<PAGE>
                                                                EXHIBIT 10.58


                                 LEASE AGREEMENT
                                     BETWEEN
                            WILMINGTON TRUST COMPANY,
                                AS OWNER TRUSTEE,
                                     LESSOR

                                       AND
                              ALOHA AIRLINES, INC.,
                             A DELAWARE CORPORATION,
                                     LESSEE
                                   DATED AS OF
                                 AUGUST 4, 1999


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


                        ONE BOEING MODEL 737-73A AIRCRAFT
                       MANUFACTURER'S SERIAL NUMBER 28499




<PAGE>

                              TABLE OF CONTENTS
<TABLE>
<S>            <C>                                                       <C>
                                                                         PAGE
                                                                         ----
ARTICLE 1.     DEFINITIONS...............................................1-1
ARTICLE 2.     ACCEPTANCE UNDER LEASE....................................2-1
    (a)        Conditions Precedent......................................2-1
    (b)        Time of Delivery..........................................2-3
    (c)        Place of Delivery.........................................2-3
    (d)        Test Flight; Customer Walk-Around.........................2-3
    (e)        Change Orders.............................................2-3
    (f)        Development Changes.......................................2-4
    (g)        Use of Aircraft by Manufacturer...........................2-4
    (h)        Lessor Aircraft Modifications.............................2-4
ARTICLE 3.     TERM AND RENT.............................................3-1
    (a)        Term......................................................3-1
    (b)        Basic Rent................................................3-1
    (c)        Security Deposit..........................................3-1
    (d)        Supplemental Rent.........................................3-2
    (e)        Payments on Business Days.................................3-2
    (f)        Place of Payment..........................................3-2
    (g)        Prohibition Against Setoff, Counterclaim, Etc. ...........3-2
ARTICLE 4.     REPRESENTATIONS AND WARRANTIES............................4-1
    (a)        Lessor's Representations and Warranties...................4-1
    (b)        Lessee's  Representations and Warranties..................4-2
ARTICLE 5.     POSSESSION AND USE........................................5-1
    (a)        Possession................................................5-1
    (b)        Lawful Operations; Use....................................5-1
    (c)        Maintenance...............................................5-2
    (d)        Registration and Insignia.................................5-3
ARTICLE 6.     REPLACEMENT AND POOLING OF PARTS;
               ALTERATIONS, MODIFICATIONS AND ADDITIONS..................6-1
</TABLE>


                                     - i -

<PAGE>






                              [MISSING PAGE -ii-]




<PAGE>

<TABLE>
<S>            <C>                                                       <C>
    (j)        Insurance of Lessee's Interest...........................10-5
ARTICLE 11.    MORTGAGES, LIENS, ETC....................................11-1
ARTICLE 12.    RECORDATION AND FURTHER ASSURANCES.......................12-1
ARTICLE 13.    RETURN OF AIRCRAFT AND RECORDS...........................13-1
    (a)        Return...................................................13-1
    (b)        Inspection; Test Flight..................................13-1
    (c)        Flight Hours/Cycles/Time Requirements....................13-2
    (d)        General Return Requirements..............................13-11
    (e)        Records..................................................13-12
    (f)        Technical Acceptance; Ferry Flight ......................13-12
    (g)        Aid in Disposition.......................................13-13
ARTICLE 14.    EVENTS OF DEFAULT .......................................14-1
ARTICLE 15.    REMEDIES.................................................15-1
ARTICLE 16.    EXCUSABLE DELAY..........................................16-1
    (a)        General..................................................16-1
    (b)        Four (4) Months' Excusable Delay.........................16-1
    (c)        Consequence of Termination...............................16-1
    (d)        Failure to Terminate.....................................16-2
    (e)        Damage to or Destruction of Aircraft - Delivery Delay....16-2
    (f)        Termination Rights Exclusive.............................16-2
 ARTICLE 17.   MISCELLANEOUS............................................17-1
    (a)        Construction and Applicable Law..........................17-1
    (b)        Notices..................................................17-1
    (c)        Lessor's Right to Perform for Lessee.....................17-2
    (d)        Corporate Existence; Merger..............................17-2
    (e)        Training and Customer Support............................17-3
    (f)        Subject and Subordinate..................................17-3
    (g)        Assignment...............................................17-4
    (h)        Expenses.................................................17-4
    (i)        Survival.................................................17-4
    (j)        Integration..............................................17-5
    (k)        Federal Bankruptcy Code..................................17-5

</TABLE>

                                        - iii -




<PAGE>

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

    (l)        Counterparts..............................................17-5
    (m)        Execution by Telecopy.....................................17-5
Schedule "1"   ...........................................................S-1
Exhibit "A"    ...........................................................A-1

</TABLE>


                                        - iv -



<PAGE>


                                 LEASE AGREEMENT

       This Lease Agreement, dated as of August 4, 1999, is entered into by and
between Wilmington Trust Company, a Delaware banking corporation, with a  place
of  business at Rodney  Square  North,  1100 North  Market  Street,  Wilmington,
Delaware  19890-0001  acting not in its individual  capacity but solely as Owner
Trustee  (herein  called  "Lessor"),  and  Aloha  Airlines,  Inc.,  a  Delaware
corporation,  having  its  principal  place of  business  at 371  Aokea  Street,
Honolulu, Hawaii 96819 (herein called "Lessee")

                                    RECITALS

        Lessee  desires to lease  from  Lessor and Lessor is willing to lease to
Lessee  the  Aircraft  described  herein  upon  and  subject  to the  terms  and
conditions  of this Lease.  In  consideration  of the mutual  promise's  herein,
Lessor and Lessee agree as follows:

                              TERMS AND CONDITIONS

        ARTICLE 1.  DEFINITIONS  The  following  terms shall have the  following
meanings  and shall be equally  applicable  to both the  singular and the plural
forms of the terms defined herein:

        "Approved   Maintenance   Performer"  means  any  maintenance  performer
approved  by the FAA and  commonly  recognized  in the  industry  as a reputable
maintenance  performer,  or any  other  person  agreed  to from  time to time in
writing by Lessor,  including  Air New Zealand  Limited,  of  Christchurch,  New
Zealand,  Aviation  Management  Systems,  Inc.  or  Goodyear,  each of  Phoenix,
Arizona, Spar Aerospace Limited, of Alberta, Canada, and B.F. Goodrich (formerly
known as Tramco), of Everett, Washington.

        "Aircraft" means the Airframe to be leased hereunder, together with each
Engine  initially  installed on the Airframe when delivered and leased hereunder
(or any engine  substituted  for any such  Engine  pursuant to the terms of this
Lease),  whether or not any of such initial or substituted Engines may from time
to time no longer be installed on the Airframe or on any other aircraft.

        "Airframe"  means (i) the Boeing Model 737-73A  aircraft,  excluding any
Engines  or other  engines that may be installed on such  aircraft  from time to
time, to be manufactured and sold pursuant to the Purchase  Agreement and leased
by Lessor to Lessee hereunder and under a Lease Supplement; and (ii) any and all
Parts,  so long as the same shall be incorporated in or installed on or attached
to the Airframe or so long as title  thereto  shall  remain  vested in Lessor in
accordance with the terms of Article 6 hereof after removal from the Airframe.


                                       1-1

<PAGE>


        "APU" means the  auxiliary  power unit  installed in the Airframe on the
Delivery Date (or such auxiliary power unit as may be substituted therefor after
the Delivery Date in accordance with the requirements of this Lease).

        "Basic  Rent" for the  Aircraft  means the basic  rent  payable  for the
Aircraft  pursuant  to  Article  3(b) hereof (as  supplemented  by  Schedule "1"
hereto).

        "Business Day" means any day other than a Saturday,  Sunday or other day
on which commercial  banking  institutions are authorized by law to be closed in
the city of Honolulu,  Hawaii,  in the city of New York, New York, or other city
as may be designated by Lessor from time to time pursuant to Article 3(f).

        "Certificated  Air  Carrier"  means an air carrier  certificated  by the
Department  of  Transportation  under  Section  41102 of Title 49 of the  United
States Code, or under similar provisions of any statute enacted in lieu thereof.

        "Companion  Lease"  means the  Lease  Agreement  of even  date  herewith
between Lessor and Lessee pursuant to which Lessor has agreed to lease to Lessee
another Boeing Model 737-73A aircraft,

        "Country of Registration" means the United States of America.

        "Cycle"  means:  (i) with  respect to the  Airframe,  one  take-off  and
landing of the  Airframe  and (ii) with  respect to an Engine or other engine or
any Part or part,  one take-off and landing of the Airframe or other airframe on
which such Engine or other engine or Part or part is installed.

        "Delivery Date" means the date of the Lease Supplement for the Aircraft,
which date shall be the same date the Aircraft is delivered to, and accepted by,
Lessee hereunder.

        "Dollars" or "$" means lawful currency of the United States of America.

        "Engine" means (i) each of the two CFM  International  Model  CFM56-7B20
engines (to be upgraded to  CFM56-7B24  engines  prior to or promptly  following
delivery) specified by manufacturer's serial numbers in the Lease Supplement and
installed on the Airframe on the Delivery  Date therefor (or an engine which may
from time to time be  substituted  for such an Engine  pursuant to Article  9(b)
hereof),  whether or not from time to time thereafter no longer installed on the
Airframe or installed on any other  aircraft and (ii) any and all Parts, so long
as the same shall be  incorporated in or installed on or attached to such Engine
(or  engine)  or so long as title  thereto  shall  remain  vested  in  Lessor in
accordance with the terms of Article 6 hereof after removal from such Engine (or
engine).

        "Equipment"  means, as the context may require,  the Aircraft,  Airframe
and Engines then leased hereunder.

                                       1-2


<PAGE>


        "Event"  means an event or  occurrence  which,  with the passing of time
and/or the giving of notice, would constitute an Event of Default.

        "Event of  Default"  means any of the events  referred  to in Article 14
hereof.

        "Event of Loss" with respect to any Item of Equipment  means any of the
following  events with respect to such Item of Equipment:  (a) loss of such Item
of  Equipment or the use thereof due to theft or  disappearance  for a period in
excess of thirty (30) days, or  destruction,  damage beyond  economic  repair or
rendition  of such Item of  Equipment  permanently  unfit for normal use for any
reason  whatsoever;  (b) any loss of or damage to such Item of  Equipment  which
results in an insurance  settlement with respect thereto on the basis of a total
loss,  or a  constructive  or  compromised  total  loss;  (c) the  condemnation,
confiscation or requisition of title to or use of such Item of Equipment,  other
than a  requisition  for use of such Item of Equipment by the  Government of the
Country of  Registration  of the  Aircraft  for a period of less than sixty (60)
days; (d) as a result of any rule, regulation, order, or other action by the FAA
or  other  governmental  body  having  jurisdiction,  the  use of  such  Item of
Equipment in the normal course of air  transportation of persons shall have been
prohibited for a period of six consecutive months; or (e) any other deprivation
or seizure of such Item of Equipment  for a period of more than sixty (60) days.
An Event of Loss to the Aircraft shall be deemed to have occurred if an Event of
Loss occurs with respect to the Airframe of the Aircraft.

        "Excusable Delay" shall have the meaning set forth in Article 16 hereof.

        "FAA"  means,  as the context may require or permit,  the United  States
Federal   Aviation   Administration,  the  Department  of  Transportation,   the
Administrator   of   the  Federal  Aviation   Administration,  and  any  person,
governmental  department,  bureau,  commission  or  agency  succeeding  to  the
functions of any of the foregoing.

        "FAR" means the United States Federal Aviation Regulations issued by the
FAA pursuant to the United  States  Transportation  Code of 1994,  as amended or
supplemented from time to time.

        "Flight Hour" means: (i) with respect to the Airframe, each hour or part
thereof which elapses from the time the wheels of the Airframe  leave the ground
on  take-off  to the time when the  wheels of the  Airframe  touch the ground on
landing, and (ii) with respect to an Engine or other engine or any Part or part,
including  the APU,  each hour or part thereof  which  elapses from the time the
wheels of the airframe,  whether or not the Airframe leased hereunder,  on which
such Engine or other  engine or Part or part is  installed,  leave the ground on
takeoff  to the time  when the  wheels  of such  airframe  touch  the  ground on
landing.

        "Item of  Equipment"  means,  as the context may require,  the Aircraft,
Airframe or any Engine then leased hereunder.

        "Incentive  Rate" means three (3)  percentage  points above the prime or
base rate of interest  charged by Citibank,  N.A., in New York from time to time
as its prime or base

                                       1-3


<PAGE>


commercial  lending rate,  but, if  prohibited  by  applicable  law, the maximum
contract rate permitted by applicable law.

        "Landing  Gear"  means  the  landing  gear  (as per  the  Manufacturer's
definition,  I.E.,  excluding  actuating  mechanisms,  etc.)  installed  on  the
Airframe  on the  Delivery  Date (or  such  landing  gear as may be  substituted
therefor  after the Delivery Date in accordance  with the  requirements  of this
Lease).

        "Lease Agreement,"  "this Lease," "this Agreement,"  "herein,"
"hereof," "hereunder"  or other like words  means  this  Lease  Agreement  as
the same may hereafter  from  time to time  be  supplemented,  amended,
waived  or  modified pursuant to the applicable  provisions hereof,
including,  without  limitation, supplementation hereof by one or more Lease
Supplements.

        "Lease  Supplement"  means each Lease  Supplement,  substantially in the
form of Exhibit "A" hereto, to be entered into between Lessor and Lessee for the
purpose of leasing an Item of Equipment  under and pursuant to the terms of this
Lease Agreement.

        "Letter  of  Credit"   means  an  irrevocable,   transferable    standby
letter  of  credit  issued  for the benefit of Lessor by a  substantial  banking
institution  in  Honolulu,  Hawaii,  Los  Angeles or San Francisco,  California,
or New York, New York, acceptable to Lessor, in form and substance  satisfactory
to Lessor in its sole discretion.

        "Lien" means any mortgage,  pledge,  lien, charge,  encumbrance,  lease,
security interest or claim.

        "Maintenance  Program," as of any date of determination,  means Lessee's
program of overhaul and maintenance  for the Equipment,  approved by the FAA and
which:  (i) at all times complies in all material  respects with the then latest
revision of the  Manufacturer's  Maintenance  Planning Document and, if Lessee's
program of overhaul and  maintenance is a block  maintenance  program,  the then
latest revision of Appendix C Document No. D626A001 (or any restatement thereof)
applicable to the Aircraft as the result of the Flight  Hours/Cycles  ratio that
the Aircraft  has been  operated  during the Term,  (ii)  incorporates  the then
latest revision of the Manufacturer's  Corrosion  Prevention and Control Program
for aircraft of similar type as the Aircraft, and (iii) at all times complies in
all material respects with the then latest revision of the Engine manufacturer's
Engine Management Program.

        "Manufacturer" means The Boeing Company, a Delaware corporation.

        "Mortgage"  means the mortgage  agreement  pursuant to which Lessor will
grant Mortgagee a mortgage  interest in the Aircraft to secure  repayment of the
financing  obligation incurred by Lessor in connection with Lessor's purchase of
the  Aircraft,  as  such  mortgage  agreement  may  be  modified,  amended  or
supplemented from time to time.

                                       1-4


<PAGE>



        "Mortgagee"  means the mortgagee under the Mortgage,  and its successors
and assigns.


        "Owner  Participant" means Ansett Worldwide  Aviation,  U.S.A., a Nevada
general partnership, and its successors and assigns.

        "Parts"  means  all  appliances,  components,  parts,  instruments,
appurtenances,  accessories, furnishings and other equipment of whatever nature,
including the APU and Landing Gear (but excluding whole Engines or engines),  so
long as the same shall be furnished  with,  incorporated  in,  installed  on, or
attached to the  Aircraft,  Airframe  or any Engine or so long as title  thereto
shall remain vested in Lessor in  accordance  with the terms of Article 6 hereof
after removal from the Aircraft, Airframe or such Engine.

        "Participant"  means Mortgagee,  WTC, Owner  Participant,  and any other
person or entity  that has or may  hereafter  acquire an  ownership  or mortgage
interest  in the  Aircraft,  whether  as  owner  trustee,  mortgagee,  indenture
trustee, owner participant, loan participant or otherwise.

        "Purchase  Agreement" means the Purchase  Agreement No. 1909 dated as of
March  6, 1999, including Detail Specification  D6-38808-7,  Latest Revision, to
the extent the same  relates to the sale and the  purchase of the  Aircraft,  as
such Purchase Agreement has heretofore been, and may hereafter from time to time
be, supplemented, amended or modified.

        "Rent" means Basic Rent and Supplemental Rent.

        "Scheduled Aircraft Delivery" for the Aircraft means the scheduled month
of delivery for the Aircraft set forth in Article 2(b) hereof.

        "Security Deposit" means the cash security or Letter of Credit deposited
with Lessor pursuant to Article 3(c) hereof.

        "Stipulated Loss Value" for the Aircraft and for each Engine shall have
the meanings set forth in Schedule "1" hereto.

        "Supplemental  Rent"  means  any  and  all  amounts,  liabilities  and
obligations which Lessee assumes or agrees hereunder to pay to Lessor or others,
including Stipulated Loss Value payments, but excluding Basic Rent.

        "Term,"  in respect  of an Item of  Equipment,  means the lease term for
which such Item of  Equipment  is leased  hereunder  pursuant  to  Article  3(a)
hereof.

        "Trust  Agreement" means the Trust Agreement dated as of August 2, 1999,
between WTC and Owner Participant, as amended or supplemented from time to time.

        "WTC" means  Wilmington Trust Company,  a Delaware banking  corporation,
and its successors and assigns.


                                       1-5


<PAGE>


        ARTICLE 2. ACCEPTANCE UNDER LEASE.

        (a)  CONDITIONS  PRECEDENT.  Lessor  hereby  agrees  to lease to  Lessee
hereunder,  and  Lessee  hereby  agrees  to lease  from  Lessor  hereunder,  the
Aircraft,  as  further evidenced  by the  execution  by Lessor and Lessee of a
Lease Supplement. Lessor's obligation to lease the Aircraft to Lessee  hereunder
shall be subject to the following  conditions  precedent  being complied with to
Lessor's satisfaction or being waived by Lessor in its discretion:

        (i) PRE-DELIVERY.  On or prior to the date specified below, Lessor shall
have received:


            (1) within ten (10) days  following the date this Lease is signed by
Lessee,  a  resolution  of the Board of  Directors  of Lessee,  certified by the
Secretary or an  Assistant  Secretary of Lessee,  duly  authorizing or ratifying
the lease of the Aircraft hereunder and the execution,  delivery and performance
of this Lease and the Lease supplement,  together with an incumbency certificate
as to the person or persons  authorized to execute and deliver such documents on
behalf of Lessee;

            (2) on the  signing  of this Lease,  Lessor  shall have received the
Security Deposit described in Article 3(c) and Schedule "1" hereto; and

            (3) on or prior to October 1, 1999,  a copy of Lessee's  Maintenance
Program for the Aircraft to enable Lessor to verify to its satisfaction that the
Maintenance  Program  complies  in  all  material  respects  with  the  Boeing
Maintenance  Planning Document and, if Lessee's  maintenance  program is a block
maintenance program, Appendix C No. D626AO01 Blocked Maintenance Program, latest
amendment, applicable to the Aircraft operations of Lessee (and Lessor agrees to
maintain the  confidentiality of Lessee's  Maintenance  Program and not disclose
Lessee's  Maintenance  Program to any person other than Owner  Participant,  its
agents and  representatives  (who in turn  shall  maintain  the  confidentiality
thereof),  or for purposes of bridging the Aircraft  from  Lessee's  Maintenance
Program to another maintenance program).

        (ii) DELIVERY.  The following  additional  conditions  shall be complied
with to Lessor's  satisfaction  (or be waived by Lessor) at or prior to the time
the  Aircraft is ready for delivery  from Lessor to Lessee  hereunder or on such
earlier date as may be applicable to such condition:

            (1) Lessor shall have received the following:

               (A) the  Lease Supplement  for the Aircraft,  duly authorized and
executed by Lessee and dated the Delivery Date for the Aircraft;

                                       2-1


<PAGE>


               (B) the first installment of Basic Rent for the Aircraft required
under Article 3(b), less the sum of $100,000 heretofore deposited by Lessee with
Lessor  (which  $100,000.  deposit  will be applied by Lessor  towards the first
installment of Basic Rent);

               (C) at least five (5) Business Days prior to the Delivery Date, a
certificate and an opinion signed by independent  aircraft  insurance brokers as
to the due compliance with the insurance provisions of Article 10 hereof;

               (D) a favorable opinion of counsel  for  Lessee,  addressed  to
Lessor and dated the Delivery Date for the Aircraft,  concerning the matters set
forth in clauses (i) through (vii), inclusive, of Article 4(b) hereof, and as to
such other matters as Lessor shall specify;

               (E) at  Lessee's  expense,  a  favorable  opinion of FAA  counsel
concerning the proper filing for recordation of this Lease and the Mortgage with
the FAA  to protect  and  perfect  Lessor's  and  Mortgagee's  interests  in the
Aircraft;

               (F) a copy of Lessee's  air  transport  license and  Lessee's air
carrier operating  certificate,  issued by the FAA, authorizing the operation of
Boeing 737-700 aircraft; and

               (G) such other documents as Lessor may reasonably request.


        (2)  On the  Delivery  Date for the  Aircraft the  following  statements
shall be true and Lessor  shall have  received a  certificate  signed by a  duly
authorized officer of Lessee, dated such Delivery Date, stating that:

               (A) the representations and warranties  contained in Article 4(b)
hereof are true and  accurate on and as of such date as though made on and as of
such date (except to the extent that such  representations and warranties relate
solely to an earlier date);

               (B) no event has occurred and is continuing, or would result from
the lease of the Aircraft,  which  constitutes  an Event or an Event of Default;
and

               (C) all necessary approvals, authorizations,  consents, licenses,
certificates  and  orders of the FAA and any other  governmental  or  regulatory
authority having jurisdiction with respect to the ownership, use or operation of
the Aircraft or the transactions  contemplated by this Lease have been obtained,
and such approvals, authorizations,  consents, licenses, certificates and orders
are in full force and effect and constitute sufficient authorization therefor.

                                       2-2


<PAGE>


               If  Lessee  fails  for  any  reason  to  fulfill  the  conditions
contained  in  this  Article 2  in  a  timely manner, other than as a result  of
Lessor's failure to perform its obligations hereunder, the same shall constitute
an Event of Default under this Lease.

               (b) TIME OF  DELIVERY.  Subject to the  provisions  of Article 16
hereof,  the Aircraft  shall be delivered  to Lessee in  compliance  with Detail
Specification  D6-38808-7,  Latest Revision, and Lessee shall accept delivery of
the Aircraft  hereunder upon tender of delivery of the Aircraft by  Manufacturer
under the  Purchase  Agreement,  currently  scheduled  during the second half of
October,  1999. Lessor shall give Lessee at least seven (7) days' advance notice
of the expected Delivery Date for the Aircraft. If, after the expiration of such
7-days'  advance notice period,  delivery of the Aircraft is delayed beyond such
expected Delivery Date due to Lessee's fault or responsibility, without limiting
Lessor's  rights to terminate this Lease and to recover damages as the result of
Lessee's  failure  to take  delivery  of the  Aircraft,  Lessee  shall  promptly
reimburse  Lessor for all costs and  expenses  incurred by Lessor as a result of
such delay,  including but not limited to reasonable amounts for transportation,
storage,  insurance,  taxes,  preservation or protection of the Aircraft,  legal
expenses  attributable  to the delay,  and Lessee shall also be obligated to pay
Lessor,  on  demand,  an amount  equal to the Basic  Rent that  would  have been
payable in respect of the Aircraft hereunder if Lessee had taken delivery of the
Aircraft on such expected Delivery Date,  prorated on a daily basis for each day
from and including  such  expected  Delivery Date to the earlier of the date the
Aircraft is delivered to Lessee  hereunder or the date this Lease is  terminated
or canceled by Lessor as a result of  Lessee's  failure to take  delivery of the
Aircraft in accordance with the terms and conditions of this Lease.

