<PAGE>

                                                                   Exhibit 10.51

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

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

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

                             DATED: January 22, 1997

                            ACG ACQUISITION VIII LLC

                                    (Lessor)

                                     - and -

                              ALOHA AIRLINES, INC.

                                    (Lessee)



                         ------------------------------
                               LEASE AGREEMENT 804
                                 - relating to -
                             Boeing 737-2Q9 Aircraft
                         Manufacturers Serial No: 21719
                          U.S. Registration Mark N804AL
                         ------------------------------


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


                                RECORDED
                      FEDERAL AVIATION ADMINISTRATION
                      Date 3-19-97      Time 12:32 pm
                        Conveyance Number RR011675
                              Sheryl Hawkins



<PAGE>

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

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

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

                             DATED: January 22, 1997

                            ACG ACQUISITION VIII LLC

                                    (Lessor)

                                     - and -

                              ALOHA AIRLINES, INC.

                                    (Lessee)

                         ------------------------------
                               LEASE AGREEMENT 804
                                 - relating to -
                             Boeing 737-2Q9 Aircraft
                         Manufacturers Serial No: 21719
                          U.S. Registration Mark N804AL
                         ------------------------------

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


<PAGE>


                                TABLE OF CONTENTS
<Table>
<Caption>

CLAUSE                                                                                               PAGE
<S>      <C>      <C>                                                                                <C>

1.       DEFINITIONS and INTERPRETATION ..............................................................  1
         1.1      Definitions ........................................................................  1
         1.2      Interpretation ..................................................................... 14

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

3.       CONDITIONS PRECEDENT ........................................................................ 19
         3.1     Lessor's Documentary Conditions Precedent ........................................... 19
         3.2     Lessor's Other Conditions Precedent ................................................. 20
         3.3     Lessor's Waiver ..................................................................... 20
         3.4     Lessee's Conditions Precedent ....................................................... 20
         3.5     Lessee's Waiver ..................................................................... 21

4.       COMMENCEMENT ................................................................................ 21
         4.1     Leasing ............................................................................. 21
         4.2     Delivery ............................................................................ 21
         4.3     Acceptance and Risk ................................................................. 22

5.       PAYMENTS .................................................................................... 22
         5.1     Security Deposit; Letter of Credit .................................................. 22
         5.2     Rental Periods ...................................................................... 24
         5.3     Basic Rent .......................................................................... 24
         5.4     Payments ............................................................................ 24
         5.5     Gross-up ............................................................................ 25
         5.6     Taxation ............................................................................ 25
         5.7     Information ......................................................................... 26
         5.8     Taxation of Indemnity Payments ...................................................... 26
         5.9     Default Interest .................................................................... 27
         5.10    Contest ............................................................................. 27
         5.11    Absolute ............................................................................ 28

6.       MANUFACTURER'S WARRANTIES ................................................................... 29

</Table>

                                     -i-

<PAGE>

                                TABLE OF CONTENTS
                                    continued

<Table>
<Caption>

CLAUSE                                                                                               PAGE
<S>      <C>     <C>                                                                                 <C>

         6.1     Assignment .......................................................................... 29
         6.2     Proceeds ............................................................................ 30
         6.3     Parts ............................................................................... 30
         6.4     Agreement ........................................................................... 30

7.       LESSOR'S COVENANTS and DISCLAIMERS .......................................................... 31
         7.1     Quiet Enjoyment ..................................................................... 31
         7.2     Maintenance Contribution ............................................................ 31
         7.3     Registration and Filings ............................................................ 31
         7.4     Agreed Maintenance Performers ....................................................... 32
         7.5     Exclusion ........................................................................... 32
         7.6     Lessee's Waiver ..................................................................... 32
         7.7     Lessee's Confirmation ............................................................... 33

8.       LESSEE'S COVENANTS .......................................................................... 33
         8.1     Duration ............................................................................ 33
         8.2     Information ......................................................................... 33
         8.3     Lawful and Safe Operation ........................................................... 35
         8.4     Taxes and Other Charges ............................................................. 37
         8.5     Sub-Leasing ......................................................................... 37
         8.6     Inspection .......................................................................... 40
         8.7     Protection of Title ................................................................. 40
         8.8     General ............................................................................. 41
         8.9     Records ............................................................................. 42
         8.10    Registration and Filings ............................................................ 42
         8.11    Maintenance and Repair .............................................................. 43
         8.12    Removal of Engines and Parts ........................................................ 44
         8.13    Installation of Engines and Parts ................................................... 45
         8.14    Non-Installed Engines and Parts ..................................................... 47
         8.15    Pooling of Engines and Parts ........................................................ 47
         8.16    Equipment Changes ................................................................... 48
         8.17    Title to Engines and Parts .......................................................... 48
         8.18    Third Parties ....................................................................... 49

9.       INSURANCE ................................................................................... 49
         9.1     Insurances .......................................................................... 49

</Table>

                                      -ii-

<PAGE>

                                TABLE OF CONTENTS
                                    continued

<Table>
<Caption>

CLAUSE                                                                                               PAGE
<S>      <C>     <C>                                                                                 <C>

         9.2     Requirements ........................................................................ 49
         9.3     Insurance Covenants ................................................................. 50
         9.4     Failure to Insure ................................................................... 51
         9.5     Continuing Indemnity ................................................................ 52
         9.6     Application of Insurance Proceeds ................................................... 52

10.      INDEMNITY ................................................................................... 53
         10.1    General ............................................................................. 53
         10.2    Mitigation .......................................................................... 54
         10.3    Duration ............................................................................ 55

11.      EVENTS OF LOSS .............................................................................. 55
         11.1    Total Loss .......................................................................... 55
         11.2    Requisition ......................................................................... 56

12.      RETURN OF AIRCRAFT .......................................................................... 57
         12.1    Redelivery .......................................................................... 57
         12.2    Final Checks ........................................................................ 57
         12.3    Final Inspection .................................................................... 58
         12.4    Non-Compliance ...................................................................... 59
         12.5    Export Documentation ................................................................ 59
         12.6    Acknowledgment ...................................................................... 59
         12.7    Maintenance Program ................................................................. 60
         12.8    Storage ............................................................................. 60

13.      DEFAULT ..................................................................................... 61
         13.1    Events .............................................................................. 61
         13.2    Rights .............................................................................. 65
         13.3    Export .............................................................................. 65
         13.4    Default Payments .................................................................... 66

14.      ASSIGNMENT and TRANSFER ..................................................................... 66
         14.1    No assignment by Lessee ............................................................. 67
         14.2    Lessor Assignment ................................................................... 67
         14.3    Grants of Security Interests ........................................................ 69
         14.4    Sale and Leaseback by Lessor ........................................................ 70

</Table>

                                               -iii-

<PAGE>


                                TABLE OF CONTENTS
                                    continued

<Table>
<Caption>

CLAUSE                                                                                               PAGE
<S>        <C>                                                                                       <C>

          14.5   Further Acknowledgments ............................................................. 71
          14.6   Certain Protections for Lessee's Benefit ............................................ 71

15.      MISCELLANEOUS ............................................................................... 71
         15.1    Waivers, Remedies Cumulative ........................................................ 71
         15.2    Delegation .......................................................................... 72
         15.3    Appropriation ....................................................................... 72
         15.4    Currency Indemnity .................................................................. 72
         15.5    Payment by the Lessor ............................................................... 73
         15.6    Severability ........................................................................ 73
         15.7    Remedy .............................................................................. 73
         15.8    Expenses ............................................................................ 73
         15.9    Time of Essence ..................................................................... 74
         15.10   Notices ............................................................................. 74
         15.11   Law and Jurisdiction ................................................................ 75
         15.12   Sole and Entire Agreement ........................................................... 76
         15.13   Indemnities ......................................................................... 76
         15.14   Counterparts ........................................................................ 76
         15.15   Confidentiality ..................................................................... 76

SCHEDULES

         1.      Aircraft Specification                                                                76
         2.      Certificate of Acceptance 804                                                         80
         3.      Operating Condition at Redelivery                                                     84
         4.      Insurance Requirements                                                                89
         5.      Form of Legal Opinion                                                                 94
         6.      Form of Letter of Credit                                                              95
         7.      Form of Semi-Annual Status Report                                                     96

</Table>

                                      -iv-



<PAGE>

THIS LEASE AGREEMENT is made the 22nd day of January, 1997

BETWEEN:

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

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

WHEREAS:

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

(B)      Pursuant to a Purchase Option Agreement 804, dated as of September 26,
         1996, between Lessee, as seller, and Lessor, as buyer (the "Purchase
         Agreement"), Lessor has exercised its option to purchase the Aircraft
         from Lessee, and Lessor has agreed to lease the Aircraft to the Lessee
         with effect from the purchase of the Aircraft upon and subject to the
         covenants, terms and conditions set out in this Agreement.

NOW IT IS HEREBY AGREED as follows:

1.       DEFINITIONS AND INTERPRETATION

1.1      DEFINITIONS

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


ACTUAL COST                         as it applies to any maintenance work on the
                                    Aircraft means the actual cost of
                                    replacement parts plus the cost of the
                                    associated labor at Lessee's in-house labor
                                    rates (if the work is performed by Lessee)
                                    or at third party costs charged to Lessee
                                    (if the work is performed by third parties)
                                    and shall in no event include late charges,
                                    interest or other similar amounts.


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


                                      -1-

<PAGE>


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

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

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

AGREED VALUE                        $6,000,000.

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


AIRCRAFT DOCUMENTS                  the documents, data and records identified
                                    in Part 2 of Schedule 1 and all additions,
                                    renewals, revisions and replacements from
                                    time to time made in accordance with this
                                    Agreement.


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


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

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


                                      -2-

<PAGE>

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

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

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

BASIC RENT                          all amounts payable pursuant to Clause 5.3.

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

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

CYCLE                               one take-off and landing of an airframe.

DAMAGE NOTIFICATION THRESHOLD       $500,000.

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


                                      -3-

<PAGE>

                                    combination of the foregoing would
                                    constitute an Event of Default.

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

DELIVERY DATE                       the date on which Delivery takes place.

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

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

ENGINE                              whether or not installed on the Aircraft:

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

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

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

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

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

EVENT OF DEFAULT                    an event specified in Clause 13.1.


                                      -4-

<PAGE>

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

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

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

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


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

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

FINANCIAL INDEBTEDNESS              any indebtedness in respect of

                                    (a)      moneys borrowed;

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

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

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



                                      -5-
<PAGE>

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

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

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

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

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

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

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

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

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

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


                                      -6-

<PAGE>

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

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

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

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

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

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

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


                                      -7-

<PAGE>

                                             such liability has or would
                                             have arisen in the absence of the
                                             transactions contemplated by this
                                             Agreement;


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

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

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

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

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


                                      -8-

<PAGE>

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

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

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

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

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

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

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


                                      -9-

<PAGE>

OTHER PERMITTED AIR CARRIER         any air carrier (i) that shall be domiciled
                                    in and duly certificated or authorized as an
                                    air carrier in a Permitted Jurisdiction,
                                    (ii) is not subject to any event of the
                                    types described in Clauses 13.1(g) and (h)
                                    as of the commencement of a sublease, and
                                    (iii) has a net worth of at least
                                    $20,000,000, calculated in accordance with
                                    GAAP, as of the commencement of a sublease.

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

PART                                whether or not installed on the Aircraft:

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

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

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

 PERMITTED JURISDICTIONS            Argentina, Australia, Belgium, Canada,
                                    Chile, Finland, France, Germany, Iceland,
                                    the Netherlands, New Zealand, Norway,
                                    Sweden, Switzerland, United Kingdom and
                                    United States of America.

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

                                    (b)      any lien of a repairer, mechanic,
                                             carrier, hangar keeper, unpaid
                                             seller or other similar hen arising
                                             in the ordinary course of business
                                             or by operation of law in respect
                                             of obligations which are not
                                             overdue in accordance with
                                             applicable


                                      -10-

<PAGE>

                                             law (or, if applicable,
                                             generally accepted accounting
                                             principles and practices in the
                                             relevant jurisdiction) or are
                                             being contested in good faith by
                                             appropriate proceedings; and

                                    (c)      any Lessor Lien;

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

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

RENT                                collectively, all Basic Rent and all
                                    Supplemental Rent.

RENTAL PERIOD                       each period ascertained in accordance with
                                    Clause 5.2.

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

SECURITY DEPOSIT                    the amount of $220,000.

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

STATE OF INCORPORATION              State of Delaware.

STATE OF REGISTRATION               United States of America.

SUBSIDIARY                          (a)      in relation to any reference to
                                             accounts, any company wholly or
                                             partially owned by Parent,


                                      -11-

<PAGE>


                                             including the Lessee, whose
                                             accounts are consolidated with the
                                             accounts of the Parent in
                                             accordance with accounting
                                             principles generally accepted under
                                             accounting standards of the State
                                             of Incorporation; and

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

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

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

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

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

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

TOTAL LOSS                          with respect to the Airframe:

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


                                      -12-

<PAGE>

                                             or requisition for use or
                                             hire which results in an
                                             insurance settlement on the basis
                                             of a total loss);

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

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

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

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

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

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

                                    (d)      in the case of any of the events
                                             described in sub-paragraph (c) of
                                             the definition of "Total Loss", the
                                             date on which the relevant
                                             requisition



                                      -13-

<PAGE>

                                             of title or other compulsory
                                             acquisition, capture, seizure,
                                             deprivation, confiscation or
                                             detention occurs;

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

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

 U.S. AIR CARRIER                   means any domestic air carrier that (i)
                                    is authorized by the FAA to operate
                                    B737-200 aircraft in commercial passenger
                                    or cargo service, (ii) is "a citizen of
                                    the United States (as defined in 40102 of
                                    title 49) holding an air carrier
                                    operating certificate issued by the
                                    Secretary of Transportation pursuant to
                                    chapter 447 of title 49 for aircraft
                                    capable of carrying 10 or more
                                    individuals or 6,000 pounds or more of
                                    cargo", as defined in 11 U.S.C. Section
                                    1100, as amended, (iii) is not subject to
                                    any event of the types described in
                                    Clauses 13.1(g) and (h) as of the
                                    commencement of a sublease, and (iv) has
                                    a net worth of at least $20,000,000,
                                    calculated in accordance with GAAP, as of
                                    the commencement of a sublease.

1.2      INTERPRETATION

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

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

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

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

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


                                      -14-


<PAGE>

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

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

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

2.       REPRESENTATIONS AND WARRANTIES

2.1      LESSEE'S REPRESENTATIONS AND WARRANTIES

         The Lessee represents and warrants to the Lessor as follows:

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

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

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

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

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

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

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

         (e)      AUTHORIZATION: All authorizations, consents and registrations
                  required by, and all notifications to be given by, the Lessee
                  in connection with the entry into, performance,


                                      -15-

<PAGE>
                  validity and enforceability of, this Agreement and the
                  transactions contemplated by this Agreement have been (or will
                  on or before Delivery have been) obtained, effected or given
                  (as appropriate) and are (or will on their being obtained or
                  effected be) in full force and effect.

         (f)      NO IMMUNITY:

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

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

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

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

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

2.2      LESSEE'S FURTHER REPRESENTATIONS AND WARRANTIES

         The Lessee further represents and warrants to the Lessor that:

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

         (b)      REGISTRATION:

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


                                      -16-

<PAGE>

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

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

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

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

2.3      REPETITION

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

2.4      LESSOR'S REPRESENTATIONS AND WARRANTIES

         The Lessor represents and warrants to the Lessee that:

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

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


                                      -17-

<PAGE>

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

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

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

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

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

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

         (f)      NO IMMUNITY:

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

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

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

2.5      REPETITION

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


                                      -18-

<PAGE>

3.       CONDITIONS PRECEDENT

3.1      LESSOR'S DOCUMENTARY CONDITIONS PRECEDENT

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

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

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

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

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

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

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

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

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

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

         (h)      REGISTRATION: evidence that the Aircraft has been validly
                  registered under the laws of the State of Registration and
                  that all filings, registrations, recordings and other actions


                                      -19-

<PAGE>

                  have been or will be taken which are necessary to ensure the
                  validity, effectiveness and enforceability of this Agreement,
                  the Mortgage and the Assignment and to protect the respective
                  rights of the Lessor and the Lender in the Aircraft or any
                  Part; and

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

3.2      LESSOR'S OTHER CONDITIONS PRECEDENT

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

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

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

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

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

3.3      LESSOR'S WAIVER

         The conditions specified in Clauses 3.1 and 3.2(a) and (b) are for the
         sole benefit of the Lessor and the Lender and may be waived or deferred
         in whole or in part and with or without conditions by the Lessor. If
         any of those conditions are not satisfied on or before Delivery and the
         Lessor (in its absolute discretion) nonetheless agrees to deliver the
         Aircraft to the Lessee, the Lessee will ensure that those conditions
         (other than the representation set forth in Clause 2.2(c) being correct
         on the Delivery Date) are fulfilled within one month after the Delivery
         Date and the Lessor may treat as an Event of Default the failure of the
         Lessee to do so.

