<PAGE>   1
                                                                    EXHIBIT 10.1







                                AGREEMENT BETWEEN
                         KITTY HAWK INTERNATIONAL, INC.
                                     AND THE
                                PILOTS AND FLIGHT
                                    ENGINEERS
                                IN THE SERVICE OF
                         KITTY HAWK INTERNATIONAL, INC.
                                AS REPRESENTED BY
                   THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS,
                                AIRLINE DIVISION


This Agreement is made and entered into in accordance with the provisions of the
Railway Labor Act, as amended, by and between Kitty Hawk International, Inc.,
hereinafter known as the "Company" and the Pilots and Flight Engineers,
hereinafter known as the "Crewmembers", in the service of the Company as
represented by the International Brotherhood of Teamsters, Airline Division,
hereinafter known as the "Union".


















<PAGE>   2

SECTION 1 - RECOGNITION, PURPOSE, SCOPE AND MERGERS

1.1.       RECOGNITION
           Pursuant to the certification by the National Mediation Board in Case
           Numbers R-6152 (Pilots) and R-6145 (Flight Engineers) dated December
           17, 1992, the Company recognizes the Union as the duly designated and
           authorized representative of the Crewmembers in the employ of the
           Company for the purposes of the Railway Labor Act, as amended.

1.2.       PURPOSE OF AGREEMENT
           In the mutual interests of the Crewmembers, the Union and the
           Company, the purpose of this Agreement is to provide for orderly
           collective bargaining relations between the Company and the Union, a
           method for the prompt and equitable disposition of grievances, and a
           method for the establishment of rates of pay, rules and working
           conditions for the Crewmembers. In making this Agreement, it is
           recognized to be the duty of the Union, the Crewmembers and the
           Company to cooperate fully for the advancement of the purpose of this
           Agreement.

1.3.       SOLE AGREEMENT
           This Agreement supersedes all existing or previously executed
           agreements between the Company and the Union or any other labor
           organization or individual with respect to the rates of pay, rules
           and working conditions covered by this Agreement in accordance with
           the provisions of the Railway Labor Act, as amended. Any and all
           subsequent modifications to this Agreement will be reduced to
           writing, signed by the appropriate authorized representatives, and
           become a part of this Agreement.

1.4.       SCOPE

         1.4.1.     FLYING PERFORMED BY CREWMEMBERS
                    All present and future flying performed in and for the
                    service of the Company under FAR Part 121, and all ferry
                    flights under FAR Part 91 for the purpose of positioning to
                    or depositioning from a revenue trip in aircraft listed by
                    tail number on the Company's Operations Specifications
                    issued by the FAA will be performed by full-time Crewmembers
                    on the Seniority Lists in accordance with the terms and
                    conditions of this Agreement. If the Company enters into
                    code sharing or interchange arrangements with other
                    airlines, Crewmembers will not be furloughed as a direct
                    result of such arrangements.

         1.4.2.     CREWMEMBERS TEMPORARILY ASSIGNED OUT OF SENIORITY
                    When short-term flying requirements or the introduction of
                    new or additional aircraft into service requires the
                    immediate use of current and qualified crewmembers and a
                    sufficient number of Crewmembers on the Seniority Lists are
                    not available, the Company may operate such aircraft with
                    Crewmembers temporarily assigned out of seniority.
                    Crewmembers temporarily assigned out of seniority will be
                    covered by the terms of this Agreement. Use of Crewmembers
                    temporarily assigned out of seniority will be subject to the
                    following:




                                      -2-
<PAGE>   3

                  1.4.2.1.     INTRODUCTION OF NEW AIRCRAFT
                               When the Company introduces new aircraft, up to
                               two hundred seventy (270) Days, unless mutually
                               extended by the Company and the Union.

                  1.4.2.2.     INTRODUCTION OF ADDITIONAL AIRCRAFT
                               When the Company introduces additional aircraft,
                               up to one hundred eighty (180) Days.

                  1.4.2.3.     SHORT-TERM FLYING REQUIREMENTS
                               When the Company has short-term flying
                               requirements, up to one hundred eighty (180)
                               Days.

                  1.4.2.4.     TRAINING OF CREWMEMBERS
                               In the case of introduction of new aircraft or
                               introduction of additional aircraft, within the
                               time limits set forth in subsection 1.4.2.1. and
                               subsection 1.4.2.2., above, the Company will
                               conduct Training for Crewmembers who have been
                               awarded the positions held by Crewmembers
                               temporarily assigned out of seniority as soon as
                               practical, taking into account safety, crew
                               pairing and availability of Training support.

                  1.4.2.5.     EXPIRATION OF TIME LIMITS
                               At the expiration of the time limits set forth
                               above or when the requirement for temporarily
                               assigned out-of-seniority Crewmembers ceases,
                               whichever is sooner, Crewmembers temporarily
                               assigned out-of-seniority will be displaced from
                               their out of seniority positions and those
                               positions will be filled in accordance with
                               Section 16.

                  1.4.2.6.     PAY PROTECTION
                               Beginning with the successful completion of OE by
                               Crewmembers temporarily assigned out of
                               seniority, each Crewmember not upgraded or
                               transitioned because of the application of this
                               provision will be pay protected in seniority
                               order, on a one-for-one basis.

                  1.4.2.7.     NO REDUCTIONS
                               No Crewmember will be reduced in Crew Class or
                               suffer any loss of MBPG or benefits as a result
                               of the use of such temporarily assigned
                               Crewmembers.

           1.4.3.   WET LEASE IN
                    If the Company's operational requirements necessitate the
                    Wet Lease of additional aircraft in order to provide service
                    to its customers or potential customers or the expansion of
                    its markets, the following applies:

                  1.4.3.1.     UNION NOTIFICATION
                               The Company will notify the Union not less than
                               three (3) Days prior to the commencement of any
                               Wet Lease agreement of more than fifteen (15)
                               Days. The notification will include the reason(s)
                               for the lease, the aircraft to be utilized, the
                               hours of flying, the duration and the effect of
                               the Wet Lease on the Crewmembers.



                                      -3-
<PAGE>   4

                  1.4.3.2.     NO REDUCTIONS
                               No Crewmember covered by this Agreement on the
                               date of any Wet Lease will be reduced in Crew
                               Class or suffer any loss of MBPG or benefits as a
                               result of the Wet Lease agreement.

                  1.4.3.3.     DURATION OF WET LEASE
                               A wet lease in will not exceed two hundred
                               seventy (270) consecutive Days, unless extended
                               by mutual agreement between the Company and the
                               Union.

1.5.       SALE OR DRY LEASE OF COMPANY AIRCRAFT
           The Company may sell or Dry Lease an aircraft to another air carrier
           or entity when the Company is unable to obtain sufficient business to
           operate the aircraft profitably. The Company will make a reasonable
           effort to arrange with the buyer or lessee to provide for the
           employment of a full or partial complement of Crewmembers. If the
           Company's efforts fail, it will, upon request of the Union, indicate
           in writing the reasons why such employment is unacceptable to the
           buyer or lessee. If a furlough is necessary because of the sale or
           Dry Lease of aircraft, the Company will provide the following
           information to the Union: reasons for the sale or lease, duration of
           the lease, the number of Crewmembers affected by Crew Class and Type,
           the number of aircraft affected by the sale or lease.

1.6.       MERGERS AND ACQUISITIONS

         1.6.1.     NOTICE OF MERGER OR ACQUISITION
                    If the Company enters into an agreement of merger or
                    acquisition with another air carrier or entity, it will
                    notify the Union in writing within three (3) Days after the
                    execution of such agreement, provided the Union executes any
                    required confidentiality agreements. The Company will give
                    written notice of the existence of this Agreement to the air
                    carrier or entity, with a copy to the Union within three (3)
                    Days after the execution of such agreement.

         1.6.2.     INTEGRATION OF SENIORITY LISTS
                    If the Company merges with, acquires or is acquired by
                    another air carrier and the merger or acquisition affects
                    the seniority rights of Crewmembers, provisions will be made
                    for the integration of Seniority Lists in a fair and
                    equitable manner as set forth below.

                  1.6.2.1.     NEGOTIATIONS
                               The method of integration will be determined
                               through direct negotiations between
                               representatives designated by the Union and
                               representatives of the crewmembers from the
                               merged, acquired or acquiring air carrier.

                  1.6.2.2.     ARBITRATION
                               Should negotiations to integrate the Seniority
                               Lists not be successfully concluded, the matter
                               will be referred to binding arbitration pursuant
                               to Sections 3 and 13 of the Allegheny-Mohawk
                               LPPs.




                                      -4-
<PAGE>   5

                  1.6.2.3.     FENCE AGREEMENT
                               The Company, the Union and representatives of the
                               crewmembers from the merged, acquired or
                               acquiring carrier will formulate a fence
                               agreement prior to the integration of the
                               Seniority Lists.

                  1.6.2.4.     NO SYSTEM FLUSH
                               Implementation of integrated Seniority Lists or a
                               fence agreement will not result in a system
                               flush.

           1.6.3.   REPRESENTATION
                    If a merger or acquisition results in creating a single air
                    carrier, as that term has been used by the National
                    Mediation Board, representation of Crewmembers will be
                    determined by the National Mediation Board.

1.7.       ALTER EGO
           The Company will not establish a third-party leasing device to evade
           the terms of this Agreement.

1.8.       TRANSFER OF ASSETS
           The Company will not transfer aircraft, routes or operating authority
           to its Parent, a subsidiary of the Parent or a subsidiary of the
           Company for the purpose of evading the terms of this Agreement. The
           Company will not transfer aircraft to its Parent, a subsidiary of the
           Parent or a subsidiary of the Company if the purpose of the transfer
           is for the Parent, a subsidiary of the Parent or a subsidiary of the
           Company to operate the aircraft, and the transfer causes a
           Curtailment or furlough of Crewmembers. This subsection does not
           prohibit such a transfer if the Company is unable to operate the
           aircraft for reasons such as FAA, or other governmental, directives;
           cessation of operations or causes beyond the control of the Company.

1.9.       SUCCESSORSHIP AND ASSUMPTION OF AGREEMENT
           This Agreement will be binding upon any successor of the Company
           unless and until changed in accordance with the provisions of the
           Railway Labor Act, as amended.

1.10       FOREIGN BASES
           If the Company establishes a Base outside the United States,
           Crewmembers assigned to such Base will be covered by the terms of
           this Agreement and the Railway Labor Act, as amended.





                                      -5-
<PAGE>   6

SECTION 2 - DEFINITIONS

"ACTIVE SERVICE" means all accumulated time, commencing with Date of Hire as a
Crewmember, for which the Crewmember is paid by the Company.

"ADEQUATE REST FACILITY" means a quiet, dark, climate-controlled room with
single beds, supplied with fresh linen, with access to clean restroom
facilities.

"ALOFT" means Block to Block.

"BASE" means the geographical point designated by the Company to which a
Crewmember is permanently assigned.

"BID LINE" means a Line of Flying, a Reserve Line or Composite Line.

"BID SENIORITY LIST" means a list of Crewmembers who are eligible to bid, listed
in Seniority order by Crew Class, Type and Base.

"BLOCK TO BLOCK" means the period of time from the moment the restraining
devices are removed from the aircraft for the purpose of flight, until the
restraining devices are installed at either the point of departure, an
intermediate stop, or the final destination. Block-to-Block time is used for,
but not limited to, scheduled arrival and departure times, duty period
calculations and Duty Time calculations. Block-to-Block time includes all time
aloft, taxi time and time that the aircraft is being positioned by a tug.

"CAPTAIN" means a Crewmember who is qualified to perform the function of pilot
in command, as designated by the Company, who is qualified to serve as Captain
under FAR Part 121 and this Agreement, and who holds a Crew Class bid award as a
Captain.

"CATEGORY" means the respective crew skill, Pilot or Flight Engineer, held by a
Crewmember.

"COMMUTE" means travel between a Crewmember's Residence Airport, or other
location, and his Base, or other location, not at the direction of the Company.

"COMPOSITE LINE" means a Bid Line containing Days free of duty, reserve Days and
Trip Sequences that become available as a result of vacation awards, Training,
leaves of absence, sick leave or Trip Sequences not contained in Lines of
Flying.

"CREW CLASS" means the respective job designation of a Crewmember within his
respective Category. Within the Category of Pilot exist the Crew Classes of
Captain and First Officer. Within the Category of Flight Engineer exist the Crew
Classes of Second Officer and Professional Flight Engineer.

"CREWMEMBER" means a Pilot or a Flight Engineer covered by this Agreement.

"CURTAILMENT" means a reduction in the number of positions within a Crew Class
on a specific Type at a specific Base.

"DATE OF HIRE" means the date a Crewmember commences initial Training by the
Company as a Crewmember, after the Crewmember has become employed by the
Company.



                                      -6-
<PAGE>   7

"DAY" means a calendar day, measured from 0000Z to 2359Z.

"DEADHEAD" means the published, scheduled time spent by a Crewmember traveling,
not local in nature, from one point to another at the direction of the Company.
If there is no published scheduled time, Deadhead will be Block-to-Block time.
Deadhead will include time spent aloft and connection times.

"DISPLACEMENT" means removal of a Crewmember from his Crew Class, Type or Base
because of a Curtailment or another Crewmember's exercise of bumping rights.

"DOMESTIC" means the forty-eight (48) contiguous United States and the District
of Columbia.

"DRY LEASE" means the leasing of an aircraft without a flight crew.

"DUTY DAY" means a Day that a Crewmember is subject to the Company's direction.

"DUTY TIME" means that interval between the time a Crewmember is required to
report for duty and the time he is released by the Company.

"EFFECTIVE DATE" means, for a vacancy, the date that a Crewmember is expected to
begin performing duties in an awarded vacancy and, for a Curtailment, the date
that a Crewmember is expected to cease performing duties in a position.

"FAR" means the Federal Aviation Regulations.

"FIRST OFFICER" means a Crewmember who is qualified to perform the function of
second in command, as designated by the Company, who is qualified to serve as
First Officer under FAR Part 121 and this Agreement, and who holds a Crew Class
bid award as a First Officer.

"FLIGHT ENGINEER" means a Crewmember who is qualified to perform the function of
Flight Engineer, as designated by the Company, who is qualified to serve as a
Flight Engineer under FAR Part 121 and this Agreement, and who holds a Crew
Class bid award as a Flight Engineer.

"FLIGHT PAY" means the hourly rate of pay for performing the duties of a
Crewmember.

"FLIGHT SEGMENT" means a leg measured from block out to block in.

"FLIGHT TIME" means the time from the moment when the aircraft first moves under
its own power for the purpose of flight until the moment it comes to rest after
landing. Flight Time is used for FAR Flight Time limitations.

"INTERNATIONAL" means any point or area outside the forty-eight (48) contiguous
United States and the District of Columbia.

"LINE OF FLYING" means a Bid Line containing Trip Sequences and scheduled Days
free of duty.

"MANAGEMENT CREWMEMBER" means a Crewmember, designated by the Company, who
participates in the establishment or implementation of Company policies related
to flight operations or in the supervision of Crewmembers, including the making
of decisions affecting the status of Crewmembers, including discipline. Status
as Check Airman does not alone designate a Crewmember as a Management
Crewmember.



                                      -7-
<PAGE>   8

"MINIMUM BID PERIOD GUARANTEE (MBPG)" means the minimum credit hours a
Crewmember will receive in a Bid Period.

"MONTH" means the period of time commencing with and including the first Day of
a calendar month up to and including the last Day of the month.

"OPEN TIME" means known flying that is not placed into Lines of Flying and
flying that becomes available for reasons such as Training, vacations, sick
leave, Bid Period-to-Bid Period transitions, ad hoc charter or other unforeseen
circumstances after completion of the bid awards.

"PILOT" means Captain or First Officer.

"POSITIONING OR DE-POSITIONING" means Deadhead.

"PRIOR RIGHTS FLIGHT ENGINEER" means a Crewmember who was listed on the Flight
Engineers' Seniority List on the date of ratification of this Agreement and so
indicated on the Flight Engineers' Seniority List.

"PROFESSIONAL FLIGHT ENGINEER" means a Crewmember who is qualified to perform
the function of a Flight Engineer, as designated by the Company, who holds an
Airframe and Powerplant Mechanic Certificate, who is qualified to serve as a
Flight Engineer under FAR Part 121 and this Agreement and has been designated by
the Company to perform maintenance on Company aircraft and who holds a Crew
Class bid award as a Flight Engineer.

"RECURRENT TRAINING" means all FAA-mandated Training required to maintain
qualification and currency, excluding remedial Training and re-qualification
Training after a Training failure.

"RESERVE CREWMEMBER" means a Crewmember who is awarded or assigned to a Reserve
Line or who is serving on a designated reserve day as part of a Line of Flying
or a Composite Line or who is temporarily assigned to reserve in accordance with
this Agreement.

"RESERVE LINE" means a Bid Line containing reserve Days and scheduled Days free
of Duty.

"RESIDENCE AIRPORT" means the airport, designated by a Crewmember, served by a
scheduled air carrier, where a Crewmember is considered to reside.

"SECOND OFFICER" means a Crewmember who is qualified to perform the function of
Flight Engineer, as designated by the Company, who is qualified to serve as a
Flight Engineer under FAR Part 121 and this Agreement, and who holds a Crew
Class bid award as a Second Officer. A Second Officer must possess a Commercial
Pilot Certificate with Multi-Engine and Instrument ratings and is not required
to possess an Airframe and Powerplant Mechanic Certificate.

"SENIORITY LIST(S)" means a listing of Crewmembers, as set forth in Section 15,
according to Date of Hire.

"STANDING BID" means a bid that reflects a Crewmember's preference(s) for
Category, Crew Class, Type and Base.




                                      -8-
<PAGE>   9

"TRAINING" means classroom, simulator and flight Training including, but not
limited to, Initial, Transition, Recurrent, Proficiency, Upgrade and
Differences.

"TRIP SEQUENCE" means a series of Flight Segments, including Deadheading, with
the initial segment departing from a Crewmember's Base and the final segment
arriving at the Crewmember's Base. A Trip Sequence may begin in one Bid Period
and end in the following Bid Period. A Trip sequence may start and end at a
location other than a Crewmember's Base, provided that both the starting and
ending locations are the same. Deadhead between two Trip Sequences is a Trip
Sequence.

"TYPE" means the type of aircraft, as defined by the FARs, operated by the
Company, designated by manufacturer and model.

"WET LEASE" means the leasing of aircraft with a flight crew.







                                      -9-
<PAGE>   10

SECTION 3 - UNION SECURITY

3.1.       UNION MEMBERSHIP
           It will be a condition of employment for all Crewmembers covered by
           this Agreement on or before the ninetieth (90th) Day following their
           Date of Hire to tender to the Union directly the required initiation
           fees. It will also be a condition of employment that all Crewmembers
           become and remain members in good standing in the Union, or in the
           alternative, tender to the Union the Monthly dues required of the
           Union members, such sums to be recognized as a service fee. It will
           also be a condition of employment that all Crewmembers tender to the
           Executive Council Monthly assessments required of Crewmembers.

3.2.       INITIATION FEES AND DUES OR SERVICE FEES AND ASSESSMENTS DEDUCTION
           The Company will deduct from the wages of any Crewmember covered by
           this Agreement dues as a member of the Union, or the service fee, the
           Executive Council assessment and the Teamsters Legal Services Plan
           fee, upon receiving the Crewmember's voluntary and individual written
           authorization for the Company to make such deductions. The
           authorization forms will be provided by the Union. No Crewmember will
           be deprived of employment under this Section for any reason other
           than failure to tender initiation fees and failure to pay the Monthly
           dues which are uniformly required as a condition of acquiring and
           retaining membership in the Union, or service fees which will be not
           more than the dues and initiation fees, or Executive Council
           assessments. The Company will deduct dues or service fees and
           Executive Council assessments in the Month in which a Crewmember is
           recalled from furlough or returns from a leave of absence. If a
           Crewmember is recalled from furlough or returns from a leave of
           absence after the dues or service fees and Executive Council
           assessments have been deducted for the Month, the Company will be
           permitted to make a double deduction in the following Month.

         3.2.1. TRANSFER OF DUES OR SERVICE FEES TO UNION
                The Company will pay to the proper officers of the Union the
                withheld dues or service fees. The Company will also pay to the
                proper officers of the Executive Council the withheld
                assessments. The Monthly dues or service fees will be deducted
                from the first paycheck in each Month and paid to the Union
                within seven (7) Days of the issuance of the paychecks. The
                Teamsters Legal Services Plan fee and the Executive Council
                assessments will be deducted from the second paycheck in each
                Month and paid to the Union within seven (7) Days of the
                issuance of paychecks. The following information will be
                reported and transmitted with each payment: Social security
                number, full name, amount of dues or service fees or
                assessments, rate of pay and status of employment.

         3.2.2. INDEMNIFICATION CLAUSE
                The Union will indemnify the Company and hold the Company
                harmless from any and all claims that may be made by Crewmembers
                against the Company by virtue of the wrongful application or
                misapplication of any of the terms of this Section.




                                      -10-
<PAGE>   11

         3.2.3.     DUES OR SERVICE FEES AND ASSESSMENTS AFTER TERMINATION
                    In the event of the termination of a Crewmember's
                    employment, there will be no obligation for the Company to
                    collect dues, or service fees, or assessments until all
                    other deductions have been made.

         3.2.4.     DEDUCTION ERROR
                    If a deduction is missed, or if an insufficient amount is
                    deducted, it is the Crewmember's responsibility to make the
                    proper adjustment with the Union.

3.3.       FAILURE TO PAY DUES OR SERVICE FEES AND ASSESSMENTS
           Written notice will be given to the Company by the Union at least
           thirty (30) days before the Company is required to remove a
           Crewmember from employment for failure to maintain membership in good
           standing in the Union, or pay service fees, or assessments in
           accordance with subsection 3.1.

3.4.       CREWMEMBER LIST
           The Company will notify the Union each Month of all new-hires,
           terminations, recalls or furloughs. The notification will include the
           Crewmember's name, address, social security number, Crew Class and
           Date of Hire, termination, recall or furlough.






                                      -11-
<PAGE>   12

SECTION 4 - MANAGEMENT RIGHTS

The Company retains the sole and exclusive right to operate, control and manage
its business and exercise all traditional management rights, powers and
authority it had prior to signing this Agreement, except those modified
specifically by an express provision of this Agreement. Included by way of
description, and not by way of limitation, are rights to direct the working
force and determine its size and composition; maintain order and efficiency;
hire, transfer, and promote Crewmembers and discipline, suspend, and discharge
for cause; assign work to Crewmembers; extend, maintain, curtail or terminate
its operations in whole or part; determine the nature and extent of services to
be rendered; determine the business concerns with whom it will deal and the
customers it wishes to serve; establish and enforce quality standards for its
services; determine and change methods, processes and techniques of operation;
determine when and if vacancies will be filled; establish and modify reasonable
rules and regulations and require observance thereof. A right of management will
not be impaired or waived by any contrary course of conduct.









                                      -12-
<PAGE>   13

SECTION 5 - COMPENSATION

5.1.       NEW-HIRE PAY
           A new-hire Crewmember who receives Training prior to his
           qualification as a Crewmember will be paid five hundred dollars
           ($500.00) per week while in Training. A new-hire Crewmember will not
           receive Flight Pay until he completes OE.

5.2.       FLIGHT PAY RATES
           A Crewmember will be paid Flight Pay in United States Dollars in
           accordance with the following schedules:

        5.2.1.     CAPTAINS

<TABLE>
<CAPTION>
                    --------------------------------------------------------------------------------
                     Year of Active      Effective        Effective       Effective        Effective
                         Service         October 16      October 16       October 16      October 16
                                            1999            2000             2001            2002
                    --------------------------------------------------------------------------------
<S>                 <C>                  <C>             <C>              <C>             <C>
                           1ST              60.00           60.00            60.00           60.00
                    --------------------------------------------------------------------------------
                           2ND              82.00           84.46            87.84           91.79
                    --------------------------------------------------------------------------------
                           3RD              95.00           97.85           101.76          106.34
                    --------------------------------------------------------------------------------
                           4TH              98.00          100.94           104.98          109.70
                    --------------------------------------------------------------------------------
                           5TH             102.00          105.06           109.26          114.18
                    --------------------------------------------------------------------------------
                           6TH             105.00          108.15           112.48          117.54
                    --------------------------------------------------------------------------------
                           7TH             108.00          111.24           115.69          120.90
                    --------------------------------------------------------------------------------
                           8TH             111.00          114.33           118.90          124.25
                    --------------------------------------------------------------------------------
                           9TH             114.00          117.42           122.12          127.61
                    --------------------------------------------------------------------------------
                          10TH             117.00          120.51           125.33          130.97
                    --------------------------------------------------------------------------------
                          11TH             120.00          123.60           128.54          134.33
                    --------------------------------------------------------------------------------
                          12TH             122.50          126.18           131.22          137.13
                    --------------------------------------------------------------------------------
                          13TH             124.50          128.24           133.36          139.37
                    --------------------------------------------------------------------------------
                          14TH             126.00          129.78           134.97          141.04
                    --------------------------------------------------------------------------------
                          15TH             127.50          131.33           136.58          142.72
                    --------------------------------------------------------------------------------
                          16TH             128.50          132.36           137.65          143.84
                    --------------------------------------------------------------------------------
                          17TH             129.50          133.39           138.72          144.96
                    --------------------------------------------------------------------------------
                          18TH             130.50          134.42           139.79          146.08
                    --------------------------------------------------------------------------------
                          19TH             131.50          135.45           140.86          147.20
                    --------------------------------------------------------------------------------
                          20TH             132.50          136.48           141.93          148.32
                    --------------------------------------------------------------------------------
</TABLE>

                    Notes:    The Company may modify first year pay rates at its
                              discretion.

                              There will be no longevity increases for Captains
                              after the twentieth (20th) year of Active Service.

                              The maximum Flight Pay rate for a narrow body
                              Captain will be the rate for the ninth (9th) year
                              of Active Service.





