AIRCRAFT LEASE AGREEMENT

                                   Dated as of

                                 August 10, 1998
                                     between

                      INTERLEASE AVIATION INVESTORS, L.L.C.

                                       as
                                     Lessor
                                       and

                             FRONTIER AIRLINES, INC.

                                       as
                                     Lessee
                      in respect of Boeing 737-2P6 Aircraft
                               Serial Number 21613
                           U.S. Registration No. N1PC

<PAGE>



                                      INDEX

                       CLAUSE                              PAGE 


         1.       INTERPRETATION                             1

         2.       REPRESENTATIONS AND WARRANTIES            13

         3.       CONDITIONS PRECEDENT                      18

         4.       COMMENCEMENT                              21

         5.       PAYMENTS                                  23

         6.       MANUFACTURER'S WARRANTIES                 29

         7.       LESSOR'S COVENANTS                        30

         8.       LESSEE'S COVENANTS                        31

         9.       INSURANCE                                 45

        10.       INDEMNITY                                 48

        11.       EVENTS OF LOSS                            49

        12.       RETURN OF AIRCRAFT                        50
 
        13.       DEFAULT                                   53

        14.       ASSIGNMENT                                58

        15.       ILLEGALITY                                58

        16.       MISCELLANEOUS                             58

        17.       DISCLAIMERS AND WAIVERS                   62

        18.       SECTION 1110                              63
 



<PAGE>


         THIS AIRCRAFT LEASE AGREEMENT (this "Agreement") is made as of the ____
day of August,  1998 between INTERLEASE  AVIATION  INVESTORS,  L.L.C., a limited
liability  company  incorporated  under  the  laws of the  State  of Iowa  whose
principal office is at One Northfield  Plaza,  Suite 525,  Northfield,  Illinois
60093, ("Lessor"), and FRONTIER AIRLINES, INC., a company incorporated under the
laws of the State of Colorado whose chief executive office is at 12015 East 46th
Avenue, Denver, Colorado 80239 ("Lessee").

         WHEREAS,  Lessor  wishes to lease to  Lessee,  and Lessee is willing to
lease  from  Lessor,  the  Aircraft  (as  defined  herein)  on the terms of this
Agreement.

         NOW, THEREFORE, in consideration of the mutual promises,  covenants and
agreements of the parties herein set forth, Lessor and Lessee agree as follows:

I.       INTERPRETATION

     A.                         DEFINITIONS

         In this  Agreement,  the  following  terms have the  meanings set forth
below:

         Agreed Maintenance
         Performer                                 Lessee (up to and including C
                                                   Check but not  including  C-7
                                                   plus  SI  Check),  or any FAA
                                                   approved maintenance facility
                                                   or any other person agreed to
                                                   from time to time in  writing
                                                   by Lessor.

         Agreed Maintenance
         Program                                   The    Maintenance    Program
                                                   agreed  to from  time to time
                                                   in writing by Lessor.

         Agreed                                    Value  $12,500,000,   or,  if
                                                   higher,  the appraised  value
                                                   of the Aircraft most recently
                                                   determined  by  an  appraiser
                                                   selected   by   Lessor   from
                                                   appraisers   experienced   in
                                                   valuing Boeing 737 aircraft.

         Air Authority                             The FAA.

         Aircraft                                  The  aircraft   described  in
                                                   Part 1 of  Schedule  1 (which
                                                   term   includes,   where  the
                                                   context  permits,  a separate
                                                   reference   to  all  Engines,
                                                   Parts      and       Aircraft
                                                   Documents).

         Aircraft Deposit                          All amounts payable  pursuant
                                                   to Section 5.1.

         Aircraft Documents                        All     historical    records
                                                   delivered  with  the Aircraft
                                                   for  work  accomplished prior
                                                   to   the  Delivery  Date  and
                                                   current   records   for  work
                                                   accomplished  subsequent   to
                                                   the Delivery Date, including,
                                                   but   not   limited  to,  the
                                                   documents,  data  and records
                                                   identified   in   Part  2  of
                                                   Schedule 1 and all additions,
                                                   renewals,    revisions    and
                                                   replacements   from  time  to
                                                   time  made in accordance with
                                                   this Agreement.

         Airframe                                  The  Aircraft,  excluding the
                                                   Engines     and      Aircraft
                                                   Documents.

         APU                                       The   auxiliary   power  unit
                                                   installed  on the Aircraft on
                                                   the  Delivery  Date  and  any
                                                   replacement  auxiliary  power
                                                   unit  installed in accordance
                                                   with this Agreement.

         Banks                                     Such financial institution(s)
                                                   or other  lenders  which from
                                                   time to time  finance(s)  the
                                                   Aircraft  for  Lessor  and/or
                                                   for  whose  benefit  security
                                                   over, or rights  relating to,
                                                   the   Aircraft   and/or  this
                                                   Agreement   is   granted   by
                                                   Lessor or at its request.

         Boeing                                    The   Boeing    Company,    a
                                                   Delaware corporation with its
                                                   principal  office in Seattle,
                                                   Washington.

         Business Day                              A  day   (other    than     a
                                                   Saturday  or Sunday) on which
                                                   business    of   the   nature
                                                   required by this Agreement is
                                                   carried  out in the  State of
                                                   Illinois  or,  where  used in
                                                   relation  to   payments,   on
                                                   which   banks  are  open  for
                                                   business  in  the  States  of
                                                   Illinois and Colorado.

         Certificated Air
         Carrier                                   Any Person (except the United
                                                   States Government)  domiciled
                                                   in   the   United  States  of
                                                   America    and    holding   a
                                                   Certificate   of  Convenience
                                                   and Necessity issued under 49
                                                   U.S.C.ss.  41102  of the Code
                                                   by    the    Department    of
                                                   Transportation     or     any
                                                   predecessor    or   successor
                                                   agency  thereto  and  an  Air
                                                   Carrier Certificate issued by
                                                   the  FAA under  49  U.S.C.ss.
                                                   44705, or, in the event  such
                                                   Certificates shall no longer 
                                                   be issued, any Person (except
                                                   the United States Government)
                                                   domiciled    in   the  United
                                                   States of America and legally
                                                   engaged  in   the business of
                                                   transporting     for     hire
                                                   passengers  or  cargo  by air
                                                   predominantly   to,  from  or
                                                   between   points  within  the
                                                   United   States  of  America,
                                                   and,   in    either    event,
                                                   operating    commercial   jet
                                                   aircraft,   which   also   is
                                                   certificated  so  as  to fall
                                                   within the purview of Section
                                                   1110  of   Title  11 of   the
                                                   United  States  Code  or  any
                                                   similar statute.

         Cold Section
         Refurbishment                             The     completion   of   the
                                                   following  tasks with respect
                                                   to   an   Engine:  completely
                                                   unstack   the   high  or  low
                                                   compressors,   or   both   if
                                                   needed,   and   complete  the
                                                   following for the appropriate
                                                   section(s); de-blade disks as
                                                   necessary;  accomplish visual
                                                   inspections  of   all  disks;
                                                   measure  to  assure  all snap
                                                   diameters on disks are within
                                                   limits;  inspect  blades  for
                                                   proper  chord  dimensions and
                                                   cracking; repair  or  replace
                                                   blades    below     minimums;
                                                   inspect and repair stators as
                                                   necessary;   blade  up  disks
                                                   using    new   lock   plates;
                                                   assemble  compressor  rotors;
                                                   balance   both   rotors;  and
                                                   install rotors in such Engine

         Cycle                                     One  take-off  and landing of
                                                   the Aircraft.

         Damage Notification
         Threshold                                 $100,000.

         Default                                   Any Event of Default  and any
                                                   event or condition which with
                                                   the giving of notice or lapse
                                                   of time would  constitute  an
                                                   Event of Default.

         Delivery Date                             The   date   on   which   the
                                                   Aircraft  is   tendered   for
                                                   delivery    by    Lessor   in
                                                   accordance      with     this
                                                   Agreement.

         Delivery                                  Location Such airport  within
                                                   the continental United States
                                                   as shall be  agreed by Lessor
                                                   and Lessee.

         Dollars and $                             The  lawful  currency  of the
                                                   United States of America.

         Engine                                    Whether  or not  installed on
                                                   the Aircraft:

                                                   (a)   each   engine  of   the
                                                         manufacture  and  model
                                                         specified  in Part 1 of
                                                         Schedule   1  (each  of
                                                         which  has  750 or more
                                                         rated           takeoff
                                                         horsepower    or    the
                                                         equivalent    of   such
                                                         horsepower)       which
                                                         Lessor elects to tender
                                                         to   Lessee   with  the
                                                         Aircraft     on     the
                                                         Delivery   Date,   such
                                                         engines being described
                                                         as to serial numbers on
                                                         the    certificate   of
                                                         acceptance    to     be
                                                         executed by Lessee upon
                                                         delivery     of     the
                                                         Aircraft; or

                                                   (b)   any  engine  which  has
                                                         replaced  that  engine,
                                                         title to which has,  or
                                                         should have, passed  to
                                                         Lessor   in  accordance
                                                         with this Agreement;

                                                         and    in   each   case
                                                         includes   all  modules
                                                         and Parts from  time to
                                                         time belonging   to  or
                                                         installed    in    that
                                                         engine but excludes any
                                                         properly       replaced
                                                         engine  title  to which
                                                         has,  or  should  have,
                                                         passed     to    Lessee
                                                         pursuant    to     this
                                                         Agreement.

         Event of Default                          An   event    or    condition
                                                   specified in Section 13.1.

         Event of Loss                             With respect to the  Aircraft
                                                   (including for  the  purposes
                                                   of   this   definition    the
                                                   Airframe):

                                                   (a)   the    actual        or
                                                         constructive total loss
                                                         of     the     Aircraft
                                                         (including  any  damage
                                                         to  the  Aircraft which
                                                         results in an insurance
                                                         settlement on the basis
                                                         of  a  total  loss,  or
                                                         requisition  for use or
                                                         hire  which  results in
                                                         an insurance settlement
                                                         on the basis of a total
                                                         loss); or

                                                   (b)   it   being   destroyed,
                                                         damaged  beyond  repair
                                                         or permanently rendered
                                                         unfit  for  normal  use
                                                         for      any     reason
                                                         whatsoever; or

                                                   (c)   the    requisition   of
                                                         title,      or    other
                                                         compulsory acquisition,
                                                         capture,       seizure,
                                                         deprivation,
                                                         confiscation         or
                                                         detention   for     any
                                                         reason of the Aircraft 
                                                         by  the government   of
                                                         the      State       of
                                                         Registration   or other
                                                         competent     authority
                                                         (whether  de jure or de
                                                         facto),   but excluding
                                                         requisition for use  or
                                                         hire   not    involving
                                                         requisition  of  title;
                                                         or

                                                   (d)   the  hijacking,  theft,
                                                         condemnation,
                                                         confiscation,   seizure
                                                         or  requisition for use
                                                         or hire of the Aircraft
                                                         which   deprives    any
                                                         person   permitted   by
                                                         this  Agreement to have
                                                         possession  and/or  use
                                                         of  the Aircraft of its
                                                         possession  and/or  use
                                                         for  more than 15 days.

         Excusable Delay                           With  respect  to delivery of
                                                   the    Aircraft,   delay   or
                                                   non-performance   due  to  or
                                                   arising out of acts of God or
                                                   public   enemy,  civil   war,
                                                   insurrection  or  riot, fire,
                                                   flood, explosion, earthquake,
                                                   accident,           epidemic,
                                                   quarantine  restriction,  any
                                                   act      of       government,
                                                   governmental        priority,
                                                   allocation,   regulation   or
                                                   order  affecting, directly or
                                                   indirectly, the Aircraft, any
                                                   vendor,     Lessor    or  any
                                                   materials    or   facilities,
                                                   strike   or   labor   dispute
                                                   causing cessation,slowdown or
                                                   interruption     of     work,
                                                   inability    after   due  and
                                                   timely  diligence  to procure
                                                   equipment,  data or materials
                                                   from           manufacturers,
                                                   suppliers,    any    existing
                                                   lessee  in  a  timely manner,
                                                   damage,  destruction or loss,
                                                   or  any  other  cause  to the
                                                   extent  that  such  cause  is
                                                   beyond  the control of Lessor
                                                   whether  above  mentioned  or
                                                   not   and   whether   or  not
                                                   similar to the foregoing.

         Expiration Date                           Subject to  Section  4.6, the
                                                   day preceding the numerically
                                                   corresponding  day  84 months
                                                   after the Delivery  Date  or,
                                                   if   earlier,  the  date   on
                                                   which:

                                                   (a)   the   Aircraft has been
                                                         redelivered          in
                                                         accordance  with   this
                                                         Agreement; or

                                                   (b)   Lesso   receives    the
                                                         Agreed Value  following
                                                         an Event of Loss.

         FAA                                       The     Federal      Aviation
                                                   Administration  of the United
                                                   States  of  America  and  any
                                                   successor thereof.

         Federal Aviation Act                      United    States      Federal
                                                   Aviation   Act  of  1958,  as
                                                   amended,   or  any    similar
                                                   legislation   of  the  United
                                                   States of America  enacted in
                                                   substitution  or  replacement
                                                   thereof.

         Financial Indebtedness                    Any  indebtedness  in respect
                                                   of:

                                                   (a)   moneys    borrowed   or
                                                         raised;

                                                   (b)   any liability under any
                                                         debenture,  bond, note,
                                                         loan stock, acceptance,
                                                         documentary  credit  or
                                                         other security;

                                                   (c)   the acquisition cost of
                                                         any   asset   to    the
                                                         extent  payable  before
                                                         or  after  the  time of
                                                         acquisition          or
                                                         possession; or

                                                   (d)   any          guarantee,
                                                         indemnity   or  similar
                                                         assurance       against
                                                         financial  loss  of any
                                                         person  in  respect  of
                                                         the above.

         Financing Statements                      Uniform    Commercial    Code
                                                   Financing    Statements    in
                                                   respect of this Agreement and
                                                   the   collateral    described
                                                   therein  prepared  in  a form
                                                   acceptable   for  filing with
                                                   the   applicable   Government
                                                   Entities   in   the  Habitual
                                                   Base,  the State in which the
                                                   chief  executive  office  (as
                                                   that  term  is   defined   in
                                                   Article 9   of  the   Uniform
                                                   Commercial  Code as in effect
                                                   in the State of Illinois) and
                                                   such  other  jurisdiction  as
                                                   Lessor    shall    reasonably
                                                   require.

         Flight Hour                               Each   hour  or  part thereof
                                                   (rounded  up  to  one decimal
                                                   place)   elapsing   from  the
                                                   moment  the   wheel  of   the
                                                   Aircraft  leave the ground on
                                                   take off until the  wheels of
                                                   the  Aircraft  next touch the
                                                   ground.

         Governing Law                             The  laws  of  the  State  of
                                                   Illinois.

         Government Entity                         Any of the following:

                                                   (a)   any            national
                                                         government,   political
                                                         subdivision thereof, or
                                                         local      jurisdiction
                                                         therein;

                                                   (b)   any    instrumentality,
                                                         board,      commission,
                                                         court or  agency of any
                                                         thereof,        however
                                                         constituted; and

                                                   (c)   any        association,
                                                         organization,        or
                                                         institution  of   which
                                                         any  of  the above is a
                                                         member   or  to   whose
                                                         jurisdiction        any
                                                         thereof  is  subject or
                                                         in whose activities any
                                                         of   the   above  is  a
                                                         participant.

         Habitual Base                             The  State   of  Colorado or,
                                                   subject    to   the     prior
                                                   written  consent  of  Lessor,
                                                   any other  state in which the
                                                   Aircraft   is  for  the  time
                                                   being habitually based.

         Hot Section
         Refurbishment                             The      complete      visual
                                                   inspection   and   repair  as
                                                   necessary  of  the combustion
                                                   section  of  an   Engine.  In
                                                   conducting   such  inspection
                                                   and  repair,  the engine shop
                                                   must  completely  unstack the
                                                   high pressure or low pressure
                                                   turbine  or  both  if needed;
                                                   accomplish  complete   visual
                                                   inspection; de-blade disks as
                                                   necessary;  accomplish visual
                                                   inspections  of  all   disks;
                                                   measure   to  assure all snap
                                                   diameters on disks are within
                                                   limits;  inspect  blade   for
                                                   proper chord  dimensions  and
                                                   cracking;  repair  or replace
                                                   blades    below     minimums;
                                                   inspect and repair stators as
                                                   necessary;    blade  up disks
                                                   using   new   lock    plates;
                                                   assemble   compressor rotors,
                                                   balance   both  rotors;   and
                                                   install rotors in such Engine

         Indemnitees                               Each  of  Lessor   and  Banks
                                                   including    any   of   their
                                                   respective   successors   and
                                                   assigns,        shareholders,
                                                   subsidiaries,     affiliates,
                                                   partners,        contractors,
                                                   directors,          officers,
                                                   servants,      agents     and
                                                   employees.

         Landing Gear                              The  landing  gear assemblies
                                                   of the Aircraft excluding any
                                                   rotable components.

         Lessor Lien                               Any of the following:

                                                   (a)   any  security  interest
                                                         whatsoever from time to
                                                         time   created   by  or
                                                         through    Lessor    in
                                                         connection   with   the
                                                         financing     of    the
                                                         Aircraft;

                                                   (b)   any    other   security
                                                         interest in respect  of
                                                         the    Aircraft   which
                                                         results from acts of or
                                                         claims  against  Lessor
                                                         not   related  to   the
                                                         transactions 
                                                         contemplated    by   or
                                                         permitted   under  this
                                                         Agreement; and

                                                   (c)   liens in respect of the
                                                         Aircraft   for   Lessor
                                                         Taxes.

         Lessor Taxes                              Taxes:

                                                   (a)   imposed  as  a   direct
                                                         result of activities of
                                                         Lessor     in       the
                                                         jurisdiction   imposing
                                                         the liability unrelated
                                                         to Lessor's    dealings
                                                         with  Lessee  or to the
                                                         transactions
                                                         contemplated   by  this
                                                         Agreement    or     the
                                                         operation    of     the
                                                         Aircraft by Lessee; or

                                                   (b)   imposed on the  income,
                                                         profits   or  gains  of
                                                         Lessor       by     any
                                                         Government   Entity  in
                                                         the   United  States of
                                                         America; or

                                                   (c)   imposed with respect to
                                                         any   period commencing
                                                         or   event    occurring
                                                         after   the  Expiration
                                                         Date  and  unrelated to
                                                         Lessor's  dealings with
                                                         Lessee    or   to   the
                                                         transactions
                                                         contemplated  by   this
                                                         Agreement.

         Letter Agreement                          Letter Agreement of even date
                                                   herewith  between  Lessor and
                                                   Lessee   in  respect  of  the
                                                   Aircraft, the terms of  which
                                                   constitute  an integral  part
                                                   of this Agreement.

         Maintenance Program                       The FAA-approved maintenance 
                                                   program  for  the    Aircraft
                                                   encompassing        scheduled
                                                   maintenance  (including block
                                                   maintenance),       condition
                                                   monitored maintenance, and/or
                                                   on-condition  maintenance  of
                                                   Airframe, Engines  and Parts,
                                                   including but not limited to,
                                                   servicing,           testing,
                                                   preventive       maintenance,
                                                   repairs,           structural
                                                   inspections,  system  checks,
                                                   overhauls,           approved
                                                   modifications,        service
                                                   bulletins,        engineering
                                                   orders,         airworthiness
                                                   directives,         corrosion
                                                   control,   inspections    and
                                                   treatments.

         Maintenance Reserves                      All   amounts   payable under
                                                   section 5.4(a).

         Major Checks                              Any    C-Check,      multiple
                                                   C-Check,  C-7 plus SI  Check,
                                                   or annual  heavy  maintenance
                                                   visit  or   segment   thereof
                                                   suggested   for    commercial
                                                   aircraft of the same model as
                                                   the     Aircraft    by    its
                                                   manufacturer         (however
                                                   denominated)  as  set  out in
                                                   the    Agreed     Maintenance
                                                   Program.

         Manufacturer                              Boeing.

         Minimum Liability Coverage                $600,000,000 on each
                                                   occurrence.

         Other Agreements                          Any   agreement (other   than
                                                   this Agreement) made or to be
                                                   made  between  Lessor  (or an
                                                   affiliate,    associate    or
                                                   subsidiary   of   Lessor) and
                                                   Lessee  (or   an   affiliate,
                                                   associate  or  Subsidiary  of
                                                   Lessee).

         Part                                      Whether or  not  installed on
                                                   the Aircraft:

                                                   (a)   any          component,
                                                         furnishing or equipment
                                                         (other  than a complete
                                                         Engine) furnished  with
                                                         the  Aircraft  on   the
                                                         Delivery Date; and

                                                   (b)   any   other  component,
                                                         furnishing or equipment
                                                         (other  than a complete
                                                         Engine) title  to which
                                                         has,  or  should   have
                                                         passed     to    Lessor
                                                         pursuant     to    this
                                                         Agreement;

                                                   but  excludes  any such items
                                                   title to which has, or should
                                                   have,    passed   to   Lessee
                                                   pursuant to this Agreement.

         Permitted Lien                            The  following,  and only the
                                                   following:

                                                   (a)   any  lien for Taxes not
                                                         assessed    or,      if
                                                         assessed,  not  yet due
                                                         and payable,  or  being
                                                         contested in good faith
                                                         by          appropriate
                                                         proceedings;

                                                   (b)   any lien of a repairer,
                                                         mechanic,      carrier,
                                                         hangarkeeper  or  other
                                                         similar lien arising i
                                                         the  ordinary course of
                                                         business    or       by
                                                         operation   of  law  in
                                                         respect  of obligations
                                                         which  are  not overdue
                                                         or  are being contested
                                                         in   good    faith   by
                                                         appropriate
                                                         proceedings;

                                                   but  only if (in the  case of
                                                   both   (a)   and   (b))   (i)
                                                   adequate  reserves  have been
                                                   provided  by  Lessee  for the
                                                   payment   of  the   Taxes  or
                                                   obligations;  and  (ii)  such
                                                   proceedings, or the continued
                                                   existence of the lien, do not
                                                   give  rise to any  likelihood
                                                   of the  sale,  forfeiture  or
                                                   other loss of the Aircraft or
                                                   any  interest  therein  or of
                                                   criminal  liability on Lessor
                                                   or any Bank; and

                                                   (c)   any Lessor Lien.

