EXHIBIT 10.4.2

                                             Federal Aviation Administration
                                          Date __02/08/2005___ Time __2:13 PM__
                                          Conveyance Number ______D001034_______
                                          By ___________________________________
                                          Formerly N491MC_______________________



                       AMENDMENT NO. 1 TO LEASE AGREEMENT
                       ----------------------------------

                  This AMENDMENT NO. 1 to Lease  Agreement  (this  "AMENDMENT"),
dated  as  of  July  27, 2004, between  WELLS  FARGO  BANK  NORTHWEST,  NATIONAL
ASSOCIATION (formerly known as FIRST SECURITY BANK, NATIONAL  ASSOCIATION),  not
in its individual  capacity except as expressly  provided herein,  but solely as
Owner Trustee  ("LESSOR" or "OWNER  TRUSTEE"),  and ATLAS AIR,  INC., a Delaware
corporation  ("LESSEE"),  amends that certain Original Lease (as defined below).
All  capitalized  terms used and not  otherwise  defined  herein  shall have the
respective meanings ascribed to such terms in the Lease (as defined below).

                             W I T N E S S E T H :
                             - - - - - - - - - -

                  WHEREAS,  Lessor and Lessee are parties to that certain  Lease
Agreement,  dated as of July 29, 1998, supplemented  by Lease  Supplement  No. 1
dated July 29, 1998,  both  recorded by the FAA on July 30, 1998,  as Conveyance
No. P16372  (collectively,  the "ORIGINAL LEASE"),  pursuant to which Lessee has
leased from Lessor the Aircraft as defined in the Original  Lease (the  Original
Lease, as amended by this Amendment, the "LEASE").

                  WHEREAS,  as contemplated  by the  Restructure  Agreement (the
"RESTRUCTURE AGREEMENT"), dated as of July 27, 2004, by and among Lessee, Lessor
and the other parties  named  therein,  all such parties  desire that Lessee and
Lessor  enter  into  this  Amendment  to set  forth  the  manner  in  which  the
restructuring of the terms of payment by Lessee of certain installments of Basic
Rent payable under the Original Lease and the  agreements  with respect to other
amendments  and  other  matters  pertaining  to  the  Original  Lease  are to be
definitively documented and implemented.

                  NOW,  THEREFORE,  in  consideration  of the mutual  agreements
herein contained and for other good and valuable consideration,  the receipt and
adequacy of which are hereby  acknowledged,  the parties  hereto hereby agree as
follows:

                  SECTION 1. AMENDMENTS TO ANNEX A TO THE ORIGINAL LEASE.  Annex
A to the Original Lease is hereby amended as follows:

                  (i)      ADDITIONS. The following definitions are hereby added
to Annex A to the Original Lease in appropriate alphabetical order:

                  "ACCELERATION" is defined in Section 14.6 of the Lease.

                  "ACQUIRED   INDEBTEDNESS"   means  Indebtedness  of  a  Person
         outstanding  on the date on which such Person  becomes a Subsidiary  or
         Indebtedness  assumed in connection with the acquisition of assets from
         any Person.

                  "ACTION EVENT" means (a) any acceleration or other exercise of
         rights or remedies by  Mortgagee as assignee of Lessor as a result of a
         Cross Default under Section  15.1.7(a) of the Lease,  or (b) the giving
         of instructions or directions by the Controlling  Certificateholders to
         exercise any such rights or remedies.

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                  "ADDITIONAL INDEBTEDNESS INCURRENCE CONDITIONS" means:

                  (a)      no Lease Default or Lease Event of Default shall have
         occurred and be continuing,

                  (b)      the Fixed Charge Coverage Ratio  determined as of the
         last day of the last fiscal quarter for which financial  statements are
         then available is greater than 1.25 to 1.00 and

                  (c)      the  aggregate   principal   amount  of  Indebtedness
         incurred  pursuant to Section  8.4.1(b) does not exceed  $50,000,000 at
         any one time outstanding.

                  If,  before the  occurrence  of an Action  Event,  a Bank Debt
         Refinancing  occurs, and the documents executed in connection with such
         Bank Debt Refinancing contain a restriction on the incurrence by Lessee
         of  indebtedness  (as defined under such Bank Debt  Refinancing),  this
         definition  and the definition of  "Indebtedness"  for purposes of this
         definition  shall  thereafter be deemed to have been amended to provide
         for the same restriction on the incurrence of indebtedness and the same
         definition of indebtedness as is provided in the documents  executed in
         connection with such Bank Debt  Refinancing  (and such lenders shall be
         "Bank Lenders" for purposes of the Lease and such documents executed in
         connection  with  such  Bank  Debt  Refinancing  shall be "Bank  Lender
         Documents" for purposes of the Lease). If such Bank Debt Refinancing is
         with more than one lender under  separate Bank Lender  Documents,  this
         definition  and the definition of  "Indebtedness"  for purposes of this
         definition  shall  thereafter be deemed to have been amended to provide
         for the same restriction on the incurrence of indebtedness and the same
         definition of indebtedness as are provided in those of such Bank Lender
         Documents   which   evidence   the  highest   dollar   amount  of  such
         indebtedness.

                  "ADDITIONAL LEASE INCURRENCE CONDITIONS" means

                  (a)      no Lease Default or Lease Event of Default shall have
         occurred and be continuing,

                  (b)      the Fixed Charge Coverage Ratio  determined as of the
         last date of the last fiscal quarter for which financial statements are
         then available is greater than 1.25 to 1.00;  PROVIDED,  HOWEVER,  that
         Parent or any of its  Subsidiaries may enter into any lease if the cash
         scheduled rental payments  required to be made under all leases entered
         into after the Restructure Agreement Execution Date (including, without
         limitation,  the  lease  proposed  to be  entered  into) do not  exceed
         $15,000,000  during any fiscal year, without having to comply with this
         clause (b), and

                  (c)      the  aggregate  principal  amount of  Capital  Leases
         entered into pursuant to Section  8.4.1(c) does not exceed  $50,000,000
         at anyone time outstanding.

         If, before the occurrence of an Action Event,  a Bank Debt  Refinancing
         occurs,  and the documents  executed in connection  with such Bank Debt
         Refinancing contain a restriction

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<PAGE>


         on the entering into by Lessee of leases or subleases,  this definition
         shall thereafter be deemed to have been amended to provide for the same
         restriction on the entering by Lessee into of leases or subleases as is
         provided in the documents  executed in  connection  with such Bank Debt
         Refinancing  (and such lenders shall be "Bank  Lenders" for purposes of
         the  Lease  and  such  documents   executed  in  connection  with  such
         refinancing  shall be  "Bank  Lender  Documents"  for  purposes  of the
         Lease). If such Bank Debt Refinancing is with more than one such lender
         under separate Bank Lender Documents,  this definition shall thereafter
         be deemed to have been amended to provide for the same  restriction  on
         the  entering  into of leases or  subleases by Lessee as is provided in
         those of such Bank Lender  Documents  which evidence the highest dollar
         amount of such indebtedness.

                  "AFL III" means Atlas Freighter  Leasing III, Inc., a Delaware
         corporation,  a subsidiary of Parent, the sole business of which is the
         ownership  of the AFL III  Equipment  and  the  leasing  of the AFL III
         Equipment  to  Lessee  pursuant  to the AFL III  Leases  and  obtaining
         financing with respect thereto.

                  "AFL III EQUIPMENT" is defined in Schedule 1 to the Lease.

                  "AFL  III  FINANCING  AGREEMENT"  means  that  certain  Credit
         Agreement  dated as of April 25,  2000,  and amended and restated as of
         July 27, 2004,  by and among AFL III,  the  lenders  party  thereto and
         Deutsche Bank Trust Company  Americas,  as agent, as such agreement may
         be amended,  amended and restated,  modified and/or  supplemented  from
         time to time in accordance with the terms thereof.

                  "AFL III  LEASES"  means one or more  triple net leases by and
         between  Lessee and AFL III with respect to the AFL III  Equipment,  as
         lessor thereunder, as such leases may be amended, amended and restated,
         modified and/or supplemented from time to time.

                  "ALLONGES" is defined in the definition of "Equipment Notes".

                  "AMENDMENT NO. 1 TO LEASE AGREEMENT" or "AMENDMENT" means that
         certain Amendment No. 1 to Lease Agreement,  dated as of July 27, 2004,
         between Lessor and Lessee in connection with the Lease.

                  "APPRAISAL" is defined in the Intercreditor Agreement.

                  "ASSUMPTIONS" is defined in Section 8.4.4(e) of the Lease.

                  "AVAILABILITY"  means  at any  time,  the  maximum  additional
         amount  available to be borrowed by Lessee as direct advances under any
         Indebtedness at such time taking into account any applicable  borrowing
         base or similar  requirements  and  limitations at such time,  PROVIDED
         that all of the  conditions to borrowing  (other than the delivery of a
         notice  of  borrowing)  required  pursuant  to  such  Indebtedness  are
         satisfied at such time.

                  "BANK  DEBT  REFINANCING"   means  any  unsecured  or  secured
         refinancing of the indebtedness owed to the Bank Lenders under the Bank
         Lender  Documents  (i)  with  institutional  lenders  or (ii)  with the
         proceeds of a private or public debt offering to lenders,

                                      -3-
<PAGE>


         which institutional  lenders or lenders are not Affiliates of Lessee or
         Parent and which  refinancing  pays such  indebtedness  in full (or any
         such refinancing the  indebtedness of which is subsequently  refinanced
         with Bank Debt Refinancing).

                  "BANK LENDER  DOCUMENTS"  means the Credit  Agreement  and the
         documents  executed in connection  therewith and the documents executed
         in connection with any subsequent extension or renewal thereof or any
         Bank Debt Refinancing.

                  "BANK LENDERS" means lenders under the Bank Lender Documents.

                  "BANKRUPTCY  COURT" means the United States  Bankruptcy  Court
         for the Southern District of Florida, Miami Division.

                  "BOEING" means Boeing Capital Corporation and its Affiliates.

                  "BOEING  DOCUMENTS"  means that certain lease agreement listed
         on Schedule 1 to the Lease opposite the heading "Boeing  Documents" and
         the documents executed in connection  therewith other than that certain
         Supplemental  Agreement,  dated as of June 1, 2002,  between  the owner
         participant  named therein and Lessee, as amended by Amendment No. 1 to
         Supplemental  Agreement  dated as of October 31,  2003,  which  relates
         solely to the tax indemnity  agreement  between such owner  participant
         and Lessee and the general tax indemnity agreement among the parties to
         such transaction.

                  "BUSINESS  PLAN" means  Debtors'  business plan filed with the
         Securities and Exchange Commission on Form 8-K on December 12, 2003 (as
         amended and  modified)  and  attached to the  Disclosure  Statement  as
         Exhibit G.

                  "CAPITAL LEASE" means, as applied to any Person,  any lease of
         any property (whether real, personal or mixed) by that Person as lessee
         that, in  conformity  with GAAP, is accounted for as a capital lease on
         the balance sheet of that Person.

                  "CASH" means money,  currency or a credit balance in a Deposit
         Account.

                  "CHAPTER  11 CASE"  means the  bankruptcy  case  commenced  by
         Lessee under Chapter 11 of Title 11 of the  Bankruptcy  Code on January
         30,  2004 in the  United  States  Bankruptcy  Court  for  the  Southern
         District of Florida.

                  "CONSOLIDATED  ADJUSTED EBITDA" means, for any period, the sum
         of the  amounts for such period of (i)  Consolidated  Net Income,  (ii)
         Consolidated  Interest  Expense,  (iii)  provisions  for taxes based on
         income,  (iv)  total  depreciation   expense,  (v)  total  amortization
         expense,  (vi) other non-cash items  reducing  Consolidated  Net Income
         LESS other non-cash items increasing  Consolidated  Net Income,  all of
         the foregoing as  determined on a consoidated  basis for Parent and its
         Subsidiaries in conformity with GAAP and, (vii) for all periods through
         the first  anniversary of the  Restructure  Agreement  Execution  Date,
         expenses  incurred  in  connection  with  the  Plan of  Reorganization,
         including  professional  fees and  expenses,  severance,  key  employee
         retention plans,  executory contract and lease rejection claims,  asset
         write downs and any other such costs determined by Parent'  independent
         accountants to be reported as "Reorganization Costs".

                                      -4-
<PAGE>


                  "CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
         sum of (i) the aggregate of all  expenditures  (whether paid in cash or
         other  consideration  or  accrued as a  liability  and  including  that
         portion of Capital  Leases  which is  capitalized  on the  consolidated
         balance  sheet  of  Parent  and its  Subsidiaries)  by  Parent  and its
         Subsidiaries  during that period that,  in  conformity  with GAAP,  are
         included in "additions  to property,  plant or equipment" or comparable
         items reflected in the  consolidated  statement of cash flows of Parent
         and its Subsidiaries  plus (ii) to the extent not covered by clause (i)
         of this definition,  the aggregate of all  expenditures by Parent and
         its  Subsidiaries  during  that  period  to  acquire  (by  purchase  or
         otherwise) the business, property or fixed assets of any Person, or the
         stock or other evidence of beneficial  ownership of any Person that, as
         a result of such acquisition, becomes a Subsidiary of Parent.

                  "CONSOLIDATED FIXED CHARGES" means, for any period, the sum of
         the amounts for such period (without  duplication) of (i)  Consolidated
         Interest Expense for such period paid in cash, (ii) Consolidated Rental
         Payments  for such  period  paid in cash,  (iii)  Consolidated  Capital
         Expenditures  paid in cash for such  period  (other  than  Consolidated
         Capital Expenditures funded with the proceeds of sales of assets), (iv)
         any Restricted Junior Payments actually made during such period and (v)
         the  scheduled  principal  amount  of all  amortization  payments  with
         respect to the Bank Lender  Documents  (assuming  for this purpose that
         the maximum amount of principal  deferral permitted pursuant to Section
         2.4A(ii)  of the  AFL  III  Financing  Agreement  shall  have  occurred
         (whether or not the conditions  thereto shall have been satisfied)) and
         other  Indebtedness of Parent and its Subsidiaries  required to be made
         during such period (as determined on the first day of such period).

                  "CONSOLIDATED  INTEREST EXPENSE" means, for any period, total
         net interest  expense (to be computed by reducing  interest  expense by
         the amount of interest income) (including that portion  attributable to
         Capital  Leases in accordance  with GAAP and  capitalized  interest) of
         Parent and its Subsidiaries on a consolidated basis with respect to all
         outstanding  Indebtedness  of Parent and its  Subsidiaries,  including,
         without  limitation,  all  commissions,  discounts  and other  fees and
         charges owed with respect to letters of credit and bankers'  acceptance
         financing  and net costs under  Interest Rate  Agreements  and Currency
         Agreements.

                  "CONSOLIDATED  NET  INCOME"  means,  for any  period,  the net
         income (or loss) of Parent and its Subsidiaries on a consolidated basis
         for such  period  taken as a single  accounting  period  determined  in
         conformity  with GAAP;  PROVIDED  that  there shall be excluded (i) the
         income (or loss) of any Person  (other than a Subsidiary  of Parent) in
         which any other Person  (other than Parent or any of its  Subsidiaries)
         has a joint  interest,  except to the extent of the amount of dividends
         or  other  distributions   actually  paid  to  Parent  or  any  of  its
         Subsidiaries  by such Person  during such  period,  (ii) the income (or
         loss) of any Person  accrued  prior to the date it becomes a Subsidiary
         of Parent or is merged into or  consolidated  with Parent or any of its
         Subsidiaries  or that Person's  assets are acquired by Parent or any of
         its  Subsidiaries,  (iii) the income of any Subsidiary of Parent to the
         extent  that  the  declaration  or  payment  of  dividends  or  similar
         distributions  by that  Subsidiary  of that  income  is not at the time
         permitted by  operation  of the terms of its charter or any  agreement,
         instrument,  judgment,  decree,  order,  statute,  rule or governmental
         regulation

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<PAGE>


         applicable  to that  Subsidiary,  (iv) any  after-tax  gains or  losses
         attributable  to a sale of assets  or  returned  surplus  assets of any
         pension  plan,  and (v) (to the extent  not  included  in  clauses  (i)
         through  (iv)  above)  any  net  extraordinary  gains  or net  non-cash
         extraordinary losses.

                  "CONSOLIDATED  RENTAL  PAYMENTS"  means,  for any period,  the
         aggregate amount of all rents with respect to aircraft and engines paid
         or payable  by Parent  and its  Subsidiaries  on a  consolidated  basis
         during that period under all Operating Leases to which Parent or any of
         its  Subsidiaries  is a party as lessee (net of sublease  income  other
         than income from ACMI  Contracts).  For the avoidance of doubt, (x) all
         rental payments to AFL III shall not be included in Consolidated Rental
         Payments  and (y)  payments in respect of Capital  Leases  shall not be
         included in Consolidated Rental Payments.

                  "CONSULTANT" means Simat Helliesen & Eichner,  Inc. or Avitas,
         Inc., or such other aircraft professional  designated from time to time
         by Mortgagee.

                  "CONSULTANT COSTS AND EXPENSES" is defined in Section 8.4.4(h)
         of the Lease.