               (c) PLACE OF DELIVERY.  The Aircraft shall be delivered to Lessee
hereunder, at Lessee's expense, at an airport in or near Seattle, Washington, or
Las Vegas,  Nevada,  or, at Lessee's  expense,  at such alternate site as may be
mutually agreed upon in writing by Lessor and Lessee in an effort to minimize as
much as reasonably possible,  consistent with law, any sales, use or similar tax
exposure to the parties relating to the place of delivery of the Aircraft.

               (d) TEST  FLIGHT;  CUSTOMER  WALK-AROUND.  Lessee shall have  the
right to participate in the test  flight(s)  and  customer  walk-around  for the
Aircraft contemplated by the Purchase Agreement, and Lessor shall give Lessee as
much advance  notice thereof as is practicable in order for Lessee to be able to
participate in such flight(s) and customer walkaround.

               (e)  CHANGE  ORDERS.  Subject  to  the  terms  of  the  Purchase
Agreement,  the Detail Specification may, by mutual agreement between Lessee and
Lessor, be amended from time to time by change order or other written agreement,
which shall set forth in detail the particular  changes to design,  performance,
weight,  balance,  Scheduled Aircraft Delivery and Rent for the Aircraft and the
other  provisions  of this  Agreement.  Such  change  orders  and other  written
agreements  shall be signed on behalf of Lessee and  Lessor by their  respective
duly authorized representatives.

                                       2-3


<PAGE>




               (f) DEVELOPMENT  CHANGES.  The Detail  Specification  also may be
revised by  Manufacturer  without  Lessee's  consent to incorporate  development
changes if such changes do not affect  Lessor's  cost,  or adversely  affect the
Scheduled Aircraft Delivery,  guaranteed weight or guaranteed performance of the
Aircraft or  interchangeability  or   replaceability   requirements  under   the
Detail  Specification.  Development  changes are  changes  deemed  necessary  to
correct defects, improve the Aircraft,  prevent delay, or insure compliance with
the Purchase  Agreement.  Lessor shall notify  Lessee of all changes made in the
Detail  Specification  pursuant to this  Article  2(f) by  furnishing  to Lessee
revised pages for the Detail Specification.

               (g)  USE  OF  AIRCRAFT  BY  MANUFACTURER.  Lessee  agrees  that
Manufacturer  may use the Aircraft to be leased hereunder for flight tests prior
to delivery if such flight tests are  permitted  under the  Purchase  Agreement.
Lessee  shall  accept  delivery  of the  Aircraft  used  for  ffight  tests  in
accordance  with  this  Article  2(g)  without  any  reduction  in the  Rent for
depreciation or wear and tear resulting therefrom.

               (h) LESSOR AIRCRAFT MODIFICATIONS. Prior to the Delivery Date, if
consistent with Manufacturer's and vendor lead-time  constraints,  but otherwise
as promptly  following  the Delivery  Date as is  consistent  with  modification
facility  and  vendor  lead-time  constraints,  Lessor  shall  cause the  Detail
Specification  for the Aircraft to be amended at Lessor's  cost to: (i) increase
the thrust of the  Engines to 24,000  lbs.,  (ii)  increase  the MTOW to 154,500
lbs., and (iii)  configure the cabin interior to a two-class  layout of 12 first
class  seats and 112  economy  class  seats.  Lessor  shall be  responsible  for
coordinating the completion and certification of the  modifications  referred to
in  clauses (i), (ii) and (iii),  above.  Lessee  shall  be  entitled  to have a
representative   present   during   the  course   of  the  performance  of  such
modifications  by such  modification  facility,  and Lessee shall be entitled to
review  the maintenance  contract in respect  thereof  (but shall not have any
right to require  modifications or additions thereto).  The maintenance contract
shall include warranties that will be assigned to Lessee.

               Promptly  following  the date this  Lease is  signed  by  Lessee,
Lessor will purchase a slimline (or a half G2) galley for installation by Lessee
at Lessor's  expense (but charged to Lessor at Lessee's cost,  i.e., no overhead
or profit) upon delivery by the  manufacturer  thereof. The  estimated  time for
delivery is seven  months,  but Lessor shall work with the  manufacturer  of the
galley in an  effort to  improve  such  delivery  time.  Lessor  also  agrees to
purchase a drop down LCD video  system for  installation  by Lessee at  Lessor's
expense (but charged to Lessor at Lessee's  cost,  i.e.,  no overhead or profit)
upon delivery by the manufacturer  thereof.  The  estimated time for delivery is
ten months,  but Lessor shall work with the  manufacturer of the video system in
an  effort to  improve  such  delivery  time.  Further,  Lessor  will  cause the
Manufacturer or the  modification  facility that configures the interior seating
referred to in the  preceding  paragraph to install  wiring and other  necessary
provisions for the video system during the interior modification,  to the extent
reasonably  practicable.  Lessor  shall  be  responsible  for  coordinating  the
completion and certification of the galley and video system installation.

                                       2-4


<PAGE>


               Lessee shall be entitled to an abatement of Basic Rent,  prorated
on a daily basis,  but not to exceed an aggregate of fifteen (15) days, for each
full day that the Aircraft  cannot be operated by Lessee solely as the result of
the required grounding of the Aircraft to incorporate the modifications referred
to in this Article 2(h). Lessee agrees to use its best efforts to minimize  such
downtime by performing the modifications in a continuous and efficient manner.

               All  Parts  removed  from the  Aircraft  in  connection  with the
foregoing  modifications as well as the parts and equipment  required to perform
such modifications  shall at all times be and remain the property of Lessor, and
Lessee shall make such Parts and equipment  available to Lessor for  disposition
by Lessor.

               Except as specifically  provided above, the Aircraft is delivered
to Lessee hereunder "AS-IS, WHERE-IS."

                                       2-5


<PAGE>


         ARTICLE 3. TERM AND RENT.

         (a) TERM.  Except as otherwise  provided herein,  the Aircraft shall be
leased to Lessee  hereunder  for a Term of ten (10)  years,  commencing  on the
Delivery Date for the Aircraft.

         (b) BASIC RENT.  Lessee  shall pay Lessor  Basic Rent for the  Aircraft
throughout  the Term in 120  consecutive  monthly in advance  payments,  due and
payable commencing on the Delivery Date for the Aircraft and on the like date in
each calendar month  thereafter to and including the 120th calendar month, or if
such month has no such date, on the last Business Day of such month.  The amount
of each monthly Basic Rent payment payable for the Aircraft  throughout the Term
shall be as specified in paragraph 2 of Schedule "I" hereto.

         (c)  SECURITY  DEPOSIT.  On the date this Lease is signed by Lessor and
Lessee, Lessee shall provide   Lessor with the cash or letter of Credit Security
Deposit specified in paragraph 3. of Schedule "1" hereto to be held by Lessor as
security for  performance  of all Lessee's  obligations  hereunder and under the
Companion Lease.  Lessee agrees to maintain the Security Deposit with Lessor for
the original amount thereof until all Lessee's obligations  hereunder shall have
been fully  performed.  Lessor may commingle the cash Security  Deposit with its
general funds.

         In the event Lessee fails to take  delivery of the Aircraft as provided
herein or if any other Event of Default occurs and is continuing or shall result
in the termination or  cancellation of this Lease by Lessor,  in addition to any
other rights or remedies Lessor may have hereunder or under the Companion Lease,
Lessor shall be  entitled,  at its option,  to draw on the Letter of Credit,  if
any,  for the full  amount  thereof or for any portion  thereof as Lessor  shall
elect, and apply all or any proceeds thereof, or, as the case may be, all or any
portion of the cash Security  Deposit  towards any or all amounts due under this
Lease or the Companion  Lease,  whether such amounts due  constitute  Basic Rent
payments  hereunder  or  thereunder,  damages  for  breach of this  Lease or the
Companion Lease, or other Rent payments hereunder or thereunder.  If at the time
the  Letter of  Credit,  if any,  is drawn upon  Lessor  shall not have  finally
determined the full amount to become  payable  hereunder and under the Companion
Lease (including without limitation,  the extent of its damages hereunder or the
damages  under the  Companion  Lease),  Lessor  shall be  entitled to retain the
unapplied portion of the cash Security Deposit or the unapplied  proceeds of the
Letter  of  Credit,  as  the  case  may  be,  until  such  time  as  such  final
determination has been made and full and final payment thereof has been received
(and Lessor agrees to use reasonable efforts to make prompt determination of the
full amount payable hereunder and under the Companion Lease).

         Upon full performance by Lessee of all its obligations  hereunder,  and
provided no Event or Event of Default  shall have  occurred  and be  continuing,
Lessor shall promptly return the Security Deposit to Lessee.

                                       3-1


<PAGE>


         (d)  SUPPLEMENTAL  RENT.  Lessee  also  agrees to pay to Lessor,  or to
whomsoever  Lessor  shall  direct  in  writing,  any and all  Supplemental  Rent
promptly as the same shall become due and owing, and in the event of any failure
on  the part of Lessee to pay any  Supplemental  Rent, Lessor shall have all the
rights, powers and remedies provided for herein, by law or otherwise,  as in the
case  of  non-payment  of  Basic  Rent.  Lessee  will  also  pay to  Lessor,  as
Supplemental Rent, on demand,  interest at the Incentive Rate on any part of any
Basic Rent not paid when due and on any other payment of  Supplemental  Rent not
paid when due or demanded by Lessor in accordance  with the terms hereof for the
period  for which the same shall  become due until the same shall be paid.  Such
interest will accrue on a day to day basis.

         (e) PAYMENTS ON BUSINESS  DAYS.  If any date on which a payment of Rent
becomes due and payable is not a Business  Day, the Rent payment  otherwise  due
and payable on such date shall be due and payable on the immediately  succeeding
Business Day.

         (f) PLACE OF PAYMENT.   All  Rent  shall  be  payable  in  Dollars,  in
immediately available  funds, not later than  11:00 a.m., New  York  City  time,
on  the  due  date thereof, at the office of Citibank, N.A., 21st Floor, Zone 1,
111 Wall Street, New  York,  New  York,  10043,  ABA  No.  02-1000089  (CHIPS ID
0008),  for  credit  to  the  account  of  Ansett  Worldwide  Aviation,  U.S.A.,
Account No. 36953153,  or at such other  location  or  account as  Lessor  shall
from  time  to  time  designate  in  writing.   Rent  payments payable hereunder
shall  be  deemed  to  have  been  paid only at the time  actually  credited  to
Lessor's   account   referred   to  above.   All  interest  and  other  payments
payable  hereunder  that  are  pro-rated  on  an annualized  or  other  periodic
basis  shall  be  calculated  on  the basis of a year consisting of 360 days and
twelve 30 day months.

         (g) PROHIBITION AGAINST SETOFF, COUNTERCLAIM,  ETC. Lessee's obligation
to pay Rent  hereunder  shall be  absolute  and  unconditional  and shall not be
affected by any circumstances,  including,  without limitation:  (i) any setoff,
counterclaim,  recoupment,  defense or other right which Lessee may have against
Lessor,  Manufacturer,  any  Participant  or any  other  person  for any  reason
whatsoever,  (ii) any defect in the  title,  airworthiness,  condition,  design,
operation, or fitness for any particular purpose or for use, or any damage to or
loss or destruction,  of the Aircraft,  or any  interruption or cessation in the
use or  possession  thereof  by  Lessee  for any  reason  whatsoever,  (iii) any
insolvency,  bankruptcy,  reorganization  or similar  proceedings  by or against
Lessor, Lessee, Manufacturer, any Participant or other person, or (iv) any other
circumstance,  happening or event  whatsoever,  whether or not similar to any of
the foregoing.

         Lessee hereby waives,  to the extent  permitted by applicable  law, any
and all  rights  which  it may now have or which  may at any time  hereafter  be
conferred  upon it by  statute or  otherwise  to  terminate,  cancel,  quit,  or
surrender  this Lease or the Aircraft or to reject or revoke  acceptance  of the
Aircraft, or to any abatement, suspension, deferment or reduction of Rent or the
performance  of any other  obligations,  except in  accordance  with the express
terms hereof.

                                       3-2


<PAGE>


         For the  avoidance  of doubt,  nothing  in this  Article  3(g) shall be
construed Io prevent Lessee from commencing legal proceedings  against Lessor to
recover  damages from Lessor for the breach by Lessor of any of its  obligations
under this Lease.


                                       3-3


<PAGE>


         ARTICLE 4. REPRESENTATIONS AND WARRANTIES

         (a) LESSOR'S REPRESENTATIONS AND WARRANTIES.  THE AIRCRAFT IS DELIVERED
AND LEASED  HEREUNDER  "AS-IS,  WHERE-IS" AND NEITHER LESSOR NOR ANY PARTICIPANT
NOR  ANY  OF  THEIR   RESPECTIVE   OFFICERS  DIRECTORS,  EMPLOYEES,  AGENTS   OR
REPRESENTATIVES  HAS  MADE OR  SHALL  BE  DEEMED  TO  HAVE  MADE  ANY  GUARANTY,
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,  AIRWORTHINESS,
VALUE, CONDITION, DESIGN, CONFORMITY TO THE PROVISIONS OF THE PURCHASE AGREEMENT
DESCRIPTION,  OPERATION,  MERCHANTABILITY OR FITNESS FOR USE OR FOR A PARTICULAR
PURPOSE OF ANY ITEM OF EQUIPMENT OR ANY PART THEREOF,  OR ANY MODIFICATION MADE
PURSUANT  To ARTICLE  2(h)  HEREOF,  OR AS TO THE  QUALITY OF  THE  MATERIAL  OR
WORKMANSHIP  OF  THE  EQUIPMENT  OR  ANY  PART  THEREOF  OR  AS  TO  ANY   OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESSED OR IMPLIED, WITH RESPECT TO THE
EQUIPMENT OR ANY PART  THEREOF,  OR ANY.  MODIFICATION  MADE PURSUANT TO ARTICLE
2(h) HEREOF,  AND LESSEE HEREBY WAIVES ALL WARRANTIES9,  GUARANTEES,  RIGHTS AND
REMEDIES,  EXPRESS OR IMPLIED,  INCLUDING BUT NOT LIMITED TO, ANY  OBLIGATION OR
LIABILITY OF LESSOR OR ANY PARTICIPANT  WITH RESPECT TO ANY IMPLIED  WARRANTY OF
MERCHANTABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE
OF  DEALING,  USAGE OF TRADE,  ANY IMPLIED  WARRANTY OF FITNESS  AND ANY DIRECT,
INCIDENTAL OR CONSEQUENTIAL  DAMAGES OF ANY KIND OR NATURE,  OR NOT ARISING FROM
THE NEGLIGENCE BUT, AS TO LESSOR OR A PARTICIPANT,  EXCLUDING  GROSS  NEGLIGENCE
AND WILLFUL  MISCONDUCT OF LESSOR OR SUCH  PARTICIPANT,  AS THE CASE MAY BE, AND
ANY RISKS WITH RESPECT THERETO ARE HEREBY ASSUMED BY LESSEE,  except that Lessor
represents to Lessee that:

         (i) Lessor has full power,  authority and legal right to enter into and
perform its obligations under this Lease.

         (ii) This Lease has been duly  authorized by all  necessary  action on
the part-of Lessor.

         (iii)  Neither the  execution  and delivery by Lessor of this Lease nor
the performance by Lessor of any of the transactions contemplated hereby require
the consent,  approval,  order or authorization of, or registration with, or the
giving of notice  to,  the FAA or any other  domestic  or  foreign  governmental
authority.

                                       4-1


<PAGE>


         (iv) This  Lease has been duly  executed  and  delivered  by Lessor and
constitutes, and the Lease Supplement when executed and delivered by Lessor will
constitute,  legal,  valid and binding  obligations  of Lessor,  enforceable  in
accordance with their terms.

         Provided no Event or Event of Default has occurred  and is  continuing,
Lessor  agrees  to  assign  or  otherwise  make  available  to  Lessee,  without
representation,  warranty  or recourse  of any kind,  express or  implied,  such
rights as Lessor may have with  respect  to the  Equipment  under any  warranty,
service policy or product  support plan of  Manufacturer  or any  subcontractor,
vendor or supplier of any  Equipment,  or part  thereof,  to the extent the same
legally may be assigned or otherwise made available to Lessee.

         THE  WARRANTIES OF LESSOR SET FORTH IN THIS ARTICLE 4 ARE EXCLUSIVE AND
IN LIEU OF ALL OTHER WARRANTIES OF LESSOR OR ANY PARTICIPANT,  INCLUDING FITNESS
FOR USE OR FOR A  PARTICULAR  PURPOSE  AND  MERCHANTABILITY,  WRITTEN  OR  ORAL,
EXPRESS OR IMPLIED.


         (b) LESSEE'S  REPRESENTATIONS  AND  WARRANTIES.  Lessee  represents and
warrants that:


             (i) Lessee is a  corporation  duly  organized  and existing in good
standing under the laws of Delaware,  has full power,  authority and legal right
to own its properties  and  to carry on its business as presently  conducted and
to perform its obligations  under this Lease, is a Certificated Air Carrier duly
authorized to act as such pursuant to the laws of the Country of  Registration,
holds all licenses,  certificates and permits from all governmental  authorities
necessary for the conduct of its business,  and is duly qualified to do business
as a corporation in good standing in each  jurisdiction  in which the failure to
be so  qualified  would  have a  materially  adverse  effect on Lessee or on its
ability to perform its obligations hereunder.

             (ii) This Lease has been duly authorized by all necessary action on
the part of Lessee, does not require any approval of stockholders of Lessee, and
neither   the  execution  and  delivery  hereof  nor  the  consummation  of  the
transactions  contemplated hereby nor compliance by Lessee with any of the terms
and  provisions  hereof does or will  violate any  provision  of the articles of
incorporation or by-laws of Lessee or any law, rule, regulation, judgment, order
or decree of any  government  or  governmental  instrumentality  or court having
jurisdiction over Lessee or any of its activities or properties, or does or will
result in any breach  of, or  constitute  any  default  under,  or result in the
creation of any Lien upon any property of Lessee under, any indenture, mortgage,
deed of trust,  conditional sale contract,  loan or credit  agreement,  or other
agreement  or  instrument  to which  Lessee is a party or by which Lessee or its
properties may be bound or affected.

             (iii)  Neither the  execution  and delivery by Lessee of this Lease
nor the  performance by Lessee of any of the  transactions  contemplated  hereby
require the consent,  approval, order or authorization of, or registration with,
or the  giving  of  notice  to,  the  FAA  or  any  other  domestic  or  foreign
governmental authority, except for the approvals, authorizations

                                       4-2


<PAGE>


and consents that have  heretofore  been obtained,  true and complete  copies of
which have been delivered to Lessor.

             (iv) This Lease has. been duly executed and delivered by Lessee and
constitutes, and the Lease Supplement when executed and delivered by Lessee will
constitute,  legal,  valid and binding  obligations  of Lessee,  enforceable  in
accordance with their terms.

             (v)  Except for the  registration  of the  Aircraft  in the name of
Lessor and the filing for  recordation of this Lease,  the Lease  Supplement and
the  Mortgage  with the FAA, no  other  registration  and no further  filing  or
recording  of this Lease,  the Mortgage or any other  instrument  or document is
necessary  or  advisable  under the laws of the Country of  Registration  or any
other jurisdiction in order to: (1) establish the priority,  legality,  validity
or  enforceability  of the  obligations of Lessee under this Lease, or (2) fully
protect, establish and perfect Lessor's title to and interest in the Aircraft or
Lessor's rights and interests hereunder  (including with respect to the Security
Deposit) as against Lessee and any third parties in any jurisdiction.

             (vi) There are no suits or proceedings pending or, to the knowledge
of Lessee threatened in any court  or before any regulatory commission,  board
or other  administrative  governmental  agency against or affecting Lessee which
may have a materially  adverse effect on the financial  condition or business of
Lessee except those described in writing to Lessor prior to the date hereof.

             (vii) Lessee is a  Certificated  Air Carrier  within the meaning of
Section 41102 of Title 49 of the United  States Code and an air carrier  holding
an air carrier  operating  certificate  issued by the United States Secretary of
Transportation  pursuant to chapter 447 of Title 49 of the United  States  Code,
and Lessor is entitled to the  benefits and  protections  of Section 1110 of the
Bankruptcy  Code (11 U.S.C.  Section 1110) in respect of the Aircraft  leased to
Lessee under this Lease.

             (viii) Lessee has filed or caused to be filed all tax returns which
are required to be filed and has paid or caused to be paid all taxes shown to be
due or payable on said returns and on any assessment  received by Lessee, to the
extent that such taxes have become due and payable.

             (ix)  The  consolidated  and  consolidating  financial   statements
reflecting Lessee's balance sheet and statements of income and retained earnings
for the three  fiscal  years ended  December 31, 1998 (copies of which have been
furnished  to Lessor) are  complete  and  correct and fairly set forth  Lessee's
financial  condition as of such dates and the results of its operations for such
periods,  and since December 31, 1998, there has been no material adverse change
in such condition or operations.

             (x) Lessee has My  disclosed to Lessor all facts which Lessee knows
are  material  for  disclosure  to Lessor in the  context  of this Lease and the
transactions  contemplated  hereby,  and Lessee  knows of no facts  which  would
render  any  prior  information  furnished  by or on  behalf of Lessee to Lessor
inaccurate or misleading.


                                      4-3



<PAGE>


         ARTICLE 5. POSSESSION AND USE.

         (a) POSSESSION. Subject to the right of Lessee to deliver possession of
any Item of Equipment to the  manufacturer  thereof for testing or other similar
purposes or to any  organization for  service,  repair,  maintenance or overhaul
work on such  Item of  Equipment  or any  part  thereof  or for  alterations  or
modifications  in or additions to such Item of Equipment to the extent  required
or permitted by the terms of Article 6 hereof, LESSEE SHALL NOT SUBLEASE, ASSIGN
OR  OTHERWISE  TRANSFER  OR  RELINQUISH  POSSESSION  OR  CONTROL  OF ANY ITEM OF
EQUIPMENT,  OR ANY PART THEREOF,  WITHOUT THE PRIOR  WRITTEN  CONSENT OF LESSOR,
which consent will not be unreasonably  withheld  (provided that if Lessee seeks
consent  from  Lessor  for a  proposed  sublease,  Lessee  shall be  responsible
(whether or not Lessor  consents to the proposed  sublease)  for  all  expenses,
including  attorneys'  fees,  incurred by Lessor in connection with assessing or
implementing  the  proposed  sublease,  and any  such  sublease  shall be and be
expressly  made subject and  subordinate  to this Lease and the Mortgage and all
Lessor's  rights  and  remedies  hereunder  and  Mortgagee's  rights  under  the
Mortgage).

         (b)  LAWFUL  OPERATIONS;  USE.  Lessee  will  not  permit  any  Item of
Equipment to be  maintained,  used or operated in  violation  of any law,  rule,
regulation,  airworthiness directive or order of any government or  governmental
authority  having  jurisdiction  (domestic   or  foreign,   including,   without
limitation,  any United States law, rule or regulation  governing  United States
manufactured  or  owned  aircraft),  or  in  violation  of  any  airworthiness
certificate, license or registration relating to any Item of Equipment issued by
any  such  authority.  In  the  event  that  any  such  law,  rule,  regulation,
airworthiness directive,  order,  certificate,  license or registration requires
addition to or modification or alteration of the Equipment, Lessee shall conform
therewith  at its expense and shall  maintain the same in proper  condition  for
operation under such laws, rules, regulations, airworthiness directives, orders,
certificates,  licenses  or  registrations.  Lessee will not cause or permit any
Equipment to be flown or transported to any airport or country if so doing would
cause Lessor or any United States owner of such  Equipment to be in violation of
United  States  laws,  rules,  regulations  or  decrees.  Without  limiting  the
foregoing,  Lessee shall use the Equipment  solely in its commercial  operations
for which it is duly licensed.

