AIRCRAFT SUBLEASE AGREEMENT



                                     between



                            INDIGO AVIATION AB (publ)
                                  as Sublessor



                                       and



                             FRONTIER AIRLINES, INC.
                                  as Sublessee



                         Dated as of October 11th, 1999





         Aircraft Make and Model:                    One Boeing 737-3L9
         Aircraft Manufacturer's Serial Number:      26442
         Aircraft Registration Mark:                 N313FL
         Engines Make and Model:                     CFM International CFM56-3B2
         Engine Serial Numbers:                      856183 and 857192


To the extent, if any, that this Agreement  constitutes  chattel paper under the
Uniform  Commercial  Code in any  jurisdiction,  no  security  interest  in this
Agreement may be created  through the transfer and possession of any counterpart
other than the original  counterparts  of this  Agreement,  so identified by the
signature  of Lender on the  receipt  set  forth on the  signature  page of such
original counterpart.

(Portions  of this  exhibit  have  been  excluded  from the  publicly  available
document and an application for an order granting confidential  treatment of the
excluded material has been made. These items are maked with (*).)


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                                TABLE OF CONTENTS


1.       DEFINITIONS; CONSTRUCTION.............................................1
         1.1      Definitions..................................................1
         1.2      Construction................................................10
2.       REPRESENTATIONS AND WARRANTIES.......................................12
         2.1      Sublessee's Representations and Warranties..................12
         2.2      Sublessor's Representations and Warranties..................14
         2.3      Survival of Representations and Warranties..................15
3.       CONDITIONS PRECEDENT.................................................16
         3.1      Sublessor's Conditions Precedent............................16
         3.2      Waiver......................................................17
         3.3      Sublessee's Conditions Precedent............................17
         3.4      Waiver......................................................18
4.       DELIVERY CONDITION AND INSPECTION OF AIRCRAFT........................18
         4.1      Sublessee Selection of Aircraft.............................18
         4.2      Condition at Delivery.......................................18
         4.3      Sublessee Inspection and Acceptance Flight..................18
         4.4      Delivery of Aircraft to Sublessee...........................18
         4.5      Sublessee's Failure to take Delivery........................19
5.       SUBLEASE TERM........................................................19
         5.1      Sublease Term...............................................19
         5.2      Expiry Date.................................................19
         5.3      Survival of Certain Sublessee Obligations...................20
         5.4      Risk........................................................20
6.       DELIVERY 20
         6.1      Location and Time of Delivery...............................20
         6.2      Delay or Failure in Delivery................................20
7.       RENT     21
         7.1      Basic Rent Period...........................................21
         7.2      Time of Payment of Basic Rent...............................21
         7.3      Amount of Basic Rent........................................21
         7.4      Maintenance Reserves........................................21
         7.5      Supplemental Rent for Excess Cycles.........................22
8.       SECURITY DEPOSIT.....................................................22
         8.1      Security Deposit............................................22
         8.2      Letter of Credit............................................22
         8.3      Sublessor's Rights..........................................22
9.       MAINTENANCE RESERVES.................................................23
         9.1      Amount......................................................23
         9.2      Payments....................................................23
         9.3      Adjustment..................................................23
         9.4      Release of Maintenance Reserves.............................23
         9.5      Costs in Excess of Maintenance Reserves.....................24
         9.6      Reimbursement after ExpiryDate..............................25
10.      PAYMENTS 25
         10.1     Account for Sublessee Payments..............................25
         10.2     Default Interest............................................25
         10.3     Absolute Obligations........................................26
         10.4     Application of Payments to Sublessor........................26
         10.5     Currency Indemnity..........................................26
         10.6     Set-Off.....................................................27
         10.7     Time for Payments...........................................27
11.      SUBLESSOR'S COVENANTS................................................27
         11.1     Quiet Enjoyment.............................................27
         11.2     Sublessor Obligations Following Expiry Date.................27
12.      SUBLESSEE'S COVENANTS................................................28
         12.1     Duration....................................................28
         12.2     Information.................................................28
         12.3     Sublessor Visits............................................30
         12.4     Periodic Estoppel Certificates..............................30
         12.5     Airport and Navigation Charges..............................30
         12.6     Operation of Aircraft.......................................31
         12.7     Areas of Operation..........................................31
         12.8     Non-Prejudicial Action......................................31
         12.9     Non-Representation of Sublessor.............................32
         12.10    Inspection..................................................32
         12.11    Registration................................................32
         12.12    Name Plates.................................................33
         12.13    Geneva Convention...........................................33
         12.14    Merger and Shareholding.....................................33
         12.15    Ownership...................................................34
         12.16    Maintenance of Principal Business Place.....................34
         12.17    Maintenance of Flight Records...............................34
13.      POSSESSION...........................................................35
         13.1     No Relinquishment of Possession.............................35
         13.2     Copy of Sublease............................................37
         13.3     Sublessee Primarily Liable..................................37
         13.4     Recognition of Rights.......................................38
14.      SECURITY INTERESTS...................................................38
         14.1     Title.......................................................38
         14.2     No Security Interests.......................................38
         14.3     Base of Aircraft............................................38
         14.4     Notice to Sublessor.........................................38