                  "CONTINGENT  OBLIGATIONS" or "CONTINGENT OBLIGATION" means, as
         applied to any Person, any direct or indirect  liability, contingent or
         otherwise, of that Person (i) with respect to any Indebtedness,  lease,
         dividend  or other  obligation  of  another if the  primary  purpose or
         intent thereof by the Person incurring the Contingent  Obligation is to
         provide  assurance  to the obligee of such  obligation  of another that
         such  obligation  of another  will be paid or  discharged,  or that any
         agreements  relating thereto will be complied with, or that the holders
         of such obligation will be protected (in whole or in part) against loss
         in respect  thereof,  (ii) with respect to any letter of credit  issued
         for the account of that Person or as to which that Person is  otherwise
         liable for  reimbursement  of drawings,  or (iii) under  Interest  Rate
         Agreements  and  Currency  Agreements.   Contingent  Obligations  shall
         include,  without  limitation,  (a) the  direct or  indirect  guaranty,
         endorsement  (otherwise  than for collection or deposit in the ordinary
         course of business), co-making,  discounting with recourse or sale with
         recourse  by  such  Person  of  the  obligation  of  another,  (b)  the
         obligation  to  make   take-or-pay  or  similar  payments  if  required
         regardless  of  nonperformance  by any  other  party or  parties  to an
         agreement,  and (c) any liability of such Person for the  obligation of
         another  through  any  agreement   (contingent  or  otherwise)  (X)  to
         purchase,  repurchase  or  otherwise  acquire  such  obligation  or any
         security therefore, or to provide funds for the payment or discharge of
         such  obligation  (whether  in  the  form  of  loans,  advances,  stock
         purchases,  capital  contributions or otherwise) or (Y) to maintain the
         solvency  or any  balance  sheet  item,  level of income  or  financial
         condition of another if, in the case of any agreement  described  under
         subclauses (X) or (Y) of this sentence,  the primary  purpose or intent
         thereof is as described in the  preceding  sentence.  The amount of any
         Contingent Obligation shall be equal to the amount of the obligation so
         guaranteed or otherwise supported or, if less, the amount to which such
         Contingent Obligation is specifically limited.

                  "CONTROLLING  CERTIFICATEHOLDERS"  means,  as of a  particular
         date of determination, the 1998 Class A Certificateholders beneficially
         holding  1998  Class A  Certificates  evidencing  Fractional  Undivided
         Interests aggregating not less than a majority in interest in

                                      -6-
<PAGE>


         the Class A Pass Through Trust (excluding any 1998 Class A Certificates
         beneficially  held  by  Lessee  or  any  Affiliate  thereof;  PROVIDED,
         HOWEVER,  the foregoing  exclusion shall not apply if Lessee and/or its
         Affiliates  beneficially  hold 100% of the 1998 Class A Certificates as
         of a particular date of determination).

                  "CREDIT AGREEMENT" means the Fifth Amended and Restated Credit
         Agreement,  dated  July  27,  2004 by and  among  Atlas  Air  Worldwide
         Holdings, Inc., Atlas Air, Inc., the lenders party thereto from time to
         time and Deutsche Bank Trust Company Americas, as administrative agent.

                  "CROSS DEFAULT" means a Lease Event of Default that occurs due
         to the  occurrence  of an  Other  Creditor  Payment  Default,  an Other
         Creditor Non-Payment Default or an Acceleration.

                  "CURRENCY  AGREEMENT"  means any  foreign  exchange  contract,
         currency swap agreement,  futures contract, option contract,  synthetic
         cap or other  similar  agreement  or  arrangement  designed  to protect
         Parent or any of its  Subsidiaries  against  fluctuations  in  currency
         values.

                  "DEBTORS" means, collectively,  Parent, Lessee, Polar, Airline
         Acquisition Corp. I and Atlas Worldwide Aviation Logistics, Inc.

                  "DEPOSIT ACCOUNT" means a demand,  time, savings,  passbook or
         like account with a bank, savings and loan association, credit union or
         like  organization,  other than an account  evidenced  by a  negotiable
         certificate of deposit.

                  "DISCLOSED  OTHER  CREDITOR  DOCUMENT"  is  defined in Section
         7(a)(xiii) of the Restructure Agreement.

                  "DISCLOSURE  STATEMENT"  means the Second  Amended  Disclosure
         Statement  filed  with the  Bankruptcy  Court by the  Debtors  under 11
         U.S.C. ss. 1125 in support of the Debtors' Second Amended Joint Chapter
         11 Plan and approved by the Bankruptcy Court on June 8, 2004.

                  "EETC AMENDMENT FEE  CONSIDERATION" is defined in Section 2 of
         the Restructure Agreement.

                  "ENGINE  MAINTENANCE   CONTRACT"  means  that  certain  Engine
         Maintenance  Agreement (1998 EETC Series-CF6-80C2  Engines) dated Apri1
         30, 2004  between  Lessee and the Engine  Maintenance  Contractor,  any
         other engine  maintenance  contract  that is  reasonably  acceptable to
         Mortgagee  (or  the  Consultant)  and  Lessor  with  any  other  Engine
         Maintenance Contractor, and any replacements thereof in accordance with
         Section  8.4.4(d) or Section 14.7 of the Lease, as amended from time to
         time, relating to the Aircraft;  PROVIDED,  HOWEVER,  that Lessor shall
         not have any  rights  with  respect  to the  acceptance  of any  Engine
         Maintenance Contract (and, therefore,  only Mortgagee shall have rights
         with respect to the acceptance of any Engine  Maintenance  Contract) so
         long as  Mortgagee  has not given notice to Lessee that the Lien of the
         Trust Indenture has been discharged.

                                      -7-
<PAGE>


                  "ENGINE  MAINTENANCE  CONTRACT  ASSIGNMENT" means that certain
         Collateral Assignment of Engine Maintenance  Contract dated as of the
         Restructure  Agreement Execution Date from Lessee to Lessor relating to
         the  Aircraft  and  any  assignment  of any  other  Engine  Maintenance
         Contract  which  replaces any Engine  Maintenance  Contract  Assignment
         entered into pursuant to this Lease from time to time.

                  "ENGINE MAINTENANCE CONTRACTOR" means MTU Maintenance Hannover
         GmbH, a German limited  liability  company,  any other engine  overhaul
         contractor of  international  stature that is reasonably  acceptable to
         Mortgagee  (or the  Consultant)  and the Lessor,  and any  replacements
         thereof in  accordance  with  Section  8.4.4(d) or Section  14.7 of the
         Lease;  PROVIDED,  HOWEVER,  that Lessor shall not have any rights with
         respect to the acceptance of any Engine  Maintenance  Contractor  (and,
         therefore,  only  Mortgagee  shall  have  rights  with  respect  to the
         acceptance of any Engine  Maintenance  Contractor) so long as Mortgagee
         has not given notice to Lessee that the Lien of the Trust Indenture has
         been discharged.

                  "ENHANCEMENT"  means (a) new or increased rent, debt payments,
         maintenance  reserves or other form of additional payment, (b) new fees
         or other compensation, (c) an increase in interest rate, (d) additional
         collateral  or credit  support,  (e)  materially  improved  maintenance
         provisions  or  return  condition  provisions,  or (f)  other  form  of
         material enhancement.

                  "ENHANCEMENT RENT" is defined in Section 8.4.2.

                  "EXISTING  INDEBTEDNESS"  means any Indebtedness of Parent and
         its  Subsidiaries  outstanding on and as of the  Restructure  Agreement
         Execution Date as set forth in Schedule  8.4.1(b) of Amendment No. 1 to
         Lease Agreement.

                  "EXIT  FACILITY"  means the primary  senior  revolving  credit
         facility of the Parent or Lessee,  now existing or  hereafter  created,
         which is secured by, among other  things,  a first lien on the accounts
         receivable and inventory of the Parent or Lessee, which facility allows
         the Parent or Lessee (and which  facility may also permit any Affiliate
         thereof) to borrow and reborrow amounts (and which may also provide for
         letters of credit to be issued at the  request of the Parent or Lessee)
         up to a borrowing base determined pursuant to the documents  evidencing
         such facility.

                  "FIXED CHARGE  COVERAGE RATIO" means as of any date, the ratio
         of (i) the sum of (x)  Consolidated  Adjusted  EBITDA for the period of
         twelve consecutive months ending on such date (a "TEST PERIOD") and (y)
         Consolidated  Rental Payments for such Test Period to (ii) Consolidated
         Fixed Charges for such Test Period.

                  "FRACTIONAL UNDIVIDED INTEREST" means the fractional undivided
         interest in the Class A Pass Through Trust.

                  "GECAS" means General Electric  Capital Aviation  Services and
         its Affiliates.

                  "GECAS  DOCUMENTS"  means  those  certain  lease and  sublease
         agreements  listed on  Schedule  1 to the Lease  opposite  the  heading
         "GECAS Documents" and the docu-


                                      -8-
<PAGE>


         ments executed in connection therewith (other than the tax indemnity or
         tax indemnification agreements, as amended, executed in connection with
         the lease and  subleases  listed on  Schedule 1 to  Amendment  No. 1 to
         Lease Agreement).

                  "INDEBTEDNESS"  means,  as  applied  to any  Person,  (i)  all
         indebtedness for borrowed money,  (ii) that portion of obligations with
         respect to Capital Leases that is properly classified as a liability on
         a balance sheet in conformity with GAAP, (iii) notes payable and drafts
         accepted representing  extensions of credit whether or not representing
         obligations for borrowed money, (iv) any obligation owed for all or any
         part of the deferred purchase price of property or services  (excluding
         any such obligations incurred under ERISA), which purchase price is (a)
         due more than six months from the date of incurrence of the  obligation
         in  respect  thereof  or (b)  evidenced  by a note or  similar  written
         instrument,  and  (v)  all  indebtedness  secured  by any  lien  on any
         property or asset owned or held by that  Person  regardless  of whether
         the indebtedness secured thereby shall have been assumed by that Person
         or is  nonrecourse  to the credit of that Person.  For purposes of this
         Lease,   obligations   under  Interest  Rate  Agreements  and  Currency
         Agreements are not Indebtedness.

                  "INTERCOMPANY LOAN" means any loans and advances from any Loan
         Party to any other Loan Party.

                  "INTEREST  RATE   AGREEMENT"  means  any  interest  rate  swap
         agreement,  interest rate cap agreement, interest rate collar agreement
         or other similar agreement or arrangement designed to protect Parent or
         any of its Subsidiaries against fluctuations in interest rates.

                  "INSPECTING PARTIES" is defined in Section 12(a) of the Lease.

                  "LEASE  AMENDMENT  DEFAULT AMOUNT" is defined in Section 19 of
         the Lease.

                  "LESSEE  SECURITY   AGREEMENT"  means  that  certain  Security
         Agreement  dated as of the  Restructure  Agreement  Execution Date from
         Lessee to Lessor relating to the Aircraft.

                  "LOAN PARTIES" means Lessee, Parent and Polar.

                  "MAINTENANCE  SCHEDULE" is defined in Section  8.4.4(c) of the
         Lease.

                  "N409  RESTRUCTURING   EVENT"  means  the  consummation  of  a
         transaction  on terms  substantially  similar with respect to covenants
         and lease  events of default set forth in the lease  documentation  for
         the Aircraft, the 1998 EETC Aircraft bearing U.S. registration number *
         and the 1999 EETC Aircraft bearing U.S.  registration number * pursuant
         to which  Lessee or an  Affiliate  of Lessee  has become the sole owner
         participant of the trust of which the owner trustee is the owner of the
         2000 EETC Aircraft bearing U.S.  registration  number * (except for the
         addition  of  covenants   regarding  the  maintenance  of  an  airframe
         maintenance contract).

---------------
*        This  information has been  intentionally  deleted from  the FAA filing
         counterpart as the parties deem it to be  confidential  and proprietary
         information.

                                      -9-
<PAGE>


                  "OBJECTIVES" is defined in Section 8.4.4(b) of the Lease.

                  "OPERATING  LEASE" means, as applied to any Person,  any lease
         (including,  without  limitation,  leases that may be terminated by the
         lessee at any time) of any property  (whether real,  personal or mixed)
         that is not a Capital  Lease other than any such lease under which that
         Person is the lessor.

                  "ORIGINAL LEASE" means the Lease  Agreement,  dated as of July
         29, 1998 between the Owner Trustee,  as Lessor,  and Lessee, as Lessee,
         as supplemented by Lease Supplement No. 1 dated July 29, 1998.

                  "OTHER  ACCELERATED  CREDITOR"  means any holder  (other  than
         GECAS,  Boeing,  any of the Bank Lenders and any Other EETC Transaction
         Person) of any  Indebtedness of Lessee or any personal or real property
         lease or sublease to which Lessee is bound, other than the Lease.

                  "OTHER  ACCELERATED  CREDITOR  DOCUMENTS"  means the documents
         executed in connection with any Indebtedness  owed by Lessee to, or any
         lease or sublease by Lessee of any personal or real  property  from, an
         Other Accelerated  Creditor,  and the documents  executed in connection
         with any extension or renewal thereof, other than the Lease,

                  "OTHER AIRCRAFT" means the Other 1998 EETC Aircraft,  the 1999
         EETC Aircraft and the 2000 EETC Aircraft.

                  "OTHER CREDITOR" means GECAS,  Boeing,  the Bank Lenders,  the
         Other EETC Transaction Persons and the Other Accelerated Creditors.

                  "OTHER  CREDITOR  AMENDMENT"  is  defined  in the  Restructure
         Agreement.

                  "OTHER  CREDITOR  NON-PAYMENT  DEFAULT"  is defined in Section
         14.6 of the Lease.

                  "OTHER CREDITOR PAYMENT DEFAULT" is defined in Section 14.6 of
         the Lease.

                  "OTHER EETC TRANSACTION DOCUMENTS" means the documents entered
         into with  respect to the lease and  financing  of the Other  Aircraft,
         PROVIDED that,  unless an N409  Restructuring  Event has occurred on or
         prior to December 1, 2004, the term Other EETC Transaction Documents as
         used in Section 14.6 hereof does not include the documents entered into
         solely with respect to the 2000 EETC Aircraft bearing U.S. registration
         number *.

                  "OTHER EETC  TRANSACTION  PERSONS"  means the Persons party to
         the Other EETC  Transaction  Documents  (other than Lessee,  Parent and
         Polar).

---------------
*        This  information has been  intentionally  deleted from the  FAA filing
         counterpart as the parties deem it to be  confidential  and proprietary
         information.

                                      -10-
<PAGE>


                  "OTHER EETC TRANSACTIONS"  means the transactions  pursuant to
         which the Other Aircraft are leased and financed.

                  "OTHER  1998 EETC  AIRCRAFT"  is defined in  Schedule 1 to the
         Lease.

                  "PARENT" means Atlas Air Worldwide Holdings,  Inc., a Delaware
         corporation.

                  "PARENT GUARANTY" means that certain Guaranty  Agreement dated
         as of the  Restructure  Agreement  Execution  Date  from the  Parent to
         Lessor relating to the Aircraft.

                  "PARENT  SECURITY   AGREEMENT"  means  that  certain  Security
         Agreement dated as of the Restructure Agreement Execution Date from the
         Parent to Lessor relating to the Aircraft.

                  "PARENT'S PROJECTED EBITDA" means Parent's Projected EBITDA as
         referenced in the Business Plan.

                  "PERMITTED EXTENSION INDEBTEDNESS" means renewals, extensions,
         substitutions,  refinancings or  replacements  (each an "extension") by
         Parent or any of its Subsidiaries of any Indebtedness of Parent or such
         Subsidiary, including any such successive transactions thereby, so long
         as (i) any such  Indebtedness  bears  interest at a rate which does not
         exceed 15% per annum,  (ii) any such Permitted  Extension  Indebtedness
         shall be in a  principal  amount  that does not  exceed  the  principal
         amount  immediately  prior to such  extension,  PLUS the  amount of any
         premium required to be paid in connection with such extension  pursuant
         to the  terms of such  Indebtedness,  PLUS the  amount of  expenses  of
         Parent or such Subsidiary  reasonably  incurred in connection with such
         extension,   (iii)  in  the  case  of  any  extension  of  subordinated
         Indebtedness, such Permitted Extension Indebtedness is made subordinate
         to the  obligations  of  Lessee  under  the  Lease at least to the same
         extent as the Indebtedness  immediately  prior to such extension,  (iv)
         such Permitted Extension Indebtedness has a final stated maturity later
         than the notes issued in connection with the Bank Lender  Documents and
         (v) the  amortization  and the  other  terms,  provisions,  conditions,
         covenants  and events of default  thereof  taken as a whole shall be no
         more  onerous or  restrictive  from the  perspective  of Parent and its
         Subsidiaries or any more favorable,  from the perspective of Mortgagee,
         than those  contained  in the  Indebtedness  immediately  prior to such
         extension.

                  "PERMITTED INDEBTEDNESS" means

                  (i)      Indebtedness incurred with respect to the Bank Lender
                           Documents;

                  (ii)     the Parent Guaranty and the Polar Guaranty;

                  (iii)    any Existing Indebtedness;

                  (iv)     any Permitted Extension Indebtedness;

                  (v)      with  respect  solely  to AFL III,  any  Indebtedness
         incurred by AFL III with respect to the AFL III Financing Agreement and
         the AFL III Leases;

                                      -11-
<PAGE>


                  (vi)     any Indebtedness incurred with respect to the Lease;

                  (vii)    any  Indebtedness  incurred with respect to the Other
         EETC Transactions;

                  (viii)   the  Exit  Facility,   PROVIDED  that  the  aggregate
         principal  amount  thereof  (including  any  letters  of credit  issued
         thereunder)   shall  not   exceed   $60,000,000.00   at  any  one  time
         outstanding;

                  (ix)     any Indebtedness constituting Intercompany Loans; and

                  (x)      any  other  Indebtedness  in an  aggregate  principal
         amount not to exceed $10,000,000 at any one time outstanding.

                  "PLAN  CONFIRMATION DATE" means the date of entry of the order
         of the Bankruptcy  Court confirming the Plan of  Reorganization,  which
         order is final and unstayed.

                  "PLAN OF  REORGANIZATION"  means  the  Final  Modified  Second
         Amended  Joint Plan of  Reorganization  of the Debtors dated as of July
         14, 2004 and confirmed by order of the Bankruptcy Court entered on July
         16, 2004.

                  "POLAR" means Polar Air Cargo, Inc., a California corporation.

                  "POLAR GUARANTY" means that certain  Guaranty  Agreement dated
         as of the  Restructure  Agreement  Execution  Date from Polar to Lessor
         relating to the Aircraft.

                  "POLAR  SECURITY   AGREEMENT"   means  that  certain  Security
         Agreement  dated as of the  Restructure  Agreement  Execution Date from
         Polar to Lessor relating to the Aircraft;

                  "REQUIRED  RATING"  means a rating of "BB-" by S&P or "Ba3" by
         Moody's.

