<PAGE>
                                                                   Exhibit 10.61

================================================================================
         ORIGINAL
  TO BE RETURNED TO M&T

                                                          RECORDED
                                               Federal Aviation Administration
                                               Date 4/1/98    Time [ILLEGIBLE]
                                               Conveyance Number T057073
                                               By /s/ [ILLEGIBLE]
                                                  ----------------------------

                                 LEASE AGREEMENT

                            dated as of March 26, 1998

                                     between

                        WILLIS LEASE FINANCE CORPORATION,

                                     Lessor

                                       and

                              ALOHA ISLANDAIR, INC.

                                     Lessee

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

                          Covering One (1) de Havilland
                      Dash 8-103 Aircraft (Reflected on the
                          FAA Records as a DHC-8-102),
                        Manufacturer's Serial Number 353
                          U.S. Registration No. N853MA,

                             Two (2) Pratt & Whitney
                     Model PW 121 Engines (Reflected on the
                            FAA Records as PW 120 A),
                              Manufacturer's Serial
                            Numbers 120968 and 121244

                                       and

                            Two (2) Hamilton Standard
                               14 SF-7 Propellers,
                              Manufacturer's Serial
                            Numbers 930310 and 920913

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

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


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                                TABLE OF CONTENTS

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<S>            <C>                                                        <C>
 SECTION 1.    DEFINITIONS................................................   1

 SECTION 2.    AGREEMENT TO LEASE: TERM...................................   8
      2.01      Leasing of Aircraft.......................................   8
      2.02      Acceptance................................................   8
      2.03      Delivery of Aircraft......................................   8
      2.04      Term......................................................   8

 SECTION 3     CONDITIONS PRECEDENT.......................................   9
      3.01     Conditions Precedent to Lessor's Obligations...............   9
      3.02     Conditions Precedent to Lessee's Obligations...............  11

 SECTION 4     LESSEE'S REPRESENTATIONS AND WARRANTIES.....................  11
      4.01     Due Organization, Standing etc.............................  11
      4.02     Operative Documents........................................  12
      4.03     No Conflict; Consent.......................................  12
      4.04     Governmental Consents......................................  12
      4.05     No Adverse Agreements......................................  12
      4.06     No Defaults or Violations..................................  13
      4.07     Litigation.................................................  13
      4.08     No Event of Default........................................  13
      4.09     Financial Statements.......................................  13
      4.10     Chief Executive Office.....................................  13
      4.11     Filings Made...............................................  13
      4.12     Certificate................................................  14

 SECTION 5     LESSOR'S REPRESENTATIONS AND WARRANTIES....................  14
      5.01      Due Organization, Standing etc............................  14
      5.02      Operative Documents.......................................  14

 SECTION 6     COVENANTS OF LESSEE........................................  14
      6.01      Air Operator's Certificate................................  14
      6.02      Financial and Other.......................................  15
      6.03      Information to be Supplied Existence......................  15
      6.04      Inspection Rights; Records................................  16
      6.05      Payment of Taxes and Claims...............................  16
      6.06      Notice of Litigation......................................  16
      6.07      Merger....................................................  17
      6.08      Chief Executive Office....................................  17
      6.09      Certificate...............................................  17

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<S>            <C>                                                        <C>

 SECTION 7     PAYMENTS...................................................  17
      7.01      Rent......................................................  17
      7.02      Net Lease; No Set-Off or Deductions.......................  18
      7.03      Immediately Available Funds...............................  18
      7.04      Supplemental Rent; Overdue Rent...........................  18
      7.05      Reserved..................................................  19
      7.06      Gross Up..................................................  19

 SECTION 8.    LIMITATION OF LESSOR'S LIABILITY...........................  19

 SECTION 9.    USE OPERATION AND MAINTENANCE..............................  19
      9.01      General...................................................  19
      9.02      Operation and Use.........................................  20
      9.03      Maintenance in General....................................  20
      9.04      Specific Items of Maintenance.............................  21
      9.05      Parts.....................................................  21
      9.06      Airworthiness Directives..................................  22
      9.07      Service Bulletins: Nondiscrimination......................  23
      9.08      Corrosion Control.........................................  23
      9.09      Modifications.............................................  23
      9.10      Possession; Subleasing; Equipment Substitution............  24
      9.11      Repairs...................................................  25
      9.12      Aircraft Records..........................................  25
      9.13      Warranties................................................  26
      9.14      Airport Charges...........................................  26
      9.15      Right to Inspect..........................................  26
      9.16      Reporting.................................................  26

 SECTION 10.   RETURN OF AIRCRAFT.........................................  27
     10.01      Return....................................................  27
     10.02      Condition of Aircraft.....................................  27
     10.03      Boroscope Inspection......................................  27
     10.04      Historical Records; Trend Monitoring Data.................  27
     10.05      Inspection................................................  27
     10.06      Operational Ground Check..................................  28
     10.07      Operational Check Flight..................................  28
     10.08      Acceptance................................................  29
     10.09      Deferred Discrepancy Correction...........................  29
     10.10      Flight Cost...............................................  29
     10.11      Indemnification...........................................  29
     10.12      Insurance.................................................  29
     10.13      Manuals and Technical Records.............................  30
     10.14      Service Bulletin Kits.....................................  30
     10.15      Lessee's Special Exterior Markings........................  30
     10.16      Ownership.................................................  31
     10.17      Storage Upon Return.......................................  31

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                                      -ii-

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<S>            <C>                                                        <C>

 SECTION 11.   TITLE; REGISTRATION; LIENS.................................  31
     11.01      Title.....................................................  31
     11.02      Registration; Filings; Registration.......................  31
     11.03      Liens.....................................................  32
     11.04      Notice of Ownership.......................................  32

 SECTION 12.   INSURANCE..................................................  32
    12.01       All-Risk Insurance........................................  33
    12.02       War Risk Insurance........................................  33
    12.03       Liability Insurance.......................................  33
    12.04       Deductibles and Self Insurance ...........................  34
    12.05       Additional Requirements; Loss Payment.....................  34
    12.06       No Set-Off................................................  35
    12.07       Notice of Material Alteration or Cancellation.............  35
    12.08       Application of Certain Insurance Proceeds.................  35
    12.09       Insurance for Own Account.................................  35
    12.10       Certificates and Reports..................................  36

 SECTION 13.   LOSS, DAMAGE OR REQUISITION................................  36
    13.01       An Event of Loss of Airframe..............................  36
    13.02       Engine or Propeller Loss..................................  37
    13.03       Payments from Governmental Authorities for
                  Requisition of Title or Use.............................  38
    13.04       Application of Payments During Existence of Event of
                  Default.................................................  38

 SECTION 14.   EVENT OF DEFAULT...........................................  39
    14.01       Failure to Make Payments..................................  39
    14.02       Failure to Obtain or Maintain Insurance...................  39
    14.03       Failure to Perform Other Obligations......................  39
    14.04       Representations and Warranties Untrue.....................  39
    14.05       Insolvency or Bankruptcy..................................  39
    14.06       Loss of Registration or Protection........................  40
    14.07       Loss of License...........................................  40
    14.08       Other Lease...............................................  40
    14.09       Final Judgment............................................  40
    14.10       Other Default.............................................  40
    14.11       Contest...................................................  40
    14.12       Failure to Maintain Letter of Credit......................  40
    14.13       ..........................................................  41

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

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<S>            <C>                                                        <C>

 SECTION 16.   INDEMNITIES AND EXPENSES...................................  43
    16.01       General Indemnification and Waiver of Certain Claims......  43
    16.02       General Tax Indemnity.....................................  44
    16.03       After-Tax Basis; Survival.................................  49
    16.04       Expenses..................................................  50

 SECTION 17.   QUIET ENJOYMENT............................................  50

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

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

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

 SECTION 21.   LEASE; SECTION 1110........................................  52
    21.01       Lease.....................................................  52
    21.02       Section 1110..............................................  52

 SECTION 22.   MISCELLANEOUS..............................................  52
    22.01       Waivers, Headings.........................................  52
    22.02       Counterparts..............................................  52
    22.03       Governing Law.............................................  52
    22.04       Benefit and Binding Effect................................  53
    22.05       Further Assurances........................................  53
    22.06       Service of Process; Waiver of Jury Trial and Immunity.....  53
    22.07       Usury Laws................................................  54
    22.08       Entire Agreement..........................................  54

 Exhibit A      Description of Aircraft
 Schedule 1     to Exhibit A - Delivery Conditions
 Exhibit B      Rent and Other Financial Matters
 Schedule 1     to Exhibit B - Letter of Credit
 Exhibit C      Acceptance Certificate
 Exhibit D      Schedule of Manuals and Technical Records
 Schedule 3     Time, Flight Hours, Cycles
 Exhibit E      Return Acceptance Certificate
 Exhibit F      General Return Conditions of the Aircraft

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                                      -iv-

<PAGE>


                                 LEASE AGREEMENT

                  THIS LEASE AGREEMENT, dated as of March 26, 1998 ("Lease"), is
between [WILLIS LEASE FINANCE CORPORATION] ("Lessor"), a California corporation
having its principal place of business at 180 Harbor Drive, Suite 200,
Sausalito, California 94965 and ALOHA ISLANDAIR, INC. ("Lessee"), a Delaware
corporation having its principal place of business at 99 Kapalulu Place,
Honolulu, Hawaii 96819.

                                   WITNESSETH:

                  WHEREAS, Lessor is purchasing the Aircraft from the Seller;

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

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

                  SECTION 1. DEFINITIONS

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

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

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

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


<PAGE>


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

                  "AIRCRAFT SALE AGREEMENT" means the Aircraft Sale Agreement
dated as of the date hereof between Seller and Lessor.

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

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

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

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

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

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

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



<PAGE>


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

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

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

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

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

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

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

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

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


                                       -3-


<PAGE>


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

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

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

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

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

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

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

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

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

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


                                       -4-


<PAGE>


that the same are not the direct or indirect result of any Default or Event of
Default hereunder and provided that the same are not covered by the Lessee's
indemnity obligations hereunder.

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

                  "LIEN" means any mortgage, pledge, lien, charge or
encumbrance, lease, financing statement, claim, exercise of rights or security
interest.

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

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

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


                  "MODIFICATIONS" means Optional Modifications and Required
Modifications.

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

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

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

                  "OTHER LEASE" means the Lease Agreement, dated as of the date
hereof, between the Lessor and Lessee with respect to the Other Aircraft.

                  "OTHER AIRCRAFT" means that certain de Havilland Dash 8-103
aircraft, manufacturer's serial number 357, as further identified in the Other
Lease.

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

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

                                       -5-


<PAGE>


                  "PERMITTED LIENS" means (i) Lessor's Liens; (ii) the
respective rights of Lessor and Lessee as provided herein; (iii) the rights of
others under agreements or arrangements to the extent expressly permitted in
Section 9.10 hereof; (iv) Liens for Taxes either not yet due or being contested
in good faith (and for the payment of which adequate reserves have been
provided) by appropriate proceedings conducted in due diligence, so long as
such proceedings do not involve any material danger of the sale, forfeiture or
loss of the Airframe or any Engine or Propeller; (v) material suppliers',
mechanics', workers', repairers', employees' or other like liens arising in the
ordinary course of business and for amounts the payment of which is either not
yet delinquent or is being contested in good faith (and for the payment of
which adequate reserves have been provided) by appropriate proceedings
conducted in due diligence, so long as such proceedings do not involve any
material danger of the sale, forfeiture or loss of the Airframe or any Engine
or Propeller; and (vi) Liens arising out of judgments or awards against Lessee
with respect to which at the time an appeal or proceeding for review is being
prosecuted in good faith (and for the payment of which adequate reserves have
been provided) and there shall have been secured a stay of execution pending
such appeal or proceeding for review.