         14.5     Procure Release.............................................39
15.      MAINTENANCE AND REPAIR...............................................39
         15.1     General Obligations.........................................39
         15.2     Specific Obligations........................................40
16.      REPLACEMENT OF PARTS.................................................41
         16.1     Replacement of Parts........................................41
         16.2     Title to Replacement Parts..................................41
         16.3     Pooling of Parts............................................42
         16.4     Alterations.................................................42
         16.5     Removal of Parts............................................43
         16.6     Substitution of Engine......................................43
         16.7     Temporary Removal of parts..................................44
         16.8     Parts Incapable of Transfer.................................45
17.      MANUFACTURER'S WARRANTIES............................................45
         17.1     Authorization...............................................45
         17.2     Proceeds....................................................45
         17.3     Agreements with Manufacturers...............................46
         17.4     No Operation Contrary to Warranties.........................46
18.      DISCLAIMERS..........................................................46
         18.1     General.....................................................46
         18.2     AS IS, WHERE IS.............................................47
         18.3     Waiver of Warranty of Description...........................47
         18.4     No Liability Under UCC......................................48
         18.5     Sublessee Acknowledgment....................................48
         18.6     Sublessee Waiver............................................48
         18.7     Sublessee Examination of Aircraft...........................48
         18.8     No Sublessor Liability for Losses...........................48
         18.9     Exclusion...................................................49
         18.10    Waiver......................................................49
         18.11    No Waiver...................................................49
         18.12    Confirmation................................................49
19.      INDEMNITIES..........................................................50
         19.1     General Indemnity...........................................50
         19.2     Exception to General Indemnity..............................50
         19.3     Time of Payment.............................................51
         19.4     Survival of General Indemnity...............................51
         19.5     Notice to Sublessee.........................................51
20.      TAXATION 51
         20.1     Gross-up....................................................51
         20.2     Tax Indemnity...............................................52
         20.3     Value Added Taxes...........................................53
         20.4     Taxation of Indemnity Payments..............................53
         20.5     Benefit of Indemnities......................................53
         20.6     Sublessor Indemnification...................................53
         20.7     Survival of Tax Indemnities.................................54
         20.8     Mitigation and Co-operation.................................54
         20.9     Furnishing Forms............................................54
21.      INSURANCE............................................................54
         21.1     Insurances..................................................54
         21.2     Reinsurance.................................................55
         21.3     Requirements................................................55
         21.4     Insurance Covenants.........................................55
         21.5     Renewal of Insurances.......................................56
         21.6     Failure to Insure...........................................57
         21.7     Continuation of Insurances..................................57
         21.8     Application of Insurance Proceeds...........................58
         21.9     Pursuit of Claims...........................................58
22.      TOTAL LOSS AND REQUISITION...........................................58
         22.1     Total Loss Prior to Delivery................................58
         22.2     Total Loss After Delivery...................................58
         22.3     Total Loss of Engines.......................................59
         22.4     Requisition.................................................60
23.      REDELIVERY...........................................................61
         23.1     Redelivery of Aircraft......................................61
         23.2     Final Inspection............................................61
         23.3     Discrepancies...............................................62
         23.4     Non-compliance..............................................62
         23.5     Acknowledgment..............................................63
         23.6     Storage.....................................................63
24.      EVENTS OF DEFAULT....................................................63
         24.1     Notice......................................................63
         24.2     Events......................................................63
         24.3     Sublessor's Rights..........................................66
         24.4     Default Payments............................................67
         24.5     Cumulative Rights...........................................68
25.      ASSIGNMENT AND TRANSFER..............................................68
         25.1     By Sublessee................................................68
         25.2     By Sublessor................................................68
         25.3     Assignment to Lender........................................69
         25.4     Sublessee Co-operation......................................69
         25.5     Sublessor Includes Sublessor's Assignee and Lender..........69
26.      MISCELLANEOUS PROVISIONS.............................................70
         26.1     Rights Cumulative, Waivers..................................70
         26.2     Delegation..................................................70
         26.3     Expenses....................................................70
         26.4     Time of Essence.............................................71
         26.5     Entire Agreement............................................71
         26.6     Further Assurances..........................................71
         26.7     Language....................................................71
         26.8     Variation...................................................71
         26.9     Invalidity of Any Provision.................................71
         26.10    Survival....................................................71
         26.11    Reimbursement...............................................72
         26.12    Press Releases..............................................72
         26.13    Power of Attorney...........................................72
         26.14    Usury Laws..................................................72
         26.15    Confidentiality.............................................72
         26.16    Counterparts................................................73
         26.17    Bankruptcy..................................................73
27.      NOTICES  73

