LEASE AMENDMENT NO. 2 TO LEASE AGREEMENT I

         This Lease Amendment No. 2 dated as of July 29, 1996 (this "Amendment")
to Lease  Agreement  I dated as of August 1, 1988,  as  amended,  between  First
Security Bank,  National  Association  (formerly known as First Security Bank of
Utah,  National  Association),  not in its  individual  capacity  but  solely as
trustee  under a Trust  Agreement I dated as of August 1, 1988  ("Lessor"),  and
Aloha Airlines, Inc., as Lessee ("Lessee").

         WHEREAS,  Lessor and Lessee are parties to that certain Lease Agreement
I dated as of  August  1,  1988  (the  "Agreement"),  as  supplemented  by Lease
Supplement No. 1 dated as of August 5, 1988 and Lease  Supplement No. 2 dated as
of March 5, 1993 (the "Supplements"), and amended by Lease Amendment dated as of
August 15, 1988 (the "First  Amendment"  and together with the Agreement and the
Supplements,  the  "Lease"),  all as more  fully  described  on Annex I  hereto,
pursuant  to which  Lessee  is  leasing  from  Lessor  that  certain  commercial
passenger  aircraft  and  aircraft  engines  identified  on Annex II hereto (the
"Aircraft"); and

         WHEREAS,  Section 17 of the Lease grants  Lessee an option to renew the
Lease on a year-to-year basis upon notice to Lessor; and

         WHEREAS,  Lessee has given due notice to  Lessor,  requesting  that the
Lease be  renewed  for a Renewal  Period of more than one year,  and  Lessor has
agreed to such longer Renewal Period; and

         WHEREAS,  Lessor and Lessee  consequently  desire to amend the Lease in
the respects, and only in the respects, hereinafter set forth.

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

         1. Unless otherwise defined herein,  all capitalized terms used in this
Amendment shall have the meanings ascribed to them in the Lease.

         2.  The  Lease  is  hereby   amended  by  deleting  the  definition  of
"Expiration Date" in its entirety and inserting the following in lieu thereof:

                 "Expiration Date shall mean November 15, 1997."

         3. Each of the  parties  hereto  represents  and  warrants  that it has
obtained  all  consents  and  approvals,  including  those of third  parties and
governmental entities,  required in connection with the execution,  delivery and
performance of this Amendment.

         4. This Amendment,  together with the Agreement,  the Supplements,  the
First  Amendment  and all Annexes,  Schedules  and Exhibits  hereto and thereto,
embodies the entire agreement and  understanding  between the parties hereto and
supersedes  all prior  agreements  and  understandings  relating  to the subject
matter hereof. On and after the date hereof,  each reference in the Agreement to
"this Agreement",  "hereunder", "hereof", "herein", or words of like import, and
each  reference  in any other  agreement  entered  into in  connection  with the
Agreement to the "Lease" or "Lease Agreement",  shall mean and be a reference to
the Agreement as amended hereby.
<PAGE>
         5. The amendment set forth above shall be limited  precisely as written
and shall not be deemed to (i) be a consent to any waiver or modification of any
other  terms  and  condition  of the  Agreement,  the  Supplements  or the First
Amendment or any of the  instruments  or  documents  referred to therein or (ii)
except as expressly provided herein,  prejudice any right or rights which Lessor
or Lessee may now have or may have in the future under or in connection with the
Agreement,  the  Supplements or the First Amendment or any of the instruments or
documents  referred to in any of them. Except as hereby expressly  amended,  the
Agreement,  the Supplements and the First Amendment are in all respects ratified
and  confirmed and all terms and  provisions  thereof shall remain in full force
and effect.

         6. This Amendment may be executed in any number of counterparts, all of
which together shall  constitute one and the same  agreement,  and either of the
parties hereto may enter into this Amendment by executing such counterpart.

         7. This Amendment shall be governed by and construed in accordance with
the laws of the State of New York.

         IN WITNESS WHEREOF,  Lessor and Lessee have caused this Lease Amendment
No. 2 to Lease  Agreement I to be duly  executed and delivered as of the day and
year first set forth above.

LESSOR:
FIRST SECURITY BANK,
NATIONAL ASSOCIATION, not in its 
individual capacity but solely as
trustee under a Trust Agreement
dated as of August 1, 1988

By:    /s/Nancy M. Dahl
-----------------------  
Name:    Nancy M. Dahl   
Title:   Vice President  


LESSEE:
ALOHA AIRLINES, INC.

By:    /s/Brenda F. Cutwright
-----------------------------    
Name:    Brenda F. Cutwright  
Title:   Sr. Vice President Finance &
         Planning and CFO

By:     /s/James M. King  
------------------------
Name:      James M. King  
Title:     Vice President Planning &
           Development
<PAGE>


                                                                      Annex I to
                                                           Lease Amendment No. 2



                            Description of the Lease


         Lease  Agreement I dated as of August 1, 1988  between  First  Security
Bank,  National  Association  (formerly  known as First  Security  Bank of Utah,
National  Association) trustee under Trust Agreement dated as of August 1, 1988,
as lessor,  and Aloha  Airlines,  Inc.,  as lessee,  which was  recorded  by the
Federal Aviation  Administration  on August 9, 1988 and assigned  Conveyance No.
S79079, as supplemented and amended by the following described instruments:

                         Date of                  FAA               FAA
Instrument               Instrument          Recording Date    Conveyance No.

Lease Supplement
No. 1                    08/05/88              08/09/88             S79079


Amendment No. 1 to       as of
Lease Agreement          08/15/88              09/15/89             P87581


Lease Supplement
No. 2                    03/05/93              03/19/93             U65527

<PAGE>


                                                                     Annex II to
                                                           Lease Amendment No. 2



                           Description of the Aircraft


One Boeing Model 737-297 aircraft which consists of the following components:

(a) Airframe: manufacturer's serial number 21739; FAA Registration No. N70723

(b)  Engines:  two (2) Pratt & Whitney  Model  JT8D-9A  Engines;  manufacturer's
serial numbers P687825B and 707357*; and

(c) Standard  accessories and equipment and such other items fitted or installed
on the aircraft.

* Each  engine  listed  has a  horsepower  rating  of at lease  750 h.p.  or the
equivalent thereof.