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

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

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

                  "RENT" means Basic Rent and Supplemental Rent.

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

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


                                       -6-


<PAGE>


without materially impairing the value or utility of the Airframe and having a
time and Cycle status, modification status, value, condition and utility at
least equal to the Engine it is replacing (assuming such Engine was in the time
status, modification status, condition and repair required by the terms hereof
immediately prior to being replaced).

                  "REPLACEMENT PROPELLER" means a propeller of the same or an
improved model (and manufactured by the same manufacturer) as a Propeller being
replaced pursuant to Section 13.02 hereof, which is suitable for installation
and use on an Engine and the Airframe and having a time and Cycle status,
modification status, value, condition and utility at least equal to the
Propeller that it is replacing (assuming such Propeller was in the time and
Cycle status, modification status, value, condition and repair required by the
terms hereof immediately prior to being replaced).

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

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

                  "SELLER" means de Havilland Corporation.

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

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

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

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

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

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

                                       -7-


<PAGE>


                  SECTION 2.  AGREEMENT TO LEASE: TERM

                  2.01 LEASING OF AIRCRAFT.

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

                  2.02 ACCEPTANCE.

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

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

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

                  2.03 DELIVERY OF AIRCRAFT.

                  The Aircraft shall be delivered for purposes of this Lease at
Great Falls, Montana, or at a mutually agreed location, which shall be in a
jurisdiction that is intended to avoid any sales, use, transfer and other
similar taxes payable upon the purchase and lease of the Aircraft. The Lessee
shall be obligated to accept delivery of the Aircraft pursuant to this Lease,
at the time and place and in the condition, AS IS, WHERE IS, that the Lessor
shall be obligated to take delivery of the Aircraft pursuant to the Aircraft
Sale Agreement; provided, that the Aircraft satisfies the Delivery Conditions
set forth in Schedule I to Exhibit A hereto, in which connection, the execution
and delivery of the Acceptance Certificate shall, as between Lessor and Lessee,
constitute conclusive evidence that the Aircraft satisfies such conditions
without prejudice, however, to any claim Lessor or Lessee may have against
Seller or any Manufacturer.

                  2.04 TERM.

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


                                       -8-


<PAGE>


                  SECTION 3. CONDITIONS PRECEDENT.

                  3.01 CONDITIONS PRECEDENT TO LESSOR'S OBLIGATIONS.

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

                  (a) Lessor shall have purchased the Aircraft pursuant to the
Aircraft Sale Agreement and each condition precedent therein to Lessor's
obligation to purchase the Aircraft shall have been satisfied.


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

                  (c) Lessor shall have received the following:

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

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

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

                  (iv) evidence that the Lessor has been duly registered with
the FAA as owner of the Aircraft, or that application for such registration has
been duly filed;

                  (v) evidence that the Lease and FAA Bill of Sale have been
duly filed for recordation with the FAA;

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

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

                                       -9-


<PAGE>


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

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

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

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

                  (xii) an insurance report of an independent insurance broker
and certificates of insurance as to Lessee's due compliance with the terms of
Section 8 of this Lease;

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

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

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

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

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

                  (d) No material adverse change in Lessee's or Guarantor's
financial or operational condition or its ability to meet its obligations under
the Operative Documents shall have occurred, as determined by Lessor, since
September 30, 1997.

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

                                      -10-


<PAGE>


                  (f) Lessor shall have received the first Basic Rent payment
and the Security Deposit.

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

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

                  3.02 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS.

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

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

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

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

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

                  SECTION 4. LESSEE'S REPRESENTATIONS AND WARRANTIES.

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

                  4.01 DUE ORGANIZATION, STANDING ETC.

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


                                      -11-


<PAGE>


necessary and the failure to so qualify would adversely effect Lessee's or
Guarantor's ability to perform its obligations under the Operative Documents to
which it is a party.

                  4.02 OPERATIVE DOCUMENTS.

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

                  4.03 NO CONFLICT; CONSENT.

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

                  4.04 GOVERNMENTAL CONSENTS.

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

                  4.05 NO ADVERSE AGREEMENTS.

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


                                      -12-


<PAGE>


                  4.06 NO DEFAULTS OR VIOLATIONS.

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

                  4.07 LITIGATION.

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

                  4.08 NO EVENT OF DEFAULT.

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

                  4.09 FINANCIAL STATEMENTS.

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

                  4.10 CHIEF EXECUTIVE OFFICE.

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

                  4.11 FILINGS MADE.

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

                                      -13-


<PAGE>


perfect Lessor's interest in the Aircraft and Lease in any jurisdiction in the
United States or elsewhere.

                  4.12 CERTIFICATE.

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

                  SECTION 5. LESSOR'S REPRESENTATIONS AND WARRANTIES.

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

                  5.01 DUE ORGANIZATION, STANDING ETC.

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

                  5.02 OPERATIVE DOCUMENTS.

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

                  SECTION 6. COVENANTS OF LESSEE.

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

                  6.01 AIR OPERATOR'S CERTIFICATE.

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

                                      -14-


<PAGE>


                  6.02 FINANCIAL AND OTHER INFORMATION TO BE SUPPLIED.

                  Furnish to Lessor:

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

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

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

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

                  6.03 EXISTENCE.

                  At all times maintain its corporate existence and do or cause
to be done all things necessary to preserve and keep in full force and effect
its corporate rights, powers, privileges and franchises except for any
corporate right, power, privilege or

                                      -15-


<PAGE>


franchise that it determines is no longer necessary or desirable in the conduct
of its business as a common carrier for the commercial transport of passengers
and the loss of which will not materially adversely affect or diminish the
rights of Lessor under the Operative Documents.

                  6.04 INSPECTION RIGHTS; RECORDS.

                  (a) Permit any duly authorized representative or designee of
Lessor (which may be a manufacturer's representative, an outside consultant or
representative of Lessor or of a lender secured by the Aircraft) to inspect the
Aircraft, to examine Lessee's technical books and Aircraft records, to take
memoranda and extracts therefrom and to make copies thereof, and to discuss the
affairs, finances and accounts of Lessee. Such inspections shall be at Lessor's
expense unless an Event of Default exists, in which case inspections shall be
at Lessee's expense. Unless an Event of Default exists, such inspections may
only take place at any reasonable time. Lessee shall notify Lessor in writing
when "C" and "D" Checks, if Lessee shall no longer be utilizing the de
Havilland Equalized Maintenance Program, are scheduled to take place and if
Lessee shall be utilizing the de Havilland Equalized Maintenance Program, when
structural inspections required by the Maintenance Program and not included in
the de Havilland Equalized Maintenance Program are scheduled to take place and
if Lessor advises Lessee in writing that it or its designee will be inspecting
during such check, the parties will use reasonable efforts to coordinate
regarding the exact time and place thereof. Lessee shall also provide Lessor,
quarterly, with scheduling information regarding the performance of the various
segments of the de Havilland Equalized Maintenance Program required to be
performed or performed during each such quarter and if Lessor advises Lessee in
writing that it or its designee will be inspecting during such segments, the
parties will use reasonable efforts to coordinate regarding the exact time and
place thereof.

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

                  6.05 PAYMENT OF TAXES AND CLAIMS.

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

                  6.06 NOTICE OF LITIGATION.

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

                                      -16-


<PAGE>


                  6.07 MERGER.

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

                  6.08 CHIEF EXECUTIVE OFFICE.

                  Lessee shall provide Lessor with not less than 30 days prior
written notice of any change in its chief executive office or office where
records pertaining to the Aircraft are kept, if moved, to any place or location
outside of the State of Hawaii and will file such financing statements or other
filings as may be reasonably requested by Lessor with respect to such change.

                  6.09 CERTIFICATE.

                  Lessee shall maintain the certificate described in Section
4.12.

                  SECTION 7. PAYMENTS

                  7.01 RENT.

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

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

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


                                      -17-


<PAGE>


                  7.02 NET LEASE; NO SET-OFF OR DEDUCTIONS.

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

                  7.03 IMMEDIATELY AVAILABLE FUNDS.

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

                  7.04 SUPPLEMENTAL RENT; OVERDUE RENT.

                  Lessee also agrees to pay to Lessor or to whomsoever shall be
entitled thereto any and all Supplemental Rent when the same shall become due
and owing, and in the event of any failure on the part of Lessee to pay any
Supplemental Rent, Lessor shall have all rights, powers and remedies provided
for herein or by law or equity in the case of nonpayment of Basic Rent. Without
limitation of the foregoing, Lessee shall


                                      -18-


<PAGE>

pay interest at the Overdue Rate on any payment of Rent not paid when due
hereunder for the period in which such Rent remains overdue and not paid.

                  7.05 RESERVED.

                  7.06 GROSS UP.

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

                  SECTION 8. LIMITATION OF LESSOR'S LIABILITY

                  LESSOR LEASES THE AIRCRAFT HEREUNDER "AS-IS", "WHERE-IS" AND
LESSOR HAS NOT MADE, AND SHALL NOT BE DEEMED TO HAVE MADE ANY REPRESENTATION OR
WARRANTY, EXPRESSED OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, CONDITION,
DESIGN, OPERATION, MERCHANTABILITY, OR FITNESS FOR USE OR PARTICULAR PURPOSE OF
THE AIRCRAFT, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT,
OR AS TO ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO THE AIRCRAFT, INCLUDING, WITHOUT LIMITATION, ANY LIABILITY IN
TORT, OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE, STRICT LIABILITY, ANY
IMPLIED WARRANTY FROM COURSE OF PERFORMANCE OR DEALING OR USAGE OR TRADE, OR
LOSS OR INTERRUPTION OF USE, PROFIT, OR BUSINESS, OR OTHER CONSEQUENTIAL
DAMAGES, except that on the Delivery Date, Lessor (a) warrants that the
Aircraft shall be free of Lessor's Liens and (b) agrees that it will not
directly or indirectly create, incur, assume or suffer to exist any Lessor's
Lien on or with respect to the Airframe or any Engine or Propeller.

                  SECTION 9. USE OPERATION AND MAINTENANCE

                  9.01 GENERAL.

                  Lessee, at its own cost and expense shall (i) service, repair,
maintain and overhaul or cause the same to be done to the Airframe and each
Engine and Propeller under the Maintenance Program in the same manner and with
the same care as used


                                      -19-

<PAGE>


by Lessee with similar aircraft and engines and propellers operated by Lessee
and so as to keep the Airframe and each Engine and Propeller in as good
operating condition as when delivered to the Lessee hereunder, ordinary wear
and tear excepted, and (ii) maintain the Manuals and Technical Records in the
English language in accordance with the Maintenance Program.

                  9.02 OPERATION AND USE.

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

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

                  9.03 MAINTENANCE IN GENERAL.

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


                                      -20-


<PAGE>


                  9.04 SPECIFIC ITEMS OF MAINTENANCE.

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

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

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

                  (c) if required by Aeronautical Authority regulations, to
notify the Manufacturer promptly (with a copy to Lessor) of any modifications
or configuration changes to the Airframe which would have a material effect on
or be a material change to the type design and/or the manuals relating to the
Airframe (such as flight, operations and maintenance); and

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

                  9.05 PARTS.

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


                                      -21-


<PAGE>


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

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

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

                  9.06 AIRWORTHINESS DIRECTIVES.

                  (a) Lessee agrees to carry out or cause to be carried out in
accordance with the requirements thereof on the Aircraft any airworthiness
directive or any other mandatory regulation or directive ("Airworthiness
Directive") which the Aeronautical Authority from time to time may issue and
which becomes due during the Term or if later prior to return of the Aircraft
to the Lessor pursuant to Section 10. All Airworthiness Directives shall be
timely accomplished in accordance with all applicable bulletins and manuals
published by the Manufacturer of the Airframe or Engines or Propellers or Parts
or data approved by the Aeronautical Authority to the extent the same are
incorporated in or by reference into the Airworthiness Directive.


