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                        AIRCRAFT LEASE NOVATION AGREEMENT

                  This AIRCRAFT LEASE NOVATION AGREEMENT (this "Novation") dated
July __, 1997, is by and among (i) FIRST  SECURITY  BANK,  NATIONAL  ASSOCIATION
(formerly  First  Security  Bank  of  Utah,  National  Association),  not in its
individual capacity (except as otherwise specified), but solely as Owner Trustee
(the  "Original  Lessor") under a Trust  Agreement  dated as of November 4, 1993
between itself and Amerilease Capital Corporation Limited  ("Amerilease"),  (ii)
FIRST  SECURITY  BANK,  NATIONAL  ASSOCIATION,  not in its  individual  capacity
(except as otherwise specified),  but solely as Owner Trustee (the "New Lessor")
under a Trust Agreement dated as of June 15, 1997 between itself and KG Aircraft
Leasing Co.,  Ltd.,  (iii) TACA  INTERNATIONAL  AIRLINES,  S.A.,  a  corporation
organized  and  existing  under the laws of El Salvador  ("Sublessor")  and (iv)
WESTERN PACIFIC AIRLINES,  INC., a corporation  organized and existing under the
laws of Delaware ("Sublessee").

                                    RECITALS

     WHEREAS,  Original  Lessor and  Sublessor,  as lessee,  are parties to that
certain  Aircraft Lease Agreement dated as of November 4, 1993 (as  supplemented
and amended,  the "Lease"),  which together with Lease  Supplement No. 1 thereto
dated  November 10, 1993 and the Mortgage  and  Security  Agreement  dated as of
November 4, 1993 (the  "Mortgage")  between  Lessor and ING Lease  International
Equipment  Finance B.V.  (formerly  Internationale  Nederlanden  Aviation  Lease
B.V.),  as Agent for itself and each of the Lenders  under the Credit  Agreement
described  therein (the  "Mortgagee")  were  recorded by the FAA on November 12,
1993 and assigned Conveyance No. S091609; and

     WHEREAS,  pursuant to the Lease, Lessor has leased to Sublessor, as lessee,
one (1) Boeing 737-3S3 aircraft bearing  manufacturer's  serial number 23787 and
United States  registration no. N375TA (to be changed to N954WP),  together with
two  (2)  CFM   International,   Inc.   engines,   Model  CFM  56-3B2,   bearing
manufacturer's serial numbers 720890 and 721734 (the "Aircraft"); and

     WHEREAS,  the Lease was  amended  pursuant to  Amendment  No. 1 to Aircraft
Lease  Agreement  dated March 29, 1996 which was  recorded by the FAA on May 30,
1996 and assigned Conveyance No. HH011972; and

     WHEREAS,  Sublessor, as sublessor, and Sublessee, as sublessee, are parties
to that  certain  Aircraft  Sublease  Agreement  dated as of March 18,  1996 (as
supplemented  and  amended,  the  "Sublease"),   which  together  with  Sublease
Supplement  No. 1 thereto  dated  March 29,  1996,  the  Assignment  of Sublease
Agreement dated as of March 29, 1996 between the Sublessor,  as assignor and the
Lessor,  as assignee (the "Sublease  Assignment") and the Assignment of Security
Document  dated as of March 29, 1996 between the Lessor,  as  assignor,  and the
Mortgagee,  as assignee (the "Security  Assignment") were recorded by the FAA on
May 30, 1996 and assigned Conveyance No. HH011973; and

     WHEREAS, pursuant to the Sublease,  Sublessor, as sublessor, has leased the
Aircraft to Sublessee, as sublessee; and

                                       1
<PAGE>

     WHEREAS,  the Sublease was amended  pursuant to Amendment No. 1 to Sublease
Agreement  dated June 11,  1996,  and  recorded  by the FAA on July 31,  1996 as
Conveyance  No.  BB24106,  and  supplemented  by  Supplement  No. 2 to  Sublease
Agreement  dated June 11,  1996,  and  recorded  by the FAA on May 31,  1996 and
assigned Conveyance No. BB24107; and