                                      -13-
<PAGE>   14

      5.2.2.   PROFESSIONAL FLIGHT ENGINEERS

<TABLE>
<CAPTION>
         ---------------------------------------------------------------------------------
          Year of Active      Effective        Effective       Effective       Effective
              Service         October 16      October 16      October 16      October 16
                                 1999            2000            2001            2002
         ---------------------------------------------------------------------------------
<S>       <C>                 <C>             <C>             <C>             <C>
                1ST             45.00            45.00           45.00           45.00
         ---------------------------------------------------------------------------------
                2ND             61.50            63.35           65.88           68.84
         ---------------------------------------------------------------------------------
                3RD             71.25            73.39           76.32           79.76
         ---------------------------------------------------------------------------------
                4TH             73.50            75.71           78.73           82.28
         ---------------------------------------------------------------------------------
                5TH             76.50            78.80           81.95           85.63
         ---------------------------------------------------------------------------------
                6TH             78.75            81.11           84.36           88.15
         ---------------------------------------------------------------------------------
                7TH             81.00            83.43           86.77           90.67
         ---------------------------------------------------------------------------------
                8TH             83.25            85.75           89.18           93.19
         ---------------------------------------------------------------------------------
                9TH             85.50            88.07           91.59           95.71
         ---------------------------------------------------------------------------------
               10TH             87.75            90.38           94.00           98.23
         ---------------------------------------------------------------------------------
               11TH             90.00            92.70           96.41          100.75
         ---------------------------------------------------------------------------------
               12TH             91.88            94.63           98.42          102.85
         ---------------------------------------------------------------------------------
               13TH             93.38            96.18          100.02          104.52
         ---------------------------------------------------------------------------------
               14TH             94.50            97.34          101.23          105.78
         ---------------------------------------------------------------------------------
               15TH             95.63            98.49          102.43          107.04
         ---------------------------------------------------------------------------------
               16TH             96.38            99.27          103.24          107.88
         ---------------------------------------------------------------------------------
               17TH             97.13           100.04          104.04          108.72
         ---------------------------------------------------------------------------------
               18TH             97.88           100.81          104.84          109.56
         ---------------------------------------------------------------------------------
               19TH             98.63           101.58          105.65          110.40
         ---------------------------------------------------------------------------------
               20TH             99.38           102.36          106.45          111.24
         ---------------------------------------------------------------------------------
</TABLE>

         Notes:   The Company may modify first year pay rates at its discretion.

                  There are no longevity increases for Professional
                  Flight Engineers after the twentieth (20th) year of
                  Active Service.

                  The maximum Flight Pay rate for a narrow body
                  Professional Flight Engineer will be the rate for
                  the ninth (9th) year of Active Service.






                                      -14-
<PAGE>   15

         5.2.3.      FIRST OFFICERS

<TABLE>
<CAPTION>
                    ---------------------------------------------------------------------------------
                     Year of Active      Effective        Effective       Effective        Effective
                         Service         October 16      October 16       October 16      October 16
                                            1999            2000             2001            2002
                    ---------------------------------------------------------------------------------
<S>                  <C>                 <C>             <C>              <C>             <C>
                           1st             40.80            40.80           40.80            40.80
                    ---------------------------------------------------------------------------------
                           2nd             55.76            57.43           59.73            62.42
                    ---------------------------------------------------------------------------------
                           3rd             64.60            66.54           69.20            72.31
                    ---------------------------------------------------------------------------------
                           4th             66.64            68.64           71.38            74.60
                    ---------------------------------------------------------------------------------
                           5th             69.36            71.44           74.30            77.64
                    ---------------------------------------------------------------------------------
                           6th             71.40            73.54           76.48            79.93
                    ---------------------------------------------------------------------------------
                           7th             73.44            75.64           78.67            82.21
                    ---------------------------------------------------------------------------------
                           8th             75.48            77.74           80.85            84.49
                    ---------------------------------------------------------------------------------
                           9th             77.52            79.85           83.04            86.78
                    ---------------------------------------------------------------------------------
                          10th             79.56            81.95           85.22            89.06
                    ---------------------------------------------------------------------------------
</TABLE>

                    Notes:    The Company may modify first year pay rates at its
                              discretion.

                              There are no longevity increases for First
                              Officers after the tenth (10th) year of Active
                              Service.

                              The maximum Flight Pay rate for a narrow body
                              First Officer will be the rate for the ninth (9th)
                              year of Active Service.

                              A Professional Flight Engineer who upgrades to
                              First Officer will not suffer any loss of pay and
                              will remain at his greater rate of pay until the
                              pay rate shown above exceeds such greater rate, at
                              which time he will be paid according to the
                              schedule above.

         5.2.4.      SECOND OFFICERS

<TABLE>
<CAPTION>
                    ---------------------------------------------------------------------------------
                     Year of Active      Effective        Effective       Effective        Effective
                         Service         October 16      October 16       October 16      October 16
                                            1999            2000             2001            2002
                    ---------------------------------------------------------------------------------
<S>                  <C>                 <C>             <C>              <C>             <C>
                           1st             33.00            33.00           33.00            33.00
                    ---------------------------------------------------------------------------------
                           2nd             45.10            46.45           48.31            50.49
                    ---------------------------------------------------------------------------------
                           3rd             52.25            53.82           55.97            58.49
                    ---------------------------------------------------------------------------------
                           4th             53.90            55.52           57.74            60.34
                    ---------------------------------------------------------------------------------
                           5th             56.10            57.78           60.09            62.80
                    ---------------------------------------------------------------------------------
</TABLE>

                    Notes:    The Company may modify first year pay rates at its
                              discretion.

                              There are no longevity increases for Second
                              Officers after the fifth (5th) year of Active
                              Service.

                              A Pilot who transitions to Second Officer will
                              receive fifty-five percent (55%) of the Captain's
                              pay rate for his year of Active Service.

5.3.       FLIGHT PAY COMPUTATION
           The departure Day for a Flight Segment will be the Day on which all
           Flight Pay for that Flight Segment will be credited.

          5.3.1.    FLIGHT PAY
                    Flight Pay credit will be computed on the basis of actual
                    Block-to-Block time.



                                      -15-
<PAGE>   16

5.4.       CHECK AIRMAN OVERRIDE
           A Check Airman will be paid a minimum override of fifteen dollars
           ($15.00) per hour for all hours flown or credited, regardless of
           whether actual instructor or Check Airman duties are being performed.
           MBPG will be paid including Check Airman override. Any increase in
           the Check Airman override will be applied uniformly.

5.5.       INSTRUCTOR PAY

         5.5.1.     GROUND SCHOOL INSTRUCTION
                    When a Crewmember performs ground school instruction, he
                    will be paid a minimum of ten dollars ($10.00) per classroom
                    hour. Any increase in the ground school instructor rate will
                    be applied uniformly.

         5.5.2.     SIMULATOR INSTRUCTION
                    When a Crewmember, who is not a Check Airman, performs
                    simulator instruction he will be paid a minimum override of
                    fifteen dollars ($15.00) per simulator hour, including
                    briefing and de-briefing. Any increase in the simulator
                    instructor override will be applied uniformly.

5.6.       REPORT PAY
           When a Crewmember reports to the field for the purpose of flight
           and does not fly, he will be credited one (1) hour of Flight Pay for
           each four (4) hours of duty or fraction thereof, with a minimum of
           one (1) hour's credit per occurrence.

5.7.       MINIMUM PAY CREDIT
           When a Crewmember reports to the field for the purpose of flight and
           does fly, he will be credited with actual Block Time. If the Flight
           Pay credit is less than one (1) hour, the Crewmember will be credited
           with one (1) of hour of Flight Pay.

5.8.       TAXI PAY

         5.8.1.     REPORT FOR TAXI ONLY
                    When a Crewmember reports to the field for the purpose of
                    repositioning an aircraft and not for the purpose of flight,
                    the Crewmember will be credited for all Block to Block time
                    with a minimum of one (1) hour of Flight Pay.

         5.8.2.     WITHIN A DUTY PERIOD
                    When a Crewmember is required to reposition an aircraft
                    within the same duty period as a flight, the Crewmember will
                    be credited for the Block to Block time.

5.9.       PAY ON A SCHEDULED DUTY FREE DAY

         5.9.1.     DAYS OFF
                    When a Crewmember performs duty other than Training on a
                    scheduled duty free Day, he will be paid four point two
                    (4.2) hours of Flight Pay, or the actual hours credited for
                    the Day, whichever is greater, in addition to MBPG.





                                      -16-
<PAGE>   17

         5.9.2.     JUNIOR ASSIGNMENT
                    When a Crewmember is junior assigned he will be paid as set
                    forth in subsection 5.9.1., multiplied by one point two five
                    (1.25). Effective November 1, 2000, when a Crewmember is
                    junior assigned he will be paid as set forth in subsection
                    5.9.1., multiplied by one point five (1.5).

5.10.      DEADHEAD PAY
           For Deadhead Pay, refer to Section 22.

5.11.      TRAINING PAY

         5.11.1.    RECURRENT AND ADDITIONAL REQUIREMENT TRAINING

                  5.11.1.1.    SCHEDULED DUTY DAYS
                               When a Crewmember is required to attend (not home
                               study) recurrent Training, a recurrent
                               proficiency check or Training for additional
                               requirements to maintain his qualification, e.g.,
                               TCAS or passenger qualification, or Check Airman
                               meetings on a scheduled Duty Day, he will be
                               credited with three point five (3.5) hours of
                               Flight Pay for each Day of such Training. A
                               Crewmember Deadheading to or from Training on a
                               scheduled Duty Day will be credited with either
                               all pay credit earned or three point five (3.5)
                               hours of Flight Pay, whichever is greater. When a
                               Crewmember's recurrent Training is interrupted or
                               he receives one Day off in seven Days as a result
                               of recurrent Training on a scheduled Duty Day, he
                               will be credited with three point five (3.5)
                               hours of Flight Pay for such Day.

                  5.11.1.2.    SCHEDULED DUTY FREE DAYS
                               When a Crewmember is required to attend (not home
                               study) recurrent Training, a recurrent
                               proficiency check or Training for additional
                               requirements to maintain his qualification, e.g.,
                               TCAS or passenger qualification, or Check Airman
                               meetings on a scheduled duty free Day, he will be
                               paid four point two (4.2) hours of Flight Pay for
                               each Day of such Training, in addition to MBPG. A
                               Crewmember Deadheading to or from Training on a
                               scheduled duty free Day will be paid either all
                               pay credit earned or four point two (4.2) hours
                               of Flight Pay, whichever is greater, in addition
                               to MBPG. When a Crewmember's recurrent Training
                               is interrupted or he receives one Day off in
                               seven Days on a scheduled duty free Day as a
                               result of recurrent Training, he will be paid
                               four point two (4.2) hours of Flight Pay for such
                               Day, in addition to MBPG.

         5.11.2.    INITIAL, TRANSITION AND UPGRADE
                    When a Crewmember attends Initial (but not new-hire
                    initial), transition or upgrade Training, he will be paid
                    his pro rated MBPG for the Type and Crew Class for which he
                    is current and qualified.




                                      -17-
<PAGE>   18

         5.11.3.    PILOT TO FLIGHT ENGINEER TRANSITIONS
                    A Pilot who has not exceeded the FAA-mandated retirement age
                    for Pilots at the time his Training commences will be paid
                    no less than his pro-rated MBPG for the Type and Crew Class
                    for which he is current and qualified while being trained. A
                    Pilot who has exceeded the FAA-mandated retirement age for
                    Pilots at the time his Training commences will be paid six
                    hundred sixty dollars ($660) per week while in Training. A
                    Pilot who is awarded a class that commences prior to
                    reaching the FAA-mandated retirement age for Pilots and has
                    his Training delayed by the Company will be paid no less
                    than his pro-rated MBPG for the Type and Crew Class held at
                    the time he reaches the FAA -mandated retirement age for
                    Pilots until his Training is completed. A Pilot who is
                    awarded a class date that commences not more than sixty (60)
                    days prior to his reaching the FAA-mandated retirement age
                    for Pilots and bypasses that class for another class that
                    commences prior to his reaching the FAA-mandated retirement
                    age for Pilots will be paid no less than his pro-rated MBPG
                    for the Type and Crew class for which he is current until he
                    reaches the FAA-mandated retirement age for Pilots and
                    thereafter will be paid six hundred and sixty dollars ($660)
                    per week while in Training.

         5.11.4.    REMEDIAL TRAINING
                    A Crewmember will not be paid Training pay for additional
                    Training or checking caused by a Training failure.

5.12.      MAINTENANCE PAY
           When a Crewmember performs maintenance in addition to his normal
           duties on the aircraft, he will be paid fifteen dollars ($15.00) per
           hour or fraction thereof, in addition to all other compensation.

5.13.      MINIMUM BID PERIOD GUARANTEE (MBPG)
           The MBPG is fifty-six (56) Flight Pay hours in a Bid Period. If a
           Crewmember is unavailable for duty for a portion of a Bid Period, the
           MBPG will be pro-rated.

5.14.      BONUS INCENTIVE PLAN
           Effective January 1, 2000, a bonus incentive plan will be
           implemented. The plan will be no less favorable than that provided to
           other Company employee groups. The plan may be terminated or modified
           by the Company in accordance with the terms of the plan provided that
           such modification will be no less favorable than modifications made
           to the plans provided to other Company employee groups.

5.15.      GENERAL

         5.15.1.    PAYROLL SCHEDULE
                    Crewmembers will be paid bi-weekly. The first paycheck of
                    the Bid Period will contain one-half (1/2) of the applicable
                    MBPG earned during the prior Bid Period. The second paycheck
                    of the Bid Period will contain one-half (1/2) of the
                    applicable MBPG earned during the current Bid Period plus
                    adjustments such as additional compensation earned in the
                    prior Bid Period. Unless otherwise required by applicable
                    law, a furloughed Crewmember will be paid all pay due him on
                    the first paycheck that covers the pay period in which he
                    was furloughed.



                                      -18-
<PAGE>   19

         5.15.2.    PAYCHECK DELIVERY AND DEPOSIT
                    Upon written request, the Company will mail a Crewmember's
                    paycheck to a specified address, other than a bank. The
                    Company must receive such request at least thirty (30) Days
                    before the paycheck is due. The Company will provide
                    electronic direct deposit of paychecks. When electronic
                    direct deposit of per diem and expense checks becomes
                    available to other Company employees, the Company will
                    provide the service for Crewmembers.

         5.15.3.    JURY DUTY
                    A Crewmember who is required to serve on jury duty will
                    receive no reduction in his MBPG for up to five (5) Duty
                    Days of jury duty, per occurrence. Any jury pay received
                    during the five (5) Days will be reimbursed to the Company.
                    A Crewmember who receives notice of jury duty will
                    immediately inform the Director of Operations, or his
                    designee, and will cooperate with the Company in obtaining a
                    postponement or release from jury duty, if required. Any
                    transportation required to attend jury duty is the
                    responsibility of the Crewmember.

         5.15.4.    SPECIAL PROJECTS
                    A Crewmember who performs a special project for the Company
                    will be compensated at an individually negotiated rate.







                                      -19-
<PAGE>   20

SECTION 6 - EXPENSES, LODGING AND TRANSPORTATION

6.1.        PER DIEM

         6.1.1.     DOMESTIC
                    Per Diem for Domestic duty will be paid at the rate set
                    forth below:

<TABLE>
<CAPTION>
                    --------------------------------------------------------------------------------
                                  EFFECTIVE DATE                                  RATE
                    --------------------------------------------------------------------------------
<S>                              <C>                                              <C>
                                 November 1, 1999                                 $1.50
                    --------------------------------------------------------------------------------
                                 November 1, 2000                                 $1.60
                    --------------------------------------------------------------------------------
                                 November 1, 2001                                 $1.65
                    --------------------------------------------------------------------------------
                                 November 1, 2002                                 $1.70
                    --------------------------------------------------------------------------------
</TABLE>

                    Except as provided in subsection 17.3.3., Domestic per diem
                    will commence when a Crewmember is required to report for
                    duty at his Base or depart his Residence Airport, if
                    applicable, until the Crewmember is released from duty at
                    his Base or is returned to his Residence Airport, if
                    applicable.

         6.1.2.     INTERNATIONAL
                    Per Diem for International duty will be paid at the rate set
                    forth below:

<TABLE>
<CAPTION>
                    --------------------------------------------------------------------------------
                                  EFFECTIVE DATE                                  RATE
                    --------------------------------------------------------------------------------
<S>                              <C>                                              <C>
                                 November 1, 1999                                 $2.05
                    --------------------------------------------------------------------------------
                                 November 1, 2000                                 $2.15
                    --------------------------------------------------------------------------------
                                 November 1, 2001                                 $2.25
                    --------------------------------------------------------------------------------
                                 November 1, 2002                                 $2.35
                    --------------------------------------------------------------------------------
</TABLE>

                    International Per Diem will be paid while a Crewmember is on
                    assignment outside the contiguous forty-eight (48) United
                    States, commencing at block out from the last Domestic
                    airport and ending at block in at the first Domestic
                    airport. In addition, an extended layover override of fifty
                    cents ($0.50) per hour will be paid for all International
                    layovers that exceed seventy-two (72) hours. The extended
                    layover override will begin at the seventy-third (73rd) hour
                    and end at block out from the layover station.

         6.1.3.     NEW HIRE TRAINING
                    A new-hire Crewmember who receives Training prior to his
                    qualification as a Crewmember will not be paid per diem
                    until completion of OE.

         6.1.4.     PAYMENT
                    Per Diem will be paid no later than the end of the Bid
                    Period following the Bid Period in which it was earned.

6.2.       LODGING
           Except as provided in subsection 17.3.3., when a Crewmember is away
           from his Base, the Company will designate and provide suitable single
           occupancy lodging in a location convenient to the airport when the
           Company determines it is necessary or when a scheduled layover or
           anticipated delay is greater than six (6) hours, block in to block
           out. The Company will consult periodically with the Union Hotel
           Committee to discuss the suitability of lodging and will give
           reasonable consideration to the recommendations of the committee. The
           Company will pay for lodging, tax, and Company-related telephone
           calls or faxes. All other incidental charges will be paid by the
           Crewmember when checking out.



                                      -20-
<PAGE>   21

         6.2.1.     NEW HIRE TRAINING
                    A new-hire Crewmember who receives Training prior to his
                    qualification as a Crewmember will not be provided lodging
                    until completion of OE.

6.3.       LOCAL TRANSPORTATION
           When the Company is required to provide lodging, the Company will
           provide transportation between the airport and the place of lodging.
           When transportation is not provided by the Company within one (1)
           hour after block in, a Crewmember may use any available means of
           transportation to the place of lodging and will be reimbursed for
           expenses substantiated by receipts.

6.4.       RENTAL CAR
           If approved by the Director of Operations, or his designee,
           Crewmembers on layover greater than forty-eight (48) hours may rent a
           car, limited to one (1) car per crew. Moving violations and parking
           tickets and all other incurred expenses in connection with such
           rental cars are the responsibility of the Crewmember.

6.5.       PERSONAL VEHICLE
           If a Crewmember is authorized to use his vehicle on Company business,
           he will be reimbursed at the current Company rate, but not less than
           twenty-nine ($.29) cents per mile and for necessary tolls
           substantiated by receipts. The Crewmember must indicate the
           origination and termination points of travel and must properly submit
           the expense for payment.






                                      -21-
<PAGE>   22

SECTION 7 - MOVING EXPENSES

7.1.       ELIGIBILITY
           A Crewmember may move at Company expense under any of the following
           circumstances, provided he moves to within one hundred (100) miles of
           his new Base from a point beyond one hundred (100) miles of his new
           Base:

         7.1.1.     NEW BASE AWARD
                    When a Crewmember is awarded a vacancy at a new Base as a
                    result of the initial bid to that Base.

         7.1.2.     INVOLUNTARY BASE ASSIGNMENT
                    When a Crewmember (except a new-hire Crewmember who is being
                    assigned to his first Base) is involuntarily assigned to
                    fill a Base vacancy as a result of insufficient bidders.

         7.1.3.     BASE DISPLACEMENT
                    When a Crewmember's move is the result of his Displacement
                    from a Base.

         7.1.4.     RECALL TO A DIFFERENT BASE
                    When a furloughed Crewmember is recalled to a different Base
                    than that from which he was furloughed.

7.2.       COORDINATION WITH COMPANY
           Prior to committing for a move, a Crewmember must coordinate the move
           with the Company.

7.3.       MOVING EXPENSES
           A Crewmember will be reimbursed for the following expenses, provided
           he moves his primary residence within one (1) year after being
           eligible:

         7.3.1.     PERSONAL
                    Actual moving expenses, including insurance and other normal
                    costs, for up to a maximum of fifteen thousand (15,000)
                    pounds of household effects, including yard and workshop
                    tools, motorcycles and lawn equipment. Moving expenses for
                    household effects must be substantiated by receipts.

         7.3.2.     VEHICLES
                    When a Crewmember drives his vehicle(s) from his former
                    residence to his new residence, the rate of reimbursement
                    will be at the current Company rate, but not less than
                    twenty-nine ($.29) cents per mile, for the most direct AAA
                    mileage between such points for the first two (2)
                    automobiles. The Company will reimburse the Crewmember for
                    the reasonable and actual expenses of meals and lodging for
                    the Crewmember and his family for the time spent in travel
                    to his new residence. A day of travel will be four hundred
                    (400) miles by the most direct AAA mileage. All lodging will
                    be the quality of that used on Crewmember layovers.




                                      -22-
<PAGE>   23

         7.3.3.     MOBILE HOMES
                    A Crewmember owning and living in a mobile home who moves
                    such mobile home to his new Base will be allowed actual
                    moving expenses, provided those expenses do not exceed the
                    amount provided for in subsections 7.3.1.
                    and 7.3.2., above.

7.4.       ACCOMMODATIONS IN LIEU OF MOVING EXPENSES
           If a Crewmember eligible for moving expenses elects not to move to
           his new Base, the Company will provide lodging and per diem in
           accordance with subsection 17.3.3. at his new Base. If a Crewmember
           exercises this subsection and subsequently moves, the cost of lodging
           and per diem will be deducted from the reimbursable moving expenses.

7.5.       NEW-HIRE CREWMEMBERS
           A new-hire Crewmember will not be eligible for moving expenses when
           reporting to his initial Base assignment or award.





                                      -23-
<PAGE>   24

SECTION 8 - SICK LEAVE

8.1.       ACCRUAL
           A new-hire Crewmember will be credited with seven (7) Days of sick
           leave but will not accrue additional sick leave until the completion
           of one (1) year of Active Service. Upon completion of one (1) year of
           Active Service, a Crewmember will accrue sick leave at the rate of
           seven-thirteenths (.54) of a Day for each Bid Period of Active
           Service to a maximum of forty-two (42) Days.

8.2.       SICK LEAVE PAY

         8.2.1.     BANK DEBIT
                    A Crewmember's sick leave bank will be debited the lesser of
                    one (1) Day for each Day on sick leave or, at a rate of
                    three point five (3.5) hours per Day, the number of whole
                    Days necessary to bring him to MBPG. The sick leave bank of
                    a Crewmember who has exceeded his MBPG at the time he
                    becomes unavailable for duty because of illness or injury
                    will be debited one (1) Day of sick leave as an
                    administrative charge, regardless of the number of Days that
                    he is unavailable for duty. At no time will sick leave
                    result in payment that exceeds a Crewmember's MBPG.

         8.2.2.     SCHEDULED DUTY DAYS
                    A Crewmember will not be charged sick leave on a scheduled
                    duty free Day.

8.3.       SICK LEAVE USAGE

         8.3.1.     CREW SCHEDULING CONTACT
                    A Crewmember will contact Crew Scheduling at least every
                    third (3rd) consecutive duty Day missed because of illness
                    or injury. A Crewmember need not comply with the preceding
                    sentence if he specifies a specific period of time for the
                    absence because of the nature of the illness or injury. A
                    Crewmember must report when he is available for duty.

         8.3.2.     EXCLUSIONS
                    A Crewmember will not be entitled to sick leave when illness
                    or injury is a result of the Crewmember's willful disregard
                    of accepted safety practices, willful intention to injure
                    himself or another, illness or injury while in the employ of
                    another employer, the abuse of alcohol or the use of illegal
                    drugs.

         8.3.3.     WORKER'S COMPENSATION
                    If an illness or injury is occupationally related, sick
                    leave may be used to augment workers compensation income
                    replacement benefits. The combination of sick leave and
                    workers compensation income replacement will not exceed a
                    Crewmember's MBPG.





                                      -24-
<PAGE>   25

8.4.       SICK LEAVE BANK REPLENISHMENT
           Within the two (2) Bid Periods following the Bid Period in which a
           Crewmember uses sick leave, he may have his sick leave bank
           replenished, on a Day for a Day basis, by performing duty pursuant
           to subsection 20.4.1.5. A Crewmember must notify Crew Scheduling at
           the time he accepts Open Time of his intent to replenish his sick
           leave bank. If the Crewmember is assigned a Trip Sequence containing
           more Days than his sick leave bank was debited, the remaining Days
           will be paid in accordance with subsection 5.9.

8.5.       DISABILITY
           A Crewmember may use his accrued sick leave to supplement his
           short-term disability benefits provided for in subsection 10.4. The
           sum of sick leave and short-term disability benefits will not exceed
           a Crewmember's MBPG.

8.6.       PHYSICIAN'S STATEMENTS
           The Company may require a physician's statement, which will state, at
           a minimum, the nature of the illness or injury and the expected
           duration of the Crewmember's inability to perform his duties to
           substantiate illness or injury. The Company may also require a
           physician's statement authorizing return to duty. If the Crewmember
           is required to visit a physician designated by the Company, the
           Company will pay for the examination.

8.7.       VACATION CONCURRENT WITH ILLNESS
           A Crewmember on sick leave when his scheduled vacation commences will
           be removed from sick leave during the vacation and, if scheduled for
           duty, returned to sick leave at the end of the vacation if the
           illness or injury continues.

8.8.       RETIREMENT
           On or after reaching the FAA-required retirement age for Pilots, the
           Company will pay a Crewmember fifty percent (50%) of any accrued sick
           leave at the time of his retirement at the hourly rate that the
           Crewmember held at retirement.

8.9.       GENERAL

         8.9.1.     RECALL
                    A recalled Crewmember will retain all unused sick leave
                    accrued prior to the furlough.

         8.9.2.     STATEMENTS
                    Each Crewmember's pay statement will show unused accrued
                    sick leave.

         8.9.3.     OUTSIDE WORK
                    A Crewmember will not work for any other employer while on
                    sick leave.

         8.9.4.     SENIORITY AND LONGEVITY
                    A Crewmember on sick leave will continue to accrue seniority
                    and longevity.

         8.9.5.     RESUMPTION OF DUTY
                    A Crewmember returning from sick leave will be returned to
                    his assigned duty at the earliest, reasonable opportunity.
                    The Company may assign the Crewmember to reserve until he is
                    returned to his assigned duty.



                                      -25-
<PAGE>   26

SECTION 9 - VACATION

9.1.     ACCRUAL
         Upon completion of one (1) year of Active Service, a Crewmember will be
         credited with fourteen (14) days of vacation.

         A Crewmember will accrue vacation based on Active Service in accordance
         with the following:

<TABLE>
<CAPTION>
                Completed Years         Vacation Days         Vacation Days
                  Of Service           Accrued Per Bid       Accrued Per Year
                                           Period
                ---------------        ---------------       ----------------
<S>             <C>                    <C>                   <C>
                      1 - 4                 1.08                   14
                      5 +                   1.62                   21
</TABLE>

9.2.     VACATION PAY

         Vacation pay will be computed at the Crewmember's rate of pay at the
         time vacation is taken or paid in lieu of vacation. A Crewmember will
         not receive less than his MBPG in a Bid Period in which all or part of
         his vacation occurs provided he is available for duty for the remainder
         of his scheduled duty Days. Vacation pay is three point five (3.5)
         hours of Flight Pay for each Day of vacation. Pay in lieu of vacation
         may be requested at any time.