         Person                                    Any    individual     person,
                                                   corporation,     partnership,
                                                   limited  liability   company,
                                                   firm,  joint  stock  company,
                                                   joint venture, trust, estate,
                                                   unincorporated  organization,
                                                   association,       Government
                                                   Entity,  or  organization  or
                                                   association  of which  any of
                                                   the  above is a  member  or a
                                                   participant.

         Prime Rate                                The  rate  of  interest  most
                                                   recently     announced     by
                                                   Lessor's  Bank  as its  prime
                                                   rate,  as in effect from time
                                                   to time.

         Redelivery Location                       Chicago,  Illinois  or   such
                                                   other   location    in    the
                                                   continental  United States of
                                                   America   as   Lessor   shall
                                                   advise  Lessee or such  other
                                                   location  as the  parties may
                                                   agree.

         Rent                                      All amounts  payable pursuant
                                                   to section 5.3.

         Rental Period                             Each   period  ascertained in
                                                   accordance with section 5.2.

         Rent Date                                 The  first day of each Rental
                                                   Period.

         Security Interest                         Any mortgage, charge, pledge,
                                                   lien,             assignment,
                                                   hypothecation, right  of  set
                                                   off  or   any  encumbrance or
                                                   other  restriction   or   any
                                                   agreement   or    arrangement
                                                   having the effect of creating
                                                   a   security  interest  other
                                                   than a Permitted Lien, or any
                                                   agreement   to   create   the
                                                   foregoing    other   than   a
                                                   Permitted Lien.

         State of Incorporation                    The State of Colorado.

         State of Registration                     The United States of America.

         Subsidiary                                (a)   In   relation  to   any
                                                         reference  to financial
                                                         statements, any company
                                                         whose  accounts     are
                                                         consolidated   with the
                                                         accounts  of Lessee  in
                                                         accordance         with
                                                         accounting   principles
                                                         generally      accepted
                                                         under        accounting
                                                         standards  of the State
                                                         of Incorporation; and

                                                   (b)   For  any  other purpose
                                                         an  entity from time to
                                                         time:

                                                         (i)of which another has
                                                         direct   or    indirect
                                                         control    or      owns
                                                         directly or  indirectly
                                                         more   than  fifty (50)
                                                         percent   of the voting
                                                         share capital; or

                                                         (ii) which is a  direct
                                                         or  indirect subsidiary
                                                         of  another  under  the
                                                         laws     of         the
                                                         jurisdiction   of   its
                                                         incorporation.

         Taxes                                     Taxes, duties and the like of
                                                   all   kinds   and  any  other
                                                   amount  corresponding  to any
                                                   taxation  together  with  any
                                                   penalties,  fines,  surcharge
                                                   or interest thereon.

         Term                                      The period  commencing on the
                                                   Delivery  Date and  ending on
                                                   the Expiration Date.

A. CONSTRUCTION

1. In  this Agreement, unless a contrary intention is expressly stated, 
a reference to:

a)       each of "Lessor" or "Lessee" or any other person includes without
         prejudice  to  the  provisions of this Agreement any successor in title
          to it and any permitted assignee;

a)       words importing  the plural  shall include the singular and vice versa;

a)       any document shall  include that document as amended, modified, novated
         or supplemented;

a)       a law 
               [A] includes  any   statute,  decree,  constitution,  regulation,
                   order,  judgment  or  directive  of  any  Government  Entity;
               [B] includes  any  treaty,  pact,  compact or  other agreement to
                   which any Government Entity is a signatory or party;  
               [C] includes  any  judicial or administrative  interpretation  or
                   application  thereof and (4) is a reference to that provision
                   as amended, substituted or re-enacted;

a)       a Section or a Schedule is a reference to a section of or a schedule to
          this Agreement; and

1. The  headings in this  Agreement  are for  convenience  only and shall not be
considered part of any Section for purposes of construing this Agreement.

I.       REPRESENTATIONS AND WARRANTIES

A. Lessee's Representations and Warranties: Lessee  represents  and  warrants to
Lessor that:

1. Status.  Lessee is a corporation  duly  incorporated  and validly existing in
good standing under the laws of the State of Incorporation and has the corporate
power to own its assets and carry on its business as it is being  conducted  and
is  the  holder  of  all  necessary  air  transportation  licenses  required  in
connection therewith and with the use and operation of the Aircraft;

1. Power  and  Authority.  Lessee  has  the  corporate  power to enter  into and
perform,  and has taken all  necessary  corporate  action to authorize the entry
into,   performance  and  delivery  of,  this  Agreement  and  the  transactions
contemplated by this Agreement;

1. Legal Validity.  This Agreement constitutes Lessee's legal, valid and binding
obligation, enforceable against Lessee in accordance with its terms;

1. No Conflicts, Etc.  The  entry  into  and  performance  by Lessee of, and the
transactions contemplated by, this Agreement do not and will not:

a)       conflict with any laws binding on Lessee; or

a)       conflict with any provisions of the organizational documents of Lessee,
         or

a)       conflict  with  or  result  in  default  under any indenture, mortgage,
         chattel  mortgage,  deed  of  trust, conditional sales contract, lease,
         bank loan or credit agreement or other agreement which  is binding upon
         Lessee  or any  of  it  assets  nor  result  in   the creation  of  any
         Security Interest over any of its assets;

1. Authorizations. All authorizations, consents, registrations and notifications
required  in  connection  with  the  entry  into,   performance,   validity  and
enforceability  of, this  Agreement and the  transactions  contemplated  by this
Agreement, have been (or will on or before the Delivery Date have been) obtained
or  effected  (as  appropriate)  and are (or will on  their  being  obtained  or
effected be) in full force and effect;

1. No Immunity.

a)       Lessee   is   subject   to  civil commercial  law  with respect  to its
         obligations under this Agreement; and

a)       neither Lessee  nor  any  of  its  assets  is  entitled to any right of
         immunity and the entry into and performance of this Agreement by Lessee
         constitute private and commercial acts;

1. Financial Statements. The audited consolidated financial statements of Lessee
and its Subsidiaries most recently delivered to Lessor:

a)       have been prepared in accordance with United States generally  accepted
         accounting principles applied consistently with the past  practices  of
         Lessee and its Subsidiaries; and
    
a)       fairly represent the consolidated financial condition of Lessee and its
         Subsidiaries as at the date thereof;

1. Chief  Executive  Office.  Lessee's chief  executive  office (as that term is
defined in Article 9 of the Uniform Commercial Code as in effect in the State of
Colorado) is located at 12015 East 46th Avenue, Denver, Colorado 80239;

1. Certificated Air Carrier. Lessee is a Certificated Air Carrier and Lessor, as
lessor of the Aircraft to Lessee, is entitled to the benefits of Section 1110 of
Title 11 of the United States Code with respect to the Aircraft; and

1. Citizen of  the United States.  Lessee is a "citizen of the United States" as
defined in Section 40102 of Title 49 of the United States Code.

A. Lessee's Further Representations and Warranties:    Lessee further represents
and warrants to Lessor that:

1. No Default.

a)       no Default has occurred and is continuing  or  might  result  from  the
         entry into or performance of this Agreement; and

a)       no  other  event  or  condition  has  occurred  and is continuing which
         constitutes (or with the giving of notice, lapse of time, determination
         of materiality or the fulfillment of any other applicable  condition or
         any combination of the foregoing,  might constitute) a material default
         under   any  indenture,  mortgage, chattel  mortgage,  deed  of  trust,
         conditional sales contract, lease,  bank  loan  or credit  agreement o
         other agreement which is binding on Lessee or any assets of Lessee;

1. Registration.
a)       except for  the filing for recordation of this Agreement  with  the FAA
         and  the filing of any Financing Statements required  (and continuation
         statements at periodic intervals), it is not necessary  under  the laws
         of the State of Incorporation or the Habitual  Base in order to  ensure
         the validity, effectiveness and enforceability  of  this  Agreement  or
         to, establish, perfect or protect  the  property  rights  of  Lessor in
         the Aircraft or any Engine or Part that  this  Agreement  or  any other
         instrument relating  thereto  be filed,  registered or recorded or tha
         any other  action   be  taken  or  if  any such filings, registrations,
         recordings or other actions are necessary or advisable, the  same  have
         been effected  or  will  have  been  effected on or before the Delivery
         Date; and

a)       under  the  laws  of  the State of Incorporation and the Habitual  Base
         the  property   rights   of   Lessor  in  the Aircraft, have been fully
         established,  perfected  and  protected and  this  Agreement  will have
         priority in  all  respects  over the claims of all creditors of Lessee;

1. Litigation.   No  litigation,  arbitration,   administrative  proceedings  or
investigation  are pending or to Lessee's  knowledge  threatened  against Lessee
which, if adversely  determined,  would have a material  adverse effect upon its
financial  condition or business or its ability to perform its obligations under
this Agreement;

1. Pari Passu. The obligations of Lessee under this Agreement rank at least pari
passu with all other present and future unsecured and unsubordinated obligations
(including  contingent  obligations)  of  Lessee,  with  the  exception  of such
obligations  as are  mandatorily  preferred  by law  and  not by  virtue  of any
contract;

1. Material  Adverse  Change.  There has been no material  adverse change in the
consolidated financial condition of Lessee and its Subsidiaries or the financial
condition  of Lessee since the date of the accounts  most  recently  provided to
Lessor on or prior to the date of this Agreement;

1. Taxes. Lessee has delivered all necessary returns and payments due to the tax
authorities  in the State of  Incorporation  and the Habitual Base and all other
jurisdictions  in which  Lessee is required to pay taxes and/or file tax returns
or  reports  and  Lessee is not  required  by law to deduct  any Taxes  from any
payments under this Agreement;

1. Information.   The  financial  and other  information  furnished by Lessee in
connection with this Agreement does not contain any untrue  statement or omit to
state facts, the omission of which makes the statement therein,  in the light of
the circumstances under which they were made, misleading,  nor omits to disclose
any material matter to Lessor and all forecasts and opinions  contained  therein
were  honestly  made on  reasonable  grounds  after due and  careful  inquiry by
Lessee;

1. Foreign Asset Control. As of the date of this Agreement, Lessee does not hold
any contract or other obligation to operate the Aircraft to any of the countries
designated under the United States Foreign Asset Control  Regulations (31 C.F.R.
Parts 500-599),  including,  as of the date hereof,  Cuba,  Haiti,  Iraq, Libya,
North Korea,  Bosnia,  Serbia and Montenegro and the Unita Rebels of Angola;  2.
ERISA.  Lessee is not engaged in any  transaction  in  connection  with which it
could be subjected to either a civil penalty assessed pursuant to Section 502(c)
of ERISA or any tax  imposed by Section  5975 of the  Internal  Revenue  Code of
1986,  as  amended;  no  material  liability  of the  Pension  Benefit  Guaranty
Corporation has been or is expected by Lessee to be incurred with respect to any
employee  pension benefit plan (as defined in Section 3 of ERISA)  maintained by
Lessee;  there has been no  reportable  event (as defined in Section  4043(b) of
ERISA) with respect to any such employee pension benefit plan. There is no event
of termination of any such employee  pension benefit plan by the Pension Benefit
Guaranty  Corporation;  and no  accumulated  funding  deficiency  (as defined in
Section 302 of ERISA or Section 412 of the Internal  Revenue  Code),  whether or
not waived, exists with respect to any such employee pension benefit plan; and

1. Maintenance  Program.  The  Maintenance  Program  for the  Aircraft,  a true,
correct and complete  copy of which has been  provided to Lessor,  complies with
all FAA  requirements  and is based on the Boeing 737-200  Maintenance  Planning
Document.

A. Survival.
The  representations  and  warranties   in Sections 2.1 and 2.2 will survive the
execution  of  this  Agreement  will  be  deemed  to  be remade by Lessee on the
Delivery  Date with  reference  to  the facts and  circumstances  then existing.
The representations and warranties  contained in Clause 2.1 will be deemed to be
remade by Lessee  on each Rent Date as if made with  reference  to the facts and
circumstances then existing.

     
A. Lessor's Representations and Warranties.  Lessor  represents and  warrants to
Lessee that:

1. Status.  Lessor is a limited liability company existing under the laws of the
State of Iowa and has the power to own its assets and carry on its  business  as
it is now being conducted;

1. Power  and  Authority.  Lessor  has  the  corporate  power to enter  into and
perform,  and has taken all  necessary  corporate  action to authorize the entry
into,   performance  and  delivery  of,  this  Agreement  and  the  transactions
contemplated by this Agreement;

1. Legal Validity.  This Agreement constitutes Lessor's legal, valid and binding
obligation, enforceable agreement Lessor in accordance with its terms;

1. No Conflicts.  The entry into and performance by Lessor of, and the
transactions contemplated by, this Agreement do not and will not:

a)       conflict with any laws binding on Lessor; or

a)       conflict  with  the  organizational documents of Lessor; or

a)       conflict with any  document  which is binding upon Lessor or any of its
         assets;

1. Authorizations.   So  far  as  concerns  the   obligations   of  Lessor,  all
authorizations,  consents,  registrations and  notifications  required under the
laws of the State of Illinois in  connection  with the entry into,  performance,
validity  and  enforceability  of, and the  transactions  contemplated  by, this
Agreement by Lessor have been (or will on or before the Delivery Date have been)
obtained or effected (as  appropriate)  and are (or will on their being obtained
or effected be) in full force and effect.

1. No Immunity.

a)       Lessor  is  subject  to  civil  commercia  law  with  respect  to   its
         obligations under this Agreement and 

                                (ii)    neither Lessor  nor any of its assets is
                                entitled  to any right of immunity and the entry
                                into and performance of this Agreement by Lessor
                                constitute private and commercial acts.

I. CONDITIONS PRECEDENT

A. Conditions Precedent. Lessor's obligation  to deliver  and lease the Aircraft
to  Lessee  under  this  Agreement  is  subject  to s atisfaction of each of the
following conditions:

1. Receipt by Lessor  from Lessee not later than one (1)  Business  Day prior to
the date set forth in, or  determined  in  accordance  with,  Section 4.1 of the
following satisfactory in form and substance to Lessor:

a)       Organizational Documents.   A  copy of  the organizational documents of
         Lessee, certified by the Secretary or an Assistant Secretary of Lessee;

a)       Resolutions. A copy of resolutions of the board of directors of Lessee,
         certified   by the  Secretary  or  an  Assistant  Secretary of  Lessee,
         approving the  terms of,  and the transactions  contemplated  by,  this
         Agreement, resolving that it enter into this Agreement, and authorizing
         a  specified  person  or  persons  to execute this Agreement and accept
         delivery of the Aircraft on its behalf;

b)       Opinion. An opinion substantially in the form of Schedule 5, dated  the
         Delivery Date, by the Vice President and General Counsel   for  Lessee,
         acceptable to Lessor;

a)       FAA Opinion.  An  opinion of counsel for Lessee, acceptable to  Lessor,
         who are recognized specialists with regard to FAA registration matters,
         in a form acceptable to Lessor, as to the  due filing  for  recordation
         of this Agreement;

a)       Approvals.  Each approval, license  and consent which  may  be require
         in  relation to  the  performance  by  Lessee of any of its obligations
         hereunder (including,  without  limitation,  any consent to  the export
         of the Aircraft from the Habitual  Base  upon  the  termination of  the
         leasing of the Aircraft under this Agreement);

a)       Import.  Any  required  import  license, and  all customs  formalities,
         relating to the import of the Aircraft into the Habitual Base have been
         obtained or complied with, and that the import of the Aircraft into the
         Habitual Base is exempt from Taxes;

a)       Licenses.  Certified  copies  of  Lessee's  air transport  license, air
         operator's  certificates  and  all  other  licenses,  certificates  and
         permits required  by  Lessee  in   relation to, or  in connection with,
         the operation of the Aircraft;

a)       Process Agent.  A letter  from the process agent appointed by Lessee in
         this Agreement accepting that appointment;

a)       Certificate.  A certificate  of the Secretary or an Assistant Secretary
         of Lessee:

a)       Setting out a specimen  of each signature referred to in Section 3.1(a)
         (ii); and

b)       Certifying  that  each  copy  document  specified  in  this  Section is
         correct, complete and in full force and effect; and

a)       General.  Such other documents as Lessor may reasonably request;

1. The receipt by Lessor on or before the Delivery Date of:

a)       Opinions.  A   signed   original of each of the opinions referred to i
         Sections 3.1(a)(iii) and (iv);

b)       Payments.   All  sums  due  to Lessor under this Agreement on or before
         the Delivery  Date, including, without limitation, the first payment of
         Rent;

a)       Insurance.  Certified  copies of all policies of insurance,  and  other
         evidence satisfactory to Lessor  that  Lessee  has  complied  with  the
         provisions  of   this Agreement as to  Insurance effective on and after
         the Delivery Date;

a)       Financial Statements.   The latest  available financial  statements  of
         Lessee as described in Sections 8.2(b)(i) and (ii);

a)       Documents.  A  confirmation  of  receipt  of  the  Aircraft   Documents
         delivered with the Aircraft on the Delivery Date;

a)       General.  Such  other  documents  as  Lessor may reasonably request;

1. Receipt by Lessor of such information and documents  relating to the proposed
Maintenance  Program as Lessor may require and Lessor having agreed the proposed
Maintenance Program on or prior to the Delivery Date; and

1. Evidence that on the Delivery  Date (i) the  Financing  Statements  have been
duly filed,  (ii) a Lease  Supplement,  substantially in the form of Schedule 1,
Part 3 hereof,  has been filed,  along with this Lease,  with the FAA's aircraft
registry  in  Oklahoma  City,  Oklahoma  and (iii) all  filings,  registrations,
recordings and other actions have been taken which are necessary or advisable to
ensure the validity,  effectiveness and  enforceability of this Agreement and to
protect the property rights of Lessor in the Aircraft or any Part.

A. Further Conditions Precedent. The obligations of Lessor to deliver and  lease
the  Aircraft  under this  Agreement  are  subject  to  the  further  conditions
precedent that:

1. The  representations  and warranties of Lessee under Sections 2.1 and 2.2 are
correct  and remain  correct on the  Delivery  Date if remade on delivery of the
Aircraft under this Agreement; and

1. No Default has occurred and is continuing or might result from the leasing of
the Aircraft to Lessee under this Agreement.

A.  Waiver.  The  conditions  specified in Sections 3.1 and 3.2 are for the sole
benefit  of Lessor  and may be  waived  in whole or in part and with or  without
conditions  by  Lessor.  If any of those  conditions  are not  satisfied  on the
Delivery  Date and Lessor (in its  absolute  discretion)  nonetheless  agrees to
deliver the  Aircraft to Lessee,  Lessee will ensure that those  conditions  are
satisfied  within fifteen (15) days after the Delivery Date and Lessor may treat
as an Event of Default the failure of Lessee to do so.

I.       COMMENCEMENT

A. Leasing.  Lessor will lease the Aircraft to Lessee, and Lessee will lease the
Aircraft from Lessor in accordance  with this  Agreement for the duration of the
Term.  Lessor  will  deliver  and Lessee  will  accept the  Aircraft on or about
October  10,  1998 or such  other  day as may be  agreed.  After  delivery,  the
Aircraft and every Part will be in every respect at the sole risk of Lessee, who
will bear all risk of loss,  theft,  damage or  destruction to the Aircraft from
any cause whatsoever.

A. Delivery.   The  Aircraft  will be delivered to and accepted by Lessee at the
Delivery  Location.  Lessee will effect  acceptance of the Aircraft by execution
and  delivery  to Lessor  of the duly  completed  and  executed  Certificate  of
Acceptance in the form of Schedule 2. Prior to the Delivery  Date,  Lessor shall
give Lessee  written  notice that the Aircraft is available for  inspection at a
location designated by Lessor. Within three (3) Business Days thereafter, Lessee
will  inspect  the  Aircraft at such  location.  Such  inspection  may include a
demonstration flight of up to two (2) hours in duration.  Upon the conclusion of
such inspection, Lessee will (a) execute a Certificate of Acceptance in the form
of  Schedule 2 or (b) in the event  that the  Aircraft  is not in the  condition
specified  in Schedule 1 to this  Agreement,  will  notify  Lessor in writing of
those deficiencies which cause the Aircraft not to meet the delivery  conditions
set forth in Schedule  1, in which  event,  prior to delivery to Lessee,  Lessor
shall  correct  those  deficiencies  required to cause the  Aircraft to meet the
delivery conditions set forth in Schedule 1 to this Lease Agreement.

A. Delayed Delivery.  If, as a result of:

1. The current  lessee of the  Aircraft  delaying the delivery of, or failing to
deliver,  the  Aircraft  to Lessor for any  reason  (other  than  because of any
default of Lessor in the performance of its obligations  under an agreement with
that  lessee),  unless the default  results  from any act or omission of Lessee,
whether or not in circumstances  entitling that seller terminate that agreement;
or

1. any Excusable Delay;

Lessor delays in the delivery of, or fails to deliver, the  Aircraft  under this
Agreement:

a)       Lessor  will  not  be  responsible  for  any  losses, including loss of
         profit, costs or expenses  arising from or in connection with the delay
         or failure suffered or incurred by Lessee;

a)       Lessee will not be  entitled to  terminate  this Agreement or to reject
         the Aircraft when tendered for delivery by Lessor, on  the  grounds  of
         any such delay, unless mutually agreed by Lessor and Lessee; and

a)       upon  any  such termination  neither  Lessor  nor Lessee  will have any
         further  obligation to the other  under   this Agreement other  than as
         expressly set out in this Agreement, except that  Lessor will rebate to
         Lessee the amount of the Aircraft Deposit paid under this Agreement.