                                      -22-


<PAGE>


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

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

                  9.07 SERVICE BULLETINS: NONDISCRIMINATION.

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

                  9.08 CORROSION CONTROL.

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

                  9.09 MODIFICATIONS.

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

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

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


                                      -23-


<PAGE>


                  (d) All Modifications shall be accomplished at Lessee's
expense and only by a Person approved by the FAA. Lessee shall provide copies
of all drawings and data to be used by Lessee in accomplishing such Optional
Modifications for Lessor's consent prior to such work.

                  9.10 POSSESSION; SUBLEASING EQUIPMENT SUBSTITUTION.

                  Lessee shall not sublease the Aircraft or otherwise in any
manner deliver, relinquish or transfer possession of the Airframe or any Engine
or Propeller to any Person or install any Engine, or permit any Engine to be
installed, on any airframe other than the Airframe or install any Propeller, or
permit any Propeller to be installed, on any engine other than an Engine or
permit any other Person to do any of the foregoing during the Term, without the
prior written consent of Lessor, PROVIDED, HOWEVER, that so long as Lessee
shall comply with the provisions of Section 12 hereof, Lessee, without the
prior written consent of Lessor (except as specified below) may:

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

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

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

                  (d) install an Engine on an airframe leased to Lessee or
owned by Lessee subject to a conditional sale or other security agreement,
PROVIDED that (i) such airframe is free and clear of all Liens except (A) the
rights of the parties to the lease, conditional sale or other security
agreement and (B) Liens of the type permitted by


                                      -24-


<PAGE>


clause (c) above, and (ii) such lease, conditional sale or other security
agreement effectively provides that such Engine shall not become subject to the
Lien of such lease, conditional sale or other security agreement,
notwithstanding the installation thereof on such airframe in. which particular
connection, a provision contained in such lease, conditional sale or other
security agreement substantially to the effect of clause (e) of this Section
9.10 shall be deemed to so effectively provide;

PROVIDED that the rights of a transferee who receives possession by reason of a
transfer permitted by this Section 9.10 shall be subject and subordinate to all
the terms of this Lease and the rights of the Lessor hereunder to repossess
such property and any such arrangement shall expressly state it is so
subordinate or contain a provision substantially to the effect of clause (e) of
this Section 9.10, and Lessee shall remain primarily liable hereunder for the
performance of all of the terms of this Lease to the same extent as if such
transfer had not occurred.

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

                  9.11 REPAIRS.

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

                  9.12 AIRCRAFT RECORDS.

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


                                      -25-


<PAGE>


                  9.13 WARRANTIES.

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

                  9.14 AIRPORT CHARGES.

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

                  9.15 RIGHT TO INSPECT.

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

                  9.16 REPORTING.

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


                                      -26-


<PAGE>


                  SECTION 10.      RETURN OF AIRCRAFT

                  10.01 RETURN.

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

                  10.02 CONDITION OF AIRCRAFT.

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

                  10.03 BOROSCOPE INSPECTION.

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

                  10.04 HISTORICAL RECORDS; TREND MONITORING DATA.

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

                  10.05 INSPECTION.

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


                                      -27-


<PAGE>


personnel, provided, however, the parties agree that such inspections shall be
scheduled in such manner that scheduled flights shall not be delayed or
cancelled.

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

                  10.06 OPERATIONAL GROUND CHECK.

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

                  10.07 OPERATIONAL CHECK FLIGHT.

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


                                      -28-


<PAGE>


                  10.08 ACCEPTANCE.

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

                  10.09 DEFERRED DISCREPANCY CORRECTION.

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

                  10.10 FLIGHT COST.

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

                  10.11 INDEMNIFICATION.

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

                  10.12 INSURANCE.

                  To the extent not covered by the existing insurance
certificates, with respect to Lessee's aviation liability insurance, Lessee
shall (i) cause Lessor to be named as an additional insured under Lessee's
aviation liability insurance policies to the extent of Lessee's undertaking set
forth in Section 10.11 and (ii) shall furnish to Lessor not later than 7
Business Days prior to the start of Lessor's ground inspection of the


                                      -29-


<PAGE>


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

                  10.13 MANUALS AND TECHNICAL RECORDS.

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

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

                  10.14 SERVICE BULLETIN KITS.

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

                  10.15 LESSEE'S SPECIAL EXTERIOR MARKINGS.

                   At the time of the return of the Aircraft* Lessee shall paint
over exterior markings painted on such Aircraft by Lessee and the area where
such markings were painted over shall be refurbished by Lessee as necessary to
blend in with the surrounding surface. In the event that, notwithstanding
Lessee's obligation to do so, Lessee does not remove such markings, Lessor
shall have no obligation to remove such markings prior to the sale, lease, or
other disposition of the Aircraft by Lessor after its return; however, if
Lessor elects to remove such markings, Lessee shall pay Lessor's


                                      -30-


<PAGE>


reasonable direct costs and expenses paid for such removal within 10 days of
the date of Lessor's invoice therefor.

                  10.16 OWNERSHIP.

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

                  10.17 STORAGE UPON RETURN.

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

                  SECTION 11. TITLE; REGISTRATION; LIENS

                  11.01 TITLE.

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

                  11.02 REGISTRATION; FILINGS; REGISTRATION.

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

                  (b) Lessee shall take or cause to be taken, at Lessee's cost
and expense, such actions as are necessary or requested by Lessor and
appropriate to maintain, so long as this Lease is in effect, (i) registration
of the Aircraft at the FAA, in the name of the Lessor including, without
limitation, the filing of all reports and applications and the payment of all
fees and (ii) maintaining the ownership interest of Lessor in the Aircraft,
provided, however, the foregoing shall not be deemed to impose upon Lessee any
obligation with respect to Lessor Liens. Lessee shall take such actions at
Lessee's expense as are necessary or reasonably requested by Lessor to
maintain the perfection


                                      -31-


<PAGE>


of any security interest that may be claimed to be created by this Lease,
including without limitation, the recording, filing, re-recording, and refiling
of this Lease, any other Operative Document, any financing statements or other
instruments. Lessee shall take no action adversely affecting the due
registration of the Aircraft with the FAA in the name of the Lessor.

                  11.03 LIENS.

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

                  11.04 NOTICE OF OWNERSHIP.

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

                      "[WILLIS LEASE FINANCE CORPORATION],
                                Owner and Lessor,
                     Leased to ALOHA ISLANDAIR, INC., Lessee"

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

                  SECTION 12. INSURANCE.

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


                                      -32-


<PAGE>


                  12.01 ALL-RISK INSURANCE.

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

                  12.02 WAR RISK INSURANCE.

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

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

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

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

                  (d) any malicious act or act of sabotage;

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

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

                  12.03 LIABILITY INSURANCE.

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

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

                                      -33-


<PAGE>


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

                  12.04 DEDUCTIBLES AND SELF INSURANCE.

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

                  12.05 ADDITIONAL REQUIREMENTS; LOSS PAYMENT.

                  The insurance required under this Section 12 shall be provided
on an agreed value basis and the policies shall, where applicable:

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

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

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

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

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

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

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

                  (h) subject to Section 12.09 hereof, name Lessor (or any
lender or other assignee designated by Lessor) as sole loss payee and provide
that losses will be adjusted with such loss payee to the extent of coverage
required herein by Section 12.


                                      -34-


<PAGE>


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

                  12.06 NO SET-OFF.

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

                  12.07 NOTICE OF MATERIAL ALTERATION OR CANCELLATION.

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

                  12.08 APPLICATION OF CERTAIN INSURANCE PROCEEDS.

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

                  (a) if such payments are received with respect to loss or
damage (including an Event of Loss with respect to an Engine or Propeller) not
constituting an Event of Loss with respect to the Airframe, such payments shall
be paid over to Lessee or at Lessee's election, to the repair facility jointly
with Lessee, upon performance by Lessee of the Lessee's repair obligations or
(if applicable) replacement obligations under this Lease pursuant to Section
13.02 hereof to the reasonable satisfaction of Lessor and, where appropriate,
Lessor shall issue any necessary payment orders with respect to such payments;

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

                  12.09 INSURANCE FOR OWN ACCOUNT.

                  Nothing in this Section 12 shall prohibit Lessee, Lessor or
any other Insured Party (in that order of priority should insurance capacity in
excess of the


                                      -35-


<PAGE>


insurances required in this Section 12 be limited as to availability or
amount), at its cost, from obtaining insurance for its own account and any
proceeds payable thereunder shall be payable as provided in the insurance
policy relating thereto, provided that no such insurance may be obtained which
would limit or otherwise adversely affect the coverage or payment of any
insurance required to be obtained or maintained pursuant to this Section 12.

                  12.10 CERTIFICATES AND REPORTS.

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

                  SECTION 13. LOSS, DAMAGE OR REQUISITION

                  13.01 AN EVENT OF LOSS OF AIRFRAME.

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

                  (b) In the event of a payment in full of the Stipulated Loss
Value for the Aircraft and other Rent payable as provided in Section 13.01(a)
above, (i) this Lease


                                      -36-


<PAGE>


and the obligations of Lessee to pay Basic Rent and Supplemental Rent shall
terminate; and (ii) Lessor shall convey to Lessee all of Lessor's right, title
and interest, AS-IS, WHERE-IS WITHOUT RECOURSE OR WARRANTY, EXPRESS OR IMPLIED
except for a warranty against Lessor's Liens, in and to (1) the Airframe and
Engines and Propellers and (2) all claims for damage to the Airframe and
Engines and Propellers, if any, against third persons arising from the Event of
Loss (unless any insurance carrier requires that such claims be assigned to
it).

                  13.02 ENGINE OR PROPELLER LOSS.

                  Upon the occurrence during the Term of an Event of Loss with
respect to an Engine or Propeller not then installed on the Airframe or an
Event of Loss with respect to an Engine or Propeller installed on the Airframe
not involving an Event of Loss with respect to the Airframe, Lessee shall give
Lessor and Lender written notice thereof as soon as is practicable but in no
event later than ten (10) Business Days after such occurrence and shall within
45 days of the occurrence of such Event of Loss and on at least 5 days' prior
written notice to Lessor substitute a Replacement Engine for such Engine or a
Replacement Propeller for such Propeller. In such event, immediately upon the
effectiveness of such substitution on the date set forth in such notice and
without further act, (i) title to the Replacement Engine or Replacement
Propeller shall thereupon vest in Lessor (subject only to Permitted Liens),
(ii) title to the replaced Engine or Propeller shall thereupon vest in Lessee,
in AS-IS, WHERE-IS CONDITION, free and clear of all rights of Lessor and free
and clear of Lessor Liens (other than Lessor Liens arising out of events
occurring after the transfer which are not attributable to actions of the
Lessor or omissions by the Lessor of actions which the Lessor is legally
obligated to take) and shall no longer be deemed an Engine or Propeller
hereunder, and (iii) such Replacement Engine or Replacement Propeller shall
become subject to this Lease and be deemed part of the Aircraft for all
purposes hereof to the same extent as the Engine or Propeller originally
installed on or attached to the Airframe. Upon such substitution, Lessee shall
execute and deliver to Lessor such bills of sale, opinions and other documents
and instruments as Lessor shall reasonably request by notice hereunder to
evidence the interest of Lessor and conveyance to Lessor of good and marketable
title to such Replacement Engine or Replacement Propeller. Upon such
substitution, (x) Lessor shall execute and deliver to Lessee such bills of sale
and other documents and instruments, prepared at Lessee's expense, as Lessee
shall reasonably request to evidence such transfer and vesting of title in and
to the replaced Engine or Propeller in Lessee, free and clear of all rights of
Lessor and (y) Lessee shall receive all insurance proceeds and proceeds in
respect of any Event of Loss causing such replacement. No Event of Loss with
respect to an Engine or Propeller under the circumstances contemplated by this
Section 13.02 shall result in any reduction of Lessee's obligations to pay Rent
hereunder. Lessee agrees that it shall at all times during the Term maintain or
cause to be maintained one (1) Engine, or other aircraft engine and one (1)
Propeller or other aircraft propeller suitable and available for use on the
Airframe and/or the airframe included with the Other Aircraft.