3.4      LESSEE'S CONDITIONS PRECEDENT

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


                                      -20-

<PAGE>

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

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

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

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

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

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

3.5      LESSEE'S WAIVER

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

4.       COMMENCEMENT

4.1      LEASING

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

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

4.2      DELIVERY

         The Aircraft will be deemed to have been delivered to, and will be
         accepted by, the Lessee at the Delivery Location, or such other
         location as may be agreed, on the Delivery Date


                                      -21-

<PAGE>

         immediately following satisfaction of the conditions precedent
         specified in Clauses 3.1, 3.2 and 3.4 (or their waiver or deferral by
         the party entitled to grant such waiver or deferral).

4.3      ACCEPTANCE AND RISK

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

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

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

5.       PAYMENTS

5.1      SECURITY DEPOSIT: LETTER OF CREDIT

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

                  (i)      If an Event of Default occurs and for as long as it
                           continues, the Lessor may (but shall not be obligated
                           to) apply all or any portion of the Security Deposit
                           in or towards satisfaction of any sums due and
                           payable to the Lessor under this Agreement or to
                           compensate the Lessor for any sums which it may, in
                           its discretion, advance or expend as a result of any
                           such Event of Default. Notwithstanding any such use
                           or application by the Lessor, the Lessee shall remain
                           in default under this Agreement until the full amount
                           owed by the Lessee, including interest accrued
                           thereon pursuant to Clause 5.9, shall have been paid
                           to the Lessor. If the Lessor so uses or applies all
                           or any portion of the Security Deposit, the Lessee
                           shall immediately, on demand of the Lessor, replenish
                           the Security Deposit in an amount equal to the amount
                           so used or applied within five Business Days after
                           Lessor's demand therefor.


                                      -22-

<PAGE>

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

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

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

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

                  (ii)     If an Event of Default occurs and for as long as it
                           continues, the Lessor may (but shall not be obliged
                           to) call on the Letter of Credit and use or apply the
                           proceeds in or towards satisfaction of any sums due
                           and payable to the Lessor under this Agreement or to
                           compensate the Lessor for any sums which it may, in
                           its discretion, advance or expend as a result of any
                           such Event of Default. Notwithstanding any such use
                           or application by the Lessor, the Lessee shall remain
                           in default under this Agreement until the full amount
                           owed by the Lessee, including interest accrued
                           thereon pursuant to Clause 5.9, shall have been paid
                           to the Lessor. If the Lessor so uses or applies all
                           or any portion of the amount available under the
                           Letter of Credit, the Lessee shall immediately, on
                           demand of the Lessor, procure the issue of a new
                           Letter of Credit acceptable to the Lessor for an
                           amount equal to the amount so used or applied, or
                           shall pay to the Lessor an amount in cash equal to
                           the amount so used or applied to be held pursuant to
                           Clause 5.1(a).

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

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


                                      -23-

<PAGE>

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

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

5.2      RENTAL PERIODS

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

5.3      BASIC RENT

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

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

                  (i)      The Basic Rent payable in respect of the first Rental
                           Period will be the product of $110,000 multiplied by
                           a fraction (1) the numerator of which is the number
                           of days from and including the Delivery Date to but
                           excluding the next succeeding Rent Date and (2) the
                           denominator of which is the number of days in the
                           calendar month immediatley preceding the calendar
                           month in which such next succeeding Rent Date occurs.

                  (iii)    The Basic Rent payable in respect of each subsequent
                           Rental Period will be the amount of $110,000.

5.4      PAYMENTS

         (a)      All payments of Rent by the Lessee to the Lessor under this
                  Agreement will be made for value on the due date, for the full
                  amount due, in Dollars and in same day funds, settled through
                  the New York Clearing House System or such other funds as may
                  for the time being be customary for the settlement in New York
                  City of payments in Dollars by telegraphic transfer to the
                  account of the Lender at Citibank, N.A., New


                                      -24-

<PAGE>

                  York, New York, ABA No. 021000089, Account No. 00067512,
                  reference "Aloha Airlines/N802AL-N804AL".

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

5.5      GROSS-UP

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

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

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

5.6      TAXATION

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

         (b)      If the Lessor or the Lender shall, based upon its own
                  reasonable interpretation of any relevant laws or regulations,
                  realize any Tax savings (by way of refund, deduction, credit
                  or otherwise) in respect of any amount with respect to which
                  the Lessee shall have made a payment (or increased payment)
                  pursuant to Clause 5.5 or 5.8 or shall have indemnified the
                  Lessor or the Lender pursuant to sub-clause (a) above, or in
                  respect of the occurrence or transaction which gave rise to
                  such payment or indemnification, and such Tax savings shall
                  not have been taken into account previously in calculating any
                  indemnity payment made by the Lessee, then the Lessor or the
                  Lender (as the case may


                                      -25-

<PAGE>

                  be) shall, to the extent that it can do so without prejudice
                  to the retention of the relevant savings and subject to the
                  Lessee's obligations to repay such amount to the Lessor or the
                  Lender (as applicable) if the relevant savings are
                  subsequently disallowed or canceled, pay to the Lessee such
                  amount as the Lessor or the Lender (as the case may be) shall
                  in its opinion have concluded to be the amount of such Tax
                  savings (together with, in the case of a refund, any interest
                  received thereon); provided however that neither the Lessor
                  nor the Lender shall be obliged to make any payment to the
                  Lessee pursuant to this sub-clause (b) to the extent that the
                  amount of any Tax savings in respect of which such payment is
                  to be made would exceed the aggregate amount of all prior
                  payments made by the Lessee to, on behalf of or as
                  indemnification of the Lessor or the Lender under this
                  Agreement for Taxes less the amount of all prior payments made
                  pursuant to this sub-clause (b) in respect of such Tax
                  savings. The Lessee acknowledges that nothing contained in
                  this sub-clause (b) shall interfere with the right of the
                  Lessor or the Lender to arrange its tax affairs in whatsoever
                  proper manner it thinks fit (or give the Lessee any right to
                  investigate, or impose any obligation on the Lessor or the
                  Lender to disclose, the same) and, in particular, neither the
                  Lessor nor the Lender shall be under any obligation to claim
                  any Tax savings in priority to any other savings available to
                  it; provided, that subject to the foregoing Lessor shall use
                  reasonable good faith diligence to realize Tax savings as
                  described above.

5.7      INFORMATION

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

5.8      TAXATION OF INDEMNITY PAYMENTS

         (a)      If and to the extent that any sums payable to the Lessor or
                  the Lender by the Lessee under this Agreement by way of
                  indemnity are insufficient, by reason of any Taxes payable in
                  respect of those sums, for the Lessor or the Lender to
                  discharge the corresponding liability to the relevant third
                  party (including any taxation authority), or to reimburse the
                  Lessor or the Lender for the cost incurred by it to a third
                  party (including any taxation authority) the Lessee will pay
                  to the Lessor or the Lender (as the case may be) such sum as
                  will, after the tax liability has been fully satisfied, leave


                                      -26-

<PAGE>

                  the Lessor or the Lender (as the case may be) with the same
                  amount as it would have been entitled to receive in the
                  absence of that liability, together with interest on the
                  amount of the deficit at the Default Rate in respect of the
                  period commencing on the date on which the payment of taxation
                  is finally due until payment by the Lessee (both before and
                  after judgment).

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

5.9      DEFAULT INTEREST

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

5.10     CONTEST

         If written claim is made against Lessor or Lender for or with respect
         to any Taxes (other than Lessor Taxes), Lessor shall, and shall cause
         Lender to, promptly notify the Lessee. If reasonably requested by the
         Lessee in writing within 30 days after such notification, Lessor shall
         or shall cause Lender to, upon receipt of indemnity satisfactory to
         Lessor or Lender, as the case may be, and at the expense of the Lessee
         (including all costs, expenses, losses, legal and accountants' fees and
         disbursements, penalties and interest), in good faith contest or to the
         extent permissible by law allow Lessee to contest in Lessee's, the
         Lessors or the Lender's name, the validity, applicability or amount of
         such Taxes by either (i) resisting payment thereof if practicable and
         permitted by applicable law, or (ii) if payment is made, using
         reasonable efforts to obtain a refund thereof in appropriate
         administrative and judicial proceedings, and in the contest of any such
         claim by Lessor or Lender, Lessor shall, and shall cause Lender to,
         apprise the Lessee of all material developments with respect to such
         contest, shall forward copies of all material submissions made in such
         contest and shall materially comply in good faith with any reasonable
         request concerning the conduct of any such


                                      -27-

<PAGE>

         contest; provided, however, the Lessor or the Lender (as the case may
         be) will not be obliged to take any such action:

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

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

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

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

         If Lessor or Lender, in accordance with the foregoing, determines to
         pay such Taxes and seek a refund, Lessee will either pay such Taxes on
         Lessor's or Lender's behalf and pay Lessor or Lender, as the case may
         be, any amount due with respect to such payment or will promptly
         reimburse Lessor for such Taxes. If Lessor shall obtain a refund of all
         or any part of such Taxes paid by the Lessee, Lessor shall pay the
         Lessee the amount of such refund; provided that such amount shall not
         be payable before such time as the Lessee shall have made all payments
         or indemnities to Lessor then due with respect to Taxes and so long as
         no Default has occurred and is continuing. If in addition to such
         refund Lessor shall receive an amount representing interest, attorneys
         fees or any other amount on the amount of such refund, the Lessee shall
         be paid that proportion of such interest, attorneys fees or any other
         amount which is fairly attributable to the Taxes paid by the Lessee
         prior to the receipt of such refund. Lessor and/or Lender shall not
         enter into a settlement or other compromise with respect to, or
         otherwise concede, any claim by a taxing authority on account of Taxes
         being contested by Lessee pursuant to this Clause 5. 10 without the
         written consent of Lessee, which consent shall not be unreasonably
         withheld, unless Lessor waives its right and the right of Lender to be
         indemnified by Lessee with respect to such claim (but not with respect
         to any future claims).

5.11     ABSOLUTE

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

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


                                      -28-

<PAGE>

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

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

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

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

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

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

6.       MANUFACTURER'S WARRANTIES

6.1      ASSIGNMENT

         Notwithstanding this Agreement and subject to the rights of the Lender
         pursuant to the Assignment, the Lessor will remain entitled to the
         benefit of each warranty, express or implied, and any unexpired
         customer and/or product support given or provided in respect of the
         Aircraft, any Engine or Part by any manufacturer, vendor, maintenance
         performer, subcontractor or supplier. Unless an Event of Default shall
         have occurred and be continuing, the Lessor hereby authorizes the
         Lessee to pursue any claim thereunder in relation to defects affecting
         the Aircraft, any Engine or Part and the Lessee agrees diligently to
         pursue any such claim which arises at its own cost. The Lessee will
         notify the Lessor promptly upon becoming aware of any such claim. The
         Lessor will provide such assistance to the Lessee in making a claim
         under any such warranties or customer and/or product support as the
         Lessee may reasonably request, and, if requested by the Lessee and at
         the Lessee's expense, will pursue a claim in its own name where the
         relevant manufacturer, vendor, maintenance


                                      -29-

<PAGE>

         performer, subcontractor or supplier has refused to acknowledge the
         Lessee's right to pursue that claim.

6.2      PROCEEDS

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

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

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

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

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

6.3      PARTS

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

6.4      AGREEMENT

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

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


                                      -30-

<PAGE>

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

7.       LESSOR'S COVENANTS AND DISCLAIMERS

7.1      QUIET ENJOYMENT

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

7.2      MAINTENANCE CONTRIBUTION

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

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

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

7.3      REGISTRATION AND FILINGS

         The Lessor shall, at the Lessor's cost:

         (a)      maintain the registration of the Aircraft with the Aviation
                  Authority reflecting (so far as permitted by applicable law)
                  the respective interests of the Lessor and the Lender and


                                      -31-

<PAGE>

                  not do or suffer to be done anything which might reasonably be
                  expected to adversely affect that registration; and

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

7.4      AGREED MAINTENANCE PERFORMERS

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

7.5      EXCLUSION

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

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

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

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

7.6      LESSEE'S WAIVER


                                      -32-

<PAGE>

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

7.7      LESSEE'S CONFIRMATION

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

8.       LESSEE'S COVENANTS

8.1      DURATION

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

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

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

8.2      INFORMATION

         The Lessee shall:

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

                  (i)      within 60 days after the last day of the first three
                           fiscal quarters of each fiscal year of the Parent,
                           unaudited consolidated quarterly financial statements
                           of the Parent prepared for such quarter, including a
                           consolidated balance sheet of the Parent and its
                           Subsidiaries as of the last day of such quarter and
                           consolidated statements of income and retained
                           earnings for such fiscal quarter and on a comparative
                           basis figures for the corresponding period of the
                           immediately preceding fiscal year, all in reasonable
                           detail, each such statement to be certified in a
                           certificate of Lessee's chief financial officer or
                           chief accounting officer as fairly presenting the
                           financial position and the results of operations of
                           the Parent


                                      -33-

<PAGE>

                           as at its date and for such quarter (subject to
                           year-end audit adjustments) and as having been
                           prepared in accordance with GAAP;

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

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

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

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

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

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

         (c)      promptly furnish to the Lessor all information which the
                  Lessor from time to time reasonably requests regarding the
                  Aircraft any Engine or any Part and its use, location

                                      -34-

<PAGE>

                  and condition, including the hours available on the Aircraft
                  and any Engine until the next scheduled check, inspection,
                  overhaul or shop visit, as the case may be;

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

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

         (f)      promptly notify the Lessor of

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

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

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

8.3      LAWFUL AND SAFE OPERATION

         The Lessee shall:

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

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


                                      -35-

<PAGE>

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

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

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

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

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

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

                  (iv)     any illegal item or substance;

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

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

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

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

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


                                      -36-

<PAGE>

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

8.4      TAXES AND OTHER CHARGES

         THE Lessee will promptly pay:

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

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

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

8.5      SUB-LEASING

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

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

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

                  (iii)    so long as no Default or Event of Default has
                           occurred and is continuing, sublease the Aircraft,
                           the Airframe or any Engines for a term (including any
                           renewals or extensions) not to continue beyond the
                           remaining Term, (1) to any U.S. Air Carrier or (2)
                           upon the written consent of Lessor and Lender (which
                           consent shall not be unreasonably withheld), to a
                           Other Permitted Air Carrier.


                                      -37-

<PAGE>

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

         (c)      With respect to any transaction pursuant to Clause
                  8.5(a)(iii):

                  (i)      except as expressly provided below, the rights of any
                           sublessee who receives possession by reason of a
                           transfer permitted by Clause 8.5(a)(iii) shall be
                           subject and subordinate to, and any sublease shall be
                           made expressly subject and subordinate to, all the
                           terms of this Agreement, including the rights to
                           repossession pursuant to Clause 13.2 and to terminate
                           and avoid such Permitted Sublease upon such
                           repossession;

                  (ii)     Lessee shall remain fully liable for the performance
                           of all the terms of this Agreement to the same extent
                           as if such sublease had not occurred;

                  (iii)    such sublease shall be consistent with the
                           requirements of this Agreement, shall not affect the
                           registration of the Aircraft, shall not permit any
                           action not permitted to Lessee under this Agreement
                           and shall include appropriate provisions not more
                           favorable or extensive to the sublessee than those
                           contained in this Agreement for the continued
                           registration, insurance, maintenance and operation of
                           the Aircraft, the Airframe, the Engines and the
                           Parts;

                  (iv)     at least 15 days prior to such sublease becoming
                           effective, Lessee shall give Lessor written notice of
                           its intent to sublet the Aircraft, the Airframe or
                           any Engine, which notice shall include the identity
                           of the proposed sublessee, the term and rental rate
                           of the proposed sublease and either a copy of such
                           sublease or the latest draft thereof (in which case
                           Lessee shall provide Lessor with copies of subsequent
                           drafts and a copy of the definitive sublease
                           agreement promptly after its effectiveness);

                  (v)      such sublease shall expressly provide that the
                           sublessee may not further sublease the Aircraft,
                           Airframe or Engines except to the extent permitted to
                           Lessee pursuant to Clauses 8.5(a)(i) and (ii);

                  (vi)     such sublease shall be assigned to Lessor as security
                           for Lessee's obligations under this Agreement, which
                           assignment (1) shall be assigned to Lender, and
                           Lessee shall have consented to the assignment of such
                           sublease as security to the Lender, (2) may provide
                           that so long as no Event of Default has occurred and
                           is continuing, Lessee shall retain all rights of
                           sublessor under such sublease, including the right to
                           receive payments of rent and to grant waivers and
                           consents thereunder, (3) shall otherwise be in form
                           and substance reasonably satisfactory to Lessor and
                           Lender, (4) shall be executed and delivered by Lessee
                           to Lessor and