A. Licenses.  Lessee  will  at its  expense  obtain all  licenses,  permits  and
approvals  which may be necessary to export  and/or  transport the Aircraft from
the Delivery  Location.  Lessor will furnish such data and information as may be
reasonably  requested by Lessee in connection  with  obtaining any such license,
permit or approval.

A. Not Used.

A. C Check  Option.  Provided  that (x) no Default  shall have  occurred  and is
continuing; and (y) there shall have been no material adverse change in Lessee's
financial  condition since the Delivery Date,  Lessee shall have the option (the
"C Check  Option")  to  extend  the Term for up to 2 months  provided  that such
extension  of the Term is required  by Lessee so as to enable  Lessee to perform
the C Check  required by paragraph 1 (e) of Schedule 3 at the time at which such
check would  otherwise fall to be performed  pursuant to the Agreed  Maintenance
Program in the absence of the requirement contained in such section. The C Check
Option  shall be  exercised,  if at all,  by Lessee  delivering  an  irrevocable
written  notice (a "C Check Notice") to Lessor not later than one hundred eighty
(180) days prior to the New  Expiration  Date (as  defined  below)  proposed  by
Lessee which notice shall state  whether  Lessee  desires to extend the Term and
the proposed date of performance and completion of the  aforementioned  C Check.
Upon the receipt by Lessor of the C Check  Notice,  (xx) Lessee shall be obliged
to lease the Aircraft from Lessor until the date (the "New Expiration  Date") of
completion  of the  aforementioned  C Check in  accordance  with the  terms  and
conditions of this Agreement; and (yy) the definition of "Expiration Date" shall
be deemed to have been amended so as to refer to the New Expiration Date and the
Aircraft  shall be redelivered to Lessor on that date (or, as may be applicable,
any other date contemplated by such definition) in accordance with the terms and
conditions of this Agreement.

I.       PAYMENTS

A. Aircraft Deposit.  In order to faithfully  secure its obligations  hereunder,
Lessee  shall pay to Lessor  an  Aircraft  Deposit  in the  amount  set forth in
paragraph 1 of the Letter  Agreement  and in  accordance  with the  schedule set
forth in that paragraph.  The Aircraft Deposit shall be nonrefundable during the
Term,  and shall be held by Lessor as security  for (i) the timely and  faithful
performance  by  Lessee  of  all  of  Lessee's   obligations  under  this  Lease
(including,  but not limited to, any prepetition or postpetition  obligations of
Lessee in connection with any proceeding or other action  involving Lessee under
any bankruptcy,  insolvency or reorganization Law of any jurisdiction), (ii) all
payments of Rent and Maintenance Reserves due and owing from time to time, (iii)
any and all damages incurred by Lessor which may arise as a result of the breach
or rejection of the Lease,  whether or not in  connection  with a motion to lift
stay or a motion to assume or reject the Lease,  including,  without limitation,
overdue interest,  costs of preservation or protection of the Aircraft and costs
of  repossession  and (iv) all attorney's  fees incurred by Lessor in connection
with any relating to any of the above,  whether or not  litigation is instituted
and whether  incurred  before or after the filing by Lessee of a petition  under
Chapter 7 or Chapter 11 of the  Bankruptcy  Code.  Unless  this Lease  Agreement
shall have been earlier  terminated  pursuant to Section 13.2, and provided that
no Default shall have occurred and be continuing,  the Aircraft Deposit shall be
returned by Lessor to Lessee on the Expiration Date.

A. Rental  Periods.  The  Term will be divided  into Rental  Periods.  The first
Rental  Period will commence on the Delivery Date and end on the last day of the
calendar  month during which the  Delivery  Date occurs,  with the Rent for such
first Rental  Period and the last Rental  Period to be prorated on a daily basis
to reflect the actual number of days in such first and last Rental Periods.  The
second and each subsequent  Rental Period will commence on the first day of each
month next  following the last day of the previous  Rental  Period.  Each Rental
Period  will end on the last day of each month  except  that if a Rental  Period
would otherwise overrun the Expiration Date, it will end on the Expiration Date.

A. Rent.  Lessee  will  pay to Lessor or its order on each Rent Date,  Rent,  in
advance,  in immediately  available funds in the amount set forth in paragraph 2
of Letter Agreement. Payment must be initiated adequately in advance of the Rent
Date to ensure that Lessor  receives  funds on the Rent Date. If a Rental Period
begins on a non-Business  Day, the Rent payable in respect of that Rental Period
shall be paid on the Business Day  immediately  preceding the date on which such
Rental Period commences. B. Maintenance Reserves.

1. Amount.  Lessee will also pay to Lessor  Maintenance  Reserves in relation to
each Rental Period (including  without  limitation the last Rental Period of the
Term)  on the 10th day  following  the end of the  preceding  Rental  Period  as
follows:

a)       in respect of the Airframe,  the amount set forth in paragraph 3 (i) of
         Letter  Agreement  in  respect  of each  Flight  Hour  operated  by the
         Aircraft during that Rental Period ("Airframe  Maintenance  Reserves");
         and

a)       in respect of each Engine,  the amount set forth in paragraph 3 (ii) of
         Letter Agreement in respect of each Flight Hour operated by that Engine
         during that Rental Period ("Engine Refurbishment Maintenance
         Reserves");

a)       in respect of the APU,  the  amount set forth in  paragraph  3 (iii) of
         Letter  Agreement  in respect of each Flight  Hour  operated by the APU
         during that Rental Period ("APU Refurbishment  Maintenance  Reserves");
         and

a)       in respect of the  Landing  Gear,  the amount set forth in  paragraph 3
         (iv) of Letter Agreement in respect of each Flight Hour operated by the
         Landing  Gear during  that Rental  Period  ("Landing  Gear  Maintenance
         Reserves").

1. Adjustment. The rate of Maintenance Reserves may be adjusted upwards annually
by  Lessor  at the rate of up to 3 percent  per  annum  commencing  on the first
anniversary of the Delivery  Date. In addition,  but not limiting the foregoing,
Lessee  acknowledges that the rates of Maintenance  Reserves  currently provided
for in this  Agreement  are  based  upon the  assumptions  that  (i) the  Agreed
Maintenance Program for the Aircraft during the Term will be the same as that in
effect on the  Delivery  Date and (ii) the  ratio of  Flight  Hours to Cycles is
1.2:1.  In the event that either such  assumption  proves to be incorrect at any
time during the Term,  Lessor and Lessee agree that Lessor shall have the right,
upon written notice to Lessee, to adjust the rate of Maintenance  Reserves so as
to reasonably  account for the incorrectness of such  assumptions.  In the event
that the Agreed Maintenance  Program changes during the Term (any such change to
be in accordance  with the relevant  terms and  conditions  of this  Agreement),
Lessor  shall make the  aforementioned  adjustment  in the manner  which  Lessor
determines,  in its reasonable discretion, is necessary to maintain the rates of
Maintenance  Reserves at levels which  accurately  reflect the costs  associated
with obtaining the affected  maintenance  services referred to in Section 7.2 at
prevailing  industry  rates.  Each such notice shall specify the revised rate of
Maintenance  Reserves and the effective date of such revision.  Lessee agrees to
advise Lessor, in writing,  of any circumstances or events which would result in
the foregoing assumptions becoming incorrect at any time during the Term.

1. General.  Maintenance  Reserves will not be held in a blocked or other escrow
account,  nor shall  the  amount of any  Maintenance  Reserves  in excess of the
amounts  payable  toward  accomplishment  of the  various  maintenance  tasks in
accordance with Section 7.2 hereof be refunded to Lessee.

A. Payments.  All payments by Lessee to Lessor under this Agreement will be made
on the due date in Dollars and in immediately  available  funds settled  through
the New York  Clearing  House  System by wire  transfer  to  Mercantile  Bank of
Dubuque,  (Acct.  No.  28100164518),  ABA No.  073900111.  Such account shall be
established  in such a fashion  as to  ensure  that  Lessor's  bank will be paid
automatically  from such account any amounts owing to the Bank in respect of the
Aircraft.

A. Gross-up.

1. All payments by Lessee under or in  connection  with this  Agreement  will be
made without set-off or  counterclaim,  free and clear of and without  deduction
for or on account of all Taxes (other than Lessor Taxes);

1. All Taxes  (other  than  Lessor  Taxes) in  respect  of  payments  under this
Agreement  shall be for the  account  of and will be paid by Lessee  for its own
account prior to the date on which penalties apply; and

1. If Lessee is compelled by law to make payment  subject to any Tax (other than
Lessor  Taxes) and Lessor does not  actually  receive for its own benefit on the
due  date a net  amount  equal  to the  full  amount  provided  for  under  this
Agreement, Lessee will pay all necessary additional amounts to ensure receipt by
Lessor of the full amount so provided for.

A. Taxation.  Lessee  will on demand pay and indemnify  Lessor against all Taxes
(other than Lessor Taxes) levied or imposed against or upon Lessor or Lessee and
relating to or attributable to Lessee,  this Agreement or the Aircraft  directly
or indirectly in connection  with the  importation,  exportation,  registration,
ownership,  leasing, sub leasing, delivery,  possession, use, operation, repair,
maintenance, overhaul, transportation,  landing, storage, presence or redelivery
of the Aircraft or any part thereof or any rent,  receipts,  insurance proceeds,
income or other amounts arising therefrom.

A. Value Added Tax.

1. For the purposes of this subsection:

a)       "VAT" means value added tax and any sales or turnover tax or imposition
         of a like nature;

a)      "supply" includes anything on which VAT is chargeable;

1. Lessee will pay to Lessor the amount of any VAT chargeable in respect  of any
supply of goods or services for VAT purposes under this Agreement; and

1. Each amount stated as payable by Lessee under this  Agreement is exclusive of
VAT (if any) and is  accordingly  to be  construed as a reference to that amount
plus any VAT in respect of it.

A. Information.  If Lessee  is required by any  applicable  law, or by any third
party, to deliver any report or return in connection with any Taxes, Lessee will
complete  the same in a manner  satisfactory  to Lessor and in  particular  will
state therein that Lessee is exclusively  responsible  for the use and operation
of the Aircraft and for any Taxes arising therefrom, and Lessee will, on request
supply a copy of the report or return to Lessor.

A. Taxation of Indemnity Payments.

1. If and to the extent  that any sums  payable  to Lessor by Lessee  under this
Agreement by way of indemnity are  insufficient,  by reason of any Taxes payable
in respect of those sums, for Lessor to discharge the corresponding liability to
the relevant party  (including any taxation  authority),  or to reimburse Lessor
for the cost incurred by it to a third party (including any taxation  authority)
Lessee  will pay to Lessor  such sum as will  after the tax  liability  has been
fully satisfied leave Lessor with the same amount as it would have been entitled
to receive in the absence of that liability together with interest on the amount
of the deficit at the rate of interest  stated in Section 5.11 in respect of the
period  commencing  on the date on which the  payment of taxation is finally due
until payment by Lessee (both before and after judgment); and

1. If and to the extent that any sums  constituting  (directly or indirectly) an
indemnity  to Lessor  but paid by Lessee to any  person  other  than  Lessor are
treated as taxable in the hands of Lessor, Lessee will pay to Lessor such sum as
will after the tax liability has been fully  satisfied  indemnify  Lessor to the
same extent as it would have been  indemnified  in the absence of such liability
together with interest on the amount payable by Lessee under this  subsection at
the rate of interest stated in Section 5.11 in respect of the period  commencing
on the date on which the payment of  taxation  is finally  due until  payment by
Lessee (both before and after judgment) provided however that Lessee will not be
liable for any Lessor  Taxes  incurred  as a result of the payment of the Agreed
Value pursuant to Section 11.

A. Default  Interest.  If  Lessee  fails to pay any  amount  payable  under this
Agreement on the due date, Lessee will pay on demand from time to time to Lessor
interest (both before and after  judgment) on that amount,  from the due date to
the date of  payment  in full by Lessee to  Lessor,  at the rate  calculated  by
Lessor to be the Prime Rate plus five percent (5%) per annum.  All such interest
will be compounded  monthly and  calculated on the basis of the actual number of
days elapsed and a 360 day year.

A. Contest.   If Lessee  disputes the payment of any Taxes payable by Lessor for
which Lessee is  responsible  under this  Agreement,  Lessor will  consider with
Lessee the taking of such  action as Lessee may  reasonably  request at Lessee's
expense to contest that payment but will not be obliged to take any such action:

1. Which Lessor considers in its sole discretion may prejudice it; or

1. Which Lessor considers does not have a reasonable prospect of success; or

1. For which  Lessee has not made  adequate  provision  to the  satisfaction  of
Lessor in respect of the expense concerned.

A. Absolute and Conditional  Obligations  of  Lessee. Lessee's obligations under
this Agreement are absolute and unconditional  irrespective of  any  contingency
whatsoever including (but not limited to):

1. Any right of set-off, counterclaim,  recoupment, defence or other right which
either party to this Agreement may have against the other;

1. Any unavailability of the Aircraft for any reason, including, but not limited
to, a  requisition  of the Aircraft or any  prohibition  or  interruption  of or
interference  with or other  restriction  against  Lessee's  use,  operation  or
possession of the Aircraft;

1. Any lack or invalidity of title or any other defect in title,  airworthiness,
merchantability, fitness for any purpose, condition, design, or operation of any
kind  or  nature  of the  Aircraft  for  any  particular  use or  trade,  or for
registration or documentation  under the laws of any relevant  jurisdiction,  or
any Event of Loss in respect of or any damage to the Aircraft;

1. Any insolvency,  bankruptcy,  reorganization,  arrangement,  readjustment  of
debt, dissolution, liquidation or similar proceedings by  or  against  Lessor or
Lessee;

1. Any invalidity or unenforceability or  lack of due authorization of, or other
defect in, this Agreement; and

1. Any other cause which but for this  provision  would or might  otherwise have
the effect of terminating or in any way affecting any obligation of Lessee under
this Agreement.

A. Security.

1. It is intended by Lessor and Lessee that the Maintenance  Reserves payable by
Lessee to Lessor pursuant to Section 5.4 are amounts paid by Lessee to Lessor in
consideration  for the use of the  Aircraft  by Lessee and the  satisfaction  of
Lessee's obligations under this Agreement and that, except as otherwise provided
in Section 7.2, once paid, those monies irrevocably and unconditionally shall be
the property of Lessor. Notwithstanding that stated intent, if and to the extent
that those monies or any thereof,  under any  applicable  law or otherwise,  are
determined to be security  deposits or otherwise the property of Lessee or if it
is so  determined  those monies are a debt owed to Lessee or that Lessee,  other
than as set forth in Section  7.2,  shall have any interest in those monies (the
"Maintenance Reserve Account"),  the parties agree that subsections (c), (d) and
(e) below shall apply;

1. It is further  intended by Lessor and Lessee that Aircraft Deposit payable by
Lessee to Lessor  pursuant  to Section  5.1 and, if  applicable,  the  Insurance
Security   Deposit   contemplated   by  the  first   paragraph   of  Schedule  4
(collectively,  the "Deposits") are security  deposits to faithfully  secure the
satisfaction by Lessee of its obligations under the Agreement.

1. To the fullest  extent  permitted by law and by way of  continuing  security,
Lessee grants to Lessor a security  interest in the Maintenance  Reserve Account
and the  Deposits  and all  rights  of  Lessee  to  payment  thereof,  the  debt
represented  thereby  and/or any and all interest of Lessee therein to Lessor by
way of first priority security interest as security for Lessee's obligations and
liabilities  under  this  Agreement  and  the  Other  Agreements  (the  "Secured
Liabilities").  Except as expressly  permitted  under  Sections 7.2 or otherwise
under this Agreement,  Lessee will not be entitled to payment of the Maintenance
Reserve Account.  Except as expressly permitted under Section 5.1 and Schedule 4
of this  Agreement,  Lessee  will not be  entitled  to payment of the  Deposits.
Lessee will not  assign,  transfer  or  otherwise  dispose of all or part of its
rights in the Maintenance Reserve Account or the Deposits and Lessee agrees that
it will  enter  into any  additional  documents  and  instruments  necessary  or
reasonably requested by Lessor to evidence, create or perfect Lessor's rights in
the Reserve Account and the Deposits.

1. If Lessee fails to comply with any  provision of this  Agreement or any Event
of Default has occurred and is continuing  Lessor may immediately or at any time
thereafter, without prior notice to Lessee:

a)       Set-off  all  or  any  part  of the  Secure  Liabilities   against  the
         contribution and/or refund  liabilities  of  Lessor  in  respect of the
         Maintenance Reserve Account and/or the Deposits; or

a)       Apply  or  appropriate  the  Maintenance  Reserve  Account  and/or  the
         Deposits  in or  towards  the  payment  or  discharge  of  the  Secured
         Liabilities in such order as Lessor sees fit; and

1. If Lessor has exercised the set-off described in sub-clause (d) above, Lessee
shall,  following  a  demand  in  writing  from  Lessor,  promptly  restore  the
Maintenance Reserve Account and/or the Deposits, as applicable,  to the level at
which they stood immediately prior to such set-off.

I.       MANUFACTURER'S WARRANTIES

A. Assignment.  Notwithstanding  this Agreement,  Lessor will remain entitled to
the benefit of each warranty,  express or implied, with respect to the Aircraft,
any Engine or Part so far as concerns any manufacturer, vendor, subcontractor or
supplier or any seller from whom Lessor  acquired  the  Aircraft.  Except to the
extent Lessor otherwise  directs,  Lessor hereby authorizes Lessee to pursue any
claim  against any  manufacturer,  vendor or supplier (but not any seller of the
Aircraft) in relation to defects affecting the Aircraft,  any Engine or Part and
Lessee agrees  diligently to pursue any such claim which arises at its own cost.
Lessee will notify Lessor promptly upon becoming aware of any such claim.

A. Proceeds.  Except to the extent Lessor otherwise agrees in a particular case,
all proceeds of any such claim will be paid directly to  Lessor, except, but  if
and to the extent that such claim relates:

1. To defects affecting the Aircraft which Lessee has rectified; or
2. To compensation for loss of use of the Aircraft, an Engine or any Part during
the Term; and provided no Default has occurred and is  continuing, the  proceeds
will be paid to Lessee by Lessor but only on  receipt of  evidence  satisfactory
to Lessor that Lessee has rectified the relevant defect.

A. Parts.  Except to the extent Lessor  otherwise  agrees in a particular  case,
Lessee will procure all engines,  components,  furnishings or equipment provided
by the  manufacturer,  vendor,  subcontractor  or supplier in  replacement  of a
defective  Engine or Part  pursuant to the terms of any  warranty,  all of which
will be  installed  promptly by Lessee such that title  thereto  vests in Lessor
free of Security Interests.  On installation those items will be deemed to be an
Engine or Part as applicable.

A. Agreement.  To the extent any warranties relating  to  the  Aircraft are made
available under an agreement between any  manufacturer, vendor, subcontractor or
supplier and Lessee, this Section 6 is subject to that agreement. However Lessee
will:

1. Pay the proceeds of any claim  thereunder to Lessor to be applied pursuant to
Section 6.2 and pending  such  payment  will hold the claim and the  proceeds on
trust for Lessor; and

1. Lessee  will take all such steps as are  necessary  at the end of the Term to
ensure the benefit of any of those  warranties which have not expired are vested
in Lessor.

I.       LESSOR'S COVENANTS

A. Quiet Enjoyment. Lessor will not interfere with the quiet use, possession and
enjoyment  of the  Aircraft by Lessee,  but the exercise by Lessor of its rights
under  or in  connection  with  this  Agreement  will  not  constitute  such  an
interference.

A. Maintenance Contribution. Provided no Default has occurred and is continuing,
Lessor will promptly pay to third party vendors, suppliers, maintenance shops or
service  facilities,  by way of  contribution  to the cost of maintenance of the
Aircraft,  upon  submission  by Lessee to Lessor  within  six (6)  months of the
commencement  of that  maintenance  and before the Expiration Date of an invoice
(which for this purpose may include such vendor's final estimated invoice issued
immediately  prior to  redelivery  to Lessee of the  Aircraft  so long as Lessee
provides Lessor with the final invoice and the relevant maintenance contribution
is adjusted to reflect such final invoice as soon as it becomes  available)  and
supporting  documentation  reasonably  satisfactory  to Lessor,  evidencing with
respect to (x) the Airframe,  any "C-7" plus SI (formerly  "D") check or (y) any
Engine or APU,  the  performance  in  accordance  with this  Agreement  of a Hot
Section  Refurbishment,  a Cold Section  Refurbishment and/or the replacement of
Life  Limited  Parts or (z) any  landing  gear,  work in the nature of  overhaul
requiring  removal and disassembly (in each case, other than (i) repairs arising
as a result of foreign object damage or  operational or maintenance  mishandling
and/or (ii) removal,  installation,  maintenance and repair of QEC (Quick Engine
Change) kits; and/or (iii)  accomplishment of any airworthiness  directives) the
lesser  of (a)  the  amount  of that  invoice  and (b) an  amount  equal  to the
aggregate amount of Maintenance  Reserves paid in respect of the Airframe,  that
Engine or APU or the Landing  Gear under this  Agreement,  respectively,  at the
time of commencement of such maintenance  less the aggregate  amount  previously
paid in respect  of the  Airframe,  that  Engine or APU or the  Landing  Gear by
Lessor under this subsection.  Notwithstanding the foregoing to the contrary, if
the amount of the Airframe  Maintenance Reserves paid by Lessee are insufficient
to perform the first "C-7" plus SI (formerly "D") check, Lessor shall contribute
to the cost thereof an amount of money up to the sum equal to $80  multiplied by
the number of Flight Hours flown by the Aircraft by the previous lessee.

A. Lessor Obligations Following Expiration Date.  Upon:

1. Redelivery of the  Aircraft to Lessor in accordance with and in the condition
required by this Agreement; or

1. Payment to  Lessor  of  the Agreed Value following an Event of Loss after the
Delivery Date;

or in each case such later time as Lessor is  satisfied  Lessee has  irrevocably
paid to Lessor all amounts which may then be outstanding or become payable under
this  Agreement or the Other  Agreements and provided that no Default shall have
occurred and is continuing, Lessor will pay to Lessee:

a)       the amount of any Rent received in respect of any period falling  after
         the date of redelivery of the Aircraft or payment of the Agreed  Value,
         as the case may be; and

a)       the Aircraft Deposit.