                  "RESTRICTED  JUNIOR  PAYMENT"  means (i) any dividend or other
         distribution, direct or indirect, on account of any shares of any class
         of stock of  Lessee  or  Parent  now or  hereafter  outstanding  or any
         Affiliate   of  Lessee  or  Parent   other  than   dividends  or  other
         distributions  payable solely in such class of stock of Lessee,  Parent
         or any Affiliate of Lessee or Parent, as applicable,  to the holders of
         that class and except for any  distribution  or  dividend  that is made
         solely  to  Parent,  Polar or Lessee  (and,  if an  Affiliate  is not a
         wholly-owned  Subsidiary,  to the other shareholders of such Subsidiary
         on a pro rata  basis  or on a basis  that  results  in the  receipt  by
         Parent,  Polar or Lessee of dividends or distributions of greater value
         than it would  receive  on a pro  rata  basis),  (ii)  any  redemption,
         retirement,   sinking  fund  or  similar  payment,  purchase  or  other
         acquisition for value,  direct or indirect,  of any shares of any class
         of stock of Lessee,  Parent or any Affiliate of Lessee or Parent now or
         hereafter  outstanding  and (iii) any  payment  made to  retire,  or to
         obtain the surrender  of, any  outstanding  warrants,  options or other
         rights to acquire shares of any class of stock of Lessee, Parent or any
         Affiliate of Lessee or Parent now or hereafter outstanding.

                                      -12-
<PAGE>


                  "RESTRICTED JUNIOR PAYMENT CONDITIONS" means

                           (a)      no Lease  Default or Lease  Event of Default
                  shall have occurred and be continuing, and

                           (b)      Parent's  reserve of  Unrestricted  Cash and
                  Cash  Equivalents  and  Availability  at any time  during  any
                  period set forth below is equal to or greater  than the amount
                  set forth opposite such period below:

                  -------------------------------------------------------
                                                           MINIMUM
                  FOR THE PERIOD                          LIQUIDITY
                  -------------------------------------------------------
                  September 1 to October 7, 2004          $55,000,000
                  -------------------------------------------------------
                  October 8 to November 7, 2004           $60,000,000
                  -------------------------------------------------------
                  November 8 to  December 7, 2004         $65,000,000
                  -------------------------------------------------------
                  December 8, 2004 to January 7, 2005     $70,000,000
                  -------------------------------------------------------
                  January 8 to April 7, 2005              $75,000,000
                  -------------------------------------------------------
                  April 8, 2005 to September 30, 2005     $85,000,000
                  -------------------------------------------------------
                  October 1, 2005 to December 31, 2005    $95,000,000
                  -------------------------------------------------------
                  January 1, 2006 to December 31, 2006    $110,000,000
                  -------------------------------------------------------
                  January 1, 2007 and thereafter          $125,000,000
                  -------------------------------------------------------

                  Notwithstanding  the "at any time"  requirement,  within  each
         calendar   month,   Unrestricted   Cash  and  Cash   Equivalents,   and
         Availability may be less than the Minimum Liquidity set forth above for
         one period not to exceed five consecutive business days.

                  "RESTRUCTURE   AGREEMENT"   means  the   certain   Restructure
         Agreement  dated as of July 27, 2004 among Lessee,  Lessor,  Mortgagee,
         Owner Participant and others relating to the Aircraft.

                  "RESTRUCTURE AGREEMENT EXECUTION DATE" means July 27, 2004.

                  "SPECIAL COVENANTS  TERMINATION DATE" means the earlier of (i)
         the date that the 1998  Class A  Certificates  are paid in full or (ii)
         the first date that the senior  unsecured  debt of Lessee  achieves the
         Required Rating which comes after the debt to the Bank Lenders has been
         paid in full;  PROVIDED that a payment  directly or indirectly from the
         proceeds of a Bank Debt Refinancing shall not be deemed to be a payment
         in full of the debt to the Bank Lenders.

                  "SPECIAL INSPECTOR" is defined in Section 12(g) of the Lease.

                  "SPECIFIED  PRIOR  DEFAULTS"  means any Lease Default or Lease
         Event of Default  arising  out of or in  connection  with (i)  Lessee's
         failure to make payments of Basic Rent that were due under the Original
         Lease on July 2, 2003, January 2, 2004 and July 2, 2004

                                      -13-
<PAGE>


         and were due  under the Lease on  February  2, 2004 and March 2,  2004;
         (ii) Lessee's  failure to deliver  certain  financial  information  and
         other reports, certificates or other information as required by Section
         8.2.1 of the Original  Lease for periods  ending prior to July 1, 2004;
         (iii) Lessee's representations and warranties contained in certificates
         delivered  prior  to the  Restructure  Agreement  Execution  Date  with
         respect  to  Lessee's  financial  statements;  and (iv) the  filing  of
         Lessee's Chapter 11 Case.

                  "SUBSIDIARY"   means,   with   respect  to  any  Person,   any
         corporation,  partnership, association, joint venture or other business
         entity of which  more than 50% of the total  voting  power of shares of
         stock or other  ownership  interests  entitled  (without  regard to the
         occurrence of any contingency) to vote in the election of the Person or
         Persons  (whether  directors,   managers,  trustees  or  other  Persons
         performing  similar  functions) having the power to direct or cause the
         direction of the management  and policies  thereof is at the time owned
         or controlled, directly or indirectly, by that Person or one or more of
         the other Subsidiaries of that Person or a combination thereof.

                  "UNRESTRICTED  CASH AND CASH EQUIVALENTS"  means Cash and Cash
         Equivalents  that are not subject to any  restriction  or limitation on
         Parent's ability to withdraw (in the case of Cash) or sell (in the case
         of Cash Equivalents).

                  "1998  CLASS  A  CERTIFICATEHOLDERS"  means  the  Persons  who
         beneficially hold through the Depository Trust Company the 1998 Class A
         Certificates.

                  "1998 CLASS A CERTIFICATES"  means the 7.38% Atlas Air Initial
         Pass Through Certificates,  Series 1998-1A and 7.38% Atlas Air Exchange
         Pass Through  Certificates,  Series  1998-1A issued by the Class A Pass
         Through Trust.

                  "1998 EETC AIRCRAFT" means the following:

                           (a)      the Aircraft; and

                           (b)      the Other 1998 EETC Aircraft.

                  "1999 EETC AIRCRAFT" is defined in Schedule 1 to the Lease.

                  "2000 EETC AIRCRAFT" is defined in Schedule 1 to the Lease.

                  "747-200   AIRCRAFT"   is  defined  in  Section  6(k)  of  the
         Restructure Agreement.

                  "747-400   AIRCRAFT"   is  defined  in  Section  6(k)  of  the
         Restructure Agreement.

                  "747-400 AIRCRAFT AGREEMENT" is defined in Section 6(k) of the
         Restructure Agreement.

                  (ii)     CHANGES.  The  definitions of the following  terms in
Annex A to the Original  Lease are amended by deleting  each  definition  in its
entirety and inserting the following definitions in lieu thereof:

                                      -14-
<PAGE>


                  "CASH EQUIVALENTS" means, as at any date of determination, (i)
         marketable  securities  (a)  issued  or  directly  and  unconditionally
         guaranteed as to interest and principal by the United States Government
         or (b)  issued by any agency of the United  States the  obligations  of
         which are backed by the full faith and credit of the United States,  in
         each case  maturing  within two years after the date of purchase;  (ii)
         marketable  direct  obligations  (fixed and/or floating rate) issued by
         any state of the United States of America or any political  subdivision
         of any such state or any public  instrumentality  thereof, in each case
         maturing within two years after the date of purchase and having, at the
         time  of the  acquisition  thereof  and at all  times  thereafter,  the
         highest rating  obtainable from at least two of S&P, Moody's and Fitch,
         Inc.; (iii)  Dollar-denominated  marketable direct  obligations  (fixed
         and/or  floating  rate) issued by any  corporation  or commercial  bank
         including   medium   term   notes   and   bonds,   deposit   notes  and
         eurodollar/yankee  notes and bonds,  in each case  maturing  within two
         years  after  the date of  purchase  and,  at the  time of  acquisition
         thereof and at all times  thereafter,  both (A) having a rating from at
         least two of S&P, Moody's,  and Fitch, Inc. and (B) not having a rating
         of less than A from S&P, A2 from Moody's,  or A from Fitch,  Inc.; (iv)
         Dollar-denominated  commercial  paper  maturing  no more than two years
         from the date of purchase  and issued by a  corporation  or  commercial
         bank that, at the time of acquisition  of the  commercial  paper and at
         all times  thereafter,  both (A) has a short-term credit rating from at
         least two of S&P,  Moody's,  and  Fitch,  Inc.  and (B) does not have a
         short-term  credit rating of less than A-1 (or the equivalent  thereof)
         from S&P, P-1 (or the equivalent  thereof) from Moody's, or F-I (or the
         equivalent   thereof)   from  Fitch,   Inc.;   (v)   Dollar-denominated
         certificates  of deposit,  bankers'  acceptances  and/or time  deposits
         maturing  within  two years  after the date of  purchase  and issued or
         accepted by any  commercial  bank that, at the time of  acquisition  of
         such  security and at all times  thereafter,  both (A) has a short-term
         credit rating from at least two of S&P,  Moody's,  and Fitch,  Inc. and
         (B) does not have a short-term  credit  rating of less than A-1 (or the
         equivalent  thereof)  from S&P, P-1 (or the  equivalent  thereof)  from
         Moody's,  or F-1 (or the  equivalent  thereof) from Fitch,  Inc.;  (vi)
         shares of any money market mutual fund that (a) has at least 95% of its
         assets invested continuously in the types of investments referred to in
         clauses  (i) and  (ii)  above,  (b) has net  assets  of not  less  than
         $500,000,000 and (c) has the highest rating obtainable from either S&P,
         Moody's  or  Fitch,   Inc.;   (vii)   Dollar-denominated   asset-backed
         securities  (excluding  any  mortgage  products)  with a stated  bullet
         maturity  of no more than two years from the date of  purchase  and, at
         the time of acquisition  thereof and at all times thereafter,  both (A)
         having a rating from at least two of S&P, Moody's,  and Fitch, Inc. and
         (B) not having a rating of less than A from S&P, A2 from Moody's,  or A
         from  Fitch,  Inc.;  (viii)  repurchase  agreements  entered  into with
         financial institutions  satisfying the criteria set forth in clause (v)
         above with terms of not more than thirty days for securities  described
         in  clauses  (i) and (ii) above and  having a fair  market  value of at
         least  102% of the  amount  of the  repurchase  obligations;  and  (ix)
         auction rate securities (auction rate debt and money market preferreds)
         with terms of not more than ninety days and, at the time of acquisition
         thereof and at all times  thereafter,  both (A) having a rating from at
         least two of S&P, Moody's,  and Fitch, Inc. and (B) not having a rating
         of less than A from S&P, A2 from Moody's, or A from Fitch, Inc.

                                      -15-
<PAGE>


                  "CLASS A PASS THROUGH TRUST" means that certain Atlas Air Pass
         Through Trust  1998-1A-S  formed  pursuant to that certain Pass Through
         Trust  Agreement  dated as of  February  9,  1998  between  Lessee  and
         Wilmington Trust Company,  as Trustee,  as amended by that certain 1998
         Class A Pass  Through  Trust  Supplement  dated  as of the  Restructure
         Agreement Execution Date.

                  "EQUIPMENT  NOTES"  means and  includes  any  equipment  notes
         issued under the Trust  Indenture in the form specified in Section 2.01
         thereof (as such form may be varied  pursuant to the terms of the Trust
         Indenture),  including the applicable  allonge (each, an "ALLONGE" and
         collectively,  the "ALLONGES") thereto dated the Restructure  Agreement
         Execution Date and executed by the Owner Trustee and any Equipment Note
         issued  under the Trust  Indenture in exchange or  replacement  for any
         Equipment Note.

                  "FAIR MARKET  RENTAL VALUE" shall be determined as provided in
         Section 15.4 of the Lease.

                  "LEASE" or "LEASE AGREEMENT" means the Lease Agreement,  dated
         as of July 29, 1998 between the Owner Trustee,  as lessor,  and Lessee,
         as lessee,  as  supplemented  by Lease  Supplement No. 1 dated July 29,
         1998, and amended by Amendment No. 1 to Lease Agreement.

                  "LESSEE   OPERATIVE   AGREEMENTS"   means  the   Participation
         Agreement,  the Lease, the Purchase  Agreement  Assignment,  the Lessee
         Security Agreement,  the Engine Maintenance  Contract  Assignment,  the
         Restructure  Agreement and each other agreement  between Lessee and any
         other  party to the  Participation  Agreement  and/or  the  Restructure
         Agreement,  in each  case  relating  to the  transactions  contemplated
         thereby (other than the related tax indemnity agreement, which has been
         terminated).

                  "MOODY'S"  means  Moody's  Investors  Service,  Inc.  and  its
         successors.

                  "OPERATIVE AGREEMENTS" means, collectively,  the Participation
         Agreement, the Trust Agreement, the Purchase Agreement Assignment,  the
         Consent and Agreement, the Engine Consent and Agreement, the Lease, the
         Trust  Indenture,  the Bills of Sale,  the  Assignment  and  Assumption
         Agreement(s),   if  any,  executed   pursuant  to  Section  10  of  the
         Participation  Agreement,  the  Equipment  Notes,  the Lessee  Security
         Agreement,  the  Engine  Maintenance  Contract  Assignment,  the  Polar
         Guaranty, the Polar Security Agreement, the Parent Guaranty, the Parent
         Security and the Restructure Agreement.

                  "OWNER  PARTICIPANT   AGREEMENTS"  means,  collectively,   the
         Participation  Agreement,  the Trust Agreement and each other agreement
         between the Owner  Participant and any other party to the Participation
         Agreement  (other than the related tax indemnity  agreement,  which has
         been terminated).

                  "PASS  THROUGH  TRUST  AGREEMENT"  means  each  of  the  three
         separate Pass Through Trust  Agreements,  each dated as of the Issuance
         Date, by and between  Lessee and Pass Through  Trustee, and in the case
         of the  Class A Pass  Through  Trust,  includes  the 1998  Class A Pass
         Through  Trust  Supplement  dated  as  of  the  Restructure   Agreement
         Execution Date.

                                      -16-
<PAGE>


                  "PAYMENT DATE" means (a) for the period from the Delivery Date
         up to and  including  January  2,  2003  each  January  2 and  July  2,
         commencing  with the first  such date to occur  after the  Commencement
         Date and (b) after  January 2, 2003,  each date set forth on Schedule 2
         to Amendment No. 1 to Lease Agreement.

                  "PAYMENT  PERIOD"  means (a) for the period from the  Delivery
         Date up to and  including  January  2,  2003,  each of the  consecutive
         semiannual periods (or, if applicable, such shorter period ended on the
         first  Payment  Date of the Base Lease Term) during such portion of the
         Term ending on a Payment Date, the first such period  commencing on and
         including the  Commencement  Date and (b) after January 2, 2003,  means
         each of the consecutive monthly periods during such portion of the Term
         ending  on the date  immediately  proceding  a  Payment  Date  (or,  if
         applicable,  such  shorter  period  ended on the  Scheduled  Expiration
         Date), the first such period  commencing on January 2, 2004;  PROVIDED,
         HOWEVER,  that the period  commencing  after  January 2, 2003 up to and
         including  January 1, 2004 shall have no Payment  Period and Basic Rent
         for such  period  shall be paid on the dates set forth in Schedule 2 to
         Amendment No. 1 to Lease Agreement.

                  "PURCHASE  DATE"  means the last day,  or if such day is not a
         Business  Day, the  immediately  succeeding  Business  Day, of the Base
         Lease Term, as specified in any Purchase Notice.

                  "RENT" means,  collectively,  Basic Rent, Enhancement Rent and
         Supplemental Rent.

                  "SCHEDULED  EXPIRATION  DATE"  is  defined  in  Schedule  1 to
         Amendment No. 1 to Lease Agreement.

                  "SERIES A" or "SERIES A EQUIPMENT NOTES" means Equipment Notes
         issued  under  the  Trust   Indenture  and  designated  as  "Series  A"
         thereunder,  in the Original Amount and maturities and bearing interest
         as  specified  in Schedule I to the Trust  Indenture  under the heading
         "Series A", as such Equipment Notes have been amended by the applicable
         Allonge.

                  "SERIES B" or "SERIES B EQUIPMENT NOTES" means Equipment Notes
         issued  under  the  Trust   Indenture  and  designated  as  "Series  B"
         thereunder,  in the Original Amount and maturities and bearing interest
         as  specified  in Schedule I to the Trust  Indenture  under the heading
         "Series B", as such Equipment Notes have been amended by the applicable
         Allonge.

                  "SERIES C" or "SERIES C EQUIPMENT NOTES" means Equipment Notes
         issued  under  the  Trust   Indenture  and  designated  as  "Series  C"
         thereunder,  in the Original Amount and maturities and bearing interest
         as  specified  in Schedule I to the Trust  Indenture  under the heading
         "Series C", as such Equipment Notes have been amended by the applicable
         Allonge.

                  "STANDARD  & POOR'S" or "S&P" means  Standard & Poor's  Rating
         Services,  a  division  of The  McGraw-Hill  Companies,  Inc.,  and its
         successors.

                                      -17-
<PAGE>


                  "STIPULATED  LOSS VALUE" means,  with respect to the Aircraft,
         during the Base Lease Term,  (a) for the period from the Delivery  Date
         up  to  and  including  January  2,  2003,  the  amount  determined  by
         multiplying  (i) the percentage set forth in Schedule 3 to the Original
         Lease  opposite the Stipulated  Loss Value Date as of which  Stipulated
         Loss Value is required to be  computed  by (ii)  Lessor's  Cost and (b)
         after January 2, 2003 (except as otherwise provided pursuant to Section
         19),  the amount set forth in  Schedule 3 to  Amendment  No. 1 to Lease
         Agreement   opposite  the  Stipulated  Loss  Value  Date  as  of  which
         Stipulated  Loss  Value is  required  to be  computed.  Notwithstanding
         anything to the contrary in any Operative  Agreement,  Stipulated  Loss
         Value  shall  always be  sufficient  to pay in full,  as of the date of
         payment thereof  (assuming  timely payment of the Equipment Notes prior
         to such date),  the aggregate  unpaid principal amount of all Equipment
         Notes  outstanding  as of such date,  together  with accrued and unpaid
         interest on all such Equipment Notes as of such date.