28.      GOVERNING LAW AND JURISDICTION.......................................74
         28.1     New York Law................................................74
         28.2     Non-exclusive Jurisdiction in New York......................74
         28.3     Service of Process..........................................75
         28.4     Prevailing Party in Dispute.................................75
         28.5     Waiver......................................................75
SIGNATURE PAGE    76

SCHEDULE 1 - Aircraft Specification...........................................77
SCHEDULE 2 - Certain Business Terms...........................................82
SCHEDULE 3 - Insurance Requirements...........................................85
SCHEDULE 4 - Delivery Conditions..............................................90
SCHEDULE 5 - Acceptance Certificate...........................................93
SCHEDULE 6 - Certificate of Officer of Frontier Airlines, Inc.................96
SCHEDULE 7 - Form of Letter of Authority......................................98
SCHEDULE 8 - Power of Attorney................................................99
SCHEDULE 9 - Form of Opinion of Sublessee Counsel............................100
SCHEDULE 10 - Monthly Aircraft Utilization and Status Report.................105
SCHEDULE 11 - Form of Quiet Enjoyment Letter.................................107
SCHEDULE 12 - Return Conditions..............................................108
SCHEDULE 13 - Return Acceptance Certificate..................................111
SCHEDULE 14 - Sublease Supplement............................................117




<PAGE>


THIS AGREEMENT is made as of October 11th, 1999.

BETWEEN:

(1) INDIGO AVIATION AB (publ), a Swedish limited liability company whose address
and  principal  place of business is at Sodra  Forstadsgatan  4, S-211 43 Malmo,
Sweden, ("Sublessor"); and

(2) FRONTIER AIRLINES,  INC., a Colorado corporation whose address and principal
place of business is at 12015 E. 46th Avenue, Denver, Colorado, United States of
America (Sublessee").