I.       LESSEE'S COVENANTS

A. Duration.  The obligations in this Section and in Section 12 will:

1. Except as otherwise stated, be performed at the expense of Lessee; and

1. Remain in force until the Expiration  Date in accordance  with this Agreement
and  thereafter  to the extent of any  accrued  rights of Lessor in  relation to
those obligations.

A. Information.  Lessee will:

1. Notify Lessor  forthwith of the  occurrence of any Default or any other event
which might adversely  affect Lessee's ability to perform any of its obligations
under this Agreement;

1.  Furnish to Lessor:

a)       on a monthly and quarterly basis, the consolidated  unaudited financial
         statements  of Lessee  (comprising  a balance sheet and profit and loss
         statement)  prepared  for the most  recent  previous  month  or  fiscal
         quarter,  certified by Lessee's chief  financial  officer as being true
         and correct;

a)       as soon as available but not in any event later than one hundred twenty
         (120)  days  after  the last day of each  fiscal  year of  Lessee,  its
         audited  consolidated  financial statements for the year ending on such
         day;

a)       at  the  same  time as it is issued to the shareholders or creditors of
         Lessee generally, a copy of each notice or circular  issued to Lessee's
         shareholders or creditors as a group; and

a)       on request from time to time,  such other  information  relevant to the
         transactions  contemplated by this Agreement  regarding  Lessee and its
         business and affairs as Lessor may reasonably request;

1. Keep Lessor  informed  as to  current  serial  numbers of the Engines and any
engine installed on the Aircraft;

1. Promptly  furnish  to  Lessor  all   information  Lessor  from  time  to time
reasonably  requests  regarding the Aircraft,  any Engine or any Part,  its use,
location and condition including, without limitation, the hours available on the
Aircraft and any Engine until the next scheduled check, inspection,  overhaul or
shop visit, as the case may be;

1. On request,  within ten (10) days after the end of any Rental Period, furnish
to Lessor  evidence  satisfactory  to Lessor of  payment of all Taxes due during
that or any previous Rental Period;

1. On request,  furnish to Lessor evidence satisfactory to Lessor that all Taxes
and charges incurred by Lessee with respect to the Aircraft,  including  without
limitation  all payments due to the  relevant air traffic  control  authorities,
have been paid and discharged in full;

1. Provide   Lessor  with a monthly  report (i) on the  Flight  Hours and Cycles
accumulated  in respect of the  Airframe,  each Engine and APU and each  Landing
Gear during the preceding month in the form required from time to time by Lessor
and (ii) removal  and/or  replacement  (whether  temporary or  otherwise) of any
Engine,  APU,  Landing Gear or other rotable Part during the preceding  month in
the form required from time to time by Lessor.

1. Give Lessor not less than sixty (60) days' written  notice as to the time and
location of all Major Checks and provide  Lessor prompt notice of any changes in
such time and location; and

1. Promptly notify Lessor of:

a)       Any loss, theft, damage  or  destruction to the Aircraft, any Engine or
         any Part, or any modification to the Aircraft if the potential cost may
         exceed the Damage Notification Threshold; and

a)       Any claim or other occurrence reasonably likely to give rise to a claim
         under the  Insurance  (but in the case of hull claims only in excess of
         the Damage Notification Threshold) and details of any negotiations with
         the insurance brokers over any such claim.

A. Lawful and Safe Operation.  Lessee will:

1. Comply  with all laws in force in any  country or  jurisdiction  which may be
applicable  to the Aircraft or, so far as concerns the use and  operation of the
Aircraft or an owner or operator thereof and take all reasonable steps to ensure
that the Aircraft is not used for any illegal purpose;

1. Not use the  Aircraft  in any manner  contrary to any  recommendation  of the
manufacturer of the Aircraft,  any Engine or any Part or any  recommendation  or
regulation of the Air Authority or for any purpose for which the Aircraft is not
designed or reasonably suitable;

1. Ensure that the crew and  engineers  employed  by it in  connection  with the
operation and maintenance of the Aircraft have the  qualifications  and hold the
licenses required by the Air Authority and applicable law;

1. Use the Aircraft solely in commercial or other operations for which Lessee is
duly authorized by the Air Authority and applicable law; 2. Not use the Aircraft
for the carriage of:

a)       whole animals living or dead except in the cargo compartments according
         to I.A.T.A. regulations, and except domestic  pet  animals carried in a
         suitable container to prevent the escap  of  any  liquid  and to ensure
         the welfare of the animal;

a)       acids, toxic chemicals, other corrosive materials,  explosives, nuclear
         fuels, nuclear wastes, or any nuclear assemblies or components,  except
         as permitted for passenger  aircraft under the  "Restriction  of Goods"
         schedule issued by I.A.T.A. from time to time and provided that all the
         requirements   for  packaging  or  otherwise   contained   therein  are
         fulfilled;

a)       any other goods, materials or items  of cargo which could reasonably be
         expected  to  cause  damage  to  the  Aircraft  and  which would not be
         adequately covered by the Insurances; or

a)       any illegal item or substance;

1. Not utilize the Aircraft for purposes of training, qualifying or reconfirming
the  status of cockpit  personnel  except for the  benefit of  Lessee's  cockpit
personnel,  and then only if the use of the  Aircraft  for such  purpose  is not
disproportionate  to the use for such purpose of other aircraft of the same type
operated by Lessee;

1. Not cause or permit the  Aircraft to proceed  to, or remain at, any  location
which is then the  subject  of a  prohibition  order  (or any  similar  order or
directive), sanctions or restrictions by:

a)       the United Nations  Security Council,  the  U.S. International Economic
         Emergency  Powers Act  or  U.N. Security Council directives or the U.S.
         Export Administration Act Regulations (15 C.F.R. Parts 730-799), except
         as may be permitted by  operating  in  accordance  with  the conditions
         specified  by  the  U.S.  Export  Administration  Regulations,  General
         License GATS (15 C.F.R. Part 771.19);

a)       any  Government  Entity  of  the  State of Registration or the Habitual
         Base;

a)       any  Government  Entity of  the  country  in  which  such  location  is
         situated; or

a)       any Government Entity having jurisdiction over Lessor, the Banks or the
         Aircraft;

1. Obtain and  maintain in full force all  certificates,  licenses,  permits and
authorizations  required for the use and  operation of the Aircraft for the time
being, and for the making of payments  required by, and the compliance by Lessee
with its other obligations under, this Agreement;

1. Not operate or locate the Aircraft or locate the Aircraft or suffer or permit
the Aircraft to be operated or located during the Term in any area excluded from
coverage by any insurance  policy issued  pursuant to the  requirements  of this
Agreement; and

1. Not operate or locate the  Aircraft  in, to or over any country  which is (x)
the subject of sanctions under the U.S.  International Economic Emergency Powers
Act or United Nations  Security Council  Directives  and/or (y) restricted under
the  United  States  Trading  with the Enemy  Act or the  United  States  Export
Administration  Act except as may be permitted by operating in  accordance  with
the conditions specified by the United States Export Administration Regulations,
General License GATS (15 CFR Part 771.19).

A. Taxes and Other Payments.  Lessee will promptly pay:

1. All license and registration  fees, Taxes (other than Lessor Taxes) and other
amounts  of any nature  imposed by any  Government  Entity  with  respect to the
Aircraft,  including  without  limitation  the  purchase,  ownership,  delivery,
leasing,  possession,  use, operation,  return, sale or other disposition of the
Aircraft; and

1. All rent, fees, charges, Taxes (other than Lessor Taxes) and other amounts in
respect of any  premises  where the Aircraft or any Part thereof is located from
time to time; except to the extent that in the reasonable opinion of Lessor such
payment is being contested in good faith by appropriate  proceedings, in respect
of which adequate reserves have been provided by Lessee and non-payment of which
does not give rise to any material  likelihood  of the  Aircraft or any interest
therein being sold,  forfeited or otherwise lost or of criminal liability on the
part of Lessor or any Bank.

A. Sub-Leasing.   LESSEE WILL NOT,  WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR,
SUB-LEASE OR OTHERWISE PART WITH POSSESSION OF THE AIRCRAFT,  THE ENGINES OR ANY
PART  EXCEPT  THAT  LESSEE  MAY PART WITH  POSSESSION  (A) WITH  RESPECT  TO THE
AIRCRAFT,  THE ENGINES OR ANY PART TO THE RELEVANT  MANUFACTURERS FOR TESTING OR
SIMILAR  PURPOSES OR TO THE AGREED  MAINTENANCE  PERFORMER FOR SERVICE,  REPAIR,
MAINTENANCE OR OVERHAUL WORK, OR ALTERATIONS,  MODIFICATIONS OR ADDITIONS TO THE
EXTENT  REQUIRED OR  PERMITTED  BY THIS  AGREEMENT,  AND (B) WITH  RESPECT TO AN
ENGINE OR PART, AS EXPRESSLY PERMITTED BY THIS AGREEMENT; PROVIDED, HOWEVER, WET
LEASES SHALL BE PERMITTED.

A. Inspection.

1. Lessor and any person designated by Lessor may at any time visit, inspect and
survey the  Aircraft,  any Engine or any Part and may maintain its own technical
representative  on site  throughout  any Major Check and for such  purpose  may,
subject to any applicable Air Authority regulation, travel on the flight deck as
observer;

1. Lessor  will  have  no  duty or liability to make, or arising out of any such
visit, inspection or survey; and

1. So long as no  Default  has  occurred  and is  continuing,  Lessor  will  not
exercise  such right  other than on  reasonable  notice and so as not to disrupt
unreasonably the commercial operations of Lessee.

A. Ownership; Property Interests; Related Matters.  Lessee will:

1. Not do or  knowingly  permit  to be done or omit or  knowingly  permit  to be
omitted  to be done any act or thing  which  might  reasonably  be  expected  to
jeopardize the rights of Lessor as owner and lessor of the Aircraft;

1. On all occasions  when the ownership of the Aircraft,  any Engine or any Part
is relevant, make clear to third parties that title is held by Lessor;

1. Not at any time (i)  represent  or hold out  Lessor or the Banks as  carrying
goods  or  passengers  on the  Aircraft  or as  being  in any way  connected  or
associated  with any  operation  or  carriage  (whether  for hire or  reward  or
gratuitously)  which may be  undertaken  by Lessee or (ii)  pledge the credit of
Lessor or the Banks;

1. Ensure that there is always affixed,  and not removed or in any way obscured,
a  fireproof  plate  (having  dimensions  of not less  than 10 cm. x 7 cm.) in a
reasonably  prominent  position in the cockpit of the  Aircraft  adjacent to the
certificate of airworthiness and on each Engine stating:

"This Aircraft/Engine is owned by Interlease Aviation Investors, L.L.C. and is 
leased to Frontier Airlines, Inc. and may not be operated by any other person
without the prior written, consent of Interlease Aviation Investors, L.L.C.;"

1. Not create or permit to  exist  any  Security Interest upon the Aircraft, any
Engine or any Part;

1. Not do or permit to be done  anything  which may  reasonably  be  expected to
expose the Aircraft, any Engine or any Part to penalty, forfeiture,  impounding,
detention,  appropriation,  damage or destruction  and without  prejudice to the
foregoing,   if  any  such  penalty,   forfeiture,   impounding,   detention  or
appropriation,  damage or  destruction  occurs,  give Lessor notice and use best
endeavors to procure the immediate  release of the  Aircraft,  any Engine or the
Part, as the case may be;

1. Not abandon the Aircraft, the Engine or any Part;

1. Pay and discharge or cause to be paid and discharged  when due and payable or
make adequate provision by way of security or otherwise for all debts,  damages,
claims  and  liabilities  which  have  given or might  give  rise to a  Security
Interest over or affecting the Aircraft, any Engine or any Part; and

1. Not  attempt,  or hold  itself  out as having any  power,  to sell,  lease or
otherwise dispose of the Aircraft, any Engine or any Part.

A. General.  Lessee will:

1. Not  liquidate or  dissolve;  and Lessee shall not,  without  Lessor's  prior
written consent, which will not be unreasonably withheld or delayed, consolidate
with or merge  into,  any  other  corporation,  and  Lessee  shall  not  convey,
transfer, lease or otherwise dispose of all or substantially all of its property
and other assets, whether in one or series of related transactions;

1. Ensure that no change will occur in the Habitual Base of the Aircraft without
the prior  written  consent of Lessor.  Lessor agrees that it shall not withhold
its  consent to a change in the  Habitual  Base to  another  state of the United
States of  America  if Lessee  shall  have  provided  Lessor  with an opinion of
counsel  practicing  in the state of the United  States of America  proposed  by
Lessee to be the Habitual Base in form and in substance reasonably  satisfactory
to Lessor  to the  effect  that the  rights  and  interests  of Lessor  are duly
protected; and

1. Not,  without giving Lessor thirty (30) days prior notice (in accordance with
this  Agreement),  change its chief executive office (as such term is defined in
Article 9 of the Uniform  Commercial Code as in effect in the State of Colorado)
from 12015 East 46th Avenue, Denver, Colorado 80239;

1. remain a  Certificated  Air Carrier and  maintain,  without  limitation,  its
status so as to fall  within  the  purview  of  Section  1110 of Title 11 of the
United States Code or any analogous Statute; and

1. remain a "citizen of  the United States" as defined in Section 40102 of Title
49 of the United States Code.

A. Records.  Lessee will:

1. Cause accurate,  complete and current records of all flights made by, and all
maintenance  carried out on, the Aircraft  (including in relation to each Engine
and Part  subsequently  installed,  before the  installation)  to be prepared in
English  and kept in such  manner  as the Air  Authority  may from  time to time
require,   and  ensure  that  they  comply  with  the   recommendations  of  any
manufacturers  of the  Aircraft,  any Engine or any Part.  The records will form
part of the Aircraft Documents; and

1. Maintain with appropriate revisions,  all Aircraft Documents,  records, logs,
and other  materials  required  by  applicable  laws and best  practice of major
international air transport operators in respect of the Aircraft.

A. Protection:  Lessee will:

1. Maintain the  registration of the Aircraft with the Air Authority in the name
of  Lessor  and,  to the  extent  permitted  under  the  laws  of the  State  of
Registration, reflecting the interests of Lessor and not do or suffer to be done
anything which might adversely affect that registration; and

1. Do all acts and things (including,  without limitation,  making any filing or
registration with the Air Authority or any other Government  Entity) and execute
and  deliver,  notarize,  file,  register and record all  documents  (including,
without  limitation,  any  amendment  of this  Agreement)  as may be required by
Lessor:

a)       at Lessor's  expense,  following  any  change or proposed change in the
         ownership  or  financing  of  the Aircraft or in the manner of securing
         Lessor's obligations to the Banks; or

a)       following any  modification of the Aircraft,  any Engine or any Part or
         the permanent replacement of any Engine or Part in accordance with this
         Agreement,  so as to  ensure  that the  rights  of  Lessor as owner and
         lessor of the  Aircraft  and under this  Agreement  apply with the same
         effect as before; or

a)       to  establish,  maintain,  preserve,  perfect and protect the rights of
         Lessor under this Agreement or the interest of Lessor as  owner  of the
         Aircraft.

A. Maintenance and Repair.  Lessee, at its own cost and expense, will:

1. Service,  repair,  maintain,  overhaul, test, or cause the same to be done to
the  Aircraft,  to  industry  standard,   and  in  accordance  with  the  Agreed
Maintenance  Program,  so as to keep the Aircraft in as good operating condition
as when delivered to Lessee on the Delivery Date, as determined  periodically by
Lessor or its agent, and such operating  condition as may be necessary to enable
the Airworthiness  Certificate of the Aircraft to be maintained in good standing
at all times under applicable law;

1. Not change  the  Agreed  Maintenance  Program  or  the schedule of the Agreed
Maintenance Program without the written consent of Lessor;

1. Maintain  the Aircraft in  accordance  with the Agreed   Maintenance  Program
through  the  Agreed  Maintenance  Performer  and  perform  (at  the  respective
intervals provided in the Agreed Maintenance Program) all Major Checks;

1. Maintain the Aircraft in accordance with FAA Federal Air Regulations Part 121
and any other rules and regulations of the FAA as may be applicable to passenger
category  aircraft  and in at least the same  manner  and with at least the same
care, including, without limitation, maintenance scheduling, modification status
and technical  condition,  as is the case with respect to similar aircraft owned
or otherwise  operated by Lessee and as if Lessee were to retain the Aircraft in
its fleet and continue to operate the  Aircraft  after the  Expiration  Date and
including,  without limitation,  all maintenance to the Airframe,  any Engine or
any Part required to maintain all warranties,  performance guarantees or service
life policies in full force and effect;

1. Without limiting Lessor's obligations under clause (d) of Schedule 1, Part 1,
to  this  Agreement,  comply  with  all  outstanding  mandatory  inspection  and
modification  requirements,  airworthiness  directives and similar  requirements
applicable  to the  Aircraft,  any Engine or Part which are issued  prior to the
Expiration  Date and have a mandatory  compliance date during the Term or within
one hundred eighty (180) days after the  Expiration  Date and which are required
by the Air  Authority,  and/or  the  laws of the  state  of  manufacture  of the
Aircraft,  any  Engine  or  Part  and/or  mandated  by any  manufacturer  of the
Aircraft,  any Engine or Part (each of the foregoing being hereinafter  referred
to as "AD").

                  The  cost  of  each  AD   accomplishment   or   repetitive  AD
accomplishment for any AD issued during the Term shall be allocated among Lessor
and Lessee as follows:

                           (i)  Lessee  shall  be  responsible   for  the  first
         $150,000  of  Lessee's  actual  cost  of  such  AD   accomplishment  or
         repetitive AD accomplishment;

                           (ii)  Lessor and Lessee  shall  share the  portion of
         Lessee's  actual  cost of  such  AD  accomplishment  or  repetitive  AD
         accomplishment  (if any) which exceeds $150,000,  on an equal basis, up
         to and including $350,000; and

                           (iii)  Lessor  shall be  wholly  responsible  for the
         portion of Lessee's actual cost of such AD accomplishment or repetitive
         AD  accomplishment  (if any) which exceeds $350,000  (subject always to
         the provisions of the following paragraph).

                  Notwithstanding  the  foregoing,  in the event  that the total
cost of any AD accomplishment  or repetitive AD accomplishment  (such total cost
to be  mutually  agreed,  in good  faith,  between  Lessor and  Lessee)  exceeds
$350,000 (the "Threshold Amount"), Lessor may elect not to make its contribution
to the  cost  of  compliance  with  such  AD  accomplishment  or  repetitive  AD
accomplishment  as described  above.  If Lessor shall so elect,  Lessee shall be
entitled,  by giving prior written notice to Lessor, to terminate this Agreement
and redeliver  the Aircraft to Lessor in  accordance  with the terms of Sections
12.1  through 12.8 and  Schedule 3 (except for  compliance  with the relevant AD
which gave rise to such  termination) on the earlier of (x) the date which is 30
days  after  the date of such  notice  from  Lessee to Lessor or (y) the date on
which  the  Aircraft  is  required  to be  removed  from  service  by  reason of
non-compliance  with the  applicable  AD. Such notice shall specify the proposed
redelivery  date of the Aircraft by Lessee and,  upon the receipt of such notice
by Lessor,  the then current  definition of  Expiration  Date shall be deemed to
have been amended  accordingly.  Upon any termination of this Agreement pursuant
to this Section 8.11(e),  neither party shall be under any further obligation in
the other hereunder except for (x) accrued obligations of Lessee hereunder;  and
(y) obligations  hereunder which are expressed to continue  notwithstanding  the
expiration of the Term;  provided,  however,  that Lessor  shall,  if applicable
having regard to the  provisions of Section 7.2, make the payments  described in
Section  7.2 but  shall be under no  obligation  to repay,  rebate or  otherwise
refund any Maintenance  Reserves  previously paid by Lessee under this Agreement
and provided  further that if no Default shall have occurred and be  continuing,
the Aircraft Deposit shall be returned by Lessor to Lessee.

1. Comply with all applicable  laws and the regulations of the Air Authority and
other aviation  authorities with jurisdiction  over Lessee or the Aircraft,  any
Engine or Part regardless of upon whom such  requirements  are imposed and which
relate to the  maintenance,  condition,  use or  operation  of the  Aircraft  or
require any modification or alteration to the Aircraft, any Engine or Part;

1.  Maintain in good standing a current  certificate  of  airworthiness  (in the
appropriate  category for the nature of the  operations of the Aircraft) for the
Aircraft  issued by the Air  Authority  except where the Aircraft is  undergoing
maintenance,  modification or repair required or permitted by this Agreement and
will from time to time provide to Lessor a copy on request;

1. If  required by the Air  Authority,  maintain a current  certification  as to
maintenance  issued by or on  behalf  of the Air  Authority  in  respect  of the
Aircraft and will from time to time provide to Lessor a copy on request; and

1. Procure promptly the replacement of any Engine or Part which has become time,
cycle or calendar expired, lost, stolen, seized, confiscated, destroyed, damaged
beyond  repair,  unserviceable  or  permanently  rendered unfit for use, with an
engine or part complying with the conditions set out in Section 8.13(a).

A. Remova  of  Engines and  Parts.  Lessee  will  ensure  that no Engine or Part
installed on the Aircraft is at any time removed from the Aircraft other than:

1. If replaced as expressly permitted by this Agreement; or

1. If  the  removal is of an obsolete  item and is in accordance with the Agreed
Maintenance Program; or 

a)       During the course of maintaining, servicing, repairing, overhauling  or
         testing that Engine or the Aircraft, as the case may be; or

a)       For  the  purpose  of  making  such  modifications to the Engine or the
         Aircraft, as the case may be, as are permitted under this Agreement;

         and then in each  case  only if it is  reinstalled  or  replaced  by an
         engine or part complying  with Section  8.13(a) as soon as possible and
         in any event no later than the Expiration Date.