         Lessee shall ensure that the Aircraft is at all times  operated by, and
under control of,  qualified and duly licensed pilots  employed by Lessee,  with
proper  ratings;  provided,  however,  qualified  pilots that are  contracted to
Lessee,  but  are not  employees  of  Lessee,  may  conduct  ferry  flights  and
maintenance  test flights of the Aircraft.  Lessee agrees not to cause or permit
any person under any  circumstance to cause the Aircraft or any Engine to be (i)
operated  or used for any  purpose  for  which  such Item of  Equipment  was not
designed and  reasonably  suited,  or (ii)  operated or used at any time for any
illegal purpose or in any illegal manner.

                                       5-1


<PAGE>


         Lessee  further  agrees  that it will not use or permit  the use of the
Aircraft for tile carriage of: (i) whole animals,  living or dead, except in the
cargo compartments  according to I.A.T.A.  regulations,  and except domestic pet
animals carried in a suitable container  to prevent the escape of any liquid and
to ensure  the  welfare of tile  animal;  (ii)  acids,  toxic  chemicals,  other
corrosive materials,  explosives,  nuclear fuels, nuclear wastes, or any nuclear
assemblies or components,  except as permitted for cargo under the  "Restriction
of Goods"  schedule  issued by I.A.T.A.  from time to time and provided that all
the  requirements  for packaging or otherwise  contained  therein are fulfilled;
(iii) any other  goods,  materials or items of cargo which could  reasonably  be
expected  to cause  damage to the  Aircraft  and which  would not be  adequately
covered by the insurances  maintained in accordance with Article 10  hereof;  or
(iv) any illegal item or substance.

         (c)  MAINTENANCE.  Lessee,  at its own cost  and  expense,  shall:  (i)
service,  repair,  maintain,  modify, overhaul and test, or cause the same to be
done to, each Item of Equipment  leased hereunder (A) so as to keep such Item of
Equipment  in the same  condition  and  appearance  as when  delivered to Lessee
hereunder (after giving effect to the  modifications referred to in Article 2(h)
hereof),  ordinary wear and tear from normal flight operations excepted, and  in
good operating condition, (B) so as to keep the Aircraft in the condition as may
be  necessary  to permit the  airworthiness  certificate  for the Aircraft to be
maintained under the United States  Transportation Code of 1994, as amended, and
to be operated  under FAR Part 121, and (C) in strict  compliance  with Lessee's
Maintenance  Program,  a true and complete copy of which has heretofore  been or
will  promptly  be  delivered  by Lessee to Lessor  (and  Lessee  agrees  not to
materially  modify  or  otherwise  vary or  permit  the  same to be done to such
Maintenance  Program  unless  required by law or unless  otherwise  agreed to by
Lessor); (ii) maintain all records, logs and other materials required by the FAA
to be maintained with respect to such Equipment;  and (iii) promptly  furnish to
Lessor  such  information  as may be  requested  by Lessor in  writing to enable
Lessor or any Participant to file any reports  required to be filed by Lessor or
such  Participant with any  governmental  authority  because of Lessor's or such
Participant's  interest  in  the  Equipment.   Lessee   shall  ensure  that  its
Maintenance Program at all times complies in all material respects with the then
latest  revision of the Boeing  Maintenance  Planning  Document and, if Lessee's
Maintenance Program is a block maintenance  program, the then latest revision of
Appendix C Document No.  D626AO01 (or  restatement  thereof)  applicable  to the
Aircraft as the result of the Flight  Hours/Cycles  ratio that the  Aircraft has
been  operated  during the Term and with the then latest  revision of the Engine
manufacturer's  Engine  Management  Program.  All  deficiencies  revealed by any
inspection  of the  Equipment by Lessee,  Lessor or any of Lessee's  maintenance
providers shall be promptly  corrected by proper cleaning,  sealing,  repairing,
replacement, overhaul, modification and adjustment, and Lessee shall ensure that
only FAA-approved parts and materials are installed or used on the Aircraft.

         If the  Aircraft,  any  Engine  or any Part is out of  revenue  service
(except  for  the  active  performance  of  maintenance,  repair   or   overhaul
procedures), the Aircraft, such Engine or such Part shall be properly and safely
stored in accordance with accepted industry and manufacturer  specifications and
procedures.  Lessee shall notify Lessor promptly of all details  relating to any
loss, damage or destruction to the Aircraft, or any part thereof, that

                                       5-2

<PAGE>

affects  the  airworthiness  of the  Aircraft,  and any loss,  theft,  damage or
destruction  to  the  Aircraft,  or any  part  thereof,  exceeding  the  sum  of
$100,000.

         Without  limiting any of the foregoing,  Lessee will maintain and  use,
and cause the Equipment to be  maintained  and used, in the same manner and with
the  same  care as used by  Lessee with respect to similar  equipment  owned  or
operated by Lessee.  Further,  Lessee agrees that it will not nor will it permit
anyone to discriminate  against the Equipment (as compared to other equipment of
the same type owned or operated by Lessee) with respect to its use, operation or
maintenance  in  contemplation  of the  expiration or  termination of this Lease
Agreement,  other than the withdrawal of the Equipment from use and operation as
is necessary to prepare the Equipment for return to Lessor upon such  expiration
or termination. To that end, without limitation,  Lessee agrees  to  incorporate
in  the  Aircraft  all  Manufacturer,   Engine  manufacturer  and  other  vendor
optional/recommended  service bulletins that Lessee schedules,  within the Term,
to  incorporate  in at least  one-third  (1/3)  of  Lessee's  fleet  of  similar
aircraft.  For the  avoidance  of doubt,  Boeing  737-200  aircraft  will not be
considered aircraft similar to the Aircraft.

         Lessee  agrees that it will not  discriminate  against the Engines with
respect to performance restoration build standards,  and that it will not remove
any Engine or Part from the Aircraft  prior to  expiration  of the Term to avoid
overhaul,  refurbishment,  replacement,  etc.,  thereof in  connection  with the
return of the Aircraft (and such Engine or Part) at the end of the Term.

         (d) REGISTRATION AND INSIGNIA. Lessee agrees that it will, on behalf of
Lessor and at Lessee's expense,  forthwith upon delivery of the Aircraft,  cause
the Aircraft to be duly  registered,  and at all times thereafter to remain duly
registered,  in accordance  with Title 49 of the United States Code, as amended.
Lessor agrees that Lessor or any other person who owns the Aircraft from time to
time will be a "citizen of the United  States" within the meaning of Title 49 of
the United States Code, as amended (or shall  otherwise be qualified to register
the Aircraft without restricting Lessee's  operational use of the Aircraft),  so
that the Lessee will be able to comply  with the  requirements  of this  Article
5(d).

         Upon delivery of the Aircraft,  unless Lessor otherwise directs, Lessee
shall  fasten or cause to be  fastened  and  maintained  in the  cockpit  of the
Aircraft adjacent to the airworthiness  certificate for the Aircraft and on each
Engine, in a prominent location, metal nameplates satisfactory to Lessor bearing
the name of Lessor,  as owner,  and  Mortgagee,  as mortgagee,  of the Aircraft.
Except as above provided,  Lessee will not allow the name of any person, firm or
corporation  to be placed on the  Airframe or any Engine as a  designation  that
might be interpreted as a Lien thereon; provided,  however, Lessee may cause the
Airframe or any Engine to be lettered in an appropriate  manner for  convenience
of identification of the interest of Lessee therein.

                                       5-3


<PAGE>


         ARTICLE   6.   REPLACEMENT   AND,   POOLING   OF  PARTS;   ALTERATIONS,
MODIFICATIONS AND ADDITIONS.

         (a)  REPLACEMENT OF PARTS.  Lessee,  at its own cost and expense,  will
promptly  replace all Parts  which 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 at its own cost and expense 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  and in any event within sixty (60) days after
removal. All replacement parts shall be free and clear of all Liens and shall be
in as good operating condition as, and shall have a value, utility, modification
status and useful  life at least  equal to, the Parts  replaced,  assuming  such
replaced  Parts were in the  condition  and  repair and had the value,  utility,
modification  status and useful  life  required  to be  maintained  by the terms
hereof   Additionally,   all replacement   parts  shall  have  a  current  valid
"serviceable tag" of the manufacturer or maintenance  repair facility  providing
such parts to Lessee,  identifying the manufacturer,  vendor, part number, make,
model and serial number,  as well as the accumulated hours or cycles and whether
such parts are new,  serviceable or overhauled.  No replacement  part shall have
less hours and cycles remaining thereon until  refurbishment or replacement than
the Part to be replaced. Lessee may temporarily replace any Part that has become
unserviceable,  lost, stolen,  destroyed,  seized,  confiscated,  damaged beyond
repair or permanently  rendered unfit for use with a part that does not meet the
requirements of this paragraph if a complying part cannot be obtained within the
available   ground  time  of  the  Aircraft,   provided  the  original  Part  is
re-installed  or the  non-complying  part is removed and replaced by a complying
part as soon as practicable and in any event within 60 days or, if  earlier,  on
the  expiration  or earlier  termination of the Term.  Except as provided in the
preceding sentence, Lessee shall ensure that no part that is a life-limited part
shall be installed on  the Airframe or any Engine after the Delivery Date unless
such part is new or Lessee complete certified, back-to-birth records.

         All Parts at any time removed from the Aircraft, Airframe or any Engine
shall remain the property of Lessor, no matter where located, until such time as
such Parts  shall be  replaced  by parts  which have been paid for by Lessee and
incorporated  or  installed  in or  attached to the  Aircraft,  Airframe or such
Engine in compliance  with the  requirements  for  replacement  parts  specified
herein. Immediately upon any replacement part becoming incorporated or installed
in or attached to the Aircraft, Airframe or an Engine as above provided, without
further act: (i) title to such  replacement part shall thereupon vest in Lessor,
(ii) such replacement part shall become subject to this Lease and be deemed part
of the Aircraft,  Airframe or such Engine,  as the case may be, for all purposes
hereof to the same extent as the Part originally incorporated or installed in or
attached  to the  Aircraft,  Airframe  or such  Engine,  and (iii)  title to the
removed Part shall thereupon vest in Lessee, free and


                                       6-1


<PAGE>


clear of all  rights  of  Lessor  and the  Participants  (and  persons  lawfully
claiming  through Lessor or the  Participants),  and shall no longer be deemed a
Part hereunder.

         (b) POOLING OF PARTS.  Any Part  removed from the Airframe or an Engine
as provided in  paragraph  (a) of this  Article may be  subjected by Lessee to a
normal pooling  arrangement  customary in the airline industry  entered into  in
the ordinary course of Lessee's business with an air carrier approved by Lessor,
provided the part replacing such removed Part shall be incorporated or installed
in or attached to the Airframe or such Engine in accordance  with  paragraph (a)
of this Article as promptly as possible  after the removal of such removed Part.
In addition,  any replacement part when incorporated or installed in or attached
to the Airframe or any Engine in accordance  with  paragraph (a) of this Article
may be owned by an air  carrier  approved  by  Lessor  subject  to such a normal
pooling arrangement,  provided Lessee, at its expense, as promptly thereafter as
possible either (i) causes title to such  replacement  part to vest in Lessor in
accordance with paragraph (a) of this Article by Lessee  acquiring title thereto
for the benefit of, and transferring such title to, Lessor free and clear of all
Liens, or (ii) replaces such  replacement part by incorporating or installing in
or attaching to the Airframe or such Engine a further  replacement part owned by
Lessee  free  and  clear  of  all  Liens  and  causing  title  to  such  further
replacement  part to vest in Lessor in  accordance  with  paragraph  (a) of this
Article.

         (c)  ALTERATIONS,  MODIFICATIONS  AND  ADDITIONS.  Lessee,  at its  own
expense, shall make such alterations and modifications in and additions  to  the
Equipment,  and shall perform all alert service  bulletins and service bulletins
that are mandated by airworthiness  directives (and all service  bulletins which
are  required  to be performed to maintain the  warranties for the Equipment) as
may be issued from time to time, to meet the  requirements of the  Manufacturer,
the Engine  manufacturer  and the other  vendors in respect of the Equipment and
the standards  and  airworthiness  directives  of the FAA or other  governmental
authority having jurisdiction.

         In addition,  Lessee,  at its own  expense,  may from time to time make
such alterations and modifications in and additions to each Item of Equipment as
Lessee may deem desirable in the proper  conduct of its business,  provided that
no such  alteration,  modification  or addition:  (i)  materially  and adversely
alters  the  specification,  structure  or  performance  of the  Aircraft,  (ii)
adversely  affects the  interchangeability  or  replaceability  of Parts,  (iii)
invalidates any warranties  applicable to the Aircraft, or (iv) in any other way
diminishes the value, utility or useful life of any Item of Equipment or impairs
the condition or airworthiness  thereof below the value,  utility,  useful life,
condition  and  airworthiness  thereof  immediately  prior  to such  alteration,
modification or addition, assuming such Item of Equipment was then of the value,
utility and useful life and in the  condition and  airworthiness  required to be
maintained by the terms of this Lease.

         Title to all Parts incorporated or installed in or attached or added to
any Item of Equipment as the result of any alteration,  modification or addition
shall, without further act, vest in Lessor;  provided,  however, that so long as
no Event or Event of Default shall have occurred and be continuing,  at any time
during the Term, Lessee may remove any


                                      6-2

<PAGE>


Part from such Item of Equipment, provided that (i) such Part is in addition to,
and  not  in  replacement  of  or  in  substitution  for,  any  Part  originally
incorporated  or  installed in or attached to such Item of Equipment at the time
of the delivery  thereof  hereunder  (after giving  effect to the  modifications
referred  to  in  Article  2(h)  hereof)  or any  Part  in  replacement  of,  or
substitution  for,  any  such  Part,  (ii)  such  Part  is  not  required  to be
incorporated  or  installed  in or attached  or added to such Item of  Equipment
pursuant to the terms of Article  5(b) or 5(c)  hereof or the first  sentence of
this  paragraph  (c),  and  (iii)  such  Part can be  removed  from such Item of
Equipment without causing any material damage thereto and without diminishing or
impairing the value, utility, useful life, condition or airworthiness which such
Item of Equipment would have had at such time had such alteration,  modification
or addition not  occurred.  Upon the removal by Lessee of any such Part as above
provided, title thereto shall, without further act, vest in Lessee and such Part
shall no longer be deemed a Part  hereunder.  Any Part not  removed by Lessee as
above provided prior to the return of the Item of Equipment to Lessor  hereunder
shall remain the property of Lessor.  In addition to the  foregoing,  if  Lessee
makes  an  alteration,  modification  or  addition  to an Item of  Equipment  in
accordance  with  the  second  paragraph  of this  Article  6(c)  (an  "Original
Modification"),  Lessee,  at its own  expense,  may from time to time during the
Term,  so long as no Event  or Event  of  Default  shall  have  occurred  and be
continuing, remove such Original Modification and restore such Item of Equipment
to its condition  that it would have been in if such Original  Modification  had
not  been  made,  provided  that  (i)  after  such  restoration,  such  Item  of
Equipment shall  be in  compliance  with the  requirements  of Article  5(b) and
Article 5(c) and the first  sentence of this  paragraph,  (ii) such  restoration
shall comply with the requirements of subparagraphs (ii) and (iii) of the second
paragraph of this Article 6(c), and (iii) such restoration is performed  without
causing  any  material  damage  to the  Equipment  and  without  diminishing  or
impairing the value, utility,  useful life, condition or airworthiness which the
Equipment would have had if the Original Modification had not been made.

         In any  event,  neither  Lessor  nor any  Participant  shall  bear  any
liability  or  cost  for any  alteration,  modification,  addition,  or for  any
grounding or suspension of certification of any Item of Equipment or for loss of
revenue.

         (d) TRANSFER OF ENGINES WITHIN  LESSEE'S  FLEET. So long as no Event or
Event of Default  shall have occurred and be  continuing,  Lessee may install an
Engine on an airframe  leased to Lessee or owned by Lessee subject to a security
agreement  or mortgage or  purchased  by Lessee  subject to a  conditional  sale
agreement,  provided  that (i)  such  airframe  is  (and  only for so long as it
continues  to be) free and clear of all Liens,  except the rights of the parties
to the  lease,  security  agreement,  mortgage  or  conditional  sale  agreement
covering  such  airframe,  (ii) prior to such  installation,  Lessor  shall have
received from the lessor, secured party, mortgagee or conditional seller of such
airframe  a written  agreement  (which  may be the  lease,  security  agreement,
mortgage or conditional  sale  agreement  covering such  airframe),  in form and
substance reasonably satisfactory to Lessor, whereby such lessor, secured party,
mortgagee  or  conditional  seller  expressly  agrees that  neither  it/they nor
its/their  successors  or assigns  will  acquire  or claim any  right,  title or
interest in any Engine by reason of such Engine being installed on such airframe
at any time  while  such  Engine is subject to this Lease or is owned by Lessor,
and (iii) Lessee maintains insurance in respect of the Engine while it is


                                       6-3


<PAGE>


installed  on such  airframe  for the agreed  value  specified in paragraph 1 of
Schedule  "1"  hereto  and  otherwise  on  terms  acceptable  to  Lessor  in its
reasonable discretion.

         Lessor hereby agrees for the benefit of any lessor of any engine leased
to Lessee or any secured party or mortgagee of an engine owned by Lessee subject
to  a security interest or mortgage granted by Lessee or any conditional  seller
of an engine  purchased by Lessee  subject to a conditional  sale agreement that
neither Lessor nor its successors or assignees will acquire or claim, as against
such lessor,  secured party,  mortgagee or conditional  vendor, or its assignee,
any right, title or interest in any engine owned by such lessor under such lease
or subject to a security  interest,  mortgage or  conditional  sale  interest in
favor  of such  secured  party,  mortgagee  or  conditional  seller  under  such
security agreement, mortgage or conditional sale agreement as the result of such
engine being  installed on the Airframe at any time while such engine is subject
to such lease, security interest, mortgage or conditional sale agreement.

         Nothing in this Article 6(d) shall diminish or otherwise  affect any of
Lessee's  obligations otherwise required to be performed or observed by it under
this Lease.


                                       6-4


<PAGE>


         ARTICLE 7. INSPECTION; FINANCIAL INFORMATION; RECORDS.

         (a)  INFORMATION AND INSPECTION.  During the Term of this Lease, Lessee
shall furnish to Lessor such  additional  information  concerning  the location,
condition,  use and operation of each Item of Equipment as Lessor may reasonably
request in writing,  and Lessee shall permit any person  designated by Lessor in
writing, at Lessor's expense, to inspect each Item of Equipment,  its condition,
use, and operation and the records  maintained in connection  therewith,  and to
visit  and  inspect  the  facilities  and to discuss  the  business  affairs and
finances of Lessee with the principal officers of Lessee, to the extent the same
relate to Lessee's  ability to perform its  obligations  hereunder,  all at such
reasonable  times  and as often as  Lessor  may  reasonably  request;  provided,
however, if an Event of Default has occurred and is continuing or as a result of
such  inspection  Lessor  becomes  aware that an Event or Event of  Default  has
occurred and is continuing then Lessee shall reimburse Lessor for  all costs and
expenses  incurred in conducting such inspection. Any inspection of the Aircraft
shall be a visual  walkaround  inspection  that may include  going  on-board the
Aircraft, but shall not include opening any panels, bays or the like  (except at
a time during a scheduled  maintenance  visit in which such panels,  bays or the
like are scheduled to be opened). Lessee shall also provide Lessor with at least
thirty (30) days' prior written  notice of the date on which the Airframe  shall
undergo any major check (i.e.,  any "C" check or above).  Neither Lessor nor any
Participant  shall have any duty to make any such inspection and shall not incur
any liability or obligation by reason of not making such inspection.

         (b)  FINANCIAL  AND OTHER  INFORMATION.  Lessee also agrees to  furnish
Lessor with the following during the Term of this Lease:

              (i) within  sixty  (60) days after the end of each  quarter-fiscal
year of  Lessee  ending  after  the date of this  Lease,  the  consolidated  and
consolidating  financial  statements  reflecting  the  balance  sheet of Lessee,
prepared by it as of the close of the period ended,  together with statements of
income and retained earnings of Lessee for such period;

              (ii)  within one hundred  twenty  (120) days after the end of each
fiscal year of Lessee, the consolidated and consolidating  financial  statements
reflecting the balance sheet and  statements of income and retained  earnings of
Lessee,  as of the close of such fiscal year,  setting forth in comparative form
the  figures  for the  previous  fiscal  year,  as  prepared  and  certified  by
independent  public  accountants,  including their  certificate and accompanying
comments;

              (iii) together with the financial statements referred to in clause
(ii), a certificate  signed by a principal officer of Lessee, to the effect that
such  officer has reviewed  the  relevant  terms of this Lease and has made,  or
caused  to be made  under his  supervision,  a review  of the  transactions  and
condition  of Lessee  during the  accounting  period  covered by such  financial
statements,  and that such review has not disclosed  the  existence  during such
accounting period, nor does such officer have any knowledge of the existence, as
at the date of


                                       7-1


<PAGE>


such  certificate,  of any condition or event which  constitutes  an Event or an
Event of Default,  or, if such condition or event which  constitutes an Event or
an Event of  Default  existed  or  exists,  specifying  the nature and period of
existence  thereof and what action  Lessee has taken or is taking or proposes to
take with respect thereto; and

              (iv) such  other data and  information  as Lessor may from time to
time reasonably request in writing.

         (c) REPORTS  OF  AIRCRAFT USE.  Within  fifteen (15) days following the
end  of  each  calendar  month  throughout  the Term,  Lessee  shall: (i) notify
Lessor of the number of Flight Hours and Cycles which have been  accumulated  on
the Airframe,  each Engine, the Landing Gear and the APU,  respectively,  during
the  preceding  calendar  month,  and (ii)  provide  Lessor with details of: (A)
replacement  of Engine,  APU and Landing Gear (and the reason for such changes),
(B)  major  repairs,  modifications,  alterations  and  additions  to an Item of
Equipment,  and (C) service bulletins and airworthiness directives applicable to
and  accomplished  with  respect  to any Item of  Equipment,  in each  case with
respect to such preceding calendar month.


                                       7-2


<PAGE>


         ARTICLE 8. INDEMNIFICATION BY LESSEE.

         (a) GENERAL INDEMNITY. Lessee agrees to pay, and on demand to indemnify
and hold harmless,  Lessor and each Participant,  and their respective officers,
directors,  employees, servants, agents, shareholders,  affiliates,  successors,
assigns and transferees  (individually,  an "Indemnitee"),  from and against any
and all claims, damages, losses, liabilities (including, but not limited to, any
claim or liability for strict liability in tort or otherwise, including, without
limitation,  liability  arising  under  any  applicable  environment,  noise  or
pollution  control  statute,  rule or regulation),  demands,  suits,  judgments,
causes  of  action  and  all  legal  proceedings,  whether  civil  or  criminal,
penalties,  fines and other  sanctions,  and any costs and expenses  incurred in
connection   therewith,   including  attorney's  fees,  which  may  directly  or
indirectly  result  from,  relate  to or  arise  out of the  Purchase  Agreement
(excluding, for the avoidance of doubt, claims by Manufacturer: (i) for a breach
of  the Purchase  Agreement  prior to the  delivery of the Aircraft  thereunder,
(ii) based on provisions of the Purchase  Agreement that have been redacted from
the copy of the Purchase  Agreement provided to Lessee, and (iii) for payment of
the purchase price of the Aircraft) or this Lease or the  condition,  ownership,
manufacture,   purchase,  test  flight,   inspection,   delivery,   nondelivery,
acceptance,  nonacceptance,  rejection,  import,  export,  registration,  lease,
sublease, possession, control, storage, return, transportation, disposition, use
or  operation of any Item of Equipment  (except as to an  Indemnitee  for claims
that are the  result of the  gross  negligence  or  willful  misconduct  of such
Indemnitee),  or which may be caused by any malfunction or defect in any Item of
Equipment,  latent or  otherwise,  arising from the material or any article used
therein  or from the  design,  testing or use  thereof or from any  maintenance,
service,  repair,  overhaul,  improvement,  modification or alteration  thereof,
including any modification  made pursuant to Article 2(h) hereof,  regardless of
when such defect shall be  discovered,  whether or not such Item of Equipment is
at the time in the possession of Lessee and wherever located.