9.3.     DUTY

        9.3.1.    NO DUTY
                  A Crewmember will not be required to perform any duty while on
                  vacation.

        9.3.2.    DUTY FREE DAYS
                  A scheduled vacation Day that falls on a scheduled duty free
                  Day will not be deducted from a Crewmember's vacation bank. A
                  Crewmember who has awarded vacation covering an entire Bid
                  Line will not be awarded that Bid Line, but his bid choice
                  will be used to determine the number of vacation Days to be
                  deducted from his vacation bank.

9.4.     ANNUAL VACATION BID

        9.4.1.    PROCEDURE
                  On or before October 1st of each year, the Company will mail
                  to each Crewmember a bid package containing vacation periods
                  available for the next calendar year and a bid form. The
                  Company must receive the completed bid form no later than
                  October 31st. Vacation will be awarded in order of seniority
                  at the Base in Type and Crew Class. A Union representative may
                  be present during the awarding of vacation. The Company will
                  mail the results to all Crewmembers no later than November
                  20th.

        9.4.2.    PROBATIONARY CREWMEMBER
                  At the time of the annual vacation bid, a Crewmember with less
                  than one (1) year of Active Service may bid a scheduled
                  vacation in the following calendar year provided such vacation
                  occurs after completion of one (1) year of Active Service.




                                      -26-
<PAGE>   27

          9.4.3.    FAILURE TO BID
                    A Crewmember who fails to bid or fails to bid sufficient
                    choices will not be awarded a scheduled vacation.

9.5.       VACATION OPTIONS
           A Crewmember may exercise the following options with his accrued
           vacation (The desired option(s) must be indicated on the bid form):
           Take the vacation in the calendar year, be paid in lieu of vacation,
           bank the vacation or a combination of the above.

9.6.       VACATION SPLITS
           Scheduled vacation may be split into periods of not less than seven
           (7) Days. Split vacation bids must be designated primary, secondary
           and tertiary on the bid form. A Crewmember's primary vacation block
           will be awarded in seniority order. The secondary vacation block will
           be awarded after all other Crewmembers have been awarded their
           primary vacation bid. Secondary vacation blocks will be awarded in
           seniority order among those Crewmembers who have bid a secondary
           block. Tertiary vacation blocks, if any, will be awarded in the same
           manner.

9.7.       UNSCHEDULED VACATION
           If a Crewmember has vacation Days in his bank, he may, depending on
           the operational needs of the Company, be awarded previously
           unscheduled vacation.

9.8.       VACATION RESCHEDULING

          9.8.1.    RESCHEDULE
                    The Company will not change any vacation date after the
                    sixtieth (60th) Day prior to the beginning of the vacation
                    except by mutual agreement between the Crewmember and the
                    Company.

          9.8.2.    RELINQUISH
                    A Crewmember may elect to relinquish his awarded vacation by
                    giving the Company written notice at least sixty (60) Days
                    prior to the beginning of the vacation.

          9.8.3.    CHANGE OF CREWMEMBER STATUS
                    Irrespective of subsection 9.8.1., above, a Crewmember who
                    changes Base, Type or Crew Class after vacation periods have
                    been awarded will be granted his choice of remaining
                    available vacation periods in his new Base, Type and Crew
                    Class. The Company will make every effort to permit the
                    Crewmember to retain his originally awarded vacation period.
                    If Company requirements preclude retention of this period,
                    the Crewmember will be notified, within twenty-one (21) Days
                    after changing Base, Type or Crew Class, that his vacation
                    must be changed and will be provided a list of vacation
                    periods available.

          9.8.4.    VACATION SLIDE
                    A Crewmember's vacation period will slide one (1) Day if,
                    because of a reroute or reschedule, the Crewmember will have
                    less than a twelve (12) hour rest period after release at
                    his Base immediately prior to the beginning of his vacation.
                    The Company will return a Crewmember to his Base or a
                    mutually agreed upon location prior to the beginning of his
                    vacation.



                                      -27-
<PAGE>   28

9.9.       VACATION BANK

          9.9.1.    MAXIMUM BANK
                    A Crewmember with five (5) years or less of Active Service
                    may bank up to twenty-eight (28) vacation Days. A Crewmember
                    with more than five (5) years of Active Service may bank up
                    to forty-two (42) vacation Days.

          9.9.2.    PAY OUT

                   9.9.2.1.    EXCESS BANK
                               Vacation Days accrued in excess of the maximum
                               allowable bank as of December 31 of each year
                               will be paid on the second paycheck of January in
                               the following year.

                   9.9.2.2.    CESSATION OF EMPLOYMENT
                               If a Crewmember resigns, retires, is terminated
                               or dies, the Crewmember or his estate will be
                               paid for all accrued vacation provided the
                               Crewmember has completed one (1) year of Active
                               Service. In case of resignation, the Crewmember
                               must give the Company at least fourteen (14) Days
                               written notice of resignation in order to receive
                               accrued vacation.

                   9.9.2.3.    SUPPLEMENT TO SICK LEAVE OR DISABILITY BENEFITS
                               A Crewmember may use accrued vacation to
                               supplement his sick leave or short-term
                               disability benefits. The combination of sick
                               leave, disability benefits and vacation will not
                               exceed a Crewmember's MBPG.

9.10.      GENERAL

         9.10.1.    VACATION DAY
                    Vacation will begin at 0000Z and end at 2359Z at a
                    Crewmember's Base.

         9.10.2.    STATEMENTS
                    A Crewmember's pay statement will show his accrued vacation.




                                      -28-
<PAGE>   29

SECTION 10 - HEALTH AND WELFARE

10.1.      LIFE INSURANCE
           The Company will provide life insurance for a Crewmember who has
           completed ninety (90) Days of Active Service. Coverage will be equal
           to one (1) year at the Crewmember's MBPG, rounded to the nearest one
           thousand dollars ($1,000). Effective July 1, 2000, a Crewmember who
           has completed five (5) years of Active Service will be provided
           coverage equal to two (2) years at the Crewmember's MBPG, rounded to
           the nearest one thousand dollars ($1,000). A Crewmember will continue
           to be covered by life insurance while operating a Company flight
           within a hostile area. Life insurance will be continued during the
           first thirty (30) Days of a leave of absence.

         10.1.1.    ADDITIONAL LIFE INSURANCE
                    The Company may offer additional life insurance that each
                    Crewmember would be eligible to purchase.

10.2.      ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE
           The Company will provide accidental death and dismemberment insurance
           for a Crewmember who has completed ninety (90) Days of Active
           Service. Coverage will be equal to one (1) year at the Crewmember's
           MBPG, rounded to the nearest one thousand dollars ($1,000).
           Accidental death and dismemberment insurance will be continued during
           the first thirty (30) Days of a leave of absence.

10.3.      HEALTH AND DENTAL INSURANCE
           The Company will provide health and dental insurance for a Crewmember
           desiring coverage who has completed ninety (90) Days of Active
           Service. Overall coverage levels will not be less than the overall
           coverage levels in effect on the effective date of this Agreement.
           The Company may change insurance carriers or offer alternative plans,
           such as HMOs or PPOs.

         10.3.1.    COBRA
                    When a Crewmember leaves the service of the Company,
                    including leaves of absence, he may be entitled to a
                    continuation of all or part of his health and dental
                    insurance coverage under COBRA. If a Crewmember is eligible
                    for coverage under COBRA, all information regarding
                    coverage, premiums, deadlines and forms will be forwarded to
                    him at the address the Company has on file.

         10.3.2.    LEAVES OF ABSENCE
                    A Crewmember on a leave of absence must pay the employee
                    portion of premiums during the first thirty (30) Days of the
                    leave if he desires to remain covered. For leaves extending
                    beyond thirty (30) Days, the Crewmember must, if he is
                    eligible, elect COBRA to continue coverage, except as
                    required by applicable law.





                                      -29-
<PAGE>   30

         10.3.3.    PREMIUMS FOR HEALTH AND DENTAL INSURANCE
                    The premium costs of health and dental insurance coverage
                    will be shared between the Company and the Crewmember.
                    Premium costs for Crewmembers will be no less favorable than
                    those provided to other groups of Company employees.
                    Notwithstanding the above, Crewmembers will have premium
                    costs no greater than set forth in the table below:

<TABLE>
<CAPTION>
                    Years of Active Service          Single Coverage           Family Coverage
                    -----------------------          ---------------           ---------------
<S>                 <C>                              <C>                       <C>
                          1 through 3                     $60.00                    $150.00
                          4 through 6                     $40.00                    $100.00
                         greater than 6                   no cost                   no cost
</TABLE>

         10.3.4.    CONTINUATION OF HEALTH AND DENTAL INSURANCE AFTER RETIREMENT
                    The Company will provide for continuation of all or a
                    portion of a Crewmember's health and dental insurance
                    coverage after retirement. Such coverage will be offset by
                    COBRA. The cost of such coverage will be borne by the
                    Crewmember and will not exceed the Company's cost for such
                    insurance. Such coverage will be available to retired
                    Crewmembers who have exceeded the FAA mandatory retirement
                    age for Pilots and will continue until the minimum age to
                    qualify for Medicare health insurance. If a Crewmember does
                    not elect this coverage or elects to discontinue this
                    coverage, he will no longer be eligible for such coverage.

10.4.      SHORT-TERM DISABILITY INSURANCE
           The Company will provide short-term disability insurance for a
           Crewmember who has completed ninety (90) Days of Active Service.
           Short-term disability benefits will be not less than sixty (60)
           percent of a Crewmember's MBPG. The maximum benefit per week will be
           not more than six hundred dollars ($600). Short-term disability
           benefits will begin, pursuant to the terms of the policy, after the
           required waiting period and after the Crewmember has been placed on a
           Medical Leave of Absence. Short-term disability benefits will
           continue for up to six (6) Months.

10.5.      LONG-TERM DISABILITY INSURANCE
           The Company will offer long-term disability insurance that each
           Crewmember would be eligible to purchase in accordance with the terms
           of the policy. The Union and the Company will periodically review the
           advisability of changing coverage and insurance carriers.

10.6.      ILLNESS OR INJURY WHILE IN THE SERVICE OF THE COMPANY

         10.6.1.    MEDICAL CARE AWAY FROM BASE
                    If a Crewmember suffers a work-related illness or injury
                    away from his Base on Company business and the injury
                    requires medical care away from his Base, the Company will
                    pay all hospitalization and medical expenses that are not
                    covered by applicable insurance.




                                      -30-
<PAGE>   31

         10.6.2.    TRANSPORTATION
                    A Crewmember who becomes ill or injured on Company business
                    and who as a result is unable to complete his assignment
                    will be provided with necessary transportation to his Base
                    or residence as soon as prudent and possible. Such
                    transportation will be provided at Company expense if not
                    otherwise covered by applicable insurance.

         10.6.3.    WORKER'S COMPENSATION FILING PROCEDURE
                    A Crewmember who suffers a work-related illness or injury
                    covered by Worker's Compensation must report such illness to
                    the Company as soon as possible and complete an
                    injury/illness report. A claim for Worker's Compensation
                    must be filed in the state where the Crewmember is Based.






                                      -31-
<PAGE>   32

SECTION 11 - RETIREMENT

11.1.      TAX DEFERRED SAVINGS PLAN
           Not later than six (6) months after the date of signing of this
           Agreement, the Company will establish the Kitty Hawk International
           Crewmember's 401(k) Tax Deferred Savings Plan (the "Plan"). In
           accordance with the terms of the Plan, the Plan will be extended to
           all eligible Crewmembers. Crewmember participation in the Teamsters
           National 401(k) Plan will cease when the Kitty Hawk International
           Crewmember's 401(k) Plan is made available. All funds in the
           Teamsters National 401(k) Plan will be rolled over into the Plan
           without cost to the Crewmember. The Plan will allow a Crewmember to
           make self-directed investments. Transition from the Teamsters
           National 401(k) Plan to the Plan will occur with no interruption in
           payroll deductions.

11.2.      COMPANY CONTRIBUTIONS
           Pursuant to the Plan, the Company will match twenty-five percent
           (25%) of the first four percent (4%) of a Crewmember's contribution
           to the Plan, to a maximum of five hundred dollars ($500). For the
           year 2001 and subsequent years the Company will match twenty-five
           percent (25%) of a Crewmember's contribution to the Plan, up to the
           maximum permitted by law.

11.3.      VESTING SCHEDULE
           Company contributions to a Crewmember's 401(k) account will be vested
           in accordance with the following schedule:

<TABLE>
<CAPTION>
           ---------------------------------------------------------------------------
           Year of Active Service                          Percent of total Company
                                                           contribution that is vested
           ---------------------------------------------------------------------------
<S>        <C>                                             <C>
           1st                                             Zero percent (0%)
           ---------------------------------------------------------------------------
           2nd                                             Twenty percent (20%)
           ---------------------------------------------------------------------------
           3rd                                             Forty percent (40%)
           ---------------------------------------------------------------------------
           4th                                             Sixty percent (60%)
           ---------------------------------------------------------------------------
           5th                                             Eighty percent (80%)
           ---------------------------------------------------------------------------
</TABLE>

           All Company contributions will be fully vested after five (5) years
           of Active Service.

11.4.      PAYROLL DEDUCTIONS
           The Company will make payroll deductions for each Crewmember who
           participates in the Plan and deposit the funds into the account
           designated by the Plan Administrator in accordance with applicable
           laws. Prior to making the Plan available to Crewmembers, such funds
           will be deposited in the account designated by the Teamsters National
           401(k) Plan Administrator. Subsequent to making the Plan available to
           Crewmembers, such funds will be deposited in the account designated
           by the Plan Administrator.

11.5.      CREWMEMBER FUNDS IN PRE-EXISTING COMPANY 401(k) PLAN
           Those Crewmembers who have funds in the pre-existing Company 401(k)
           plan that were deposited into the Company plan prior to the Teamsters
           National 401(k) Plan being offered to Crewmembers will continue to
           have those funds held in the Company 401(k) plan, until or unless
           such Crewmembers elect to transfer the pre-existing Company 401(k)
           plan into the new Plan, in accordance with applicable laws.




                                      -32-
<PAGE>   33

SECTION 12 - UNIFORMS

12.1.      INITIAL UNIFORMS
           A Crewmember will wear the standard uniform as prescribed by the
           Company while on duty. The cost of the original uniform will be borne
           by the Crewmember. A payroll deduction plan will be made available.

12.2.      MAINTENANCE ALLOWANCE
           The annual uniform maintenance allowance for a Crewmember will be one
           hundred thirty dollars ($130.00), paid during the first Month
           following the anniversary of his Date of Hire and every year
           thereafter, provided the Crewmember is employed at the time the
           allowance is paid.

12.3.      REPLACEMENT OF DAMAGED ITEMS
           The Company will reimburse a Crewmember for any items of the uniform
           that are damaged in the performance of duty. A Crewmember requesting
           reimbursement for replacement of an item damaged in the performance
           of duty must submit an expense reimbursement form to the Company with
           the original receipt along with the damaged uniform item.

12.4.      COMPANY INSIGNIA
           The Company will provide each Crewmember, free of charge, any Company
           insignia, epaulets or emblem worn as part of the uniform. Such items
           will remain the property of the Company. Each Crewmember will be
           responsible for replacement of these items if they are lost.

12.5.      UNION INSIGNIA
           A Union lapel pin may be worn on the uniform.

12.6.      CHANGES IN UNIFORM
           The Company will consider the recommendations of the Crewmembers
           regarding any changes to the uniform.




                                      -33-
<PAGE>   34

SECTION 13 - PHYSICAL EXAMINATIONS

13.1.      COMPANY STANDARDS
           The physical standards required of a Crewmember are the standards
           established by the Federal Aviation Administration (FAA).

13.2.      CONFIDENTIALITY
           Information obtained from an FAA-required physical examination will
           be kept confidential between the doctor(s), the Crewmember and
           Company personnel concerned with the Crewmember's physical condition,
           unless otherwise required by law or regulation.

13.3.      FAA PHYSICAL EXAMINATIONS

         13.3.1.    CERTIFICATES TO TRAINING DEPARTMENT
                    A Crewmember will provide the Training Department with a
                    copy of his new current medical certificate by the twenty
                    fifth (25th) Day of the Month in which the old medical
                    certificate will expire. The Company may remove a Crewmember
                    from service without pay if he fails to comply with this
                    requirement. A Crewmember who is not able to exercise the
                    privileges of his medical certificate will notify the
                    Company of such inability in writing within twenty four (24)
                    hours.

         13.3.2.    SCHEDULING OF FAA PHYSICAL
                    During the Month in which a Crewmember's physical
                    examination is due, the Company will not prevent a
                    Crewmember from attending the examination. A Crewmember will
                    schedule his physical examination so as not to interfere
                    with any Company-required duty.

         13.3.3.    INABILITY TO MAINTAIN A FIRST CLASS MEDICAL CERTIFICATE
                    A Pilot who is unable to maintain a First Class Medical
                    Certificate but who is able to maintain a Second Class
                    Medical Certificate may elect to remain as, or revert to, a
                    First Officer. If the Pilot regains a First Class Medical
                    Certificate, he may bid for Captain.

13.4.      REIMBURSEMENT FOR A PHYSICAL EXAMINATION
           If a Crewmember is eligible for, and carries, Company health
           insurance, the Company will pay the cost of one (1) physical
           examination annually. The examination will be paid in full up to one
           hundred dollars ($100) without regard to the annual deductible. If
           the cost of the examination exceeds one hundred dollars ($100), the
           additional amount will be covered at eighty percent (80%), provided
           that the annual deductible has been satisfied.




                                      -34-
<PAGE>   35

13.5.      FAA DRUG AND ALCOHOL TESTING PROGRAMS

         13.5.1.    PROGRAM ADMINISTRATION AND DESCRIPTION
                    The Company and the Crewmembers will adhere to the current
                    FAA Drug and Alcohol Testing Programs. The Company will
                    provide each Crewmember and the Union with all FAA-required
                    material and information regarding the programs. The Company
                    will make every effort to schedule FAA-required drug testing
                    on a Crewmember's Duty Day. A Crewmember will not be called
                    in to take an FAA-required random alcohol test on a duty
                    free Day. The Company will notify Crewmembers, in writing,
                    of any changes, modifications, or additions to the programs.

         13.5.2.    REIMBURSEMENT OF EXPENSES
                    The Company will reimburse a Crewmember for the cost of
                    transportation, including mileage, to and from all
                    FAA-required drug and alcohol testing.

         13.5.3.    DRUG TESTING ON A SCHEDULED DUTY FREE DAY
                    A Crewmember who is called in for an FAA-required random
                    drug test on a scheduled duty free Day will be paid two (2)
                    hours Flight Pay in addition to all other compensation.






                                      -35-
<PAGE>   36

SECTION 14 - LEAVES OF ABSENCE

14.1.      PERSONAL LEAVE

         14.1.1.    REQUESTS
                    When the requirements of the Company will permit, at the
                    sole discretion of the Company, and upon written request
                    submitted by a Crewmember to the Company as far in advance
                    as possible, a Crewmember may be granted a leave of absence
                    without pay. Such approval will not be effective unless
                    stated in writing, specifying the beginning and ending dates
                    for the leave and signed by the Director of Operations, or
                    his designee.

         14.1.2.    SENIORITY AND LONGEVITY ACCRUAL
                    When a personal leave is granted, a Crewmember will continue
                    to accrue seniority during the first sixty (60) Days of the
                    leave. A Crewmember will not accrue sick leave, vacation or
                    longevity for pay purposes, starting with the first day of
                    the Bid Period following the Bid Period in which his leave
                    commenced. Accrual will recommence on the first Day of the
                    Bid Period in which a Crewmember returns from leave.

         14.1.3.    EXTENSIONS
                    Personal leave may be extended for additional periods when
                    approved in writing by the Company. Such approval will state
                    the ending date of the leave and be signed by the Director
                    of Operations, or his designee.

14.2.      MILITARY LEAVE
           A Crewmember who enters involuntary, extended military service will
           be granted military leave in accordance with applicable federal laws
           and regulations. Military leave will be without pay. Return to duty
           will be subject to a requalifying period not to exceed thirty (30)
           Days. Weekend drills and annual two (2) week requirements are dealt
           with in Section 20.

14.3.      UNION LEAVE
           With thirty (30) Days written notice, up to four (4) Crewmembers
           appointed as Union officials, representatives, or delegates will be
           granted leaves of absence without pay. A Crewmember on Union leave
           will accrue seniority and longevity for pay purposes but will not
           accrue longevity for any other purpose.

14.4.      MEDICAL LEAVE
           A Crewmember whose sick leave bank has been exhausted, or who has
           been on sick leave for seven (7) consecutive Days and who is unable
           to return to active status will be placed on medical leave of absence
           without pay. A medical leave of absence will not exceed three (3)
           years. A Crewmember on medical leave of absence will accrue seniority
           but will not accrue longevity for any purpose.





                                      -36-
<PAGE>   37

14.5.      FUNERAL LEAVE

         14.5.1.    DURATION
                    In the case of death in the immediate family, a Crewmember
                    is entitled to three (3) Days leave with pay for the purpose
                    of attending the funeral. The Crewmember will inform Crew
                    Scheduling which three (3) Day period is to be taken.

         14.5.2.    IMMEDIATE FAMILY
                    Immediate family will be limited to the Crewmember's spouse,
                    children, stepchildren, father, father-in-law, stepfather,
                    mother, mother-in-law, stepmother, sister, stepsister,
                    brother, and stepbrother. The Crewmember may be required to
                    provide verification of attendance at the funeral.

         14.5.3.    VACATION
                    A Crewmember who experiences the a death of an immediate
                    family member during a vacation must notify his supervisor
                    immediately upon receiving notice of the death and will have
                    up to three (3) Days of remaining vacation rescheduled at a
                    later date provided the Crewmember attends the funeral.

         14.5.4.    SCHEDULED DUTY FREE DAYS
                    Funeral leave will not apply when a Crewmember is on a
                    scheduled duty free Day.

14.6.      FAMILY AND MEDICAL LEAVE ACT (FMLA)

         14.6.1.    FMLA
                    A Crewmember is permitted a leave of absence to the extent
                    required by, and in accordance with, the terms of the FMLA.

         14.6.2.    SENIORITY AND LONGEVITY ACCRUAL
                    During FMLA leave, a Crewmember will accrue seniority and
                    longevity for pay purposes but will not accrue longevity for
                    any other purpose.

14.7.      MANAGEMENT CREWMEMBER LEAVE

         14.7.1.    SENIORITY AND LONGEVITY ACCRUAL
                    A Management Crewmember will be included on the Seniority
                    List(s), designated by title. A Management Crewmember will
                    accrue seniority and longevity, but will not accrue sick
                    leave or vacation in accordance with this Agreement.

         14.7.2.    EXCLUSION FROM THE AGREEMENT
                    A Management Crewmember is not subject to this Agreement.

         14.7.3.    MAXIMUM NUMBER
                    Management leave is limited to a maximum of eleven (11)
                    Crewmembers. The Company will provide the Union with a list
                    of Management Crewmembers and notify the Union in writing of
                    any changes.




                                      -37-
<PAGE>   38

         14.7.4.    401(k) PLAN
                    Management Crewmembers may participate in the 401(k) plan
                    set forth in Section 11.

         14.7.5.    DUES EXEMPTION
                    A Management Crewmember will not be required to pay a Union
                    initiation fee, Union dues or service fees.

         14.7.6.    FLYING RESTRICTION
                    A Management Crewmember will be limited to twenty-eight (28)
                    hours of out-of-seniority flying in any Bid Period when a
                    furlough is in effect.

14.8.      GENERAL

         14.8.1.    OTHER EMPLOYMENT
                    A Crewmember on a leave of absence will not, without prior
                    written permission of the Company, engage in any employment.

         14.8.2.    RETURN FROM LEAVE
                    A Crewmember returning from leave will return to a vacancy,
                    pursuant to Section 16, or to his former position, provided
                    that it still exists and his seniority will allow him to
                    hold the position. If the former position does not exist or
                    he can no longer hold the position, the Crewmember may bump
                    into any position for which he is qualified. If no such
                    position exists, the Crewmember may exercise his seniority
                    to assume another position.

         14.8.3.    PAY DURING REQUALIFICATION
                    Should qualification or requalification be necessary, a
                    Crewmember returning from leave will be paid new-hire pay
                    during such qualification or requalification for not more
                    than thirty (30) Days. If the qualification or
                    requalification period exceeds thirty (30) Days, the
                    Crewmember will receive his applicable MBPG for that portion
                    of the requalification that exceeds thirty (30) Days. If
                    qualification or requalification is necessary, the Company
                    will have up to thirty (30) Days following the Crewmember's
                    notification that he is available to resume duty to return
                    the Crewmember to pay status in accordance with this
                    subsection.




                                      -38-
<PAGE>   39

SECTION 15 - SENIORITY

15.1.      SENIORITY GOVERNS
           Except as otherwise provided in this Agreement, seniority will govern
           awards and assignments.

15.2.      SENIORITY LISTS

         15.2.1.    SEPARATE LISTS
                    Two (2) separate Seniority Lists will be maintained. The
                    Pilot's Seniority List will be based on a Crewmember's Date
                    of Hire with the Company as a Crewmember. The Flight
                    Engineer's Seniority List will be based on a Crewmember's
                    Date of Hire with the Company as a Crewmember. When two (2)
                    or more Crewmembers have the same Date of Hire in the same
                    Category, they will be placed on the applicable Seniority
                    List according to their age, i.e., the oldest Crewmember
                    will receive the more senior position.

         15.2.2.    LIST CONTENTS
                    The Pilots' Seniority List will include all Captains and
                    First Officers. The Flight Engineers' Seniority List will
                    include all Second Officers and Professional Flight
                    Engineers. Crewmembers hired by the Company after the date
                    of ratification of this Agreement will be placed on either
                    the Pilots' Seniority List or the Flight Engineers'
                    Seniority List by Date of Hire.

15.3.      SENIORITY ACCRUAL
           A Crewmember will accrue seniority continuously during his
           employment, except as otherwise provided in this Agreement.

15.4.      SENIORITY LIST CONTENT AND PUBLISHING

         15.4.1.    CONTENT
                    The Seniority Lists will contain the date of the List, the
                    category identification of the List, i.e., Pilot or Flight
                    Engineer, seniority numbers, Crewmembers' names, Dates of
                    Hire, birth dates, aircraft assignments, Crew Class, Check
                    Airman or management status, Leave Status, assigned Base and
                    designation as Prior Rights Flight Engineers.

         15.4.2.    POSTING
                    The Company will post the Seniority Lists at all Base(s) and
                    hubs. On or before January 15 and July 15 of each year, the
                    Company will mail an updated copy of the Seniority Lists to
                    each Crewmember's home address and to the Union. The person
                    issuing the Seniority Lists will date and sign the Lists.