A. Installation of Engines and Parts.  Lessee will:

1. Ensure  that,  except as permitted  by this  Agreement,  no engine or part is
installed on the Aircraft unless:

a)       in the case of an  engine,  it is an engine of the same model as, or an
         improved or advanced version of the Engine it replaces, which is in the
         same or better operating condition, has substantially similar hours and
         cycles  available  until  the  next  scheduled   checks,   inspections,
         overhauls,  shop visits and replacement of life limited  components and
         has the same or greater value and utility as the replaced Engine;

a)       in the  case  of a  part,  it is in as good  operating  condition,  has
         substantially  similar hours available until the next scheduled checks,
         inspections,  overhauls  and  shop  visits,  is of the  same  or a more
         advanced make and model and is of the same interchangeable modification
         status as the replaced Part;

a)       in  each case,  it  has  become and remains the property of Lessor free
         from Security  Interests  and  on  installation on  the  Aircraft  will
         without further act be subject to this Agreement; and

a)       in each case, Lessee has full details as to its source and  maintenance
         records;

1. If no Default has occurred  which is  continuing,  be entitled to install any
engine or part on the  Aircraft by way of  replacement  notwithstanding  Section
8.13(a) if:

a)       there is not available to Lessee at the time and in the place that that
         engine  or  part  is  required  to be  installed  on  the  Aircraft,  a
         replacement  engine  or, as the case may be,  part  complying  with the
         requirements of Section 8.13(a);

a)       it would result in an  unreasonable  disruption of the operation of the
         Aircraft  and/or the business of Lessee to ground the Aircraft until an
         engine or part,  as the case may be,  complying  with  Section  8.13(a)
         becomes available for installation on the Aircraft;

a)       Lessee    gives    Lessor    written    notice   of  such   replacement
         contemporaneously with such installation; and

a)       as soon as possible after installation of the same on the Aircraft but,
         in any event, no later than sixty (60) days thereafter (but in no event
         later than the Expiration Date), Lessee removes any such engine or part
         and replaces it with the Engine or Part  replaced by it or by an engine
         or part, as the case may be, complying with Section 8.13(a).

A. Non-Installed Engines and Parts.  Lessee will:

1. Ensure that any Engine or Part which is not installed on the Aircraft (or any
other aircraft as permitted by this Agreement) is, except as expressly permitted
by this  Agreement,  properly  and safely  stored,  and kept free from  Security
Interests;

1. Notify Lessor whenever any Engine is removed from the Aircraft and, from time
to time on request,  ensure that any person to whom  possession  of an Engine is
given  acknowledges in writing to Lessor, in form and substance  satisfactory to
Lessor,  that it will respect the interests of Lessor and as owner of the Engine
and will not seek to exercise any rights whatsoever in relation to it;

1. Notwithstanding the foregoing provisions of this subsection, be permitted, if
no Default has occurred and is  continuing,  to install any Engine or Part on an
aircraft,  or in the case of a Part,  an engine for a temporary  period of up to
thirty (30) days:

a)       owned and operated by Lessee free from Security Interests; or

a)       leased  or hired to  Lessee  pursuant  to a lease or  conditional  sale
         agreement  on a long-term  basis and on terms  whereby  Lessee has full
         operational control of that aircraft or engine; or

a)       acquired by Lessee  and/or  financed  or  refinanced,  and  operated by
         Lessee, on terms that ownership of that aircraft or engine, as the case
         may be,  pursuant  to a  lease  or  conditional  sale  agreement,  or a
         Security Interest therein, is vested in or held by any other person;

         provided that in the case of (ii) and (iii):

(i)               the terms of any such lease,  conditional  sale  agreement  or
                  Security  Interest will not have the effect of prejudicing the
                  interests  of  Lessor as owner  and  lessor of that  Engine or
                  Part; and

(i)               the lessor under such lease, the seller under such conditional
                  sale agreement or the holder of such Security Interest, as the
                  case may be,  has  confirmed  and  acknowledged  in writing to
                  Lessor, in form and substance  satisfactory to Lessor, that it
                  will  respect  the  interest  of Lessor as owner and lessor of
                  that Engine or Part and that it will not seek to exercise  any
                  rights whatsoever in relation thereto.

A. Pooling  of  Engines  and  Parts.  Lessee  will not enter into nor permit any
pooling  agreement  or  arrangement  in respect of an Engine or Part without the
prior written consent of Lessor.

A. Equipment Changes.

1. Lessee will not make any  modification  or addition to the Aircraft  (each an
"Equipment Change"), except for an Equipment Change which:

a)       is expressly permitted by this Agreement, or

a)       has  the  prior  written approval of Lessor and which does not diminish
         the value, utility, condition, or airworthiness of the Aircraft; and

1. So long as a Default has not  occurred and is  continuing,  Lessee may remove
any Equipment Change if it can be removed from the Aircraft without  diminishing
or impairing the value, utility, condition or airworthiness of the Aircraft.

A. Title on an Equipment Change.

1. Title to all Engines and Parts  installed on the  Aircraft  whether by way of
replacement,  as the result of an Equipment  Change or otherwise  (except  those
installed  pursuant to Section  8.13(b)) will on  installation,  without further
act,  vest in Lessor  subject to this  Agreement  free and clear of all Security
Interests.  Lessee will at its own expense take all such steps and execute,  and
procure the execution of, all such  instruments  as Lessor may require and which
are  necessary  to  ensure  that  title so passes  to  Lessor  according  to all
applicable  laws.  At any time when  requested  by Lessor,  Lessee will  provide
evidence to Lessor's  satisfaction  (including  the provision,  if required,  to
Lessor of one or more legal opinions) that title has so passed to Lessor;

1. Lessor  may  require Lessee to remove any Equipment Change and to restore the
Aircraft to its condition prior to that Equipment Change; and

1.  Except as  referred  to in  Section  8.17(b)  any Engine or Part at any time
removed from the Aircraft will remain the property of Lessor until a replacement
has  been  made in  accordance  with  this  Agreement  and  until  title in that
replacement has passed,  according to applicable laws, to Lessor subject to this
Agreement free of all Security Interests  whereupon title to the replaced Engine
or Part will pass to Lessee.  B. Third Party.  Lessee will ensure that no person
(other  than  Lessor or any Bank) will act in any manner  inconsistent  with its
obligations  under this  Agreement  and that all persons  will comply with those
obligations as if references to "Lessee" included a separate  reference to those
persons.

I.       INSURANCE

A. Insurance.  Lessee will maintain  in full force during the Term  insurance in
respect  of the  Aircraft  in form and  substance  satisfactory  to Lessor  (the
"Insurance",  which  expression  includes,  where the  context  so  admits,  any
relevant re-insurance(s)) through such brokers and with such insurers and having
such  deductibles  and being  subject to such  exclusions  as may be approved by
Lessor.  The  Insurance  will be  effected  either:  (a) on a direct  basis with
insurers of recognized  standing who normally  participate in aviation insurance
in  the  leading   international   insurance   markets  and  led  by   reputable
underwriter(s)  approved  by  Lessor;  or (b) with a single  insurer or group of
insurers approved by Lessor who does not retain the risk but effects substantial
reinsurance with reinsurers in the leading  international  insurance markets and
through  brokers  each of  recognized  standing and  acceptable  to Lessor for a
percentage acceptable to Lessor of all risks insured (the "Reinsurance").

A. Requirements.  Lessor's current  requirements as to required Insurance are as
specified  in this  Section  and in  Schedule  4.  Lessor  may from time to time
stipulate  other  requirements  for the Insurance so that the scope and level of
cover is  maintained  in line with best  industry  practice and the interests of
Lessor protected.

A. Change.  If at any time Lessor  wishes to revoke its approval of any insurer,
reinsurer, insurance or reinsurance, Lessor and/or its brokers will consult with
Lessee and Lessee's brokers (as for the time being approved by Lessor) regarding
whether that approval  should be revoked to protect the interests of the parties
insured. If, following the consultation, Lessor considers that any change should
be made,  Lessee will then  arrange or procure the  arrangement  of  alternative
cover satisfactory to Lessor.

A. Insurance Covenants.  Lessee will:

1. Ensure that all legal  requirements  as to  insurance  of the  Aircraft,  any
Engine or any Part  which may from  time to time be  imposed  by the laws of the
State of  Registration  or any state to, from or over which the  Aircraft may be
flown,  in so far as they affect or concern the operation of the  Aircraft,  are
complied  with and in particular  those  requirements  compliance  with which is
necessary  to ensure  that (i) the  Aircraft  is not in danger of  detention  or
forfeiture,  (ii) the Insurance  remain valid and in full force and effect,  and
(iii) the interests of the  Indemnitees in the Insurance and the Aircraft or any
Part are not thereby prejudiced;

1. Not use, cause or permit the Aircraft,  any Engine or any Part to be used for
any  purpose or in any  manner  not  covered  by the  Insurance  or outside  any
geographical limit imposed by the Insurance;

1. Comply with the terms and  conditions of each policy of the Insurance and not
do, consent or agree to any act or omission which:

a)       invalidates or may invalidate the Insurance; or

a)       renders or may render void or voidable the whole or any part of any  of
         the Insurance; or

a)       brings  any  particular  liability  within the scope of an exclusion or
         exception to the Insurance;

1. Not take out without the prior  written  approval of Lessor any  insurance or
reinsurance  in respect of the  Aircraft  other than those  required  under this
Agreement  unless  relating  solely to hull total loss,  business  interruption,
profit commission and deductible risk;

1. Commence renewal  procedures at least thirty (30) days prior to expiration of
any of the Insurance and provide to Lessor:

a)       if requested by Lessor, a written status report of renewal  negotiation
          14 days prior to each expiration date;

a)       facsimile   confirmation   of   completion of  renewal  prior  to  each
         expiration date;

a)       certificates  of  insurance  (and  where  appropriate  certificates  of
         reinsurance),  and broker's (and any  reinsurance  brokers')  letter of
         undertaking in a form acceptable to Lessor,  detailing the coverage and
         confirming  the  insurers'  (and  any  reinsurers')  agreement  to  the
         specified  insurance  requirements  of this Agreement  within seven (7)
         days after each renewal date;

1. Provide to Lessor copies of documents evidencing the Insurance;

1. Provide to Lessor evidence that the Insurance premiums have been paid; 2. Not
make any modification or alteration to the Insurance material and adverse to the
interests of any of the Indemnitees;

1. Be responsible for any deductible under the Insurance; and

1. Provide   any  other  insurance  and  reinsurance  related  information,   or
assistance, in respect of the Insurance as Lessor may reasonably require.

A. Failure to Insure.  If Lessee fails to maintain the  Insurance in  compliance
with this  Agreement,  each of the  Indemnitees  will be entitled  but not bound
(without prejudice to any other rights of Lessor under this Agreement):

1. To pay the premiums due or to effect and maintain  insurance  satisfactory to
it or  otherwise  remedy  Lessee's  failure in such manner  (including,  without
limitation to effect and maintain an "owner's  interest" policy) as it considers
appropriate.  Any sums so expended by it will become immediately due and payable
by Lessee to Lessor  together  with  interest  thereon at the rate  specified in
Section 5.11, from the date of expenditure by it up to the date of reimbursement
by Lessee; and

1. At any time while such  failure is  continuing  to require  the  Aircraft  to
remain at any airport or to proceed to and remain at any airport  designated  by
it until the failure is remedied to its satisfaction.

A. Continuing  Indemnity.  Lessor  may require  Lessee to effect and to maintain
insurance  after the  Expiration  Date with respect to its  liability  under the
indemnities in Section 10 for such period as Lessor may reasonably  require (but
in any event not more than two (2) years) which provides for each  Indemnitee to
be named as additional insured. Lessee's obligation in this Section shall not be
affected  by  Lessee  ceasing  to be lessee of the  Aircraft  and/or  any of the
Indemnitees ceasing to have any interest in respect of the Aircraft.

A. Application of Insurance Proceeds.  As between Lessor and Lessee:

1. All insurance  payments  received as the result of an Event of Loss occurring
during the Term will be paid to Lessor, and Lessor will pay the balance of those
amounts to Lessee after  deduction of all amounts which may be or become payable
by Lessee to Lessor under this Agreement (including under Section 11.1(b));

1. All insurance  proceeds of any property  damage or loss to the Aircraft,  any
Engine or any Part occurring  during the Term not  constituting an Event of Loss
and in excess of the Damage  Notification  Threshold  will be paid to Lessor and
applied in payment (or to reimburse Lessee) for repairs or replacement  property
upon Lessor being  satisfied that the repairs or replacement  have been effected
in  accordance  with this  Agreement.  Insurance  proceeds in amounts  below the
Damage Notification Threshold may be paid by the insurer directly to Lessee. Any
balance remaining may be retained by Lessor;

1. All insurance  proceeds in respect of third party liability  will,  except to
the extent paid by the insurers to the relevant  third party,  be paid to Lessor
to be paid directly in  satisfaction  of the relevant  liability or to Lessee in
reimbursement of any payment so made; and

1. Notwithstanding Sections 9.7(a), (b) or (c), if at the time of the payment of
any such insurance  proceeds a Default has occurred and is continuing,  all such
proceeds will be paid to or retained by Lessor to be applied  toward  payment of
any  amounts  which may be or become  payable  by Lessee in such order as Lessor
sees fit or as Lessor may elect.

I.       INDEMNITY

A. General.  Lessee agrees to assume liability for,  defend,  indemnify and hold
harmless  the  Indemnitees  on an after tax basis from and  against  any and all
claims,  proceedings,  losses,  liabilities,  damages (whether direct, indirect,
special,   incidental  or  consequential)  suits,  judgments,   costs,  expenses
(including,  without  limitation,  legal fees and expenses),  penalties (whether
civil or  criminal)  or fines (each a "Claim")  (regardless  of when the same is
made or incurred, whether during or after the Term (but not before)):

1. Which may at any time be  suffered or incurred  directly or  indirectly  as a
result of or in any manner connected with the possession, delivery, performance,
management, ownership, registration,  control, maintenance,  condition, service,
repair, overhaul,  leasing, use, operation or return of the Aircraft, any Engine
or Part  (either  in the air or on the  ground)  whether or not the Claim may be
attributable  to any  defect in the  Aircraft,  any Engine or any Part or to its
design,  testing or use or otherwise,  and regardless of when the same arises or
whether it arises out of or is attributable to any act or omission, negligent or
otherwise, of any Indemnitee; or

1. Which arise out of any act or  omission  which  invalidates  or which renders
voidable any of the Insurance; or

1. Which may at any time be suffered or incurred as a consequence of any design,
article or material in the Aircraft,  any Engine or any Part or its operation or
use  constituting  an infringement of patent,  copyright,  trademark,  design or
other proprietary right or a breach of any obligation of confidentiality owed to
any person; or

1. Which  results  from  Lessee's  breach  of   any of  its  representations  or
warranties or any other Event of Default under this Agreement.

but  excluding  any Claim in relation to a particular  Indemnitee  to the extent
that that  Claim is covered  pursuant  to another  indemnity  provision  of this
Agreement  or to the extent it arises  solely as a result of the  negligence  or
wilful misconduct of that Indemnitee, Lessor, Lessor Taxes or a Lessor Lien.

A. Duration.  The  indemnities contained in this Agreement will continue in full
force after the Expiration Date.

I.       EVENTS OF LOSS

A. Events of Loss.

1. If an Event of Loss  occurs  prior to  delivery  of the  Aircraft  to Lessee,
Lessor will have the option,  exercisable by giving Lessee notice in writing, to
substitute an alternative  aircraft of the same  manufacture,  model,  value and
utility as the  Aircraft.  If Lessor  exercises  such  option,  Lessee  shall be
obliged to lease such substitute  aircraft  pursuant to the terms and conditions
of this Agreement and such substitute aircraft shall constitute the Aircraft for
all purposes of this Agreement.  Lessor shall provide Lessee with details of the
substitute  aircraft as soon as may be  practicable  after the occurrence of the
Event of Loss.  If Lessor  advises  Lessee that Lessor does not wish to exercise
such option,  this Agreement will immediately  terminate and except as expressly
stated in this  Agreement  neither  party will have any  further  obligation  or
liability  under this Agreement other than pursuant to Section 16.90 except that
Lessor will rebate to Lessee the amount of any Aircraft  Deposit paid under this
Agreement; and

1. If an Event of Loss occurs after  delivery of the Aircraft to Lessee,  Lessee
will pay the Agreed  Value to Lessor on or prior to the  earlier of (i) five (5)
Business  Days after the Event of Loss and (ii) the date of receipt of insurance
proceeds in respect of that Event of Loss. Subject to the rights of any insurers
and reinsurers or other third party, upon irrevocable  payment in full to Lessor
of that amount and all other  amounts  which may be or become  payable to Lessor
under this  Agreement,  Lessor will without  recourse or warranty  (except as to
Lessor's Liens) and without further act, be deemed to have transferred to Lessee
all of Lessor's  rights to any Engines and Parts not installed when the Event of
Loss occurred,  all on an as-is where-is  basis,  and will at Lessee's  expense,
execute and deliver such bills of sale and other  documents and  instruments  as
Lessee may  reasonably  request to evidence (on the public  record or otherwise)
the  transfer  and the vesting of Lessor's  rights in such  Engines and Parts in
Lessee, free and clear of all rights of Lessor and Lessor Liens.

A. Requisition.  During  any  requisition  for  use or hire of the Aircraft, any
Engine or Part which does not constitute an Event of Loss:

1. The Rent,  Supplemental  Rent and other charges  payable under this Agreement
will not be suspended or abated either in whole or in part,  and Lessee will not
be released from any of its other  obligations  under the Agreement  (other than
operational  obligations  with which Lessee is unable to comply solely by virtue
of the requisition); and

1. So long as no Default has occurred and is continuing, Lessee will be entitled
to any hire paid by the requisitioning  authority in respect of the Term. Lessee
will, as soon as practicable  after the end of any such  requisition,  cause the
Aircraft to be put into the condition required by this Agreement. Lessor will be
entitled to all compensation payable by the requisitioning  authority in respect
of any change in the  structure,  state or  condition  of the  Aircraft  arising
during the period of  requisition,  and Lessor will apply such  compensation  in
reimbursing  Lessee for the cost of complying  with its  obligations  under this
Agreement  in  respect  of any such  change,  but so that,  if any  Default  has
occurred  and is  continuing,  Lessor may apply the  compensation  or hire in or
towards settlement of any amounts owing by Lessee under this Agreement.

I.       RETURN OF AIRCRAFT

A. Return.  On the  Expiration  Date or earlier  termination of the lease of the
Aircraft under this Agreement,  unless an Event of Loss has occurred,  and after
the Final Inspection required by Section 12.2 has occurred,  Lessee will, at its
expense,  redeliver  the  Aircraft  and  Aircraft  Documents  to  Lessor  at the
Redelivery  Location  or such other  airport as is  mutually  acceptable  to the
parties hereto, in a condition  complying with Schedule 3, free and clear of all
Security  Interests  and  Permitted  Liens  (other than  Lessor  Liens) and in a
condition qualifying for immediate  certification of airworthiness by the FAA or
as otherwise agreed by Lessor and Lessee.

A. Final  Inspection.  Immediately  prior to redelivery of the Aircraft,  Lessee
will make the  Aircraft  available  to Lessor for  detailed  inspection  ("Final
Inspection") in order to verify that the condition of the Aircraft complies with
the  requirements of Schedule 3 to this Agreement.  The Final Inspection will be
long enough to permit Lessor to:

1. Inspect the Aircraft Documents;

1. Inspect the Aircraft and uninstalled Parts;

1. Inspect the Engines,  including without limitation (i) at Lessor's expense, a
video boroscope inspection of (A) the low pressure and high pressure compressors
and (B) turbine area and (ii) at Lessee's expense, engine condition runs; and

1. Observe a two (2) hour test flight (with Lessor's representatives as on-board
observers).

Such test flight shall be conducted by Lessee using the aircraft  manufacturer's
recommended test flight procedures.  The Lessee shall provide, at Lessee's cost,
insurance on the aircraft hull and liability and for the  representatives of the
Lessor  during the test  flight.  Lessor shall be permitted to have a minimum of
two (2)  representatives  attend the Inspection  and/or test flight.  The Lessee
shall be required to open any areas of the  Aircraft  requested  to be opened by
the Lessor or its representative in order to verify any aspect of its condition,
including but not limited to the opening of the galley area,  the lavatories and
the lower cargo  compartment  bilges.  The Final Inspection shall commence on or
before the Expiration Date with respect to the Aircraft and shall continue until
concluded.

A. Non-Compliance.  To  the  extent that,  at  the time of Final Inspection, the
condition  of  the  Aircraft does not comply with this Agreement, Lessee will at
Lessor's option:

1. Immediately  rectify the  non-compliance and to the extent the non-compliance
extends  beyond the Expiration  Date,  the Term (and Lessee's  obligation to pay
Rent) will be  automatically  extended and this  Agreement  will remain in force
until the non-compliance has been rectified; or

1. Redeliver  the  Aircraft  to  Lessor and  indemnify  Lessor,  and  provide to
Lessor's  satisfaction cash as security for that indemnity,  against the cost of
putting the Aircraft into the condition required by this Agreement.

A. Intentionally Omitted.

A. Acknowledgement. Provided Lessee has complied with its obligations under this
Agreement,  following  redelivery  of  the  Aircraft  by Lessee to Lessor at the
Redelivery Location, Lessor will deliver to Lessee an acknowledgement confirmin
that Lessee has redelivered the  Aircraft to  Lessor  in  accordance  with  this
Agreement.

B. Maintenance Program.

1. Prior to the Expiration Date and upon Lessor's  request,  Lessee will provide
Lessor or its agent reasonable access to the Agreed Maintenance  Program and the
Aircraft  Documents in order to facilitate the Aircraft's  integration  into any
subsequent operator's fleet;

1. Lessee  will,  if  requested  by Lessor to do so, upon return of the Aircraft
deliver to Lessor a  certified  true  current  and  complete  copy of the Agreed
Maintenance Program,  together with a letter authorizing Lessor to use such copy
for "bridging" purposes for the next lessee of the Aircraft.  Lessor agrees that
it will not  disclose  the  contents  of the Agreed  Maintenance  Program to any
person or entity except to the extent necessary to monitor  Lessee's  compliance
with this Agreement  and/or to bridge the  maintenance  program for the Aircraft
from the Agreed  Maintenance  Program to another  program  after the  Expiration
Date.

