S REPRESENTATIONS AND WARRANTIES .................... 13
      5.01   DUE ORGANIZATION, STANDING ETC. ............................ 14
      5.02   OPERATIVE DOCUMENTS ........................................ 14

SECTION 6.   COVENANTS OF LESSEE ........................................ 14
      6.01   AIR OPERATOR'S CERTIFICATE ................................. 14
      6.02   FINANCIAL AND OTHER INFORMATION TO BE SUPPLIED ............. 14
      6.03   EXISTENCE .................................................. 15
      6.04   INSPECTION RIGHTS; RECORDS ................................. 15
      6.05   PAYMENT OF TAXES AND CLAIMS ................................ 16
      6.06   NOTICE OF LITIGATION ....................................... 16
      6.07   MERGER ..................................................... 16
      6.08   CHIEF EXECUTIVE OFFICE ..................................... 16
      6.09   CERTIFICATE ................................................ 17


                                       i
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SECTION 7.   PAYMENTS ................................................... 17
      7.01   RENT ....................................................... 17
      7.02   NET LEASE; NO SET-OFF OR DEDUCTIONS ........................ 17
      7.03   IMMEDIATELY AVAILABLE FUNDS ................................ 18
      7.04   SUPPLEMENTAL RENT; OVERDUE RENT ............................ 18
      7.05   RESERVED ................................................... 18
      7.06   GROSS UP ................................................... 18

SECTION 8.   LIMITATION OF LESSOR'S LIABILITY ........................... 18

SECTION 9.   USE, OPERATION AND MAINTENANCE ............................. 19
      9.01   GENERAL .................................................... 19
      9.02   OPERATION AND USE .......................................... 19
      9.03   MAINTENANCE IN GENERAL ..................................... 20
      9.04   SPECIFIC ITEMS OF MAINTENANCE .............................. 21
      9.05   PARTS ...................................................... 22
      9.06   AIRWORTHINESS DIRECTIVES ................................... 23
      9.07   SERVICE BULLETINS: NONDISCRIMINATION ....................... 23
      9.08   CORROSION CONTROL .......................................... 24
      9.09   MODIFICATIONS .............................................. 24
      9.10   POSSESSION; SUBLEASING; EQUIPMENT SUBSTITUTION ............. 24
      9.11   REPAIRS .................................................... 26
      9.12   AIRCRAFT RECORDS ........................................... 26
      9.13   WARRANTIES ................................................. 26
      9.14   AIRPORT CHANGE ............................................. 27
      9.15   RIGHT TO INSPECT ........................................... 27
      9.16   REPORTING .................................................. 27

SECTION 10.  RETURN OF AIRCRAFT ......................................... 27
     10.01   RETURN ..................................................... 27
     10.02   CONDITION OF AIRCRAFT ...................................... 27
     10.03   BOROSCOPE INSPECTION ....................................... 27
     10.04   HISTORICAL RECORDS; TREND MONITORING DATA .................. 28
     10.05   INSPECTION ................................................. 28
     10.06   OPERATIONAL GROUND CHECK ................................... 28
     10.07   OPERATION CHECK FLIGHT ..................................... 29
     10.08   ACCEPTANCE ................................................. 29
     10.09   DEFERRED DISCREPANCY CORRECTION ............................ 29
     10.10   FLIGHT COST ................................................ 30
     10.11   INDEMNIFICATION ............................................ 30
     10.12   INSURANCE .................................................. 30
     10.13   MANUALS AND TECHNICAL RECORDS .............................. 30
     10.14   SERVICE BULLETIN KITS ...................................... 31
     10.15   LESSEE'S SPECIAL EXTERIOR MARKINGS . ....................... 31
     10.16   OWNERSHIP .................................................. 31
     10.17   STORAGE UPON RETURN ........................................ 31

SECTION 11.  TITLE; REGISTRATION; LIENS . ............................... 31
     11.01   TITLE ...................................................... 31
     11.02   REGISTRATION; FILINGS; REGISTRATION ........................ 32
     11.03   LIENS ...................................................... 32
     11.04   NOTICE OF OWNERSHIP ........................................ 32


                                      ii
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SECTION 12.  INSURANCE .................................................. 33
     12.01   ALL-RISK INSURANCE ......................................... 33
     12.02   WAR RISK INSURANCE ......................................... 33
     12.03   LIABILITY INSURANCE ........................................ 34
     12.04   ELECTRONIC DATE RECOGNITION INSURANCE ...................... 34
     12.05   DEDUCTIBLES AND SELF INSURANCE ............................. 34
     12.06   ADDITIONAL REQUIREMENTS; LOSS PAYMENT ...................... 34
     12.07   NO SET-OFF ................................................. 35
     12.08   NOTICE OF MATERIAL ALTERATION OR CANCELLATION .............. 35
     12.09   APPLICATION OF CERTAIN INSURANCE PROCEEDS .................. 35
     12.10   INSURANCE FOR OWN ACCOUNT .................................. 36
     12.11   CERTIFICATES AND REPORT .................................... 36

SECTION 13.  LOSS, DAMAGE OR REQUISITION ................................ 36
     13.01   AN EVENT OF LOSS OF AIRFRAME ............................... 36
     13.02   ENGINE OR PROPELLER LOSS ................................... 37
     13.03   PAYMENTS FROM GOVERNMENTAL AUTHORITIES FOR REQUISITION
             OF TITLE OR USE ............................................ 38
     13.04   APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT
             OF DEFAULT ................................................. 38

SECTION 14.  EVENT OF DEFAULT ........................................... 39
     14.01   FAILURE TO MAKE PAYMENTS ................................... 39
     14.02   FAILURE TO OBTAIN OR MAINTAIN INSURANCE .................... 39
     14.03   FAILURE TO PERFORM OTHER OBLIGATIONS ....................... 39
     14.04   REPRESENTATIONS AND WARRANTIES UNTRUE ...................... 39
     14.05   INSOLVENCY OR BANKRUPTCY ................................... 39
     14.06   LOSS OF REGISTRATION OR PROTECTION ......................... 40
     14.07   LOSS OF LICENSE ............................................ 40
     14.08   OTHER LEASE ................................................ 40
     14.09   FINAL JUDGMENT ............................................. 40
     14.10   OTHER DEFAULT .............................................. 40
     14.11   CONTEST .................................................... 40
     14.12   FAILURE TO MAINTAIN LETTER OF CREDIT ....................... 40
     14.13   FAILURE TO MAINTAIN THE GUARANTY ........................... 41

SECTION 15.  REMEDIES ................................................... 41

SECTION 16.  INDEMNITIES AND EXPENSES ................................... 43
     16.01   GENERAL INDEMNIFICATION AND WAIVER OF CERTAIN CLAIMS ....... 43
     16.02   GENERAL TAX INDEMNITY ...................................... 44
     16.03   AFTER-TAX BASIS; SURVIVAL .................................. 49
     16.04   EXPENSES ................................................... 50

SECTION 18.  ASSIGNMENT ................................................. 50

SECTION 19.  NOTICES .................................................... 51

SECTION 20.  LESSOR'S RIGHT TO PERFORM FOR LESSEE ....................... 51


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SECTION 21.  LEASE; SECTION 1110 ........................................ 51
     21.01   LEASE ...................................................... 51
     21.02   SECTION 1110 ............................................... 52

SECTION 22.  MISCELLANEOUS .............................................. 52
     22.01   WAIVERS, HEADINGS .......................................... 52
     22.02   COUNTERPARTS ............................................... 52
     22.03   GOVERNING LAW .............................................. 52
     22.04   BENEFIT AND BINDING EFFECT ................................. 52
     22.05   FURTHER ASSURANCES ......................................... 53
     22.07   USURY LAWS ................................................. 53
     22.08   ENTIRE AGREEMENT ........................................... 54

Exhibit A        Description of Aircraft

Schedule 1       to Exhibit A - Delivery Conditions

Exhibit B        Rent and Other Financial Matters

Schedule 1       to Exhibit B - Letter of Credit

Exhibit C        Acceptance Certificate

Exhibit D        Schedule of Manuals and Technical Records

Exhibit E        Return Acceptance Certificate

Exhibit F        General Return Conditions of the Aircraft


                                    iv
<PAGE>


                             LEASE AGREEMENT

         THIS LEASE AGREEMENT, dated as of February 22, 2000 ("Lease"), is
between WILLIS LEASE FINANCE CORPORATION ("Lessor"), a Delaware corporation
having its principal place of business at 2320 Marinship Way, Sausalito, CA
94965 and ALOHA ISLANDAIR, INC. ("Lessee"), a Delaware corporation having its
principal place of business at 99 Kapalulu Place, Honolulu, Hawaii 96819.

                          W I T N E S S E T H :

         WHEREAS, Lessee desires to lease the Aircraft from Lessor, and
Lessor desires to lease the Aircraft to Lessee, pursuant to the terms and
conditions of this Lease;

         NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:

         SECTION 1. DEFINITIONS.

         The following terms shall have the following respective meanings
(such meanings to be equally applicable to both the singular and plural forms
of the terms defined). All definitions of documents shall refer to such
documents as they may now or hereafter be amended or supplemented. All
definitions of parties hereto shall include the successors and permitted
assigns of such parties.

         "ACCEPTANCE CERTIFICATE" means a certificate in substantially the
form of Exhibit C, to be signed by Lessee on the Delivery Date as required
under Section 2.02 hereof.

         "AERONAUTICAL  AUTHORITY" means as of any time of determination, the
FAA or other governmental airworthiness authority having jurisdiction over
the Aircraft under the laws of the country in which the Aircraft is then
registered.

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

         "AIRCRAFT" means (A) the Airframe and Engines and Propellers (or any
engine or propeller substituted for any of said Engines or Propellers
pursuant to Section 13.02 of this Lease), whether or not any of such Engines
or Propellers or engines or propellers may from time to time be installed on
such Airframe or may be installed on any other airframe or on any other
aircraft; and (B) where the context permits, the Manuals and Technical Records.


                                    -1-
<PAGE>

         "AIRFRAME" means (i) the aircraft (except the Engines or engines and
Propellers or propellers from time to time installed thereon) identified and
described in Exhibit A hereto and (ii) any and all Parts so long as the same
shall be incorporated or installed in or attached to the Airframe, or so long
as title thereto shall remain vested in Lessor in accordance with the terms
of Section 9.05 of this Lease, after removal from the Airframe.

         "AIR OPERATOR'S CERTIFICATE" means, the certificate, license or
permit required by the Aeronautical Authority or any other governmental
authority having jurisdiction required for the Lessee to carry passengers in
common carriage as it then does in its operations.

         "AIRWORTHINESS DIRECTIVE(S)" has the meaning given in Section 9.06
hereof.

         "APPLICABLE LAW" means all applicable laws, treaties, judgments,
decrees, injunctions, writs and orders of any court, governmental agency or
authority and rules, regulations, orders, directives, licenses and permits of
any governmental body, instrumentality, agency or authority and all
interpretations, implementation and enforcement of any of the foregoing,
whether or not enforceable as a matter of law, by any court, government body,
instrumentality, agency or authority.

        "BASIC RENT" means the rent payable throughout the Term for the
Aircraft pursuant to Section 7.01 of the Lease in the amount and as set forth
in Exhibit B hereto.

         "BUSINESS DAY(S)" means any day other than a Saturday, a Sunday or a
day on which banks are permitted. or required to close in San Francisco,
California or Honolulu, Hawaii.

         "CERTIFICATE OF AIRWORTHINESS" means, at any time that the FAA is
the Aeronautical Authority, a Standard Certificate of Airworthiness issued by
the FAA and, at any time that the FAA is not the Aeronautical Authority, any
analogous certificate, document or approval required by the Aeronautical
Authority for operation of the Aircraft in the manner that it will be
operated by Lessee.

         "CERTIFICATED AIR CARRIER" means any U.S. air carrier holding an air
carrier operating certificate issued by the Secretary of Transportation
pursuant to Chapter 447 of Title 49 of the United States Code.

         "CONTRIBUTION AMOUNT" has the meaning given in Exhibit B hereto.

         "CYCLE" means one takeoff and landing of an aircraft.

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

         "DELIVERY DATE" means the date on which the Acceptance Certificate
is delivered by the Lessee pursuant to Section 2.02 hereof.


                                   -2-
<PAGE>

         "DOLLARS" or "dollars" or the symbol "$" means dollars in lawful
currency of the United States of America.

         "ENGINE" means: (i) any or all of the engines identified and
described in Exhibit A, whether or not from time to time installed on the
Airframe or installed on any other airframe; (ii) any engine that may from
time to time be substituted, pursuant to Section 9.10 or 13.02 of this Lease,
for such Engine and (iii) any and all Parts incorporated or installed in or
attached thereto or any and all Parts removed therefrom so long as title
thereto shall remain vested in Lessor in accordance with the terms of Section
9.05 of this Lease after removal from such Engine. Each such engine is 750 or
more rated takeoff horsepower or the equivalent thereof.

         "EVENT OF DEFAULT" has the meaning given in Section 14 hereof.

         "EVENT OF LOSS" with respect to the Aircraft, Airframe or any Engine
or Propeller means any of the following events with respect to such property:
(i) loss of such property or the use thereof due to theft or disappearance
for more than 30 days; (ii) loss of such property or the use thereof due to
destruction, damage beyond repair or rendition of such property permanently
unfit for normal use; (iii) any event which should or does result in the
receipt of insurance proceeds with respect to such property on the basis of a
total loss, arranged total loss or constructive total loss; (iv)(A) the
taking, confiscation or seizure of title to the Aircraft or Airframe or (B)
the condemnation, taking, confiscation or seizure of the use of the Aircraft
or Airframe for a period in excess of 30 days by any government or agency or
instrumentality thereof; or (v) with respect to any Engine or Propeller, the
taking of title or requisition for use by any government and any divestiture
of title deemed an Event of Loss pursuant to Section 9.10 of this Lease. An
Event of Loss with respect to the Aircraft shall be deemed to occur if an
Event of Loss occurs with respect to the Airframe.

         "FAA" means the United States Federal Aviation Administration, the
Administrator thereof and any agency or instrumentality of the United States
government succeeding to their functions.

         "FLIGHT HOUR" means (i) with respect to the Airframe, any hour,
including calculating by aggregating fractions of an hour, occurring on any
flight, measured from the time the wheels of the Airframe leave the ground
until the wheels next touch the ground, or (ii) with respect to any Engine or
Propeller, any hour, including calculating by aggregating fractions of an
hour, occurring on any flight, measured from the time the wheels of any
airframe, including the Airframe, on which such Engine or Propeller is
installed leave the ground until the wheels next touch the ground.

         "GUARANTOR" means Aloha Airgroup, Inc., a Hawaii corporation.

         "GUARANTY" means the Guaranty, dated the date hereof, from the
Guarantor in favor of the Lessor.

         "IMPOSITION" has the meaning given in Section 16.02 hereto.


                                     -3-
<PAGE>

         "INDEMNITEE" means the Lessor, its Affiliates, any permitted
assignee of the Lessor (whether such assignment is for security or other
reasons and, if such assignment is to an owner trustee, agent, indenture
trustee or other Person acting in a fiduciary or similar capacity for other
Persons, such other Persons shall also be Indemnitees), and each agent,
director, employee, representative and successor thereof.

         "INSURED PARTY" means the Lessor,  its Affiliates,  any permitted
assignee of the Lessor (whether such assignment is for security or other
reasons and, if such assignment is to an owner trustee, agent, indenture
trustee or other Person acting in a fiduciary or similar capacity for other
Persons, such other Persons shall also be Insured Parties), including without
limitation Lender, and any successor thereof.

         "LEASE" has the meaning given in the Introductory Statement hereof
and includes all Exhibits and Schedules hereto.

         "LENDER" means any bank or other financial  institution providing
debt financing to the Lessor.

         "LESSEE" means the Lessee (as defined in the Introductory Statement
hereof) and its successors and permitted assigns.

         "LESSOR" means the Lessor (as defined in the Introductory Statement
hereof) and its successors and permitted assigns.

         "LESSOR'S LIENS" means any Lien arising as a result of (i) claims
against Lessor or its Affiliates not related to the transactions contemplated
by the Lease, (ii) any act or omission of Lessor or its Affiliates which is
not related to the transactions contemplated by the Lease or is in violation
of any of the terms of the Lease, (iii) claims against Lessor or its
Affiliates with respect to Taxes against which Lessee is not required to
indemnify Lessor, (iv) claims against the Aircraft arising out of events
occurring prior to the commencement of the Term or after the expiration or
termination of the Term and the redelivery of the Aircraft in accordance with
this Lease and (v) claims against the Lessor or its Affiliates for any acts
or omissions of Lessor or its Affiliates related to the transactions
contemplated by this Lease; provided that the same are not the direct or
indirect result of any Default or Event of Default hereunder and provided
that the same are not covered by the Lessee's indemnity obligations hereunder.

         "LETTER OF CREDIT" has the meaning given in Exhibit B hereto.

         "LIFE LIMITED PART" means a part having a designated finite number
of Flight Hours, Cycles or days the Part can be used before being permanently
removed from use.

         "LIEN" means any mortgage, pledge, lien, charge or encumbrance,
lease,


                                    -4-
<PAGE>

financing statement, claim, exercise of rights or security interest.

         "MAINTENANCE PROGRAM" has the meaning given in Section 9.03 hereof.

         "MANUALS AND TECHNICAL RECORDS" means all such manuals, technical
data, log books and other records pertaining to the Aircraft (including,
without limitation, the technical manuals and aircraft records listed in
Exhibit D hereto) to be maintained by Lessee or as shall be required to
comply with the requirements of the Aeronautical Authority from time to time
in force. All such manuals, technical data, logbooks and other records shall
be maintained in English or with English translations.

         "MANUFACTURER"  means, with respect to the Airframe, de Havilland,
with respect to the Engines, Pratt & Whitney Canada, and, with respect to the
Propellers, Hamilton Standard.

         "MODIFICATIONS" means Optional Modifications and Required
Modifications.

         "OFFICER'S CERTIFICATE" means as to any company a certificate signed
by a duly authorized officer of the company.

         "OPERATIVE DOCUMENTS"  means this Lease, the Acceptance Certificate
and the Guaranty.

         "OPTIONAL MODIFICATIONS" has the meaning given in Section 9.09(b)
hereof.

         "OTHER LEASE" means the Lease Agreement, between the Lessor and
Lessee with respect to the Other Aircraft.

         "OTHER AIRCRAFT" means that certain de Havilland Dash 8-102
aircraft, manufacturer's serial number 023, as further identified in the
Other Lease.

         "OVERDUE RATE" has the meaning given in Exhibit B hereto.

         "PARTS"  means  all  appliances,  parts,  instruments,
appurtenances, accessories, furnishings and other equipment of whatever
nature (other than Engines or engines or Propellers or propellers) which may
from time to time be incorporated or installed in or attached to the Airframe
or any Engine or Propeller or so long as title thereto shall remain vested in
Lessor in accordance with Section 9.05 after removal therefrom.

         "PERMITTED  LIENS" means (i) Lessor's  Liens;  (ii) the respective
rights of Lessor and Lessee as provided herein; (iii) the rights of others
under agreements or arrangements to the extent expressly permitted in Section
9.10 hereof; (iv) Liens for Taxes either not yet due or being contested in
good faith (and for the payment of which adequate reserves have been
provided) by appropriate proceedings conducted in due diligence, so long as
such proceedings do not involve any material danger of the sale, forfeiture
or loss of the Airframe or any Engine or Propeller; (v) material suppliers',
mechanics', workers', repairers', employees' or other like liens arising in
the ordinary


                                    -5-
<PAGE>

course of business and for amounts the payment of which is either not yet
delinquent or is being contested in good faith (and for the payment of which
adequate reserves have been provided) by appropriate proceedings conducted in
due diligence, so long as such proceedings do not involve any material danger
of the sale, forfeiture or loss of the Airframe or any Engine or Propeller;
and (vi) Liens arising out of judgments or awards against Lessee with respect
to which at the time an appeal or proceeding for review is being prosecuted
in good faith (and for the payment of which adequate reserves have been
provided) and there shall have been secured a stay of execution pending such
appeal or proceeding for review.

         "PERSON" means any natural person, corporation, partnership, joint
venture, firm,  association,  trust,  unincorporated  organization,
government or governmental agency or political subdivision or any other
entity, whether acting in an individual, fiduciary or other capacity.

         "PROPELLER" means (i) any or all of the propellers identified and
described in Exhibit A, whether or not from time to time installed on an
Engine or any other engine; (ii) any propeller that may from time to time be
substituted, pursuant to Section 9.10 or 13.02 of this Lease, for such
Propeller; and (iii) any and all Parts incorporated or installed in or
attached thereto or any and all Parts removed therefrom so long as such title
thereto shall remain vested in Lessor in accordance with the terms of Section
9.05 of this Lease after removal from such propeller. Each such propeller is
capable of absorbing 750 or more rated takeoff shaft horsepower or the
equivalent thereof.

         "REGISTRY" means, at any time that the FAA is the Aeronautical
Authority, the FAA and, at any time that the FAA is not the Aeronautical
Authority, the registry maintained in the country of registration of the
Aircraft during the Term to register and record ownership of and other
interests in aircraft.

         "RENT" means Basic Rent and Supplemental Rent.

         "RENT PAYMENT DATE" means each day on which an installment of Basic
Rent is due throughout the Term as set forth in Exhibit B hereto.

         "REPLACEMENT ENGINE" means an engine of the same or an improved
model (and manufactured by the same manufacturer) as an Engine being replaced
pursuant to Section 13.02 hereof, which is suitable for installation and use
on the Airframe without materially impairing the value or utility of the
Airframe and having a modification status, value (giving consideration to
maintenance status and time remaining to any scheduled or required
replacement of any Life Limited Part), condition and utility at least equal
to the Engine it is replacing (assuming such Engine was in the time status,
modification status, condition and repair required by the terms hereof
immediately prior to being replaced).

         "REPLACEMENT PROPELLER" means a propeller of the same or an improved
model (and manufactured by the same manufacturer) as a Propeller being
replaced pursuant to Section 13.02 hereof, which is suitable for installation
and use on an Engine


                                   -6-
<PAGE>

and the Airframe and having a time status, modification status, value,
condition and utility at least equal to the Propeller that it is replacing
(assuming such Propeller was in the time and Cycle status, modification
status, value, condition and repair required by the terms hereof immediately
prior to being replaced).

         "REQUIRED MODIFICATION" has the meaning given in Section 9.09(a)
hereof.

         "RETURN LOCATION" has the meaning given in Section 10.01 hereof.

         "SERVICE BULLETINS" means service bulletins issued by the
Manufacturer or any other manufacturer or vendor setting forth Alert and
other service procedures applicable to the Aircraft or any Engine or
Propeller.

         "STANDARD CERTIFICATE OF AIRWORTHINESS" means the certificate of
airworthiness issued by the Aeronautical Authority.

         "STIPULATED LOSS VALUE" has the meaning given in Exhibit B hereto.

         "SUPPLEMENTAL RENT" means all monetary amounts, liabilities and
obligations (other than Basic Rent) that Lessee assumes or agrees to pay or
requires any other person to pay under any Operative Documents to Lessor or
others, including, without limitation, indemnity payments, requisition
proceeds and Stipulated Loss Value.

         "TAX" means all license, documentation and registration fees and all
taxes, levies, imposts, duties, charges, assessments or withholdings of any
nature whatsoever together with any penalties, additions to tax, fines or
interest thereon, (including, without limitation, income, gross receipts,
rental, turnover, occupation, sales, use, excise, value added, personal
property (tangible and intangible) and other taxes imposed by any federal,
state or local or governmental taxing authority in the United States or any
foreign government or taxing authority.

         "TERM" has the meaning given in Exhibit B hereto.

         SECTION 2. AGREEMENT TO LEASE: TERM.

         2.01 LEASING OF AIRCRAFT.

         Subject to the terms and conditions hereof, Lessor agrees to lease
the Aircraft to Lessee hereunder on the Delivery Date, such leasing to be
evidenced by Lessee executing and delivering the Acceptance Certificate
hereunder, and (to the extent that it has not already done so) executing and
delivering all documents or certificates and taking such other actions as are
required by Lessor to be executed and delivered or taken on or before the
Delivery Date pursuant to the terms of any Operative Document.