                                      -37-


<PAGE>


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

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

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

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

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

                  13.04 APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF
DEFAULT.

                  Any amount referred to in Section 13 or Section 12 hereof
which is payable to Lessee shall not be paid to Lessee, or, if it has been
previously paid directly to Lessee, shall not be retained by Lessee if at the
time of such payment an Event of Default shall have occurred and be continuing,
but shall be paid to and held by the Lessor as security for the obligations of
Lessee under this Lease and/or applied to any unpaid Rent hereunder then due,
and at such time as there shall not be continuing any such Event of Default,
such remaining amount shall be paid over to Lessee.


                                      -38-
<PAGE>

                 SECTION 14. EVENT OF DEFAULT

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

                 14.01 FAILURE TO MAKE PAYMENTS.

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

                 14.02 FAILURE TO OBTAIN OR MAINTAIN INSURANCE.

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

                 14.03 FAILURE TO PERFORM OTHER OBLIGATIONS.

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

                 14.04 REPRESENTATIONS AND WARRANTIES UNTRUE.

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

                 14.05 INSOLVENCY OR BANKRUPTCY.

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


                                     -39-


<PAGE>


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

                 14.06 LOSS OF REGISTRATION OR PROTECTION.

                 If the Aircraft is no longer registered in compliance with
Section 11.02(a) hereof.

                 14.07 LOSS OF LICENSE.

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

                 14.08 OTHER LEASE.

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

                 14.09 FINAL JUDGMENT.

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

                 14.10 OTHER DEFAULT.

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

                 14.11 CONTEST.

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

                 14.12 FAILURE TO MAINTAIN LETTER OF CREDIT.

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


                                     -40-


<PAGE>


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

                 SECTION 15. REMEDIES

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

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

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

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


                                     -41-


<PAGE>


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

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

                 (e) Terminate this Lease as to the Airframe or any or all of
the Engines or Propellers, or exercise any other right or remedy which may be
available under Applicable Law or proceed by appropriate court action to
enforce the terms hereof or to recover damages for the breach hereof, provided,
however, that this Lease shall be deemed to be terminated automatically and
immediately upon the occurrence of any Event of Default under Section 14.05. In
addition, Lessee shall be liable for any and all Rent due hereunder before or
after any termination hereof, including all costs and expenses (including
reasonable attorneys' fees and disbursements) paid by Lessor as a result of
the occurrence of any Event of Default or the exercise of remedies with respect


                                     -42-


<PAGE>


thereto including all costs and expenses incurred in connection with the return
of the Airframe or any Engine or Propeller in accordance with the terms of
Section 10 hereof and such obligation shall survive any termination of the
Lease. Except as otherwise expressly provided above, no remedy referred to in
this Section 15 is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to above or otherwise available to
Lessor at law or in equity; and the exercise or beginning of exercise by Lessor
of any one or more of such remedies shall not preclude the simultaneous or
later exercise by Lessor of any or all such other remedies. No express or
implied waiver by Lessor of any Default or Event of Default hereunder shall in
any way be, or be construed to be, a waiver of any future or subsequent Default
or Event of Default.

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

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

                 SECTION 16. INDEMNITIES AND EXPENSES

                 16.01 GENERAL INDEMNIFICATION AND WAIVER OF CERTAIN CLAIMS.

                 (a) INDEMNIFICATION. Lessee assumes liability for, and hereby
agrees to indemnify, protect, save and keep harmless each Indemnitee from and
against any and all liabilities, obligations, losses, damages, injuries,
penalties, claims (including,

                                     -43-


<PAGE>


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

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

                 16.02 GENERAL TAX INDEMNITY.

                 (a) INDEMNITY. Lessee agrees to pay and to indemnify each
Indemnitee for, and hold each Indemnitee harmless from and against, all license
and registration fees, income, franchise, gross receipts, sales, use, excise
(including without limitation, any excise tax imposed by the State of Hawaii),
personal property, ad

                                     -44-


<PAGE>


valorem, value added (except as indicated in subclause 16.02(a)(i) below),
leasing, leasing use, stamp, documentary, landing, airport use or other taxes,
and all levies, imposts, duties, charges, or withholdings of any nature, each
of the foregoing together with any penalties, forfeitures, fines or interest
thereon ("Impositions"), arising out of the transactions contemplated by this
Lease and imposed against an Indemnitee, Lessee or the Aircraft or any part
thereof by any Federal, state, local or foreign government or other taxing
authority upon or with respect to the Aircraft or any part thereof or upon the
sale, purchase, ownership, delivery, leasing, possession, use, operation,
return, transfer or other disposition thereof or based on or measured by the
rentals, receipts or earnings arising therefrom, or upon or with respect to
this Lease. Notwithstanding the provisions of the above paragraph, Lessee's
obligations under this Section 16.02 shall not include any of the following:

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

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

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

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

                   (v) indemnification of the Lessor, but without prejudice to
              the rights of indemnification of any other Indemnitee, with
              respect to any Impositions


                                     -45-


<PAGE>


              imposed as a direct result of the willful misconduct or
              gross negligence of the Lessor or its affiliates or, if acting
              within the scope of their employment or duties, of Lessor's
              officers, directors, employees, agents or representatives or as a
              direct result of a breach by Lessor of its express obligations
              under this Lease or as a direct result of an express
              representation or warranty given by Lessor in this Lease not
              being true and correct at the date when, or when deemed to have
              been, given or made;

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

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

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


                                     -46-


<PAGE>


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

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

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


                                     -47-


<PAGE>


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

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

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

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

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

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


                                     -48-


<PAGE>


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

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

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


                                     -49-


<PAGE>


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

                  SECTION 17. QUIET ENJOYMENT

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

                  SECTION 18. ASSIGNMENT

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


                                     -50-


<PAGE>


                 SECTION 19. NOTICES

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

                 IF TO LESSOR:

                 Willis Lease Finance Corporation
                 180 Harbor Drive
                 Suite 200
                 Sausalito, CA 94965
                 Attention: General Counsel
                 Telephone: (415) 331-5281
                 Telecopy: (415) 331-0607


                 If to Lessee:


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

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

                 SECTION 20. LESSOR'S RIGHT TO PERFORM FOR LESSEE

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


                                     -51-


<PAGE>


                 SECTION 21. LEASE; SECTION 1110

                 21.01 LEASE.

                 Lessee and Lessor agree that this Lease is to be treated as a
Lease for Federal income tax purposes, that the Lessor is the owner of the
Aircraft for Federal income tax purposes and all other purposes and that the
interest of the Lessee in the Aircraft is that of a lessee only.

                 21.02 SECTION 1110.

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

                 SECTION 22. MISCELLANEOUS

                 22.01 WAIVERS, HEADINGS.

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

                 22.02 COUNTERPARTS.

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

                 22.03 GOVERNING LAW.

                 THIS LEASE HAS BEEN DELIVERED IN THE STATE OF CALIFORNIA AND
SHALL IN ALL RESPECTS BE GOVERNED BY, AND

                                     -52-


<PAGE>


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

                 22.04 BENEFIT AND BINDING EFFECT.

                 The terms and provisions of this Lease shall inure to the
benefit of and be binding on Lessor and Lessee and their respective successors
and permitted assigns.

                 22.05 FURTHER ASSURANCES.

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

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

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

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


                                     -53-


<PAGE>


                 22.07 USURY LAWS.

                 The parties intend to contract in strict compliance with the
usury laws of the State of California and, to the extent applicable, the United
States. Notwithstanding anything to the contrary in the Operative Documents,
Lessee will not be obligated to pay interest at the Overdue Rate on overdue
payments of Rent or other interest in excess of the maximum non-usurious
interest rate, as in effect from time to time, which may by Applicable Law be
charged, contracted for, reserved, received or collected by Lessor in
connection with the Operative Documents. During any period of time in which the
then-applicable highest lawful rate is lower than the Overdue Rate, interest on
overdue payments of Rent will accrue and be payable at such highest lawful
rate. However, if at later times such highest lawful rate is greater than the
Overdue Rate, then Lessee will pay interest on overdue payments of Rent at the
highest lawful rate until the interest on overdue payments of Rent which is
paid by Lessee equals the amount of interest that would have been payable at
the Overdue Rate.

                 22.08 ENTIRE AGREEMENT.

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


                    [This space intentionally left blank.]


                                     -54-


<PAGE>


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


LESSOR                                        WILLIS LEASE FINANCE CORPORATION

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


LESSEE                                        ALOHA ISLANDAIR, INC.

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


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









Lease of DeHavilland Dash 8-103 Aircraft
MSN 353


<PAGE>


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

LESSOR                                WILLIS LEASE FINANCE CORPORATION

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


LESSEE                                ALOHA ISLANDAIR, INC.

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


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









Lease of DeHavilland Dash 8-103 Aircraft
MSN 353

<PAGE>

                                  EXHIBIT A

                            DESCRIPTION OF AIRCRAFT

<TABLE>
<CAPTION>
Mfr.             Model        Manufac-    Registration    Number and Type
----         Configuration    turer's     ------------      of Engines*
             -------------    Serial                      ---------------
                              Number
                              ------

<S>           <C>             <C>         <C>            <C>
DeHavilland   Dash-103         353          N853MA       Two (2) Pratt &
              Aircraft                                   Whitney 121 (reflected
              (reflected on the                          on the FAA Records as
              FAA Records as a                           PW 120 A) Engines
              DHC-8-102)                                 MSN 120968
                                                         MSN 121244

                                                         Number and Type
                                                         of Propellers"

                                                         Two (2) Hamilton
                                                         Standard 14 SF-7
                                                         Propellers
                                                         MSN 930310
                                                         MSN 920913

</TABLE>

The Aircraft is to be delivered and redelivered without APU.

     *     Each of the engines is of 750 or more rated takeoff horsepower or
           the equivalent of such horsepower.

     **    Each such propeller is capable of absorbing 750 or more rated
           takeoff shaft horsepower or the equivalent thereto.

                                      -57-

<PAGE>


                             SCHEDULE 1 TO EXHIBIT A

                               DELIVERY CONDITIONS

 (1)     The Aircraft engines shall have completed an engine overhaul in
         accordance with Pratt and Whitney overhaul maintenance practices. The
         life limited components will have a minimum of 5,000 cycles remaining.

 (2)     The Aircraft engines shall be upgraded from Model 120 to Model 121
         engines.

 (3)     All Aircraft propeller components that have more than 7,000 hours shall
         be overhauled in accordance with Hamilton Standard maintenance
         practices.

 (4)     The Aircraft shall have completed a bridging inspection to Aloha's
         equalized maintenance program ("EMP").

 (5)     The Aircraft will be stripped and painted to Aloha's paint scheme.

 (6)     Prior to delivery, the Aircraft will be weighed and a weight and
         balance statement shall be provided.

 (7)     The Aircraft shall be delivered with serviceable passenger life vests
         installed in under seat stowage pockets.

 (8)     A "3W randome boot shall be installed.