                                      -38-

<PAGE>

                           Lender, and all steps required for perfection shall
                           have been taken at Lessee's expense, at or before
                           commencement of such sublease, and (5) shall be
                           consented to by the sublessee; and any monies
                           received by Lessor pursuant to such assignment as a
                           result of the occurrence of a Default or an Event of
                           Default shall be held by Lessor as additional
                           security for the performance by Lessee of its
                           obligations under this Agreement and, to the extent
                           not applied against amounts due and owing by Lessee
                           under this Agreement and the exercise of remedies
                           under this Agreement, shall be returned to Lessee at
                           such time as no Default or Event of Default shall be
                           continuing;

                  (vii)    Lessee shall have furnished to Lessor and Lender, at
                           no expense to Lessor or Lender, (1) a legal opinion
                           in form and substance reasonably satisfactory to
                           Lessor and Lender, from counsel to Lessee reasonably
                           satisfactory to Lessor and Lender, as to the due
                           execution, delivery and enforceability of the
                           sublease against Lessee, the due execution, delivery,
                           enforceability and perfection of such assignment and
                           as to such other matters as Lessor and Lender may
                           reasonably request, and (2) a legal opinion in form
                           and substance reasonably satisfactory to Lessor and
                           Lender, from counsel to the sublessee reasonably
                           satisfactory to Lessor and Lender, as to the due
                           execution, delivery and enforceability of the
                           sublease against sublessee and as to such other
                           matters as Lessor and Lender may reasonably request;

                  (viii)   in the case of a sublease to a foreign sublessee,
                           Lessee shall have furnished to Lessor and Lender, at
                           no expense to Lessor or Lender, a legal opinion in
                           form and substance reasonably satisfactory to Lessor
                           and Lender from counsel reasonably satisfactory to
                           Lessor and Lender admitted to practice in the
                           jurisdiction in which such foreign sublessee is
                           domiciled to the effect that such sublease will not
                           impair the respective rights of, perfection and
                           priority of interest of and availability of remedies
                           to Lessor and Lender in respect of the subleased
                           Aircraft, Airframe or Engines and as to such other
                           matters relating to the laws of, and the enforcement
                           of foreign contracts and judgments in, such
                           jurisdiction as Lessor and Lender may reasonably
                           request; and

                  (ix)     all necessary action shall be taken at Lessee's
                           expense which is required to continue the perfection
                           of Lessor's title and interest in and to, and
                           Lender's security interests in, the Aircraft,
                           Airframe, Engines, Parts and rights under this
                           Agreement, and such sublease and all other necessary
                           documents shall be duly filed, registered or recorded
                           in such public offices as may be required or
                           advisable to preserve fully the title and the
                           priority of the interest of the Lessor, and the
                           perfection and priority of the Liens of the Lender,
                           in and to the Aircraft, Airframe, Engines and Parts
                           and in and to this Agreement.


                                      -39-

<PAGE>

8.6      INSPECTION

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

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

         (c)      The Lessor shall:

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

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

8.7      PROTECTION OF TITLE

         The Lessee shall:

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

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

         (c)      not at any time:

                  (i)      represent or hold out the Lessor or the Lender as
                           carrying goods or passengers on the Aircraft or as
                           being in any way connected or associated with any
                           operation or carriage (whether for hire or reward or
                           gratuitously) which may be undertaken by the Lessee;
                           or

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


                                      -40-

<PAGE>

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

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

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

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

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

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

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

8.8       GENERAL

         The Lessee will:

         (a)      not make any substantial change in the nature of the business
                  in which it is engaged if such change, in the reasonable
                  opinion of the Lessor, might reasonably be expected to have a
                  material adverse effect on the Lessee's performance of its
                  obligations under this Agreement;

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


                                      -41-

<PAGE>

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

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

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

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

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

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

8.9      RECORDS

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

8.10     REGISTRATION AND FILINGS

         The Lessee shall:

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

         (b)      do all acts and things (including making any filing or
                  registration with the Aviation Authority or any other
                  Government Entity) and executing and delivering all documents
                  (including any amendment of this Agreement) as may be required
                  by the Lessor


                                      -42-

<PAGE>

                  following any modification of the Aircraft, any Engine or any
                  Part or the permanent replacement of any Engine or Part in
                  accordance with this Agreement, so as to ensure that the
                  respective rights of the Lessor and the Lender under this
                  Agreement apply with the same effect as before.

8.11     MAINTENANCE AND REPAIR

         THE Lessee shall:

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

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

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

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

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

         (f)      comply with all alert service bulletins issued by any
                  manufacturer of the Aircraft, Engines or Parts, and comply
                  (including scheduling complying work and then performing such
                  work on schedule) with all other service bulletins issued by
                  any such manufacturer if and to the extent that the Lessee
                  brings or schedules to bring in compliance at least one-half
                  of the applicable aircraft it operates (excluding for purposes
                  of such calculation aircraft acquired from unrelated third
                  parties that already comply with such other service
                  bulletins);

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


                                      -43-

<PAGE>

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

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

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

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

         (1)      subject to Clause 11. 1 (c), procure promptly the replacement
                  of any Engine or Part which has become time, cycle or calendar
                  expired, lost, stolen, seized, confiscated, destroyed, damaged
                  beyond repair, unserviceable or permanently rendered unfit for
                  use, with an engine or part complying with the conditions set
                  out in Clause 8.13 (a).

8.12     REMOVAL OF ENGINES AND PARTS

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

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

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

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

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

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

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


                                      -44-

<PAGE>

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

8.13     INSTALLATION OF ENGINES AND PARTS

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

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

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

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

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

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

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

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


                                      -45-

<PAGE>

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

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

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

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

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

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


                                      -46-

<PAGE>

8.14     NON-INSTALLED ENGINES AND PARTS

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

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

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

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

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

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

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

                  (2)      the lessor under such lease, the seller under such
                           conditional sale agreement or the secured party of
                           such Security Interest, as the case may be, has
                           confirmed and acknowledged in writing (which such
                           confirmation and acknowledgment may be contained in
                           the lease, conditional sale agreement or document
                           creating the Security Interest) to the Lessor and the
                           Lender, in form and substance satisfactory to the
                           Lessor, that it will recognize the respective rights,
                           title and interest of the Lessor and the Lender to
                           and in that Engine or Part and that it will not seek
                           to exercise any rights whatever in relation thereto.

8.15     POOLING OF ENGINES AND PARTS

         The Lessee will not enter into nor permit any pooling agreement or
         arrangement in respect of an Engine or Part without the prior written
         consent of the Lessor and the Lender, such consent not to be
         unreasonably withheld in any case where an Engine or Part is leased,
         let


                                      -47-

<PAGE>

         on hire or otherwise made available by the Lessee (on terms conferring
         no more than a contractual right IN PERSONAM against the Lessee and not
         a right IN REM against such Engine or Part) pursuant to a pooling
         agreement to which the Lessee is a party and:

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

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

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

8.16     EQUIPMENT CHANGES

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

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

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

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

8.17     TITLE TO ENGINES AND PARTS

         (a)      Title to all engines and parts installed on the Aircraft,
                  whether by way of replacement as the result of an Equipment
                  Change or otherwise (except those installed pursuant to Clause
                  8.13(b) or Clause 8.15) will on installation, without further
                  act, vest in the Lessor subject to this Agreement free and
                  clear of all Security Interests. The Lessee will at its own
                  expense take all such steps and execute, and procure the
                  execution of, all such instruments that are necessary to
                  ensure that title so passes to the Lessor and is subject to
                  the Security Interest created by the Mortgage according to all
                  applicable


                                      -48-

<PAGE>

                  laws. At any time when requested by the Lessor, the Lessee
                  will provide evidence to the Lessor's reasonable satisfaction
                  (including the provision, if required, to the Lessor of one of
                  more legal opinions) that title has so passed to the Lessor
                  and is subject to the Security Interest created by the
                  Mortgage.

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

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

8.18     THIRD PARTIES

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

9.       INSURANCE

9.1      INSURANCES

         The Lessee will maintain in full force and effect during the Term
         insurances in respect of the Aircraft in form and substance reasonably
         satisfactory to the Lessor (the "INSURANCES") through such brokers and
         with such insurers and having such deductibles and being subject to
         such exclusions as are usual and customary in the worldwide aviation
         insurance marketplace for air carriers operating similar equipment who
         are similarly situated with Lessee. The Insurances will be effected
         either on a direct basis with insurers of recognized standing who
         normally participate in aviation insurances in the leading
         international insurance markets and led by reputable underwriters
         approved by the Lessor and the Lender, such approval not to be
         unreasonably withheld. The Lessor acknowledges and confirms that the
         current deductibles and exclusions, together with the existing brokers
         and insurers, in respect of the insurances maintained by Lessee on the
         date of the Purchase Agreement are acceptable to it and the Lender.

9.2      REQUIREMENTS

         The Lessor's current requirements as to required Insurances are as
         specified in this Clause and in Part I of Schedule 4. Except for the
         amount of the Agreed Value, the Minimum


                                      -49-

<PAGE>

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

9.3      INSURANCE COVENANTS

         The Lessee shall:

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

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

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

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

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

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

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

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

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


                                      -50-

<PAGE>

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

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

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

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

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

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

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

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

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

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

9.4      FAILURE TO INSURE

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

         (a)      to pay the premiums due or to effect and maintain insurances
                  satisfactory to it or otherwise remedy the Lessee's failure in
                  such manner (including to effect and maintain an "owner's
                  interest" policy) as it considers appropriate. Any sums so
                  expended by it will become immediately due and payable by the
                  Lessee to the Lessor on demand (such demand being made as soon
                  as reasonably practicable following the incurring of such


                                      -51-

<PAGE>

                  expenditure), together with interest thereon at the Default
                  Rate from the date of expenditure by it up to the date of
                  reimbursement by the Lessee (before and after any judgment);
                  and

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

9.5      CONTINUING INDEMNITY

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

9.6      APPLICATION OF INSURANCE PROCEEDS

         As between the Lessor and the Lessee:

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

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

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

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


                                      -52-

<PAGE>

                  applied by the Lessor in accordance with this sub-clause (d)
                  shall be paid promptly to the Lessee.

10.      INDEMNITY

10.1      GENERAL

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

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

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

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

         but excluding any Claim to the extent that:

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

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

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

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


                                      -53-

<PAGE>

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

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

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

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

10.2     MITIGATION

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

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


                                      -54-

<PAGE>

10.3     DURATION

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

11.      EVENTS OF LOSS

11.1     TOTAL LOSS

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

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

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

                                      -55-

<PAGE>

                           reasonably request to evidence (on the public record
                           or otherwise) the transfer and the vesting of the
                           Lessor's rights in such Engines and Parts in the
                           Lessee, free and clear of all rights of the Lessor
                           and any Lessor Liens; and

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

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

11.2     REQUISITION

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

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

         (b)      so long as no Default has occurred and is continuing, the
                  Lessee will be entitled to any compensation payable by the
                  requisitioning authority in respect of the Term. The Lessee
                  will, as soon as practicable after the end of any such
                  requisition (with the Term being extended if and to the extent
                  that the period of requisition continues beyond the scheduled
                  Expiry Date), cause the Aircraft to be put into the condition
                  required by this


                                      -56-

<PAGE>

                  Agreement. The Lessor will be entitled to all compensation
                  payable by the requisitioning authority in respect of any
                  change in the structure, state or condition of the Aircraft
                  arising during the period of requisition, and the Lessor will
                  apply such compensation in reimbursing the Lessee for the cost
                  of complying with its obligations under this Agreement in
                  respect of any such change, but so that, if any Default has
                  occurred and is continuing, the Lessor may apply the
                  compensation in or towards settlement of any amounts owing by
                  the Lessee under this Agreement. All such sums shall be held
                  by the Lender.

12.     RETURN OF AIRCRAFT

12.1    REDELIVERY

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

12.2    FINAL CHECKS

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

         (a)      Lessee shall perform (or have performed by an Agreed
                  Maintenance Performer) a full and complete zonal, systems and
                  structural check ("C" or its equivalent), including the
                  corresponding lower checks ("A" and "B" or equivalent) and any
                  other maintenance and inspections tasks that are a part
                  thereof, all in accordance with the Agreed Maintenance
                  Program. At return, the Airframe will have zero Flight Hours
                  since such "C" check, except for the acceptance Rights and the
                  ferry flight to the Redelivery Location. Lessee will also
                  weigh the Aircraft. Any discrepancies revealed during such
                  inspection will be corrected in accordance with Manufacturer's
                  maintenance and repair manuals or FAA-approved data. Lessee
                  shall also perform during such check, to the extent it is
                  able, any other work reasonably required by Lessor (and not
                  otherwise required under this Agreement) so long as such work
                  does not prevent Lessee from returning the Aircraft on the
                  Expiry Date, and Lessor shall reimburse Lessee for such work
                  at Lessee's preferred customer rates.

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


                                      -57-

<PAGE>

                  areas will be properly treated with corrosion inhibitor as
                  recommended by manufacturer.

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

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

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

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

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

12.3     FINAL INSPECTION

         (a)      During the 15 days prior to redelivery of the Aircraft, the
                  Lessee will make the Aircraft available to the Lessor and the
                  Lender for inspection ("FINAL INSPECTION") in order to verify
                  that the condition of the Aircraft complies with this
                  Agreement. The Final Inspection will be long enough to permit
                  the Lessor and the Lender to inspect, at their own cost, the
                  Aircraft Documents, the Aircraft and uninstalled Parts and the
                  Engines. The Lessor and the Lender shall attend and conduct
                  the Final Inspection diligently and, without limiting their
                  right to conduct the fall Final Inspection permitted by this
                  Agreement, will cooperate with the Lessee in order to complete
                  the Final Inspection as soon as reasonably practical.

         (b)      The Lessor and the Lender shall also be entitled, as part of
                  the Final Inspection, to require the Lessee to perform an
                  acceptance flight of up to three hours at the Lessee's cost
                  (with the Lessor's and the Lender's representatives as
                  on-board observers) and such further acceptance flights as may
                  be necessary in the event that the first or subsequent


                                      -58-

<PAGE>

                  flights do not confirm that the Aircraft complies with the
                  requirements of this Agreement.

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

12.4     NON-COMPLIANCE

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

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

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

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

12.5     EXPORT DOCUMENTATION

         Upon redelivery and upon request by the Lessor, the Lessee shall (a)
         provide to the Lessor all documents necessary to export the Aircraft
         from the State of Registration (including a valid and subsisting export
         licence for the Aircraft), and (b) provide any documents requested by
         the Lessor in connection with, and otherwise cooperate with, the
         deregistration of the Aircraft by the Aviation Authority, including
         causing the Aviation Authority to issue an Export Certificate of
         Airworthiness to a country specified by the Lessor.

12.6     ACKNOWLEDGMENT

         Provided the Lessee has complied with its obligations under this
         Agreement, following redelivery of the Aircraft by the Lessee to the
         Lessor at the Redelivery Location, the Lessor will deliver to the
         Lessee an acknowledgment confirming that the Lessor is satisfied that
         the


                                      -59-

<PAGE>

         Aircraft is in the condition required by this Agreement and has been
         redelivered to the Lessor in accordance with this Agreement.

12.7     MAINTENANCE PROGRAM

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

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

12.8     STORAGE

         If the Lessor so requests, and subject to the availability of the
         requisite space, the Lessee shall park and store the Aircraft at a
         secure storage area, which may be at the Redelivery Location or at any
         other suitable facility of the Lessee selected by the Lessee, wherever
         located (the "STORAGE LOCATION"), on behalf of the Lessor for a period
         not exceeding 30 days from the Expiry Date. During that period the
         Aircraft shall be at the Lessee's risk (save as to any loss or damage
         caused by the Lessor's wilful misconduct or gross negligence), and the
         Lessee shall maintain and store the Aircraft in accordance with the
         respective manufacturer's maintenance planning document and shall
         insure the Aircraft in accordance with a "ground risk only" policy
         usual and customary in the worldwide aviation insurance marketplace.
         All storage, maintenance and insurance costs shall be borne by the
         Lessee. If the Lessor so requests, and subject to the availability of
         the requisite space, the Lessee shall continue to park and store the
         Aircraft at the Storage Location on behalf of the Lessor for a further
         period not exceeding 60 days. During that further period the Aircraft
         shall be at the Lessor's risk (save as to any loss or damage caused by
         the Lessee's wilful misconduct or gross negligence), but the Lessee
         shall continue to maintain, store and insure the Aircraft in accordance
         with this Clause 12.8. All reasonable storage, maintenance and
         insurance costs incurred by the Lessee (excluding any profit element
         accruing to the Lessee) during such further period shall be reimbursed
         by the Lessor promptly upon presentation of supporting invoices and/or
         receipts.