15.5.      PROTESTS
           A Crewmember will be permitted ninety (90) days after posting of a
           Seniority List in which to protest, in writing to the Company, any
           omission or incorrect posting affecting his seniority. If a
           Crewmember fails to file such protest, he is bound by the list and
           has no further recourse regarding that or any subsequent list
           containing that omission or incorrect posting.



                                      -39-
<PAGE>   40

15.6.      LOSS OF SENIORITY
           A Crewmember having established a seniority date hereunder will not
           lose that date except by resignation or retirement, termination,
           furlough of more than six (6) continuous years or failure to return
           to duty upon expiration of a leave of absence.

15.7.      EFFECT OF BYPASS ON SENIORITY
           When a junior Crewmember is promoted over a senior Crewmember by
           reason of the failure of the latter to qualify in his turn, the more
           senior Crewmember will retain his position on the applicable
           Seniority List.

15.8.      LONGEVITY
           Longevity for pay and benefits will be based on a Crewmember's Date
           of Hire with the Company in any capacity, adjusted for leaves of
           absence and furloughs. Longevity will be utilized to determine
           entitlement to benefits and to establish rates of pay.

15.9.      PROBATION
           A Crewmember will be on probation until he has accumulated twelve
           (12) Months of Active Service from his Date of Hire as a Crewmember
           or the successful completion of his next proficiency check, whichever
           is later.

15.10.     FLIGHT ENGINEER TO PILOT BIDDING
           A Crewmember may exercise his seniority to move from the Flight
           Engineers' Seniority List to the Pilots' Seniority List by bidding
           for a Pilot vacancy.

         15.10.1.   MINIMUM REQUIREMENTS
                    A Crewmember submitting such a bid must meet the First
                    Officer minimum requirements set forth in Section 19.

         15.10.2.   TRAINING AVAILABILITY
                    A Crewmember who is awarded a bid pursuant to this
                    subsection must make himself available at a time convenient
                    to the Company for Training for the Pilot position.

         15.10.3.   FAILURE TO QUALIFY
                    A Crewmember awarded a bid pursuant to this subsection who
                    fails to qualify as a Pilot may return to his previous
                    position on the Flight Engineers' Seniority List provided
                    the Crewmember can qualify for such position.

         15.10.4.   REMOVAL FROM SENIORITY LIST
                    Upon successful qualification as a Pilot, including
                    completion of all required Training, a Crewmember awarded a
                    bid pursuant to this subsection will be removed from the
                    Flight Engineers' Seniority List.

15.11.     PILOT TO FLIGHT ENGINEER BIDDING
           A Crewmember may exercise his seniority to move from the Pilots'
           Seniority List to the Flight Engineers' Seniority List one (1) time
           only by bidding for a Flight Engineer vacancy.




                                      -40-
<PAGE>   41

         15.11.1.   BID SUBMISSION DEADLINE
                    Such a bid must be on file not less than one hundred eighty
                    (180) Days before the Crewmember reaches the FAA mandatory
                    Pilot retirement age.

         15.11.2.   MINIMUM REQUIREMENTS
                    A Crewmember submitting such a bid must meet the Flight
                    Engineer minimum requirements set forth in Section 19.

         15.11.3.   BID TO PROFESSIONAL FLIGHT ENGINEER
                    A Crewmember who, at the time of bid award, can qualify as a
                    Professional Flight Engineer will be placed on the Flight
                    Engineers' Seniority List, in accordance with his seniority,
                    upon successful qualification as a Flight Engineer.

         15.11.4.   BID TO SECOND OFFICER
                    A Crewmember who, at the time of bid award, cannot qualify
                    as a Professional Flight Engineer will be placed on the
                    Flight Engineers' Seniority List, in seniority order, below
                    the lowest seniority Prior Rights Flight Engineer, upon
                    successful qualification as a Flight Engineer.

         15.11.5.   HOLDING A BID ON FILE
                    If a bid filed pursuant to subsection 15.11.1. is not
                    awarded before the Crewmember reaches the FAA mandatory
                    Pilot retirement age, such bid will remain on file and
                    eligible for award until twenty-four (24) months after the
                    Crewmember reaches the FAA mandatory Pilot retirement age.
                    However, in such a case the Crewmember will be placed on the
                    Flight Engineer's Seniority List, in seniority order, below
                    the lowest seniority Prior Rights Flight Engineer.

         15.11.6.   TRAINING AVAILABILITY
                    A Crewmember who is awarded a bid pursuant to this
                    subsection must make himself available at a time convenient
                    to the Company for Training for the Flight Engineer
                    position. A Crewmember who declines a Flight Engineer class
                    date for reasons within his control forfeits rights to
                    subsections 15.11.3. and 15.11.5. If the Company elects to
                    delay Training, the affected Crewmember will not forfeit
                    rights to any part of this Section.

         15.11.7.   REMOVAL FROM SENIORITY LIST
                    Upon successful qualification as a Flight Engineer,
                    including completion of all required Training, a Crewmember
                    awarded a bid pursuant to this subsection will be removed
                    from the Pilots' Seniority List.

         15.11.8.   FAILURE TO QUALIFY
                    A Crewmember awarded a bid pursuant to this subsection who
                    fails to qualify as a Flight Engineer may return to his
                    previous position on the Pilots' Seniority List, provided
                    the Crewmember can qualify for such position.

         15.11.9.   DISPLACEMENT TO FLIGHT ENGINEER
                    The one-time bid limitation of this subsection will not
                    apply to a Crewmember who is Displaced from the Pilots'
                    Seniority List to the Flight Engineers' Seniority List.



                                      -41-
<PAGE>   42

SECTION 16 - FILLING OF VACANCIES

16.1.      VACANCY DEFINITION
           A vacancy means additional or open positions designated by the
           Company in any Base, Type and Crew Class.

16.2.      STANDING BID

         16.2.1.    STANDING BID DEFINITION
                    Each Crewmember must submit a signed and dated Standing Bid
                    on a form provided by the Company to the Director of
                    Operations, or his designee, by certified or registered
                    mail, return receipt requested, fax or hand delivery.
                    Standing Bids are effective upon receipt but will not be
                    considered for a vacancy notice that has closed. The
                    Standing Bid will indicate the Crewmember's preferences for
                    all Base, Type and Crew Class listings. A Standing Bid file
                    will be maintained by the Director of Operations, or his
                    designee. A Crewmember may inspect his bid during normal
                    office hours. A Crewmember who has no Standing Bid on file
                    will be assumed to have bid his present position.

         16.2.2.    STANDING BID UPDATES
                    A Crewmember's Standing Bid may be updated at any time. An
                    updated Standing Bid must be submitted on a form provided by
                    the Company, signed and dated by the Crewmember, to the
                    Director of Operations, or his designee, by certified or
                    registered mail, return receipt requested, fax or hand
                    delivery. Updated Standing Bids are effective upon receipt,
                    but will not be considered for a vacancy notice that has
                    closed.

16.3.      VACANCY FILLING
           Vacancies will be filled in accordance with the following procedure:

         16.3.1.    VACANCY NOTICE
                    The Company will determine the number of vacancies and post
                    a notice announcing all known vacancies. The notice will
                    state the Effective Date for each vacancy and the total
                    number of positions, by Base, Type and Crew Class, required
                    system wide. A copy of such notice will be mailed to each
                    Crewmember, including each furloughed Crewmember.

         16.3.2.    VACANCY CLOSING AND BID SUBMISSION
                    The notice will include a deadline by which updated Standing
                    Bids must be received by the Director of Operations, or his
                    designee, which will not be less than fourteen (14) Days
                    after the date such notice is mailed to Crewmembers. Each
                    notice will be numbered consecutively during a calendar
                    year. By mutual agreement, the Union and the Company may
                    reduce the deadline period.

         16.3.3.    BID AWARD
                    Bids will be awarded in seniority order to Crewmembers who
                    will be, or reasonably can be expected to be, available on
                    the date Training for the award commences. A Crewmember
                    appointed by the Union will be present at the time of bid
                    awards, if the Union so requests. A Crewmember awarded a bid
                    must meet the qualifications set forth in Section 19.



                                      -42-
<PAGE>   43

         16.3.4.    ADDITIONAL VACANCIES
                    Additional vacancies created by the bid awards will be
                    filled concurrent with the bid awards in seniority order,
                    based on a Crewmember's Standing Bid. No additional vacancy
                    notice will be required.

         16.3.5.    UNFILLED VACANCIES
                    Vacancies that remain unfilled after bids have been awarded
                    may be assigned in reverse Category seniority order or
                    filled by new-hire Crewmembers.

         16.3.6.    PUBLISHING OF BID RESULTS
                    Results of bid awards and assignments will be mailed to each
                    Crewmember within fourteen (14) Days after the specified
                    closing date and will refer to the notice number that
                    announced such vacancy(s). Results will include the
                    Effective Date, Base, Type, Crew Class, name and seniority
                    number of each successful bidder or assigned Crewmember.

16.4.      EQUIPMENT LOCK
           A Crewmember is not eligible to bid on any type of aircraft other
           than the type he is flying unless , on the Effective Date of the
           vacancy, he has completed eighteen (18) Months of Active Service from
           completion of his initial line check in his Type and Crew Class. This
           provision does not apply in the case of any Crewmember who has
           received notice of Curtailment in his Base, Type and Crew Class or
           who has been Displaced. When posting a vacancy notice, the Company
           may waive the equipment lock, provided the waiver is applied equally
           to all Crewmembers within a Crew Class. The waiver must be contained
           within the vacancy notice.

         16.4.1.    NEW EQUIPMENT TYPE
                    If the Company acquires a Type not previously in its fleet,
                    all non-probationary Crewmembers who bid for that Type will
                    have any existing equipment lock waived. This waiver applies
                    for twelve (12) Months from the date such Type is placed in
                    service.

16.5.      BYPASS
           If a Pilot, or a Flight Engineer who has bid for the Category of
           Pilot, has attained the age of 57 at the time of his bid award or
           Displacement, and Training is required, the Company may elect not to
           train the Crewmember and pay him as follows:

         16.5.1.    UPGRADE TO CAPTAIN
                    The Crewmember will be paid as a Captain until reaching the
                    FAA mandated retirement age for Pilots.

         16.5.2.    TRANSITION
                    The Crewmember will be paid an override of ten dollars
                    ($10.00) per hour for each hour credited until reaching the
                    FAA mandated retirement age for Pilots.





                                      -43-
<PAGE>   44

SECTION 17 - BASES

17.1.      UNION CONSULTATION
           The Company will confer with the Union before opening any new Base.

17.2.      INTERNATIONAL BASES
           If the Company desires to establish any Base outside the contiguous
           United States and the District of Columbia, the Union and the Company
           will meet and agree upon the changes necessary in this Agreement
           prior to establishing such a Base.

17.3.      DOMESTIC BASES

         17.3.1.    MINIMUM STAFFING LEVEL
                    If the Company desires to establish any Base inside the
                    contiguous United States and the District of Columbia, the
                    Base will be staffed initially with at least four (4) crews
                    by Type. The average annualized staffing at the base will be
                    maintained at a minimum of four (4) crews.

         17.3.2.    STAFFING LEVEL CHANGES
                    Subject to subsection 17.3.1., the Company may increase or
                    decrease the staffing level at any domestic Base as follows:

                   17.3.2.1.   INCREASED STAFFING
                               If the Company opens a new base or desires to
                               increase staffing within a Type and Crew Class at
                               an existing Base, it will award such positions in
                               seniority order in accordance with standing bids
                               on file from among Crewmembers in the appropriate
                               Type and Crew Class. If no Crewmember in the Type
                               and Crew Class has a standing bid on file for
                               such Base, the Company may junior assign to such
                               position from among Crewmembers in the Type and
                               Crew Class or may fill the position in accordance
                               with Section 16.

                   17.3.2.2.   DECREASED STAFFING
                               If the Company desires to decrease staffing
                               within a Type and Crew Class at a Base, it will
                               displace the most junior Crewmember in that Type
                               and Crew Class at the Base. In accordance with
                               his standing bid on file, the displaced
                               Crewmember will displace a more junior Crewmember
                               in his Type and Crew Class at any other Base. If
                               the displaced Crewmember is unable to fill a
                               position in his Type and Crew Class pursuant to
                               subsections 17.3.2.1. or 17.3.2.2., he will be
                               subject to the provisions of subsection 18.2..

                   17.3.2.3.   NO MOVING EXPENSES
                               A Crewmember who changes Bases voluntarily or
                               involuntarily in accordance with the provisions
                               of subsection 17.3. will not be eligible for
                               moving expenses.





                                      -44-
<PAGE>   45

         17.3.3.  THIRTY-FIVE (35) MILE RULE

                   17.3.3.1.   PER DIEM IN BASE
                               A Crewmember whose principal residence is more
                               than thirty-five (35) miles from his Base will be
                               eligible for Per Diem for all hours beginning
                               when he reports for a flight assignment at his
                               Base or is required to be on reserve, other than
                               R-3, at his Base and ending when he is released
                               from all duty at his Base for a Day off meeting
                               the requirements of subsection 20.2.2.3.

                  17.3.3.2.    LODGING IN BASE
                               A Crewmember whose principal residence is more
                               than thirty-five (35) miles from his Base will be
                               eligible for lodging in his base beginning when
                               he reports for a flight assignment at his Base or
                               is required to be on reserve, other than R-3, at
                               his Base and ending when he is released from all
                               duty at his Base for a Day off meeting the
                               requirements of subsection 20.2.2.3. A Crewmember
                               who is eligible for lodging under this subsection
                               who reports for an assignment during which he
                               will be provided with lodging in accordance with
                               subsection 6.2. will check out from the in-Base
                               lodging during such an assignment.

17.4.      TEMPORARY BASES
           The Company may establish temporary Bases within the contiguous
           United States and the District of Columbia for up to three (3)
           consecutive Bid Periods, when establishment of a permanent Base is
           not practical. Temporary Bases may be bid only by Crewmembers in the
           Base, Type and Crew Class designated by the Company. If there are
           insufficient bidders, the Company may assign Crewmembers to a
           temporary Base, in inverse seniority order. Lodging will be provided
           while the Crewmember is in his temporary Base. Per Diem will be
           provided continuously from the time the Crewmember leaves his
           permanent Base or Residence Airport for the temporary Base assignment
           until he returns to his permanent Base or Residence Airport after his
           temporary assignment is completed. Transportation to and from the
           temporary Base will be provided at the beginning and the end of the
           temporary assignment. Release for all scheduled Days free of duty
           will occur at the Crewmember's temporary Base.





                                      -45-
<PAGE>   46

SECTION 18 - CURTAILMENT, DISPLACEMENT, FURLOUGH AND RECALL

18.1.      CURTAILMENT
           When a reduction in the required number of Crewmembers becomes
           necessary in any Base, Type and Crew Class, a Curtailment will occur.
           A notice of Curtailment will be published prior to the effective date
           of the Curtailment.

         18.1.1.    CURTAILMENT PROCEDURE
                    If a Curtailment is not satisfied by the awarding of a
                    vacancy, retirement, resignation, termination, death or
                    leave of absence, a Displacement will occur.

18.2.      DISPLACEMENT
           When, because of a Curtailment, a Crewmember can no longer hold his
           position, a Displacement will occur.

         18.2.1.    DISPLACEMENT PROCEDURE
                    Displacement will occur in inverse order of seniority. A
                    displaced Crewmember may exercise his seniority to assume
                    any position in his Type and Crew Class or, if no such
                    position is available, to assume any position he can hold.

18.3.      FURLOUGH
           If a Displaced Crewmember is unable to hold any position, he may be
           furloughed.

         18.3.1.    VOLUNTARY FURLOUGH
                    Prior to a furlough, the Company may grant voluntary
                    furloughs.

         18.3.2.    NOTICE OF FURLOUGH
                    When a Crewmember is to be furloughed, he will be given at
                    least fourteen (14) Days written notice, or pay in lieu
                    thereof, except when the furlough is caused by a strike, Act
                    of God, involuntary grounding of Company aircraft or other
                    circumstances beyond the Company's control. In such cases,
                    the Company will give as much notice as possible.
                    Announcements of furlough will be posted at all Bases and
                    hubs. Notice to an affected Crewmember will be registered or
                    certified mail, return receipt requested, or hand delivered
                    to, and signed for by, the Crewmember. An affected
                    Crewmember on a Trip Sequence that does not transit any
                    Bases or hubs will be notified of his furlough directly by
                    the Company not later than twelve (12) Days prior to the
                    effective date of the furlough.

         18.3.3.    RETENTION OF SENIORITY
                    A Crewmember will accrue seniority but not longevity while
                    on furlough.

         18.3.4.    CHANGE IN ADDRESS OR TELEPHONE NUMBER
                    A furloughed Crewmember will notify the Company within
                    twenty four (24) hours of any change in his address or
                    telephone number.

         18.3.5.    STANDING BID
                    A furloughed Crewmember should maintain his Standing Bid
                    while on furlough. If no Standing Bid is on file, or if
                    insufficient choices are listed, the Crewmember will be
                    recalled to the Base, Type and Crew Class of the Company's
                    choice.



                                      -46-
<PAGE>   47

         18.3.6.    FURLOUGH EXPIRATION
                    A Crewmember who has not been recalled within six (6) years
                    from the date of his furlough will forfeit his seniority and
                    will not be entitled to recall.

18.4.      RECALL
           When a vacancy exists in a Category that is not filled in accordance
           with Section 16, the Company will recall a furloughed Crewmember in
           that Category before filling the vacancy with a new-hire Crewmember.

         18.4.1.    CATEGORY SENIORITY ORDER
                    A furloughed Crewmember will be recalled in Category
                    seniority order to unfilled vacancies in his Category.
                    However, a furloughed Second Officer meeting the
                    requirements of subsection 19.1.2.1. will be recalled to
                    First Officer provided no Pilot is on furlough, and, a
                    furloughed Pilot meeting the requirements of subsection
                    19.1.2.2. will be recalled to Second Officer provided no
                    Prior Rights Flight Engineer is on furlough and he is unable
                    to hold a position as First Officer.

         18.4.2.    BYPASS OF RECALL
                    If a furloughed Crewmember desires to be bypassed for
                    recall, he must notify the Company in writing that he wishes
                    to be placed on the bypass list. The Crewmember may remove
                    his name from the bypass list at any time. If all furloughed
                    Crewmembers in a Category are on the bypass list at the time
                    of a recall, the most junior Crewmember in the recalled
                    Category on the bypass list must accept recall or he will be
                    terminated.

         18.4.3.    RECALL NOTICE
                    A notice of recall will be in writing, by certified or
                    registered mail, return receipt requested, to the
                    Crewmember's last address on file with the Company, with a
                    copy to the Union. The recalled Crewmember must reply in
                    writing to the Company, by certified or registered mail,
                    return receipt requested, within seven (7) Days of date of
                    receipt of the recall notice. A Crewmember accepting recall
                    must be able to report for duty within fourteen (14) Days of
                    receipt of the recall notice. If the Crewmember's address on
                    file with the Company is outside the United States, he will
                    be allowed thirty-one (31) Days in which to be able to
                    report for duty. If, after accepting recall, the Crewmember
                    is unable to report for duty because of circumstances beyond
                    his control, he will be placed on an appropriate leave of
                    absence.

         18.4.4.    WAIVER OF RECALL NOTICE
                    A Crewmember may accept early recall and waive the
                    provisions of subsection 18.4.3., above, by telephone or any
                    other means. Oral waivers will be followed up in writing.

         18.4.5.    FAILURE TO RESPOND OR REPORT
                    A Crewmember will be terminated if he fails to state his
                    intent to accept recall within seven (7) Days of receipt of
                    the recall notice, if the US Post Office informs the Company
                    that the recall notice is undeliverable, if he fails to
                    respond to a recall notice within thirty-one (31) Days of
                    the mailing of the recall notice or if he fails to report
                    for duty after recall.



                                      -47-
<PAGE>   48

         18.4.6.    MINIMUM RECALL DURATION
                    A recall will be for a minimum of sixty (60) Days.

         18.4.7.    NEW-HIRE FLYING EXCLUSION
                    A new-hire Crewmember will not be placed on Flight Pay
                    status until all recalled Crewmembers in his Category have
                    been placed on Flight Pay status unless a recalled
                    Crewmember fails to complete Training successfully or delays
                    his own Training.

         18.4.8.    PAY WHEN RECALLED
                    Should qualification or requalification be necessary, a
                    recalled Crewmember will be paid new-hire pay during such
                    qualification or requalification, for not more than thirty
                    (30) Days. If the qualification or requalification period
                    exceeds thirty (30) Days, the Crewmember will receive his
                    applicable MBPG for that portion of the qualification or
                    requalification period that exceeds thirty (30) Days.





                                      -48-
<PAGE>   49

SECTION 19 - TRAINING

19.1.      QUALIFICATIONS

         19.1.1.    FAA REQUIREMENTS
                    A Crewmember must meet all FAA qualifications and
                    certification requirements applicable to his Crew Class and
                    Type.

         19.1.2.    COMPANY MINIMUM REQUIREMENTS
                    The minimum requirements for bid award are set forth below.
                    The Company may reduce the requirements provided they are
                    applied equally to all Crewmembers in any notice of vacancy.
                    The minimum requirements may be increased if required by the
                    FAA or with the agreement of the Union.

                  19.1.2.1.    FIRST OFFICER MINIMUM REQUIREMENTS:

                           19.1.2.1.1.    CERTIFICATES
                                          A Commercial Pilot Certificate with
                                          Instrument and Multi-Engine Land
                                          Rating; and

                           19.1.2.1.2.    FLYING EXPERIENCE
                                          1,500 hours total pilot time; and

                           19.1.2.1.3.    MEDICAL CERTIFICATE
                                          An FAA First Class Medical
                                          Certificate, and

                           19.1.2.1.4.    SIMULATOR EVALUATION
                                          A satisfactory simulator evaluation;
                                          and

                           19.1.2.1.5.    WRITTEN EXAMINATION
                                          Successfully complete the FAA ATP
                                          written examination or an equivalent
                                          Company examination.

                           19.1.2.1.6.    FLIGHT ENGINEER UPGRADES
                                          A Flight Engineer may use fifty
                                          percent (50%) of his Flight Engineer
                                          time with the Company, up to a maximum
                                          of 750 hours, to satisfy the
                                          requirement set forth in subsection
                                          19.1.2.1.2.

                  19.1.2.2.    SECOND OFFICER MINIMUM REQUIREMENTS:

                           19.1.2.2.1.    CERTIFICATES
                                          A Commercial Pilot Certificate with
                                          Instrument and Multi-Engine Land
                                          Ratings; and

                           19.1.2.2.2.    FLYING EXPERIENCE
                                          1,500 hours total pilot time; and

                           19.1.2.2.3.    MEDICAL CERTIFICATE
                                          An FAA First or Second Class Medical
                                          Certificate, and



                                      -49-
<PAGE>   50

                           19.1.2.2.4.    WRITTEN EXAMINATION
                                          Successfully complete the FAA Flight
                                          Engineer written examination(s).

                  19.1.2.3.   PROFESSIONAL FLIGHT ENGINEER MINIMUM REQUIREMENTS:

                           19.1.2.3.1.    CERTIFICATES
                                          An Aircraft Mechanic Certificate with
                                          Airframe and Powerplant Ratings.  A
                                          Flight Engineer Certificate with a
                                          Turbojet Rating; and

                           19.1.2.3.2.    MEDICAL CERTIFICATE
                                          An FAA First or Second Class Medical
                                          Certificate; and

                           19.1.2.3.3.    COMPANY EMPLOYEES
                                          A Company employee may substitute the
                                          appropriate FAA written examination(s)
                                          for the Flight Engineer Certificate
                                          requirement set forth in subsection
                                          19.1.2.3.1.

                  19.1.2.4.   CAPTAIN MINIMUM REQUIREMENTS:

                           19.1.2.4.1.    CERTIFICATES
                                          An Airline Transport Pilot
                                          Certificate; and

                           19.1.2.4.2.    FLYING EXPERIENCE
                                          5,000 hours of total pilot time, or,
                                          twenty-four (24) Months of pilot
                                          experience on Company aircraft, or,
                                          500 hours of pilot time with the
                                          Company in Type, but not less than
                                          2,500 hours of total pilot time; and

                           19.1.2.4.3.    MEDICAL CERTIFICATE
                                          An FAA First Class Medical
                                          Certificate.

                           19.1.2.4.4.    FIRST OFFICER UPGRADES
                                          A First Officer with the Company is
                                          exempted from the requirements of
                                          subsection 19.1.2.4.1., provided he
                                          has passed the FAA ATP written
                                          examination.

19.2.      COMPANY-PROVIDED TRAINING
           The Company will provide the necessary manuals and Training to meet
           the requirements of the FAA-Approved Training Program at no cost to
           the Crewmember.

19.3.      TRAINING RECORDS REVIEW
           A Crewmember may review all pertinent forms at the conclusion of each
           Training or check period. He will be provided a copy of his Training
           event form(s) at the conclusion of each Training course or check
           period. The Crewmember will sign the Training event form(s). Upon
           written request to the Training Department, a Crewmember may review
           his permanent Training record.





                                      -50-
<PAGE>   51

19.4.      NOTICE OF TRAINING
           The Company will provide at least seven (7) Day's notice of all
           ground and simulator Training unless the Crewmember agrees to shorter
           notice.

19.5.      TRAINING SCHEDULES

         19.5.1.    RECURRENT GROUND SCHOOL
                    Recurrent ground school will not be scheduled so as to
                    conflict with a Crewmember's scheduled vacation. However, in
                    a Crewmember's grace Month, when the scheduling of recurrent
                    ground school is the result of his own actions, recurrent
                    ground school may conflict with his scheduled vacation. If
                    more than one (1) recurrent ground school period is
                    available in a Bid Period, the ground school periods will be
                    assigned at the Company's discretion.

         19.5.2.    RECURRENT SIMULATOR TRAINING
                    Recurrent simulator Training and recurrent proficiency
                    checks will not be scheduled so as to conflict with a
                    Crewmember's scheduled vacation, unless a Crewmember is in
                    his grace Month. A Crewmember must attend his assigned
                    recurrent simulator Training period(s) and recurrent
                    proficiency check(s).

         19.5.3.    ONE-IN-SEVEN
                    Unless waived by all Crewmembers in a Training class, a
                    Crewmember will be provided at least one (1) period of
                    twenty-four (24) consecutive hours free of all duty during
                    any seven (7) consecutive Days assigned to Training, except
                    for recurrent Training.

         19.5.4.    MINIMUM SCHEDULED DAYS FREE OF DUTY
                    A Crewmember scheduled for initial, transition or upgrade
                    Training of fifteen (15) or more Days duration will be
                    scheduled for five (5) consecutive Days free of duty prior
                    to the commencement of such Training. A Crewmember may waive
                    such Days free of duty. However, such waiver will not cause
                    the waived Days to be paid under subsection 5.9. Training
                    will not be scheduled for seven (7) consecutive Days.