 (9)     The Aircraft shall be delivered with the existing ground spoilers
         de-activated.

(10)     The Aircraft will be delivered with leather passenger seat covers
         installed. Lessee shall pay to, or as directed by Lessor, the
         difference in price between fabric seat covers and leather seat
         covers.

 (11)    The Aircraft will be delivered with the existing APU removed from the
         Aircraft.

 (12)    Any de-ice boots that have deterioration or more than 3 patches shall
         be replaced prior to the delivery of the Aircraft.

 (13)    The main landing gear shall, at the time of delivery to Buyer, have at
         least fifty (50%) cycles remaining prior to the required time for
         removal for overhaul or refurbishment.
         The nose landing gear at the time of delivery shall have remaining, for
         Aircraft Serial Number 353 at least 7500 cycles and for Aircraft Serial
         Number 357 at least 7,800 cycles, prior to the required time for
         removal for overhaul or refurbishment.


                                      -58-


<PAGE>


 (14)    The propellers shall have modification AD95-22-12 Paragraph "B" to the
         secondary damper quills ("SDQ") installed,

 (15)    The next structural inspection shall be due no sooner than twelve (12)
         months, 3,500 flight hours or cycles as appropriate after delivery of
         the Aircraft to Lessee.

 (16)    The Aircraft shall be delivered to Lessee with no deferred maintenance.
         All airworthiness directives shall be in compliance without waiver or
         deviation.

 (17)    A power assurance run shall be completed and any discrepancies
         corrected prior to the delivery of the Aircraft to Lessee.

 (18)    The interior of the Aircraft shall be refurbished including the
         replacement of the carpet.

 (19)    At the time of technical acceptance the condition of N853MA will be
         substantially the same or better than the condition of the Aircraft as
         inspected by Lessee's designees on March 1, 1998, and March 9 through
         11, 1998 and March 25, 1998.

 (20)    The Aircraft shall have a valid FAA Standard United States Certificate
         of Airworthiness.

 (21)    The Aircraft shall have cleared U.S. Customs.

 (22)    The Aircraft shall have been registered in the name of the Lessor, as
         owner, or application for such registration shall have been filed, with
         the FAA.

                                      -59-


<PAGE>





                                    EXHIBIT B

                        RENT AND OTHER FINANCIAL MATTERS

 1.       STIPULATED LOSS VALUE

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

 2.       PAYMENT ACCOUNT

          All payments of Rent shall be paid to Lessor's bank account at:

               Wells Fargo Bank
               San Francisco, California USA
               ABA No. 121000 248

               To the Account of
               Willis Lease Finance Corporation
               Account No. 4518-101423

 until Lessee is advised by Lessor in writing to pay such amounts to another
 account.

 3.       TERM.

          The Term shall commence on the Delivery Date and expire on the same
 calendar date as the Delivery Date sixty (60) months thereafter unless earlier
 terminated in accordance with the terms of the Lease.

 4.       BASIC RENT

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

 5.       PUBLIC LIABILITY INSURANCE.

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


                                      -60-


<PAGE>


 6.      LETTER OF CREDIT.

          Lessee shall establish a Letter of Credit in favor of the Lessor in
compliance with Schedule 1 hereto.

 7.      EXTENSION OF TERM.

          Provided no Event of Default shall have occurred and be continuing,
 Lessee shall have the option, exercisable once, to extend the Term of the Lease
 for an additional two years at the same Rent and on the same terms and
 conditions as provided for in the Lease, exercisable by written notice given to
 the Lessor no later than one year prior to the end of the Term. Upon such
 notice of extension, the Term shall be deemed extended and such extension shall
 be irrevocable once such notice shall have been given. Failure to give such
 notice shall constitute an irrevocable undertaking on the part of the Lessee to
 return the Aircraft pursuant to Section 10 of the Lease at the end of the Term,
 without extension.

 8.       OVERDUE RATE.

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


                                      -61-


<PAGE>

                             SCHEDULE 1 TO EXHIBIT B

                                LETTER OF CREDIT

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

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

 Notwithstanding the foregoing, in the event that:

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

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

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

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

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

                                      *Intentionally omitted as
                                      confidential financial
                                      information and filed
                                      separately with the
                                      Commission.


                                            -62-


<PAGE>


                                    EXHIBIT C

                             ACCEPTANCE CERTIFICATE

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

                  1. Lessee has received this _______ day of , 1998 (Time: ), at
___________, from [WILLIS LEASE FINANCE CORPORATION] ("Lessor") possession of:

          A.   One (1) de Havilland Model Dash 8-103 (reflected on the FAA
               Records as a DHC-8-102) Aircraft, bearing Manufacturer's Serial
               Number 353, U.S. Registration No. N853MA, together with two (2)
               Pratt & Whitney PW 121 (reflected on the FAA Records as PW 120 A)
               Engines, Manufacturer's Serial Numbers 120968 and 121244, two (2)
               Hamilton Standard 14 SF-7 Propellers, Manufacturer's Serial
               Numbers 930310 and 920913 and all appliances, instruments,
               accessories, equipment (not including an APU) and parts attached
               thereto and thereon, in an airworthy condition;

          B.   Fuel on board the Aircraft, _______________________;

          C.   All manuals, logbooks, flight records and historical information
               regarding the Aircraft, the engines and the accessories and
               equipment, including, without limitation, those listed on Exhibit
               D to the Lease, as received from the Seller; and

          D.   the items listed on Schedule 1 hereto.

                  2. All of the foregoing were delivered and accepted to
 Lessee's full satisfaction and pursuant to the terms and provisions of the
 Aircraft Lease Agreement between Lessor and Lessee, dated as of __, 1998 (the
 "Lease"), except as set forth on Schedule 2 hereto. For purposes of the Lease,
 Lessor and Lessee agree that the installed hard time components have, as of the
 Delivery Date, the time, Flight Hours and Cycles operating time remaining as
 set forth on Schedule 3 hereto.

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

                  4. The Lease and Operative Documents (as defined therein) are
 in full force and effect; Lessor has fully, duly and timely performed all of
 its obligations of every kind or nature under the Lease and other Operative
 Documents; and Lessee has


                                      -63-


<PAGE>


 no claims; deductions, set-offs or defenses of any kind or nature in connection
 with the Lease and other Operative Documents.

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

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

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


                                     ALOHA ISLANDAIR, INC.
                                                              (LESSEE)
                                     By: ____________________
                                     Name:
                                     Title:



                                     By: ____________________
                                     Name:
                                     Title:


 Lease Acceptance Certificate
 Lease of de Havilland Dash 8-103
 MSN 353


                                      -64-

<PAGE>


                  SCHEDULE 1 TO EXHIBIT C

S/N 353                                Aircraft Purchase Agreement UAS-125

                        AIRCRAFT LOOSE EQUIPMENT
<Table>
<Caption>
QTY              ITEM DESCRIPTION
---              ----------------
<S>              <C>
3                Crew Oxygen masks
3                Smoke goggles
2                Crew headsets
2                coffee cup holders
1                QRH, AFM, Ops Data Manual (3 books in total)
2                crew life-vests
1                observer's lifevest
2                hand-microphones
2                crew flashlights
1                crew fire extinguisher
1                crew fire-axe
1                spare filament holder
1                PBE forward RH side of fit compartment
1                alternate extension handle RH side of crew compt. (also 1 unit in RH nacelle)
1                emergency light
1                galley pax service cart and 3 beverage trays
3                galley food tray boxes
2                galley hot jugs
1                PBE fwd cabin in fwd galley stowage
1                Fire extinguisher fwd cabin in fwd galley stowage
3                seat belt extenders in pouch in fwd galley stowage
2                Pax oxygen bottles in fwd galley stowage
5                cabin seat tables
37               underseat life-vest pouches and 37 life-vests
1                Crew life vest under fwd FA seat
1                Flashlight under fwd FA seat
2                First-Aid Kits RH fwd overhead locker
1                PBE Aft bulkhead
1                Fire extinguisher Aft bulkhead
2                Prop restraint a/c parking
2                Engine plugs (consisting of one plug type and one cover type)
2                Gear locking pins
2                Static port covers
6                wheel covers-2 x NLG, 4 x MLG,
2                exhaust covers
2                pitot covers
2                MLG downlock safety pins
2                MLG door safety pins
1                NLG door safety pins
2                Aft cargo nets and post
1                cargo net door

</Table>

On behalf of Willis Lease Finance Corporation accepted as complete except
where noted next to the item.

By _________________

Its: _______________

<PAGE>


                                   SCHEDULE 2

                                 [Discrepancies]

<PAGE>


                                   SCHEDULE 3

                          [Time, Flight Hours, Cycles]


<PAGE>

                           SCHEDULE 3 TO EXHIBIT C

           TIME CONTROLLED / LIFE LIMITED PARTS STATUS AT DELIVERY

        Aircraft: Total Time 11,326 Total Cycles 12,409 Date 12/02/97

<TABLE>
<CAPTION>
[ILLEGIBLE]                      Position                     Serial Number                     Time Since Overhaul/Installation
------------                     --------                     -------------                     --------------------------------
<S>                              <C>                          <C>                               <C>
Cockpit Voice Recorder           Only                         61173                             1990 fh

Flight Data Recorder             Only                         03346                             211 days

Air Cycle Machine                Only                         831230                            651 fh

Starter / Generator              Left                         96145                             Zero fh

Starter / Generator              Right                        1513                              2 fh

A/C Generator                    Left                         883                               4,371 fh

A/C Generator                    Right                        1252                              1,313 fh

ELT                              Only                         406422                            03/18/98

Fire Bottle Discharge Cart.      #1                           MAL2778                           611 days

Fire Bottle Discharge Cart.      #2                           MAL1434                           1019 days

Fire Bottle Discharge Cart.      #3                           MAL1444                           1030 days

Fire Bottle Discharge Cart.      #4                           MAL1449                           1038 days

Fire Bottles, HST                Fwd                          23108D1                           237 days

Fire Bottle, HST                 Aft                          23584D1                           126 days

Crew O2 Bottle, HST              Only                         140163                            219 days

Transponder                      Left                         92040817                          03/06/98

Transponder                      Right                        92020729                          03/06/98

Propeller                        Left                         930310                            57 fh

Blade, Propeller                 #1                           858396-7                          Zero fh            03/23/98

Blade, Propeller                 #2                           858162-7                          Zero fh            03/23/98

Blade, Propeller                 #3                           876199-7                          741 fh

Blade, Propeller                 #4                           876187-7                          677 fh

Propeller                        Right                        920913                            2,042 fh

Blade, Propeller                 #1                           855893-7                          Zero fh            03/23/98

Blade, Propeller                 #2                           863561-7                          Zero fh            03/23/98

Blade, Propeller                 #3                           855004-7                          Zero fh            03/23/98


                                       1

<PAGE>

<CAPTION>
[ILLEGIBLE]                      Position                     Serial Number                     Time Since Overhaul/Installation
------------                     --------                     -------------                     --------------------------------
<S>                              <C>                          <C>                               <C>
Blade, Propeller                 #4                           878378-7                          655 fh

Propeller Control Unit           Left                         920243                            Zero fh            03/23/98

Propeller Control Unit           Right                        861142                            4118 fh

Propeller Actuator               Left                         920523                            Zero fh            03/23/98

Propeller Actuator               Right                        920311                            2042 fh

Engine                           Left                         120968/121205                     Zero               02/26/98

Impeller, HP                     Left                         7D525                             12,256 cy          02/26/98

Impeller, LP                     Left                         7D255                             12,256 cy          02/26/98

Cover, HP Front                  Left                         97A905                            4,739 cy           02/26/98

Cover, HP Rear                   Left                         14B637                            4,739 cy           02/26/98