                                      -60-

<PAGE>

13.      DEFAULT

13.1     EVENTS

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

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

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

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

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

         (e)      CROSS DEFAULT:

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

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

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

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


                                      -61-

<PAGE>


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

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

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

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

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

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

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

         (g)      INSOLVENCY:

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

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

         (h)      BANKRUPTCY AND SIMILAR PROCEEDINGS


                                      -62-

<PAGE>

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

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

                  (iii)    Lessee shall file a voluntary petition in bankruptcy
                           or a voluntary petition or answer seeking
                           reorganization in a proceeding under the 11 U.S.C.
                           Sections 101 ET SEQ. or under any other laws dealing
                           with bankruptcy, insolvency, moratorium or creditors'
                           rights generally (any or all of which are hereinafter
                           referred to as "BANKRUPTCY LAWS"), or an answer
                           admitting the material allegations of a petition
                           filed against Lessee in any such proceeding, or
                           Lessee shall by voluntary petition, answer or consent
                           to or seek relief under the provisions of any
                           Bankruptcy Laws; or

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

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

                  (vi)     any step (including petition, proposal or convening a
                           meeting) is taken with a view to a composition,
                           assignment or arrangement with any creditors of, or
                           the reorganization, rehabilitation, administration,
                           liquidation, or dissolution of, the Lessee or any of
                           its Affiliates or any other insolvency proceedings
                           involving the Lessee or any of its Affiliates; or

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

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


                                      -63-

<PAGE>

                  to perform its obligations under this Agreement or the
                  Lessor's rights, title and interest in and to the Aircraft or
                  under this Agreement; or

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

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

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

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

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

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

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


                                      -64-

<PAGE>

13.2     RIGHTS

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

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

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

         (c)      either:

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

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

13.3     EXPORT

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


                                      -65-

<PAGE>

13.4     DEFAULT PAYMENTS

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

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

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

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

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

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

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

14.      ASSIGNMENT AND TRANSFER


                                      -66-

<PAGE>

14.1     NO ASSIGNMENT BY LESSEE

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

14.2     LESSOR ASSIGNMENT

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

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

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

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

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

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

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

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


                                      -67-

<PAGE>

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

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

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

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

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

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

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


                                      -68-

<PAGE>

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

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

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

14.3     GRANTS OF SECURITY INTERESTS

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

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


                                      -69-

<PAGE>

                  or document furnished by Lessee in connection with this
                  Agreement Documents as though such Additional Mortgagee was
                  originally the "Lessor" or "Lender";

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

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

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

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

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

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

14.4     SALE AND LEASEBACK BY LESSOR

         In addition to the Transfers and grants of security interests permitted
         by Clauses 14.2 and 14.3, Lessor shall be entitled to transfer its
         right, title and interests in and to the Aircraft to any person and
         lease the Aircraft from such person (a "HEAD LESSOR"), and in such
         event


                                      -70-

<PAGE>

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

14.5     FURTHER ACKNOWLEDGMENTS

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

14.6     CERTAIN PROTECTIONS FOR LESSEE'S BENEFIT

         The rights of Lessee under this Agreement shall be superior to the
         rights of any Additional Mortgagee or Head Lessor, and the Lessor shall
         require each Additional Mortgagee and Head Lessor to agree in writing
         with the Lessee that such Additional Mortgagee's and Head Lessor's
         rights in and to the Aircraft shall be subject to the terms of this
         Agreement, including to the Lessee's rights to the quiet use,
         possession and enjoyment provisions contained in this Agreement. Except
         as expressly set forth in this Agreement, no Additional Mortgage or
         Head Lease shall increase the responsibilities, obligations or
         liabilities of the Lessee or deprive the Lessee of any of its rights or
         privileges under this Agreement. The Lessor's obligations to perform
         the terms and conditions of this Lease shall remain in full force and
         effect notwithstanding the creation of any Additional Mortgage or Head
         Lease. Lessor shall not create any Additional Mortgage or enter into
         any Head Lease that violates the terms of this Clause 14.6.

15.      MISCELLANEOUS

15.1     WAIVERS. REMEDIES CUMULATIVE

         The rights of either party under this Agreement:


                                      -71-

<PAGE>

         (a)      may be exercised as often as necessary;

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

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

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

15.2     DELEGATION

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

15.3     APPROPRIATION

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

15.4     CURRENCY INDEMNITY

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

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

                  (ii)     if the amount received by the Lessor, when converted
                           into the contractual currency (at the market rate at
                           which the Lessor is able on the relevant date to
                           purchase the contractual currency in New York City
                           with that other currency) is less than the amount
                           owed in the contractual currency, the Lessee will,
                           forthwith on demand, pay to the Lessor an amount in
                           the contractual currency equal to the deficit; and

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


                                      -72-

<PAGE>

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

15.5     PAYMENT BY THE LESSOR

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

15.6     SEVERABILITY

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

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

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

15.7     REMEDY

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

15.8     EXPENSES

         (a)      The Lessor and the Lessee shall each bear their respective
                  expenses (including legal, professional and out-of-pocket
                  expenses) incurred or payable in connection with the
                  negotiation, preparation and execution of this Agreement, and
                  shall share equally the fees and expenses of special FAA
                  counsel in connection with the transactions contemplated by
                  this Agreement.

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

                                      -73-


<PAGE>

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

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

15.9     TIME OF ESSENCE

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

15.10    NOTICES

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

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

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

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

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


                                      -74-
<PAGE>

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

                                      -and-

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

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

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

15.11    LAW AND JURISDICTION

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

         (b)      The Lessor and the Lessee hereby irrevocably agree to submit
                  to the non-exclusive jurisdiction of the United States
                  District Court for the Southern District of New York and the
                  Supreme Court of the State of New York located in the Borough
                  of Manhattan, County of New York (the "AGREED COURTS") in the
                  event of any claims or disputes arising under this Agreement.
                  Such submission to jurisdiction shall not be construed so as
                  to limit the right of either party to take proceedings against
                  the other in whatsoever jurisdiction shall to it seem fit nor
                  shall the taking of proceedings in any one or more
                  jurisdictions preclude the taking of proceedings in any other
                  jurisdiction, whether concurrently or not. Final judgment
                  against Lessor or Lessee in any such suit shall be conclusive
                  and may be enforced in any other jurisdiction by suit on the



                                      -75-
<PAGE>


                  judgment or as otherwise permitted by applicable law, a
                  certified or true copy of which shall be conclusive
                  evidence of the facts and of the amount of any indebtedness
                  or liability of Lessor or Lessee. Each of Lessor and Lessee
                  hereby irrevocably waives any objection which it may now or
                  hereafter have to the laying of venue in any suit, action
                  or proceeding brought in any Agreed Court, and irrevocably
                  waives any claim that any such suit, action or proceeding
                  brought in any Agreed Court has been brought in an
                  inconvenient forum.

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

         (d)      Without prejudice to any other mode of service, each of the
                  Lessor and the Lessee consents to the service of process
                  relating to any proceedings involving, directly or indirectly,
                  any matter arising out of or relating to this Agreement by
                  U.S. Postal Service registered mail (prepaid, return receipt
                  requested) of a copy of the process to the Lessee's address
                  identified in Clause 15.10(b).

15.12    SOLE AND ENTIRE AGREEMENT

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

15.13    INDEMNITIES

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

15.14    COUNTERPARTS

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

15.15    CONFIDENTIALITY

         Neither the Lessor nor the Lessee shall, without the other's prior
         written consent, communicate or disclose the terms of this Agreement or
         any information or documents furnished pursuant to this Agreement
         (except to the extent that the same are within the public domain) to
         any third party (other than the Lender, any prospective Transferee, any
         material investor in the Parent or creditor in Lessee, Additional
         Mortgagees or Head Lessors, the



                                      -76-

<PAGE>

         respective external legal advisers, auditors, insurance brokers or
         underwriters of Lessor, Lessee and such parties, and the Airframe and
         Engine manufacturers); provided however that disclosure will be
         permitted, to the extent required:

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

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

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

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

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

                              [SIGNATURE PAGE FOLLOWS]



                                      -77-

<PAGE>

IN WITNESS WHEREOF Lessor and Lessee have executed this Lease Agreement 804 on
the date shown at the beginning of this Agreement.

                                       SIGNED on behalf of
                                       ACG ACQUISITION VIII LLC



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



                                       SIGNED on behalf of
                                       ALOHA AIRLINES, INC.



                                       By:____________________________________
                                       Name:
                                       Title:



                                       By:____________________________________
                                       Name:
                                       Title:


<PAGE>


IN WITNESS WHEREOF Lessor and Lessee have executed this Lease Agreement 804
on the date shown at the beginning of this Agreement.

                                       SIGNED on behalf of
                                       ACG ACQUISITION VIII LLC



                                       By:____________________________________
                                       Name:
                                       Title:



                                       SIGNED on behalf of
                                       ALOHA AIRLINES, INC.



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



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


<PAGE>


                                 SCHEDULE 1

                                   PART 1

                           AIRCRAFT SPECIFICATION

IDENTIFICATION:

<TABLE>

 <S>                   <C>
 Aircraft Type         B737-2Q9
 Registration          N804AL
 Serial Number         21719
 Date of Manufacture.  1/79

</TABLE>

WEIGHT DATA:

<TABLE>

 <S>                                   <C>
 Maximum Taxi Weight                       120,000 lbs.
 Maximum Takeoff Weight                    119,500 lbs.
 Maximum Landing Weight                    105,000 lbs.
 Maximum Zero Fuel Weight                   95,000 lbs.
 Fuel Capacity                         5168.7 U.S. gal.

</TABLE>

AIRFRAMIE AND INTERIOR EQUIPMENT:

<TABLE>

 <S>               <C>     <C>
 Galleys           2       Locations: G-1  forward and G-4 aft
 Lavatories        2       Locations:      1    forward and 1 aft
 Air Stairs        1       Locations:      1    forward and _ aft
 Passenger Seats   126     Locations/Types: 8 first class and 118 economy class
 Overhead bins     Standard 60" Carry-All type
 Cargo Door        None

</TABLE>

ENGINES:

<TABLE>

 <S>                   <C>             <C>
 Position              No.1            No.2
 Type                  JT8D-9A         JT8D-9A
 Serial No.            P687772B        P674389B

</TABLE>

APU:

<TABLE>

 <S>                   <C>
 Model:                GTCP 85-129CKB
 Serial No.            P35144

</TABLE>

                                      -79-

<PAGE>

LANDING GEAR:

<TABLE>

 <S>               <C>                 <C>                     <C>
 Position          Nose                Left Main               Right Main
 Type              65-46300-48         65-46100-37             65-73761-87
 Serial No.        R7642P639           [MR01158P617]          [MRO1184P630]

</TABLE>

MAJOR AVIONICS EQUIPMENT:

<TABLE>
 <S>                  <C>                    <C>                      <C>
 DESCRIPTION          MANUFACTURER           PART NO.                 QUANTITY

</TABLE>


                                      -80-
<PAGE>


                                     PART 2

                               AIRCRAFT DOCUMENTS

MANUALS

<TABLE>
<CAPTION>

DESCRIPTION                             QUANTITY                       MEDIA

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

</TABLE>

TECHNICAL RECORDS

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

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

Engine Shop Visit history including disk sheets

Emergency Equipment Listing including location
Cabin Layout Drawing


                                      -81-

<PAGE>

RECORDS FOR:

  Last Compass Swing
  Last Altimeters Calibration
  Last ATC Transponder Calibration


                                      -82-

<PAGE>


                                   SCHEDULE 2

                          CERTIFICATE OF ACCEPTANCE 804

         This Certificate of Acceptance 804 is delivered on the date set forth
         in paragraph 1 below by Aloha Airlines, Inc. (the "LESSEE") to ACG
         Acquisition VIII LLC (the "LESSOR") pursuant to Lease Agreement 804,
         dated January    , 1997, between the Lessor and the Lessee (the
         "AGREEMENT"). Capitalized terms used but not defined in this
         Certificate of Acceptance 804 shall have the meaning given to such
         terms in the Agreement.

1.       DETAILS OF ACCEPTANCE

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

         (a)      Airframe: Boeing 737-2Q9 airframe, Manufacturer's Serial No.
                  21719 and FAA Registration No. N804AL;

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

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

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

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

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

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

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

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


                                      -83-

<PAGE>

IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
Acceptance 804 on the date shown at the beginning of this Agreement.

                                                SIGNED on behalf of
                                                ACG ACQUISITION VIII LLC



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

                                               SIGNED on behalf of
                                               ALOHA AIRLINES, INC.



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



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


                                      -84-


<PAGE>

                                                                         ANNEX 1

                         MAINTENANCE STATUS AT DELIVERY

                              DATE: JANUARY 21,1997

<Table>
<Caption>

AIRFRAME TIME:
<S>                               <C>               <C>                         <C>

Total Flight Hours                40,053:51
Total Cycles                      52,697

AIRFRAME LIMITS:

Type of Check:                    "C" Check
Check Interval:                   3,600.0H
Time Since Last Check:            1,218:09

ENGINE DATA:

Position                                            No.1                         No.2
Type                                                JT8D-9A                      JT8D-9A
Serial Number                                       674389                       687778

Total Flight Hours:                                 40,930:30                   31,776:0
Total Cycles:                                       80,691                        62,196

Flight Hours Since Last Shop Visit:                  3,610:30                    2,499:0
Cycles Since Last Shop Visit:                        8,170                         5,627
Flight Hours to Next Hard Limit:                     7,997:30                   24,088:0
Cycles to Next Hard Limit:                             719                         6,486

APU:

Type:                 CK B
Serial Number:        P35144

Total Flight Hours:                                                             18,716:17 APU Hours
Total Cycles:
Flight Hours Since Last HSI Inspection:                                          3,466:17 APU Hours
Cycles Since Last HSI Inspection:

Flight Hours Remaining on Turbine and Compressor LLPs:                             718:17 APU Hours
Cycles Remaining on Turbine and Compressor LLPs:

                                                                      Flight time x 1.9 = APU Hours

</Table>

                                      -85-


<PAGE>


<Table>
<Caption>

LANDING GEAR LIMITS:
<S>                            <C>                            <C>                           <C>

Position:                          Nose                         Left                           Right
Overhaul Interval:                15,000 H                      15,000 H                       15,000 H

Time Since Overhaul:            1,315:51 H                    5,754:51 H                     4,975:51 H
Time to Next Overhaul:         13,684:09 H                    9,245:09 H                    10,024:09 H

</Table>

                                      -86-


<PAGE>


                                   SCHEDULE 3

                       OPERATING CONDITION AT REDELIVERY

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

1.   GENERAL CONDITION

     The Aircraft will:

     (a)  be clean by United States airline standards;

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

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

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

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

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

                                      -87-

<PAGE>

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

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

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

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

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

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

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

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

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

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

                                      -88-


<PAGE>

2.   PARTS

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

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

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

3.   ENGINES

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

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

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

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

4.   FUSELAGE, WINDOWS AND DOORS

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

                             -89-


<PAGE>


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

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

5.   WINGS AND EMPENNAGE

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

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

     (c)  wings will be free of fuel leaks.

6.   INTERIOR

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

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

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

7.   COCKPIT

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

     (b)  floor coverings will be clean and effectively sealed;

     (c)  seat covers will be in good condition, clean and free of stains and
          will conform to FAR fire resistance regulations as applicable to an
          FAR Part 121 operator; and

     (d)  seats will be serviceable, in good condition and repainted as
          necessary.

8.   CARGO COMPARTMENTS

     (a)  panels will be in good condition and effectively sealed;

                             -90-


<PAGE>


     (b)  nets will be in good condition; and

     (c)  the compartments will comply with FAR fire resistance and
          containment regulations as applicable to an FAR Part 121 operator.

9.   LANDING GEAR

     (a)  The installed main and nose landing gear components and their
          associated actuators and parts will be cleared of all inspections
          for not less than 12 months, 3,000 Flight Hours or 3,000 Cycles of
          operation (whichever is more limiting).

     (b)  The installed main and nose landing gear will have at least 50% of
          the full allotment of Flight Hours, Cycles or calendar time
          (whichever is most limiting) remaining until the next scheduled
          removal for inspection or overhaul under the Agreed Maintenance
          Program, and if the Flight Hours, Cycles or calendar time of any
          Landing Gear is less than 50% of the interval between scheduled
          removals then the Lessee shall pay to the Lessor an amount equal to
          the product of (i) the number of Flight Hours, Cycles or calendar
          days (whichever is most limiting) by which such Landing Gear is
          less than 50% of the interval between scheduled removals,
          multiplied by (ii) $4.50 in the case of the main Landing Gear and
          $2.50 in the case of the nose Landing Gear.

     (c)  The tires and brakes will have 50% of the wear, as specified by the
          manufacturer as serviceable limits, remaining until next removal.

     (d)  The landing gear and wheel wells will be clean, free of leaks and
          repaired as necessary.

10.  APU

     (a)  The APU shall be serviceable in accordance with the Approved
          Maintenance Program parameters.

     (b)  The APU shall have not more than 1,500 Flight Hours of operation
          since its last hot section inspection.

11.  CORROSION

     (a)  The Aircraft will be in compliance with the CPCP and will have been
          inspected and treated with respect to corrosion as required by the
          CPCP; and

     (b)  Fuel tanks will be free from contamination and corrosion and a tank
          treatment program will be in operation and up-to-date.