                  "STIPULATED LOSS VALUE DATE" means, for any month, (a) for the
         period from the Delivery Date up to and including  January 2, 2003, the
         day in such month  specified in Schedule 3 to the Original Lease or, if
         such a day is not a Business Day, the immediately  succeeding  Business
         Day and (b) after January 2, 2003,  the day in such month  specified in
         Schedule 3 to Amendment  No. 1 to Lease  Agreement or, if such a day is
         not a Business Day, the immediately succeeding Business Day.

                  "SUPPLEMENTAL  RENT"  means,  without  duplication,   (a)  all
         amounts,  liabilities,  indemnities and  obligations  (other than Basic
         Rent and Enhancement Rent but including Make-Whole Amount, if any, EETC
         Amendment  Fee  Consideration,  if any,  and  Enhancements  pursuant to
         clause (ii) of Section  8.4.2,  if any) that Lessee  assumes or becomes
         obligated to or agrees to pay under any Lessee  Operative  Agreement to
         or on  behalf  of  Lessor  or  any  other  Person,  including,  without
         limitation,  payments of Stipulated Loss Value,  Termination  Value and
         payments of indemnities under Section 9 of the Participation Agreement,
         but  excluding  any amount as to which Lessee is obligated to pay a Pro
         Rata Share  pursuant to clause (e) of this  definition,  (b) (i) to the
         extent not payable  (whether or not in fact paid) under Section 6(a) of
         the Note Purchase  Agreement (as  originally in effect or amended),  an
         amount  or  amounts  equal to the fees paid to the  relevant  Liquidity
         Provider under Section 2.03 of each Liquidity  Facility and the related
         Fee Letter (as defined in the Intercreditor  Agreement) multiplied by a
         fraction the numerator of which shall be the then outstanding aggregate
         principal  amount of the Series A Equipment  Notes,  Series B Equipment
         Notes and Series C Equipment  Notes and the  denominator of which shall
         be the then  outstanding  aggregate  principal  amount of all "Series A
         Equipment  Notes",  "Series B Equipment  Notes" and "Series C Equipment
         Notes" (each as defined in the Note Purchase  Agreement);  (ii) (x) the
         amount  equal to  interest  on any  Downgrade  Advance  (other than any
         Applied  Downgrade  Advance)  payable  under  Section  3.07(e)  of each
         Liquidity  Facility  minus  Investment  Earnings  from  such  Downgrade
         Advance  multiplied  by (y) the  fraction  specified  in the  foregoing
         clause (i); (iii) (x) the amount equal to interest on any Non-Extension
         Advance (other than any Applied  Non-Extension  Advance)  payable under
         Section 3.07(a)(i) of each Liquidity Facility minus Investment Earnings
         from  such  Non-Extension   Advance  multiplied  by  (y)  the  fraction
         specified in the forgoing clause (i); (iv) if any payment default shall
         have occurred and be continuing  with respect to interest on any Series
         A Equipment Notes, Series B

                                      -18-
<PAGE>


         Equipment Notes or Series C Equipment Notes, (x) the excess, if any, of
         (1) an  amount  equal  to  interest  on  any  Unpaid  Advance,  Applied
         Downgrade  Advance  or  Applied  Non-Extension  Advance  payable  under
         Section  3.07(a)  of  each  Liquidity  Facility  over  (2)  the  sum of
         Investment  Earnings from any Final Advance plus any amount of interest
         at the Payment Due Rate actually  payable (whether or not in fact paid)
         by Lessee in respect of the overdue scheduled interest on the Equipment
         Notes in  respect  of which  such  Unpaid  Advance,  Applied  Downgrade
         Advance or Applied  Non-Extension  Advance was made multiplied by (y) a
         fraction  the  numerator of which shall be the then  aggregate  overdue
         amounts of interest on the Series A Equipment Notes, Series B Equipment
         Notes and Series C Equipment  Notes (other than  interest  becoming due
         and payable  solely as a result of  acceleration  of any such Equipment
         Notes) and the denominator of which shall be the then aggregate overdue
         amounts  of  interest  on all  "Series A  Equipment  Notes",  "Series B
         Equipment Notes" and "Series C Equipment Notes" (each as defined in the
         Note Purchase  Agreement) (other than interest becoming due and payable
         solely as a result of acceleration of any such "Equipment Notes");  and
         (v) Lessee's pro rata share of any other  amounts owed to the Liquidity
         Providers by the  Subordination  Agent as borrower under each Liquidity
         Facility (other than amounts due as repayment of advances thereunder or
         as interest on such advances), except to the extent payable pursuant to
         clause  (ii),  (iii) or (iv) above,  (c) Lessee's pro rata share of all
         compensation and reimbursement of expenses,  disbursements and advances
         payable by Lessee under the Pass Through Trust Agreements, (d) Lessee's
         pro rata share of all  compensation  and  reimbursement of expenses and
         disbursements   payable   to  the   Subordination   Agent   under   the
         Intercreditor  Agreement except with respect to any income or franchise
         taxes  incurred  by the  Subordination  Agent  in  connection  with the
         transactions  contemplated by the Intercreditor Agreement, (e) Lessee's
         pro rata  share of any  amount  payable  under  Section  9.1  (and,  if
         attributable  thereto,  Section 9.5) of the Participation  Agreement to
         any Pass  Through  Indemnitee  to the extent  such  amount  relates to,
         results  from or  arises  out of or in  connection  with  (i) the  Pass
         Through Agreements or the enforcement of any of the terms of any of the
         Pass Through Agreements,  (ii) the offer, sale, or delivery of the Pass
         Through  Certificates or any interest therein or represented thereby or
         (iii) any breach of or failure  to  perform  or  observe,  or any other
         noncompliance with, any covenant or agreement or other obligation to be
         performed by Lessee under any Pass Through  Agreement or the falsity of
         any  representation or warranty of Lessee in any Pass Through Agreement
         and (f) in the event  Lessee  requests any  amendment to any  Operative
         Agreement  or Pass  Through  Agreement,  Lessee's pro rata share of all
         reasonable fees and expenses (including,  without limitation,  fees and
         disbursements of counsel) of the Escrow Agents and the Paying Agents in
         connection  therewith  payable by the Pass Through  Trustees  under the
         Escrow Agreements.  As used herein,  "Lessee's pro rata share" means as
         of any time a fraction, the numerator of which is the principal balance
         then outstanding of Equipment Notes and the denominator of which is the
         aggregate  principal  balance then outstanding of all "Equipment Notes"
         (as such term is  defined  in each of the  Operative  Indentures).  For
         purposes of this  definition,  the terms "Applied  Downgrade  Advance",
         "Applied Non-Extension Advance", "Cash Collateral Account",  "Downgrade
         Advance",  "Final  Advance",   "Investment  Earnings",   "Non-Extension
         Advance" and "Unpaid Advance" shall have the meanings specified in each
         Liquidity Facility.

                                      -19-
<PAGE>


                  "TERM"  means the Base  Lease  Term;  PROVIDED  that if at the
         scheduled  end of the Base Lease Term the Aircraft or Airframe is being
         used,  or was within six (6) months prior  thereto  being used,  by the
         U.S. Government pursuant to CRAF, the Term shall be deemed extended for
         the period  necessary to accommodate  usage of the Aircraft or Airframe
         pursuant  to CRAF  plus six  months  thereafter,  and  Lessee  shall be
         obligated to pay with respect to any such period of extension (i) Basic
         Rent at a daily  equivalent rate equal to the average of the Basic Rent
         paid during the Base Lease Term plus (ii) the daily  equivalent rate of
         Enhancement  Rent,  if  applicable  at the time,  paid during the final
         Payment Period.

                  "TERMINATION  VALUE"  means,  with  respect  to the  Aircraft,
         during the Base Lease Term,  (a) for the period from the Delivery  Date
         up  to  and  including  January  2,  2003,  the  amount  determined  by
         multiplying  (i) the percentage set forth in Schedule 4 to the Original
         Lease opposite the Termination Value Date as of which Termination Value
         is required to be computed by (ii)  Lessor's Cost and (b) after January
         2, 2003  (except as  otherwise  provided  pursuant to Section  19), the
         amount set forth in Schedule 4 to  Amendment  No. 1 to Lease  Agreement
         opposite the Termination  Value Date as of which  Termination  Value is
         required to be  computed.  Notwithstanding  anything to the contrary in
         any Operative  Agreement,  Termination Value shall always be sufficient
         to pay in full,  as of the date of  payment  thereof  (assuming  timely
         payment of the  Equipment  Notes  prior to such  date),  the  aggregate
         unpaid principal  amount of all Equipment Notes  outstanding as of such
         date,  together with accrued and unpaid  interest on all such Equipment
         Notes as of such date.

                  "TERMINATION  VALUE DATE"  means,  for any month,  (a) for the
         period from the Delivery Date up to and including  January 2, 2003, the
         day in such month  specified in Schedule 4 to the Original Lease or, if
         such a day is not a Business Day, the immediately  succeeding  Business
         Day and (b) after January 2, 2003,  the day in such month  specified in
         Schedule 4 to Amendment  No. 1 to Lease  Agreement or, if such a day is
         not a Business Day, the immediately succeeding Business Day.

                  "TRUST INDENTURE" means the Trust Indenture and Mortgage dated
         as of even date with the Participation Agreement, between Owner Trustee
         and  Mortgagee,  as  supplemented  by the Trust  Indenture and Mortgage
         Supplement  dated July 29, 1998 and the Trust  Indenture  and  Mortgage
         Supplement  dated  March 19,  2004 and as further  supplemented  by the
         Trust  Indenture and Mortgage  Supplement  dated as of the  Restructure
         Agreement Execution Date.

                  (iii) DELETIONS.  The definitions of the terms "ADVERSE CHANGE
IN TAX LAW", "CHANGE IN TAX LAW", "EBO DATE", "EBO PRICE",  "EXCLUDED PAYMENTS",
"MATERIALLY ADVERSE TAX EVENT", "NEW DEBT", "REFUNDING CERTIFICATE",  "REFUNDING
DATE", "REFUNDING INFORMATION", "RENEWAL LEASE TERM", "RENEWAL NOTICE", "RENEWAL
RENT",  "RENEWAL RENT CAP", "RENEWAL TERM EXPIRATION DATE",  "SUBSEQUENT RENEWAL
LEASE TERM",  "TAX ATTRIBUTE  PERIOD" and "TAX  INDEMNITY  AGREEMENT" are hereby
deleted from Annex A to the Original Lease in their entirety.

                                      -20-
<PAGE>



                  SECTION 2. AMENDMENTS TO SECTION 3 OR THE ORIGINAL LEASE.  (A)
Section  3.1 of the  Original  Lease is hereby  amended by  deleting  the second
sentence of such Section 3.1 in its entirety.

                  (B)      Clauses  (a)  through  (d) of  Section  3.2.1  of the
Original Lease are hereby amended by deleting such clauses in their entirety and
inserting the following in lieu thereof:

                  (a)  During  the  Base  Lease  Term,  (i) up to and  including
         January 2, 2003,  Lessee  shall pay to Lessor,  on each  Payment  Date,
         Basic Rent in the amount  specified in Schedule 2 to the Original Lease
         for such Payment Date,  which shall be allocated to the Payment  Period
         ending on such Payment Date, if designated as a payment in arrears,  or
         allocated to the Payment  Period  commencing  on such Payment  Date, if
         designated  as a  payment  in  advance,  in each case as  specified  in
         Schedule 2 to the Original Lease and (ii) after January 2, 2003, Lessee
         shall,  except as  otherwise  provided  pursuant  to Section 19, pay to
         Lessor,  on each Payment  Date,  Basic Rent in the amount  specified in
         Schedule 2 to Amendment No. 1 to Lease Agreement for such Payment Date,
         which shall be allocated to the Payment  Period  ending on such Payment
         Date,  if  designated  as a payment in  arrears,  or  allocated  to the
         Payment  Period  commencing  on such Payment  Date,  if designated as a
         payment  in  advance,  in  each  case as  specified  in  Schedule  2 to
         Amendment No. 1 to Lease Agreement;  PROVIDED, HOWEVER, that Basic Rent
         paid on the July 2, 2003, October 1, 2003,  October 30, 2003,  November
         5, 2003 and  December  17,  2003  Payment  Dates and Basic Rent paid on
         January 30, 2004 and March 17, 2004 shall be  allocated  as provided in
         Schedule 2 to Amendment No. 1 to Lease Agreement.

                  (C)      Clause (e) of Section 3.2.1 of the Original  Lease is
hereby amended by relettering such clause as clause "(b)".

                  (D)      Section  3.3(a)  of  the  Original  Lease  is  hereby
amended by adding the following words to the end of Section 3.3(a):  "So long as
Mortgagee  has not given  notice to Lessee that the Lien of the Trust  Indenture
has been  discharged,  if (i) Lessee  consolidates a wire transfer of Basic Rent
with payments of Enhancement Rent or Supplemental Rent for the Aircraft, or (ii)
Lessee  consolidates  a wire transfer of Rent with payments of rent under leases
and/or principal or interest under equipment notes (as applicable) for any Other
Aircraft  and such  wire  transfer  contains  payments  of  Enhancement  Rent or
Supplemental Rent for the Aircraft and/or similar  payments,  AMLR and/or Excess
Rent (as defined in the leases for certain of the Other  Aircraft)  with respect
to such Other Aircraft, then, at least one (1) Business Day prior to Mortgagee's
receipt  of such Rent  described  in clauses  (i) or (ii)  above,  Lessee  shall
provide Mortgagee with a spreadsheet itemizing by U.S. registration mark how the
payments of Basic Rent,  Enhancement  Rent or Supplemental  Rent with respect to
the Aircraft and, if  applicable,  such similar  payments  and/or AMLR or Excess
Rent with respect to such Other  Aircraft  should be applied  among the Aircraft
and such Other Aircraft.

                  (E)      Section  3.3(c)  of  the  Original  Lease  is  hereby
amended by deleting the words ", other than Excluded Payments" therefrom.

                  (F)      Section  3.3(d)  of  the  Original  Lease  is  hereby
amended by deleting such section in its entirety.

                                      -21-
<PAGE>

                  (G)      Clause (e) of Section  3.3 of the  Original  Lease is
hereby amended by relettering such clause as clause "(d)".

                  SECTION 3. AMENDMENT TO SECTION 4.7(b) OF THE  ORIGINAL LEASE.
Section 4. 7(b) of the Original  Lease is hereby amended by adding the following
to the end of such Section 4.7(b):

                  Notwithstanding  the foregoing,  at all times on and after the
         date that Lessee or any Affiliate of Lessee is the Owner Participant or
         otherwise  beneficially owns (or has the contractual option to acquire)
         a  majority  of  the  Owner  Participant's  interest  in  the  Aircraft
         (including  all times after Lessee or any Affiliate of Lessee ceases to
         be the Owner Participant or to beneficially own or have the contractual
         option to acquire such Owner Participant's  interest),  Lessor will not
         have the right to exercise its rights as a "secured  party",  "lessor",
         or "conditional  vendor",  or their equivalent,  under Section 1110 for
         any purpose in  connection  with such  Aircraft  in any case  commenced
         under the Bankruptcy Code (and this clause constitutes a waiver, to the
         extent set forth herein, of Lessor's and the Owner Participant's rights
         under Section 12 of the Participation  Agreement),  provided,  however,
         that  (i)  Mortgagee  will  nevertheless  have all of the  rights  of a
         secured party and lessor unless and until the Equipment Notes have been
         indefeasibly  paid in full in cash  (including  any  such  rights  that
         Mortgagee has as an assignee of Lessor under the Trust  Indenture),  it
         being  understood  that,  to the  extent  necessary  for  Mortgagee  to
         exercise any such rights as its  assignee,  Lessor will retain all such
         rights that it may have even though it is  waiving,  as between  Lessor
         and   Mortgagee,   the  right  to  exercise   such  rights   under  the
         circumstances  set forth above,  and (ii) Lessee is not waiving  herein
         any rights it has or could have under  Section  1110 as a lessee of the
         Aircraft.  For the avoidance of doubt, Lessee's options to purchase the
         Aircraft pursuant to Sections 10 and 17 of this Lease do not constitute
         "the   contractual   option  to  acquire  a   majority   of  the  Owner
         Participant's interest in the Aircraft".

                  SECTION  4.  AMENDMENTS  TO SECTION 7 OF THE  ORIGINAL  LEASE.
Section 7 of the  Original  Lease is hereby  amended by (i) deleting the proviso
contained in Section 7.1.2,  (ii) deleting the words "or any Renewal Lease Term"
from Section 7.2.7(c) and (iii) deleting  Section 7.2.7(i) in its entirety.

                  SECTION 5. AMENDMENTS TO SECTION 8 OF THE  ORIGINAL LEASE. (A)
Section 8 of the Original Lease is hereby amended by deleting  Sections 8.2.1(a)
and (b) in their entirety and substituting the following in lieu thereof:

                  (a)      Within  90 days  after  the end of each of the  first
         three  fiscal  quarters  in each fiscal  year of Parent,  an  unaudited
         balance sheet of Parent and its  consolidated  affiliates as of the end
         of such quarter and  unaudited  related  statements  of income and cash
         flows for the period  commencing at the end of the previous fiscal year
         and ending with the end of such quarter,  prepared in  accordance  with
         GAAP and in the case of the fiscal  quarter  ending  March 31, 2005 and
         each and  every  fiscal  quarter  ending  thereafter  setting  forth in
         comparative form the corresponding figures for the corresponding period
         in the

                                      -22-
<PAGE>

         preceding fiscal year, prepared in accordance with GAAP; PROVIDED that,
         so long as Parent  is  subject  to the  reporting  requirements  of the
         Securities Exchange Act of 1934, a copy of Parent's report on Form 10-Q
         for  such  fiscal  quarter  (excluding   exhibits)  will  satisfy  this
         paragraph (a); PROVIDED, FURTHER, that for fiscal quarters ending March
         31, 2004, June 30, 2004 and September 30, 2004,  Lessee will provide an
         unaudited balance sheet and unaudited related  statements of income and
         cash flow of Parent and its consolidated  affiliates within 120 days of
         the end of such quarter.