         Without  limiting  Lessee's  liability under this Article 8(a),  Lessee
hereby agrees to indemnify, reimburse and hold the Indemnitees harmless from any
and all  liability,  claims,  demands,  costs,  charges and expenses,  including
royalty  payments  and  counsel  fees,  in  any  manner,   whether  directly  or
indirectly,  imposed  upon or  accruing  against  an  Indemnitee  because of the
manufacture, use or operation of any Item of Equipment or any design, article or
material therein or relating thereto,  whether because of infringement of patent
or any other  right.  At  Lessor's  request,  Lessee  shall  assume and  conduct
promptly and  diligently,  at  its sole cost and expense,  the entire defense of
the Indemnitees  against any such claim, and any claim,  demand,  suit or action
for which an Indemnitee as a buyer is required to assume liability,  whether for
patent infringement or otherwise, under the Purchase Agreement.

         Notwithstanding  anything to the  contrary  contained  in this  Article
8(a), the indemnification  provided for in this Article 8(a) shall only apply to
events or circumstances which either (i) occur prior to the expiration or sooner
termination  of this  Lease and  return of the  Aircraft  pursuant  to the terms
hereof, regardless of when asserted, or (ii) are caused by or


                                       8-1


<PAGE>


attributable to acts or omissions of Lessee, or any of its officers,  directors,
employees, servants, agents, contractors or affiliates.

         (b)  GENERAL TAX  INDEMNITY.  Lessee  agrees that each  payment of Rent
shall  be free of all  withholdings  and  deductions for or on account of taxes,
duties and any other charges of any nature whatsoever, present or future, unless
Lessee is  required  by  operation  of law or  otherwise  to  withhold or deduct
amounts for or on account of any of the same,  in which  event,  Lessee will pay
such  additional  amounts as Rent as will result in the receipt by Lessor on the
due date for  payment  thereof  of the sums  which  would  otherwise  have  been
receivable on such date had there been no such  withholding  or  deduction.  All
such  withholdings  and  deductions  shall be  promptly  paid by  Lessee  to the
relevant taxing authority and Lessee shall promptly furnish Lessor with evidence
of each such payment. The preceding portion of this paragraph shall not apply to
taxes,  fees and other  charges with respect to which Lessee is not obligated to
indemnify any Indemnitee  pursuant to the remaining  portion of this paragraph.
In addition, and not by way of limiting the foregoing, Lessee agrees to pay, and
on  written  demand  to indemnify and hold harmless the  Indemnitees  from,  all
license,  recording and registration fees and all sales, use, personal property,
stamp, documentary,  customs, excise, income, consumption, value added and other
taxes, levies,  imposts,  duties,  assessments,  charges and withholdings of any
nature whatsoever,  together with any penalties,  fines,  additions and interest
thereon  (collectively,  "taxes,  fees and other  charges")  imposed  against an
Indemnitee,  Lessee  or any  Item  of  Equipment  or  any  part  thereof  by any
government  or  governmental   subdivision  or  taxing  authority  (domestic  or
foreign),  upon or with  respect to any Item of Equipment or any part thereof or
upon  or  with  respect  to  the  purchase,  ownership,   acceptance,  delivery,
registration,   leasing,  subleasing,  possession,  use,  operation,  departure,
landing, maintenance, repair, modification, location, importation,  exportation,
sale, return,  storage or other disposition  thereof, or upon or with respect to
the rentals,  receipts or earnings  arising  therefrom or received  with respect
thereto,  or upon or  with  respect  to this  Lease  or the  Purchase  Agreement
(excluding,  however, any taxes (i) based on or measured by Lessor's net income,
gross  receipts,  capital,  or excess profits which are payable by Lessor to (A)
the United States federal  government,  or (B) any state or local  government or
other taxing  jurisdiction  in the United  States  other than Hawaii  (provided,
however,  Lessee  shall be liable  for such  taxes if such  taxes are taxes that
would not have been imposed but for the use, operation, registration or location
of any Item of Equipment within the jurisdiction of such taxing  authority),  or
(C) any other  jurisdiction  solely as the result of  business  or  transactions
unrelated  to this  Lease,  E.G., such taxes  resulting  solely  from  events or
circumstances  other than the use,  operation,  registration  or location of any
Item of Equipment or part thereof,  or the location,  activities or residency of
Lessee in such jurisdiction), unless, but only so long as,  such taxes, fees and
other charges are being contested by Lessee or at Lessee's expense in good faith
and by appropriate  proceedings,  so long as, in Lessor's  reasonable  judgment,
such  proceedings  do not involve any danger of the sale,  forfeiture or loss of
any Item of Equipment, or any interest therein.

         If a claim is made against an Indemnitee or Lessee for any taxes,  fees
and other charges for which Lessee is obligated to indemnify an  Indemnitee,  or
if notice is received by an  Indemnitee or Lessee from a taxing  authority  that
such a claim is going to be


                                       8-2


<PAGE>


made, such  Indemnitee or Lessee,  as the case may be, shall promptly notify the
other.  If  requested  by Lessee in writing  within  thirty (30) days after such
notification,  Lessor  shall or shall  cause such  Indemnitee,  upon  receipt of
indemnity reasonably  satisfactory to it and at the expense of Lessee (including
without limitation,  all costs, expenses,  losses, legal and accounting fees and
disbursements,  penalties  and  interest) in good faith to contest the validity,
applicability  or amount of such  taxes,  fees and  other  charges  in the forum
selected by such Indemnitee by (A) resisting payment thereof if practicable,  or
(B) if payment is made,  using reasonable  efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings;  PROVIDED,  HOWEVER, Lessor
shall not be required to take or to cause any  Indemnitee  to take any action to
contest a claim unless (1) Lessee  provides  Lessor,  together with such written
request,  with an opinion of independent tax counsel reasonably  satisfactory to
Lessor  both  as to  counsel  and  substance,  to the  effect  that  there  is a
meritorious basis for such contest,  (2) such action to be taken will not result
in the risk of an imposition of criminal  penalties or, in  Lessor's  reasonable
judgment,  any risk of any sale,  forfeiture or loss of, or creation of any Lien
on any  Equipment,  or any  interest  therein,  (3) no Event or Event of Default
shall have occurred and be continuing, (4) if such Indemnitee shall pay such tax
and  seek a  refund,  Lessee  has  advanced  the  amount  of  such  tax  to such
Indemnitee  with  respect to such advance,  (5) the amount of the taxes at issue
exceeds  $15,000,  and (6) Lessee shall have  provided  such  Indemnitee  with a
written acknowledgment of liability if and to the extent that the contest is not
successful. Upon written  request of Lessee but subject to  compliance  with the
foregoing  provisions of this paragraph,  such Indemnitee  shall allow Lessee to
prosecute such tax contest in its name (or, if possible,  in the name of Lessee)
by granting an  appropriate  power of attorney or other  authorization  and such
other action as is reasonably  necessary  (and Lessee shall also  reimburse such
Indemnitee  for the costs and expenses,  including  reasonable  attorneys  fees,
incurred in connection with its monitoring such tax contest by Lessee), or, upon
written request of Lessee and at Lessee's expense, such Indemnitee shall consult
with Lessee regarding the tax contest and shall follow the reasonable directions
of Lessee as to the  prosecution  of the tax  contest.  If an  Indemnitee  shall
obtain a refund of all or any part of such taxes, fees and other charges paid by
Lessee,  Lessor  shall  cause such  Indemnitee  to pay Lessee the amount of such
refund,  after  deducting  all costs and  expenses  that were  incurred  by such
Indemnitee  in  connection  therewith;  provided  that such amount  shall not be
payable before such time as Lessee shall have made all payments and  indemnities
then due  hereunder.  If in  addition  to such  refund  an  amount  representing
interest  on the amount of such  refund or an amount  representing  expenses  or
attorneys fees is received,  Lessee shall be paid such expenses,  attorneys fees
and that proportion of such interest which is fairly attributable to taxes, fees
and other charges paid by Lessee prior to the receipt of such refund;  provided,
however,  that no amount shall be payable under this or the  preceding  sentence
during any period in which an Event or an Event of Default has  occurred  and is
continuing.  In case any report or return is required to be made with respect to
any obligation of Lessee under or arising out of this Article 8(b),  Lessee will
either make such report or return in such manner as will show the  interests  of
Lessor and the  Participants  in the  Aircraft and send a copy of such report or
return to Lessor, or will notify Lessor of such requirement and make such report
or return in such manner as shall be  reasonably  satisfactory  to Lessor.  Upon
written  request by Lessee and at Lessee's  expense,  Lessor and each Indemnitee
shall  furnish to Lessee such  information  and  documentation  as is reasonably
necessary for Lessee to assess or


                                       8-3


<PAGE>


prosecute a tax  contest,  or to make a report or return,  as  described  above,
provided,  however,  neither  Lessor nor any  Indemnitee  shall be  required  to
provide Lessee with information that Lessor or such Indemnitee,  in its sole and
absolute discretion, determines is confidential tax return information.

         Notwithstanding  the  foregoing,  Lessee  shall have no  obligation  to
Lessor or any Indemnitee for any of the following:

              (A) Taxes,  fees or other  charges  arising  out of any  voluntary
transfer  (including  a transfer  by way of  security  but  excluding a transfer
following an Event of Loss or pursuant to the exercise of remedies in connection
with an Event of Default) or  disposition  (including  a  disposition  by way of
security but excluding a  disposition  following an Event of Loss or pursuant to
the exercise of remedies in connection with an Event of Default);

              (B) Taxes, fees or other charges  attributable to any period after
the expiration of the Term and return of possession of the Airframe, the Engines
and the Parts to Lessor or its  designee  in  compliance  with the terms of this
Lease;

              (C) Taxes,  fees or other charges  caused solely by a breach by an
Indemnitee of any of such Indemnitee's obligations in this Article 8(b);

              (D)  Taxes,  fees or other  charges  caused  solely  by the  gross
negligence or willful misconduct of such Indemnitee; or

              (E) Taxes, fees or other charges based on or measured by the value
or  principal  amount  of any loan or  promissory  note (or  security  therefor)
entered into by Lessor or  an Indemnitee  or anyone  claiming an interest in the
Aircraft or any portion  thereof  through  Lessor or an  Indemnitee  (other than
Lessee).

         (c)  AFTER-TAX  NATURE OF  INDEMNITY.  Lessee  further  agrees that any
payment  of  indemnity  made under this Lease by Lessee shall include any amount
necessary to hold the Indemnitees harmless on an after-tax basis from all taxes,
fees and other  charges  required  to be paid with  respect  to such  payment of
indemnity  under the laws of any  domestic  or  foreign  governmental  or taxing
authority,  agency or  subdivision.  If an  Indemnitee  realizes  a tax  benefit
resulting  from any item for which it has been  indemnified  by Lessee  (whether
such tax benefit  results from a deduction,  credit,  allocation or  otherwise),
such Indemnitee  shall promptly after  realization pay to Lessee an amount equal
to the net value to such  Indemnitee of such tax benefit  (such  payments not to
exceed in the aggregate the amount of the related indemnity paid by Lessee), but
not before  Lessee shall have made all payments or provided all  indemnities  to
such Indemnitee  required  pursuant to this Article 8. If such Indemnitee  loses
such tax  benefit  subsequent  to any payment to Lessee  with  respect  thereto,
Lessee shall  indemnify  such  Indemnitee  with respect to such loss pursuant to
this  Article 8. If requested  by Lessee,  such  Indemnitee  shall  provide,  in
reasonable detail, a written explanation of the calculation  upon which it based
its  determination  of the amount of the tax benefit;  provided,  however,  such
Indemnitee  shall not be required to provide Lessee with  information  that such
Indemnitee, in its sole and absolute discretion,  determines is confidential Tax
return


                                       8-4


<PAGE>


information,  provided  that Lessee may require that an  Indemnitee  furnish all
relevant  Information  to a  nationally  recognized  firm  of  certified  public
accountants  selected  by such  Indemnitee  (which  shall keep such  information
confidential) to verify the accuracy of such Indemnitee's  calculation, and  the
determination of such firm of certified public  accountants  shall be binding on
such  Indemnitee  and Lessee as to the amount which  Indemnitee is obligated  to
pay to Lessee on account of the subject tax benefit. Lessee shall be responsible
for the fees and expenses of the firm of certified public accountants unless the
review  discloses  an error made by such  Indemnitee  exceeding  the  greater of
$15,000 or 10% of the amount of the  subject  tax  benefit,  as the case may be,
determined by such Indemnitee, in which case such Indemnitee shall pay such firm
of certified public accountants' fees and expenses.

         (d) SURVIVAL OF  INDEMNITIES.  All of the  obligations  of Lessee under
this  Article 8 shall  continue  in full  force and effect  notwithstanding  the
expiration or sooner  termination  of this Lease and are expressly  made for the
benefit of, and shall be enforceable by, the  Indemnitees  and their  successors
and assigns.

         (e) PERFORMANCE BY INDEMNITEES. For purposes of this Article 8,  Lessor
shall cause all  Indemnitees  to perform their  obligations as set forth in this
Article 8.


                                       8-5


<PAGE>


         ARTICLE 9. DAMAGE, DESTRUCTION, REQUISITION, CONDEMNATION.

         (a) EVENT OF LOSS WITH RESPECT TO AIRCRAFT.  From the Delivery  Date of
the  Aircraft  until  the  return  thereof  to  Lessor  in  compliance  with the
requirements of Article 13 hereof, Lessee shall bear all risks of loss or damage
to the  Aircraft,  no  matter  how  occasioned  and from  every  source or cause
whatsoever. Upon the occurrence of an Event of Loss with respect to the Airframe
or the Airframe and any Engines or engines then installed thereon,  Lessee shall
give Lessor prompt  written  notice thereof and shall pay or cause to be paid to
Lessor  within  thirty  (30) days of such Event of Loss all Basic Rent  payments
payable for the Aircraft  (and all other  accrued and unpaid  Rent)  through the
date of such payment,  together with the Stipulated  Loss Value of the Aircraft.
At  such time as Lessor has received the foregoing sums: (A) the  obligation  of
Lessee  to pay  Basic  Rent  hereunder  shall  terminate,  (B) the  Term for the
Aircraft  shall end, and (C) Lessor will transfer or cause to be  transferred to
Lessee  (or  to  the   relevant   insurers,   as  the  case  may  be),   without
representation,  recourse or warranty of any kind,  express or implied (except a
warranty that the  Aircraft is free of Liens  other than Liens  which  Lessee is
required to discharge hereunder,  or defects in title resulting from Lessor's or
any Participant's acts), all of Lessor's and each Participant's right, title and
interest, if any, in and to the Aircraft.

         (b) EVENT OF LOSS WITH RESPECT TO AN ENGINE.  Upon the occurrence of an
Event of Loss with respect to an Engine not then  installed on the Airframe,  or
in the Event of Loss with respect to an Engine installed on the Airframe but not
involving  an Event of Loss with  respect  to the  Airframe,  Lessee  shall give
Lessor prompt written  notice thereof and Lessee shall,  as promptly as possible
and in any event  within  seventy-five  (75) days after the  occurrence  of such
Event of Loss,  duly  convey to Lessor,  as a  replacement  for the Engine  with
respect to which such Event of Loss occurred, title to another CFM International
Model CFM56-7B24 engine owned by Lessee free and clear of all Liens and having a
value, utility, modification status and useful life at least equal to, and being
in  as   good  operating   condition   (including  the   incorporation   of  all
airworthiness  directives  and service  bulletins in such engine) as, the Engine
with respect to which such Event of Loss  occurred,  assuming such Engine was of
the value, utility, modification status and useful life and in the condition and
repair required by the terms hereof  immediately prior to the occurrence of such
Event of Loss; and in such case,  Lessee, at its own expense,  will promptly (i)
furnish  Lessor  with a bill of sale,  in form  and  substance  satisfactory  to
Lessor,  for such replacement  engine,  (ii) execute a supplement hereto in form
and substance  satisfactory to Lessor subjecting such replacement engine to this
Lease  and   cause  the  same to be duly  recorded  pursuant  to the laws of the
Country of Registration, (iii) furnish Lessor with evidence of Lessee's title to
such  replacement  engine  (including,  if  requested,  an opinion  of  Lessee's
counsel) and of compliance  with the  insurance  provisions of Article 10 hereof
with respect to such replacement  engine as Lessor may reasonably  request,  and
(iv)  take such  other  Action as Lessor  may  reasonably  request  in order and
properly vested in Lessor and leased


                                       9-1


<PAGE>


hereunder  to the  same  extent  as  the  Engine  replaced  thereby.  Upon  full
compliance by Lessee with the terms of this paragraph (b),  Lessor will transfer
to  Lessee  (or  to  the  relevant  insurers,  as  the  case  may  be),  without
representation,  recourse or warranty of any kind,  express or implied (except a
warranty  that such Engine is free of Liens,  other than Liens  which  Lessee is
required to discharge hereunder,  or defects in title resulting from Lessor's or
the Participants'  acts), all of Lessor's and the Participants' right, title and
interest, if any, in and to the Engine with  respect to which such Event of Loss
occurred and, for all purposes hereof,  such replacement  engine shall be deemed
an "Engine" as defined herein. No Event of Loss with respect to an Engine shall,
except  as  otherwise  expressly  provided  in this  Article  9,  result  in any
reduction in Basic Rent.

         (c) APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES IN RESPECT OF
EVENT OF LOSS. Any payments (other than insurance  proceeds,  the application of
which is  provided  for in Article 10 hereof)  received at any time by Lessor or
Lessee from any governmental  authority or other person with respect to an Event
of Loss with respect to any Item of Equipment will be applied as follows:

              (i) if such payments are received with respect to an Event of Loss
relating to the Airframe or the Airframe and the Engines or engines installed on
the  Airframe,  after  reimbursement  to  Lessor  for all  costs  and  expenses,
including  attorneys  fees,  incurred in connection  with such Event of Loss, so
much of such payment as shall not exceed the amounts due under  paragraph (a) of
this Article 9 shall be applied in reduction of Lessee's  obligation to pay such
amounts, if not already paid by Lessee, or, if already paid by Lessee,  shall be
applied to reimburse Lessee for its payment of such amounts, and the balance, if
any, of such payment  remaining  thereafter  will be paid over to or retained by
Lessor; and

              (ii) if such payments are received with respect to an Engine under
circumstances  contemplated  by paragraph (b) of this Article 9, so much of such
payments  remaining  after  reimbursement  to Lessor for all costs and expenses,
including  attorneys fees,  incurred in connection with such Event of Loss shall
be paid over to, or retained by, Lessee,  provided that Lessee shall have  fully
performed  or  concurrently  therewith  will  fully perform the terms of Article
9(b).

         (d)  APPLICATION  OF  PAYMENTS  DURING  EXISTENCE  OF EVENT OR EVENT OF
DEFAULT.  Any amount  referred to in clause (i) or (ii) of paragraph (c) of this
Article  which is  payable  to Lessee  shall  not be paid to Lessee  or, if such
amount has been previously paid to Lessee,  shall not be retained by Lessee,  if
at the time of such payment an Event or an Event of Default  shall have occurred
and be continuing.  In such event, all such amounts shall be paid to and held by
Lessor as security for the  performance by Lessee of its  obligations  hereunder
or,  at  Lessor's  option,  applied  by  Lessor  toward  payment  of any of such
obligations  of Lessee at the time due  hereunder  as Lessor may elect.  At such
time as Lessee  shall have cured all  Events  and  Events of  Default,  all such
amounts  at the time held by Lessor in  excess  of the  amounts,  if any,  which
Lessor shall have elected to apply as above provided shall be paid to Lessee.


                                       9-2


<PAGE>


         ARTICLE 10. INSURANCE.

         (a)  LIABILITY  AND PROPERTY  DAMAGE  INSURANCE.  Lessee will carry and
maintain  in effect  with  respect to the  Aircraft,  at its own  expense,  with
insurers  of  recognized   responsibility  and  substantial  financial  capacity
acceptable to Lessor in its reasonable discretion,  comprehensive aircraft third
party, passenger, baggage, cargo, products, mail and airline general third party
legal liability insurance, including war and allied perils, in amounts which are
not less than and of the types usually carried by companies  engaged in the same
or similar  business,  similarly  situated with Lessee,  and owning or operating
similar  aircraft  and engines and which  covers  risks of the kind  customarily
insured against by such companies,  including, without limitation, bodily injury
and property damage of whatever  nature;  provided,  however,  in no event shall
such  amounts of  insurance  coverage  be less than a combined  single  limit of
liability  of  $600,000,000  for any one  occurrence  and in the  aggregate  for
products  liability  (or such  higher  amounts  as Lessor  may from time to time
reasonably require).  In no event shall Lessee discriminate against the Aircraft
in  respect  of the  amount or other  aspects  of  liability  insurance  for the
Aircraft as compared to the amount or other  aspects of liability  insurance for
other similar aircraft in Lessee's fleet.

         (b) INSURANCE  AGAINST LOSS OR  DAMAGE  TO AIRCRAFT.  From the Delivery
Date of an Item of Equipment  until the return  thereof to Lessor in  compliance
with the requirements of Article 13 hereof,  Lessee shall bear all risks of loss
or damage to such Item of  Equipment,  no matter how  occasioned  and from every
source 'or cause  whatsoever.  Lessee shall carry and maintain in effect, at its
own  expense,  with  insurers  of  recognized   responsibility  and  substantial
financial capacity acceptable to Lessor in its reasonable  discretion,  all-risk
ground, flight, taxiing and ingestion aircraft hull insurance on an agreed value
basis  covering the  Aircraft,  and all-risk  insurance on an agreed value basis
with  respect to the Engines  while not  installed in the Aircraft and on a full
replacement  cost  basis  with  respect  to Parts  while  not  installed  in the
Aircraft,  in each case which is of the type and in  substantially  the  amounts
usually  carried  by  companies  engaged  in the same or  similar  business  and
similarly  situated  with Lessee,  and shall include war risk  insurance  (which
shall  not be  restricted  to  physical  loss or damage  to the  aircraft  hull)
covering the perils of:

              (i) 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;

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

              (iii) 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 resulting therefrom is accidental or intentional;

              (iv) any malicious act or act of sabotage;


                                      10-1


<PAGE>


              (v) confiscation,  nationalization, seizure, restraint, detention,
appropriation,  requisition  for  title  or use by or  under  the  order  of any
government  (whether  civil,  military  or de  facto)  and/or  public  or  local
authority including the government of the Country of Registration; and

              (vi)  hijacking  or any unlawful  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 the Aircraft  acting  without
the consent of Lessee;

PROVIDED, HOWEVER, that all hull insurance required  by this paragraph (b) shall
at all times  while the  Aircraft  is subject to this Lease be for an amount not
less than the Stipulated Loss Value from time to time computed for the Aircraft.
Lessee may self-insure, by means of a deductible or similar clause, the aircraft
hull risk  required  to be  insured  against  pursuant  to this  paragraph  (b),
provided that the amount of  such  self-insurance shall not exceed the lesser of
$500,000    for   any    one    occurrence    or   the    lowest    amount    of
self-insurance/deductible applying to any aircraft in Lessee's fleet. All of the
foregoing  insurance  policies  required  under tins paragraph (b) shall provide
that any loss which:  (i) is less than  $500,000 may be adjusted with Lessee and
paid to  Lessee,  provided  that if  Lessor or  Mortgagee  shall  have  notified
Lessee's  insurance  brokers that an Event or Event of Default exists hereunder,
such payment  shall be made to Lessor or  Mortgagee,  whoever has provided  such
notice,  and such payment  shall be held by such party  pursuant to the terms of
this Lease,  (ii) exceeds $500,000 but is less than $3,000,000 shall be adjusted
with  Lessor and Lessee and shall be payable to the order of Lessor in  Dollars,
and (iii) exceeds $3,000,000 shall be adjusted with Lessor and Lessee and  shall
be payable in Dollars to  Mortgagee  (or is  Mortgagee  has given  notice to the
insurers of the termination of the Mortgage, to Lessor).