         19.5.5.    REST BEFORE SIMULATOR
                    If a Crewmember reports directly from line flying to the
                    simulator, the Company will schedule that Crewmember for
                    twelve (12) hours free of all duty between arrival at the
                    simulator city and the simulator briefing. If, because of
                    circumstances beyond the Company's control, less than ten
                    (10) hours free of all duty is available, the Crewmember may
                    elect to reschedule the simulator period.

         19.5.6.    SIMULATOR PERIOD DURATION
                    Simulator Training or check periods will not be scheduled to
                    exceed four (4) hours per Day, excluding briefing and
                    debriefing.





                                      -51-
<PAGE>   52

19.6.      INITIAL, UPGRADE AND TRANSITION TRAINING FAILURES

         19.6.1.    FIRST TRAINING FAILURE
                    When a successful bidder fails to qualify, he will be
                    returned to his former Crew Class and Type and will be given
                    requalification Training in accordance with the Company's
                    FAA-Approved Training Program. If the Crewmember fails to
                    requalify, he may be terminated. If his former Type is no
                    longer a part of the Company fleet, he will be given his
                    second Training attempt.

         19.6.2.    INELIGIBILITY TO BID AFTER FAILURES
                    A Crewmember who fails to complete Training successfully or
                    fails a pre-Training simulator evaluation will be ineligible
                    to bid on any vacancy requiring Training until he has
                    completed an additional five hundred (500) hours and twelve
                    (12) Months of active flying on the Type to which he is
                    assigned. The Company may waive this restriction. A
                    withdrawal from Training will be considered a failure to
                    complete Training under the terms of this Section.

         19.6.3.    SECOND TRAINING FAILURE
                    A Crewmember who fails to complete two (2) consecutive
                    Initial, Upgrade or Transition Training events successfully
                    may be terminated or be returned to his former Crew Class
                    for the duration of his employment.

         19.6.4.    FAILURE TO MEET TRAINING TIME LINES
                    A Crewmember who fails to complete Training because of the
                    failure to meet FAA-mandated Training time lines will
                    receive additional Training. If the failure to meet the time
                    lines was for reasons beyond the Crewmember's control and he
                    subsequently fails to complete Training successfully, he
                    will not be subject to subsection 19.6.3. However, he will
                    be subject to subsection 19.6.2.

         19.6.5.    FAILURE TO PASS PRE-TRAINING EVALUATIONS
                    A Crewmember who fails three (3) consecutive pre-Training
                    simulator evaluations may be restricted in his present Crew
                    Class for the duration of his employment.

19.7.      RECURRENT TRAINING FAILURES

         19.7.1.    FIRST FAILURE
                    A Crewmember who fails to complete a recurrent Training
                    event successfully will be given additional Training in the
                    areas of deficiency, as determined by the Director of
                    Training in consultation with the Professional Standards
                    Committee.

         19.7.2.    SECOND FAILURE
                    A Crewmember who receives additional Training and
                    subsequently fails to complete recurrent Training
                    successfully may be terminated.





                                      -52-
<PAGE>   53

19.8.      PROFESSIONAL STANDARDS COMMITTEE INVOLVEMENT

         19.8.1.    TRAINING FAILURES
                    The Company will advise a member of the Professional
                    Standards Committee whenever a Crewmember fails to complete
                    any Training event. Upon request, the Director of Training
                    will consult with a member of the Professional Standards
                    Committee and the Crewmember before the disposition of the
                    affected Crewmember is determined.

         19.8.2.    COMMITTEE MEMBER PAY PROTECTION
                    Committee Member pay protection is dealt with in subsection
                    28.7.

19.9.      TRAINING PAY
           Training Pay is dealt with in Section 5.

19.10.     GENERAL

         19.10.1.   REVENUE FLYING
                    Except for OE, a Crewmember will not be required to fly a
                    revenue flight while in initial or transition Training.

         19.10.2.   PROBATIONARY CREWMEMBERS
                    Training of probationary Crewmembers will be handled at the
                    Company's discretion.

         19.10.3.   RECURRENT TRAINING ORDER
                    Recurrent ground school must be completed successfully prior
                    to administering simulator Training or a proficiency check.

         19.10.4.   RE-INDEXING
                    The Company may reschedule the due Month of recurrent
                    Training to equalize the number of Crewmembers needing
                    recurrent Training over a twelve (12) Month period. The
                    Company will provide at least thirty (30) days notice to a
                    Crewmember whose due Month is being rescheduled. The
                    Crewmember may waive such notice.

         19.10.5.   GROUND TRANSPORTATION
                    The Company will provide ground transportation between a
                    place of lodging and a Training facility if ground
                    transportation is not provided by the place of lodging or
                    the Training facility.




                                      -53-
<PAGE>   54

SECTION 20 - SCHEDULING

20.1.      BID PERIOD
           A Bid Period will contain twenty-eight (28) days. The Company may
           utilize Bid Periods of other than twenty-eight (28) Days with mutual
           agreement between the Union and the Company.

         20.1.1.    MULTIPLE BID PERIODS AWARDED SEPARATELY
                    The Company may include up to three (3) Bid Periods in one
                    (1) Bid Package. Each Bid Period will be bid and awarded
                    separately and sequentially.

         20.1.2.    MULTIPLE BID PERIODS AWARDED CONCURRENTLY
                    When a scheduling requirement exceeds twenty-eight (28), but
                    no more than fifty-six (56) days, the Company may include
                    two (2) bid periods in one (1) Bid Package for one (1) or
                    more Lines of Flying, Composite Lines or Reserve Lines. The
                    two (2) bid periods will be bid and awarded as if they were
                    one (1) Bid Period. Concurrently awarded or assigned
                    consecutive Bid Lines will not contain more than twenty-one
                    (21) consecutive duty Days.

20.2.      BID LINE CONSTRUCTION

         20.2.1.    LINES OF FLYING, COMPOSITE LINES AND RESERVE LINES
                    The Company will construct Lines of Flying that may contain
                    Days free of duty, Trip Sequences and reserve Days. The
                    Company may also construct Composite Lines that will be
                    blank when published. The Company may also construct Reserve
                    Lines containing Days free of duty and reserve Days. Reserve
                    Days on a Bid Line will be designated R-1, R-2 or R-3. Lines
                    of Flying will contain all known flying, except that the
                    Company may withhold from Lines of Flying up to five (5)
                    percent of known flying, by Type, Base and Crew Class, to be
                    used for management flying or Training. Such time may be
                    designated Open Time at the Company's discretion.

         20.2.1.    SCHEDULED DUTY FREE DAYS
                    Except as provided in subsection 17.4., release for a
                    Crewmember's scheduled Days free of duty will occur in his
                    Base or Residence Airport.

                  20.2.1.1.    MINIMUM SCHEDULED DUTY FREE DAYS
                               Bid Lines will contain a minimum of twelve (12)
                               scheduled Days free of duty.

                  20.2.1.2.    INVIOLATE SCHEDULED DUTY FREE DAYS
                               A Crewmember may declare up to three (3)
                               consecutive scheduled duty free Days as
                               inviolate. Such declaration must be made not
                               later than forty-eight (48) hours prior to the
                               beginning of the Bid Period. A Crewmember is not
                               required to perform duty, including Junior
                               Assignment and Training, on an inviolate
                               scheduled duty free Day.




                                      -54-
<PAGE>   55

                  20.2.2.3.    MINIMUM CONSECUTIVE SCHEDULED DUTY FREE DAYS
                               The minimum scheduled duty free Days required in
                               subsection 20.2.2.1. will be scheduled in a
                               maximum of two (2) blocks of Days off, with a
                               minimum of three (3) Days off in any block.
                               Additional Days free of duty may be in blocks of
                               less than three (3).

                  20.2.2.4.    CONTACT ON SCHEDULED DUTY FREE DAYS
                               A Crewmember is not required to keep the Company
                               informed of his whereabouts or carry a pager
                               while on his scheduled duty free Days. A
                               Crewmember is not required to maintain contact
                               with the Company on a scheduled duty free Day
                               other than to comply with subsection 20.6.5.

20.3.      BID PROCEDURES

         20.3.1.    ELIGIBILITY TO BID
                    A Crewmember must be Type and Crew Class current and
                    qualified at bid close to bid a line. A Crewmember scheduled
                    for upgrade or transition Training in a Bid Period will not
                    be awarded a Bid Line that conflicts with such Training. A
                    Crewmember who is not expected to be available for at least
                    one half of the Days in the Bid Period will not be awarded a
                    line. Crew Scheduling will assign or construct a line with
                    pro-rated scheduled duty free Days, rounded to the nearest
                    whole Day for a Crewmember who is not awarded a line
                    pursuant to this subsection. A Crewmember who becomes
                    available after bid close will be assigned a Reserve Line
                    with pro-rated scheduled duty free Days, rounded to the
                    nearest whole Day. The Crew Scheduler will consider a
                    Crewmember's request regarding the scheduling of such duty
                    free Days.

         20.3.2.    BID PACKAGE CONTENTS
                    A Bid Package will be published for each Type at each Base
                    for each Bid Period. It will contain Trip Sequence
                    descriptions including report times, Bid Lines, Open Time,
                    the bid request form, the Bid Seniority List, Crewmember
                    vacation dates, the anticipated Recurrent ground school
                    dates, the anticipated Recurrent simulator periods and a
                    list of Crewmembers who require recurrent Training.

         20.3.3.    BID PACKAGE DISTRIBUTION
                    The Company will mail or e-mail a Bid Package to each
                    Crewmember's residence and post the Bid Package at Bases and
                    hubs, not later than twenty (20) Days before the last Day of
                    the Bid Period prior to the one being bid. If a Crewmember
                    does not have access to his residence, Bases or hubs, Crew
                    Scheduling will fax or e-mail a bid package to him upon
                    request.

         20.3.4.    BID SUBMISSION
                    Completed bid request forms may be submitted to the
                    Scheduling Department. A Crewmember may request confirmation
                    that his bid has been received.




                                      -55-
<PAGE>   56

         20.3.5.    BID AWARD SCHEDULE
                    Bids will close ten (10) Days before the last Day of the Bid
                    Period prior to the one being bid. The Company will award
                    and post the awards at Bases and hubs no later than five (5)
                    Days before the last Day of the Bid Period prior to the one
                    being bid. A re-bid will not occur after Bid Line awards are
                    posted. However, this will not prevent correction, within
                    seventy-two (72) hours of award, for errors in the bid
                    award.

                  20.3.5.1.    COMPOSITE LINE CONSTRUCTION
                               No later than seventy-two (72) hours after bid
                               award, the Company will utilize Open Time,
                               reserve Days and Days free of duty to construct
                               Composite Lines. Crewmembers awarded or assigned
                               Composite Lines will then be provided with a copy
                               of the Bid Line.

                  20.3.5.2.    RESERVE STATUS CHANGE
                               A Crewmember may have his reserve status (R-3,
                               R-2, R-1) on any reserve Day(s) changed before
                               the beginning of the Bid Period in accordance
                               with the response times in Section 23. Changes to
                               reserve status after the beginning of the Bid
                               Period are dealt with in Section 23.

         20.3.6.    BID PERIOD TRANSITION
                    A Crewmember must complete a Trip Sequence that continues
                    into the subsequent Bid Period.

                  20.3.6.1.    SCHEDULE CONFLICTS
                               If a Crewmember is awarded or assigned a Bid Line
                               that conflicts with a Trip Sequence from the
                               preceding Bid Period (e.g., he must be in two
                               places at once) or results in a potential
                               conflict with the FARs, Crew Scheduling will
                               adjust his Bid Line by dropping the conflicting
                               Days from the conflicting Trip Sequence(s) or
                               replacing them with a Trip Sequence(s) or reserve
                               Day that does not conflict.

                  20.3.6.2.    EXCESS DAYS
                               If a Crewmember is awarded or assigned a Bid Line
                               that, in combination with a Trip Sequence that
                               continues from the preceding Bid Period, will
                               cause him to have fewer than the minimum
                               scheduled duty free Days set forth in subsection
                               20.2.2.1., he may elect to drop sufficient Days
                               from a Trip Sequence(s) to meet the requirements
                               of subsections 20.2.2.1. and 20.2.2.3. Such
                               election will be coordinated with Crew
                               Scheduling. As an alternative, he may elect to
                               fly the extra Days and have the Days paid at the
                               rate set forth in subsection 5.9. If he elects to
                               fly the Trip Sequence(s), pay under subsection
                               5.9. will be calculated from the last Day of the
                               Trip Sequence(s) forward. He must coordinate his
                               election with Crew Scheduling within forty-eight
                               (48) hours of the bid award. If the Crewmember
                               fails to contact Crew Scheduling within
                               forty-eight (48) hours of the bid award, Crew
                               Scheduling will adjust his Bid Line by dropping
                               sufficient Days from a Trip Sequence(s) to cause
                               his Bid Line to comply with subsections 20.2.2.1.
                               and 20.2.2.3.



                                      -56-
<PAGE>   57

         20.3.7.    BID AWARDS
                    Bids will be awarded in seniority order by Type and Crew
                    Class in each Base. If a member of the Scheduling Committee
                    requests to be present at the award, he will be
                    accommodated, provided that his attendance does not
                    interfere with his ability to perform any scheduled duty. If
                    a Captain is unable to hold a line as a Captain because of
                    an insufficient number of lines, he will be awarded a line
                    as a First Officer in seniority order after all First
                    Officers have been awarded their bids.

         20.3.8.    FAILURE TO BID
                    If a Crewmember does not bid or if his bid does not comply
                    with this Section or contain sufficient choices, he will be
                    assigned a Bid Line after all other bids are awarded.

20.4.      OPEN TIME
           Open Time is known flying that is not placed into Lines of Flying and
           flying that subsequently becomes available during the Bid Period. A
           Trip Sequence that is dropped from a Crewmember's Bid Line for
           reasons such as vacation, leaves of absence, sick leave, Bid Period
           transition or Training is also Open Time. Prior to the beginning of a
           Bid Period, Open Time may be used to construct Composite Lines. The
           Company may award or assign a partial Trip Sequence.

         20.4.1.    OPEN TIME AWARD AND ASSIGNMENT
                    After the beginning of the Bid Period, except for a trip
                    scheduled to depart within forty-eight (48) hours of the
                    Company becoming aware of such trip, or for time assigned to
                    a Crewmember pursuant to other provisions of this Section,
                    Open Time will be awarded or assigned in the order listed
                    below:

                  20.4.1.1.    DEDICATED RESERVE
                               At the Company's option, to a Crewmember who is
                               serving in a designated reserve or standby role,
                               such as a reserve that is dedicated to the
                               specific customer for whom the trip is operating,
                               e.g., AMC and USPS standby.

                  20.4.1.2.    TRAINING
                               At the Company's option, to a Crewmember who
                               requires OE, route qualification or other line
                               flight Training.

                  20.4.1.3.    SHORTED TIME CREWMEMBER
                               To a Crewmember, in seniority order, who has lost
                               flying from his Bid Line and who is on a
                               scheduled Duty Day.

                  20.4.1.4.    MANAGEMENT CREWMEMBERS
                               At the Company's option, to a Management
                               Crewmember.





                                      -57-
<PAGE>   58

                  20.4.1.5.    VOLUNTEER
                               To a Crewmember, in seniority order by Type,
                               Category and Crew Class, who has volunteered for
                               Open Time. The Crewmember will have the option to
                               either replenish his sick leave bank, in
                               accordance with subsection 8.4., or be paid for
                               the flying. The Company may bypass a Crewmember
                               who, including the Open Time, is projected to
                               exceed eighty-four (84) actual flight hours for
                               the Bid Period or FAR annual Flight Time
                               limitations.

                  20.4.1.6.    RESERVE
                               To a Crewmember on reserve.

                  20.4.1.7.    JUNIOR ASSIGNMENT
                               If no reserve is available, to the most junior
                               available Crewmember on a scheduled duty free
                               Day. The most junior available Crewmember may be
                               bypassed if his junior assignment will create a
                               conflict with a Trip Sequence on his Bid Line.

                           20.4.1.7.1.    MAXIMUM NUMBER OF JUNIOR ASSIGNMENTS
                                          A Crewmember will not be junior
                                          assigned more than six (6) Days in any
                                          thirteen (13) consecutive Bid Periods,
                                          unless the Crewmember agrees
                                          otherwise.

                           20.4.1.7.2.    SCHEDULE CONFLICTS AS A RESULT OF
                                          JUNIOR ASSIGNMENT
                                          A Crewmember who, as a result of a
                                          junior assignment, is required to drop
                                          a subsequent Trip Sequence(s) because
                                          of either FAR or contractual Flight or
                                          Duty Time limitations may be
                                          rescheduled under subsection 20.5.2.
                                          However, he will be credited with the
                                          value of the junior assigned trip and
                                          the greater of the Trip Sequence(s)
                                          dropped or the Trip Sequence(s), if
                                          any, to which he is reassigned.

20.5.      RESCHEDULE AFTER BID AWARD

         20.5.1.   RESCHEDULE FOR TRAINING

                  20.5.1.1.    RESCHEDULE FOR ANOTHER CREWMEMBER'S TRAINING
                               If the Company removes a Crewmember from a Trip
                               Sequence(s) or reserve assignment for the purpose
                               of Training another Crewmember, the Company will
                               return the Crewmember to his Bid Line as soon as
                               practical. A Crewmember will not be required to
                               make up lost time on his scheduled duty free
                               Days. The Crewmember will be credited with the
                               greater of the Trip Sequence(s) from which he is
                               removed or the Trip Sequence(s) or reserve duty,
                               if any, to which he is assigned.





                                      -58-
<PAGE>   59

                20.5.1.2.      RESCHEDULE FOR A CREWMEMBER'S OWN TRAINING
                               If the Company removes a Crewmember from a Trip
                               Sequence(s) or reserve assignment for the purpose
                               of his recurrent Training, the Company will
                               return the Crewmember to his Bid Line as soon as
                               practical. A Crewmember will not be required to
                               make up lost time on his scheduled duty free
                               Days. The Crewmember will be credited with
                               Training pay pursuant to subsection 5.11.1.1. for
                               all Days rescheduled.

         20.5.2.    RESCHEDULE FOR OTHER THAN TRAINING
                    If the Company removes a Crewmember from a Trip Sequence(s)
                    for reasons such as trip cancellations, crew legality or
                    weather, it will return the Crewmember to his Bid Line as
                    soon as practical. A Crewmember will not be required to make
                    up lost time on his scheduled duty free Days. The Crewmember
                    will not be credited for the Trip Sequence(s) from which he
                    was removed. The Crewmember may be assigned to another Trip
                    Sequence(s) or to reserve.

20.6.      SCHEDULING PROCEDURES

         20.6.1.    TRIP SEQUENCE TRADES
                    Trip Sequence trades are permitted in accordance with Crew
                    Scheduling guidelines.

         20.6.2.    RESERVE ASSIGNMENTS
                    Reserve assignments are dealt with in Section 23.

         20.6.3.    RELEASE FROM DUTY
                    The Company may release a Crewmember from his Bid Line,
                    provided there are no additional flying or reserve
                    requirements.

         20.6.4.    DUTY AT RESIDENCE
                    A Crewmember may satisfy his Duty Day(s) on a Line of
                    Flying, Composite Line or Reserve Line at his residence at
                    the Company's discretion. A Crewmember will not be paid
                    in-base per diem or be provided with lodging on such days.

         20.6.5.    PRE-DUTY CHECK IN
                    A Crewmember will call Crew Scheduling within twenty-four
                    (24) to forty-eight (48) hours prior to the first Day of his
                    duty assignment(s).

         20.6.6.    POST DUTY CHECK IN
                    When a Crewmember completes a duty assignment, he will
                    contact the Company.





                                      -59-
<PAGE>   60

20.7.      GENERAL

         20.7.1.    SCHEDULING COMMITTEE
                    The Union will appoint a Scheduling Committee composed of
                    Crewmembers. Bid packages will be made available to
                    Scheduling Committee members, upon request, before
                    publication. The Company will consider recommendations of
                    the Scheduling Committee concerning scheduling policies and
                    procedures.

         20.7.2.    MILITARY DUTY
                    When a Crewmember has military duty of fourteen (14) Days or
                    less, he must bid all Bid Lines that accommodate such
                    military duty. Days of military duty will be considered a
                    Crewmember's scheduled duty free Days. If a Crewmember is
                    unable or fails to bid around his military duty, he will be
                    assigned Duty Days that will not conflict with his military
                    duty requirements.

         20.7.3.    REQUIRED RECORDS
                    The Company will keep a record of all Bid Packages and Bid
                    Line awards or assignments, and bid request forms for
                    thirteen (13) Bid Periods.

         20.7.4.    HOSTILE AREAS
                    Prior to operating a flight(s) into an area with ongoing
                    armed conflicts that may affect the personal safety of
                    Crewmembers, the Union and the Company will consult to
                    determine the procedures for such flight(s).

         20.7.5.    NOTIFICATION OF APPRECIABLE DELAY
                    The Company will notify a Crewmember of any appreciable
                    delay in his departure time as soon as practical after the
                    delay becomes known.




                                      -60-
<PAGE>   61

SECTION 21 - HOURS OF SERVICE

21.1.      FAR CONFLICTS
           If an FAR is more restrictive than a provision of this Section, the
           FAR will apply.

21.2.      DUTY TIME

         21.2.1.    DIRECTION OF THE COMPANY
                    During Duty Time, a Crewmember is under the control and
                    direction of the Company.

         21.2.2.    REPORT AND RELEASE TIMES
                    Duty Time or duty period begins when a Crewmember is
                    required to report for duty (normally one (1) hour prior to
                    scheduled departure for domestic flights and two (2) hours
                    for international flights but not more than two and one-half
                    (2 1/2) hours prior to scheduled departure for any flights)
                    or actually reports to the airport, whichever is later. Duty
                    Time or duty period ends fifteen (15) minutes after block-in
                    at the point where the flight terminates or when the
                    Crewmember is released by the Company, whichever is later.
                    If a Crewmember is called to the field for the purpose of
                    flight and is not used, his Duty Time or duty period ends
                    when the Crewmember is released by the Company.

         21.2.3.    REDUCED REPORT TIME
                    Affected Crewmembers and the Director of Operations, or his
                    designee, may reduce report time, in coordination with the
                    Captain, as provided in the Company GOM. A late departure
                    caused by this reduced report time will not be the
                    responsibility of the Crewmembers.

         21.2.4.    SUSPENSION OF DUTY TIME

                  21.2.4.1.    INVOLUNTARY
                               A Crewmember's Duty Time may be suspended once in
                               a duty period for less than a required rest
                               period provided Adequate Rest Facilities,
                               convenient to the airport, are made available.
                               The minimum time for such a suspension is five
                               (5) hours from release to report. If this
                               provision is exercised by the Company, the
                               affected Crewmember's previously accumulated Duty
                               Time is not changed by such suspension. Such
                               suspension will not be assigned retroactively.

                  21.2.4.2.    VOLUNTARY
                               A Crewmember may suspend his Duty Time once in a
                               duty period due to unforeseen operational
                               circumstances for less than a required rest
                               period, provided Adequate Rest Facilities are
                               made available. If this provision is exercised by
                               the Crewmember, with the concurrence of Crew
                               Scheduling, his previously accumulated Duty Time
                               is not changed by such suspension. Such
                               suspension will not occur retroactively.




                                      -61-
<PAGE>   62

         21.2.5.    MAXIMUM DUTY TIMES
                    When scheduling Crewmembers for flying, the Company will not
                    exceed the following Duty Time limitations:

                  21.2.5.1.    SINGLE CREW - DOMESTIC
                               Single Crew operating domestic flight(s) only -
                               sixteen (16) hours.

                  21.2.5.2.    AUGMENTED CREW - DOMESTIC
                               Augmented Crew operating domestic flight(s) only
                               - eighteen (18) hours.

                  21.2.5.3.    DOUBLE CREW - DOMESTIC
                               Double Crew operating domestic flight(s) only -
                               twenty (20) hours.

                  21.2.5.4.    SINGLE CREW - INTERNATIONAL
                               Single Crew operating international flight(s) -
                               eighteen (18) hours.

                  21.2.5.5.    AUGMENTED CREW - INTERNATIONAL
                               Augmented Crew operating international flight(s)
                               - twenty six (26) hours.

                  21.2.5.6.    DOUBLE CREW - INTERNATIONAL
                               Double Crew operating international flight(s) -
                               thirty (30) hours.

         21.2.6.    DEADHEAD DUTY LIMITATIONS
                    Deadhead duty limitations are dealt with in Section 22.

21.3.      REST

         21.3.1.    REST PERIOD
                    Rest is measured from release from duty until report for
                    duty as adjusted for operational requirements, delays in
                    transportation to and from the place of lodging and the
                    availability of lodging.

         21.3.2.    MINIMUM REST PERIOD - DOMESTIC
                    The rest period will be a minimum of eight (8) hours free of
                    all duty, unless a Crewmember exceeds, or is scheduled to
                    exceed eight (8) hours of flight in a twenty-four (24) hour
                    period.

         21.3.3.    MINIMUM REST PERIOD - INTERNATIONAL
                    If a Crewmember's duty period is less than eighteen (18)
                    hours, the rest period will be a minimum of ten (10) hours
                    free of all duty. If a Crewmember's duty period exceeds
                    eighteen (18) hours, the rest period will be a minimum of
                    twelve (12) hours free of all duty.

         21.3.4.    FATIGUE
                    If a Crewmember determines that fatigue is a factor in
                    continuing a flight or series of flights, the Captain will
                    coordinate with Crew Scheduling a rest period for the
                    affected Crewmember(s) of not less than twelve (12) hours
                    free of all duty.




                                      -62-
<PAGE>   63

         21.3.5.    INTERRUPTION OF REST PERIOD
                    During a rest period of twelve (12) hours or less, a
                    Crewmember will not be disturbed by the Company, except to
                    receive calls no more than two (2) hours prior to report
                    time or to notify a Crewmember that his flight will be
                    appreciably delayed. Any other earlier calls from the
                    Company during a rest period, except in case of personal
                    emergency, permits the Crewmember to begin a new rest
                    period.

         21.3.6.    REST AFTER RELEASE
                    A Crewmember released from duty after a Trip Sequence that
                    immediately precedes his scheduled duty free Days may elect
                    to remain at a release location for a rest period. If he
                    elects to remain at the release location, the Company will
                    provide the Crewmember with lodging so long as the release
                    location is not his Residence Airport and the release occurs
                    after a duty period of at least twelve (12) hours or viable
                    transportation from the release location to the Crewmember's
                    Residence Airport or Base is unavailable within four (4)
                    hours of release. Deadhead required after release from duty
                    remains the responsibility of the Company. If a Crewmember
                    is released at his Residence Airport or Base and elects to
                    remain in the release location, he will not be entitled to
                    pay under subsection 5.9.