Disc, HP                         Left                         14B364                            4,739 cy           02/26/98

Disc, LP                         Left                         23A386                            12,256 cy          02/26/98

Disc, PT-1                       Left                         19A958                            12,256 cy          02/26/98

Disc, PT-2                       Left                         20A946                            12,256 cy          02/26/98

Seal, Air Interstage             Left                         19B751                            4,739 cy           02/26/98

Blades, HP                       Left                         Various                           657 cy             02/26/98

Engine                           Right                        121244                            Zero               02/27/98

Impeller, HP                     Right                        4B739                             12,274 cy          02/27/98

Impeller, LP                     Right                        4E960                             12,274 cy          02/27/98

Cover, HP Front                  Right                        28B598                            2,800 cy           02/27/98

Cover, HP Rear                   Right                        29B142                            2,800 cy           02/27/98

Disc, HP                         Right                        26B649                            2,800 cy           02/27/98

Disc, LP                         Right                        6X375                             14,132 cy          02/27/98

Disc, PT-1                       Right                        56A062                            12,274 cy          02/27/98

Disc, PT-2                       Right                        55A958                            12,274 cy          02/27/98

Seal, Air Interstage             Right                        27B841                            2,800 cy           02/27/98

Blades, HP                       Right                        Various                           Zero cy            02/27/98

Ground Prox. Warn.               Only                         7103                              Zero fh

Air Data Computer                Left                         90033971                          03/24/98 days


                                       2

<PAGE>

<CAPTION>
[ILLEGIBLE]                      Position                     Serial Number                     Time Since Overhaul/Installation
------------                     --------                     -------------                     --------------------------------
<S>                              <C>                          <C>                               <C>
Air Data Computer                Right                        92055334                          03/24/98 days

Altimeter                        Pilot                        92107266                          03/24/98 days

Altimeter                        Co-Pilot                     92107266                          03/24/98 days

Altimeter                        Standby                      8160A                             03/24/12 days

Yolk Assembly, MLG               Left                         DCL542/92                         12,409 cy

Yolk Assembly, MLG               Right                        DCL547/92                         12,409 cy

Drag Strut Assembly, MLG         Left                         DCL554/92                         12,409 cy

Drag Strut Assembly, MLG         Right                        DCL553/92                         12,409 cy

Shock Strut Assembly, MLG        Left                         DCL553/9292                       12,409 cy

Shock Strut Assembly, MLG        Right                        DCL541/9292                       12,409 cy

Pin. Strut to Yolk, MLG          Left                         DCL702                            12,409 cy

Pin. Strut to Yolk, MLG          Right                        DCL704                            12,409 cy

Stabilizer Stay Assembly, MLG    Left                         DCL502/92                         12,409 cy

Stabilizer Stay Assembly, MLG    Right                        DCL505/92                         12,409 cy          03/23/98

Frame Assembly, MLG              Left                         495572CTA/495571CTA               12,409 cy

Frame Assembly, MLG              Right                        495572CTA/495572CTA               12,409 cy

Drag Strut Assembly, NLG         Only                         DCL378/92                         12,443 cy          03/23/98

Drag Strut Assembly, NLG         Only                         DCL379/92                         12,409 cy

Outer Cylinder, NLG              Only                         DCL470                            12,409 cy

Trunnion Plate, NLG              Left                         486306CB                          12,409 cy

Trunnion Plate, NLG              Right                        49740380HXC                       12,409 cy

Trunnion Cap, NLG                Left                         252008CO                          12,409 cy

Trunnion Cap, NLG                Right                        252008CP                          12,409 cy

</TABLE>


To calculate delivery times on all undated items add 21 Flight hours, 11
Flight cycles, 113 Days to all undated items to compensate for ferry time
between return to de Havilland on 12/02/97 and delivery to Island Air on
3/26/98. To calculate delivery times on all dated items add 6 Flight hours, 6
Flight cycles, [ILLEGIBLE] Days to compensate for ferry time from
installation maintenance facility and delivery to Island Air on 3/26/98.


<TABLE>
<S>                                              <C>                                               <C>
Aircraft Time at Delivery                        Total Time: 11,347                                Delivery Location: Wichita, KS
                                                 Total Cycles: 12,420                              Delivery Date: 3/26/98
</TABLE>


                                       3


<PAGE>


                                  EXHIBIT D

                  Schedule of Manuals / Maintenance Records

<TABLE>
<CAPTION>
             Description                                               Qty
             -----------                                               ---
<S>                                                                    <C>
Aircraft Journey and Maintenance Log Books                             Numerous

Aircraft Technical Log Book, Record of Installations and Modifications   1

Engine Log Book for each Engine                                          1

Propeller Log Book for each Propeller                                    1

Component Serialization Record                                           1

Aircraft Technical Log for Airframe                                      1

FAA Approved Flight Manual (FAA-103)                                     1

Operating Data Manual                                                    1

Weight & Balance Manual                                                  1

Quick Reference Manual                                                   1

Customized Maintenance Manual                                            1

Customized Wiring Manual                                                 1

Airworthiness Directive Records and Accomplishment Files               Numerous

STC Record File                                                          1

Serviceable Tags for Components                                          1 Box

Structural Deviation Inspection Requirements File                        1

Electrical Load Analysis File                                            1

Form 337 File                                                            1

FDAU Calibration File                                                    1

Flight Data Recorder File                                                1

Previous Maintenance Checks Accomplished File                            1

Certified Computer Record for Parts Installed Time Status/Summary        1

Certified Computer Record for Maintenance Due Summary                    1

Current Weight & Balance File                                            1
</TABLE>

<PAGE>


                                   EXHIBIT E

                          RETURN ACCEPTANCE CERTIFICATE


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

                  1. Lessor has received this ____ day of _______ 200_
(Time:____), at [____________], from ALOHA ISLANDAIR, INC. ("Lessee")
possession of:

                  A.   One (1) de Havilland Model Dash 8-103 Aircraft,
                       bearing Manufacturer's Serial Number ____ together
                       with two (2) Pratt & Whitney___ Engines,
                       Manufacturer's Serial Numbers _______ and _______, two
                       (2) Hamilton Standard ___ propellers, Manufacturer's
                       Serial Numbers _______ and _______ and all appliances,
                       instruments, accessories, equipment (not including an
                       APU) and parts attached thereto and thereon, in an
                       airworthy condition;

                  B.   Fuel on board the Aircraft, __________________; and

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

                  2. All of the foregoing were delivered and accepted to
Lessor's full satisfaction and pursuant to the terms and provisions of the Lease
Agreement between Lessor and Lessee dated as of March __, 1998 (the "Lease")
except as set forth on Schedule 2 hereto.

                  3. The Aircraft, Engines, Propellers and Parts as described in
the Lease have been fully examined by Lessor and have been received in a
condition fully


<PAGE>


satisfactory to Lessor and in full conformance with the Lease except as set
forth on Schedule 2 hereto.

                    Dated this ____ day of _________, [200_]


                                       WILLIS LEASE FINANCE CORPORATION

                                                                (LESSOR)


                                       By:    ________________________________
                                       Name:  ________________________________
                                       Title: ________________________________

Lease Return Acceptance Certificate
Lease of de Havilland Dash 8-103
MSN __




                                      -2-

<PAGE>


                                    EXHIBIT F

I.       GENERAL RETURN CONDITIONS OF THE AIRCRAFT.

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

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

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

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

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

                   (f) CORROSION TREATMENT. The Aircraft shall have been
maintained by cleaning and treating of all mild corrosion and correcting of all
moderate and severe or exfoliated corrosion in accordance with the Maintenance
Program.


<PAGE>


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

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

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

II.      CONDITION OF AIRFRAME AND ENGINES.

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

                  (a) Lessee shall have performed or caused to be performed
prior to redelivery to the Lessor the following: (i) the next succeeding
segment of the de Havilland Equalized Maintenance Program, (ii) any maintenance
or inspections, including structural inspections, required by the Maintenance
Program and not included in the Equalized Maintenance Program or, any
replacement Maintenance Program for the de Havilland Equalized Maintenance
Program, in effect on the Redelivery Date, (the "Out of Phase Items") due
within 3,500 Flight Hours or Cycles or 12 months (whichever is the more
limiting) after the end of the Term, (iii) the Aircraft shall be redelivered to
the Lessor with not less than the number of Cycles remaining until the next
40,000 cycle structural inspection required under the de Havilland Maintenance
Program as it had remaining on the Delivery Date. In the event, during the
Term, the Lessee adopts a Maintenance Program other than the de Havilland
Equalized Maintenance Program the requirement in (i) above shall be changed to,
an "A" and "C" check or their equivalent under the Maintenance Program. The
Aircraft


                                       -2-


<PAGE>


shall not have been operated since the completion of the maintenance required
in this section except for flights pursuant to Section 10.07 and 10.08.

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

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

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

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

                   (f) The Engines and Propellers shall have not less than the
number of Flight Hours and Cycles remaining to their next scheduled removal as
each did on the Delivery Date, provided that in no event shall any Engine or
Propeller have fewer than 3,500 Flight Hours or Cycles (whichever is more
limiting) until its next scheduled removal; and

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

III.    ADJUSTMENTS.

                  In the event the Airframe, Engines, Propellers, Parts or other
components (each a "Component") do not meet the return conditions in Part II
above, the Lessee shall pay the Lessor a dollar amount computed by multiplying
(i) the cost to Lessee of having an outside supplier or contractor perform
checks, scheduled removal, scheduled maintenance or replacement of the
Component, whichever is the appropriate measure for such return condition (the
"Periodic Service"), by (ii) a fraction of which (i) the numerator shall be the
difference between the required number of Flight Hours or

                                      -3-

<PAGE>


Cycles (whichever is more limiting) for such Component to the next Periodic
Service specified in Part II above and the actual number of Flight Hours or
Cycles (whichever is more limiting) remaining for such Component to the next
Periodic Service and (y) the denominator shall be the number of Flight Hours or
Cycles (whichever is more limiting) allowable between each instance of Periodic
Service for such Component. To the extent that the remaining life of any
Component exceeds the Flight Hours or Cycles (whichever is more limiting) to
the next Periodic Service required in part II above and no Default or Event of
Default shall then exist, the Lessee shall be entitled to a credit against
amounts due to Lessor by operation of the preceding sentence. Such credit shall
equal a dollar amount calculated by multiplying (i) the cost to Lessee of
having an outside supplier or contractor perform the appropriate Periodic
Service for the Component by (ii) a fraction of which (i) the numerator shall
be the difference between the actual number of Flight Hours or Cycles
(whichever is more limiting) remaining for such Component to the next Periodic
Service and the required number of hours of operation or Cycles for such
Component to the next Periodic Service specified in Part II above, and (y) the
denominator shall be the number of Flight Hours or Cycles (whichever is more
limiting) allowable between each instance of Periodic Service for such
Component, provided that (1) the credit shall only be used to offset the
Lessee's obligation to pay a dollar adjustment to Seller pursuant to this Part
III and in no event shall Lessor be required to pay any amount to Lessee by
reason of the condition of any Component and (2) no credit provided herein
shall be used to offset a dollar adjustment caused by the Component having less
than the minimum hours of Flight Hours or Cycles (whichever is more limiting)
to the next Periodic Service provided for in Part II above.


