<PAGE>

                                                                   Exhibit 10.67

                                                               EXECUTION VERSION
                                                               -----------------

            TO THE EXTENT THAT THIS AIRCRAFT LEASE AGREEMENT CONSTITUTES CHATTEL
            PAPER (AS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
            APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS AIRCRAFT
            LEASE AGREEMENT MAY BE CREATED THROUGH TRANSFER OR POSSESSION OF ANY
            COUNTERPART OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE
            IDENTIFIED AS THE COUNTERPART DESIGNATED AS THE ORIGINAL ON THE
            SIGNATURE PAGE OF THIS AGREEMENT BY GE CAPITAL AVIATION SERVICES,
            INC.

                            AIRCRAFT LEASE AGREEMENT


                            DATED AS OF MAY 12, 2000
                                     BETWEEN

                        AVIATION FINANCIAL SERVICES INC.

                                    AS LESSOR

                                       AND

                              ALOHA AIRLINES, INC.

                                    AS LESSEE

                  IN RESPECT OF AIRCRAFT: BOEING MODEL 737-700

                                SERIAL NO: 28640

                         U.S. REGISTRATION NO.: N740AL

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

                        INCORPORATING THE PROVISIONS OF A

                             COMMON TERMS AGREEMENT

                            DATED AS OF MAY 12,2000


<PAGE>


                            AIRCRAFT LEASE AGREEMENT

  THIS AIRCRAFT LEASE AGREEMENT is made as of May 12,2000 and is

  BETWEEN:

  (1)      AVIATION FINANCIAL SERVICES INC., a corporation incorporated under
           the Laws of the State of Delaware having its principal place of
           business and chief executive office at 201 High Ridge Road, Stamford,
           Connecticut 06927 ("LESSOR"); and

           ALOHA AIRLINES, INC., a corporation incorporated under the Laws of
           the State of Delaware with its principal place of business and chief
           executive office at 371 Aokea Street, Honolulu, Hawaii 96819
           ("LESSEE").

  WHEREAS:

 (A)       Lessee wishes to lease the Aircraft (as defined below) from Lessor,
           and Lessor wishes to lease the Aircraft to Lessee, on the terms and
           subject to the conditions provided herein;

 (B)       General Electric Capital Corporation ("GECC"), an Affiliate of
           Lessor, and Lessee have entered into the Common Terms Agreement
           (as defined below) in respect of aircraft that may be leased from
           time to time by Lessee or one of its Affiliates from GECC or one of
           its Affiliates; and

 (C)       Lessor and Lessee wish to incorporate by reference such Common Terms
           Agreement, as well as Schedules A and B attached hereto, into this
           Aircraft Lease Agreement for the Aircraft and a true and complete
           copy of such Common Terms Agreement is attached hereto as Schedule C;

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

  1.       INTERPRETATION

  1.1      DEFINITIONS: In this Aircraft Lease Agreement, the following
           capitalized words and expressions have the respective meanings set
           forth below:

           AIRCRAFT means the Airframe and Engines described on Schedule A
           hereto.

           AIRFRAME STRUCTURAL CHECK, AIRFRAME SUPPLEMENTAL RENT, ANNUAL
           SUPPLEMENTAL RENT ADJUSTMENT, APU SUPPLEMENTAL RENT AND ASSUMED RATIO
           are not applicable.

           COMMON TERMS AGREEMENT means the "Aircraft Lease Common Terms
           Agreement" dated as of May 12, 2000 executed by GECC and Lessee (as
           in effect on the date hereof


                                       -1-

<PAGE>



            without, unless Lessor and Lessee otherwise expressly agree, giving
            any effect to any subsequent amendment, supplement, waiver or other
            modification thereto), and which forms part of this Aircraft Lease
            Agreement.

            DELIVERY CONDITION REQUIREMENTS means the requirements specified in
            Part II of Schedule A.

            DELIVERY LOCATION means Seattle, Washington or such other location
            as Lessor and Lessee mutually agree in order to minimize any Taxes
            that may be applicable to the Delivery.

            DEPOSIT means all amounts payable pursuant to Section 3.1 hereof

            ENGINE SUPPLEMENTAL RENT AND ENGINE LLP SUPPLEMENTAL RENT are not
            applicable.

            FINAL DELIVERY DATE means the date that is 90 days after the last
            day of the Scheduled Delivery Month.

            FINANCING DOCUMENTS means the documents, if any, relating to any
            indebtedness of Lessor secured, in whole or in part, by Lessor's
            interest in the Aircraft and this Aircraft Lease Agreement.

            FINANCING DOCUMENTS CONTEST RIGHTS, FINANCING DOCUMENTS INDEMNITY
            AMOUNTS AND FINANCING DOCUMENTS TAX AMOUNTS are all inapplicable.

            FINANCING PARTIES means the Persons, if any, that hold the
            indebtedness of Lessor evidenced by the Financing Documents, and
            shall include the Financing Parties Representative.

            FINANCING PARTIES' REPRESENTATIVE the Person, if any, identified by
            Lessor to Lessee in writing as the representative of the Financing
            Parties and the beneficiary of the Security Interest in the Aircraft
            and this Aircraft Lease Agreement created by the Financing
            Documents, and its successors and assigns.

            GUARANTOR is inapplicable.

            INDEMNITEE means each of Lessor, Owner, GECC, GECAS, the Financing
            Parties and their respective successors and permitted assigns, and
            each of their respective shareholders, subsidiaries, affiliates,
            partners, contractors, directors, officers, representatives, agents
            and employees.

            LANDING GEAR SUPPLEMENTAL RENT is not applicable.


                                       -2-


<PAGE>


           MANUFACTURER means the manufacturer of the Airframe or an Engine, as
           the case may be, as set forth on Schedule A hereto.

           OWNER means Lessor.

           PRE-APPROVED BANK means (i) First Hawaiian Bank for so long as its
           long-term unsecured Dollar denominated debt carries a rating from S&P
           of A or better, and (ii) any bank organized under the laws of the
           United States or any State thereof, or the New York branch of a major
           international bank for only so long as its long-term Dollar
           denominated unsecured debt (or if it does not have long-term
           unsecured Dollar denominated debt, its parent corporation's long-term
           unsecured Dollar denominated debt) carries a rating from S&P of A or
           better.

           REDELIVERY LOCATION means any location in the State of Washington,
           Oregon or California as Lessor may designate to Lessee or such other
           location as may be agreed in writing by Lessor and Lessee.

           RENT COMMENCEMENT DATE means the date on which Lessor tenders the
           Aircraft under Clause 4.3.(a) of the Common Terms Agreement and the
           Lessee Conditions Precedent are met or could reasonably be expected
           to be met if the Delivery of the Aircraft had occurred.

           SCHEDULED DELIVERY DATE means the date that Aircraft is scheduled to
           be delivered by Lessor to Lessee under the Lease, as notified by
           Lessor to Lessee pursuant to Section 4.1 of the Common Terms
           Agreement, and, notwithstanding any subsequent delays in delivery,
           the "Scheduled Delivery Date" shall remain the first such date
           notified by Lessor to Lessee pursuant to Section 4.1 of the Common
           Terms Agreement.

           SCHEDULED DELIVERY MONTH means March 2001.

           SCHEDULED DELIVERY WEEK means the week during which the Scheduled
           Delivery Date is anticipated to fall, as the same is notified by
           Lessor to Lessee pursuant to Section 4.1 of the Common Terms
           Agreement.

           SCHEDULED EXPIRY DATE means the day immediately preceding the
           fifteenth (15th) anniversary of the Rent Commencement Date (or in
           the event that such date is a day that is not a Business Day, the
           immediately preceding Business Day), which date shall be specifically
           set forth in Lease Supplement No. 1; provided, however, that Lessee
           shall receive a credit for Rent actually paid by Lessee to Lessor, on
           a per diem basis, against other obligations owed by Lessee to Lessor
           at the Return Occasion in respect of any non-Business Days which are
           truncated from the Term based on this provision.

           STATE OF DESIGN means the United States.


                                            -3-


<PAGE>



            TAX INDEMNITEE means each of Owner, Lessor, and each member of the
            consolidated group of which Lessor or Owner is a member for United
            States Federal Income Tax purposes, and their successors and
            permitted assigns.

   1.2      INTERPRETATION: Unless otherwise defined herein, words and
            expressions defined in the Common Terms Agreement have the same
            respective meanings for the purposes of this Aircraft Lease
            Agreement. The construction provisions of Section 1.2 of the Common
            Terms Agreement shall apply to this Aircraft Lease Agreement.

   2.       LEASING

   2.1      AGREEMENT TO LEASE: Subject to the terms and conditions of the
            Lease, Lessor will lease the Aircraft to Lessee and Lessee will take
            delivery of and lease the Aircraft from Lessor in accordance with
            the Lease for the duration of the Term.

   2.2      TERM: Subject to Sections 4.1 through 4.4 of the Common Terms
            Agreement, Delivery of the Aircraft will occur at the Delivery
            Location, whereupon Lessee shall accept the Aircraft hereunder and
            evidence such Delivery and acceptance by executing and delivering
            Lease Supplement No. 1 as provided in Section 4.3 of the Common
            Terms Agreement. The Term will commence on the Delivery Date, which
            Delivery Date is scheduled to occur in the Scheduled Delivery Month,
            and will expire on the Scheduled Expiry Date unless terminated
            earlier in accordance with the provisions of the Lease.

   2.3      [Not applicable].

   3.       PAYMENTS

   3.1      DEPOSIT AND LETTER OF CREDIT: Lessee shall pay to Lessor the Deposit
            in cash (to which Deposit Section 5.13 of the Common Terms Agreement
            shall apply) in the amount and at the times provided in Schedule B
            hereto. Lessee shall be permitted to deliver to Lessor an
            irrevocable Letter of Credit in lieu of a portion of the Deposit in
            an amount up to the amount provided in Schedule B as the LC Amount,
            which Letter of Credit shall comply with the provisions of Section
            5.14 of the Common Terms Agreement.

   3.2      RENT: Lessee shall pay Rent to Lessor on each Rent Date during the
            Term in the amount provided in Schedule B hereto and as provided in
            Sections 5.2 and 5.3 of the Common Terms Agreement. The first
            installment of Rent shall be due and payable on the Rent
            Commencement Date as defined herein.

   3.3      SUPPLEMENTAL RENT: Lessee shall have no obligation to pay
            Supplemental Rent.


                                       -4-


<PAGE>


   3.4      LESSOR'S MAINTENANCE CONTRIBUTION: Lessor shall have no obligation
            to make Maintenance Contribution payments.

   3.5      LESSOR'S BANK ACCOUNT: For the purposes of Section 5.5 of the Common
            Terms Agreement, Lessor's bank account and wire transfer
            particulars, to which all payments to Lessor shall be made, are at
            the date hereof: Bankers Trust Company, New York, ABA 021 001 033,
            For the account of: Aviation Financial Services Inc., Account
            Number: 50-259-862.

   3.6     MACRS: Lessor has assumed that MACRS Deductions shall be available in
           respect of the leasing of the Aircraft and accordingly the provisions
           of Section 5.7(d) of the Common Terms Agreement and the related
           provisions of Schedule B shall apply under this Agreement.

   4.       CONDITION OF THE AIRCRAFT AT DELIVERY

   4.1      On the Delivery Date, as a condition to Lessee's obligation to
            accept delivery thereof, the Aircraft shall be in the condition
            provided in Part III of Schedule A hereto.

   5.       CONDITION OF THE AIRCRAFT AT REDELIVERY

   5.1      On the Return Occasion, Lessee shall redeliver the Aircraft to
            Lessor at the Redelivery Location and at such redelivery the
            Aircraft shall be in the condition provided in Part II of Schedule
            A hereto and in the Common Terms Agreement, including Schedule 6 of
            the Common Terms Agreement.

   6.       ADDRESSES FOR NOTICES

            The addresses and facsimile and telephone numbers of Lessor and
            Lessee are as follows:

            Lessor:          Aviation Financial Services Inc.
            Address:         c/o GE Capital Aviation Services
                             201 High Ridge Road
                             Stamford, CT 06927
            Attention:       Executive Vice President Risk and Portfolio
                             Management
            Facsimile:       (203) 357-4585
            Telephone:       (203) 357-3776

            Lessee:          Aloha Airlines, Inc.
            Address:         371 Aokea Street
                             Honolulu, Hawaii 96819
            Attention:       Executive Vice President and Chief Financial
                             Officer
            Facsimile:       (808) 833-3100
            Telephone:       (808) 836-4245


                                       -5-


<PAGE>


   7.       THE SCHEDULES AND COMMON TERMS AGREEMENT

            ALL THE PROVISIONS OF SCHEDULE A HERETO, SCHEDULE B HERETO, AND THE
            COMMON TERMS AGREEMENT, ARE INCORPORATED BY REFERENCE HEREIN AND ARE
            PART OF THIS AIRCRAFT LEASE AGREEMENT AS IF THEY WERE SET OUT IN
            FULL HEREIN. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BY
            ITS SIGNATURE BELOW, THE LESSEE ACKNOWLEDGES AND AGREES THAT THE
            LEASE OF THE AIRCRAFT HEREUNDER IS ON AN "AS IS, WHERE IS" BASIS AND
            THAT THE DISCLAIMERS, EXCULPATIONS AND LIMITATIONS OF LIABILITY,
            INDEMNITIES, THE CHOICE OF NEW YORK LAW AS THE GOVERNING LAW, THE
            LESSEE'S SUBMISSION TO PERSONAL JURISDICTION IN NEW YORK, AND THE
            WAIVER OF ANY RIGHT TO A TRIAL BY JURY PROVIDED FOR IN THE COMMON
            TERMS AGREEMENT ARE INCORPORATED HEREIN BY SUCH REFERENCE AND ARE
            PART OF THIS AIRCRAFT LEASE AGREEMENT AS IF THE SAME WERE SET OUT IN
            FULL HEREIN.

   8.       NO AMENDMENT EXCEPT IN WRITING

            No provision of this Lease, including any provision of Schedule A,
            Schedule B or the Common Terms Agreement, may be amended, rescinded,
            changed, waived, discharged, terminated or otherwise modified in any
            way whatsoever, except by a writing signed by the party to be
            charged. Lessor and Lessee acknowledge their agreement to the
            provisions of this Section 8 by their signatures below.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK. THE
                             SIGNATURE PAGE FOLLOWS]


                                      -6-


<PAGE>


 IN WITNESS WHEREOF, the parties hereto have executed this Aircraft Lease
 Agreement, each by their duly authorized representative(s), as of the date
 shown at the beginning of this Aircraft Lease Agreement.

 LESSOR:                                    LESSEE:

AVIATION FINANCIAL                          ALOHA AIRLINES, INC.
SERVICES INC.



By:    /s/ [Illegible]                        By: _________________________
     -----------------------
Name:      [Illegible]                        Name: _______________________
     -----------------------
Title:   Vice President                       Title:_______________________
     -----------------------



                                              By: ________________________

                                              Name:_______________________

                                              Title:______________________



<PAGE>


 IN WITNESS WHEREOF, the parties hereto have executed this Aircraft Lease
 Agreement, each by their duly authorized representative(s), as of the date
 shown at the beginning of this Aircraft Lease Agreement.


LESSOR:                                     LESSEE:

AVIATION FINANCIAL                          ALOHA AIRLINES, INC.
SERVICES INC.



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

Name: ____________________                    Name:  Brenda F. Cutwright
                                                    ---------------------------
Title:____________________
                                              Title: Exec. Vice President & CFO
                                                    ---------------------------




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

                                              Name:        James M. King
                                                    ---------------------------

                                              Title: VP Planning & Development
                                                    ---------------------------




<PAGE>



                                  SCHEDULE A

                     PART I-AIRFRAME AND ENGINES DESCRIPTION

  AIRCRAFT
  --------

           Manufacturer:              Boeing
           Model:                     737-700 ETOPS

           Serial Number:             28640

           U.S. Registration No.      To be advised at Delivery and included in
                                      Lease Supplement No. 1

  ENGINES  (each of which has 750 or more rated takeoff horsepower or the
  -------
  equivalent of such horsepower)


           Engine Type:               CFM56-7B24
           Serial Nos:                To be advised at Delivery and included in
                                      Lease Supplement No. 1


                                       A-1


<PAGE>


                                   SCHEDULE A

                     PART II-DELIVERY CONDITION REQUIREMENTS

  Set forth below is a description of the condition in which the Aircraft must
  be in order for Lessee to be obligated to accept the Aircraft under the Lease.
  It is solely a description of such condition precedent and shall not be
  construed as a representation, warranty or agreement of any kind whatsoever,
  express or implied, by Lessor with respect to the Aircraft or its condition,
  all of which have been disclaimed by Lessor and waived by Lessee as set forth
  in the Lease, including in the Common Terms Agreement.

   DELIVERY CONDITION REQUIREMENTS:

   This "DELIVERY CONDITION REQUIREMENTS" are as follows:

     Airframe,                New from Manufacturer, configured in
     Engines,                 accordance with GECAS Detail Specification
     Components:              D6-38808-34 (Revision D), except as modified
                              in accordance with the specification changes
                              noted on the Appendix to this Schedule A -
                              Part II

     Livery Painting:         Lessee's current livery as in effect on the date
                              of this Aircraft Lease Agreement, or such other
                              livery as Lessee may specify in writing to
                              Lessor so long as Lessee provides to Lessor,
                              reasonably in advance of the Scheduled
                              Delivery Month so as to permit Lessor to make
                              all necessary arrangements for such painting, all
                              technical specifications necessary in order to
                              complete the painting of the Aircraft in such
                              livery


                                       A-2



<PAGE>


                                                                    APPENDIX TO
                                                            SCHEDULE A, PART II

                             SPECIFICATION CHANGES
                             ---------------------

   The following table outlines those specification items which the Lessee has
   identified as requiring modification to make the GEF specification compatible
   with those aircraft currently in operation by Lessee. Each of the items
   listed under the column marked GECAS (left) shall be modified during
   production to reflect the configuration listed in the Aloha column (right).
   All such modifications shall be accomplished at Lessor's expense.

   Notwithstanding the above, it is further agreed that Lessee will afford
   Lessor or its designated representative the opportunity to discuss alternate
   proposals with regard to those modifications below which cause BFE vendor
   changes to Lessor's baseline specification (ref D6-38808-34);


<Table>
<Caption>
<S>                                                                <C>                       <C>
   01    GENERAL AIRPLANE DESCRIPTION                              GECAS                     ALOHA
         Manuals/Instrumentation Units                             Metric                    English

   03    GENERAL AIRPLANE CRITERIA
         Operational Capabilities
           Max Taxi Weight                                         133,500 lbs               155,000 lbs
           Max Takeoff Weight                                      133,000 lbs               154,500 lbs

   11     PLACARDS and MARKINGS
          Exterior Registry Markings                                No                       Yes

   21     AIR CONDITIONING
          Cabin Ascent Rate (ft/min)                                600                      750
          Cabin Descent Rate (ft/min)                               350                      500

   22     AUTOMATIC FLIGHT CONTROL
          DFCS Features
            Control Wheel Steering Reversion in Approach            Yes                       No
            Mode
          Altitude Alert (ft)                                       300/900                   200/900

   23     COMMUNICATION
          Voice Recorder                                            (1) Allied Signal 980-    (1) Loral Fairchild
                                                                    6022-001 ARINC            2100-1020-00
                                                                    557
            Man ON/Auto OFF Switch                                  YA607-YA670               Yes
          Audio Entertainment                                       None                      Matsushita (MPES)
                                                                                              RDAX1302-11
          Video Entertainment                                       None                      SONY/PSU
                                                                                              mounted
</Table>


                                       A-3


<PAGE>


<Table>
<Caption>
<S>                                                                 <C>                       <C>
            Monitors                                                Structural Provs 5        VCC same as GEF
                                                                    Centerline Ovhd
            Video Control Center (VCC)                              Structural Provs Aft
                                                                    RH Stow Bin
           HF System                                                Single/Complete           Dual
                                                                    Provs for second
            Transceiver                                             (1) Rockwell 822-         (2) Rockwell 822-
                                                                    0990-001 ARINC            0330-001
                                                                    719/753
           VHF System                                               Dual/Complete Provs       Triple
                                                                    for Third
           Transceiver                                              (2) Allied Signal 064-    (3) Rockwell 822-
                                                                    50000-0110 ARINC          1047-002
                                                                    716
           8.33 KHZ Spacing
              Capable                                               YA601-YA606               Yes
              Activated                                             YA607-YA670               No
           ACARS                                                    Part Provisions for       Rockwell 822-0666-
                                                                    ARINC 724B                003
           ELT                                                      No                        Artex 453-0004

   24     ELECTRICAL POWER
          Standby Power Load Additions
            Captain's Pilot Heat                                    YA607-YA670               No
            ATC No. 1                                               No                        Yes

   25     EQUIPMENT/FURNISHINGS                                                               See NOTE 1
          Interior Layout (See Attached)                            LOPS-377-0201             LOPS-377-0203
                                                                                              12F@38"/112Y@
                                                                                              3 1 " with fixed class
                                                                                              divider.
          Overwater Equipped                                        No, Lifevests Only        Yes, 3 x 46 man
            Lifeline                                                Yes                       Liferafts
          Installed Positions                                       G1, G4B                   G1, G2, G4B
          Provisions                                                G2 (Seat Track-3/         G2 half galley
                                                                    Power/Water/ Drain/       underbin (Jamco)
                                                                    Ovhd Ties)
          Windscreen(s)                                             Fwd RH Sta 336.75         Fwd Left Hand with
                                                                                              emerg. Equip.
                                                                                              stowage and closet
                                                                                              at BS350
          Class Divider(s)                                                                    Fixed
            Rails                                                   Yes (Basic)               Yes (Basic)
            Stow Bin Cutout                                         YA610-YA670 Yes           No
          Center Overhead Stowage Bins                              No                        Yes (3)
                                                                                              (1) Forward
                                                                                              (2) Center
</Table>

                                                      A-4


<PAGE>


<Table>
<Caption>
<S>                                                                 <C>                       <C>
  28     FUEL
         Measuring Sticks
           Conversion Tables                                        NDU to Kilograms          NDU to Pounds

  29      HYDRAULIC POWER
          Engine Driven Pump                                        Abex                      Vickers
                                                                    10-62167-2
          AC Electric Pump                                          Abex
                                                                    10-60556-30

   31     INDICATING/RECORDING SYSTEMS
          Flight Data Recorder                                      AlliedSignal 980-         L-3
                                                                    4700-042 ARINC            Communications
                                                                    747                       2100-4043-00
          Digital Flight Data Acquisition Unit                      Teledyne 2233000-85       AlliedSignal 967-
                                                                    ARINC 717                 0212-002
          Printer                                                   Part Provs Half           Full Format
                                                                    Format
          Data Loader                                               Connector                 AlliedSignal 964-
                                                                                              0401-016
          Display Format                                            EFIS/MAP                  PFD/ND
          Engine Instrument Display                                 Side-by-Side              Over/Under
          Engine Fuel Flow                                          N/A                       Full Time Display
          Radio Altitude Display                                    Below ADI                 Above ADI
          Round Dial & Digital Radio Altitude                       N/A                       Yes
          Ground Speed - Below Airspeed Tape                        N/A                       Yes
          Landing Altitude Reference Bar                            N/A                       Yes
          Baro Mins Pointer                                         N/A                       Yes
          Radio Altitude Height Alert Display                       No                        2500 Feet
          ADF Pointers in NAV Mode Display                          Suppressed
          TCAS 3 NM Range Ring - Nav Display                        No                        Yes
          FMC/ADIRU Position Difference Display                     Exceedence
          Weather Radar Range Area                                  Yes                       Yes
          TCAS Resolution Advisory                                  ADI                       ADI
          ILS Failure Flags                                         Inhibited
          ILS Localizer Deviation Expanded Scale                    Autopilot & Flt Dir       Autopilot & Flt Dir
          Oil Quantity Display                                      % Full Quantity           Quarts
          Approach Minimums                                         Radio Based
          Airspeed Bug #5                                           Disabled                  80 Knots
          Control Surface Position - System Display                 N/A                       Yes

   32     NOSE GEAR TAXI LIGHT                                      250 Watt                  450 Watt

   33     LIGHTING
          Passenger Cabin Lighting (Zone)                           Single                    Two
</Table>

                                       A-5


<PAGE>

<Table>
<Caption>
<S>                                                                 <C>                       <C>
          Escape Path Lighting                                                                 Seat Mounted

   34     NAVIGATION
          Standby Altitude Indicator                                (1) BF Goodrich 501-       Sextent
                                                                    1657-02
          Ground Proximity Warning Computer                         AlliedSignal 965-          AlliedSignal 965-
                                                                    0976-003-204-204           0976-003-204-204
                                                                    (Enhanced)                 (Enhanced)
            Callouts                                                Bank Angle (Basic)         Bank Angle (Basic)
                                                                                               "Plus 100
                                                                                               Minimums"
          VHF Nav (VOR)/Marker Beacon Receiver                      (2) AlliedSignal 066-      Rockwell 822-0297
                                                                    50012-0101 ARINC           001
                                                                    711
          Multi-Mode Receiver (MMR)(ILS/GPS)                        (2) AlliedSignal 066-      Rockwell 822-1152
                                                                    50029-1101                 002
          ATC Transponder                                           (2) AlliedSignal 066-      Rockwell 822-0336
                                                                    01127-1301 ARINC           001
                                                                    718
            TCAS Change 7                                           AlliedSignal 066-          No
                                                                    0 1127-1601 YA609
                                                                    YA670
          DME Interrogator                                          (2) AlliedSignal 066-      Rockwell 822-0329
                                                                    50013-0101 ARINC           001
                                                                    709
          ADF Receiver                                              (1) AlliedSignal 066-      (2) Rockwell 822
                                                                    50014-0101 ARINC           0299-001
                                                                    712
            Dual                                                    Provisions
          TCAS Computer                                             (1) AlliedSignal 066-      Rockwell 622-8971
                                                                    50000-1508 ARINC           020
                                                                    735
            TCAS Change 7                                           AlliedSignal 066-          No
                                                                    50000-2220 YA609
                                                                    YA670
          Flight Management Computer System
            Computer                                                (1) Smiths; Indust 10-     (2) Smiths Indust
                                                                    62225-003                  10-62225-003
            2 d Computer                                            Partial Provisions         Installed
          CDU/MCDU                                                  CDU                        MCDU
          Date Base Size
            1 MEG                                                   YA601
            2 MEG                                                   YA602-YA670                Yes
          Built-In Test Equip Printer Receptacles                   No                         No
          FMCS Definition
            Runaway Offset Position                                 Feet                       Feet
            Alternate Destinations Predictions                      Inhibit                    Yes
</Table>

                                       A-6


<PAGE>


<Table>
<Caption>
<S>                                                                 <C>                       <C>
           Retention of Original Waypoints                          Inhibit                   Yes
           Message Recall                                           Inhibit                   Yes
         LRRA Transceiver                                           (2) AlliedSignal 066-     Rockwell 822-0334-
                                                                    50007-0101                002
         Weather Radar Transceiver                                  (1) AlliedSignal 066-     Rockwell 622-5132-
                                                                    50008-0405                633
           Predictive Windshear                                     Activated                 Activated

   35     OXYGEN
          Flight Crew System - Press Breathing                      Yes                       No
   38     WATER/WASTE
          Potable Water: Cap/Vol (US Gallons)                       40/40                     60/50

   39     E6 PANEL                                                                            Yes

   52     DOORS
          Airstairs, Forward                                        Part Provisions +         Installed
                                                                    Install Data Kit
</Table>

                                       A-7


<PAGE>


                                   SCHEDULE A

            PART III - PROCEDURES AND OPERATING CONDITION AT REDELIVERY

            On the Return Occasion the Aircraft, subject to ordinary wear and
            tear of a kind and to an extent consistent with similar aircraft
            engaged in commercial airline operations, will be redelivered to
            Lessor by Lessee in accordance with the procedures and in any event
            in the condition set out below. For the avoidance of doubt, any
            damage assessment and/or rectification criteria used in assessing
            the redelivery condition shall be as prescribed in the
            Manufacturer's structural repair manual ("SRM") and/or the
            Manufacturer's Maintenance Planning Document, as appropriate. Any
            damage outside the scope of the SRM shall require FAA 8110-3
            certification.

1.1         FINAL INSPECTION

            Immediately prior to the Return Occasion, Lessee will make the
            Aircraft available to Lessor and Owner for inspection ("FINAL
            INSPECTION") in order to verify that the condition of the Aircraft
            complies with the Lease. The Final Inspection will include, and be
            long enough to permit Lessor to:

            (a)       inspect the Aircraft Documents and Records;

            (b)       inspect the Aircraft (with Lessee to open or remove panels
                      as reasonably requested by Lessor or Owner based on
                      Lessor's or Owner's visual observation of the Aircraft
                      and/or their respective review of the Aircraft Documents
                      and Records), uninstalled Parts and the APU (including a
                      complete video borescope inspection of the APU);

            (c)       inspect the Engines, including (i) a complete video
                      borescope inspection of (A) the low pressure and high
                      pressure compressors and (B) turbine area and (ii) power
                      assurance runs (including full take-off power engine
                      run-up performed in accordance with the performance test
                      in the Engine Manufacturer's test specifications, and the
                      Engines shall not exceed corrected limits for all
                      parameters using temperature corrected charts); and

            (d)       observe a two hour demonstration flight at Lessee's cost
                      (with up to three (to the extent permitted by FARS) of
                      Lessor's and Owner's representatives as on-board
                      observers).

            Furthermore, Lessee acknowledges that a purchaser or the next
            operator of the Aircraft may need to inspect the Aircraft, the
            Engines and the Aircraft Documents and Records prior to redelivery
            and Lessee hereby agrees to cooperate reasonably at all times during
            the Term


                                       A-8


<PAGE>


            with Lessor, Owner and/or such purchaser or such next operator in
            order to coordinate, assist and grant access for the above
            inspections and/or sale or subsequent lease as applicable.

            Lessor or Owner, as the case may be, is responsible for and will
            indemnify Lessee against all Losses arising from the death or injury
            to any observer or any employee of Lessor or Owner, as the case may
            be, in connection with the inspection of the Aircraft under this
            Section 1.1.

1.2         GENERAL CONDITION

            The Aircraft will:

            (a)       be in the same configuration as at Delivery after giving
                      effect to any post-Delivery modifications to the Aircraft
                      paid for or otherwise provided by or on behalf of Lessor
                      (or as permitted by the Lease or as otherwise mutually
                      agreed), be in as good operating condition and appearance
                      as when delivered to Lessee (after giving effect to any
                      such post-Delivery modifications), except for ordinary
                      wear and tear and alterations and modifications authorized
                      or required under the Lease and paid for by Lessee or a
                      Sub-Lessee, and be clean by major passenger airline
                      standards;

            (b)       have installed the full complement of equipment, parts,
                      accessories, furnishings and loose equipment as when
                      originally delivered to Lessee (subject to Lessee's rights
                      under Section 8.12 to reverse certain Equipment Changes,
                      after giving effect to all modifications, repairs or
                      maintenance performed during the Term, regardless of
                      whether paid for by Lessee or Lessor) and the Aircraft
                      (including the Aircraft Documents and Records) shall be in
                      a condition suitable for immediate registration with the
                      FAA (assuming that the Owner qualifies for such
                      registration) and immediate operations under FAR Part 121
                      with a new operator, without waiver, unless the benefit of
                      such waiver is applicable to the next operator of the
                      Aircraft; and if any of the engines or parts tendered for
                      redelivery with the Aircraft is not one of the Engines or
                      Parts referred to in the Certificate of Technical
                      Acceptance or a Replacement Engine installed pursuant to
                      Section 8.11(b) following an Engine Event of Loss, Lessor
                      shall have no obligation to accept such engine or part
                      unless Lessee furnishes to Lessor all the documents and
                      evidence in respect of such engine or part in accordance
                      with Section 8.11(b), as if such engine were a
                      Replacement Engine or replacement Part, and otherwise
                      complies with such Section 8.11(b) with respect thereto;

            (c)       have in existence a valid and effective certificate of
                      airworthiness (and if required by Lessor, a valid and
                      effective export certificate of airworthiness) with
                      respect to


                                       A-9


<PAGE>


                      the Aircraft issued by the Air Authority (in the case
                      of an export certificate of airworthiness no earlier
                      than 30 days prior to the redelivery);

            (d)       comply with the Manufacturer's original specifications as
                      at the Delivery, except as modified during the Term in
                      accordance with the Manufacturer's service bulletins or
                      letters, Airworthiness Directives, Air Authority approved
                      data or otherwise as permitted by the Lease;

            (e)       be fresh out of a "C" Check (or higher check if
                      applicable) in block format (which shall be the next
                      sequential "C" Check under Lessee's Maintenance Program
                      following the last regularly scheduled "C" Check performed
                      by Lessee prior to the Return Occasion if Lessee's
                      Maintenance Program is based on the then current
                      Manufacturer's Maintenance Planning Document in block
                      format. If Lessee's Maintenance Program is not based on
                      the Manufacturer's Maintenance Planning Document in block
                      format, then Lessee shall integrate the Aircraft
                      Maintenance Program onto the then current Manufacturer's
                      Maintenance Planning Document Block Maintenance Program
                      such that all airframe inspections falling due within the
                      "C" check interval (which shall not be less than 4,000
                      Flight Hours) as defined in and in accordance with the
                      Manufacturer's Maintenance Planning Document have been
                      accomplished;

            (f)       have had accomplished all outstanding Airworthiness
                      Directives affecting that model of Aircraft issued by the
                      FAA requiring action during the Term or within 180 days
                      after the Return Occasion or the Scheduled Expiry Date,
                      whichever is later; for this purpose, compliance shall be
                      by terminating action if:

                      (i)    Lessee has complied by terminating action for
                             sixty-five percent (65%) of the aircraft of the
                             same model and series then operated by Lessee; or

                      (ii)   the latest date permitted by such Airworthiness
                             Directive for required compliance by terminating
                             action falls within 180 days after the Return
                             Occasion or the Scheduled Expiry Date, whichever is
                             later.

                      (iii)  In no event shall there be any non-transferable
                             time extensions, waivers, deviations or alternative
                             means of compliance with any Airworthiness
                             Directions or other Regulations.

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


                                      A-10


<PAGE>


            (h)       have the fuselage, empennage, wings and pylons stripped
                      (or sanded if only three or less coats of paint) and
                      painted in such livery as Lessor may designate in
                      accordance with standard industry practice;

            (i)       have all signs and decals clean, secure and legible;

            (j)       [NOT APPLICABLE];

            (k)       have no open, deferred, continued, carry over or placarded
                      maintenance items or watch items or placarded log book
                      items, and all other log book discrepancies shall be
                      cleared;

            (l)       all discrepancies discovered during the inspections
                      described above which exceed the Manufacturer's
                      maintenance manual allowable limits for in-service
                      aircraft shall have been repaired in accordance with
                      FAA-approved procedures;

            (m)       all repairs of a temporary or interim nature, requiring
                      repetitive inspections or future upgrading, including
                      external doublers with blind fasteners, shall be upgraded
                      to permanent repair in accordance with the Manufacturer's
                      Maintenance Planning Document or structural repair manual;
                      and

            (n)       all systems shall be fully operational for their intended
                      functions in accordance with the Manufacturer's
                      Maintenance Planning Document specifications.

1.3         COMPONENTS

            (a)       If the Aircraft Lease Agreement specifies Minimum
                      Component Flight Hours and/or Minimum Component Cycles,
                      each Airframe Flight Hour and Cycle controlled Hard Time
                      Component (other than the APU) shall have not less than
                      the Minimum Component Flight Hours and the Minimum
                      Component Cycles of life remaining to the next scheduled
                      removal, in accordance with the Lessee's Maintenance
                      Program and shall be supported by appropriate
                      certification documentation indicating TSN, CSN, TSO and
                      CSO such as FAA form 8130-1; for this purpose "Hard Time
                      Component" means any component which has a limited
                      on-wing life in accordance with the Manufacturer's
                      Maintenance Planning Document and which can have life
                      fully restored through appropriate maintenance;

            (b)       If the Aircraft Lease Agreement specifies a Minimum
                      Component Calendar Life, each calendar-limited component
                      including safety equipment will have not less than its
                      Minimum Component Calendar Life remaining to the next
                      scheduled removal in accordance with the Lessee's
                      Maintenance Program;

            (c)       Each "on-condition" and "condition-monitored" component
                      will be serviceable;


                                      A-11


<PAGE>


            (d)       The installed components as a group will have an average
                      of total flight time since new of not more than that of
                      the Airframe;

            (e)       If the Aircraft Lease Agreement specifies Minimum
                      Component Flight Hours and/or Minimum Component Cycles,
                      each Airframe Life-Limited Component will have not less
                      than the Minimum Component Flight Hours and the Minimum
                      Component Cycles remaining to next scheduled removal and
                      will be supported by certification documentation necessary
                      to demonstrate back-to-birth traceability; for this
                      purpose "Airframe Life-Limited Component" means a
                      component with an ultimate life which cannot be restored
                      through appropriate maintenance.

1.4         ENGINES

            Each Engine (or a Replacement Engine as and to the extent permitted
            by Section 1.2(b)) will be installed on the Aircraft and comply with
            the following:

            (a)       If the Aircraft Lease Agreement specifies a Minimum Engine
                      Flight Hours and/or Minimum Engine Cycles, each Engine
                      will have not less than the Minimum Engine Flight Hours
                      and Minimum Engine Cycles expected life remaining to the
                      next scheduled removal. The expected life remaining will
                      be determined by third party mutually acceptable to both
                      Lessor and Lessee (at Lessor's cost) or by the Engine
                      Manufacturer, in each case based on the inspection and
                      checks to be performed at the Return Occasion in
                      accordance with the Lease;

            (b)       Each Engine shall have just completed at the location for
                      Lessor's acceptance on the Return Occasion a hot
                      (including combustion chamber) and cold section video
                      borescope inspection, which inspection shall be performed
                      at Lessor's expense, and a power assurance run performed
                      at Lessee's expense in accordance with the Lessee's
                      Maintenance Program or Manufacturer's Maintenance Planning
                      Document and any defects discovered in such inspections
                      which exceed the Engine manufacturer's in-service limits
                      shall be corrected at Lessee's expense. Lessee shall cause
                      such borescope inspections to be performed and to be
                      recorded on videotape by an agency selected by Lessor and
                      shall provide Lessor with a copy of such videotape on the
                      Return Occasion. No Engine shall be on "watch" for any
                      reason requiring any special or out of sequence
                      inspection. Each Engine shall comply with the operations
                      specification of Lessee without waiver or exceptions. All
                      items beyond the Engine manufacturer's in-service limits
                      shall be repaired;

            (c)       If the Aircraft Lease Agreement specifies Minimum
                      Component Cycles, each Engine Life-Limited Component will
                      have not less than the Minimum Component Cycles remaining
                      per the manufacturer's then current limitations for the
                      part


                                      A-12


<PAGE>


                    number in question, and will be supported by certification
                    documentation necessary to demonstrate back-to-birth
                    traceability; for this purpose "Engine Life-Limited
                    Component" means a component with an ultimate life which
                    cannot be restored through appropriate maintenance; and

1.5        FUSELAGE, WINDOWS AND DOORS

           (a)      The fuselage will be free of major dents and abrasions in
                    excess of the limits specified in Manufacturer's Maintenance
                    Planning Document or structural repair manual; loose or
                    pulled or missing rivets shall be replaced;

           (b)      Windows will be free of delamination, blemishes and crazing,
                    in excess of the limits specified in the Manufacturer's
                    Maintenance Planning Document or structural repair manual
                    and will be properly sealed; and

           (c)      Doors will be free moving, correctly rigged and be fitted
                    with serviceable seals.

1.6        WINGS AND EMPENNAGE

           (a)      Leading edges will be free from damage in excess of the
                    limits specified in the Manufacturer's Maintenance Planning
                    Document or structural repair manual; and

           (b)      Unpainted surfaces of the wings and empennage will be
                    polished.

1.7        INTERIOR AND COCKPIT

           All soft furnishings, including but not limited to carpets, seat
           covers and curtains, will be in good condition, clean and free of
           stains and meet FAR fire resistance regulations.

1.8        LANDING GEAR; WHEELS AND BRAKES

           (a)      The Landing Gear and wheel wells will be clean, free of
                    leaks and repaired as necessary;

           (b)      Each installed Landing Gear shall have no more Cycles
                    accumulated than the Airframe and, if the Aircraft Lease
                    Agreement specifies Minimum Landing Gear Flight Hours and/or
                    Minimum Landing Gear Cycles and Minimum Landing Gear
                    Calendar Time, not less than the Minimum Landing Gear Flight
                    Hours and the Minimum Landing Gear Cycles and the Minimum
                    Landing Gear Calendar Time shall be remaining to the next
                    scheduled overhaul or removal, as the case may be, of each
                    installed Landing Gear in accordance with the then current
                    Manufacturer's Maintenance Planning Document and Lessee's
                    Maintenance Program; and

           (c)      The wheels and brakes will have not less than half of their
                    useful life remaining.


                                      A-13


<PAGE>


1.9        RETURN OF AUXILIARY POWER UNIT (APU)

           The APU shall have just completed a borescope inspection and shall
           meet all air outputs and temperature limitations under load in
           accordance with the Lessee's Maintenance Program and the APU
           manufacturer's maintenance manual, and any defects discovered in such
           inspection, which exceed the APU manufacturer's in-service limits,
           shall be corrected at Lessee's expense. If the Aircraft Lease
           Agreement specifies a Minimum APU Limit, the APU shall have not more
           than the Minimum APU Limit since the last gas path refurbishment. If
           the Aircraft Lease Agreement specifies a Minimum APU LLP Limit, APU
           Life Limited Parts shall have not less than the Minimum APU LLP Limit
           of useful life remaining on average.

1.10       CORROSION

           (a)      The Aircraft shall be in compliance with the Manufacturer's
                    corrosion prevention and control program (CPCP)
                    requirements. All CPCP inspections which would normally be
                    accomplished while access is provided during structural
                    inspection in accordance with the Lessee's Maintenance
                    Program during the Term shall have been accomplished;

           (b)      The entire fuselage will be substantially free from
                    corrosion and will be adequately treated in accordance with
                    Lessee's corrosion prevention program and the Manufacturer's
                    Maintenance Planning Document; and

           (c)      Fuel tanks will be free from contamination and corrosion and
                    a tank treatment program will be in operation.

1.11       FUEL

           If the Aircraft Lease Agreement specifies a Minimum Measurable Fuel
           Requirement, at redelivery, the Aircraft fuel tanks shall contain at
           least enough fuel to meet the Minimum Measurable Fuel Requirement.

1.12       MAINTENANCE PROGRAM

           (a)      Prior to the Return Occasion and upon Lessor's or Owner's
                    request, Lessee will provide Lessor or Owner or its agent
                    reasonable access to the Lessee's Maintenance Program and
                    the Aircraft Documents and Records in order to facilitate
                    the Aircraft's integration into any subsequent operator's
                    fleet; and

           (b)      Lessee will, if requested by Lessor or Owner to do so,
                    provide sufficient access to Lessee's Maintenance Program in
                    order to integrate the Aircraft to the next operator's
                    maintenance program. Lessor and any Person to whom Lessor
                    grants


                                      A-14


<PAGE>


                    access to Lessee's Maintenance Program shall agree that it
                    will not disclose the contents of the Lessee's Maintenance
                    Program to any Person except to the extent necessary to
                    monitor Lessee's compliance with the Lease and/or to bridge
                    the maintenance program for the Aircraft from the Lessee's
                    Maintenance Program to another program after the Return
                    Occasion.