WHEREAS

Owner Trustee holds title to the Aircraft for the benefit of Sublessor;

Owner Trustee, as headlessor, leases the Aircraft to Sublessor under the terms
of the Headlease Agreement;

NOW, THEREFORE,  in consideration of and subject to the mutual covenants,  terms
and conditions  contained in this Agreement,  and other valuable  consideration,
the receipt and sufficiency of which is hereby acknowledged, Sublessor agrees to
sublease to  Sublessee  and  Sublessee  agrees to sublease  from  Sublessor  the
Aircraft for the Sublease Term and the parties further agree as follows:

1.       DEFINITIONS; CONSTRUCTION

1.1      Definitions

In this  Agreement  the  following  words  and  expressions  have the  following
meanings unless the context otherwise requires:

Acceptance Certificate means a certificate of acceptance substantially in the
form set out in Schedule 5;

Agreed Value has the meaning ascribed to it in Schedule 2;

Aircraft means the Airframe,  the Engines, the Parts and the Aircraft Documents,
collectively.  As the context requires, the Aircraft may also mean the Airframe,
any Engine, any Part, the Aircraft Documents or any part thereof, individually;

Aircraft Documents means the documents, data and records referred to in Annexure
1 to Schedule 1 of this Agreement and, at Delivery,  more closely  identified in
Annexure 1 to the Acceptance Certificate and all additions,  renewals, revisions
and  replacements  from time to time made to any of the  foregoing in accordance
with this Agreement;

Airframe  means the  airframe  described in  Schedule1  together  with all Parts
relating thereto (except Engines or engines);

Air Navigation Charges means all charges incurred with the furnishing,  issue or
provision of information, directions and other facilities in connection with the
navigation  or movement of the  Aircraft  (including  the control or movement of
vehicles in any part of any airport used for the movement of aircraft);

Airport  Charges  means all charges  incurred in  connection  with the  landing,
parking or taking-off of aircraft at airports or for the use of, or for services
provided at, airports;

Airworthiness  Directive  means an  airworthiness  directive or other  mandatory
requirement  issued by the FAA or any other  Aviation  Authority  or  Government
Entity;

APU means the  auxiliary  power unit  installed  on the Aircraft on the Delivery
Date and any replacement  auxiliary power unit installed in accordance with this
Agreement, title to which is transferred to Owner Trustee;

Aviation Authority means all and any of the authorities, government departments,
committees or agencies which under the laws of the State of  Registration  shall
from time to time:

         (a) have control or supervision of civil aviation in that state; or

         (b) have jurisdiction over the registration, airworthiness or operation
of, or other matters relating to the Aircraft;

Basic Rent has the meaning ascribed to it in Schedule 2;

Basic Rent Period means each period ascertained in accordance with Clause 7.1;

Business  Day means  any day  (other  than a  Saturday  or  Sunday  or  holidays
scheduled  by law) on which  banks are open for  foreign  exchange  business  in
London, New York and Stockholm;

"C"  Check  means a "C"  check (a  complete  zonal  and  systems  check  and the
corresponding lower "A" and "B" checks or equivalent in accordance with the MPD)
in accordance with the Maintenance Program;

Conditions Precedent means the conditions specified in Clause 3;

CPCP means corrosion prevention control program;

Cycle  means one  take-off  and  landing of the  Airframe  or, in relation to an
Engine or Part, one take-off and landing of the airframe to which that Engine or
Part may be attached;

"D" Check means a "C7" Check plus  Structural  Inspection  (a  complete  system,
zonal, corrosion and structural inspection in accordance with the MPD);

Damage Notification Threshold has the meaning ascribed to it in Schedule 2;

Default  means any Event of Default or any event which with the lapse of time or
giving of notice or making of any  determination,  would  constitute an Event of
Default;

Default Rate means, for the relevant  period,  three percent (3%) above the rate
of  interest  at the  start of that  relevant  period  publicly  quoted by Chase
Manhattan Bank N.A. as its prime rate;

Delivery means delivery of the Aircraft by Sublessor  to  Sublessee  pursuant to
Clause 6;

Delivery Date means the date on which Delivery occurs;

Delivery Location means Munich, Germany or such other location as Sublessor  and
Sublessee may agree;

Dollars and US$ means the lawful currency of the United States of America;

Engine means, whether or not for the time being installed on the Aircraft:

         (a)      each  engine  of the  manufacture,  model  and  serial  number
                  specified  in Schedule 1 which  Sublessor  elects to tender to
                  Sublessee,  whether or not  installed  on the Airframe on this
                  Delivery  Date,  such  engines  being  described  as to serial
                  numbers on the Acceptance Certificate; or

         (b)      any engine that has replaced that engine,  title to which has,
                  or should have,  passed to Owner  Trustee 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 Sublessee pursuant to this Agreement;

Engine Agreed Value has the meaning ascribed to it in Schedule 2;

Engine Manufacturer means CFM International;

Engine  Performance  Restoration  Visit means any Overhaul,  refurbishment,  hot
section  inspection,  replacement of internal life limited  parts,  disassembly,
assembly  and  testing  required  thereof  during an  engine  shop  visit  which
requires,  as a minimum,  a major  disassembly  of an Engine and the removal and
reinstallation of internal rotating parts;

Engine Total Loss means the occurrence  with respect to an Engine only,  whether
or not  installed  on the  Airframe,  of any of those  events  described  in the
definition of Total Loss;

Event of Default means any event specified in Clause 24;

Expiry Date means the date determined in accordance with Clause 5.2;

Extension Sublease Expiry Date has the meaning ascribed to it in Schedule 2;

FAA  means  the  Federal   Aviation   Administration   of  the   Department   of
Transportation of the United States of America and any successor thereof;

FAR means the Federal  Aviation  Regulations set forth in Title 14 of the United
States Code of Federal Regulations,  as amended,  modified or replaced from time
to time and any successor regulation thereto;

Federal  Aviation Act means Title 49 Subtitle VII of the U.S.  Code, as amended,
modified or replaced from time to time;

Final Inspection has the meaning given to it in Clause 23.2;

Financial Indebtedness means any indebtedness in respect of:

         (a)      moneys borrowed or raised;

         (b)      payments due under finance or operating leases;

         (c)      any  guarantee  or  indemnity in respect of obligations of the
                  type referred to in paragraphs (a) or (b)

Flight Hour means each hour or part thereof  (rounded up to two decimal  places)
elapsing from the moment the wheels of the Aircraft leave the ground at take off
until the wheels of the Aircraft next touch the ground at landing;

Geneva  Convention  means the  Convention on the  International  Recognition  of
Rights in Aircraft  signed in Geneva,  Switzerland  on 19 June 1948, and amended
from  time  to  time,  but  excluding  the  terms  of any  adhesion  thereto  or
ratification thereof containing  reservations to which the State of Registration
does not accede;

Government Entity means:

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

         (b)      any instrumentality,  board,  commission,  court, or agency of
                  any thereof,  however constituted including, for the avoidance
                  of doubt, the Aviation Authority; 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;

Head Lease  Agreement  means the  aircraft  Head Lease  Agreement  entered  into
between Owner Trustee and Sublessor  dated as of October 11th, 1999 and which is
being filed with the FAA simultaneously herewith;

Indemnitees  means Sublessor,  Owner Trustee,  Lender, or any parts or equipment
vendor or Maintenance  Facility as identified by Sublessor from time to time and
any other person  identified by Sublessor to have an interest in the Transaction
Documents   and  their   respective   successors   and  assigns,   shareholders,
subsidiaries,  affiliates, partners, contractors, directors, officers, servants,
agents and employees; Insurances has the meaning ascribed to it in Clause 21.1;

Landing Gear means the landing gear assembly of the Aircraft, including all life
limited parts;

Lender  means any  person or persons  notified  by  Sublessor  to  Sublessee  as
providing financing to Owner Trustee or Sublessor in respect of the acquisition,
ownership or leasing of the Aircraft from time to time (including any successors
in title or assignees of any such persons);

Letter of Credit has the meaning ascribed to it in Schedule 2;

LLP means life limited part;

Loss  means any and all  loss,  liability,  obligation,  action,  claim,  suits,
proceeding,  judgement,  penalty,  fine,  damages,  fee, cost,  disbursement and
expense and Losses shall be construed accordingly;