                                       -4-


<PAGE>


                             ACCEPTANCE CERTIFICATE

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

                  1. Lessee has received this 26th day of March, 1998 (Time:
10:15 a.m. CST), at Wichita, Kansas from [WILLIS LEASE FINANCE CORPORATION]
("Lessor") possession of:

                   A.    One (1) de Havilland Model Dash 8-103 (reflected on the
                         FAA Records as a DHC-8-102) Aircraft, bearing
                         Manufacturer's Serial Number 353, U.S. Registration No.
                         N853MA, together with two (2) Pratt & Whitney PW 121
                         (reflected on the FAA Records as PW 120 A) Engines,
                         Manufacturer's Serial Numbers 120968 and 121244, two
                         (2) Hamilton Standard 14 SF-7 Propellers,
                         Manufacturer's Serial Numbers 930310 and 920913 and
                         all appliances, instruments, accessories, equipment
                         (not including an APU) and parts attached thereto and
                         thereon, in an airworthy condition;

                    B.   Fuel on board the Aircraft, 1,400 lbs;

                    C.   All manuals, logbooks, flight records and historical
                         information regarding the Aircraft, the engines and the
                         accessories and equipment, including, without
                         limitation, those listed on Exhibit D to the Lease, as
                         received from the Seller; and

                    D.   the items listed on Schedule 1 hereto.

                  2. All of the foregoing were delivered and accepted to
Lessee's full satisfaction and pursuant to the terms and provisions of the
Aircraft Lease Agreement between Lessor and Lessee, dated as of March 26, 1998
(the "Lease"), except as set forth on Schedule 2 hereto. For purposes of the
Lease, Lessor and Lessee agree that the installed hard time components have, as
of the Delivery Date, the time, Flight Hours and Cycles operating time
remaining as set forth on Schedule 3 hereto.

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

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


<PAGE>


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

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

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


                                            ALOHA ISLANDAIR, INC.

                                                                      (LESSEE)

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

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



Lease Acceptance Certificate
Lease of DeHavilland Dash 8-103
MSN 353

<PAGE>

                                   SCHEDULE 1

S/N 353                                Aircraft Purchase Agreement UAS-125

                        AIRCRAFT LOOSE EQUIPMENT
<Table>
<Caption>
QTY              ITEM DESCRIPTION
---              ----------------
<S>              <C>
3                Crew Oxygen masks
3                Smoke goggles
2                Crew headsets
2                coffee cup holders
1                QRH, AFM, Ops Data Manual (3 books in total)
2                crew life-vests
1                observer's lifevest
2                hand-microphones
2                crew flashlights
1                crew fire extinguisher
1                crew fire-axe
1                spare filament holder
1                PBE forward RH side of fit compartment
1                alternate extension handle RH side of crew compt. (also 1 unit in RH nacelle)
1                emergency light
1                galley pax service cart and 3 beverage trays
3                galley food tray boxes
2                galley hot jugs
1                PBE fwd cabin in fwd galley stowage
1                Fire extinguisher fwd cabin in fwd galley stowage
3                seat belt extenders in pouch in fwd galley stowage
2                Pax oxygen bottles in fwd galley stowage
5                cabin seat tables
37               underseat life-vest pouches and 37 life-vests
1                Crew life vest under fwd FA seat
1                Flashlight under fwd FA seat
2                First-Aid Kits RH fwd overhead locker
1                PBE Aft bulkhead
1                Fire extinguisher Aft bulkhead
2                Prop restraint a/c parking
2                Engine plugs (consisting of one plug type and one cover type)
2                Gear locking pins
2                Static port covers
6                wheel covers-2 x NLG, 4 x MLG,
2                exhaust covers
2                pitot covers
2                MLG downlock safety pins
2                MLG door safety pins
1                NLG door safety pins
2                Aft cargo nets and post
1                cargo net door

</Table>

On behalf of Willis Lease Finance Corporation accepted as complete except
where noted next to the item.

By _________________

Its: _______________

<PAGE>


                                   SCHEDULE 2

                                 [Discrepancies]

<PAGE>


                                   SCHEDULE 3

                          [Time, Flight Hours, Cycles]


<PAGE>

                           SCHEDULE 3 TO EXHIBIT C

           TIME CONTROLLED / LIFE LIMITED PARTS STATUS AT DELIVERY

        Aircraft: Total Time 11,326 Total Cycles 12,409 Date 12/02/97

<TABLE>
<CAPTION>
[ILLEGIBLE]                      Position                     Serial Number                     Time Since Overhaul/Installation
------------                     --------                     -------------                     --------------------------------
<S>                              <C>                          <C>                               <C>
Cockpit Voice Recorder           Only                         61173                             1990 fh

Flight Data Recorder             Only                         03346                             211 days

Air Cycle Machine                Only                         831230                            651 fh

Starter / Generator              Left                         96145                             Zero fh

Starter / Generator              Right                        1513                              2 fh

A/C Generator                    Left                         883                               4,371 fh

A/C Generator                    Right                        1252                              1,313 fh

ELT                              Only                         406422                            03/18/98

Fire Bottle Discharge Cart.      #1                           MAL2778                           611 days

Fire Bottle Discharge Cart.      #2                           MAL1434                           1019 days

Fire Bottle Discharge Cart.      #3                           MAL1444                           1030 days

Fire Bottle Discharge Cart.      #4                           MAL1449                           1038 days

Fire Bottles, HST                Fwd                          23108D1                           237 days

Fire Bottle, HST                 Aft                          23584D1                           126 days

Crew O2 Bottle, HST              Only                         140163                            219 days

Transponder                      Left                         92040817                          03/06/98

Transponder                      Right                        92020729                          03/06/98

Propeller                        Left                         930310                            57 fh

Blade, Propeller                 #1                           858396-7                          Zero fh            03/23/98

Blade, Propeller                 #2                           858162-7                          Zero fh            03/23/98

Blade, Propeller                 #3                           876199-7                          741 fh

Blade, Propeller                 #4                           876187-7                          677 fh

Propeller                        Right                        920913                            2,042 fh

Blade, Propeller                 #1                           855893-7                          Zero fh            03/23/98

Blade, Propeller                 #2                           863561-7                          Zero fh            03/23/98

Blade, Propeller                 #3                           855004-7                          Zero fh            03/23/98


                                       1

<PAGE>

<CAPTION>
[ILLEGIBLE]                      Position                     Serial Number                     Time Since Overhaul/Installation
------------                     --------                     -------------                     --------------------------------
<S>                              <C>                          <C>                               <C>
Blade, Propeller                 #4                           878378-7                          655 fh

Propeller Control Unit           Left                         920243                            Zero fh            03/23/98

Propeller Control Unit           Right                        861142                            4118 fh

Propeller Actuator               Left                         920523                            Zero fh            03/23/98

Propeller Actuator               Right                        920311                            2042 fh

Engine                           Left                         120968/121205                     Zero               02/26/98

Impeller, HP                     Left                         7D525                             12,256 cy          02/26/98

Impeller, LP                     Left                         7D255                             12,256 cy          02/26/98

Cover, HP Front                  Left                         97A905                            4,739 cy           02/26/98

Cover, HP Rear                   Left                         14B637                            4,739 cy           02/26/98

Disc, HP                         Left                         14B364                            4,739 cy           02/26/98

Disc, LP                         Left                         23A386                            12,256 cy          02/26/98

Disc, PT-1                       Left                         19A958                            12,256 cy          02/26/98

Disc, PT-2                       Left                         20A946                            12,256 cy          02/26/98

Seal, Air Interstage             Left                         19B751                            4,739 cy           02/26/98

Blades, HP                       Left                         Various                           657 cy             02/26/98

Engine                           Right                        121244                            Zero               02/27/98

Impeller, HP                     Right                        4B739                             12,274 cy          02/27/98

Impeller, LP                     Right                        4E960                             12,274 cy          02/27/98

Cover, HP Front                  Right                        28B598                            2,800 cy           02/27/98

Cover, HP Rear                   Right                        29B142                            2,800 cy           02/27/98

Disc, HP                         Right                        26B649                            2,800 cy           02/27/98

Disc, LP                         Right                        6X375                             14,132 cy          02/27/98

Disc, PT-1                       Right                        56A062                            12,274 cy          02/27/98

Disc, PT-2                       Right                        55A958                            12,274 cy          02/27/98

Seal, Air Interstage             Right                        27B841                            2,800 cy           02/27/98

Blades, HP                       Right                        Various                           Zero cy            02/27/98

Ground Prox. Warn.               Only                         7103                              Zero fh

Air Data Computer                Left                         90033971                          03/24/98 days


                                       2

<PAGE>

<CAPTION>
[ILLEGIBLE]                      Position                     Serial Number                     Time Since Overhaul/Installation
------------                     --------                     -------------                     --------------------------------
<S>                              <C>                          <C>                               <C>
Air Data Computer                Right                        92055334                          03/24/98 days

Altimeter                        Pilot                        92107266                          03/24/98 days

Altimeter                        Co-Pilot                     92107266                          03/24/98 days

Altimeter                        Standby                      8160A                             03/24/12 days

Yolk Assembly, MLG               Left                         DCL542/92                         12,409 cy

Yolk Assembly, MLG               Right                        DCL547/92                         12,409 cy

Drag Strut Assembly, MLG         Left                         DCL554/92                         12,409 cy

Drag Strut Assembly, MLG         Right                        DCL553/92                         12,409 cy

Shock Strut Assembly, MLG        Left                         DCL553/9292                       12,409 cy

Shock Strut Assembly, MLG        Right                        DCL541/9292                       12,409 cy

Pin. Strut to Yolk, MLG          Left                         DCL702                            12,409 cy

Pin. Strut to Yolk, MLG          Right                        DCL704                            12,409 cy

Stabilizer Stay Assembly, MLG    Left                         DCL502/92                         12,409 cy

Stabilizer Stay Assembly, MLG    Right                        DCL505/92                         12,409 cy          03/23/98

Frame Assembly, MLG              Left                         495572CTA/495571CTA               12,409 cy

Frame Assembly, MLG              Right                        495572CTA/495572CTA               12,409 cy

Drag Strut Assembly, NLG         Only                         DCL378/92                         12,443 cy          03/23/98

Drag Strut Assembly, NLG         Only                         DCL379/92                         12,409 cy

Outer Cylinder, NLG              Only                         DCL470                            12,409 cy

Trunnion Plate, NLG              Left                         486306CB                          12,409 cy

Trunnion Plate, NLG              Right                        49740380HXC                       12,409 cy

Trunnion Cap, NLG                Left                         252008CO                          12,409 cy

Trunnion Cap, NLG                Right                        252008CP                          12,409 cy

</TABLE>


To calculate delivery times on all undated items add 21 Flight hours, 11
Flight cycles, 113 Days to all undated items to compensate for ferry time
between return to de Havilland on 12/02/97 and delivery to Island Air on
3/26/98. To calculate delivery times on all dated items add 6 Flight hours, 6
Flight cycles, [ILLEGIBLE] Days to compensate for ferry time from
installation maintenance facility and delivery to Island Air on 3/26/98.