1.13       AIRCRAFT DOCUMENTS

           At redelivery Lessee will deliver to Lessor and Owner all current and
           complete historical records required to be maintained relevant to the
           Aircraft, including documents, manuals, data, overhaul records, life
           limited part traceability to "zero time since new", log books,
           original delivery documents serviceable parts tags, FAA forms,
           modification records and inspection records, and including each of
           the Aircraft Documents and Records.

1.13.      ETOPS:

           The Aircraft shall be certified by the FAA for 180 minutes ETOPS
           operation or shall be in such condition as to be eligible for
           certification by the FAA for 180 minutes ETOPS operation.


                                      A-15


<PAGE>


                                   SCHEDULE B
                                COMMERCIAL TERMS

             Lessor and Lessee hereby agree that the definitions and other
     commercial and financial terms set forth in this Schedule B shall apply to
     the leasing of the Aircraft under the Lease.

             In addition, Lessor and Lessee understand and agree that the
     commercial and financial information contained in this Schedule B are
     considered by Lessor and Lessee as proprietary and confidential. Lessor and
     Lessee each hereby agree, and any of their assignees, upon becoming such
     shall agree that it will treat this Schedule B as proprietary and
     confidential and will not, without the prior written consent of the other,
     disclose or cause to be disclosed, the terms hereof or thereof to any
     Person, except to its agents, representatives, advisors, employees,
     counsel, underwriters, auditors, investors, financing parties, head lessors
     and sub-lessees as necessary or appropriate for the leasing transaction
     which is the subject hereof, or except (a) as may be required by applicable
     Law or pursuant to an order, or a valid and binding request, issued by any
     court or other Government Entity having jurisdiction over Lessor, Lessee or
     the assignee of either of them, as the case may be, or (b) as necessary to
     enable Lessor or its assignee to make transfers, assignments or other
     dispositions to potential transferees, assignees or participants of its
     interest in and to the Lease.

             In connection with any such disclosure or any filing of the
     information contained herein or therein pursuant to any such applicable
     Law, Lessor, Lessee or the assignee of either of them, as the case may be,
     shall request and use its best reasonable efforts to obtain confidential
     treatment of this Schedule B and the other party will cooperate in making
     and supporting any such request for confidential treatment.

     PART I            CASUALTY OCCURRENCE DEFINITIONS

           [This provision has been omitted as confidential information, and is
   separately filed with the Commission.]


                                       B-1


<PAGE>


     PART II          DEPOSIT; DISCOUNT RATE; LC AMOUNT; INTEREST RATE

           [This provision has been omitted as confidential information, and is
           separately filed with the Commission.]

     PART III         RENT

           [This provision has been omitted as confidential information, and is
           separately filed with the Commission.]


                                       B-2


<PAGE>


    PART IV           TAX DEFINITIONS; SPECIAL TAX INDEMNITY

           [This provision has been omitted as confidential information, and is
           separately filed with the Commission.]


                                       B-3


<PAGE>


    PART V            SUPPLEMENTAL RENT - NOT APPLICABLE

           [This provision has been omitted as confidential information, and is
           separately filed with the Commission.]


    PART VI           MAINTENANCE AND RETURN CONDITION DEFINITIONS;
                      AIRWORTHINESS DIRECTIVE SHARING PAYMENTS

           [This provision has been omitted as confidential information, and is
           separately filed with the Commission.]


                                      B-4

<PAGE>


    PART VII   SUBLEASE FEE

           [This provision has been omitted as confidential information, and is
           separately filed with the Commission.]

    PART VIII   UTILIZATION RATIO

           [This provision has been omitted as confidential information, and is
           separately filed with the Commission.]


                                       B-5


<PAGE>

                                                               EXECUTION VERSION





                      ------------------------------------
                                 AIRCRAFT LEASE

                             COMMON TERMS AGREEMENT
                      ------------------------------------

                             DATED AS OF MAY 12, 2000


                                     BETWEEN


                      GENERAL ELECTRIC CAPITAL CORPORATION


                                       And


                              ALOHA AIRLINES, INC.


<PAGE>

                                    CONTENTS

<table>

<caption>

 SECTION                                                                            PAGE

 
     <c>                                                                        <c>

  1.     INTERPRETATION .................................................................1

  2.     REPRESENTATIONS AND WARRANTIES .................................................2

  3.     CONDITIONS PRECEDENT ...........................................................2

  4.     COMMENCEMENT ...................................................................3

  5.     PAYMENTS .......................................................................5

  6.     MANUFACTURER'S WARRANTIES .....................................................19

  7.     LESSOR'S COVENANTS ............................................................20

  8.     LESSEE'S COVENANTS ............................................................20

  9.     INSURANCE .....................................................................38

  10.    INDEMNITY .....................................................................39

  11.    EVENTS OF LOSS ................................................................41

  12.    RETURN OF AIRCRAFT ............................................................42

  13.    DEFAULT .......................................................................45

  14.    TRANSFER ......................................................................52

  15.    MISCELLANEOUS .................................................................54

  16.    DISCLAIMERS AND WAIVERS .......................................................58

  17.    BROKERS AND OTHER THIRD PARTIES ...............................................61

</table>

<PAGE>


  Schedule 1        Definitions
  Schedule 2        Representations and Warranties
  Schedule 3        Conditions Precedent
  Schedule 4        Pre-Delivery Procedures and Delivery Condition
  Schedule 5        Certificate of Technical Acceptance
  Schedule 6        [NOT APPLICABLE]
  Schedule 7        Insurance Requirements
  Schedule 8        Form of Lessee's Legal Opinion
  Schedule 9        Events of Default
  Schedule 10       [NOT APPLICABLE]
  Schedule 11       Form of Lease Termination Certificate
  Schedule 12       Form of Lease Supplement No. 1
  Schedule 13       Form of Letter of Credit
  Schedule 14       Maintenance Performers
  Schedule 15       Technical Report


<PAGE>


                             COMMON TERMS AGREEMENT

 THIS COMMON TERMS AGREEMENT (this "CTA") is made as of May 12,2000 BETWEEN:

 (1)      GENERAL ELECTRIC CAPITAL CORPORATION ("GE CAPITAL") and

 (2)      ALOHA AIRLINES, INC. ("ALOHA")

 WHEREAS:

          (A)  From time to time, Aloha or one of its Affiliates may wish to
               lease commercial aircraft from GE Capital or one of its
               Affiliates, and GE Capital or one of its Affiliates may wish to
               lease commercial aircraft to Aloha or one of its Affiliates;

          (B)  Each party hereto wishes to provide in one document for certain
               common terms and conditions, as hereinafter provided in this CTA,
               that will be applicable, unless otherwise stated, to each such
               lease referred to in Recital (A); and

          (C)  Each such lease transaction will be concluded only on the terms
               of an agreement entitled "Aircraft Lease Agreement," which
               together with this CTA (which will be incorporated into and
               become part of such Aircraft Lease Agreement), will constitute
               the lease for the applicable aircraft as identified therein;

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

 1.       INTERPRETATION

 1.1      Definitions

          All references herein to "Lease" mean the integrated agreement
          consisting of the various documents comprising the Lease as defined in
          Schedule 1. In the Lease, capitalized words and expressions have the
          meanings set out for them in Schedule 1 and in the Aircraft Lease
          Agreement.

 1.2      Construction

          (a)  In the Lease, unless otherwise stated, a reference to:

               (i)  "Lessor" "Lessee," "GECAS," "Owner" or any other Person
                    includes any of their successors and assignees;

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


<PAGE>


               (iii) any document (except this CTA unless Lessor and Lessee
                    otherwise expressly agree) shall include any changes to that
                    document and any replacement for it;

               (iv) a Section or a Schedule is a reference to a clause of or a
                    schedule to this CTA;

               (v)  any Regulation shall include any changes to that Regulation
                    and any replacement for it;

               (vi) an obligation of a Person refers to any obligation that
                    Person has under or in relation to the Lease; and

               (vii) "includes," "including", "include" or similar terms shall
                    not be construed as limiting and shall mean "including,
                    without limitation."

     (b)  Headings to Sections and Schedules in the Lease are not intended to
          affect their meaning.

 2.       REPRESENTATIONS AND WARRANTIES

 2.1      Lessee's Representations and Warranties

          Lessee hereby makes the representations and warranties set out in
          Section 1.1 of Schedule 2 as of the date of execution of the Aircraft
          Lease Agreement and as of the Delivery Date, and Lessee understands
          that these statements must be true, both when the Aircraft Lease
          Agreement is executed and on the Delivery Date.

 2.2      Lessor's Representations and Warranties

          Lessor hereby makes the representations and warranties set out in
          Section 1.2 of Schedule 2 as of the date of execution of the Aircraft
          Lease Agreement and as of the Delivery Date, and Lessor understands
          that these statements must be true, both when the Aircraft Lease
          Agreement is executed and on the Delivery Date.

 3.       CONDITIONS PRECEDENT

 3.1      Conditions Precedent

          Lessor need not deliver and start the leasing of the Aircraft under
          the Lease unless each of the Lessor Conditions Precedent is satisfied
          or waived in writing by Lessor. Lessee need not accept and start the
          leasing of the Aircraft under the Lease unless each of the Lessee
          Conditions Precedent is satisfied or waived in writing by Lessee;
          provided, however, in the event that Lessee fails to accept and start
          the leasing of the Aircraft under the Lease, any Lessee Condition
          Precedent which reasonably could be expected to be met if the Delivery
          of the Aircraft had



                                      -2-
<PAGE>


          occurred shall be deemed to have been satisfied or waived for purposes
          of determining Lessee's liability for Rent in respect of the Aircraft
          in accordance with Section 4.1(b) below.

 3.2      Waiver

          If any Lessor Condition Precedent is not satisfied, or waived in
          writing by Lessor, on or before the Delivery Date, and Lessor (in its
          absolute discretion) nonetheless agrees to deliver the Aircraft to
          Lessee and to start the leasing of the Aircraft, Lessee will ensure
          that such Lessor Condition Precedent is fulfilled within 15 days after
          the Delivery Date, and Lessor may treat as an Event of Default the
          failure of Lessee to do so.

 4.       COMMENCEMENT

 4.1      Leasing

          (a)  Lessor shall notify Lessee of the Scheduled Delivery Week as soon
               as possible, but no later than at least thirty (30) days prior to
               the Scheduled Delivery Month, and Lessor shall notify Lessee of
               the Scheduled Delivery Date as soon as possible, but no later
               than at least one (1) week prior to the Scheduled Delivery Week.
               Subject to Sections 3.1 and 4.4, Lessor will lease the Aircraft
               to Lessee and Lessee will take the Aircraft on lease for the
               Term, which shall commence on the Delivery Date, and which shall
               be evidenced by Lessee's execution of Lease Supplement No. 1.

          (b)  If (i) Lessee is unwilling or unable to accept delivery of the
               Aircraft on the date on which Lessor tenders the Aircraft for
               Delivery to Lessee under and in accordance with Section 4.3(a),
               or Lessee fails to fulfil any Lessor Condition Precedent on or
               before such date, and (ii) the Lessee Conditions Precedent are
               met (or could reasonably be expected to be met if Delivery had
               occurred), then the Rent Commencement Date for the Aircraft shall
               be deemed to have occurred on the date on which it is tendered by
               Lessor for Delivery in accordance with subclause (ii) of this
               Section 4.1(b), and Lessee shall be obligated to pay Rent for
               the Aircraft on and from such date regardless of whether the
               Delivery Date occurs or whether Lessee executes Lease Supplement
               No. 1, but Lessor shall have no obligation to deliver, and Lessee
               shall have no lease interest in the Aircraft or other right to
               possession of the Aircraft, unless and until Lessee fulfils all
               Lessor Conditions Precedent as and when provided in the Lease and
               Lessee accepts delivery of the Aircraft as evidenced by its
               execution of Lease Supplement No. 1, and so long as no Default
               has occurred and is continuing.

          (c)  Lessee will be responsible for all risks associated with any loss
               of or damage to the Aircraft from the Rent Commencement Date
               until possession of the Aircraft is returned


                                      -3-
<PAGE>

               to Lessor on the Return Occasion and Lessor executes and delivers
               to Lessee the acknowledgement contemplated by Section 12.4.

 4.2      Procedure before Delivery

          Lessor and Lessee will follow the Pre-Delivery Procedure.

 4.3      Delivery and Acceptance

          (a)  After the Pre-Delivery Procedure has been carried out:

               (i)  Subject to Section 3.1, Lessor will tender delivery of the
                    Aircraft to Lessee at the Delivery Location.

               (ii) Subject to Section 3.1, Lessee will accept the Aircraft.
                    Upon such acceptance, Lessee must also provide evidence of
                    its acceptance by signing Lease Supplement No. 1 and
                    delivering it to Lessor.

          (b)  Lessee's acceptance of the Aircraft shall be regarded as
               absolute, unconditional and irrevocable.

  4.4     Delayed Delivery

          If Delivery takes place after the Scheduled Delivery Date or does not
          happen due to an Unforeseen Event or for any other reason (other than
          Lessor's willful misconduct in the performance of its obligation to
          deliver the Aircraft under and subject to the conditions in the
          Lease):

          (a)  Lessor will not be responsible for any Losses that Lessee suffers
               resulting from the delay or from the non-delivery of the
               Aircraft;

          (b)  Lessee will not, except in the circumstances described in Section
               4.4(c), be entitled to terminate the Lease or to reject the
               Aircraft when it is offered for Delivery because of the delay.

          (c)  If the Aircraft has not been tendered for Delivery, in accordance
               with Section 4.3, by the Final Delivery Date, either party may
               terminate the Lease by delivering notice to the other party
               within 10 days of such Final Delivery Date (and if such notice is
               not delivered within such 10-day period the Final Delivery Date
               will be deemed extended for one additional period of 90 days).
               Upon the delivery of any such notice or automatically on the
               expiration of such 90-day period if no such notice has been
               delivered, all obligations of each party under the Lease will end
               on the date of such notice or the date of the


                                      -4-
<PAGE>

               expiration of such period, as the case may be, except that Lessor
               will repay to Lessee the Deposit (if any) or return to Lessee or
               cancel any Letter of Credit and Lessee will remain obligated
               under its indemnity set forth in Section 3 of Schedule 4.

          (d)  Lessee hereby agrees that its only right or remedy for a delay in
               or failure of delivery of the Aircraft due to an Unforeseen Event
               or for any other reason (other than Lessor's willful misconduct
               in the performance of its obligation to deliver the Aircraft
               under and subject to the conditions in the Lease) is the remedy
               set forth in Section 4.4(c) above and Lessee hereby waives any
               rights it may have under Section 2A-406 of the UCC or otherwise
               for any delay in or failure of delivery.

 5.       PAYMENTS

 5.1      Deposit

          Lessee shall pay Lessor any Deposit that is specified in Section 3 of
          the Aircraft Lease Agreement.

 5.2      Rental Periods

          The first Rental Period will start on the Rent Commencement Date and
          each subsequent Rental Period will start on the date immediately
          following the last day of the previous Rental Period. Each Rental
          Period will end on the date immediately before the numerically
          corresponding day in the next month, except that:

          (a)  if there is no numerically corresponding day in that month, it
               will end on the last day of that month; and

          (b)  if a Rental Period would otherwise overrun the Expiry Date, it
               will end on the Expiry Date.

 5.3      Rent

          (a)      TIME OF PAYMENT: Lessee will pay to Lessor or its order Rent
                   in advance on each Rent Date. Lessor must receive value for
                   the payment on each Rent Date. If a Rental Period begins on a
                   day which is not a Business Day, the Rent payable in respect
                   of that Rental Period shall be paid on the Business Day
                   immediately following that day.

          (b)      AMOUNT: The Rent payable during the Term shall be calculated
                   in accordance with Schedule B of the Aircraft Lease
                   Agreement.


                                      -5-
<PAGE>

  5.4      Supplemental Rent

          (a)  AMOUNT: If, under the Aircraft Lease Agreement, Lessee is
               required to pay Supplemental Rent, Lessee will pay that
               Supplemental Rent, at the rates referred to in Section 3 of the
               Aircraft Lease Agreement, to Lessor in relation to each calendar
               month (or part of a month) of the Term, on the fifteenth day
               following the end of that calendar month (except that the last
               payment of Supplemental Rent during the Term shall be paid on the
               Expiry Date).

          (b)  ADJUSTMENT: If, under the Aircraft Lease Agreement, Lessee is
               required to pay Supplemental Rent, the Supplemental Rent rates
               shall be adjusted after the Delivery Date in the manner provided
               in the Aircraft Lease Agreement.

          (c)  LESSOR'S PROPERTY: Lessee acknowledges and agrees that
               Supplemental Rent is additional rent for the leasing of the
               Aircraft and not cash collateral or other collateral security for
               Lessee's maintenance obligations under the Lease. Once paid all
               Supplemental Rent is the property of Lessor, it is not refundable
               to Lessee under any circumstances whatsoever and Lessee has no
               interest therein whatsoever.

  5.5     Payments

          All payments by Lessee to Lessor under the Lease will be made for
          value on the due date in Dollars and in immediately available funds by
          wire transfer to the Lessor's Account as specified in the Aircraft
          Lease Agreement.

  5.6     Withholding and Tax Credit

          (a)  WITHHOLDING: Lessee must not deduct any amount from any of its
               payments under the Lease, for or on account of any Taxes, unless
               it is required by law to do so, in which case Lessee must:

               (i)  deduct the minimum amount necessary to comply with the Law;

               (ii) pay Lessor an extra amount so that Lessor receives a net
                    amount on the relevant payment date, that is equal to the
                    amount that it would have received if the reduction had not
                    been made (provided that Lessee shall have no obligation to
                    pay Lessor an extra amount on account of withholding in
                    relation to any Taxes with respect to which Lessee is not
                    required to indemnify Lessor under Section 5.7). The amount
                    of any such payment to Lessor must take into account the tax
                    treatment of that payment to Lessor applying the principles
                    of Section 5.10 such that Lessor shall be in no worse
                    position than it would have been if the deduction had not
                    applied in the first place;


                                      -6-
<PAGE>

               (iii) pay the Tax to the relevant taxing authority according to
                    the relevant Law; and

               (iv) obtain a receipt (if one is available) from the relevant
                    taxing authority and give it to Lessor.

          (b)  TAX CREDIT: If Lessor, in good faith, determines that it has
               realized a tax benefit (by way of deduction, credit or otherwise)
               as a result of any payment for which Lessee is liable under
               Section 5.6(a), Section 5.7, Section 5.10, Section 5.21 or
               Section 10, Lessor shall pay to Lessee as soon as practicable
               after the tax benefit has been realized (but not before Lessee
               has made all payments and indemnities to Lessor required under
               this Section or Section 5.7), an amount which will ensure that
               (after taking account of the payment itself) Lessor is in no
               better and no worse position than it would have been if the Tax
               giving rise to the payment hereunder had not been incurred.

               Nothing in this Section 5.6(b) shall:

               (i)  interfere with the right of Lessor to arrange its tax
                    affairs in whatever manner it thinks fit; or

               (ii) oblige Lessor to disclose any information relating to its
                    Tax affairs or any Tax computations (other than information
                    reasonably necessary for Lessee to verify Lessor's
                    determination, which information may be supplied on a
                    confidential basis to an independent third party reasonably
                    acceptable to Lessor and Lessee).

 5.7      Tax Indemnity

          (a)  General:

               (i)  Except as provided in Section 5.7(c), Lessee will on demand
                    pay and indemnify each Tax Indemnitee against any and all
                    Taxes levied or imposed against or upon or payable by such
                    Tax Indemnitee or Lessee and arising from, with respect to
                    or in connection with the transactions pursuant to the
                    Lease, including all Taxes relating or attributable to
                    Lessee, the Lease or the Aircraft, directly or indirectly,
                    in connection with the importation, exportation,
                    registration, ownership (but only to the extent relating to
                    or attributable to or arising as a result of the possession,
                    operation, use or maintenance of the Aircraft by Lessee),
                    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, indemnification payment or other amounts arising
                    therefrom, or the making of any Equipment Change or the
                    permanent replacement of any Engine.



                                      -7-
<PAGE>

               (ii) All Taxes indemnified pursuant to this Section 5.7(a) shall
                    be paid by Lessee directly to the appropriate taxing
                    authority (to the extent permitted by applicable Law) at or
                    before the time prescribed by applicable Law. After any
                    payment by Lessee of any Tax directly to a taxing authority,
                    Lessee shall furnish to Lessor, on request, a certified copy
                    of a receipt for Lessee's payment of such Tax or such other
                    evidence of payment of such Tax as is reasonably obtainable
                    by Lessee and reasonably acceptable to Lessor.

               (iii) Any amount payable by Lessee to a Tax Indemnitee pursuant
                    to Section 5.7(a) shall be paid within ten days after
                    receipt of a written demand therefor from the relevant Tax
                    Indemnitee accompanied by a written statement describing in
                    reasonable detail the basis for such indemnity and the
                    computation of the amount so payable, provided that if an
                    amount of any indemnified Tax is being contested in
                    accordance with Section 5.9 and Lessee shall have duly
                    performed (and shall continue to perform) all its
                    obligations under Section 5.9 with respect to such contest,
                    then payment of the indemnity with respect to such Tax under
                    Section 5.7(a) shall, at Lessee's election, be deferred
                    until the date the contest has been completed.

          (b)  Sales and Use Taxes:

               (i)  Without limiting Section 5.7(a) above, Lessee shall pay to
                    Lessor (or, if permitted by applicable Law and if requested
                    by Lessor, Lessee shall pay to the relevant tax authority
                    for the account of Lessor):

                    (y)  all sales, use, excise, rental, value added, goods and
                         services and similar taxes ("SALES TAXES") required to
                         be paid to the tax authority of the jurisdiction in
                         which the Delivery Location is situated or to the
                         jurisdiction of the Habitual Base or the State of
                         Incorporation with respect to the lease of the Aircraft
                         to Lessee pursuant to the Lease unless Lessee delivers
                         to Lessor on or prior to the Delivery Date such
                         exemption certificate or other document as may be
                         required by applicable law to evidence Lessor's
                         entitlement to exemption from all Sales Taxes imposed
                         by each such jurisdiction with respect to the lease of
                         the Aircraft pursuant to the Lease; and

                    (z)  all Sales Taxes required to be paid to the tax
                         authority of any jurisdiction in which the Aircraft may
                         be used, operated or otherwise located from time to
                         time unless Lessee deliver to Lessor such exemption
                         certificates or other documents as may be required by
                         applicable law to evidence Lessee's entitlement to
                         exemption from all Sales Taxes imposed by each



                                      -8-
<PAGE>

                         such jurisdiction with respect to the lease of the
                         Aircraft pursuant to the Lease.

               (ii) Lessee and Lessor will cooperate with each other in
                    connection with the preparation and filing of any exemption
                    application or similar document that is reasonably necessary
                    or desirable under, applicable Law to avoid the imposition
                    of any Sales Taxes with respect to the transactions
                    contemplated by the Lease.

               (iii) The specific obligations with respect to sales and use
                    taxes set forth in this Section 5.7(b) are in addition to,
                    and are not in substitution for, Lessee's obligation to
                    indemnify for sales and use taxes pursuant to Section
                    5.7(a).

          (c)  Lessee is not required to indemnify a Tax Indemnitee under
               Section 5.7(a) or Section 5.7(b) to the extent that the Tax
               arises because of

               (i)  the willful misconduct or gross negligence of the Tax
                    Indemnitee seeking indemnity under Section 5.7;

               (ii) a Tax liability a Tax Indemnitee has which would have arisen
                    even if the Lease had not been entered into;

               (iii) a Tax liability charged on or measured by a Tax
                    Indemnitee's net income, profits or gains by any Government
                    Entity in the United States; but excluding any Tax (A) that
                    is a Sales Tax (other than a Sales Tax that is enacted by a
                    Government Entity as a substitute for or replacement of a
                    Tax charged on or measured by net income, profits, or gains
                    as a revenue source for that Government Entity (a
                    "Replacement Sales Tax")) or (B) that is imposed by any
                    government or taxing authority of any jurisdiction (other
                    than the United States federal government) if and to the
                    extent that such Tax (including a Replacement Sales Tax)
                    results from (x) the use, operation, presence, registration
                    or location of the Aircraft, the Airframe, any Engine or any
                    Part in the jurisdiction imposing the Tax, or (y) the situs
                    of organization, any place of business or any activity of
                    Lessee or any other Person having use, possession or custody
                    of the Aircraft, the Airframe, any Engine or any Part in the
                    jurisdiction imposing the Tax;

               (iv) a Tax liability charged with respect to the period, or an
                    event occurring, (x) prior to the Delivery Date or (y) after
                    the Expiry Date and, in either case, unrelated to Lessor's
                    dealings with Lessee or to the transactions contemplated by
                    the Lease;

               (v)  a Tax liability arising out of any voluntary transfer or
                    disposition by a Tax Indemnitee of any equitable or legal
                    interest in the Aircraft or any part thereof or



                                      -9-
<PAGE>

                    this Agreement to any Person (including a transfer or
                    disposition by way of security but excluding a transfer or
                    disposition pursuant to the exercise of remedies in
                    connection with an Event Default), provided, however, that
                    Lessor shall in connection with an Event of Default comply
                    with any request as Lessee shall make concerning the
                    appropriate jurisdiction in which such disposition shall be
                    made unless Lessor reasonably determines (and advises
                    Lessee) that compliance with such request by Lessee would
                    generate an adverse consequence or prejudice Lessor; or

               (vi) a Tax liability with respect to a Tax based on or measured
                    by the value or principal amount of any loan or promissory
                    note (or security therefor) entered into by a Tax Indemnitee
                    or anyone claiming an interest in the Aircraft or any
                    portion thereof through a Tax Indemnitee; or

               (vii) a Tax liability arising out of a Replacement Sales Tax as
                    described in Section 5.7(c)(iii), but excluding a
                    Replacement Sales Tax described in Section 5.7(c)(iii)(B).

          (d)  Lessee will also indemnify each Tax Indemnitee, on an After-Tax
               Basis, as set forth in the Section entitled "Special Tax
               Indemnity" in Schedule B of the Aircraft Lease Agreement, and the
               provisions of Section 5.9 (TAX CONTEST AND INFORMATION) shall
               apply thereto.

  5.8      [NOT APPLICABLE]

  5.9      Tax Contest and Information

          (a)  If a Tax Indemnitee receives a notice of an audit or a written
               claim for any Tax for which Lessee would be required to pay an
               indemnity pursuant to Section 5.6 or Section 5.7, Lessor or such
               Tax Indemnitee shall notify Lessee promptly of such audit or
               claim, provided that any failure to provide such notice will not
               relieve Lessee of any indemnification obligation pursuant to
               Section 5.6 or 5.7 except to the extent that such failure
               precludes the right to contest such Taxes. If requested by Lessee
               in writing promptly after receipt of notice hereunder, Lessor
               shall or Lessor shall cause, to the extent that it has the
               ability to do so through relationship or contractual privity,
               such Tax Indemnitee to, upon receipt of indemnity satisfactory to
               it and at the expense of Lessee (including all costs, expenses,
               legal and accountants' fees and disbursements, and penalties,
               interest and additions to tax incurred in contesting such claim)
               permit Lessee to contest such audit or claim, or, if such contest
               (w) relates to an income tax, (x) involves Taxes in addition to
               those for which Lessee is responsible hereunder, (y) may not,
               under applicable law be conducted by Lessee, or (z) is one for
               which Lessee requests in writing


                                      -10-
<PAGE>

               that Lessor or the Tax Indemnitee conduct such contest, Lessor
               shall, or Lessor shall cause, to the extent that it has the
               ability to do so through relationship or contractual privity, the
               appropriate Tax Indemnitee to in good faith contest such audit or
               claim, by (i) resisting payment thereof if practicable and
               appropriate, (ii) not paying the same except under protest if
               protest is necessary and proper, or (iii) if payment is made,
               using reasonable efforts to obtain a refund of such Taxes in
               appropriate administrative and judicial proceedings. Lessor or
               the Tax Indemnitee shall determine the method of any contest
               conducted by Lessor or the Tax Indemnitee and (in good faith
               consultation with Lessee) control the conduct thereof, except
               that with respect to matters described in clause (y) or in clause
               (z) above which are not also described in clause (w) or clause
               (x) above Lessor shall and Lessor shall cause, to the extent that
               it has the ability to do so through relationship or contractual
               privity, the Tax Indemnitee to comply with the reasonable
               instructions of Lessee regarding the method of any contest
               conducted by Lessor or the Tax Indemnitee and Lessee shall (in
               good faith consultation with Lessor) control the conduct thereof.
               Lessee shall determine the method of any contest conducted by
               Lessee and (in good faith consultation with Lessor or the Tax
               Indemnitee) control the conduct thereof. Lessee shall pay in full
               all payments of Rent and other amounts payable pursuant to the
               Lease, without reduction for or on account of any Tax (except as
               provided in Section 5.6), while such contest is continuing.
               Lessor shall not be required to contest, or to continue to
               contest, a claim for Taxes under this Section 5.9 if (x) such
               contest would result in a risk of criminal penalties or risk of a
               sale, forfeiture or loss of, or the imposition of a Security
               Interest (other than a Permitted Lien) on, the Aircraft, or (y)
               Lessee shall not have furnished, at Lessee's expense, an opinion
               of independent tax counsel selected by Lessor and reasonably
               satisfactory to Lessee, that a reasonable basis exists for such
               contest, or (z) a Default shall be continuing (unless Lessee
               shall have provided security reasonably satisfactory to Lessor
               securing Lessee's performance of its obligations under this
               Section 5.9). If Lessor or any Tax Indemnitee contests any claim
               for Taxes by making a payment and seeking a refund thereof, then
               Lessee shall advance to Lessor or such Tax Indemnitee, on an
               interest-free basis, an amount equal to the Taxes to be paid by
               Lessor or such Tax Indemnitee in connection with the contest and
               shall indemnify Lessor or such Tax Indemnitee on an After-Tax
               Basis for any adverse tax consequences to Lessor or such Tax
               Indemnitee of such interest-free advance. Upon the final
               determination of any contest pursuant to this Section 5.9 in
               respect of any Taxes for which Lessee shall have made an advance
               to Lessor or a Tax Indemnitee in accordance with the immediately
               preceding sentence, the amount of Lessee's obligation shall be
               determined as if such advance had not been made; any indemnity
               obligation of Lessee to Lessor or a Tax Indemnitee under this
               Section 5.9 and Lessor's or such Tax Indemnitee's obligation to
               repay the advance will be satisfied first by setoff against each
               other, and any difference owing by either party shall be paid
               within ten days after such final determination.


                                      -11-
<PAGE>

          (b)  If Lessor or any Tax Indemnitee obtains a refund or reimbursement
               of all or any part of any Taxes for which a full indemnity was
               paid by Lessee, Lessor shall and Lessor shall cause such Tax
               Indemnitee to pay Lessee the amount of such refund or
               reimbursement, reduced by any Taxes imposed on Lessor or such Tax
               Indemnitee on receipt or accrual of such refund or reimbursement
               and increased by any Taxes saved by Lessor or such Tax Indemnitee
               by reason of the deductibility of such payment by Lessor or such
               Tax Indemnitee. If, in addition to such refund or reimbursement,
               Lessor or such Tax Indemnitee receives an amount of interest on
               such refund or reimbursement or a recovery of costs or attorney's
               fees with respect thereto that were paid by Lessee, Lessor or
               such Tax Indemnitee shall pay to Lessee the portion of such
               interest or recovered costs or attorney's fees which is fairly
               attributable to such refund, reduced by any Taxes imposed by
               Lessor or such Tax Indemnitee on receipt or accrual of such
               interest and increased by any Taxes saved by reason of the
               deductibility of such payment by Lessor or such Tax Indemnitee.
               Neither Lessor nor the Tax Indemnitee shall be required to make
               any payment to Lessee pursuant to this Section 5.9 if, and for so
               long as, a Default shall have occurred and be continuing.

          (c)  Lessor or a Tax Indemnitee in its sole discretion (by written
               notice to Lessee) may waive its rights to indemnification
               pursuant to Section 5.7 with respect to any claim for any Tax and
               may refrain from contesting or continuing the contest of such
               claim, in which event Lessee shall have no obligation to
               indemnify Lessor for the Taxes that are the subject of such
               claim. If Lessor agrees to a settlement of any contest conducted
               pursuant to this Section 5.9 without the prior written consent of
               Lessee, which consent shall not be unreasonably withheld, then
               Lessor shall be deemed to have waived its rights to the
               indemnification provided for in Section 5.7 with respect to the
               Tax liability accepted in such settlement or with respect to
               which Lessee's ability to avoid or minimize, directly or by
               instruction to the Lessor or such Tax Indemnitee regarding how to
               avoid or minimize, Taxes has been materially impaired as a result
               of failure of the Lessor or such Tax Indemnitee to so contest or
               continue to contest.

          (d)  Information:

               (i)  If Lessee is required by any applicable Law, or by any third
                    party, to deliver any report or return in connection with
                    any Taxes for which Lessee would be obligated to indemnify
                    Lessor or any other Tax Indemnitee under the Lease, Lessee
                    will complete the same and, on request, supply a copy of the
                    report or return to Lessor.

               (ii) If any report, return or statement is required to be made by
                    Lessor or any other Tax Indemnitee with respect to any Tax
                    for which there is an indemnity obligation of Lessee under
                    the Lease, and Lessee knows of, or reasonably should


                                      -12-
<PAGE>

                    have known of, such return, report or statement, Lessee will
                    promptly notify Lessor of the requirement and:

                    (y)  if permitted by applicable Law, make and timely file
                         such report, return or statement (except for any
                         report, return or statement that Lessor has notified
                         Lessee that Lessor or any other Tax Indemnitee intends
                         to prepare and file), prepare such return in such
                         manner as will show Lessor as lessor of the Aircraft
                         and the ownership of the Aircraft in Lessor if required
                         or appropriate, and provide Lessor upon request a copy
                         of each such report, return or statement filed by
                         Lessee, or

                    (z)  if Lessee is not permitted by applicable Law to file
                         any such report, return or statement, Lessee will
                         prepare and deliver to Lessor a proposed form of such
                         report, return or statement within a reasonable time
                         prior to the time such report, return or statement is
                         to be filed.

               (iii) Lessee will provide such information and documents as
                    Lessor may reasonably request to enable Lessor or any other
                    Tax Indemnitee to comply with its tax filing, audit and
                    litigation obligations. Lessor or any other Tax Indemnitee
                    will provide such information or documents, at Lessee's
                    expense, that Lessee does not otherwise have as Lessee may
                    reasonably request and which are necessary to enable Lessee
                    to comply with its obligations under the Lease (including
                    Sections 5.6 and 5.7 of the CTA and Schedule B of the
                    Aircraft Lease Agreement) or to minimize Taxes that are the
                    subject of any filing, audit, or contest under this Section
                    5.9.

 5.10     Indemnity Payments - After-Tax Basis

          The amount of any payment made under Section 5.7 (TAX INDEMNITY)
          (including Section 5.7(d)), Section 5.21 (EXPENSES) or Section 10
          (INDEMNITY) to or for the benefit of any Indemnitee, shall include
          such amount as may be necessary to hold such Indemnitee harmless on an
          After-Tax Basis from all Taxes required to be paid by such Indemnitee
          with respect to such payment or indemnity (including any payments
          pursuant to this Section 5.10.

 5.11     Lessor Obligations Following Expiry Date

          Within 91 days (or such shorter period after the Expiry Date to which
          Lessor may agree after Lessee demonstrates to Lessor's reasonable
          satisfaction that Lessee has a net worth, determined in accordance
          with GAAP, of not less than Five Million Dollars ($5,000,000.00) as of
          the Expiry Date) after:



                                      -13-
<PAGE>

          (a)  redelivery of the Aircraft to Lessor in accordance with and in
               the condition required by the Lease; or

          (b)  payment to Lessor of the Agreed Value following an Event of Loss
               after the Delivery Date;

          and in each case so long as all amounts which may then be due and
          payable under the Lease and the Other Agreements shall have been paid
          in full and (no other Default has occurred and is continuing:

               (i)  Lessor will pay to Lessee the balance of the Deposit (if
                    any);

               (ii) Lessor will pay to Lessee the amount of any Rent received in
                    respect of any period falling after the date of redelivery
                    of the Aircraft or payment of the Agreed Value, as the case
                    may be; and

               (iii) Lessor will return to Lessee or cancel any Letter of
                    Credit.

  5.12    Net Lease

          The Lease is a net lease. The Lessee's obligation to pay Rent and to
          perform all of its other obligations under the Lease is absolute and
          unconditional no matter what happens and no matter how fundamental or
          unforeseen the event, including any of the following: (a) any right of
          set-off, counterclaim, recoupment, defense or other right which either
          party to the Lease may have against the other (including any right of
          reimbursement) or which Lessee may have against the Manufacturer, any
          manufacturer or seller of or any Person providing services with
          respect to the Aircraft, any Engine or any Part or any other Person,
          for any reason whatsoever; (b) any unavailability of the Aircraft for
          any reason, including a requisition of the Aircraft or any prohibition
          or interruption of or interference with or other restriction against
          Lessee's use, operation or possession of the Aircraft (whether or not
          the same would, but for this provision, result in the termination of
          the Lease by operation of law); (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
          Event of 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
          Lessor, Lessee or any other Person; (e) any invalidity or
          unenforceability or lack of due authorization of, or other defect in,
          the Lease; (f) any Security Interests or Taxes; and/or (g) any other
          cause or circumstance which but for this provision would or might
          otherwise have the effect of terminating or in any way affecting any
          obligation of Lessee under the Lease. Lessee acknowledges and agrees
          that it has used its own judgement in selecting the Aircraft, and has
          not relied on Lessor or


                                      -14-
<PAGE>

          on any information supplied by Lessor, that Lessor is not a
          manufacturer of or dealer in aircraft and that Lessor has all of the
          rights and benefits of a lessor under a lease to which Section 2A-407
          of the UCC applies as provided in such Section 2A-407.

          Except as expressly set forth elsewhere in the Lease, Lessee hereby
          waives, to the extent permitted by applicable Law, any and all right
          which it may now have or which at any time hereafter may be conferred
          upon it, by statute or otherwise, to terminate, abate, cancel, quit,
          reduce, defer, suspend or surrender the Lease or the Aircraft or any
          obligation imposed upon Lessee under the Lease (including payment of
          Rent or Supplemental Rent).

          Each payment of Rent or Supplemental Rent made by Lessee shall be
          final. Lessee will not seek to recover all or any part of any payment
          of Rent or Supplemental Rent for any reason whatsoever except manifest
          error.

          If for any reason whatsoever the Lease shall be terminated in whole or
          in part by operation of Law, except as specifically provided in the
          Lease, Lessee waives all rights (if any) to any termination or
          diminution in its Rent or Supplemental Rent obligations hereunder and
          nonetheless agrees to pay to Lessor, an amount equal to each Rent and
          Supplemental Rent payment at the time such payments would have become
          due and payable in accordance with the terms thereof had the Lease not
          been terminated in whole or in part and so long as such payments are
          made and all other terms and conditions hereof are complied with by
          Lessee, Lessor and Lessee will deem the Lease to remain in full force
          and effect and Lessee shall continue in possession of the Aircraft
          under the terms and conditions of the Lease.

          Nothing in this Section 5.12 will be construed to limit Lessee's right
          to institute separate legal proceedings against Lessor in the event of
          Lessor's breach of the Lease as and to the extent permitted by
          Sections 7.1 and 16.3 of this CTA, or to limit Lessee's rights and
          remedies against any other Person.

 5.13     Further Provisions regarding Deposit

          (a)  If, under the Lease, Lessee is required to pay a Deposit, Lessee
               hereby grants a security interest in the Deposit to Lessor and
               the remaining provisions of this Section shall apply. Lessee
               agrees that Lessor shall be entitled to commingle the Deposit
               with Lessor's general or other funds, Lessor will have no
               obligation to pay any interest thereon and Lessor will not hold
               any such funds as agent or in trust for Lessee or in any similar
               fiduciary capacity. In this regard, Lessee acknowledges and
               agrees that it is not located in the State of New York within the
               meaning of Section 7-101 1-c. (b) of the New York General
               Obligations Law and, therefore, the requirements of Section 7-101
               of the New York General Obligations Law to the effect that Lessor
               hold the Deposit in a separate, interest bearing account do not
               apply.


                                      -15-
<PAGE>

          (b)  If any Event of Default or any Default under clause (g) of
               Schedule 9 shall have occurred and be continuing, in addition to
               all rights and remedies accorded to Lessor elsewhere in the Lease
               or under Law in respect of the Deposit, Lessor may immediately or
               at any time thereafter, without prior notice to Lessee, apply all
               or part of the Deposit in or towards the payment or discharge of
               any matured obligation owed by Lessee or any affiliate or
               associate of Lessee under the Lease or the Other Agreements, in
               such order as Lessor sees fit, and/or exercise any of the rights
               of set-off described in Section 5.20 against all or part of the
               Deposit.

          (c)  If Lessor exercises the rights described in Section 5.13(b)
               above, Lessee shall, following a demand in writing from Lessor,
               immediately restore the Deposit to the level at which it stood
               immediately prior to such exercise.

 5.14     Letter of Credit

          (a)  If, under the Lease, Lessee is required or elects to provide
               Lessor with a Letter of Credit, the provisions of this Section
               shall apply. Any Letter of Credit provided by Lessee to Lessor
               will be issued and payable by a Pre-Approved Bank or another bank
               acceptable to Lessor in its sole and absolute discretion and in
               substantially the form of Schedule 13, or in another form and
               substance acceptable to Lessor in its sole and absolute
               discretion, and, if not issued by a Pre-Approved Bank or by the
               New York branch of a major international bank acceptable to
               Lessor in its sole and absolute discretion from time to time,
               will be confirmed by and payable at the New York branch of a
               major international bank acceptable to Lessor in its sole and
               absolute discretion from time to time, and will be issued as
               security for all payment obligations of Lessee or any its
               Affiliates under the Lease and each Other Agreement (including
               any and all Losses suffered or incurred by Lessor or any of its
               Affiliates in respect of which Lessee or any if its Affiliates is
               obligated under the Lease or each Other Agreement), which shall
               remain in full force and effect until the Required LC Expiry Date
               and may be drawn down by Lessor upon demand at any time or times
               prior to the Required LC Expiry Date following (i) the occurrence
               of an Event of Default or a Default under clause (g) of Schedule
               9, or (ii) the receipt by Lessor of notice of non-renewal of the
               Letter of Credit under Section 5.14(b) below.