A. Fuel.  Upon  redelivery of the Aircraft to Lessor, an adjustment will be made
in respect of fuel on board on the Delivery Date and the  Expiration Date at the
price then prevailing at the Redelivery Location.

A. Aircraft Storage.  During the period of thirty (30) days after the Expiration
Date,  Lessor  shall have the right to  require  Lessee to  maintain,  store and
insure the  Aircraft  at a  location  having a  facility  capable of  performing
required  maintenance  of the  Aircraft  (to be  mutually  agreed by Lessor  and
Lessee).  All  costs  actually  paid by  Lessee  to any  third  party  vendor in
connection with the foregoing shall be payable by Lessor at Lessee's direct cost
without  "mark-up".  At least  thirty  (30) days prior to the  Expiration  Date,
Lessor shall advise Lessee as to whether Lessor  requires  Lessee to provide the
services contemplated by this Section 12.8.

I.       DEFAULT

A. Events of Default. Each of the following events or conditions will constitute
an Event of  Default  (whether  any such  event or  condition  is  voluntary  or
involuntary  or occurs by operation of law or pursuant to or in compliance  with
any judgment,  decree or order of any court or any order,  rule or regulation of
any Government Entity):

1. Non-Payment. Lessee fails to make any payment under this Agreement on the due
date and such failure continues for two (2) Business Days; or

1. Insurance.  Lessee  fails  to  comply  with any provision of Section 9 or any
insurance  required  to  be  maintained  under  this  Agreement  is cancelled or
terminated or notice of cancellation is given in respect of any  such insurance;
or

1. Breach.  Lessee fails to  comply with any other  provision of this  Agreement
and, if such failure is in the  reasonable  opinion of Lessor capable of remedy,
the failure  continues  for five (5)  Business  Days after notice from Lessor to
Lessee; or

1. Representation.  Any  representation   or  warranty  made  (or  deemed  to be
repeated)  by  Lessee  in  or  pursuant to  this Agreement or in any document or
certificate  or  statement is  or  proves to have been incorrect in any material
respect when made or deemed to be repeated; or

1. Cross Default.

a)       A final  judgment  for the payment of money not covered by insurance in
         excess of Two  Hundred  Fifty  Thousand  Dollars  ($250,000),  or final
         judgments  for the payment of money not covered by  insurance in excess
         of Two Hundred Fifty Thousand Dollars ($250,000) in aggregate, shall be
         rendered  against Lessee and the same shall remain  undischarged  for a
         period of ninety (90) days during which execution  thereof shall not be
         effectively  stayed by  agreement  of the parties  involved,  stayed by
         court order or adequately bonded; or

a)       Attachments  or other  Security  Interests  shall be issued or  entered
         against  substantially  all of the  property of Lessee and shall remain
         undischarged  or  unbonded  for ninety  (90) days  except for  Security
         Interests  created in connection  with monies  borrowed or  obligations
         agreed to by Lessee in the ordinary course of its business; or

a)       Lessee  shall  default in the  payment of any sum which is in excess of
         $250,000  of any one or more  obligations  for the  payment of borrowed
         money,  for the deferred  purchase price of property or for the payment
         of rent or hire under any lease of aircraft  when the same  becomes due
         if such  nonpayment  results in or would permit an acceleration of such
         indebtedness,  or Lessee shall default in the  performance of any other
         term, agreement,  or condition contained in any agreement or instrument
         under or by which any such obligation is created, evidenced or secured,
         if the effect of such default is to cause or permit such  obligation to
         become due prior to its stated maturity; or

a)       Any event of default or termination event, howsoever described,  occurs
         under any Other Agreement.

1. Approvals: Any consent, authorization, license, certificate or approval of or
registration  with or declaration to any  Government  Entity in connection  with
this Agreement (including, without limitation):

a)       required by Lessee to authorize,  or in connection with, the execution,
         delivery, validity, enforceability or admissibility in evidence of this
         Agreement or the  performance by Lessee of its  obligations  under this
         Agreement; or

a)       the registration of the Aircraft (to the extent that the same is within
         the control of Lessee); or

a)       any  airline  license  or  air  transport  license  including,  without
         limitation,  authority  to operate the  Aircraft  under Part 121 of the
         Federal  Aviation  Regulations  and a Certificate  of  Convenience  and
         Necessity issued under Section 401 of the Federal Aviation Act;

is modified in a manner  unacceptable  to Lessor or is withheld,  or is revoked,
suspended,  cancelled, withdrawn, terminated or not renewed, or otherwise ceases
to be in full force; or

1. Bankruptcy, Etc.

a)       Lessee or  any  Subsidiary  consents to the appointment of a custodian,
         receiver,  trustee  or liquidator of itself or all or any material part
         of  Lessee's  property  or Lessee's consolidated property, or Lessee or
         any Subsidiary admits in writing its inability to,  or is unable to, or
         does not, pay its debts generally as they come due, or  makes a general
         assignment for the  benefit  of  creditors, or Lessee or any Subsidiary
         files  a  voluntary  petition  in  bankruptcy  or  a voluntary petition
         seeking  reorganization  in  a  proceeding  under  any  bankruptcy   or
         insolvency laws (as now or hereafter in effect), or an answer admitting
         the material allegations of a petition  filed  against  Lessee  or  any
         Subsidiary in any such proceeding,  or  Lessee  or  any  Subsidiary  by
         voluntary petition, answer or consent seeks relief under the provisions
         of any other bankruptcy, insolvency or other similar law providing  for
         the reorganization or winding-up of corporations, or  provides  for  an
         agreement,  composition, extension or adjustment with its creditors, or
         any corporate  action  (including,  without  limitation,  any  board of
         directors or shareholder action) is taken by Lessee or  any  Subsidiary
         in furtherance of any of  the  foregoing, whether  or  not  the same is
         fully effected or accomplished; or

a)       an  order,  judgment  or  decree is  entered  by any court  appointing,
         without the consent of Lessee or any Subsidiary, a custodian, receiver,
         trustee or  liquidator  of Lessee or any  Subsidiary,  or of all or any
         material part of Lessee's property or Lessee's consolidated property is
         sequestered,  and any such order,  judgment or decree of appointment or
         sequestration remains in effect, undismissed, unstayed or unvacated for
         a period of thirty (30) days after the date of entry  thereof or at any
         time an order for relief is granted; or

a)       an  involuntary  petition  against  Lessee  or  any   Subsidiary  in  a
         proceeding  under  the  United States Federal  Bankruptcy laws or other
         insolvency  laws  (as now or hereafter in effect)  is  filed and is not
         withdrawn or dismissed within thirty (30) days  thereafter  or  at  any
         time an order for relief is granted in such proceeding,  or  if,  under
         the provisions of any law providing for reorganization or winding-up of
         corporations which may apply to Lessee or any Subsidiary, any court  of
         competent jurisdiction assumes jurisdiction over, or custody or control
         of, Lessee or any Subsidiary or of all or any material part of Lessee's
         property,  or  Lessee's  consolidated  property  and such jurisdiction,
         custody or control  remains  in  effect,  unrelinquished,  unstayed  or
         unterminated for a period of 30 days or at any time an order for relief
         is granted in such proceeding; or

1. Unlawful.  It becomes unlawful for Lessee  to  perform any of its obligations
under  this  Agreement  or  this  Agreement  becomes wholly or partly invalid or
unenforceable; or

1. Suspension of Business.  Lessee or any of its Subsidiaries suspends or ceases
or  threatens  to  suspend or cease to carry on all or a substantial part of its
business as a Certificated Air Carrier for a period of more than seven (7) days;
or

1. Disposal. Lessee or any of its Subsidiaries disposes, conveys or transfers or
threatens  to  dispose,  convey or  transfer  of all or a  material  part of its
assets,  liquidates or dissolves or, without the prior written consent of Lessor
which will not be unreasonably withheld or delayed,  consolidates or merges with
any other Person whether by one or a series of transactions, related or not; or

1. Rights.  The existence, validity, enforceability or priority of the rights of
Lessor as owner and lessor in respect of the Aircraft are  challenged  by Lessee
or any other person claiming by or through Lessee; or

1. Not Used.

2. Delivery.   Lessee  fails  to  accept  delivery  of the Aircraft when validly
tendered by Lessor pursuant to this Agreement; or

1. Adverse Change.  Any event or series of events occurs which Lessor reasonably
believes is likely to have a material adverse effect on the ability of Lessee to
comply  with its  obligations  under  this  Agreement  and of which  Lessor  has
notified Lessee.

A. Rights. If an Event of Default occurs,  Lessor may at its option (and without
prejudice  to any  of its  other  rights  under  this  Agreement),  at any  time
thereafter (without notice to Lessee except as required under applicable law):

1. By notice to Lessee and with  immediate  effect,  terminate this lease of the
Aircraft (but without  prejudice to the  continuing  obligations of Lessee under
this  Agreement),  whereupon  all rights of Lessee  under this  Agreement  shall
cease; and/or

1. Proceed by appropriate court action or actions to enforce performance of this
Agreement or to recover damages for the breach of this Agreement; and/or

1. Either:

a)       Take possession of the Aircraft, for which purpose Lessor may enter any
         premises  belonging to or in the  occupation of or under the control of
         Lessee where the  Aircraft may be located,  or cause the Aircraft to be
         redelivered  to Lessor at Chicago,  Illinois (or such other location as
         Lessor  may  require),  and  Lessor  is  hereby  irrevocably  by way of
         security  for  Lessee's  obligations  under  this  Agreement  appointed
         attorney  for Lessee in causing  the  redelivery  or in  directing  the
         pilots of Lessee or other  pilots to fly the  Aircraft to that  airport
         and will have all the powers and  authorizations  necessary  for taking
         that action; or

a)       By serving notice require Lessee to redeliver the Aircraft to Lessor at
         Chicago, Illinois (or such other location as Lessor may require).

Further,  in the event that Lessee  fails to  redeliver  the  Aircraft to Lessor
pursuant  to  Lessor's  written  notice  and Lessor  seeks a  judicial  order of
replevin,  attachment or similar remedy,  to the extent  permitted by applicable
law,  Lessee  hereby  waives  the  posting  of any bond by Lessor in  connection
therewith.

A. Deregistration.  If an Event of Default occurs,  Lessor may sell or otherwise
deal with the  Aircraft  free and clear of any  leasehold  or other  interest of
Lessee as if this  Agreement had never been made and Lessee will, at the request
of Lessor, take all steps necessary to effect (if applicable)  deregistration of
the Aircraft and its export from the country  where the Aircraft is situated and
any other steps  necessary to enable the Aircraft to be  delivered,  at Lessor's
option,  outside the United  States;  Lessee  hereby  irrevocably  and by way of
security for its obligations under this Agreement appoints (which appointment is
coupled  with an  interest)  Lessor as its  attorney  to execute and deliver any
documentation  and to do any  act or  thing  required  in  connection  with  the
foregoing.

A. Default Payments.  If:

1. A Default occurs; or

1. The  Aircraft  is  not  delivered  on the proposed Delivery Date by reason of
failure of Lessee to satisfy any conditions to that delivery;

Lessee  will  indemnify  Lessor on demand  against any loss  (including  loss of
profit),  damage,  expense,  cost or liability which Lessor may sustain or incur
directly or indirectly as a result including but not limited to:

                  (a) Any loss of profit  suffered by Lessor because of Lessor's
inability  to place  the  Aircraft  on lease  with  another  lessee  on terms as
favorable to Lessor as this Agreement or because  whatever use, if any, to which
Lessor  is able to put the  Aircraft  upon its  return to  Lessor,  or the funds
arising upon a sale or other  disposal of the Aircraft,  is not as profitable to
Lessor as this Agreement;

                  (b) Any  amount of  principal,  interest,  fees or other  sums
whatsoever  paid or payable on account of funds  borrowed  in order to carry any
unpaid amount;

                  (c)  Any  loss,  premium,  penalty  or  expense  which  may be
incurred in repaying  funds raised to finance the  Aircraft or in unwinding  any
swap, forward interest rate agreement or other financial  instrument relating in
whole or in part to Lessor's financing of the Aircraft; and

                  (d) Any loss, cost, expense or liability sustained or incurred
by Lessor owing to Lessee's  failure to redeliver  the Aircraft on the date,  at
the place and in the condition required by this Agreement.

I.       ASSIGNMENT

A. LESSEE WILL NOT ASSIGN,  TRANSFER  (VOLUNTARILY OR INVOLUNTARILY BY OPERATION
OF LAW OR OTHERWISE)  OR CREATE OR PERMIT TO EXIST ANY SECURITY  INTEREST IN, TO
OR UNDER, ANY OF ITS RIGHTS UNDER THIS AGREEMENT.

A. Lessor at its expense may assign or transfer  all or any of its rights  under
this Agreement and in the Aircraft,  provided that Lessor will in the case of an
assignment  other than by way of security have no further  obligation under this
Agreement  following the  assignment of all its rights under this  Agreement and
the  assumption  by the assignee or  transferee  of all of Lessor's  obligations
under this Agreement,  but notwithstanding  that assignment will remain entitled
to the benefit of each  indemnity and the liability  insurances  effected  under
this Agreement.  Lessee will comply with all reasonable  requests of Lessor, its
successors  and  assigns  in  respect of any such  assignment,  and Lessor  will
promptly notify Lessee of any such assignment.

A. If Lessor  desires to effect any  assignment  or  transfer  of its rights and
obligations under this Agreement, Lessee at Lessor's expense agrees to cooperate
and take all such steps as Lessor may reasonably  request to give the transferee
the benefit of this Agreement.

I.       ILLEGALITY

         If it is or becomes  unlawful  in any  jurisdiction  for Lessor to give
effect to any of its material  obligations as  contemplated by this Agreement or
to continue this Agreement  Lessor may by notice in writing to Lessee  terminate
the leasing of the  Aircraft  under this  Agreement  and Lessee  will  forthwith
redeliver  the  Aircraft  to Lessor  in  accordance  with  Section  12.  Without
prejudice to the  foregoing  Lessor will consult in good faith with Lessee as to
any steps  which  may be taken to  restructure  the  transaction  to avoid  that
unlawfulness but will be under no obligation to take any such steps.

I.       MISCELLANEOUS

A. Waivers, Remedies Cumulative.  The rights of Lessor under this Agreement:

1. May be exercised as often as necessary;

1. Are cumulative and not exclusive of its rights under any law; and

1. May be waived only in writing and specifically.

Delay in  exercising  or  non-exercise  of any such right will not  constitute a
waiver of that right.

A. Delegation.  Lessor  may  delegate to any person or persons all or any of the
trusts,  powers  or  discretions  vested  in it by these  presents  and any such
delegation  may be made  upon such  terms and  conditions  and  subject  to such
regulations  (including  power  to  sub-delegate)  as  Lessor  in  its  absolute
discretion thinks fit.

A. Certificates.   Except  where  expressly  provided  in  this  Agreement,  any
certificate or  determination  by Lessor as to any rate of interest or as to any
other  amount  payable  under this  Agreement  will,  in the absence of manifest
error, be conclusive and binding on Lessee.

A. Appropriation.  If any sum paid or recovered in respect of the liabilities of
Lessee under this  Agreement is less than the amount then due,  Lessor may apply
that sum to amounts due under this Agreement in such  proportions  and order and
generally in such manner as Lessor may determine at its sole discretion.

A. Not Used.

A. Set-off.  Lessor may set off any matured obligation owed by Lessee under this
Agreement or the Other Agreements (to the extent  beneficially  owned by Lessor)
against  any  obligation  (whether  or not  matured)  owed by Lessor to  Lessee,
regardless   of  the  place  of  payment  or  currency.   If  an  obligation  is
unascertained or unliquidated, Lessor may in good faith estimate that obligation
and set off in respect of the estimate, subject to the relevant party accounting
to the other when the obligation is  ascertained or liquidated.  Lessor will not
be obliged to pay any amounts to Lessee under this Agreement so long as any sums
which are then due from  Lessee  under this  Agreement  or the Other  Agreements
remain  unpaid and any such amounts  which would  otherwise be due will fall due
only if and when  Lessee  has paid all such  sums  except to the  extent  Lessor
otherwise  agrees or sets off such amounts against such payment  pursuant to the
foregoing.

A. Severability. If a provision of this Agreement is or becomes illegal, invalid
or unenforceable in any jurisdiction, that will not affect:

1. The legality,  validity  or  enforceability in that jurisdiction of any other
provision of this Agreement; or

1. The legality, validity or enforceability in any other jurisdiction of that or
any other provision of this Agreement.

A. Remedy.   If Lessee  fails to comply with any  provision  of this  Agreement,
Lessor  may,  without  being in any way obliged to do so or  responsible  for so
doing and without prejudice to the ability of Lessor to treat the non-compliance
as a Default  or an Event of  Default,  effect  compliance  on behalf of Lessee,
whereupon  Lessee shall become  liable to pay  immediately  any sums expended by
Lessor  together  with  all  costs  and  expenses  (including  legal  costs)  in
connection therewith.

A. Expenses.   Whether or not the Aircraft is delivered to Lessee  (except where
such  delivery is  prevented by the act of Lessor)  pursuant to this  Agreement,
Lessee will pay to Lessor on demand all expenses  (including  legal,  survey and
other costs) payable or incurred by Lessor in contemplation  of, or otherwise in
connection  with, the  enforcement of or  preservation of any of Lessor's rights
under this Agreement, or in respect of the repossession of the Aircraft.

All  expenses  payable  pursuant to this  Section  16.9 will be paid as they are
incurred by Lessor.

A. Time of Essence.  The time  stipulated  in this  Agreement  for all  payments
payable  by  Lessee  to  Lessor  and  for  the  performance  of  Lessee's  other
obligations under this Agreement will be of the essence of this Agreement.

A. Notices.  All notices under,  or in connection  with,  this  Agreement  will,
unless otherwise  stated,  be given in writing by letter or facsimile.  Any such
notice is deemed effectively to be given as follows:

1. If by letter, when delivered;

1. If by facsimile,  when transmitted and full  transmission has been separately
notified by telephone by the transmitting party.

The  address,  facsimile  and  telephone  numbers  of Lessee  and  Lessor are as
follows:

                  Lessee:  Frontier Airlines, Inc.
                                    12015 East 46th Avenue
                                    Denver, Colorado 80239
                                    Attn:  General Counsel
                                    Facsimile:       (303) 371-7007
                                    Telephone:       (303) 371-7400

                  Lessor:  Interlease Aviation Investors, L.L.C.
                                    One Northfield Plaza
                                    Suite 525
                                    Northfield, Illinois  60093
                                    Attn:            Philip Coleman
                                    Facsimile:       (708) 446-2749
                                    Telephone:       (708) 446-2644

A. Law and Jurisdiction:

1. THIS  AGREEMENT  IN ALL  RESPECTS  IS GOVERNED  BY AND TO BE  INTERPRETED  IN
ACCORDANCE  WITH LAWS OF THE STATE OF THE GOVERNING  LAW,  WITHOUT REGARD TO ITS
CONFLICTS OF LAW  PRINCIPLES.  2. For the benefit of Lessor,  Lessee agrees that
the federal  courts of the Northern  District of Illinois,  or the courts of the
State of Illinois,  County of Cook,  are to have  nonexclusive  jurisdiction  to
settle any disputes in connection with this Agreement and submits itself and its
property to the  jurisdiction  of the courts of the State of Iowa in  connection
with this Agreement;

1. Without prejudice to any other mode of service, Lessee:

a)       appoints  Prentice  Hall  Corporation  System,  Inc.  as  its agent for
         service of process relating  to any  proceedings  before  the  Illinois
         courts in  connection  with  this  Agreement and agrees to maintain the
         process agent in Illinois notified to Lessor;

a)       agrees that failure by a process agent to notify Lessee of the  process
         shall not invalidate the proceedings concerned;

a)       consents to the service of process relating to any such proceedings  by
         prepaid  mailing  of  a  copy  of  the process to Lessee's agent at the
         address identified in paragraph (i);

1. Lessee:

a)       waives objection  to  the  federal  and  state  courts  in the State of
         Illinois  on  grounds  of  inconvenient  forum  or otherwise as regards
         proceedings in connection with this Agreement; and

a)       agrees  that a judgment  or order of a federal or court in the State of
         Illinois in connection with this Agreement is conclusive and binding on
         it  and  may  be  enforced  against  it in  the  courts  of  any  other
         jurisdiction;

1. Nothing  in this  Section  limits  the  right of  Lessor  or Lessee to bring
proceedings  against  Lessee or Lessor,  as the case may be, in connection  with
this Agreement:

a)       in any other court of competent jurisdiction; or

a)       concurrently in more than one jurisdiction; and

2. Lessee irrevocably and unconditionally:

a)       agrees that if Lessor brings legal proceedings against it or its assets
         in relation to this  Agreement no immunity from such legal  proceedings
         (which will be deemed to include without limitation,  suit,  attachment
         prior  to  judgment,  other  attachment,  the  obtaining  of  judgment,
         execution  or other  enforcement)  will be  claimed  by or on behalf of
         itself or with respect to its assets;

a)       waives any such right of immunity which it or its assets now has or may
         in the future acquire;

a)       consents  generally in respect of any such proceedings to the giving of
         any  relief  or the  issue  of any  process  in  connection  with  such
         proceedings including,  without limitation,  the making, enforcement or
         execution against any property  whatsoever  (irrespective of its use or
         intended  use) of any order or  judgment  which may be made or given in
         such proceedings.

A. Entire  Agreement.   This  Agreement,  the Letter  Agreement  and any related
side-letters  are the sole and  entire  agreement  between  Lessor and Lessee in
relation to the leasing of the Aircraft,  and supersede all previous  agreements
in relation to that leasing.

A. Indemnities. All rights expressed to be granted to each Indemnitee under this
Agreement (other than Lessor) are given to Lessor on behalf of that Indemnitee.