         (c) REQUIREMENTS IN INSURANCE POLICIES.  All insurance policies carried
in  accordance  with  paragraph  (a) or (b) of this  Article 10 and all policies
taken out in  substitution  or replacement  for any such policies,  shall (i) be
subject  to  Lessor's  approval,   (ii)  include  a  waiver  of  any  rights  of
subrogation,  set-off, counterclaim or other deduction, whether by attachment or
otherwise  as  against  Lessor  and  each  Participant,   and  their  respective
successors and  assigns (hereafter  collectively  referred to as the "Additional
Insureds"),  and the  Indemnitees  (as defined in Article 8(a)),  (iii) name the
Additional Insureds,  and in respect of the insurance carried in accordance with
Article  10(a),  the  Additional  Insureds  and the  Indemnitees  as  additional
insureds,  as their  respective  interests appear (but without imposing upon any
such Additional  Insured or Indemnitee any obligation  imposed upon the insured,
including,  without  limitation,  the  liability  to pay the  premium  for  such
policies),  (iv)  provide  that in respect of the  interests  of the  Additional
Insureds and  Indemnitees in such policies,  the insurance shall not be impaired
or  invalidated  by any action or omission of Lessee or any other person  (other
than  action of such  Additional  Insured),  and  shall  insure  the  Additional
Insureds and Indemnitees,  as their respective  interests appear,  regardless of
any  breach  or  violation  by  Lessee  or any  other  person  (other  than such
Additional Insured) of any warranties,  declarations or conditions  contained in
such policies,  (v) provide that if such insurance is canceled or terminated for
any reason  whatsoever or is changed in any material  respect in relation to the
interests of  an Additional Insured or if such insurance is allowed to lapse for


                                      10-2


<PAGE>


nonpayment of premium, such cancellation, termination, change or lapse shall not
be effective as to such Additional Insured for thirty (30) days (seven (7) days,
or such lesser period as is  customarily  available in accordance  with industry
practice,  in the case of any war risk and allied perils coverage) after receipt
by  such  Additional  Insured  of  written  notice  by  such  insurers  of  such
cancellation,  termination,  change or lapse, (vi) in the event Lessee maintains
separate  policies  to cover all risk  aircraft  hull and war risk  and  related
perils  insurances,  all such policies shall include a 50/50  provisional claims
settlement  arrangement  in the event of dispute  over which  policy  covers the
loss,  (vii) be primary without right of  contribution  from any other insurance
carried by any Additional  Insured or Indemnitee with respect to its interest as
such in the Aircraft,  (viii) be in an amount  sufficient to prevent  Lessee and
any Additional  Insured from becoming a co-insurer,  (ix) provide for  worldwide
geographical coverage,  except  for exclusions  of geographical areas reasonably
acceptable  to Lessor,  (x)  provide  satisfactory  coverage  against  the risks
associated with electronic date recognition  problems,  in the form of AVN 2000,
AVN2001 and AVN2002, 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 in accordance with
then current market  practice,  and (xi) comply to the extent necessary with the
insurance  requirements  set forth in the  Manufacturer's  product  support  and
customer  training  agreements.  Each  liability  insurance  policy  carried  in
accordance  with section (a) of this  Article  shall  contain a  cross-liability
endorsement so that each insured,  Additional  Insured and  Indemnitee  shall be
protected from claims by each other insured,  Additional  Insured or Indemnitee,
and a severability of interest  provision which shall expressly provide that all
of the  provisions  thereof  shall operate in the same manner as if there were a
separate  policy  covering  each  insured,  Additional  Insured and  Indemnitee;
provided,  however,  such  policies  shall not operate to increase the insurers'
limit of liability.  Lessee shall cause its insurers to agree that the indemnity
and hold  harmless  provisions  of Article  8(a) are  insured  as a  contractual
assumption  of  liability  by Lessee's  insurers,  but only to the extent of the
risks covered by the policy of insurance.

         (d) UNINSURED  OPERATIONS.  Lessee shall not operate or locate any Item
of Equipment, or suffer the same to be operated or located, in any recognized or
threatened  area of  hostilities  or in any area or on any route  excluded  from
coverage by any  insurance  contemplated  by this  Article 10.  Lessee shall not
operate any Item of Equipment,  or suffer the same to be operated, in any manner
or for any  purpose  which is not  covered  by the  insurance  which  Lessee  is
required to carry and maintain pursuant to this Article 10.

         (e) APPLICATION OF INSURANCE  PROCEEDS FOR EVENT OF LOSS. All insurance
payments  received  as the result of the  occurrence  of an Event of Loss (other
than an Event of Loss described in Article 9(c),  above) with respect to an Item
of Equipment, or any part thereof, will be applied as follows:

              (i) if such payments are received with respect to an Event of Loss
relating to the Airframe or the Airframe and Engines  installed on the Airframe,
so much of such payments  remaining after  reimbursement to Lessor for all costs
and expenses including  attorneys fees incurred in connection with such Event of
Loss as shall not exceed the amounts


                                      10-3


<PAGE>


due under  paragraph  (a) of Article 9 shall be applied in reduction of Lessee's
obligation  to pay such amounts,  if not already paid by Lessee,  or, if already
paid by Lessee,  shall be applied to  reimburse  Lessee for its  payment of such
amounts,  and the balance, if any, of such payment remaining  thereafter will be
paid over to or retained by, Lessee; or

              (ii) if such payments are received with respect to an Engine under
the  circumstances  contemplated  by  Article  9(b),  so much  of such  payments
remaining  after  reimbursement  to Lessor for all costs and expenses  including
attorneys fees incurred in connection with such Event of Loss shall be paid over
to, or retained by,  Lessee,  provided  that Lessee shall have  fully  performed
or, concurrently therewith, will fully perform the terms of Article 9(b).

         (f) APPLICATION OF INSURANCE PROCEEDS FOR OTHER THAN EVENT OF LOSS. The
insurance proceeds of any damage to the Airframe or any Engine, or part thereof,
not  constituting  an Event of Loss will be applied in payment (or to  reimburse
Lessee) for repairs or for replacement  property in accordance with the terms of
Articles 5 and 6 hereof,  and any balance  remaining after compliance with  such
Articles with respect to such loss shall be paid to, or retained by, Lessee.

         (g)  APPLICATION  IN DEFAULT.  Any amount  referred to in clause (i) or
(ii) of paragraph (e) or in paragraph (f) of this Article 10 which is payable to
Lessee  shall not be paid to Lessee  or, if it has been previously paid directly
to Lessee,  shall not be retained by Lessee, if  at the time  of such payment an
Event or an Event of Default  shall have  occurred  and be  continuing.  In such
event,  all such amounts shall be paid to and held by Lessor as security for the
performance  by Lessee of its  obligations  hereunder  or, at  Lessor's  option,
applied by Lessor toward  payment of any such  obligations of Lessee at the time
due  hereunder as Lessor may elect.  At such time as Lessee shall have cured all
Events and Events of  Default,  all such  amounts  at the time held by Lessor in
excess of the amounts, if any, which Lessor shall have elected to apply as above
provided shall be paid to Lessee.

         (h) REPORTS,  CERTIFICATES,  ETC. At least five (5) Business Days prior
to the Delivery Date of the Aircraft and  concurrently  with the renewal of each
insurance policy (but in no event less frequently than once each calendar year),
Lessee will furnish to Lessor and  each Additional  Insured a certificate signed
by a firm of independent  aircraft insurance brokers of recognized  standing and
responsibility in the international  aviation insurance  industry,  appointed by
Lessee and acceptable to Lessor,  describing in reasonable  detail the insurance
then carried and maintained on the Equipment and  certifying  that the insurance
then carried and maintained on the Aircraft and Engines  complies with the terms
hereof.  Lessee will advise  and will cause such firm to agree to advise  Lessor
and each Additional Insured in writing promptly of any default in the payment of
any premium and of any other act or omission on the part of Lessee or  otherwise
of  which it or they  have  knowledge  and  which  might  invalidate  or  render
unenforceable, in whole or in part, any insurance on the Aircraft or any Engine.
Lessee will also advise and will also cause such firm to agree to advise  Lessor
and each Additional  Insured in writing of the termination date of any insurance
carried and maintained on the Aircraft or any Engine pursuant to this Article at
least thirty (30) days


                                      10-4


<PAGE>


(seven  (7)  days,  or  such  lesser  period  as is  customarily  available   in
accordance  with  industry  practice,  in  the case of any war  risk and  allied
perils coverage) prior to such termination date. Upon request by Lessor,  Lessee
will  deliver to Lessor a true and complete  copy of all policies of  insurance.
carried by Lessee in accordance with the requirements of this Article 10. In the
event that Lessee shall fail to maintain  insurance as herein  provided,  Lessor
may at its option  obtain such insurance and, in such event,  Lessee shall, upon
demand, reimburse Lessor, as Supplemental Rent, for the cost thereof.

         (i) INSURANCE - GENERAL. If at any time Lessor determines that Lessor's
approval of any insurer  should be revoked in the  interests  of the  Additional
Insureds  as  the  result  of  such  insurer  no  longer  being  of   recognized
responsibility and substantial  financial  capacity  acceptable to Lessor in its
reasonable  discretion,  or if Lessor  determines that Lessor's  approval of any
insurance  should be revoked in the interests of the Additional  Insureds as the
result of a change in market practice,  Lessor agrees to consult with Lessee and
Lessee's insurance brokers regarding revocation of such approval.  If, following
such  consultation,  Lessor determines that revocation is required,  Lessee will
promptly arrange or procure  the arrangement  of alternative cover  satisfactory
to Lessor.  Lessee shall, on request,  provide Lessor with satisfactory evidence
that the premiums in respect of the  insurance  required  hereby have been paid.
Lessee shall not make, or permit to be made, any  modification  to or alteration
of the insurance coverage required hereby adverse to the interests of any of the
Additional  Insureds  or  Indemnitees.  Lessee  shall  be  responsible  for  any
deductible in respect of the insurances  required  hereby.  Lessee shall provide
any other insurance/reinsurancer-related information or assistance in respect of
the insurances required hereby, as Lessor may reasonably  request.  Lessee shall
at its own  expense  maintain  insurance  following  the  expiration  or  sooner
cancellation  or  termination  of the Term in respect of Lessee's  indemnity and
hold harmless  obligations set forth in Article 8(a) hereof,  for such period as
Lessor  may  reasonably  require  (but in any event not more than two (2) years)
naming  each  Indemnitee  (as  defined in Article 8) as an  additional  insured.
Lessee's obligation under the preceding sentence shall not be affected by Lessee
ceasing  to be the  lessee  of the  Aircraft  or by any of the  Indemnitees  (as
defined in Article 8) ceasing to have an interest in respect of the Aircraft.

         (j)  INSURANCE OF LESSEE'S  INTEREST.  Nothing  contained in this Lease
shall prevent Lessee from carrying insurance against Events of Loss with respect
to the Equipment in excess of that required hereunder,  and nothing herein shall
prevent any Additional  Insured,  at its own expense,  from carrying  additional
insurance  against  Events  of Loss with  respect  to the  Equipment;  PROVIDED,
HOWEVER,  (i) Lessee shall not procure  insurance or permit  Lessee to  be named
assured in any  insurance  with  respect to any Item of  Equipment  which  could
prejudice any Additional Insured's rights under the insurance required hereunder
or any right of recovery under any such  insurance,  and (ii) in the event there
is a limitation  on the  aggregate  amount of insurance  which may be carried or
collected by any or all parties in respect of any  Equipment,  Lessee's right to
carry and  collect  insurance  on such  Equipment  in  excess  of that  required
hereunder  shall be  subordinate to and shall not in any way prejudice the right
of any  Additional  Insured to carry and collect  insurance on such Equipment in
excess of such amounts.


                                      10-5


<PAGE>


         ARTICLE  11.  MORTGAGES,  LIENS,  ETC.  Lessee  shall not  directly  or
indirectly create, incur, assume or suffer to exist any Lien on  or with respect
to any Item of  Equipment,  any part  thereof,  title  thereto  or any  interest
therein,  except:  (i) the respective  rights of Lessor,  the  Participants  and
Lessee as herein  provided,  (ii) Liens which result from Claims  against Lessor
that are not to be paid or indemnified against by Lessee hereunder,  (iii) Liens
for taxes either not yet due or being  contested  in good  faith by  appropriate
proceedings,  but only so long as, in Lessor's judgment, such proceedings do not
involve any danger of the  sale, forfeiture or loss of any Item of Equipment, or
interest therein, and (iv) materialmen's,  mechanics',  workmen's,  repairmen's,
airport charges, employees'  or other like liens  arising  by  operation  of law
in  the  ordinary  course  of business  and for amounts the payment of which  is
either  not  delinquent  or  is  being  contested  in  good faith by appropriate
proceedings,  but only so long as, in  Lessor's  judgment,  such  proceedings do
not involve any danger of the sale, forfeiture or loss of any Item of Equipment,
or any interest therein.


                                      11-1

<PAGE>


         ARTICLE 12.  RECORDATION AND FURTHER  ASSURANCES.  Lessee shall, at its
own cost and expense,  cause this Lease, the Lease Supplement,  the Mortgage and
any and all additional instruments which shall be executed pursuant to the terms
hereof, so far as permitted by applicable law or regulation,  to be kept, filed,
registered and recorded at all times in the appropriate  offices pursuant to the
laws of the Country of Registration, and in such other places, whether within or
outside the Country of Registration, as Lessor may reasonably request to perfect
and  preserve  Lessor's  and any  Participants  title  to and  interests  in the
Equipment and rights hereunder  (including its rights to the Security  Deposit),
and Lessee shall on request furnish to Lessor an opinion of counsel satisfactory
to  Lessor  or other  evidence  satisfactory  to  Lessor  of each  such  filing,
recordation and registration.

         Without limiting the foregoing, Lessee shall do or cause to be done, at
its own cost and  expense,  any and all acts and  things  which may be  required
under the terms of the Convention for the International Recognition of Rights in
Aircraft,  signed at Geneva,  Switzerland,  on June 18,  1948,  to  perfect  and
preserve  the tide and  interests of Lessor and each  Participant  in and to the
Equipment within the jurisdiction of any signatory State which has ratified such
Convention  and in the  territories  thereof  in which  Lessee may  operate  the
Equipment,  and Lessee  shall also do or cause to be done at its own expense any
and all acts and  things  which  may be  required  under  the terms of any other
agreement,   treaty,   convention,   pact,  or  by  any  practice,   custom,  or
understanding  involving any State in which Lessee may operate,  and any and all
acts and things which Lessor may reasonably request, to perfect and preserve the
rights of Lessor and each Participant in the Equipment and hereunder.

         In  addition,  Lessee  will  promptly  and duly  execute and deliver to
Lessor such further  documents and  assurances  and take such further  action as
Lessor may from time to time  reasonably  request  in order to more  effectively
carry out the intent and purpose of this Lease and to establish  and protect the
rights  and  remedies  created  or  intended  to be  created  in favor of Lessor
hereunder.


                                      12-1


<PAGE>

     ARTICLE 13. RETURN OF AIRCRAFT AND RECORDS.

     (a) RETURN. Except as otherwise provided herein, at the expiration of
the Term for the Aircraft or upon the sooner cancellation or termination of
this Lease, Lessee, at its own expense, shall return the Aircraft and related
documentation and records to Lessor by delivering the same to Lessor at an
airport in the western part of the United States as may be designated by
Lessor in full compliance with all Lessee's obligations hereunder. The
Aircraft, at the time of return to Lessor, shall be fully equipped with two
Engines properly installed thereon. On return of the Aircraft to Lessor, but
in no event more than thirty (30) days thereafter, Lessor or Lessee, as the
case may be, shall reimburse the other for the cost of the fuel contained in
the fuel tanks of the Aircraft on return to Lessor, to the extent such fuel
is less than (which will result in payment by Lessee) or exceeds (which will
result in payment by Lessor) the amount of fuel contained in the fuel tanks
of the Aircraft on the Delivery Date.

     (b) INSPECTION; TEST FLIGHT. Lessor shall have the right, within sixty
(60) days prior to the expiration date of the Term for the Aircraft, to
inspect the Aircraft and its records, including all maintenance, pilots and
aircraft systems functional check reports, to determine whether the Aircraft
and its records will be in compliance with the requirements for return at the
expiration of the Term, including confirmation of the full serviceability
status of each component of the Aircraft. Lessee shall make such personnel
available to Lessor for such inspection of the Aircraft and its records as
Lessor may reasonably require. Lessor's right of inspection shall include:
(i) the right to a complete and thorough inspection of all documents and
records maintained for the Equipment by or for Lessee (including the Engine
performance monitoring data), which Lessee shall make available to Lessor's
representatives and designees in one location, (ii) the right to conduct a
full systems functional and operational check, and (iii) the right to have up
to four of its representatives or designees participate as direct observers
in a test flight of the Aircraft of at least ninety (90) minutes in duration
(the cost of which shall be borne by Lessee) conducted by Lessee in
accordance with Manufacturer's standard flight operation check flight
procedures to demonstrate the airworthiness of the Aircraft and the proper
functioning of all systems and components within limits. All discrepancies
and deficiencies from the return conditions provided herein shall be
corrected by Lessee at its expense. If an additional test flight is required
after correction of discrepancies discovered on the initial test flight or
during the inspections, Lessee shall provide such additional test flight.
Lessor's right of inspection shall not include the right to open any panels
or bays that are not required to be opened in connection with the maintenance
that is required to be performed on the Aircraft pursuant to this Article 13,
unless Lessor has reasonable cause to believe that a defect likely exists
behind the closed panel or bay.

     If: (x) repairs or other work items are required to cause the Aircraft
to comply with the return requirements provided herein, or (y) Lessor,
through no fault of its own, has not been allowed a full and thorough right
to inspect the Aircraft and its records prior to the end of the Term as
contemplated herein, or (z) Lessee for any other reason fails to

                                 13-1
<PAGE>

return the Aircraft and its records to Lessor at the time or place and in the
condition required hereunder, Lessee shall forthwith take such action as may
be necessary to remedy such non-compliance to enable Lessee to return the
Aircraft and its records to Lessor in accordance with the requirements
hereof. Without waiving any other rights or remedies Lessor may have as a
result thereof, Lessee shall pay Lessor one and one-half (1-1/2) the monthly
Basic Rent for the Aircraft, prorated on a daily basis, payable weekly in
arrears, for each day following the expiration of the Term for the Aircraft
until Lessor has been allowed and has completed a full and thorough right to
inspect the Aircraft and its records prior to the end of the Term as
contemplated herein and the Aircraft is returned to Lessor in the condition
and with the supporting documentation required hereunder at the time of
return to Lessor. During the period required for Lessee to comply with the
requirements of this paragraph, Lessee shall not operate the Aircraft (other
than for maintenance, repair or return purposes) and all of Lessee's other
obligations hereunder shall remain in full force and effect. Nothing in this
paragraph shall be interpreted to give Lessee the right to retain the
Aircraft after the end of the Term.

     (c) FLIGHT HOURS/CYCLES/TIME REQUIREMENTS. At the time of return of the
Aircraft to Lessor:

         (i) The Airframe shall be fresh out of its next sequential block
"6C" systems, zonal and structural check (all as described in the latest
revision of the Boeing Maintenance Planning Document and the latest revision
of Appendix C No. D626AOOl (or restatement thereof)  applicable to the
Aircraft as the result of the hour/cycle ratio that the Aircraft has been
operated during the Term) or  equivalent  block-type  maintenance  check,
including all corresponding lower level checks (I.E , "A" and lower "C"
checks), and corrosion prevention and control and aging aircraft inspections,
if any, and all other known inspections and routine and non-routine tasks due
at such time, all with full fault rectification and interior refurbishment
and all without taking into account any sampling programs (collectively
referred to hereafter as the "6C Maintenance"). If Lessee's Maintenance
Program permits such 6C Maintenance to be performed in phases, Lessee shall
perform all phases of such 6C Maintenance immediately prior to return of the
Aircraft to Lessor in order to align such maintenance of the Aircraft with
the Boeing Maintenance Planning Document and the latest revision of Appendix
C No. D626AO01 (or restatement thereof) to the same extent as if Lessee's
Maintenance Program did not permit such maintenance to be performed in
phases. During such 6C Maintenance, Lessee shall also perform any other work
reasonably requested by Lessor and not otherwise required hereunder (provided
such other work does not increase the ground time required for Lessee to
prepare the Aircraft for return to Lessor as required hereby, or,  if it does
increase the downtime, Lessor and Lessee shall have agreed to a Basic Rent
abatement for such additional ground time), and Lessor will reimburse Lessee
for the cost of such work (including labor and materials), billed at Lessee's
most preferred customer's rates. Lessee shall give Lessor at least thirty
(30) days prior notice of the date on which such 6C Maintenance is to be
performed.

         If the Airframe is not fresh from such 6C Maintenance at the time of
return to Lessor, subject to the requirements of the next succeeding
paragraph of this clause (i), Lessee shall pay Lessor a Dollar amount
determined by multiplying the then current


                                   13-2
<PAGE>

cost of such 6C Maintenance for the Airframe as quoted by an FAA-approved
overhaul facility selected by Lessee and reasonably acceptable to Lessor
(provided that if Lessor and Lessee cannot agree on the FAA-approved overhaul
facility, each shall select an FAA-approved overhaul facility and the
quotations of the two facilities shall be averaged) by (b) a fraction of
which (x) the numerator shall be the number of Flight Hours, Cycles or
calendar time (whichever is limiting) accumulated on the Airframe since the
Delivery Date or its last complete block "6C" check (or the final phase of
the phased "6C" check), as the case may be, and (y) the denominator shall be
the total number of Flight Hours, Cycles or calendar time (whichever is
limiting) between block "6C" checks for the Airframe (determined by reference
to the latest revision of the Boeing Maintenance Planning Document and the
latest revision of Appendix C No. D626AOOI (or restatement thereof)
applicable to the Aircraft as the result of the Flight Hours/Cycles ratio
that the Aircraft has been operated during the Term);

         Notwithstanding anything to the contrary in the preceding paragraph,
at the time of return of the Aircraft:

              (A) the Airframe shall be fresh out of its next sequential
     block "C" check or equivalent block-type maintenance, and the
     corresponding lower level checks, and all other inspections and tasks,
     including corrosion prevention and control and aging aircraft
     inspections, if any, and all  structural/systems/zonal  inspections  and
     out-of-sequence inspections due at that tune, and all routine and
     non-routine tasks shall have been performed, all with full fault
     rectification, sufficient to clear the Aircraft for operation until its
     next scheduled "C" check, all in accordance with the then latest
     revision of the Boeing Maintenance Planning Document and the latest
     revision of Appendix C No. D626AO01 (or restatement thereof) applicable
     to the Aircraft as the result of the hour/cycle ratio that the Aircraft
     has been operated during the Term), and all without taking into account
     any sampling programs. If Lessee's Maintenance Program permits such "C"
     check to be performed in phases, all phases of such maintenance check
     shall be performed immediately prior to return of the Aircraft to
     Lessor in order to align such maintenance of the Aircraft with the then
     latest revision of the Boeing Maintenance Planning Document and the
     latest revision of Appendix C No. D626AO01 (or restatement thereof) to
     the same extent as if Lessee's Maintenance Program did not permit such
     maintenance check to be performed in phases. During such "C" check,
     Lessee shall also perform any other work reasonably requested by Lessor
     and not otherwise required hereunder (provided such other work does not
     increase the ground time required for Lessee to prepare the Aircraft for
     return to Lessor as required hereby, or, if it does increase the
     downtime, Lessor and Lessee shall have agreed to a Basic Rent abatement
     for such additional ground time), and Lessor will reimburse Lessee for
     the cost of such work (including labor and materials), billed at
     Lessee's most preferred customer's rates. Lessee shall give Lessor at
     least thirty (30) days prior notice of the date on which such "C" check
     is to be performed; and


                                    13-3
<PAGE>

              (B) the Airframe shall have at least 4,000 Flight Hours/Cycles
     or sixteen (16) months, whichever is limiting, remaining to its next 6C
     Maintenance.