                             -91-


<PAGE>


                                   SCHEDULE 4

                                     PART I

                            (INSURANCE REQUIREMENTS)

1.   The Insurances required to be maintained are as follows:

     (a)  HULL "ALL RISKS" of Loss or Damage while flying and on the ground
          with respect to the Aircraft for the Agreed Value and with a
          deductible not exceeding $500,000.

     (b)  HULL WAR AND ALLIED PERILS, covering those war risks excluded from
          the Hull "All Risks" Policy to the extent such coverage is
          available from the leading international insurance markets,
          including confiscation and requisition by the State of
          Registration, for the Agreed Value;

     (c)  "ALL RISKS" PROPERTY INSURANCE (INCLUDING WAR AND ALLIED RISK
          except when on the ground or in transit other than by air or sea)
          on all Engines and Parts when not installed on the Aircraft (to the
          extent not covered under the Aircraft hull insurances described in
          paragraphs (a) and (b) above), including Engine test and running
          risks, in an amount equal to replacement value in the case of the
          Engines;

     (d)  AIRCRAFT THIRD PARTY, BODILY INJURY/PROPERTY DAMAGE, PASSENGER,
          BAGGAGE, CARGO AND MAIL AND. AIRLINE GENERAL THIRD PARTY (INCLUDING
          PRODUCTS) LEGAL LIABILITY for a combined single limit (Bodily
          Injury/Property Damage) of an amount not less than the Minimum
          Liability Coverage for the time being in respect of any one
          occurrence (but, in respect of products liability, this limit may
          be an aggregate limit for any and all losses occurring during the
          currency of the policy, and in respect of liability arising out of
          certain offences, the limit (within the said combined single limit)
          may be $25,000,000 in respect of any one offence and in the
          aggregate, and cargo and mail legal liability may be subject to a
          limit of $ 1,000,000 any one occurrence); War and Allied Risks are
          also to be covered under the Policy to the extent available from
          the leading international insurance markets. The Minimum Liability
          Coverage may be adjusted upwards from time to time to such an
          amount as the Lessor may be advised by its insurance brokers
          constitutes the standard Minimum Liability Coverage applicable to
          Boeing 737-200 series aircraft operating in North America by an
          airline similarly situated as Lessee. If the Lessee disputes any
          such adjustment, the matter shall be referred to a reputable
          independent insurance broker in the United States of America
          appointed by the Lessor, whose decision, acting as expert, shall be
          conclusive and binding on the Lessee.

2.   All required hull and spares insurance (specified in (1)(a), (b) and (c)
     above), so far as it relates to the Aircraft, will:

                                      -92-


<PAGE>


     (a)  provide that any loss will be settled with the Lessee (who
          undertakes to consult with the Lessor and the Lender in regard
          thereto), and any claim that becomes payable on the basis of a
          Total Loss shall be paid in Dollars to the Lender as sole loss
          payee up to the Agreed Value, and loss proceeds in excess of the
          Agreed Value shall be payable to Lessee, with any other claim being
          payable as may be necessary for the repair of the damage to which
          it relates;

     (b)  if separate Hull "All Risks" and "War Risks" insurances are
          arranged, include a 50/50 provision in the terms of Lloyd's
          endorsement AVS 103 or its equivalent; and

     (c)  confirm that the Insurers are not entitled to replace the Aircraft
          in the event of a Total Loss.

3.   All required liability insurances (specified in (1)(d) above) will:

     (a)  include the Lessor, the Lender, their respective successors and
          assigns and their respective shareholders, Affiliates,
          subsidiaries, directors, officers, agents, employees and
          indemnitees as additional assureds for their respective rights and
          interests, warranted (each as to itself only) no operational
          interest; but the coverage provided will not include claims arising
          out of their legal liability as manufacturer, repairer or servicing
          agent of the aircraft or any part thereof;

     (b)  include a severability of interest clause;

     (c)  contain a provision confirming that the policy is primary without
          right of contribution and that the liability of the insurers will
          not be affected by any other insurance of which the Lessor, the
          Lender or the Lessee have the benefit; and

     (d)  accept and insure the indemnity provisions of this Agreement to the
          extent of the risks covered by the relevant policy or policies.

4.   All Insurances will:

     (a)  be in accordance with normal industry practice of persons operating
          similar aircraft in similar circumstances;

     (b)  provide coverage on a worldwide basis subject to those territorial
          exclusions which are usual and customary for carriers similarly
          situated with Lessee in the case of War Risks and Allied Perils
          coverage which are advised to and approved by Lessor, such approval
          not to be unreasonably withheld;

                             -93-


<PAGE>


     (c)  acknowledge that the insurers are aware that the Aircraft is owned
          by the Lessor and is subject to this Agreement;

     (d)  provide that, in relation to the interests of each of the
          additional assureds, the Insurances will not be invalidated by any
          act or omission of the Insured which results in a breach of any
          terms, conditions or warranty of the policies;

     (e)  provide that the Insurers will waive any rights of recourse and/or
          subrogation against each additional assured to the same extent that
          Lessee has waived or has no rights of recovery against such
          additional assured in the Lease;

     (f)  provide that the additional assureds will have no obligation or
          responsibility for the payment of any premiums (but reserve the
          right to pay the same should any of them elect to do so) and that
          the Insurers will waive any right of offset or counterclaim against
          the respective additional assureds other than for outstanding
          premiums in respect of the Aircraft, any Engine or Part;

     (g)  provide that, except in the case of any provision for cancellation
          or automatic termination specified in the policies or endorsements
          thereof, the Insurance can only be canceled or materially altered
          in a manner adverse to the additional assureds by giving at least
          30 days' written notice to the Lessor and the Lender, except in the
          case of war risks (or radioactive contamination), for which seven
          days' written notice (or such lesser period as is or may be
          customarily available in respect thereof) will be given; and

     (h)  include a services of suit clause.

                                      -94-


<PAGE>

                                                              SCHEDULE 4, PART 2
                                     [LOGO]
                                    Sedgwick

                                                                   No. AQ-T.B.A.

DATE: January __, 1996

TO:                  FINOVA Capital Corporation ("Lender")
                     1850 N. Central Avenue
                     P.O. Box 2209
                     Phoenix, ARIZONA 85002-2209

                     and

                     ACG Acquisition VIII LLC ("Owner"/"Lessor")
                     Three Stamford Landing
                     46 Southfield Avenue
                     Stamford, Connecticut 06902

Re:       Broker's Report Lease Agreement N804AL dated as of January 1997
          between ACG Acquisition VIII LLC ("Owner"/"Lessor"), FINOVA Capital
          Corporation ("Lender") and Aloha Airlines, Inc. ("Lessee") (to the
          "Lease") regarding One (1) B737-2Q9 Aircraft, Registration Number
          N804AL, Serial Number 21719 including two (2) Pratt 7 Whitney
          JT8D-9A engines, Serial Numbers 697772 and 674389 (the "Engines")
          (hereinafter the "Aircraft*)

To Whom It May Concern:

We hereby certify that as the independent aviation insurance brokers duly
appointed by Lessee, and acting on their behalf that, as of this date, the
insurance described in the attached Certificate of Insurance (No. AQ-T.B.A.)
complies with the requirements of the Lease as far as said requirements
relate to the insurance described in said Certificate and that said
insurance is in full force and effect on the Aircraft and that all premiums
due as of this date (per the accounting procedures arranged between; Lessee
and ourselves) have been paid.

We also confirm that, as of this date, all such policies of insurance as
described in said Certficate as are carried by Lessee are in such amounts and
cover such perils and are placed with insurers of recognized reputation
responsibility in the worldwide aviation insurance marketplace so that
protection afforded thereby is not less than that which would customarily be
maintained for aircraft of a similar character by corporations engaged in the
same or similar business, similarly situated with Lessee.

The perils, limits of liability, and insurers relating to the above mentioned
insurance policies are more fully described in the attached Certficate of
Insurance, No. AQ-T.B.A.

<PAGE>

                                     [LOGO]
                                    Sedgwick

It is our opinion that only an Insured (i.e., the Named insured and/or the
Additional Insureds) can breach or violate any warranty, condition or
declaration of the policy.

We undertake to advise you

         1.       promptly of any cancellation or adverse material changes
                  notified to us which are proposed to be made in the terms of
                  the insurance;

         2.       upon written application from you not later than thirty (30)
                  days prior to the expiration date of said insurance to notify
                  you within seven (7) days of the receipt of said application
                  if we have not received renewal instructions from Lessee and
                  in the event of our receiving instructions to renew, to advise
                  you promptly thereof,

         3.       promptly if premiums are not paid to us by the. due date as
                  per the accounting procedures between Lessee and ourselves;

         4.       promptly if our appointment as Insurance Broker by Lessee is
                  terminated or not timely renewed.

The above is given subject to:

         1.       our continuing appointment for the time being as Insurance
                  Brokers to Aloha Airlines, Inc.

         2.       our lieu, if any, on the policies referred to in our
                  Certificate of Insurance for premiums due under such policies
                  in respect of the Aircraft

         3.       Insurers' right of cancellation on default in payment of
                  premiums

         4.       all hull claims proceeds and all premiums are to be
                  collected through ourselves as the Insurance Broker for
                  Aloha Airlines, Inc.

This letter shall be governed and construed in a respect in accordance with the
laws of United States of America.

Sincerely,

Paul H. Yelavich
Director


<PAGE>


                                                              SCHEDULE 4, PART 3
                                     [LOGO]
                                    Sedgwick

                            CERTIFICATE OF INSURANCE               No. AQ-T.B.A.



This is to certify to:   FINOVA Capital Corporation ("Lender")
                         1850 N. Central Avenue
                         P.O. Box 2209
                         Phoenix, Arizona 85002-2209

                         and

                         ACG Acquisition VIII LLC ("Owner"/"Lessor")
                         Three Stamford Landing
                         46 Southfield Avenue
                         Stamford, Connecticut 06902

that the insurers/underwriters/companies listed below, each for their own part
AND NOT ONE FOR THE OTHER, are providing the following insurance:

NAMED INSURED:             Aloha Airlines, Inc.

NAMED INSURED'S            Honolulu International Airport
ADDRESS:                   P.O. Box 30028
                           Honolulu, HI 96820


INSURANCE COVERAGES:       A)       All Risks (Ground and Flight) Aircraft Hull
                                    Insurance (including All Risks Aircraft
                                    Spare Parts Insurance)

                           B)       War Risks Aircraft Hull Insurance (including
                                    War Risks Spare Parts Insurance) (Coverage
                                    amended to include coverage for confiscation
                                    by government of registry)

                           C)       Comprehensive Airline Liability Insurance
                                    (including, but not limited to:
                                    Comprehensive General Liability, Public
                                    Liability, Passenger Liability, Personal
                                    Injury Liability, Contractual Liability,
                                    Passengers' Checked and Unchecked Baggage
                                    Liability, Premises, Products, and Completed
                                    Operations Liabilities, Ground Hangarkeepers
                                    Liability, Cargo Legal including Mail Legal
                                    Liability) and the AAU equivalent of AV.52C
                                    (War Risks Liability Clause.)


<PAGE>

                                     [LOGO]
                                    Sedgwick

POLICY PERIOD:                   November 1, 1996 to November 1, 1997 on both
                                 dates at 12:01 A.M. Local Standard Time at the
                                 address of the Named Insured.

GEOGRAPHICAL LIMITS:             Worldwide*

LIMITS OF LIABILITY:    A)       As respects Aircraft Hulls: Agreed Value as
                                 stated below. Subject to a deductible of
                                 US$500,000.00 each and every loss
                                 (Deductibles not applicable in the event of
                                 Total Loss/Constructive Total Loss/Arranged
                                 Total Loss.)

NOTE: AGGREGATE                  As respects Aircraft Spare Parts:
LIMITS WAY BE                    US$60,000,000.00 any one loss/any one
REDUCED DUE TO                   location, US$25,000,000.00 any one transit,
PAID CLAIMS                      subject to a deductible of US$10,000.00 any
                                 one loss but the applicable aircraft hull
                                 deductible stated above shall apply in
                                 respect of spare engine running or testing
                                 losses.

                        B)       As respects Aircraft Hulls: Agreed Value as
                                 stated below. As respects Aircraft Spares
                                 Parts: US$60,000,000.00 any one loss/any one
                                 location, US$25,000,000.00 any one transit.
                                 Subject to an annual aggregate of
                                 US$125,000,000.00. Subject to nil
                                 deductibles.

                        C)       Combined Single Limit Bodily Injury
                                 (including passengers), Property Damage and
                                 Personal Injury (Passengers only):
                                 US$300,000,000.00 any one
                                 occurrence/offense, in the aggregate
                                 annually as respects Products, Completed
                                 Operations and Personal Lnjury Liabilities.
                                 However, the following sublimits apply as
                                 part of and not in addition to the limit
                                 stated above.

                                 As respects Personal Injury to third parties
                                 other than passengers: US$25,000,000.00 any
                                 one occurrence, any one offense, in the
                                 aggregate annually. As respects Cargo Legal
                                 Liability: US$1,000,000.00 each occurrence


<PAGE>

                                     [LOGO]
                                    Sedgwick

AIRCRAFT INSURED:                One (1) B737-2Q9 aircraft, Registration
                                 Number: N804AL, Manufacturer's Serial Number
                                 21719, Agreed Value: US$6,000,000 inclusive
                                 of two (2) Pratt & Whitney JT8D-9A Engines,
                                 Manufacturers Serial Numbers 687772 and
                                 674389 (the "Engines") while attached to the
                                 Aircraft or removed from the Aircraft, but
                                 not replaced (hereinafter, the "Aircraft").

* As respects Coverage B - War Risks Aircraft Hull insurance, the Geographical
Limits of the policy are:

Worldwide but excluding Africa, Columbia, Peru, Iraq, Afghanistan, Former
Republics of the U.S.S.R. and Yugoslavia.




<PAGE>

                                     [LOGO]
                                    Sedgwick

                                    SECURITY

                         As Respects Coverages A and C
<Table>
<Caption>

                                            QUOTA SHARE                POLICY
INSURERS                                   PARTICIPATION               NUMBER
                                           (Part of 100%)

<S>                                         <C>                         <C>
One or More Member Companies
of Associated Aviation Underwriters             T.B.A.                  T.B.A.

Certain Underwriters at Lloyds, London
through Sedgwick Aviation Limited               T.B.A.                  T.B.A.

Certain U.K. Insurance Companies and
Others through Sedgwick Aviation Limited        T.B.A.                  T.B.A.

La Reunion Aerienne through
La Concorde                                     T.B.A.                  T.B.A.

Insurance Company of North America              T.B.A.                  T.B.A.

Navigators Insurance Company through
Somerset Aviation                               T.B.A.                  T.B.A

Assurance France Aviation                       T.B.A.                  T.B.A.

Mutual Maxine Office                            T.B.A.                  T.B.A.

American Home Assurance Company
Through AIG Aviation                            T.B.A.                  T.B.A.


</Table>

                            SEVERAL LIABILITY NOTICE

The subscribing insurers' obligations under contracts of insurance to which
they subscribe are several and not joint and are limited solely to the extent
of their individual subscriptions. The subscribing insurers are not responsible
for the subscription of any co-subscribing insurer who for any reason does not
satisfy all or part of its obligations.

LSW 1001 (Insurance)


<PAGE>

                                      [LOGO]
                                    Sedgwick

                                    SECURITY

                             As Respects Coverage B

<Table>
<Caption>

                                            QUOTA SHARE                POLICY
INSURERS                                   PARTICIPATION               NUMBER
                                           (Part of 100%)

<S>                                         <C>                         <C>

Certain Underwriters at Lloyds,
London through Sedgwick Aviation
Limited                                         T.B.A.                  T.B.A.

Certain U.K. Insurance Companies
and Others through Sedgwick Aviation
Limited                                         T.B.A.                  T.B.A.

Navigators Insurance Company
through Somerset Aviation                       T.B.A.                  T.B.A

Assurance France, Aviation                      T.B.A.                  T.B.A.

La Reunion Aerienne through
La Concorde                                     T.B.A.                  T.B.A.

Mutual Marine Office                            T.B.A.                  T.B.A.

</Table>


                            SERVERAL LIABILITY NOTICE

The subscribing Insurer's obligations under contracts of insurance to which they
subscribe are several and not joint and are limited solely to the extent of
their individual subscriptions. The subscribing insurers are not responsible
for the subscription of any co-subscribing insurer who for any reason does not
satisfy all or part of its obligations.