     WHEREAS,  the Sublease was further  amended  pursuant to Amendment No. 2 to
Sublease  Agreement  dated March 22, 1997,  which was filed with the FAA on June
10, 1997, but not yet recorded; and

     WHEREAS,  on the date that the Aircraft is sold (the "Closing Date") by the
Original  Lessor to the New  Lessor,  (i) all right,  title and  interest of the
Mortgagee in and to the Lease, the Mortgage and the Security Assignment is being
released by the  Mortgagee  and (ii) the Sublease  Assignment  and the Lease are
being  terminated  and all rights of the Original  Lessor  thereunder  are being
released,  in each case,  contemporaneously  with the  execution and delivery of
this Novation; and

     WHEREAS,  Sublessor desires to novate certain of its rights and obligations
under the Sublease to the New Lessor,  and the New Lessor desires to assume such
rights and obligations  and in connection with such novation and  simultaneously
therewith,  the New Lessor and the Sublessee intend to enter into an Amended and
Restated Aircraft Lease Agreement (the "Amended and Restated Lease"); and

     Section  1.  DEFINITIONS.  Capitalized  terms used  herein and not  defined
otherwise  herein  shall  have the  meanings  specified  in the  Sublease  or by
reference therein.

     Section 2.  NOVATION OF SUBLEASE.  Subject to the terms and  conditions  of
this Novation, the parties hereto agree that from and after the Closing Date:

                  (a) The  Sublessor  assigns to New  Lessor all of  Sublessor's
right,  title and  interest,  and all of the  covenants,  undertakings,  duties,
liabilities and  obligations of the Sublessor in and under the Sublease  arising
on or after the Closing Date.

                  (b) The Sublessor  releases and  discharges the Sublessee from
the  performance  of any and all of its  covenants,  undertakings,  obligations,
duties and  liabilities  to the  Sublessor  under the Sublease to the extent the
same arise or accrue on or after the Closing Date.  The  Sublessor  releases and
discharges  the  Sublessee and its officers,  directors,  employees,  agents and
servants,  and the  Sublessee  releases and  discharges  the  Sublessor  and its
officers,  directors,  employees,  agents and servants,  of and from any and all
actions, causes of action, claims,  demands,  costs, expenses,  compensation and
consideration,  which  either party  (Sublessor  or  Sublessee)  now has, or may
hereafter  have, on account of, or arising out of that certain letter of intent,
dated July 25, 1996,  among  Amerilease,  the  Sublessor and the  Sublessee,  or
otherwise  on  account  of,  related  to  or  arising  out  of  the  transaction
contemplated  thereby,  and each  party  (Sublessor  and  Sublessee)  agrees  to
indemnify,  defend and hold the other harmless for, from and against any and all
claims that may be asserted by any third  party  (including  without  limitation
Amerilease) with respect to the matters subject to the foregoing releases.

                  (c) The Sublessee  releases and  discharges the Sublessor from
the Sublessor's covenants, undertakings,  obligations, duties and liabilities to
Sublessee  under the Sublease to the extent the same arise or accrue on or after
the Closing Date.

                                       2
<PAGE>

                  (d) The New Lessor agrees with the Sublessee and the Sublessor
to assume  all of the  right,  title  and  interest,  and all of the  covenants,
undertakings,  duties, liabilities and obligations of the Sublessor in and under
the Sublease, other than the obligation to Cauff, Lippman & Crane Aviation, Inc.
as provided in Section  3(c)  thereof,  arising on or after the Closing Date and
hereby  undertakes to observe and perform in favor of the Sublessee at all times
on or after  the  Closing  Date,  all of the  covenants,  undertakings,  duties,
obligations and liabilities  originally  made, given or assumed by the Sublessor
under or pursuant to the Sublease,  including,  without limitation,  any and all
obligations in respect of the Security Deposit and the Maintenance Reserves.