         (ii) The Landing Gear shall be fresh from overhaul or shall be new
(i.e. no Flight Hours/Cycles/calendar time accumulated thereon, whichever is
limiting).

         Notwithstanding the preceding paragraph, if the Landing Gear is not
returned fresh from overhaul or new, at the time the Aircraft is returned to
Lessor, subject to the requirements of the last sentence of this  paragraph,
Lessee shall pay Lessor a Dollar amount computed by multiplying: (A) the then
current estimated cost of overhaul of the Landing Gear as quoted by an
FAA-approved overhaul facility selected by Lessor and reasonably satisfactory
to Lessee, by (B) a fraction the numerator of which shall be the number of
Flight Hours/Cycles/calendar time (whichever is limiting) accumulated on the
Landing Gear since new or since its last overhaul and the denominator shall
be the total number of Flight Hours/Cycles/calendar time (whichever is
limiting) allowable between overhauls (determined by reference to the latest
revision of the Boeing Maintenance Planning Document). In any event, on
return of the Aircraft the Landing Gear shall have at least 4,000 Flight
Hours/Cycles or sixteen (16) months (whichever is limiting) remaining until
its next scheduled overhaul (determined by reference to the latest revision
of the Boeing Maintenance Planning Document).

         (iii) Each "hard time/life limited" component of the Aircraft,
including life-limited Parts of the Engines, the APU and the Landing Gear
(but excluding components  referred to in clause (iv), below, and excluding
the Landing Gear as a whole) shall  be fresh from overhaul or shall be new
(i.e., no Flight Hours/Cycles/calendar time accumulated thereon, whichever is
limiting).

         Notwithstanding the preceding paragraph, if any "hard time/life
limited" component, including life-limited Parts of the Engines, the APU and
the Landing Gear (but excluding components referred to in clause (iv), below,
and excluding the Landing Gear as a whole) is not returned fresh from
overhaul or new, at the time the Aircraft is returned to Lessor, subject to
the requirements of the last sentence of this paragraph, Lessee shall pay
Lessor a Dollar amount computed by multiplying: (A) the then current
estimated cost of overhaul or purchase and replacement of such component, as
quoted by an FAA-approved overhaul facility selected by Lessor and reasonably
satisfactory to Lessee, by (B) a fraction  the  numerator  of  which  shall
be the  number  of  Flight Hours/Cycles/calendar time (whichever is limiting)
accumulated on each "hard time/life limited" component, as the case may be,
since new or since its last overhaul  and the  denominator  shall be the
total  number  of Flight Hours/Cycles/calendar time (whichever is limiting)
allowable between overhauls (determined by reference to the latest revision
of the Boeing Maintenance Planning Document). In any event, on return of the
Aircraft each "hard time/life limited" component of the Aircraft, including
Life-limited Parts of the Engines, the APU and the Landing Gear (but
excluding the components referred to in clause (iv), below, and excluding the
Landing Gear as a whole) shall have at least 4,000 Flight Hours/Cycles or
sixteen (16) months (whichever is


                                   13-4
<PAGE>

limiting) remaining until its next scheduled overhaul (determined by
reference to the latest revision of the Boeing Maintenance Planning
Document). For the avoidance of doubt, Lessor does not intend to receive
double payment for any item for which compensation if paid pursuant, to this
Article 13(c). Therefore, the provisions of this Article 13(c) shall be
construed so that if appropriate payment in respect of a Part is paid
pursuant to one clause of this Article 13(c), an equivalent payment in
respect of such Part shall not be payable pursuant to any other clause of
this Article 13(c).

         (iv) Each component of the Aircraft which has a hard time/life limit
(i.e.,  hours/cycles/calendar time) to overhaul interval/shop visit
interval/replacement of less than 4,000 Flight Hours/Cycles or sixteen (16)
months  (whichever  is  limiting)  shall  have  100%  of  its  Flight
Hours/Cycles/calendar time remaining until next overhaul interval, shop visit
interval or replacement (determined by reference to the latest revision of
the Boeing Maintenance Planning Document).

         (v) Each Engine and the APU shall be fresh out of its heavy
maintenance shop visit requiring teardown/disassembly and resulting in full
performance restoration. If an Engine or the APU is not fresh out of its
heavy maintenance shop visit requiring teardown/disassembly and resulting in
full performance restoration on return to Lessor, subject to the requirements
of the next succeeding paragraph of this clause (v), on return of the
Aircraft to Lessor Lessee shall pay Lessor a Dollar amount computed by
multiplying: (A) the then current estimated cost of such heavy maintenance
shop visit requiring teardown/disassembly and resulting in full performance
restoration for such Engine or the APU, as the case may be, as quoted by an
FAA-approved overhaul facility selected by Lessee and reasonably satisfactory
to Lessor (provided that if Lessor and Lessee cannot agree on the
FAA-approved overhaul facility, each shall select an FAA-approved overhaul
facility and the quotations of the two facilities shall be averaged), by (B)
a fraction the numerator of which shall be the number of Flight
Hours/Cycles/calendar time (whichever is limiting) accumulated on such Engine
or the APU since new or since its last heavy maintenance shop visit requiring
teardown/disassembly and resulting in full performance restoration (whichever
is later), and the denominator shall be the total number of Flight
Hours/Cycles/calendar time (whichever is limiting) allowable between heavy
maintenance shop visits requiring teardown/disassembly and resulting in full
performance restoration. The industry mean time between removals for engines
and auxiliary power units of similar age, characteristics and maintenance
histories  as such Engines and the APU, determined by Lessor from records
maintained by the manufacturer of such equipment on the basis of the average
of the industry mean time between removals over the immediately preceding two
(2) years, shall be used to determine the number of Flight
Hours/Cycles/calendar time allowable between heavy maintenance shop  visits
requiring teardown/disassembly  and resulting in full performance
restoration. The industry mean time between removals for engines and
auxiliary power units does not include removals solely for foreign object
damage or customer convenience.

         Notwithstanding anything to the contrary in the preceding paragraph,
on return of the Aircraft, each Engine and the APU shall have at least 3,000
Flight Hours/Cycles or one (1) year (whichever is limiting) remaining to the
industry mean time


                                  13-5
<PAGE>

between removals for engines and auxiliary power units of similar age,
characteristics and maintenance  histories as such Engines and the APU,
determined from records maintained by the manufacturer of such equipment on
the basis of the average of the industry mean time between removals over the
immediately preceding two (2) years.

         (vi) Each major component of the Aircraft which is "on condition" or
"condition monitored" (other than such components referred to in clause
(vii), below) shall be fresh out of its heavy maintenance shop visit. If any
such major component is not fresh out of its heavy maintenance shop visit on
return to Lessor, subject to the requirements of the next succeeding
paragraph of this clause (vi), on return of the Aircraft to Lessor Lessee
shall pay Lessor a Dollar amount computed by multiplying: (A) the then
current estimated cost of such heavy maintenance shop visit for such
component, as quoted by an FAA-approved overhaul facility selected by Lessor
and reasonably satisfactory to Lessee, by (B) a fraction the numerator of
which shall be the number of Flight Hours/Cycles/calendar time (whichever is
limiting) accumulated on such component since new or since its last heavy
maintenance shop visit (whichever is later), and the denominator shall be
the total number of Flight Hours/Cycles/calendar time (whichever is limiting)
allowable between heavy maintenance shop visits. The average industry mean
time between failures over the, immediately preceding twelve months for
components of similar age, characteristics and maintenance histories, as
determined by Lessor from records maintained by Manufacturer, shall be used
to determine the number of Flight Hours/Cycles/calendar time allowable
between heavy maintenance shop visits.

         Notwithstanding  anything to the contrary in the  preceding
paragraph, on return of the Aircraft, each major component of the Aircraft
which is "on condition" or "condition monitored" (other than such components
referred to in clause (vii),  below) shall have at least 4,000 Flight
Hours/Cycles or sixteen (16) months (whichever is limiting) remaining to the
industry  mean time  between  failures for  components  of similar age,
characteristics and maintenance histories, determined on the basis of the
average of the industry mean time between failures over the immediately
preceding twelve months from records maintained by Manufacturer.

         (vii) Each "on condition" or "condition monitored" major component
of the Aircraft which has an industry mean time between failures of less than
4,000 Flight Hours/Cycles or sixteen (16) Months (Whichever is limiting),
determined on the basis of the average of the industry mean time between
failures over the immediately preceding twelve months, shall have 100% of its
Flight Hours, Cycles or calendar time, whichever is limiting, remaining to
the industry mean time between failures for such component, determined on the
basis of the  average of the industry mean time between failures over the
immediately preceding twelve months from records maintained by Manufacturer.

         (viii) Except as otherwise required above, each component of the
Aircraft which has a calendar limit to removal and replacement or
refurbishment shall have at least one year remaining to operate until removal
and replacement or refurbishment (determined by reference to the latest
revision of the Boeing Maintenance Planning


                                 13-6
<PAGE>

Document), and each component of the Aircraft which has a calendar limit to
removal and replacement or refurbishment of less than one year (determined by
reference to the latest revision of the Boeing Maintenance Planning Document)
shall have 100% of its calendar time remaining until next removal and
replacement or refurbishment.

     All of the foregoing overhauls, checks, maintenance and visits shall
have been performed by an Approved Maintenance Performer and be in compliance
with Lessee's Maintenance Program (except to the extent otherwise specified
above). Lessee shall not be entitled to any adjustment or to be reimbursed or
in any way compensated if the Airframe, any Engine or any Parts are returned
in a better condition than as required under this Article 13.

     (d) GENERAL RETURN REQUIREMENTS. The Airframe, Engines and Parts shall
have been maintained, serviced and repaired throughout the Term in accordance
with (i) all the requirements of this Lease, (ii) Lessee's Maintenance
Program, and (iii) the rules, and regulations of the FAA, and shall be in
compliance with the following:

         (1) AIRWORTHINESS CERTIFICATE; REGISTRATION. The Aircraft when
returned to Lessor shall have a currently effective airworthiness certificate
(and, if required by Lessor, an airworthiness certificate for export to such
location as may be designated by Lessor) issued by the FAA, and shall be in
such condition and shall have such supporting documentation as required to
maintain the airworthiness certificate from the FAA for FAR Part 121
passenger operations with no restrictions and an FAA certificate of
registration. The Aircraft will be equipped for operation in accordance with
FAR Part 121 passenger operations.

         (2) GENERAL CONDITION. Each Item of Equipment shall be in the same
condition as when delivered to Lessee, ordinary wear and tear from normal
flight operations (subject to the obligations set forth in Article 5(c) and
alterations and modifications properly made by Lessee as permitted or
required under this Lease) excepted, shall be in good operating condition,
and shall be free and clear of all Liens, except Liens which result from acts
of Lessor or of a Participant which are not indemnified against hereunder.
The Aircraft shall be clean, internally and externally, and serviceable by
commercial passenger airline operating standards, and shall have installed
thereon and furnished therewith all Engines, Parts and equipment installed
thereon or furnished therewith (including all cabin passenger service and
loose equipment) at the commencement of the Term (after giving effect to the
modifications referred to in Article 2(h) hereof) or replacements therefor
(as herein authorized) and additions and  improvements thereto made in
accordance with the provisions of this Lease. No Part will have a total time
since new in hours, cycles or calendar time greater than 110% of the total
time since new in hours, cycles or calendar time of the Airframe.

             The Aircraft shall be capable of certificated, full-rated
performance without limitation throughout the entire operating envelope, as
defined in the Aircraft flight manual, and performance compliance will be
demonstrated at the time of the technical acceptance flight test and by
on-wing static inspection and testing of the powerplants in accordance with
the Engine maintenance manual.


                                    13-7
<PAGE>

             The Engines shall not be on "watch" for any reason requiring any
special or out-of-sequence inspection and shall comply with the operations
specification of Lessee and the Engine manufacturer (or, if such requirements
differ, whichever is the more limiting), without waiver, carryover,
deferment, restriction or exception. If the historical and technical records
and/or trend monitoring data indicate an acceleration in the rate of
deterioration in the performance of an Engine or the APU which is higher than
normal as per the recommendations of the manufacturer of such Engine or APU,
Lessee shall, prior to return, correct such conditions that are determined to
be causing such accelerated rate of deterioration or that otherwise exceed
Lessee's or the manufacturer's maintenance manual tolerances.

             Without limiting any of the foregoing, on return the Aircraft
shall comply with the following:

             (i) FUSELAGE, WINDOWS AND DOORS: The fuselage shall be free of
major dents and abrasions which are out of Manufacturer's manual limits, scab
patches which are temporary or out of Manufacturer's manual limits, and loose
or pulled rivets (reasonable wear and tear from normal flight operations
excepted); windows shall be free of delamination, distortion and blemishes
out of Manufacturer's manual limits and shall be properly sealed and free of
crazing (reasonable wear and tear from normal flight operations excepted);
and doors shall be free-moving, correctly rigged, and fitted with serviceable
seals; and all external placards and markings shall be installed and legible;

             (ii) WINGS AND EMPENNAGE: All leading edges shall be free from
damage out of Manufacturer's manual limits; all control surfaces shall be
waxed and polished and all unpainted cowlings and fairings shall be polished;
and all wings, empennage and fuel tanks shall be free of fuel leaks; all
flight controls shall be properly balanced, and all external placards and
markings shall be installed and legible;

             (iii) INTERIOR: The interior of the Aircraft shall be
deepcleaned; carpets, galleys, lavatories, ceiling, side walls, overhead,
passenger service units, bag racks and bulkhead panels shall be serviceable,
secure, clean and free of cracks and reasonably stain-free (provided the
cosmetic appearance is reasonably acceptable to Lessor); all seats shall be
fully serviceable, in good condition and repainted as necessary; all signs
and decals shall be clean and legible; and all calendar-lifed emergency
equipment shall have a minimum of one year's life remaining; all carpets,
cushions and seat covers shall be in original pattern and color (unless
Lessor shall have agreed otherwise with Lessee in writing) and in good
condition and clean and the seats shall conform to FAA fire-resistance and
crash-worthiness regulations; and all placards and markings shall be
installed and legible; all galley areas shall not have any detectable cracks
or corrosion, shall meet safety and health standards, shall present a good
appearance and shall be free of food and; all galley floors shall be sealed
and reasonably stain-free (provided the cosmetic appearance is reasonably
acceptable to Lessor), shall have an effective non-skid coating and shall
meet safety and health standards; all galley structures, galley inserts and
galley carts will be clean and sealed, and shall not have any detectable
leaks, cracks or other defects and shall be fully serviceable.


                              13-8
<PAGE>

             (iv) COCKPIT: All placards and markings shall be clean, secure,
and legible, all fairing panels shall be free of cracks and shall be
reasonably stain-free (provided the cosmetic appearance is reasonably
acceptable to Lessor), and shall be clean, secure, and repainted as
necessary; all floor coverings shall be clean and effectively secured and
sealed; all seat covers shall be in good condition and clean and shall
conform to FAA fire resistance regulations; and all seats shall be fully
serviceable and in good condition;

             (v) CARGO COMPARTMENTS: All panels and nets shall be in good
condition; all cargo-restraint and moving mechanisms shall be serviceable;
and all compartments shall meet then current FAA fire regulations; all doors
shall be rigged and functioning properly; and the compartments shall  be
clean;

             (vi) LANDING GEAR AND WHEEL WELLS: The Landing Gear and all
wheel wells shall be clean, free of leaks, and repaired as necessary; and,
all placards and markings shall be clean, secure, and legible;

             (vii) LAVATORIES: All lavatory areas shall be clean and
reasonably free of cracks and free of detectable corrosion, meet safety and
health standards, present a good appearance and shall be free of abnormal
contamination; all lavatory floors and floor coverings shall be in good
condition and clean, shall be sealed and reasonably stain-free (provided the
cosmetic appearance is reasonably acceptable to Lessor), and shall have an
effective non-skid coating; mirrors shall be free of cracks and delamination
and free of noticeable and unsightly scratches; all doors and latches shall
be properly fitted and fully functional; lavatory systems shall be clean,
free of leaks, detectable cracks and other defects and shall be properly
sealed and fully functional; and

             (viii) TIRES AND BRAKES: All tires and brakes shall be fully
serviceable and have a minimum of 75% wear-life remaining. No tire shall have
more than two recaps.

         (3) MODIFICATIONS. At Lessor's request, Lessee shall, at Lessee's
expense, remove any or all alterations or modifications in or additions to
any Item of Equipment accomplished during the Term not required to be
incorporated or installed in or  attached to such Item of Equipment to
obtain an airworthiness  certificate and registration from the FAA,
including the modifications contemplated by Article 2(h) hereof, and Lessee
shall, at Lessee's expense, restore such Item of Equipment to the value,
utility, condition and airworthiness  thereof  which would have  existed had
such  alterations, modifications or additions not been made (provided that
Lessor shall provide Lessee with the necessary Parts that were returned by
Lessee to Lessor pursuant to Article 2(h), to enable Lessee to make such
restoration). Without limiting any other obligations of Lessee under this
Lease, all modifications made to the Aircraft during the Term shall be in
accordance with FAA-approved data.

         (4) REPAIRS. All repairs performed since the Delivery Date and that
exist on the Equipment at return shall be permanent in accordance with the
Manufacturer's Structural Repair Manual, provided that if such Structural
Repair Manual authorizes as


                                  13-9
<PAGE>

permanent a non-flush structural patch repair or a flush-type structural
patch repair, or does not cover such repair, such repair shall be a
flush-type permanent repair. All repairs shall be in accordance with Lessee's
Maintenance Program and conform to the Manufacturer's Structural Repair
Manual or the Engine manufacturer's approved manual, as the case  may be,
and  shall be provided with approval by the FAA if so required. Any repair
not covered by the Manufacturer's Structural Repair Manual or the Engine
manufacturer's approved manual, as the case may be, shall be in accordance
with FAA-approved data and shall be approved by Manufacturer or the Engine
manufacturer, as the case may be.

         (5) TERMINATING ACTION. Lessee shall perform all deferred and
carryover maintenance items and clear all pilot discrepancies with respect to
the Aircraft on a terminating action basis. All airworthiness directives
issued during the Term by the FAA, all changes required by any amendments or
changes to the FAR's during the Term, and all alert service bulletins or
service bulletins that are mandated by airworthiness directives issued during
the Term by a manufacturer or vendor applicable to the Equipment having a
date for compliance that falls on or prior to twelve (12) months or 3,000
Flight Hours or Cycles, as the case may be, after the expiration of the Term
(or return of the Aircraft, if later) shall be accomplished in compliance
with the issuing entity's specific instructions without regard to any
alternate means of compliance, waiver or operator exemptions  delaying
compliance.  Without  limiting the  foregoing,  any airworthiness directives,
FAR's or manufacturer's or vendor's alert service bulletins or service
bulletins that are mandated by airworthiness directives issued during the
Term which allow temporary compliance by inspection or other action (other
than by terminating action) but require terminating compliance on or prior to
twelve (12) months or 3,000 Flight Hours or Cycles, as the case may be, after
the expiration of the Term (or return of the Aircraft, if later) shall have
such  terminating  compliance  complete  prior to return,  and all
manufacturer's and vendor's service bulletins issued during the Term which
are rendered mandatory   by the Manufacturer's then current ETOPS Compliance
Configuration and Maintenance Procedures Guide and which require a repetitive
inspection, modification or terminating compliance on or prior to twelve (12)
months or 3,000 Flight Hours or Cycles, as the case may be, after the
expiration of the Term (or return of the Aircraft, if later) shall have such
inspection, modification or terminating compliance completed at the highest
level of compliance possible prior to return. Without limiting the foregoing,
the Aircraft shall be in full compliance with the Manufacturer's then current
ETOPS Compliance Configuration and Maintenance Procedures Document for 120
(or, if applicable, 180) minutes ETOPS operation. The Aircraft shall also be
in compliance with the Manufacturer's SSI, SSID, Corrosion Prevention and
Control and Aging Aircraft Programs, and shall comply with United States and
ICAO (to the extent applicable to aircraft operated in the United States)
noise and environmental regulations.

         (6) BORESCOPE INSPECTION, ETC. Lessor shall have the right at
Lessee's expense to carry out a full video borescope inspection of the gas
path of the hot and cold sections of each Engine and the APU and undertake a
full operational check (power assurance run) of each Engine and the APU
system. Lessee shall provide evidence satisfactory to Lessor reflecting the
correction at Lessee's expense of any watch items or unserviceable or


                                 13-10
<PAGE>

reject conditions or defects or discrepancies found not to be in compliance with
manufacturer's maintenance manual limits during such inspections and checks.

         (7) KITS. Lessee shall have ordered during the Term all no-charge
kits for the Aircraft offered by Manufacturer, the Engine manufacturer and
other vendors, and, if not incorporated in the Aircraft at the time of return
hereunder (unless required to do so by the terms hereof), Lessee shall return
such kits to Lessor with the Aircraft. Lessor shall be provided with all
modification kits and other such items that are on order for the Aircraft.

         (8) LEAKS, ETC. The Airframe and Engines so returned shall be free
 of fuel leaks, and the fuel system of the Aircraft, including the Engines,
shall have been tested and free of bacteriological, fungus and other
contamination and corrosion and shall show no indication of breakdown. The
hydraulic and oil systems of the Aircraft, including the Engines, shall have
been tested and free of contamination and corrosion and shall show no
indication of breakdown. Lessee shall provide copies of the results of
laboratory tests of all such systems to Lessor and of full bacteriological
and fungus tests of all fuel tanks performed no more than thirty (30) days
prior to return of the  Aircraft.  Any bacteriological, fungus or other
contamination or corrosion revealed thereby shall be corrected or treated to
Lessor's satisfaction prior to return.

         (9) PAINTING. Lessee shall remove all special markings of Lessee,
and shall strip the paint from the Aircraft and repaint the Aircraft in a
livery specified by Lessor after application of corrosion protection and
performance of other procedures, in accordance with industry practice, with
control surfaces balanced and other procedures performed in accordance with
Manufacturer's maintenance procedures, all at Lessee's expense. Lessee shall
also weigh the Aircraft.

         (10) NOISE CREDITS. Any and all noise credits, base level rights or
any other types of rights which accrue with respect to the Aircraft shall be
deemed to be transferred to and to have accrued to the benefit of Lessor upon
the expiration or sooner cancellation or termination of this Lease for any
reason.

     (e) RECORDS. Upon the return of the Aircraft, (i) the Airframe, Engines
and all Parts shall be documented with work orders, vendor serviceable tags,
etc. to have been maintained, repaired and overhauled by FAA certified repair
stations or by those approved by the FAA through reciprocal agreements and in
a manner so that such equipment is approved by the FAA for use on United
States registered and certificated aircraft, and (ii) Lessee shall deliver
to Lessor (A) all logs, manuals, certificates, data and inspection,
modification, maintenance and overhaul records, amended to their latest
amendment revision available generally, required to be maintained with
respect thereto under applicable rules and regulations of the FAA or other
governmental authority having jurisdiction, and (B) all logs, manuals and
catalogs included with the Aircraft on the Delivery Date therefor or supplied
during the Term hereof, amended to their latest amendment revision available
generally.

         If non-computerized copies of maintenance records are not available,
then Lessee shall take action with the pertinent regulatory agencies to
insure that Lessor and


                                   13-11
<PAGE>

the FAA are provided with all requested necessary and proper guarantees of
methods of compliance, component overhaul and management, scheduling, quality
control, serial number verification, etc.