LSW 1001 (Insurance)


<PAGE>

                                     [LOGO]
                                    Sedgwick

                               SPECIAL PROVISIONS

Solely as respects coverages A, B and C and solely as respects Lease Agreement
N804AL dated as of January _, 1997 between ACG Acquisition VIII LLC ("Owner"/
"Lessor"), FINOVA Capital Corporation ("Lender") and Aloha Airlines, Inc.
("Lessee") (the "Lease") regarding the Aircraft, subject to policy terms,
conditions, limitations, deductibles, warranties and exclusions the following
provisions apply:

1.       SOLELY AS RESPECTS COVERAGES A AND B:

         1.       All losses will be adjusted with Lessee. In the event of a
                  Total Loss of the Aircraft, Lender is named as Sole Loss
                  Payee for all insurance proceeds up to the Agreed Value (as
                  defined in the Lease). With respect to damage or loss not
                  constituting a Total Loss of the Aircraft, Lender is named
                  as Sole Loss Payee in respect of all insurance proceeds
                  where such insurance proceeds exceed US$500,000.00. Such
                  insurance proceeds which are not in excess of US$500,000.00
                  shall be payable solely to Lessee; provided that upon
                  receipt by Insurers and the Insurance Broker of written
                  notice from Lender or Owner/Lessor that an Event of
                  Default on the part of Lessee has occurred and is
                  continuing, all payments up to the Agreed Value will be
                  made to, Lender. In all cases, any insurance proceeds in
                  excess of the Agreed Value will be payable solely to
                  Lessee.

         2.       Hull All Risks insurers and Hull War Risks and Allied Perils
                  insurers agree to a 5O/50 claims settlement provision per the
                  terms of AVS103 (or its equivalent),

         3.       Underwriters are not entitled to replace the Aircraft in the
                  event of a Total Loss of the Aircraft.

II.      SOLELY IS RESPECT COVERAGE C:

         1.       Lender, Owner/Lessor and their respective successors and
                  assigns and their respective shareholders, affiliates,
                  subsidiaries, directors, officers, employees, agents and
                  indemnitees are included as Additional Insureds ("the
                  Additional Insureds") as their respective interests may
                  appear, warranted no operational interest. However, no party
                  shall be included as an Additional Insured as respects its
                  legal liability as manufacturer, repairer, supplier or
                  servicing agent of the Aircraft or any part thereof.


<PAGE>

                                     [LOGO]
                                    Sedgwick

         2.       This insurance is primary without right of contribution from
                  any other insurance as may be carried by an Additional
                  Insured.

         3.       Such as is afforded the Lessee under the policy applies to
                  liability assumed by the Lessee under the Lease, specifically
                  Article 10-INDEMNITY of the Lease, but only. to the extent of
                  the coverage otherwise afforded under the policy.

         4.       Each of Additional Insureds shall have the same protection as
                  would have been available had this policy been issued
                  individually to each of them except that this fact shall not
                  in any event increase the Insurers' total liability beyond the
                  limits set forth in the policy.

III.     SOLELY AS RESPECTS COVERAGES A, B AND C:

         1.       Insurers waive their rights to any set-off or counter claim or
                  any other deduction, whether by attachment or otherwise, in
                  respect of any liability to the Additional Insureds (save in
                  respect of unpaid premiums in respect of the Aircraft only).

         2.       The Additional Insureds have no responsibility for premiums,
                  commissions, assessments or calls (save as is provided for in
                  Special Provision III. 1).

         3.       Insurers waive their rights of subrogation against the
                  Additional Insureds but only to the same extent that Lessee
                  has waived its rights of recovery against the Additional
                  Insureds in the Lease.

         4.       In respect of the interests of each Additional Insured, the
                  insurance shall not be invalidated by any act or omission
                  by Lessee or any other insured. The Additional Insureds are
                  held covered for their respective interests notwithstanding
                  any breach or violation of any warranty, condition or
                  declaration of the policy by Lessee or any other insured.
                  However, such protection as is afforded an Additional
                  Insured under this clause will not apply in the event such
                  Additional Insured breaches or violates any warranty,
                  condition or declaration of the policy, nor does this
                  clause apply in the event of exhaustion of policy limits or
                  to losses/claims arising from perils specifically excluded
                  from coverage under the policies.

<PAGE>

                                     [LOGO]
                                    Sedgwick

         5.       In the event of cancellation or material change of the
                  policies by Insurers, which would adversely affect the
                  interests of the Additional Insureds, Insurers agree that such
                  cancellation or change shall not be effective as to the
                  Additional Insureds until thirty (30) days (seven (7) days or
                  such shorter period as may be customary in the case of War
                  Risks insurance) after issuance of notice thereof to Lender
                  and Owner/Lessor.

         6.       Insurers Note the existence of the Lease and acknowledge ACG
                  Acquisition VIII LLC as Owner of the Aircraft.

THE undersigned has been authorized by the above insurers to issue this
certificate on their behalf. The undersigned is not an insurer and has no
liability of any sort under the above policies nor as a result of this
certification. This certificate does not alter, extend or amend any policy
terms, conditions, limitations, deductibles, warranties or exclusions.


DATE OF ISSUE                                 SEDGWICK AVIATION, NORTH AMERICA


______________                                ________________________________
                                              AUTHORIZED REPRESENTATIVE



<PAGE>


CHAR
SAKAMOTO                                                              SCHEDULE 5
ISHII
& LUM
--------------------
ATTORNEYS AT LAW

__________________, 1997

ACG Acquisition VIII LLC
c/o Aviation Capital Group Corp.
Three Stamford Landing
46 Southfield Avenue
Stamford, Connecticut 06902

FINOVA CAPITAL CORPORATION
1850 North Central Avenue
Phoenix, Arizona 85077

Re: LEASE AGREEMENT 804 dated as of ___________________________, 1997 between
ACG ACQUISITION VIII LLC ("Lessor") and ALOHA AIRLINES, INC. ("Lessee") with
respect to one (1) The Boeing Company Model 737-2Q9 Aircraft, bearing
manufacturer's serial no. 21719 and U.S. registration no. N804AL, together with
two (2) Pratt & Whitney Model JT8D-9A engines bearing engine manufacturer's
serial nos. 687772 and 674389 (the "Aircraft").

Gentlemen:

We are counsel to Aloha Airlines, Inc. in regard to the above-referenced
transaction.

You have asked us to render an opinion in connection with the transactions
governed by the following documents:

     1.   Lease Agreement 804 (as described above) dated as of
          ________________, 1997 by and between Lessor and Lessee ("Lease
          Agreement");

     2.   Acceptance Certificate dated as of ________________, 1997 executed
          by Lessee ("Acceptance Certificate"); and

     3.   Acknowledgment and Consent dated as of __________________________
          1997 relating to Lessor's assignment of Lease Agreement to FINOVA
          Capital Corporation, as Lender ("Acknowledgment").

The documents listed above collectively referred to as the "Operative
Documents." Except as otherwise expressly stated herein, words and expressions
used herein shall bear the same meanings as defined in the Operative Documents.


A LAW CORPORATION Suite 850, Davies Pacific Center, 841 Bishop Street, Honolulu,
Hawaii 96813 - (808) 522-5133 - Facsimile: (808) 522-5144


<PAGE>


CHAR
SAKAMOTO
ISHII
& LUM
--------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
__________________,  1996
Page 2

In rendering the opinions expressed below, we have examined the (a) the
Operative Documents, (b) the Articles of Association and By-Laws of Lessee, (c)
certain certificates executed by officers of Borrower and (d) other documents,
in our judgment and to our knowledge, necessary or appropriate to examine to
enable us to give the opinions expressed below.

Having reviewed the foregoing described documents, and having regard to the
relevant laws of the State of Hawaii and the United States of America, it is our
opinion that:

     A.   Lessee (i) is a corporation duly formed, validly existing and in
          good standing under the laws of the State of Hawaii, (ii) is
          qualified to do business in all jurisdictions in which the nature
          of its business or its properties requires it to be qualified,
          (iii) presently maintains its principal place of business and chief
          executive office in Honolulu, Hawaii, (iv) has full power to carry
          on its business as it is now being conducted and to enter into,
          legally bind itself by, and perform its obligations under the
          Operative Documents and (v) to our knowledge and without any
          inquiry except review of a certification as to the following
          provided by Lessee, has complied with all material statutory and
          other requirements relative to its businesses;

     B.   To our knowledge and without any inquiry except review of a
          certification as to the following provided by Lessee, (i) all
          consents, resolutions and authorizations necessary or advisable in
          order for Lessee to enter into the Operative Documents and to lease
          the Aircraft in accordance with the terms and conditions of the
          Operative Documents have been obtained, and (ii) no further
          consents or authorizations are necessary for the lease of the
          Aircraft by Lessee pursuant to the provisions of the Operative
          Documents and for the performance by Lessee of all of its
          obligations pursuant to the provisions of the Operative Documents;

     C.   The Operative Documents (i) constitute valid and binding
          obligations of Lessee, enforceable in accordance with their
          respective terms, (ii) are in


A LAW CORPORATION


<PAGE>


CHAR
SAKAMOTO
ISHII
& LUM
--------------------
ATTORNEYS AT LAW


ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
_________________,  1996
Page 3

          full force and effect, and (iii) the provisions of the Operative
          Documents with respect to choice of substantive law to govern the
          interpretation and enforcement of such Operative Documents and
          consent to jurisdiction and choice of forum in connection with such
          interpretation and enforcement are legal, valid and binding;
          however, the state and federal courts in the State of Hawaii may
          not apply the procedural law, including without limitation, law
          relating to remedies or provisional remedies, of a non-forum state,
          such as, without limitation, New York and Arizona;

     D.   To our knowledge and without any inquiry except review of a
          certification as to the following provided by Lessee, (i) the
          execution and delivery of and the performance of the provisions of
          the Operative Documents and of the transactions contemplated
          thereby and hereby do not contravene in any material respect any
          applicable law, regulation, decree, order, permit or contractual or
          other restriction now existing and binding on Lessee or on any of
          the properties of Lessee, and (ii) the performance of the
          provisions of the Operative Documents in effect on this date, and
          of the transactions contemplated thereby will not contravene in any
          material respect any applicable law, regulation, decree, order or
          permit currently in effect or contractual or other restriction now
          existing and binding on Lessee or on any of the properties of
          Lessee;

     E.   To our knowledge and without inquiry except review of a
          certification as to the following provided by Lessee, (i) there are
          no outstanding judgments against Lessee and (ii) no action, claim,
          suit or proceeding pending or threatened (including, but not
          limited to, tax liens or tax actions) against or affecting Lessee
          or any of the property of Lessee before any court, board of
          arbitration or administrative agency which would likely result in
          any material adverse change in the business or condition (financial
          or otherwise) of Lessee;

     F.   To our knowledge and without inquiry except review of a
          certification as to the following provided by Lessee, Lessee is not
          in default under any agreement to which


A LAW CORPORATION


<PAGE>


CHAR
SAKAMOTO
ISHII
& LUM
--------------------
ATTORNEYS AT LAW


ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
______________________,  1996
Page 4

          it is a party or by which it may be bound, nor in default of any
          kind in respect of any financial commitment or obligation
          (including obligations under guarantees) which could have a
          material adverse effect on the ability of Lessee to perform its
          obligations under the Operative Documents nor is there any fact
          which by giving of notice or by lapse of time or otherwise might
          constitute such default by Lessee;

     G.   None of the Operative Documents or any other document executed in
          connection with the Operative Documents or contemplated thereby nor
          any filing required or permitted thereunder is subject to any
          registration tax, any stamp duty or similar tax;

     H.   To our knowledge and without inquiry except for review of a
          certification as to the following provided by Lessee, Lessee has
          furnished Lessor with consolidated financial statements of Aloha
          Airgroup, Inc., the corporate parent of Lessee, reflecting the
          financial results of Aloha Airgroup, Inc. and its subsidiaries
          (including Lessee) as of __________________________, 199_.

     I.   Lessee is (i) a "United States citizen" as that term is used and
          defined in the Federal Aviation Act of 1958, as amended and
          recodified as Title 49 of the United States Code, and (ii) a duly
          certified United States Air Carrier pursuant to the provisions of
          14 C.F.R. 121;

     J.   To our knowledge and without inquiry except for review of a
          certification as to the following provided by Lessee, no written
          information given by Lessee in relation to the Operative Documents
          contains any misstatement of fact or omits to state a fact which
          would be adverse to the interest of Lessor or which would be
          necessary to make any statement or representation or warranty
          contained herein or therein not misleading;

     K.   To our knowledge and without inquiry except for review of a
          certification as to the following provided by Lessee, there has
          occurred no event which, with the giving of notice or lapse of time
          or both, would


A LAW CORPORATION


<PAGE>


CHAR
SAKAMOTO
ISHII
& LUM
--------------------
ATTORNEYS AT LAW


ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
_________________,  1996
Page 5

          constitute an Event of Default or Default under the Operative
          Documents;

     L.  To our knowledge and without inquiry except for review of a
certification as to the following provided by Lessee, Lessee
does not do business under any assumed or trade names;

     M.   Except for the filing of appropriate financing statements (UCC-1s)
          with the Bureau of Conveyances, State of Hawaii and the filing of
          the Lease Agreement with the Federal Aviation Administration, no
          further actions are necessary to record or perfect Lessor's
          interest in the Lease in the United States or in the State of
          Hawaii;

     N.   The Operative Documents do not violate any law relating to the
          charging, contracting for or payment or collection of interest or
          the like; and

     0.   In the event that Lessee files a petition for relief under Chapter
          11 of the United States Bankruptcy Code, as amended, or has such a
          petition filed against it, Lessor will be entitled to the rights
          provided to a "lessor" under the provisions of section 1110(a) (1)
          of Title 11 of the United States Code.

The opinion expressed above is qualified to the extent that:

     1.   We are members of the Bar of the State of Hawaii and do not hold
          ourselves out as being conversant with, and express no opinion as
          to, the laws of any jurisdiction other than those of the State of
          Hawaii and the United States of America.

     2.   The opinions expressed herein are solely for your benefit and may
          not be relied upon in any manner or for any purpose by any other
          person.

     3.   In conducting our examination, we have assumed the genuineness of
          all signatures (other than the signatures of Lessee), the
          correctness of all certificates, the authenticity of all documents
          submitted to us as originals, the conformity to


A LAW CORPORATION


<PAGE>


CHAR
SAKAMOTO
ISHII
& LUM
--------------------
ATTORNEYS AT LAW


ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
___________________, 1996
Page 6

          original documents of all documents submitted to us as certified or
          photostatic copies and the authenticity of the originals of such
          copies, and the accuracy and completeness of all records made
          available to us by Lessee. In making our examination of documents
          and instruments, we have assumed that each party to such documents
          and instruments (other than Lessee and its affiliates) has: (i) the
          power and capacity to enter into and perform all its obligations
          under such documents and instruments, (ii) duly authorized all
          requisite action with respect to such documents and instruments,
          and (iii) duly executed and delivered such documents and
          instruments.

     4.   The opinions expressed above are qualified to the extent that (i)
          enforceability of the Operative Documents and transactions
          contemplated thereby may be limited by bankruptcy, insolvency,
          reorganization, moratorium or similar laws of general application
          from time to time affecting the rights of creditors, lessors and
          secured parties generally and providing relief for debtors; and
          (ii) a particular court may refuse to grant certain equitable or
          legal remedies, including without limiting the generality of the
          foregoing, specific performance or foreclosure, with respect to the
          enforcement of any provisions of the Operative Documents.

     5.   This opinion letter is limited to the matters stated herein and no
          opinion may be implied or inferred beyond the matters expressly
          stated herein.

     6.   The opinions given herein are as of the date hereof and we assume
          no obligation to update or supplement such opinions to reflect any
          facts or circumstances which


A LAW CORPORATION


<PAGE>


CHAR
SAKAMOTO
ISHII
& LUM
--------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
___________________,  1996
Page 7

          may hereafter come to our attention or any changes in law which may
          hereafter occur.

Very truly yours,

CHAR SAKAMOTO ISHII & LUM


Elizabeth Ann Ishii
Lana Proctor Banbury

CC:  Ms. Brenda F. Cutwright
     Mr. James M. King
     Mr. Timothy Ng


A LAW CORPORATION


<PAGE>


                                                                      SCHEDULE 6

                      IRREVOCABLE STANDBY LETTER OF CREDIT

Beneficiary:

ACG Acquisition VIII LLC
c/o Aviation Capital Group Corp.
Three Stamford Landing
46 Southfield Avenue
Stamford, Connecticut 06902

Gentlemen:

         We hereby establish our irrevocable Standby Letter of Credit
No. S/B _______. in your favor, effective 19___, available by your draft(s)
on First Hawaiian Bank, International Banking, Honolulu, a, sight for the
account of Aloha Airlines, Inc., P. 0. Box 30028, Honolulu, Hawaii 96820, up
to an aggregate amount of U.S. $220,000 (two hundred twenty thousand United
States Dollars), accompanied by:

         A statement purportedly signed by a duly authorized officer of ACG
         Acquisition VIII LLC , certifying that an "Event of Default" has
         occurred and is continuing under that certain Lease Agreement 804
         by and between Aloha Airlines, Inc. and ACG Acquisition VIII LLC.