          (b)  The Letter of Credit may have a validity period or periods ending
               prior to the Required LC Expiry Date, provided that (i) the
               Letter of Credit shall be renewed automatically, without further
               act or deed by any party, until such time as Lessor receives
               notice of non renewal of the Letter Credit, (ii) notice of
               non-renewal of the Letter of Credit shall be provided to Lessor
               no less than 30 Business Days prior to its then scheduled expiry
               date, (iii) Lessor shall be entitled to draw the full amount of
               the Letter of Credit immediately in




                                      -16-
<PAGE>

          the event that Lessor receives any notice of non-renewal of the Letter
          of Credit; and (iv) a Letter of Credit shall remain in force at all
          times up to the Required LC Expiry Date.

          (c)  If at any time during the Term, the current issuing or confirming
               bank for the Letter of Credit ceases to meet the requirements set
               forth in the definition of Pre-Approved Bank, Lessee shall within
               five (5) Business Days after the date of notice from Lessor of
               such decrease in credit rating, cause the Letter of Credit to be
               replaced by a Letter of Credit issued by another bank that meets
               the definition of a Pre-Approved Bank and (if requested by Lessor
               in its sole and absolute discretion) that such replacement Letter
               of Credit is confirmed by another bank that meets the requirement
               of a Pre-Approved Bank.

          (d)  If Lessor makes a drawing under the Letter of Credit, Lessee
               shall, following a demand in writing by Lessor, immediately cause
               the maximum amount available for drawing under the Letter of
               Credit to be restored to the level at which it stood immediately
               prior to such drawing.

 5.15     Guarantee

          If, under the Aircraft Lease Agreement, Lessee is required to provide
          Lessor with a Guarantee, Lessee will on or prior to the Delivery Date
          provide Lessor with the Guarantee.

 5.16     Late Payment Interest

          If Lessee fails to pay any amount payable under the Lease on the due
          date, Lessee will pay on demand from time to time to Lessor interest
          (both before and after judgement) on that amount, from the due date to
          the date of payment in full by Lessee to Lessor, at the Interest Rate.
          All such interest will be compounded monthly and calculated on the
          basis of the actual number of days elapsed in the month, assuming a 30
          day month and a 360 day year.

 5.17     Currency

          (a)  Except for Losses and expenses suffered or incurred by Lessor,
               which shall be payable by Lessee to Lessor in the currency and in
               the amount in which such Loss is suffered or incurred, all
               amounts payable to Lessor under the Lease shall be payable in
               Dollars in New York and payment in Dollars in New York is of the
               essence. Lessee must indemnify Lessor against any Loss Lessor
               suffers if

               (i)  Lessor receives an amount relating to Lessee's obligations
                    in a different currency from that in which payments should
                    be made under the Lease; or

               (ii) Lessee pays a judgement or claim in a different currency
                    from that in which payments should be made under the Lease.


                                      -17-
<PAGE>

          (b)  Lessee relinquishes any right to pay any amount under the Lease
               in a currency which is different from the currency provided in
               the Lease. Notwithstanding any such receipt, judgement or claim
               described in Section 5.17(a), Lessee shall have a separate
               obligation to pay, and Lessor shall have a separate claim against
               Lessee for, amounts to be indemnified by Lessee under this
               Section 5.17.

   5.18    Certificates

           Except where expressly provided in the Lease, any certificate or
           determination by Lessor as to any rate of interest or as to any other
           amount payable under the Lease will, in the absence of manifest
           error, be presumed to be correct.

   5.19    Appropriation

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

   5.20    Set-off

          (a)  In this sub-clause, references to Lessee will also include Lessee
               Affiliates.

          (b)  Lessor may, without notice, set-off any obligations owed by
               Lessee under the Lease or under the Other Agreements against any
               obligation Lessor or any of its Affiliates owes Lessee under the
               Lease or under the Other Agreements, regardless of the place of
               payment or currency. Promptly after making any such set-off,
               Lessor shall notify Lessee thereof, including in such notice such
               information about the set-off as may be reasonably required to
               enable a reasonable person to identify the claims so set off and
               to verify the calculation of the set-off, but neither failure to
               give such notice nor any alleged defect in such notice shall
               affect the effectiveness of any such set-off.

          If the obligations are in different currencies, Lessor may convert
          either obligation at the market rate of exchange available in New
          York. If the amount of an obligation is unknown, Lessor may estimate
          the amount. Any difference between the estimated obligation and the
          actual obligation will be paid by either Lessor or Lessee, as
          appropriate, when the amount becomes known.

  5.21    Expenses

          Lessee will pay to Lessor on demand all reasonable expenses (including
          all legal fees and expenses and the fees and expenses of other
          professional advisers) that the Lessor suffers or incurs:



                                      -18-
<PAGE>

          (a)  to deal with any amendments, extensions, consents or waivers that
               are required in connection with the Lease (but excluding any
               expenses incurred by Lessor or Owner in connection with any
               change in the ownership or financing of the Aircraft or a change
               in the Lease that is otherwise requested by Lessor or Owner, and
               in each case unrelated to any consent, waiver or amendment
               requested by Lessee or any other act or omission of Lessee) or to
               deal with any replacement of any Engine or Part (except for the
               replacement of an Engine by or at the request of Lessor prior to
               the Delivery Date);

          (b)  for FAA counsel and otherwise to act upon any advice and obtain
               assistance to perfect the Lease in the State of Registry and the
               State of Incorporation (and any other appropriate place); and

          (c)  in contemplation of, or otherwise in connection with, the
               enforcement or preservation of any of Lessor's rights under the
               Lease (including under Section 10) or in respect of the
               repossession of any Aircraft.

          All amounts payable pursuant to this Section 5.21 will be paid in the
          currency in which they are incurred by Lessor.

 6.       MANUFACTURER'S WARRANTIES

          (a)  So long as no Default has occurred which is continuing, Lessor
               shall make available to Lessee during the Term the benefit of all
               manufacturer's warranties in relation to the repair or remedy of
               any defect in the Aircraft (including compensation for loss of
               use of the Aircraft) to the extent that it is permitted to do so.
               In furtherance of the foregoing, Lessor shall take such actions,
               at Lessee's cost and expense, as Lessee may reasonably request to
               make such warranties available to Lessee.

          (b)  If a Default has occurred and is continuing Lessor may
               immediately recover from Lessee the proceeds of any warranty
               claims previously paid to Lessee to the extent that such claims
               relate to any defect in the Aircraft not fully and completely
               rectified by Lessee before such Default and Lessor may:

               (i)  retain for its own account any such proceeds previously paid
                    to Lessor which would have been remitted to Lessee under
                    this Section 6 in the absence of such Default; and

               (ii) cause any proceeds of any pending claims to be paid to
                    Lessor, rather than Lessee.



                                      -19-
<PAGE>

          (c)  Lessee will take all steps at the end of the Term as may be
               reasonably required to ensure that the benefit of any warranties
               relating to the Aircraft which have not expired is vested in
               Lessor.

 7.       LESSOR'S COVENANTS

 7.1      Quiet Enjoyment

          So long as no Default has occurred and is continuing, Lessor will not
          interfere with Lessee's right to quiet use and possession of the
          Aircraft during the Term. Exercise by Lessor of its rights of
          inspection or other rights provided to it under the Lease in the
          absence of a Default shall not be considered to be a breach of the
          foregoing covenant. Lessee agrees that its only right with respect to
          a default by Lessor under the Lease is to make a claim against Lessor
          for actual damages resulting directly therefrom and in any event
          subject to Section 16.3 hereof, and Lessee hereby waives any and all
          other rights or remedies it may have under Section 2A-211 of the UCC
          or Sections 2A-508 through 2A-522 of the UCC or otherwise.

 7.2      Maintenance Contributions

          If, under the Aircraft Lease Agreement for the Aircraft, Lessee is
          required to pay Supplemental Rent, then provided no Default has
          occurred and is continuing, Lessor will pay such amounts, if any, as
          may be specified in the Aircraft Lease Agreement to Lessee by way of
          contribution to the cost of maintenance of the Aircraft, which
          payments, if any, shall be made in the amounts and in the manner
          specified in the Aircraft Lease Agreement.

 8.       LESSEE'S COVENANTS

 8.1      Duration: Lessee shall perform and comply, or cause its Permitted
          Sub-Lessee or maintenance contractor to perform and comply, with its
          undertakings and covenants in the Lease at all times during the Term.
          All such undertakings and covenants shall, except where expressly
          otherwise stated, be performed at the expense of Lessee.

 8.2      Information

          Lessee will:

          (a)  provide Lessor with a Technical Report for the Aircraft within 15
               days after the end of each calendar month throughout the Term and
               otherwise provide Lessor with a Technical Report for the Aircraft
               within thirty (30) days after Lessor's request therefor;

          (b)  provide Lessor with the Financial Information;


                                      -20-
<PAGE>

          (c)  (i) notify Lessor of any Event of Loss and of any event which is
               likely to result in an insurance claim in excess of the Damage
               Notification Threshold promptly after the occurrence of any such
               event, (ii) consult with Lessor in the course of, and keep Lessor
               fully apprised as to the details of, any negotiations with its
               insurers or insurance brokers (and, in the case of repairable
               damage, with any applicable repair facility) with respect to any
               insurance claim arising out of such event, and (iii) obtain
               Lessor's prior approval before agreeing to any disposition of any
               insurance claim in excess of the Damage Notification Threshold;

          (d)  upon the occurrence of any event which is likely to give rise to
               an insurance claim under any of the Insurances relating to the
               Aircraft, Lessee shall promptly execute and deliver all documents
               and instruments and take all such other action as may reasonably
               be required to initiate and process any such claim under the
               applicable insurance, and in any event, Lessee shall initiate
               such claim, execute such documents or instruments and take such
               other action promptly following a written request by Lessor that
               Lessee initiate such claim, execute such document or instrument
               or take such other action;

          (e)  provide Lessor, upon request, with evidence that all Taxes and
               charges that are due and payable and were incurred by Lessee in
               connection with the Aircraft, its location and its operations,
               including those invoiced by airports and air traffic control
               authorities have been paid in full (or are being contested in
               good faith by appropriate proceedings in respect of which
               adequate reserves have been provided by Lessee and non-payment of
               which does not give rise to any risk of the Aircraft or any
               interest therein being sold, forfeited or otherwise lost or of
               criminal liability on the part of Lessor or Owner);

          (f)  provide Lessor with such other information concerning the
               location, condition, use and operation of the Aircraft or
               concerning the business or financial affairs of Lessee, as Lessor
               may from time to time reasonably request;

          (g)  [NOT APPLICABLE];

          (h)  [NOT APPLICABLE];

          (i)  notify Lessor promptly as to any material modification to
               Lessee's Maintenance Program (including, without limitation, any
               change from maintenance on a block format to maintenance on a
               phase-basis); provided, however, that Lessee shall not make any
               modifications to Lessee's Maintenance Program which may adversely
               affect the return conditions specified in Part III of Schedule A
               to the Aircraft Lease Agreement without prior consultation with
               Lessor. For the avoidance of doubt, changes to Lessee's
               Maintenance Program extending or shortening times between
               scheduled overhaul of Parts



                                      -21-
<PAGE>

               shall not be deemed to be material modification or to adversely
               affect the return conditions;

 8.3      Lawful and Safe Operation

          Lessee will operate the Aircraft for commercial purposes from the
          Delivery Date until the Return Occasion from a base within the State
          of Registry or from such other base outside the State of Registry
          pursuant to a sublease or a wet-lease complying with Section 8.4(a),
          provided, always that Lessee must not use or operate the Aircraft or
          suffer or permit the Aircraft to be used or operated:

          (a)  in violation of any applicable Regulations or in a manner causing
               Lessor, Owner, any Financing Party or GECAS to be in violation of
               (i) any applicable Regulations of the United States, (ii) any
               applicable Regulations of any jurisdiction of which Lessee is
               notified in writing by Lessor as a jurisdiction applicable to
               Lessor, Owner, GECAS or any Financing Party, or (iii) any
               applicable Regulations of any other jurisdiction into which or
               over which the Aircraft is operated; provided, however, that
               nothing in Section 8.3(a)(ii) shall be deemed to require Lessee
               to comply with any Regulations of any jurisdiction other than the
               United States which pertain to the maintenance or modification of
               aircraft.

          (b)  for any purpose for which the Aircraft was not designed or which
               is illegal;

          (c)  to carry cargo which could reasonably be expected to damage the
               Aircraft;

          (d)  in any circumstances or place where the Aircraft is not covered
               by the Insurances; or

          (e)  for purposes of training, qualifying or re-confirming the
               status of cockpit personnel except for the benefit of Lessee's
               or a Permitted Sub-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 Lessee or such Permitted Sub
               Lessee, as the case may be.

 8.4      Subleasing

          (a)  AT NO TIME PRIOR TO THE RETURN OCCASION WILL LESSEE SUB-LEASE,
               WET-LEASE OR OTHERWISE GIVE POSSESSION OR CONTROL OF THE AIRCRAFT
               OR ANY ENGINE TO, OR OTHERWISE PERMIT THE AIRCRAFT OR ANY ENGINE
               TO BE IN THE POSSESSION OR CONTROL OF, ANY PERSON EXCEPT:


                                      -22-
<PAGE>

               (i)  when the prior written consent of Lessor has been obtained,
                    which consent shall not be unreasonably withheld (it being
                    expressly acknowledged by Lessor and Lessee that the
                    withholding of Lessor's consent in respect of any sub-lease
                    or wet lease shall not be deemed to be unreasonable if the
                    terms of such sub-lease do not comply with the conditions
                    set out in Section 8.4(b) or the terms of such wet lease do
                    not comply with Section 8.4(c), as the case may be); or

               (ii) where the Aircraft or Engine is delivered to a manufacturer
                    or maintenance facility for work to be done on it as
                    required or permitted under the Lease; or

               (iii) to a sub-lessee of the Aircraft to which Lessor consents in
                    writing (a "PERMITTED SUB-LESSEE"), pursuant to a sub-lease
                    to which Lessor consents in (a "PERMITTED SUB-LEASE"), which
                    complies with the conditions set out in Section 8.4(b), and
                    provided that no Default shall have occurred and be
                    continuing at the commencement of such sub-lease;

               (iv) on a wet-lease which complies with Section 8.4(c); or

               (v)  with respect to an Engine, as permitted under Section 8.11.

          (b)  If Lessor grants its consent to a proposed sub-lessee and a
               proposed sub-lease, in addition to any conditions required by
               Lessor as part of any such consent of Lessor, each of the
               following conditions shall be required to be satisfied in
               relation to any Permitted Sub Lease prior to any sub-leasing
               pursuant to this Section:

               (i)  NOTIFICATION: at least 30 days prior to entering into any
                    Permitted Sub-Lease, Lessee shall give Lessor written
                    notice, specifying the identity of the Permitted Sub-Lessee,
                    the term of the Permitted Sub-Lease, the delivery date under
                    the Permitted Sub-Lease and the habitual base of the
                    Permitted Sub-Lessee;

               (ii) TERM: the term of the Permitted Sub-Lease shall not be
                    capable of extending beyond one month (or such shorter
                    period as Lessor may agree (which agreement shall not be
                    unreasonably withheld) in giving its consent to such
                    Permitted Sub Lease) before the Scheduled Expiry Date;

               (iii) FORM: a Permitted Sub-Lease shall:

                    (aa) not contain provisions inconsistent with the provisions
                         of the Lease (but may impose additional or more
                         stringent obligations on any Permitted Sub-Lessee than
                         are imposed on Lessee under the Lease);


                                      -23-
<PAGE>

                    (bb) provide that no further subleases of the Aircraft by
                         such Permitted Sub-Lessee are permitted; and

                    (cc) include provisions substantially identical to or having
                         substantially the same effect as Sections 2.1, 5.6,
                         5.7, 5.10, 5.12, 5.16, 5.17, 5.21, 8, 9, 10, 11, 13,
                         15.1, 15.8 and 16 and Schedules 2 (Section 1.1), 7 and
                         9 of the Lease (but the Permitted Sub-Lease may impose
                         additional or more stringent obligations on any
                         Permitted Sub-Lessee than are imposed on Lessee under
                         the Lease);

               (iv) SUBORDINATION AND ASSIGNMENT: the Permitted Sub-Lease shall
                    provide that (aa) the Permitted Sub- Lease is subject and
                    subordinate to the Lease in all respects and the rights of
                    the Permitted Sub-Lessee under the Permitted Sub-Lease are
                    subject and subordinate in all respects to the rights of
                    Lessor under the Lease; and (bb) prior to delivery of the
                    Aircraft to the Permitted Sub-Lessee (as a condition
                    precedent thereof), the Permitted Sub-Lessee shall provide
                    an acknowledgement to Lessor and Owner in a form reasonably
                    satisfactory to Lessor, confirming its agreement to this
                    provision and confirming that, except to the extent, if any,
                    that it receives a quiet enjoyment letter from Lessor
                    pursuant to Section 8.4(b)(v) below, its rights to
                    possession of the Aircraft under the Permitted Sub-Lease
                    will terminate immediately upon the termination of the
                    Lease, and that it will redeliver the Aircraft to Lessor,
                    upon notification from Lessor that an Event of Default has
                    occurred and that it has, as a result thereof, terminated
                    Lessee's right to possession of the Aircraft under the Lease
                    (the "SUBORDINATION ACKNOWLEDGEMENT"). The Permitted
                    Sub-Lease shall be assigned, as security, to Lessor for
                    Lessee's obligations under the Lease, pursuant to an
                    agreement reasonably acceptable to Lessor (the "SUB-LEASE
                    ASSIGNMENT") (and, if applicable, Lessor's interest in such
                    Sub-Lease Assignment may be reassigned, as security, to
                    Owner and/or the Financing Parties' Representative);

               (v)  QUIET ENJOYMENT: the Permitted Sub-Lease shall provide that
                    the Permitted Sub-Lessee shall have the right to quiet
                    enjoyment of the Aircraft for so long as no Event of Default
                    has occurred under the Lease; provided, however, that, upon
                    request by a Permitted Sub-Lessee, Lessor shall, and shall
                    cause the Financing Parties Representative (if applicable)
                    to, execute and deliver to the Permitted Sub-Lessee a letter
                    of quiet enjoyment in respect of the Permitted Sub-Lessee's
                    use and possession of the Aircraft for so long as no event
                    of default occurs under the Permitted Sub-Lease,
                    notwithstanding the occurrence of an Event of Default under
                    the Lease, in a form substantially similar to Section 7.1
                    hereof if Lessor is satisfied in its sole discretion as to
                    (i) the creditworthiness of the Proposed Sub-



                                      -24-
<PAGE>

                    Lessee at the time of such request, (ii) the sufficiency of
                    the rentals and other payment obligations, including
                    indemnities under the Permitted Sub-Lease to discharge in
                    full the Rent and the indemnity obligations of Lessee under
                    the Lease, (iii) the installment frequency of the rent
                    payable under the Permitted Sub-Lease, (iv) the
                    acknowledgment of and agreement by the Permitted SubLessee
                    to be bound by the provisions of Section 16 hereof, (v) the
                    acknowledgment by each of the Permitted Sub-Lessee and the
                    Lessee that Lessor shall have no greater liability to either
                    Permitted Sub-Lessee or the Lessee in respect of Lessor's
                    obligations under Section 7.1 hereof or under such letter
                    than Lessor would have had under Section 7.1 in the absence
                    of the Permitted SubLease, (vi) the form and substance of
                    the Subordination Acknowledgment, and (vii) the terms of the
                    Permitted Sub-Lease in respect of the matters contemplated
                    by this Section 8.4(b);

               (vi) OBLIGATIONS OF LESSEE: Lessee shall remain primarily liable
                    under the Lease for the performance and observance of all
                    its obligations to the same extent as if no Permitted
                    Sub-Lease had been entered into. To the extent that the
                    Permitted Sub-Lessee properly performs an obligation under
                    the Permitted Sub-Lease, Lessor agrees that such performance
                    shall also be regarded as discharging (to such extent)
                    Lessee's corresponding obligation;

               (vii) INSURANCES: all insurance requirements herein shall be
                    complied with either by Lessee or by the Permitted
                    Sub-Lessee as if references in the insurance provisions of
                    the Lease to "Lessee" were references to "the Permitted
                    Sub-Lessee", and Lessee shall provide or cause the Permitted
                    Sub-Lessee to provide the insurance certificate and brokers'
                    letter of undertaking referred to in Section 9.3(c)(ii) at
                    least five (5) Business Days prior to the commencement of
                    the Permitted Sub-Lease;

               (viii) REGISTRATION: there shall be no change in the registration
                    of the Aircraft from its State of Registry;

               (ix) REPOSSESSION OR POLITICAL RISK INSURANCE: if reasonably
                    required by Lessor or if required of Lessor by Owner or the
                    Financing Parties' Representative, repossession or political
                    risk insurance, as the case may be, shall be obtained by
                    Lessor at Lessee's cost, provided that repossession or
                    political risk insurance , as the case may be, will not be
                    required if the Permitted Sub-Lessee meets the requirements
                    of Sections 8.7(iv) and (v). If repossession or political
                    risk insurance is required, the Permitted Sub-Lease must
                    provide that, if any such repossession or political risk as
                    the case may be, insurance cannot be obtained or renewed, a
                    termination event will occur upon notice by Lessor to Lessee
                    or the


                                      -25-
<PAGE>

                    Permitted Sub-Lessee of an inability to procure repossession
                    or political risk, as the case may be, insurance;

               (x)  LEGAL OPINIONS: as a condition precedent to the
                    effectiveness of the Permitted Sub-Lease, Lessee shall
                    provide to Lessor the following legal opinions (at Lessee's
                    or Permitted Sub-Lessee's expense) addressed to Lessor,
                    Owner and the Financing Parties' Representative from counsel
                    reasonably acceptable to Lessor;

                    (aa) a legal opinion in relation to the Permitted Sub-Lease
                         in form and substance reasonably satisfactory to, and
                         containing such other matters set out in Schedule 8
                         requested by, Lessor and confirming further that each
                         of the Subordination Acknowledgement, the Permitted
                         Sub-Lease and the Sub-Lease Assignment is valid,
                         binding and (except as limited by any equitable
                         principles and applicable bankruptcy, insolvency,
                         reorganization, moratorium or similar laws affecting
                         creditors' or lessors' rights generally) enforceable
                         against Permitted Sub-Lessee and, in the case of the
                         Sub-Lease Assignment, properly perfected as against
                         Lessee;

                    (bb) if the Habitual Base is not in the United States, one
                         or more legal opinions in form and from counsel
                         reasonably acceptable to Lessor to the effect, inter
                         alia, that Lessor's, Owner's and Financing Parties'
                         Representative's interests in the Aircraft will be
                         recognized under the laws of such country or countries
                         (it being expressly understood that there shall be no
                         requirement that any single legal point or issue be
                         covered in opinions from more than one counsel except
                         to the extent, if any, that the laws of more than one
                         jurisdiction may be at issue); and

                    (cc) such opinions as may be required under the Financing
                         Documents.

                         Final forms of the foregoing opinion or opinions (x)
                         shall be forwarded promptly to Lessor at least five
                         Business Days prior to the effective date of the
                         Permitted Sub-Lease, and (y) may, if different
                         opinions are required hereunder, be made by a single
                         counsel qualified to render opinions in each such
                         country;

               (xi) FILINGS: Lessee shall co-operate with Lessor (at no cost to
                    Lessor) in connection with the execution and filing of any
                    documents reasonably required by Lessor to be executed and
                    filed from time to time with any registry or authority in
                    the Habitual Base, the State of Registration and State of
                    Incorporation (of each of Lessee and the Permitted
                    Sub-Lessee) in order to protect the interests of Lessor,
                    Owner and Financing Parties' Representative in and to the
                    Aircraft, the Lease or


                                      -26-
<PAGE>

                    the Permitted Sub-Lease and/or to ensure the validity,
                    enforcement or priority thereof;

               (xii) EXPENSES: Lessee will pay to Lessor on demand all
                    reasonable out of pocket expenses (including legal, survey
                    and other costs) and Taxes payable or incurred by Lessor,
                    Owner or Financing Parties' Representative in connection
                    with the review and approval of the documentation required
                    pursuant to this Section or otherwise incurred in connection
                    with any requested sub-lease or the sub-leasing of the
                    Aircraft thereunder, and will pay any Sublease Fee specified
                    in the Aircraft Lease Agreement for such Aircraft;

               (xiii) PERMITTED SUB-LEASE: Promptly after its execution, Lessee
                    shall provide Lessor with a copy of the signed Permitted
                    Sub-Lease;

               (xiv) ACKNOWLEDGEMENT BY GUARANTOR: If a Guarantee is required
                    under the Aircraft Lease Agreement, Lessee shall provide to
                    Lessor at least five Business Days prior to the effective
                    date of the Permitted Sub-Lease an acknowledgement by
                    Guarantor of the Permitted Sub-Lease and confirmation that
                    the Guarantee will remain in full force and effect during
                    the term of such Permitted Sub-Lease;

               (xv) FINANCING RESTRICTIONS AND REQUIREMENTS: If Lessee requests
                    Lessor's consent to a sub-lease, it will not be unreasonable
                    for Lessor to decline its consent to such sub-lease, if such
                    sub-lease would result in a breach by Lessor of the
                    restrictions contained in or give rise to any liability or
                    adversely affect Lessor's rights or obligations or otherwise
                    result in a detriment under any of the Financing Documents;
                    and

               (xvi) MAINTENANCE PROGRAM: Lessee shall, or shall cause the
                    Permitted Sub-Lessee to, provide Lessor with such
                    information as Lessor may reasonably request with respect to
                    the Maintenance Program of the Permitted Sub-Lessee, and
                    Lessor shall be reasonably satisfied with the Maintenance
                    Program of the Permitted Sub-Lessee.

          (c)  Notwithstanding Section 8.4 (a), Lessee shall be permitted to wet
               lease the Aircraft provided such wet lease constitutes an
               arrangement whereby Lessee agrees to furnish the Aircraft to a
               third party pursuant to which the Aircraft (i) shall be operated
               solely by regular employees of Lessee possessing all current
               certificates and licenses that are required by applicable
               Regulations, including by the State of Registry, and shall remain
               in the operational control and possession of Lessee, (ii) shall
               be subject to insurance coverage as provided for in the Lease,
               (iii) shall be used and operated in accordance with the Lease and
               shall be maintained or caused to be maintained by Lessee in
               accordance



                                      -27-
<PAGE>

               with Lessee's Maintenance Program and Lessee's normal maintenance
               practices, (iv) shall not be subject to any change in its State
               of Registry, and (v) shall not be operated out of a Habitual Base
               located outside the United States; and provided always that, such
               arrangement is expressly subordinated to the Lease and the rights
               of Lessor and Owner thereunder and to the Aircraft, and Lessee
               provides Lessor with all opinions, certificates and other
               documents requested by Lessor which are required to be provided,
               and takes all other action requested by Lessor which is required
               of Lessee or Lessor under any Financing Document in connection
               with such a wet lease.

  8.5     Inspection

          (a)  Lessee will permit Lessor's, Owner's and the Financing Parties'
               Representative representatives to inspect the Aircraft at any
               time. Unless a Default has occurred and is continuing, any such
               Person will give Lessee reasonable notice of inspection and will
               ensure that it does not result in a disruption to the scheduled
               operation or maintenance of the Aircraft. Lessee shall comply
               with the reasonable requests of Lessor's, Owner's and the
               Financing Parties' Representative representatives during the
               course of an inspection, including any request to travel on the
               flight deck of the Aircraft as an observer, subject, to any
               applicable Regulations and insurance requirements.

          (b)  The cost of conducting an inspection shall be home by Lessor,
               Owner or the Financing Parties, as the case may be, unless, as a
               result of that inspection, Lessee is found to be in material
               default of its obligations under the Lease in which case the cost
               shall be borne by Lessee.

          (c)  No liability or obligation will be incurred by Lessor, Owner,
               Financing Parties' Representative or the Financing Parties, as
               the case may be, by reason of non-exercise by any of them of the
               inspection rights referred to in this Section.

 8.6      Ownership; Property Interests; Related Matters

          (a)  Lessee will:

               (i)  fix and maintain Nameplates containing the Nameplate
                    Inscription in a prominent position in the cockpit or cabin
                    of the Aircraft and on each Engine;

               (ii) in any circumstance where such interests are relevant, take
                    all reasonable steps to make sure that all relevant Persons
                    know about the interests of Owner, Lessor and Financing
                    Parties Representative in the Aircraft; and

               (iii) pay all navigation charges, air traffic control charges,
                    landing charges or other amounts of any nature imposed by
                    any Government Entity with respect to



                                      -28-
<PAGE>

                    Lessee, the Aircraft and/or the Lease except to the extent
                    that, in the reasonable opinion of Lessor, such payment is
                    being contested in good faith by appropriate proceedings in
                    respect of which adequate reserves have been provided by
                    Lessee and non-payment of which does not give 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 Lessor or Owner.

          (b)  Lessee will not:

               (i)  represent that it is the owner of the Aircraft or that it
                    has an economic interest (equivalent to ownership) in the
                    Aircraft for Tax treatment or other purposes;

               (ii) take any action or fail to take any action, other than
                    action required under the Lease (including under Section
                    7.1) to be taken by Lessor, Affiliates of Lessor, Owner or a
                    Financing Party, if such action or omission could result in
                    a forfeiture or seizure of the Aircraft or otherwise
                    similarly put Owner's and/or Lessor's and/or Financing
                    Parties' Representative's rights or interests at risk,

               (iii) represent to others that Owner, Lessor or Financing
                    Parties' Representative is associated with or responsible
                    for the business activities and/or flight operations of
                    Lessee;

               (iv) allow the Aircraft or Owner's, Lessor's or Financing
                    Parties' Representative's interest in it or the Lease to
                    become or remain subject to any Security Interest (other
                    than a Permitted Lien); or

               (v)  allow the name of any Person to be placed on the Aircraft or
                    any Engine as a designation that could reasonably be
                    interpreted as a claim of ownership or as a Security
                    Interest; provided, that Lessee may place thereon, or allow
                    a Permitted Sub-Lessee to place thereon, its customary
                    livery, insignia and colors.

 8.7      General

          Lessee will:

               (i)  maintain its business as a commercial scheduled airline,
                    will preserve its corporate existence (other than as
                    permitted in Section 8.7 (vii) below) and will maintain all
                    rights, privileges, licenses and franchises material thereto
                    or material to performing its obligations under the Lease;

               (ii) not operate, maintain, insure or deal with, or keep records
                    with respect to, the Aircraft in a manner which
                    discriminates against the Aircraft adversely insofar as


                                      -29-
<PAGE>

                    Lessor's, Owner's or Financing Parties' interests are
                    concerned, when compared with the manner in which Lessee
                    operates, maintains, insures or deals with, or keep records
                    with respect to, similar aircraft, engines or parts in
                    Lessee's fleet; provided, however, in the event that Lessee
                    determines that any particular expenditure or modification
                    may not be prudent during the last nine months prior to the
                    Scheduled Expiry Date, then Lessor and Lessee shall discuss
                    the issue and negotiate in good faith to agree on a mutually
                    acceptable solution.

               (iii) not change the location of its chief executive office from
                    that described in the heading of the Aircraft Lease
                    Agreement or otherwise be located (as defined in Section
                    9-103(3)(d) of the UCC) at any place in the United States
                    other than the location described the heading of the
                    Aircraft Lease Agreement, except upon 30 days prior written
                    notice thereof to Lessor;

               (iv) remain a Certificated Air Carrier and maintain its status so
                    as to fall within the purview of Section 1110 of Title 11 of
                    the U.S.C. or any analogous statute;

               (v)  remain a "citizen of the United States" as defined in
                    Section 40102(a)(15)(c) of Title 49 of the U.S.C.;

               (vi) not liquidate or dissolve; and

               (vii) not consolidate with or merge into or with any other
                    corporation or other Person, and not convey, transfer, lease
                    or otherwise dispose of all or substantially all of its
                    property and other assets to, or acquire all or any
                    substantial part of the property or other assets or capital
                    stock of (if such acquisition is analogous in either purpose
                    or effect to a consolidation or merger), any corporation or
                    other Person, unless Lessee provides Lessor with written
                    notice of such transaction promptly following Lessee's
                    execution of a binding agreement or commitment to enter into
                    any such transaction, which notice shall in any event be
                    provided no later than 30 days prior to the effectiveness or
                    consummation of any such transaction and which notice shall
                    describe such transaction in reasonable detail and contain
                    or be accompanied by evidence reasonably satisfactory to
                    Lessor demonstrating that such transaction will comply with
                    the following requirements of this Section and unless:

                    (x)  such transaction shall not have any material adverse
                         effect on the rights of Lessor, Owner or the Financing
                         Parties' Representative under or in respect of the
                         Lease or the Aircraft; and all applicable requirements
                         of the Financing Documents shall have been complied
                         with in connection therewith;



                                      -30-
<PAGE>

                    (y)  the Person formed by or surviving such consolidation or
                         merger or the Person which acquires by conveyance,
                         transfer, lease or other disposition all or
                         substantially all of such property and other assets or
                         stock (the "SUCCESSOR ENTITY"): (A) shall be a
                         corporation organized and existing under the laws of
                         the United States or any State thereof or the District
                         of Columbia; (B) immediately after giving effect to
                         such transaction, shall be Lessee or shall have
                         acquired or succeeded to all or substantially all of
                         the property and other assets of Lessee (if such assets
                         are being transferred) as an entirety, and shall have a
                         tangible net worth (determined in accordance with GAAP)
                         of not less than Lessee's tangible net worth
                         (determined in accordance with GAAP) immediately prior
                         to such transaction; (C) shall be a "citizen of the
                         United States" of America as defined in Section
                         40102(a)(15)(c) of Title 49 of the U.S.C. and a
                         Certificated Air Carrier; and (D) shall execute and
                         deliver to Lessor such recordations and filings with
                         any Governmental Entity and such other documents as
                         Lessor determines shall be reasonably necessary or
                         advisable to evidence, or in connection with, such
                         consolidation, merger, sale, lease, transfer or other
                         disposition and an agreement, in form and substance
                         reasonably satisfactory to Lessor which is a legal,
                         valid, binding and enforceable assumption by such
                         Successor Entity of the due and punctual performance
                         and observance of each covenant and condition of the
                         Lease and the other related documents to which Lessee
                         is a party, and an officer's certificate to such effect
                         and to the effect that the other requirements of this
                         Section have been satisfied, and a legal opinion from
                         counsel to such effect and otherwise in such form and
                         substance reasonably satisfactory to Lessor; and

                    (z)  no Default shall have occurred and be continuing or
                         shall occur as a result thereof.

 8.8      Records

          Lessee will keep all Aircraft Documents and Records:

          (a)  in English;

          (b)  according to good United States airline practice; and

          (c)  so they meet the requirements of applicable Regulations
               (including FAR 91.417) and Lessee's Maintenance Program.



                                      -31-
<PAGE>

 8.9      Protection

          Lessee will:

          (a)  take all actions requested by Lessor that are within Lessee's
               control to keep the Aircraft registered with the Air Authority in
               the name of Owner and, if applicable, subject to the
               first-priority Security Interest in favor of Financing Parties'
               Representative; and

          (b)  make any and all filings required to be made with the Air
               Authority registry that are within its control and take all other
               actions within its control that are necessary or advisable to
               reflect on the Air Authority registry any change in the ownership
               of the Aircraft, or in the interests of Lessor, Owner or the
               Financing Parties' Representative in the Lease or the Aircraft,
               any modification to the Aircraft (such as the permanent
               replacement of any Engine or Part in accordance with the Lease)
               or as a result of any change in applicable Regulation. Lessor
               will bear any costs incurred as a consequence of a transfer by
               Lessor, Owner or the Financing Parties' Representative of the
               interests of Lessor, Owner or the Financing Parties'
               Representative in the Lease or the Aircraft or a change in the
               identity of Lessor, Owner or the Financing Parties'
               Representative (in each case, unrelated to the replacement of any
               Engine or Part or a Default), and Lessee will bear any other
               costs incurred in complying with this Section, including in
               connection with the replacement of any Engine or Part.

  8.10    Maintenance and Repair

          Lessee will maintain, overhaul and repair the Aircraft (or arrange for
          the Aircraft to be maintained, overhauled and repaired, through the
          Maintenance Performer), so that:

          (a)  the Aircraft is kept in as good operating condition and repair as
               the condition of the Aircraft as at Delivery and after giving
               effect to any post-Delivery modifications, repairs or maintenance
               paid for or otherwise provided by or on behalf of Lessor, except
               for ordinary wear and tear;

          (b)  the Lessee has a current certificate of airworthiness (issued by
               the Air Authority in the appropriate public transport category)
               for the Aircraft;

          (c)  the Aircraft complies with (i) all applicable Regulations
               including the standard stipulated by FAR Part 121 Subpart L and
               any other rules and regulations of the FAA and, subject to the
               provisions of ss.8.10(d), in at least the same manner and with at
               least the same care, including record keeping, maintenance
               scheduling, modification status and technical condition, as is
               the case with respect to similar aircraft owned or otherwise
               operated by Lessee and as if Lessee were to retain and continue
               operating the Aircraft in its fleet after


                                      -32-
<PAGE>

               the Expiry Date, including All maintenance to the Airframe, any
               Engine or any Part required to maintain all warranties,
               performance guaranties or service life policies that are assigned
               by Lessor to Lessee in full force and effect; and (ii) the
               requirements of all Airworthiness Directives and all service
               bulletins designated by the State of Design or State of Registry
               as "mandatory," and to be carried out before the Return Occasion
               or the Scheduled Expiry Date, whichever is later, or within a
               period of 180 days after the Return Occasion or the Scheduled
               Expiry Date, whichever is later; and

          (d)  all maintenance is carried out according to Lessee's Maintenance
               Program in at least the same manner and with at least the same
               care, including maintenance scheduling, modification status and
               technical condition, as is the case with respect to similar
               aircraft owned or otherwise operated by Lessee; provided,
               however, in the event that Lessee determines that any particular
               expenditure or modification may not be prudent during the last
               nine months prior to the Scheduled Expiry Date, then Lessor and
               Lessee shall discuss the issue and negotiate in good faith to
               agree on a mutually acceptable solution.

 8.11     Removal of Engines and Parts

          (a)  GENERAL: Lessee must replace, within one hundred and five (105)
               days thereof, any Engine that has suffered an Engine Event of
               Loss in accordance with Section 8.11(b), and any Part which is
               permanently removed from the Aircraft must be replaced in
               accordance with Section 8.11(b). Any Part which otherwise is
               lost, stolen, destroyed, seized, obsolete, confiscated, damaged
               beyond repair or permanently rendered unfit for any reason, must
               be replaced in accordance with Section 8.11(b). Any Engine or
               Part may be installed on another aircraft Lessee owns or leases
               in accordance with Section 8.11(c). Lessee may temporarily
               install an engine or part in accordance with Section 8.11(d).
               Lessee shall obtain from any Person to whom possession of an
               Engine is given (other than (i) any Maintenance Performer to whom
               an Engine is delivered for maintenance, repair or overhaul, (ii)
               the Engine Manufacturer, or (iii) any other Person to whom an
               Engine is given solely for purpose of transporting the Engine),
               and from the lessor of any airframe on which an Engine is
               installed and from any holder of a Security Interest in any
               airframe on which an Engine is installed, an agreement in writing
               (which agreement, in the case of a lease or Security Interest,
               may be contained in the applicable lease or Security Interest
               agreement covering such airframe) that such Person will not
               acquire or claim any rights, title or interest in such Engine as
               a result of such Engine being installed on such other airframe at
               any time while such Engine is subject to the Lease. In the event
               Lessee shall have received from a lessor of or secured party
               holding a Security Interest in any airframe leased to Lessee or
               owned by Lessee a written agreement pursuant to the foregoing
               sentence and the lease or Security Interest covering such
               airframe also covers an engine or engines owned by the lessor
               under such lease or subject to such Security


                                      -33-
<PAGE>

               Interest in favor of the secured party under such Security
               Interest, Lessor hereby agrees for the benefit of such lessor or
               secured party that Lessor will not acquire or claim as against
               such lessor or secured party, any rights, title or interest in
               any such engine as a result of such engine being installed on the
               Airframe at any time while such engine is owned by such lessor
               and subject to such lease or such Security Interest in favor of
               such secured party.

          (b)  PERMANENT REPLACEMENT: If Lessee permanently replaces an Engine
               or Part:

               (i)  in the case of an Engine, the replacement engine must be of
                    the same manufacturer and model, or at Lessee's option an
                    engine of an improved model, and have equivalent or better
                    remaining useful life and modification status as the Engine
                    it replaces, and is otherwise of an equivalent or better
                    value and utility and suitable for installation and use on
                    the Airframe without impairing the value or utility of the
                    Airframe and compatible with the remaining installed
                    Engine(s);

               (ii) in the case of a Part, the replacement part must be in good
                    operating condition, have a value and utility the same or
                    better than the Part it is replacing, be of the same or a
                    more advanced make and model and be of the same
                    interchangeable modification status as the Part it is
                    replacing;

               (iii) the replacement engine or part must have become and remain,
                    until replaced in accordance with this Section, the property
                    of Owner free from Security Interests (other than Permitted
                    Liens), and subject to the applicable Financing Documents;
                    (iv) Lessee must have full details of the source and
                    maintenance records of the replacement engine or part and in
                    the case of serialized rotable parts, also have a complete
                    service history; and

               (v)  Lessee must comply with the requirements of the Financing
                    Documents in connection with any such replacement including
                    to provide such legal opinions and other documents as may be
                    required under the Financing Documents.

          (c)  OTHER AIRCRAFT: An Engine or Part may be installed on an aircraft
               which Lessee owns or leases if

               (i)  no Event of Default has occurred and is continuing;

               (ii) Lessee or a Permitted Sub-Lessee has operational control
                    over the aircraft;

               (iii) Owner keeps the ownership of the Engine or Part concerned
                    until replaced in accordance with Section 8.11(b);


                                      -34-
<PAGE>

               (iv) the Engine or Part does not become subject to a Security
                    Interest and the applicable airframe is not subject to any
                    Security Interest except a Permitted Lien or a lease or
                    Security Interest described in Section 8.11(a) above; and

               (v)  the Engine or Part is replaced in accordance with Section
                    8.11(b) or is removed from the aircraft as soon as
                    practicable under Lessee's engine rotation program but not
                    later than the Expiry Date.

          (d)  TEMPORARY REPLACEMENT: Lessee may install any engine or part on
               the Aircraft as a temporary replacement if

               (i)  no Event of Default has occurred and is continuing;

               (ii) there is not available an engine or part complying with the
                    requirements of the Lease for a replacement Engine or Part;

               (iii) it would result in an unreasonable disruption of the
                    operation of the Aircraft or the business of Lessee to have
                    the Aircraft grounded until such time as an engine or part
                    complying with the requirements of the Lease for a
                    replacement Engine or Part becomes available for
                    installation;

               (iv) as soon as practicable (under Lessee's engine rotation
                    program in the case of an engine) after an engine or part is
                    installed on the Aircraft, but before the earlier of sixty
                    (60) days after such temporary replacement or the Expiry
                    Date, Lessee removes that engine or part and replaces it
                    with the original Engine or Part (or by an engine or part
                    which is allowed by Section 8.11(b)); and

               (v)  the Insurances for the Aircraft are not adversely affected.

          (e)  POOLING/INTERCHANGE: Lessee shall not subject any Engine or Part
               to any pooling, interchange, lease or similar arrangement unless
               Lessee obtains Lessor's prior written consent thereto, which
               consent shall not be unreasonably withheld.