         2.02 ACCEPTANCE.

         Subject to the terms and conditions hereof and of the other Operative


                                      -7-
<PAGE>

Documents to which Lessee or Guarantor is a party, Lessee hereby agrees to
lease the Aircraft from Lessor hereunder on the Delivery Date, and (to the
extent that it has not already done so) taking the following action:

         (a) Execute and deliver to Lessor the Acceptance Certificate; and

         (b) Execute and deliver all other documents and certificates, and
take all other actions as are required to be executed and delivered or taken
by Lessee on or before the Delivery Date pursuant to the terms of any
Operative Document to which Lessee or Guarantor is a party.

         2.03 DELIVERY OF AIRCRAFT.

         The Aircraft shall be delivered for purposes of this Lease at
Wichita, Kansas, or at a mutually agreed location, which shall be in a
jurisdiction that is intended to avoid any sales, use, transfer and other
similar taxes payable upon the purchase and lease of the Aircraft. The Lessee
shall be obligated to accept delivery of the Aircraft pursuant to this Lease,
at the time and place and in the condition, AS IS, WHERE IS. The execution
and delivery of the Acceptance Certificate shall, as between Lessor and
Lessee, constitute conclusive evidence that the Aircraft satisfies such
conditions without prejudice, however, to any claim Lessor or Lessee may
have against any Manufacturer.

         2.04 TERM.

         Except as otherwise provided herein, the Aircraft shall be
leased for the Term, which shall commence on the Delivery Date.

         SECTION 3. CONDITIONS PRECEDENT.

         3.01 CONDITIONS PRECEDENT TO LESSOR'S OBLIGATIONS.

         The Lessor's obligation to Lease the Aircraft to Lessee hereunder is
subject to the prior satisfaction, as determined by Lessor, of the following
conditions precedent, including the determination by Lessor that each
document, certificate, opinion or other writing referred to below is in form
and substance satisfactory to Lessor:

         (a) RESERVED.

         (b) the Letter of Credit shall have been established and delivered
to Lessor.

         (c) Lessor shall have received the following:

         (i) the Chattel Paper counterpart of the Lease, duly executed by
Lessee;

         (ii) the Acceptance Certificate, duly executed by Lessee;


                                   -8-
<PAGE>

         (iii) original copies of the other Operative Documents, each duly
executed by each of the parties thereto;

         (iv)  evidence that the Lease has been duly filed for recordation
with the FAA;

         (v) evidence  that  "precautionary"  or other  financing statements
or other instruments covering the Lease and Aircraft have been duly filed in
a form acceptable to Lessor under the Uniform Commercial Code or other
applicable law of all jurisdictions in which Lessor reasonably deems it
necessary or desirable in order to perfect and protect its interest in the
Aircraft;

         (vi) copies of the resolutions of the boards of directors of Lessee
and of the Guarantor approving the execution, delivery and performance by the
Lessee and the Guarantor of the Lease and other Operative Documents to which
either is a party, certified by the Lessee's and Guarantor's secretaries,
together with such other evidence of corporate action as Lessor shall
reasonably request;

         (vii) certificates of the Lessee's and Guarantor's secretaries
certifying as to the incumbency and signatures of the persons authorized to
execute and deliver the Lease and other Operative Documents;

         (viii) copies, certified by the Lessee's and Guarantor's
secretaries, of Lessee's and Guarantors charter documents and bylaws;

         (ix) a certificate signed by an officer of Lessee to the effect that
no default or event which, with notice or the lapse of time, or both, would
constitute a default has occurred and is continuing or will exist under any
of the Operative Documents to which Lessee or Guarantor is a party upon
delivery of the Aircraft to the Lessee  hereunder  and that the
representations and warranties of Lessee in this Agreement are true and
correct with the same force and effect as if made on and as of the Delivery
Date;

         (x) certificates of corporate good standing for Lessee and Guarantor;

         (xi) an insurance report of an independent insurance broker and
certificates of insurance as to Lessee's due compliance with the terms of
Section 12 of this Lease;

         (xii) opinions from Char Sakamoto Ishii Lum & Ching, counsel for
Lessee and Guarantor, addressed to Lessor and covering such matters incident
to the transactions hereto as Lessor may reasonably request;

         (xiii) an opinion of McAfee & Taft, special FAA counsel, addressed
to Lessor and covering such matters incident to the transactions hereto as
Lessor may reasonably request;


                                   -9-
<PAGE>

         (xiv) a letter from CT Corporation Systems accepting appointment as
Lessee's and Guarantor's agent for service of process in California;

         (xv) a copy of Lessee's Air Operator Certificate; and

         (xvi) a copy of the Summary of Lessee's Aeronautical Authority
approved Maintenance Program.

         (d) No material adverse change in Lessee's or Guarantor's
financial or operational condition or its ability to meet its obligations under
the Operative Documents shall have occurred, as determined by Lessor, since
September 30, 1999.

         (e) No change shall have occurred in Applicable Law after the date
of this Agreement that in the opinion of Lessor would make it illegal or
inadvisable to consummate the transactions contemplated hereunder.

         (f) Lessee shall have paid the fees and expenses of Lessor's FAA
counsel as to which invoices have been presented to Lessee and any other
expenses payable by Lessee pursuant to this Lease as to which invoices have
been presented to Lessee, which invoices are then due and owing.

         (g) Lessee and Guarantor shall have taken such other actions, or
delivered such other documents, as may be reasonably requested by Lessor in
connection with the transactions contemplated herein.

         3.02 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS.

         The Lessee's obligations to Lessor hereunder are subject to the
prior satisfaction of the following conditions precedent:

         (a) Lessee shall have received copies of the following:

         (i) original copies of the Operative Documents, each duly executed
by the parties thereto;

         (ii) copies of the resolutions of the Board of Directors of Lessor
approving the execution, delivery and performance by the Lessor of this Lease
and any other Operative Documents to which the Lessor is a party, certified
by the Lessor's secretary, together with such other evidence of corporate
action as Lessee may reasonably request; and

         (iii) a certificate of the Lessor's Secretary certifying as to the
incumbency and signatures of the persons authorized to execute and deliver
the Lease and any other Operative Documents to which the Lessor is a party.

         (b) The Aircraft shall be registered in the name of Lessor with the
FAA.


                                       -10-
<PAGE>

         (c) The Aircraft shall have a Standard  Certificate of Airworthiness.

         (d) Lessee shall have viewed and approved the video borescope that
was performed on the Engines after last flight of the Aircraft operated by
the previous operator.

         (e) The Engines shall have undergone a power assurance run at model
121 engine settings.

         (f) The Engines shall have undergone and passed a power assurance at
model 120A settings and all discrepancies shall have been corrected.

         (g) The Aircraft shall be in substantially the same condition as
when inspected by Lessee in the week of January 24, 2000; and any Part that
has been replaced since such inspection shall be replaced by a part having a
modification status, value, condition and utility and remaining life, hour or
cycle status and overhaul status (whichever is applicable) at least equal to
the Part it is replacing;

provided, however, that in the event the conditions set forth in Section
3.02(e) or (f) are not satisfied and all other conditions of this Section
3.02 are satisfied, then Lessee's obligations under this Lease shall be
effective, subject to the adjustment in the date of the first Rent Payment
Date set forth in Section 4(b) of Exhibit B hereto.

         SECTION 4. LESSEE'S REPRESENTATIONS AND WARRANTIES.

         Lessee represents and warrants to Lessor on the date hereof and on
the Delivery Date as follows:

         4.01 DUE ORGANIZATION, STANDING ETC.

         Each of Lessee and Guarantor is a corporation duly organized and
validly existing in good standing under the laws of its jurisdiction of
incorporation and has the power and authority to enter into and to perform
its obligations under the Operative Documents to which either is a party.
Each of Lessee and Guarantor is duly qualified and in good standing in all of
the jurisdictions in which the character of the properties owned or it or the
business conducted by it makes such qualification necessary and the failure
to so qualify would adversely effect Lessee's or Guarantor's ability to
perform its obligations under the Operative Documents to which it is a party.

         4.02 OPERATIVE DOCUMENTS.

         The Operative Documents to which each is a party have been duly
authorized, executed and delivered by Lessee and Guarantor, and, assuming
due authorization, execution and delivery by the other parties thereto, are
legal, valid and binding agreements of Lessee and Guarantor, enforceable in
accordance with their resive terms.


                                 -11-
<PAGE>

         4.03 NO CONFLICT; CONSENT.

         The execution and delivery by Lessee and Guarantor of the Operative
Documents to which either is a party are not, and the performance by Lessee
and Guarantor of their respective obligations under each will not be,
inconsistent with its charter or bylaws or other organizational documents, do
not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to it, and do not and will not contravene the
provisions of, or constitute a default or result in the creation of any Lien
upon any property of Lessee or Guarantor under any indenture, mortgage,
contract, agreement or other instrument to which either is a party or by
which either is bound or require the consent or approval of, the giving of
notice to, the registration with or the taking of any action in respect of or
under any federal, state or local governmental authority or agency in the
United States or any foreign country, except such as has been obtained, given
or accomplished.

         4.04 GOVERNMENTAL CONSENTS.

         Neither the execution and delivery of any of the Operative Documents
to which Lessee or Guarantor is a party nor performance of any of the
transactions contemplated thereby by either Lessee or Guarantor, or, to the
knowledge of Lessee, Lessor, requires the consent or approval of, the giving
of notice to, the registration with, or the taking of any other action with
respect to the Aeronautical Authority or any other governmental authority or
agency, including any judicial body, in the United States or any other
country, except for the filings for recording and registration with the
Registry referred to in Section 3.01(c)(iv) and (v) hereof and the other
filings and consents, referred to in Section 3.01 (c)(vi) and (xvi) hereof.

         4.05 NO ADVERSE AGREEMENTS.

         Neither Lessee nor Guarantor is a party to any agreement or
instrument or subject to any charter or any corporate restriction which, if
performed in accordance with its terms, would materially and adversely affect
Lessee's or Guarantor's financial condition, business or operations or the
ability of Lessee or Guarantor to perform its obligations under any of the
Operative Documents to which it is a party.

         4.06 NO DEFAULTS OR VIOLATIONS.

         Neither Lessee nor Guarantor is in default under any mortgage, deed
of trust, indenture or other instrument or agreement to which it is a party
or by which it or any of its properties or assets may be bound, or in
violation of any Applicable Law, which default or violation would have a
material adverse effect on the financial condition, business or operations of
Lessee or Guarantor or its ability to perform any of its obligations under
any of the Operative Documents to which it is a party.

         4.07 LITIGATION.

         Except as the Lessee has otherwise disclosed to the Lessor in
writing on


                                   -12-
<PAGE>

or before the date hereof there are no pending or threatened actions,
proceedings or investigations (or any basis therefore known to Lessee) that
would either individually or in the aggregate materially and adversely affect
the financial condition, business or operations of Lessee or Guarantor or the
ability of Lessee or Guarantor to perform its obligations under any of the
Operative Documents to which it is a party.

         4.08 NO EVENT OF DEFAULT.

         No event exists attributable to Lessee's or Guarantor's acts or
omissions which, upon delivery and leasing of the Aircraft hereunder, would
be an Event of Default or Default.

         4.09 FINANCIAL STATEMENTS.

         The consolidated audited financial statements of the Guarantor and
its Affiliates delivered to Lessor, each prepared in accordance with
generally accepted accounting principles and practices, fairly present the
financial position of the Guarantor and its Affiliates as of the dates
covered thereby. Since the date of such financials there has been no material
adverse change in the overall financial condition, business or operations of
the Guarantor and its Affiliates.

         4.10 CHIEF EXECUTIVE OFFICE.

         The chief executive office of Lessee and its records with respect to
the Aircraft are located at 99 Kapalulu Place, Honolulu, Hawaii, 96819.

         4.11 FILINGS MADE.

         Except for the filing and recording of the Lease with the Registry,
the "precautionary" UCC Financing Statement in Hawaii and Delaware and the
filings referred to in the opinion required by Section 3.01(c)(xiv) hereof,
no further action (including filing any financing statement in respect
thereof under the Uniform Commercial Code of any applicable jurisdiction) is
necessary in order to establish and perfect Lessor's interest in the Aircraft
and Lease in any jurisdiction in the United States or elsewhere.

         4.12 CERTIFICATE.

         Lessee holds an air carrier operating certificate issued by the U.S.
Secretary of Transportation pursuant to Chapter 447 of Title 49 of the United
States Code.

         SECTION 5. LESSOR'S REPRESENTATIONS AND WARRANTIES.

         Lessor represents and warrants to Lessee on the date hereof and on
the Delivery Date as follows:


                                   -13-
<PAGE>

     5.01 DUE ORGANIZATION, STANDING ETC.

     Lessor is a corporation duly organized and validly existing in good
standing under the laws of its jurisdiction of incorporation and has the
power and authority to enter into and to perform its obligations under the
Operative Documents to which it is a party. Lessor is duly qualified and in
good standing in all of the jurisdictions in which the character of the
properties owned or leased by it or the business conducted by it makes such
qualification necessary and the failure to so qualify would adversely effect
Lessor's ability to perform its obligations under the Operative Documents to
which it is a party.

     5.02 OPERATIVE DOCUMENTS.

     The Operative Documents to which Lessor is a party have been duly
authorized, executed and delivered by Lessor, and, assuming due
authorization, execution and delivery by the other parties thereto, are
legal, valid and binding agreements of Lessor, enforceable in accordance with
their respective terms.

     SECTION 6. COVENANTS OF LESSEE.

     From the Delivery Date and until the return of the Aircraft pursuant to
Section 10 hereof, Lessee covenants to Lessor that Lessee shall:

     6.01 AIR OPERATOR'S CERTIFICATE.

     Maintain its Air Operators Certificate and any other required licenses
and permits from the Aeronautical Authority and any other governmental
authority having jurisdiction required to enable Lessee to carry passengers
in common carriage.

     6.02 FINANCIAL AND OTHER INFORMATION TO BE SUPPLIED.

     Furnish to Lessor:

          (a) as soon as possible and in any event within 10 days after the
occurrence of an Event of Default, an Officer's Certificate setting forth in
detail the nature of such Event of Default and the action which Lessee
proposes to take with respect thereto;

          (b) as soon as available, and. in any event within 60 days after
the end of each of the first three fiscal quarters in each fiscal year of
Guarantor, consolidated balance sheets of Guarantor and its Affiliates as of
the end of such quarter and related statements of income and shareholders'
equity and changes in financial condition of Guarantor and its Affiliates for
the period commencing at the end of the previous fiscal year and ending with
the end of such quarter,  setting forth in each case in comparative  form the
corresponding figures for the corresponding period in such other preceding
fiscal year, all in reasonable detail and duly certified (subject to year-end
audit adjustments) by a financial officer of Guarantor as having been
prepared in accordance with generally accepted accounting principles and
practices, together


                                  -14-
<PAGE>

with detailed information regarding any Event of Default as may have occurred
in the relevant period and the action taken or proposed to be taken with
respect thereto;

         (c) as soon as available, and in any event within 90 days after the
end of each fiscal year of Guarantor, a copy of the annual report for such
year for Guarantor and the affiliated group of which Guarantor is a member on
a consolidated basis, including therein consolidated balance sheets of
Guarantor as of the end of such fiscal year and related statement of income,
shareholders' equity and changes in financial condition of Guarantor and its
Affiliates for such fiscal year, in comparative form with the preceding
fiscal year, in each case certified by independent certified public
accountants of national standing as having been prepared in accordance with
generally accepted accounting principles and practices consistently applied
(except as noted therein; PROVIDED that any changes in accounting principle
or practices must be disclosed by such accountants), together with detailed
information regarding any Event of Default as may have occurred in the
relevant period and the action taken or proposed to be taken with respect
thereto;

         (d) from time to time, such other information relating to its
financial,  operational or business affairs or conditions as Lessor may
reasonably  request by written  notice  including,  but not limited to,
correspondence with any Manufacturer and with Lessee's insurance carriers or
brokers.

     6.03 EXISTENCE.

     At all times maintain its corporate existence and do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate rights, powers, privileges and franchises except for any corporate
right, power, privilege or franchise that it determines is no longer
necessary or desirable in the conduct of its business as a common carrier for
the commercial transport of passengers and the loss of which will not
materially adversely affect or diminish the rights of Lessor under the
Operative Documents.

     6.04 INSPECTION RIGHTS: RECORDS.

          (a) Permit any duly authorized representative or designee of Lessor
(which may be a manufacturer's representative, an outside consultant or
representative of Lessor or of a lender secured by the Aircraft) to inspect
the Aircraft, to examine Lessee's technical books and Aircraft records, to
take memoranda and extracts therefrom and to make copies thereof, and to
discuss the affairs, finances and accounts of Lessee. Such inspections shall
be at Lessor's expense unless an Event of Default exists, in which case
inspections shall be at Lessee's expense. Unless an Event of Default exists,
such inspections may only take place at any reasonable time. Lessee shall
notify Lessor in writing when "C" and "D" Checks, if Lessee shall no longer
be utilizing the de Havilland Equalized Maintenance Program, are scheduled to
take place and if Lessee shall be utilizing the de Havilland Equalized
Maintenance Program, when structural inspections required by the Maintenance
Program and not included in the de Havilland Equalized Maintenance Program
are scheduled to take place and if Lessor


                                     -15-
<PAGE>

advises Lessee in writing that it or its designee will be inspecting during
such check, the parties will use reasonable efforts to coordinate regarding
the exact time and place thereof. Lessee shall also provide Lessor, quarterly,
with scheduling information regarding the performance of the various
segments of the de Havilland Equalized Maintenance Program required to be
performed or performed during each such quarter and if Lessor advises Lessee
in writing that it or its designee will be inspecting during such segments,
the parties will use reasonable efforts to coordinate regarding the exact
time and place thereof.

          (b) Maintain or cause to be maintained at all times records
adequate to identify the Aircraft and to disclose its location, use and
maintenance.

     6.05 PAYMENT OF TAXES AND CLAIMS.

     Pay when due all Lessee's Taxes, assessments and other liabilities
except as contested in good faith and by appropriate proceedings, provided
that adequate reserves have been established with respect thereto to the
extent required by generally accepted accounting principles as established in
the United States.

     6.06 NOTICE OF LITIGATION.

     Give prompt written notice to Lessor of any litigation or governmental
proceeding pending or, to its knowledge, overtly threatened against Lessee or
Guarantor which, if determined adversely to Lessee, might materially
adversely affect the financial condition of Lessee or adversely affect the
ability of Lessee or Guarantor to perform its obligations under the Operative
Agreements to which either is a party.

     6.07 MERGER.

     Not, without prior written consent of Lessor, merge into or with any
Person, or be acquired by any Person, or sell or agree to sell all or
substantially all of its assets (whether directly or through a series of
transactions)  unless (a) the successor to Lessee or purchaser in such
transaction enters into an agreement acceptable to Lessor to assume all
obligations of Lessee under the Operative Documents unless such successor or
purchaser succeeds to such obligations by operation of law and provides an
opinion of counsel acceptable to Lessor with respect thereto in form and
substance acceptable to Lessor and (b) such transaction shall not give rise
to a Default or Event of Default; provided, however, the written consent of
Lessor shall not be required if such successor or purchaser shall be an
Affiliate of Guarantor of which Guarantor is the owner of all of the
outstanding capital stock or other ownership interests and the consolidated
net worth of the Guarantor and its Affiliates after giving effect to such
transaction shall be equal to or greater than such net worth immediately
prior to giving effect to such transaction.

     6.08 CHIEF EXECUTIVE OFFICE.

     Lessee shall provide Lessor with not less than 30 days prior written
notice


                                     -16-
<PAGE>

of any change in its chief executive office or office where records
pertaining to the Aircraft are kept, if moved, to any place or location
outside of the State of Hawaii and will file such financing statements or
other filings as may be reasonably requested by Lessor with respect to such
change.

     6.09 CERTIFICATE.

     Lessee shall maintain the certificate described in Section 4.12.

     SECTION 7. PAYMENTS.

     7.01 RENT.

     During the Term, Lessee shall pay Basic Rent as follows:

     (a) BASIC RENT. On each Rent Payment Date during the Term, Lessee shall
pay to Lessor Basic Rent with respect to the Aircraft in the amount and as
provided in Exhibit B hereto.

     (b) REPORTS. At least quarterly during the Term and on the 10th day of
the first calendar month following termination of the Term, Lessee shall
deliver to Lessor internally generated reports setting forth the number of
Flight Hours and Cycles flown by the Airframe and each Engine during the
preceding calendar quarter.

     7.02 NET LEASE; NO SET-OFF OR DEDUCTIONS.

     This Lease is a net lease, and Lessee acknowledges and agrees that
Lessee's obligation to pay all Rent and the rights of Lessor in and to such
Rent shall be ABSOLUTE AND UNCONDITIONAL UNDER ALL CIRCUMSTANCES and shall
not be subject to any abatement,  reduction,  set-off, defense, counterclaim
or recoupment ("ABATEMENTS") for any reason whatsoever (other than
Impositions as defined in Section 16.02 with respect to which Lessee is not
required to indemnify Lessor or any Indemnitee under Section 16.02),
including without limitation, Abatements due to any present or future claims
of Lessee against Lessor under this Lease or otherwise or against the
Manufacturer or against any other Person for whatever reason. Except as
otherwise expressly provided herein, this Lease shall not terminate for any
cause, nor shall the obligations of Lessee be affected, by reason of any
invalidity of title or any defect in the title, condition, design,
merchantability or fitness for use of, or operation of the Aircraft or any
Engine or Propeller or Part thereof as a result of damage to, or any loss, or
destruction of the Aircraft or any Engine or Propeller or any Part thereof
from whatsoever cause, or the interference with the use thereof by Lessor or
any Person, the invalidity or unenforceability of this Lease or any other
Operative Document, the insolvency, bankruptcy or reorganization of any
Person, or for any other cause, whether similar or dissimilar to the
foregoing, any present or future law or regulation to the contrary
notwithstanding. Lessee hereby waives, to the extent permitted by Applicable
Law, any and all rights which it may now or hereafter have, by statute or
otherwise, to terminate, cancel, quit or surrender the Lease and the leasing
thereunder of the Aircraft,


                                      -17-
<PAGE>

it being the express intention of Lessor and Lessee that all Rent payable by
Lessee hereunder shall be, and continue to be, payable in all events unless
the obligation to pay the same shall be terminated pursuant to the express
provisions of this Lease. Notwithstanding the foregoing, Lessee shall retain
separate rights of action with respect to any present or future claims
against Lessor under this Lease.

     7.03 IMMEDIATELY AVAILABLE FUNDS.

     All Rent shall be paid by wire transfer in immediately available funds
by 1:00 p.m. San Francisco, California time on the day in question to the
Lessor at the account listed on Exhibit B hereto or at such other account as
shall be designated in writing by Lessor to Lessee. Funds not received by
such time on such day shall be deemed to have been received on the next day
that the recipient bank is open for business. If any Rent is due on a day
which is not a Business Day, it shall be due on the next succeeding Business
Day. All payments hereunder shall be in United States Dollars.

     7.04 SUPPLEMENTAL RENT; OVERDUE RENT.

     Lessee also agrees to pay to Lessor or to whomsoever shall be entitled
thereto any and all Supplemental Rent when the same shall become due and
owing, and in the event of any failure on the part of Lessee to pay any
Supplemental Rent, Lessor shall have all rights, powers and remedies provided
for herein or by law or equity in the case of nonpayment of Basic Rent.
Without limitation of the foregoing, Lessee shall pay interest at the Overdue
Rate on any payment of Rent not paid when due hereunder for the period in
which such Rent remains overdue and not paid.