Maintenance  Facility  means a FAA approved  maintenance  facility or such other
maintenance facility as Sublessor may, in its absolute discretion,  from time to
time approve in writing;

Maintenance Program means Sublessee's maintenance program as approved by the FAA
provided  in  compliance  with  the MPD or such  other  maintenance  program  as
Sublessor may, in its absolute discretion, approve in writing;

Maintenance Reserves means all amounts payable pursuant to Clause 9;

Manufacturer means the Boeing Company, a Delaware Corporation with its principal
office in the City of Seattle, State of Washington, United States of America;

Minimum Liability Coverage has the meaning ascribed to it in Schedule 2;

Monthly Report means a report substantially in the form of Schedule 10;

Mortgage means a mortgage over the Aircraft created for the benefit of Lender;

MPD  mean  the  Maintenance  Planning Document published by the Manufacturer and
applicable to the Aircraft;

Other Agreements  means any other aircraft lease or sublease  agreement or other
agreement  from time to time  entered  into  between  Sublessor  (or any  parent
company, subsidiary,  associate or affiliate of Sublessor) and Sublessee (or any
subsidiary, associate or affiliate of Sublessee);

Overhaul means the full  refurbishment  of the Aircraft,  an Engine,  the APU, a
Landing  Gear, a module or a Part,  as the case may be, in which such  equipment
has been disassembled,  cleaned, thoroughly inspected, repaired, reworked or had
a replacement of parts, reassembled,  and tested to the tolerances and standards
specified  by  the  applicable  manufacturer's  overhaul  procedures  manual  or
equivalent;

Owner Trustee means First Security Bank, National Association;

Part means,  whether or not for the time being  installed  in or attached to the
Airframe or any Engine:

         (a)      any component,  furnishing or equipment (other than a complete
                  Engine) installed or attached to the Airframe or any Engine 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
                  Owner Trustee pursuant to this Agreement;

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

Permitted Air Carrier has the meaning ascribed to it in Clause 13.1;

Permitted Liens means:

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

         (b)      any  inchoate  liens  of  a  repairer,  materialman,  workman,
                  employee,  mechanic,  carrier,  hangar keeper or other similar
                  lien arising in the ordinary  course of business in respect of
                  obligations  which are not overdue or are being  contested  in
                  good faith by appropriate proceedings;

         (c)      any  Sublessee  liens  arising out of judgments or awards with
                  respect  to which at the time  (i) an  appeal  proceeding  for
                  review is being  contested  diligently  and in good  faith and
                  (ii) a stay of execution  shall have been secured (and remains
                  in force);

         (d)      any  lien  of  the  Owner  Trustee  as  Owner  Trustee  or  as
                  Headlessor;

         (e)      any Sublessor Lien; and

         (f)      any Security Interest over the Aircraft  created by  Sublessee
                  with the written consent of Sublessor;

but  only if (in the  case of (a),  (b) and  (c))  (i)  adequate  resources  are
available  for  the  payment  of  those  Taxes  or  obligations  and  (ii)  such
proceedings,  or the continue  existence of the lien,  do not involve any danger
(in the  reasonable  opinion of Sublessor or Lender) of the sale,  forfeiture or
other loss of the Aircraft or any interest therein;

Redelivery  Date means the Expiry Date or the earlier date of termination of the
leasing of the Aircraft in accordance with the terms of this Agreement;

Redelivery Location means a location in the continental US reasonably  requested
by Sublessor or such other location as Sublessor and Sublessee may agree;

Rent means Basic Rent and Supplemental Rent;

Rent Date means the day preceding each Basic Rent Period;

Replacement Engine means an engine complying with Clause 16;

Return Conditions means the conditions specified in Schedule 12;

Scheduled Delivery Date has the meaning ascribed to it in Schedule 2;

Security Deposit has the meaning ascribed to it in Schedule 2;

Security  Interest  means any  encumbrance  or  security  interest,  however and
wherever  created  or  arising,  including  without  limitation,  any  right  of
ownership,  security,  mortgage, charge, pledge, lien, encumbrance,  assignment,
hypothecation or any other agreement or arrangement conferring security;