          (f)  ENGINES: Notwithstanding anything to the contrary set forth in
               Sections 8.11(c) and (d) above, so long as no Default shall have
               occurred and be continuing, any Engine may remain installed on an
               aircraft other than the Aircraft, and any auxiliary power unit
               may remain installed on the Aircraft indefinitely during the
               Term; provided, however, (i) upon the occurrence of any Default,
               Lessee shall promptly, and in any case within sixty (60) days
               following the occurrence of such Default, cause each Engine to be
               re-installed on the Aircraft or, at Lessee's election, cause any
               of the Engines to be replaced by a replacement Engine meeting the
               requirements of, and in accordance with, Section 8.11(b), and
               (ii) in any event Lessee shall cause such Engine to be either
               re-installed on the Aircraft or


                                      -35-
<PAGE>

               replaced by a replacement Engine meeting the requirements of, and
               in accordance with, Section 8.11 (b) on or before the Expiry
               Date.

          (g)  APU: Notwithstanding anything to the contrary set forth in
               Sections 8.11(c) and (d) above, so long as no Default shall have
               occurred and be continuing, the APU may remain installed on an
               aircraft other than the Aircraft, and any auxiliary power unit
               may remain installed on the Aircraft indefinitely during the
               Term; provided, however, (i) upon the occurrence of any Default,
               Lessee shall promptly, and in any case within sixty (60) days
               following the occurrence of such Default, cause the APU to be
               re-installed on the Aircraft, or, at Lessee's election, cause the
               APU to be replaced by a replacement auxiliary power unit meeting
               the requirements of, and in accordance with, Section 8.11(b),
               and (ii) in any event Lessee shall cause the APU to be either
               re-installed on the Aircraft or replaced by a Replacement APU
               meeting the requirements of, and in accordance with, Section
               8.11(b) on or before the Expiry Date.

  8.12    Equipment Changes

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

               (i)  is expressly permitted or required by the Lease; or

               (ii) has (x) a cost (including labor) of less than the
                    Modification Approval Amount or (y) the prior written
                    approval of Lessor, and (z) in either case, does not
                    diminish the condition, utility, airworthiness or value of
                    the Aircraft.

          So long as no Default has occurred and is continuing, Lessee may
          remove or reverse any Equipment Change provided that the Equipment
          Change is not required pursuant to the terms of the Lease or to
          maintain the Insurances and removal or reversal does not diminish the
          value, utility, airworthiness or condition of the Aircraft assuming
          that such Equipment Change was not made and that Aircraft is
          maintained in accordance with the Lease. Furthermore, Lessor may
          require Lessee to remove or reverse any Equipment Change on the Expiry
          Date and to restore the Aircraft to its condition prior to that
          Equipment Change. Any Equipment Change not so removed or reversed
          becomes the property of Lessor or Owner, as the case may be, at the
          Expiry Date.

  8.13    Title on an Equipment Change

          Title to any equipment that is installed on the Airframe shall, except
          in the case of an engine or an auxiliary power unit or a temporary
          replacement of a Part or any In-Flight Equipment, vest in Owner solely
          by virtue of its attachment to the Airframe or an Engine and it shall
          then be subject


                                      -36-
<PAGE>

          to the Lease and, if applicable, the Financing Documents, as if it
          were attached to the Aircraft at Delivery. In the case of any
          replacement of an Engine or the APU pursuant to Section 8.11(b), and
          otherwise if so requested by Lessor, Lessee will provide a properly
          executed bill of sale or similar instrument to evidence the vesting of
          good and marketable title, free and clear of Security Interest (except
          Lessor Liens), to any such Replacement Engine, Replacement APU or
          other equipment in Owner and all documents required under the
          Financing Documents. After Lessor has determined that Lessee has
          permanently replaced an Engine or the APU in accordance with Section
          8.11(b) and this Section 8.13, Lessor will, or will procure that Owner
          will, without recourse or warranty (except as to the absence of
          Lessor's Liens), transfer to Lessee or will procure that Owner will
          transfer to Lessee all of Lessor's or Owner's, as the case may be,
          rights to the engine or the auxiliary power unit that has been
          replaced, on an AS IS, WHERE IS basis, and will at Lessee's expense
          provide or will procure that Owner provides a bill of sale or similar
          instrument as Lessee may reasonably request to evidence such transfer.
          Lessee shall indemnify, on an After-Tax Basis, Lessor, Owner and each
          other Tax Indemnitee for all fees, expenses and Taxes incurred by
          Lessor, Owner or any other Tax Indemnitee in connection with any such
          transfer.

 8.14     Inflight Equipment

          (a)  Notwithstanding any other provision of this Agreement, Lessor
               acknowledges that Lessee may at any time during the Term install
               a telephone system and/or an inflight entertainment system for
               passenger use (collectively, the Inflight Equipment) on the
               Aircraft notwithstanding that the Inflight Equipment may not be
               owned by Lessee provided that:

               (i)  Lessee shall give Lessor notice of the installation of any
                    Inflight Equipment on the Aircraft and the name and address
                    of the owner of such Inflight Equipment;

               (ii) the documents pursuant to which the owner of the Inflight
                    Equipment installs same on the Aircraft shall provide that
                    such owner shall not have any lien, security interest, claim
                    or other encumbrance on or against the Aircraft, and such
                    owners only right with respect to the Aircraft shall be to
                    remove the Inflight Equipment from the Aircraft and, such
                    documents shall also provide that such owner shall remove
                    the Inflight Equipment from the Aircraft not later than the
                    earlier of (A) thirty (30) days after notice from Lessor of
                    the occurrence of an Event of Default, and (B) the Expiry
                    Date;

               (iii) such right of removal is subject to and conditioned upon
                    such owner restoring, or causing Lessee to restore, all
                    alterations made to the Aircraft in connection with the
                    installation of the Inflight Equipment to the condition
                    prior to the installation thereof (ordinary wear and tear
                    excepted).

          (b)  Lessor acknowledges that at all times:

               (i)  the owner of the Inflight Equipment has and will retain sole
                    and exclusive right and title to and in the Inflight
                    Equipment;

               (ii) the Inflight Equipment shall not constitute a Part or a part
                    of the Aircraft;



                                      -37-
<PAGE>

               (iii) title to the Inflight Equipment shall not transfer to or
                    from Lessor pursuant to Clauses 8.12 and 8.13; and

               (iv) the Inflight Equipment shall not become subject to the
                    Security Interest of any Person to whom Lessor grants a
                    Security Interest in the Aircraft pursuant to Clause 14.1.

 9.       INSURANCE

 9.1      INSURANCE

          Lessee will maintain the Insurance in full force during the Term, and
          thereafter as expressly required in the Lease, which Insurance shall
          be of the type usual and customary in the industry for comparable
          operators operating similar equipment in similar circumstances, and
          shall be through reputable brokers and insurers of recognized standing
          in the commercial aviation insurance industry. The Insurance shall in
          any event meet the requirements set forth in Schedule 7.

 9.2      [NOT APPLICABLE]

 9.3      Insurance Undertakings and Information: Lessee will:

          (a)  comply with the terms and conditions of each policy of any
               Insurance and not do, consent or agree to any act or omission
               which:

               (i)  invalidates or may invalidate any Insurance; or

               (ii) renders or may render void or voidable the whole or any part
                    of any Insurance; or

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

          (b)  not take out any insurance or reinsurance in respect of the
               Aircraft other than that which is required under the Lease which
               adversely affects the Insurance required to be maintained
               hereunder; provided, however, Lessee may purchase a separate
               "hull total loss" policy with respect to the Aircraft in such
               amount as Lessee may desire;

          (c)  commence renewal procedures at least 30 days prior to expiry of
               any of the Insurance and provide to Lessor:

               (i)  if requested by Lessor in writing, a written status report
                    of renewal negotiation as of the time of the request;

               (ii) [NOT APPLICABLE];


                                      -38-
<PAGE>

               (iii) receipt of certificates of insurance (and where appropriate
                    certificates of reinsurance), and broker's (and any
                    reinsurance broker's) letter of undertaking in a form
                    acceptable to Lessor, detailing the coverage and confirming
                    compliance with the specified insurance requirements of the
                    Lease and, in the case of the broker's letter of
                    undertaking, opining that the Insurance complies with the
                    requirements of the Lease on or before each renewal date;

          (d)  on reasonable request, provide to Lessor copies of documents or
               other information evidencing the Insurances; and

          (e)  provide any other insurance and reinsurance related information,
               or assistance, in respect of the Insurance as Lessor may
               reasonably require.

  9.4     Failure to Insure

          If Lessee fails to maintain any of the Insurance in compliance with
          the Lease:

          (a)  each of the Indemnitees will be entitled but not bound (without
               prejudice to any other rights of Lessor under the Lease) to pay
               the premiums due or to effect and maintain insurance satisfactory
               to such Indemnitee or otherwise remedy Lessee's failure in such
               manner (including, without limitation to effect and maintain an
               "owner's interest" policy) as such Indemnitee considers
               appropriate. Any sums so expended by any such Indemnitee will
               become immediately due and payable by Lessee on demand by Lessor
               together with interest thereon at the Interest Rate, from the
               date of expenditure by such Indemnitee up to the date of
               reimbursement by Lessee; and

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

 9.5      Continuing Indemnity

          Lessee shall effect and maintain product legal liability insurance
          after the Expiry Date with respect to its liability under Section 10
          (INDEMNITY) for two years, and such insurance shall name each
          Indemnitee as an additional insured.

  10.     INDEMNITY

          (a)  Except as provided in Section 10(b) below, Lessee agrees to
               assume liability for and to indemnify each of the Indemnitees
               against and agrees to pay on demand any and all Losses which an
               Indemnitee may at any time suffer or incur at any time, whether
               directly or indirectly, arising out of, related to or in any way
               connected with:



                                      -39-
<PAGE>

               (i)  the ownership, maintenance, overhaul, service, repair,
                    delivery, possession, transfer of ownership or possession,
                    import, export, registration, control, storage,
                    modification, leasing, insurance, inspection, testing,
                    design, date processing, sub leasing, use, condition,
                    redelivery or other matters relating to the Aircraft, any
                    Engine or any Part (regardless of whether in the air or on
                    the ground, and regardless of whether such Losses are based
                    on strict liability in tort, any act or omission, including
                    the negligence, of any Indemnitee, or otherwise); or

               (ii) any breach by the Lessee of any of its obligations under the
                    Lease; or

               (iii) the design, testing or use of or any article or material
                    in, the Aircraft, any Engine or any Part or its use or
                    operation, including any defect in design and regardless of
                    whether it is discoverable, and any infringement of patent,
                    copyright, trademark design or other proprietary right
                    claimed by any Person or a breach of any obligation of
                    confidentiality claimed to be owed to any Person.

                    For the avoidance of doubt, the reference to "ownership" in
                    clause (i) shall not require Lessee to indemnify Lessor in
                    respect of (y) any defect in Lessor's or Owner's title to
                    the Aircraft or (z) any decline in residual value of the
                    Aircraft if Lessee shall have fully complied with its
                    obligations under the Lease.

          (b)  Lessee is not required to indemnify any particular Indemnitee
               (provided that (i) Lessor and its Subsidiaries and Affiliates and
               its and their officers, directors, representatives, agents,
               partners, contractors and employees shall be treated as a single
               Indemnitee, and (ii) each Financing Party and its shareholders,
               subsidiaries, affiliates, partners, contractors, directors,
               officers, representatives, agents and employees shall be treated
               as a single Indemnitee) under this Section, to the extent a
               particular Loss is:

               (i)  caused solely by the willful misconduct of that Indemnitee
                    or gross negligence of that Indemnitee, other than gross
                    negligence imputed to that Indemnitee by reason of its
                    interest in the Aircraft or the Lease;

               (ii) caused solely by Lessor's breach of the Lease which does not
                    result from a Default;

               (iii) related to any Taxes (but without prejudice to any
                    Indemnitee's rights under any other provision of this Lease
                    relating to Taxes);

               (iv) caused solely by an event which occurs before the
                    commencement of the Term (except where the Loss is suffered
                    during the Term as a result of a pre-Delivery defect in or
                    such Loss otherwise arises out of or relates to or is any
                    way



                                      -40-
<PAGE>

                    connected with the manufacture, design, maintenance, repair,
                    rebuilding, overhaul or modification of the Aircraft);

               (v)  caused solely by an event which occurs after the redelivery
                    of the Aircraft to Lessor in compliance with the Lease and
                    is not attributable to any act, omission, event or
                    circumstance occurring prior to such redelivery;

               (vi) caused solely as a result of any sale, assignment, transfer
                    or other disposition (whether voluntary or involuntary) by
                    such Indemnitee of the Aircraft or Engine or any interest
                    therein that is not a replacement thereof under the Lease or
                    is otherwise not contemplated under the Lease, and unless
                    such sale, transfer or other disposition has resulted from
                    or occurred following a Default; or

               (vii) consists of normal administrative costs and expenses of
                    such Indemnitee (but excluding any such costs or expenses
                    resulting from the occurrence of any Default); or

               (viii) consists of costs or expenses for which Lessor has
                    expressly agreed to be responsible under any other provision
                    of the Lease.

 11.      EVENTS OF LOSS

 11.1     Events of Loss

          (a)  If an Event of Loss occurs prior to Delivery of the Aircraft, the
               Lease will immediately terminate and except as expressly stated
               in the Lease neither party will have any further obligation other
               than pursuant to Section 5.21 and Section 3 of Schedule 4, except
               that Lessor will return the Deposit (if any) to Lessee and return
               to Lessee or cancel any Letter of Credit.

          (b)  If an Event of Loss occurs after Delivery, Lessee will pay the
               Agreed Value to Lessor on or prior to the earlier of (i) sixty
               (60) days after the Event of Loss and (ii) the date of receipt of
               insurance proceeds in respect of that Event of Loss.

          (c)  Subject to the rights of any insurers and reinsurers or other
               third party, upon irrevocable payment in full to Lessor of the
               Agreed Value and all other amounts which may be or become payable
               to Lessor under the Lease, and if Lessee requests such transfer,
               Lessor will, or will procure that Owner will, without recourse or
               warranty (except as to the absence of Lessor's Liens) transfer to
               Lessee or will procure that Owner transfers to Lessee or to
               Lessee's designee legal and beneficial title, subject to no
               Lessor's Liens (but otherwise without warranty), to the Aircraft,
               on an AS IS, WHERE IS basis, and will at Lessee's expense,
               execute and deliver or will procure that Owner executes and
               delivers



                                      -41-
<PAGE>

               such bills of sale and other documents and instruments as Lessee
               may reasonably request to evidence (on the public record or
               otherwise) such transfer, free and clear of all rights of Lessor
               and Owner and Lessor Liens. Lessee shall indemnify, on an
               After-Tax Basis, Lessor, Owner and each other Tax Indemnitee for
               all fees, expenses and Taxes incurred by Lessor, Owner or any
               other Tax Indemnitee in connection with any such transfer.

 11.2     Requisition

          During any requisition for use or hire of the Aircraft, any Engine
          or Part which does not constitute an Event of Loss:

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

          (b)  so long as no Default has occurred and is continuing, Lessee will
               be entitled to any compensation paid by the requisitioning
               authority in respect of such authority's use of the Aircraft,
               such Engine or such Part during the Term. Lessee will, as soon as
               practicable after the end of any such requisition, cause the
               Aircraft to be put into the condition required by the Lease.
               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 Lessor will apply such compensation in
               reimbursing Lessee for the cost of complying with its obligations
               under the Lease in respect of any such change, but, if any
               Default has occurred and is continuing, Lessor may apply the
               compensation in or towards settlement of any amounts owing by
               Lessee under the Lease and/or under any Other Agreement.

 12.      RETURN OF AIRCRAFT

 12.1     Return

          On the Expiry Date or redelivery of the Aircraft pursuant to Section
          13.2 or termination of the leasing of the Aircraft under the Lease,
          Lessee will, unless an Event of Loss has occurred, redeliver the
          Aircraft and the Aircraft Documents and Records at Lessee's expense to
          Lessor at the Redelivery Location, in accordance with the procedures
          and in compliance with the conditions set forth in the Aircraft Lease
          Agreement, free and clear of all Security Interests (other than Lessor
          Liens) and in a condition qualifying for and having a valid and fully
          effective certification of airworthiness under FAR Part 121. Lessor
          shall commence the Final Inspection in accordance with the Aircraft
          Lease Agreement promptly upon Lessee making the Aircraft and the
          Aircraft Documents and Records available for the Final Inspection
          provided that Lessee gives



                                      -42-
<PAGE>

          Lessor no less than thirty (30) days prior written notice of the
          availability of the Aircraft and the Aircraft Documents and Records
          for such inspection.

  12.2    Non-Compliance

          If at the time of Final Inspection Lessee has not FULLY complied with
          any of its obligations under the Lease (including, without limitation,
          Part III of Schedule A to the Aircraft Lease Agreement), or Lessee
          fails to make the Aircraft available to Lessor on a timely basis for
          inspection and redelivery pursuant to Section 12.1 and Part III of
          Schedule A to the Aircraft Lease Agreement (whether such failure is
          due to any act or omission of Lessee or any other circumstance
          whatsoever), the Term shall be extended until the time when the
          Aircraft has been redelivered to Lessor in full compliance with the
          Lease, for the sole purpose of enabling such non-compliance or failure
          to be promptly rectified, and during such extension period:

          (a)  Lessee shall not use the Aircraft in flight operations except
               those related directly to the redelivery of the Aircraft to
               Lessor;

          (b)  all Lessee's obligations and covenants under the Lease will
               remain in full force until Lessee so redelivers the Aircraft; and

          (c)  Lessee shall pay Rent to Lessor at a rate per month equal to the
               amount of Rent payable in respect of the last scheduled Rental
               Period plus 50 per cent thereof, calculated on a per diem basis;
               provided, however, with respect to the portion of such extension,
               if any, attributable solely to a good faith dispute between
               Lessor and Lessee as to the meaning of some particular language
               in the Lease applicable to the return of the Aircraft, whether
               set forth in Part III of Schedule A to the Aircraft Lease
               Agreement or elsewhere (but not, for the avoidance of doubt, in
               respect of any dispute as to the result or outcome of any
               inspection or check required in connection with the Final
               Inspection under the Lease), Lessee shall pay to Lessor Rent,
               calculated on a per diem basis, at 50% of the rate otherwise
               applicable, which rate shall be equal to (i) 50% of the rate
               applicable to the last scheduled Rental Period, without giving
               effect to the 50% premium required in the introductory clause of
               this paragraph (c), if as of the Scheduled Expiry Date the
               Aircraft is in full compliance with the requirements of the Lease
               for return to Lessor (other than the item in dispute), and (ii)
               50% of the rate specified in the introductory clause of this
               paragraph (c), or 75% of the rate applicable to the last
               scheduled Rental Period, if the rate specified in the
               introductory clause of this paragraph (c) becomes applicable as
               of the Scheduled Expiry Date due to Lessee's failure to comply
               with its obligations in respect of the Final Inspection in a
               timely manner or the Aircraft otherwise fails to comply as of the
               Scheduled Delivery Date with the requirements of the Lease for
               return to Lessor in any respect other than in reference to the
               disputed language. For so long as the Aircraft remains
               non-compliant with any requirements of the Lease other than those
               that are the



                                      -43-
<PAGE>

               subject of the disputed language, Lessee shall pay to Lessor
               Rent in the amount specified in the introductory clause of
               this paragraph (c), and the Rent rate specified in this clause
               (ii) shall become applicable, if at all, only from and after
               such time as the Aircraft is brought into compliance with all
               requirements of the Lease for return to Lessor (including, but
               not limited to, Part III of Schedule A to the Aircraft Lease
               Agreement) other than the with respect to the items that are
               the subject of the disputed language, such that the disputed
               language remains as the sole cause in the delay in the return
               of the Aircraft to Lessor.

          Any such extension shall not prejudice Lessor's right to treat such
          non-compliance or failure as an Event of Default at any time, and to
          enforce such rights and remedies as may be available to Lessor in
          respect thereof under the terms of the Lease or applicable Law.
          Without limiting the generality of the foregoing, Lessee's Rent
          obligation under paragraph (c) above shall be without prejudice to
          Lessor's rights to terminate the letting of the Aircraft and to
          indemnification pursuant to Section 13.3.

          Lessor may elect (either on first tender of the Aircraft by Lessee or
          at any time during the said extension period) to accept redelivery of
          the Aircraft notwithstanding non-compliance with Section 12.1 or Part
          III of Schedule A to the Aircraft lease Agreement, in which case
          Lessee will indemnify Lessor on an After-Tax Basis, and provide cash
          to Lessor (in an amount satisfactory to Lessor) as security for that
          indemnity, in respect of the cost to Lessor of putting the Aircraft
          into the condition required by the Lease.

  12.3    Redelivery

          Upon redelivery Lessee will provide to Lessor, upon Lessor's request,
          all documents necessary to export the Aircraft from the United States
          (including a valid and subsisting export certificate of airworthiness
          for the Aircraft) or required in relation to the deregistration of the
          Aircraft with the Air Authority.

  12.4    Acknowledgement

          Provided Lessee has complied with its obligations under Section 12
          hereof and Part III of Schedule A to the Aircraft Lease Agreement,
          following redelivery of the Aircraft by Lessee to Lessor at the
          Redelivery Location, Lessor will deliver to Lessee an acknowledgement
          confirming that Lessee has redelivered the Aircraft to Lessor in
          accordance with the Lease which acknowledgement shall be without
          prejudice to Lessor's accrued and continuing rights under the Lease or
          any Other Agreement.



                                      -44-
<PAGE>

 13.      DEFAULT

 13.1     Events

          The occurrence of any of the Events of Default will constitute a
          repudiation (but not a termination) of the Lease by Lessee (whether
          the occurrence of any such Event of Default is voluntary or
          involuntary or occurs by operation of Law or pursuant to or in
          compliance with any judgement, decree or order of any court or any
          order, rule or regulation of any Government Entity).

 13.2     Rights and Remedies

          If an Event of Default occurs, Lessor may at its option (and without
          prejudice to any of its other rights under the Lease), at any time
          thereafter (without notice to Lessee except as required under
          applicable Law):

          (a)  accept such repudiation and by notice to Lessee and with
               immediate effect cancel the leasing of the Aircraft (but without
               prejudice to the continuing obligations of Lessee under the
               Lease), whereupon all rights of Lessee under the Lease shall
               cease; and/or

          (b)  proceed by appropriate court action or actions to enforce
               performance of the Lease including the payment of all Rent and
               all other amounts payable to Lessor or any Indemnitee pursuant to
               the terms of the Lease; and/or

          (c)  proceed by appropriate court action or actions to recover damages
               for the breach of the Lease which shall include:

               (i)  all Rent and other amounts which are or become due and
                    payable hereunder prior to the earlier to occur of the date
                    Lessor sells or re-leases the Aircraft or receives payment
                    of the amount calculated pursuant to clause (ii) below;

               (ii) an amount equal to the aggregate Rent for the remainder of
                    the Term (determined without reference to any right of
                    Lessor to cancel the leasing of the Aircraft, whether or not
                    such right is exercised), discounted periodically (equal to
                    installment frequency) to present worth at the Discount Rate
                    to the date of payment by Lessee to Lessor, less the
                    applicable amount set forth below:

                    A.   in the event that Lessor has re-let the Aircraft on
                         terms (other than rental payment terms) which, taken as
                         a whole, Lessor reasonably regards as being
                         substantially similar to the material economic terms of
                         the Lease (taking into account factors affecting the
                         degree of risk associated with such re-lease and/or the
                         residual value of the Aircraft thereunder, but

                                      -45-

<PAGE>

                         excluding the rental payment terms), an amount equal to
                         the aggregate basic rental payments to become due under
                         such re-lease for the period coinciding with the
                         remainder of the Term (determined without reference to
                         any right of Lessor to cancel the leasing of the
                         Aircraft, whether or not such right is exercised),
                         discounted periodically (equal to installment
                         frequency) to present worth at the Discount Rate to the
                         date of payment by Lessee; or

                    B.   in the event that Lessor has not re-let the Aircraft or
                         has sold the Aircraft or has re-let the Aircraft on
                         terms which, taken as a whole, Lessor does not
                         reasonably regard as being substantially similar to the
                         material economic terms of the Lease (taking into
                         account factors affecting the degree of risk associated
                         with such re-lease and/or the residual value of the
                         Aircraft thereunder, but excluding the rental payment
                         terms), an amount equal to the fair market rental value
                         (determined pursuant to the Appraisal Procedure) of the
                         Aircraft for the period commencing with the date that
                         Lessor reasonably anticipates that the Aircraft could
                         be re-let at such rental rate and ending with the date
                         that the Tenn was scheduled to expire (determined
                         without reference to any right of Lessor to cancel the
                         leasing of the Aircraft, whether or not such right is
                         exercised), discounted periodically (equal to
                         installment frequency) to present worth at the Discount
                         Rate to the date of payment by Lessee.

               (iii) all costs and other incidental damages associated with
                    Lessor's exercise of its remedies hereunder or otherwise
                    incurred by Lessor as a result of an Event of Default,
                    including repossession costs, legal fees, Aircraft storage,
                    maintenance and insurance costs, Aircraft re-lease or sale
                    costs (including, in the case of a release, any costs
                    incurred to transition the Aircraft to the next operator's
                    maintenance program) and Lessor's internal costs and
                    expenses (including the cost of personnel time calculated
                    based upon the compensation paid to the individuals involved
                    on an annual basis and a general Lessor overhead
                    allocation), all such costs and incidental damages being
                    referred to herein collectively as "Enforcement and
                    Remarketing Costs";

               (iv) any loss, premium, penalty or expense which may be incurred
                    in repaying funds raised to finance the Aircraft or in
                    unwinding any financial instrument relating in whole or in
                    part to Lessor's financing of the Aircraft, all such amounts
                    being referred to herein collectively as "Unwind Expenses";

               (v)  any loss, cost, expense or liability, or damage to Lessor's
                    residual interest in the Aircraft, sustained by Lessor due
                    to Lessee's failure to maintain the Aircraft in


                                      -46-
<PAGE>

                    accordance with the terms of this Agreement or Lessee's
                    failure to redeliver the Aircraft in the condition required
                    by this Agreement, including any consequential loss of
                    revenues or profits, all such amounts being referred to
                    herein collectively as "Aircraft Condition Damages"; and

               (vi) such additional amount, if any, as may be necessary to place
                    Lessor in the same economic position, on an After-Tax Basis,
                    as Lessor would have been in if Lessee had timely performed
                    each of its obligations under this Agreement; and/or

          (d)  either:

               (i)  enter upon the premises where all or any part of the
                    Aircraft is located and take immediate possession of and, at
                    Lessor's sole option, remove the same (and/or any engine
                    which is not an Engine but which is installed on the
                    Airframe, subject to the rights of the lessor or secured
                    party thereof), all without liability accruing to Lessor for
                    or by reason of such entry or taking of possession whether
                    for the restoration of damage to property, conversion or
                    otherwise, caused by such entry or taking, except damages
                    caused by gross negligence or willful misconduct; or

               (ii) by delivering notice to Lessee, require Lessee to redeliver
                    the Aircraft to Lessor at Phoenix Sky Harbor International
                    Airport in Phoenix, Arizona (or such other location as
                    Lessor may require) on the date specified in such notice and
                    in all respects in the condition required by the Lease upon
                    the Return Occasion (it being understood that Lessee shall
                    not delay any such return for the purpose of placing the
                    Aircraft in such condition, but shall nevertheless be liable
                    to Lessor for the failure of the Aircraft to be in such
                    condition); and/or

          (e)  sell at private or public sale, as Lessor may determine, or hold,
               use, operate or lease to others the Aircraft as Lessor in its
               sole discretion may determine, all free and clear of any rights
               of Lessee; and/or

          (f)  by written notice to Lessee specifying a payment date (which
               shall be a date not earlier than five (5) Business Days following
               the date of such notice), Lessor may demand that Lessee pay to
               Lessor, and Lessee shall pay to Lessor on the payment date
               specified in such notice (in lieu of the Rent due for the period
               commencing after the date specified for payment in such notice)
               the sum of the following amounts:

               (i)  all Rent and other amounts which are or are expected to
                    become due and payable hereunder prior to the payment date
                    specified by Lessor;

                                      -47-
<PAGE>

               (ii) an amount equaling the aggregate Rent for, the remainder of
                    the Term (determined without reference to any right of
                    Lessor to cancel the leasing of the Aircraft, whether or not
                    such right is exercised), discounted periodically (equal to
                    installment frequency) to present worth at the Discount Rate
                    to the payment date specified by Lessee to Lessor, less the
                    applicable amount set forth below:

                    A.   in the event that Lessor has re-let the Aircraft on
                         terms (other than rental payment terms) which, taken as
                         a whole, Lessor reasonably regards as being
                         substantially similar to the material economic terms of
                         the Lease (taking into account factors affecting the
                         degree of risk associated with such re-lease and/or the
                         residual value of the Aircraft thereunder, but
                         excluding the rental payment terms), an amount equal to
                         the aggregate basic rental payments to become due under
                         such re-lease for the period coinciding with the
                         remainder of the Term (determined without reference to
                         any right of Lessor to cancel the leasing of the
                         Aircraft, whether or not such right is exercised),
                         discounted periodically (equal to installment
                         frequency) to present worth at the Discount Rate to the
                         date of payment by Lessee; or

                    B.   in the event that Lessor has not re-let the Aircraft or
                         has sold the Aircraft or has re-let the Aircraft on
                         terms which, taken as a whole, Lessor does not
                         reasonably regard as being substantially similar to the
                         material economic terms of the Lease (taking into
                         account factors affecting the degree of risk associated
                         with such release and/or the residual value of the
                         Aircraft thereunder, but excluding the rental payment
                         terms) an amount equal to the fair market rental value
                         (determined pursuant to the Appraisal Procedure) of the
                         Aircraft for the period commencing with the date that
                         Lessor reasonably anticipates that the Aircraft could
                         be re-let at such rental rate and ending with the date
                         that the Term was scheduled to expire (determined
                         without reference to any right of Lessor to cancel the
                         leasing of the Aircraft, whether or not such right is
                         exercised), discounted periodically (equal to
                         installment frequency) to present worth at the Discount
                         Rate to the date of payment by Lessee;

               (iii) an amount equal to Lessor's reasonably anticipated
                    Enforcement and Remarketing Costs, Unwind Expenses and
                    Aircraft Condition Damages; and

               (iv) such additional amount, if any, as may be necessary to place
                    Lessor in the same economic position, on an After-Tax Basis,
                    as Lessor would have been in if Lessee had timely performed
                    each of its obligations under this Agreement;



                                      -48-
<PAGE>

               (v)  it being understood that, to the extent that any of the
                    foregoing amounts represents an estimate by Lessor of
                    losses, damages, costs or expenses which Lessor expects to
                    incur, (y) Lessor shall adjust the amount thereof as needed
                    to reflect the actual amount of such losses, damages, costs
                    or expenses incurred by Lessor when substantially all of
                    such amounts become known to Lessor, but Lessee shall
                    nevertheless be obligated to pay the amount demanded by
                    Lessor (subject to such subsequent adjustment in which (i)
                    amounts, if any, actually paid by Lessee to Lessor upon such
                    demand as may exceed the actual amount of losses, damages,
                    costs or expenses incurred by Lessor as finally determined
                    by Lessor are refunded to Lessee or otherwise credited to
                    the account of Lessee and (ii) additional amounts, if any,
                    as may be required to cure any shortfall between the
                    estimated amounts paid by Lessee and the actual amount of
                    losses, damages, costs or expenses incurred by Lessor as
                    finally determined by Lessor are paid by Lessee to Lessor),
                    and (z) notwithstanding the amount specified in such demand,
                    Lessor shall be entitled to claim such other (and greater)
                    amount in any action against Lessee hereunder; and/or

          (g)  draw upon the Deposit or the Letter of Credit and apply such
               amounts to any amounts owing to Lessor hereunder and/or make
               demand against any Guarantor for any or all of the foregoing.

          In addition to the foregoing, Lessor shall be entitled to exercise
          such other rights and remedies as may be available under applicable
          Law and Lessee shall be liable on an After-Tax Basis for, and shall
          pay Lessor on demand: (i) interest on all unpaid amounts at the
          Interest Rate, from the due date until the date of payment in full;
          (ii) all reasonable legal fees and other reasonable costs and expenses
          incurred by Lessor by reason of the occurrence of any Event of Default
          or the exercise of Lessor's remedies with respect thereto; and (iii)
          all reasonable expenses, disbursements, costs and fees incurred in (A)
          repossessing, storing, preserving, shipping, maintaining, repairing
          and refurbishing the Aircraft, the Airframe, any Engine or Part to the
          condition required by Section 12 hereof and (B) preparing the
          Aircraft, the Airframe, an Engine or Part for sale or lease,
          advertising the sale or lease of the Aircraft, the Airframe, an Engine
          or Part and selling or releasing the Aircraft, the Airframe, an Engine
          or Part.

          Lessor is hereby authorized and instructed, but shall have no
          obligation, to make any expenditures which Lessor, in its sole
          discretion, considers advisable to repair and restore the Aircraft,
          the Airframe, an Engine or Part to the condition required by Section
          12 hereof (it being understood that Lessee shall be liable for all
          such expenditures).

          Lessee hereby agrees that, in the event of the return to or
          repossession by Lessor of the Aircraft, the Airframe, an Engine or
          Part, any rights in any warranty (express or implied) previously



                                      -49-
<PAGE>

          assigned to Lessee or otherwise held by Lessee shall without further
          act, notice or writing be assigned or reassigned to Lessor, if
          assignable.

          No remedy referred to in this Section 13 is intended to be exclusive,
          but, to the extent permissible under the Lease or under applicable
          Law, each shall be cumulative and in addition to any other remedy
          referred to above or otherwise available to Lessor at Law or in
          equity; and the exercise or beginning of exercise by Lessor of any one
          or more of such remedies shall not preclude the simultaneous or later
          exercise by Lessor of any or all of such other remedies; provided,
          however, that nothing in this Section 13 shall be construed to permit
          Lessor to obtain a duplicate recovery of any element of damages to
          which Lessor is entitled. No express or implied waiver by Lessor of
          any Default or Event of Default shall in any way be, or be construed
          to be, a waiver of any future or subsequent Default or Event of
          Default.







                                      -50-
<PAGE>


  13.3    Power of Attorney: Lessee hereby appoints Lessor as the
          attorney-in-fact of Lessee, with full authority in the place and stead
          of Lessee and in the name of Lessee or otherwise, for the purpose of
          carrying out the provisions of the Lease and taking any action and
          executing any instrument that Lessor may deem necessary or advisable
          to accomplish the purposes hereof; provided, however, that Lessor may
          only take action or execute instruments under this Section 13 after an
          Event of Default has occurred and is continuing. Lessee hereby
          declares that the foregoing powers are granted for valuable
          consideration, constitute powers granted as security for the
          performance of the obligations of Lessee hereunder and are coupled
          with an interest and shall be irrevocable. Without limiting the
          generality of the foregoing or any other rights of Lessor under the
          Lease, upon the occurrence and during the continuation of an Event of
          Default, Lessor shall have the sole and exclusive right and power to
          (i) settle, compromise, adjust or defend any actions, suits or
          proceedings relating to or pertaining to the Aircraft, Airframe or any
          Engine, or the Lease and (ii) make proof of loss, appear in and
          prosecute any action arising from any policy or policies of insurance
          maintained pursuant to the Lease, and settle, adjust or compromise any
          claims for loss, damage or destruction under, or take any other action
          in respect of, any such policy or policies.

  13.4    Sale or Re-Lease

          If an Event of Default occurs, Lessor may sell or re-lease or
          otherwise deal with the Aircraft at such time and in such manner and
          on such terms as Lessor considers appropriate in its absolute
          discretion, free and clear of any interest of Lessee, as if the Lease
          had never been entered into. Lessor shall have no duty or obligation
          to sell the Aircraft, and Lessor shall be obligated to attempt to
          re-lease the Aircraft only to the extent, if any, that it is required
          to do so under Article 2A of the UCC, and Lessee hereby disclaims any
          right to compel Lessor to sell or otherwise release the Aircraft.

  13.5    Removal of Lease from FAA Registry

          If an Event of Default occurs, Lessee will at the request of Lessor
          immediately take all steps necessary to enable the Aircraft to be
          redelivered to Lessor in accordance with and free and clear of the
          Lease and Lessee hereby irrevocably and by way of security for its
          obligations under the Lease appoints (which appointment is coupled
          with an interest) Lessor as its attorney-in-fact to execute and
          deliver any documentation and to do any act or thing not prohibited by
          Law required in connection with the foregoing during the continuance
          of an Event of Default. Without limiting the foregoing, Lessor may
          file with the FAA the Lease Termination Certificate provided to Lessor
          under the Lease.



                                      -51-
<PAGE>

 14.      TRANSFER

 14.1     Lessee

          LESSEE WILL NOT ASSIGN, DELEGATE OR OTHERWISE TRANSFER (VOLUNTARILY,
          INVOLUNTARILY, BY OPERATION OF LAW OR OTHERWISE) ANY OF ITS RIGHTS OR
          OBLIGATIONS UNDER THE LEASE (INCLUDING THE AIRCRAFT LEASE AGREEMENT OR
          THIS CTA), OR CREATE OR PERMIT TO EXIST ANY SECURITY INTEREST OVER ANY
          OF ITS RIGHTS UNDER THE LEASE (INCLUDING THE AIRCRAFT LEASE AGREEMENT
          OR THIS CTA), AND ANY ATTEMPT TO DO SO SHALL BE NULL AND VOID.
          The foregoing shall not be construed to prohibit a Permitted
          Sub-Lease.

 14.2     Lessor

          Lessee acknowledges and agrees that Lessor will, if applicable under
          the Financing Documents, assign as security Lessor's interest in the
          Lease as described in the Acknowledgement and Agreement referred to in
          Schedule 3.

          In addition insofar as Lessee is concerned, Lessor may, without the
          consent of Lessee, further transfer all or any of its rights or
          obligations under the Lease or all or any of its right, title or
          interest in and to the Aircraft, including pursuant to:

          (a)  a sale and leaseback; or

          (b)  a novation or assignment of the Lease and/or a sale of the
               Aircraft (including to a special purpose or securitization or
               monetization trust, fund, limited liability company, corporation,
               partnership or other vehicle or in connection with any other
               direct or indirect raising of capital); or

          (c)  a secured loan financing.

          Lessor will promptly notify Lessee of any transfer and Lessee agrees
          promptly to execute and deliver in connection with any transfer such
          documents and assurances (including an acknowledgement of the transfer
          and a certificate as to the absence of any Default under the Lease)
          and to take such further action as Lessor may reasonably request to
          establish or protect the rights and remedies created or intended to be
          created in favor of the transferee in connection with any transfer.
          After any transfer, the transferee shall be entitled to be an
          Indemnitee and to such other rights under the Lease as Lessor shall
          specify. Upon an assignment or novation described in clause (b),
          Lessor shall be released from all obligations and liabilities under
          the Lease to the extent such obligations and liabilities are assumed
          by such transferee, and the Lease, including this CTA as in effect at
          that time and as incorporated in the Aircraft Lease Agreement, shall
          be


                                      -52-
<PAGE>

          deemed applicable as between Lessee and the transferee of the Lease
          and may be amended, supplemented or otherwise modified without the
          consent of the transferor (if this CTA is applicable to the Other
          Agreements not so transferred, it shall remain in full force and
          effect and may be amended, supplemented or otherwise modified without
          the consent of the transferee). Notwithstanding any such assignment or
          novation, Lessor, Owner, Financing Parties' Representative and each
          other Indemnitee shall continue to be entitled to indemnification
          under Section 10, and shall continue to be named as an additional
          insured under all Insurances referred to in Section 9 for a period of
          not less than two years after such transfer. The agreements,
          covenants, obligations and liabilities contained in the Lease,
          including all obligations to pay Rent and indemnify each Indemnitee,
          are made for the benefit of Lessor (and, in the case of Section 10,
          each other Indemnitee) and its or their respective successors and
          assigns, notwithstanding the possibility that any such Person was not
          originally a party to the Lease or may, at the time such enforcement
          is sought, not be a party to the Lease.

  14.3    Conditions

          In connection with any such transfer by Lessor:

          (a)  QUIET ENJOYMENT: as a condition precedent to such transfer
               becoming effective, Lessor will procure that the transferee or
               any new owner of the Aircraft or any new holder of a Security
               Interest in the Aircraft or any holder of an interest in the
               Aircraft or the Lease (by way of security or otherwise), as the
               case may be, shall in the case of a transferee that is the
               "Lessor" acknowledge Lessor's obligation under Section 7.1 or, if
               not the Lessor, execute and deliver to Lessee a letter of quiet
               enjoyment in respect of Lessee's use and possession of the
               Aircraft in a form substantially similar to Section 7.1 hereof,

          (b)  COSTS: Lessor shall reimburse to Lessee its reasonable
               out-of-pocket expenses (including reasonable legal fees and
               expenses) actually incurred in connection with co-operating with
               Lessor in relation to any such transfer referred to in this
               Section 14, provided that such expenses are substantiated to
               Lessor's reasonable satisfaction;

          (c)  RIGHTS OF LESSEE: as a condition precedent to any transfer
               becoming effective, such transfer shall not, at the time of the
               transfer, materially expand Lessee's obligations under the Lease
               or materially reduce Lessee's rights under the Lease, in each
               case as compared to what such obligations and rights would have
               been in the absence of such transfer; provided, however, that no
               transfer to any Person that meets the requirements of a "citizen
               of the United States" under 49 U.S.C. Section 40102(a)(15) shall
               be deemed to materially expand Lessee's obligations or materially
               restrict Lessee's rights under the Lease.


                                      -53-
<PAGE>

 15.      MISCELLANEOUS

 15.1     Survival

          Lessee's obligations under Section 3 of Schedule 4, under Sections
          5.6, 5.7, 5.10, 5.21, 9.5, 10, 12, and 13.2 and under any other
          provision of the Lease providing for an obligation on the part of the
          Lessee to indemnify Lessor or any other Indemnitee shall survive the
          expiration or any termination of the Lease and continue in full force
          and effect.

 15.2     Waivers, Remedies Cumulative

          The rights of Lessor under the Lease may be exercised as often as
          necessary, are cumulative and not exclusive of its rights under any
          Law; and may be waived only in writing and specifically. Delay by
          Lessor in exercising, or non-exercise of, any such right will not
          constitute a waiver of that right.

 15.3     Delegation

          Lessor may delegate to any Person all or any of the rights, powers or
          discretion vested in it by the Lease, and any such delegation may be
          made upon such terms and conditions and subject to such regulations
          (including power to sub-delegate) as Lessor in its absolute discretion
          thinks fit.

 15.4     Severability

          If a provision of the Lease 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 the Lease; or

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

 15.5     Remedy

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


                                      -54-
<PAGE>

 15.6     Time of Essence

          The time stipulated in the Lease for all payments payable by Lessee
          and the prompt, punctual performance of Lessee's other obligations
          under the Lease are of the essence of the Lease.

  15.7    Notices

          All notices under, or in connection with, the Lease will, unless
          otherwise stated, be given in writing by means of a overnight courier
          service or facsimile. Any such notice is deemed effectively to be
          given when received by the recipient (or if receipt is refused by the
          intended recipient, when so refused).