                  (b)      Within 120 days after the end of each  fiscal year of
         Parent,  an  audited  balance  sheet  of  Parent  and its  consolidated
         affiliates  as of the end of  such  fiscal  year  and  related  audited
         statements  of income and cash flows for such fiscal year,  prepared in
         accordance  with GAAP,  together with a report of Lessee's  independent
         certified  public  accountants  with  respect  to  their  audit of such
         financial  statements,  and  in the  case  of the  fiscal  year  ending
         December 31, 2005 and each and every fiscal year ending  thereafter  in
         comparative  form with the  preceding  fiscal year;  PROVIDED  that, so
         long  as  Parent  is  subject  to  the  reporting  requirements  of the
         Securities Exchange Act of 1934, a copy of Parent's report on Form 10-K
         for such fiscal year  (excluding  exhibits) will satisfy this paragraph
         (b);  PROVIDED,  FURTHER,  that  for the fiscal year ended December 31,
         2003,  Lessee shall provide an audited  balance sheet of Parent and its
         consolidated  affiliates and audited  related  statements of income and
         cash flows as soon as such audited  balance  sheet and audited  related
         statements of income and cash flows are available.

                  (c)      Notwithstanding the foregoing,  as soon as available,
         and in any event within  thirty (30) days  following the date of filing
         with the Securities and Exchange Commission, one copy of each Quarterly
         Report on Form 10-Q (or any successor  form thereto  promulgated by the
         Securities and Exchange Commission) of Parent and each Annual Report on
         Form 10-K (or any successor form thereto  promulgated by the Securities
         and  Exchange  Commission)  of Parent  filed  with the  Securities  and
         Exchange Commission.

                  (d)      Lessee  shall  deliver  to  Mortgagee  a copy  of any
         officer's  certificate  or notice that Lessee is required to deliver to
         the  administrative  agent under the Bank Lender Documents  pursuant to
         Sections 5. 1 (viii),  (ix),  (x) and (xii) of the Credit  Agreement or
         any  comparable  section  of any  Bank  Lender  Documents  executed  in
         connection with a Bank Debt  Refinancing or any amendment of the Credit
         Agreement.

                  (e)      In the  event  that  an  executive  officer  (or  any
         officer  with  responsibility  in  relation  to this Lease or any other
         person determining senior management  policies or exercising  executive
         responsibilities)  of Lessee shall have actual knowledge of the failure
         by Lessee to observe or perform (or  cause to be observed or performed)
         in any material respect any of its covenants, agreements or obligations
         in Sections 8.4.1,  8.4.2, 8.4.3, 8.4.4 or 12(g), Lessee shall deliver,
         within five (5) Business Days of such actual knowledge,  an affirmative
         written notice thereof to Lessor, Owner Participant and Mortgagee.

                  (f)      Lessee shall deliver to Lessor, Owner Participant and
         Mortgagee  as  soon as  available  and in any  event  within  five  (5)
         Business  Days after the end of each  quarter of each fiscal  year,  an
         officer's certificate certifying that Lessee is in compliance with its

                                      -23-
<PAGE>

         covenants,  agreements and obligations in Sections 8.4.1, 8.4.2, 8.4.3,
         8.4.4 or 12(g)  or,  if Lessee  is not in  compliance,  specifying  the
         nature  of  the   non-compliance,   the  period  of  existence  of  the
         non-compliance and the action that Lessee has taken or proposes to take
         with respect thereto.

                  (B)      Section 8 of the Original  Lease is amended by adding
the following to the end of such Section 8 as new Sections 8.3 and 8.4:

                  8.3      [Intentionally Omitted]

                  8.4.1    RESTRICTED  PAYMENTS;  RESTRICTIONS ON  INDEBTEDNESS;
         RESTRICTIONS  ON LEASES  AND  SUBLEASES:  MERGERS;  LINES OF  BUSINESS;
         SUBORDINATED DEBT; CONTINGENT OBLIGATIONS.

                  From and after the  Restructure  Agreement  Execution Date and
         prior to the Special  Covenants  Termination Date, Lessee will not, and
         Lessee will not permit  Parent or any  Subsidiary  or any  Affiliate of
         Lessee or Parent to:

                           (a)      make any Restricted  Junior Payment,  unless
                  the Restricted  Junior  Payment  Conditions are satisfied both
                  immediately  prior to  giving  effect  to the  making  of such
                  Restricted  Junior  Payment  and  after  giving  effect to the
                  making of such proposed Restricted Junior Payment;

                           (b)      create,   incur  (by   merger,   conversion,
                  exchange or  otherwise),  assume,  guarantee or become liable,
                  contingently or otherwise, for any Indebtedness (including any
                  Acquired  Indebtedness),  unless the  Additional  Indebtedness
                  Incurrence  Conditions are satisfied both immediately prior to
                  giving  effect  to the  creation,  incurrence,  assumption  or
                  guarantee of such other  Indebtedness  and after giving effect
                  to such proposed creation, incurrence, assumption or guarantee
                  of such other Indebtedness;  PROVIDED,  HOWEVER,  this Section
                  8.4.l(b)  shall  not  apply  to  Permitted  Indebtedness;  and
                  PROVIDED,   FURTHER,   for  the   avoidance   of   doubt   and
                  notwithstanding  anything to the  contrary  contained  in this
                  Lease,  the accrual of interest,  accretion or amortization of
                  original  issue  discount  and  the  payment  of  interest  or
                  dividends in the form of additional  Indebtedness  will not be
                  deemed to be an incurrence of Indebtedness;

                           (c)      enter into any lease or sublease of any real
                  or  personal  property  as lessee  or  sublessee  (other  than
                  intercompany leases between Parent, Polar and Lessee),  unless
                  the Additional Lease Incurrence  Conditions are satisfied both
                  immediately  prior to giving  effect to the  entering  into of
                  such other lease or sublease and after  giving  effect to such
                  entering  into of  such  other  proposed  lease  or  sublease;
                  PROVIDED, HOWEVER, Operating Leases and Capital Leases entered
                  into after the Restructure  Agreement Execution Date which are
                  replacements  of Operating  Leases or Capital Leases in effect
                  on the  Restructure  Agreement  Execution Date (and related to
                  the same property),  shall be deemed to have been entered into
                  after the  Restructure  Agreement  Execution  Date only to the
                  extent that the scheduled cash rental payments  required to be
                  made  thereunder  during any fiscal year of Lessee  exceed the
                  scheduled cash rental payments required to be made during any

                                      -24-
<PAGE>

                  fiscal year of Lessee under the  replaced  leases as in effect
                  on the Restructure Agreement Execution Date;

                           (d)      (x) enter into any  transaction of merger or
                  consolidation,  or liquidate,  wind up or dissolve  itself (or
                  suffer any  liquidation  or  dissolution),  or  convey,  sell,
                  lease,  sublease,  transfer  or  otherwise  dispose of, in one
                  transaction or a series of transactions,  all or substantially
                  all of its  business,  property or fixed  assets,  whether now
                  owned or  hereafter  acquired,  (y) change to any  substantial
                  extent any line or lines of  business  activity  engaged in by
                  Lessee as described in the Business Plan, or (z) engage to any
                  substantial extent in any line or lines of business other than
                  airfreight  and  airfreight   services   consistent  with  the
                  Business Plan; PROVIDED, HOWEVER:

                                    (i)      any  Subsidiary  of  Parent  may be
                           merged  with or into  Parent,  Lessee  or  Polar,  or
                           (other than Lessee or Polar) be liquidated,  wound up
                           or  dissolved;  PROVIDED  that, in the case of such a
                           merger,   Parent,   Lessee  or  Polar  shall  be  the
                           continuing or surviving corporation; and

                                    (ii)     any   Subsidiary   of  Parent   may
                           convey,  lease  (subject,  in the case of Lessee,  to
                           Section 7.2.7),  license,  sell or otherwise transfer
                           all or substantially all of its business,  properties
                           or  assets  to   Parent,   Lessee  or  Polar  in  one
                           transaction or a series of  transactions,  so long as
                           any security  interests  and liens  granted to Lessor
                           and  Mortgagee  in the  assets so  transferred  shall
                           remain in full force and effect and  perfected (to at
                           least the same extent as in effect  immediately prior
                           to  such  transfer)  and  all  actions   required  to
                           maintain said perfected status have been taken;

                           (e)      in addition to and not in limitation of, any
                  other term,  covenant or condition set forth in this Lease (x)
                  any Indebtedness of Parent and its Subsidiaries which shall be
                  subordinated in right of payment to any other  Indebtedness of
                  Parent  and  its   Subsidiaries   shall   also  be   expressly
                  subordinated  in right  of  payment  on the same  basis to the
                  obligations  under  the  Credit  Agreement,   the  Lease,  the
                  Equipment  Notes,  the  Other  EETC  Transactions  and AFL III
                  Financing   Agreement  and  (y)  no  repayments  of  any  such
                  subordinated   Indebtedness   (except  scheduled  payments  of
                  principal and interest or mandatory  prepayments of principal)
                  shall be made unless, on a pro forma basis after giving effect
                  to such repayment,  Parent and its  Subsidiaries shall be able
                  to  incur  an  additional  $1.00  of  Indebtedness  under  the
                  Additional Indebtedness Incurrence Conditions; or

                           (f)      create  or  become  or  remain  liable  with
                  respect to any Contingent Obligation, except:

                                    (i)      Parent  and  any   Subsidiary   may
                           become and remain  liable with respect to  Contingent
                           Obligations  arising under their guaranties under the
                           Credit   Agreement,   the   Lease,   the  Other  EETC
                           Transactions,  the  Polar  Guaranty  and  the  Parent
                           Guaranty;

                                      -25-
<PAGE>

                                    (ii)     Lessee may become and remain liable
                           with respect to Contingent Obligations under Interest
                           Rate Agreements and Currency Agreements with a lender
                           under the Credit Agreement;

                                    (iii)    Parent  and  its  Subsidiaries  may
                           become and remain  liable with respect to  Contingent
                           Obligations  in respect of customary  indemnification
                           and purchase price adjustment obligations incurred in
                           connection with sales of assets or securities;

                                    (iv)     Parent  and  its  Subsidiaries  may
                           become and remain  liable with  respect to letters of
                           credit issued under the Exit Facility;

                                    (v)      Parent  and  its  Subsidiaries  may
                           become and remain  liable with  respect to letters of
                           credit  issued in the ordinary  course of business of
                           Parent  and  its  Subsidiaries  in an  amount  not to
                           exceed $5,000,000 in the aggregate at any time;

                                    (vi)     Parent  and  its  Subsidiaries,  as
                           applicable,   may  remain   liable  with  respect  to
                           Contingent  Obligations  described  in Schedule 8.4.1
                           (f)(vi)  annexed  hereto  (other  than in  respect of
                           letters of credit);

                                    (vii)    Parent  and  its  Subsidiaries  may
                           become and remain  liable with respect to  Contingent
                           Obligations to the extent such Contingent Obligations
                           are permitted pursuant to Section 8.4.1(c); and

                                    (viii)   Parent  and  its  Subsidiaries  may
                           become  and  remain  liable  with  respect  to  other
                           Contingent  Obligations;  PROVIDED  that the  maximum
                           aggregate  liability,  contingent  or  otherwise,  of
                           Lessee  and its  Subsidiaries  in respect of all such
                           Contingent   Obligations  shall  at  no  time  exceed
                           $10,000,000.

                  8.4.2    ENHANCEMENTS

                  If, after the Restructure  Agreement  Execution Date and prior
         to the Special Covenants  Termination Date, any Other Creditor receives
         any   Enhancement  in  connection   with  any   amendment,   waiver  or
         modification  of the terms of such Other  Creditor's  written  contract
         with Lessee  regarding any action,  inaction,  state of affairs or item
         which  constitutes  an event of default or may have  become an event of
         default under the terms of such Other Creditor's  written contract with
         Lessee without such amendment, waiver or modification. Lessee shall (a)
         give prompt  notice to Mortgagee  and Lessor  describing  in reasonable
         detail the amendment,  waiver or modification and the Enhancement given
         in connection therewith, and (b) cause Lessor to simultaneously receive
         equal and  identical  (or if identical is not  possible,  substantially
         identical) Enhancements (calculated as the net economic benefit to such
         Other Creditor,  but not less than zero);  PROVIDED that any settlement
         by Lessee in the ordinary  course of business of  contractual  aircraft
         return condition obligations of Lessee regarding an aircraft which does
         not exceed the amount of the  applicable  contractual  aircraft  return
         condition  obligation of Lessee shall not constitute an Enhancement for
         the purposes hereof. Enhancements which are calculated on a

                                      -26-
<PAGE>

         per unit  basis will be  provided  to Lessor on a per unit  basis,  and
         Enhancements   which  are  provided  as  a  percentage  of  outstanding
         obligations shall be provided to Lessor pro rata in the proportion that
         the debt then  outstanding on the Series A Equipment Notes bears to the
         amount of the  obligation  owed to such  Other  Creditor.  Enhancements
         which are  payable in cash shall be paid by Lessee to Lessor  hereunder
         either (i) as  additional  Rent in the case of  Enhancements  which are
         being provided  because an Other Creditor is receiving new or increased
         rent,  debt payments or other periodic  payments,  fees or compensation
         ("ENHANCEMENT  RENT")  or (ii)  as  Supplemental  Rent  in the  case of
         Enhancements  which  are  being  provided  because  an  Other  Creditor
         received maintenance reserves or other non-periodic  payments,  fees or
         compensation.

                  8.4.3 ADDITIONAL SALE PROVISIONS. Lessee agrees to comply with
the provisions of Schedule 8.4.3.

                  8.4.4    PROTECTIONS  FOR  THE  USE  AND  DEPRECIATION  OF THE
AIRCRAFT

                  Without  limiting the  generality of the provisions of Section
         8.1 hereof,  after the Restructure  Agreement  Execution  Date,  Lessee
         shall  have  the  following  obligations,  in  addition  to  any  other
         obligations  under this Lease with  respect to the  maintenance  of the
         Aircraft and Engines:

                           (a)      Lessee  shall  at  all  times  maintain  the
                  Airframe and each Engine in airworthy condition, including the
                  performance of all procedures and checks necessary to keep the
                  Aircraft  and  each  Engine  in an  airworthy  condition,  and
                  without limiting the generality of the foregoing, Lessee shall
                  perform  all  airframe  "D-Checks"  as  required  for  further
                  operation  of the  Aircraft  (with no  extensions  of  D-Check
                  intervals  by more  than one year  beyond  the  manufacturer's
                  recommended D-Check interval,  in each case as approved by the
                  FAA),  and  perform all Engine  overhauls  as required  by the
                  Engine's condition.

                           (b)      Lessee shall  establish,  maintain in effect
                  at all  times and  timely  fund all  payments  under an Engine
                  Maintenance Contract designed to meet the objectives set forth
                  in paragraphs 1(a)(i) and (ii) of the Maintenance Schedule (as
                  that term is defined in clause (c) below) (the "OBJECTIVES").

                           (c)      Schedule    8.4.4(c)    (the    "MAINTENANCE
                  SCHEDULE") sets forth  responsibilities  and obligations  that
                  Lessee will timely and fully perform and Lessee agrees to each
                  of the terms, conditions, covenants and other requirements set
                  forth  therein.  Capitalized  terms used in this Section 8.4.4
                  and not  otherwise  defined in this  Amendment  No. 1 to Lease
                  Agreement  shall  have the  meanings  ascribed  to them in the
                  Maintenance Schedule.

                           (d)      Except  as  otherwise  provided  in  Section
                  8.4.4(f),  (g) or (i) or the Maintenance Schedule,  Lessee (i)
                  will  maintain the Engine  Maintenance  Contract in accordance
                  with  the  terms  thereof,   (ii)  will  not  consent  to  any
                  amendment,  supplement  or waiver of any of the  provisions of
                  the Engine  Maintenance  Contract  without  the prior  written
                  consent of Mortgagee and Lessor (other than amend-

                                      -27-
<PAGE>

                  ments,  supplements or waivers that (A) have no adverse effect
                  on any  obligation  to maintain the Airframe or the Engines or
                  (B) have no  material  effect  on any other  provision  of the
                  Engine Maintenance Contract), or (iii) will not enter into any
                  additional Engine Maintenance Contract in replacement (whether
                  in partial replacement or complete  replacement) of the Engine
                  Maintenance  Contract  without  the prior  written  consent of
                  Mortgagee and Lessor;  PROVIDED,  HOWEVER, that the consent of
                  Lessor shall not be required  under this clause (d) so long as
                  Mortgagee  has not given notice to Lessee that the Lien of the
                  Trust Indenture has been duly discharged. For the avoidance of
                  doubt, any  reduction  to or delay in any  payment  obligation
                  under any Engine Maintenance Contract shall be material except
                  any such change, reduction or delay which is effected pursuant
                  to Section 8.4.4(g).

                           (e)      To  monitor   the   maintenance   activities
                  contemplated by the Engine Maintenance Contract, (i) not later
                  than the fifteenth  day of each  calendar  month, Lessee shall
                  provide to the  Consultant  the Report  required by  paragraph
                  1(e) of the  Maintenance  Schedule with respect to the use and
                  operation of each Engine in the immediately  preceding  month,
                  (ii) not later than the  twenty-fifth day of each month Lessee
                  shall cause the Engine  Maintenance  Contractor to provide the
                  Consultant  with a report that  indicates  the current  credit
                  balance  for  each   Engine   under  the   applicable   Engine
                  Maintenance  Contract,  and (iii) not later than the twentieth
                  day after  December 31, 2005 and not later  than the twentieth
                  day after every second year  thereafter  commencing with 2007,
                  Lessee shall provide to the  Consultant a certificate  from an
                  executive  officer of Lessee  certifying,  as of the  relevant
                  date, (A) that all of the  assumptions  set forth in  Schedule
                  8.4.4(e)  to  Amendment   No.  1  to  Lease   Agreement   (the
                  "ASSUMPTIONS")  continue  to be correct  and  accurate  in all
                  respects ( or, if the  Assumptions  are no longer  correct and
                  accurate,  certifying as to the ways in which the  Assumptions
                  have changed) and (B) that the maintenance  programs  provided
                  under the Engine Maintenance  Contract have met the Objectives
                  (or, if they have not met the Objectives, certifying as to the
                  ways in which the Objectives have not been met).