                   (e) The  Sublessee  agrees with the New Lessor to observe and
perform in favor of and for the benefit of the New Lessor all of the  covenants,
undertakings,  duties,  obligations and liabilities  originally  made,  given or
assumed by the  Sublessee  in favor of the  Sublessor  under or  pursuant to the
Sublease arising on or after the Closing Date.

                  (f) The Sublessee hereby expressly consents to and accepts the
assumption  by  the  New  Lessor  of the  Sublessor's  right,  title,  interest,
covenants, undertakings,  obligations, duties and liabilities under the Sublease
arising or accruing on or after the Closing Date.

                  (g) The Sublessee  agrees that it will not assert  against the
Sublessor any claim or defense that it may have against the New Lessor under the
Amended and Restated Lease to the extent the same is  attributable to any act or
event occurring on or after the Closing Date.

                  (h) The Sublessee  agrees that it will not assert  against the
New Lessor any claim or defense that it may have against the Sublessor under the
Sublease to the extent the same is  attributable  to any act or event  occurring
prior to the Closing Date.

                  (i)      The Sublessee, the New Lessor and the Sublessor 
accordingly agree that

                  (i)      from and after the  Closing  Date,  the  Amended  and
                           Restated Lease  constitutes an agreement  between the
                           New Lessor (as lessor) and the  Sublessee (as lessee)
                           on the terms and conditions set forth therein;

                  (ii)     from and  after the  Closing  Date,  the  Sublessor's
                           obligation  to lease the Aircraft to the Sublessee is
                           terminated and the Sublessee accepts the New Lessor's
                           obligation to lease the Aircraft to the Sublessee and
                           the  Sublessee  will take the  Aircraft on lease from
                           the New  Lessor,  and the New Lessor  agrees to lease
                           the  Aircraft  to the  Sublessee,  on the  terms  and
                           conditions  set  forth in the  Amended  and  Restated
                           Lease; and

                  (iii)    from and after the Closing Date, the Sublessee  shall
                           make all  payments of Rent and all other  amounts due
                           and payable  under the Amended and Restated  Lease to
                           the New  Lessor,  or as the New  Lessor may direct in
                           accordance with the terms of the Amended and Restated
                           Lease,  and shall  look  solely to the New Lessor for
                           reimbursement   of  the  Security   Deposit  and  the
                           Maintenance  Reserves  in  accordance  with the terms
                           thereof.

                                       3
<PAGE>

     Section 3. CLAIMS ARISING PRIOR TO THE CLOSING DATE. (a) Without  prejudice
to the  rights of the New Lessor  under the  Amended  and  Restated  Lease,  the
Sublessor and the Sublessee  agree that each of them,  and each  Indemnitee  (as
defined in the Sublease) shall have, pursuant to this Section 3, the same rights
and  remedies  as they would  have had under the  Sublease  (including,  without
limitation,  Sublessee's indemnities under Section 12 of the Sublease),  without
regard to any amendment  thereto  effected by the Amended and Restated Lease, in
respect of any losses, liabilities indemnities or claims suffered or incurred or
brought against,  or payment due to, the other to the extent attributable to any
period ending prior to the Closing Date to the same extent as provided for under
the Sublease as in effect prior to the execution and delivery of the Amended and
Restated Lease.

     (b) The Sublessee hereby acknowledges and agrees that all of the covenants,
undertakings, obligations and liabilities of the Sublessor under Section 6(b) of
the Sublease  have been fully  performed  and that it has no claims  against any
Maintenance Reserves or the Sublessor in respect thereof.