          The addresses and facsimile and telephone numbers of Lessee and Lessor
          are as set forth in the Aircraft Lease Agreement.

  15.8    Governing Law; Jurisdiction; WAIVER OF JURY TRIAL

          (a)  PURSUANT TO AND IN ACCORDANCE WITH SECTION 5-1401 OF THE NEW YORK
               GENERAL OBLIGATIONS LAW, THE PARTIES HERETO AGREE THAT THE LEASE
               IN ALL RESPECTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
               WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES, AS
               APPLIED TO CONTRACTS TO BE PERFORMED WHOLLY WITHIN THE STATE OF
               NEW YORK (EXCLUSIVE OF SECTION 7-101 OF THE NEW YORK GENERAL
               OBLIGATIONS LAW WHICH IS INAPPLICABLE TO THE LEASE). THE PARTIES
               AGREE THAT THE LEASE WAS EXECUTED AND DELIVERED IN THE STATE OF
               NEW YORK.

          (b)  Pursuant to and in accordance with Section 5-1402 of the New York
               General Obligations Law, Lessee and Lessor each agree that the
               United States District Court for the Southern District of New
               York and any New York state court sitting in the County of New
               York, New York, and all related appellate courts, are to have
               non-exclusive jurisdiction to settle any disputes arising out of
               or relating to the Lease and submits itself and its property to
               the non-exclusive jurisdiction of the foregoing courts with
               respect to such disputes.

          (c)  Without prejudice to any other mode of service, Lessee:

               (i)  appoints CT Corporation System, 1633 Broadway, New York, New
                    York 10019, as its agent for service of process relating to
                    any proceedings before the New York courts in connection
                    with the Lease and agrees to maintain the process agent in
                    New York notified to Lessor;


                                      -55-
<PAGE>

               (ii) agrees that failure by a process agent to notify Lessee of
                    the process shall not invalidate the proceedings concerned;

               (iii) consents to the service of process relating to any such
                    proceedings by prepaid mailing of a copy of the process to
                    Lessee's agent at the address identified in paragraph (i) or
                    by prepaid mailing by air mail, certified or registered mail
                    of a copy of the process to Lessee at the address set forth
                    in Section 15.7.

          (d)  [NOT APPLICABLE.]

          (e)  Each of Lessor and Lessee:

               (i)  waives to the fullest extent permitted by Law any objection
                    which it may now or hereafter have to the courts referred to
                    in Section 15.8(b) above on grounds of inconvenient forum or
                    otherwise as regards proceedings in connection with the
                    Lease;

               (ii) waives to the fullest extent permitted by Law any objection
                    which it may now or hereafter have to the laying of venue of
                    any suit, action or proceeding arising out of or relating to
                    the Lease brought in the courts referred to in Section
                    15.8(b); and

               (iii) agrees that a judgement or order of any court referred to
                    in Section 15.8(b) in connection with the Lease is
                    conclusive and binding on it and may be enforced against it
                    in the courts of any other jurisdiction.

          (f)  Nothing in this Section 15.8 limits the right of either party to
               bring proceedings against the other in connection with the Lease:

               (i)  in any other court of competent jurisdiction; or

               (ii) concurrently in more than one jurisdiction.

          (g)  Each of Lessee and Lessor irrevocably and unconditionally:

               (i)  agrees that if the other brings legal proceedings against it
                    or its assets in relation to the Lease no sovereign or other
                    immunity from such legal proceedings (which will be deemed
                    to include suit, court jurisdiction, attachment prior to
                    judgement, attachment in aid of execution of a judgement,
                    other attachment, the obtaining of judgement, execution of a
                    judgement or other enforcement or legal process or remedy)
                    will be claimed by or on behalf of itself or with respect to
                    its assets; and


                                      -56-
<PAGE>

               (ii) waives any such right of immunity which it or its assets now
                    has or may in the future acquire and agrees that the
                    foregoing waiver shall have the fullest extent permitted
                    under the Foreign Sovereign Immunities Act of 1976 of the
                    United States and is intended to be irrevocable for the
                    purposes of such Act.

          (h)  EACH OF LESSEE AND LESSOR HEREBY IRREVOCABLY AND UNCONDITIONALLY
               WAIVES ANY AND ALL RIGHTS TO A JURY TRIAL IN RESPECT OF ANY CLAIM
               OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE LEASE OR ANY
               DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE
               TRANSACTIONS CONTEMPLATED THEREBY OR THE LESSOR/LESSEE
               RELATIONSHIP BEING ESTABLISHED, including, without limitation,
               contract claims, tort claims, breach of duty claims and other
               common law and statutory claims. Each of Lessor and Lessee
               represents and warrants that each has reviewed and voluntarily
               waives its jury trial rights following consultation with its
               legal counsel. THIS WAIVER IS IRREVOCABLE, AND THIS WAIVER SHALL
               APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
               MODIFICATIONS TO THE LEASE. In the event of litigation, this
               Section may be filed as a written consent to a trial by the
               court.

 15.9     Sole and Entire Agreement; True Lease; Section 1110

          (a)  ENTIRE AGREEMENT: The Lease is the sole and entire agreement
               between Lessor and Lessee in relation to the leasing of the
               Aircraft, and supersedes all previous agreements in relation to
               that leasing. Any amendments to the Lease must be made in writing
               and signed on behalf of Lessor and Lessee.

          (b)  TRUE LEASE: The parties intend and agree that the Lease:

               (i)  constitutes a "true lease", and not a "security interest" as
                    defined in Section 1-201(37) of the UCC;

               (ii) constitutes a "true lease" for United States Federal income
                    tax purposes; and

               (iii) confers only a leasehold interest on Lessee in and to
                    the Aircraft on and subject to the terms of the Lease,
                    and no ownership or other interest with respect to the
                    Aircraft is provided to Lessee under the Lease.

               Lessee shall not file a tax return that is inconsistent with the
               provisions of this Section 15.9(b).

          (c)  SECTION 1110: Lessee acknowledges that Lessor would not have
               entered into the Lease unless it had available to it the benefits
               of a lessor under Section 1110 of Title 11 of the


                                      -57-
<PAGE>

               U.S.C. Lessee covenants and agrees with Lessor that to better
               ensure the availability of such benefits, Lessee shall not oppose
               any motion, petition or application filed by Lessor with any
               bankruptcy court having jurisdiction over Lessee whereby Lessor
               seeks recovery of possession of the Aircraft under said Section
               1110, except in a situation in which Lessee shall have complied
               with the requirements of said Section 1110 to be fulfilled in
               order to entitle Lessee to continued use and possession of the
               Aircraft hereunder. In the event said Section 1110 is amended, or
               if it is repealed and another statute is enacted in lieu thereof,
               Lessor and Lessee agree to amend the Lease and take such other
               action not inconsistent with the Lease as Lessor reasonably
               requests so as to afford to Lessor the rights and benefits as
               such amended or substituted statute confers upon owners and
               lessors of aircraft similarly situated to Lessor.

 15.10    Indemnitees

          All rights expressed to be granted to each Indemnitee (other than
          Lessor) under the Lease are given to Lessor on behalf of that
          Indemnitee, and each Indemnitee is an express third party beneficiary
          thereof.

  15.11   Counterparts

          The Lease (including the Aircraft Lease Agreement and this CTA) may be
          executed in two or more counterparts, each of which shall be deemed an
          original, but all of which together shall constitute one and the same
          instrument. To the extent, if any, that the Lease 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 may be created through the transfer or possession of any
          counterpart other than the original counterpart, which shall be
          identified as the counterpart designated as the "original" on the
          signature page of the Aircraft Lease Agreement by Financing Parties'
          Representative, Owner or Lessor, as the case may be.

  15.12   Language

          All notices to be given under the Lease will be in English. All
          documents delivered to Lessor pursuant to the Lease (including any
          documents to be delivered pursuant to the Conditions Precedent) will
          be in English.

 16.      DISCLAIMERS AND WAIVERS

          LESSOR AND LESSEE AGREE THAT THE DISCLAIMERS, WAIVERS AND
          CONFIRMATIONS SET FORTH IN CLAUSES 16.1 TO 16.4 BELOW SHALL APPLY AT
          ALL TIMES DURING THE TERM. LESSEE'S ACCEPTANCE OF THE AIRCRAFT IN
          ACCORDANCE WITH SECTION 4.3 SHALL BE CONCLUSIVE EVIDENCE THAT


                                      -58-
<PAGE>

          LESSEE HAS FULLY INSPECTED THE AIRCRAFT AND EVERY PART THEREOF AND
          THAT THE AIRCRAFT, THE ENGINES, THE PARTS AND THE AIRCRAFT DOCUMENTS
          AND RECORDS ARE TECHNICALLY ACCEPTABLE TO LESSEE AND SATISFY THE
          DELIVERY CONDITION REQUIREMENTS AND ARE IN SUITABLE CONDITION FOR
          DELIVERY TO AND ACCEPTANCE BY LESSEE.

 16.1     Exclusion

          THE AIRCRAFT IS LEASED AND DELIVERED UNDER THE LEASE "AS IS, WHERE
          IS," AND LESSEE AGREES AND ACKNOWLEDGES THAT:

          (a)  LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR HAS NOT
               AND WILL NOT BE DEEMED TO HAVE ACCEPTED, MADE OR GIVEN (WHETHER
               BY VIRTUE OF HAVING DONE OR FAILED TO DO ANY ACT, OR HAVING
               ACQUIRED OR FAILED TO ACQUIRE ANY STATUS UNDER OR IN RELATION TO
               THE LEASE OR OTHERWISE), ANY GUARANTEES, COVENANTS, WARRANTIES OR
               REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO, THE
               AIRCRAFT OR ANY ENGINE OR PART OR ANY SERVICES PROVIDED BY LESSOR
               UNDER THE LEASE, INCLUDING (BUT NOT LIMITED TO) THE TITLE (EXCEPT
               AS AND TO THE EXTENT EXPRESSLY PROVIDED IN SECTION 7.1),
               DESCRIPTION, AIRWORTHINESS, COMPLIANCE WITH SPECIFICATIONS,
               OPERATION, MERCHANTABILITY, QUALITY, FREEDOM FROM INFRINGEMENT OF
               PATENT, COPYRIGHT, TRADEMARK OR OTHER PROPRIETARY RIGHTS, FITNESS
               FOR ANY PARTICULAR USE OR PURPOSE, VALUE, DURABILITY, DATE
               PROCESSING, CONDITION, OR DESIGN, OR AS TO THE QUALITY OF THE
               MATERIAL OR WORKMANSHIP, THE ABSENCE OF LATENT OR OTHER DEFECTS,
               WHETHER OR NOT DISCOVERABLE, OR AS TO ANY OTHER MATTER
               WHATSOEVER, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY
               ARISING FROM A COURSE OF PERFORMANCE OR DEALING OR USAGE OF
               TRADE) WITH RESPECT TO THE AIRCRAFT, ANY ENGINE OR ANY PART OR
               ANY SERVICES PROVIDED BY LESSOR UNDER THE LEASE; AND

          (b)  LESSOR SHALL NOT HAVE ANY OBLIGATION OR LIABILITY WHATSOEVER TO
               LESSEE (WHETHER ARISING IN CONTRACT OR IN TORT, AND WHETHER
               ARISING BY REFERENCE TO NEGLIGENCE, MISREPRESENTATION OR STRICT
               LIABILITY OF LESSOR OR OTHERWISE) FOR:

               (i)  ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED
                    DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR ANY ENGINE OR BY
                    ANY INADEQUACY THEREOF OR DEFICIENCY OR


                                      -59-
<PAGE>

                    DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE IN CONNECTION
                    THEREWITH (EXCEPT FOR DIRECT DAMAGES DUE TO LESSOR'S BREACH
                    AS AND TO THE EXTENT EXPRESSLY PROVIDED IN SECTION 4.4 OR
                    7.1 HEREOF);

               (ii) THE USE, OPERATION OR PERFORMANCE OF THE AIRCRAFT OR ANY
                    RISKS RELATING THERETO;

               (iii) ANY INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR
                    ANTICIPATED PROFITS OR ANY OTHER DIRECT (EXCEPT FOR DIRECT
                    DAMAGES DUE TO LESSOR'S BREACH AS PROVIDED IN SECTION 4.4 or
                    7.1), INDIRECT OR CONSEQUENTIAL LOSS OR DAMAGE; OR

               (iv) THE DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR,
                    IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT, ANY ENGINE OR
                    ANY PART.

 16.2     Waiver

          LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND 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 ANY OF THE
          MATTERS REFERRED TO IN SECTION 16.1.

 16.3     Disclaimer Of Consequential Damages

          LESSEE AGREES THAT IT SHALL NOT BE ENTITLED TO RECOVER, AND HEREBY
          DISCLAIMS AND WAIVES ANY RIGHT THAT IT MAY OTHERWISE HAVE TO RECOVER,
          FOR INTERRUPTION OF SERVICE, LOSS OF BUSINESS, LOST PROFITS OR
          REVENUES OR CONSEQUENTIAL DAMAGES (AS DEFINED IN SECTION 2A-520 OF THE
          UCC OR OTHERWISE) AS A RESULT OF ANY BREACH OR ALLEGED BREACH BY
          LESSOR OF ANY OF THE AGREEMENTS, REPRESENTATIONS OR WARRANTIES OF
          LESSOR CONTAINED IN THE LEASE (INCLUDING A BREACH BY LESSOR UNDER
          SECTION 4.4 OR 7.1).

 16.4     Confirmation

          LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF THIS
          SECTION 16 AND ACKNOWLEDGES THAT RENT AND OTHER AMOUNTS PAYABLE UNDER
          THE LEASE HAVE BEEN CALCULATED BASED ON ITS PROVISIONS.


                                      -60-
<PAGE>

 16.5     Limitation

          LESSOR HEREBY EXPRESSLY AGREES AND ACKNOWLEDGES THAT NOTHING IN THIS
          SECTION 16 SHALL DEROGATE FROM LESSOR'S OBLIGATIONS UNDER, OR
          OTHERWISE LIMIT LESSOR'S LIABILITY IN RESPECT OF, SECTIONS 2.2,
          4.4(c), 7.1, 7.2, 14.2 or 14.3 HEREOF OR SECTION 2(c) OF SCHEDULE 4
          HERETO.

 17.      BROKERS AND OTHER THIRD PARTIES

 17.1     No Brokers

          Each of the parties hereby represents and warrants to the other that
          it has not paid, agreed to pay or caused to be paid directly or
          indirectly in any form, any commission, percentage, contingent fee,
          brokerage or other similar payments of any kind, in connection with
          the establishment or operation of the Lease, to any Person (other than
          fees payable to legal advisers or portfolio services).

 17.2     Indemnity

          Each party agrees to indemnify and hold the other harmless from and
          against any and all claims, suits, damages, costs and expenses
          (including, reasonable legal fees and expenses) asserted by any agent,
          broker or other third party for any commission or compensation of any
          nature whatsoever based upon the Lease or the Aircraft, if such claim,
          suit, damage, cost or expense arises out of any breach by the
          indemnifying party, its employees or agents of Section 17.1.

                   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
                           THE SIGNATURE PAGE FOLLOWS.









                                      -61-
<PAGE>


 IN WITNESS WHEREOF the parties hereto have executed the Common Terms Agreement
 on the date shown at the beginning of the document.

 GENERAL ELECTRIC CAPITAL CORPORATION


 By:    /s/   [illegible]
        --------------------------
 Name:    Norm Liu
        --------------------------
 Title:   Vice President
        --------------------------


 ALOHA AIRLINES, INC.

 By:    ___________________________

 Name:  ___________________________

 Title: ___________________________



 By:    ___________________________

 Name:  ___________________________

 Title: ___________________________




<PAGE>


  IN WITNESS WHEREOF the parties hereto have executed the Common Terms Agreement
  on the date shown at the beginning of the document.

  GENERAL ELECTRIC CAPITAL CORPORATION

  By:    ___________________________

  Name:  ___________________________

  Title: ___________________________



  ALOHA AIRLINES, INC.

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

  Name:   Brenda F. Cutwright
         ----------------------------

  Title:  Exec. Vice President & CFO
         ----------------------------


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

  Name:   James M. King
         ----------------------------

  Title:  VP Planning & Development
         ----------------------------



<PAGE>


                             SCHEDULE 1
                            DEFINITIONS

 The following words and expressions have the respective meanings set forth
 below:

 ACT means the Federal Aviation Act of 1958, as amended, and as recodified in
 Title 49 U.S.C. pursuant to Public Law 103-272, or any similar legislation of
 the United States enacted in substitution or replacement thereof.

 AFFILIATE means as to any Person, any other Person that, directly or
 indirectly, is in control of, is controlled by, or is under common control
 with, such Person. For purposes of this definition, "control" of a Person means
 the power, directly or indirectly, either to (a) vote 50% or more of the
 securities having ordinary voting power for the election of directors (or
 persons performing similar functions) of such Person or (b) direct or cause the
 direction of the management and policies of such Person, whether by contract or
 otherwise.

 AFTER-TAX BASIS means in the case of any amount payable on an "After-Tax Basis"
 to or for the benefit of any Person (including any amount payable pursuant to
 this definition) that the total amount paid shall be such that the Person
 actually realizes the amount payable, after deduction from the total amount
 paid of the net amount of all Taxes required to be paid by such Person with
 respect to the receipt or accrual by it of such amount.

 AGREED VALUE has the meaning given in the Aircraft Lease Agreement.

 AIR AUTHORITY means the FAA.

 AIRCRAFT has the meaning given in the Aircraft Lease Agreement.

 AIRCRAFT DOCUMENTS AND RECORDS means the documents, data and records identified
 in the list attached to the Certificate of Technical Acceptance, and any other
 documents and records Lessee is required to maintain under Section 8.8, and all
 additions, renewals, revisions and replacements from time to time made to any
 of the foregoing in accordance with the Lease.

 AIRCRAFT LEASE AGREEMENT means the specific aircraft lease agreement for the
 Aircraft entered or to be entered into between the parties hereto or Affiliates
 thereof.

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

 AIRFRAME STRUCTURAL CHECK has the meaning given in the Aircraft Lease
 Agreement.

 AIRFRAME SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease
 Agreement.


                                      1-1
<PAGE>

 AIRWORTHINESS DIRECTIVE means an airworthiness directive issued by the State of
 Design or the State of Registry.

 ANNUAL SUPPLEMENTAL RENT ADJUSTMENT has the meaning given in the Aircraft Lease
 Agreement.

 APPRAISAL PROCEDURE means the following procedure for determining the "fair
 market rental value" of the Aircraft pursuant to Sections 13.2 and 13.4 of the
 CTA: (a) Lessor shall select an independent aircraft appraiser in its sole and
 absolute discretion who shall make a determination of "fair market rental
 value" of the Aircraft; and (b) the fees and expenses of the appraiser shall be
 paid by Lessee. "Fair market rental value" shall mean the value determined by
 an appraisal completed on an "as-is" and "where-is" basis.

 APU means the auxiliary power unit installed on the Aircraft on the Delivery
 Date and any replacement auxiliary power unit installed on the Aircraft and
 title to which is transferred to Owner in accordance with the Lease.

 APU SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease Agreement.

 ASSUMED UTILIZATION has the meaning given in the Aircraft Lease Agreement.

 ASSUMED RATIO has the meaning given in the Aircraft Lease Agreement.

 BUSINESS DAY means any day other than a Saturday, Sunday or other day on which
 banking institutions in New York New York or Honolulu, Hawaii are authorized or
 required by Law to be closed.

 "C" CHECK means a block "C" check in accordance with Lessee's Maintenance
 Program or, if the Lessee's Maintenance Program is not based on the
 Manufacturer's Maintenance Planning Document on a block basis, in accordance
 with the Manufacturer's Maintenance Planning Document.

 CERTIFICATE OF TECHNICAL ACCEPTANCE means a certificate of technical acceptance
 in the form of Part 1 or Part 2, as applicable, of Schedule 5.

 CERTIFICATED AIR CARRIER means any Person (except the United States Government)
 that is a "citizen of the United States of America" (as defined in Section
 40102 of Title 49 of the U.S.C.) and holding a Certificate of Public
 Convenience and Necessity issued under Section 41102 of Title 49 of U.S.C. by
 the Department of Transportation or any predecessor or successor agency
 thereto, and an air carrier operating certificate issued pursuant to Chapter
 447 of Title 49 of U.S.C. or, in the event such certificates shall no longer be
 applicable, any Person (except the United States Government) that is a citizen
 of the United States (as defined in Section 40102 of Title 49 of the U.S.C.)
 and legally engaged in the business of transporting for hire passengers or
 cargo by air predominantly to, from or between points within the United States
 of America, and, in either event, operating commercial jet aircraft capable of
 carrying ten or more individuals or 6,000 pounds or more of cargo, which also
 is certificated so as to entitle Lessor, as a lessor, to the benefits of
 Section 1110 of Title 11 of U.S.C. with respect to the Aircraft.


                                      1-2
<PAGE>

 CONDITIONS PRECEDENT means Lessee Conditions Precedent and Lessor's Conditions
 Precedent, collectively, or any of them, as the context may require.

 CYCLE means one take-off and landing of the Aircraft.

 DAMAGE NOTIFICATION THRESHOLD has the meaning given in the Aircraft Lease
 Agreement.

 DEDUCTIBLE AMOUNT has the meaning given in the Aircraft Lease Agreement.

 DEFAULT means any Event of Default or any event or circumstance which, with the
 giving of notice and/or lapse of time and/or determination of materiality
 and/or fulfillment of any other condition, would constitute an Event of
 Default.

 DEFECT means any defect or non-conformity with the Delivery Condition
 Requirements notified by Lessee to Lessor during the Pre-Delivery Procedure.

 DELIVERY means delivery of the Aircraft by Lessor to Lessee under the Lease.

 DELIVERY CONDITION REQUIREMENTS has the meaning given in the Aircraft Lease
 Agreement.

 DELIVERY DATE means the date on which Delivery occurs.

 DELIVERY LOCATION has the meaning given in the Aircraft Lease Agreement.

 DEPOSIT has the meaning given in the Aircraft Lease Agreement.

 DISCOUNT RATE has the meaning given in the Aircraft Lease Agreement.

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

 ENGINE means, whether or not installed on the Aircraft:

     (a)  each engine of the manufacture and model specified in the Aircraft
          Lease Agreement for the Aircraft which Lessor offers to Lessee for
          delivery with the Airframe on the Delivery Date, such engines being
          described as to serial numbers on the Certificate of Technical
          Acceptance; and

     (b)  any Replacement Engine, with effect from the time when title thereto
          has passed to Owner in accordance with the Lease;

 and in each case includes all modules and Parts from time to time belonging to
 or installed in that engine but excludes any properly replaced engine title to
 which has passed to Lessee pursuant to the Lease.

 ENGINE CYCLE means operation of an engine on an aircraft from and including a
 take-off to and including the landing of that aircraft.


                                      1-3
<PAGE>

 ENGINE EVENT OF LOSS means the occurrence, with respect to the Engine only,
 whether or not installed on the Airframe, of any of those events described in
 the definition of Event of Loss.

 ENGINE FLIGHT HOUR means each hour or part thereof an Engine is operated,
 elapsing from the moment the wheels of an aircraft on which such Engine is
 installed leave the ground until the wheels of such aircraft next touch the
 ground.

 ENGINE LLP REPLACEMENT has the meaning given in Section 7.2(ii);

 ENGINE LLP SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease
 Agreement.

 ENGINE REFURBISHMENT means all scheduled and unscheduled off the wing Engine
 maintenance and repair accomplished for each module in accordance with the
 performance restoration or full overhaul sections of the Manufacturer's
 workscope planning guide.

 ENGINE SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease Agreement.

 EQUIPMENT CHANGE has the meaning given in Section 8.12.

 ERISA means the Employee Retirement Income Security Act of 1974, as amended.

 EVENT OF DEFAULT means any event or condition specified in Schedule 9.

 EVENT OF LOSS means with respect to the Aircraft (including for the purposes of
 this definition the Airframe):

     (a)  the actual or constructive, compromised, arranged or agreed total loss
          of the Aircraft; or

     (b)  the Aircraft being destroyed, damaged beyond reasonable economic
          repair as determined by Lessor or permanently rendered unfit for
          normal use for any reason whatsoever; or

     (c)  the Aircraft being condemned, confiscated or requisitioned for title,
          or title to the Aircraft being otherwise compulsorily acquired by the
          government of the State of Registry or any other Government Entity; or

     (d)  the Aircraft being hijacked, stolen, confiscated, detained, seized,
          condemned or requisitioned for use or hire for the lesser of (i) a
          period of more than 30 days (or 60 days in the case of requisition for
          use or hire by the government of the State of Registry) or (ii) a
          period equal to or exceeding the remaining balance of the Term; or

     (e)  as a result of any rule, regulation, order or other action by the FAA
          the use of the Aircraft by Lessee or any Permitted Sub Lessee shall
          have been prohibited for a period of twelve (12) consecutive months.


                                      1-4
<PAGE>

 EXPIRY DATE means the Scheduled Expiry Date or, if earlier (i) the date when
 Lessor acting in accordance with the provisions of the Lease, terminates the
 leasing of the Aircraft to Lessee under the Lease, or (ii) subject to the
 provisions of Section 11.1 and 11.2, the date when Lessor receives the Agreed
 Value together with any other amounts then due and unpaid under the Lease and
 the Other Agreements following an Event of Loss; provided, that if the Term is
 extended pursuant to Section 12.2, the Expiry Date shall be extended to the
 date to which the Term is extended pursuant to Section 12.2.

 FAA means the Federal Aviation Administration of the United States and any
successor thereof.

 FAR means the Federal Aviation Regulations set forth in Title 14 of the United
 States Code of Federal Regulations, as amended and modified from time to time.

 FINAL DELIVERY DATE has the meaning given in the Aircraft Lease Agreement.

 FINAL INSPECTION has the meaning given in Section 1.1 of Part III of Schedule A
 to the Aircraft Lease Agreement.

 FINANCIAL INDEBTEDNESS means any indebtedness in respect of:

     (a)  moneys borrowed or raised;

     (b)  any liability under any debenture, bond, note, loan stock, acceptance,
          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 (exclusive of trade
          payables); or

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

 FINANCIAL INFORMATION means:

     (a)  as soon as available but not in any event later than 60 days after the
          last day of each fiscal quarter of Lessee, the consolidated financial
          statements of Aloha Airgroup, Inc. (consisting of a balance sheet and
          statements of operations and of retained earnings and cash flows)
          prepared for the most recent previous fiscal quarter certified by a
          qualified financial officer of Aloha Airgroup, Inc. as being true and
          correct and fairly presenting its financial condition and results of
          operation in accordance with GAAP (subject to year-end adjustments);
          and

     (b)  as soon as available but not in any event later than 120 days after
          the last day of each fiscal year of Lessee, the audited combined
          financial statements of Aloha Airgroup, Inc. (consisting of a balance
          sheet and statements of operations and of retained earnings and cash
          flows), prepared for the fiscal year then most recently ended
          certified by the independent auditors of Aloha Airgroup, Inc. without
          qualification.



                                      1-5
<PAGE>

 FINANCING DOCUMENTS (if applicable) has the meaning given in the Aircraft Lease
 Agreement.

 FINANCING DOCUMENTS CONTEST RIGHTS (if applicable) has the meaning given in the
 Aircraft Lease Agreement.

 FINANCING DOCUMENTS INDEMNITY AMOUNTS (if applicable) has the meaning given in
 the Aircraft Lease Agreement.

 FINANCING DOCUMENTS TAX AMOUNTS (if applicable) has the meaning given in the
 Aircraft Lease Agreement.

 FINANCING PARTIES (if applicable) has the meaning given in the Aircraft Lease
 Agreement.

 FINANCING PARTIES' REPRESENTATIVE (if applicable) has the meaning given in the
 Aircraft Lease Agreement.

 FINANCING STATEMENTS means Uniform Commercial Code Financing Statements in
 respect of the Lease and the Aircraft and Engines leased thereunder prepared in
 a form acceptable for filing with the applicable Government Entities in the
 state in which Lessee's chief executive office is located (as the term "chief
 executive office" is defined in Article 9 of the Uniform Commercial Code as in
 effect in such state) and such other jurisdictions as Lessor shall reasonably
 require.

 FLIGHT HOUR means each hour or part thereof elapsing from the moment the wheels
 of the Aircraft leave the ground on take off until the wheels of the Aircraft
 next touch the ground.

 GAAP means generally accepted accounting principles in the United States.

 GE CAPITAL means General Electric Capital Corporation.

 GECAS means either or both of GE Capital Aviation Services, Limited and GE
 Capital Aviation Services, Inc.

 GOVERNMENT ENTITY means:

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

     (b)  any instrumentality, board, commission, court, or agency of any of the
          above, 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.


                                      1-6
<PAGE>

 GUARANTEE means, if applicable, a guarantee by the Guarantor in form and
 substance reasonably acceptable to Lessor and references to the Guarantee
 include reference to any replacement or re-issued guarantee.

 GUARANTOR (if applicable) has the meaning given in the Aircraft Lease
 Agreement.

 HABITUAL BASE means the jurisdiction in which the Aircraft's primary aircraft
 operations center is located.

 INDEMNITEE has the meaning given in the Aircraft Lease Agreement.

 INTEREST RATE has the meaning given in the Aircraft Lease Agreement.

 INSURANCE means the insurance in respect of the Aircraft in form and substance
 satisfactory to Lessor, and includes any insurance and reinsurance required by
 Section 9 and Schedule 7.

 LANDING GEAR means the landing gear assembly of the Aircraft excluding any
 rotable components.

 LANDING GEAR SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease
 Agreement.

 LAW means and includes (a) any statute, decree, constitution, regulation,
 order, judgement or other directive of any Government Entity; (b) any treaty,
 pact, compact or other agreement to which any Government Entity is a signatory
 or party; (c) any judicial or administrative interpretation or application of
 any Law described in (a) or (b) above; and (d) any amendment or revision of
 any Law described in (a), (b) or (c) above.

 LC AMOUNT has the meaning given in the Aircraft Lease Agreement.

 LEASE means the Aircraft Lease Agreement for the Aircraft (of which this CTA
 forms a part), any schedules or documents executed pursuant to the Schedules
 hereto or pursuant to the Aircraft Lease Agreement, any Lease Supplement to
 the Lease (including Lease Supplement No. 1), and any side letters related to
 the Lease.

 LEASE SUPPLEMENT means any Lease Supplement executed and delivered with
 respect to the Lease.

 LEASE SUPPLEMENT NO. 1 means a Lease Supplement No. 1 substantially in
 the form of Schedule 12.

 LEASE TERMINATION CERTIFICATE means a Lease Termination Certificate
 substantially in the form of Schedule 11 in respect of the Lease.

 LESSEE means the Person named as Lessee in the Aircraft Lease Agreement.

 LESSEE AFFILIATE means any Subsidiary or other Affiliate for the time being of
 Lessee.

 LESSEE CONDITIONS PRECEDENT means the conditions specified in Part B of
 Schedule 3.



                                      1-7
<PAGE>

 LESSEE'S MAINTENANCE PROGRAM means the Maintenance Program specifically
 approved by the Air Authority for maintenance of the Aircraft by Lessee, or at
 any time that a Permitted Sub-Lease approved by Lessor and meeting the
 requirements of Section 8.4(b) is in effect, by the Permitted Sub-Lessee under
 such Permitted Sub-Lease.

 LESSOR means the Person named as Lessor in the Aircraft Lease Agreement.

 LESSOR CONDITIONS PRECEDENT means the conditions specified in Part A of
 Schedule 3.

 LESSOR LIEN means (i) any Security Interest whatsoever from time to time
 created by Lessor or Owner in connection with the financing of the Aircraft,
 including the Financing Documents, and (ii) any other Security Interest in the
 Aircraft which (a) results from acts of or claims against Lessor or Owner or
 any affiliate of Lessor or Owner that do not relate to the transactions
 contemplated by the Lease or by any other contract or agreement between Lessee
 or any affiliate of Lessee and Lessor or Owner or any affiliate of Lessor or
 Owner and (b) is not attributable to Lessee or Lessee's use or possession of
 the Aircraft.

 LESSOR/OWNER TAX JURISDICTION has the meaning given in the Aircraft Lease
 Agreement.

 LESSOR TAXES means Taxes for which Lessee is not obligated to indemnify Lessor
 and/or Owner and/or a Financing Party as provided in Section 5.7(c).

 LETTER OF CREDIT means any letter of credit issued in relation to the Lease
 pursuant to Section 5.14 and any replacement or renewal of that letter of
 credit.

 LOSSES means any and all cost, expense (including any and all reasonable legal
 fees and expenses and the fees and expenses of other professional advisers),
 claims, proceedings, losses, liabilities, obligations, damages (whether direct,
 indirect, special, incidental or consequential), suits, judgements, fees,
 penalties or fines (whether criminal or civil) of any kind or nature
 whatsoever, including any of the foregoing arising or imposed with or without
 any Indemnitee's fault or negligence, whether passive or active or under the
 doctrine of strict liability.

 MAINTENANCE CONTRIBUTIONS means, as and if applicable, all amounts payable by
 Lessor pursuant to Section 7.2.

 MAINTENANCE PERFORMER means (i) any of the Persons identified on Schedule 14
 hereto (until such time as Lessor delivers written notice to Lessee of the
 removal of any such Person from the list of Maintenance Performers), or (ii)
 such other mutually acceptable Persons as may be added to Schedule 14 hereto
 from time to time (Lessee shall advise Lessor in writing of any request to add
 a Person to Schedule 14 and Lessor shall respond in writing).

 MAINTENANCE PROGRAM means an Air Authority approved maintenance program for the
 Aircraft and encompassing scheduled maintenance, condition-monitored
 maintenance, and/or on-condition



                                      1-8
<PAGE>

 maintenance of Airframe, Engines and Parts, including servicing, testing,
 preventive maintenance, repairs, structural inspections, system checks,
 overhauls, approved modifications, engineering orders, airworthiness
 directives, corrosion control, inspections and treatments.

 MAJOR CHECKS means any C-check, multiple C-check or heavier check (including
 structural inspections and CPCP) suggested for commercial aircraft of the same
 model as the Aircraft by its manufacturer (however denominated) as set out in
 the Lessee's Maintenance Program.

 MANUFACTURER has the meaning given in the Aircraft Lease Agreement.

 MANUFACTURER'S MAINTENANCE PLANNING DOCUMENT means the recommended maintenance
 program for the Aircraft issued by the Manufacturer as in effect at the time of
 any applicable determination.

 MINIMUM AIRFRAME LIFE LIMITED COMPONENT CYCLES has the meaning given in the
 Aircraft Lease Agreement.

 MINIMUM AIRFRAME LIFE LIMITED COMPONENT FLIGHT HOURS has the meaning given in
 the Aircraft Lease Agreement.

 MINIMUM APU LIMIT has the meaning given in the Aircraft Lease Agreement.

 MINIMUM APU LLP LIMIT has the meaning given in the Aircraft Lease Agreement.

 MINIMUM COMPONENT CALENDAR LIFE has the meaning given in the Aircraft Lease
 Agreement.

 MINIMUM COMPONENT CYCLES has the meaning given in the Aircraft Lease Agreement.

 MINIMUM COMPONENT FLIGHT HOURS has the meaning given in the Aircraft Lease
 Agreement.

 MINIMUM ENGINE CYCLES has the meaning given in the Aircraft Lease Agreement.

 MINIMUM ENGINE FLIGHT HOURS has the meaning given in the Aircraft Lease
 Agreement.

 MINIMUM LANDING GEAR CALENDAR TIME has the meaning given in the Aircraft Lease
 Agreement.

 MINIMUM LANDING GEAR CYCLES has the meaning given in the Aircraft Lease
 Agreement.

 MINIMUM LANDING GEAR FLIGHT HOURS has the meaning given in the Aircraft Lease
 Agreement.

 MINIMUM LIABILITY COVERAGE has the meaning given in the Aircraft Lease
 Agreement.

 MINIMUM MEASURABLE FUEL REQUIREMENT has the meaning given in the Aircraft Lease
 Agreement.

 NAMEPLATE INSCRIPTION means the inscription to be included on the Nameplates as
 reasonably requested by Lessor from time to time.


                                      1-9
<PAGE>

 NAMEPLATES means the fireproof plates to be installed on the Aircraft in
 accordance with Section 8.6(a).

 OTHER AGREEMENTS means any aircraft, engine or spare parts related lease or
 financing agreement (including an aircraft, engine or spare parts related loan,
 hire purchase, conditional sale, credit sale or security agreement) from time
 to time entered into between Lessor (or any Subsidiary or Affiliate of Lessor),
 on the one hand, and Lessee (or any Subsidiary or Affiliate of Lessee), on the
 other hand.

 OWNER has the meaning given in the Aircraft Lease Agreement.

 PART means, whether or not installed on the Aircraft:

     (a)  any component, furnishing or equipment (other than a complete Engine
          or engine) incorporated or installed in or attached to or furnished
          with the Aircraft on the Delivery Date or thereafter if paid for or
          otherwise provided by or on behalf of Lessor; and

     (b)  any other component, furnishing or equipment (other than a complete
          Engine or engine), with effect from the time when title thereto has
          passed to Owner pursuant to the Lease;

     (c)  but excludes any such items title to which has passed to Lessee
          pursuant to the Lease.

 PART 36 OR FAR PART 36 means Part 36 of the FAR, as amended or modified from
 time to time.

 PART 121 OR FAR PART 121 means Part 121 of the FAR, as amended or modified from
 time to time.

 PERMITTED LIEN means:

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

     (b)  any lien of a repairer, mechanic, hangar-keeper or other similar lien
          arising in the ordinary course of business by operation of Law in
          respect of obligations which are not overdue or are being diligently
          contested in good faith by appropriate proceedings;

     (c)  any Lessor Lien; and

     (d)  rights of others under any sub-lease or other arrangements to the
          extent expressly permitted under Section 8.4;

 but only if (in the case of both (a) and (b)) (i) adequate reserves have been
 provided by Lessee for the payment of such Taxes or obligations; and (ii) such
 proceedings, or the continued existence of the lien, do not give rise to any
 risk of the sale, forfeiture or other loss of the Aircraft or any interest
 therein or of criminal liability on the part of Lessor or Owner.


                                      1-10
<PAGE>

 PERMITTED SUB-LEASE means any sub-lease of the Aircraft to a Permitted
 Sub-Lessee to which Lessor has consented as provided for in Section 8.4(a).

 PERMITTED SUB-LESSEE means any sub-lessee of the Aircraft to which Lessor has
 consented as provided in Section 8.4(a).

 PERSON means any individual person, any form of corporate or business
 association, trust, Government Entity, or organization or association of which
 any of the above is a member or a participant.

 PRE-APPROVED BANK has the meaning given in the Aircraft Lease Agreement.

 PRE-DELIVERY PROCEDURE means the procedure leading to Delivery as specified in
 Schedule 4.

 REDELIVERY LOCATION has the meaning given in the Aircraft Lease Agreement.

 REGULATIONS means any Law or regulation, official directive or recommendation,
 mandatory requirement, or contractual undertaking, or airworthiness
 requirements or limitations, which applies to Lessee or the Aircraft and any
 Law or regulation, official directive or recommendation or mandatory
 requirement which applies to Lessor, Owner, Financing Parties' Representative
 or GECAS.

 RENT means the basic monthly "Rent", as defined in Schedule B of the Aircraft
 Lease Agreement, and payable pursuant to Section 5.3.

 RENT COMMENCEMENT DATE has the meaning given in the Aircraft Lease Agreement.

 RENTAL PERIOD means each period ascertained in accordance with Section 5.2.

 RENT DATE means the first day of each Rental Period.

 REPLACEMENT APU means an "APU" that has duly replaced the APU in accordance
 with the requirements of Section 8.11(b).

 REPLACEMENT ENGINE means an "Engine" that has duly replaced an "Engine" in
 accordance with the requirements of Section 8.11(b).

 REQUIRED LC EXPIRY DATE means the date being 91 days after the Expiry Date.

 RETURN OCCASION means the date on which the Aircraft is redelivered to Lessor
 in accordance with Section 12.

 SCHEDULED DELIVERY DATE has the meaning given in the Aircraft Lease Agreement.

 SCHEDULED DELIVERY MONTH has the meaning given in the Aircraft Lease Agreement.

 SCHEDULED DELIVERY WEEK has the meaning given in the Aircraft Lease Agreement.


                                      1-11
<PAGE>

 SCHEDULED EXPIRY DATE has the meaning given in the Aircraft Lease Agreement.

 SECURITY INTEREST means any mortgage, chattel mortgage, security interest,
 charge, pledge, lien, conditional sale agreement, title retention agreement,
 equipment trust agreement, encumbrance, assignment, hypothecation, right of
 detention, right of set-off or any other agreement or arrangement having the
 effect of conferring security.

 STATE OF DESIGN has the meaning specified in the Aircraft Lease Agreement.

 STATE OF INCORPORATION means the United States and the state of organization of
 the applicable Person as identified in the heading of the Aircraft Lease
 Agreement.

 STATE OF REGISTRY means the United States.

 SUBSIDIARY means:

     (a)  in relation to any reference to financial statements, any Person whose
          financial statements are consolidated with the accounts of Lessee in
          accordance with GAAP; and

     (b)  for any other purpose, an entity from time to time of which another
          has direct or indirect control or owns directly or indirectly more
          than 50 percent of the voting share capital or similar equity
          interests.

 SUPPLEMENTAL RENT means, as and if applicable, all amounts payable under the
 Lease in respect of each of Airframe Supplemental Rent, Engine Supplemental
 Rent, Engine LLP Supplemental Rent, APU Supplemental Rent and Landing Gear
 Supplemental Rent.

 TAXES means any and all present and future taxes, duties, withholdings, levies,
 assessments, imposts, fees and other governmental charges of all kinds
 (including any value added or similar tax and any stamp, documentary, license,
 registration or similar fees or tax) imposed by a Government Entity, together
 with any penalties, fines, surcharges and interest thereon and any additions
 thereto.

 TAX INDEMNITEE has the meaning given in the Aircraft Lease Agreement.

 TECHNICAL REPORT means a monthly report of the Flight Hours, Cycles, Engine
 Flight Hours and Engine Cycles operated by the Airframe and Engines in respect
 of each calendar month substantially in the form attached as Schedule 15.

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

 UCC means the Uniform Commercial Code as in effect in the State of New York.

 UNFORESEEN EVENT means:



                                      1-12
<PAGE>

     (a)  civil disturbance or act of any Government Entity;

     (b)  natural disaster or any other act of God;

     (c)  Law of, or any allocation or other action by, a Government Entity or
          any unexpected shortage of labor, materials or facilities affecting
          the Aircraft;

     (d)  any damage or Defect;

     (e)  labor disputes;

     (f)  breach of contract by any Person (other than Lessor), or other failure
          to deliver or redeliver the Aircraft by any Person (whether or not a
          breach) with possession or control of the Aircraft (other than by
          Lessor, if it has possession and control of the Aircraft), including
          any failure to deliver or delay in delivery by any prior lessee, any
          seller of the Aircraft or any Person performing modifications or
          maintenance to the Aircraft and any breach by any prior lessee, seller
          or modification or maintenance performer or failure to cooperate by
          any prior lessee, seller or modification or maintenance performer, or
          any "excusable" or "inexcusable" delay under any previous lease,
          purchase or modification or maintenance agreement for the Aircraft, or
          any purchase or modification or maintenance agreement for the Aircraft
          terminating prior to Delivery (including due to Lessor or an Affiliate
          of Lessor voluntarily terminating such agreement);

     (g)  delays in obtaining the Aircraft or any equipment or services for the
          Aircraft;

     (h)  any delay due to Air Authority certifications; or

     (i)  any other cause beyond the control of Lessor or not occasioned by
          Lessor's gross negligence or willful misconduct.