State of Incorporation means the State of Colorado, United States of America;

State of  Registration  means in relation to the Aircraft,  the United States of
America or any other state or territory in which the Aircraft is, in  accordance
with the provisions hereof, registered from time to time;

Sublease Expiry Date has the meaning ascribed to it in Schedule 2;

Sublease Extension Option has the meaning ascribed to it in Schedule 2;

Sublease Term has the meaning ascribed to it in Schedule 2;



<PAGE>


Sublessor Lien means:

         (a)      any Security Interest  from time to time created by or throug
                  Sublessor in  connection  with the  financing of the Aircraft;

         (b)      any other  Security  Interest in respect of the Aircraft  that
                  results from acts of or claims  against  Sublessor not related
                  to the  transactions  contemplated  by or permitted under this
                  Agreement;

         (c)      any Security Interest in respect of the Aircraft for Sublessor
                  Taxes;

         (d)      any  Security  Interest  in  respect  of the Aircraft existing
                  prior to Delivery;

         (e)      any  Security  Interest  arising  as a  result  of any  act or
                  omission of Sublessor  that  constitutes a breach by Sublessor
                  of this Agreement; or

         (f)      any Security  Interest  that  results  from any  indebtedness,
                  liability  or other  obligation  arising by,  through or under
                  Sublessor  or  any  of  the   Indemnitees   and  that  is  not
                  indemnified against by Sublessee under this Agreement;

Sublessor Taxes means Taxes:

         (a)      imposed  as  a  result  of  activities  of  Sublessor  in  the
                  jurisdiction   imposing  the   liability   unrelated  to  this
                  Agreement or the operation of the Aircraft by Sublessee;

         (b)      imposed on the net income,  profits or gains of Sublessor (but
                  excluding for the avoidance of doubt,  taxes directly  related
                  to payment made under this Agreement); or

         (c)      imposed with respect to (i) any event  occurring  prior to the
                  Delivery  Date or after  the  Expiry  Date or (ii) any  period
                  commencing and ending prior to the Delivery Date or any period
                  commencing after the Expiry Date;

Supplemental Rent means any and all amounts,  liabilities and obligations (other
than Basic Rent) which Sublessee  assumes,  agrees or is otherwise  obligated to
pay Sublessor hereunder  including  Maintenance  Reserves,  Total Loss Proceeds,
payment of Indemnity, interest or Default Interest;

Taxes means all present and future taxes,  imports,  levies,  duties or charges,
deductions, withholdings of any nature (including without limiting the foregoing
any value added, franchise,  transfer, sales, gross receipts,  business, excise,
personal property, stamp,  documentary,  registration or other tax of whatsoever
nature)  together  with any  assessments,  fines,  additions  to tax or interest
thereon included and Tax and Taxation shall be construed accordingly;

Total Loss means with  respect to the  Aircraft  (including  for the purposes of
this definition the Airframe):

         (a)      the  actual,  constructive,  compromised,  arranged  or agreed
                  total loss of the Aircraft; or

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

         (c)      the   requisition   of  title,   confiscation,   sequestration
                  restraint, detention, forfeiture or any compulsory acquisition
                  or  seizure or  requisition  for hire by or under the order of
                  any government (whether civil, military or de facto) or public
                  or local authorities or courts; or

         (d)      the hi-jacking,  theft or disappearance of the Aircraft or any
                  other occurrence  resulting in loss of possession by Sublessee
                  and/or   operation   thereof  for  a  period  of  thirty  (30)
                  consecutive days or longer;

         (e)      any  sale  of  the  Aircraft  in  connection  with a Sublessee
                  bankruptcy whether by an administrator, trustee or court;

         (f)      any other  occurrence not permitted  under this Agreement that
                  deprives  Sublessee  of use and  possession  for a  period  of
                  thirty (30) consecutive days or longer;

For the avoidance of doubt,  a Total Loss of the Aircraft will be deemed to have
occurred  when a Total Loss of the Airframe  occurs even if there has not been a
Total Loss of an Engine or Engines;