                           (f)      If the  information  provided to or obtained
                  by the Consultant  indicates that the Objectives are not being
                  met,  including  without  limitation, due to a failure to meet
                  the obligations under the Engine Maintenance Contract, or that
                  there has been either a change in any material  respect in the
                  Assumptions  upon which the  Engine  Maintenance  Contract  is
                  based or any material  variance in meeting the Objectives, the
                  Consultant,   after   consultation   with  the  1998  Class  A
                  Certificateholders  as Consultant can reasonably  identify and
                  after  reasonable  discussions and  consultation  with Lessee,
                  shall by written  notice to Lessee  (x) advise  Lessee of such
                  non-compliance,  failure  to  meet  its  obligations,  changed
                  circumstances   or  a  material   variance,  and  (y)  specify
                  reasonable  actions or adjustments  respecting  maintenance in
                  order to  comply  with its  obligations  contemplated  by this
                  Section and the  Maintenance  Schedule.  Lessee  shall have 30
                  days from the  delivery  of such  notice  to  comply  with the
                  obligations  specified in the Consultant's notice, which shall
                  be implemented as provided in clause (g) hereof.

                                      -28-
<PAGE>

                           (g)      Beginning  December  31,  2005 and every two
                  years thereafter the Consultant will review the Assumptions to
                  determine   whether  changes  in  the  Assumptions  that  have
                  occurred, or are reasonably expected to occur, require changes
                  to the  remaining  life  limits  and/or  rate per flight  hour
                  amounts so that the Objectives  can be met.  Within 20 days of
                  December  31, 2005  and within  20 days of every  second  year
                  thereafter  commencing  with  December 31, 2007,  Lessee shall
                  provide to the  Consultant the  maintenance  conditions of the
                  Engines and Airframe and the variance of such  conditions from
                  the  Objectives  (the  "VARIANCE"),  together  with the engine
                  overhaul  costs  pursuant  to  the  then  Engine   Maintenance
                  Contract and the  contractor  quotes or cost estimates for the
                  next D-checks  (including  landing gear, if necessary) for the
                  Airframe and the  then-applicable  values for the Assumptions.
                  If the Variance is more than 0.5% of the time remaining  under
                  either of the two Objectives or there are material differences
                  for the future  periods in the  Assumptions,  then Lessee will
                  propose to the  Consultant  an  increase  or  decrease  in the
                  monthly   payments   per   engine   flight   hour   under  the
                  then-applicable Engine Maintenance Contract so as to eliminate
                  such Variance over the next twelve (12) months,  giving effect
                  to Assumptions  then applicable for future  periods;  PROVIDED
                  that the Variance will be eliminated over a period longer than
                  twelve (12) months, but not to exceed twenty-four (24) months,
                  if such  increase in payments  per flight hour would have been
                  more than 110% of the payments per flight hour  applicable for
                  the month ended December 31, 2005, or the month ended December
                  31 of every second year  thereafter  commencing  with December
                  31, 2007.

                           (h)      Lessee shall pay, promptly upon demand,  all
                  reasonable  costs and expenses of the Consultant in connection
                  with  Lessee's   compliance   with  this  Section  8.4.4  (the
                  "CONSULTANT  COSTS AND  EXPENSES").  The Consultant  Costs and
                  Expenses  shall be paid by  Lessee  directly  and shall not be
                  satisfied from any amounts  otherwise paid by Lessee under the
                  Operative Agreements.

                           (i)      Lessee's  obligation  to maintain the Engine
                  Maintenance  Contract  will end on the earlier to occur of (i)
                  the date that the aggregate amount outstanding on the Series A
                  Equipment  Notes for the Aircraft is $30 million or less,  and
                  (ii)  the  date  that  the  senior  unsecured  debt of  Lessee
                  achieves the Required Rating, in either case, however, only if
                  (x) the Aircraft and the Other 1998 EETC  Aircraft are then in
                  compliance  with the  provisions  of  Section  8.1 and of this
                  section  8.4.4  or (y)  Lessee  is no  longer  subject  to any
                  obligation  to maintain the Engine  Maintenance  Contract with
                  respect to such Other 1998 EETC Aircraft.

                           (j)      Notwithstanding  anything  to  the  contrary
                  contained  herein,  (i) Lessee shall not take the Aircraft out
                  of use or  operation  other  than  for  required  maintenance,
                  unless at such time the Objectives  have been met, (ii) at all
                  times  while the  Aircraft  is taken  out of use or  operation
                  Lessee shall comply with the requirements set forth in Section
                  8.1 and this Section 8.4.4, and (iii) this Section 8.4.4 shall
                  in no way result in any adverse change to Lessee's obligations
                  to maintain the Aircraft under the Original Lease.

                                      -29-
<PAGE>

                           (k)      Notwithstanding  anything  to  the  contrary
                  herein,  this Section 8.4.4 is intended to supplement Lessee's
                  maintenance  obligations  set forth in Section 8.1 and Annex C
                  and the return  conditions set forth in Section 5 and Annex B;
                  PROVIDED,  HOWEVER,  if any of the  obligations,  standards or
                  requirements  set forth in this Section 8.4.4 conflict with or
                  are  inconsistent  with Section 8.1 or Annex C or Section 5 or
                  Annex B and such conflict or inconsistency  (i) results in any
                  adverse  effect on Lessor's  rights with respect to any of the
                  maintenance  provisions contained in Section 8.1 or Annex C or
                  any of the return conditions contained in Section 5 or Annex B
                  or (ii) reduces any of Lessee's obligations or requirements or
                  makes any of the standards less restrictive  under Section 8.1
                  or Annex C or Section 5 or Annex B, then Lessee  shall  comply
                  with the relevant obligation(s), standard(s) or requirement(s)
                  set forth in the applicable provisions of Section 8.1 or Annex
                  C or Section 5 or Annex B, as the case may be.

                  8.4.5    BANK LENDER COVENANTS

                  If, before the occurrence of an Action Event, the Bank Lenders
         waive or amend Sections 6.1,6.4,6.7, 6.9(A), 6.14 or 6.16 of the Credit
         Agreement  (and  the  definitions  relating  thereto),   then  Sections
         8.4.1(b) - (f) (and the definitions  relating  thereto) shall be deemed
         to have been  waived or amended in the same  manner,  so long as Lessee
         has complied with Section 8.4.2; PROVIDED, HOWEVER, that the provisions
         of  Sections  8.4.1(b) - (f) shall not be amended, waived or  otherwise
         affected  by any  amendments  or  waivers  that  were  made or given in
         anticipation  of or in connection with any payment in full (or securing
         by collateral consisting of cash, cash equivalents,  letters of credit,
         surety bonds or the equivalent thereof) of the obligations owed to such
         Bank Lenders.

                  SECTION 6. AMENDMENTS TO SECTION 9 OF THE ORIGINAL LEASE.  (A)
Section  9.2.2(b)(i)  of the Original  Lease is hereby  amended by deleting such
section in its entirety and substituting the following in lieu thereof:

                  (i)      all unpaid Basic Rent or Enhancement  Rent due at any
         time prior to such  Termination  Date but  excluding  any Basic Rent or
         Enhancement Rent payable on such Termination Date; plus

                  (B)      Section  9.2.2(c)(ii) of the Original Lease is hereby
amended by deleting such section in its entirety and  substituting the following
in lieu thereof:

                  (ii)     the  obligation  of  Lessee  to  pay  Basic  Rent  or
         Enhancement  Rent on or after the Payment Date with  reference to which
         Termination  Value  is  computed,  shall  cease,  and the  Term for the
         Aircraft shall end effective as of the date of such sale.

                  (C)      Section  9.3(a)(iii)(1)  of  the  Original  Lease  is
hereby  amended by deleting  such section in its entirety and  substituting  the
following in lieu hereof:

                  (1)      all unpaid Basic Rent and Enhancement Rent due at any
         time prior to such  Termination  Date (or any later date  agreed by the
         parties pursuant to Section  9.2.2(d)) but excluding any Basic Rent and
         Enhancement  Rent payable on such  Termination  Date (or any later date
         agreed by the parties pursuant to Section 9.2.2(d)); plus

                                      -30-
<PAGE>

                  (D)      Section  9.3(b)(ii)  of the Original  Lease is hereby
amended by deleting such section in its entirety and  substituting the following
in lieu thereof:

                  (i)      The  obligation  of  Lessee  to pay  Basic  Rent  and
         Enhancement  Rent otherwise due on or after the Termination  Date shall
         cease,  and the Term for the  Aircraft  shall end  effective as of such
         Termination Date.

                  SECTION  7.  AMENDMENTS  TO SECTION 10 OF THE ORIGINAL  LEASE.
(A) Section  10.1.2(a)(i)  of the Original  Lease is hereby  amended by deleting
such clause in its entirety and substituting the following in lieu thereof:

                  (i)      on the Stipulated  Loss Value Date next following the
         earlier of (x) the 180th day  following  the date of the  occurrence of
         such  Event of Loss,  and (y) no later  than  the  third  Business  Day
         following  the receipt of all  insurance  proceeds with respect to such
         occurrence  (but in any event  not  earlier  than the date of  Lessee's
         election  under  Section  10.1.1 to make  payment  under  this  Section
         10.1.2),  Lessee shall pay to Lessor an amount equal to the  Stipulated
         Loss Value of the  Aircraft  as of the Loss  Payment  Date plus (a) all
         unpaid Basic Rent or Enhancement Rent, as the case may be, due prior to
         the  Loss  Payment  Date,  but  excluding  any  unpaid  Basic  Rent  or
         Enhancement  Rent,  as the case may be,  payable on or before such Loss
         Payment  Date,  plus (b) all  amounts  of  Supplemental  Rent due on or
         before the Loss  Payment  Date and any  reasonable  expenses  and costs
         incurred in  connection  with such Event of Loss by Lessor or Mortgagee
         (including with respect to Make-Whole Amount, if any).

                  (B)      Section  10.1.2(b)  of the  Original  Lease is hereby
amended by deleting such clause in its entirety and  substituting  the following
in lieu thereof:

                  (b)      Upon payment in full of all amounts  described in the
         foregoing paragraph (a), (i) the obligation of Lessee to pay Basic Rent
         and  Enhancement  Rent  hereunder  with respect to the  Aircraft  shall
         terminate,  (ii) the Term for the  Aircraft  shall end and (iii) Lessor
         will transfer the Aircraft to Lessee,  as-is and where-is,  and subject
         to any insurer's salvage rights,  but otherwise in the manner described
         in Section 4.5.

                  (C)      Section  10.5.3(a)  of the  Original  Lease is hereby
amended by  deleting  the words ", except  with  respect to  Excluded  Payments"
therefrom.

                  (D)      Section 10.6 of the Original  Lease is hereby amended
by deleting such section in its entirety and  substituting the following in lieu
thereof:

                  10.6     REQUISITION OF AIRCRAFT FOR USE

                  If  any  Government  Entity  shall  requisition  for  use  the
         Airframe and the Engines or engines  installed  thereon  (including the
         U.S.  Government pursuant to CRAF), and if the same does not constitute
         an Event of Loss,  Lessee shall promptly notify Lessor and Mortgagee of
         such requisition and all of Lessee's  obligations  under this Agreement
         shall  continue  to the  same  extent  as if such  requisition  had not
         occurred;  PROVIDED,  HOWEVER,  that if the  Airframe  and  Engines  or
         engines  installed  thereon are not returned to Lessor by Lessee at the
         end of the Term or within 180 days thereafter, and Lessor, upon notice

                                      -31-
<PAGE>

         given not less than 30 days nor more  than 120 days  before  the end of
         the Term,  shall have  elected to treat such event as  constituting  an
         Event of Loss with respect to the Aircraft, Lessee shall then be deemed
         to have made the election  set forth in Section  10.1.2 with the effect
         that Lessee shall be obligated to pay the Stipulated Loss Value and all
         other amounts  payable  pursuant to Section  10.1.2 with respect to the
         Aircraft as if an Event of Loss had occurred as of the end of the Term.
         If Lessor  shall not have  elected  to treat  such event as an Event of
         Loss,  Lessee  shall be obligated to return the Airframe and Engines or
         engines to Lessor pursuant to, and in all other respects to comply with
         the  provisions  of,  Section  5  promptly  upon  their  return by such
         Government  Entity, and Lessee shall pay to Lessor upon such return for
         each day  after  the end of the Term to but  excluding  the day of such
         return,  up to a maximum of 30 days,  an amount  equal to (i) the daily
         equivalent  rate equal to average  daily  Basic Rent  payable by Lessor
         during  the Base  Lease  Term plus (ii) the  daily  equivalent  rate of
         Enhancement  Rent, if applicable at the time,  payable during the final
         Payment Period.

                  SECTION 8.  AMENDMENT  TO SECTION  12 OF THE  ORIGINAL  LEASE.
Section 12 of the Original  Lease is hereby  amended by adding the  following to
the end of such Section 12 as a new clause (g):

                  (g)      In addition to any inspection as provided  hereunder,
         an aviation professional  designated by Mortgagee and Lessor and chosen
         from the list attached to Amendment No.1 to Lease Agreement in Schedule
         12(g) (the "SPECIAL  INSPECTOR") may, at the times and intervals and on
         the other  terms and  conditions  set forth in this  Section  12 as are
         provided with respect to the Inspecting Parties,  inspect the Aircraft,
         the  Airframe  and  the  Engines  (including  without  limitation,  the
         Aircraft  Documents),  make  copies  of  such  Aircraft  Documents  not
         reasonably deemed  confidential by Lessee or such Permitted  Sublessee,
         and share the results of such inspection and such copies with Mortgagee
         and  Lessor,  and such  Special  Inspector  shall  have such  rights to
         information as the other Inspecting Parties have under this Section 12;
         PROVIDED,  HOWEVER,  that Lessor shall not have any rights with respect
         to the  designation  of the Special  Inspector  (and,  therefore,  only
         Mortgagee  shall have rights  with  respect to the  designation  of the
         Special  Inspector) so long as Mortgagee has not given notice to Lessee
         that the Lien of the Trust Indenture has been duly discharged.

                  SECTION  9.  AMENDMENTS  TO SECTION 13 OF THE ORIGINAL  LEASE.
(A) Section  13.2.1 of the Original  Lease is hereby amended by adding the words
"Subject to the provisions of Section 8.4.1 (d),"  in front of the first word of
such section.

                  (B)      Section 13.3 of the Original  Lease is hereby amended
by deleting the words "(other than Excluded Payments)" therefrom.

                  SECTION  10.  AMENDMENTS TO SECTION 14 OF THE ORIGINAL  LEASE.
(A) Section 14 of the Original  Lease is hereby  amended as follows:  The eighth
line of Section 14 is amended  by adding  the  phrase  "within  any cure  period
provided for herein with respect to such matter" after the word  "remedied"  and
before the ":".

                                      -32-
<PAGE>

                  (B)      Section 14.1 of the Original  Lease is hereby amended
by deleting such section in its entirety and  substituting the following in lieu
thereof:

                  14.1     PAYMENTS

                  Lessee shall fail to pay any amount of Basic Rent,  Stipulated
         Loss Value,  Termination  Value or  Enhancement  Rent when due and such
         failure shall  continue for ten (10) Business Days after the same shall
         have  become  due; or Lessee  shall fail to pay any  Supplemental  Rent
         (other than  Stipulated  Loss Value or Termination  Value) when due and
         such failure shall  continue for ten (10) Business  Days from and after
         the date of any written  notice to Lessee from Lessor or  Mortgagee  of
         the failure to make such payment when due.

                  (C)      Sections  14.3 and  14.4 of the  Original  Lease  are
hereby amended by deleting such sections in their entirety and  substituting the
following Sections 14.3 and 14.4 in lieu thereof:

                  14.3     OTHER COVENANTS

                  (a)      If Lessee  shall fail to observe or perform (or cause
         to be  observed  and  performed)  in any  material  respect  any  other
         covenant,  agreement  or  obligation  set forth  herein or in any other
         Lessee Operative  Agreement  (other than the covenants,  agreements and
         obligations set forth in Sections 8.4.1, 8.4.2, 8.4.3, 8.4.4 and 12(g))
         and such failure continues  unremedied for a period of 30 days from and
         after the date of  written  notice  thereof  to Lessee  from  Lessor or
         Mortgagee, unless such failure is capable of being corrected and Lessee
         shall be diligently  proceeding to correct such failure,  in which case
         there shall be no Lease Event of Default  unless and until such failure
         shall  continue  unremedied  for a period of 120 days after  receipt of
         such notice.

                  (b)      If Parent or Polar  shall  fail to observe or perform
         (or cause to be observed and  performed)  in any  material  respect any
         covenant, agreement or obligation set forth in the Parent Guaranty, the
         Parent  Security  Agreement,  the Polar  Guaranty or the Polar Security
         Agreement,  and such failure  continues  unremedied  for a period of 30
         days from and after the date of written  notice  thereof to Lessee from
         Lessor or Mortgagee,  unless such failure is capable of being corrected
         and Polar or Parent, as applicable,  shall be diligently  proceeding to
         correct  such  failure,  in which case there shall be no Lease Event of
         Default unless and until such failure shall  continue  unremedied for a
         period of 120 days after receipt of such notice.