 UNITED STATES means the United States of America.

 U.S.C. means the United States Code.


                                      1-13
<PAGE>

                                   SCHEDULE 2
                         REPRESENTATIONS AND WARRANTIES

 1.1      LESSEE'S REPRESENTATIONS AND WARRANTIES

 Lessee's representations and warranties to Lessor as of the date of execution
 of the Lease and the Delivery Date are as follows:

          (a)  STATUS: It is duly organized, validly existing and in good
               standing in its State of Incorporation.

          (b)  NON-CONFLICT: Execution, delivery and performance of the Lease do
               not contravene or breach any Regulation applicable to Lessee.

          (c)  POWER AND AUTHORITY: It has all corporate and other power and
               authority to execute, deliver and perform the Lease, and the
               Lease has been duly authorized, executed and delivered by Lessee.

          (d)  LEGAL VALIDITY: The Lease is its legal, valid and binding
               obligation, enforceable against Lessee in accordance with its
               terms.

          (e)  NO EVENT OF DEFAULT: No Event of Default has occurred and is
               continuing or would occur because of Delivery.

          (f)  LITIGATION: It is not involved in any litigation or other dispute
               which could materially and adversely affect its financial
               condition or its ability to perform its obligations under the
               Lease.

          (g)  FINANCIAL INFORMATION: Its audited financial statements most
               recently delivered to Lessor:

               (i)  have been prepared in accordance with GAAP; and

               (ii) are true and correct and present fairly the financial
                    condition and results of operations of Lessee as at the date
                    thereof and for the period then ending.

          (h)  FULL DISCLOSURE: Neither the audited financial statements
               referred to in paragraph (g) nor any other financial, operational
               or credit related information provided to Lessor by Lessee for
               the purposes of the Lease contains as of the date thereof any
               untrue statement of a material fact or omits to state any
               material fact necessary in order to make the statements therein
               not misleading in the light of the circumstances under which they
               were made.



                                      2-1
<PAGE>

          (i)  LOCATION: Lessee's chief executive office (as that term is
               defined in Article 9 of the UCC) is located at the address set
               forth in the heading of the Aircraft Lease Agreement; and the
               records of the Lessee concerning the Aircraft are maintained at
               such chief executive office or at the Habitual Base of the
               Aircraft.

          (j)  CERTIFICATED AIR CARRIER: Lessee is a Certificated Air Carrier
               and Lessor, as lessor of the Aircraft to Lessee, is entitled to
               the benefits of Section 1110 of Title 11 of the U.S.C. with
               respect to the Aircraft.

          (k)  CITIZEN OF THE UNITED STATES: Lessee is a "citizen of the United
               States" as defined in Section 40102 of Title 49 of the U.S.C.

          (1)  ERISA: Lessee is not engaged in any transaction in connection
               with which it could be subjected to either a civil penalty
               assessed pursuant to Section 502 of ERISA or any tax imposed by
               Section 4975 of the Internal Revenue Code; no material liability
               to the Pension Benefit Guaranty Corporation has been or is
               expected by Lessee to be incurred with respect to any employee
               pension benefit plan (as defined in Section 3 of ERISA)
               maintained by Lessee or by any trade or business (whether or not
               incorporated) which together with Lessee would be treated as a
               single employer under Section 4001 of ERISA and Section 414 of
               the Internal Revenue Code; there has been no reportable event (as
               defined in Section 4043(b) of ERISA) with respect to any such
               employee pension benefit plan; no notice of intent to terminate
               any such employee pension benefit plan has been filed or is
               expected to be filed, nor has any such employee pension benefit
               been terminated; no circumstance exists or is anticipated that
               constitutes or would constitute grounds under Section 4042 of
               ERISA for the Pension Benefit Guaranty Corporation to institute
               proceedings to terminate, or to appoint a trustee to manage the
               administration of, such an employee pension benefit plan; and no
               accumulated funding deficiency (as defined in Section 302 of
               ERISA or Section 412 of the Internal Revenue Code), whether or
               not waived, exists with respect to any such employee pension
               benefit plan.

          (m)  MATERIAL ADVERSE CHANGE: there has been no material adverse
               change in the financial condition or operations of Lessee and
               Lessee Affiliates or in the ability of Lessee to comply with its
               obligations under the Lease since the date of the financial
               statements most recently provided to Lessor on or prior to the
               date of the Aircraft Lease Agreement.

 1.2      LESSOR'S REPRESENTATIONS AND WARRANTIES

 Lessor's representations and warranties to Lessee as of the date of execution
 of the Lease and the Delivery Date are as follows:

          (a)  STATUS: It is duly organized, validly existing and in good
               standing in its State of Incorporation.

                                       2-2


<PAGE>

          (b)  NON-CONFLICT: Execution, delivery and performance of the Lease do
               not contravene or breach any Regulation applicable to Lessor.

          (c)  POWER AND AUTHORITY: It has all corporate and other power and
               authority to execute, deliver and perform the Lease, and the
               Lease has been duly authorized, executed and delivered by Lessor.

          (d)  LEGAL VALIDITY: The Lease is its legal, valid and binding
               obligation, enforceable against Lessor in accordance with its
               terms.

          (e)  CITIZEN OF THE UNITED STATES: Lessor is a "citizen of the United
               States" as defined in Section 40102 of Title 49 of the U.S.C. and
               the FAR.

                                       2-3

<PAGE>

                                   SCHEDULE 3
                              CONDITIONS PRECEDENT

 PART A - LESSOR CONDITIONS PRECEDENT

 The conditions precedent to Lessor's obligation to deliver and to commence the
 leasing of the Aircraft are as follows. All documents delivered to Lessor
 pursuant to this Schedule 3 will be in English:

 1.1      PRELIMINARY CONDITIONS

 Lessor will receive from Lessee, not later than two Business Days prior to the
 Scheduled Delivery Date, each of the following, satisfactory in form and
 substance to Lessor:

          (a)  OPINION(S): forms of the opinion(s) substantially in the form of
               Schedule 8 that will be issued on the Delivery Date by legal
               counsel(s) reasonably acceptable to Lessor with respect to the
               laws of the State of New York the state of the location of
               Lessee's chief executive offices and the general corporate laws
               of the State of Incorporation;

          (b)  APPROVALS: evidence of the issue of each approval, license and
               consent, if any, which is required in relation to, or in
               connection with the performance by Lessee of any of its
               obligations under the Lease;

          (c)  IMPORT: evidence that any required license, and all customs
               formalities, relating to the import of the Aircraft into the
               Habitual Base have been obtained or complied with, and that the
               import of the Aircraft into the Habitual Base is exempt from
               Taxes;

          (d)  PROCESS AGENT: a letter from the process agent appointed by
               Lessee in the Lease accepting that appointment;

          (e)  LICENSES: copies of Lessee's air transport license, air carrier
               operating certificate, air operator's certificates, including
               authority to operate the Aircraft under FAR Part 121, and a
               Certificate of Public Convenience and Necessity issued under
               Section 40102 of Title 49 of U.S.C.;

          (f)  UCC: Financing Statements with respect to the Lease and the
               Aircraft in a form reasonably acceptable to Lessor shall have
               been executed and delivered by Lessee to Lessor and duly filed
               in each jurisdiction reasonably requested by Lessor;

          (g)  LETTER OF CREDIT (if applicable): the form of the Letter of
               Credit;

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


                                      3-1
<PAGE>

 1.2      FINAL CONDITIONS

          (a)  Final Documents: Lessor shall receive on or before the Delivery
               Date each of the following:

               (i)  CERTIFICATE OF TECHNICAL ACCEPTANCE AND LEASE SUPPLEMENT NO.
                    1: each of the Certificate of Technical Acceptance and Lease
                    Supplement No. 1, dated and fully completed, and executed by
                    Lessee, and, in the case of Lease Supplement No. 1, filed
                    for recording at the FAA (together with the CTA);

               (ii) OPINIONS: a signed original (or facsimile transmission
                    thereof) of each of the opinions referred to in Section
                    1.1(a) of this Schedule, dated the Delivery Date;

               (iii) PAYMENTS: all sums due to Lessor under the Lease on or
                    before the Delivery Date, including the first payment of
                    Rent and, if applicable, the balance of the Deposit;

               (iv) INSURANCE: certificates of insurance, an opinion and
                    undertaking from Lessee's insurance broker and other
                    evidence reasonably satisfactory to Lessor that Lessee is
                    taking the required steps to ensure due compliance with the
                    provisions of the Agreement as to Insurance with effect on
                    and after the Delivery Date;

               (v)  FINANCIAL INFORMATION: the latest Financial Information of
                    Lessee requested by Lessor;

               (vi) LETTER OF CREDIT (if applicable): the Letter of Credit;

               (vii) GUARANTEE (if applicable): the Guarantee, duly executed and
                    delivered by the Guarantor, and an opinion of legal counsel
                    acceptable to Lessor in respect of the Guarantee in form and
                    substance acceptable to Lessor and its legal counsel;

               (viii) LESSEE'S MAINTENANCE PROGRAM: such information and
                    documents relating to the Lessee's Maintenance Program as
                    Lessor may reasonably require;

               (ix) FILINGS: evidence that on the Delivery Date all filings,
                    registrations, recordings and other actions have been or
                    will be taken which are necessary or advisable to ensure the
                    validity, effectiveness and enforceability of the Lease and
                    to protect the interests of Owner and, if applicable, the
                    Financing Parties in the Aircraft, any Engine or any Part
                    and in the Lease;

               (x)  FAA OPINION: evidence that there will be issued an
                    opinion of _______ or other counsel reasonably acceptable
                    to Lessor who are recognized specialists with regard to
                    FAA registration matters in a form reasonably acceptable
                    to Lessor as

                                      3-2
<PAGE>

                    to the due filing for recordation of the Lease and, if
                    applicable, the Financing Documents, (the costs for which
                    shall be paid by Lessee);

               (xi) CERTIFICATE OF LEASE TERMINATION: a certificate of lease
                    termination executed by a duly authorized officer of Lessee
                    substantially in the form of Schedule 11 acknowledging that
                    the Lease is no longer in effect with respect to the
                    Aircraft and Engines, which certificate Lessor will hold in
                    escrow to be filed at the FAA upon the expiration or other
                    termination of the Lease;

               (xii) ACKNOWLEDGEMENT AND AGREEMENT RE ASSIGNMENT (if
                    applicable): an acknowledgement of and certain agreements
                    with respect to the assignment by Lessor of this Lease to
                    Owner and Financing Parties' Representative in the form
                    previously provided to Lessee or as Owner or Financing
                    Parties' Representative may otherwise reasonably request;
                    and

               (xiii) GENERAL: such other documents as Lessor may reasonably
                    request;

          (c)  REPRESENTATIONS/WARRANTIES: the representations and warranties of
               Lessee in Schedule 2 shall be true and correct in all material
               respects, and would be true and correct in all material respects
               if repeated on Delivery; and

          (d)  NO DEFAULT: no Default shall have occurred and be continuing on
               Delivery or could reasonably be expected to result from the
               leasing of the Aircraft to Lessee under the Lease.

 PART B - LESSEE CONDITIONS PRECEDENT

 The conditions precedent to Lessee's obligation to accept and to commence the
 leasing of the Aircraft are as follows. All documents delivered to Lessee
 pursuant to this Schedule 3 will be in English.

          (a)  FINAL DOCUMENTS: Lessee shall receive on or before the Delivery
               Date for the Aircraft each of the following:

               (i)  LEASE SUPPLEMENT NO. 1: Lease Supplement No. 1, dated and
                    executed by Lessor and filed for recording at the FAA
                    (together with the CTA); and

               (ii) ACKNOWLEDGEMENT RE QUIET ENJOYMENT: if Lessee is required to
                    deliver an acknowledgement of or agreement with respect to
                    the assignment by Lessor of the Lease to Owner or Financing
                    Parties' Representative, an agreement by each such Person
                    (Owner, Financing Parties' Representative or both, as the
                    case may be) as to itself to the effect set forth in Section
                    7.1;



                                      3-3
<PAGE>

               (iii) REPRESENTATIONS/WARRANTIES: the representations and
                    warranties of Lessor in Schedule 2 shall be true and correct
                    in all material respects, and would be true and correct in
                    all material respects if repeated on Delivery; and

               (iv) DELIVERY CONDITION REQUIREMENTS: tender by Lessor of
                    delivery of the Aircraft in compliance with the Delivery
                    Condition Requirements.


                                      3-4
<PAGE>

                                   SCHEDULE 4
                 PRE-DELIVERY PROCEDURES AND DELIVERY CONDITION

                      REQUIREMENTS - PART 1 (NEW AIRCRAFT)

  1.      LICENSES

          (a)  It is the responsibility of Lessee to obtain all licenses,
               permits or approvals necessary to export or transport the
               Aircraft from the Delivery Location.

          (b)  Lessor will provide Lessee with any required data and information
               for the purposes of obtaining any such licenses, permits or
               approvals.

 2.       INSPECTION

          Except as otherwise provided in the Aircraft Lease Agreement:

          (a)  Subject to any applicable purchase agreement, Lessee may inspect
               the Aircraft (including such rights as Lessor has to be present
               and inspect, on an ongoing basis, the manufacture of the Aircraft
               and including a demonstration flight at no expense to Lessee with
               up to two (2) representatives of Lessee on the Aircraft as
               observers) to ensure that the Aircraft fulfils the Delivery
               Condition Requirements.

          (b)  If Lessee's inspection of the Aircraft shows that the Aircraft
               does not fulfil the Delivery Condition Requirements, Lessor will
               correct any defects and make the Aircraft available for
               re-inspection by Lessee provided that, in Lessor's reasonable
               opinion, it is not impracticable or prohibitively expensive to
               correct the defect.

          (c)  If Lessor notifies Lessee that it does not intend to correct the
               defect, either party may terminate the Lease, and upon such
               termination neither party shall have any further liability to any
               party under this Lease, except that Lessor shall promptly return
               to Lessee the Deposit and/or the Letter of Credit, if any, to
               Lessor.

  3.      INDEMNITY

          Lessee is responsible for and will indemnify each Indeninitee against
          all Losses arising from death or injury to any observer or any
          employee of Lessee in connection with the inspection of the Aircraft.


                                      4-1
<PAGE>

                                   SCHEDULE 4
                 PRE-DELIVERY PROCEDURES AND DELIVERY CONDITION

                      REQUIREMENTS - PART 2 (USED AIRCRAFT)

  1.      LICENSES

          (a)  It is the responsibility of Lessee to obtain all licenses,
               permits or approvals necessary to export or transport the
               Aircraft from the Delivery Location.

          (b)  Lessor will provide Lessee with any required data and information
               for the purposes of obtaining any such licenses, permits or
               approvals.

 2.       INSPECTION

          Except as otherwise provided in the Aircraft Lease Agreement:

          (a)  Subject to any applicable purchase agreement or prior lease,
               Lessee may inspect the Aircraft (including a demonstration flight
               at no expense to Lessee with up to two (2) representatives of
               Lessee on the Aircraft as observers) to ensure that the Aircraft
               fulfils the Delivery Condition Requirements.

          (b)  If Lessee's inspection of the Aircraft shows that the Aircraft
               does not fulfil the Delivery Condition Requirements, Lessor will
               correct any defects and make the Aircraft available for
               re-inspection by Lessee provided that, in Lessor's reasonable
               opinion, it is not impracticable or prohibitively expensive to
               correct the defect.

          (c)  If Lessor notifies Lessee that it does not intend to correct the
               defect, either party may terminate the Lease, and upon such
               termination neither party shall have any further liability to any
               party under this Lease, except that Lessor shall promptly return
               to Lessee the Deposit and/or the Letter of Credit, if any, to
               Lessor.

 3.       INDEMNITY

          Lessee is responsible for and will indemnify each Indemnitee against
          all Losses arising from death or injury to any observer or any
          employee of Lessee in connection with the inspection of the Aircraft.


                                      4-2


<PAGE>

                                  SCHEDULE 5

         CERTIFICATE OF TECHNICAL ACCEPTANCE - PART 1 (NEW AIRCRAFT)

This Certificate of Technical Acceptance is delivered, on the date set out
below by _______________ ("Lessee") to _________________ ("Lessor") pursuant
to the Aircraft Lease Agreement dated _______________ between Lessor and
Lessee (the "Lease"). The capitalized terms used in this Certificate shall
have the meaning given to such terms in the Lease.

DETAILS OF ACCEPTANCE

Lessee hereby confirms to Lessor that Lessee has at [ ] o'clock on this
_______________ day of _______________, at _______________, technically
accepted the following, in accordance with the provisions of the Lease:

___________ Aircraft, Manufacturer's Serial Number ___________;

___________ Engines:

Engine Number    Manufacturer's Serial Number

[To be completed at Delivery]

(each of which has 750 or more rated take off horsepower or the equivalent of
such horsepower)

Fuel Status:    Kilos/lbs ___________; and

Loose Equipment Check List: in accordance with the list signed by Lessor and
Lessee and attached hereto.

Aircraft Documents and Records: in accordance with the list signed by Lessor
and Lessee and attached hereto.

LOPA drawing attached.

HOURS AND CYCLES DATA (AS OF DELIVERY DATE)

Airframe:

Time Since New: ---------------             Cycles Since New: ---------

Landing Gear (Main and Nose)

Time Since New: [, Center]                  Cycles Since New: ----------

Engines

Position:                                   Time Since New: ------------

                                            Cycles Since New: ----------
-----------------------------------
Auxiliary Power Unit:

Number of Flight Hours/APU Hours

(as applicable) since New: -----------------


                                     5-1


<PAGE>


ACCEPTANCE:

Lessee hereby confirms that the Aircraft, Engines, Parts and Aircraft
Documents and Records are technically acceptable to it, satisfy all of the
Delivery Condition Requirements and are in the condition for delivery and
acceptance as required under the Lease.

IN WITNESS WHEREOF, Lessee and Lessor have, by their duly authorized
representative, executed this Certificate of Technical Acceptance on the date
in paragraph 1 above.

LESSEE:______________________

By:__________________________

Title:_______________________

LESSOR:______________________

By:__________________________

Title:_______________________


                                      5-2

<PAGE>


                                  SCHEDULE 5

         CERTIFICATE OF TECHNICAL ACCEPTANCE - PART 2 (USED AIRCRAFT)

This Certificate of Technical Acceptance is delivered, on the date set out
below by _________________ ("Lessee") to ______________ ("Lessor") pursuant
to the Aircraft Lease Agreement dated _____________________ between Lessor
and Lessee (the "Lease"). The capitalized terms used in this Certificate
shall have the meaning given to such terms in the Lease.

DETAILS OF ACCEPTANCE

Lessee hereby confirms to Lessor that Lessee has at [ ] o'clock on this _____
day of ___________, at ________________, technically accepted the following,
in accordance with the provisions of the Lease:

_______________ Aircraft, Manufacturer's Serial Number _________;

_______________ Engines:

Engine Number _____________ Manufacturer's Serial Number ____________________

[to be completed at Delivery]

(each of which has 750 or more rated take off horsepower or the equivalent of
such horsepower)

Fuel Status: Kilos/lbs ___________; and

Loose Equipment Check List: in accordance with the list signed by Lessor and
Lessee and attached hereto.

Aircraft Documents and Records: in accordance with the list signed by Lessor
and Lessee and attached hereto.

HOURS AND CYCLES DATA (as of Delivery Date)

Airframe:

Number of Hours since last Airframe Structural Check: ________ hours

"C" Check (or Equivalent)

Interval:_____________________

Time Since:___________________

Landing Gear Overhaul:

Number of Cycles Since Last Overhaul:


                                     5-3

<PAGE>

[___] Gear ___________________ cycles

Interval:_____________________

Engines:

Number of Hours Since Last Engine Refurbishment:

S/N ________: ________ hours

Hot Section Inspection:

Interval:_____________________

Time Since (S/N________):______________

Time Remaining to First Restriction:

Engine S/N:

Hours:________________________ Restriction:______________

Cycles:_______________________ Restriction:______________

Average Cycles in Life Limited Parts (see attached Schedule):______________

Auxiliary Power Unit:

Number of APU Hours since Last Heavy Shop Visit:

______________ hours   Date accomplished ______________

Hot Section Inspection:

Interval:_____________________

Time Since:___________________

Interior Equipment:

LOPA - attached ___________________________

Emergency drawing - attached ______________

Galley Equipment __________________________


                                      5-4


<PAGE>


ACCEPTANCE:

Lessee hereby confirms that the Aircraft, Engines, Parts and Aircraft
Documents and Records are technically acceptable to it, satisfy all of the
Delivery Condition Requirements and are in the condition for delivery and
acceptance as required under the Lease.

IN WITNESS WHEREOF, Lessee and Lessor have, by their duly authorized
representative, executed this Certificate of Technical Acceptance on the date
in paragraph 1 above.

LESSEE:

By:__________________________

Title:_______________________

LESSOR:

By:__________________________

Title:_______________________

By:__________________________

Title:_______________________


                                     5-5


<PAGE>


                                   SCHEDULE 6

                                [NOT APPLICABLE]




                                       6-1


<PAGE>


                                   SCHEDULE 7

                             INSURANCE REQUIREMENTS

1.1      TYPES OF INSURANCE

The Insurances required to be maintained are as follows:

        (a)  HULL ALL RISKS of loss or damage while flying, taxiing and on the
             ground with respect to the Aircraft on an agreed value basis for
             not less than the Agreed Value and not more than 110% of the
             Agreed Value and with a deductible not exceeding the Deductible
             Amount;

        (b)  HULL WAR AND ALLIED PERILS, being such risks excluded from the
             Hull All Risks Policy, to the fullest extent available from the
             leading international insurance markets for the Agreed Value;
             provided that, when the Aircraft is being operated in or over the
             United States or Canada, coverage may be limited to such coverage
             as is usual and customary for comparable airlines, operating
             similar equipment in similar circumstances, namely subject to the
             North American buy-back;

        (c)  ALL RISKS (including War and Allied Risk except when on the
             ground or in transit other than by air) property insurance on all
             Engines and Parts when not installed on the Aircraft for like
             kind and quality value and including engine test and running
             risks; and

        (d)  COMPREHENSIVE AIRCRAFT THIRD PARTY, 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 for any one
             occurrence (but in respect of products and personal injury
             liability, this limit may be an aggregate limit for any and all
             losses occurring during the currency of the policy). War and
             Allied Risks are also to be covered under the policy in line with
             prudent market practice for comparable airlines, operating
             similar equipment in similar circumstances.

1.2     TERMS OF HULL AND SPARES INSURANCE

All required hull and spares insurance, so far as it relates to the Aircraft,
will:

        (a)  LOSS PAYEE: name Lessor, as loss payee (without imposing on
             Lessor any obligation imposed on the insured, including the
             liability to pay any calls, commissions or premiums);

        (b)  PAYMENT OF LOSSES: Losses will be payable in Dollars to Lessor
             for all amounts up to the Agreed Value and to Lessee for any
             excess above the Agreed Value (which excess shall not exceed 10%
             of the Agreed Value), except where the insurance payment does not


                                      7-1
<PAGE>

             exceed the Damage Notification Threshold, and no Default is in
             existence, in which case the loss will be settled with and paid
             to Lessee;

        (c)  50/50 PROVISION: if separate Hull "all risks" and "war risks"
             insurances are arranged, include a 50/50 provision in accordance
             with market practice (AVS. 103 is the current London market
             language); and

        (d)  NO OPTION TO REPLACE: confirm that the insurers are not entitled
             to replace the Aircraft in the event of an insured Event of Loss
             and are not entitled to replace any Engine in the event of an
             Engine Event of Loss with respect to such Engine.

1.3     TERMS OF LIABILITY INSURANCE

All required liability insurances will:

        (a)  ADDITIONAL INSUREDS: include each Indemnitee, as additional
             insureds for its respective rights and interests, warranted, each
             as to itself only, no operational interest (without imposing on
             any such Person any obligation imposed on the insured, including
             the liability to pay any calls, commissions or premiums);

        (b)  SEVERABILITY: include a severability of interests clause which
             provides that the insurance, except for the limit of liability,
             will operate to give each insured the same protection as if there
             were a separate policy issued to each insured; and

        (c)  PRIMARY POLICY: contain a provision confirming that the policy is
             primary without right of contribution and the liability of the
             insurers will not be affected by any other insurance of which
             Lessor, any Indemnitee or Lessee has the benefit so as to reduce
             the amount payable to the additional insureds under such
             policies.

1.4     TERMS OF ALL INSURANCES

All Insurances will:

        (a)  INDUSTRY PRACTICE: be in accordance with standard industry
             practice for airlines operating similar aircraft in similar
             circumstances;

        (b)  DOLLARS: provide cover denominated in Dollars;

        (c)  WORLDWIDE: operate on a worldwide basis subject to such
             limitations and exclusions as are in line with industry practice
             obtained by prudent United States-based international air
             carriers;

        (d)  BREACH OF WARRANTY: provide that, in relation to the interests of
             each of the additional assureds, the Insurances will not be
             invalidated by any act or omission by Lessee, or any other Person
             other than the respective additional assureds seeking protection
             and shall


                                      7-2
<PAGE>

             insure the interests of each of the additional assureds
             regardless of any breach or violation by Lessee, or any other
             Person other than the respective additional assured seeking
             protection of any warranty, declaration or condition, contained
             in such Insurances;

        (e)  SUBROGATION: provide that the insurers will hold harmless and
             waive any rights of recourse or subrogation against the
             additional insureds to the extent Lessee has waived its rights
             against the additional insureds in the Lease;

        (f)  PREMIUMS: provide that the additional insureds will have no
             obligation or responsibility for the payment of any premiums due
             (but reserve the right to pay the same should any of them elect
             so to do) and that the insurers will not exercise any right of
             set-off, counter claim or other deduction, by attachment or
             otherwise, in respect of any premium due against the respective
             interests of the additional insureds other than outstanding
             premiums relating to the Aircraft, any Engine or Part the subject
             of the relevant claim;

        (g)  CANCELLATION/CHANGE: provide that the Insurances will continue
             unaltered for the benefit of the additional insureds for at least
             30 days after written notice by registered mail or telex of any
             cancellation, change, event of non-payment of premium or
             installment thereof has been sent by insurer(s) to Lessor, or
             where an insurance broker is appointed to the insurance broker
             who shall promptly send on such notice to Lessor, except in the
             case of war risks for which 7 days (or such lesser period as is
             or may be customarily available in respect of war risks or allied
             perils) will be given, or in the case of war between the 5 great
             powers or nuclear peril for which termination is automatic; and

        (h)  [NOT APPLICABLE)

        (i)  [INTENTIONALLY OMITTED.]

        (j)  INDEMNITIES: accept and insure the indemnity provisions of the
             Lease to the extent of the risks covered by the policies.

1.5     DEDUCTIBLES

Lessee shall be responsible for any and all deductibles under the Insurances.

1.6     APPLICATION OF INSURANCE PROCEEDS

The Insurances will be endorsed to provide for payment of proceeds as follows:

        (a)  EVENT OF LOSS: all insurance payments up to the Agreed Value
             received as the result of an Event of Loss occurring during the
             Term will be paid to Lessor as loss payee and any amount in
             excess of the Agreed Value (which excess shall not exceed 10% of
             the Agreed Value) shall be paid to Lessee;


                                      7-3
<PAGE>

        (b)  EXCEEDING DAMAGE NOTIFICATION THRESHOLD: all insurance proceeds
             of any damage or loss to the Aircraft, any Engine or any Part
             occurring during the Term not constituting an Event of Loss and
             in excess of the Damage Notification Threshold will be paid to
             the appropriate repair facility, and applied in payment (or paid
             to Lessee and/or Lessor as reimbursement) for repairs or
             replacement property upon Lessor being satisfied that the repairs
             or replacement have been effected in accordance with the Lease.

        (c)  BELOW DAMAGE NOTIFICATION THRESHOLD: insurance proceeds in
             amounts below the Damage Notification Threshold shall be paid by
             the insurer directly to Lessee;

        (d)  LIABILITY PROCEEDS: all insurance proceeds in respect of third
             party liability will be paid by the insurers to the relevant
             third party in satisfaction of the relevant liability or to
             Owner, Lessor, Financing Partners' Representative or Lessee, as
             the case may be, in reimbursement of any payment so made;

        (e)  DEFAULT: notwithstanding any of the foregoing paragraphs, 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
             Lessor, Owner or Financing Parties' Representative, as the case
             may be, or retained to be applied toward payment of any amounts
             which may be or become payable by Lessee in such order as Lessor
             or Owner, as the case may be, may elect until such time as no
             Default is continuing and then applied as described above; and to
             the extent that insurance proceeds are paid to Lessee, Lessee
             agrees to hold such proceeds in trust and comply with the
             foregoing provisions and apply or pay over such proceeds as so
             required.

1.7  UNITED STATES GOVERNMENTAL INDEMNITY

Notwithstanding any of the foregoing paragraphs, in the event of a Permitted
Sub-Lease to, or a requisition of use by, the United States or any
Governmental Entity whose obligations have the full faith and credit of the
federal Government of the United States, Lessor agrees to accept in lieu of
insurance required hereunder indemnification or insurance from the United
States or such a Governmental Entity in a form reasonably acceptable to
Lessor and Owner and against such risks and in such amounts and on such terms
such that when added to the Insurance maintained by Lessee, Lessee is in full
compliance with the requirements of Section 9 and this Schedule.

                                      7-4
<PAGE>

                                   SCHEDULE 8

                 FORM OF LESSEE'S AND GUARANTOR'S LEGAL OPINION

[Lessor]

[Owner]

[Financing Parties' Representative]

Ladies and Gentlemen:

1.   You have asked us to render an opinion in connection with the transaction
     governed by or subject to, inter alia, the following documents.

     (a)  the Lease as defined below;

     (b)  the [Articles/Certificate of Incorporation and By-laws]* of Lessee;
          and

          [*Counsel should amend this reference as necessary to describe the
          actual constitutional documents of Lessee].

     (c)  all other documents, approvals and consents of whatever nature and
          wherever kept which it was, in our judgement and to our knowledge,
          necessary or appropriate to examine to enable us to give the opinion
          expressed below.

          Words and expressions used and not otherwise defined herein will
          bear the same meanings as defined in an Aircraft Lease Agreement
          dated __, _________ between ______________ ("Lessor") and
          ______________ ("Lessee") in respect of one ___________________
          aircraft with manufacturer's serial number __________ together with
          the _______ installed _______ engines (the "Aircraft"). As used
          herein the term "Lease" means and includes the Aircraft Lease
          Agreement which incorporates the Common Terms Agreement (as defined
          therein) and Lease Supplement No.____. Also, for the purposes of
          this opinion, the term "Lease" includes the Acknowledgment and
          Agreement dated as of the date hereof executed by Lessee in favor
          of Owner and Financing Parties' Representative.

2.   Having considered the documents listed in paragraph 1 above, and having
     regard to the relevant laws of __________ we are pleased to advise that in
     our opinion: -

     (a)  Lessee is a company duly incorporated and in good standing under the
          laws of _______________, and is qualified to do business as a foreign
          corporation in each jurisdiction where failure to so qualify would
          have a materially adverse effect on Lessee's business or its ability
          to perform its obligations under the Lease;

     (b)  Lessee has the corporate power to enter into and perform, and has
          taken all necessary corporate action to authorize the entry into, and
          the execution, delivery and performance by it of, the Lease and the
          transactions contemplated by the Lease;

                                       8-1


<PAGE>


     (c)  the entry into and performance by Lessee of, and the transactions
          contemplated by, the Lease do not and will not (x) conflict with any
          laws binding on Lessee, (y) conflict with the [Articles/Certificate of
          Incorporation or By-laws] of Lessee; or (z) conflict with or result in
          default under any agreement or instrument which is binding upon Lessee
          or any of its assets or result in the creation of any Security
          Interest on any of its assets;

     (d)  no authorizations, consents, licenses, approvals and registrations
          (other than those which have been obtained and of which copies are
          attached hereto) are necessary or desirable to be obtained from any
          governmental or other regulatory authorities in the United States or
          any other jurisdiction having jurisdiction over Lessee, its operations
          or its properties to enable Lessee (x) to enter into and perform the
          transactions contemplated by the Lease, (y) to operate the Aircraft in
          the United States and on international flights for the transport of
          fare-paying passengers, or (z) to make the payments provided for in
          the Lease;

     (e)  except for the filing and recordation of [a bill of sale in favor of
          the Owner] the Financing Documents and the Lease with the FAA (which
          filing has been duly made on or before this date) and the filing
          of Financing Statements in________________, it is not necessary or
          desirable, to ensure the priority, validity and enforceability of
          all the obligations of Lessee under the Lease, as against Lessee
          and all third parties, or to perfect the interests of Lessor,
          Owner or Financing Parties' Representative in and to the Aircraft
          or the Lease, that the Lease be filed, registered, recorded or
          notarized in any public office or elsewhere or that any other
          instrument be signed, delivered, filed, registered or recorded,
          that any tax or duty be paid or that any other action whatsoever
          be taken;

     (f)  the Lease has been duly executed and delivered on
          behalf of Lessee and constitutes the legal, valid and binding
          obligation of Lessee, enforceable against Lessee in accordance
          with its terms;

     (g)  [NOT APPLICABLE];

     (h)  there is no applicable usury or interest limitation law in
          ___________ applicable to payments in accordance with the Lease;

     (i)  there are no registration, stamp or other taxes or duties of any kind
          payable in ___________________ in connection with the execution,
          performance or enforcement by legal proceedings of the Lease or the
          Guaranty;

     (j)  the choice of New York law to govern the Lease will be upheld as a
          valid choice of law in any action in the courts of _________________;

     (k)  the consent to the jurisdiction by Lessee contained in the Lease is
          valid and binding on Lessee;

                                       8-2


<PAGE>


     (l)  Lessee is a Certificated Air Carrier;

     (m)  Lessee is a "citizen of the United States" as defined in 49 U.S.C.
          Section 40102(a)(15);

     (n)  Lessee's "chief executive office" (as referenced in the Uniform
          Commercial Code adopted in the State of _______________________)
          is __________________________;

     (o)  Lessor will not violate any law or regulation of the States of ______
          or New York or any federal laws or regulations of the United States
          of America and Lessor will not become liable to income tax in the
          State of _______________ solely by reason of Lessor entering into the
          Lease with Lessee or performing its obligations thereunder or
          enforcement of its rights thereunder;

     (p)  It is not necessary for Lessor to establish a place of business or be
          licensed or qualified to do business in the State of _____________ or
          New York in order for Lessor to enforce any provisions of the Lease;
          and

     (q)  Lessor is entitled to the benefits of Section 1110 of Title 11 of the
          U.S.C. with respect to the Aircraft and the Lease.

                                               Very truly yours,





[If there is a Guarantor/Guarantee the opinion must also include paragraphs (a),
(b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (o) and (p) revised to be
applicable to the Guarantor/Guarantee]

                                       8-3


<PAGE>


                                   SCHEDULE 9
                                EVENTS OF DEFAULT

Each of the following events or conditions constitutes an Event of Default:

    (a)  NON-PAYMENT: Lessee fails to make any payment of Rent, Supplemental
         Rent or any other amount payable under the Lease on the due date and
         such failure continues for three (3) Business Days or more; or

    (b)  INSURANCE: Lessee fails to comply with any provision of Section 9
         (other than the requirement to provide Lessor with evidence of renewal
         of any policy on or before the renewal date where the policy has
         actually been renewed on or prior to such date) or Schedule 7, or any
         insurance required to be maintained under the Lease is cancelled or
         terminated, or a notice of cancellation is given in respect of any
         such insurance; or

    (c)  BREACH: (i) Lessee fails to provide Lessor with evidence of renewal of
         any insurance policy on or before the renewal date for that policy
         where the policy has actually been renewed on or prior to such date
         and such failure continues for 24 hours after notice from Lessor to
         Lessee of such failure to comply; or (ii) Lessee fails to comply with
         any other provision of the Lease not referenced in this Schedule 9
         and, if such failure is in the opinion of Lessor capable of remedy,
         such failure continues for 30 days after notice from Lessor to Lessee;
         or

    (d)  REPRESENTATION: any representation or warranty made (or deemed to be
         repeated) by Lessee in or pursuant to the Lease or in any document
         executed by Lessee in connection with or pursuant to the Lease or in
         any document or in any certificate is or proves to have been incorrect
         in any material respect when made or deemed to be repeated; or

    (e)  CROSS-DEFAULT:

         (i)  any amount in respect of Financial Indebtedness of Lessee or any
              Lessee Affiliate having a principal amount in excess of Five
              Hundred Thousand Dollars ($500,000) is not paid when due;

         (ii) any such Financial Indebtedness becomes due or capable of being
              declared due prior to the date when it would otherwise have
              become due; or becomes due as a result of an event of default or
              termination event, howsoever described, on the part of Lessee or
              any other Person prior to the date when it would otherwise have
              become due; or

         (iii) the security for any such Financial Indebtedness becomes
              enforceable; or

                                       9-1


<PAGE>


         (iv) any event of default or termination event, howsoever described,
              occurs under any Other Agreement, or any other lease, hire
              purchase, conditional sale or credit sale agreement of Lessee or
              any Lessee Affiliate; or

    (f)  APPROVALS: any consent, authorization, license, certificate or
         approval of or registration with or declaration to any Government
         Entity required to be obtained or maintained by Lessee in connection
         with the Lease and/or the operation of the Aircraft (including any
         airline license or air transport license including authority to
         operate the Aircraft under Part 121 of the FARs, a Certificate of
         Convenience and Necessity issued under the Act and any air carrier
         operating certificate issued under the Act) is modified in a
         materially prejudicial manner or is withheld, or is revoked,
         suspended, cancelled, withdrawn, terminated or not renewed, or
         otherwise ceases to be in full force; or

    (g)  BANKRUPTCY, ETC:

         (i)  Lessee or any Lessee Affiliate consents to the appointment of a
              custodian, receiver, trustee or liquidator of itself or all or a
              material part of its property or its consolidated property, or
              Lessee or any Lessee Affiliate admits in writing its inability
              to, or is unable to, or does not, pay its debts generally as they
              come due, or makes a general assignment for the benefit of
              creditors, or Lessee or any Lessee Affiliate files a voluntary
              petition in bankruptcy or voluntary petition seeking
              reorganization in a proceeding under any bankruptcy or insolvency
              laws (as now or hereafter in effect), or an answer admitting the
              material allegations of a petition filed against Lessee in any
              such proceeding, or Lessee or any Lessee Affiliate by voluntary
              petition, answer or consent seeks relief under the provisions of
              any other bankruptcy, insolvency or other similar law providing
              for the reorganization or winding-up of debtors, or provides for
              an agreement, composition, extension or adjustment with its
              creditors, or any board of directors or shareholder action is
              taken by Lessee or any Lessee Affiliate in furtherance of any of
              the foregoing, whether or not the same is fully effected or
              accomplished; or

         (ii) An order, judgement or decree is entered by any court appointing,
              without the consent of Lessee or any Lessee Affiliate, a
              custodian, receiver, trustee or liquidator of or sequestering any
              of Lessee's or any Lessee Affiliate's property, and any such
              order, judgement or decree of appointment or sequestration
              remains in effect, undismissed, unstayed or unvacated for a
              period of 30 days after the date of entry thereof or at any time
              an order for relief is granted; or

         (iii) An involuntary petition against Lessee or any Lessee Affiliate
              or other proceeding under the United States Federal Bankruptcy
              laws or other insolvency laws (as now or hereafter in effect) is
              filed and is not withdrawn or dismissed

                                       9-2

<PAGE>


              within 30 days thereafter or at any time an order for relief is
              granted in such proceeding, or if, under the provisions of any
              law providing for reorganization or winding-up of debtors which
              may apply to Lessee or any Lessee Affiliate, any court of
              competent jurisdiction assumes jurisdiction over, or custody or
              control of, Lessee or any Lessee Affiliate or of all or any
              material part of Lessee's or Lessee Affiliates' property, and
              such jurisdiction, custody or control remains in effect,
              unrelinquished, unstayed or unterminated for a period of 30 days
              or at any time an order for relief is granted in such proceeding;
              or

         (h)  SUSPENSION OF BUSINESS: Lessee suspends or ceases or takes
              substantive steps to suspend or cease to carry on all or a
              material part of its business as a Certificated Air Carrier
              (other than as a result of a labor dispute with Lessee's
              employees); or

         (i)  RIGHTS AND REMEDIES: Lessee or any other Person claiming by or
              through Lessee challenges the existence, validity, enforceability
              or priority of the Lease or the rights of Lessor as lessor or of
              Owner as owner in respect of the Aircraft or Financing Parties'
              Representative as holder of a first priority Security Interest in
              the Aircraft and the Lease; or

         (j)  CHANGE OF CONTROL: any single person or group of persons acquire
              control of Lessee or Guarantor without the previous consent in
              writing of Lessor; or

         (k)  DELIVERY: Lessee fails to comply with its obligation under
              Section 4 to accept delivery of the Aircraft or Lessee fails to
              comply with its obligations under Section 2 of Part III of
              Schedule A to the Aircraft Lease Agreement; or

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

         (m)  LETTER OF CREDIT:

              (i)  the issuer of the Letter of Credit (if any) fails to make
                   any payment under that Letter of Credit when due; or

              (ii) any such Letter of Credit is not in full force or, for any
                   reason ceases to constitute the legal, valid and binding
                   obligation of the issuer; or

              (iii) any of the events listed in paragraph (g) above applies to
                   such issuer (references in those sub-paragraphs to Lessee
                   being deemed to be to the issuer); or

                                       9-3


<PAGE>


              (iv) where applicable, any Letter of Credit is not renewed,
                   extended or reissued within the time, or replaced when,
                   required by Section 5.14; or

              (v)  any consent, authorization, license, certificate or approval
                   of or registration with or declaration to any Governmental
                   Entity required to be obtained or maintained by the issuer
                   of the Letter of Credit in connection with the Letter of
                   Credit is modified in a materially prejudicial manner or is
                   withheld, revoked, suspended, cancelled, withdrawn,
                   terminated or not renewed, or otherwise ceases to be in full
                   force; or

              (vi) and each reference in this paragraph (m) to "the issuer"
                   shall include a reference to any confirming bank for the
                   Letter of Credit

         (n)  REDELIVERY: Lessee fails to return the Aircraft to Lessor on the
              Expiry Date in accordance with Section 12; or

         (o)  LITIGATION: a judgement for the payment of money not covered by
              insurance in excess of Six Hundred Fifty Thousand Dollars
              ($650,000) (or the equivalent thereof in other currencies) shall
              be rendered against Lessee or any Lessee Affiliate and the same
              shall remain undischarged for a period of 30 days, unless during
              such period, execution of such judgement shall have been
              effectively stayed by agreement of the parties involved or by
              court order or such judgement shall have been adequately bonded;
              or

         (p)  GUARANTEE:

              (i)  any representation or warranty made by Guarantor is or
                   proves to have been incorrect in any material respect when
                   made or deemed to be repeated or Guarantor fails to make any
                   payment or comply with any other obligation under the
                   Guarantee when due; or

              (ii) the Guarantor repudiates, revokes or claims that it has no
                   further obligations under the Guarantee or the Guarantee
                   ceases to be in full force or, for any reason, ceases to be
                   the legal, valid and binding obligation of Guarantor; or

              (iii) any of the events listed in paragraph (f)(i) or (g) above
                   occurs in respect of Guarantor (and for purposes of this
                   paragraph(s), references in those paragraphs to Lessee shall
                   be deemed to be references to Guarantor); OR

         (q)  UNLAWFUL: it becomes unlawful for Lessee to perform any of its
              obligations under the Lease or the Lease becomes wholly or partly
              invalid or unenforceable; or

         (r)  TRANSFER/LESSEE REQUIREMENTS: Lessee makes or permits any
              assignment or transfer of the Lease, or any interest herein, or
              of the right to possession of the Aircraft, the

                                       9-4


<PAGE>

              Airframe, or any Engine, or any obligations under the Lease, or
              Lessee subleases the Aircraft, in any case except as expressly
              permitted in the Lease; or Lessee breaches any provision of
              Section 8.7; or

         (s)  ENGINE LOSS: Lessee fails to timely comply with its obligations
              under Sections 8.11(a) and 8.11(b) with respect to an Engine
              Event of Loss.