     7.05 RESERVED.

     7.06 GROSS UP.

     All Rent shall be paid free and clear of, and without deduction for, any
taxes, levies, imposts, charges, duties, fees or withholdings of any nature
whatsoever now or hereafter imposed by or within any governmental authority
or pursuant to any governmental rule or regulation or any administrative
subdivision or taxing authority thereof or therein, respectively, unless
Lessee is compelled by law to deduct or withhold such taxes, levies, imposts,
charges, duties or fees, in which event Lessee shall pay such additional
amounts as shall result in the effective receipt by Lessor of the Rent due to
Lessor or any other Person had no such deduction or withholding been made.

     SECTION 8. LIMITATION OF LESSOR'S LIABILITY.

     LESSOR LEASES THE AIRCRAFT HEREUNDER "AS-IS", "WHERE-IS" AND LESSOR HAS
NOT MADE, AND SHALL NOT BE DEEMED TO HAVE MADE ANY REPRESENTATION OR
WARRANTY, EXPRESSED OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, CONDITION,
DESIGN, OPERATION, MERCHANTABILITY, OR FITNESS FOR USE OR PARTICULAR PURPOSE
OF THE


                                 -18-
<PAGE>

AIRCRAFT, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE
AIRCRAFT, OR AS TO ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING, WITHOUT LIMITATION, ANY
LIABILITY IN TORT, OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE, STRICT
LIABILITY, ANY IMPLIED WARRANTY FROM COURSE OF PERFORMANCE OR DEALING OR
USAGE OR TRADE, OR LOSS OR INTERRUPTION OF USE, PROFIT, OR BUSINESS, OR OTHER
CONSEQUENTIAL DAMAGES, except that on the Delivery Date, Lessor (a) warrants
that the Aircraft shall be free of Lessor's Liens and (b) agrees that it will
not directly or indirectly create, incur, assume or suffer to exist any
Lessors Lien on or with respect to the Airframe or any Engine or Propeller.

     SECTION 9. USE, OPERATION AND MAINTENANCE.

     9.01 GENERAL.

     Lessee, at its own cost and expense shall (i) service, repair, maintain
and overhaul or cause the same to be done to the Airframe and each Engine and
Propeller under the Maintenance Program in the same manner and with the same
care as used by Lessee with similar aircraft and engines and propellers
operated by Lessee and so as to keep the Airframe and each Engine and
Propeller in as good operating condition as when delivered to the Lessee
hereunder, ordinary wear and tear excepted, and (ii) maintain the Manuals and
Technical Records in the English language in accordance with the Maintenance
Program.

     9.02 OPERATION AND USE.

     (a) Lessee agrees not to operate or locate the Airframe or any Engine or
Propeller, or suffer the Airframe or any Engine or Propeller to be operated
or located by any other Person, in any area (i) excluded from coverage by any
insurance policy required to be maintained hereunder with respect to the
Airframe or Engines or Propellers or (ii) in any recognized or threatened
area of hostilities. Lessee agrees not to operate the Airframe or any Engine
or Propeller, or suffer the Airframe or any Engine or Propeller to be
operated by any other Person (1) unless the Airframe and Engine and Propeller
are covered by insurance as required by the provisions of Section 12 hereof
or (2) contrary to the terms of such insurance as required by the provisions
of Section 12 hereof.

     (b) Lessee agrees not to (i) operate the Airframe or any Engine or
Propeller except in a passenger configuration, in commercial operations for
which Lessee is duly authorized by the Aeronautical Authority or (ii) use the
Aircraft for a purpose for which the Aircraft is not designed or reasonably
suitable. Lessee will not maintain, use or operate the Aircraft in violation
of any Applicable Law, or contrary to any manufacturer's operating manuals
or instructions.


                                     -19-




<PAGE>


     9.03 MAINTENANCE IN GENERAL.

     Lessee  agrees that until the Aircraft is delivered to Lessor  pursuant
to Section 10 (except as specified  below),  it has the sole  obligation to,
and shall maintain and repair or to cause to be maintained and repaired the
Airframe and the Engines and Propellers under Lessee's  Aeronautical
Authority  approved maintenance program as in effect on the Delivery Date as
the same may be amended from time to time in accordance  with the second
sentence of this paragraph with respect  to the  Airframe  and the  Engines
and  Propellers  (the  "Maintenance Program") and so as to keep them in as
good a condition as on the Delivery Date, ordinary wear and tear  excepted.
If any material  changes  (including  without limitation,  time  limit
changes)  shall be made to such  Maintenance  Program, including  without
limitation,  any  change  from  the de  Havilland  Equalized Maintenance
Program,  Lessee  shall give Lessor not less than 30 days'  advance written
notice  thereof and no such changes shall be implemented  until approved by
the Aeronautical Authority. Included within the obligation of maintenance and
repair is the  obligation  and  affirmative  undertaking by Lessee to replace
or cause to be replaced from time to time all  unserviceable or defective
Parts, to the extent required to cause the Aircraft to be in an airworthy
condition in all respects, and covered by a valid Certificate of
Airworthiness at all times.

Notwithstanding  the above, Lessor agrees, on a one time only basis, at its
sole cost and expense to:

     (i)  reimburse  Lessee  for  the  cost  of  the  first  major
          refurbishment following  the  Delivery  Date of  Engines  serial
          numbers  120107 and 120142. Such costs, payable within 30 days
          after invoices, satisfactory to the Lessor,  are  received,  shall
          be for the  refurbishment  of the Engines only.  All other costs,
          including but not limited to,  removal and  installation  of the
          Engines,  transportation  and/or  substitute engine(s)  are for
          the  account  of the  Lessee.  Notwithstanding  the foregoing,  if
          the  refurbishment  is performed  due to foreign  object damage
          ("FOD")  or  FOD  is  discovered   during   performance  of  the
          refurbishment  under  this  subsection  9.03(i),  (A)  Lessee  will
          use commercially  reasonable  best  efforts to recover the  maximum
          damage amount recoverable from any and all insurance providers
          with respect to the Aircraft and (B) Lessee shall  contribute  an
          amount up to the full amount of any  applicable  insurance
          deductible and the full amount of any recovery  from any  insurance
          provider with respect to such damage toward the cost of the
          refurbishment. For purposes of this subpart (i), refurbishment
          shall include the  replacement of all Life Limited Parts having
          fewer than 10,000 cycles remaining.

     (ii) either provide Lessee serviceable  replacement flaps and carriages,
          as necessary,  modified to eliminate the repeat inspection
          requirements of DHC-8  Maintenance  Program task numbers  5750/09A
          and 5750/10A through the term or reimburse  Lessee for the cost of
          replacing  such flaps and carriages. Not less than 180 days prior
          to the estimated date the flaps

                                      -20-


<PAGE>


          will  accumulate  60,000 total Cycles,  Lessor and Lessee will
          commence cooperation  with each other in  locating  such
          replacement  flaps and carriages.  In the event Lessor  replaces
          such flaps and carriages,  as necessary,  Lessor  shall  furnish
          such flaps and  carriages to Lessee between  90 and 180 days  prior
          to the  estimated  date the flaps  will accumulate 60,000 total
          cycles. In the event Lessee replaces such flaps and carriages, as
          necessary,  and Lessor is to reimburse Lessee for the cost of
          replacing such flaps and carriages,  such cost,  payable within 30
          days after invoices  satisfactory to the Lessor are received,
          shall be for the  Lessee's  reasonable  net cost of such flaps and
          carriages only. Notification, in writing, from the Lessee to the
          Lessor, shall be given no later than 12 months  prior to the date
          the  Lessee  estimates the flaps will have accumulated 60,000 total
          Cycles.

     (iii) reimburse Lessee for the reasonable cost of replacing landing gear
          Life Limited  Parts  replaced  because of expired life.  Such cost,
          payable within 30 days after invoices satisfactory to the Lessor
          are received, shall be for the Lessee's reasonable net cost of the
          part only.

     (iv) reimburse  Lessee  the  cost  of  modifying  the  Aircraft  to a
          model DHC-8-103  including the cost of  converting  the Engines to
          P/W 121's. Such cost shall be payable within 30 days after
          invoices  satisfactory to the Lessor have been received.

     (v)  reimburse Lessee the cost of stripping the entire Aircraft and
          painting the Lessee's livery up to a total  aggregate  amount of
          $60,000 for the painting of Lessee's livery on the Aircraft and the
          Other Aircraft.

     9.04 SPECIFIC ITEMS OF MAINTENANCE.

     Lessee agrees that maintenance and repairs shall include, but shall not
be limited to, the following specific items:

     (a)  to perform or have  performed in  accordance  with the  Maintenance
Program all routine  maintenance  work,  including  on-line  maintenance  on
the Aircraft,  and to ensure that all such  maintenance  shall be in
accordance with the regulations and directives of the Aeronautical Authority.
Lessee shall cause all maintenance and repairs to be performed at repair
facilities approved by the Aeronautical Authority;

     (b)  to maintain or cause to be maintained  all Aircraft  documentation,
including,  without limitation, the Manuals and Technical Records, in
compliance with Aeronautical  Authority regulations and in up-to-date status
(if necessary, through manufacturers'  revision service) and to make these
available for review by Lessor on reasonable notice at Lessee's principal
maintenance base;

     (c)  if required by Aeronautical  Authority  regulations,  to notify the
Manufacturer   promptly  (with  a  copy  to  Lessor)  of  any  modifications
or configuration

                                      -21-


<PAGE>


changes to the Airframe  which would have a material  effect on or be a
material change to the type design and/or the manuals  relating to the
Airframe  (such as flight, operations and maintenance); and

     (d)  on Lessor's  request to furnish Lessor  promptly with copies of any
written  communications  with  manufacturers with respect to material defects
or malfunctions of the Aircraft.

     9.05 PARTS.

     (a)  Lessee,  at its own cost and  expense,  will  promptly  replace all
Parts that may from time to time become unserviceable,  lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever.  In addition,  in the ordinary
course of maintenance, service,  repair,  overhaul or testing,  Lessee may
remove any Parts, whether or not unserviceable,  lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered unfit for
use, provided that Lessee shall replace such Parts as promptly as practicable
with  replacement  parts. All replacement parts  shall be made by the  same
manufacturer  and  shall be of the same or an improved model number and
modification status or substitutes (whether or not the same  manufacturer  is
involved)  approved by the  Aeronautical  Authority  and normally used by
Lessee,  shall be free and clear of all Liens except  Permitted Liens and
shall be in as good  operating  condition  as, and shall have a value,
utility and a remaining useful life at least equal to that of the Parts
replaced assuming  such replaced  Parts were in the  condition and repair
required to be maintained by the terms hereof.

     (b)  Except  as  provided  in  Section  9.05(d),  all Parts at any time
removed from the  Airframe or any Engine or Propeller  shall remain the
property of Lessor and subject to this Lease, no matter where located, until
such time as such Parts shall be replaced by parts that have been
incorporated  or installed in or  attached  to such  Airframe  or  Engine  or
Propeller  and that meet the requirements for replacement Parts specified in
clause (a) of this Section 9.05. Immediately upon any replacement  part
becoming  incorporated or installed in or attached  to such  Airframe  or
Engine or  Propeller  as  provided in clause (a) hereof,  without further
act, (i) title to such replacement part shall thereupon vest in Lessor and it
shall become a Part for all purposes  hereof to the same extent as the Part
originally  incorporated or installed in or attached to such Airframe  or
Engine or  Propeller;  and (ii)  title to the  replaced  Part shall thereupon
vest in  Lessee,  free and clear of all rights of Lessor and free and clear
of Lessor Liens (other than Lessor Liens  arising out of events  occurring
after the  transfer  which are not  attributable  to  actions  of the  Lessor
or omissions  by the Lessor of actions  which the  Lessor is legally
obligated  to take) and such replaced Part shall no longer be deemed a Part
hereunder.

     (c)  Title to all parts  incorporated  or  installed  in or  attached or
added  to  the  Airframe  or any  Engine  or  Propeller  as  the  result  of
any alteration,  modification or addition effected by Lessee shall,  without
further act,  vest in Lessor  and  become  subject  to this Lease and such
part shall be deemed to be a Part for all purposes

                                      -22-


<PAGE>


hereof.

     (d)  Lessee may remove Parts which Lessee  determines in its  reasonable
judgment to be obsolete or no longer  suitable or appropriate  for use by
Lessee on the Airframe or any Engine or Propeller ("Obsolete Parts"),
PROVIDED that (i) such  removal  is being  applied  by Lessee on a
fleet-wide  basis and does not discriminate  against the  Aircraft  and (ii)
removal of any such Part shall not diminish the fair market value, utility or
remaining useful life of the Airframe or such Engine or Propeller,  or
materially  impair the condition or impair the airworthiness  thereof,  below
the  fair  market  value,  utility,   condition, airworthiness or remaining
useful life thereof immediately prior to such removal assuming the  Airframe
or such Engine or  Propeller  was then of the fair market value  and  utility
and in  the  condition  and  airworthiness  required  to be maintained by
the terms of this Lease.

     9.06 AIRWORTHINESS DIRECTIVES.

     (a)  Lessee agrees to carry out or cause to be carried out in accordance
with the requirements thereof on the Aircraft any airworthiness directive or
any other mandatory  regulation or directive  ("Airworthiness  Directive")
which the Aeronautical  Authority  from time to time may issue and which
becomes due prior to the  later of the end of the Term or  return of the
Aircraft  to the  Lessor pursuant to Section 10, which shall include without
limitation,  compliance with any terminating  action with which  compliance
must be met prior to the later of the end of the Term or the  return of the
Aircraft  to the Lessor  pursuant  to Section  10.  All  Airworthiness
Directives  shall be  timely  accomplished  in accordance  with  all
applicable   bulletins  and  manuals  published  by  the Manufacturer  of
the Airframe or Engines or Propellers or Parts or data approved by the
Aeronautical  Authority to the extent the same are incorporated in or by
reference into the Airworthiness Directive.

     (b)  Title  to any  parts  installed  on the  Aircraft  pursuant  to an
Airworthiness Directive issued after the Delivery Date shall vest in Lessor
free and clear of any Liens except  Permitted Liens and such parts shall be
deemed to be Parts for all purposes hereof.

     (c)  Lessee  shall  pay the cost of  complying  with all  Airworthiness
Directives.

     9.07 SERVICE BULLETINS: NONDISCRIMINATION.

     Lessee  agrees,  at its sole cost and  expense to  incorporate  Service
Bulletins  into the  Aircraft  which  Lessee  has  accomplished  on 30% of
it's Aircraft  fleet  during  the Term of this  Lease.  It is not the  intent
of the parties that the Aircraft shall be  discriminated  from the rest of
the Lessee's Aircraft fleet in Service Bulletin  compliance or other
maintenance,  provided, however,  the foregoing shall not be interpreted to
expand Lessee's  obligations beyond the express requirements of Section 10 and

                                      -23-


<PAGE>


Exhibit "F".

     9.08 CORROSION CONTROL.

     Lessee  shall carry out such work as may be required for the control of
corrosion, including without limitation,  periodic inspections by penetration
of fuel tanks,  periodic  inspection and clean-up  under  galleys,  forward
and aft cargo pit areas and  lavatories,  periodic  treatment of all mild
corrosion and correcting  of all moderate and severe or  exfoliation
corrosion in  accordance with the Maintenance Program.

     9.09 MODIFICATIONS.

     (a)  Lessee,  at its own  expense,  shall  make  such  alterations  and
modifications in and additions to the Airframe or any Engine or Propeller as
may be  required  to be made from time to time by  Applicable  Law  during
the Term regardless upon whom such  requirements  are, by their terms,
nominally imposed ("Required Modifications").

     (b)  Lessee shall not, without Lessor's prior written consent,  make any
major   modifications,   alterations  or  additions   (collectively,
"Optional Modifications") to the Aircraft,  other than Required
Modifications,  including, without limitation,  Optional  Modifications which
will result in changes to the Aircraft structure or performance,  or which
could adversely affect spare parts, interchangeability or irreplaceability.

     (c)  NOTWITHSTANDING  ANY OTHER  PROVISION  OF THIS LEASE,  NO OPTIONAL
MODIFICATION SHALL BE MADE WHICH HAS THE EFFECT OF DECREASING THE UTILITY,
VALUE OR  REMAINING   USEFUL  LIFE  OF  THE  AIRCRAFT  OR  ADVERSELY
AFFECTING   ITS AIRWORTHINESS OR USE FOR TRANSPORTING PASSENGERS OR CARGO IN
COMMERCIAL SERVICE.

     (d)  All Modifications  shall be accomplished at Lessee's expense except
for  modifications  in (1) below  which  Lessee  will make at  Lessor's
expense provided the rent is adjusted per Exhibit B and only by a Person
approved by the FAA.  Lessee shall provide  copies of all drawings and data
to be used by Lessee in accomplishing such Optional  Modifications for
Lessor's consent prior to such work.

          (1)  Lessor  will   reimburse   Lessee  for  Optional
               Modifications accomplished in accordance with Section
               9.09(b)(c) and (d) above in an amount not to exceed the
               Contribution  Amount.  Basic Rent will be increased for such
               modifications per Exhibit B, 4(a) of the Lease.

     9.10 POSSESSION; SUBLEASING; EQUIPMENT SUBSTITUTION.

     Lessee  shall not  sublease  the  Aircraft or  otherwise  in any manner
deliver,  relinquish  or transfer  possession  of the  Airframe or any Engine
or Propeller  to any  Person or  install  any  Engine,  or permit  any Engine
to be installed, on any airframe other

                                      -24-


<PAGE>


than the  Airframe  or install  any  Propeller,  or permit any  Propeller  to
be installed,  on any engine  other than an Engine or permit any other Person
to do any of the  foregoing  during the Term,  without  the prior  written
consent of Lessor,  PROVIDED,  HOWEVER,  that so long  as  Lessee  shall
comply  with  the provisions of Section 12 hereof,  Lessee,  without the
prior written  consent of Lessor (except as specified below) may:

     (a)  deliver possession of the Airframe or an Engine or Propeller to the
Manufacturer  thereof for testing or other similar  purposes or to any
qualified organization for service, repair,  maintenance or overhaul work on
such Airframe or such Engine or Propeller or for alterations or
modifications in or additions to such  Airframe  or such  Engine  or
Propeller,  to the  extent  required  or permitted by the terms of this Lease;

     (b)  with the prior  consent of Lessor,  subject any Engine or Propeller
to normal interchange or pooling  agreements or arrangements,  entered into
with any  Certificated  Air Carrier  consented to in advance of such
arrangement  in writing by the Lessor (a  "Permitted  Air  Carrier"),
provided that (i) no such agreement or arrangement  contemplates or requires
the transfer of title to such Engine or Propeller; and (ii) if Lessor's title
to any Engine or Propeller shall be divested under any such agreement or
arrangement,  such divestiture  shall be deemed to be Fan Event of Loss with
respect  to such  Engine or  Propeller  and Lessee  shall  comply  with
Section  13 hereof  in  respect  of such  Engine or Propeller;

     (c)  install an Engine on an airframe  owned by Lessee free and clear of
all Liens,  except (i) Permitted  Liens,  and (ii) those which apply only to
the engines (other than Engines),  appliances,  parts,  instruments,
appurtenances, accessories,  furnishings  and other equipment  (other than
Parts)  installed on such airframe (but not to the airframe as an entirety),
and (iii) those created by the rights of other  Permitted  Air  Carriers
under  normal  interchange  or pooling  agreements or arrangements  customary
in the airline  industry which do not  contemplate,  permit  or  require  the
transfer  of title to such  engines installed thereon; or

     (d)  install  an  Engine  on an  airframe  leased to Lessee or owned by
Lessee subject to a conditional sale or other security  agreement,  PROVIDED
that (i) such  airframe  is free and clear of all Liens  except (A) the
rights of the parties to the lease, conditional sale or other security
agreement and (B) Liens of the type permitted by clause (c) above, and (ii)
such lease, conditional sale or other  security  agreement  effectively
provides  that such Engine shall not become  subject to the Lien of such
lease,  conditional  sale or other  security agreement,  notwithstanding  the
installation  thereof on such airframe in which particular connection,  a
provision contained in such lease, conditional sale or other  security
agreement  substantially  to the  effect of clause  (e) of this Section 9.10
shall be deemed to so effectively provide;

PROVIDED that the rights of a transferee who receives  possession by reason
of a transfer  permitted by this Section 9.10 shall be subject and
subordinate to all the terms of this Lease and the rights of the Lessor
hereunder to repossess such property and any such arrangement  shall
expressly state it is so subordinate or contain a provision  substantially
to the effect of clause (e) of this  Section 9.10, and Lessee shall remain

                                      -25-


<PAGE>


primarily liable hereunder for the performance of all of the terms of this
Lease to the same extent as if such transfer had not occurred.

     (e)  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 propeller (other than a Propeller) owned by the Lessee, any lessor of any
engine (other  than an Engine) or  propeller  (other  than a  Propeller)
leased to the Lessee  and any  conditional  vendor of any  engine  (other
than an  Engine) or propeller  (other  than a  Propeller)  purchased  by the
Lessee  subject to a conditional sale agreement or any other security
agreement, that no right, title to or interest in any such engine or
propeller 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  propeller  as a result of its
installation on the Airframe.

     9.11 REPAIRS.

     Any repair to the Aircraft accomplished prior to return of the Aircraft
to Lessor pursuant to Section 10 hereof shall be accomplished  where
applicable pursuant to the appropriate  Manufacturer's  repair manual
instructions (if any) and the Maintenance  Program.  All such repairs,
inclusive of corrosion control repairs,  are to be documented and mapped
identifying the location,  dimensions and repair procedure.

     9.12 AIRCRAFT RECORDS.

     All  records  maintained  by Lessee  prior to  return  of the  Aircraft
pursuant to Section 10 hereof  relating to the  location,  service,
inspection, maintenance,  modification,  repair and  overhaul of the
Airframe,  Engines and Parts installed therein,  will at all times be
maintained in accordance with all applicable requirements of the Aeronautical
Authority and any other governmental authority having jurisdiction with
respect thereto and shall be kept current, up to date, in English, accurate
and complete.

     9.13 WARRANTIES.

Lessor  agrees that  during the Term,  so long as no Default or Event of
Default has  occurred  and is  continuing,  Lessee  shall have the right to
enforce  all manufacturer  and vendor  warranties  with  respect to the
Aircraft,  PROVIDED, HOWEVER,  that (i) all such rights shall  immediately
revert to the Lessor upon expiration of the Term or upon the  occurrence  and
continuance of a Default or Event of Default,  (ii) Lessee shall not attempt
to enforce any such  warranties by legal  proceedings  without Lessors
approval and (iii) Lessee shall indemnify Lessor and each other  Indemnitee
against any  Impositions  with respect to any warranties or  enforcement  of
warranties  pursuant to Section 16.01 hereof and (iv) Lessor makes no
warranties or representations  whatever to Lessee as to the existence or
enforceability of any such warranties.  Lessee agrees that it shall maintain
the Aircraft in such a manner so as not to knowingly void any available
warranties.

                                      -26-


<PAGE>


     9.14 AIRPORT CHARGES.

     Lessee shall as the same become due, pay and discharge,  or procure the
payment and discharge of any and all charges, fees, taxes, imposts and levies
of whatsoever  nature  which are incurred by Lessee or Lessee's  sublessees
in the course  of the  operation  of the  Aircraft  under  this  Lease or of
any  other aircraft  under the  management  or  control of Lessee or
Lessee's  sublessees, including  without  limitation  all  charges  of
airport  authorities  (whether relating to landing fees,  parking fees,
handling  charges or otherwise),  all charges  imposed by air  navigation
authorities  whatsoever  and all charges of aviation  authorities  whether
relating to navigation or otherwise and will upon written  request  therefore
by Lessor  supply  evidence  of payment of any such charges.

     9.15 RIGHT TO INSPECT.

     The  Lessor  or its  designee(s)  shall  have  the  right,  but not the
obligation,  after  ten  (10)  Business  Days  written  notice  to  the
Lessee, periodically  to inspect  the  Aircraft,  Technical  Records  and
Manuals,  for condition  and  compliance  with this  Lease.  Except as
otherwise  provided in Section 6.04, such inspections shall be at the cost of
the Lessor.

     9.16 REPORTING.

     Lessee  agrees  to  provide  to the  Lessor  no  less  frequently  than
quarterly such  operational data as may be requested by the Lessor to
maintain a record of the  Aircraft  maintenance  and parts  status  including
the Engines, Propellers and landing gear.