A. Counterparts.  This  Agreement  may be executed in counterparts each of which
will constitute one and the same document.

I.       DISCLAIMERS AND WAIVERS

A. Exclusion.  EXCEPT AS SET FORTH IN THIS AGREEMENT,  THE SCHEDULES  HERETO AND
THE LETTER  AGREEMENT,  THE AIRCRAFT IS  DELIVERED  "AS IS, WHERE IS" AND LESSEE
AGREES AND ACKNOWLEDGES THAT, SAVE AS EXPRESSLY STATED IN THIS AGREEMENT, LESSOR
WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR HAS NOT AND WILL NOT BE DEEMED
TO HAVE MADE OR GIVEN,  ANY WARRANTIES OR  REPRESENTATIONS,  EXPRESS OR IMPLIED,
WITH RESPECT TO, THE AIRCRAFT, INCLUDING BUT NOT LIMITED TO:

1. THE DESCRIPTION,  AIRWORTHINESS,  MERCHANTABILITY, FITNESS FOR ANY PARTICULAR
USE OR PURPOSE, VALUE, CONDITION, OR DESIGN, OF THE AIRCRAFT OR ANY PART; OR

1. ANY  OBLIGATION,  LIABILITY,  RIGHT,  CLAIM OR REMEDY IN TORT, WHETHER OR NOT
ARISING FROM LESSOR'S NEGLIGENCE, ACTUAL OR IMPUTED; OR

1. ANY OBLIGATION,  LIABILITY,  RIGHT,  CLAIM OR REMEDY FOR LOSS OF OR DAMAGE TO
THE AIRCRAFT,  FOR ANY LIABILITY OF LESSEE TO ANY THIRD PARTY,  OR FOR ANY OTHER
DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.

A. Waiver.  LESSEE  HEREBY  WAIVES,  AS BETWEEN  ITSELF AND THE LESSOR,  ALL ITS
RIGHTS IN RESPECT OF ANY WARRANTY OR REPRESENTATION,  EXPRESS OR IMPLIED, ON THE
PART OF LESSOR AND ALL CLAIMS AGAINST LESSOR  HOWSOEVER AND WHENEVER  ARISING AT
ANY TIME IN RESPECT OF OR OUT OF THE OPERATION OR PERFORMANCE OF THE AIRCRAFT OR
THIS AGREEMENT EXCEPT TO THE EXTENT EXPRESSLY ARISING UNDER THIS AGREEMENT.

A. Confirmation.    LESSEE  CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF
THIS   SECTION  17  AND  ACKNOWLEDGES  THAT  RENT  AND  OTHER  AMOUNTS HAVE BEEN
CALCULATED BASED ON ITS PROVISIONS.

I.       SECTION 1110

         Lessee  acknowledges  that  Lessor  would  not have  entered  into this
Agreement  unless it had  available to it the benefits of a lessor under Section
1110 of Title 11 of the United  States Code.  Lessee  covenants  and agrees with
Lessor that to better ensure the  availability  of such  benefits,  Lessee shall
support any motion,  petition or application filed by Lessor with any bankruptcy
court  having  jurisdiction  over  Lessee,  whereby  Lessor  seeks  recovery  of
possession  of the  Aircraft  under said  Section  1110 and shall not in any way
oppose  such  action  by Lessor  unless  Lessee  shall  have  complied  with the
requirements  of said Section 1110 to be fulfilled in order to entitle Lessee to
continued  use and  possession  of the  Aircraft  hereunder.  In the event  said
Section 1110 is amended,  or if it is repealed and another statute is enacted in
lieu  thereof,  Lessor and Lessee  agree to amend this  Agreement  and take such
other action not  inconsistent  with this Agreement as Lessor  reasonably  deems
necessary  so as to afford to Lessor the rights and  benefits as such amended or
substituted  statute  confers  upon  owners and  lessors of  aircraft  similarly
situated to Lessor.
<PAGE>

         IN WITNESS  whereof the parties  hereto have executed this Agreement on
the date shown at the beginning of this Agreement.


 WITNESS:                                    Lessor:

                                         INTERLEASE AVIATION INVESTORS, L.L.C.  
__________________________                                              
                                                                                
                                         By:    _____________________________   
                                                                                
                                         Name:  _____________________________   
                                                                                
                                         Title: _____________________________   
                                                                                
                                         

                                 

 WITNESS:                                    Lessee:

                                         FRONTIER AIRLINES, INC.


___________________________              By:    _____________________________

                                         Name:  _____________________________
   
                                         Title: _____________________________

<PAGE>



                                   SCHEDULE 1

                                     PART 1

                             DESCRIPTION OF AIRCRAFT

AIRCRAFT MANUFACTURER:                       Boeing

MODEL:                                       737-2P6

SERIAL NUMBER:                               21613

ENGINES

ENGINE TYPE AND NO.:                         Pratt & Whitney JT8D-15 x 2 with 
                                             Stage 3 Nordam "LGW-N" Hushkits

SERIAL NOS:                                  P688665 and P688655


                    On the Delivery Date, the Aircraft shall:

1. Possess a Certificate of Airworthiness issued by the Air Authority;

1. Meet  the  requirements  for  U.S  domestic operation  under  an FAA Part 121
Operating Certificate;

1. Have  undergone  a fresh "C-3" check in accordance with the existing lessee's
maintenance program;

1. Be in compliance with all outstanding  airworthiness directives issued by the
FAA (AD's), and mandatory manufacturing orders which have a mandatory compliance
date within 180 days of the Delivery  Date,  including  compliance  with initial
tasks of the Corrosion  Prevention  and Control  Program (CPCP) due under Boeing
D6-38528 document;

1. Be equipped  with Engines  which are fresh from a Hot Section  Refurbishment,
with not less than 6,000 Cycles and 9,000 Flight Hours until the next  scheduled
Life Limited Parts replacement.

1. Have hard time  components  with the lesser of either (i) not less than 4,000
Flight Hours or Cycles,  whichever is most limiting,  or (ii) twelve (12) months
and shall be  delivered  with a copy of the hard time  components  listing  with
corresponding  time remaining until removal,  all of which will be in accordance
with the Boeing maintenance program; 2. Be delivered with applicable records and
manuals in either microfilm or paper medium;

1. Be  delivered  with a listing of each life  limited  part within each Landing
Gear and corresponding time remaining until replacement;

1. Have had a boroscope  inspection of each Engine, at Lessee's  expense,  and a
power  assurance  run,  to be  witnessed  by both  parties.  Any  discrepancies,
mutually  agreed,  beyond the Engine  manufacturer's  limits will be repaired at
Lessor's  expense.  No Engine  will be "on watch" for any reason  requiring  any
special or out of sequence inspection;

1. Be in an all economy  seating  configuration  of 119 seats providing at least
31" pitch or other seating  configuration  to be mutually  agreed between Lessor
and Lessee;

1. Shall be stripped and repainted white, with Boeing gray wings;

1. Have  installed  Windshear  (W/S) and Traffic Alert and  Collision  Avoidance
Systems (TCAS) in accordance with FAR part 121 standards;

1. Emergency   equipment  having a calendar  life will have a minimum of one (1)
year or 100% of its total approved life, whichever is less, remaining;

1. Time  remaining  to overhaul on the Landing  Gear will not be less than 4,000
Flight Hours or Cycles,  whichever is most limiting.  The Landing Gear and wheel
wells will be clean, free of leaks and repaired as necessary.

1. Wheel wells shall be coated with corrosion inhibitor;

1. All decals and placards shall be clean, secure and legible.

1. Intalled tires and brakes shall have at least 50% landings remaining.

1. The Aircraft  will have been  inspected and treated with respect to corrosion
as defined in the Agreed Maintenance Program and/or Boeing Document  No.D6-38528
relative to compliance with the Corrosion Prevention and Control Program (CPCP).
The  entire  fuselage  will be  substantially  free from  corrosion  and will be
adequately  treated  and an approved  corrosion  prevention  program  will be in
operation; and

1. Fuel tanks will be free from contamination and corrosion and a tank treatment
program will be in operation.

<PAGE>


                                   SCHEDULE 1

                                     PART 2

                               AIRCRAFT DOCUMENTS

A. CERTIFICATES

   o     FAA Certificate of Airworthiness

B. AIRCRAFT STATUS RECORDS

   o     Log Books
   o     Airframe Maintenance Status Report
   o     Supplemental Structural Inspection Document Status (if applicable)
   o     Manufacturer's Service Bulletin Status Report
   o     Airworthiness Directive Compliance Report (terminated and repetitive)
   o     Modification Status Report List documents will be provided upon request
   o     Last Weighing Report
   o     List of Life Limited Components with remaining hours/cycles

C. AIRCRAFT MAINTENANCE RECORDS (last heavy maintenance visit)

   o     Test Flight Report
   o     X-ray pictures
   o     Last annual check and heaviest maintenance check Work Cards

D. AIRCRAFT HISTORY RECORDS

   o     Aircraft Maintenance History Cards
   o     Service Difficulty Report
   o     Accident or Incident Report (Major Structural Repair)

E. ENGINE RECORDS (for each engine)

   o     Engine time and cycle records
   o     Last overhaul and repair documents (including FAA Forms 337)
   o     Airworthiness Directive Compliance Report (terminated and repetitive)
   o     Manufacturer's Service Bulletin Status Report
   o     List of Time Controlled Components with remaining hours and cycles
   o     Modification Status Report
   o     Engine Disc Sheets
   o     Engine Build Specifications

F. APU RECORDS

   o     Last Overhaul and Repair Documents (including modification status)
   o     Airworthiness Directive Compliance Report (terminated and repetitive)
   o     Manufacturer's Service Bulletin Status Report
   o     List of Time Controlled Components with remaining hours/cycles
   o     Modification Status Report

G. COMPONENT RECORDS

   o     Time Controlled Component  Historical  Records  with  Installation  and
         Serviceability Tags

H. MANUALS

   o     Airplane Flight Manual (Manufacturer Approved, FAA Approved)
   o     Flight Crew Operating Manual
   o     Weight and Balance Manual
   o     Wiring Diagram Manual (microfilm and hard copy if available)
   o     Illustrated Parts Catalog (microfilm)
   o     Aircraft Maintenance Manual (microfilm)
   o     Manufacturer's  Engine  Maintenance Manual and any approved engineering
         changes, as applicable

I. MISCELLANEOUS TECHNICAL DOCUMENTS

   o     Maintenance Program Specifications
   o     Interior Configuration Drawings
   o     Original Delivery Documents
   o     Loose Equipment Inventory

<PAGE>


                                   SCHEDULE 1

                                     PART 3

                                LEASE SUPPLEMENT


                  THIS LEASE  SUPPLEMENT is dated as of ______ __, 1998,  and is
executed  by  Frontier  Airlines,   Inc.   ("Lessee")  and  Interlease  Aviation
Investors,  L.L.C. ("Lessor"),  pursuant to Section 3.1(d) of the Aircraft Lease
Agreement  between  Lessor and Lessee dated as of August __, 1998 (the "Lease").
All capitalized  terms used herein which are not otherwise  defined herein shall
have the meaning given to such terms in the Lease.

                  Lessor hereby leases to Lessee,  and Lessee hereby leases from
Lessor, the Aircraft described below (the "Aircraft") upon and subject to all of
the terms, conditions and provisions of the Lease, and Lessor and Lessee further
agree and state as follows:

1.       Description of the Aircraft:

(a)      Airframe:  Boeing 737-2P6

         Manufacturer's Serial No.:  21613

         U.S. FAA Registration No.:  N1PC

(b)      Engines:  Two (2)  Pratt &  Whitney  JT8D-15 engines,  Serial   Numbers
         P688665, and P688655, each of said engines  having  750 or  more  rated
         take-off horsepower or  the equivalent thereof;

(c)      All  Parts  (other than Engines)  installed  on  or associated with the
         Airframe and Engines; and

(d)      The Aircraft Documents relating to the Airframe and Engines.

2. The Habitual Base of the Aircraft is __________, ______________.

3. The Term for the Lease  commences on __________,  1998  (the "Delivery Date")
and ends on the day preceding the numerically corresponding day 84  months after
the  Delivery Date, both dates inclusive, unless sooner terminated in accordance
with the provisions of the Lease.

4. The  Rent  for  the  Aircraft  shall  be  the  amount set forth in the Letter
Agreement.

                  IN WITNESS  WHEREOF,  Lessor and Lessee have caused this Lease
Supplement to be executed by their respective  corporate officers as of the date
first above written.



<PAGE>


                        FRONTIER AIRLINES, INC. (LESSEE)



                       By: _______________________________
                       Title: ____________________________



<PAGE>


                      INTERLEASE AVIATION INVESTORS, L.L.C.
                                    (LESSOR)



                       By: ______________________________
                       Title: ___________________________



<PAGE>


                                   SCHEDULE 2

                            CERTIFICATE OF ACCEPTANCE

         This  Certificate  of Acceptance  is  delivered,  on the date set forth
below by Frontier Airlines,  Inc. ("Lessee"),  to Interlease Aviation Investors,
L.L.C.  ("Lessor"),  pursuant to the Aircraft Lease Agreement dated as of August
10, 1998 between Lessor and Lessee (the "Agreement").  Capitalized terms used in
this Certificate shall have the meaning given to such terms in the Agreement.

1. DETAILS OF ACCEPTANCE

         Lessee hereby  confirms to Lessor that Lessee has at _________  o'clock
on this ____ day of _______________,  199_, at ________, accepted the following,
in accordance with the provisions of the Agreement

(a)      Boeing 737-286 airframe, Manufacturer's Serial No. 21613;

(b)      2 Pratt & Whitney JT8D-15 Engines:

         Engine Number                      Manufacturer's Serial No.

              1                                   P688665; and

              2                                      P688655

(Each of  which  shall  have  more  than 750  rated  takeoff  horsepower  or the
equivalent of such horsepower).

(c)      Fuel Status: _____________; and

(d)      Loose Equipment Check List: as per list signed by Lessor and Lessee and
         attached hereto.

2. CONFIRMATION

         Lessee  confirms to Lessor that as at the time indicated  above,  being
the Delivery Date:

(a)      The  representations  and warranties  contained  in Clause 2 are hereby
         repeated;

(b)      The Aircraft is insured as required by the Agreement;

(c)      Lessee  confirms  that there have been  affixed to the Aircraft and the
         Engines the fireproof notices required by the Agreement; and

(d)      Lessee's  authorized  technical experts have inspected the  Aircraft to
         ensure the  Aircraft  conforms to Lessee's  requirements.  The Aircraft
         is  in  accordance   with  the  specifications  of  the  Agreement  and
         satisfactory in all respects. 

3. HOURS AND CYCLES DATA (as of Delivery Date)

(a)      Airframe:

         Number of Hours since last "C-7" plus SI (formerly "D") Check (Heaviest
         Check): ____hours

         "C" Check (or Equivalent):

         Type of Check: _______________________

         Interval: ____________________________

         Time Since: __________________________

(b)      Landing Gear Overhaul:

         Number of Hours Since Last Overhaul:

         Left Gear ___________________________  Hours

         Right Gear __________________________  Hours

         Nose Gear ___________________________  Hours

         Interval:               
         
         Left Gear ________________________

         Right Gear _______________________

         Nose Gear ________________________

(c)      Engines:


         Total Number of Hours and Cycles:

         S/N ______:_________ hours; _____________ cycles

         S/N ______:_________ hours; _____________ cycles


         Number of Hours Since Last Hot Section Refurbishment:

         S/N ______:_________ hours

         S/N ______:_________ hours

         Number of Hours Since Last Cold Section Refurbishment:

         S/N ______:_________ hours

         S/N ______:_________ hours

         Hot Section Refurbishment:

         Interval _________________________________

         Time Since (S/N _________): ______________________

         Time Since (S/N _________): ______________________

         Time Remaining to First Restriction ("Limiter"):

         Engine S/N: P688665

         Hours: ____________       Restriction: ____________

         Cycles: ___________       Restriction: ____________

         Engine S/N: P688655

         Hours: ____________       Restriction: ____________

         Cycles: ___________       Restriction: ____________

         Hours and Cycles used and remaining in Life Limited Parts (see attached
         Schedule):
                     --------------

(d)      Auxiliary Power Unit:

         Number of APU Hours Since Last Heavy Shop Visit:

         _________ hours  __________ Date accomplished

         Hot Section Refurbishment:

         Interval: _______________________

         Time Since: _____________________

(e)      Time Controlled Components:  [see attached report]

(f)      Fuel on Board on Delivery Date: ____________________

(g)      Interior Equipment:

         Number of Passenger Seats
         and Configuration:                          _____   _____

         Number of Galleys and Location:             _____    _____

         Number of Lavatories and Location:          _____    _____

         LOPA - Attached:                            _____    _____

         List of Loose Equipment on Board:

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

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

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

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

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

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

(h)      Avionics:
                                                                                
         Description (use continuation               Model     No.
         sheet(s) as required)

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

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

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

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

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

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

         IN WITNESS WHEREOF, Lessee has, by its duly authorized  representative,
executed this Certificate on the date in paragraph 1 above.

 LESSEE:

         FRONTIER AIRLINES, INC.


         By: __________________________

         Title: _______________________

<PAGE>


                                   SCHEDULE 3

                        OPERATING CONDITION AT REDELIVERY

1. GENERAL CONDITION

         In addition to the specific  requirements set forth below, on or before
the Expiration Date,  Lessee,  at its own expense,  shall return the Aircraft in
compliance with all applicable Federal Aviation Regulations  ("FAR"),  including
Part 121 thereof, and all of the following provisions:

         (a) The Aircraft shall be airworthy and shall have been  maintained and
operated in accordance  with Article 8 of the Lease in accordance  with FAR Part
121  and  all  other   applicable  FAA  regulations   with  the  same  care  and
consideration  for the  technical  condition  of the Aircraft as if the Aircraft
were  to  have  been  kept  in  continued  regular  service  by  Lessee  and all
modifications  and maintenance to the Aircraft shall have been performed in such
a manner as to  demonstrate  compliance  with such Article 8, the applicable FAA
regulations and the Maintenance Program, or as recommended by the manufacturer.

         (b) The Aircraft  exterior  shall be washed and the interior shall have
received a deep cleaning by  international  commercial  airline  standards.  The
cockpit  placards  shall  be  replaced  as  required  and the  cockpit  shall be
repainted as required.

         (c) The Aircraft  shall have  installed the full  complement of Engines
and other equipment, parts, components, accessories, and loose equipment as when
delivered, each such item functioning in accordance with its intended use.

         (d) The Aircraft  shall comply with the  manufacturer's  original  type
certificate  specifications,  as revised up to the Expiration Date, in so far as
such revisions are mandatory and as amended by  supplemental  type  certificates
applicable to the Aircraft.

         (e) The Aircraft and each Engine shall comply with all outstanding U.S.
Federal  Aviation  Regulations and  Airworthiness  Directives  issued by the FAA
affecting such model aircraft, engines, and components which by their terms have
a  mandatory  compliance  date on or before the  return  date or within 180 days
thereafter,  notwithstanding any waiver, deviation or time extension obtained by
Lessee  from the FAA or  otherwise  other  than any  waiver,  deviation  or time
extension  which is issued for all  aircraft or engines,  as the case may be, of
the same model and type as such  Aircraft  or such  Engine,  as the case may be,
without a requirement for application to the FAA for such waiver,  deviation, or
time extension.

         (f)  The  Aircraft  shall  meet  the  requirements  for   airworthiness
certification for a transport  category  commercial  aircraft in accordance with
all  applicable  FARs and  shall  have a  current  and  effective  airworthiness
certificate issued by the FAA.

         (g) The  Aircraft  shall  be in as  good  operating  condition  as when
delivered to Lessee hereunder,  ordinary wear and tear excepted.  Those items in
the interior of the Aircraft  which,  in the reasonable  opinion of Lessor,  are
defective, damaged or excessively worn shall be repaired or replaced by Lessee.

         (h) The entire fuselage and vertical  stabilizer,  including  fairings,
wheel well doors, and engine cowlings,  and horizontal stabilizer shall be newly
stripped of paint and  repainted  white.  Lessee shall  prepare the Aircraft for
such repainting by restoring  aerodynamic  sealer to any area stripped of paint.
Wing surfaces shall be stripped and painted Boeing gray and the floor line which
shall have fresh paint in white.  All required  placards  and markings  shall be
replaced as required.

         (i)  The  Aircraft  and  Engines  shall  be  in  compliance   with  all
manufacturer's  service bulletins as accomplished on similar aircraft engines in
Lessee's fleet.

         (j) The  Aircraft,  except  as  otherwise  provided  in the Lease or as
consented to by Lessor, shall be in the same configuration  (including,  but not
limited to, interior seating configuration,  galleys and lavatories) as when the
Aircraft was originally  delivered to Lessee hereunder,  unless otherwise agreed
to by Lessor in writing.

         (k) Neither the Aircraft  nor any Engine shall have any open,  deferred
or placarded  maintenance  items or watch  items,  nor shall they have any hour,
cycle or calendar time extensions, waivers or non-transferable alternate methods
of  compliance.  The Aircraft  and each Engine  shall comply with the  operation
specifications of the Lessee without waiver or exceptions.

         (l) The Aircraft shall have undergone, immediately prior to redelivery,
the  complete C check which is next due per the Boeing MPD. If the C-check  next
due is a "C-7"  plus SI  (formerly  "D")  check,  Lessor may  require  Lessee to
perform  a "C-7"  plus SI check  utilizing  the  Airframe  Maintenance  Reserves
accumulated for that purpose or, alternatively, may require Lessee to pay Lessor
an additional payment equivalent to the Maintenance  Reserve per Flight Hour for
each Flight Hour  remaining  to the time when the Next "C-7" plus SI check would
become mandatory in accordance with the Agreed Maintenance Program.

         (m) The  Aircraft  shall have  installed  all  applicable  vendor's and
manufacturer's  service bulletin kits received free of charge by Lessee that are
appropriate for the Aircraft and to the extent not installed, those kits will be
furnished free of charge to Lessor.