<TABLE>
<S>                                              <C>                                               <C>
Aircraft Time at Delivery                        Total Time: 11,347                                Delivery Location: Wichita, KS
                                                 Total Cycles: 12,420                              Delivery Date: 3/26/98
</TABLE>


                                       3


<PAGE>


                                  EXHIBIT D

                  Schedule of Manuals / Maintenance Records

<TABLE>
<CAPTION>
             Description                                               Qty
             -----------                                               ---
<S>                                                                    <C>
Aircraft Journey and Maintenance Log Books                             Numerous

Aircraft Technical Log Book, Record of Installations and Modifications   1

Engine Log Book for each Engine                                          1

Propeller Log Book for each Propeller                                    1

Component Serialization Record                                           1

Aircraft Technical Log for Airframe                                      1

FAA Approved Flight Manual (FAA-103)                                     1

Operating Data Manual                                                    1

Weight & Balance Manual                                                  1

Quick Reference Manual                                                   1

Customized Maintenance Manual                                            1

Customized Wiring Manual                                                 1

Airworthiness Directive Records and Accomplishment Files               Numerous

STC Record File                                                          1

Serviceable Tags for Components                                          1 Box

Structural Deviation Inspection Requirements File                        1

Electrical Load Analysis File                                            1

Form 337 File                                                            1

FDAU Calibration File                                                    1

Flight Data Recorder File                                                1

Previous Maintenance Checks Accomplished File                            1

Certified Computer Record for Parts Installed Time Status/Summary        1

Certified Computer Record for Maintenance Due Summary                    1

Current Weight & Balance File                                            1
</TABLE>




<PAGE>


                           MORTGAGE SUPPLEMENT N0. 14

                   MORTGAGE SUPPLEMENT NO. 14 dated March 26, 1998, of Willis
Lease Finance Corporation (together with its successors and assigns being
hereinafter called the "Borrower"), supplementing the Mortgage and Security
Agreement, dated as of June 27, 1997 (as amended, modified or supplemented from
time to time, herein called the "Mortgage"), made by the Borrower in favor of
CoreStates Bank, N.A. (together with its successors and assigns, the
"Mortgagee").

                                   WITNESSETH:

                   WHEREAS, the Mortgage provides for the execution and delivery
from time to time of Mortgage Supplements thereto substantially in the form
hereof, each of which shall particularly describe certain Engines, Airframes
and Spare Parts (such term and other defined terms in the Mortgage being herein
used with the same meanings) and shall specifically mortgage such Engines,
Airframes and Spare Parts to the Mortgagee; and

                  WHEREAS, the Mortgage and Mortgage Supplement No. 1 of the
Borrower, dated June 27, 1997 were recorded by the Federal Aviation
Administration on July 9, 1997, and assigned Conveyance No. H90651; and

                  WHEREAS, Mortgage Supplement No. 2 of the Borrower, dated June
30, 1997 was recorded by the Federal Aviation Administration on July 9, 1997,
and assigned Conveyance No. H90653; and

                  WHEREAS, Mortgage Supplement No. 3 of the Borrower, dated July
28, 1997 was recorded by the Federal Aviation Administration on July 31, 1997,
and assigned Conveyance No. GG011163; and

                  WHEREAS, Mortgage Supplement No. 4 of the Borrower, dated
August 1, 1997 was recorded by the Federal Aviation Administration on August 20,
1997, and assigned Conveyance No. M32717; and

                  WHEREAS, Mortgage Supplement No. 5 of the Borrower, dated
August 25, 1997 was recorded by the Federal Aviation Administration on December
11. 1997, and assigned Conveyance No. MM015328; and

                  WHEREAS, Mortgage Supplement No. 6 of the Borrower, dated
September 29, 1997 was recorded by the Federal Aviation Administration on
December 12, 1997, and assigned Conveyance No. MM015329; and

                  WHEREAS, Mortgage Supplement No. 7 of the Borrower, dated
September 30, 1997 was recorded by the Federal Aviation Administration on
October 6, 1997, and assigned Conveyance No. FF22634; and


<PAGE>


                  WHEREAS, Amendment No. 1 to the Mortgage, dated November 18,
1997 was recorded by the Federal Aviation Administration on January 13, 1998,
and assigned Conveyance No. P13938; and

                  WHEREAS, Mortgage Supplement No. 8 of the Borrower, dated
November 20, 1997 was recorded by the Federal Aviation Administration on January
13, 1998, and assigned Conveyance No. P13939; and

                  WHEREAS, Mortgage Supplement No. 9 of the Borrower, dated
December 2, 1997 was recorded by the Federal Aviation Administration on December
3, 1997, and assigned Conveyance No. Z02486; and

                  WHEREAS, Mortgage Supplement No. 10 of the Borrower, dated
December 4, 1997 was recorded by the Federal Aviation Administration on December
9, 1997, and assigned Conveyance No. X133882; and

                  WHEREAS, Mortgage Supplement No. 11 of the Borrower, dated
March 10, 1998 was filed with the Federal Aviation Administration on March 10,
1998, but has not yet been recorded; and

                  WHEREAS, Mortgage Supplement No. 12 of the Borrower, dated
March 16, 1998 was filed with the Federal Aviation Administration on March 16,
1998, but has not yet been recorded; and

                  WHEREAS, Mortgage Supplement No. 13 of the Borrower, dated
March 19, 1998 was filed with the Federal Aviation Administration on March 19,
1998, but has not yet been recorded; and

                  WHEREAS, the Mortgage relates in part to the Aircraft and
Lease described in the following paragraph:

                   NOW, THEREFORE, This Supplement Witnesseth, that to secure
(i) the prompt and complete payment and performance when due of all of the
Obligations and (ii) the performance and observance by the Borrower of all the
agreements, covenants and provisions in the Mortgage, and in consideration of
the premises and of the covenants contained in the Mortgage, and of the sum of
$1.00 paid to the Borrower by the Mortgagee at or before the delivery hereof,
the receipt whereof is hereby acknowledged, the Borrower has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, granted a
security interest in and confirmed unto the Mortgagee, and does hereby grant,
bargain, sell, assign, transfer, convey, mortgage, pledge, grant a security
interest in and confirm unto the Mortgagee, the Borrower's interest (whether as
owner or secured party) in the following described property, whether now owned
or hereafter acquired (the "Mortgaged Property"):

                    A.   (i) One (1) de Havilland Dash 9-103 turboprop passenger
                         aircraft consisting of the following principal
                         components (the "Aircraft"):
                             (a) one (1) Dash 8-103 (described in the FAA
                             records as a DHC-8-102) airframe bearing
                             Manufacturer's Serial No. 353 and United States
                             Registration No. N853MA and; (b) two (2) Pratt &
                             Whitney Model PW120A aircraft engines bearing
                             Manufacturer's Serial Nos. 120968 and


<PAGE>


                             121244, respectively (each of which engines has 750
                             or more rated takeoff horsepower or the equivalent
                             of such horsepower), whether or not such engines
                             shall be installed in or attached to any airframe;
                             (c) two (2) Hamilton Standard Model 14SF-7
                             four-blade propellers bearing Manufacturer's Serial
                             Nos. 930310 and 920913, respectively (each of
                             which is capable of absorbing at least 750 rated
                             takeoff horsepower or the equivalent of such
                             horsepower), whether or not such propellers shall
                             be installed on or attached to any engine

                      (ii) Lease Agreement, dated as of March 26, 1998 between
                   Willis Lease Finance Corporation, as lessor and Aloha
                   IslandAir, Inc., as lessee in respect of the Aircraft, with
                   Acceptance Certificate dated March 26, 1998 by Aloha
                   IslandAir, Inc.

                   B. all parts, components, equipment instruments, appliances,
avionics, radio and radar devices, cargo handling systems and loose equipment
that are incorporated or installed in or attached to said Aircraft, with the
exception of one Sunstrand Model T-62-40-C7B APU with serial number 925151,
whether now owned or hereafter acquired by the Borrower; and

                    C. all Records relating to any of the property described in
paragraphs A and B above.

                   TO HAVE AND TO HOLD all and singular the aforesaid property
unto the Mortgagee, its successors and assigns, for the uses and purposes and
subject to the terms and provisions set forth in the Mortgage.

                   This Supplement shall be construed as supplemental to the
Mortgage and shall form a part of the Mortgage and the Mortgage is hereby
incorporated by reference herein and is hereby ratified, approved and
confirmed.

                    This Supplement is being delivered in the State of
Pennsylvania.

                   This Supplement may be executed by the Borrower and the
Mortgagee in separate counterparts, each of which when so executed and
delivered is an original, but all such counterparts shall together constitute
but one and the same Supplement.

                   AND, FURTHER, the Borrower hereby acknowledges that the
Mortgaged Property has been delivered to the Borrower and is included in the
property of the Borrower covered by all the terms and conditions of the
Mortgage.


<PAGE>


                  IN WITNESS WHEREOF, the Borrower and the Mortgagee have each
caused this Supplement to be duly executed, as of the day and year first above
written.

                                       WILLIS LEASE FINANCE CORPORATION

                                       By:   /s/ Charles F. Willis
                                             ---------------------------------
                                       Name:  CHARLES F. WILLIS
                                       Title:     PRESIDENT


                                       CORESTATES BAN& N.A.

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


<PAGE>


                  IN WITNESS WHEREOF, the Borrower and the Mortgagee have each
caused this Supplement to be duly executed, as of the day and year first above
written.

                                       WILLIS LEASE FINANCE CORPORATION

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


                                       CORESTATES BANK, N.A.


                                       By:     /s/ Hugh W. Connelly
                                             ---------------------------------
                                       Name:   Hugh W. Connelly
                                       Title:  Vice President


<PAGE>

[LOGO IslandAir]
--------------------------------------------------------------------------------


May 20, 1998


VIA FACSIMILE
(415) 331-0607


Mr. Donald A. Nunemaker
Richard A. Cogan, Esq.
Willis Lease Finance Corporation


RE:  Lease Agreement between Willis Lease Finance Corporation, as Lessor, and
     Aloha IslandAir, Inc., as Lessee, relating to one (1) de Havilland Dash
     8-103 aircraft Manufacturer Serial No. 353, U.S. Registration No. N853MA
     dated as of March 26, 1998 ("Lease").


Gentlemen:


Lease, Section 12.05(b), page 34, is corrected as follows, effective as of March
26, 1998:

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

Lease, Section 1, page 5, definitions of "Other Lease" and "Other Aircraft" are
amended as of the date hereof to read as follows:

          "OTHER LEASE" means the Lease Agreement covering one (1) de Havilland
     Dash 8-103 Aircraft (Reflected on the FAA Records as a DHC-8-102),
     Manufacturer's Serial Number 357, U.S. Registration No. N854MA, two (2)
     Pratt & Whitney Model PW 121 Engines (Reflected on the FAA Records as PW
     120 A), Manufacturer's Serial Numbers 121298 and 121179, and two (2)
     Hamilton Standard 14SF-7 Propellers, Manufacturer's Serial Numbers 921018
     and 921211 between Lessor and Lessee with respect to the Other Aircraft.

          "OTHER AIRCRAFT" means that certain de Havilland Dash 8-103 aircraft
     (Reflected on the FAA Records as a DHC-8-102), Manufacturer's Serial
     Number 357, U.S. Registration No. N854MA, as further identified in the
     Other Lease.

In all other respects, the Lease shall remain in full force and effect.

99 Kapalulu Place - Honolulu, Hawaii 96819-1843 - Telephone (808) 836-7693 -
Facsimile (808) 833-5498


<PAGE>

May 20, 1998
Mr. Donald Nunemaker
Richard A. Cogan, Esq.
Page - 2 -

ALOHA ISLANDAIR, INC.


By:
    -----------------------------
    Its:
         ------------------------


By:
    -----------------------------
    Its:
         ------------------------


 WILLIS LEASE FINANCE CORPORATION

By: /s/ JAMES D. McBRIDE
        -------------------------
        JAMES D. McBRIDE
        -------------------------
   Its: EXECUTIVE VICE PRESIDENT
        -------------------------
        CHIEF FINANCIAL OFFICER
        -------------------------


<PAGE>

May 20, 1998
Mr. Donald Nunemaker
Richard A. Cogan, Esq.
Page - 2 -


ALOHA ISLANDAIR, INC.


By: /s/ BRENDA F. CUTWRIGHT
        ------------------------
   Its: Sr. Vice President
        ------------------------
        Finance & Planning
        ------------------------
        and CFO
        ------------------------


By: /s/ OWEN SEKIMURA
        ------------------------
   Its: Staff Vice President
        ------------------------
        Finance & Controller
        ------------------------


 WILLIS LEASE FINANCE CORPORATION

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