     SECTION 10. RETURN OF AIRCRAFT.

     10.01 RETURN.

     At the end of the Term or upon  termination  of this Lease  pursuant to
Section 15 hereof,  Lessee,  at Lessee's  expense,  shall return the Aircraft
to Lessor at an airport located in the western  continental  United States
selected by Lessor (the "Return Location").  The Aircraft at the time of its
return shall be free and clear of all Liens other than Lessor's  Liens. At
the time of return of the Aircraft to Lessor, Lessor shall execute a return
acceptance  certificate (the "Return Acceptance Certificate") in the form
attached hereto as Exhibit E.

     10.02 CONDITION OF AIRCRAFT.

     The  Aircraft  at the time of its  return  to  Lessor  shall  have been
maintained  and repaired in  accordance  with the  Maintenance  Program and
this Lease, and shall meet the requirements set forth in Exhibit F hereof.

     10.03 BOROSCOPE INSPECTION.

                                      -27-


<PAGE>


     A boroscope inspection shall be performed by Lessor at Lessee's expense
at the time of the Aircraft's return to Lessor and Lessee shall provide
evidence satisfactory  to Lessor  reflecting  the correction of any
discrepancies  found during such  inspection and  determined not to have been
in compliance  with the Maintenance Program.

     10.04 HISTORICAL RECORDS: TREND MONITORING DATA.

     If the Engine  historical and maintenance  records or trend  monitoring
data indicate a rate of acceleration in performance  deterioration of any
Engine which is outside of the parameters  permitted by the Pratt & Whitney
maintenance manual,  Lessee shall,  prior to the Aircraft's  return,  correct
or cause to be corrected  such  conditions  which are  determined to have
caused such increased deterioration, such correction to be made in compliance
with the Pratt & Whitney maintenance manual.

     10.05 INSPECTION.

     (a)  During the last twelve (12) months of the Term,  Lessor,  from time
to time,  may wish to make the Aircraft  available for  inspection to
designated representatives  or technical  teams  evaluating  the Aircraft for
use after the Term.  Lessor  agrees to give  Lessee not less than 10
Business  Days'  advance written  notice of such  inspection  and Lessee
agrees to cooperate  fully with Lessor's  requests in making the Aircraft and
the Manuals and Technical  Records available  to such  authorized  technical
teams  and  Lessor  agrees  that such requests  will be  reasonable  and
will be  coordinated  with  Lessee  so as to minimize  disturbance  to
Lessee's  operations  and  its  personnel,  provided, however,  the parties
agree that such  inspections  shall be  scheduled in such manner that
scheduled flights shall not be delayed or cancelled.

     (b)  The Aircraft  (including  the Manuals and  Technical  Records to be
returned  therewith as set forth in this Section 10 and Exhibit F) shall be
made available  to Lessor or its  designee  for  ground  inspection  by
Lessor or its designee  at Lessee's  facilities  or where the heavy
maintenance  check or its equivalent,  if required  by Exhibit F hereto,  is
being  performed,  while such heavy maintenance  check or its  equivalent
is being  performed.  Lessee shall remove the Aircraft from scheduled service
and open the areas of the Aircraft as required by the Maintenance  Program
for such heavy maintenance check, and shall allow Lessor or its designee to
accomplish  its inspection in order to determine that the  Aircraft
(including  the  Manuals  and  Technical  Records) is in the condition
required by the  provisions  of this Section 10 and Exhibit F hereto. Lessee
shall promptly correct any discrepancies  from the condition  required by the
provisions of this Section 10 and Exhibit F hereto which are observed during
such inspection.

     10.06 OPERATIONAL GROUND CHECK.

     Promptly  after  completion of any  corrections  required under Section
10.05(b) above,  Lessee shall conduct an operational  ground check in
accordance with  the  requirements  of the  Maintenance  Program  and shall
correct  any discrepancies

                                      -28-


<PAGE>


disclosed by such check.

     10.07 OPERATIONAL CHECK FLIGHT.

     Promptly  after  completion of all  corrections  required under Section
10.05 and 10.06 above,  the Aircraft  shall be check flown by Lessee at
Lessee's risk and expense,  using qualified flight  personnel,  for not more
than two (2) hours on a noncommercial  flight, for the purpose of
demonstrating to Lessor the satisfactory  operation  of the Aircraft and its
equipment  and systems.  If no major  discrepancy  is found,  the Aircraft
may proceed to the Return  Location. Lessor's  representatives may
participate in such flight as observers.  Lessee's pilot shall be in command
of the  Aircraft.  Such flight shall be flown using de Havilland's
operational check flight  procedures  sufficient to demonstrate the proper
operation of all systems for normal  passenger  use. Upon  completion of such
operational  check  flight,  the  representatives  of  Lessee  and  Lessor
participating  in such flight shall agree in writing upon any  discrepancies
in such  Aircraft  required to be  corrected  by Lessee in order to comply
with the provisions  of this  Section 10 and Exhibit F hereto and Lessee
shall  promptly correct or cause to be corrected at Lessee's expense any such
discrepancies.  If any of the  discrepancies  referred  to in  Sections
10.05  and  10.06 or 10.07 continue to persist,  Lessor may (but shall not be
obligated to) accept delivery of the  Aircraft  and apply the  procedure  set
forth in  Section  10.9 for such discrepancies.

     10.08 ACCEPTANCE.

     Unless otherwise  mutually agreed,  the operational  check flight shall
take place at the location in the United States where the final  maintenance
to put  the  Aircraft  into  the  required  return  condition  is  being
performed ("Maintenance  Location").  Upon completion of the  operational
check flight or after Lessee has  corrected  the  discrepancies  as required
to comply with this Section,  the Aircraft shall be technically accepted at
the Maintenance Location and be  ferried by Lessee at its risk and  expense,
including  accumulation  of Basic Rent, to the Return  Location.  To the
extent  possible,  the  operational check  flight will be  combined  with the
ferry  flight to the Return  Location. Lessee  shall  remedy  or  correct
any  defects  or  deficiencies  that  may be discovered during such flight.

     10.09 DEFERRED DISCREPANCY CORRECTION.

     Any  discrepancies  found  during  the ground  inspection,  operational
ground check and operational check flight set forth in Sections 10.05, 10.06
and 10.07 above,  which were not  corrected by Lessee prior to return of
Aircraft to Lessor,  may be corrected by Lessor or its designee after return
of the Aircraft and Lessee shall reimburse  Lessor for all reasonable  direct
costs and expenses paid by Lessor or its designee for accomplishing  such
discrepancy  corrections. Lessee shall pay Lessor or its designee for all
such costs and expenses incurred within 10 days of the date of receipt of an
invoice therefor.

                                      -29-


<PAGE>


     10.10 FLIGHT COST.

     All  flights  pursuant  to  Section  10.07 and  10.08  shall be made at
Lessee's  expense  and  Lessee  shall  pay  for any  and  all  reasonable
costs associated with such flights including, but not limited to, costs for
crew, oil, airport fees, insurance, takeoff/landing fees, airway
communication fees, ground handling fees and customs duties, if any. All
obligations and risks with respect to the Aircraft  under this Lease or
otherwise  shall be Lessor's from and after technical  acceptance  by  Lessor
under  Section  10.08,  except  as  otherwise expressly provided herein.

     10.11 INDEMNIFICATION.

     Section 16 hereof shall apply to all activity  pursuant to this Section
10 and shall  cover  Lessor's  representatives  with regard to the return of
the Aircraft.

     10.12 INSURANCE.

     To the extent not covered by the existing insurance certificates,  with
respect to Lessee's aviation liability insurance,  Lessee shall (i) cause
Lessor to be named as an additional insured under Lessee's aviation liability
insurance policies to the extent of Lessee's  undertaking  set forth in
Section 10.11 and (ii) shall  furnish to Lessor not later than 7 Business
Days prior to the start of  Lessor's  ground  inspection  of the  Aircraft
certificates  from  Lessee's aviation  liability  insurance  carriers in a
form  reasonably  satisfactory  to Lessor stating the limits and terms of
Lessee's  liability  insurance  coverage, and showing that Lessor has been
named as an additional insured and specifically referring to Section 10.11.
With  respect to Lessee's  hull  insurance,  Lessee shall (i)  cause
Lessee's  hull and war risk  insurance  carriers  to waive all rights of
subrogation  against  Lessor  and  Lender to the  extent of  Lessee's
undertaking  set forth in Section 10.11 and (ii) shall  furnish to Lessor,
not later than 7 Business Days prior to the start of Lessor's  ground
inspection on the Aircraft,  certificates from Lessee's hull and war risk
insurance  carriers, in a form acceptable to Lessor (such approval not to be
unreasonably  withheld), stating  that such  carriers  have so waived all
rights of  subrogation  against Lessor and specifically referring to Section
10.11.

     10.13 MANUALS AND TECHNICAL RECORDS.

     (a)  Lessee shall return to Lessor, at the time the Aircraft is returned
to Lessor,  all of the Manuals and Technical  Records and other data
previously provided to Lessee at delivery as described in Exhibit D hereto,
as updated and maintained  by Lessee  through  the date of return of the
Aircraft  subject  to retention time limits of the Aeronautical Authority.
In addition,  Lessee shall also provide Lessor at the time the Aircraft is
returned to Lessor, all records, documents,  manuals,  authorizations,
drawings  and data in English  which were developed or caused to be
developed  by Lessee or required by the  Aeronautical Authority,  updated and
maintained  by Lessee for the  Aircraft and through the date of return of
the Aircraft in an accurate and correct condition.

                                      -30-


<PAGE>


     (b)  All  Manuals  and  Technical  Records  which have been  supplied by
Lessor to Lessee shall be returned in  accordance  with United States FAA
F.A.R. 91.417 and 121.380.

     10.14 SERVICE BULLETIN KITS.

     All  vendors'  and  manufacturers'  Service  Bulletin  kits ordered and
received by Lessee at the time of  redelivery  of the  Aircraft and which
Lessee obtained free of charge from such vendors or manufacturers  for the
Aircraft but not  installed  therein  shall be  returned  with the  Aircraft,
as part of the Aircraft at the time of return,  free of charge to Lessor and
shall be loaded by Lessee on board the Aircraft as cargo.

     10.15 LESSEE'S SPECIAL EXTERIOR MARKING.

     At the time of the  return  of the  Aircraft,  Lessee  shall  paint the
Aircraft solid white. In the event that,  notwithstanding Lessee's obligation
to do so,  Lessee does not paint the  Aircraft  solid  white,  Lessor shall
have no obligation to remove any markings prior to the sale, lease, or other
disposition of the Aircraft by Lessor after its return;  however,  if Lessor
elects to paint the Aircraft solid white,  Lessee shall pay Lessor's
reasonable direct costs and expenses  paid for such painting  within 10 days
of the date of Lessors  invoice therefor.

     10.16 OWNERSHIP.

     Any  documents,  equipment  and any  other  items  returned  to  Lessor
pursuant  to this  Section  10  which  are not  already  owned by  Lessor
shall thereupon become the property of Lessor.

     10.17 STORAGE UPON RETURN.

     Upon  request of Lessor  received  at least 30 days prior to the end of
the Term, Lessee will store the Aircraft at its expense in Honolulu,  Hawaii
for a period not exceeding 60 days.  Lessee shall at its expense maintain
liability and hull insurance with respect to the Aircraft  during such
storage period that meet  industry  standards  for a stored  aircraft  and
Lessor  shall be named an additional insured and loss payee under such
insurance.

     SECTION 11. TITLE; REGISTRATION; LIENS.

     11.01 Title.

     Lessee  acknowledges that during the Lease Term full legal title to the
Aircraft  shall remain vested in Lessor  notwithstanding  the possession and
use thereof by Lessee,  and Lessee  shall take all  actions,  subject to
Section 18, where applicable,  at its expense that Lessor may reasonably
require to evidence the interest of Lessor in the Aircraft or to protect such
interest  against the claims of any other Person (other than  claimants
under Lessor  Liens).  Lessee shall not  attempt to hold  itself out as
having any power to sell or dispose of the Aircraft or any Engine or
Propeller.

                                      -31-


<PAGE>


     11.02 REGISTRATION: FILINGS: REGISTRATION.

     (a)  The Aircraft  shall be  registered at the FAA in the name of Lessor
throughout  the Term and  Lessee  shall not do, and shall  further  use its
best endeavors  to ensure that no third party  (except  with regard to Lessor
Liens) does, any act or thing which might prejudice or cancel such
registration.

     (b)  Lessee  shall  take or cause to be  taken,  at  Lessee's  cost and
expense, such actions as are necessary or requested by Lessor and appropriate
to maintain,  so long as this Lease is in effect,  (i) registration of the
Aircraft at the FAA, in the name of the Lessor including,  without
limitation, the filing of all reports and applications and the payment of all
fees and (ii) maintaining the  ownership  interest  of  Lessor in the
Aircraft,  provided,  however,  the foregoing  shall not be deemed to impose
upon Lessee any obligation with respect to Lessor  Liens.  Lessee  shall take
such  actions at  Lessee's  expense as are necessary or  reasonably
requested by Lessor to maintain the  perfection of any security  interest
that may be claimed to be created by this  Lease,  including without
limitation, the recording,  filing,  re-recording,  and refiling of this
Lease,  any  other  Operative  Document,   any  financing  statements  or
other instruments.   Lessee  shall  take  no  action   adversely   affecting
the  due registration of the Aircraft with the FAA in the name of the Lessor.

     11.03 LIENS.

     Lessee shall not directly or indirectly create, incur, assume or suffer
to exist any Lien on or with  respect to the Airframe or any Engine or
Propeller other than Permitted Liens. Lessee promptly, at its own expense,
shall take such action as may be  necessary  to duly  discharge  any Lien
other than a Permitted Lien if the same shall arise at any time and shall
indemnify Lessor with respect to any charge or cost incurred in connection
with such Lien.

     11.04 NOTICE OF OWNERSHIP.

     As soon as practicable  after the Delivery Date but in any event within
5  Business  Days of the  Delivery  Date,  Lessee  shall  affix in a
reasonably prominent position on the flight deck or cockpit,  and on each of
the Engines, a reasonably legible notice which shall be provided by Lessor,
reading as follows:

                       "WILLIS LEASE FINANCE CORPORATION,

                                Owner and Lessor,

                    Leased to ALOHA ISLANDAIR, INC., Lessee"

Once affixed as aforesaid,  such notice shall not be defaced, covered or
removed during the Term,  unless  the Lessor  instructs  Lessee by notice
hereunder  to change  such  notice.  Lessee  will not allow the name of any
person  other than Lessor or a lender  designated in writing by Lessor to be
placed on the Airframe or any Engine or Propeller

                                      -32-


<PAGE>


as a  designation  that  might be  interpreted  as a claim of  ownership  or
any security or other interest therein.

     SECTION 12. INSURANCE.

     On or before the  Delivery  Date and until the  Aircraft is returned to
Lessor in accordance  with Section 10 hereof,  Lessee,  at its cost and
expense, shall obtain, maintain and keep in full force and effect the
following insurance with respect to the Aircraft  (Lessor  recognizes  that
such  insurances may not cover the Manuals and Technical Records),  carried
with insurers and re-insurers of recognized  standing who normally
participate in aviation  insurances in the leading international insurance
markets:

     12.01 ALL-RISK INSURANCE.

     All-risk  hull,  ground  and flight  insurance  on the  Aircraft  (with
flight,  taxiing  and  ingestion  coverages)  in an  amount  not  less  than
the Stipulated  Loss Value.  Such hull  insurance  shall  cover  Engines or
engines, Propellers or propellers and Parts temporarily removed from the
Airframe pending installation of the same or similar Engines,  engines,
Propellers or propellers or Parts on the Airframe in an amount not less than
their replacement cost.

     12.02 WAR RISK INSURANCE.

     War risk and allied  perils  insurance on the Aircraft in an amount not
less than the Stipulated Loss Value covering the perils of:

     (a)  war, invasion, acts of foreign enemies, hostilities (whether war be
declared or not), civil war, rebellion, revolution,  insurrection,  martial
law, military or usurped power, or attempts at usurpation of power;

     (b)  strikes, riots, civil commotions or labor disturbances;

     (c)  any act of  one  or more  persons,  whether  or not  agents  of a
sovereign  power,  for  political or terrorist  purposes and whether the loss
or damage therefrom is accidental or intentional;

     (d)  any malicious act or act of sabotage;

     (e)  confiscation,   nationalization,  seizure,  restraint,  detention,
appropriation,  requisition  of  title  or  use by or  under  the  order  of
any government  (whether  civil,  military or de facto) or public or local
authority other than the  government  or any public or local  authority  of
the country of registration; and

     (f)  hijacking or any unlawful  seizure or wrongful  seizure or wrongful
exercise of control of the Aircraft or crew in flight  (including any attempt
at such  seizure or control)  made by any person or persons on board this
Aircraft acting without the consent of Lessee.

                                      -33-


<PAGE>


     12.03 LIABILITY INSURANCE.

     Public liability insurance for a combined single limit of not less than
the amount set forth in Exhibit B hereto for public liability  insurance,
which shall:

     (a)  include public liability  insurance,  passenger liability insurance
and property damage liability insurance; and

     (b)  provide  that all the  provisions  thereof,  except  the limits of
liability,  shall operate in the same manner as if there were a separate
policy covering each such insured.

     12.04 ELECTRONIC DATE RECOGNITION INSURANCE.

     Satisfactory coverage against the risks associated with electronic date
recognition  problems, in the form of Date Recognition Limited Coverage
Clauses AVN2000 and AVN2001, or equivalent, substitute or replacement in
respect thereof in  accordance  with then  current  market  practice  (and
Lessee shall make and comply with the warranties,  representations,  and
undertakings  required to be given in connection with obtaining/maintaining
such clauses).

     12.05 DEDUCTIBLES AND SELF INSURANCE.

     Any insurance  carried in accordance with this Section 12 may contain a
provision  for a  deductible  or self  insurance  in an amount not to exceed
the amount set out in Exhibit B hereto as the permitted insurance deductible.

     12.06 ADDITIONAL REQUIREMENTS: LOSS PAYMENT.

     The  insurance  required  under this Section 12 shall be provided on an
agreed value basis (as to the Aircraft as a whole,  but not as to its
individual parts) and the policies shall, where applicable:

     (a)  name Lessor and each other Insured Party as additional  insureds as
its interests may appear;

     (b)  provide that the insurance  shall not be  invalidated by any action
or inaction by Lessee or any other  Person and insure the interest of Lessor
and each other Insured Party  regardless of any breach or violation by Lessee
or any other Insured Party of any warranty,  declaration or condition
contained in such policies;

     (c)  provide  that the  insurers  shall  waive any right of  subrogation
against Lessor and any other Insured Party;

     (d)  provide that in the event of separate  insurance  being arranged to
cover the all-risk hull insurance and the war risk and allied perils
insurance, the  underwriters  subscribing to such insurance  agree to a 50/50
claim funding arrangement in the event of any dispute as to which insurance
is applicable;

                                      -34-


<PAGE>


     (e)  be of the  type  usually  carried  by  major  airlines  owning  and
operating  similar aircraft,  engines and propellers,  and covering risks of
the kind customarily insured against by such airlines;

     (f)  be primary and without right of  contribution  from other insurance
which may be available to Lessor and any other Insured Party;

     (g)  provide  that  Lessor and each other  Insured  Party shall have no
liability for premiums,  commissions,  calls or assessments with respect to
such policies; and

     (h)  subject to Section  12.09  hereof,  name  Lessor (or any lender or
other  assignee  designated  by Lessor) as loss payees,  as their  interests
may appear, and provide that losses will be adjusted with lessee and payable
to loss payees, as their interests may appear, to the extent of coverage
required herein by Section 12.

     (i)  contain a "cut through" clause satisfactory to Lessor.

     12.07 NO SET-OFF.

     Each  insurance  policy to be  maintained  under this  Section 12 shall
contain a waiver of any right of the insurers to any set-off or  counterclaim
or any other  deduction  against  Lessee,  and Lessor and each other  Insured
Party other than with  respect to unpaid  premiums  then due and owing with
respect to the Aircraft (and not any other aircraft).

     12.08 NOTICE OF MATERIAL ALTERATION OR CANCELLATION.

     Each  insurance  policy to be  maintained  under this  Section 12 shall
provide that no  cancellation or lapse of coverage for nonpayment of premium
or otherwise,  and no substantial change of coverage which adversely affects
Lessor or Lender  shall be  effective as to Lessor or Lender until not less
than thirty (30) days (seven (7) days in the case of war risk  policies)
after  issuance to Lessor or Lender (as the case may be) of written  notice
from the  insurers  of such cancellation, lapse or change.

     12.09 APPLICATION OF CERTAIN INSURANCE PROCEEDS.

     As among Lessor and Lessee,  any payments  received  under  policies of
insurance  required to be  maintained  by Lessee  pursuant to Sections  12.01
or 12.02, shall be applied as follows:

     (a)  if such  payments  are  received  with  respect  to loss or  damage
(including  an Event  of Loss  with  respect  to an  Engine  or  Propeller)
not constituting an Event of Loss with respect to the Airframe,  such
payments shall be paid over to Lessee or at Lessee's  election,  to the
repair facility jointly with Lessee,  upon  performance by Lessee of the
Lessee's repair  obligations or (if applicable) replacement obligations

                                      -35-




<PAGE>


under this Lease pursuant to Section 13.02 hereof to the reasonable
satisfaction of Lessor and,  where  appropriate,  Lessor  shall issue any
necessary  payment orders with respect to such payments;

     (b)  if such payments are received with respect to an Event of Loss with
respect to the Aircraft, so much of such payments as shall not exceed the
amount required to be paid by Lessee  pursuant to Section 13.01 hereof shall
be applied by Lessor in reduction of Lessee's  obligation to pay such amount
if not already paid by  Lessee,  and to  reimburse  Lessee if it shall have
paid all or part of such amount; and the balance,  if any, of such payments
shall be paid over to or retained by Lessee.

     12.10 INSURANCE FOR OWN ACCOUNT.

     Nothing in this Section 12 shall prohibit  Lessee,  Lessor or any other
Insured Party (in that order of priority should insurance  capacity in excess
of the  insurances  required in this  Section 12 be limited as to
availability  or amount),  at its cost,  from  obtaining  insurance  for its
own  account and any proceeds payable thereunder shall be payable as provided
in the insurance policy relating  thereto,  provided that no such  insurance
may be obtained which would limit or otherwise  adversely  affect the
coverage or payment of any  insurance required to be obtained or maintained
pursuant to this Section 12.

     12.11 CERTIFICATES AND REPORTS.

     Lessee  shall  furnish to Lessor and Lender not later than the Delivery
Date  certificates  of insurance  satisfactory to Lessor and Lender and a
report signed by a firm of independent  insurance  brokers  satisfactory  to
Lessor and Lender,  such report  stating the opinion of such firm that the
insurance  then carried and  maintained on the Aircraft  complies with the
terms of this Section 12. Lessee will prior to the renewal dates of the
insurance  policies  required pursuant to this Section 12 (but in any event
prior to the  cancellation,  lapse or expiration of such insurance policies)
provide additional  certificates and a report to Lessor and Lender meeting
the terms of the preceding sentence.  Lessee will cause such firm to advise
Lessor  and  Lender in writing  promptly  of any default in the payment of
any premium and of any other act or  omissions  on the part of  Lessee of
which  they have  knowledge  and which  would in such  firm's opinion
invalidate or render  unenforceable,  in whole or in any material part, any
insurance on the Aircraft. Lessee will also cause such firm to advise Lessor
and Lender in writing at least  thirty  (30) days (seven (7) days in the case
of war risk insurance)  prior to the  termination or  cancellation  of, or
material adverse  change in,  such  insurance  carried  and  maintained  on
the  Aircraft pursuant to this Section 12.

     SECTION 13. LOSS, DAMAGE OR REQUISITION.