2. COMPONENTS

   The Aircraft shall:

         (a) Have  hard time  components  with the  lesser  of either  (i) 4,000
Flight Hours or Cycles,  whichever is most limiting, or (ii) twelve (12) months,
and shall be  delivered  with a copy of the hard time  components  listing  with
corresponding  time remaining until removal,  all of which will be in accordance
with the Boeing maintenance program;

         (b) Each  "on-condition"  and  "condition monitored"  component will be
serviceable; and

         (c)  The  APU  will  be in the  same  operational  condition  as at the
Delivery Date with  temperatures  and air outputs within the APU  manufacturer's
limits at all operational settings; and

3. ENGINES

         Each Engine will be installed  on the Aircraft  (and if not the engines
installed on the Delivery Date will be accompanied by all  documentation  Lessor
may require to evidence that title thereto is properly vested in Lessor) and, at
Lessor's option and expense, each Engine will have had a complete hot (including
combustion  chamber) and cold section video  boroscope  inspection,  and a power
assurance run in accordance with the Engine  manufacturer's  maintenance  manual
and all items  beyond  such  manufacturer's  limits will be repaired at Lessee's
expense.  No Engine will be "on watch" for any reason  requiring  any special or
out of sequence inspection.

         Lessee shall redeliver each Engine to Lessor with at least 9,000 Flight
Hours and 6,000 Cycles  remaining  until the next  scheduled  life limited Parts
replacement  (determined in accordance with the Agreed Maintenance  Program). If
Lessee  desires to return the Engines with less than the minimum Flight Hours or
Cycles  specified  above, at Lessor's sole option,  Lessor may require Lessee to
perform a  premature  shop visit and Hot  Section  Refurbishment  utilizing  the
Engine  Maintenance  Reserves  accumulated  for that purpose or,  alternatively,
Lessor may require Lessee to pay Lessor an additional  payment equivalent to the
Maintenance  Reserve  for each  Flight  Hour  remaining  to the time of the next
scheduled life limited parts replacement.

4. FUSELAGE, WINDOWS AND DOORS

         (a) The fuselage will be free of major dents and abrasions and loose or
pulled or missing rivets;

         (b) Doors will be free  moving,  correctly  rigged  and be fitted  with
serviceable seals;

         (c) Windows shall be free of delamination, blemishes and/or crazing and
shall be properly sealed; and

         (d) Prior to the Expiration Date, all repairs  accomplished  during the
Term of a temporary or interim nature,  including  repairs using blind fasteners
and  those  requiring  repetitive  inspections  or  future  upgrading,  shall be
upgraded to a permanent  repair,  and all external doublers (scab patches) shall
be replaced  with flush repairs  (unless such external  doublers are approved by
the  manufacturer  as permanent  repair),  all in accordance with the applicable
manufacturer's  maintenance  manual,  structural  repair  manual  or  other  FAA
approved  data.  In addition,  all AD's shall be  terminated  with no carry over
items.

5. WINGS AND EMPENNAGE

         (a) Leading edges will be free from damage and patches;

         (b) Wings will be free of fuel leaks and no  previous  fuel leaks shall
have temporary repairs.

6. INTERIOR

         (a) Ceilings,  sidewalls and bulkhead  panels will be clean and free of
cracks and stains.

         (b) Carpets and seat covers will be in good condition, reasonably clean
and free of stains and meet FAR burn certification regulations;

         (c) Seats will be  serviceable,  in good  condition and the seat frames
shall be repainted as necessary;

         (d) Emergency  equipment  having a calendar life will have a minimum of
one (1) year or 100% of its total approved life, whichever is less, remaining;

         (e) Galleys will contain all  equipment on board at Delivery  installed
and functional  including service carts (trolleys),  containers and coffee pots,
which will be clean by airline standards,  free of corrosion, and shall have all
FAA required markings installed;

         (f) Overhead stowage  compartments  will be clean by airline  standards
and serviceable with proper markings installed; and

         (g)  Lavatories  will be  clean,  and  free  of  corrosion  by  airline
standards and serviceable with correct FAA markings installed.

7. COCKPIT

         (a) Trim  panels  shall  be free of  stains  and  cracks, will be clean
secure and repainted as necessary;

         (b) Seat covers will be in good condition, clean and free of stains and
will conform to FAR burn certification regulations; and

         (c) Floor coverings shall be effectively sealed.

8. CARGO COMPARTMENTS

         (a) Panels will be in good condition; and

         (b) Nets will be in good condition.

         (c) All   electrical  equipment  shall  be  installed  and  functioning
normally.

9. LANDING GEAR AND WHEEL WELLS

         (a) Time  remaining  to overhaul  on the Landing  Gear will not be less
than 4,000  Flight  Hours or Flight  Cycles,  whichever  is most  limiting.  The
Landing  Gear and wheel  wells  will be clean,  free of leaks  and  repaired  as
necessary.

         (b) Wheel wells shall be coated with corrosion inhibitor;

         (c) All decals and placards shall be clean, secure and legible.

         (d) Installed  tires  and  brakes  shall  have at  least  50%  landings
remaining.

10.CORROSION

         (a) The Aircraft  will have been  inspected and treated with respect to
corrosion as defined in the Agreed  Maintenance  Program and/or Boeing  Document
No.D6-38528  relative to compliance  with the Corrosion  Prevention  and Control
Program (CPCP).  The entire fuselage will be  substantially  free from corrosion
and will be adequately treated and an approved corrosion prevention program will
be in operation; and

         (b) Fuel tanks will be free from contamination and corrosion and a tank
treatment program will be in operation.

11.DOCUMENTATION

         (a) All Aircraft  Documents  and other current and  historical  records
delivered  with the Aircraft on the Delivery  Date,  and acquired or prepared by
Lessee  during  the Term of the  Lease,  shall  be  returned  with the  Aircraft
including,  but not limited to, time logs showing Flight Hours and Cycles on any
given date, documents,  manuals (as revised up to and including the most current
revisions issued by the manufacturer),  data, overhaul records,  Time Controlled
Part traceability to overhaul and "zero time since new" for life-limited  parts,
log books,  original Aircraft and Engine delivery  documents,  serviceable parts
tags,  FAA  forms,   modification   records,   inspection  records,   all  other
documentation pertaining to the Aircraft, Engine and Part, and all documents and
records  described in Part 2 to Schedule I. All records  discrepancies  shall be
corrected,  and any missing or  incomplete  records  shall be  reconstructed  by
Lessee at Lessee's sole cost and expense prior to the return of the Aircraft.

         (b) Lessee shall  cooperate  with the Lessor and any  successor  lessee
identified  by Lessor  at any  time,  in order to  assist  the  Lessor  and such
successor  lessee  with the  integration  of the  Aircraft  into  the  successor
lessee's  maintenance  program, and the approval of the addition of the Aircraft
as an aircraft  on such  successor  lessee's  operating  certificate,  and other
licenses,  permits and approvals,  solely by providing all data, access to logs,
job cards,  yellow tags,  service  records,  overhaul data and test data for any
Engine, Part or the Airframe,  which data, logs, job cards, yellow tags, service
records, overhaul data and test data (i) were delivered to or received by Lessee
at any time; (ii) were required by law to be created or maintained by Lessee; or
(iii) are customarily created or maintained by aircraft operators and can easily
and readily be produced for Lessor at Lessor's  expense.  This sub-section shall
survive the termination of this Lease for any reason whatsoever.

         Notwithstanding anything contained in this Schedule 3, Lessor shall not
be required to make any payments to Lessee in the event that the  Airframe,  the
Engines,  the Landing Gear, any time, cycle or calendar controlled  component is
returned to Lessor in a condition  better than that  specified in Section 12 and
this Schedule 3.



<PAGE>


                                   SCHEDULE 4

                             INSURANCE REQUIREMENTS

         The Insurance required to be maintained are as follows:

         (a) HULL ALL RISKS of Loss or Damage  (while  flying and on the ground)
with respect to the Aircraft on an "agreed value basis" for the Agreed Value and
with a deductible not exceeding $250,000 (including, without limitation, foreign
object damage  coverage with a deductible not exceeding  $250,000 per engine per
occurrence),  or such other amount  agreed by Lessor from time to time.  Without
prejudice to the foregoing, with the prior written consent of Lessor, Lessee may
increase  the  aforesaid  deductible  amount to $500,000  if, prior to doing so,
Lessee  shall have paid to Lessor  the sum of  $250,000  by way of an  insurance
security deposit (the "Insurance  Security  Deposit")  (which Insurance  Deposit
shall also be available to be applied to deductible  losses between $100,000 and
$500,000). Insurance Security Deposit (which shall be held by Lessor as security
for the  performance by Lessee of its  obligations  under this Agreement and the
Other  Agreements),  shall be returned to Lessee on the  Expiration  Date if all
amounts  payable by Lessee under this  Agreement and any Other  Agreement  shall
have been paid in full and no Default  shall have  occurred  and be  continuing.
With Lessor's prior consent,  the Insurance Deposit may be provided by Lessee by
way of letter of credit issued by a bank acceptable to Lessor and in form and in
substance satisfactory to Lessor.

         In the event that the Insurance  Security  Deposit is applied to a loss
claim thereby reducing the balance  thereof,  Lessee will either (a) replace any
deficiency in such balance; or (b) lower the all risk hull insurance  deductible
to $250,000 within 15 days after the aforementioned application.

         (b) HULL WAR AND ALLIED PERILS, being such risks excluded from the Hull
All Risks Policy to the fullest extent available from the leading  international
insurance  markets  including  confiscation  and  requisition  by the  State  of
Registration for the Agreed Value;

         (c) ALL RISKS  (INCLUDING WAR AND ALLIED RISK except when on the ground
or in transit  other than by air)  property  insurance  on all Engines and Parts
when not  installed  on the  Aircraft on an "agreed  value" basis for their full
replacement value and including engine test and running risks;

         (d) AIRCRAFT THIRD PARTY, PROPERTY DAMAGE,  PASSENGER,  BAGGAGE,  CARGO
AND MAIL AND AIRLINE  GENERAL THIRD PARTY  (INCLUDING  PRODUCTS) LEGAL LIABILITY
for a Combined  Single Limit  (Bodily  Injury/Property  Damage) of an amount not
less than the Minimum Liability  Coverage for any one occurrence (but in respect
of products and personal  injury  liability this limit may be an aggregate limit
for any and all losses  occurring  during the currency of the  policy).  War and
Allied  Risks are also to be  covered  under the  Policy to the  fullest  extent
available from the leading international insurance markets;

         (e) All required hull and spares insurance (as specified above), so far
as it relates to the Aircraft will:

                           (i) name  Lessor and their  respective successors and
         assigns  as  additional   assureds  for  their  respective  rights  and
         interests, warranted, each as to itself only, no operational interest;

                           (ii) provide  that  any loss will be settled  jointly
         with Lessor and Lessee,  subject to final prior  approval of Lessor and
         will be payable in Dollars to Lessor,  for the account of all interests
         except  where  the  loss  does  not  exceed  the  Damage   Notification
         Threshold, and Lessor has not notified the insurers to the contrary, in
         which case the loss will be settled with and paid to Lessee;

                           (iii) include  a  notice  and/or  acknowledgement  of
         assignment in a form acceptable to Lessor;

                           (iv) if  separate  Hull "all  risks" and "war  risks"
         insurances are arranged,  include a 50/50  provision in accordance with
         market practice (AVS. 103 is the current market language);

                           (v) confirm  that the  insurers  are not  entitled to
         replace the Aircraft in the event of an insured Event of Loss;

                           (vi)  confirm  that the  insurers  will not  obtain a
         valid  discharge of the  obligations  under the Insurance by payment to
         the broker, notwithstanding market practice to the contrary;

         (f) All required liability insurances (specified above) will:

                           (i) include Lessor and its successors and assigns and
         their  respective  shareholders,   subsidiaries,  directors,  officers,
         agents,  employees and  indemnitees  as  additional  insureds for their
         respective rights and interests,  warranted, each as to itself only, no
         operational interest;

                           (ii) include a Severability  of Interest Clause which
         provides that the  insurance,  except for the limit of liability,  will
         operate  to give each  assured  the same  protection  as if there was a
         separate policy issued to each assured;

                           (iii) contain a provision  confirming that the policy
         is primary  without  right of  contribution  and the  liability  of the
         insurers will not be affected by any other insurance of which Lessor or
         Lessee  have the  benefit  so as to reduce  the  amount  payable to the
         additional insureds under such policies;

         (g)      All Insurance will:

                           (i) be in accordance with normal industry practice o
         persons operating similar aircraft in similar circumstances;

                           (ii)  provide  cover  denominated  in Dollars and any
         other  currencies  which Lessor may  reasonably  require in relation to
         liability insurance;

                           (iii)  operate on a worldwide  basis  subject to such
         limitations and exclusions as Lessor may agree;

                           (iv) acknowledge the insurer is aware (and has seen a
         copy) of this Agreement and that the Aircraft is owned by Lessor;

                           (v) provide  that,  in relation to the  interests  of
         each of the  additional  assureds the Insurance will not be invalidated
         by any act or omission by Lessee,  or any other  person  other than the
         respective  additional  assured seeking protection and shall insure the
         interests of each of the additional  assureds  regardless of any breach
         or violation by Lessee,  or any other person other than the  respective
         additional assured seeking  protection of any warranty,  declaration or
         condition, contained in such Insurances;

                           (vi) provide that the insurers will hold harmless and
         waive any rights of recourse and/or subrogation  against the additional
         assureds or to be subrogated to any rights of the Banks against  Lessor
         or Lessee;

                           (vii) provide that the additional  assureds will have
         no  obligation  or  responsibility  for the payment of any premiums due
         (but  reserve  the right to pay the same should any of them elect so to
         do) and that the  insurers  will not  exercise  any right of set-off or
         counter-claim  in respect of any premium  due  against  the  respective
         interests of the additional  assureds other than  outstanding  premiums
         relating  to the  Aircraft,  any  Engine  or Part  the  subject  of the
         relevant claim;

                           (viii)  provide  that  the  Insurance  will  continue
         unaltered  for the  benefit  of the  additional  assureds  for at least
         thirty (30) days after written  notice by  registered  mail or telex of
         any cancellation, change, event of non-payment of premium or instalment
         thereof  has been sent to  Lessor,  except in the case of war risks for
         which seven (7) days (or such lesser period as is or may be customarily
         available in respect of war risks or allied  perils) will be given,  or
         in the case of war between the five (5) great  powers or nuclear  peril
         for which termination is automatic;

                           (ix)  if   reinsurance   is  a  requirement  of  this
         Agreement  such  reinsurance  will  (i) be on  the  same  terms  as the
         original  insurances  and will include the provisions of this Schedule,
         (ii)  provide  that   notwithstanding   any   bankruptcy,   insolvency,
         liquidation,  dissolution  or similar  proceedings  of or affecting the
         reinsured that the reinsurers'  liability will be to make such payments
         as would have fallen due under the relevant  policy of  reinsurance  if
         the  reinsured had  (immediately  before such  bankruptcy,  insolvency,
         liquidation,   dissolution  or  similar  proceedings)   discharged  its
         obligations in full under the original insurance policies in respect of
         which the then relevant  policy of reinsurance  has been effected;  and
         (iii)  contain  a  "cutthrough"   clause  in  the  following  form  (or
         otherwise,  satisfactory to Lessor):  "The Reinsurers and the Reinsured
         hereby  mutually agree that in the event of any claim arising under the
         reinsurances  in  respect  of a total  loss or  other  claim  where  as
         provided by the Aircraft  Lease  Agreement  dated as of August 10, 1998
         and made between  Interlease  Aviation  Investors,  L.L.C. and Frontier
         Airlines,  Inc.  such claim is to be paid to the  person  named as sole
         loss payee under the primary insurances, the Reinsurers will in lieu of
         payment to the Reinsured, its successors in interest and assigns pay to
         the  person  named as sole  loss  payee  under the  primary  insurances
         effected by the  Reinsured  that  portion of any loss due for which the
         Reinsurers  would otherwise be liable to pay the Reinsured  (subject to
         proof of loss), it being understood and agreed that any such payment by
         the Reinsurers will (to the extent of such payment) fully discharge and
         release the Reinsurers from any and all further liability in connection
         therewith";  subject to such provisions not contravening any law of the
         State of Incorporation;

                           (x)  contain  a  provision  entitling  Lessor  or any
         insured  party to initiate a claim under any policy in the event of the
         refusal or failure of Lessee to do so; and

                           (xi) accept and insure the  indemnity  provisions  of
         this Agreement to the extent of the risks covered by the policies.

<PAGE>


                                   SCHEDULE 5

                              FORM OF LEGAL OPINION


 To:     [Lessor]

                                                                       [Date]


Dear Sir or Madam:

                  You have asked us to render an opinion in connection  with the
transaction governed,  inter alia, by the Lease (as hereinafter defined).  Words
and  expressions  used  herein  will have the same  meanings  as  defined  in an
Aircraft Lease Agreement (the "Lease") dated as of  ____________,  199__ between
Interlease Aviation  Investors,  L.L.C.  ("Lessor") and Frontier Airlines,  Inc.
("Lessee") in respect of one Boeing 737  aircraft,  with  manufacturer's  serial
number  ________,  together  with the 2  installed  Pratt &  Whitney  __________
engines (the "Aircraft").

         In  connection  with our opinion,  we have  reviewed,  inter alia,  the
following:

                  (a)      The Lease;

                  (b)      The Articles of Incorporation and Bylaws of Lessee;

                  (c) All other  documents,  approvals  and consents of whatever
nature and wherever  kept which it was, in our  judgment  and to our  knowledge,
necessary or appropriate  to examine to enable us to give the opinion  expressed
below.

         After reviewing the documents listed in the preceding  paragraph above,
and having regard to the relevant  laws of the State of Illinois,  we are of the
opinion that:

                  (a)  Lessee  is  a  corporation  duly  organized  and  validly
existing under the laws of [Colorado],  is qualified to do business as a foreign
corporation  in each  jurisdiction  where  failure  to so  qualify  would have a
materially  adverse  effect on  Lessee's  business or its ability to perform its
obligations under the Lease;

                  (b) Lessee has the corporate  power to enter into and perform,
and has taken  all  necessary  corporate  action to  authorize  the entry  into,
performance and delivery of, the Lease and the transactions  contemplated by the
Lease; and

                  (c) The  entry  into and  performance  by Lessee  of,  and the
transactions contemplated by, the Lease do not and will not:

                           (i)  conflict with any laws binding on Lessee; or

                           (ii) conflict with the  Articles  of Incorporation or
         Bylaws of Lessee; or

                           (iii)  to the best of our  knowledge,  after inquiry,
         conflict with or result  in  default  under  any  indenture,  mortgage,
         chattel  mortgage,  deed of trust, conditional  sales contract,  lease,
         bank loan or credit agreement  or other agreement which is binding upon
         Lessee or any of its assets or result in the creation of  any  Security
         Interest over any of its assets.

                  (d)  No  authorizations,  consents,  licenses,  approvals  and
registrations (other than those which have been obtained and of which copies are
attached hereto) are necessary or desirable to be obtained from any governmental
or other  regulatory  authorities  in  having  jurisdiction  over  Lessee or its
properties to enable Lessee:

                           (1)      To  enter  into and perform the transactions
                           contemplated by the Lease;

                           (2)      To  import  the  Aircraft  into the   United
                           States and Colorado for the duration of the Term;

                           (3)      To operate the Aircraft in the United States
                           for the transport of fare-paying passengers; or

                           (4)      To  make  the  payments  provided for in the
                           Lease;

                  (e) Except for the  filing and  recordation  of the Lease with
the FAA and the filing of the Financial  Statements  with the Secretary of State
of Colorado  (which filing has been duly made on or before this date), it is not
necessary  to  ensure  the  priority,  validity  and  enforceability  of all the
obligations  of  Lessee  under the  Lease  that the Lease be filed,  registered,
recorded  or  notarized  in any  public  office or  elsewhere  or that any other
instrument relating thereto be signed, delivered, filed, registered or recorded,
that any tax or duty be paid or that any other action whatsoever be taken;

                  (f)      No  other steps are  necessary  to  record or perfect
Lessor's interest in the Aircraft in the United States or Colorado;

                  (g)      On termination of the Lease (whether on expiration or
otherwise) as contemplated in the Lease, Lessor will be entitled;

                           (1)      To repossess the Aircraft;

                           (2)      To  de-register   the   Aircraft   from  the
                           aircraft registry of the Air Authority; and

                           (3)      To  export  the  Aircraft  from  the  United
                           States;   without  requiring  any  further  consents,
                           approvals  or  licenses  from  any  governmental   or
                           regulatory authority in the United States;

                  (h)      The  Lease  has been properly signed and delivered on
behalf of Lessee and the  obligations on the part of Lessee  contained  therein,
assuming them to be valid and binding  according to the Governing Law, are valid
and legally binding on and  enforceable  against Lessee  respectively  under the
laws of Iowa;

                  (i)      Lessee is a Certificated Air Carrier;

                  (j)      Lessee is a "citizen of the United States" as defined
in Section 101(16) of the Federal Aviation Act;

                  (k)      Lessor is  entitled  to the  benefits of Section 1110
of Title 11 of the United States Code with respect to the Aircraft;

                  (l)      There  is  no  withholding  tax  or other  Tax  to be
deducted from any payment whatsoever which may be made by Lessee pursuant to the
Lease;

                  (m)      There  is  no applicable usury or interest limitation
law in Illinois  which may restrict the recovery of payments in accordance  with
the Lease;
                  (n)      There are no registration, stamp or  other  taxes  or
duties  of any kind  payable  in  Colorado  in  connection  with the  signature,
performance or enforcement by legal proceedings of the Lease;

                  (o)      It  is  not necessary  for  Lessor  to  qualify to do
business in Colorado in order to enforce  any  provisions  of the Lease  against
Lessee;

                  (p)      The choice of the  Governing  Law to govern the Lease
will be upheld as a valid choice of law in any action in the Courts of Illinois;
and
                  (q)      The consent  to  the jurisdiction by Lessee contained
in the Lease is valid and binding on Lessee and not subject to revocation.

                                Very truly yours,