     Section 4. MAINTENANCE RESERVES; SECURITY DEPOSIT. (a) On the Closing Date,
the New Lessor has agreed to pay the purchase price to the Original Lessor,  and
such purchase price reflects a reduction in respect of the amount of Maintenance
Reserves  and  Security  Deposit held on the Closing Date by or on behalf of the
Sublessor. From and after the Closing Date, the Sublessee shall look only to the
New Lessor for the  reimbursement  of the Security  Deposit and any  Maintenance
Reserves in accordance  with the  provisions of the Amended and Restated  Lease.
For the  avoidance  of doubt,  the  Sublessee  confirms,  for the benefit of the
Sublessor  and the New Lessor,  that the amounts being held by the Sublessor for
Maintenance Reserves are as set forth below:

                  Airframe C-7 or D-check            $[     ]*

                  Engine MSN 720890

                           Shop Visit Portion        $[     ]*

                           LLP Portion               $[     ]*

                  Engine MSN 721734

                           Shop Visit Portion        $[    ]*

                           LLP Portion               $[    ]*

          The  amount of the  Security  Deposit  being  held in  respect  of the
          Aircraft is $[ ]*

     (b) From  and  after  the  Closing  Date,  all  payments  to be made by the
Sublessee in respect of Maintenance Reserves shall be paid to the New Lessor and
not to the Sublessor, and the Sublessor shall not make any claim thereon or have
any right  therein.  From and after the Closing Date,  the New Lessor shall have
the right to receive all  Maintenance  Reserve  payments that have accrued since
the immediately  preceding date on which Maintenance  Reserves were due pursuant
to Section 6(b) of the Sublease and the Sublessee  shall pay all such amounts to
the New  Lessor on the due date  therefor  in  accordance  with the terms of the
Amended and Restated Lease.

                                       4
<PAGE>

     Section 5.  CONDITIONS  PRECEDENT.  On or prior to the  Closing  Date,  the
Sublessee  shall  deliver  to the New  Lessor  and  Sublessor  (i) an opinion of
counsel in form and substance  reasonably  satisfactory to the New Lessor to the
effect,  among other  things,  that this  Novation  and the Amended and Restated
Lease have been duly  authorized  by the Sublessee  and  constitute  enforceable
obligations  of the  Sublessee and (ii) a  certificate  of insurance  evidencing
compliance by the Sublessee  with the provisions of Section 9 of the Amended and
Restated Lease and Section 6 of this Novation.

     Section 6. INSURANCE.  (a) Required  Insurance.  From and after the Closing
Date and until the  earlier of April 30,  1999 or the date of the next "D" check
(or its equivalent) on the Aircraft,  Sublessee shall maintain public  liability
(including,   without  limitation,   aircraft   third-party,   baggage,   cargo,
contractual and passenger legal liability including war risks),  property damage
liability insurance with respect to the Aircraft and general airline third party
legal liability insurance (including products liability insurance) with insurers
of recognized  responsibility and good repute specializing in aviation insurance
in the leading international  markets, in amounts at least equal to [ ]* Dollars
(U.S. $[ ]*) per occurrence  subject to no deductible  except  deductibles as to
baggage  and cargo  that are  standard  in the  airline  industry  in respect of
carriers  operating  in the  countries  in which the  operator  of the  Aircraft
operates.

     (b) TERMS OF INSURANCE.  Any policies  carried in  accordance  with Section
6(a) hereof and any policies taken out in  substitution  or replacement  for any
such policies shall (i) insure the interests of and name as additional insureds,
each of the Original  Lessor,  Amerilease  and  Sublessor  and their  respective
officers,  directors,  employees  and agents  (the  "Additional  Insureds")  and
provide  that the  Additional  Insureds  bear no  liability  for the  payment of
premiums;  (ii)  provide  that the  coverages  afforded by such  policies to the
Additional Insureds shall not be invalidated by any act or omission of any named
insured or other person which results in a violation of the terms, conditions or
warranties  of the  policies,  provided  that the named insured or the person so
protected has not caused,  contributed to or knowingly  condoned the said act or
omission; (iii) provide that if there is any cancellation of the insurance, such
cancellation shall not be effective as to any Additional Insured for thirty (30)
days (with respect to war risk  insurance,  seven (7) days or such lesser period
as may be customarily  available) after the underwriters of such insurance issue
written notice of such cancellation or alteration;  (iv) contain a waiver by the
insurers of (A) all rights of subrogation  against any and all of the Additional
Insureds  and (B) and rights of set-off,  counterclaim  or any other  deductions
whether by attachment or otherwise,  which they may have against any  Additional
Insured;  and (v) be primary and without  right of  contribution  from any other
insurance carried by any of the Additional Insureds, and shall expressly provide
that all of the provisions thereof (except limits of liability) shall operate in
the same  manner as if there were a separate  policy  covering  each  Additional
Insured;  with substantially the same endorsements (insofar as the same apply to
liability coverage) as are currently in effect with respect to the Aircraft.