         (t)  OTHER: Such other events, if any, as may be specified in the
              Aircraft Lease Agreement.

                                       9-5


<PAGE>


                                   SCHEDULE 10

                                [NOT APPLICABLE]























                                      10-1




<PAGE>


                                   SCHEDULE 11

                      FORM OF LEASE TERMINATION CERTIFICATE


 The undersigned hereby certify that the Aircraft Lease Agreement dated as of
 ____________________, _________ between the undersigned Lessor and undersigned
 Lessee, and as further described in the Appendix attached hereto, has
 terminated (except as described in Section 15.1 of the Common Terms Agreement
 incorporated therein) and the aircraft and aircraft engines covered thereby
 are no longer subject to the terms thereof. This certificate may be executed
 in one or more counterparts each of which when taken together shall constitute
 one and the same instrument.



          DATED this ____________ day of __________________, ___________



 LESSOR                                   LESSEE

 [INSERT LESSOR'S NAME]                   [INSERT LESSEE'S NAME]





 By: _____________________________        By: ______________________________

 Title: __________________________        Title: ___________________________



                                      11-1


<PAGE>



                                   SCHEDULE 12

                         FORM OF LEASE SUPPLEMENT NO. 1


               LEASE SUPPLEMENT NO. 1, dated ________________, ______,
      between _______________, [a corporation organized under the laws
      of ______________] [, not in its individual capacity, but solely as
      owner trustee] ("Lessor"), and __________________________, a corporation
      organized  under the laws of the ___________________("Lessee").

              Lessor and Lessee have previously entered into that certain
      Aircraft Lease Agreement dated as of __________________, including the
      Common Terms Agreement as defined therein (collectively, herein referred
      to as the "Agreement" and the defined terms therein being hereinafter
      used with the same meaning). The Agreement provides for the execution and
      delivery from time to time of a Lease Supplement substantially in the
      form hereof for the purpose of leasing the aircraft described below under
      the Agreement as and when delivered by Lessor to Lessee in accordance with
      the terms thereof.

              The Agreement and this Lease Supplement relate to the Aircraft,
      Engines and Parts as more precisely described below and in the Certificate
      of Technical Acceptance. A counterpart of the Agreement is attached hereto
      and this Lease Supplement and the Agreement shall form one document.

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

      1.  Lessor hereby delivers and leases to Lessee under and pursuant to the
      Agreement and Lessee hereby accepts, acknowledges receipt of possession
      and leases from Lessor under and pursuant to the Agreement, that certain
      ___________ aircraft, and the ___________ (___) ________________________
      Engines (each of which Engines has 750 or more rated takeoff horsepower
      or the equivalent of such horsepower) described in Schedule 1 hereto,
      together with the Aircraft Documents and Records described in the
      Agreement (the "Delivered Aircraft").

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

      3.  The Term for the Delivered Aircraft shall commence on the Delivery
      Date and shall end on the Expiry Date, with respect to which the
      Scheduled Expiry Date shall be [insert date].

      4.  The amount of Rent for the Delivered Aircraft is set forth in
      Schedule B to the Agreement.


                                      12-1


<PAGE>


      5.  Lessee hereby confirms to Lessor that (i) the Delivered Aircraft and
      each delivered Engine have been duly marked in accordance with the terms
      of Section 8.6(a) of the Agreement, (ii) the Aircraft is insured as
      required by the Agreement, (iii) the representations and warranties of
      Lessee referred to in Section 2.1 of the Agreement are hereby repeated
      with effect as of the date first above written, (iv) having inspected the
      Delivered Aircraft, Lessee acknowledges that the Delivered Aircraft
      satisfies all conditions required for Lessee's acceptance of delivery as
      set forth in the Agreement, and (v) the execution and delivery of this
      Lease Supplement signifies absolute and irrevocable acceptance by Lessee
      of the Delivered Aircraft for all purposes hereof and of the Agreement.

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

      7.  This Lease Supplement may be executed in any number of counterparts;
      each of such counterparts, shall for all purposes be deemed to be an
      original; and all such counterparts shall together constitute but one and
      the same Lease Supplement.

              IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
      Supplement No. 1 to be duly executed as of the day and year first above
      written.


      LESSOR,                                       LESSEE,


      [INSERT LESSOR'S NAME]                        [INSERT LESSEE'S NAME]




      By:_______________________                    By: _______________________

      Name: ____________________                    Name: _____________________

      Title: ___________________                    Title:_____________________



                                      12-2


<PAGE>


                                   SCHEDULE 13

                            FORM OF LETTER OF CREDIT



                      IRREVOCABLE STANDBY LETTER OF CREDIT

      BENEFICIARY:
      Aviation Financial Services, Inc.
      Attention: _______________
      201 High Ridge Road
      Stamford, CT 06927

      Gentlemen:

              We hereby establish our irrevocable Standby Letter of Credit No.
      S/B dated __________________ dated February ___, 2000 (this "Letter of
      Credit") in your favor in connection with the leasing of one Boeing
      737-700 aircraft by Aviation Financial Services Inc. ("Beneficiary") to
      Aloha Airlines, Inc. ("Customer"). All bank charges relating to this
      Letter of Credit are for the account of Customer.

               At the request of Customer for account of same, we hereby
      establish this Irrevocable Standby Letter of Credit No. S/B ______ (this
      "Letter of Credit") to authorise you to draw on First Hawaiian Bank,
      Honolulu, Hawaii an amount or amounts not exceeding in aggregate
      US$___________ (__________ United States Dollars) upon receipt by us of
      the following demand certificate from Beneficiary, accompanied by a copy
      of this Letter of Credit (which certificate and copy may be presented to
      us by telecopy at telecopy no. __________________):

           "The undersigned are two authorised signatories of Aviation Financial
            Services Inc ("Beneficiary"). Beneficiary hereby draws upon the
            Irrevocable Standby Letter of Credit No. S/B ____________ of first
            Hawaiian Bank, Honolulu, Hawaii dated ________________. Beneficiary
            hereby instructs you to transfer US$_______ (_____ United States
            Dollars) to Bankers Trust Company, New York, ABA 021 001 033, For
            the account of:  Aviation Financial Services Inc., Account Number:
            50-259-862, immediately, with telex confirmation to us of such
            payment."

              We hereby agree with you that drawings drawn under and in
      compliance with the terms of this Letter of Credit received on or prior to
      the first anniversary of the date of this Letter of Credit (as the same
      may be extended pursuant to the terms hereof, the "Expiration Date") will
      be duly honoured upon receipt by us of such a demand certificate. Partial
      drawings are permitted. This Letter of Credit shall be automatically
      renewed for successive one year periods until at least ________________,
      unless at least thirty (30) business days prior to the then current
      Expiration Date, we notify you in writing by certified mail, return
      receipt requested, at the address set forth above or such other address
      as Beneficiary may have notified to us in writing, of our election not to
      renew this Letter of Credit beyond the then current Expiration Date. In
      the event of such non-


                                      13-1


<PAGE>


      renewal, the full amount of this Letter of Credit may be drawn down upon
      presentation of a demand certificate as provided above.

              If a drawing by you hereunder does not, in any instance, conform
      to the provisions of this Letter of Credit, we shall give you prompt
      notice that the purported drawing was not effected in accordance with such
      provisions, stating the reasons therefor, and that we are holding any
      documents presented in connection therewith at your disposal or are
      returning the same to you, as we may elect.

              This Letter of Credit is transferable and constitutes an
      obligation to make payment against documents. Except to the extent the
      express provisions hereof conflict, this Letter of Credit is issued
      subject to the Uniform Customs and Practice for Documentary Credits (1993
      Revision) International Chamber of Commerce Publication No. 500 ("Uniform
      Customs").

                                             Sincerely,

                                             FIRST HAWAIIAN BANK



      _____________________________          _________________________________
      Authorised Signature                   Authorised Signature



                                      13-2



<PAGE>


                                   SCHEDULE 14

                             MAINTENANCE PERFORMERS

Air New Zealand Limited
Repair Station #ANZZ188C
Christchurch

Aviation Management Systems
Repair Station #ZM7R567Y
Sky Harbor Int'l Airport

Aviation Management Systems
Repair Station #D8LR566Y
Goodyear, AZ

BFGoodrich Aerospace MRO
Repair Station #HN6R593N
Everett, WA

Conair Aviation Ltd.
Repair Station #AMO 10-75
Abbotsford, B.C.

Spar Aerospace Limited
Repair Station #AMO 03-57
Canada









                                      14-1


<PAGE>


                                  SCHEDULE 15

                            FORM OF TECHNICAL REPORT

                             AIRCRAFT SPECIFICATIONS
                                    WORKSHEET

<TABLE>
<CAPTION>
GENERAL                                    WEIGHTS
<S>                     <C>                <C>                       <C>
Registration:           __________         Max. Taxi Weight:         __________
Manufacturer:           __________         Max. Take Off Weight:     __________
Aircraft Type:          __________         Max. Landing Weight:      __________
Serial Number:          __________         Max. Zero Fuel Weight:    __________
Line Number:            __________         Operating Empty Weight:   __________
Date of Manufacture:    __________         Fuel Capacity:            __________
Aircraft TT:            __________                                   __________
Aircraft TC:            __________         UTILIZATION               __________
Data as of:             __________         Hours:                    __________
                                           Cycles:                   __________

</TABLE>

INSPECTIONS

<TABLE>
-------------------------------------------------------------------------------
  <S>               <C>       <C>      <C>           <C>              <C>
  TYPE OF CHECK         LAST ACCOMPLISHED                               TIME
                    DATE      TIME     CYCLE         INTERVAL         REMAINING
-------------------------------------------------------------------------------
       C
-------------------------------------------------------------------------------
</TABLE>
__ Any major checks coming due in the next 3 months.

ENGINES                                      MFG:       ___________

                                             TYPE:      ___________

<TABLE>
-------------------------------------------------------------------------------
 <S>                <C>           <C>         <C>         <C>           <C>
 POSITION           S/N           TT          TC          TSO           ICO
-------------------------------------------------------------------------------

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

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

</TABLE>



                                      15-1


<PAGE>


                             AIRCRAFT SPECIFICATIONS
                                    WORKSHEET

REGISTRATION:   _________________

AUXILIARY POWER UNIT

                    MFG:       ___________

                    TYPE:      ___________


       S/N                TT                 TC                   TSO
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

      LANDING GEAR

              OVERHAUL INTERVAL

                    MAIN:       ___________

                    NOSE:       ___________
<TABLE>
-------------------------------------------------------------------------------
 <S>       <C>     <C>    <C>   <C>     <C>      <C>               <C>
           S/N     TT     TC    TSO     CSO         TIME            CYCLES
                                                 REMAINING         REMAINING
                                                  TO O/H            TO LIFE
        -----------------------------------------------------------------------
 NLG
        -----------------------------------------------------------------------
 LMG
        -----------------------------------------------------------------------
 RMG
        -----------------------------------------------------------------------
</TABLE>

INTERIOR EQUIPMENT

<TABLE>
<S>                                    <C>                <C>
                                       QTY                LOCATION & TYPE
                               -----------------------------------------------
GALLEYS:
                               -----------------------------------------------
LAVATORIES:
                               -----------------------------------------------
AIR STAIRS:
                               -----------------------------------------------
PSGR. SEATS:
                               -----------------------------------------------

</TABLE>
                                      15-2


<PAGE>

                             AIRCRAFT LEASE NOVATION
                             AND AMENDMENT AGREEMENT

                          DATED AS OF FEBRUARY 28, 2001

                        AVIATION FINANCIAL SERVICES INC.
                               AS EXISTING LESSOR

                              ALOHA AIRLINES, INC.
                                    AS LESSEE

                           CASTLE HARBOUR LEASING INC.
                                  AS NEW LESSOR

                                  IN RESPECT OF
                AIRCRAFT LEASE AGREEMENT DATED AS OF MAY 12, 2000
              RELATING TO BOEING 737-700 AIRCRAFT BEARING MSN 28640


<PAGE>


                                                              EXECUTION VERSION

   THIS AGREEMENT is made as of February 28, 2001

   BETWEEN:

   AVIATION FINANCIAL SERVICES INC., a corporation incorporated under the laws
   of the State of Delaware having its principal place of business and chief
   executive office at 201 High Ridge Road, Stamford, Connecticut 06927.
   ("EXISTING LESSOR");

   ALOHA AIRLINES, INC., a corporation incorporated under the laws of the State
   of Delaware with its principal place of business at 371 Aokea Street,
   Honolulu, Hawaii 96819 and its chief executive office at 500 Ala Moana Blvd.,
   Two Waterfront Tower, Suite 500, Honolulu, Hawaii 96813 ("LESSEE"); and

   CASTLE HARBOUR LEASING INC., a corporation incorporated under the laws of the
   State of Delaware and having its principal office at c/o GE Capital Aviation
   Services, Inc., 201 High Ridge Road, Stamford, CT 06927, U.S.A. ("NEW
   LESSOR").

   WHEREAS:

    (A)     By Aircraft Lease Agreement, dated as of May 12, 2000, between
            Lessee and Existing Lessor which incorporates by reference that
            certain Aircraft Lease Common Terms Agreement dated as of May 12,
            2000 executed by General Electric Capital Corporation and Lessee, as
            the same has been amended by that certain letter agreement dated May
            12, 2000 entered into between Existing Lessor and Lessee
            (collectively, and as amended, the "LEASE"), Existing Lessor has
            agreed to lease to Lessee and Lessee has agreed to take on lease one
            Boeing Model 737-700 aircraft identified in such Lease as having
            manufacturer's serial number 28640 (the "AIRCRAFT") on the terms and
            subject to the conditions contained in the Lease.

    (B)     The parties have agreed that New Lessor should assume the rights,
            liabilities and obligations of Existing Lessor under the Lease, and
            that Existing Lessor should be released from its liabilities and
            obligations under the Lease on the terms and conditions set out
            herein.

   NOW THEREFORE in consideration of the provisions and mutual covenants herein
   contained and for other good and valuable consideration, the receipt and
   sufficiency of which are hereby acknowledged, IT IS AGREED as follows:

    1.      INTERPRETATION

    1.1     DEFINITIONS: In this Agreement, the following expressions shall have
            the following meanings:

            "EFFECTIVE TIME" bears the meaning ascribed to it in Clause 5; and


<PAGE>


            "NOVATED LEASE" means an agreement between New Lessor and Lessee on
            the same terms as the Lease, subject to the amendments specified in
            this Agreement.

    1.2     DEFINED TERMS IN LEASE: Capitalised terms used, but not defined, in
            this Agreement shall have the respective meanings assigned to them
            in the Lease.

    1.3     INTERPRETATION: In this Agreement, unless the context otherwise
            requires:

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

            (b)      a reference to a person includes its successors and
                     permitted assigns;

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

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

   2.       NOVATION

    2.1     RELEASES, ASSIGNMENTS AND ASSUMPTIONS: As of and with effect from
            the Effective Time, and subject to the provisions of Clauses 2.2 and
            2.3:

            (a)      Existing Lessor releases Lessee from Lessee's obligations,
                     duties and liabilities under the Lease, and Lessee agrees
                     that it has no further rights against Existing Lessor under
                     the Lease;

            (b)      Lessee releases Existing Lessor from Existing Lessor's
                     obligations, duties and liabilities under the Lease, and
                     Existing Lessor agrees that it has no farther rights
                     against Lessee under the Lease;

            (c)      Existing Lessor assigns to New Lessor, and New Lessor
                     assumes, the rights and obligations, duties and liabilities
                     of Existing Lessor under the Lease, and New Lessor agrees
                     to perform the obligations of the Lessor under the Novated
                     Lease;

            (d)      Lessee consents to and accepts the assumption by New Lessor
                     of Existing Lessor's rights and obligations, duties and
                     liabilities under the Lease and New Lessor's agreement to
                     perform the obligations of the Lessor under the Novated
                     Lease;

            (e)      Lessee agrees that it will not assert against New Lessor
                     any claim or defence which it may have or have had against
                     Existing Lessor under the Lease prior to the Effective
                     Time; and

            (f)      Lessee acknowledges that its obligations, duties and
                     liabilities under the Novated Lease are to New Lessor, and
                     agrees with New Lessor to perform the obligations of Lessee
                     under the Novated Lease.

            Each of the foregoing events and agreements is conditional upon the
            happening of the others and shall occur simultaneously.


<PAGE>


    2.2      EFFECT: Existing Lessor, New Lessor and Lessee accordingly agree
             that, as and with effect from the Effective Time, the Lease is
             novated and constitutes an agreement between New Lessor as lessor
             and Lessee as lessee on the terms and conditions of the Novated
             Lease.

    2.3      PRE-EFFECTIVE TIME RIGHTS AND REMEDIES: Without prejudice to the
             rights of New Lessor under the Novated Lease and in consideration
             of the payment by Existing Lessor to Lessee of US$5 (receipt and
             sufficiency of which are hereby acknowledged), New Lessor, Lessee
             and Existing Lessor agree that Existing Lessor and Lessee shall
             have the same rights and remedies against each other pursuant to
             this Clause 2.3 as each would have had under the Lease in respect
             of any losses, liabilities or claims suffered or incurred or
             brought against or payments due to each other in respect of or
             attributable to the period of the Term prior to the Effective Time
             as if Existing Lessor had remained the Lessor under the Lease, and
             New Lessor shall not be responsible to Lessee in respect of any
             such losses, liabilities or claims, nor shall Lessee exercise any
             set-off or counterclaim in respect of any such losses, liabilities
             or claims against New Lessor.

    3.       LEASE AMENDMENTS

    3.1     AMENDMENTS: As of, and with effect from, the Effective Time the
            Lease shall be (and it is hereby) amended as follows:

            (a)      the expressions THIS LEASE and THE LEASE shall be
                     construed, wherever they appear in the Lease and wherever
                     the context so permits, as if they referred to the Novated
                     Lease;

            (b)      the expression LESSOR shall be construed, wherever it
                     appears in the Lease, as if it referred to New Lessor in
                     place of Existing Lessor (other than Recital B to the
                     Aircraft Lease Agreement, in which case the expression
                     LESSOR shall be construed to mean General Electric Capital
                     Corporation, a New York corporation);

            (c)      Clause 3.4 of the Aircraft Lease Agreement shall be amended
                     and restated in its entirety as follows:

             LESSOR'S BANK ACCOUNT: For the purposes of Clause 5.5 of the Common
             Terms Agreement, Lessor's bank account and wire transfer
             particulars, to which all payments to Lessor shall be made, are at
             the date hereof:

                     Bankers Trust Company
                     New York
                     ABA 021001033

                     For the account of:
                     Castle Harbour Leasing Inc
                     Account Number: 50-263-968

    3.2      REFERENCES IN OTHER DOCUMENTS: With effect from the Effective Time,
             all references to the Lease contained in any documents delivered
             under or pursuant to the Lease shall be construed as references to
             the Novated Lease (as it may be further amended from time to time).

                                                          3


<PAGE>


    4.       DEPOSIT

            As of the Effective Time the portion of the Deposit actually paid by
            Lessee as of the date hereof ($286,400) shall be transferred by
            Existing Lessor to New Lessor, and:

            (a)      New Lessor acknowledges and agrees with Lessee, with effect
                     from the Effective Time, that such moneys have been paid by
                     Lessee in accordance with the Novated Lease and further
                     acknowledges and agrees that Lessee shall have no further
                     obligation to make any payment in respect of the Deposit
                     which have become due and payable before the Effective Time
                     and in respect of which Lessee has made payment in favour
                     of Existing Lessor;

            (b)      each of New Lessor, Lessee and Existing Lessor agrees that
                     any amounts in respect of the Deposit which become due and
                     payable at or after the Effective Time shall be payable by
                     Lessee to New Lessor in accordance with the Novated Lease;

            (c)      Existing Lessor acknowledges that it has released and has
                     no continuing security or other interest in the moneys and
                     amounts transferred to New Lessor under this clause.

    5.       EFFECTIVE TIME

            This Agreement shall become effective at the time (the "EFFECTIVE
            TIME") at which this Agreement shall have been executed by all of
            the parties hereto and such signatures shall have been delivered to
            New Lessor. New Lessor shall notify each of Existing Lessor and
            Lessee in writing of the Effective Time promptly upon its
            determination of the same. Filing of this Agreement with the FAA
            shall evidence that the Effective Time has occurred.

    6.       MISCELLANEOUS

    6.1      CONTINUING EFFECT: Save as provided for herein, the Novated Lease
             and all provisions thereof shall continue in full force and effect
             as the legal, valid and binding rights and obligations of each of
             New Lessor and Lessee enforceable in accordance with their
             respective terms. All representations, warranties and agreements
             contained in this Agreement shall continue in full force and effect
             after the Effective Time.


    6.2      VARIATION: The provisions of this Agreement shall not be varied
             otherwise than by an instrument in writing executed by or on behalf
             of all the parties; provided that New Lessor and Lessee shall be
             entitled to amend, modify or vary the terms of the Novated Lease
             after the Effective Time without reference to Existing Lessor.

    6.3      NOTICES: Every notice, request, demand or other communication under
             this Agreement shall be made in accordance with Clause 15.7 of the
             Novated Lease and shall be sent to Existing Lessor and Lessee to
             the addresses for notices set forth in Clause 6 of the Aircraft
             Lease Agreement and every notice, request, demand or other
             communication to New Lessor under this Agreement and the Novated
             Lease shall be sent to:


<PAGE>


                              c/o GE Capital Aviation Services, Inc.
                              201 High Ridge Road
                              Stamford, CT 06927
             Attention:       Contracts Leader
             Facsimile:       203-357-4585
             Telephone:       203-357-3776

    6.4      COUNTERPARTS: This Agreement may be executed in any number of
             counterparts and by any party hereto in separate counterparts, each
             of which when so executed shall be deemed to be an original and all
             of which, when taken together, shall constitute one and the same
             agreement.

    6.5      LEASE PROVISIONS: The provisions of Clauses 14 (Assignment), 15.2
             (Waivers, Remedies Cumulative), 15.4 (Severability), and 15.8
             (Governing Law; Jurisdiction; WAIVER OF JURY TRIAL) of the Lease
             shall apply to this Agreement as if set out in full herein.

    6.6      NAMEPLATES: New Lessor hereby advises Lessee that the Nameplate
             Inscription on the Nameplates installed on the Aircraft in
             accordance with the requirements of Clause 8.6(a) shall read as
             follows:

             "This Aircraft/Engine is owned by Castle Harbour Leasing Inc.,
             and is leased to Aloha Airlines, Inc. and may not be operated by
             any other person without the prior written consent of Castle
             Harbour Leasing Inc."

    6.7      EXPENSES: New Lessor hereby agrees that it will, upon written
             request from Lessee accompanied by written evidence as to the
             amount of such fees and expenses reasonably satisfactory to New
             Lessor, reimburse Lessee, or cause Lessee to be reimbursed, for the
             reasonable fees and disbursements of Lessee's outside legal counsel
             relating to the review, negotiation and execution of this
             Agreement.

    6.8      ENTIRE AGREEMENT: The Novated Lease and this Agreement together
             constitute the sole and entire agreement between Lessee and New
             Lessor in relation to the leasing of the Aircraft, and supersede
             all previous agreements in relation to that leasing.


<PAGE>


IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first herein written.

     SIGNED for and on behalf of AVIATION FINANCIAL SERVICES INC.


     By: /s/       Charles H. Meyer
         ---------------------------------------
     Name:           Charles Meyer
          -------------------------------------
     Title:          Vice President
          -------------------------------------


     SIGNED for and on behalf of ALOHA AIRLINES, INC.

     By:
        ---------------------------------------

     Name:
          -------------------------------------

     Title:
          -------------------------------------


     By:
        ---------------------------------------

     Name:
          -------------------------------------

     Title:
          -------------------------------------


      SIGNED for and on behalf of CASTLE HARBOUR LEASING INC..


     By: /s/       Charles H. Meyer
        ---------------------------------------

     Name:           Charles Meyer
          -------------------------------------

     Title:          Vice President
          -------------------------------------



                                          6


<PAGE>


IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and
year first herein written.

 SIGNED for and on behalf of AVIATION FINANCIAL SERVICES INC.


     By:
        ---------------------------------------

     Name:
          -------------------------------------

     Title:
          -------------------------------------


  SIGNED for and on behalf of ALOHA AIRLINES, INC.


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

    Name:          Brenda F. Cutwright
         -------------------------------------

    Title:     Executive Vice President & CFO
         -------------------------------------


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

    Name:            JAMES M. KING
         -------------------------------------

    Title: Sr. V.P. Planning & Business Development
          --------------------------------------

  SIGNED for and on behalf of CASTLE HARBOUR LEASING INC,


     By:
        ---------------------------------------

     Name:
          -------------------------------------

     Title:
          -------------------------------------




<PAGE>

                                                              EXECUTION VERSION

                                 March 20, 2001

  Aloha Airlines, Inc.
  371 Aokea Street
  Honolulu, Hawaii 96819
  Attn: Executive Vice President and Chief Financial Officer

          Re:       Aircraft Lease Agreement dated as of May 12, 2000 between
                    Aviation Financial Services Inc. ("AFSI"), as lessor, and
                    Aloha Airlines, Inc., as Lessee ("LESSEE"), in respect of
                    One Boeing 737-700 Aircraft Bearing MSN 28640
                    and U.S. Reg. No. N740AL, which incorporates the terms of
                    that certain Common Terms Agreement dated as of May 12, 2000
                    between General Electric Capital Corporation and Aloha
                    Airlines, Inc. (i) as modified by that certain Letter
                    Agreement dated May 12, 2000 between AFSI and Lessee, and
                    (ii) as assigned and novated by that certain Aircraft Lease
                    Novation and Amendment Agreement among AFSI, as existing
                    lessor, Castle Harbour Leasing Inc., as new lessor
                    ("Lessor"), and Lessee (collectively, and as amended or
                    supplemented from time to time, the "LEASE")

  Ladies and Gentlemen:

           We refer to the Lease, as defined above, and capitalized terms used
  without definition herein have the meanings assigned to them in the Lease.
  Lessor and Lessee desire to enter into this Letter Agreement in order to
  document their mutual understanding in respect of certain additional changes
  in the specifications for the Aircraft to be completed prior to Delivery.

           1. SCOPE OF CHANGES TO DELIVERY CONDITIONS. Lessor and Lessee hereby
  acknowledge and agree that, notwithstanding anything to the contrary set forth
  in the Lease, at Delivery under the Lease, (i) the engine thrust capacity of
  the Aircraft shall have been modified from the level currently specified in
  the GECAS Detail Specification D6-38808-34 (Revision D) as incorporated in the
  Purchase Agreement No. 1905 dated as of April 1996 (the "PURCHASE AGREEMENT")
  between General Electric Capital Corporation, as buyer, and The Boeing
  Company, as seller, to include 26,000 lbs. Engine thrust bump option (the
  "ENGINE THRUST BUMP UPGRADE"), and (ii) the Aircraft shall be modified to
  include partial provisions for the installation of the Honeywell SATCOM system
  (the "SATCOM PROVISIONS"). Completion of the Engine Thrust Bump Upgrade and
  the installation of the


<PAGE>

  SATCOM Provisions shall each be deemed one of the "Delivery Condition
  Requirements" for all purposes of the Lease.

           2. COST OF CHANGES AND EFFECT ON RENT.

  [This provision has been omitted as confidential information, and is
  separately filed with the Commission.]

           3. LIMITATION ON AMENDMENT. Except as expressly modified by this
  Letter Agreement, all of the terms and provisions of the Lease remain in full
  force and effect and are hereby ratified and confirmed by the parties.


<PAGE>

         Please indicate your acceptance of and agreement with the terms set
 forth in this Letter Agreement by signing in the space provided below and
 return one fully-executed counterpart of this Letter Agreement to Lessor.

                                                    Very truly yours,

                                                    CASTLE HARBOUR LEASING INC.

                                                By: /s/ Charles H. Meyer
                                                        -----------------------
                                                Name:   Charles H. Meyer
                                                        -----------------------
                                                Title:  Vice President
                                                        -----------------------


 ACKNOWLEDGED AND AGREED.

 ALOHA AIRLINES, INC.


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


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


<PAGE>

            Please indicate your acceptance of and agreement with the terms set
   forth in this Letter Agreement by signing in the space provided below and
   return one fully-executed counterpart of this Letter Agreement to Lessor.

                                      Very truly yours,

                                      CASTLE HARBOUR LEASING INC.


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


  ACKNOWLEDGED AND AGREED.

  ALOHA AIRLINES, INC.

  By: /s/ Brenda F. Cutwright
          --------------------------
  Name:   Brenda F. Cutwright
          --------------------------
  Title:  Exec. VP & CFO
          --------------------------


  By: /s/ James M. King
          --------------------------
  Name:   James M. King
          --------------------------
  Title:  Sr. VP Planning &
          Business Development
          --------------------------


<PAGE>

                                 March 23, 2001

  Aloha Airlines, Inc.
  371 Aokea Street
  Honolulu, Hawaii 96819
  Attn: Executive Vice President and Chief Financial Officer

          Re:       Aircraft Lease Agreement dated as of May 12, 2000 between
                    Aviation Financial Services Inc. ("AFSI"), as lessor, and
                    Aloha Airlines, Inc., as Lessee ("LESSEE"), in respect
                    of One Boeing 737-700 Aircraft Bearing MSN 28640 and
                    U.S. Reg. No. N740AL, which incorporates the terms of
                    that certain Common Terms Agreement dated as of May 12, 2000
                    between General Electric Capital Corporation and Aloha
                    Airlines, Inc. (i) as modified by that certain Letter
                    Agreemnet dated May 12, 2000 between AFSI and Lessee, (ii)
                    as assigned and novated by that certain Aircraft Lease
                    Novation and Amendment Agreement among AFSI, as existing
                    lessor, Castle Harbour Leasing Inc., as new lessor
                    ("Lessor"), and Lessee, and (iii) as modified by that
                    certain Letter Agreement dated March 20, 2001 (collectively,
                    and as amended or supplemented from time to time, the
                    "LEASE")

  Ladies and Gentlemen:

           We refer to the Lease, as defined above, and capitalized terms used
   without definition herein have the meanings assigned to them in the Lease.
   Lessor and Lessee desire to enter into this Letter Agreement in order to
   document their mutual understanding in respect of the determination of the
   actual amount of Rent pursuant to Part III of Schedule B to the Lease as well
   as in respect of an undertaking by Lessee with respect to a legal opinion.

           1. RENT. [This provision has been omitted as confidential
   information, and is separately filed with the Commission.]

           2. UNDERTAKING BY LESSEE. Lessee hereby covenants and undertakes to
   obtain, and to deliver to Lessor within thirty (30) days following the
   Delivery Date an updated legal opinion from Squires, Sanders & Dempsey,
   Lessee's regulatory counsel, which shall be in form and substance reasonably
   satisfactory to Lessor, as to (i) Lessee's possession of an air carrier
   operating certificate issued by the


<PAGE>

  Secretary of Transportation pursuant to Chapter 447 of Title 49 of the United
  States Code for aircraft capable of carrying 10 or more individuals or 6,000
  pounds or more of cargo and (ii) Lessee's possession of a Certificate of
  Public Convenience and Necessity issued by the U.S. Department of
  Transportation authorizing Lessee to engage in both interstate and foreign
  carriage of passengers and cargo. Lessee and Lessor mutually agree and
  acknowledge that, if Lessee fails to deliver the foregoing updated legal
  opinion to Lessor within the period specified in the preceding sentence, such
  failure shall constitute an "Event of Default" for all purposes of the Lease
  and Lessor shall be entitled to any and all rights and remedies available to
  Lessor under the Lease and applicable Law.

           3. LIMITATION ON AMENDMENT. Except as expressly modified by this
  Letter Agreement, all of the terms and provisions of the Lease remain in full
  force and effect and are hereby ratified and confirmed by the parties.


<PAGE>

           Please indicate your acceptance of and agreement with the terms set
   forth in this Letter Agreement by signing in the space provided below and
   return one fully-executed counterpart of this Letter Agreement to Lessor.

                                              Very truly yours,

                                              CASTLE HARBOUR LEASING INC.

                                              By: /s/ Charles H. Meyer
                                                      ------------------------

                                              Name:   Charles H. Meyer
                                                      ------------------------

                                              Title:  Vice President
                                                      ------------------------

  ACKNOWLEDGED AND AGREED.

  ALOHA AIRLINES, INC.

  By:
         ----------------------------

  Name:
         ----------------------------

  Title:
         ----------------------------


  By:
         ----------------------------

  Name:
         ----------------------------

  Title:
         ----------------------------


<PAGE>

           Please indicate your acceptance of and agreement with the terms set
   forth in this Letter Agreement by signing in the space provided below and
   return one fully-executed counterpart of this Letter Agreement to Lessor.

                                                 Very truly yours,

                                                 CASTLE HARBOUR LEASING INC.

                                              By:
                                                     ------------------------

                                              Name:
                                                     ------------------------

                                              Title:
                                                     ------------------------


  ACKNOWLEDGED AND AGREED.

  ALOHA AIRLINES, INC.

  By: /s/ G. R. Zander
          ----------------------------

  Name:   Glenn R. Zander
          ----------------------------

  Title:  President & CEO
          ----------------------------


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

  Name:   James M. King
          ----------------------------
  Title:  Sr. VP Planning &
          Business Development
          ----------------------------



<PAGE>

                             LEASE SUPPLEMENT NO. 1

          LEASE SUPPLEMENT NO. 1, dated March 23, 2001 between Castle Harbour
 Leasing Inc., a corporation organized under the laws of the State of Delaware
 ("Lessor"), and Aloha Airlines, Inc., a corporation organized under the laws of
 the State of Delaware ("Lessee").

          Lessor and Lessee have previously entered into that certain Aircraft
 Lease Agreement dated as of May 12, 2000, including the Common Terms Agreement
 as defined therein (collectively, herein referred to as the "Agreement" and the
 defined terms therein being hereinafter used with the same meaning). The
 Agreement provides for the execution and delivery from time to time of a Lease
 Supplement substantially in the form hereof for the purpose of leasing the
 aircraft described below under the Agreement as and when delivered by Lessor to
 Lessee in accordance with the terms thereof.

          The Agreement and this Lease Supplement relate to the Aircraft,
 Engines and Parts as more precisely described below and in the Certificate of
 Technical Acceptance. A counterpart of the Agreement is attached hereto and
 this Lease Supplement and the Agreement shall form one document.

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

          1. Lessor hereby delivers and leases to Lessee under and pursuant to
 the Agreement and Lessee hereby accepts, acknowledges receipt of possession and
 leases from Lessor under and pursuant to the Agreement, that certain Boeing
 737-76N aircraft, and the two (2) CFM56-7B26 Engines (each of which Engines has
 750 or more rated takeoff horsepower or the equivalent of such horsepower)
 described in Schedule 1 hereto, together with the Aircraft Documents and
 Records described in the Agreement (the "Delivered Aircraft").

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

          3. The Term for the Delivered Aircraft shall commence on the Delivery
 Date and shall end on the Expiry Date, with respect to which the Scheduled
 Expiry Date shall be March 22, 2016.

          4. The amount of Rent for the Delivered Aircraft is set forth in
 Schedule B to the Agreement.

          5. Lessee hereby confirms to Lessor that (i) the Delivered Aircraft
 and each delivered Engine have been duly marked in accordance with the terms of
 Section 8.6(a) of the Agreement, (ii) the Aircraft is insured as required by
 the Agreement, (iii) the representations and warranties of Lessee referred to
 in Section 2.1 of the Agreement are hereby repeated with effect as of the date
 first above written, (iv) having inspected the Delivered Aircraft, Lessee
 acknowledges that the Delivered Aircraft satisfies all conditions required for
 Lessee's acceptance of delivery as set forth


<PAGE>

  in the Agreement, and (v) the execution and delivery of this Lease Supplement
  signifies absolute and irrevocable acceptance by Lessee of the Delivered
  Aircraft for all purposes hereof and of the Agreement.

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

           7. This Lease Supplement may be executed in any number of
  counterparts; each of such counterparts, shall for all purposes be deemed to
  be an original; and all such counterparts shall together constitute but one
  and the same Lease Supplement.


<PAGE>

          IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
 Supplement No. 1 to be duly executed as of the day and year first above
 written.

     LESSOR,                                  LESSEE,

     CASTLE HARBOUR LEASING INC.              ALOHA AIRLINES, INC.

     By: /s/ Charles H. Meyer                 By:
             ----------------------------            ---------------------------

     Name:   Charles H. Meyer                 Name:
             ----------------------------            ---------------------------

     Title:  Vice President                   Title:
             ----------------------------            ---------------------------


                                              By:
                                                     ---------------------------

                                              Name:
                                                     ---------------------------

                                              Title:
                                                     ---------------------------


<PAGE>

          IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
 Supplement No. 1 to be duly executed as of the day and year first above
 written.

  LESSOR,                                LESSEE,

  CASTLE HARBOUR LEASING INC.            ALOHA AIRLINES, INC.


  By:                                    By: /s/  Brenda F. Cutwright
        --------------------------             ---------------------------------
  Name:                                  Name:    BRENDA F. CUTWRIGHT
        --------------------------             ---------------------------------
  Title:                                 Title:   EXEC. V.P. & C.F.O.
        --------------------------             ---------------------------------


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

                                         Name:    JAMES M. KING
                                               ---------------------------------

                                         Title:   SENIOR V.P. PLANNING &
                                                  BUS. DEV.
                                               ---------------------------------


<PAGE>

                                       SCHEDULE 1

            Airframe Manufacturer:                      Boeing
            Aircraft Model and Series:                  737-76N
            Registration Mark:                          N740L
            Manufacturer's Serial Number:               28640
            Engine Manufacturer and Model:              CFMI Model CFM56-7B26
            Engine Serial Numbers:                      888263 and 888259



<PAGE>

                                                              EXECUTION VERSION

               AGREEMENT AND AMENDMENT TO AIRCRAFT LEASE AGREEMENT

                             DATED DECEMBER 14, 2001

                                     BETWEEN

                           CASTLE HARBOUR LEASING INC.

                                    AS LESSOR

                                       AND

                              ALOHA AIRLINES, INC.

                                    AS LESSEE

               AGREEMENT AND AMENDMENT TO AIRCRAFT LEASE AGREEMENT

                                  IN RESPECT OF

                  AIRCRAFT LEASE AGREEMENT DATED AS OF MAY 12,
                 2000 RELATING TO BOEING MODEL 737-700 AIRCRAFT
                       MANUFACTURER'S SERIAL NUMBER 28640


<PAGE>

 THIS AGREEMENT is made on December 14, 2001 ("AGREEMENT")

 BETWEEN:

 CASTLE HARBOUR LEASING INC., a company incorporated under the laws of Delaware
 whose principal office is at c/o GE Capital Aviation Services, Inc., 201 High
 Ridge Road, Stamford, CT 06927, U.S.A. ("LESSOR"); and

 ALOHA AIRLINES, INC., a company incorporated under the laws of Delaware whose
 principal place of business is at 371 Aokea Street, Honolulu, HI 96819, U.S.A.
 and its chief executive office at 500 Ala Moana Blvd., Two Waterfront Tower,
 Suite 500, Honolulu, HI 96813, U.S.A. ("LESSEE").

 WHEREAS:

  (A)      By an Aircraft Lease Agreement dated as of May 12, 2000 ("ORIGINAL
           LEASE") between Lessee, as lessee, and Aviation Financial Services
           Inc. ("AFSI"), as lessor, which incorporates by reference that
           certain Aircraft Lease Common Terms Agreement dated as of May 12,
           2000 executed by General Electric Capital Corporation and Lessee (the
           "CTA"), as the same has been amended by (i) that certain letter
           agreement dated May 12, 2000 entered into between AFSI and Lessee,
           (ii) that certain Aircraft Lease Novation and Amendment Agreement
           dated as of February 28, 2001 (the "NOVATION AGREEMENT") among AFSI
           as existing lessor, Lessor, as new lessor and Lessee, (iii) that
           certain letter agreement dated March 20, 2001 entered into between
           Lessor and Lessee, (iv) that certain letter agreement dated March 23,
           2001 entered into between Lessor and Lessee, and (v) Lease Supplement
           No. 1 dated March 23, 2001 entered into between Lessor and Lessee
           (collectively, and as amended or supplemented from time to time, the
           "LEASE") Lessor leased to Lessee and Lessee took on lease one Boeing
           model 737-700 aircraft with manufacturer's serial number 28640 (the
           "AIRCRAFT") on the terms and subject to the conditions contained
           therein.

  (B)      The Original Lease, together with the Novation Agreement and Lease
           Supplement No. 1 thereto, have been recorded by the FAA and assigned
           conveyance numbers by the FAA as set forth on Schedule 1 hereto.

  (C)      Lessee has requested Lessor to permit Lessee to defer the payment of
           a portion of the Rent and to amend the Lease to change certain
           provisions therein subject to the terms and conditions of this
           Agreement.

 IT IS AGREED as follows:

 1.       INTERPRETATION

 1.1      DEFINITIONS: Capitalised terms used herein but not defined shall have
          the respective meanings ascribed to such terms in the Lease.

 1.2      CONSTRUCTION: The provisions of Clause 1.2 (Construction) of the CTA
          shall apply to this Agreement as if the same were set out in full
          herein. From and after the effective date of this Agreement (as
          notified to Lessee pursuant to the Notice), all references in the
          Lease to "the Lease," the "Aircraft Lease Agreement," "hereunder" or
          the like shall mean the Lease as amended by this Agreement.


                                        1

<PAGE>

 2.       REPRESENTATIONS AND WARRANTIES

          Lessee hereby repeats the representations and warranties in Clause 2.1
          of the CTA as if made with reference to the facts and circumstances
          existing as at the date hereof and as if the references in such
          representations and warranties to the "Lease" referred to the Lease as
          amended by this Agreement.