21.4.      GENERAL

         21.4.1.    MIXING OF DOMESTIC AND INTERNATIONAL FLIGHTS
                    The Company may combine domestic and international flights
                    provided the maximum flight and Duty Time limitations of FAR
                    Part 121 or this Section are not exceeded.

         21.4.2.    ONE-IN-SEVEN
                    A Crewmember will receive at least one (1) twenty-four (24)
                    hour period free of all duty in any consecutive seven (7)
                    Days. A one-in-seven may be moved by the Company, with
                    notice to the Crewmember, but will not be assigned
                    retroactively.

         21.4.3.    AIRCRAFT REST FACILITIES FOR DOUBLE AND AUGMENTED CREWS
                    When the Company operates a flight scheduled for twenty (20)
                    or more hours of duty with a double or an augmented crew,
                    the aircraft must have enclosed, fully reclining, first
                    class seats or enclosed bunks with clean bedding to allow
                    each Crewmember to sleep. When the Company operates a flight
                    scheduled for less than twenty (20), but more than sixteen
                    (16), hours of duty with a double or an augmented crew, the
                    aircraft must have reclining seats located outside the
                    cockpit to allow each Crewmember to rest.





                                      -63-
<PAGE>   64

SECTION 22 - DEADHEADING AND COMMUTING

22.1.      COMMUTING

         22.1.1.    COMMUTE TO BASE OR ASSIGNMENT
                    A Crewmember who elects to Commute to his Base is
                    responsible for being at his Base prior to report time for
                    an assignment. A Crewmember who wishes to report to his
                    first point of departure or reserve assignment instead of
                    reporting to his Base must first coordinate with Crew
                    Scheduling and report for his first assignment at the time
                    determined by Crew Scheduling.

         22.1.2.    DUTY AND REST
                    Time spent Commuting is not duty. A Crewmember Commuting to
                    an assignment will ensure that he is adequately rested to
                    perform his required duties.

22.2.      DEADHEADING

         22.2.1.    COST OF DEADHEAD
                    The cost of Deadhead transportation will be paid by the
                    Company.

         22.2.2.    RESPONSIBILITY FOR DELAYS
                    When the Company provides transportation to an assignment
                    for a Crewmember, the Crewmember will not be held
                    responsible for delays beyond his control.

         22.2.3.    COMMERCIAL AIR TRANSPORTATION
                    When negotiating contracts with airline customers, the
                    Company will attempt to secure, at no additional cost to
                    itself, business class travel for commercial deadhead legs
                    that exceed six (6) hours published scheduled time. If such
                    travel has not been secured, the Company will provide
                    relevant correspondence to the Union, upon request.

         22.2.4.    TRANSPORTATION FOR JUNIOR ASSIGNMENT
                    A Crewmember who performs duty on a scheduled duty free Day
                    pursuant to Section 20.4.1.7. will be provided deadhead
                    transportation between his Residence Airport and his
                    assignment, if necessary, at no cost to the Crewmember.

22.3.    DEADHEAD DUTY CALCULATIONS

         22.3.1.    SINGLE CREW DEADHEAD TO A DUTY ASSIGNMENT
                    If a Crewmember who is part of a single crew Deadheads to a
                    duty assignment, he will not be scheduled for the
                    combination of the Deadhead time and duty in excess of
                    twenty (20) hours without an intervening rest period. If
                    such a Crewmember is provided the equivalent of business
                    class or better transportation, or a bunk, one-half (1/2) of
                    the Deadhead time will be credited toward the Duty Time
                    limitations set forth in Section 21.



                                      -64-
<PAGE>   65

         22.3.2.    AUGMENTED AND DOUBLE CREW DEADHEAD TO A DUTY ASSIGNMENT
                    If a Crewmember who is part of an augmented or double crew
                    Deadheads to a duty assignment without an intervening rest
                    period, one-half (1/2) of the Deadhead time will be credited
                    toward the Duty Time limitations set forth in Section 21.

         22.3.3.    DEADHEAD BETWEEN DUTY ASSIGNMENTS
                    If a Crewmember Deadheads between duty assignments and is
                    not provided an intervening rest period, all Deadhead time
                    will be credited toward Duty Time limitations.

         22.3.4.    DEADHEAD FROM A DUTY ASSIGNMENT
                    If a Crewmember Deadheads from a duty assignment to his
                    Residence Airport or Base, the Deadhead time will not be
                    credited toward Duty Time limitations, provided the
                    Crewmember waives his required rest period.

         22.3.5.    DEADHEAD TO AND FROM TRAINING
                    If a Crewmember Deadheads to and from a Training assignment,
                    the Deadhead time will not be credited toward Duty Time
                    limitations. For the purpose of this subsection, OE is not
                    Training.

22.4.      NO COCKPIT DUTY DURING DEADHEAD
           A Crewmember will not be required to operate the aircraft when
           Deadheading.

22.5.      DEADHEAD PAY

         22.5.1.    AIR TRANSPORTATION
                    A Crewmember who Deadheads by air will be credited with
                    Flight Pay for one-half (1/2) of the published scheduled
                    time. If a Crewmember Deadheads by air on a segment for
                    which there is no published schedule, he will be credited
                    with Flight Pay for one-half (1/2) of the Block-to-Block
                    time.

         22.5.2.    SURFACE TRANSPORTATION
                    A Crewmember who Deadheads by surface transportation will be
                    credited with Flight Pay for one-fourth (1/4) of the
                    published scheduled time. If a Crewmember Deadheads by
                    surface transportation on a segment for which there is no
                    published schedule, he will be credited with Flight Pay for
                    one-fourth (1/4) of the actual time.

         22.5.3.    REPORT TO DUTY ASSIGNMENT INSTEAD OF BASE
                    A Crewmember who reports to a duty assignment directly from
                    his Residence Airport in accordance with subsection 22.1.1.
                    will be paid Deadhead pay as if he had Deadheaded from his
                    Base to the duty assignment.

         22.5.4.    TRAINING
                    Travel to and from Training not in a Crewmember's Base is
                    Deadhead. Travel between Training in a Crewmember's Base and
                    a duty assignment on a scheduled Duty Day is Deadhead. All
                    other travel to and from Training is a Commute.




                                      -65-
<PAGE>   66

SECTION 23 - RESERVE

23.1.      LONG CALL RESERVE (R - 3)
           Long call reserve will be performed at a Crewmember's residence. A
           long call reserve Day begins at 0000Z and ends at 2359Z. A Crewmember
           on R-3 may be moved up to either R-2 or R-1.

         23.1.1.    CONTACT
                    When on long call reserve, a Crewmember must be able to be
                    contacted at his designated telephone number, pager or
                    answering machine. A Crewmember who elects to use an
                    answering machine or a pager is considered to have been
                    contacted when the pager is activated or a message is left
                    by Crew Scheduling. A Crewmember on long call reserve must
                    return a call to Crew Scheduling within one (1) hour of
                    being paged or from the time of the message, unless other
                    arrangements are made with Crew Scheduling.

         23.1.2.    RESPONSE
                    A Crewmember on long call reserve will use his best efforts
                    to obtain the first available departure from his Residence
                    Airport, unless a later departure is selected by Crew
                    Scheduling. A Crewmember on long call reserve must be able
                    to report to either his Base or another location that can
                    reasonably be reached within twelve (12) hours after being
                    contacted by Crew Scheduling. A Crewmember on R-3 who is
                    moved up to R-2 or R-1 must be able to report to the R-2 or
                    R-1 location within twelve (12) hours after being contacted
                    by Crew Scheduling.

         23.1.3.    COMPENSATION
                    A Crewmember who performs long call reserve on a scheduled
                    duty free Day will be paid in accordance with subsection
                    5.9.

         23.1.4.    EXPENSES
                    A Crewmember on long call reserve will not be provided
                    lodging or Per Diem.

23.2.      SHORT CALL RESERVE (R - 2)
           Short call reserve will be performed at any Company-designated
           location. A Crewmember on R-2 may be moved up to R-1 or moved down to
           R-3.

         23.2.1.    CONTACT
                    A Crewmember on short call reserve must be able to be
                    contacted at his designated telephone number or pager. A
                    Crewmember who elects to use a pager is considered to have
                    been contacted when the pager is activated. A Crewmember on
                    short call reserve must return a call to Crew Scheduling
                    within twenty (20) minutes of being paged or from the time
                    of a message, unless other arrangements are made with Crew
                    Scheduling.

         23.2.2.    RESPONSE
                    A Crewmember on short call reserve must be at the location
                    designated by the Company as soon as possible but no later
                    than two (2) hours after being contacted by Crew Scheduling.





                                      -66-
<PAGE>   67

         23.2.3.    COMPENSATION
                    A Crewmember who holds a Line of Flying or a Composite Line
                    who performs short call reserve will be credited with the
                    greater of three point five (3.5) hours of Flight Pay for
                    each such Day or the actual pay credit for that Day. A
                    Crewmember who performs short call reserve on a scheduled
                    duty free Day will be paid in accordance with subsection
                    5.9.

         23.2.4.    EXPENSES
                    A Crewmember on short call reserve will be provided lodging
                    and Per Diem in accordance with Section 6 and subsection
                    17.3.3.

         23.2.5.    ASSIGNMENT
                    If more than one qualified Crewmember, by Type and Crew
                    Class, is on short call reserve at the same location,
                    assignments will be on a first-in, first-out basis, except
                    when legality, Flight Time, Duty Time or scheduled Days free
                    from duty considerations preclude such an assignment order.

23.3.      STANDBY (R - 1)
           Standby will be performed at any Company-designated location. A
           Crewmember on R-1 may be moved down to either R-2 or R-3. Duty Time
           for standby begins when a Crewmember reports to the airport or other
           standby location assigned by the Company and ends when the Crewmember
           is released.

         23.3.1.    CONTACT
                    A Crewmember on standby must be available for immediate
                    contact by Crew Scheduling.

         23.3.2.    RESPONSE
                    Taking into account operational considerations, a Crewmember
                    on standby must be able to depart from the assigned airport
                    within one (1) hour of being contacted by Crew Scheduling.

         23.3.3.    COMPENSATION
                    A Crewmember on standby will be credited with three point
                    five (3.5) hours of Flight Pay for each standby Day or the
                    actual Flight Pay credit for the Day, whichever is greater.
                    A Crewmember who performs standby on a scheduled duty free
                    Day will be paid in accordance with subsection 5.9.

         23.3.4.    EXPENSES
                    A Crewmember on standby will be provided lodging and Per
                    Diem in accordance with Section 6 and subsection 17.3.3.

         23.3.5.    ASSIGNMENT
                    If more than one qualified Crewmember, by Type and Crew
                    Class, is on standby at the same location, assignments will
                    be on a first-in, first-out basis, except when legality,
                    Flight Time, Duty Time or scheduled Days free of duty
                    considerations preclude such an assignment order.




                                      -67-
<PAGE>   68

         23.3.6.    REST FACILITIES
                    A Crewmember on standby for more than six (6) hours will be
                    provided Adequate Rest Facilities or the aircraft rest
                    facilities set forth in subsection 21.4.3.





                                      -68-
<PAGE>   69

SECTION 24 - DISCIPLINE AND DISCHARGE

24.1.      HOLDING OUT OF SERVICE
           Prior to disciplining or discharging a Crewmember, the Company may
           hold the Crewmember out of service, with pay, until the conclusion of
           an investigatory hearing. Thereafter, the Crewmember may be held out
           of service pending further investigation with or without pay. If a
           Crewmember is held out of service without pay, the Company will
           either take disciplinary action or restore the Crewmember to pay
           status within sixty (60) Days after the conclusion of an
           investigatory hearing.

24.2.      INVESTIGATORY HEARING
           The Company will notify the Crewmember and the Union of the time,
           date and location of an investigatory hearing. A Crewmember may be
           represented by a Union representative at an investigatory hearing. It
           is the responsibility of the Crewmember to obtain Union
           representation.

         24.2.1.    EXPENSES
                    The Company will provide transportation and lodging for a
                    Crewmember required to attend an investigatory hearing,
                    except when the Crewmember is scheduled to be in the
                    location of the hearing or resides in the location of the
                    hearing or is Based in the location where the hearing will
                    be held.

24.3.      WRITTEN NOTIFICATION
           The Company will notify a Crewmember in writing of the reasons for
           any discipline or discharge, with a copy to the Union.

24.4.      GRIEVANCE RIGHTS
           A Crewmember who has been disciplined or discharged may file a
           grievance pursuant to Section 25. A non-probationary Crewmember who
           has been discharged may file a grievance directly at the step
           contained in subsection 25.4.




                                      -69-
<PAGE>   70

SECTION 25 - GRIEVANCE PROCEDURE

25.1.      GRIEVANCE DEFINITION
           A grievance is defined as a dispute between the Company and a
           Crewmember or the Union arising out of the interpretation or
           application of this Agreement or the discipline or discharge of a
           Crewmember. Grievances will not include proposed changes in rates of
           pay, hours of service or working conditions.

25.2.      STEP ONE - REQUEST FOR RELIEF
           Prior to filing a written grievance and within ten (10) Days after
           the Crewmember became aware or reasonably should have become aware of
           the circumstances from which the grievance arose, the Crewmember will
           discuss the matter with the Chief Pilot, or his designee, in an
           effort to resolve it. The Chief Pilot, or his designee, will respond
           to the Crewmember within ten (10) Days of the discussion.

25.3.      STEP TWO - FILING A WRITTEN GRIEVANCE
           If the Crewmember is not satisfied with the Chief Pilot's, or his
           designee's, response or if the Chief Pilot, or his designee, does not
           respond within ten (10) Days after the discussion in subsection
           25.2., the Union may file a written grievance with the Director of
           Operations, or his designee, by certified or registered mail, return
           receipt requested. Written grievances must contain a reference to the
           provision of the Agreement alleged to have been violated, a statement
           of the facts involved which is sufficiently detailed to allow
           investigation of the incident and any supporting documentation.

         25.3.1.    TIMELINES FOR FILING AND RESPONSE
                    Except for discharge grievances, a grievance must be filed
                    within thirty (30) Days after the Crewmember receives an
                    unsatisfactory response made in accordance with subsection
                    25.2., above, or forty (40) Days after the Crewmember
                    discusses the matter with his Chief Pilot, or his designee,
                    whichever occurs first. In the case of a discharged
                    Crewmember, the Union must file a grievance within thirty
                    (30) Days after the Crewmember receives written notice of
                    discharge. The Director of Operations, or his designee, will
                    file his decision with the Union in writing within twenty
                    (20) Days after receiving the grievance from the Union by
                    certified or registered mail, return receipt requested.

25.4.      STEP THREE - APPEAL TO SYSTEM BOARD OF ADJUSTMENT
           If the decision in subsection 25.3.1., above, is not satisfactory,
           the Union may appeal the decision to the Chairman of the System Board
           of Adjustment, with a copy to the Vice-Chairman. The appeal must be
           made in writing within fifteen (15) Days after receipt of the
           decision of the Director of Operations, or his designee, with a copy
           of the appeal to the Director of Operations, or his designee, sent by
           certified or registered mail, return receipt requested.

25.5.      TIMELINE VERIFICATION
           Filing dates will be considered to be postmark dates. Receipt dates
           will be considered to be the dates on the return receipt.






                                      -70-
<PAGE>   71

25.6.      TIME LIMIT EXTENSIONS AND PENALTIES
           All time limits in this Section may be extended by mutual agreement
           of the parties, confirmed in writing. If any decision made by the
           Company is not appealed by the Union within the time limit prescribed
           for such appeal, the decision of the Company will become final and
           binding. If the Company fails to render a decision within the time
           limits prescribed above, the grievance will be considered denied and
           automatically appealed to the System Board of Adjustment.

25.7.      PROBATIONARY CREWMEMBER EXCLUSION
           A probationary Crewmember may not file a grievance involving
           discipline or discharge.

25.8.      UNION REPRESENTATION
           Upon request, a Crewmember may be represented by a Union
           representative at any step of the Grievance Procedure.

25.9.      RECORDING OF SETTLEMENT
           If a grievance is settled, the settlement will be reduced to writing
           with a date certain for implementation. The Union will mail a copy
           of the settlement to the affected Crewmember(s) not later than
           thirty (30) Days after settlement.





                                      -71-
<PAGE>   72

SECTION 26 - SYSTEM BOARD OF ADJUSTMENT

26.1.      THE BOARD
           In compliance with the Railway Labor Act, as amended, a System Board
           of Adjustment is hereby established for the purpose of adjusting and
           deciding grievances that may arise under the terms of the Grievance
           Procedure and that are properly submitted to it. The Board will be
           known as The "Kitty Hawk International, Inc. Crewmembers' System
           Board of Adjustment," hereafter referred to as the "Board."

26.2.      COMPOSITION OF THE BOARD

         26.2.1.    MEMBER SELECTION
                    The Board will consist of four (4) members. Two (2) will be
                    selected by the Company and two (2) will be selected by the
                    Union. These appointees will be known as "Board Members." In
                    addition, the Company and the Union will each select an
                    alternate. If a Board Member is unavailable, the alternate
                    will serve in place of the absent Board Member. All members
                    of the Board will be employees of the Company.

         26.2.2.    TERMS OF OFFICE FOR BOARD MEMBERS
                    The Board Members and their alternates will serve for one
                    (1) year from the date of their selection and, thereafter,
                    until their successors have been selected. Vacancies will be
                    filled within thirty (30) Days in the same manner provided
                    for the selection of the original Board Members and
                    alternates.

         26.2.3.    CHAIRMAN AND VICE CHAIRMAN
                    The office of Chairman will be filled and held alternately
                    by a Board Member selected by the Union and by a Board
                    Member selected by the Company. When a Board Member selected
                    by the Union is Chairman, a Board Member selected by the
                    Company will be Vice Chairman and vice versa. The Chairman
                    or, in his absence, the Vice Chairman, will preside at
                    meetings of the Board and at hearings and will have a vote
                    in connection with all actions taken by the Board.

         26.2.4.    TERMS OF OFFICE FOR CHAIRMAN AND VICE CHAIRMAN
                    The terms of office of Chairman and Vice Chairman will be
                    one (1) year. A Company Board Member will be Chairman in odd
                    numbered years; a Union Board Member will be Chairman in
                    even numbered years. Terms of office will commence on
                    January 1 of each year.

26.3.      MEETING SCHEDULE
           The Board will meet quarterly in the city where the Company's general
           offices are located, unless the Parties agree upon an alternate
           location, at a time to be fixed by the Board, provided that at that
           time there are cases filed with the Board for consideration. The
           meetings will continue in session until all matters before the Board
           have been considered, unless otherwise mutually agreed to in writing.
           The Chairman may schedule additional meetings if requested by at
           least two (2) other Board Members. Each Party will assume the cost of
           their own expenses.





                                      -72-
<PAGE>   73

26.4.      BOARD MEMBER COMPENSATION
           Crewmembers will be released from flight duty to serve on the Board.
           Each Party will bear the cost of the compensation and expenses of its
           Board Members.

26.5.      JURISDICTION OF THE BOARD

         26.5.1.    LIMITATIONS
                    The Board has jurisdiction over all grievances growing out
                    of this Agreement. The jurisdiction of the Board does not
                    extend to proposed changes in rates of pay, hours of service
                    or working conditions.

         26.5.2.    REQUIREMENTS
                    The Board will consider any grievance properly submitted to
                    it, provided that the grievance has not been previously
                    settled in accordance with the provisions of Section 25.

26.6.      PROCEEDINGS BEFORE THE BOARD

         26.6.1.    AGENDA AND SUBMISSIONS
                    The Company and the Union will determine the agenda for the
                    Board not less than ten (10) Days prior to the date of the
                    hearing. The Union will forward copies of each submission,
                    including all papers and exhibits, to each Board member no
                    later than seven (7) Days prior to the date of the hearing.
                    Each submission will include the following:

                  26.6.1.1.    ISSUE
                               Question or questions at issue, including the
                               Section of the Agreement alleged to have been
                               breached; and

                  26.6.1.2.    FACTS
                               Statement of facts; and

                  26.6.1.3.    GRIEVANT POSITION
                               Position of the grievant(s); and

                  26.6.1.4.    COMPANY POSITION
                               Position of the Company; and

                  26.6.1.5.    DOCUMENTATION
                               Available supporting documentation.

         26.6.2.    ADDITIONAL MEETING DATES
                    If at least two (2) Board Members, one (1) from the Company
                    and one (1) from the Union, consider a matter of sufficient
                    urgency, an additional Board will meet at an earlier date
                    and place agreeable to the Board Members. The meeting will
                    be not more than thirty (30) Days after such request for a
                    meeting is made. The Chairman will give the necessary
                    notices of such a meeting to the Board Members and to the
                    parties to the dispute.





                                      -73-
<PAGE>   74

         26.6.3.    REPRESENTATION
                    Crewmembers may be represented at the Board hearing by any
                    person, or persons, as they may choose and designate. The
                    Company may be represented by any person, or persons, as it
                    may choose and designate. Evidence may be presented either
                    orally or in writing, or both.

         26.6.4.    WITNESSES
                    The Board Members selected by either Party may summon
                    witnesses who are deemed necessary by such Board Members.
                    Each Party will bear the cost of the compensation and
                    expenses of witnesses summoned by its Board Members. The
                    number of witnesses summoned at any one time will not be
                    greater than the number that can be spared without
                    interference with the operation of the Company. Each Party
                    may present witnesses on its behalf. Each Party will bear
                    the cost of the compensation and expenses of its witnesses.

         26.6.5.    COMPETENCY
                    The Board is competent to hear any grievance properly
                    submitted to it and decide that grievance by a majority vote
                    of all members of the Board. Decisions of the Board will be
                    in writing, final and binding, and will include
                    implementation dates. The Company will mail a copy of the
                    decision to the affected Crewmember(s) not later than thirty
                    (30) Days after decision is rendered.

26.7.      DEADLOCK PROCEDURES

         26.7.1.    SUBMISSION TO ARBITRATION
                    When a grievance is properly submitted to the Board and the
                    Board is unable, by majority vote, to decide the grievance,
                    the Board will declare itself deadlocked. The grievance upon
                    which the Board is deadlocked may be submitted to
                    arbitration by the Union or the Company within twenty (20)
                    Days from the close of the Board hearing by written notice
                    to the other Party with copies to the Chairman and Vice
                    Chairman of the Board.

         26.7.2.    FAILURE TO TIMELY SUBMIT TO ARBITRATION
                    If notice that arbitration is desired is not properly served
                    upon the other Party, with a copy to the Chairman and the
                    Vice-Chairman within twenty (20) Days after the close of the
                    Board hearing, the arbitrator will have no jurisdiction to
                    consider that grievance, and the grievance will be
                    considered withdrawn.

26.8.      FREEDOM TO ACT INDEPENDENTLY
           Each Board Member will be free to discharge his duty in an
           independent and uncoerced manner without fear that his individual
           relations with the Company, the Crewmembers, or the Union will be
           affected in any manner by any action taken by him in good faith in
           his capacity as a Board Member.





                                      -74-
<PAGE>   75

SECTION 27 - ARBITRATION

27.1.      THE ARBITRATION PROCEDURE
           An arbitration procedure is hereby established for the purpose of
           adjusting grievances that may arise under the terms of the Grievance
           Procedure and that are properly submitted to the procedure after all
           steps for settling grievances in the Grievance Procedure and System
           Board of Adjustment have been exhausted.

27.2.      STANDING PANEL
           If any grievance is properly appealed to arbitration, the arbitrator
           will be appointed by mutual agreement of the Company and the Union
           from the following standing panel of arbitrators:

                         Benjamin Aaron
                         Richard Bloch
                         Herbert Fishgold
                         Robert Harris
                         Peter Meyers
                         M. David Vaughn
                         Nicholas Zumas

           The Parties may mutually agree to add to or delete from the panel of
           arbitrators. The panel must always contain an odd number of
           arbitrators, but never less than seven (7).

27.3.      ARBITRATOR SELECTION METHOD
           If the Parties are unable to agree on the selection of an arbitrator,
           the Company and the Union will alternately strike a name from the
           panel until only one name remains. That individual will serve as the
           arbitrator for the grievance at issue. The order in which the Parties
           alternately strike names from the panel will be determined by a coin
           toss.

27.4.      HEARING DATE AND LOCATION
           The arbitrator will hear and decide the grievance as promptly as
           possible. All hearings will be held at a place determined by the
           Company and the Union.

27.5.      EXPENSES
           Each of the Parties will assume the compensation, traveling expense,
           and other expenses of its representatives and witnesses called or
           summoned by it. The number of witnesses summoned at any one time will
           not be greater than the number that can be spared without
           interference with the operation of the Company.

27.6.      ARBITRATOR'S COMPENSATION AND EXPENSES
           The compensation, traveling expense and other expenses of the
           arbitrator will be shared equally between the Company and the Union.

27.7.      COURT REPORTER COST
           If the Company or the Union independently requests that a court
           reporter be present at the hearing, the cost of the court reporter
           will be borne by the requesting party. If both Parties request a
           court reporter, the cost will be shared equally between the Company
           and the Union.



                                      -75-
<PAGE>   76

27.8.      LIMITATIONS
           The arbitrator will have no power to add to, subtract from, or modify
           any of the terms of this Agreement.

27.9.      AWARDS
           The award of the arbitrator will be final and binding on both
           Parties. The award of the arbitrator will be enforceable, at law or
           in equity, in any Federal Court having jurisdiction. The Company
           will mail a copy of the award to the affected Crewmember(s) not
           later than thirty (30) Days after it receives the award.

27.10.     JURISDICTION
           The arbitrator will have the sole and exclusive jurisdiction to
           determine whether a particular grievance is arbitrable.




                                      -76-
<PAGE>   77

SECTION 28 - PROFESSIONAL STANDARDS COMMITTEE

28.1.      COMMITTEE SELECTION
           The Union will appoint a Professional Standards Committee composed of
           Crewmembers. The Union will provide the Director of Operations, or
           his designee, with a current list of Professional Standards Committee
           members.

28.2.      COMMITTEE PURPOSE
           The purpose of the Professional Standards Committee is to identify
           problems affecting the professionalism, Training, safety and the
           overall performance of Crewmembers. The goal of the Professional
           Standards Committee is to identify and correct problems through early
           intervention before official notice and action is required.

28.3.      COMPANY INTERACTION
           The Professional Standards Committee will confer and attempt to reach
           consensus with the Company on matters relating to professional
           standards.

28.4.      REPORTS
           The Professional Standards Committee will be under no obligation to
           report its activities to the Company.

28.5.      CONFIDENTIALITY
           The Professional Standards Committee will maintain confidentiality in
           all of its functions, except where necessary to prevent the
           compromise of safety or injury to personnel or property.

28.6.      INVESTIGATIONS
           The Professional Standards Committee will investigate any problems
           brought to its attention by Crewmembers or the Company.