     13.01 AN EVENT OF LOSS OF AIRFRAME.

     (a)  Upon  the  occurrence  of an Event  of Loss  with  respect  to the
Aircraft  during the Term,  Lessee shall give Lessor written  notice of
such Event of Loss

                                      -36-


<PAGE>


as soon as is  practicable  but in no event  later than ten (10)  Business
Days after such  occurrence.  Lessee shall  thereafter pay or cause to be
paid to the Lessor in  immediately  available  funds  upon the  earlier  of
(i)  receipt  of insurance  proceeds with respect to such Event of Loss or
(ii) 60 days following the  Event of Loss,  an  amount  equal to (A) the
Basic  Rent,  if any,  due and payable  pursuant  to the terms of Section
7.01 and  Exhibit B hereto due on or before such date of payment,  PLUS (B)
all unpaid  Supplemental Rent (other than Stipulated  Loss  Value)  due on or
before  such date of  payment,  PLUS (C) the Stipulated Loss Value for the
Aircraft determined as of the date of payment.

     (b)  In the event of a payment in full of the Stipulated  Loss Value for
the Aircraft and other Rent payable as provided in Section 13.01 (a) above,
(i) this Lease and the obligations of Lessee to pay Basic Rent and
Supplemental Rent shall  terminate;  and (ii) Lessor shall convey to Lessee
all of Lessors  right, title and interest,  AS-IS,  WHERE-IS WITHOUT
RECOURSE OR WARRANTY,  EXPRESS OR IMPLIED except for a warranty against
Lessor's Liens, in and to (1) the Airframe and Engines and  Propellers  and
(2) all claims for damage to the  Airframe  and Engines and Propellers,  if
any, against third persons arising from the Event of Loss (unless any
insurance carrier requires that such claims be assigned to it).

     13.02 ENGINE OR PROPELLER LOSS.

     Upon the occurrence during the Term of an Event of Loss with respect to
an Engine or  Propeller  not then  installed on the Airframe or an Event of
Loss with respect to an Engine or Propeller  installed on the Airframe not
involving an Event of Loss with  respect to the  Airframe,  Lessee  shall
give  Lessor and Lender written  notice  thereof as soon as is practicable
but in no event later than ten (10)  Business Days after such  occurrence
and shall within 45 days of the  occurrence  of such  Event of Loss and on at
least 5 days'  prior  written notice  to  Lessor  substitute  a  Replacement
Engine  for  such  Engine  or  a Replacement  Propeller for such Propeller.
In such event,  immediately upon the effectiveness  of such  substitution  on
the date set forth in such  notice  and without  further  act,  (i)  title
to the  Replacement  Engine  or  Replacement Propeller shall thereupon vest
in Lessor (subject only to Permitted Liens), (ii) title to the replaced
Engine or Propeller  shall  thereupon vest in Lessee,  in AS-IS,  WHERE-IS
CONDITION,  free and clear of all rights of Lessor and free and clear of
Lessor Liens (other than Lessor Liens  arising out of events  occurring after
the  transfer  which are not  attributable  to  actions  of the  Lessor or
omissions  by the Lessor of actions  which the  Lessor is legally  obligated
to take) and shall no longer be deemed an Engine or Propeller hereunder,  and
(iii) such  Replacement  Engine or Replacement  Propeller shall become
subject to this Lease and be deemed part of the  Aircraft  for all  purposes
hereof to the same extent as the Engine or  Propeller  originally  installed
on or attached to the Airframe.  Upon such  substitution,  Lessee shall
execute and deliver to Lessor such bills of sale, opinions and other
documents and instruments as Lessor shall reasonably  request by notice
hereunder  to evidence the interest of Lessor and conveyance to Lessor of
good and marketable title to such Replacement  Engine or Replacement
Propeller.  Upon such  substitution,  (x) Lessor shall  execute and deliver
to Lessee such

                                      -37-


<PAGE>


bills of sale and other documents and instruments, prepared at Lessee's
expense, as Lessee  shall  reasonably  request to evidence  such  transfer
and vesting of title in and to the replaced  Engine or  Propeller in Lessee,
free and clear of all rights of Lessor and (y) Lessee  shall  receive all
insurance  proceeds and proceeds in respect of any Event of Loss causing such
replacement.  No Event of Loss with respect to an Engine or Propeller under
the circumstances contemplated by this Section 13.02 shall result in any
reduction of Lessee's  obligations  to pay Rent  hereunder.  Lessee  agrees
that it shall at all times  during the Term maintain or cause to be
maintained one (1) Engine,  or other aircraft engine and one (1) Propeller or
other aircraft  propeller suitable and available for use on the Airframe
and/or the airframe included with the Other Aircraft.

     13.03 PAYMENTS FROM  GOVERNMENTAL  AUTHORITIES FOR REQUISITION OF TITLE
           OR USE.

     (a)  Any  payments on account of an Event of Loss (other than  insurance
proceeds or other  payments  the  application  of which are provided for in
this Section 13, or elsewhere in this Lease, as the case may be) received at
any time by Lessor or by Lessee from any  governmental  authority or other
Person will be applied as follows:

          (i)  if such payments are received with respect to an Engine or
     Propeller,  such  payments  shall be paid over to, or retained  by, the
     Lessor,   and  upon   completion   of  (or,  if  requested  by  Lessee,
     simultaneously  with) Lessee's  replacement  obligation,  shall be paid
     over to, or retained by, Lessee; and

          (ii) if  such  payments  are  received  with  respect  to the
     Aircraft,  (A) so  much  of such  payments  as  shall  not  exceed  the
     Stipulated  Loss  Value and any  other  amount  required  to be paid by
     Lessee  pursuant to Section 9.01 hereof,  shall be applied in reduction
     of Lessee's  obligation  to pay such  Stipulated,  Loss Value and other
     amounts,  to the extent not already paid by Lessee,  and, to the extent
     already paid by Lessee  shall be applied to  reimburse  Lessee for such
     payment,  (B) the balance, if any, of such payment remaining thereafter
     shall be retained by Lessor; and

     (b)  In the event of a requisition for use by any government, so long as
it does not  constitute  an  Event of Loss of the  Airframe  and the  Engine
or engines or Propellers or propellers  installed  thereon during the Term,
Lessee shall promptly notify Lessor of such  requisition and all Lessee's
obligations under this Lease shall  continue to the same extent as if such
requisition  had not  occurred.  Any payments  received by Lessor or Lessee
from such  government with respect to such requisition shall be paid over to
or retained by, Lessee.

     13.04 APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF DEFAULT.

     Any amount  referred  to in  Section  13 or Section 12 hereof  which is
payable  to Lessee  shall not be paid to Lessee,  or, if it has been
previously paid directly

                                      -38-


<PAGE>


to Lessee,  shall not be  retained  by Lessee if at the time of such  payment
an Event of Default shall have occurred and be continuing, but shall be paid
to and held by the Lessor as security  for the  obligations  of Lessee under
this Lease and/or  applied to any unpaid Rent hereunder then due, and at such
time as there shall not be continuing any such Event of Default,  such
remaining  amount shall be paid over to Lessee.

     SECTION 14. EVENT OF DEFAULT

     Each of the following events shall be an Event of Default:

     14.01 FAILURE TO MAKE PAYMENTS.

     If Lessee or Guarantor shall fail to pay in full in the manner provided
in, and at the place  required by the terms of,  Section 7 and Exhibit B
hereof, any  payment  of Rent  when due and such  failure  shall  continue
for five (5) Business Days.

     14.02 FAILURE TO OBTAIN OR MAINTAIN INSURANCE.

     If Lessee  fails to obtain or maintain  any  insurance  pursuant to the
provisions  of  Section  12 of this  Lease or  operates  or  locates  or
permits operation or location of the Aircraft in violation of Section 9.02
hereof.

     14.03 FAILURE TO PERFORM OTHER OBLIGATIONS.

     If Lessee or  Guarantor  fails to duly  observe or  perform  any of its
other  obligations or agreements  under any Operative  Document and such
failure shall not have been  remedied  within a period of ten (10)  Business
Days after delivery  of  written  notice  to  Lessee  or  Guarantor,  as the
case  may be, specifying  the same from Lessor  unless  such  failure is
curable and Lessee or Guarantor,  as the case may be,  shall  after the
delivery of such  notice,  be diligently  proceeding  to correct  such
failure and shall in fact correct such failure within thirty (30) days after
the delivery of such notice.

     14.04 REPRESENTATIONS AND WARRANTIES UNTRUE.

     If any  representation  or  warranty  made by Lessee  in any  Operative
Document or in any  document  or  certificate  furnished  to Lessor or Lender
in connection  therewith shall be untrue,  inaccurate or incomplete in any
material respect.

     14.05 INSOLVENCY OR BANKRUPTCY.

     (a)  If Lessee or Guarantor  shall become  insolvent or shall  generally
not pay its debts as they mature or acknowledges that it cannot pay its debts
as they  mature or Lessee or  Guarantor  shall  apply  for,  shall  consent
to, or acquiesce in the appointment of a trustee, custodian,  liquidator or
receiver of Lessee or Guarantor  or its  property;  or, in the absence of
such  application, consent or acquiescence,  a trustee, custodian,
liquidator or receiver shall be appointed for Lessee or Guarantor by a court
of competent  jurisdiction or for a material  part  of  its  property;  or
any  bankruptcy,   reorganization,  debt arrangement or other proceedings
under any bankruptcy or

                                      -39-


<PAGE>


insolvency law shall be instituted by or against Lessee or Guarantor.

     (b)  If  any  bankruptcy,  reorgarization,  dissolution  or  liquidation
proceeding shall be instituted (i) by Lessee or Guarantor or (ii) against
Lessee or  Guarantor  and not be  vacated  within  60 days  of the
initiation  of such preceding.

     14.06 LOSS OF REGISTRATION OR PROTECTION.

     If Lessee  fails to comply with its  obligations  under  Section  11.02
hereof.

     14.07 LOSS OF LICENSE.

     If Lessee  shall fail to remain a  Certificated  Air  Carrier or Lessee
shall suspend all or substantially all of its airline operations or Lessee
shall fail to retain a valid Air Operator's Certificate.

     14.08 OTHER LEASE.

     If an "Event of  Default"  (as defined  therein)  shall occur under the
Other Lease or any other lease between the Lessor and the Lessee.

     14.09 FINAL JUDGMENT.

     Final  judgment  for the  payment of money in I excess of  $500,000  or
final  judgments for the payment of money in excess of $500,000 in the
aggregate shall be rendered against Lessee or Guarantor unless such
judgment(s) shall have been stayed,  insured against or adequate reserves for
the payment thereof shall have been set aside in accordance with generally
accepted accounting principles.

     14.10 OTHER DEFAULT.

     Any event of  default  shall  have been  declared  under any  agreement
relating to  Lessee's  or  Guarantor's  debt or lease  obligations  in an
amount exceeding $500,000 individually or in the aggregate (and determined,
in the case of lease obligations, by the present value of the remaining lease
payments).

     14.11 CONTEST.

     The existence,  validity or  enforceability of the rights of the Lessor
under the Lease are contested by Lessee.

     14.12 FAILURE TO MAINTAIN LETTER OF CREDIT.

     If Lessee  fails to deliver to Lessor and keep in full force and effect
an acceptable Letter of Credit at the times and in the form and amounts
required under Exhibit B hereto.

                                      -40-



<PAGE>


         14.13 FAILURE TO MAINTAIN THE GUARANTY.

         If, for any reason, the Guaranty ceases to be in full force and effect.

         SECTION 15. REMEDIES.

         Upon the occurrence of any Event of Default and at any time
thereafter so long as the same shall be continuing, Lessor, at its option,
may declare this Lease to be in default;  and at any time  thereafter so long
as Lessee shall not have remedied all outstanding Events of Default, Lessor
may do, and Lessee shall comply with, one or more of the following with
respect to all or any part of the Airframe and the Engines and Propellers,
as Lessor in its sole discretion shall elect, to the extent  permitted by,
and subject to compliance with any mandatory requirements of, Applicable Law
then in effect:

         (a) Cause  Lessee,  upon  notice  hereunder  to Lessee by Lessor and
at Lessee's expense, to, and Lessee shall,  promptly return all or such part
of the Airframe  or the  Engines or  Propellers  as Lessor may demand to
Lessor at such location in the United  States as selected by Lessor in the
manner and condition required by, and otherwise in accordance  with all of
the provisions of, Section 10 hereof;  or Lessor,  at its  option,  may enter
upon the  premises  where the Airframe  or any or all  Engines or
Propellers  are  located or believed to be located and take immediate
possession of and remove such Airframe or Engines or Propellers  without  the
necessity  for first  instituting  proceedings,  or by summary proceedings
or otherwise,  in which connection,  to the extent permitted by Applicable
law, Lessee waives and agrees to waive any requirement that Lessor post any
bond or other  security in connection  with any such  proceedings,  and
Lessee shall comply therewith,  all without liability to Lessor for or by
reason of such entry or taking  possession,  whether for the  restoration  or
damage to property caused by such taking or otherwise;

         (b) Sell or otherwise dispose of any or all of the Aircraft,  at
public or private sale and with or without notice to Lessee or advertisement,
as Lessor may  determine or hold,  use,  operate,  lease to others or keep
idle all or any part  of the  Airframe  or any  Engine  or  Propeller  as
Lessor,  in its  sole discretion,  may  determine,  in any such case  free
and clear of any  rights of Lessee except as  hereinafter  set forth in this
Section 15 and without any duty to account to Lessee with respect to such
action or inaction or for any proceeds with  respect  thereto  and the
proceeds  of any such sale  shall be applied by Lessor to  reduce  Lessee's
obligations  under  15(d)  below or  otherwise  due hereunder;

         (c) Whether or not Lessor shall have exercised,  or shall thereafter
at any time exercise,  any of its rights under paragraph (a) or paragraph (b)
above with  respect  to all or any part of the  Aircraft,  (i) if  Lessor
shall  have succeeded  in  repossessing  the  Aircraft  as a result of the
exercise of such rights within thirty (30) Business Days following  such
declaration of default, Lessor shall have the right to recover from Lessee
any amounts which may be then due and unpaid or which may become due for the
use of the  Aircraft  (including, without limitation, any Basic Rent and

                                      -41-


<PAGE>


other  obligations  accruing  hereunder  after the date of the occurrence of
the Event of Default  through the date the Lessor is revested with possession
of the Aircraft  as a result of the  exercise of such  rights) and also to
immediately recover  from  Lessee any  damages,  costs and  expenses,
including  reasonable Attorney's  fees which Lessor shall have sustained by
reason of such Event(s) of Default or any other breach by Lessee of its
obligations  hereunder;  or (ii) if Lessor shall not have succeeded in
repossessing  the Aircraft as a result of the exercise  of such  rights
within  thirty  (30)  Business  Days  following  such declaration of default,
Lessor, by written notice to Lessee specifying a payment date not  earlier
than ten (10) days from the date of such  notice,  may demand that the Lessee
pay to Lessor,  and Lessee shall pay Lessor, on the payment date specified in
such notice, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent due for periods  commencing on or after the
payment date  specified in such  notice),  any unpaid Basic Rent due for
periods prior to the period  commencing  with the payment date specified in
such notice, plus whichever of the following  amounts Lessor,  in its sole
discretion,  shall specify in such  notice:  (aa) an amount  equal to the
excess,  if any,  of the Stipulated  Loss  Value  for  the  Aircraft,
computed  as of the  payment  date specified in such notice,  over the
aggregate fair market rental value (computed as hereafter in this Section
provided) of the Aircraft for the remainder of the scheduled  Term,  after
discounting  such aggregate fair market rental value to present  worth  using
a discount  rate  equal to 1/2 of 1 % per annum  above the prime rate as
announced  from time to time by  Citibank,  N.A. in effect on the date of
computation;  or (bb) an amount  equal to the  excess,  if any,  of the
Stipulated  Loss Value for the  Aircraft on the payment  date  specified  as
the payment  date in such notice over the fair  market  sales value of the
Aircraft (computed  as  hereafter  in  this  Section  provided)  as of the
payment  date specified in such notice;

         (d) In the event Lessor,  pursuant to paragraph  (b) above,  shall
have sold the Aircraft,  Lessor, in lieu of exercising its rights under
paragraph (c) above with  respect to the  Aircraft,  may,  if it shall so
elect,  demand  that Lessee pay Lessor,  and Lessee shall pay to Lessor, on
the date of such sale, as liquidated  damages  for loss of a bargain  and not
as a penalty (in lieu of the Basic Rent due for periods commencing on or
after such date of sale), any unpaid Basic  Rent due for  periods up to and
including  the period in which such sale occurs,  plus the amount of any
deficiency between the net proceeds of such sale (after deduction of all
costs of sale including,  without  limitation,  costs of overhaul,
maintenance,  broker's fees,  preparation  and moving to sale) and the
Stipulated Loss Value; and/or

         (e)  Terminate  this  Lease  as to  the  Airframe  or any or all of
the Engines  or  Propellers,  or  exercise  any other  right or remedy  which
may be available under Applicable Law or proceed by appropriate court action
to enforce the terms  hereof or to recover  damages  for the  breach  hereof
(which  shall include  recovery of the present value,  calculated at a
discount rate equalling the prime rate as announced from time to time of
Citibank,  N.A. as in effect on the date of calculation,  of all Basic Rent
for the period  corresponding to the unexpired  portion of the Term),
provided,  however,  that this Lease  shall be deemed to be terminated
automatically and immediately upon the occurrence of any Event of Default
under Section 14.05.

                                      -42-


<PAGE>


         In addition,  Lessee shall be liable for any and all Rent due
hereunder before or after any  termination  hereof,  together with interest
on such unpaid amounts at the Overdue Rate,  and all costs and expenses
(including  reasonable attorneys' fees and disbursements)  paid by Lessor as
a result of the occurrence of any Event of  Default  or the  exercise  of
remedies  with  respect  thereto including all costs and expenses  incurred
in connection  with the return of the Airframe or any Engine or Propeller in
accordance  with the terms of Section 10 hereof or in  placing  the  Aircraft
in the  condition  and with  airworthiness certification  as required by
such Section and such obligation shall survive any termination  of the Lease.
Except as otherwise  expressly  provided  above,  no remedy  referred to in
this  Section 15 is intended  to be  exclusive,  but each shall be
cumulative  and in addition to any other  remedy  referred to above or
otherwise available to Lessor at law or in equity; and the exercise or
beginning of exercise by Lessor of any one or more of such remedies shall not
preclude the simultaneous or later exercise by Lessor of any or all such
other  remedies.  No express or implied waiver by Lessor of any Default or
Event of Default hereunder shall in any way be, or be construed to be, a
waiver of any future or subsequent Default or Event of Default.

         For the purposes of paragraph  (c) above,  the  "aggregate  fair
market rental  value" or the "fair market  sales  value" of the  Aircraft
shall be the rental value or sales  value,  as the case may be, which would
be obtained in an arm's-length transaction between an informed and willing
lessee or purchaser, as the case may be, under no compulsion  to lease or
purchase,  as the case may be, and an  informed  and willing  lessor or seller,
as the case may be, in each case based upon the actual condition and
location of the Aircraft,  which value shall be  determined  by  mutual
agreement  or,  in the  absence  of  mutual  written agreement,  pursuant to
an appraisal prepared and delivered in the United States by a nationally
recognized firm of independent  aircraft appraisers selected by Lessor. The
cost of such appraisal shall be borne by Lessee.

         (f) To the extent  permitted by applicable  law,  Lessee waives any
and all rights and remedies  conferred upon a lessee by UCC Sections  2A-508
through 2A-522 (where  applicable),  including  (without  limitation)  any
rights to (i) cancel  or  repudiate  this  Lease,  (ii)  reject or  revoke
acceptance  of any Aircraft,  (iii)  recover  damages from Lessor for breach
of warranty or for any other  reason,  (iv) claim a  security  interest  in
any  rejected  property  in Lessee's  possession or control,  (v) deduct from
the Rent or other sums due and payable under this Lease all or any part of
any claimed  damages  resulting from Lessor's  alleged  defaults  under this
Lease,  (vi)  recover  from  Lessor any general, special, incidental or
consequential damages for any reason whatsoever, and (vii) specific
performance,  replevin or the like for the Aircraft.  Lessee further waives
its rights under Section 2A-401 and 2A-402 to suspend performance of any of
its obligations under this Lease with respect to the Aircraft.  Lessee waives
any and all rights to notice and to a judicial  hearing  with  respect to the
repossession  of the Aircraft by Lessor upon the  occurrence of an Event of
Default hereunder.

         SECTION 16. INDEMNITIES AND EXPENSES.

         16.01 GENERAL INDEMNIFICATION AND WAIVER OF CERTAIN CLAIMS.

                                      -43-


<PAGE>




         (a) INDEMNIFICATION. Lessee assumes liability for, and hereby agrees
to indemnify,  protect, save and keep harmless each Indemnitee from and
against any and all liabilities,  obligations,  losses, damages, injuries,
penalties, claims (including,  without  limitation,  claims involving or
alleging any Indemnitee's negligence and claims involving strict or absolute
liability in tort),  demands, actions, penalties, suits, costs, expenses and
disbursements (including, without limitation,   legal  fees  and   expenses,
consultation   fees  and  costs  of environmental  investigation  and
remediation) of any kind and nature whatsoever (collectively,  a "CLAIM")
which may be imposed  on,  incurred  by or  asserted against an Indemnitee,
whether or not such Indemnitee shall also be indemnified as to any such Claim
by any other Person,  in any way relating to or arising out of this Lease,
any Operative  Document to which Lessee or Guarantor is a party, or any other
document  contemplated hereby, or the performance or enforcement of any of
the terms hereof or thereof,  or in any way relating to or arising out of the
manufacture,  purchase, acceptance,  rejection,  ownership, delivery, lease,
sublease,  possession,  use, operation,  maintenance,  condition,
registration, sale,  return,  storage or other  disposition  of each Aircraft
or any Engine or Part  thereof  or any  accident  in  connection  therewith
(including,  without limitation,  latent and other defects, whether or not
discoverable and any claim for patent, trademark or copyright  infringement),
regardless of where, how and by whom operated, the failure of Lessee to
perform or comply with any law or any provision of the Operative  Documents
to which Lessee or Guarantor is a party or the  breach by Lessee  of its
obligations  or  representations  and  warranties hereunder  or the failure
of Lessee to comply with any law;  provided,  however, that Lessee shall not
be required to indemnify any  Indemnitee  for any Claim in respect  of any
Aircraft  arising  from acts or  events  which  occur  prior to commencement
of the Term of this Lease or after  possession of such Aircraft has been
re-delivered  to Lessor in  accordance  with  Section 10  hereof.  Further
provided that Lessee shall not be required to indemnify  (i) an  Indemnitee
for any Claim resulting from acts which would  constitute the willful
misconduct or gross negligence of such Indemnitee, (ii) Lessor or its
Affiliates for any Claim resulting  from acts which  would  constitute  the
willful  misconduct  or gross negligence of any respective agent,  director,
employee or  representative,  if acting  within  the  scope of their
employment  or  duties,  of  Lessor  or its Affiliates,  or (iii) any other
Indemnitee  for any Claim  resulting  from acts which would constitute the
willful  misconduct or gross negligence of any agent, director,  employee  or
representative,  if  acting  within  the scope of their employment or
duties, of such Indemnitee.

         (b) WAIVER OF CERTAIN  CLAIMS.  Lessee  hereby  waives and releases
any Claim now or hereafter  existing against any Indemnified  Person arising
out of death or personal injury to personnel of the Lessee, loss or damage
to property of Lessee,  or the loss of use of any property of Lessee,  which
may result from or arise out of the condition, use or operation of the
Aircraft during the Term, including  without  limitation  any  latent  or
patent  defect  whether  or not discoverable.