         Payment of amounts drawn under this Letter of Credit shall be made in
full, without any offset or counterclaim whatsoever and free and clear of any
deductions or withholdings. Until all amounts which may be or become payable to
the Lessor or the Lender by the Lessee have been irrevocable paid in full we
shall not by virtue of this Letter of Credit be subrogated to any of the
Lessors or the Lender's rights or claim in competition with the Lessor or the
Lender against the Lessee.

         It is a condition of this Letter of Credit that it shall be deemed
automatically extended without amendment for an additional period of one (1)
year each from the present or each future expiration date unless at least
thirty (30) days prior to any such expiry date we shall notify you in writing
by certified mail at the above address, that we elect not to consider this
Letter of Credit renewed for such additional period. Upon receipt of such
notice, you may draw hereunder by means of your draft on us as sight
accompanied by this Letter of Credit and your written certification stating
that "FINOVA Capital Corporation has received a notice of non-renewal from
First Hawaiian Bank to its Letter of Credit No. S/B________".

         Partial drawings permitted.

         All drafts must beer the clause "Drawn under Credit No. S/B _____ of
First Hawaiian Bank, Honolulu, Hawaii dated ____________, 19__.

         This Letter of Credit is transferable only by Beneficiary. Notice of
such Transfer, if any, must be mailed immediately to First Hawaiian Bank,
International Banking, at P.O. Box 3200, Honolulu, Hawaii 96847

         All bank charges relating to this Letter of Credit are for the account
of applicant.


<PAGE>


         Alternatively, drawings may be sent via fax to our International
Banking at Fax No. (608) 525-5791, originals to follow by mail. Drawings by fax
or by presentment of original documents must be received by First Hawaiian Bank,
International Banking on or before 3:00 P.M. Hawaii Standard Time on
_______________, 19__, the expiration date or any automatically extended date.

         Except as otherwise expressly stated, this Credit Is subject to the
"Uniform Customs mid Practice for Documentary Credits" (1993 Revision)
International Chamber of Commerce Publication No. 500.

         We hereby engage with you that all drafts drawn under and in
compliance with the terms of this Credit shall be duly honored upon
presentation if drawn on or before _________________, 19__, the expiration
date, at our international Banking counters In Honolulu, Hawaii.

                                    Sincerely,

                                    FIRST HAWAIIAN BANK

--------------------------------    -----------------------------------
     Authorized Signature                   Authorized Signature


<PAGE>


                                   SCHEDULE 7

                        FORM OF SEMI-ANNUAL STATUS REPORT

<Table>
<Caption>

     AIRCRAFT TYPE                    REG. MARK      SERIAL NO.    MONTH ENDING
     -------------                    ---------      ----------    ------------
<S>  <C>                              <C>            <C>           <C>

     Boeing 737-2Q9                   N804AL         21719         -------------

1.   AIRCRAFT UTILIZATION:

(a)  Airframe Total Flight Hours                     ..................................................

(b)  Airframe Total Cycles                           ..................................................

(c)  Airframe Flight Hours for Month                 ..................................................

(d)  Airframe Flight Cycles for Month                ..................................................

2.   POWERPLANT STATUS:                                              No.1                    No.2

(a)  Serial Nos. of Delivered Engines                             ............           .............

(b)  Serial Nos. of Replacement Engines                           ............           .............
     (if applicable)

(c)  Serial Nos. of Installed Engines                             ............           .............
     (if different from (a) or (b) above)

(d)  Current Location of Delivered or                             ............           .............
     Replacement Engines (as applicable)
     (if not installed on Airframe)

(e)  Total Time Since New of Delivered                            ............           .............
     or Replacement Engines (as applicable)

(f)  Total Cycles Since New of Delivered                          ............           .............
     or Replacement Engines (as applicable)

</Table>

                                     -99-


<PAGE>


<Table>
<Caption>

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

(g)  Total Flight Hours for the Month for                         ............           .............
     each Delivered or Replacement Engine
     (as applicable)

(h)  Total Cycles for the Month for each                          ............           .............
     Delivered or Replacement Engine
     (as applicable)

(i)  Serial No. of Delivered APU                                  ............

(j)  Serial No. of Replacement APU                                ............
     (if applicable)

(k)  Serial No. of Installed APU                                  ............
     (if different from (a) or (b) above)

(l)  Current Location of Delivered or                             ............
     Replacement APU (as applicable)
     (if not installed on Airframe)

(m)  Total Time Since New of Delivered                            ............
     or Replacement APU (as applicable)

(n)  Total Cycles Since New of Delivered                          ............
     or Replacement APU (as applicable)

(o)  Total Hours for the Month for                                ............
     Delivered or Replacement APU
     (as applicable)

(p)  Total Cycles for the Month for                               ............
     Delivered or Replacement APU
     (as applicable)

3.   ROUTINE CHECKS / A.D. AND S.B. COMPLIANCE:

(a)  Routine Checks (A and above) performed during Month:

(b)  Airworthiness Directives complied with during Month:

</Table>


                                    -100-


<PAGE>



(c)  Service Bulletins complied with during Month:

4.   AIRCRAFT DAMAGE OR ENGINE CHANGES:

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

5.   UPCOMING MAINTENANCE CHECKS

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

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

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


Date: ____________________, ______      CERTIFIED FOR AND ON BEHALF OF
                                        ALOHA AIRLINES, INC.

                                        By:___________________________________
                                        Name:
                                        Title:

                                      -101-


<PAGE>

                                                          RECORDED

                                              Federal Aviation Administration

                                              Date  5-16-01        Time  3:13 pm
                                                   ---------            --------

                                              Conveyance Number  BB 34833
                                                               ------------

                                              By /s/       [Illegible]
                                                      --------------------
                                                      Conveyances Examiner

                            LEASE AMENDMENT 804 NO. 1

     This Lease Amendment 804 No. 1, dated April 30, 2001 (this "Amendment"), is
between ACG Acquisition VIII LLC ("Lessor") and Aloha Airlines, Inc. ("Lessee")
and relates to the lease documents for one Boeing Model 737-2Q9 aircraft bearing
manufacturer's serial number 21719 and U.S. registration mark N804AL, including
two Pratt & Whitney Model JT8D-9A engines bearing manufacturer's serial numbers
P687772B and P674389B, which engines have 750 or more rated takeoff horsepower
(the "Aircraft").

RECITALS:
---------

(1)  Lessor is leasing the Aircraft to Lessee pursuant to Lease Agreement 804,
     dated January 22, 1997 (the "Original Lease Agreement"), between Lessor and
     Lessee, as supplemented by Certificate of Acceptance 804, dated January 22,
     1997, between Lessor and Lessee (the "Acceptance Certificate"). The
     Original Lease Agreement, as supplemented by the Acceptance Certificate, is
     referred to in this Amendment as the Lease Agreement.

(2)  The Original Lease Agreement and the Acceptance Certificate were recorded
     by the FAA and were assigned conveyance numbers by the FAA as set forth on
     the attached Schedule 1.

(3)  Lessor and Lessee wish to amend the Lease Agreement to extend the term of
     the Lease Agreement for one year, to amend the monthly rent during the
     extended term, to grant Lessee a further one-year extension option and to
     make certain other changes as set forth in this Amendment.

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

1.   DEFINITIONS.

     Capitalized terms used but not defined in this Amendment shall have the
     meanings ascribed to such terms in the Lease Agreement.

2.   AMENDMENT OF LEASE AGREEMENT.

     The Lease Agreement is amended as follows:

     (a)  The definition of "Expiry Date" in Clause 1.1 of the Lease Agreement
          is amended and restated in its entirety as follows:


                                      -1-
<PAGE>

          "September 25, 2002 or, if extended pursuant to Clause 4.1(b),
          September 25, 2003 or, if earlier than either of those dates, as
          applicable, the date on which:

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

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

     (b)  The definition of "Lender" in Clause 1.1 of the Lease Agreement is
          amended to delete the words "FINOVA Capital Corporation, a Delaware
          corporation, and".

     (c)  The definition of "Mortgage" in Clause 1.1 of the Lease Agreement and
          all references to "Mortgage" in the Lease Agreement are deleted.

     (d)  The definition of "Security Deposit" in Clause 1.1 of the Lease
          Agreement is amended and restated in its entirety as follows: "the
          amount of $100,000".

     (e)  Clause 4.1(b) of the Lease Agreement is designated Clause 4.1(c),
          and a new Clause 4.1(b) is added to the Lease Agreement as follows:

          (b)  By written notice delivered to Lessor on or before December 26,
               2001, Lessee may elect to extend the scheduled "Expiry Date" by
               one year, to September 25, 2003. Except as set forth in the
               preceding sentence, there shall be no renewals or extensions of
               the Term.

     (f)  Clause 5.3(b)(ii) of the Lease Agreement is amended and restated in
          its entirety as follows:

         "(ii) The Basic Rent payable in respect of each subsequent Rental
               Period will be (1) for Rental Periods ending on or before
               September 25, 2001, the amount of $110,000, and (2) for Rental
               Periods beginning on or after September 26, 2001, the amount of
               $80,000."

     (g)  Clause 5.4(a) of the Lease Agreement is amended and restated in its
          entirety as follows:

          "(a) All payments of Rent by the Lessee to the Lessor under this
               Agreement will be made for value on the due date, for the full
               amount due, in Dollars and in same day funds, settled through the
               New York Clearing House System or such other funds as may for the
               time being be customary for the settlement in New York City of
               payments in


                                       -2-
<PAGE>

              Dollars by telegraphic transfer to the account of the Lessor at
              Chase Manhattan Bank, N.A., New York, New York, ABA No. 021000021,
              Account No. 249-500-335-765."

     (h)  The text of the plates required pursuant to Clause 8.7(d) of the Lease
          Agreement is amended and restated in its entirety as follows:

            "This Aircraft/Engine is owned by ACG Acquisition VIII LLC and is
            leased to Aloha Airlines, Inc. It may not be operated by any other
            person without the prior written consent of ACG Acquisition VIII
            LLC."

     (i)  Clause 15.10(b)(i) of the Lease Agreement is amended and restated in
          its entirety as follows:

          "(i) if to Lessor, to it at: c/o Aviation Capital Group Corp.
                                       800 Newport Center Drive, Suite 425
                                       Newport Beach, California 92660-6309
                                       Attention: Managing Director
                                       Telefax No.: 949-759-5675

               with a copy to:         Aviation Capital Group Corp.
                                       2 Stamford Landing, Suite 295
                                       46 Southfield Avenue
                                       Stamford, Connecticut 06902
                                       Attention:   Managing Director
                                       Telefax No.: 203-967-3287."

     (j)  Clause 1(g) of Schedule 3 of the Lease Agreement is deleted, and the
          text "[Intentionally Omitted]" is substituted in its place.

     (k)  Clause 3(a) of Schedule 3 of the Lease Agreement is amended to add the
          following text after the word "removal" in the first line: "(including
          removal for a hot section inspection)".

     (l)  Clause 2(a) of Schedule 4, Part 1 of the Lease Agreement is amended to
          delete the words "Lender as sole loss payee" in the third line and
          substitute the words "Lessor as sole loss payee".

3.   RATIFICATION.

     Except as amended in Section 2 above, the Lease Agreement remains in full
     force and effect in accordance with its terms.


                                       -3-
<PAGE>

4.   LESSEE'S REPRESENTATIONS AND WARRANTIES.

     Lessee represents and warrants to Lessor as follows:

     (a)  After giving effect to this Amendment, (i) each of the representations
          and warranties set forth in Clauses 2.1 and 2.2 of the Lease Agreement
          is true and correct in all respects as if made on the date of this
          Amendment, and (ii) no Default or Event of Default exists under the
          Lease Agreement.

     (b)  Lessee has the power to execute, deliver and perform, and has taken
          all necessary corporate action to authorize the execution, delivery
          and performance of, this Amendment and the other agreements,
          instruments and documents to be executed by it in connection with this
          Amendment. No consent or approval of any Person, no consent or
          approval of any mortgagee, no waiver of any Lien or right of distraint
          or other similar right and no consent, license, certificate of need,
          approval, authorization or declaration of, or filing with, any
          governmental authority, bureau or agency is or will be required in
          connection with the execution, delivery or performance by Lessee, or
          in connection with the validity or enforcement against Lessee, of this
          Amendment and the other agreements, instruments and documents executed
          in connection with this Amendment, except for the filing of this
          Amendment for recordation with the aircraft registry of the FAA.

     (c)  The execution, delivery and performance by Lessee of this Amendment
          and each of the agreements, instruments and documents executed in
          connection with this Amendment to which it is a party will not (i)
          violate any provision of law, (ii) conflict with or result in a breach
          of any order, writ, injunction, ordinance, resolution, decree or other
          similar document or instrument binding on Lessee of any court or
          governmental authority, bureau or agency, domestic or foreign, (iii)
          conflict with or result in a breach of the certificate of
          incorporation or by-laws of Lessee, (iv) create (with or without the
          giving of notice or lapse of time, or both) a default under or breach
          of any agreement, bond, note or indenture to which Lessee is a party,
          by which Lessee is bound or by which any of its properties or assets
          is affected, or (v) result in the imposition of any Lien of any nature
          whatsoever upon any of the properties or assets owned by or used in
          connection with the business of Lessee.

     (d)  This Amendment and each of the other agreements, instruments and
          documents executed in connection with this Amendment to which Lessee
          is a party have been duly executed and delivered by Lessee and
          constitute the valid and legally binding agreements of Lessee,
          enforceable in accordance with their respective terms, except as such
          enforcement may be limited by applicable bankruptcy, insolvency,
          reorganization, moratorium, or other similar laws, now or hereafter in
          effect, relating to or affecting the enforcement of creditors' rights
          generally and except that the


                                       -4-
<PAGE>

          remedy of specific performance and other equitable remedies are
          subject to judicial discretion.

5.   LESSOR'S REPRESENTATIONS AND WARRANTIES.

     Lessor represents and warrants to Lessee as follows:

     (a)  After giving effect to this Amendment, each of the representations and
          warranties set forth in Clause 2.4 of the Lease Agreement is true and
          correct in all respects as if made on the date of this Amendment.

     (b)  Lessor has the power to execute, deliver and perform, and has taken
          all necessary limited liability company action to authorize the
          execution, delivery and performance of, this Amendment and the other
          agreements, instruments and documents to be executed by it in
          connection with this Amendment. No consent or approval of any Person,
          no consent or approval of any mortgagee, no waiver of any Lien or
          right of distraint or other similar right and no consent, license,
          certificate of need, approval, authorization or declaration of, or
          filing with, any governmental authority, bureau or agency is or will
          be required in connection with the execution, delivery or performance
          by Lessor, or in connection with the validity or enforcement against
          Lessor, of this Amendment and the other agreements, instruments and
          documents executed in connection with this Amendment, except for the
          filing of this Amendment for recordation with the aircraft registry of
          the FAA.

     (c)  The execution, delivery and performance by Lessor of this Amendment
          and each of the agreements, instruments and documents executed in
          connection with this Amendment to which it is a party will not (i)
          violate any provision of law, (ii) conflict with or result in a breach
          of any order, writ, injunction, ordinance, resolution, decree or other
          similar document or instrument binding on Lessor of any court or
          governmental authority, bureau or agency, domestic or foreign, (iii)
          conflict with or result in a breach of the certificate of formation or
          operating agreement of Lessor, (iv) create (with or without the giving
          of notice or lapse of time, or both) a default under or breach of any
          agreement, bond, note or indenture to which Lessor is a party, by
          which Lessor is bound or by which any of its properties or assets is
          affected, or (v) result in the imposition of any Lien of any nature
          whatsoever upon any of the properties or assets owned by or used in
          connection with the business of Lessor, except the Lien of the
          Security Trust Agreement.

     (d)  This Amendment and each of the other agreements, instruments and
          documents executed in connection with this Amendment to which Lessor
          is a party have been duly executed and delivered by Lessor and
          constitute the valid and legally binding agreements of Lessor,
          enforceable in accordance with their respective terms, except as such
          enforcement may be limited by applicable bankruptcy, insolvency,


                                       -5-
<PAGE>

          reorganization, moratorium, or other similar laws, now or hereafter in
          effect, relating to or affecting the enforcement of creditors' rights
          generally and except that the remedy of specific performance and other
          equitable remedies are subject to judicial discretion.

6.   GOVERNING LAW.

     This Amendment shall be governed by and construed in accordance with the
     laws of the State of New York applicable to contracts executed in the State
     of New York by residents of such State and to be performed entirely within
     such State.

7.   SUCCESSORS AND ASSIGNS.

     This Amendment shall be binding upon, inure to the benefit of and be
     enforceable by Lessor, Lessee, and their respective successors, transferees
     and assigns. Neither Lessor nor Lessee shall assign or delegate its rights
     and obligations under this Amendment except in accordance with an
     assignment or delegation of its rights and obligations under, and in
     accordance with the terms of, the Lease Agreement, and any other purported
     assignment or delegation shall be null and void AB INITIO.