28.7.      COMMITTEE MEMBER PAY PROTECTION
           The Director of Operations, or his designee, will release
           Professional Standards Committee members to pursue Committee
           functions, consistent with reasonable scheduling requirements. In
           such case, the Committee member will suffer no loss of pay or
           benefits if the Committee member is pursuing Committee functions at
           the request of the Company. If the Committee member is pursuing
           Committee functions at the request of the Union, the Union will
           reimburse the Company for the pay and benefits of the Committee
           member. A Professional Standards Committee member performing
           professional standards duties on a scheduled duty free Day will not
           be entitled to compensation. Expenses incurred by a Professional
           Standards Committee member while acting on behalf of the Committee
           will be paid by the Union.





                                      -77-
<PAGE>   78

SECTION 29 -  MISSING, INTERNMENT, PRISONER OR HOSTAGE OF WAR AND
              HIJACKING

29.1.      COMPENSATION
           A Crewmember who, in the course of his employment, becomes
           involuntarily missing, is interned or held hostage will be paid his
           MBPG. Payments will continue until released or, if missing, until
           proof of death is established in fact, or until there is reasonable
           presumption of death, to a maximum of thirty-six (36) Months. The
           MBPG will be paid to the beneficiary or beneficiaries designated in
           writing by the Crewmember as set forth in subsection 29.5.

29.2.      SENIORITY AND LONGEVITY ACCRUAL
           A Crewmember will accrue seniority and longevity during a period in
           which he is involuntarily missing or interned.

29.3.      SICK LEAVE USE
           A Crewmember who requires the use of sick leave as a result of hijack
           or terrorist activity that occurs in the course of his employment
           will be allowed to use sick leave with no charge to the Crewmember's
           sick leave account for a period not to exceed one hundred eighty
           (180) Days.

29.4.      DIRECTION OF PAYMENTS

         29.4.1.    WRITTEN DIRECTION
                    The MBPG will be disbursed by the Company in accordance with
                    written direction from the Crewmember. The Company will
                    require each Crewmember to execute and deliver to the
                    Company such written direction.

         29.4.2.    NO WRITTEN DIRECTION
                    Any payments due a Crewmember under this Section which are
                    not covered by a written direction will be held by the
                    Company for such Crewmember and in the event of his death
                    will be paid to the legal representative of his estate.

29.5.      FORM FOR PAYMENT DIRECTION
           The direction will be in substantially the following form:

                TO:        Kitty Hawk International, Inc.

                You are hereby directed to pay all compensation due me under the
                terms of the Collective Bargaining Agreement between Kitty Hawk
                International, Inc. and the International Brotherhood of
                Teamsters, Airline Division, while missing, or resulting from
                death or any other condition that makes direct payment to me
                impossible under the Agreement, as follows:

                $__________ per month to _________________________________
                ____________________________________________ as long as living,
                and thereafter to ________________________________________
                _____________________________________________as long as living.



                                      -78-
<PAGE>   79

                The balance, if any, and any amounts accrued after the death of
                all persons named in the above designation will be held for me,
                or in the event of my death before receipt thereof, will be paid
                to the legal representative of my estate.

                This direction may be modified from time to time by letter
                signed by the undersigned, and any such modification will become
                effective upon receipt of such letter by the Company.

                Payments made by the Company pursuant to this direction will
                fully relieve the Company from the obligation of making payment
                with respect thereto.




                -----------------------                --------------------
                Crewmember Name (Print)                Witness Name (Print)





                -----------------------                --------------------
                Signature                              Signature




                ------------                           ------------
                Date                                   Date








SECTION 30 - STRIKES, LOCKOUTS AND PICKET LINES

30.1.      STRIKE
           During the term of this Agreement, the Union will not authorize,
           cause, sanction or engage in any strike, non-informational picketing,
           slowdown, or work stoppage.

30.2.      LOCKOUT
           During the term of this Agreement, the Company will not cause,
           permit, or engage in any lockout of Crewmembers.

30.3.      PICKET LINE
           The Union and the Company will consult prior to the Company
           conducting any flight operations behind a picket line on behalf of an
           air carrier involved in an AFL-CIO sanctioned labor dispute.



                                      -79-
<PAGE>   80

SECTION 31 - GENERAL

31.1.      NO DISCRIMINATION
           In accordance with applicable law, there will be no discrimination by
           either party against any Crewmember covered by this Agreement because
           of race, color, religion, sex, national origin, age, veteran status
           or disability.

31.2.      GENDER NEUTRAL
           Wherever a Crewmember is referred to in this Agreement in the
           masculine, it is understood to include the feminine.

31.3.      INVALIDATION OF AGREEMENT PROVISIONS
           If any provision of this Agreement is held invalid by operation of
           law or by any court of competent jurisdiction, or if compliance with
           or enforcement of any provision should be restrained by such court
           pending a final determination as to its validity, the remainder of
           this Agreement, or the application of such to persons or
           circumstances other than those as to which it has been held invalid
           or as to which compliance with or enforcement of has been restrained,
           will not be affected. If any provision is held invalid, either party
           may request negotiations for the purpose of arriving at a mutually
           satisfactory replacement of such provision. If such negotiations fail
           to produce an agreement as to such replacement, either party,
           notwithstanding the provisions of Section 32, may invoke the services
           of the National Mediation Board in accordance with Section 6, Title
           1, of the Railway Labor Act, as amended, to resolve such dispute.

31.4.      MODIFICATIONS TO THE AGREEMENT
           Any modification to this Agreement must be in writing, signed by a
           representative of the Union, a representative of the Executive
           Council, and two (2) representatives of the Company, one of whom must
           be the Director of Operations or his superior.

31.5.      ID CARDS
           The Company will provide identification cards to each Crewmember
           indicating his Crew Class.

31.6.      CHARTS AND MANUALS
           The Company will provide current charts and manuals for each
           aircraft. A Crewmember will not be required to update or maintain
           manuals, documents or charts during flight.

31.7.      VISAS AND INOCULATIONS
           The Company will pay for visas, visa photographs and inoculations
           required of Crewmembers and, if practicable, the Company will obtain
           such visas.

31.8.      USE AND DAMAGE OF COMPANY EQUIPMENT
           A Crewmember will not be required to pay for the use of any Company
           equipment used in Training and will not be required to pay for any
           Company aircraft damaged while under the direction of the Company
           unless such damage occurs as a result of the gross negligence of the
           Crewmember.






                                      -80-
<PAGE>   81

31.9.      CREWMEMBER LIABILITY COVERAGE
           The Company will include each Crewmember as an insured under the
           Company's Airline Liability Policy while the Crewmember is performing
           duty at the direction of the Company.

31.10.     PERSONNEL FILES

         31.10.1.   CONTENTS
                    The Company will maintain a personnel file for each
                    Crewmember. The personnel file will contain all
                    personnel-related documents involving the Crewmember. All
                    orders to a Crewmember involving promotions, demotions,
                    furloughs and leaves of absences will be stated in writing,
                    and will be placed in the Crewmember's personnel file.

         31.10.2.   ACCESS
                    Upon written request, a Crewmember may review his personnel
                    file in the presence of an appropriate Company
                    representative at a time and place mutually agreed upon
                    between the Crewmember and the Company and will be entitled
                    to copies of any document(s) in his personnel file. Such
                    request(s) will be limited to one (1) every six (6) Months.

31.11.     UNION REPRESENTATION

         31.11.1.   BULLETIN BOARD
                    The Company will provide the Union with a suitable location
                    for a bulletin board at all Base(s) for the posting of
                    official notices of Union meetings, elections, and other
                    notices pertaining to internal Union matters. The bulletin
                    board will not contain any inflammatory material or material
                    derogatory to the Company or any of its employees.

         31.11.2.   UNION ACCESS TO PROPERTY
                    The Company will admit to its Base(s) and operational line
                    stations, the official designated representatives of the
                    Union to transact such business as is necessary for the
                    administration of this Agreement. The Union will provide the
                    Company with prior notice of a request to be admitted to any
                    operational line station. All such requests must be approved
                    by the Company.

         31.11.3.   CREWMEMBER REPRESENTATIVES
                    The Union will select Crewmember representatives and notify
                    the Company of their appointment or removal. The number of
                    representatives will be limited to those necessary to
                    provide convenient representation for Crewmembers. The
                    Company will notify the Union of the appropriate Company
                    representatives.

         31.11.4.   NEW-HIRE INDOCTRINATION
                    The Company will inform the Union of any scheduled new-hire
                    Crewmember classes and allow a reasonable period of time
                    during new hire indoctrination for Union orientation.

31.12.     MANAGEMENT POSITIONS, CHECK AIRMEN AND SPECIAL PROJECTS
           A Crewmember will not be required to accept a management or Check
           Airman position nor be required to perform special projects for the
           Company.



                                      -81-
<PAGE>   82

31.13.     PROMOTIONAL ACTIVITIES
           A Crewmember will not be required to participate in publicity or
           promotional activities.

31.14.     HOSTILE AREAS
           A Crewmember with less than ninety (90) Days of Active Service will
           not be required to operate a flight(s) into an area with an ongoing
           armed conflict that may affect his personal safety.

31.15.     JUMPSEAT AGREEMENTS
           The Company will negotiate reciprocal jumpseat agreements with other
           airlines and provide a list to each Crewmember.

31.16.     INTERLINE AGREEMENTS
           Consistent with the Company's pass policy and interline agreements
           with other airlines, a Crewmember and his immediate family will be
           entitled to the same pass or reduced fare privileges afforded other
           groups of non-managerial Company employees and their families. The
           Company will provide a current list of all agreements and interline
           privileges to each Crewmember once each year.

31.17.     CABIN AND FLIGHT DECK MAINTENANCE
           Aircraft cabin entry area and flight decks will be cleaned regularly
           and properly maintained. All aircraft will have a clean and
           serviceable toilet. All cockpit seats will be fully functional and
           clean with all seat covers and cushions in good condition. A
           Crewmember must assure that such areas are left in a clean and
           orderly condition. The Company will provide all appropriate cleaning
           supplies and approved wipes for oxygen mask equipment.

31.18.     AIRCRAFT GALLEY EQUIPMENT
           When feasible at a reasonable cost, all Company aircraft will have a
           hot cup and a microwave or galley oven installed. Such galley
           equipment will be maintained in operational condition. Each aircraft
           will have a cooler stocked with water and ice for each flight.

31.19.     CREW MEALS
           If a Crewmember is scheduled for eight (8) or more hours of duty and
           is not scheduled for an en route stop of at least three (3) hours
           where ground transportation to a restaurant is provided, the Company
           will provide crew meals. Crew meals will also be provided on Flight
           Segments of six (6) hours or more, Block to Block. When at an airport
           where catering is available, crew meals will be delivered directly to
           the aircraft not more than two (2) hours prior to actual departure. A
           flight will not be delayed because of the failure to provide a crew
           meal. If the Company fails to provide crew meals, the Captain may,
           upon obtaining approval from the Company, which approval will not be
           unreasonably withheld, purchase crew meals with Company funds not to
           exceed reasonable and customary charges. A Crewmember will not be
           required to provide his own crew meal when the Company is required to
           provide such a meal.





                                      -82-
<PAGE>   83

SECTION 32 - DURATION

Except as otherwise provided herein, this Agreement will become effective on
October 30, 1999, and will remain in full force and effect until October 30,
2003, and will renew itself without change until each succeeding October 30
thereafter, unless written notice of intended change is served in accordance
with Section 6, Title I of the Railway Labor Act, as amended, by either party at
least sixty (60) days prior to October 30, 2003 or any October 30 thereafter.

The parties agree to commence negotiations pursuant to a Section 6 notice not
later than sixty (60) Days prior to October 30, 2003.

IN WITNESS WHEREOF, the parties have signed this Agreement, this 30th Day of
October, 1999.


KITTY HAWK INTERNATIONAL,                    FOR INTERNATIONAL BROTHERHOOD
INC.:                                        OF TEAMSTERS, AIRLINE DIVISION:


/s/  CHARLES C. CARSON II                    /s/ RAY W. BENNING, JR.
-----------------------------                ---------------------------------
Charles C. Carson  II                        Ray W. Benning, Jr.
President                                    Director, Airline Division


/s/  TIMIOTHY D. KOMBEREC                    /s/  DONALD R. TREICHLER
-----------------------------                ---------------------------------
Timothy D. Komberec                          Donald R. Treichler
Vice President of Operations                 International Representative,
                                             Airline Division


                                             /s/  ROBERT F. VETTER, JR.
                                             ---------------------------------
                                             Robert F. Vetter, Jr.
                                             Chairman, Executive Council and
                                             Negotiating Committee


                                             /s/  BRYANT H. BEEBE
                                             ---------------------------------
                                             Bryant H. Beebe
                                             Negotiating Committee


                                             /s/  ROBERT S. WOLFE
                                             ---------------------------------
                                             Robert S. Wolfe
                                             Negotiating Committee





                                      -83-
<PAGE>   84

                               LETTER OF AGREEMENT
                                     BETWEEN
                         KITTY HAWK INTERNATIONAL, INC.
                                       AND
                     INTERNATIONAL BROTHERHOOD OF TEAMSTERS,
                                AIRLINE DIVISION
                                    REGARDING
                          PRIOR RIGHTS FLIGHT ENGINEERS


THIS LETTER OF AGREEMENT is made and entered into in accordance with the
provisions of the Railway Labor Act, as amended, by and between Kitty Hawk
International, Inc. (the "Company") and The International Brotherhood of
Teamsters, Airline Division (the "Union"), hereinafter known as the "Parties".

The Parties agree as follows:

1. All Flight Engineers in the employ of the Company on the date of the signing
of this Agreement listed on the Flight Engineer's Seniority List appended hereto
are recognized as being Prior Rights Flight Engineers. Designation as a Prior
Rights Flight Engineer will continue until a Prior Rights Flight Engineer is no
longer employed by the Company as a Flight Engineer.

2. No Prior Rights Flight Engineer will be furloughed until all other Flight
Engineers are furloughed. No Prior Rights Flight Engineer will be furloughed as
a result of any Pilot being displaced. A Prior Rights Flight Engineer who is
furloughed will retain Prior Rights Flight Engineer status upon recall.

3. This Letter of Agreement will survive the duration of the Agreement between
the Parties dated October 30, 1999, and all succeeding Agreements so long as any
Prior Rights Flight Engineer is employed by the Company as a Flight Engineer.
The Parties to this Letter of Agreement and this Agreement irrevocably waive the
right to serve any notice under Section 6 of the Railway Labor Act of any
intended change to the Agreement that, if adopted, would modify any terms of
this Letter of Agreement.


IN WITNESS WHEREOF, the Parties have signed this Letter of Agreement this 30th
Day of October, 1999.


For Kitty Hawk International, Inc.:         For The International Brotherhood of
                                            Teamsters, Airline Division:


/s/  CHARLES C. CARSON II                   /s/  DONALD R. TREICHLER
-------------------------                   --------------------------------
Charles C. Carson II                        Donald R. Treichler
President                                   International Representative,
                                            Airline Division

/s/  TIMOTHY D. KOMBEREC                    /s/  ROBERT F. VETTER, JR.
-------------------------                   --------------------------------
Timothy D. Komberec                         Robert F. Vetter, Jr.
Vice President of Operations                Chairman, Executive Council






                                      -84-
<PAGE>   85










                             ATTACH FLIGHT ENGINEER
                                 SENIORITY LIST
                               AS OF SIGNING DATE
                 (PRIOR RIGHTS ENGINEERS AS OF OCT 30, 1999.XLS)
                                      HERE









                                      -85-
<PAGE>   86










                             ATTACH FLIGHT ENGINEER
                                 SENIORITY LIST
                               AS OF SIGNING DATE
                 (PRIOR RIGHTS ENGINEERS AS OF OCT 30, 1999.XLS)
                                      HERE














                                      -86-
<PAGE>   87


                               LETTER OF AGREEMENT
                                     BETWEEN
                         KITTY HAWK INTERNATIONAL, INC.
                                       AND
                     INTERNATIONAL BROTHERHOOD OF TEAMSTERS,
                                AIRLINE DIVISION
                                    REGARDING
                         HIGH LONGEVITY DC-8 CREWMEMBERS


This Letter of Agreement is made and entered into in accordance with the
provisions of the Railway Labor Act, as amended, by and between Kitty Hawk
International, Inc. (the "Company") and The International Brotherhood of
Teamsters, Airline Division (the "Union"), hereinafter known as the "Parties".

The Parties agree as follows:

1. The Parties recognize that there are DC-8 Crewmembers with nine (9) years or
more of Active Service and that those Crewmembers should be afforded time in
which to evaluate their best available option and exercise their seniority to
either bid an available vacancy on another Type, Displace to another Type if
Displacements occur on the DC-8 in 2000 or remain on the DC-8.

2. All DC-8 Crewmembers with nine (9) years or more of Active Service during
2000 will be paid at the pay rates set forth in Section 5 of this Agreement
without regard to the longevity increase cap above the ninth (9th) year of
Active Service.

3. Effective January 1, 2001, DC-8 Crewmembers with nine (9) or more years of
Active Service will be returned to the pay rate set forth in Section 5 of this
Agreement. Thereafter, those Crewmembers will not receive longevity increases.


IN WITNESS WHEREOF, the Parties have signed this Letter of Agreement this 30th
Day of October, 1999.


For Kitty Hawk International, Inc.:        For The International Brotherhood of
                                           Teamsters, Airline Division:


/s/  CHARLES C. CARSON II                  /s/  DONALD R. TREICHLER
--------------------------                 -----------------------------------
Charles C. Carson II                       Donald R. Treichler
President                                  International Representative,
                                           Airline Division


/s/  TIMOTHY D. KOMBEREC                   /s/  ROBERT F. VETTER, JR.
--------------------------                 -----------------------------------
Timothy D. Komberec                        Robert F. Vetter, Jr.
Vice President of Operations               Chairman, Executive Council





                                      -87-
<PAGE>   88

                                KITTY HAWK, INC.
                                  (LETTERHEAD)

                                OCTOBER 30, 1999



To:    Mr. Donald R. Treichler
       International Representative,
       International Brotherhood of Teamsters, Airline Division

       Mr. Robert F. Vetter, Jr.
       Chairman,
       Executive Council


1. Except as provided in Section 1 of the Agreement between Kitty Hawk
International, Inc. and the International Brotherhood of Teamsters (the
"Agreement") and in paragraph 2, below, Kitty Hawk, Inc. agrees that all revenue
flying in widebody aircraft and aircraft having an FAA certificated gross
takeoff weight of 300,000 pounds or greater that are listed by tail number on
the Operations Specifications issued by the FAA for Kitty Hawk, Inc., any
subsidiary of Kitty Hawk, Inc. or any subsidiary of Kitty Hawk International,
Inc. will be performed by Crewmembers on the Kitty Hawk International, Inc.
seniority lists.

2. It is understood that the purpose of this letter is not to prevent or hinder
any potential merger or acquisition of another airline that may operate widebody
aircraft and aircraft having an FAA certificated gross takeoff weight of 300,000
pounds or greater. If such a merger or acquisition occurs, it would be
considered to affect the seniority rights of Crewmembers at Kitty hawk
International, Inc. and the procedures set forth in Section 1.6.2. of the
Agreement will be followed.

3. This letter will be effective concurrently with the Agreement and, in any
event, only so long as Kitty Hawk International, Inc. is owned by Kitty Hawk,
Inc.


Kitty Hawk, Inc.                             Agreed:


By:                                          /s/  DONALD R. TREICHLER
                                             -----------------------------
                                             Donald R. Treichler
                                             International Representative,
/s/  M. TOM CHRISTOPHER                      Airline Division
-----------------------------
(Officer of Kitty Hawk, Inc.)


                                             /s/  ROBERT F. VETTER, JR.
                                             -----------------------------
                                             Robert F. Vetter, Jr.
                                             Chairman, Executive Council





                                      -88-
<PAGE>   89

                                      INDEX


PREAMBLE

SECTION 1 - RECOGNITION, PURPOSE, SCOPE AND MERGERS

1.1.       RECOGNITION

1.2.       PURPOSE OF AGREEMENT

1.3.       SOLE AGREEMENT

1.4.       SCOPE

         1.4.1.     FLYING PERFORMED BY CREWMEMBERS

         1.4.2.     CREWMEMBERS TEMPORARILY ASSIGNED OUT OF SENIORITY

                  1.4.2.1.     INTRODUCTION OF NEW AIRCRAFT

                  1.4.2.2.     INTRODUCTION OF ADDITIONAL AIRCRAFT

                  1.4.2.3.     SHORT TERM FLYING REQUIREMENTS

                  1.4.2.4      TRAINING OF CREWMEMBERS

                  1.4.2.5.     EXPIRATION OF TIME LIMITS

                  1.4.2.6.     PAY PROTECTION

                  1.4.2.7.     NO REDUCTIONS

         1.4.3.     WET LEASE IN

                  1.4.3.1.     UNION NOTIFICATION

                  1.4.3.2.     NO REDUCTIONS

                  1.4.3.3.     DURATION OF WET LEASE

1.5.       SALE OR DRY LEASE OF COMPANY AIRCRAFT

1.6.       MERGERS AND ACQUISITIONS

         1.6.1.     NOTICE OF MERGER OR ACQUISITION

         1.6.2.     INTEGRATION OF SENIORITY LISTS

                  1.6.2.1.     NEGOTIATIONS

                  1.6.2.2.     ARBITRATION

                  1.6.2.3.     FENCE AGREEMENT

                  1.6.2.4.     NO SYSTEM FLUSH

         1.6.3.     REPRESENTATION

1.7.       ALTER EGO

1.8.       TRANSFER OF ASSETS


                                      -89-
<PAGE>   90

1.9.       SUCCESSORSHIP AND ASSUMPTION OF AGREEMENT

1.10       FOREIGN BASES

SECTION 2 - DEFINITIONS
"ACTIVE SERVICE"
"ADEQUATE REST FACILITY"
"ALOFT"
"BASE"
"BID LINE"
"BID SENIORITY LIST"
"BLOCK TO BLOCK
"CAPTAIN"
"CATEGORY"
"COMMUTE"
"COMPOSITE LINE"
"CREW CLASS"
"CREWMEMBER"
"CURTAILMENT"
"DATE OF HIRE"
"DAY"
"DEADHEAD"
"DISPLACEMENT"
"DOMESTIC"
"DRY LEASE"
"DUTY DAY"
"DUTY TIME"
"EFFECTIVE DATE"
"FAR"
"FIRST OFFICER"
"FLIGHT ENGINEER"
"FLIGHT PAY"
"FLIGHT SEGMENT"
"FLIGHT TIME"
"INTERNATIONAL"


                                      -90-
<PAGE>   91

"LINE OF FLYING"
"MANAGEMENT CREWMEMBER"
"MINIMUM BID PERIOD GUARANTEE (MBPG)"
"MONTH"
"OPEN TIME"
"PILOT"
"POSITIONING OR DE-POSITIONING"
"PRIOR RIGHTS FLIGHT ENGINEER"
"PROFESSIONAL FLIGHT ENGINEER"
"RECURRENT TRAINING"
"RESERVE CREWMEMBER"
"RESERVE LINE"
"RESIDENCE AIRPORT"
"SECOND OFFICER"
"SENIORITY LIST(S)"
"STANDING BID"
"TRAINING"
"TRIP SEQUENCE"
"TYPE"
"WET LEASE"