         16.02 GENERAL TAX INDEMNITY.

         (a) INDEMNITY. Lessee agrees to pay and to indemnify each

                                      -44-


<PAGE>


Indemnitee for, and hold each Indemnitee harmless from and against,  all
license and registration fees,  income,  franchise,  gross receipts,  sales,
use, excise (including without  limitation,  any excise tax imposed by the
State of Hawaii), personal  property,  ad valorem,  value added  (except as
indicated in subclause 16.02(a)(i) below), leasing, leasing use, stamp,
documentary,  landing, airport use or other taxes, and all levies, imposts,
duties, charges, or withholdings of any nature,  each of the  foregoing
together with any  penalties,  forfeitures, fines or  interest  thereon
("Impositions"),  arising  out of the  transactions contemplated  by this
Lease and  imposed  against an  Indemnitee,  Lessee or the Aircraft or any
part thereof by any Federal,  state, local or foreign government or other
taxing  authority  upon or with  respect to the  Aircraft  or any part
thereof or upon the sale, purchase,  ownership,  delivery, leasing,
possession, use,  operation,  return,  transfer or other disposition  thereof
or based on or measured by the rentals, receipts or earnings arising
therefrom, or upon or with respect to this Lease.  Notwithstanding  the
provisions of the above  paragraph, Lessee's  obligations  under this
Section  16.02  shall not  include any of the following:

                  (i)  Impositions  on,  based on, or measured by, net income
        of any Indemnitee  (other than taxes in the nature of sales, use,
        property or value added tax but including within this exclusion, any
        value added tax, consumption tax or similar tax in the event such tax
        is enacted by a taxing  jurisdiction,  as a complete  substitute or
        replacement of an Imposition on, based on, or measured by, net income
        as a revenue source for that jurisdiction),  imposed by the United
        States of America or any United States federal taxing authority or
        imposed by any state or local political subdivision or taxing
        authority in any jurisdiction where the Lessor  maintains  an office
        or other place of  business  (and for this purpose  the   ownership
        or  leasing  of  the  Aircraft  in  any  such jurisdiction  shall not
        be deemed to constitute  the  maintenance  of a place of  business)
        and in which the Lessor would have been subject to taxation without
        regard to the transactions contemplated by this Lease;

                  (ii) any impositions  imposed as a result of a voluntary
        sale, transfer of title, mortgaging,  pledging, financing, or other
        voluntary disposition  by any  Indemnitee  of the  Aircraft  or part
        thereof  or interest  therein,  or any  interest in the Rent or part
        thereof or any interest  in the Lease or part  thereof,  unless such
        sale,  transfer, mortgage, pledge or disposition occurs by reason of
        the occurrence of a Default or an Event of Default or the  exercise
        of  Lessor's  remedies under this Lease upon an Event of Default;

                  (iii) any Impositions  imposed on any Indemnitee to the
        extent caused by the gross negligence or willful misconduct of such
        Indemnitee;

                  (iv) Impositions relating to the Aircraft or any part
        thereof, or  interest  therein,  for any  taxable  period  or
        portion  thereof, relating to events  occurring prior to commencement
        of the Term of this Lease  or  after  the  expiration  of the  Term
        of this  Lease  and the redelivery of the Aircraft in accordance with
        this Lease;

                                      -45-


<PAGE>


                  (v)  indemnification  of the Lessor,  but without prejudice
        to the rights of indemnification of any other Indemnitee,  with
        respect to any Impositions imposed as a direct result of the willful
        misconduct or gross  negligence of the Lessor or its  affiliates or,
        if acting within the  scope  of their  employment  or  duties,  of
        Lessor's officers, directors,  employees,  agents or
        representatives or as a direct result of a breach by Lessor of its
        express obligations under this Lease or as a direct  result of an
        express  representation  or  warranty  given by Lessor in this  Lease
        not being true and  correct at the date when,  or when deemed to have
        been, given or made;

         (vi)  indemnification of any lender to Lessor or any permitted
        successor  or assign  thereof,  but without  prejudice to the rights
        of indemnification  of any  other  Indemnitee,  (aa) with respect  to
        any Impositions  imposed on such  lender,  successor  or assign as a
        direct result of its own willful  misconduct or gross negligence or,
        if acting within the scope of their employment or duties,  the
        willful misconduct or gross negligence of the officers, directors,
        employees,  agents or representatives of such lender, successor or
        assign otherwise asserting the right to indemnification hereunder;
        or (bb) in the event any such lender, its successor or assign shall,
        in the course of the exercise of rights and  remedies  under the
        relevant  security  agreement or other assignment,  exercise  the
        rights and remedies of the Lessor under this Lease,  (I) with
        respect to any  Impositions  imposed on such  lender, successor  or
        assign as a direct  result of its own  breach of its own obligations
        expressly undertaken in its own capacity (and not merely as successor
        in interest to Lessor under the relevant  security  agreement or
        other assignment); or (II) with respect to any Imposition imposed as
        a direct result of an express  representation or warranty given by
        such lender,  successor  or assign in its own  capacity  (and not
        merely as successor in interest to Lessor under the relevant
        security  agreement or other  assignment)  not being true and correct
        at the date when,  or when deemed to have been, given or made; or

         (vii)  Impositions  imposed  on  an  Indemnitee  by  a  taxing
        jurisdiction (other than the United States or any jurisdiction in
        which the Lessee is  organized,  maintains  a place of business or
        from which the Lessee may make payments under this Lease or where the
        Aircraft may be  located  or  operated)  which  would not have been
        imposed on such Indemnitee but for such Indemnitee  engaging in
        transactions  unrelated to the transactions contemplated by this
        Lease.

         (b) Reports. In case of any report or return to be made with respect
to any  Imposition or possible  Imposition,  Lessee will either make such
report or return in such manner as will show the ownership in Lessor of the
Aircraft,  and when  requested  by an  Indemnitee  send a copy of such
report or return to the Indemnitee,  or will notify the  Indemnitee  of such
requirement  and make such report or return in such  manner  as shall be
satisfactory  to the  Indemnitee. Lessee  shall,  at its own expense,  duly
file all required  reports and returns respecting all  Impositions  paid or
indemnified  against by Lessee  pursuant to this Section 16.02 to the extent
Lessee is permitted by Applicable

                                      -46-


<PAGE>


Law to do so. If the same must be filed by an  Indemnitee,  Lessee  will
advise such  Indemnitee  of the  necessity of filing the same and, in
sufficient  time before the same is due,  furnish such  Indemnitee with a
completed copy thereof. Lessee shall hold each  Indemnitee  harmless  from
and against any  liabilities, obligations,  losses,  damages,  penalties,
claims,  actions,  suits  and costs arising out of any insufficiency or
inaccuracy in any information in such report or return  filed or  supplied
by Lessee,  except to the extent that the same is attributable  to an
Indemnitee's  failure  to timely  provide  Lessee  accurate information which
Lessee has requested,  in writing,  with specificity and which Lessee needs
to fulfill its  reporting or return  obligations,  an  Indemnitee's failure
to timely and properly file returns  which have been timely  prepared by
Lessee and timely  delivered to such  Indemnitee or with respect to which
Lessee has provided such Indemnitee the necessary  information  which would
enable such Indemnitee to do so. If actual notice is given by any authority
to an Indemnitee that a report  or  return  is  required  to be filed  with
respect  to any such Impositions  referred  to in this  Section  16.02 and
Lessor  has actual  notice thereof,  Lessor shall cause that  Indemnitee to
promptly  notify Lessee of such required report or return.  Lessor agrees to
cause each Indemnitee to respond to any  reasonable  request,  of which
Lessor  has  actual  notice,  of Lessee for information  within the control
of such Indemnitee with respect to the filing of any such report or return.
Lessee agrees to pay any reasonable  costs,  fees or other charges of
independent  counsel or  independent  accountants  incurred by Lessor or such
Indemnitee  in  connection  with any such  response  or  request
contemplated by this subsection.

         (c) Contests. If claim is made against an Indemnitee for any
Imposition with respect to which  Lessee has an  obligation  under this
Section  16.02 and Lessor has actual notice thereof, Lessor shall cause such
Indemnitee to promptly notify the Lessee but  failure  to so notify the
Lessee  shall not  reduce  the Lessee's  obligations  hereunder,  except to
the extent  that  Lessee is thereby precluded from contesting such claim or
Imposition.  If reasonably requested by the Lessee in writing  and  provided
no Default or Event of Default  shall have occurred and is  continuing,
Lessor,  at the sole expense of the Lessee,  shall itself (or shall cause
such Indemnitee to) in good faith and diligently  contest (and not settle
without  Lessee's written consent) or shall (or shall cause such Indemnitee
to) permit the Lessee,  if desired by the Lessee,  to contest in the name of
the Lessee the  validity,  applicability  or amount of such  Imposition.
Lessee may contest,  or require that Lessor or such Indemnitee  contest,  by
(a) resisting  payment thereof if practicable,  (b) not paying the same
except under protest with funds advanced by Lessee on an  interest-free
basis, if protest is necessary and proper,  and (c) if payments be made,
using reasonable  efforts to obtain a refund thereof in appropriate
administrative and judicial proceedings; provided,  however,  that, in each
such instance, the Lessor and such Indemnitee shall not be required to
undertake any contest unless:

                  (i) Lessee shall have provided Lessor with an opinion of
        legal counsel reasonably acceptable to Lessor to the effect that a
        reasonable basis exists to contest such claim and,  prior to the
        commencement  of any appeal of an  adverse  judicial  decision,  with
        an opinion of such legal  counsel to be effect that a  reasonable
        basis  exists to appeal such adverse judicial decision (which opinions

                                      -47-


<PAGE>


        shall be obtained at Lessee's sole cost and expense);

               (ii) such proceedings do not involve any material risk or
        danger of the sale, forfeiture or loss of the Aircraft or any part
        thereof or interest therein or the  imposition  of  civil  or
        criminal  fines, penalties,  forfeitures  or sanctions  against
        Lessor or such  Indemnitee or the creation of any Lien other than a
        Lien for  Impositions  not yet due or being  contested  in good
        faith by appropriate  proceedings,  and for payment of which such
        reserves if any, as are required to be provided under generally
        accepted accounting principles have been made unless  Lessee has
        provided to Lessor a bond or other  security  reasonably satisfactory
        to Lessor (provided that in the case of civil or criminal  fines,
        penalties,  forfeitures  or  sanctions  such  bond or  other
        security  shall be satisfactory  to Lessor in its sole  discretion)
        to protect against such risk or danger;

                  (iii) in the event that the subject matter of the contest
        is of a continuing  nature and has  previously been decided
        adversely pursuant to the contest provisions of this Section 16.02 by
        the highest court to which an appeal could be taken (other than the
        U.S. Supreme Court),  there has been a change in the law (including,
        without limitation,  amendments to statutes or regulations,
        administrative  rulings and court decisions) after such claim shall
        have been so previously  decided and Lessor shall have received an
        opinion of independent tax counsel  selected  by the  Lessee and
        reasonably  acceptable  to Lessor,  which opinion shall be obtained
        at the Lessee's sole expense, to the effect that, as a result  of
        such  change,  it is more  likely  than not that the  position  which
        Lessor,  an Indemnitee  or the Lessee,  as the case may be, had
        asserted in such previous contest would prevail;

                 (iv) no  Default or Event of Default shall have occurred and
        be continuing;

                 (v) prior to the commencement of any contest undertaken by
        the Lessee or any contest undertaken by Lessor or any Indemnitee with
        respect to which Lessor or such Indemnitee is required to follow the
        direction of the Lessee, the Lessee shall have  delivered to  Lessor
        a written  acknowledgement of its obligations to indemnify fully
        Lessor and such Indemnitee to the extent that the contest is not
        successful;

                (vi) if such contest is to be initiated by the payment of,
        and the claiming of a refund for, such Imposition,  Lessee shall have
        advanced to Lessor or such Indemnitee  sufficient  funds (on an
        interest-free  basis) to make such payments,  provided,  however,
        that  Lessee  shall  indemnify  Lessor  and such Indemnitee for any
        adverse tax consequences resulting from such advance; and

                (vii) such contest does not involve any Imposition or taxes
        of any Indemnitee not indemnified hereunder.

                Lessee shall not be deemed to be in default under any of the
        above

                                      -48-


<PAGE>


        indemnification  provisions of this Section 16.02 so long as Lessee
        shall diligently prosecute  a contest in conformity with the
        requirements of this Section 16.02(c),  or in the case where the
        Lessor or an Indemnitee  shall be  prosecuting  such contest
        pursuant to this Section  16.02(c),  Lessee has fulfilled all of its
        obligations  under this Section 16.02(c) with respect to such
        contest. Notwithstanding the foregoing,  if  a  claim  is  made
        against  an  Indemnitee  which,  if successful,  would result in an
        Imposition  under  circumstances  which would require the Lessee to
        indemnity such Indemnitee,  such Indemnitee shall be released from
        its  responsibility  to contest such claim,  or part  thereof, if it
        agrees  in  writing  with  Lessee  not  to  seek indemnification from
        Lessee in  respect  of the  claim,  or such part thereof to be
        contested. In the event an Indemnitee fails diligently to contest,
        or refuses to permit the Lessee to contest,  a claim or, part thereof
        which  such  Indemnitee  has the obligation to contest or to permit
        Lessee to contest under this Section 16.02,  then Lessee shall not be
        obligated to indemnify such  Indemnitee  for such claim or such part
        thereof to the extent that Lessee is precluded  thereby  from
        contesting  any such claim and Lessor  shall cause such  Indemnitee
        to refund to Lessee to such extent any amounts  paid or advanced by
        Lessee in connection  with such Imposition that were the subject of
        such claim (plus interest from the date payment is due at the rate
        established for refunds by the authority imposing such Imposition).

         (d) REFUNDS.  If an Indemnitee shall obtain a refund of all or any
part of such Imposition paid by Lessee, Lessor shall cause such Indemnitee to
pay the Lessee the amount of such refund less the amount of any Impositions
payable by such  Indemnitee  in respect of the receipt of such refund;
provided  that such amount  shall not be payable (x) before such time as the
Lessee  shall have made all payments or indemnities then due to Lessor under
the Lease, or (y) while any Default or Event of Default  is  outstanding  and
continues  unremedied.  If in addition to such refund,  such Indemnitee
shall receive an amount  representing attorneys  fees,  interest or other
amount with  respect to of such refund,  the Lessee shall be paid that
proportion  of such  amounts (net of any  Impositions imposed on the  receipt
of such  amounts  by such  Indemnitee)  which is fairly attributable  to
Impositions  paid by the Lessee  prior to the  receipt of such refund.

         16.03 AFTER-TAX BASIS; SURVIVAL.

         It is  understood  and agreed  that all  payments  for which  Lessee
is obligated  hereunder  are to be made on an "after  tax basis" so that the
amount the Lessee  shall be  required  to pay with  respect to any Claim or
Imposition indemnified  against  hereunder  shall be an amount  sufficient
to restore  the Indemnitee(s)  to the same  position such  Indemnitee(s)
would have been in had such Claim not been asserted or such  Imposition  not
been incurred  taking into account, INTER ALIA, Impositions,  fees and
other  charges, however  imposed, required to be paid on the  receipt of an
indemnity  under this  Section 16 and further taking into account any tax
benefits realized by such Indemnitee(s) that is  attributable  to such
indemnifiable  imposition. The  Lessee's  obligations hereunder shall survive
the expiration or earlier

                                      -49-


<PAGE>


termination of this Lease and return of the Aircraft to Lessor.

         16.04 EXPENSES.

         Lessee  shall pay its own legal  fees and  disbursements and its
other fees and expenses  incurred in connection with  documenting and
negotiating this transaction,  together with the fees and  disbursements of
Lessor's FAA counsel. Lessor shall pay all of Lessor's other fees and
expenses  including the fees and disbursements of its outside counsel.

         SECTION 17. QUIET ENJOYMENT.

         The Lessor  agrees that unless a Default or Event of Default
hereunder has  occurred  and is  continuing,  neither  the Lessor nor any
Person  claiming through or under any of them will  interfere with the quiet
enjoyment,  use and operation  of the  Aircraft  by the  Lessee as  provided
hereunder,  including, without limitation, Lessee's possession and use of the
Aircraft.

         SECTION 18. ASSIGNMENT.

         Lessee  shall not assign or transfer  any of its rights or
obligations under this Lease or in the Aircraft without the prior written
consent of Lessor. Lessor  may  assign  all or any  portion  of its  rights
or  obligations  in the Aircraft and Lease without consent of the Lessee,
for security or for any other purpose,  and Lessee shall take such actions in
connection  therewith as Lessor shall  reasonably  request,  including,  but
not limited to, (i)  delivering  an estoppel  certificate causing such
assignee to be named as an additional insured and loss payee under the
insurances required hereunder,  naming such assignee as an indemnified  party
under the  indemnities  provided  hereunder and addressing such  additional
matters  as Lessor may  reasonably  request,  (ii)  causing an insurance
report and certificates to be issued  confirming that the assignee has been
named as additional  insured and loss payee under the  insurances  required
hereunder, (iii) delivering an opinion of counsel to Lessee and (iv) taking
such additional  action,  and  delivering  such  additional  documents  as
Lessor may reasonably  request.  Without  limitation of the  foregoing,  any
assignment by Lessor may (but shall not be required to be) be to an owner
trustee,  indenture trustee,  agent or other  Person  acting in a fiduciary
or similar  capacity on behalf of other Persons and such other  Persons (as
well as such trustee,  agent or other  Person  acting on  behalf of such
Persons)  shall be  entitled  to be Indemnitees and Insured  Persons
hereunder.  No assignment by Lessor  hereunder shall release Lessor from its
obligations  hereunder except that if, pursuant to any  assignment,  Lessor
assigns  all of its right,  title and  interest to the Aircraft and Lease,
the assignee thereof shall assume,  in a written  agreement reasonably
satisfactory  to Lessee,  all of the Lessors  obligations  under the Lease
from and after such assignment, the Lessor shall be released from all such
obligations  and such assignee shall be the "Lessor"  hereunder for all
purposes of this Lease.  Lessor  will pay the  reasonable  out-of-pocket
expenses of the Lessee in connection with an assignment by the Lessor
hereunder.  No assignment by Lessor hereunder shall result in an increase in
Lessee's

                                      -50-


<PAGE>


obligations under this Lease.

         SECTION 19. NOTICES.

         Unless otherwise. specifically provided herein, all notices required
or permitted  by the terms  hereof  shall be in writing.  Any written  notice
shall become  effective when  received.  Any written notice shall be sent by
telecopy, commercial  courier  service or delivered by hand. Any notice shall
be addressed as follows:.

             IF TO LESSOR:

             Willis Lease Finance Corporation
             2320 Marinship Way
             Suite 300
             Sausalito, CA 94965
             Attention: General Counsel
             Telephone: (415) 331-5281
             Telecopy: (415) 331-5167

             If to Lessee:

             Aloha Islandair, Inc.
             99 Kapalulu Place
             Honolulu, Hawaii 96819
             Attention: President
             Telephone:
             Telecopy: (808) 833-5498

Such  persons and addresses may be changed, from time to time, by means of a
notice given in the manner provided in this Section 19.

         SECTION 20. LESSOR'S RIGHT TO PERFORM FOR LESSEE.

         If Lessee  fails to perform or comply  with any of its payment or
other obligations  herein,  Lessor may itself pay or perform such obligation,
and the amount of such  payment  and the  amount of the  reasonable
expenses  of Lessor incurred in connection with such payment or the
performance of such  obligation, as the case may be, together with interest
thereon at the Overdue Rate, shall be deemed Supplemental Rent, payable by
Lessee upon demand by notice hereunder.  No such  payment or  performance  by
Lessor shall be deemed to waive any Default or Event of Default or relieve
Lessee of any of its obligations hereunder.

         SECTION 21. LEASE; SECTION 1110.

         21.01 LEASE.

         Lessee and Lessor agree that this Lease is to be treated as a Lease
for Federal  income tax  purposes, that the Lessor is the owner of the
Aircraft for Federal

                                      -51-


<PAGE>


income tax purposes  and all other purposes and that the interest of the Lessee
in the Aircraft is that of a lessee only.

         21.02 SECTION 1110.

         TO  THE  EXTENT  PROVIDED  THEREBY  (OR TO THE  FULLEST  EXTENT  IT
MAY LAWFULLY SO AGREE,  WHETHER OR NOT PROVIDED THEREBY),  LESSEE HEREBY
AGREES THAT ANY RIGHT OF LESSOR TO TAKE  POSSESSION OF THE AIRCRAFT OR
ENGINES OR PROPELLERS IN COMPLIANCE  WITH THE PROVISIONS OF THIS LEASE AND IN
ACCORDANCE  WITH SECTION 1110 OF TITLE 11 OF THE UNITED  STATES  CODE OR ANY
SIMILAR  PROVISION  OF ANY SUPERSEDING  STATUTE, AS AMENDED FROM TIME TO
TIME, SHALL NOT BE AFFECTED BY THE PROVISIONS OF SECTIONS 362, 363 OR 1129 OF
SAID TITLE,  OR OTHER  ANALOGOUS PART OF ANY SUPERSEDING STATUTE, AS AMENDED
FROM TIME TO TIME, AND ACCORDINGLY, IT IS THE INTENTION OF THE PARTIES
HERETO THAT TO THE FULLEST EXTENT THAT THE PARTIES HERETO MAY  LAWFULLY SO
AGREE THIS  AGREEMENT  BE AFFORDED  THE BENEFITS OF SAID SECTION 1110.

         SECTION 22. MISCELLANEOUS.

         22.01 WAIVERS, HEADINGS.

         No term or provision of this Lease may be changed,  waived,
discharged or terminated  orally,  but only by an instrument in writing
signed by the party against which  enforcement  of the change,  waiver,
discharge or termination is sought.  The headings contained herein are for
convenience of reference only and are not intended to define or limit the
scope of any provisions of this lease.

         22.02 COUNTERPARTS.

         This  Lease  may be signed in one or more counterparts with the same
effect as if the signatures to each counterpart were upon a single instrument.
All counterparts shall be considered an original of this Lease.

         22.03 GOVERNING LAW.

         THIS LEASE HAS BEEN  DELIVERED IN THE STATE OF CALIFORNIA  AND SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,  THE LAWS
OF THE STATE OF  CALIFORNIA,  INCLUDING  ALL  MATTERS  OF  CONSTRUCTION,
VALIDITY  AND PERFORMANCE,  WITHOUT GIVING EFFECT TO CONFLICT OF LAWS
PRINCIPLES THEREOF. THIS LEASE SHALL BE EFFECTIVE FOR ALL PURPOSES AS OF THE
DATE FIRST ABOVE WRITTEN.

         22.04 BENEFIT AND BINDING EFFECT.

         The terms and provisions of this Lease shall inure to the benefit of
and be

                                      -52-


<PAGE>


binding on Lessor and Lessee and their respective successors and permitted
assigns.

         22.05 FURTHER ASSURANCES.

         Lessor and Lessee,  from time to time,  shall do and perform such
other and  further  acts and  execute  and  deliver any and all such other
and further instruments  as  may  be  required  by law or  reasonably
requested  by  notice hereunder by the other party to establish,  maintain
and protect the  respective rights and remedies of the other  party,  to
carry out the intent and purpose of this Lease and the other Operative
Documents to which either is a party.

         22.06 SERVICE OF PROCESS: WAIVER OF JURY TRIAL AND IMMUNITY.

         (a)  LESSEE  HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION
OR PROCEEDING AGAINST IT WITH RESPECT TO THE OPERATIVE DOCUMENTS MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT LOCATED IN SAN FRANCISCO,  CALIFORNIA
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, LESSEE HEREBY IRREVOCABLY
SUBMITS TO EACH SUCH JURISDICTION AND HEREBY IRREVOCABLY WAIVES ANY AND ALL
OBJECTIONS WHICH IT MAY HAVE AS TO VENUE IN ANY OF THE ABOVE COURTS.

         (b) Lessee  hereby  irrevocably appoints CT Corporation Systems
(the "Process  Agent") as agent for service of process in  California.
Lessee hereby authorizes and directs the Process Agent to accept service on
its behalf. In the event that Lessee does not maintain the Process  Agent as
its validly  appointed agent for service of process, Lessee  hereby agrees
that service of process may be made on it by certified or registered mail,
return receipt requested,  at its address for notices specified or
determined  in  accordance  with  Section 15 hereof. Nothing herein  shall
affect the right to serve  process in any other manner  permitted by law. Any
judicial  proceeding by Lessee  against the Lessor involving, directly or
indirectly, any matter in any way arising out of, related to, or connected
with any of the Operative  Documents shall be brought only in a court
located in the State of  California.  THE LESSEE AND LESSOR HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL  PROCEEDING BROUGHT BY THE LESSEE OR BY THE
LESSOR OR LENDER  INVOLVING  DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THE OPERATIVE DOCUMENTS.