                  14.4     REPRESENTATIONS AND WARRANTIES

                  (a)      Any representation or warranty made by Lessee herein,
         in  the  Participation  Agreement  or in  any  other  Lessee  Operative
         Agreement  or in any  certificate  required to be  delivered  by Lessee
         pursuant thereto (other than the representations and warranties made by
         Lessee in clauses (x), (xi), (xii),  (xiii) and (xv) in Section 7(a) of
         the  Restructure  Agreement)  (i) shall  prove to have  been  untrue or
         inaccurate  in any  material  respect  as of the date  made,  (ii) such
         untrue or inaccurate representation or warranty is material at the time
         in question and (iii) the same shall  remain  uncured (to the extent of
         the adverse im-

                                      -33-
<PAGE>

         pact of such  incorrectness  on the  interest  of the  Participants  or
         Lessor)  for a period of 30 days  from and  after  the date of  written
         notice thereof to Lessee from Lessor or Mortgagee.

                  (b)      Any  representation  or  warranty  made by  Parent or
         Polar, in the Parent Guaranty, the Parent Security Agreement, the Polar
         Guaranty or the Polar Security Agreement,  (i) shall prove to have been
         untrue or inaccurate in any material  respect as of the date made, (ii)
         such untrue or inaccurate representation or warranty is material at the
         time in question and (iii) the same shall remain uncured (to the extent
         of the  adverse  impact of such  incorrectness  on the  interest of the
         Participants or Lessor) for a period of 30 days from and after the date
         of written notice thereof to Lessee from Lessor or Mortgagee.

                  (D)      Section 14 of the Original Lease is hereby amended by
         adding the following to the end of Section 14.5 as new Sections 14.5(d)
         through (i):

                  (d)      Parent  shall  consent to the  appointment  of or the
         taking of possession by a receiver,  trustee or liquidator of itself or
         of substantially all of its property,  or Parent shall admit in writing
         its inability to pay its debts  generally as they come due, or does not
         pay its debts  generally  as they  become  due or shall  make a general
         assignment  for the  benefit  of  creditors,  or  Parent  shall  file a
         voluntary  petition in bankruptcy or a voluntary  petition or an answer
         seeking reorganization, liquidation or other relief in a case under any
         bankruptcy Laws or other insolvency Laws (as in effect at such time) or
         an answer  admitting  the  material  allegations  of a  petition  filed
         against  Parent  in any such  case,  or  Parent  shall  seek  relief by
         voluntary  petition,  answer or consent,  under the  provisions  of any
         other bankruptcy or other similar Law providing for the  reorganization
         or winding-up of  corporations  (as in effect at such time),  or Parent
         shall seek an agreement, composition,  extension or adjustment with its
         creditors under such Laws, or Parent's board of directors shall adopt a
         resolution authorizing any of the foregoing; or

                  (e)      an order,  judgment or decree shall be entered by any
         court of  competent  jurisdiction  appointing,  without  the consent of
         Parent, a receiver, trustee or liquidator of Parent or of substantially
         all of its  property,  or  substantially  all of the property of Parent
         shall be  sequestered,  and any  such  order,  judgment  or  decree  of
         appointment  or  sequestration   shall  remain  in  force  undismissed,
         unstayed and  unvacated for a period of 90 days after the date of entry
         thereof; or

                  (f)      a  petition  against  Parent  in  a  case  under  any
         bankruptcy Laws or other insolvency Laws (as in effect at such time) is
         filed and not withdrawn or dismissed within 90 days thereafter,  or if,
         under  the  provisions  of any  Law  providing  for  reorganization  or
         winding-up  of  corporations  which may apply to  Parent,  any court of
         competent  jurisdiction  assumes  jurisdiction,  custody  or control of
         Parent or of substantially  all of its property and such  jurisdiction,
         custody  or  control  remains  in force  unrelinquished,  unstayed  and
         unterminated for a period of 90 days.

                                      -34-
<PAGE>

                  (g)      Polar  shall  consent  to the  appointment  of or the
         taking of possession by a receiver,  trustee or liquidator of itself or
         of substantially  all of its property,  or Polar shall admit in writing
         its inability to pay its debts  generally as they come due, or does not
         pay its  debts  generally  as they  become  due or Polar  shall  make a
         general assignment for the benefit of creditors,  or Polar shall file a
         voluntary  petition in bankruptcy or a voluntary  petition or an answer
         seeking reorganization, liquidation or other relief in a case under any
         bankruptcy Laws or other insolvency Laws (as in effect at such time) or
         an answer  admitting  the  material  allegations  of a  petition  filed
         against Polar in any such case, or Polar shall seek relief by voluntary
         petition,  answer  or  consent,  under  the  provisions  of  any  other
         bankruptcy or other similar Law  providing  for the  reorganization  or
         winding-up of corporations  (as in effect at such time), or Polar shall
         seek an  agreement,  composition,  extension  or  adjustment  with  its
         creditors  under such Laws, or Polar's board of directors shall adopt a
         resolution authorizing any of the foregoing; or

                  (h)      an order,  judgment or decree shall be entered by any
         court of  competent  jurisdiction  appointing,  without  the consent of
         Polar, a receiver,  trustee or liquidator of Polar or of  substantially
         all of its  property,  or  substantially  all of the  property of Polar
         shall be  sequestered,  and any  such  order,  judgment  or  decree  of
         appointment  or  sequestration   shall  remain  in  force  undismissed,
         unstayed and  unvacated for a period of 90 days after the date of entry
         thereof; or

                  (i)      a  petition   against  Polar  in  a  case  under  any
         bankruptcy Laws or other insolvency Laws (as in effect at such time) is
         filed and not withdrawn or dismissed within 90 days thereafter,  or if,
         under  the  provisions  of any  Law  providing  for  reorganization  or
         winding-up  of  corporations  which may  apply to  Polar,  any court of
         competent  jurisdiction  assumes  jurisdiction,  custody  or control of
         Polar or of  substantially  all of its property and such  jurisdiction,
         custody  or  control  remains  in force  unrelinquished,  unstayed  and
         unterminated for a period of 90 days.

                  (E)      Section 14 of the Original Lease is hereby amended by
adding the following to the end of such Section 14 as new Sections  14.6,  14.7,
14.8 and 14.9:

                  14.6     CROSS DEFAULT

                  Following the Restructure Agreement Execution Date, (a) Lessee
         shall fail to pay when due, or within any applicable grace period,  any
         obligation under the GECAS Documents,  the Boeing  Documents,  the Bank
         Lender  Documents or the Other EETC  Transaction  Documents  (an "OTHER
         CREDITOR PAYMENT DEFAULT"), (b) Lessee shall fail to observe or perform
         any term, covenant or agreement  contained in the GECAS Documents,  the
         Boeing  Documents,   the  Bank  Lender  Documents  or  the  Other  EETC
         Transaction Documents for such period of time as would permit (assuming
         the giving  of appropriate  notice if required) GECAS, Boeing, the Bank
         Lenders or any Other EETC Transaction Person to accelerate the maturity
         of any  indebtedness  of Lessee  relating  thereto or to terminate  the
         lease relating thereto (an "OTHER CREDITOR NON-PAYMENT DEFAULT") or (c)
         there is an  acceleration of obligations  exceeding  $50,000,000 in the
         aggregate  owed  to  one  or   more  Other  Accelerated  Creditors  (an
         "ACCELERATION");  PROVIDED,  HOWEVER,  that no default under subsection
         7.2(i) and 7.2(ii) of the Credit Agreement (or any similar provi-

                                      -35-
<PAGE>

         sion  subsequently  incorporated  therein or included in any  documents
         executed in connection with a Bank Debt Refinancing) based on a default
         under an agreement with an Other Accelerated  Creditor shall constitute
         a Lease Event of Default  under this Section  14.6,  unless there is an
         acceleration of obligations  exceeding $50,000,000 with respect to such
         default or there is an acceleration of default by GECAS,  Boeing or the
         Bank Lenders as a result of such default.

                  14.7     MAINTENANCE CONTRACTS

                  If (a) Lessee fails or refuses to comply with the  obligations
         in the Consultant's notice referred to in Section 8.4.4(f),  (b) Lessee
         defaults  on  any  of  its  material   obligations   under  any  Engine
         Maintenance  Contract,   and  (c)  any  Engine  Maintenance  Contractor
         breaches any of its material  obligations under any Engine  Maintenance
         Contract,  such breach is not remedied within any cure period set forth
         in such Engine Maintenance  Contract,  and Lessee fails to replace such
         Engine Maintenance  Contractor with another  maintenance  contractor of
         international  stature  acceptable  (and pursuant to a contract that is
         acceptable and an assignment that is acceptable to Lessor and Mortgagee
         and  executed by Lessee) to Lessor and  Mortgagee  within 90 days after
         the date of such breach by Engine Maintenance  Contractor (or, if there
         is a cure period, after the end of such cure period), which replacement
         maintenance  contract  is funded at the same  level as the  maintenance
         contract that it replaced,  and any of the  foregoing  continues for 30
         days after the  earlier of (i) notice  thereof to Lessee from Lessor or
         Mortgagee,  and (ii) knowledge thereof by any executive officer (or any
         officer  with  responsibility  in  relation  to this Lease or any other
         person determining senior management  policies or exercising  executive
         responsibilities) of Lessee;  PROVIDED,  HOWEVER, that Lessor shall not
         have  any  rights  with  respect  to  the   acceptance  of  any  Engine
         Maintenance  Contract  or  Engine  Maintenance  Contractor  so  long as
         Mortgagee  has not given  notice  to Lessee  that the Lien of the Trust
         Indenture has been duly discharged.

                  14.8     SPECIAL COVENANT DEFAULT

                  Subject  to  Section  8.4.5  hereof,  if Lessee  shall fail to
         observe or  perform  (or cause to be  observed  and  performed)  in any
         material  respect any covenant,  agreement or  obligation  set forth in
         Sections 8.4.1, 8.4.2, 8.4.3, 8.4.4 or 12(g) and such failure continues
         Unremedied  for a period of 30 days from and after the  earlier  of the
         date of (i) written  notice thereof to Lessee from Lessor or Mortgagee,
         and (ii)  actual  knowledge  thereof by  any executive  officer (or any
         officer  with  responsibility  in  relation  to this Lease or any other
         person determining senior management  policies or exercising  executive
         responsibilities)  of Lessee,  unless such  failure is capable of being
         corrected  and Lessee shall be  diligently  proceeding  to correct such
         failure,  in which case there shall be no Lease Event of Default unless
         and until such failure shall  continue  unremedied  for a period of 120
         days after receipt of the notice referenced in clause (i) hereof or the
         date such officer or other person referred to in clause (ii) has actual
         knowledge, as applicable.

                                      -36-
<PAGE>

                  14.9     SPECIAL REPRESENTATION DEFAULT

                  If any  representation  or  warranty  made by Lessee in clause
         (x),  (xi),  (xii),  (xiii) or (xv) in Section 7(a) in the  Restructure
         Agreement  (i) shall  prove to have been  untrue or  inaccurate  in any
         material  respect as of the date made,  (ii) such untrue or  inaccurate
         representation  or warranty  is  material  at the time in question  and
         (iii) the same  shall  remain  uncured  (to the  extent of the  adverse
         impact of such  incorrectness  on the  interest of Mortgagee or Lessor)
         for  a  period  of 30  days  from  and  after  (1)  with  respect  to a
         representation  or  warranty  which  is  untrue  or  inaccurate  in any
         material  respect due to a  provision  in a  Disclosed  Other  Creditor
         Document  (as  defined  in  clause   (xiii)  of  Section  7(a)  of  the
         Restructure  Agreement)  other than a provision  thereof  which was not
         delivered  to the  Mortgagee,  the date of  written  notice  thereof to
         Lessee  from   Lessor  or   Mortgagee,   or  (2)  with   respect  to  a
         representation  or  warranty  which  is  untrue  or  inaccurate  in any
         material  respect due to a provision  in any Other  Creditor  Amendment
         with respect to a 747-400 Aircraft, a provision in any 747-400 Aircraft
         Agreement,  or a provision in any Other Creditor Amendment with respect
         to a lease, indenture,  mortgage,  contract or other agreement to which
         the Lessee and the Bank  Lenders  are parties  with  respect to 747-200
         Aircraft,  which  is not a  Disclosed  Other  Creditor  Document  (or a
         provision in a Disclosed Other Creditor Document with respect to any of
         the foregoing which was not delivered to the Mortgagee), the earlier of
         (x) the date of  written  notice  thereof  to  Lessee  from  Lessor  or
         Mortgagee,  and (y) the date that any executive officer (or any officer
         with  responsibility  in  relation  to this  Lease or any other  person
         determining   senior  management   policies  or  exercising   executive
         responsibilities)  of Lessee obtains actual knowledge of such provision
         that has resulted in such  representation  or warranty  being untrue or
         inaccurate,  unless  (in the case of  clause (1) or (2))  such  adverse
         impact is capable of being  corrected  and Lessee  shall be  diligently
         proceeding to correct such adverse impact, in which case there shall be
         no Lease Event of Default  under this  Section 14.9 as a result of such
         representation  or warranty being untrue or inaccurate unless and until
         such adverse impact shall continue  unremedied for a period of 120 days
         after,  in the case of clause (1), the giving of the notice  referenced
         in clause (1) hereof or, in the case of clause (2),  the earlier of the
         dates referred to in clauses (x) and (y) of such clause (2).

                  SECTION  11.  AMENDMENTS TO SECTION 15 OF THE ORIGINAL  LEASE.
(A) Section 15.1.1 of the Original Lease is hereby amended by deleting the words
"or any Renewal Lease Term."

                  (B)      The eleventh  line of Section  15.1.3 of the Original
Lease is hereby amended by deleting the words "or Renewal Rent" and substituting
the words "and Enhancement Rent" in their stead.

                  (C)      Section  15.1.3(a) is hereby  amended by deleting the
words "or Renewal Rent" and  substituting  the words "and  Enhancement  Rent" in
their stead.

                  (D)      Section  15.1.3(b)(i)  is hereby  amended by deleting
such clause in its entirety and substituting the following in lieu thereof:

                                      -37-
<PAGE>

                  (i)      an amount equal to the excess, if any, of the present
         value,  computed as of the Stipulated Loss Value Date specified in such
         notice,  discounted  to such date at a rate per annum equal to the Debt
         Rate, compounded semiannually, of all unpaid Basic Rent during the then
         remaining  portion of the Base Lease Term,  over the Fair Market Rental
         Value of the Aircraft for the remainder of the Term, after  discounting
         such Fair Market  Rental Value to its then present value (at a rate per
         annum  equal  to the  Debt  Rate,  compounded  semiannually)  as of the
         Stipulated Loss Value Date specified in such notice, or

                  (E)      Line 10 of Section  15.1.4 and Section  15.1.4(a) are
hereby  amended by deleting the words "or Renewal  Rent," and  substituting  the
words "and Enhancement Rent" in their stead.

                  (F)      Section 15 of the Original Lease is hereby amended by
adding the following to the end of such Section 15 as a new Section 15.1.7:

                  15.1.7   SPECIFIC REMEDIES UPON A CROSS DEFAULT

                  (a)      Notwithstanding  the  foregoing, if  a Lease Event of
         Default occurs due to a Cross Default  pursuant to Section 14.6 (and so
         long  as  the  term,  covenant  or  agreement  the   non-observance  or
         non-performance  of which  gave  rise to the  Lease  Event  of  Default
         pursuant  to Section  14.6 is not also a term,  covenant  or  agreement
         under the Lessee Operative Agreements that if not observed or performed
         would  constitute  a Lease  Event of  Default  other than  pursuant  to
         Section  14.6),  Lessor may exercise its rights and remedies under this
         Lease only after the earliest of (i) 30 days  following the  occurrence
         of  an  Other  Creditor  Payment  Default  or  60  days  following  the
         occurrence of an Other Creditor NonPayment  Default,  (ii) acceleration
         of the  obligation  that is the subject of the Other  Creditor  Payment
         Default  or  the  Other  Creditor  Non-Payment  Default  and  (iii)  an
         Acceleration.

                  (b)      If, before the occurrence of an Action Event,  GECAS,
         Boeing,  any Other EETC  Transaction  Person,  the Bank  Lenders or any
         Other Accelerated  Creditor (i) waive an Other Creditor Payment Default
         or an Other Creditor Non-Payment Default under the GECAS Documents, the
         Boeing  Documents,  the Other EETC  Transaction  Documents  or the Bank
         Lender Documents,  respectively,  or cancel or rescind the Acceleration
         or (ii)  amend  the  provisions  of the  GECAS  Documents,  the  Boeing
         Documents,  the Bank  Lender  Documents,  the  Other  EETC  Transaction
         Documents or Other  Accelerated  Creditor  Documents which gave rise to
         the Other Creditor Payment Default,  Other Creditor Non-Payment Default
         or Acceleration such that the Other Creditor Payment Default, the Other
         Creditor Non-Payment Default or the Acceleration no longer exists, then
         the Cross Default that would otherwise have occurred shall be deemed to
         have been waived on the same terms and  conditions,  so long as (x) the
         provision of the GECAS Documents, the Boeing Documents, the Bank Lender
         Documents,   the  Other  EETC   Transaction   Documents  or  the  Other
         Accelerated  Creditor  Documents  which was so waived or amended is not
         also a  provision  under the Lessee  Operative  Agreements  that if not
         waived or amended would  constitute a Lease Event of Default other than
         pursuant  to Section  14.6, and (y) Lessee has  complied  with  Section
         8.4.2 hereof.

                                      -38-
<PAGE>

                  SECTION  12.  AMENDMENT TO SECTION 16 OF THE  ORIGINAL  LEASE.
Section  16(c) of the  Original  Lease is hereby  amended by deleting  the words
"Renewal Rent" and substituting the words "Enhancement Rent" in their stead.

                  SECTION  13.  AMENDMENT TO SECTION 17 OF THE  ORIGINAL  LEASE.
Section  17 of the  Original  Lease  is  hereby  deleted  and the  following  is
substituted in lieu thereof:

                  SECTION  17. PURCHASE OPTIONS

                  17.1     PRELIMINARY NOTICES

                  At least  180 days  prior to the  Scheduled  Expiration  Date,
         Lessee may provide  written  notice to Lessor that Lessee may  exercise
         the option to purchase the Aircraft on the  Scheduled  Expiration  Date
         pursuant to Section 17.3.1(a). Any such notice (a "PRELIMINARY NOTICE")
         shall not be binding on Lessee. Promptly upon delivery of a Preliminary
         Notice,  Lessee and Lessor shall  determine the Fair Market Sales Value
         under Section 17.3.2.  If within the 35 days allowed for  determination
         of the Fair Market  Sales  Value,  the parties  have not  succeeded  in
         reaching agreement with respect to such Fair Market Sales Value, Lessee
         and Lessor shall commence the appraisal process provided for in Section
         17.4,  and shall be  subject  to the  timing  constraints  set forth in
         Section 17.4.