SECTION 3 - UNION SECURITY

3.1.       UNION MEMBERSHIP

3.2.       INITIATION FEES AND DUES OR SERVICE FEES AND ASSESSMENTS DEDUCTION

         3.2.1.     TRANSFER OF DUES OR SERVICE FEES TO UNION

         3.2.2.     INDEMNIFICATION CLAUSE

         3.2.3.     DUES OR SERVICE FEES AND ASSESSMENTS AFTER TERMINATION

         3.2.4.     DEDUCTION ERROR

3.3.       FAILURE TO PAY DUES OR SERVICE FEES AND ASSESSMENTS

3.4.       CREWMEMBER LIST


SECTION 4 - MANAGEMENT RIGHTS


                                      -91-
<PAGE>   92

SECTION 5 - COMPENSATION

5.1.       NEW-HIRE PAY

5.2.       FLIGHT PAY RATES

         5.2.1.      CAPTAINS

         5.2.2.      PROFESSIONAL FLIGHT ENGINEERS

         5.2.3.      FIRST OFFICERS

         5.2.4.      SECOND OFFICERS

5.3.       FLIGHT PAY COMPUTATION

         5.3.1.      FLIGHT PAY

5.4.       CHECK AIRMAN OVERRIDE

5.5.       INSTRUCTOR PAY

         5.5.1.      GROUND SCHOOL INSTRUCTION

         5.5.2.      SIMULATOR INSTRUCTION

5.6.       REPORT PAY

5.7.       MINIMUM PAY CREDIT

5.8.       TAXI PAY

         5.8.1.     REPORT FOR TAXI ONLY

         5.8.2.     WITHIN A DUTY PERIOD

5.9.       PAY ON A SCHEDULED DUTY FREE DAY

         5.9.1.     DAYS OFF

         5.9.2.     JUNIOR ASSIGNMENT

5.10.      DEADHEAD PAY

5.11.      TRAINING PAY

         5.11.1.    RECURRENT AND ADDITIONAL REQUIREMENT TRAINING

                  5.11.1.1.    SCHEDULED DUTY DAYS

                  5.11.1.2.    SCHEDULED DUTY FREE DAYS

         5.11.2.    INITIAL, TRANSITION AND UPGRADE

         5.11.3.    PILOT TO FLIGHT ENGINEER TRANSITIONS

         5.11.4.    REMEDIAL TRAINING

5.12.      MAINTENANCE PAY

5.13.      MINIMUM BID PERIOD GUARANTEE (MBPG)

5.14.      BONUS INCENTIVE PLAN

5.15.      GENERAL

         5.15.1.    PAYROLL SCHEDULE


                                      -92-
<PAGE>   93

         5.15.2.    PAYCHECK DELIVERY AND DEPOSIT

         5.15.3.    JURY DUTY

         5.15.4.    SPECIAL PROJECTS

SECTION 6 - EXPENSES, LODGING AND TRANSPORTATION

6.1.       PER DIEM

         6.1.1.     DOMESTIC

         6.1.2.     INTERNATIONAL

         6.1.3.     NEW HIRE TRAINING

         6.1.4.     PAYMENT

6.2.       LODGING

         6.2.1.     NEW HIRE TRAINING

6.3.       LOCAL TRANSPORTATION

6.4.       RENTAL CAR

6.5.       PERSONAL VEHICLE

SECTION 7 - MOVING EXPENSES

7.1.       ELIGIBILITY

         7.1.1.     NEW BASE AWARD

         7.1.2.     INVOLUNTARY BASE ASSIGNMENT

         7.1.3.     BASE DISPLACEMENT

         7.1.4.     RECALL TO A DIFFERENT BASE

7.2.       COORDINATION WITH COMPANY

7.3.       MOVING EXPENSES

         7.3.1.     PERSONAL

         7.3.2.     VEHICLES

         7.3.3.     MOBILE HOMES

7.4.       ACCOMMODATIONS IN LIEU OF MOVING EXPENSES

7.5.       NEW-HIRE CREWMEMBERS


SECTION 8 - SICK LEAVE

8.1.       ACCRUAL

8.2.       SICK LEAVE PAY

         8.2.1.     BANK DEBIT


                                      -93-
<PAGE>   94

         8.2.2.     SCHEDULED DUTY DAYS

8.3.       SICK LEAVE USAGE

         8.3.1.     CREW SCHEDULING CONTACT

         8.3.2.     EXCLUSIONS

         8.3.3.     WORKER'S COMPENSATION

8.4.       SICK LEAVE BANK REPLENISHMENT

8.5.       DISABILITY

8.6.       PHYSICIAN'S STATEMENTS

8.7.       VACATION CONCURRENT WITH ILLNESS

8.8.       RETIREMENT

8.9.       GENERAL

         8.9.1.     RECALL

         8.9.2.     STATEMENTS

         8.9.3.     OUTSIDE WORK

         8.9.4.     SENIORITY AND LONGEVITY

         8.9.5.     RESUMPTION OF DUTY


SECTION 9 - VACATION

9.1.       ACCRUAL

9.2.       VACATION PAY

9.3.       DUTY

         9.3.1.     NO DUTY

         9.3.1.     DUTY FREE DAYS

9.4.       ANNUAL VACATION BID

         9.4.1.     PROCEDURE

         9.4.2.     PROBATIONARY CREWMEMBER

         9.4.3.     FAILURE TO BID

9.5.       VACATION OPTIONS

9.6.       VACATION SPLITS

9.7.       UNSCHEDULED VACATION

9.8.       VACATION RESCHEDULING

         9.8.1.     RESCHEDULE

         9.8.2.     RELINQUISH

         9.8.3.     CHANGE OF CREWMEMBER STATUS


                                      -94-
<PAGE>   95

         9.8.4.     VACATION SLIDE

9.9.       VACATION BANK

         9.9.1.     MAXIMUM BANK

         9.9.2.     PAY OUT

                  9.9.2.1.    EXCESS BANK

                  9.9.2.2.    CESSATION OF EMPLOYMENT

                  9.9.2.3.    SUPPLEMENT TO SICK LEAVE OR DISABILITY BENEFITS

9.10.      GENERAL

         9.10.1.    VACATION DAY

         9.10.2.    STATEMENTS

SECTION 10 - HEALTH AND WELFARE

10.1.      LIFE INSURANCE

         10.1.1.    ADDITIONAL LIFE INSURANCE

10.2.      ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE

10.3.      HEALTH AND DENTAL INSURANCE

         10.3.1.    COBRA

         10.3.2.    LEAVES OF ABSENCE

         10.3.3.    PREMIUMS FOR HEALTH AND DENTAL INSURANCE

         10.3.4.    CONTINUATION OF HEALTH AND DENTAL INSURANCE AFTER RETIREMENT

10.4.      SHORT-TERM DISABILITY INSURANCE

10.5.      LONG-TERM DISABILITY INSURANCE

10.6.      ILLNESS OR INJURY WHILE IN THE SERVICE OF THE COMPANY

         10.6.1.    MEDICAL CARE AWAY FROM BASE

         10.6.2.    TRANSPORTATION

         10.6.3.    WORKER'S COMPENSATION FILING PROCEDURE

SECTION 11 - RETIREMENT

11.1.      TAX DEFERRED SAVINGS PLAN

11.2.      COMPANY CONTRIBUTIONS

11.3.      VESTING SCHEDULE

11.4.      PAYROLL DEDUCTIONS

11.5.      CREWMEMBER FUNDS IN PRE-EXISTING COMPANY 401(k) PLAN


                                      -95-
<PAGE>   96

SECTION 12 - UNIFORMS

12.1.      INITIAL UNIFORMS

12.2.      MAINTENANCE ALLOWANCE

12.3.      REPLACEMENT OF DAMAGED ITEMS

12.4.      COMPANY INSIGNIA

12.5.      UNION INSIGNIA

12.6.      CHANGES IN UNIFORM

SECTION 13 - PHYSICAL EXAMINATIONS

13.1.      COMPANY STANDARDS

13.2.      CONFIDENTIALITY

13.3.      FAA PHYSICAL EXAMINATIONS

         13.3.1.    CERTIFICATES TO TRAINING DEPARTMENT

         13.3.2.    SCHEDULING OF FAA PHYSICAL

         13.3.3.    INABILITY TO MAINTAIN A FIRST CLASS MEDICAL CERTIFICATE

13.4.      REIMBURSEMENT FOR A PHYSICAL EXAMINATION

13.5.      FAA DRUG AND ALCOHOL TESTING PROGRAMS

         13.5.1.    PROGRAM ADMINISTRATION AND DESCRIPTION

         13.5.2.    REIMBURSEMENT OF EXPENSES

         13.5.3.    DRUG TESTING ON A SCHEDULED DUTY FREE DAY



SECTION 14 - LEAVES OF ABSENCE

14.1.      PERSONAL LEAVE

         14.1.1.    REQUESTS

         14.1.2.    SENIORITY AND LONGEVITY ACCRUAL

         14.1.3.    EXTENSIONS

14.2.      MILITARY LEAVE

14.3.      UNION LEAVE

14.4.      MEDICAL LEAVE

14.5.      FUNERAL LEAVE

         14.5.1.    DURATION

         14.5.2.    IMMEDIATE FAMILY

         14.5.3.    VACATION

         14.5.4.    SCHEDULED DUTY FREE DAYS


                                      -96-
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14.6.      FAMILY AND MEDICAL LEAVE ACT (FMLA)

         14.6.1.    FMLA

         14.6.2.    SENIORITY AND LONGEVITY ACCRUAL

14.7.      MANAGEMENT CREWMEMBER LEAVE

         14.7.1.    SENIORITY AND LONGEVITY ACCRUAL

         14.7.2.    EXCLUSION FROM THE AGREEMENT

         14.7.3.    MAXIMUM NUMBER

         14.7.4.    401(K) PLAN

         14.7.5.    DUES EXEMPTION

         14.7.6.    FLYING RESTRICTION

14.8.      GENERAL

         14.8.1.    OTHER EMPLOYMENT

         14.8.2.    RETURN FROM LEAVE

         14.8.3.    PAY DURING REQUALIFICATION



SECTION 15 - SENIORITY

15.1.      SENIORITY GOVERNS

15.2.      SENIORITY LISTS

         15.2.1.    SEPARATE LISTS

         15.2.2.    LIST CONTENTS

15.3.      SENIORITY ACCRUAL

15.4.      SENIORITY LIST CONTENT AND PUBLISHING

         15.4.1.    CONTENT

         15.4.2.    POSTING

15.5.      PROTESTS

15.6.      LOSS OF SENIORITY

15.7.      EFFECT OF BYPASS ON SENIORITY

15.8.      LONGEVITY

15.9.      PROBATION

15.10.     FLIGHT ENGINEER TO PILOT BIDDING

         15.10.1.   MINIMUM REQUIREMENTS

         15.10.2.   TRAINING AVAILABILITY

         15.10.3.   FAILURE TO QUALIFY

         15.10.4.   REMOVAL FROM SENIORITY LIST


                                      -97-
<PAGE>   98
15.11.     PILOT TO FLIGHT ENGINEER BIDDING

         15.11.1.   BID SUBMISSION DEADLINE

         15.11.2.   MINIMUM REQUIREMENTS

         15.11.3.   BID TO PROFESSIONAL FLIGHT ENGINEER

         15.11.4.   BID TO SECOND OFFICER

         15.11.5.   HOLDING A BID ON FILE

         15.11.6.   TRAINING AVAILABILITY

         15.11.7.   REMOVAL FROM SENIORITY LIST

         15.11.8.   FAILURE TO QUALIFY

         15.11.9.   DISPLACEMENT TO FLIGHT ENGINEER



SECTION 16 - FILLING OF VACANCIES

16.1.      VACANCY DEFINITION

16.2.      STANDING BID

         16.2.1.    STANDING BID DEFINITION

         16.2.2.    STANDING BID UPDATES

16.3.      VACANCY FILLING

         16.3.1.    VACANCY NOTICE

         16.3.2.    VACANCY CLOSING AND BID SUBMISSION

         16.3.3.    BID AWARD

         16.3.4.    ADDITIONAL VACANCIES

         16.3.5.    UNFILLED VACANCIES

         16.3.6.    PUBLISHING OF BID RESULTS

16.4.      EQUIPMENT LOCK

         16.4.1.    NEW EQUIPMENT TYPE

16.5.      BYPASS

         16.5.1.    UPGRADE TO CAPTAIN

         16.5.2.    TRANSITION



SECTION 17 - BASES

17.1.      UNION CONSULTATION

17.2.      INTERNATIONAL BASES

17.3.      DOMESTIC BASES

         17.3.1.    MINIMUM STAFFING LEVEL


                                      -98-
<PAGE>   99

         17.3.2.    STAFFING LEVEL CHANGES

                  17.3.3.2.    INCREASED STAFFING

                  17.3.3.3.    DECREASED STAFFING

                  17.3.3.4.    NO MOVING EXPENSES

         17.3.3.    THIRTY-FIVE (35) MILE RULE

                  17.3.3.1.    PER DIEM IN BASE

                  17.3.3.2.    LODGING IN BASE

17.4.      TEMPORARY BASES



SECTION 18 - CURTAILMENT, DISPLACEMENT, FURLOUGH AND RECALL

18.2.      CURTAILMENT

         18.2.1.    CURTAILMENT PROCEDURE

18.2.      DISPLACEMENT

         18.2.1.    DISPLACEMENT PROCEDURE

18.3.      FURLOUGH

         18.3.1.    VOLUNTARY FURLOUGH

         18.3.2.    NOTICE OF FURLOUGH

         18.3.3.    RETENTION OF SENIORITY

         18.3.4.    CHANGE IN ADDRESS OR TELEPHONE NUMBER

         18.3.5.    STANDING BID

         18.3.6.    FURLOUGH EXPIRATION

18.4.      RECALL

         18.4.1.    CATEGORY SENIORITY ORDER

         18.4.2.    BYPASS OF RECALL

         18.4.3.    RECALL NOTICE

         18.4.4.    WAIVER OF RECALL NOTICE

         18.4.5.    FAILURE TO RESPOND OR REPORT

         18.4.6.    MINIMUM RECALL DURATION

         18.4.7.    NEW-HIRE FLYING EXCLUSION

         18.4.8.    PAY WHEN RECALLED



SECTION 19 - TRAINING

19.1.      QUALIFICATIONS

         19.1.1.    FAA REQUIREMENTS


                                      -99-
<PAGE>   100

         19.1.2.    COMPANY MINIMUM REQUIREMENTS

                  19.1.2.1.   FIRST OFFICER MINIMUM REQUIREMENTS:

                           19.1.2.1.1.    CERTIFICATES

                           19.1.2.1.2.    FLYING EXPERIENCE

                           19.1.2.1.3.    MEDICAL CERTIFICATE

                           19.1.2.1.4.    SIMULATOR EVALUATION

                           19.1.2.1.5.    WRITTEN EXAMINATION

                           19.1.2.1.6.    FLIGHT ENGINEER UPGRADES

                  19.1.2.2.   SECOND OFFICER MINIMUM REQUIREMENTS:

                           19.1.2.2.1.    CERTIFICATES

                           19.1.2.2.2.    FLYING EXPERIENCE

                           19.1.2.2.3.    MEDICAL CERTIFICATE

                           19.1.2.2.4.    WRITTEN EXAMINATION

                  19.1.2.3.   PROFESSIONAL FLIGHT ENGINEER MINIMUM REQUIREMENTS:

                           19.1.2.3.1.    CERTIFICATES

                           19.1.2.3.2.    MEDICAL CERTIFICATE

                           19.1.2.3.3.    COMPANY EMPLOYEES

                  19.1.2.4.   CAPTAIN MINIMUM REQUIREMENTS:

                           19.1.2.4.1.    CERTIFICATES

                           19.1.2.4.2.    FLYING EXPERIENCE

                           19.1.2.4.3.    MEDICAL CERTIFICATE

                           19.1.2.4.4.    FIRST OFFICER UPGRADES

19.2.      COMPANY-PROVIDED TRAINING

19.3.      TRAINING RECORDS REVIEW

19.4.      NOTICE OF TRAINING

19.5.      TRAINING SCHEDULES

         19.5.1.    RECURRENT GROUND SCHOOL

         19.5.2.    RECURRENT SIMULATOR TRAINING

         19.5.3.    ONE-IN-SEVEN

         19.5.4.    MINIMUM SCHEDULED DAYS FREE OF DUTY

         19.5.5.    REST BEFORE SIMULATOR

         19.5.6.    SIMULATOR PERIOD DURATION

19.6.      INITIAL, UPGRADE AND TRANSITION TRAINING FAILURES

         19.6.1.    FIRST TRAINING FAILURE


                                     -100-
<PAGE>   101

         19.6.2.    INELIGIBILITY TO BID AFTER FAILURES

         19.6.3.    SECOND TRAINING FAILURE

         19.6.4.    FAILURE TO MEET TRAINING TIME LINES

         19.6.5.    FAILURE TO PASS PRE-TRAINING EVALUATIONS

19.7.      RECURRENT TRAINING FAILURES

         19.7.1.    FIRST FAILURE

         19.7.2.    SECOND FAILURE

19.8.      PROFESSIONAL STANDARDS COMMITTEE INVOLVEMENT

         19.8.1.    TRAINING FAILURES

         19.8.2.    COMMITTEE MEMBER PAY PROTECTION

19.9.      TRAINING PAY

19.10.     GENERAL

         19.10.1.   REVENUE FLYING

         19.10.2.   PROBATIONARY CREWMEMBERS

         19.10.3.   RECURRENT TRAINING ORDER

         19.10.4.   RE-INDEXING

         19.10.5.   GROUND TRANSPORTATION



SECTION 20 - SCHEDULING

20.1.      BID PERIOD

         20.1.1.    MULTIPLE BID PERIODS AWARDED SEPARATELY

         20.1.2.    MULTIPLE BID PERIODS AWARDED CONCURRENTLY

20.2.      BID LINE CONSTRUCTION

         20.2.1.    LINES OF FLYING, COMPOSITE LINES AND RESERVE LINES

         20.2.2.    SCHEDULED DUTY FREE DAYS

                  20.2.2.1.    MINIMUM SCHEDULED DUTY FREE DAYS

                  20.2.2.2.    INVIOLATE SCHEDULED DUTY FREE DAYS

                  20.2.2.3.    MINIMUM CONSECUTIVE SCHEDULED DUTY FREE DAYS

                  20.2.2.4.    CONTACT ON SCHEDULED DUTY FREE DAYS

20.3.      BID PROCEDURES

         20.3.1.    ELIGIBILITY TO BID

         20.3.2.    BID PACKAGE CONTENTS

         20.3.3.    BID PACKAGE DISTRIBUTION

                                     -101-
<PAGE>   102

         20.3.4.    BID SUBMISSION

         20.3.5.    BID AWARD SCHEDULE

                  20.3.5.1.    COMPOSITE LINE CONSTRUCTION

                  20.3.5.2.    RESERVE STATUS CHANGE

         20.3.6.    BID PERIOD TRANSITION

                  20.3.6.1.    SCHEDULE CONFLICTS

                  20.3.6.2.    EXCESS DAYS

         20.3.7.    BID AWARDS

         20.3.8.    FAILURE TO BID

20.4.      OPEN TIME

         20.4.1.    OPEN TIME AWARD AND ASSIGNMENT

                  20.4.1.1.    DEDICATED RESERVE

                  20.4.1.2.    TRAINING

                  20.4.1.3.    SHORTED TIME CREWMEMBER

                  20.4.1.4.    MANAGEMENT CREWMEMBERS

                  20.4.1.5.    VOLUNTEER

                  20.4.1.6.    RESERVE

                  20.4.1.7.    JUNIOR ASSIGNMENT

                           20.4.1.7.1.    MAXIMUM NUMBER OF JUNIOR ASSIGNMENTS

                           20.4.1.7.2.    SCHEDULE CONFLICTS AS A RESULT OF
                                          JUNIOR ASSIGNMENT

20.5.      RESCHEDULE AFTER BID AWARD

         20.5.1.    RESCHEDULE FOR TRAINING

                  20.5.1.1.    RESCHEDULE FOR ANOTHER CREWMEMBER'S TRAINING

                  20.5.1.2.    RESCHEDULE FOR A CREWMEMBER'S OWN TRAINING

         20.5.2.    RESCHEDULE FOR OTHER THAN TRAINING

20.6.      SCHEDULING PROCEDURES

         20.6.1.    TRIP SEQUENCE TRADES

         20.6.2.    RESERVE ASSIGNMENTS

         20.6.3.    RELEASE FROM DUTY

         20.6.4.    DUTY AT RESIDENCE

         20.6.5.    PRE-DUTY CHECK IN

         20.6.6.    POST DUTY CHECK IN

20.7.      GENERAL


                                     -102-
<PAGE>   103

         20.7.1.    SCHEDULING COMMITTEE

         20.7.2.    MILITARY DUTY

         20.7.3.    REQUIRED RECORDS

         20.7.4.    HOSTILE AREAS

         20.7.5.    NOTIFICATION OF APPRECIABLE DELAY



SECTION 21 - HOURS OF SERVICE

21.1.      FAR CONFLICTS

21.2.      DUTY TIME

         21.2.1.    DIRECTION OF THE COMPANY

         21.2.2.    REPORT AND RELEASE TIMES

         21.2.3.    REDUCED REPORT TIME

         21.2.4.    SUSPENSION OF DUTY TIME

                  21.2.4.1.    INVOLUNTARY

                  21.2.4.2.    VOLUNTARY

         21.2.5.    MAXIMUM DUTY TIMES

                  21.2.5.1.    SINGLE CREW - DOMESTIC

                  21.2.5.2.    AUGMENTED CREW - DOMESTIC

                  21.2.5.3.    DOUBLE CREW - DOMESTIC

                  21.2.5.4.    SINGLE CREW - INTERNATIONAL

                  21.2.5.5.    AUGMENTED CREW - INTERNATIONAL

                  21.2.5.6.    DOUBLE CREW - INTERNATIONAL

         21.2.6.    DEADHEAD DUTY LIMITATIONS

21.3.      REST

         21.3.1.    REST PERIOD

         21.3.2.    MINIMUM REST PERIOD - DOMESTIC

         21.3.3.    MINIMUM REST PERIOD - INTERNATIONAL

         21.3.4.    FATIGUE

         21.3.5.    INTERRUPTION OF REST PERIOD

         21.3.6.    REST AFTER RELEASE

21.4.      GENERAL


                                     -103-
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         21.4.1.    MIXING OF DOMESTIC AND INTERNATIONAL FLIGHTS

         21.4.2.    ONE-IN-SEVEN

         21.4.3.    AIRCRAFT REST FACILITIES FOR DOUBLE AND AUGMENTED CREWS



SECTION 22 - DEADHEADING AND COMMUTING

22.1.      COMMUTING

         22.1.2.    COMMUTE TO BASE OR ASSIGNMENT

         22.1.2.    DUTY AND REST

22.2.      DEADHEADING

         22.2.1.    COST OF DEADHEAD

         22.2.2.    RESPONSIBILITY FOR DELAYS

         22.2.3.    COMMERCIAL AIR TRANSPORTATION

         22.2.4.    TRANSPORTATION FOR JUNIOR ASSIGNMENT

22.3.      DEADHEAD DUTY CALCULATIONS

         22.3.1.    SINGLE CREW DEADHEAD TO A DUTY ASSIGNMENT

         22.3.2.    AUGMENTED AND DOUBLE CREW DEADHEAD TO A DUTY ASSIGNMENT

         22.3.3.    DEADHEAD BETWEEN DUTY ASSIGNMENTS

         22.3.4.    DEADHEAD FROM A DUTY ASSIGNMENT

         22.3.5.    DEADHEAD TO AND FROM TRAINING

22.4.      NO COCKPIT DUTY DURING DEADHEAD

22.5.      DEADHEAD PAY

         22.5.1.    AIR TRANSPORTATION

         22.5.2.    SURFACE TRANSPORTATION

         22.5.3.    REPORT TO DUTY ASSIGNMENT INSTEAD OF BASE

         22.5.4.    TRAINING


SECTION 23 - RESERVE

23.1.      LONG CALL RESERVE (R - 3)

         23.1.1.    CONTACT

         23.1.2.    RESPONSE

         23.1.3.    COMPENSATION

23.1.4.  EXPENSES

23.2.      SHORT CALL RESERVE (R - 2)

         23.2.1.    CONTACT


                                     -104-
<PAGE>   105

         23.2.2.    RESPONSE

         23.2.3.    COMPENSATION

         23.2.4.    EXPENSES

         23.2.5.    ASSIGNMENT

23.3.      STANDBY (R - 1)

         23.3.1.    CONTACT

         23.3.2.    RESPONSE

         23.3.3.    COMPENSATION

         23.3.4.    EXPENSES

         23.3.5.    ASSIGNMENT

         23.3.6.    REST FACILITIES



SECTION 24 - DISCIPLINE AND DISCHARGE

24.1.      HOLDING OUT OF SERVICE

24.2.      INVESTIGATORY HEARING

         24.2.1.    EXPENSES

24.3.      WRITTEN NOTIFICATION

24.4.      GRIEVANCE RIGHTS



SECTION 25 - GRIEVANCE PROCEDURE

25.1.      GRIEVANCE DEFINITION

25.2.      STEP ONE - REQUEST FOR RELIEF

25.3.      STEP TWO - FILING A WRITTEN GRIEVANCE

         25.3.1.    TIMELINES FOR FILING AND RESPONSE

25.4.      STEP THREE - APPEAL TO SYSTEM BOARD OF ADJUSTMENT

25.5.      TIMELINE VERIFICATION

25.6.      TIME LIMIT EXTENSIONS AND PENALTIES

25.7.      PROBATIONARY CREWMEMBER EXCLUSION

25.8.      UNION REPRESENTATION

25.9.      RECORDING OF SETTLEMENT



SECTION 26 - SYSTEM BOARD OF ADJUSTMENT

26.1.      THE BOARD

26.2.      COMPOSITION OF THE BOARD


                                     -105-
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         26.2.1.    MEMBER SELECTION

         26.2.2.    TERMS OF OFFICE FOR BOARD MEMBERS

         26.2.3.    CHAIRMAN AND VICE CHAIRMAN

         26.2.4.    TERMS OF OFFICE FOR CHAIRMAN AND VICE CHAIRMAN

26.3.      MEETING SCHEDULE

26.4.      BOARD MEMBER COMPENSATION

26.5.      JURISDICTION OF THE BOARD

         26.5.1.    LIMITATIONS

         26.5.2.    REQUIREMENTS

26.6.      PROCEEDINGS BEFORE THE BOARD

         26.6.1.    AGENDA AND SUBMISSIONS

                  26.6.1.1.    ISSUE

                  26.6.1.2.    FACTS

                  26.6.1.3.    GRIEVANT POSITION

                  26.6.1.4.    COMPANY POSITION

                  26.6.1.5.    DOCUMENTATION

         26.6.2.    ADDITIONAL MEETING DATES

         26.6.3.    REPRESENTATION

         26.6.4.    WITNESSES

         26.6.5.    COMPETENCY

26.7.      DEADLOCK PROCEDURES

         26.7.1.    SUBMISSION TO ARBITRATION

         26.7.2.    FAILURE TO TIMELY SUBMIT TO ARBITRATION

26.8.      FREEDOM TO ACT INDEPENDENTLY



SECTION 27 - ARBITRATION

27.1.      THE ARBITRATION PROCEDURE

27.2.      STANDING PANEL

27.3.      ARBITRATOR SELECTION METHOD

27.4.      HEARING DATE AND LOCATION

27.5.      EXPENSES

27.6.      ARBITRATOR'S COMPENSATION AND EXPENSES

27.7.      COURT REPORTER COST

27.8.      LIMITATIONS


                                     -106-
<PAGE>   107

27.9.      AWARDS

27.10.     JURISDICTION



SECTION 28 - PROFESSIONAL STANDARDS COMMITTEE

28.1.      COMMITTEE SELECTION

28.2.      COMMITTEE PURPOSE

28.3.      COMPANY INTERACTION

28.4.      REPORTS

28.5.      CONFIDENTIALITY

28.6.      INVESTIGATIONS

28.7.      COMMITTEE MEMBER PAY PROTECTION



SECTION 29 - MISSING, INTERNMENT, PRISONER OR HOSTAGE OF WAR AND HIJACKING

29.1.      COMPENSATION

29.2.      SENIORITY AND LONGEVITY ACCRUAL

29.3.      SICK LEAVE USE

29.4.      DIRECTION OF PAYMENTS

         29.4.1.    WRITTEN DIRECTION

         29.4.2.    NO WRITTEN DIRECTION

29.5.      FORM FOR PAYMENT DIRECTION



SECTION 30 - STRIKES, LOCKOUTS AND PICKET LINES

30.1.      STRIKE

30.2.      LOCKOUT

30.3.      PICKET LINE



SECTION 31 - GENERAL

31.1.      NO DISCRIMINATION

31.2.      GENDER NEUTRAL

31.3.      INVALIDATION OF AGREEMENT PROVISIONS

31.4.      MODIFICATIONS TO THE AGREEMENT

31.5.      ID CARDS

31.6.      CHARTS AND MANUALS


                                     -107-
<PAGE>   108

31.7.      VISAS AND INOCULATIONS

31.8.      USE AND DAMAGE OF COMPANY EQUIPMENT

31.9.      CREWMEMBER LIABILITY COVERAGE

31.10.     PERSONNEL FILES

         31.10.1.   CONTENTS

         31.10.2.   ACCESS

31.11.     UNION REPRESENTATION

         31.11.1.   BULLETIN BOARD

         31.11.2.   UNION ACCESS TO PROPERTY

         31.11.3.   CREWMEMBER REPRESENTATIVES

         31.11.4.   NEW-HIRE INDOCTRINATION

31.12.     MANAGEMENT POSITIONS, CHECK AIRMEN AND SPECIAL PROJECTS

31.13.     PROMOTIONAL ACTIVITIES

31.14.     HOSTILE AREAS

31.15.     JUMPSEAT AGREEMENTS

31.16.     INTERLINE AGREEMENTS

31.17.     CABIN AND FLIGHT DECK MAINTENANCE

31.18.     AIRCRAFT GALLEY EQUIPMENT

31.19.     CREW MEALS

SECTION 32 - DURATION

LETTER OF AGREEMENT REGARDING PRIOR RIGHTS FLIGHT ENGINEERS

LETTER OF AGREEMENT REGARDING HIGH LONGEVITY DC-8 CREWMEMBERS

KITTY HAWK, INC. LETTER REGARDING SCOPE


                                     -108-