         22.07 USURY LAW.

         The parties intend to contract in strict compliance with the usury
laws of the State of California  and, to the extent  applicable,  the United
States. Notwithstanding anything to the contrary in the Operative Documents,
Lessee will not be obligated to pay interest at the Overdue Rate on overdue
payments of Rent or other  interest in excess of the maximum  non-usurious
interest  rate, as in effect from time to time, which may by Applicable
Law be charged, contracted for, reserved, received or collected by Lessor
in connection with the Operative Documents. During any period of time in which

                                      -53-


<PAGE>


the then-applicable highest lawful rate is lower than the Overdue Rate,
interest on overdue  payments of Rent will accrue and be payable at such
highest  lawful rate.  However,  if at later times such highest  lawful rate
is greater than the Overdue Rate,  then Lessee will pay interest on overdue
payments of Rent at the highest lawful rate until the interest on overdue
payments of Rent which is paid by Lessee  equals the  amount of  interest
that would have been  payable at the Overdue Rate.

         22.08 ENTIRE AGREEMENT.

         This Lease and the other Operative Documents embody the entire
agreement and understanding among the parties thereto and supersede all prior
agreements and understandings relating to the subject matter thereof.

                           [Continued on next page]


                                      -54-


<PAGE>


         IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly  executed by their authorized officers as of the day and year first
above written.

LESSOR                                    WILLIS LEASE FINANCE CORPORATION



                                          By:    /s/ James McBride
                                              --------------------------------
                                              Name:       JAMES D. MCBRIDE
                                              Title:  EXECUTIVE VICE PRESIDENT
                                                      CHIEF FINANCIAL OFFICER

LESSEE                                    ALOHA ISLANDAIR, INC.

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


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




Lease of de Havilland Dash 8-102 Aircraft
MSN 026



                                     -55-


<PAGE>


         IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease to
be duly  executed by their authorized officers as of the day and year first
above written.

LESSOR                                 WILLIS LEASE FINANCE CORPORATION



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

LESSEE                                 ALOHA ISLANDAIR, INC.

                                       By:   /s/ Brenda F. Cutwright
                                           --------------------------------
                                           Name:     BRENDA F. CUTWRIGHT
                                           Title: EXECUTIVE VICE PRESIDENT AND
                                                    CHIEF FINANCIAL OFFICER


                                       By:   /s/ Owen Sekimura
                                           --------------------------------
                                           Name:         OWEN SEKIMURA
                                           Title:    VICE PRESIDENT FINANCE
                                                         AND CONTROLLER



Lease of de Havilland Dash 8-102 Aircraft
MSN 026



<PAGE>


                                    EXHIBIT B

                        RENT AND OTHER FINANCIAL MATTERS

      [Two pages of confidential information are omitted and filed separately
      with the Commission]


<PAGE>


                             SCHEDULE 1 TO EXHIBIT B

                                LETTER OF CREDIT

Lessee shall provide  Lessor, on  the  Closing  Date, with an irrevocable
transferable  Letter of Credit in the amount of U.S. $80,000 in a form and
drawn on a U.S.  bank  acceptable  to Lessor,  which  Letter of Credit  shall
be valid during the Term of this Lease and the Other Lease and for ninety
(90) days after the later of the last day of the Term  under  this Lease and
the last day of the Term  under  the Other  Lease,  guaranteeing  payment  of
Rent due and all other obligations of Lessee to Lessor  hereunder and under
the Other Lease,  which may be drawn by Lessor upon  demand in the event of
Lessee's  failure to fulfill any of its  obligations  hereunder  or under the
Other Lease or receipt of notice by Lessor that the Letter of Credit will not
be renewed on a date prior to the last date on which the Letter of Credit
must be valid under this  Agreement.  Lessor may,  but shall not be obliged
to, apply the proceeds of the Letter of Credit in whole or in part, to the
payment of any rent,  indemnities,  attorneys  fees and other expenses,
insurance and other casualty payments and any other amount owing from time to
time by Lessee  hereunder  or under the Other  Lease,  or under any other
agreement  between  Lessor  or its  associate,  subsidiary  or  affiliate
companies,  and Lessee, for the payment of any loss or damage suffered by
Lessor as a result of any other Event of Default or utilize the  proceeds of
the Letter of Credit in whole or in part to perform any of Lessee's
obligations under this Lease  and the Other  Lease or otherwise remedy  any
other  Event of  Default hereunder  or  thereunder, including,  without
limitation,  in the  redelivery condition for the Aircraft or the Other
Aircraft, without prejudice to any other remedy of Lessor.

In the event  Lessor  draws upon the Letter of Credit  during the Term,  then
in such event Lessee shall, upon demand, restore the amount of the Letter of
Credit to the full amount  thereof.  Failure to so restore promptly  the
amount of the Letter of Credit to the full amount  thereof  shall
constitute  an Event of Default.

Notwithstanding the foregoing, in the event that:

            (i) the Letter of Credit provided for pursuant to this Lease shall
        not have been drawn upon during the Term of this Lease; and

            (ii) the  Guarantor  and its consolidated affiliates shall have a
        combined net worth of not less than $5,000,000 as of the last day of the
        Term of this  Lease as evidenced  by the then  most recent financial
        statements  required  to be  delivered  to the Lessor  pursuant  to this
        Lease,

then the Lessor  shall  release the Letter of Credit  provided  pursuant to this
Lease on the later of:

                                       B-3


<PAGE>


            (x) the date the Aircraft is redelivered to the Lessor and accepted
        by the  Lessor in full compliance with Section 10 of this Lease and
        Exhibit F thereto, and

            (y)  the  date on  which Lessee  shall have  satisfied  all of its
        obligations under this Lease, including its obligations with respect to
        the return condition of the Aircraft and the payment of any adjustments
        to the Lessor in connection therewith.

For avoidance of doubt, if the condition  specified in paragraph (ii) above
is not satisfied, the Letter of Credit  shall remain in effect until the
later of the  ninetieth  day after the last day of the Term under this Lease
or the Other Lease and shall thereupon be returned to Lessee for cancellation.

                                       B-4


<PAGE>


                                    EXHIBIT C

                             ACCEPTANCE CERTIFICATE

    ALOHA ISLANDAIR,  INC. ("LESSEE"), a corporation organized under the laws of
Delaware, hereby represents, acknowledges, warrants and agrees as follows:

    1. Lessee has  received  this      day of          , 2000 (Time:   ),
at    , from WILLIS LEASE FINANCE CORPORATION ("Lessor") possession of:

    A.   One (1) de Havilland  Model Dash 8-102  Aircraft (described in the
        FAA records as a Model DHC-8-102), bearing Manufacturer's Serial
        Number 026, U.S. Registration No. N812PH, together with two (2) Pratt
        & Whitney PW 120 Engines, Manufacturer's Serial Numbers 120107 and
        120142,  two (2) Hamilton Standard 14 SF-7  Propellers,
        Manufacturer's  Serial Numbers 851114 and 890711 and all appliances,
        instruments, accessories, equipment (not including an APU) and parts
        attached thereto and thereon, in an airworthy condition;

    B.  Fuel on board the Aircraft,            pounds;

    C.  All  manuals, logbooks, flight records and historical information
        regarding the Aircraft, the engines and the accessories and
        equipment, including, without limitation, those listed on Exhibit D
        to the Lease[, in the possession of Lessor]; and

    D.  the items listed on Schedule 1 hereto.

    2. All of the  foregoing  were delivered and accepted to Lessee's  full
satisfaction  and pursuant to the terms and  provisions  of the  Aircraft
Lease Agreement  between  Lessor  and  Lessee,  dated as of  February 22,
2000 (the "Lease"), except as set forth on Schedule 2 hereto.  For purposes
of the Lease, Lessor and Lessee agree that the installed hard time components
have, as of the Delivery Date, the time, Flight Hours and Cycles operating
time remaining as set forth on Schedule 3 hereto.

    3. The  Aircraft,  Engines,  Propellers  and Parts as described in the
Lease have been fully  examined by Lessee and have been received in a
condition  fully satisfactory to Lessee and in full  conformance  with the
Lease in every respect except as set forth in Schedule 2 hereto.

                                      C-1


<PAGE>


    4. The Lease and Operative  Documents (as defined therein) are in full
force and effect;  Lessor has fully,  duly and timely performed all of its
obligations of every  kind or nature  under the Lease  and other  Operative
Documents;  and Lessee has no claims; deductions,  set-offs or defenses of
any kind or nature in connection with the Lease and other Operative Documents.

    5. Prior to the Delivery  Date,  Lessee has  obtained all required
permits, authorizations,  and licenses required, and has paid all required
foes and taxes relating  to the Lease  imposed  by the  United  States or any
other  government and/or any  political  subdivision  thereof  and any
agencies  and  departments thereof to allow Lessee to operate the Aircraft as
permitted by the terms of the Lease.

    6. Lessor and its successors and assigns shall be entitled to rely upon this
Acceptance Certificate.

    7. The Delivery Date (as defined in the Lease) is the date written in
paragraph 1 herein.

                                         ALOHA ISLANDAIR, INC. (LESSEE)


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




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



Lease Acceptance Certificate

Lease of de Havilland Dash 8-102

MSN 026


                                       C-2


<PAGE>


                                   SCHEDULE 1

                            AIRCRAFT LOOSE EQUIPMENT

QTY    ITEM DESCRIPTION
3      Crew Oxygen Mask
3      Smoke Goggles
2      Coffee Cup Holders
1      AFM
2      Crew Life Vest
1      Observers Life Vest
2      Hand Microphones
2      Crew Flashlights
1      Crew Fire Extinguisher
1      Crew Fire Ax
1      Spare Filament Holder
1      PBE in cockpit
1      Alternate Extension Handle in cockpit
1      Overhead Emergency Light in cockpit
1      Galley Service Cart with trays
3      Galley Food Tray Boxes
2      Galley Hot Jugs
1      PBE in forward galley storage area
1      Fire Extinguisher in forward galley storage compartment
3      Seat Belt Extensions in forward galley storage compartment
2      Passenger 02 Bottles in forward galley storage compartment
5      Cabin Seat Tables
1      Life Vest under F/A seat
1      Flash Light under F/A seat
1      First Aid Kit in forward galley storage compartment
1      Medical Kit in forward galley storage compartment
1      PBE on aft bulkhead
1      Fire Extinguisher on aft bulkhead
2      Propeller Restraints
2      Engine Plug
2      Static Port Covers
1      Set Windshield Covers
2      Pilot Tube Covers
1      Set Landing Gear Safety Pins


                                     C-3


<PAGE>


                                   SCHEDULE 2

                             LIST OF DISCREPANCIES

1.   Refurbish left ice shield as necessary.

2.   Refurbish right ice shield as necessary.

3.   Left wing to fuselage aft brace upper bolts have rust and corrosion on
     the heads. Clean or replace as necessary.

4.   Left wing to fuselage aft brace upper bolts have rust and corrosion on
     the heads. Clean or replace as necessary.

5.   Left engine outboard cowl door de-laminating at aft lower edge. Repair
     as necessary.

6.   Check top composite access panel just forward of the left exhaust
     fingernail for de-lamination. Repair as necessary.

7.   Repair damage to forward edge of overhead bin door at seat row 9CDE.

8.   Seat 3B table cracked at forward right corner. Replace table.

9.   Trim at lower inboard corner of flight attendants seat is damaged.
     Repair or replace as necessary.

10.  Check cockpit door for freedom of opening and interference with lavatory
     door.

11.  The overhead ceiling panel around the captain's map light is cracked and
     has a piece missing. Repair or replace as necessary.

12.  Cockpit floor coming loose in front of the pedestal and inboard of the
     copilots seat. Secure as necessary.

13.  Check observers seat belt for fraying. Replace as necessary.

14.  The pilots coat hook will not stow. Replace as necessary.

15.  Composite panel on the outboard side of #2 nacelle just aft of the flap
     trailing edge needs repair on the aft edge.

16.  Engine condition panel door in the left wheel well has the wrong
     fasteners. Replace with correct fasteners.

17.  The bottom edge of left and right exhaust fingernails need to be
     straightened and smoothed.

18.  Non-standard grommet installed on structure under the cockpit floor for
     the left elevator cable. Ref. EO 8-53-99-199. Repair as necessary.

19.  FDAU needs repair.

Note: Lessor will pay the cost for the correction of items 1 through 18 by
Avmax.


                                     C-4



<PAGE>



                                    SCHEDULE 3

              TIME CONTROLLED/LIFE LIMITED PARTS STATUS AT DELIVERY

Aircraft: Total Time 31,539     Total Cycles 43,190     Date 23 March 2000

<Table>
<Caption>

NOMENCLATURE                    POSITION          SERIAL NUMBER          TIME SINCE OVERHAUL/INSTALLATION
------------                    --------          -------------          --------------------------------
<S>                             <C>               <C>                    <C>

Cockpit Voice Recorder          only              101128                 due
Flight Data Recorder            only              2893                   on condition
Air Cycle Machine               only              unk                    on condition
Starter/Generator               left              290                    170 hr
Starter/Generator               right             96117                  702 hr
AC Generator                    left              578                    170 hr
AC Generator                    right             96108                  2,187 hr
ELT                             only              408241                 due
Fire Bottle Disc. Cart          F#1               9705145                1,032 da
Fire Bottle Disc. Cart          F#2               9705146                1,032 da
Fire Bottle Disc. Cart          A#1               9705143                1,032 da
Fire Bottle Disc. Cart          A#2               9705144                1,032 da
Fire Bottle HST                 fwd               21548D1                1,044 da
Fire Bottle HST                 aft               15280D1                1,044 da
Crew O2 Bottle, HST             only              544077                 4,958 da
Transponder                     left              4371                   619 da
Transponder                     right             4355                   635 da
Propeller                       left              851114 Hub s/n199      7,929 hr
Blade, Prop.                    #1                852759                 3 hr
Blade, Prop.                    #2                854366                 1 hr
Blade, Prop.                    #3                876632-7               208 hr
Blade, Prop.                    #4                886214-7               6,432 hr
Propeller Actuator              left              890124                 6,389 hr
Propeller Control Unit          left              870553                 4,297 hr
Propeller                       right             890711 Hub s/n641      6,350 hr
Blade, Prop.                    #1                860036-7               6,872 hr
Blade, Prop.                    #2                856034                 7,542 hr
Blade, Prop.                    #3                865607-7               7,050 hr
Blade, Prop.                    #4                851590                 6,872 hr
Propeller Actuator              right             106                    7,747 hr
Propeller Control Unit          right             890357                  1,732 hr
Engine                          left              120107                 on condition
Impeller, HP                    left              2E542                  22,890 cy
Impeller, LP                    left              3F823                  9,048 cy
Cover, HP Front                 left              15B144                 9,048 cy
Cover, HP Rear                  left              15B172                 9,048 cy
Disc, HP                        left              14B921                 9,048 cy
Disc, LP                        left              94A609                 9,048 cy
Disc, PT-1                      left              86A734                 9,048 cy
Disc, PT-2                      left              97A582                 9,048 cy
Seal, Interstage Air            left              11B719                 9,048 cy
Blades, HP                      left              various                9,048 cy
Engine                          right             120142                 on condition
Impeller, HP                    right             5E754                  17,361 cy
Impeller, LP                    right             7F528                  3,062 cy
Cover, HP Front                 right             23B271                 7,383 cy

</Table>


                                      C-5


<PAGE>


<Table>
<Caption>

NOMENCLATURE                    POSITION          SERIAL NUMBER          TIME SINCE OVERHAUL/INSTALLATION
------------                    --------          -------------          --------------------------------
<S>                             <C>               <C>                    <C>

Cover, HP Rear                  right             27B996                 7,383 cy
Disc, HP                        right             17B182                7,383 cy
Disc, LP                        right             23B548                 7,383 cy
Disc, PT-1                      right             56AO52                 15,099 cy
Disc, PT-2                      right             18A324                 22,021 cy
Seal, Air Interstage            right             27B788                 7,383 cy
Blades, HP                      right             various                3,062 cy
Ground Prox. Warning            only              6345                   1 hr.
Air Data Computer               left              86101758               40 da
Air Data Computer               right             87092321               184 da
Altimeter                       pilot             unk                    on condition
Altimeter                       co-pilot          unk                    on condition.
Altimeter                       standby           8309                   541 da
Yolk Assembly, MLG              left              DCL104-85              OH       5 cy / LL 38,545 cy
Yolk Assembly, MLG              right             DCL103-85              OH 2,962 cy / LL 41,262 cy
Drag Strut, MLG                 left              DCL127-86              OH 2,961 cy / LL 41,262 cy
Drag Strut, MLG                 right             DCL259-87              OH 2,961 cy / LL 30,380 cy
Shock Strut, MLG                left              DCL060-85              OH 14,676 cy / LL 36,892 cy
Piston, MLG Shock Strut         left              0364WH                 OH 14,676 cy / LL 36,892 cy
Cylinder, MLG Shock Strut       left              057                    OH 14,676 cy / LL 36,892 cy
Link, MLG Up. Torque            left              DCL1 65                OH 14,676 cy / LL 23,730 cy
Link, MLG Lo. Torque            left              DCL637                 OH 14,676 cy / LL 39,455 cy
Shock Strut, MLG                right             CL1188693R             OH 14,676 cy / LL 36,938 cy
Piston, MLG Shock Strut         right             231                    OH 14,676 cy / LL 36,938 cy
Cylinder, MLG Shock Strut       right             DCL116                 OH 14,676 cy / LL 36,938 cy
Link, MLG Up. Torque            right             DCL138                 OH 14,676 cy / LL 39,455 cy
Link, MLG Lo. Torque            right             DCL691                 OH 14,676 cy / LL 15,434 cy
Pin, Strut to Yolk, MLG         left              CL1188693R                          / LL 14,676 cy
Pin, Strut to Yolk, MLG         right             DCL060-85                           / LL 14,676 cy
Stabilizer Stay, MLG            left              DCL1288688             OH 3,883 cy / LL 37,137 cy
Stabilizer Stay, MLG            right             DCL1 68-86             OH 7,485 cy / LL 37,308 cy
Drag Strut, NLG                 only              DCL233-89              OH 8,232 cy / LL 29,111 cy
Shock Strut, NLG                only              PCL092-86              OH 6,046 cy / LL 36,205 cy
Piston, NLG Shock Strut         only              CH008                  OH 6,046 cy    LL 36,205 cy
Cylinder, NLG Outer             only              DCL206                 OH 6,046 cy    LL 31,338 cy
Cylinder, NLG Inner             only              0165WH                 OH 6,046 cy    LL 36,205 cy
Axle, NLG                       only              CH008                  OH 6,046 cy    LL 36,205 cy
Trailing Arm, NLG               only              DCL161                 OH 6,046 cy    LL 31,338 cy
Actuator, Steering, NLG         only              DCL0338586             on condition / LL 36,205 cy
Trunnion Plates, NLG            left & right      NSN                    on condition / LL 43,190 cy
Trunnion Cap, NLG               left & right      NSN                    on condition / LL 43,190 cy

</Table>


                                       C-6


<PAGE>


                                    EXHIBIT D

                     SCHEDULE OF MANUALS/MAINTENANCE RECORDS


<Table>
<Caption>

DESCRIPTION                                                                    QUANTITY
-----------                                                                    --------
<S>                                                                            <C>

Aircraft Journey and Maintenance Log Books                                     Numerous
Aircraft Technical Log Book, Record of Installations and Modifications         1
Engine Log Book for each Engine                                                1
Propeller Log Book for each Propeller                                          1
Component Serialization Record                                                 1
Aircraft Technical Log for Airframe                                            1
FAA Approved Flight Manual (FAA 102)                                           1
Weight & Balance Manual                                                        1
Customized Chapters Maintenance Manual                                         1
Customized Wiring Diagram Manual                                               1
Airworthiness Directive Records for Airframe, Engines and Propellers           Numerous
STC Record File                                                                1
Serviceable Tags for Time Controlled and Life Limited Parts                    1 Box
Serviceable Tags for On Condition Components                                   1 Box
Structural Deviation Inspection Requirements Log                               1
Electrical Load Analysis File                                                  1
Engineering Orders                                                             Numerous
Engineering Authorizations                                                     Numerous
Previous Maintenance Checks Accomplished, A1-A10,C-1-C-6, 40K                  1 ea
Computer Runs for Current status of Inspections, time controlled and LLPs      Numerous
Current Weight & Balance File                                                  1 ea

</Table>


                                      D-1


<PAGE>


                                    EXHIBIT E

                          RETURN ACCEPTANCE CERTIFICATE

                  WILLIS LEASE  FINANCE  CORPORATION  ("LESSOR"),  a corporation
organized  under  the  laws  of  California,  hereby  represents,  acknowledges,
warrants and agrees as follows:

                  1.  Lessor has received this day of                    , 200-
(Time: __), at               from ALOHA ISLANDAIR, [ INC.  ("Lessee")
possession of:

                  A.    One (1) de Havilland Model Dash 8-102 Aircraft,  bearing
                        Manufacturer's  Serial  Number 026 together with two (2)
                        Pratt & Whitney_ Engines,  Manufacturer's Serial Numbers
                            and   , two (2)   Hamilton   Standard    propellers,
                        Manufacturer's  Serial  Numbers and and all  appliances,
                        instruments,  accessories,  equipment  (not including an
                        APU) and  parts  attached  thereto  and  thereon,  in an
                        airworthy condition;

                  B.    Fuel on board the Aircraft,      ; and

                  C.    All  usual  and  customary  manuals,   logbooks,  flight
                        records  and   historical   information   regarding  the
                        Aircraft, the engines and the accessories and equipment,
                        including, without limitation, those listed on Exhibit D
                        to the Lease.

     2.   All  of  the  foregoing   were  delivered  and  accepted  to
Lessor's  full satisfaction  and pursuant to the terms and  provisions of
the Lease  Agreement between Lessor and Lessee dated as of February 22, 2000
(the "Lease")  except as set forth on Schedule 2 hereto.

     3.   The Aircraft,  Engines,  Propellers and Parts as described in the
Lease have been fully  examined  by Lessor and have been  received  in a
condition fully  satisfactory to Lessor and in full  conformance with the
Lease except as set forth on Schedule 2 hereto.


                                      E-1

<PAGE>



Dated this ______________ day of __________________. 200__


                                        WILLIS LEASE FINANCE CORPORATION

                                        (LESSOR)


                                        By: _______________________________
                                        Name: _____________________________
                                        Title: ____________________________


Lease Return Acceptance Certificate

Lease of de Havilland Dash 8-102

MSN 026


                                      E-2


<PAGE>


                                    EXHIBIT F

                    GENERAL RETURN CONDITIONS OF THE AIRCRAFT

1.      GENERAL RETURN CONDITIONS OF THE AIRCRAFT.

                 (a)  OPERATING  CONDITION.  The  Aircraft  shall be in as good
operating condition as on the Delivery Date, ordinary wear and tear from normal
airline passenger operations excepted.

                 (b)  CLEANLINESS  STANDARDS.  The  Aircraft  shall be clean by
United States commercial  airline standards and shall have received an exterior
and an interior deep cleaning since its last commercial  flight and shall be in
the condition  required for  immediate  service in the  commercial  carriage of
passengers.

                 (c) CERTIFICATE OF AIRWORTHINESS. The Aircraft shall have, and
be in  compliance with, a current valid Standard  Certificate of Airworthiness
issued by the FAA without any corrections, repairs, modifications,  alterations
or overhauls having to be performed by Lessor to meet such standards and rules.
If required by Lessor, Lessee shall assist Lessor to do the necessary paperwork
to request in the name of Lessor or such other Person  designated by the Lessor
a Certificate of  Airworthiness  for Export so as to allow Lessor to place the
Aircraft on a different aircraft registry. If any work, including  engineering,
is required on the Aircraft to obtain such  Certificate  of  Airworthiness  for
Export,  Lessee will  cooperate with Lessor to do or cause to be done such work
at Lessor's expense.