         The head of Lessee's Quality Control Department shall certify in
writing that the data and information contained in all documentation and
records returned to Lessor is true and correct. For any computerized
records, the head of Lessee's Quality Control Department shall sign or
initial each computer page.

         All Parts identified with safe-life limits shall be identified with
their back to birth service histories, accumulated Cycles or Flight Hours, as
applicable, and remaining service lives on a separate listing. All Parts
which are identified in the maintenance records by part numbers and serial
numbers, other than the manufacturer's shall be provided with interchange or
cross reference listing necessary to establish complete traceability.

         In the event of missing, incomplete or noncompliant records, Lessee
shall at its expense reaccomplish the tasks necessary to produce such records
in accordance with its Maintenance Program prior to return of the Equipment
to Lessor. Without limiting any of the foregoing, all overhaul and repair
procedures shall as to quality and documentation be such as to enable
immediate transfer to a new operator under FAR Part 121. At the time of
return of the Aircraft to Lessor hereunder, Lessee shall also provide Lessor
with evidence satisfactory to Lessor that Lessee has fully paid and
discharged all navigation charges, airport landing fees and the like which
have resulted in or could give rise to a Lien on the Aircraft or any part
thereof if the same remains unpaid.

     (f) TECHNICAL ACCEPTANCE; FERRY FLIGHT. Upon completion of the
inspection of the Aircraft and records by Lessor and, unless otherwise agreed
in writing by Lessor and Lessee, correction of any discrepancies or
deficiencies required to be corrected by Lessee prior to redelivery to
Lessor, Lessor shall execute and deliver to Lessee, a technical acceptance
certificate which shall constitute Lessor's technical acceptance of the
Aircraft, except as noted in such technical acceptance certificate.
Notwithstanding the execution and delivery of such technical acceptance
certificate by Lessor, all Lessee's obligations hereunder shall continue in
full force and effect until actual return of the Aircraft to and final
acceptance of the Aircraft by Lessor at the location specified in Article
13(a), in full compliance with all Lessee's obligations hereunder, to the
same extent as if such technical acceptance certificate had not been executed
by Lessor (it being understood, without limitation, that Lessee shall (i)
bear the full risk of damage and loss to the Aircraft and shall promptly
repair or cause to be repaired any damage to the Aircraft which may occur
prior to completion of ferry flight referred to below, and (ii) maintain
insurance in respect of the Aircraft as required by Article 10 hereof to and
including the time of redelivery of the Aircraft to Lessor); provided,
however, Lessee shall not be responsible to correct any discrepancies or
deficiencies that existed at the time of the final inspection of the Aircraft
referred to above but were not raised until completion of the ferry flight of
the Aircraft referred to below if such discrepancies or deficiencies could
have been noted on completion of the final inspection of the Aircraft (ie.,
the foregoing shall not relieve Lessee from its responsibility  to correct
discrepancies or


                                     13-12
<PAGE>

deficiencies discovered as the result of the ferry flight of the Aircraft).
Upon technical acceptance of the Aircraft by Lessor, Lessee shall promptly
ferry the Aircraft at Lessee's cost to the redelivery location referred to in
Article 13(a) hereof. Lessor shall have the right (subject to compliance with
the requirements or approval of the FAA) for up to five (5) representatives
or designees to travel on the Aircraft on such ferry flight.

     (g) AID IN DISPOSITION. Lessee agrees that during the last 180 days of
the Term it win cooperate in all reasonable respects with the efforts of
Lessor to lease or sell the Aircraft, including, without limitation,
permitting potential lessees or purchasers to inspect the Aircraft and the
records relating thereto, provided that the same shall not interfere with
Lessee's use  of the Aircraft or require Lessee to incur out-of-pocket
expenses for which it is not reimbursed.


                                  13-13
<PAGE>

     ARTICLE 14. EVENTS OF DEFAULT. The following events shall constitute
Events of Default (whether any such event shall be voluntary or involuntary
or come about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):

     (a) Lessee shall fail to make any payment of Rent as and when due, and
such failure shall continue for a period of at least three (3) consecutive
days;

     (b) Lessee shall fail to carry and maintain insurance in accordance with
the provisions of Article 10 hereof,

     (c) Lessee shall fail to perform or observe any term, condition or
agreement to be performed or observed by it under Article 3(c) (as
supplemented in Schedule "1" hereto), Article 5(a), 5(b), or 5(d), Article
10(d), Article 12 or Article 13;

     (d) Lessee shall fail to perform or observe any other term, condition,
covenant or agreement to be performed or observed by it hereunder or under
any other agreement between Lessor and Lessee and such failure shall continue
unremedied for a period of thirty (30) days after actual knowledge thereof by
Lessee;

     (e) Any representation or warranty made by Lessee herein or in any
document or certificate furnished Lessor in connection herewith or pursuant
hereto shall prove to be false or misleading in any material respect;

     (f) Any obligation of Lessee for the payment or guarantee of payment of
borrowed money or the deferred purchase price of property or for the payment
or guarantee of payment of rent under any lease of aircraft shall not be paid
when due, whether by acceleration or otherwise, and such default in payment
shall continue beyond any applicable grace period or extension thereof, and
the other party to any such agreement has commenced to exercise any of its
remedies under such agreement;

     (g) Lessee shall consent to the appointment of a receiver, custodian,
administrator, trustee, liquidator or any similar official of itself or of a
substantial part of its property, or Lessee shall become insolvent or fail to
pay or admit in writing its inability to pay its debts generally as they come
due, or shall make a general assignment for the benefit of creditors, or
Lessee shall file a voluntary petition for an order for relief pursuant to
Section 301 of Title 11 of the United States Code, or any superseding
statute, as amended from time to time, or a voluntary petition in bankruptcy
or a voluntary petition or an answer seeking reorganization in a proceeding
under any bankruptcy laws (as now or hereafter in effect) or an answer
admitting the material allegations of a petition filed against Lessee for an
order for relief or in any such proceeding, or Lessee shall by voluntary
petition, answer or consent, seek relief under the provisions of any other
now existing or future bankruptcy or other similar law


                                14-1
<PAGE>

providing for the reorganization, liquidation or winding-up of corporations,
or providing for an arrangement, composition, extension or adjustment with
its creditors;

     (h) An order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of Lessee, a receiver,
custodian, administrator, trustee, liquidator or similar official of Lessee
or of any substantial part of its property, or any substantial part of the
property of Lessee shall be sequestered, and any such order, judgment or
decree of appointment or sequestration shall remain in force undismissed,
unstayed or unvacated for a period of thirty (30) days after the date of
entry thereof;

     (i) A petition against Lessee for an order for relief pursuant to
Section 303 of Title 11 of the United States Code, or any superseding
statute, as amended from time to time or an order for any proceeding under
any bankruptcy laws or other insolvency laws (as now or hereafter in effect)
shall be filed and shall not be withdrawn or dismissed within thirty (30)
days thereafter, or, under the provisions of any law providing for
reorganization, liquidation or winding-up of corporations which may apply to
Lessee, any court of competent jurisdiction shall assume jurisdiction,
custody or control of Lessee or of any substantial part of its property and
such jurisdiction, custody or control shall remain in force unrelinquished,
unstayed or unterminated  for a period of thirty (30) days;

     (j) Final judgment for the payment of money in excess of $500,000 (or
its equivalent) shall be rendered against Lessee and the same shall remain
unpaid, unstayed or undischarged for a period of thirty (30) days;

     (k) Lessee's certificated operations shall be suspended, or Lessee shall
cease to be a certificated Air Carrier, or the franchises, concessions,
permits, certificates, licenses (including, without limitation, its air
operator certificate or air transport license), rights or privileges required
for the conduct of Lessee's airline operations are revoked, canceled,
suspended, not renewed or otherwise terminated; or

     (l) An "Event of Default" under, and as such term is defined in, the
Companion Lease shall have occurred and be continuing.


                                  14-2
<PAGE>

     ARTICLE 15. REMEDIES. Upon the occurrence of any Event of Default and at
any time thereafter so long as the same shall be continuing, Lessor may, at
its option, declare this Lease to be in default and Lessor may, in addition
to any other remedies provided herein or by applicable law, exercise one or
more of the following remedies with respect to the Aircraft, or any part
thereof, as Lessor in its sole discretion shall elect:

     (a) Demand that Lessee, and Lessee shall upon the written demand of
Lessor and at Lessee's expense, return promptly to Lessor the Aircraft in the
manner and condition required by, and otherwise in accordance with all of the
provisions of, Article 13 hereof as if the Aircraft were being returned at
the end of the Term therefor; or Lessor, at its option, may enter upon the
premises where all or any part of the Aircraft or any Engine is located and
take immediate possession of and remove the same (together with any engine
which is not an Engine but which is installed on the Airframe and any other
property in the Aircraft subject to all of the rights of the owner, lessor,
lienor or secured party of such engine  or other property, provided, however,
that the Airframe with an engine (which is not an Engine) installed thereon
or any property therein may be flown to a location within Europe or the
United States, and such engine or other property shall be held for the
account of any such owner, lessor, lienor or secured party or, in the case of
an engine owned by Lessee free of Liens, may, at the option of Lessor, be
exchanged with Lessee for an Engine in accordance with the terms of Article
13 hereof) by summary proceedings or otherwise, all without liability
accruing to Lessor for or by reason of such entry or taking of possession,
whether for the restoration of damage to property caused by such taking or
otherwise;

     (b) Sell the Aircraft, or part thereof, at public or private sale, or
otherwise dispose of, hold, use, operate, lease to others or keep idle the
Aircraft, or part thereof, as Lessor in its sole discretion may determine,
all free and clear of any rights of Lessee and without any duty to account to
Lessee with respect to such action or inaction or for any proceeds with
respect thereto, except to the extent required by paragraph (c) below in the
event Lessor exercises its rights under such paragraph;

     (c) In the event Lessor, pursuant to paragraph (b), above, shall have
relet the Aircraft or shall have sold the Aircraft, Lessor, in lieu of
exercising its rights under paragraph (d), below (but without limiting any of
its other rights hereunder or under law), may, if it shall so elect, demand
that Lessee pay Lessor and Lessee shall pay Lessor, as liquidated damages for
loss of a bargain and not as a penalty (in lieu of the Basic Rent for the
Aircraft due for the period commencing as of the commencement of the term of
the reletting or the date of sale, as the case may be) any accrued but unpaid
Basic Rent for the Aircraft due up to and including the date of the
commencement of the term of the reletting or the date of sale plus the excess
of: (i) in the case of a reletting, the aggregate unpaid Basic Rent for the
Aircraft which would otherwise have become due hereunder over the Term but
for the Event of Default, discounted monthly to present value as of the date
of the commencement of the term of the reletting at 6% per annum, over the
aggregate basic rental payments to become due


                                    15-1
<PAGE>

under the reletting from the date of the commencement of the term of the
reletting to the date upon which the Term for the Aircraft would have expired
but for Lessee's default, discounted monthly to present value as of the date
of the commencement of the term of the reletting at 6% per annum, or (ii) in
the case of a sale, the Stipulated Loss Value for the Aircraft, computed as
of the Basic Rent payment date immediately preceding the date of sale, over
the net cash proceeds  of such sale. The amounts specified in this paragraph
shall continue to bear interest at the Incentive Rate from the date of the
commencement of the term of the reletting or the date of sale, as  the case
may be, until payment is made;

     (d) if Lessor shall have obtained possession of the Aircraft as
contemplated in paragraph (a), above, but shall not have relet or sold the
Aircraft as contemplated by paragraph (c), above, Lessor shall have the right
(but without limiting any of its other rights hereunder or under law), by
written notice to Lessee specifying a payment date, to demand that Lessee pay
to Lessor, and Lessee shall pay to Lessor, on the payment date specified in
such notice, all accrued but unpaid Basic Rent for the Aircraft due to and
including the payment date specified in such notice, plus the aggregate
unpaid Basic Rent for the Aircraft which would otherwise have accrued over
the remainder of the Term but for the Event of Default, discounted monthly
to present value as of the payment date specified in such notice at 6% per
annum. The amounts referred to in this paragraph shall continue to bear
interest at the Incentive Rate from the payment date specified in said notice
until payment is made;

     (e) Proceed by appropriate  court action or actions to enforce
performance by Lessee of the applicable covenants of this Lease and to
recover damages for the breach hereof;

     (f) Cancel this Lease,  which  cancellation  shall be effective
immediately upon Lessor having given notice of cancellation to Lessee,
whereupon Lessee's right to possess and use the Equipment shall immediately
cease, but such cancellation shall not relieve Lessee of any of its
obligations hereunder which accrued prior to the time of cancellation nor
shall such cancellation be deemed a release or a waiver of Lessee's
obligations for the unperformed balance of this Lease or Lessee's obligation
to compensate Lessor for all damages suffered by Lessor as a result of
Lessee's breach of this Lease, including, without limitation, damages
described in clauses (c), (d) or (e), above;

     (g) Recover from Lessee any losses, premiums, fees, costs or expense
that are paid or incurred by Lessor in connection with the repayment of funds
obtained to finance or otherwise acquire the Aircraft, if any, or in
connection with the borrowing of funds to refinance the Aircraft, if any.

     Except as otherwise specifically provided above, Lessee shall also be
liable for all unpaid Rent due hereunder before, during or after the exercise
of any of the foregoing remedies and for all legal fees and other costs and
expenses incurred by reason of the occurrence of any Event of Default or the
exercise of any of Lessor's rights or remedies with respect thereto,
including all costs and expenses incurred in connection with the repossession
or return of the Aircraft in accordance with the terms of Article 13 hereof,
in placing the


                                    15-2



<PAGE>


         ARTICLE 16. EXCUSABLE DELAY.

         (a) GENERAL. Lessor shall not be responsible for nor be deemed to be in
default under this Agreement on account of any delay in delivery of the Aircraft
or other performance  hereunder due to any of the following causes: acts of God;
war,  warlike-operations,  insurrections or riots;  fires; floods or explosions;
serious accidents;  epidemics or quarantine restrictions; any act of government,
governmental  priorities,  allocation regulations or orders affecting materials,
facilities or completed  aircraft;  strikes or labor troubles causing cessation,
slow-down or interruption of work; delay in transportation;  delay or default by
Manufacturer  under the  Purchase  Agreement  or any  manufacturer  or vendor in
respect of the modifications  referred to in Article 2(h) hereof;  or inability
after due and timely diligence to procure materials,  accessories,  equipment or
parts; or due to any other cause to the extent it is beyond Lessor's  control or
not occasioned by Lessor's fault or negligence. Delays resulting from any of the
foregoing  causes are  referred to herein as  "Excusable  Delays."  Lessor shall
promptly  notify  Lessee of any delay or  anticipated  delay in  delivery of the
Aircraft.

         (b) FOUR (4) MONTHS' EXCUSABLE DELAY.

              (i) TERMINATION FOR ACTUAL DELAY.  If, due to Excusable  Delays,
delivery  of the  Aircraft  is delayed for a period of more than four (4) months
after the end of the  calendar  month in which  delivery is  otherwise  required
hereunder in accordance with the Scheduled Aircraft  Delivery,  either Lessor or
Lessee may terminate  this Lease by giving  written notice to that effect to the
other within ten (10) days after the expiration of such four month-period.

              (ii)  TERMINATION  FOR  ANTICIPATED  DELAY.  If  the  Manufacturer
concludes  based on its  appraisal of the facts,  that due to Excusable  Delays,
delivery  of the  Aircraft  will be  delayed  for a period of more than four (4)
months after the Scheduled  Aircraft  Delivery,  and as a result thereof in good
faith and in  accordance  with its normal  scheduling  procedures,  Manufacturer
internally  reschedules delivery of the Aircraft to a date reflecting such delay
and notifies Lessor thereof, Lessor shall notify Lessee in writing of such delay
and  rescheduling,  in which event either  Lessor or Lessee may  terminate  this
Agreement by giving  written  notice to that effect to the other within ten (10)
days after receipt by Lessee of such notice of anticipated delay.

         (c) CONSEQUENCE OF TERMINATION.  Termination  under Article 16(b) shall
terminate and discharge all  obligations  and  liabilities  of Lessee and Lessor
hereunder and all undelivered items and services to be furnished hereunder which
are related  thereto,  and Lessor shall promptly return the Security Deposit and
$100,000 payment  theretofore  paid by Lessee to Lessor,  except that, if Lessee
and not Lessor  terminates  this Lease pursuant to this Article 16, Lessor shall
reduce the payment to Lessee and/or,  as the case may be, be entitled to draw on
the Letter of Credit (and for this  purpose an Event of Default  shall be deemed
to exist  hereunder  so that  Lessor may certify  the  existence  of an Event of
Default hereunder) for the

                                      16-1


<PAGE>




amount  necessary  to  compensate  Lessor for the value of any training or other
goods or services  received by Lessee in connection with this Lease and the cost
of any  modifications  to the Aircraft or equipment or other items  purchased by
Lessor at the request of Lessee in connection with this Lease.

         (d) FAILURE TO TERMINATE. If, following notice of an anticipated delay
under Article  16(b)(ii),  this Lease is not  terminated in accordance  with the
provisions  of such  Article,  then  the  Scheduled  Aircraft  Delivery  for the
Aircraft otherwise required hereunder shall be extended by a period equal to the
resulting delay.

         (e) DAMAGE TO OR DESTRUCTION OF AIRCRAFT - DELIVERY DELAY. In the event
that prior to delivery  the Aircraft  is, due to any cause,  lost,  destroyed or
damaged beyond repair (and this Agreement has not been  terminated in accordance
with this Article 16), or is damaged to the extent that it cannot be repaired to
new  condition  by  replacement  parts  and  delivered  in  accordance  with the
Scheduled  Aircraft  Delivery,   the  time  reasonably  required  to  furnish  a
replacement  for the Aircraft or to  accomplish  such repairs shall be deemed an
Excusable Delay.

         (f) TERMINATION RIGHTS EXCLUSIVE.  The termination rights of Lessee set
forth in this Article 16 are in substitution for any other rights of termination
or contract  lapse which Lessee might have arising by operation of law by virtue
of delays in  performance  for which Lessor is not deemed to be in default or to
have breached its duties hereunder.

                                      16-2


<PAGE>


         ARTICLE 17. MISCELLANEOUS.

         (a)  CONSTRUCTION AND APPLICABLE LAW. Any provision of this Lease which
is  prohibited  or  unenforceable   in  any  jurisdiction   shall,  as  to  such
jurisdiction,   be   ineffective   to  the   extent  of  such   prohibition   or
unenforceability  without invalidating the remaining such provisions hereof, and
any  such  prohibition  or   unenforceability  in  any  jurisdiction  shall  not
invalidate or render unenforceable such provision in any other jurisdiction.  To
the extent  permitted by applicable  law,  Lessee hereby waives any provision of
law which  renders any  provision  hereof  prohibited  or  unenforceable  in any
respect. 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 whom the enforcement of the change, waiver,  discharge or termination is
sought.  This Lease shall  constitute an agreement of lease,  and nothing herein
shall be  construed as conveying to Lessee any right,  title or interest in the
Aircraft or any Engine  except as a lessee only.  The captions in this Lease are
for convenience of reference only and shall not define or limit any of the terms
or  provisions  hereof.  This Lease shall in all respects  be  governed by, and
construed in  accordance  with,  the internal  laws of the State of  California,
United States of America (without regard to any conflict of laws rule that might
result in the application of the laws of any other jurisdiction),  including all
matters of construction, validity and performance.

         (b) NOTICES. All notices,  demands and other communications required or
permitted  under the terms hereof shall be in writing (which shall include telex
and telecopy),  and shall be deemed given or received: (i) if sent by registered
or certified  mail, on the third Business Day after deposit in the national mail
service of the country from which it is sent,  postage  prepaid,  return receipt
requested,  (ii) if sent by any other means of  physical  delivery,  E.G.,  hand
delivery or courier service,  when delivered to the appropriate address provided
below,  (iii)  if  sent  by  telecopier,  when  transmitted  to the  appropriate
telecopier  number provided below and the sender's  telecopy  machine produces a
confirmation  report  confirming that such  transmission has been sent. All such
notices,  demands and other communications shall be addressed and/or telecopied
to the  appropriate  party at its  address  and/or  telecopier  number set forth
below, or at such other address or telecopier number as such party may from time
to time hereafter designate to such other parties in writing:

        If to Lessee:   Aloha Airlines, Inc.
                        371 Aokea Street
                        Honolulu, Hawaii 96819
                        Attention: Senior Vice President - Finance & Planning
                                   & Chief Financial Officer

                                      17-1


<PAGE>


        If to Lessor:   Wilmington Trust Company, Owner Trustee
                        Rodney Square North
                        1100 North Market Street
                        Wilmington, Delaware 19890-0001
                        Attention: Corporate Trust Administration


        With a copy to: Ansett Worldwide Aviation,  U.S.A.
                        c/o Kummer,  Kaempfer,  Bonner & Renshaw
                        3800 Howard  Hughes  Parkway, 7th Floor
                        Las Vegas,  Nevada  89109
                        Attention:  Chief Executive Officer


              and to:   Ansett Worldwide Aviation, U.S.A.
                        c/o Ansett Worldwide Aviation Services
                        TNT Plaza, Tower 1, Lawson Square
                        Redfern, NSW 2016, Australia
                        Attention: Chief Executive Officer

         Lessor's  telefax  number  is  (702)  796-7181,  with a copy to  (61-2)
9699-1349. Lessee's telefax number is (808) 833-3100.

         (c) LESSOR'S  RIGHT TO PERFORM FOR LESSEE.  If Lessee fails to make any
payment of  Supplemental  Rent  required to be made by it  hereunder or fails to
perform or comply with any of its agreements contained herein, Lessor may itself
make such  payment or perform or comply with such  agreement,  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 or compliance  with such
agreement,  as the case may be, together with interest  thereon at the Incentive
Rate, shall be deemed Supplemental Rent, payable by Lessee upon demand.

         (d) CORPORATE EXISTENCE;  MERGER. Lessee will preserve and maintain its
corporate  existence  and all its rights,  privileges  and  franchises  in every
jurisdiction  in which  the  character  of its  property  or the  nature  of its
business makes licensing or  qualification  necessary.  Lessee will not or sell,
lease or otherwise  dispose of all or  substantially  all of its  properties nor
will it merge  with or  consolidate  with or into or be  acquired  by any  other
corporation or entity, unless:

              (i) the  corporation  formed by such  consolidation  or into which
Lessee is merged (the  "Successor"):  (a) shall be organized and existing  under
the laws of the United States of America or any State thereof or the District of
Columbia, (b) shall be a Certificated Air Carrier, (c) shall execute and deliver
to Lessor an agreement in form and substance  reasonably  satisfactory to Lessor
containing an assumption by the Successor of each covenant and condition of this
Lease, (d) immediately  after giving effect to such  transaction,  shall have at
least the tangible net worth and credit  worthiness  that Lessee had immediately
prior to giving effect to such transaction,  and (e) shall make such filings and
recordings,

                                      17-2


<PAGE>


including  any  filing  or  recording  with the FAA,  as shall be  necessary  or
desirable to evidence such consolidation or merger with the Successor; or merger
with the Successor;

              (ii)  Immediately  prior  to  and  after  giving  effect  to  such
transaction, no Event or Event of Default shall have occurred and be continuing,
and the  ability  of the  Successor  (or Lessee if Lessee is the  Successor)  to
perform its obligations under this Lease shall not be adversely affected by such
transaction; and

              (iii) the Successor (or Lessee if Lessee is the  Successor)  shall
have  delivered  to Lessee an  officer's  certificate  and an opinion of counsel
satisfactory to Lessor,  each stating that such  consolidation or merger and the
assumption  agreement  described  above  comply  with this  Article and that the
agreements  entered  into to  effect  such  consolidation  or  merger  and  such
assumption  agreement are legal, valid and binding  obligations of the Successor
(or Lessee if Lessee is the  Successor),  enforceable  in accordance  with their
respective terms.