     (c) INSURANCE  CERTIFICATES.  On or before the Closing  Date,  and promptly
after each renewal or  replacement  of the  policies of  insurance  covering the
Aircraft,  Sublessee  shall cause to be  furnished  to  Sublessor  an  insurance
certificate  of  independent  aircraft  insurance  brokers  evidencing  that the
insurance  then carried and  maintained on the Aircraft  complies with the terms
hereof.  Sublessee  shall cause such firm to advise the  Additional  Insureds in
writing promptly of any default in the payment of any premium,  of any other act
or omission on the part of Sublessee of which such firm has knowledge that might
invalidate or render unenforceable,  in whole or in part, any insurance provided
pursuant to Section 6(a).

                                       5
<PAGE>

     Section 7.  REPRESENTATIONS.  (a) REPRESENTATIONS OF EACH PARTY. Each party
hereto  represents  and  warrants  (each as to itself only) to each of the other
parties as of the Closing Date as follows:

                  (i)      Such party has the power, authority   and legal right
                           to execute and deliver this Novation  and to perform 
                           its  obligations hereunder, such execution, delivery
                           and performance have been authorized by all necessary
                           corporate and  other  action  of such party and  this
                           Novation  constitutes  the legal,  valid and binding
                           agreement of such party, enforceable  in  accordance
                           with  its  terms  except as  limited  by  bankruptcy,
                           insolvency, moratorium, reorganization, receivership,
                           fraudulent  conveyance  or  other  similar  laws or
                           equitable  principles of  general  application  to or
                           affecting  the enforcement  of creditors' rights and
                           remedies  generally  from  time  to  time  in effect,
                           regardless   of   whether   such   enforceability  is
                           considered  in  a  proceeding  at equity  or  at law.

                  (ii)     All  governmental  and other licenses,  approvals and
                           consents  that may be  necessary  for  such  party to
                           enter into this  Novation  have been obtained and are
                           in full force and effect.

                  (iii)    The  execution,  delivery  and  performance  of  this
                           Novation by such party will not contravene or violate
                           any provision of any law,  rule,  regulation or order
                           binding  on such  party or any of its  organizational
                           documents and will not  contravene the provisions of,
                           or constitute a default under,  any contract or other
                           instrument binding upon such party.

     (b) REPRESENTATIONS OF SUBLESSOR.  Sublessor represents and warrants to the
Sublessee and to the New Lessor as of the Closing Date as follows:

                  (i)      all  payments  of Rent  due as  at the Closing  Date 
                           have been duly made to the  Sublessor and received by
                           it, and

                  (ii)     as of the Closing Date, Sublessor is not aware of any
                           claims  that it has  against  the  Sublessee  arising
                           under or pursuant to the Sublease.

     (c) REPRESENTATIONS OF SUBLESSEE.  The Sublessee represents and warrants to
the Sublessor and to the New Lessor as of the Closing Date as follows:

                  (i)      each of the  representations  and  warranties  of the
                           Sublessee set forth in the Amended and Restated Lease
                           are true on and as of the Closing Date, and

                  (ii)     as of the Closing Date, the Sublessee is not aware of
                           any  claims  that  it  has  against  the   Sublessor,
                           Amerilease or the Original Lessor, including, without
                           limitation,   any   claims   for   reimbursement   of
                           Maintenance  Reserves pursuant to Section 6(b) of the
                           Sublease.

     (d)  REPRESENTATIONS  OF NEW LESSOR. The New Lessor represents and warrants
to the  Sublessee  as of the Closing Date that each of the  representations  and
warranties  of the New Lessor set forth in the  Amended and  Restated  Lease are
true on and as of the Closing Date.