                 (d) COMPLIANCE WITH  GOVERNMENTAL  REQUIREMENTS.  The Aircraft
shall  be  in  compliance  with  all  Airworthiness  Directives  affecting  the
Aircraft.  In the event  Lessee has obtained a waiver or  applicable  deviation
from  the   Aeronautical   Authority  from  having  to  comply  with  any  such
Airworthiness  Directives,  Lessee at its expense shall,  irrespective  of such
waiver  or  deviation,  fully  comply  with all such  Airworthiness  Directives
covered by such  waiver or  deviation  prior to the return of the  Aircraft  to
Lessor as if such waiver or deviation did not exist. It is expressly understood
that with respect to Airworthiness  Directives with respect to which compliance
is required during the Term Section 9.06 shall apply.

                 (e)  DEFERRED   MAINTENANCE.   The  Aircraft  shall  have  had
accomplished  thereon all  outstanding  deferred  maintenance  items and flight
discrepancies.  Items deferred  because of maintenance  concessions  (i.e.,  an
exemption to operate beyond the normal limits by  monitoring)  shall be brought
up-to-date as if such maintenance concessions or exemptions did not exist.

                 (f)  CORROSION TREATMENT. The Aircraft shall have been
maintained by cleaning and treating of all mild corrosion and correcting of all
moderate and


                                      F-1


<PAGE>


severe or exfoliated corrosion in accordance with the Maintenance Program.

                  (g)  CONFIGURATION  AND  CONDITION.   The  Aircraft  shall  be
returned  in the same  configuration  as on the  Delivery  Date and in the same
condition with all Parts installed  therein as on the Delivery Date,  excepting
only  Modifications,  additions,  replacements and substitution of Parts as may
have been  properly  made by Lessee  pursuant  to Section 9 of the Lease and as
specifically otherwise set forth in this Exhibit F. Lessee shall, prior to such
return of the Aircraft,  furnish  Lessor with a list of all such  Modifications
made during the Term.  Lessee  shall  provide  Lessor with the last twelve (12)
reliability reports for the Aircraft as provided to the Aeronautical  Authority
and a list of all  rotable  Parts  installed  on the  Aircraft  during the last
twelve (12) months of the Term and of all rotable  Parts  replaced  during said
last twelve (12) months.  Lessee  shall not replace  Parts with parts having an
operating record indicating a higher failure rate than the average for the same
type of parts placed by Lessee in other  aircraft or engines or  propellers  of
the same respective model and  manufacturer  during the last twelve (12) months
of the Term.

                  (h) PART 121  OPERATION.  The Aircraft shall be in a condition
as to be immediately capable of being operated as a Part 121 Aircraft.

                  (i) INTERIOR  CONDITION.  The interior of the Aircraft will be
in  substantially  the same condition as it was on the Delivery Date,  ordinary
wear and tear excepted.  Cabin windows shall be clear and without major crazing
or scratches.

II.  CONDITION OF AIRFRAME AND ENGINES.

                 The  Airframe  at the time of its return to Lessor  shall meet
the requirements set forth below, all at Lessee's expense,  except as otherwise
provided herein:

                 (a) Lessee  shall  have  performed  or caused to be
performed prior to  redelivery  to the  Lessor  the  following:  (i) a
segment  of the de Havilland   Equalized   Maintenance  Program  (without
changing  the  sequence thereof),   (ii)  any   maintenance  or
inspections,   including   structural inspections,  required  by the
Maintenance  Program  and not  included  in the Equalized  Maintenance
Program or, any replacement  Maintenance Program for the de Havilland
Equalized  Maintenance  Program, in effect on the Redelivery Date, (the "Out
of Phase Items") due within 3,500 Flight Hours or Cycles or 12 months
(whichever is the more  limiting)  after the end of the Term,  and (iii)
either the Aircraft  shall be  redelivered to the Lessor with not less than
the number of Cycles remaining until the next 40,000 cycle structural
inspection required under the de Havilland  Maintenance Program as it had
remaining on the Delivery Date,  or Lessee  shall  compensate  Lessor in
respect  of the  deficiency  as provided in Section III hereof. In the event,
during the Term, the Lessee adopts a Maintenance Program other than the de
Havilland Equalized Maintenance Program the requirement in (i) above shall be
changed to, an "A" and "C" check or their equivalent under the Maintenance
Program. The

                                      F-2


<PAGE>


Aircraft shall not have been operated  since the  completion of the  maintenance
required in this section except for flights pursuant to Section 10.07 and 10.08.
For  purposes  of clause II (a) (ii)  above,  in the  event any  maintenance  or
inspection  is  required  within the period  after the end of the Term set forth
therein,  Lessee  shall be  deemed  to have  satisfied  such  requirement  if it
performs the next such  maintenance  or inspection due after the end of the Term
(it not being intended that Lessee be required to perform any terminating action
due after the later of the end of the Term or the return of the  Aircraft to the
Lessor pursuant to Section 9.06).

                  (b) Lessee will correct any deficiencies  revealed during such
check, if any, and all deferred maintenance items;

                  (c) The  cockpit  shall be cleaned  and  placards  replaced if
required by the Maintenance Program.  Those items which are reasonably found by
Lessor to be  defective  items in the  Aircrafts  interior  will be replaced or
repaired in accordance with the Maintenance  Program.  All cockpit  windshields
and windows shall be free of delamination, bubbles or signs of overheat;

                 (d)  Lessee  will  permanently  repair  impact  damage  to the
Aircraft not within the limits of the structural repair manual caused by ground
handling  equipment or impact damage  caused by foreign  objects if required by
and shall be repaired in accordance with the structural  repair manual or other
FAA approved data;

                 (e) Except as otherwise  provided in this Exhibit F, all Parts
shall be serviceable in accordance with Aeronautical  Authority  standards and
have a  value,  modification  status  and  condition  equivalent  to the  Parts
originally  installed in the  Aircraft,  ordinary wear and tear  excepted.  All
installed  life-limited and time controlled  components,  including the landing
gear, shall either (i) have not less than the number of Flight Hours and Cycles
or days as its respective  then authorized life remaining to the next scheduled
maintenance  as it did on the  Delivery  Date or (ii) Lessee  shall  compensate
Lessor in respect  of the  deficiency  as  provided  in  Section  III  hereof.
Notwithstanding  the  foregoing and Section III,  below,  in no event shall any
single  component  have less  than  3,500  Flight  Hours or Cycles or 12 months
(whichever is the most limiting) of its then  authorized  life remaining to the
next scheduled maintenance;

                   (f) The  Propellers  shall  either (i) have not less than the
number of Flight Hours and Cycles remaining to their next scheduled  removal as
each did on the  Delivery  Date or (ii)  Lessee  shall  compensate  Lessor  in
respect of the  deficiency  as provided in Section III hereof.  Notwithstanding
the foregoing  and Section III,  below,  in no event shall any  Propeller  have
fewer than 3,500 Flight Hours or Cycles  (whichever is more limiting) until its
next scheduled removal;

                  (g) The  Engines  shall be  returned  zero  time from a major
refurbishment  except for flights pursuant to Section 10.07 and 10.08.  Engine
Life Limited  Parts (LLP) and time  controlled  Parts shall either (i) have not
less than the


                                      F-3


<PAGE>


number of Flight Hours or Cycles (whichever is more limiting) remaining to their
next scheduled removal as each had on the Delivery Date, or, with respect to any
Life  Limited  Part  or time  controlled  component  that  -is  replaced  in the
refurbishment performed at Lessor's expense pursuant to Section 9.03, had at the
time of installation,  or (ii) Lessee shall compensate  Lessor in respect of the
deficiency as provided in Section III hereof.  Notwithstanding the foregoing and
Section III,  below, in no event shall any LLP or time controlled Part have less
than 3,500 Flight Hours or Cycles  (whichever is more  limiting)  until its next
scheduled removal, and

                 (h) The  Aircraft  shall be  returned  with the same amount of
fuel on board as when delivered. All engine oil tanks, hydraulic reservoirs and
oxygen cylinders shall be serviced full.

Ill. ADJUSTMENTS.

                 In the event the Airframe, Engines, Propellers, Parts or other
components  (each a "Component")  do not meet the return  conditions in Part II
above, and the relevant  provision permits Lessee to either meet such condition
or compensate Lessor (herein, a "Compensation  Item"), the Lessee shall pay the
Lessor a dollar amount computed by multiplying (i) the cost to Lessee of having
an outside supplier or contractor perform checks, scheduled removal,  scheduled
maintenance  or  replacement  of the  Component,  whichever is the  appropriate
measure for such return condition (the "Periodic Service"),  by (ii) a fraction
of which (x) the numerator shall be the difference  between the required number
of Flight Hours or Cycles  (whichever is more  limiting) for such  Component to
the next Periodic  Service  specified in Part II above and the actual number of
Flight  Hours  or  Cycles  (whichever  is more  limiting)  remaining  for  such
Component to the next  Periodic  Service and (y) the  denominator  shall be the
number of Flight Hours or Cycles (whichever is more limiting) allowable between
each instance of Periodic  Service for such  Component.  To the extent that the
remaining  life of any  Component  (excluding  for this purpose any LLP or time
controlled  component  that  is  replaced  in the  refurbishment  performed  at
Lessor's  expense  pursuant to Section 9.03) exceeds the Flight Hours or Cycles
(whichever  is more  limiting)  to the  next  Periodic  Service  required  in a
Compensation  Item in part II above and no Default  or Event of  Default  shall
then exist,  the Lessee  shall be entitled to a credit  against  amounts due to
Lessor by operation of the preceding sentence. Such credit shall equal a dollar
amount  calculated by  multiplying  (i) the cost to Lessee of having an outside
supplier  or  contractor  perform  the  appropriate  Periodic  Service  for the
Component by (ii) a fraction of which (x) the numerator shall be the difference
between  the  actual  number  of  Flight  Hours or  Cycles  (whichever  is more
limiting)  remaining for such  Component to the next  Periodic  Service and the
required  number of hours of operation or Cycles for such Component to the next
Periodic Service  specified in Part II above, and (y) the denominator  shall be
the number of Flight Hours or Cycles  (whichever  is more  limiting)  allowable
between each instance of Periodic Service for such Component, provided that (1)
the credit shall only be used to offset the Lessee's obligation to pay a dollar
adjustment to Lessor  pursuant to this Part Ill and in no event shall Lessor be
required to pay any amount


                                      F-4


<PAGE>


to Lessee by reason of the condition of any Component and (2) no credit provided
herein  shall be used to  offset a dollar  adjustment  caused  by the  Component
having less than the minimum hours of Flight Hours or Cycles  (whichever is more
limiting) to the next Periodic Service provided for in Part II above.


                                      F-5

<PAGE>

                             ACCEPTANCE CERTIFICATE

     ALOHA  ISLANDAIR,  INC.  ("LESSEE"),  a corporation  organized under the
laws of Delaware, hereby represents, acknowledges, warrants and agrees as
follows:

     1. Lessee has received  this 24th day of March,  2000 (Time: 11:45 a.m.
CST time) at Wichita,  Kansas,  from WILLIS LEASE FINANCE CORPORATION
("Lessor") possession of:

     A.   One  (1)  de   Havilland   Model  Dash  8-102   Aircraft (described
          in the FAA  records  as a Model  DHC-8-102), bearing
          Manufacturer's   Serial   Number   026,   U.S. Registration  No.
          N812PH,  together with two (2) Pratt & Whitney PW120  Engines,
          Manufacturer's  Serial  Numbers 120107 and  120142,  two (2)
          Hamilton  Standard 14 SF-7 Propellers,  Manufacturer's  Serial
          Numbers  851114 and 890711  and all  appliances,  instruments,
          accessories, equipment  (not  including  an APU) and  parts
          attached thereto and thereon, in an airworthy condition;

     B.   Fuel on board the Aircraft, 2200 pounds;

     C.   All manuals,  logbooks,  flight  records and  historical
          information regarding the Aircraft,  the engines and the
          accessories    and   equipment,    including,    without
          limitation,  those listed on Exhibit D to the Lease,  in the
          possession of Lessor; and

     D.   the items listed on Schedule 1 hereto.

     2.   All  of the  foregoing  were  delivered  and  accepted  to Lessee's
full  satisfaction  and  pursuant to the terms and  provisions  of the
Aircraft Lease  Agreement  between  Lessor and Lessee,  dated as of February
22, 2000 (the  "Lease"),  except as set forth on Schedule 2 hereto.  For
purposes of the Lease, Lessor and Lessee agree that the installed hard time
components have, as of the  Delivery  Date,  the time,  Flight  Hours and
Cycles  operating  time remaining as set forth on Schedule 3 hereto.

     3.   The Aircraft, Engines, Propellers and Parts as described in the
Lease  have  been  fully  examined  by Lessee  and have been  received  in a
condition fully satisfactory to Lessee and in full conformance with the Lease
in every respect except as set forth in Schedule 2 hereto.

     4.   The Lease and Operative  Documents (as defined therein) are in full
force and effect; Lessor has fully, duly and timely performed all of its
obligations  of every  kind or  nature  under  the  Lease  and  other
Operative Documents;  and Lessee has no claims;  deductions,  set-offs or
defenses of any kind or nature in connection with the Lease and, other
Operative Documents.

                                      -1-


<PAGE>


     5.   Prior  to the  Delivery  Date,  Lessee  has  obtained  all required
permits,  authorizations,  and  licenses  required,  and has  paid all
required  fees and taxes  relating to the Lease  imposed by the United States
or any other government and/or any political  subdivision  thereof and any
agencies and departments  thereof to allow Lessee to operate the Aircraft as
permitted by the terms of the Lease.

     6.   Lessor and its  successors and assigns shall be entitled to rely
upon this Acceptance Certificate.

     7.   The  Delivery  Date (as  defined  in the Lease) is the date written
in paragraph 1 herein.

                                    ALOHA ISLANDAIR, INC. (LESSEE)


                             By:     /s/ BRENDA F. CUTWRIGHT
                                    -----------------------------------
                             Title:  EXECUTIVE VICE PRESIDENT AND
                                     CHIEF FINANCIAL OFFICER
                                    -----------------------------------


                             By:     /s/ OWEN SEKIMURA
                                    -----------------------------------
                             Title:  VICE PRESDIENT FINANCE
                                     AND CONTROLLER
                                    -----------------------------------




Lease Acceptance Certificate

 Lease of de Havilland Dash 8-102

 MSN 026

                                       -2-


<PAGE>


                                   SCHEDULE 1

                            AIRCRAFT LOOSE EQUIPMENT

<table>

<caption>

QTY      ITEM DESCRIPTION


      <c>
3        Crew Oxygen Mask
3        Smoke Goggles
2        Coffee Cup Holders
1        AFM
2        Crew Life Vest
1        Observers Life Vest
2        Hand Microphones
2        Crew Flashlights
1        Crew Fire Extinguisher
1        Crew Fire Ax
1        Spare Filament Holder
1        PBE in cockpit
1        Alternate  Extension  Handle in  cockpit
1        Overhead  Emergency  Light in cockpit
1        Galley  Service  Cart with trays
3        Galley Food Tray Boxes
2        Galley Hot Jugs
1        PBE in forward galley storage area
1        Fire Extinguisher in forward galley storage compartment
3        Seat Belt Extensions in forward  galley  storage  compartment
2        Passenger O2 Bottles in forward  galley storage  compartment
5        Cabin Seat  Tables
1        Life Vest under F/A seat
1        Flash  Light under F/A seat
1        First Aid Kit in forward galley storage  compartment
1        Medical Kit in forward galley storage  compartment
1        PBE on aft bulkhead
1        Fire Extinguisher on aft bulkhead
2        Propeller Restraints
2        Engine Plug
2        Static Port Covers
1        Set Windshield Covers
2        Pitot Tube Covers
1        Set Landing Gear Safety Pins

 </table>

<PAGE>


                                   SCHEDULE 2

                              LIST OF DISCREPANCIES


1.   Refurbish  left ice  shield as  necessary.
2.   Refurbish  right ice shield as   necessary.
3.   Left wing to fuselage  aft brace upper bolts have rust and  corrosion
     on the   heads.  Clean or replace as necessary.
4.   Left wing to fuselage aft brace upper   bolts have rust and  corrosion
     on the heads. Clean or replace as  necessary.
5.   Left engine  outboard cowl door  de-laminating  at aft lower edge.
     Repair as   necessary.
6.   Check top composite access panel just forward of the left exhaust
     fingernail   for  de-lamination.  Repair as  necessary.
7.   Repair  damage to forward  edge of overhead bin door at seat row 9CDE.
8.   Seat 3B table cracked at forward right corner. Replace table.
9.   Trim at lower inboard corner of flight attendants seat is damaged. Repair
     or replace as necessary.
10.  Check cockpit door for freedom of opening and interference with lavatory
     door.
11.  The overhead ceiling panel around the captain's map light is cracked and
     has a piece missing. Repair or replace as necessary.

12.  Cockpit floor  coming  loose in front of the  pedestal  and inboard of the
     copilots seat. Secure as necessary.
13.  Check observers seat belt for fraying. Replace as necessary.
14.  The pilots coat hook will not stow. Replace as necessary.
15.  Composite  panel on the  outboard  side of #2 nacelle  just aft of the
     flap trailing edge needs repair on the aft edge.
16.  Engine  condition panel door in the left wheel well has the wrong
     fasteners. Replace with correct fasteners.
17.  The bottom edge of left and right exhaust fingernails need to be
     straightened and smoothed.
18.  Non-standard grommet installed on structure under the cockpit floor for
     the left elevator cable. Ref. EO 8-53-99-199. Repair as necessary.
19.  FDAU needs repair.
Note: Lessor will pay the cost for the correction of items 1 through 18 by
Avmax.


<PAGE>


                                   SCHEDULE 3

             TIME CONTROLLED/ LIFE LIMITED PARTS STATUS AT DELIVERY

       Aircraft: Total Time 31,539 Total Cycles 43,190 Date 23 March 2000

<table>

<Caption>
NOMENCLATURE               POSITION        SERIAL NUMBER         TIME SINCE OVERHAUL/INSTALLATION


                        <c>             <c>                   <c>
Cockpit Voice Recorder     only            101128                due
Flight Data Recorder       only            2893                  on condition
Air Cycle Machine          only            unk                   on condition
Starter/Generator          left            290                   170 hr
Starter/Generator          right           96117                 702 hr
AC Generator               left            578                   170 hr
AC Generator               right           96108                 2,187 hr
ELT                        only            408241                due
Fire Bottle Disc. Cart     F#1             9705145               1,032 da
Fire Bottle Disc. Cart     F#2             9705146               1,032 da
Fire Bottle Disc. Cart     A#1             9705143               1,032 da
Fire Bottle Disc. Cart     A#2             9705144               1,032 da
Fire Bottle HST            fwd             21548D1               1,044 da
Fire Bottle HST            aft             15280D1               1,044 da
Crew O2 Bottle, HST        only            544077                4,958 da
Transponder                left            4371                  619 da
Transponder                right           4355                  635 da
Propeller                  left            851114 Hub s/n199     7,929 hr
Blade, Prop.               #1              852759                3 hr
Blade, Prop.               #2              854366                1 hr
Blade, Prop.               #3              876632-7              208 hr
Blade, Prop.               #4              886214-7              6,432 hr
Propeller Actuator         left            890124                6,389 hr
Propeller Control Unit     left            870553                4,297 hr
Propeller                  right           890711 Hub s/n641     6,350 hr
Blade, Prop.               #1              860036-7              6,872 hr
Blade, Prop.               #2              856034                7,542 hr
Blade, Prop.               #3              865607-7              7,050 hr
Blade, Prop.               #4              851590                6,872 hr
Propeller Actuator         right           106                   7,747 hr
Propeller Control Unit     right           890357                1,732 hr
Engine                     left            120107                on condition
Impeller, HP               left            2E542                 22,890 cy
Impeller, LP               left            3F823                 9,048 cy
Cover, HP Front            left            15B144                9,048 cy
Cover, HP Rear             left            15B172                9,048 cy
Disc, HP                   left            14B921                9,048 cy
Disc, LP                   left            94A609                9,048 cy
Disc, PT-1                 left            86A734                9,048 cy
Disc, PT-2                 left            97A582                9,048 cy
Seal, Interstage Air       left            11B719                9,048 cy

</table>



<PAGE>


<TABLE>

                        <c>             <c>                   <c>
Blades, HP                 left            various               9,048 cy
Engine                     right           120142                on condition
Impeller, LP               right           5E754                 17,361 cy
Impeller, HP               right           7F528                 3,062 cy
Cover, HP Front            right           23B271                7,383 cy
Cover, HP Rear             right           27B996                7,383 cy
Disc, HP                   right           17B182                7,383 cy
Disc, LP                   right           23B548                7,383 cy
Disc, PT-1                 right           56AO52                15,099 cy
Disc, PT-2                 right           18A324                22,021 cy
Seal, Air Interstage       right           27B788                7,383 cy
Blades, HP                 right           various               3,062 cy
Ground Prox. Warning       only            6345                  1 hr.
Air Data Computer          left            86101758              40 da
Air Data Computer          right           87092321              184 da
Altimeter                  pilot           unk                   on condition
Altimeter                  co-pilot        unk                   on condition
Altimeter                  standby         8309                  541 da
Yolk Assembly, MLG         left            DCL104-85             OH     5 cy / LL 38,545 cy
Yolk Assembly   MLG        right           DCL103-85             OH 2,962 cy / LL 41,262 cy
Drag Strut, MLG            left            DCL127-86             OH 2,961 cy / LL 41,262 cy
Drag Strut, MLG            right           DCL259-87             OH 2,961 cy / LL 30,380 cy
Shock Strut, MLG           left            DCL060-85             OH 14,676 cy / LL36,892 cy
Piston, MLG Shock Strut    left            0364WH                OH 14,676 cy / LL 36,892 cy
Cylinder, MLG Shock Strut  left            057                   OH 14,676 cy / LL 36,892 cy
Link, MLG Up. Torque       left            DCL165                OH 14,676 cy / LL 23,730 cy
Link, MLG Lo. Torque       left            DCL637                OH 14,676 cy I LL 39,455 cy
Shock Strut, MLG           right           CL1188693R            OH 14,676 cy / LL 36,938 cy
Piston, MLG Shock Strut    right           231                   OH 14,676 cy / LL 36,938 cy
Cylinder, MLG Shock Strut  right           DCL116                OH 14,676 cy / LL 36,938 cy
Link, MLG Up. Torque       right           DCL138                OH 14,676 cy / LL 39,455 cy
Link, MLG Lo. Torque       right           DCL691                OH 14,676 cy / LL 15,434 cy
Pin, Strut to Yolk, MLG    left            CL1188693R                         / LL 14,676 cy
Pin, Strut to Yolk, MLG    right           DCLO60-85                          / LL 14,676 cy
Stabilizer Stay, MLG       left            DCL1288688            OH 3,883 cy / LL 37,137 cy
Stabilizer Stay, MLG       right           DCL168-86             OH 7,485 cy / LL 37,308 cy
Drag Strut, NLG            only            DCL233-89             OH 8,232 cy / LL 29,111 cy
Shock Strut, NLG           only            DCL092-86             OH 6,046 cy / LL 36,205cy
Piston, NLG Shock Strut    only            CH008                 OH 6,046 cy / LL 36,205 cy
Cylinder, NLG Outer        only            DCL206                OH 6,046 cy / LL 31,338 cy
Cylinder, NLG Inner        only            0165WH                OH 6,046 cy / LL 36,205 cy
Axle, NLG                  only            CH008                 OH 6,046 cy / LL 36,205 cy
Trailing Arm, NLG          only            DCL161                OH 6,046 cy / LL 31,338 cy
Actuator, Steering, NLG    only            DCL0338586            on condition / LL 36,205 cy
Trunnion Plates, NLG       left & right    NSN                   on condition / LL 43,190 cy
Trunnion Cap, NLG          left & right    NSN                   on condition / LL 43,190 cy
</TABLE>


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