         (e)  TRAINING  AND  CUSTOMER  SUPPORT.  Pursuant  to  Customer  Support
Document  to  the  Purchase  Agreement,  a copy of which  has  heretofore  been
provided  by Lessor to  Lessee,  Manufacturer  has  agreed to  provide  certain
training,  support services and technical data and documents.  Provided no Event
or Event of Default has occurred and is continuing  hereunder,  Lessor agrees to
assign to Lessee the  training,  support  services,  data,  documents  and other
rights  available  under  such  Customer  Support  Document  in  respect  of the
Aircraft. Lessor shall not have any liability or responsibility for the adequacy
of such  training;  support  services or  technical  data and  documents  or for
Manufacturer's  performance or nonperformance  in respect thereof,  all of which
is, as to Lessor,  without  recourse,  representation  or  warranty,  express or
implied.  Lessee hereby agrees to be bound by all the provisions of the Customer
Support Document.

         (f) SUBJECT AND SUBORDINATE. THIS LEASE AND LESSEE'S RIGHTS HEREUNDER
AND IN THE  AIRCRAFT  ARE  SUBJECT  AND  SUBORDINATE  TO ALL THE  TERMS  OF THE
MORTGAGE,  INCLUDING,  WITHOUT  LIMITATION  MORTGAGEE'S  RIGHT TO TAKE IMMEDIATE
POSSESSION OF THE AIRCRAFT UPON THE  OCCURRENCE OF AN EVENT OF DEFAULT UNDER THE
MORTGAGE.  Without limiting the foregoing,  solely as between Lessor and Lessee,
Lessor  covenants  that if,  and so long as,  no Event  of  Default  shall  have
occurred  and be  continuing,  Lessor  shall not (and Lessor shall not provide a
basis for  Mortgagee or any other person  lawfully  claiming  through  Lessor or
Mortgagee to) disturb  Lessee's quiet  enjoyment of the Aircraft  hereunder.  If
Lessor breaches the foregoing covenant or if Mortgagee  improperly  repossesses,
seizes or attaches the  Aircraft,  Lessee  acknowledges and agrees that Lessee's
sole right and remedy  shall be the right to seek to recover  resulting  damages
from  Lessor,  but Lessee  shall have no right to recover  any  damages  from or
otherwise  sue  Mortgagee  in  connection   therewith  or  otherwise  to  retain
possession  or use of the Aircraft in  contravention  of the rights,  interests,
benefits or remedies of Mortgagee.

                                      17-3


<PAGE>


         (g) ASSIGNMENT. THIS LEASE AND ALL OR ANY PART OF LESSEE'S RIGHTS
HEREUNDER, INCLUDING, WITHOUT LIMITATION, ITS RIGHTS IN RESPECT OF THE
SECURITY DEPOSIT AND TO THE RETURN THEREOF, SHALL NOT BE ASSIGNED, NOVATED,
HYPOTHECATED OR OTHERWISE TRANSFERRED BY LESSEE WITHOUT LESSOR'S PRIOR
WRITTEN CONSENT,  AND ANY PURPORTED ASSIGNMENT,  NOVATION,  HYPOTHECATION  OR
TRANSFER  SHALL BE VOID.  Subject  to theforegoing,  this Lease shall inure
to the benefit of and be binding  upon the respective  successors and assigns
of the parties hereto.  Lessor's  interest in this Lease  Agreement and in
the Aircraft are freely  saleable,  novateable  and assignable  by Lessor  in
whole or in part  without  restriction,  and upon such sale,  novation or
assignment  (unless the assignment is solely for collateral security
purposes),  Lessor shall be  discharged  from all further  obligations
hereunder in respect of such interest or Equipment sold or assigned and
Lessor's assignee or transferee  shall succeed to all of Lessor's  rights,
interests and obligations  in respect  thereof as though such assignee or
transferee  had been the initial owner or lessor, as the. case may be, in
respect thereof Lessor may also assign for collateral  security purposes or
otherwise mortgage its fixed or contingent rights to receive money hereunder
or its interests in this Lease or in the Aircraft,  in whole or in part.
Lessee shall comply with all  reasonable requests of Lessor, its successors,
transferees and - assigns in respect of the sale,  assignment,  novation,
hypothecation  or other transfer  (including,  if requested,  execution of a
consent  thereto,  reaffirming  its  representations, warranties and
obligations  hereunder in favor of such  assignee,  successor or transferee
or execution of a lease agreement on terms  substantially  identical to this
Lease Agreement  substituting the name of such transferee,  successor or
assignee for Lessor,  and in either case  providing the  assignee,  successor
or transferee with an insurance certificate and broker's report,  addressed
to such assignee,  successor or  transferee,  in  compliance  with the
requirements  of Article 10 hereof).  No such sale,  assignment,  novation or
other transfer by Lessor  shall   materially   expand  the   obligations
of  Lessee   hereunder. Notwithstanding any such sale,  assignment,  novation
or other transfer,  Lessor and the Participants  shall continue to be
Indemnitees  pursuant to Article 8(a) and shall continue to be named as
additional  insureds on all liability policies carried by Lessee  pursuant
to Article 10 hereof. Without  limiting  any of the foregoing,  Lessor may,
and at Lessor's  request  Lessee shall,  take any action reasonably  required
for the purpose of causing the Aircraft to be subjected to an equipment
trust,  conditional sale,  leveraged lease or other arrangement for the
financing by Lessor or Lessor's transferee or assignee of the Aircraft.

         (h) EXPENSES.  The prevailing party in any action or proceeding between
Lessor and  Lessee to  enforce  the terms of this  Lease  shall be  entitled  to
recover from the other party all its costs and  expenses,  including  reasonable
attorneys' fees incurred by such prevailing  party in such action or proceeding.
In addition,  Lessee shall also reimburse Lessor for all out-of-pocket costs and
expenses,  including reasonable attorneys fees, incurred by Lessor in connection
with any  approvals,  consents,  waivers,  modifications  or  amendments  hereto
requested by Lessee.

         (i) SURVIVAL. The representations, warranties and indemnities of Lessee
in this Lease shall  survive the delivery of the Aircraft and the  expiration or
other termination of

                                      17-4


<PAGE>


this lease and are expressly  made for the benefit of, and shall be  enforceable
by Lessor and its successors and assigns.

         (j) INTEGRATION. This Lease Agreement  contains the entire
agreement of the parties hereto  with  respect to the  subject  matter
hereof and  supersedes  all prior written and oral agreements and
understandings  between the parties hereto with respect to the subject matter
hereof.

         (k) FEDERAL  BANKRUPTCY  CODE. In accordance with Section 1110 of Title
11 of the United States Bankruptcy Code, or any superseding  statute, as amended
from time to time, Lessee hereby agrees that the title of Lessor to the Aircraft
and  Engines  and any right of Lessor to take  possession  of the  Aircraft  and
Engines in compliance with the provisions of this Lease shall not be affected by
the  provisions  of Section 105,  362, 363 or any other  Section of Title 11, as
amended and in effect from time to time.  In the event  Section 1110 is amended,
or if it is repealed and another statute is enacted in lieu thereof,  Lessor and
Lessee  agree to amend  this Lease and take such  other  action as Lessor  deems
necessary  so as to afford to Lessor the rights and  benefits as such amended or
substituted statute confers upon owners and lessors of aircraft.

         (l)   COUNTERPARTS.   This  Lease  may  be  executed  in  two  or  more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

         (m) EXECUTION BY TELECOPY. Delivery by Lessor or Lessee to the other by
telecopy  of an  executed  counterpart  of this  Lease or of any other  document
executed  pursuant  hereto  shall be  deemed  as  effective  as  delivery  of an
originally executed  counterpart  thereof.  Such party shall promptly deliver to
the other party an originally executed  counterpart  thereof, but the failure of
such party to deliver an executed counterpart shall not affect the validity or
effectiveness of this Lease or such other document.

                                      17-5


<PAGE>


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

                                        LESSOR:

                                        WILMINGTON  TRUST  COMPANY,  not in its
                                        individual  capacity  but solely in its
                                        capacity as Owner Trustee

WITNESS:                                By:        [ILLEGIBLE]
                                           ----------------------------------
                                        Title:          AVP
                                               ------------------------------
         [ILLEGIBLE]
---------------------------------

                                        LESSEE:

                                        ALOHA AIRLINES, INC.

WITNESS:                                By:        [ILLEGIBLE]
                                           ----------------------------------
                                        Title: PRESIDENT AND CHIEF
                                               EXECUTIVE OFFICER
                                               ------------------------------

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

WITNESS:                                By:        [ILLEGIBLE]
                                           ----------------------------------
                                        Title: VICE PRESIDENT PLANNING
                                               & DEVELOPMENT
                                               ------------------------------

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


                                      17-6



<PAGE>


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

                                        LESSOR:

                                        WILMINGTON  TRUST  COMPANY,  not in its
                                        individual  capacity  but solely in its
                                        capacity as Owner Trustee

WITNESS:                                By:        [ILLEGIBLE]
                                           ----------------------------------
                                        Title:
                                               ------------------------------

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

                                        LESSEE:

                                        ALOHA AIRLINES, INC.

WITNESS:                                By:        [ILLEGIBLE]
                                           ----------------------------------
                                        Title: PRESIDENT & CHIEF
                                               EXECUTIVE OFFICER
                                               ------------------------------
         [ILLEGIBLE]
---------------------------------

WITNESS:                                By:        [ILLEGIBLE]
                                           ----------------------------------
                                        Title: VICE PRESIDENT PLANNING
                                               & DEVELOPMENT
                                               ------------------------------
         [ILLEGIBLE]
---------------------------------

                                      17-6

<PAGE>


                                   SCHEDULE "1"

This is Schedule "1" to the Lease Agreement between  Wilmington Trust
Company, a Delaware banking  corporation,  acting not in its individual
capacity but solely as Owner Trustee (herein called "Lessor"),  and Aloha
Airlines, Inc. ("Lessee"), for the lease of a Boeing Model 737-73A  aircraft,
 MSN 28499.

[This Schedule has been omitted as confidential information and filed
separately with the Commission]


                                       S-1
<PAGE>


                                   Exhibit "A"

                                LEASE SUPPLEMENT

         THIS LEASE SUPPLEMENT,  dated _________, 1999, between Wilmington
Trust Company, a Delaware banking corporation, acting not in its individual
capacity but solely as Owner  Trustee  (herein  called  "Lessor"),  and Aloha
 Airlines,  Inc.  (the "Lessee").

         Lessor and Lessee have heretofore  entered into a Lease Agreement dated
as of August 4, 1999 (herein the "Lease Agreement" and the terms defined therein
being herein used with the same meaning), which Lease Agreement provides for the
execution and delivery of a Lease  Supplement,  substantially in the form hereof
for the purpose of leasing a specific  Aircraft under the Lease Agreement as and
when delivered by Lessor to Lessee in accordance with the terms thereof.

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

         NOW,  THEREFORE,  in  consideration  of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:

         (1) Lessor  hereby  delivers  and leases to Lessee,  and Lessee  hereby
accepts  and  leases  from  Lessor,  under the Lease  Agreement,  the  following
described Boeing Model 737-73A aircraft and engines  (hereafter,  the "Delivered
Equipment"):


              (i)  Airframe:  Identification  Number ________; Manufacturer's
Serial No. ______; and

              (ii) Engines:  Two CFM International  Model CFM56-7B20 engines
(to be upgraded to  CFM56-7B24  engines  prior to or  promptly  following
delivery) bearing, respectively,  manufacturer's serial numbers _________ and
_______ (each of which engines has 750 or more rated takeoff horsepower or
the equivalent of such horsepower).

         (2) The Delivery  Date of the  Delivered  Equipment is the date of this
Lease supplement set forth in the opening paragraph hereof.

         (3) The Term for the Delivered  Equipment shall commence on the
Delivery Date therefor and shall end on ________________ 2009.

         (4) Lessee  hereby  confirms  its  agreement  to pay  Lessor  Rent with
respect to the Delivered  Equipment  throughout  the Term therefor in accordance
with the terms of the Lease Agreement.

                                       A-1


<PAGE>


         (5) The fuel in the fuel tanks of the Aircraft on the Delivery Date is
_________.

         (6) Lessee hereby  confirms to Lessor that the  Airframe  and
Engines described above have been duly marked as showing  Lessor's  title
thereto and Mortgagee interest  therein in accordance  with the terms of the
Lease Agreement and that Lessee mortgage has accepted the Delivered
Equipment for all purposes of the Lease Agreement,  including its being
airworthy,  in accordance with  specifications,  in good  working  order and
repair and without  defect or inherent vice in title, condition, design,
operation or fitness for use, whether or not discoverable by Lessee as of the
date hereof,  and free. and clear of all Liens;  provided,  however,  that
nothing  contained  herein  or in  the  Lease Agreement  shall in any way
diminish or  otherwise  affect any right  Lessee or Lessor may have with
respect to the Delivered Equipment as against Manufacturer or any other
person, whether under the Purchase Agreement or otherwise.

         (7) All of the terms and provisions of this Lease Supplement are
hereby incorporated  by reference into the Lease  Agreement to the same
extent as if fully set forth therein.

         (8) This.  Lease  Supplement  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.

                                       A-2


<PAGE>


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

                                        LESSOR:

                                        WILMINGTON  TRUST  COMPANY,  not in its
                                        individual  capacity  but solely in its
                                        capacity as Owner Trustee

WITNESS:                                By:
                                           ----------------------------------
                                        Title:
                                               ------------------------------

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

                                        LESSEE:

                                        ALOHA AIRLINES, INC.

WITNESS:                                By:
                                           ----------------------------------
                                        Title:
                                               ------------------------------

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

WITNESS:                                By:
                                           ----------------------------------
                                        Title:
                                               ------------------------------

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

                                       A-3
<PAGE>


                                LEASE SUPPLEMENT

         THIS LEASE SUPPLEMENT, dated October 18, 1999, between Wilmington Trust
Company, a Delaware banking  corporation,  acting not in its individual capacity
but solely as Owner Trustee (herein called "Lessor"),  and Aloha Airlines,  Inc.
(the "Lessee").

         Lessor and Lessee have heretofore  entered into a Lease Agreement dated
as of August 4, 1999 (herein the "Lease Agreement" and the terms defined therein
being herein used with the same meaning), which Lease Agreement provides for the
execution and delivery of a Lease  Supplement,  substantially in the form hereof
for the purpose of leasing a specific  Aircraft under the Lease Agreement as and
when delivered by Lessor to Lessee in accordance with the terms thereof.

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

         NOW,  THEREFORE,  in  consideration  of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:

         (1) Lessor  hereby  delivers  and leases to Lessee,  and Lessee  hereby
accepts  and  leases  from  Lessor,  under the Lease  Agreement,  the  following
described Boeing Model 737-73A aircraft and engines  (hereafter,  the "Delivered
Equipment"):

              (i) Airframe:  U.S.  Registration  Number  N738AL;  Manufacturer's
Serial No. 28499; and

              (ii)  Engines:  Two CFM  International  Model  CFM56-7B24  engines
bearing, respectively,  manufacturer's serial numbers 874938 and 874945 (each of
which engines has 750 or more rated takeoff horsepower or the equivalent of such
horsepower).

         (2) The Delivery  Date of the  Delivered  Equipment is the date of this
Lease Supplement set forth in the opening paragraph hereof.

         (3) The Term for the Delivered Equipment shall commence on the Delivery
Date therefor and shall end on October 17, 2009.

         (4) Lessee  hereby  confirms  its  agreement  to pay  Lessor  Rent with
respect to the Delivered  Equipment  throughout  the Term therefor in accordance
with the terms of the Lease Agreement.


<PAGE>


         (5) The fuel in the fuel tanks of the Aircraft on the Delivery  Date is
5,700 lbs.

         (6) The Lease  Agreement is amended and  supplemented  in the following
respects:

              (i) The "Mortgage"  referred to in Article 1 is more  specifically
defined  as the  Mortgage  Agreement  dated  October  1999  between  Lessor  and
Mortgagee;

              (ii) The "Mortgagee" referred to in Article 1 is more specifically
defined as Citibank  International  Plc,  and its  successors,  transferees  and
assigns; and

              (iii) Citibank International Plc and Citibank, N.A. are lenders in
connection  with the Mortgage and are  therefore  included in the  definition of
"Participants" in Article 1.

         (7) Lessee  hereby  confirm to Lessor  that the  Airframe  and  Engines
described  above have been duly  marked as showing  Lessor's  title  thereto and
Mortgagee's  mortgage interest therein in accordance with the terms of the Lease
Agreement and that Lessee has accepted the Delivered  Equipment for all purposes
of the Lease  Agreement,  including  its being  airworthy,  in  accordance  with
specifications,  in good working order and repair and without defect or inherent
vice in title, condition,  design,  operation or fitness for use, whether or not
discoverable  by Lessee as of the date hereof,  and free and clear of all Liens;
provided, however, that nothing contained herein or in the Lease Agreement shall
in any way diminish or otherwise affect any right Lessee or Lessor may have with
respect to the Delivered Equipment as against  Manufacturer or any other person,
whether under the Purchase Agreement or otherwise.

         (8) All of the terms and provisions of this Lease Supplement are hereby
incorporated  by  reference  into the Lease  Agreement  to the same extent as if
fully set forth therein.

         (9) This Lease Supplement may be executed in two or more  counterparts,
each of which  shall be  deemed an  original,  but all of which  together  shall
constitute one and the same instrument.

         (9) This Lease  Supplement  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.



                                        2


<PAGE>


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


                                        LESSOR:

                                        WILMINGTON  TRUST  COMPANY,  not in its
                                        individual  capacity  but solely in its
                                        capacity as Owner Trustee

WITNESS:                                By: /s/ Patricia A. Evans
                                           ----------------------------------
                                        Title: Financial Services Officer
                                               ------------------------------

         [ILLEGIBLE]
---------------------------------

                                        LESSEE:

                                        ALOHA AIRLINES, INC.

WITNESS:                                By:
                                           ----------------------------------
                                        Title:
                                               ------------------------------

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

WITNESS:                                By:
                                           ----------------------------------
                                        Title:
                                               ------------------------------

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


                                      3


<PAGE>


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

                                        LESSOR:

                                        WILMINGTON  TRUST  COMPANY,  not in its
                                        individual  capacity  but solely in its
                                        capacity as Owner Trustee

WITNESS:                                By:
                                           ----------------------------------
                                        Title:
                                               ------------------------------


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

                                        LESSEE:

                                        ALOHA AIRLINES, INC.

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

WITNESS:                                By: /s/ James M. King
                                           ----------------------------------
                                        Title: VICE PRESIDENT
                                               PLANNING & DEVELOPMENT
                                               ------------------------------
         [ILLEGIBLE]
---------------------------------


                                      3
<PAGE>
                                             (CERTIFIED COPY TO BE RETURNED)
                                                         RECORDED
                                             Federal Aviation Administration

                                            Date   1-24-02      Time   am 8:28
                                                 --------------      ----------
                                             Conveyance Number     QQ024259
                                                              -----------------
                                            By     /s/ L. Kelley
                                               ---------------------


                                 AMENDMENT NO. 1
                               TO LEASE AGREEMENT

     This Amendment No. 1 to Lease Agreement ("Amendment No. 1"), dated as of
November 29, 2001, is entered into by and between Wilmington Trust Company not
in its individual capacity but solely as Owner Trustee (herein called "Lessor"),
and Aloha Airlines, Inc., a Delaware corporation (herein called "Lessee").

                                    RECITALS

     A. Lessor and Lessee have heretofore entered into a Lease Agreement dated
as of August 4, 1999*, as supplemented to the date hereof (collectively referred
to as the "Lease"), pursuant to which Lessor has leased to Lessee one Boeing
Model 737-73A aircraft bearing manufacturer's serial number 28499 and United
States Registration Marks N738AL, equipped with two CFM 56-7B24 engines
bearing, respectively, manufacturer's serial numbers 874938 and 874945.

     B. Lessor and Lessee wish to amend certain terms of the Lease and to extend
the Term of the Lease all on the terms and conditions set forth below.

     C. Capitalized terms used herein and not otherwise defined herein shall
have the meaning assigned to such terms in the Lease and reference to
"Articles" herein shall be construed to refer to Articles of the Lease.

                              TERMS AND CONDITIONS

     Therefore, in consideration of the premises, and for good and valuable
consideration, receipt of which is hereby acknowledged, the parties hereto
hereby agree as follows:

     1. Article 3(a) of the Lease is hereby amended and restated in its entirety
as follows:

     "(a) TERM. Except as otherwise provided herein, the Aircraft shall be
     leased to Lessee hereunder for a Term that commences on the Delivery Date
     and ends on October 17, 2010."

     2. Schedule 1 to the Lease Agreement shall be amended in accordance
with the Amendment to Schedule 1 attached hereto.



* as more particularly described in Annex I attached hereto (the "Lease"),


<PAGE>

     3. This Amendment No. 1, when executed by Lessor and Lessee, shall become
effective as of the date first written above.

     4. On and after the effective date of this Amendment No. 1, each reference
in the Lease to "the Lease", "this Lease", "hereunder", "hereof" or words of
like import referring, shall mean and be a reference to the Lease as amended by
this Amendment No. 1. The Lease, except to the extent amended by this Amendment
No. 1, remains in full force and effect and is hereby in all respects ratified
and confirmed.

     5. This Amendment No. 1 may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.

     6. This Amendment No. 1 shall be governed by and construed in accordance
with the laws of California.


     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed by their respective authorized officers or representatives as
of the date first written above.


                                 WILMINGTON TRUST COMPANY, not in its
                                 individual capacity but solely as Owner Trustee

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


                                 ALOHA AIRLINES, INC.

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

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


                                     2
<PAGE>

     3. This Amendment No. 1, when executed by Lessor and Lessee, shall become
effective as of the date first written above.

     4. On and after the effective date of this Amendment No. 1, each reference
in the Lease to "the Lease", "this Lease", "hereunder", "hereof" or words of
like import referring, shall mean and be a reference to the Lease as amended by
this Amendment No. 1. The Lease, except to the extent amended by this Amendment
No. 1, remains in full force and effect and is hereby in all respects ratified
and confirmed.

     5. This Amendment No. 1 may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.

     6. This Amendment No. 1 shall be governed by and construed in accordance
with the laws of California.


     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed by their respective authorized officers or representatives as
of the date first written above.


                                 WILMINGTON TRUST COMPANY, not in its
                                 individual capacity but solely as Owner Trustee

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


                                 ALOHA AIRLINES, INC.

                                 By:    /s/ Brenda F. Cutwright
                                        ----------------------------------------
                                 Title: EXECUTIVE VICE PRESIDENT & CFO
                                        ----------------------------------------

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

<PAGE>

                                                                         Annex I
                                           to Amendment No. 1 to Lease Agreement


                              DESCRIPTION OF LEASE

     Lease Agreement dated as of August 4, 1999 between Wilmington Trust
Company, as owner trustee under Amended and Restated Trust Agreement dated as of
September 29, 1999, as lessor, and Aloha Airlines, Inc., as lessee, which was
recorded by the Federal Aviation Administration on November 8, 1999 and assigned
Conveyance No. HH023936, as supplemented by the following described instrument:

<Table>
<Caption>
                              Date of              FAA                 FAA
        Instrument           Instrument       Recording Date      Conveyance No.
        ----------           ----------       --------------      --------------
<S>                          <C>              <C>                 <C>
Lease Supplement              10/18/99           11/08/99            HH023936
</Table>

<PAGE>

                           AMENDMENTS TO SCHEDULE "1"

This Amendment to Schedule 1 of the Lease Agreement between Wilmington Trust
Company as Owner Trustee ("Lessor") and Aloha Airlines Inc. ("Lessee") has been
intentionally omitted from the FAA filing counterpart as containing confidential
financial information but Lessor and Lessee agree that this Schedule forms a
part of and is incorporated into the Lease as if fully set forth therein.

Lessor and Lessee agree as follows:

[These provisions have been omitted as confidential information and filed
separately with the Commission]


                                       3