 3.       DEFERRAL OF RENT

 3.1      DEFINITION OF DEFERRED AMOUNT: The term "Deferred Amount" is defined
          in Clause 2 of Schedule 2 hereto.

 3.2      TERMS OF RENT DEFERRAL: Each Deferred Amount shall be deferred as set
          forth in Clause 3 of Schedule 2 hereto.

 4.       LETTER OF CREDIT

 4.1      DEFINITION OF LETTER OF CREDIT PROCEEDS: The term "Letter of Credit
          Proceeds" is defined in Clause 2 of Schedule 2 hereto.

 4.2      APPLICATION OF LETTER OF CREDIT PROCEEDS: The Letter of Credit
          Proceeds shall be applied as set forth in Clause 4.1 of Schedule 2
          hereto.

 4.3      RESTORATION OF LETTER OF CREDIT: The Letter of Credit shall be
          restored by Lessee as set forth in Clause 4.2 of Schedule 2 hereto.

 4.4      REMAINING AMOUNTS AVAILABLE UNDER LETTER OF CREDIT: Lessor shall
          continue to hold the Letter of Credit and shall be entitled to draw
          the remaining amounts available for drawing in accordance with the
          Lease, and Lessee shall ensure that the Letter of Credit complies with
          all requirements of Section 5.14 of the CTA and Section 3.1 of the
          Lease, except as set forth in Clause 4.2 of Schedule 2 hereto.

 5.       AMENDMENTS TO LEASE

 5.1      AMENDMENT TO CLAUSE 1.1: The following new definition is hereby added
          to Clause 1.1 of the Lease:

          DEFERRED AMOUNT has the meaning assigned to it in the Agreement and
          Amendment to Aircraft Lease Agreement dated December 14, 2001 between
          Lessor and Lessee.

 5.2      EVENTS OF DEFAULT:

          (a)      In lieu of paragraph (a) (NON-PAYMENT) of Schedule 9 to the
                   CTA, the following shall constitute an Event of Default:

                            NON-PAYMENT: Lessee fails to make any payment of
                            Rent, Supplemental Rent or any other amount payable
                            under the Lease (including, without limitation, any
                            repayment of a Deferred Amount due under the
                            Agreement and Amendment to Aircraft Lease Agreement
                            dated December 14, 2001 between Lessor and Lessee)
                            on the due date and such failure continues for three
                            (3) Business Days or more.


                                        2


<PAGE>

          (b)      In addition to the Events of Default set forth in paragraph
                   (m) of Schedule 9 to the CTA, the following shall constitute
                   an Event of Default:

                           the Letter of Credit is not restored as set forth in
                           Clause 4.3 of the Agreement and Amendment to Aircraft
                           Lease Agreement dated December 14, 2001 between
                           Lessor and Lessee.

 5.3      RIGHTS AND REMEDIES ON DEFAULT: In addition to the rights and
          remedies set forth in Clause 13.2 of the CTA, the following shall be
          an additional right of Lessor:

                   Upon the occurrence of an Event of Default, the entire
                   outstanding Deferred Amounts, together with interest thereon
                   at the Interest Rate, shall become immediately due and
                   payable by Lessee.

 5.4      AMENDMENT TO THE CTA. Lessor and Lessee hereby acknowledge and agree
          that (i) the Amendment of Aircraft Lease Common Terms Agreement
          attached hereto as Schedule 3 is hereby incorporated by this reference
          and made an integral part of the Lease, and (ii) all references in the
          Lease to the "CTA" or "Common Terms Agreement" shall mean the CTA as
          amended by such amendment.

 6.       CONDITIONS PRECEDENT

 6.1      CONDITIONS: This Agreement shall take effect upon issuance by Lessor
          of a notice to Lessee (the "NOTICE") confirming the satisfaction of
          each of the following conditions and receipt of the following
          documents by Lessor on or prior to December 31, 2001:

          (a)      RESOLUTIONS: a copy of a resolution of the board of directors
                   of Lessee approving the terms of, and transactions
                   contemplated by, this Agreement, resolving that it enter
                   into this Agreement, and authorising a specified person or
                   persons to execute this Agreement;

          (b)      LEGAL OPINION: a legal opinion from Lessee's counsel in a
                   form reasonably satisfactory to Lessor; and

          (c)      OTHER: such other documents as Lessor may reasonably
                   request.

 6.2      FURTHER CONDITIONS PRECEDENT: Lessor's obligations under this
          Agreement are subject to the further conditions precedent that as of
          the date of issuance of the Notice:

          (a)      the representations and warranties of Lessee under Clause 2
                   of this Agreement and under Clause 2.1 of the CTA shall be
                   true and correct; and

          (b)      no Default shall have occurred and be continuing or might
                   result from the leasing of the Aircraft to Lessee under
                   the Lease as amended hereby.

 6.3      WAIVER: The conditions specified in Clauses 6.1 and 6.2 are for the
          sole benefit of Lessor and may be waived or deferred (in whole or in
          part and with or without conditions) by Lessor.

 7.       MISCELLANEOUS

 7.1      FURTHER ASSURANCES: Lessee agrees from time to time to do and perform
          such other and further acts and execute and deliver any and all such
          other instruments as may be required by law or

                                        3


<PAGE>

          reasonably requested by Lessor to establish, maintain and protect the
          rights and remedies of Lessor and to carry out and effect the intent
          and purpose of this Agreement.

 7.2      COUNTERPARTS: This Agreement may be executed in any number of separate
          counterparts, and each counterpart shall when executed and delivered
          be an original document, but all counterparts shall together
          constitute one and the same instrument.

 7.3      GOVERNING LAW: The provisions of Clause 15.8 (Governing Law;
          jurisdiction; WAIVER OF JURY TRIAL) of the CTA shall apply to this
          Agreement as if the same were set out in full herein.

 7.4      VARIATION: The provisions of this Agreement shall not be varied
          otherwise than by an instrument in writing executed by or on behalf of
          Lessor and Lessee.

 7.5      INVALIDITY OF ANY PROVISION: If any provision of this Agreement
          becomes invalid, illegal or unenforceable in any respect under any
          law, the validity, legality and enforceability of the remaining
          provisions shall not in any way be affected or impaired.

 7.6      COSTS AND EXPENSES: Whether or not the conditions specified in Clause
          6 are fulfilled, Lessee shall pay to Lessor on demand all fees, costs
          and expenses incurred or payable by Lessor in connection with the
          preparation, negotiation and completion of this Agreement and
          performance of the transactions contemplated hereby.

 8.       CONTINUATION OF LEASE

          Save as expressly amended by this Agreement, the Lease shall continue
          in full and unvaried force and effect as the legal, valid and binding
          rights and obligations of each of Lessor and Lessee enforceable in
          accordance with their respective terms.


                                         4

<PAGE>

     IN WITNESS WHEREOF the parties hereto have executed this Agreement the day
     and year first above written.

     Signed for and on behalf of
     CASTLE HARBOUR SING INC.

     By:    /s/ Charles H. Meyer
            ---------------------------

     Name:  Charles H. Meyer
            ---------------------------

     Title: Vice President
            ---------------------------

     Signed for and on behalf of
     ALOHA AIRLINES, INC.

     By:    ___________________________

     Name:  ___________________________

     Title: ___________________________



     By:    ___________________________

     Name:  ___________________________

     Title: ___________________________


<PAGE>

     IN WITNESS WHEREOF the parties hereto have executed this Agreement the day
     and year first above written.

     Signed for and on behalf of
     CASTLE HARBOUR LEASING INC.

     By:    ___________________________

     Name:  ___________________________

     Title: ___________________________



     Signed for and on behalf of
     ALOHA AIRLINES INC.

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

    Name:      Brenda F. Cutwright
            ---------------------------

    Title:     Exec. Vice President & CFO
            -----------------------------

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

    Name:      James M. King
            ---------------------------

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


<PAGE>

                                   SCHEDULE 1

         Aircraft Lease Agreement dated as of May 12, 2000 between Aviation
 Financial Services Inc., as lessor, and Aloha Airlines, Inc., as lessee, which
 was recorded by the Federal Aviation Administration on March 26, 2001 and
 assigned Conveyance No. H101572, as assigned and supplemented by the following
 described instruments:

<Table>
<Caption>
 DOCUMENT                                   FAA RECORDING DATE                    FAA CONVEYANCE NO.
 --------                                   ------------------                    ------------------
<S>                                               <C>                                  <C>
 Aircraft Lease Novation and                      03/26/01                             H101572
 Amendment Agreement among
 Aviation Financial Services Inc.,
 as existing lessor, Aloha Airlines,
 Inc., as lessee, and Castle Harbour
 Leasing Inc., as new lessor

 Lease Supplement No. 1                           03/26/01                             H101572
</Table>




                                  Schedule 1-1


<PAGE>

                                   SCHEDULE 2

                             CERTAIN FINANCIAL TERMS

  1.       CONFIDENTIALITY

  Lessor and Lessee understand that the commercial and financial information
  contained in this Schedule 2 to this Agreement are considered by Lessor and
  Lessee as proprietary and confidential. Lessor and Lessee each hereby agree,
  and any of their assignees, upon becoming such shall agree that it will treat
  this Schedule 2 as proprietary and confidential and win not without the prior
  written consent of the other, disclose or cause to be disclosed, the terms
  hereof to any person or entity, except to its employees, counsel, underwriters
  and auditors as necessary or appropriate for the leasing transaction which is
  the subject hereof, or except (a) as may be required by applicable law or
  pursuant to an order, or a valid and binding request, issued by any court or
  other Government Entity having jurisdiction over Lessor, Lessee or the
  assignee of either of them, as the case may be, or (b) as necessary to enable
  Lessor or its assignee to make transfers, assignments or other dispositions to
  potential transferees, assignees or participants of its interest in and to the
  Lease and this Agreement. In connection with any such disclosure or any filing
  of the information contained herein pursuant to any such applicable law,
  Lessor, Lessee or the assignee of either of them, as the case may be, shall
  request and use its best reasonable efforts to obtain confidential treatment
  of this Schedule 2 and the other party will cooperate in making and supporting
  any such request for confidential treatment.

  2.       DEFINITIONS OF CERTAIN TERMS

  DEFERRED AMOUNT:                   [This provision has been omitted as
                                     confidential information, and is
                                     separately filed with the Commission.]

  3.       TERMS OF RENT DEFERRAL

  Provided that each of the conditions precedent set forth in Section 6 of this
  Agreement are satisfied and that no Event of Default has occurred and is
  continuing under the Lease on any Rent Date, Lessee and Lessor agree that
  effective as of the Rent Date on which each Deferred Amount would otherwise be
  due under the Lease, each Deferred Amount shall be deferred as follows:

  [This provision has been omitted as confidential information, and is
  separately filed with the Commission.]


                                  Schedule 2-1


<PAGE>

 4.       LETTER OF CREDIT

 4.1      APPLICATION OF LETTER OF CREDIT PROCEEDS: The Letter of Credit
          Proceeds shall be applied by Lessor towards Lessee's Rent payment
          obligation due on the Rent Dates occurring in the months of September
          2001 and October 2001 under the Lease.

4.2       RESTORATION OF LETTER OF CREDIT: On or prior to the Rent Date
          occurring in the month of March 2002, Lessee shall cause the maximum
          amount available for drawing under the Letter of Credit to be
          restored to the level at which it stood immediately prior to Lessor's
          October 31, 2001 drawing under the Letter of Credit.







                                  Schedule 2-2


<PAGE>

                                   SCHEDULE 3

                                  AMENDMENT TO

                      AIRCRAFT LEASE COMMON TERMS AGREEMENT















                                  Schedule 2-4



<PAGE>


                                                              EXECUTION VERSION

                                  AMENDMENT TO

                      AIRCRAFT LEASE COMMON TERMS AGREEMENT




                             DATED DECEMBER 14, 2001


                                     BETWEEN


                      GENERAL ELECTRIC CAPITAL CORPORATION


                                    AS LESSOR


                                       AND


                              ALOHA AIRLINES, INC.


                                    AS LESSEE


<PAGE>


  THIS AMENDMENT TO AIRCRAFT LEASE COMMON TERMS AGREEMENT is made on December
  14, 2001 (this "AGREEMENT')

  BETWEEN:

  GENERAL ELECTRIC CAPITAL CORPORATION, a company incorporated under the laws of
  Delaware whose principal office is at 201 Long Ridge Road, Stamford, CT 06927,
  U.S.A. ("GE CAPITAL"); and

  ALOHA AIRLINES, INC., a company incorporated under the laws of Delaware whose
  principal place of business is at 371 Aokea Street, Honolulu, Hl 96819, U.S.A.
  and its chief executive office at 500 Ala Moana Blvd., Two Waterfront Tower,
  Suite 500, Honolulu, HI 96813, U.S.A. ("ALOHA").

 WHEREAS:

  (A)     GE Capital and Aloha have previously entered into that certain
          Aircraft Lease Common Terms Agreement dated as of May 12, 2000 (the
          "CTA");

  (B)     GE Capital and Aloha desire to amend the CTA on the terms set forth
          in this Agreement.

  IT IS AGREED as follows:

  1.      INTERPRETATION
  1.1     DEFINITIONS: From and after the effective date of this Agreement
          (as notified to Lessee pursuant to the Notice), all references
          herein to the "Lease" mean the integrated agreement consisting of
          the various documents comprising the Lease as defined in Schedule 1
          to the CTA as the same is amended by this Agreement and all
          references in the Lease to "the Lease," the "Aircraft, Lease
          Agreement," "hereunder" or the like shall mean the Lease as amended
          by this Agreement. Capitalized terms. used herein but not defined
          shall have the respective meanings ascribed to such terms in the
          Lease.

  1.2     CONSTRUCTION: The provisions of Clause 1.2 (Construction) of the CTA
          shall apply to this Agreement as if the same were set out in full
          herein.

  2.      AMENDMENT TO CTA

  2.1     Schedule 7 to the CTA is hereby amended to read in its entirety as set
          forth on Schedule 7 attached to this Agreement.

  3.      MISCELLANEOUS

  3.1     FURTHER ASSURANCES: Aloha agrees from time to time to do and perform
          such other and further acts and execute and deliver any and all such
          other instruments as may be required by law or reasonably requested by
          GE Capital to establish, maintain and protect the rights and remedies
          of GE Capital and to carry out and effect the intent and purpose of
          this Agreement and of any Lease in which the CTA as amended by this
          Agreement may be incorporated.

                                        1


<PAGE>


  3.2     COUNTERPARTS: This Agreement may be executed in any number of separate
          counterparts, and each counterpart shall when executed and delivered
          be an original document, but all counterparts shall together
          constitute one and the same instrument.

  3.3     GOVERNING LAW: The provisions of Clause 15.8 (Governing Law;
          Jurisdiction; WAIVER OF JURY TRIAL) of the CTA shall apply to this
          Agreement as if the same were set out in full herein.

  3.4     VARIATION: The provisions of this Agreement shall not be varied
          otherwise than by an instrument in writing executed by or on behalf of
          GE Capital, and Aloha.

  3.5     INVALIDITY OF ANY PROVISION: If any provision of this Agreement
          becomes invalid, illegal or unenforceable in any respect under any
          law, the validity, legality and enforceability of the remaining
          provisions shall not in any way be affected or impaired.

  3.6     COSTS AND EXPENSES: Aloha shall pay to GE Capital on demand all fees,
          costs and expenses incurred or payable by GE Capital in connection
          with the preparation, negotiation and completion of this Agreement and
          performance of the transactions contemplated hereby.

 4.      CONTINUATION OF COMMON TERMS AGREEMENT

         Save as expressly amended by this Agreement, the CTA shall continue in
         full and unvaried force and effect as the legal, valid and binding
         rights and obligations of each of GE Capital and Aloha enforceable in
         accordance with their respective terms.

                                        2


<PAGE>


       IN WITNESS WHEREOF the parties hereto have executed this Agreement the
       day and year first above written.

       Signed for and on behalf of
       GENERAL ELECTRIC CAPITAL CORPORATION

       By:    /s/ Norman Liu
              -----------------------------

       Name:  Norman Liu
              -----------------------------

       Title: Vice President
              -----------------------------


       Signed for and on behalf of
       ALOHA AIRLINES, INC.

       By:    ____________________________

       Name:  ____________________________

       Title: ____________________________



       By:    ____________________________

       Name:  ____________________________

       Title: ____________________________



<PAGE>


       IN WITNESS WHEREOF the parties hereto have executed this Agreement the
       day and year first above written.

       Signed for and on behalf of
       GENERAL ELECTRIC CAPITAL CORPORATION

       By:    ____________________________

       Name:  ____________________________

       Title: ____________________________


       Signed for and on behalf of
       ALOHA AIRLINES, INC.

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

       Name: Brenda F. Cutwright
             ------------------------------

       Title: Exec. Vice President & CFO
             ------------------------------


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

       Name:  JAMES M. KING
             ------------------------------

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


<PAGE>


                                   SCHEDULE 7
                             INSURANCE REQUIREMENTS

 1.1     TYPES OF INSURANCE

 The Insurances required to be maintained are as follows:

      (a)   HULL ALL RISKS of loss or damage while flying, taxiing and on the
            ground with respect to the Aircraft on an agreed value basis for not
            less than the Agreed Value and not more than 110% of the Agreed
            Value and with a deductible not exceeding the Deductible Amount;

      (b)   HULL WAR Risks AND ALLIED PERILS in accordance with LSW555B or its
            equivalent form reasonably acceptable to Lessor (or an agreement of
            the United States Government to insure against or indemnify for
            substantially the same risks) in an amount not less than the Agreed
            Value;

      (c)   All RISKS (including War and Allied Risk except when on the ground
            or in transit other than by air) property insurance on all Engines
            and Parts when not installed on the Aircraft for like kind and
            quality value and including engine test and running risks; and

      (d)   COMPREHENSIVE AIRCRAFT THIRD PARTY, 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 for any one occurrence (but in
            respect of products and personal injury liability, this limit may be
            an aggregate limit for any and all losses occurring during the
            currency of the policy). War and Allied Risks are also to be covered
            under the policy in line with prudent market practice for comparable
            airlines, operating similar equipment in similar circumstances. In
            addition, without limitation of the requirements of the preceding
            sentence (and notwithstanding anything to the contrary contained in
            the preceding sentence), the Lessee shall in all events maintain war
            risk and allied perils liability insurance in accordance with London
            form AVN52C (as in effect on September 1, 2001) or its equivalent
            form reaonsably acceptable to Lessor (or an agreement of the United
            States Government to insure against or indemnify for substantially
            the same risks), from time to time, with respect to the Aircraft in
            an amount not less than the Minimum Liability Coverage.

 1.2      TERMS OF HULL AND SPARES INSURANCE

 All required hull and spares insurance, so far as it relates to the Aircraft,
 will:

      (a)   LOSS PAYEE: name Lessor, as loss payee (without imposing on Lessor
            any obligation imposed on the insured, including the liability to
            pay any calls, commissions or premiums);

      (b)   PAYMENT OF LOSSES: Losses will be payable in Dollars to Lessor for
            all amounts up to the Agreed Value and to Lessee for any excess
            above the Agreed Value

                                        4


<PAGE>


            (which excess shall not exceed 10% of the Agreed Value), except
            where the insurance payment does not exceed the Damage Notification
            Threshold, and no Default is in existence, in which case the loss
            will be settled with and paid to Lessee;

      (c)   50/50 PROVISION: if separate Hull "all risks" and "war risks"
            insurances are arranged, include a 50/50 provision in accordance
            with market practice (AVS. 103 is the current London market
            language); and

      (d)   NO OPTION TO REPLACE: confirm that the insurers are not entitled to
            replace the Aircraft in the event of an insured Event of Loss and
            are not entitled to replace any Engine in the event of an Engine
            Event of Loss with respect to such Engine.

 1.3     TERMS OF LIABILITY  INSURANCE

 All required liability insurances will:

      (a)   ADDITIONAL INSUREDS: include each Indemnitee, as additional insureds
            for its respective rights and interests, warranted, each as to
            itself only, no operational interest (without imposing on any such
            Person any obligation imposed on the insured, including the
            liability to pay any calls, commissions or premiums);

      (b)   SEVERABILITY: include a severability of interests clause which
            provides that the insurance, except for the limit of liability, will
            operate to give each insured the same protection as if there were a
            separate policy issued to each insured; and

      (c)   PRIMARY POLICY: contain a provision confirming that the policy is
            primary without right of contribution and the liability of the
            insurers will not be affected by any other insurance of which
            Lessor, any Indemnitee or Lessee has the benefit so as to reduce the
            amount payable to the additional insureds under such policies.

 1.4     TERMS OF ALL INSURANCES

 All Insurances will:

      (a)   INDUSTRY PRACTICE: be in accordance with standard industry practice
            for airlines operating similar aircraft in similar circumstances;

      (b)   DOLLARS: provide cover denominated in Dollars;

      (c)   WORLDWIDE: operate on a worldwide basis subject to such limitations
            and exclusions as are in line with industry practice obtained by
            prudent United States based international air carriers;

      (d)   BREACH OF WARRANTY: provide that, in relation to the interests of
            each of the additional assureds, the Insurances will not be
            invalidated by any act or omission by Lessee, or any other Person
            other than the respective additional assureds seeking protection and
            shall insure the interests of each of the additional assureds
            regardless of any breach or violation by Lessee, or any other Person
            other than the respective additional assured seeking protection of
            any warranty, declaration or condition, contained in such
            Insurances;

                                        5


<PAGE>


      (e)   SUBROGATION: provide that the insurers will hold harmless and waive
            any rights of recourse or subrogation against the additional
            insureds to the extent Lessee has waived its rights against the
            additional insureds in the Lease;

      (f)   PREMIUMS: provide that the additional insureds will have no
            obligation or responsibility for the payment of any premiums due
            (but reserve the right to pay the same should any of them elect so
            to do) and that the insurers will not exercise any right of set-off,
            counter-claim or other deduction, by attachment or otherwise, in
            respect of any premium due against the respective interests of the
            additional insureds other than outstanding premiums relating to the
            Aircraft, any Engine or Part the subject of the relevant claim;

      (g)   Cancellation/Change: provide that the Insurances will continue
            unaltered for the benefit of the additional insureds for at least 30
            days after written notice by registered mail or telex of any
            cancellation, change, event of non-payment of premium or installment
            thereof has been sent by insurer(s) to Lessor, or where an insurance
            broker is appointed to the insurance broker who shall promptly send
            on such notice. to Lessor, except in the case of war risks for which
            7 days (or such lesser period as is or may be customarily available
            in respect of war risks or allied perils) will be given, or in the
            case of war between the 5 great powers or nuclear peril for which
            termination is automatic; and

      (h)   [NOT APPLICABLE]

      (i)   [INTENTIONALLY OMITTED.]

      (j)   INDEMNITIES: accept and insure the indemnity provisions of the Lease
            to the extent of the risks covered by the policies.

 1.5      DEDUCTIBLES

 Lessee shall be responsible for any and all deductibles under the Insurances.

 1.6     APPLICATION OF INSURANCE PROCEEDS

 The Insurances will be endorsed to provide for payment of proceeds as follows:

      (a)   EVENT OF LOSS: all insurance payments up to the Agreed Value
            received as the result of an Event of Loss occurring during the Term
            will be paid to Lessor as loss payee and any amount in excess of the
            Agreed Value (which excess shall not exceed 10% of the Agreed Value)
            shall be paid to Lessee;

      (b)   EXCEEDING DAMAGE NOTIFICATION THRESHOLD: all insurance proceeds of
            any damage or loss to the Aircraft, any Engine or any Part occurring
            during the Term not constituting an Event of Loss and in excess of
            the Damage Notification Threshold will be paid to the appropriate
            repair facility, and applied in payment (or paid to Lessee and/or
            Lessor as reimbursement) for repairs or replacement property upon
            Lessor being satisfied that the repairs or replacement have been
            effected in accordance with the Lease.

      (c)   BELOW DAMAGE NOTIFICATION THRESHOLD: insurance proceeds in amounts
            below

                                        6


<PAGE>


            the Damage Notification Threshold shall be paid by the insurer
            directly to Lessee;

      (d)   LIABILITY PROCEEDS: all insurance proceeds in respect of third party
            liability will be paid by the insurers to the relevant third party
            in satisfaction of the relevant liability or to Owner, Lessor,
            Financing Partners' Representative or Lessee, as the case may be, in
            reimbursement of any payment so made;

      (e)   DEFAULT: notwithstanding any of the foregoing paragraphs, 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
            Lessor, Owner or Financing Parties' Representative, as the case may
            be, or retained to be applied toward payment of any amounts which
            may be or become payable by Lessee in such order as Lessor or Owner,
            as the case may be, may elect until such time as no Default is
            continuing and then applied as described above; and to the extent
            that insurance proceeds are paid to Lessee, Lessee agrees to hold
            such proceeds in trust and comply with the foregoing provisions and
            apply or pay over such proceeds as so required.

 1.7      UNITED STATES GOVERNMENTAL INDEMNITY

 Notwithstanding any of the foregoing paragraphs, in the event of a Permitted
 Sub-Lease to, or a requisition of use by, the United States or any Governmental
 Entity whose obligations have the full faith and credit of the federal
 Government of the United States, Lessor agrees to accept in lieu of insurance
 required hereunder indemnification or insurance from the United States or such
 a Governmental Entity in a form reasonably acceptable to Lessor and Owner and
 against such risks and in such amounts and on such terms such that when added
 to the Insurance maintained by Lessee, Lessee is in full compliance with the
 requirements of Section 9 and this Schedule.


                                        7



<PAGE>

                                                               EXECUTION VERSION
                                                               -----------------


                                  AMENDMENT TO

                      AIRCRAFT LEASE COMMON TERMS AGREEMENT




                             DATED DECEMBER 14, 2001

                                     BETWEEN


                      GENERAL ELECTRIC CAPITAL CORPORATION

                                    AS LESSOR


                                       AND


                              ALOHA AIRLINES, INC.

                                    AS LESSEE



<PAGE>



  THIS AMENDMENT TO AIRCRAFT LEASE COMMON TERMS AGREEMENT is made on December
  14, 2001 (this "AGREEMENT")

  BETWEEN:

  GENERAL ELECTRIC CAPITAL CORPORATION, a company incorporated under the laws of
  Delaware whose principal office is at 201 Long Ridge Road, Stamford, CT 06927,
  U.S.A. ("GE CAPITAL"); and

  ALOHA AIRLINES, INC., a company incorporated under the laws of Delaware whose
  principal place of business is at 371 Aokea Street, Honolulu, HI 96819, U.S.A.
  and its chief executive office at 500 Ala Moana Blvd., Two Waterfront Tower,
  Suite 500, Honolulu, HI 96813, U.S.A. ("ALOHA").

  WHEREAS:

  (A)     GE Capital and Aloha have previously entered into that certain
          Aircraft Lease Common Terms Agreement dated as of May 12, 2000 (the
          "CTA");

  (B)     GE Capital and Aloha desire to amend the CTA on the terms set forth
          in this Agreement.

  IT IS AGREED as follows:

  1.       INTERPRETATION

  1.1     DEFINITIONS: From and after the effective date of this Agreement (as
          notified to Lessee pursuant to the Notice), all references herein to
          the "Lease" mean the integrated agreement consisting of the various
          documents comprising the Lease as defined in Schedule 1 to the CTA as
          the same is amended by this Agreement and all references in the Lease
          to "the Lease," the "Aircraft Lease Agreement," "hereunder" or the
          like shall mean the Lease as amended by this Agreement. Capitalized
          terms used herein but not defined shall have the respective meanings
          ascribed to such terms in the Lease.

  1.2     CONSTRUCTION: The provisions of Clause 1.2 (Construction) of the CTA
          shall 11 apply to this Agreement as if the same were set out in full
          herein.

  2.      AMENDMENT TO CTA

  2.1     Schedule 7 to the CTA is hereby amended to read in its entirety as set
          forth on Schedule 7 attached to this Agreement.

  3.      MISCELLANEOUS

  3.1     FURTHER ASSURANCES: Aloha agrees from time to time to do and perform
          such other and further acts and execute and deliver any and all such
          other instruments as may be required by law or reasonably requested by
          GE Capital to establish, maintain and protect the rights and remedies
          of GE Capital and to carry out and effect the intent and purpose of
          this Agreement and of any Lease in which the CTA as amended by this
          Agreement may be incorporated.


                                        1


<PAGE>


   3.2     COUNTERPARTS: This Agreement may be executed in any number of
           separate counterparts, and each counterpart shall when executed and
           delivered be an original document, but all counterparts shall
           together constitute one and the same instrument.

   3.3     GOVERNING LAW: The provisions of Clause 15.8 (Governing Law;
           Jurisdiction; WAIVER OF JURY TRIAL) of the CTA shall apply to this
           Agreement as if the same were set out in full herein.

   3.4      VARIATION: The provisions of this Agreement shall not be varied
            otherwise than by an instrument in writing executed by or on behalf
            of GE Capital and Aloha.

   3.5     INVALIDITY OF ANY PROVISION: If any provision of this Agreement
           becomes invalid, illegal or unenforceable in any respect under any
           law, the validity, legality and enforceability of the remaining
           provisions shall not in any way be affected or impaired.

   3.6     COSTS AND EXPENSES: Aloha shall pay to GE Capital on demand all fees,
           costs and expenses incurred or payable by GE Capital in connection
           with the preparation, negotiation and completion of this Agreement
           and performance of the transactions contemplated hereby.

   4.       CONTINUATION OF COMMON TERMS AGREEMENT

           Save as expressly amended by this Agreement, the CTA shall continue
           in full and unvaried force and effect as the legal, valid and binding
           rights and obligations of each of GE Capital and Aloha enforceable in
           accordance with their respective terms.


                                           2

<PAGE>

                               [missing page 3]

<PAGE>

                                   SCHEDULE 7
                             INSURANCE REQUIREMENTS

  1.1  TYPES OF INSURANCE

  The Insurances required to be maintained are as follows:

            (a)      HULL ALL RISKS of loss or damage while flying, taxiing and
                     on the ground with respect to the Aircraft on an agreed
                     value basis for not less than the Agreed Value and not more
                     than 110% of the Agreed Value and with a deductible not
                     exceeding the Deductible Amount;

            (b)      HULL WAR Risks AND ALLIED PERILS in accordance with LSW555B
                     or its equivalent form reasonably acceptable to Lessor (or
                     an agreement of the United States Government to insure
                     against or indemnify for substantially the same risks) in
                     an amount not less than the Agreed Value;

            (c)      ALL RISKS (including War and Allied Risk except when on the
                     ground or in transit other than by air) property insurance
                     on all Engines and Parts when not installed on the Aircraft
                     for like kind and quality value and including engine test
                     and running risks; and

            (d)      COMPREHENSIVE AIRCRAFT THIRD PARTY, 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 for any one occurrence (but in respect of
                     products and personal injury liability, this limit may be
                     an aggregate limit for any and all losses occurring during
                     the currency of the policy). War and Allied Risks are also
                     to be covered under the policy in line with prudent market
                     practice for comparable airlines, operating similar
                     equipment in similar circumstances. In addition, without
                     limitation of the requirements of the preceding sentence
                     (and notwithstanding anything to the contrary contained in
                     the preceding sentence), the Lessee shall in all events
                     maintain war risk and allied perils liability insurance in
                     accordance with London form AVN52C (as in effect on
                     September 1, 2001) or its equivalent form reasonably
                     acceptable to Lessor (or an agreement of the United States
                     Government to insure against or indemnify for substantially
                     the same risks), from time to time, with respect to the
                     Aircraft in an amount not less than the Minimum Liability
                     Coverage.

  1.2      TERMS OF HULL AND SPARES INSURANCE

  All required hull and spares insurance, so far as it relates to the Aircraft,
  will:

            (a)      LOSS PAYEE: name Lessor, as loss payee (without imposing on
                     Lessor any obligation imposed on the insured, including the
                     liability to pay any calls, commissions or premiums);

            (b)      PAYMENT OF LOSSES: Losses will be payable in Dollars to
                     Lessor for all amounts up to the Agreed Value and to Lessee
                     for any excess above the Agreed Value


                                        4




<PAGE>


                    (which excess shall not exceed 10% of the Agreed Value),
                    except where the insurance payment does not exceed the
                    Damage Notification Threshold, and no Default is in
                    existence, in which case the loss will be settled with and
                    paid to Lessee;

            (c)     50/50 PROVISION: if separate Hull "all risks" and "war
                    risks" insurances are arranged, include a 50/50 provision in
                    accordance with market practice (AVS. 103 is the current
                    London market language); and

            (d)     NO OPTION TO REPLACE: confirm that the insurers are not
                    entitled to replace the Aircraft in the event of an insured
                    Event of Loss and are not entitled to replace any Engine in
                    the event of an Engine Event of Loss with respect to such
                    Engine.

   1.3     TERMS OF LIABILITY INSURANCE

   All required liability insurances will:

            (a)     ADDITIONAL INSUREDS: include each Indemnitee, as -additional
                    insureds for its respective rights and interests, warranted,
                    each as to itself only, no operational interest (without
                    imposing on any such Person any obligation imposed on the
                    insured, including the liability to pay any calls,
                    commissions or premiums);

            (b)     SEVERABILITY: include a severability of interests clause
                    which provides that the insurance, except for the limit of
                    liability, will operate to give each insured the same
                    protection as if there were a separate policy issued to each
                    insured; and

            (c)     PRIMARY POLICY: contain a provision confirming that the
                    policy is primary without right of contribution and the
                    liability of the insurers will not be affected by any other
                    insurance of which Lessor, any Indemnitee or Lessee has the
                    benefit so as to reduce the amount payable to the additional
                    insureds under such policies.

   1.4     TERMS OF ALL INSURANCES

   All Insurances will:

            (a)     INDUSTRY PRACTICE: be in accordance with standard industry
                    practice for airlines operating similar aircraft in similar
                    circumstances;

           (b)      DOLLARS: provide cover denominated in Dollars;


            (c)     WORLDWIDE: operate on a worldwide basis subject to such
                    limitations and exclusions as are in line with industry
                    practice obtained by prudent United States based
                    international air carriers;

            (d)     BREACH OF WARRANTY: provide that, in relation to the
                    interests of each of the additional assureds, the Insurances
                    will not be invalidated by any act or omission by Lessee, or
                    any other Person other than the respective additional
                    assureds seeking protection and shall insure the interests
                    of each of the additional assureds regardless of any breach
                    or violation by Lessee, or any other Person other than the
                    respective additional assured seeking protection of any
                    warranty, declaration or condition, contained in such
                    Insurances;


                                        5


<PAGE>


            (e)     SUBROGATION: provide that the insurers will hold harmless
                    and waive any rights of recourse or subrogation against the
                    additional insureds to the extent Lessee has waived its
                    rights against the additional insureds in the Lease;

            (f)     PREMIUMS: provide that the additional insureds will have no
                    obligation or responsibility for the payment of any premiums
                    due (but reserve the right to pay the same should any of
                    them elect so to do) and that the insurers will not exercise
                    any right of set-off, counter-claim or other deduction, by
                    attachment or otherwise, in respect of any premium due
                    against the respective interests of the additional insureds
                    other than outstanding premiums relating to the Aircraft,
                    any Engine or Part the subject of the relevant claim;

            (g)     Cancellation/Change: provide that the Insurances will
                    continue unaltered for the benefit of the additional
                    insureds for at least 30 days after written notice by
                    registered mail or telex of any cancellation, change, event
                    of non-payment of premium or installment thereof has been
                    sent by insurer(s) to Lessor, or where an insurance broker
                    is appointed to the insurance broker who shall promptly send
                    on such notice to Lessor, except in the case of war risks
                    for which 7 days (or such lesser period as is or may be
                    customarily available in respect of war risks or allied
                    perils) will be given, or in the case of war between the 5
                    great powers or nuclear peril for which termination is
                    automatic; and

            (h)     [NOT APPLICABLE]

            (i)     [INTENTIONALLY OMITTED.]

            (j)     INDEMNITIES: accept and insure the indemnity provisions of
                    the Lease to the extent of the risks covered by the
                    policies.

  1.5    DEDUCTIBLES

  Lessee shall be responsible for any and all deductibles under the Insurances.

  1.6   APPLICATION OF INSURANCE PROCEEDS

  The Insurances will be endorsed to provide for payment of proceeds as follows:

            (a)     EVENT OF LOSS: all insurance payments up to the Agreed Value
                    received as the result of an Event of Loss occurring during
                    the Term will be paid to Lessor as loss payee and any amount
                    in excess of the Agreed Value (which excess shall not exceed
                    10% of the Agreed Value) shall be paid to Lessee;

            (b)     EXCEEDING DAMAGE NOTIFICATION THRESHOLD: all insurance
                    proceeds of any damage or loss to the Aircraft, any Engine
                    or any Part occurring during the Term not constituting an
                    Event of Loss and in excess of the Damage Notification
                    Threshold will be paid to the appropriate repair facility,
                    and applied in payment (or paid to Lessee and/or Lessor as
                    reimbursement) for repairs or replacement property upon
                    Lessor being satisfied that the repairs or replacement have
                    been effected in accordance with the Lease.

            (c)     BELOW DAMAGE NOTIFICATION THRESHOLD: insurance proceeds in
                    amounts below


                                        6


<PAGE>



                    the Damage Notification Threshold shall be paid by the
                    insurer directly to Lessee;

            (d)     LIABILITY PROCEEDS: all insurance proceeds in respect of
                    third party liability will be paid by the insurers to the
                    relevant third party in satisfaction of the relevant
                    liability or to Owner, Lessor, Financing Partners'
                    Representative or Lessee, as the case may be, in
                    reimbursement of any payment so made;

            (e)     DEFAULT: notwithstanding any of the foregoing paragraphs, 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 Lessor, Owner or Financing Parties'
                    Representative, as the case may be, or retained to be
                    applied toward payment of any amounts which may be or become
                    payable by Lessee in such order as Lessor or Owner, as the
                    case may be, may elect until such time as no Default is
                    continuing and then applied as described above; and to the
                    extent that insurance proceeds are paid to Lessee, Lessee
                    agrees to hold such proceeds in trust and comply with the
                    foregoing provisions and apply or pay over such proceeds as
                    so required.

  1.7      UNITED STATES GOVERNMENTAL INDEMNITY

  Notwithstanding any of the foregoing paragraphs, in the event of a Permitted
  Sub-Lease to, or a requisition of use by, the United States or any
  Governmental Entity whose obligations have the full faith and credit of the
  federal Government of the United States, Lessor agrees to accept in lieu of
  insurance required hereunder indemnification or insurance from the United
  States or such a Governmental Entity in a form reasonably acceptable to Lessor
  and Owner and against such risks and in such amounts and on such terms such
  that when added to the Insurance maintained by Lessee, Lessee is in full
  compliance with the requirements of Section 9 and this Schedule.


                                        7


<PAGE>


      IN WITNESS WHEREOF the parties hereto have executed this Agreement the day
      and year first above written.



      Signed for and on behalf of
      GENERAL ELECTRIC CAPITAL CORPORATION



      By: /s/ Norman Liu
          -----------------------------

      Name: Norman Liu
            ---------------------------

      Title:  Vice-President
            ---------------------------



      Signed for and on behalf of
      ALOHA AIRLINES, INC.

      By: -----------------------------

      Name: ---------------------------

      Title: --------------------------



      By: -----------------------------

      Name: ---------------------------

      Title: --------------------------



<PAGE>


     IN WITNESS WHEREOF the parties hereto have executed this Agreement the day
     and year first above written.



     Signed for and on behalf of
     GENERAL ELECTRIC CAPITAL CORPORATION


      By: -----------------------------

      Name: ---------------------------

      Title: --------------------------




     Signed for and on behalf of
     ALOHA AIRLINES, INC.

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

     Name: Brenda F. Cutwright
           ----------------------------

     Title: Exec. Vice President & CFO
            ---------------------------



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

      Name: JAMES M. KING
            ---------------------------

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



<PAGE>


                                                   May 12, 2000

Aloha Airlines, Inc.
371 Aokea Street
Honolulu, Hawaii 96819
Attn: Executive Vice President and Chief Financial Officer

     Re:  Aircraft Lease Agreement dated as of May 12, 2000 between Aviation
          Financial Services, Inc., as Lessor, and Aloha Airlines, Inc., as
          Lessee, in respect of One Boeing 737-700 Aircraft Bearing MSN 28640,
          incorporating the terms of that certain Common Terms Agreement dated
          as of May 12, 2000 (the "CTA") between General Electric Capital
          Corporation and Aloha Airlines, Inc. (collectively, the "Lease")

Ladies and Gentlemen:

We refer to the Lease, as defined above, and capitalized terms used without
definition herein have the meanings assigned to them in the Lease. This letter
will serve as the acknowledgment of Aviation Financial Services, Inc., as lessor
("Lessor") under the Lease, that neither of the following situations shall
constitute an "Event of Default" under the Lease pursuant to Section (h) of
Schedule 9 to the CTA:

          1.   Cessation or temporary suspension of Lessee's trans-Pacific route
               between Hawaii and California (or any other location within the
               continental United States); or

          2.   Cessation or temporary suspension of any segment of Lessee's
               business which accounted for ten percent (10%) or less of the
               gross revenues of Lessee over the last three fiscal years
               immediately preceding the date of suspension or cessation (which
               calculation shall be made on a cumulative basis taking into
               account any and all segments of Lessee's business suspended or
               ceased within such three-year period).

For the avoidance of doubt, Lessor and Lessee expressly acknowledge and agree
that nothing in this letter agreement shall be deemed to derogate from or modify
any other provisions of the Lease. Without limiting the foregoing, Lessee
expressly acknowledges and agrees that, in the event that Lessee's utilization
of the Aircraft results in an operational ratio of less than one Flight Hour per
Cycle for a period of twelve (12) consecutive months, an "Event of Default"
shall arise pursuant to Part VIII of Schedule B to the Lease, regardless of
whether or not such operation arises out of or as a result of any suspension of
Lessee's trans-Pacific route.

<PAGE>

Please indicate your acceptance of and agreement with the terms set forth in
this letter by signing in the space provided below and return one fully-executed
counterpart of this letter to Lessor.


                                         Very truly yours,

                                         AVIATION FINANCIAL SERVICES, INC.

                                         By:      /s/ Norm Liu
                                             -----------------------------------
                                         Name:        Norm Liu
                                               ---------------------------------
                                         Title:       Vice President
                                                --------------------------------


ACKNOWLEDGED AND AGREED.

ALOHA AIRLINES, INC.

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

<PAGE>

Please indicate your acceptance of and agreement with the terms set forth in
this letter by signing in the space provided below and return one fully-executed
counterpart of this letter to Lessor.


                                         Very truly yours,

                                         AVIATION FINANCIAL SERVICES, INC.

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


ACKNOWLEDGED AND AGREED.

ALOHA AIRLINES, INC.

By:      /s/ Brenda F. Cutwright
    -----------------------------------
Name:  Brenda F. Cutwright
      ---------------------------------
Title: Executive Vice President & CFO
       --------------------------------

By:      /s/ James M. King
    -----------------------------------
Name:  James M. King
      ---------------------------------
Title: VP Planning & Development
       --------------------------------