                  17.2     [Intentionally Omitted]

                  17.3     PURCHASE OPTIONS

                  17.3.1   ELECTION

                  (a)      Subject to the terms and  conditions  of this Section
         17.3. Lessee or its designee may elect to purchase the Aircraft, on the
         Purchase Date, at a purchase price equal to the Fair Market Sales Value
         of the Aircraft (or, if greater,  the Termination Value) computed as of
         the Purchase Date.

                  (b)      Lessee  may  exercise  its  option  to  purchase  the
         Aircraft  by  delivery  of a written  notice (a  "PURCHASE  NOTICE") to
         Lessor not less than 90 days prior to the Scheduled Expiration Date.

                  (c)      Notwithstanding  anything  to the  contrary  in  this
         Section 17:

                                    (i)      Any Purchase  Notice under  Section
                           17.3.1(b) shall be irrevocable  and shall  constitute
                           an unconditional obligation of Lessee to purchase the
                           Aircraft under this Section 17.3.

                                    (ii)     No Purchase  Notice  under  Section
                           17.3.1(b)  shall be  binding  on  Lessor if any Lease
                           Event of  Default  or  Specified  Default  shall have
                           occurred and be continuing on the Purchase Date.

                                    (iii)    At  the  election  of  Lessee.  any
                           purchase option described in this Section 17.3 may be
                           exercised by a designee of Lessee.

                                      -39-
<PAGE>

                  17.3.2   DETERMINATION OF FAIR MARKET SALES VALUE

                  The  Fair  Market  Sales  Value  of  the  Aircraft   shall  be
         determined by mutual  agreement of Lessor and Lessee (i) within 35 days
         after  delivery of a Preliminary  Notice,  if a Preliminary  Notice has
         been given, or (ii) if no Preliminary Notice has been given,  within 35
         days after delivery of a Purchase Notice under this Section 17.3 or, in
         either  case,  if they  shall be  unable to agree, by an  appraisal  in
         accordance with Section 17.4.

                  17.3.3   TITLE

                  Upon full and final  payment  by Lessee of (a) the  applicable
         purchase  price of the  Aircraft,  (b) all unpaid  Rent due and payable
         through and including the Purchase  Date, and (c) all other amounts due
         and  payable  by  Lessee  under  this  Lease  and any  other  Operative
         Agreement,  Lessor will transfer to Lessee or to a Person designated by
         Lessee title to the Aircraft in accordance with Section 4.5.

                  17.4     APPRAISALS

                  Whenever  Fair Market  Sales Value of the Aircraft is required
         to be determined by an appraisal under the foregoing provisions of this
         Section  17,  Lessee  and  Lessor  shall,  within  seven days after the
         expiration of the 35-day period referred to in Section 17.3.2,  appoint
         a mutually  satisfactory  Appraiser to complete such  appraisal  within
         seven days of the appointment and the  determination  of such Appraiser
         shall be final and binding on Lessor and  Lessee.  If Lessee and Lessor
         fail to agree  within such 7-day period upon a  satisfactory  Appraiser
         then each shall within one day thereafter  appoint a separate Appraiser
         and such Appraisers shall within seven days of such appointment jointly
         determine  such  amount,  and such jointly  determined  amount shall be
         final and  binding on Lessor  and  Lessee.  If either  Lessee or Lessor
         fails to so  appoint  an  Appraiser,  the  determination  of the single
         Appraiser appointed shall be final and binding on Lessor and Lessee. If
         two   Appraisers   are  appointed  and  within  seven  days  after  the
         appointment  of the latter of such two  Appraisers,  they cannot  agree
         upon such amount, such two Appraisers shall, within two days after such
         seventh  day,  appoint  a third  Appraiser  and  such  amount  shall be
         determined  by such three  Appraisers,  who shall  make their  separate
         appraisals  within seven days  following the  appointment  of the third
         Appraiser,  and any  determination  so made  shall  be  conclusive  and
         binding  upon  Lessor  and  Lessee  in  accordance  with the  following
         provisions  of this Section 17. If three  Appraisers  are appointed and
         the  difference  between the  determination  which is farther  from the
         middle  determination and the middle determination is more than 125% of
         the  difference   between  the  middle   determination  and  the  third
         determination,  then such farther determination shall be excluded,  the
         remaining two  determinations  shall be averaged and such average shall
         be final and binding upon Lessor and Lessee.  Otherwise, the average of
         all three  determinations  shall be final and  binding  upon Lessor and
         Lessee.  If no such  third  Appraiser is  appointed  within  such 2-day
         period,  either Lessor or Lessee may apply to the American  Arbitration
         Association to make such appointment,  and both parties shall cooperate
         in making, and be bound by, such appointment.  The fees and expenses of
         all such  Appraisers  and such  appraisal  procedure  shall be borne by
         Lessee.

                                      -40-
<PAGE>


                  SECTION 14. NEW SECTION 19 TO THE ORIGINAL LEASE. The Original
Lease is hereby amended by adding the following  section after Section 18 of the
Original Lease as a new Section 19:

                  19.      LEASE EVENT OF DEFAULT

                  At any time after the Restructure Agreement Execution Date, if
         a Lease Event of Default occurs (it being  understood that for purposes
         of this Section 19 a Lease Event of Default  pursuant solely to Section
         14.6 shall not take effect until the expiration of the applicable  cure
         periods set forth in clauses (i) and (ii) of Section  15.1.7(a) of this
         Lease (a  "15.1.7(a)(i)  or (ii) EVENT") and that this Section 19 shall
         take effect solely as a result of a 15.1.7(a)(i)  or (ii) Event only if
         such  default  has not  been  waived  prior  to the  expiration  of the
         applicable cure periods), (a) an amount equal to the excess, if any, of
         (x) the Basic  Rent that  would  have been  payable  under  this  Lease
         pursuant to  Schedule 2 of the  Original  Lease  after  January 2, 2003
         (which  amount  shall be  determined  by  reference  to  Schedule 19 of
         Amendment  No. 1 to Lease  Agreement  for  purposes of this  Section 19
         instead of  Schedule 2 to the  Original  Lease) over (y) the sum of (i)
         the Basic Rent that was paid under this Lease pursuant to Schedule 2 to
         Amendment No. 1 to Lease Agreement after January 2, 2003 up to the date
         of such Lease Event of Default plus (ii) the aggregate  amount, if any,
         of Enhancement  Rent that was paid under this Lease prior to such Lease
         Event of Default shall become  immediately due and payable by Lessee to
         Lessor  on the date that  such  Lease  Event of  Default  occurs  (such
         amounts  payable  under  clause  (a),  the  "LEASE  AMENDMENT   DEFAULT
         AMOUNT"),  shall become immediately due and payable by Lessee to Lessor
         on the date that such Lease Event of Default  occurs and (b) regardless
         of whether any amounts are payable under clause (a) of this  paragraph,
         Basic Rent shall  thereafter  be payable under this Lease each month in
         an amount  equal to the higher of (A) the amount due under  Schedule 19
         to Amendment  No. 1 to Lease  Agreement in such month or (B) the amount
         due under  Schedule  2 to  Amendment  No.1 to Lease  Agreement  in such
         month,  and Lessee's  obligation to pay  Enhancement  Rent shall cease.
         Upon the  occurrence  of a Lease Event of Default,  any claim by Lessor
         for any Termination  Value or Stipulated Loss Value payable pursuant to
         this  Lease  shall be  determined,  for any date of  determination,  by
         reference to the higher of (A) the Termination Value or Stipulated Loss
         Value  (as the case may be) as set  forth in  Schedules  3 or 4 (as the
         case  may be) to the  Original  Lease or (B) the  Termination  Value or
         Stipulated  Loss Value (as the case may be) as set forth in Schedules 3
         or 4 (as the case may be) to Amendment  No. 1 to Lease  Agreement.  For
         the  avoidance  of doubt,  if Lessee  pays  Lessor any Lease  Amendment
         Default Amount upon the occurrence of a Lease Event of Default,  Lessee
         shall not be liable for such particular Lease Amendment  Default Amount
         again,  regardless  of the number of times Lessee  defaults  under this
         Lease.  In addition,  for purposes of calculating  the Lease  Amendment
         Default  Amount,  payments made by Lessee under Schedule 2 to Amendment
         No. 1 to Lease  Agreement  as Basic Rent shall be applied  against  the
         payments of Basic Rent which are set forth on Schedule 19 to  Amendment
         No. 1 to Lease Agreement in the order received. Nothing in this Section
         19 is intended to or shall limit or  prejudice  in any manner or to any
         extent the right of Lessor or Mortgagee, as applicable, to exercise all
         rights and  remedies  that are  available  to Lessor or  Mortgagee,  as
         applicable,  under  this  Lease  or  under  applicable  law  after  the
         occurrence and during the continuance of a Lease Event of Default.

                                      -41-
<PAGE>


                  SECTION 15.  AMENDMENT  TO  SCHEDULE 1 - CERTAIN  TERMS TO THE
ORIGINAL  LEASE.  Schedule  1 - Certain  Terms to the  Original  Lease is hereby
deleted in its entirety and  Schedule 1 Certain  Terms  attached to Exhibit A to
this Amendment is hereby substituted in lieu thereof.

                  SECTION 16. AMENDMENT TO ANNEX B TO THE ORIGINAL LEASE.  Annex
B to the Original  Lease is hereby  amended by deleting the words "or the end of
any Renewal Lease Term" from the fIrst paragraph thereof.

                  SECTION 17. WAIVER.  Lessor hereby waives the Specified  Prior
Defaults and agrees that Lessor will not exercise  remedies  solely by reason of
or in respect of any Specified Prior Default. For the avoidance of doubt, Lessee
acknowledges  that the  foregoing  waiver  does not extend to (i) any failure by
Lessee  to pay as and  when  due  Basic  Rent,  Supplemental  Rent or any  other
obligation under the Lease after giving effect to this Amendment (other than the
failure to make the Basic Rent  payments as and when due on February 2, 2004 and
March 2, 2004),  including without limitation,  any failure by Lessee to pay the
amounts required to be paid pursuant to Section 19 of the Lease as added by this
Amendment,  (ii) any  failure  by  Lessee to  deliver  financial  statements  as
provided in Section 8.2.1 of the Lease after giving effect to this  Amendment or
(iii) any event or circumstance  that constitutes a Lease Event of Default after
giving effect to this  Amendment  (other than the failure to make the Basic Rent
payments as and when due on  February 2, 2004 and March 2, 2004),  if such event
or  circumstance  continues to exist after the Restructure  Agreement  Execution
Date  (other  than the  failure  to make the  Basic  Rent  Payments  when due on
February 2, 2004 and March 2, 2004).

                  SECTION 18. LEASE.  Except as amended by this  Amendment,  the
Original Lease remains unchanged and in full force and effect.

                  SECTION 19. LESSOR  REPRESENTATION.  Lessor  confirms that the
Owner  Participant  has instructed  Lessor to execute and deliver this Amendment
No. 1 to Lease Agreement.

                  SECTION 20.  ENTIRETIES.  This Amendment  represents the final
agreement between the parties about the subject matter of this Amendment and may
not be  contradicted by evidence of prior,  contemporaneous,  or subsequent oral
agreements of the parties.  There are no unwritten oral  agreements  between the
parties.  This  Amendment  shall be considered an "Operative  Agreement" as such
term is defined in the Lease.

                  SECTION 21.  COUNTERPARTS.  This  Amendment may be executed by
one of more of the parties hereto in any number of  counterparts,  each of which
shall be deemed to be an original, but all such counterparts when taken together
shall constitute one and the same instrument.  Except as expressly  provided for
herein, no modification,  amendment or waiver of any provision of this Amendment
shall be effective unless such  modification,  amendment or waiver is in writing
and signed by each of the parties hereto.

                  SECTION 22. FURTHER ASSURANCES. Each of the parties shall take
such further action as may be reasonably requested by the other to carry out the
purposes and intent of this  Amendment  and shall refrain from taking any action
which would frustrate the purposes and intent of this Amendment.

                                      -42-
<PAGE>


                  SECTION 23.  SEVERABILITY.  If any provision of this Amendment
is held to be invalid or  unenforceable  in whole or in part, such invalidity or
unenforceability  shall  attach only to such  provision  or part thereof and the
remaining part of such provision hereof shall continue in full force and effect.

                  SECTION 24. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.

                  (a)      THIS  AMENDMENT  SHALL IN ALL RESPECTS BE GOVERNED BY
THE LAWS OF THE STATE  OF NEW  YORK,  INCLUDING  ALL  MATTERS  OF  CONSTRUCTION.
VALIDITY AND PERFORMANCE.  THIS AMENDMENT IS BEING DELIVERED IN THE STATE OF NEW
YORK.

                  (b)      EACH PARTY HERETO HEREBY IRREVOCABLY AGREES,  ACCEPTS
AND SUBMITS ITSELF TO THE NON-EXCLUSIVE  JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED  STATES FOR THE
SOUTHERN  DISTRICT OF NEW YORK,  IN CONNECTION  WITH ANY LEGAL  ACTION,  SUIT OR
PROCEEDING  WITH  RESPECT TO ANY  MATTER  RELATING  TO OR  ARISING  OUT OF OR IN
CONNECTION WITH THIS AMENDMENT.

                  (c)      EACH PARTY  HERETO  HEREBY  IRREVOCABLY  CONSENTS AND
AGREES  THAT THE  SERVICE OF ANY AND ALL LEGAL  PROCESS,  SUMMONS.  NOTICES  AND
DOCUMENTS  OF ANY OF THE  AFOREMENTIONED  COURTS  IN ANY SUCH  SUIT,  ACTION  OR
PROCEEDING  MAY BE MADE BY MAILING  COPIES  THEREOF BY  REGISTERED  OR CERTIFIED
MAIL, POSTAGE PREPAID,  AT THE ADDRESS SET FORTH PURSUANT TO SECTION 18.6 OF THE
LEASE.  EACH PARTY  HERETO  HEREBY  AGREES THAT  SERVICE  UPON IT, OR ANY OF ITS
AGENTS,  IN EACH CASE IN ACCORDANCE WITH THIS SECTION 24, SHALL CONSTITUTE VALID
AND  EFFECTIVE  PERSONAL  SERVICE UPON SUCH PARTY,  AND EACH PARTY HERETO HEREBY
AGREES, THAT THE FAILURE OF ANY OF ITS AGENTS TO GIVE ANY NOTICE OF SUCH SERVICE
TO ANY SUCH  PARTY  SHALL NOT IMPAIR OR AFFECT IN ANY WAY THE  VALIDITY  OF SUCH
SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED IN ANY ACTION OR PROCEEDING BASED
THEREON.

                  (d)      EACH PARTY HERETO HEREBY  IRREVOCABLY  WAIVES, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT,  BY WAY OF MOTION,
AS A DEFENSE OR OTHERWISE,  IN ANY LEGAL ACTION OR PROCEEDING  BROUGHT HEREUNDER
IN ANY OF THE ABOVE-NAMED  COURTS,  THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN
AN  INCONVENIENT  FORUM,  THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR
THAT THIS AMENDMENT OR ANY OTHER  OPERATIVE  AGREEMENT MAY NOT BE ENFORCED IN OR
BY SUCH COURTS.

                  (e)      EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION
BASED UPON OR ARISING OUT OF OR RELATING TO THIS AMENDMENT.

                                      -43-
<PAGE>


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


                                  ATLAS AIR, INC., Lessee

                                  By: /s/ William C. Bradley
                                      --------------------------
                                  Name:   William C. Bradley
                                  Title:  Vice President & Treasurer

                                  WELLS FARGO BANK NORTHWEST,
                                  NATIONAL ASSOCIATION (not in its individual
                                  capacity except as expressly provided herein,
                                  but solely as Owner Trustee), Lessor

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


             [THIS IS A DUPLICATE EXECUTED COUNTERPART, AND IS NOT
             THE ORIGINAL COUNTERPART FOR CHATTEL PAPER PURPOSES.]


                                    [N491MC]
<PAGE>


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

                                ATLAS AIR, INC., Lessee

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

                                WELLS FARGO BANK NORTHWEST,
                                NATIONAL ASSOCIATION (not in its
                                individual capacity except as expressly provided
                                herein, but solely as Owner Trustee), Lessor

                                By:  /s/ Michael D. Hoggan
                                    --------------------------
                                Name:   Michael D. Hoggan
                                Title:  Vice President


             [THIS IS A DUPLICATE EXECUTED COUNTERPART, AND IS NOT
             THE ORIGINAL COUNTERPART FOR CHATTEL PAPER PURPOSES.]


                                    [N491MC]
<PAGE>

                           SCHEDULE TO EXHIBIT 10.4.2

The agreements listed below are substantially identical to this exhibit and are
not being filed separately as exhibits pursuant to instruction 2 to Regulation
S-K, Item 601.

<TABLE>
<CAPTION>
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
PROGRAM YEAR       REGISTRATION NUMBER      RESTRUCTURE AGREEMENT TYPE         LESSOR                          LESSEE


------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
<C>                <C>                      <C>                                <C>                             <C>
1998               N494MC                   Owned Aircraft Restructure         Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1998               N408MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1998               N491MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1998               N492MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1998               N493MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1999               N495MC                   Owned Aircraft Restructure         Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1999               N496MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1999               N497MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1999               N498MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
1999               N499MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
2000               N409MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
2000               N412MC                   Leased Aircraft Restructure        Wells Fargo Bank Northwest,     Atlas Air, Inc.
                                            Agreement                          National Association
------------------ ------------------------ ---------------------------------- ------------------------------- ---------------------
</TABLE>