                                       6
<PAGE>

     Section 8. MISCELLANEOUS.

     (a)  COUNTERPARTS.  This Novation may be executed by the parties  hereto in
separate counterparts each of which, when so executed and delivered, shall be an
original for all purposes,  but all such counterparts shall together  constitute
but one and the same instrument.

     (b)  SEVERABILITY.  If any  term or  provision  hereof  or the  application
thereof to any circumstance  shall, in any  jurisdiction  and to any extent,  be
invalid or unenforceable, such term or such provision shall be ineffective as to
such jurisdiction to the extent of such invalidity or  unenforceability  without
invalidating  or rendering  unenforceable  any  remaining  terms and  provisions
hereof or the application of such term or provision to circumstances  other than
those as to which it is held invalid or  unenforceable.  To the extent permitted
by  applicable  law, the parties  hereto  hereby waive any provision of law that
renders any term or provision hereof invalid or unenforceable in any respect.

     (c)  FURTHER  ASSURANCES.  Each party will  promptly  and duly  execute and
deliver all such  documents and  assurances  and take such further action as the
other party may from time to time reasonably  request in order to carry out more
effectively the intent and purpose of this Novation and to establish and protect
the  rights  and  remedies  created  or  intended  to be created in favor of the
parties,  including,  without limitation, if requested by Lessor, at the expense
of Lessor,  the  recording or filing of this  Novation or any other  document or
financing  statement with respect to the transactions  contemplated hereby so as
to more  effectively  carry out the intent of such  transactions,  in accordance
with the laws of such jurisdictions as either party from time to time reasonably
requests.

     (d) ENTIRE  AGREEMENT.  This  Novation  embodies the entire  agreement  and
understanding  between the parties  relating to the matters provided for herein,
and supersedes all prior agreements and understandings relating thereto.

     (e) SUCCESSORS  AND ASSIGNS.  This Novation shall be binding upon and inure
to the benefit of the parties hereto and their successors and assigns.

     (f) GOVERNING LAW. THIS NOVATION SHALL IN ALL RESPECTS,  INCLUDING  WITHOUT
LIMITATION, ALL MATTERS OF CONSTRUCTION,  VALIDITY AND PERFORMANCE,  BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

     (g)  EXPENSES.  Each of the parties  hereto  shall bear its own expenses in
connection  with  this  Novation  and  the  transactions   contemplated  hereby,
including,  without  limitation,  its own attorneys' fees,  except that KGAL and
TACA shall each pay one half of any  expenses in  connection  with any  Aviation
Authority or other  filings,  including  the fees and  disbursements  of special
local counsel retained in connection therewith. All expenses incurred by WestPac
for which it is entitled to reimbursement  pursuant to the Sublease shall be for
the account of TACA except any such expenses relating solely to the negotiation,
preparation,  execution and delivery of the Amended and Restated Aircraft Lease,
which shall be for the account of KGAL.








                



                                       7
<PAGE>



         IN WITNESS  WHEREOF,  the parties hereto have each caused this Novation
to be duly executed as of the day and year first above written.


                    FIRST SECURITY BANK, NATIONAL  ASSOCIATION,  (formerly First
               Security  Bank  of  Utah,  National  Association),   not  in  its
               individual  capacity but solely as Owner  Trustee  under the 1993
               Trust Agreement


                    By:_____________________________________________ 
                      Name:
                      Title:


                    FIRST SECURITY BANK, NATIONAL  ASSOCIATION,  (formerly First
               Security  Bank  of  Utah,  National  Association),   not  in  its
               individual  capacity but solely as Owner  Trustee  under the 1997
               Trust Agreement


                    By:_____________________________________________ 
                      Name:
                      Title:


                    TACA INTERNATIONAL AIRLINES, S.A.


                    By:______________________________________________ 
                      Name:
                      Title:


                    WESTERN PACIFIC AIRLINES, INC.


                    By:______________________________________________   
                      Name:
                      Title:

<PAGE>