8.   SEVERABLE PROVISIONS.

     The provisions of this Amendment are severable, and if any section or
     provision shall be held invalid or unenforceable in whole or in part in any
     jurisdiction, then such invalidity or unenforceability shall affect only
     such section, provision or part in such jurisdiction and shall not in any
     manner affect such section, provision or part in any other jurisdiction or
     any other section or provision in this Amendment in any jurisdiction.

9.   COUNTERPARTS.

     This Amendment may be executed in one or more counterparts, each of which
     shall be deemed an original but all of which together shall constitute one
     and the same Amendment.

10.  EXPENSES.

     Each of Lessor and Lessee shall bear its own expenses, including the legal
     fees and expenses of its counsel, in connection with the negotiation,
     execution and delivery of this Amendment and all other documents executed
     and delivered in connection with this Agreement, and Lessor and Lessee
     shall share equally the legal fees and expenses, including filing fees,
     incurred by [Lytle, Soule & Curlee], special counsel for FAA matters.


                                       -6-
<PAGE>

11.  CHATTEL PAPER COUNTERPART.

     TO THE EXTENT, IF ANY, THAT THE LEASE AGREEMENT, AS AMENDED BY THIS
     AMENDMENT, CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
     UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO
     SECURITY INTEREST IN THE LEASE AGREEMENT AS AMENDED BY THIS AMENDMENT MAY
     BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OF THIS
     AMENDMENT OTHER THAN THE ORIGINAL COUNTERPART MARKED "CHATTEL PAPER
     COUNTERPART".

                            [SIGNATURE PAGE FOLLOWS]

     IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Amendment
804 No. 1 on the date first above written.


                                        ACG ACQUISITION VIII LLC, as Lessor

                                        By: /s/ R. STEPHEN HANNAIB
                                                -------------------------------
                                        Name:   R. STEPHEN HANNAIB
                                                -------------------------------
                                        Title:  MANAGER
                                                -------------------------------


                                        ALOHA AIRLINES, INC., as Lessee

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


                                        By: /s/ GLENN R. ZANDER
                                                -------------------------------
                                        Name:   Glenn R. Zander
                                                -------------------------------
                                        Title:  President & CEO
                                                -------------------------------


                                      -7-
<PAGE>

                                   Schedule 1
                          to Lease Amendment 804 No. 1

                              Description of Lease

     Lease Agreement 804 dated January 22, 1997, between ACG Acquisition VIII
LLC as lessor and Aloha Airlines, Inc. as lessee, as supplemented by Certificate
of Acceptance 804 dated January 22, 1997, recorded by the Federal Aviation
Administration on March 19, 1997, as Conveyance No. RR011675.

                                       -8-



<PAGE>

                            LEASE AMENDMENT 804 NO. 2

     This Lease Amendment 804 No. 2, dated as of November 9, 2001 (this
"Amendment"), is between ACG Acquisition VIII LLC ("Lessor") and Aloha Airlines,
Inc. ("Lessee") and relates to the lease documents for one Boeing Model 737-2Q9
aircraft bearing manufacturer's serial number 21719 and U.S. registration mark
N804AL, including two Pratt & Whitney Model JT8D-9A engines bearing
manufacturer's serial numbers P687772B and P674389B, which engines have 750 or
more rated takeoff horsepower (the "Aircraft").

RECITALS:
---------

(1)  Lessor is leasing the Aircraft to Lessee pursuant to Lease Agreement 804,
     dated January 22, 1997 (the "Original Lease Agreement"), between Lessor and
     Lessee, as supplemented by Certificate of Acceptance 804, dated January 22,
     1997, between Lessor and Lessee (the "Acceptance Certificate") and as
     amended by Lease Amendment 804 No. 1, dated April 30, 2001, between Lessor
     and Lessee ("Amendment No. 1"). The Original Lease Agreement, as
     supplemented by the Acceptance Certificate and amended by Amendment No. 1,
     is referred to in this Amendment as the Lease Agreement.

(2)  The Original Lease Agreement, the Acceptance Certificate and Amendment No.
     1 were recorded by the FAA and were assigned conveyance numbers by the FAA
     as set forth on the attached Schedule 1.

(3)  Lessor and Lessee wish to amend the Lease Agreement to extend the term of
     the Lease Agreement for approximately three months, to amend the monthly
     rent during the remainder of the term and to make certain other changes as
     set forth in this Amendment.

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

1.   DEFINITIONS.

     Capitalized terms used but not defined in this Amendment shall have the
     meanings ascribed to such terms in the Lease Agreement.

2.   AMENDMENT OF LEASE AGREEMENT.

     The Lease Agreement is amended as follows:


                                       -1-
<PAGE>

     (a)  The definition of "Agreed Value" in Clause 1.1 of the Lease Agreement
          is amended to read "as set forth in Appendix 1".

     (b)  The definition of "Expiry Date" in Clause 1.1 of the Lease Agreement
          is amended and restated in its entirety as follows:

               "December 25, 2002 or, if extended pursuant to Clause 4.1(b),
               December 25, 2003 or, if earlier than either of those dates, as
               applicable, the date on which:

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

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

     (c)  The definitions of "Letter of Credit" and "Security Deposit" in Clause
          1.1 of the Lease Agreement are deleted in their entirety, and all
          references in the Lease Agreement to such terms shall have no force or
          effect.

     (d)  Clause 4.1(b) of the Lease Agreement is amended and restated in its
          entirety as follows:

               "(b) By written notice delivered to Lessor on or before June 26,
                    2002, Lessee may elect to extend the scheduled "Expiry Date"
                    by one year, to December 25, 2003. Except as set forth in
                    the preceding sentence, there shall be no renewals or
                    extensions of the Term."

     (e)  Clause 5.1 of the Lease Agreement is deleted in its entirety.

     (f)  Clause 5.3(b)(ii) of the Lease Agreement is amended and restated in
          its entirety as follows:

               "(ii) The Basic Rent payable in respect of each subsequent Rental
                    Period will be the Basic Rent Amount, as set forth in
                    Appendix l."

     (g)  The Lease Agreement is amended to add Appendix 1 in the form attached
          to this Amendment as Schedule 2.

3.   APPLICATION OF LETTER OF CREDIT.

     Lessor is holding the Letter of Credit (as defined in the Lease Agreement,
     without giving effect to Section 2(c) above). Lessor and Lessee agree that
     Lessor shall be entitled to present


                                      -2-
<PAGE>

     the Letter of Credit to the issuing bank, and that the resulting proceeds
     paid to Lessor shall constitute payment in full for the Basic Rent due for
     the Rental Periods beginning on or after September 26, 2001 and ending on
     or before December 25, 2001 under the Lease Agreement, as amended by this
     Amendment. Lessee further agrees (a) notwithstanding the effect of this
     Amendment, Lessor may represent to the bank issuing the Letter of Credit
     that an Event of Default has occurred and may make such other statements
     and representations as are necessary for drawing the full amount under the
     Letter of Credit, and (b) Lessee shall take all such actions and grant to
     Lessor and the issuing bank all such waivers of the provisions of the Lease
     Agreement and the Letter of Credit as are necessary for Lessor to draw the
     full amount under the Letter of Credit.

4.   RATIFICATION.

     Except as amended in Section 2 above, the Lease Agreement remains in full
     force and effect in accordance with its terms.

5.   LESSEE'S REPRESENTATIONS AND WARRANTIES.

     Lessee represents and warrants to Lessor as follows:

     (a)  After giving effect to this Amendment, (i) each of the representations
          and warranties set forth in Clauses 2.1 and 2.2 of the Lease Agreement
          is true and correct in all respects as if made on the date of this
          Amendment, and (ii) no Default or Event of Default exists under the
          Lease Agreement.

     (b)  Lessee has the power to execute, deliver and perform, and has taken
          all necessary corporate action to authorize the execution, delivery
          and performance of, this Amendment and the other agreements,
          instruments and documents to be executed by it in connection with this
          Amendment. No consent or approval of any Person, no consent or
          approval of any mortgagee, no waiver of any Lien or right of distraint
          or other similar right and no consent, license, certificate of need,
          approval, authorization or declaration of, or filing with, any
          governmental authority, bureau or agency is or will be required in
          connection with the execution, delivery or performance by Lessee, or
          in connection with the validity or enforcement against Lessee, of this
          Amendment and the other agreements, instruments and documents executed
          in connection with this Amendment, except for the filing of this
          Amendment for recordation with the aircraft registry of the FAA.

     (c)  The execution, delivery and performance by Lessee of this Amendment
          and each of the agreements, instruments and documents executed in
          connection with this Amendment to which it is a party will not (i)
          violate any provision of law, (ii) conflict with or result in a breach
          of any order, writ, injunction, ordinance, resolution, decree or other
          similar document or instrument binding on Lessee of any


                                      -3-
<PAGE>

          court or governmental authority, bureau or agency, domestic or
          foreign, (iii) conflict with or result in a breach of the certificate
          of incorporation or by-laws of Lessee, (iv) create (with or, without
          the giving of notice or lapse of time, or both) a default under or
          breach of any agreement, bond, note or indenture to which Lessee is a
          party, by which Lessee is bound or by which any of its properties or
          assets is affected, or (v) result in the imposition of any Lien of any
          nature whatsoever upon any of the properties or assets owned by or
          used in connection with the business of Lessee.

     (d)  This Amendment and each of the other agreements, instruments and
          documents executed in connection with this Amendment to which Lessee
          is a party have been duly executed and delivered by Lessee and
          constitute the valid and legally binding agreements of Lessee,
          enforceable in accordance with their respective terms, except as such
          enforcement may be limited by applicable bankruptcy, insolvency,
          reorganization, moratorium, or other similar laws, now or hereafter in
          effect, relating to or affecting the enforcement of creditors' rights
          generally and except that the remedy of specific performance and other
          equitable remedies are subject to judicial discretion.

6.   LESSOR'S REPRESENTATIONS AND WARRANTIES.

     Lessor represents and warrants to Lessee as follows:

     (a)  After giving effect to this Amendment, each of the representations and
          warranties set forth in Clause 2.4 of the Lease Agreement is true and
          correct in all respects as if made on the date of this Amendment.

     (b)  Lessor has the power to execute, deliver and perform, and has taken
          all necessary limited liability company action to authorize the
          execution, delivery and performance of, this Amendment and the other
          agreements, instruments and documents to be executed by it in
          connection with this Amendment. No consent or approval of any Person,
          no consent or approval of any mortgagee, no waiver of any Lien or
          right of distraint or other similar right and no consent, license,
          certificate of need, approval, authorization or declaration of, or
          filing with, any governmental authority, bureau or agency is or will
          be required in connection with the execution, delivery or performance
          by Lessor, or in connection with the validity or enforcement against
          Lessor, of this Amendment and the other agreements, instruments and
          documents executed in connection with this Amendment, except for the
          filing of this Amendment for recordation with the aircraft registry of
          the FAA.

     (c)  The execution, delivery and performance by Lessor of this Amendment
          and each of the agreements, instruments and documents executed in
          connection with this Amendment to which it is a party will not (i)
          violate any provision of law, (ii) conflict with or result in a breach
          of any order, writ, injunction, ordinance,


                                       -4-
<PAGE>

          resolution, decree or other similar document or instrument binding on
          Lessor of any court or governmental authority, bureau or agency,
          domestic or foreign, (iii) conflict with or result in a breach of the
          certificate of formation or operating agreement of Lessor, (iv) create
          (with or without the giving of notice or lapse of time, or both) a
          default under or breach of any agreement, bond, note or indenture to
          which Lessor is a party, by which Lessor is bound or by which any of
          its properties or assets is affected, or (v) result in the imposition
          of any Lien of any nature whatsoever upon any of the properties or
          assets owned by or used in connection with the business of Lessor,
          except the Lien of the Security Trust Agreement.

     (d)  This Amendment and each of the other agreements, instruments and
          documents executed in connection with this Amendment to which Lessor
          is a party have been duly executed and delivered by Lessor and
          constitute the valid and legally binding agreements of Lessor,
          enforceable in accordance with their respective terms, except as such
          enforcement may be limited by applicable bankruptcy, insolvency,
          reorganization, moratorium, or other similar laws, now or hereafter in
          effect, relating to or affecting the enforcement of creditors' rights
          generally and except that the remedy of specific performance and other
          equitable remedies are subject to judicial discretion.

7.   GOVERNING LAW.

     This Amendment shall be governed by and construed in accordance with the
     laws of the State of New York applicable to contracts executed in the State
     of New York by residents of such State and to be performed entirely within
     such State.

8.   SUCCESSORS AND ASSIGNS.

     This Amendment shall be binding upon, inure to the benefit of and be
     enforceable by Lessor, Lessee, and their respective successors, transferees
     and assigns. Neither Lessor nor Lessee shall assign or delegate its rights
     and obligations under this Amendment except in accordance with an
     assignment or delegation of its rights and obligations under, and in
     accordance with the terms of, the Lease Agreement, and any other purported
     assignment or delegation shall be null and void AB INITIO.

9.   SEVERABLE PROVISIONS.

     The provisions of this Amendment are severable, and if any section or
     provision shall be held invalid or unenforceable in whole or in part in any
     jurisdiction, then such invalidity or unenforceability shall affect only
     such section, provision or part in such jurisdiction and shall not in any
     manner affect such section, provision or part in any other jurisdiction or
     any other section or provision in this Amendment in any jurisdiction.


                                       -5-
<PAGE>

10.  COUNTERPARTS.

     This Amendment may be executed in one or more counterparts, each of which
     shall be deemed an original but all of which together shall constitute one
     and the same Amendment.

11.  EXPENSES.

     Each of Lessor and Lessee shall bear its own expenses, including the legal
     fees and expenses of its counsel, in connection with the negotiation,
     execution and delivery of this Amendment and all other documents executed
     and delivered in connection with this Agreement, and Lessor and Lessee
     shall share equally the legal fees and expenses, including filing fees,
     incurred by Lytle, Soule & Curlee, special counsel for FAA matters.

12.  CHATTEL PAPER COUNTERPART.

     TO THE EXTENT, IF ANY, THAT THE LEASE AGREEMENT, AS AMENDED BY THIS
     AMENDMENT, CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
     UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO
     SECURITY INTEREST IN THE LEASE AGREEMENT AS AMENDED BY THIS AMENDMENT MAY
     BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OF THIS
     AMENDMENT OTHER THAN THE ORIGINAL COUNTERPART MARKED "CHATTEL PAPER
     COUNTERPART".

                            [SIGNATURE PAGE FOLLOWS]


                                      -6-
<PAGE>

     IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Amendment
804 No. 2 as of the date first above written.

                                        ACG ACQUISITION VIII LLC, as Lessor

                                        By: /s/ BENJAMIN L. JUNG
                                                -------------------------------
                                        Name:   BENJAMIN L. JUNG
                                                -------------------------------
                                        Title:  MANAGER
                                                -------------------------------


                                        ALOHA AIRLINES, INC., as Lessee

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


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


                                      -7-
<PAGE>

     IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Amendment
804 No. 2 as of the date first above written.

                                        ACG ACQUISITION VIII LLC, as Lessor

                                        By:
                                                -------------------------------
                                        Name:   BENJAMIN L. JUNG
                                                -------------------------------
                                        Title:  MANAGER
                                                -------------------------------


                                        ALOHA AIRLINES, INC., as Lessee


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


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


                                      -7-
<PAGE>

                                   Schedule 1
                          to Lease Amendment 804 No. 2

                              Description of Lease

     Lease Agreement 804, dated January 22, 1997, between ACG Acquisition VIII
LLC as lessor and Aloha Airlines, Inc. as lessee, as supplemented by Certificate
of Acceptance 804 dated January 22, 1997, recorded by the Federal Aviation
Administration on March 19, 1997, as Conveyance No. RRO11675.

     Lease Amendment 804 No. 1, dated April 30, 2001, between ACG Acquisition
VIII LLC as lessor and Aloha Airlines, Inc. as lessee, recorded by the Federal
Aviation Administration on May 16, 2001 as Conveyance No. BB34833.


                                       -8-
<PAGE>

                                   Schedule 2
                          to Lease Amendment 804 No. 2

         [INTENTIONALLY OMITTED AS CONTAINING CONFIDENTIAL INFORMATION](1)

                        APPENDIX 1 TO LEASE AGREEMENT 804
                        ---------------------------------

ADDITIONAL DEFINITIONS

In addition to the definitions set forth in Clause 1.1, the following
expressions shall have the following respective meanings in this Agreement:

<TABLE>
<CAPTION>
<S>                          <C>
AGREED VALUE                 $5,000,000

BASIC RENT AMOUNT            means (1) for Rental Periods ending on or before
                             September 25, 2001, the amount of $110,000, (2)
                             for Rental Periods beginning on or after September
                             26, 2001 and ending on or before December 25, 2001,
                             the amount of $33,333.33, and (3) for Rental
                             Periods beginning on or after December 26, 2001,
                             the amount of $90,000.
</TABLE>

------------------------
(1)  For inclusion on FAA filed copies of this Amendment in lieu of the
     following information.


                                       -9-