Total Loss Date means:

         (a)      in the case of an actual  total  loss or  destruction,  damage
                  beyond repair, or being rendered  permanently  unfit, the date
                  on which such loss,  destruction,  damage or rendition  occurs
                  (or, if the date of loss or destruction is not known, the date
                  on which the  Aircraft or the  relevant  part thereof was last
                  heard of);

         (b)      in the case of a constructive, compromised, arranged or agreed
                  total  loss,  whichever  shall be the  earlier of (i) the date
                  being sixty (60) days after the date on which notice  claiming
                  such total loss is issued to the insurers or brokers, and (ii)
                  the date on which  such loss is agreed or  compromised  by the
                  insurers;

         (c)      in the case of paragraph (c) in the  definition of Total Loss,
                  the date on which the event referred to therein takes effect;

         (d)      in  the case of paragraph (d) in the definition of Total Loss,
                  the final day of the said  period  of  thirty (30) consecutive
                  days;

         (e)      in the case of paragraph (e) in the  definition of Total Loss,
                  the date on which the Aircraft is sold; and

         (f)      in case of paragraph (f) above the definition  of  Total Loss,
                  the  final  day of  the said period of thirty (30) consecutive
                  days;

Total  Loss  Proceeds   means  the  proceeds  of  any  insurance  or  any  other
compensation or similar payment arising in respect of a Total Loss;

Transaction Documents means

         (a)      this Aircraft Sublease Agreement;

         (b)      the Acceptance Certificate;

         (c)      the acknowledgment by Sublessee of the security  assignment or
                  the pledge of,  inter  alia,  this  Agreement  in favor of the
                  Lender and any documents duly executed  pursuant to any of the
                  foregoing by Sublessee or Sublessor;

         (d)      the Sublease Supplement; and

         (e)      the Side Letter;

US Air Carrier  means an air carrier (a) operating  under (i) a  certificate  of
public convenience and necessity issued under 49 U.S.C. 41102(a) and of the type
referred to in U.S.C.  section 1110,  which is in full force and effect and (ii)
an air carrier operators  certificate  issued pursuant to chapter 447 of the FAA
for aircraft capable of carrying ten or more individuals or 6,000 pounds or more
of cargo  which is in full  force and  effect;  and (b)  qualifying  as a debtor
subject to 11 U.S.C. section 1110;

1.2      Construction

1.2.1    References in this Agreement to:

         (i)      Clauses  or  Schedules  are,   unless   otherwise   specified,
                  references to Clauses of, and Schedules to, this Agreement;

         (ii)     any  statutory  or  other   legislative   provision  shall  be
                  construed  as   including   any   statutory   or   legislative
                  modification or re-enactment thereof, or any provision enacted
                  in substitution therefor;

         (iii)    the Aircraft includes any part of the Aircraft, and, where the
                  context  so  admits,  any  of  the  Aircraft  Documents,   and
                  references to any part of the Aircraft include any part of any
                  Engine;

         (iv)     the word  person  or  persons  or to words  importing  persons
                  include   individuals,    partnerships,    limited   liability
                  companies,  corporations,   government  agencies,  committees,
                  departments,   authorities  and  other  bodies,  corporate  or
                  unincorporated,  whether having distinct legal  personality or
                  not;

         (v)      Sublessor  or  Sublessee  include any assignee or successor in
                  title to the Sublessor or the Sublessee  respectively (subject
                  to the provisions of Clause 25);

         (vi)     any  agreement or instrument  shall include such  agreement or
                  instrument   as  it  may  from   time  to  time  be   amended,
                  supplemented or substituted;

         (vii)    an agreement shall also include a concession,  contract, deed,
                  franchise,  license,  treaty  or  undertaking  (in each  case,
                  whether oral or written);

         (viii)   the assets of any person  shall be construed as a reference to
                  the whole or any part of its business, undertaking,  property,
                  assets and revenues (including any right to receive revenues);

         (ix)     law  includes  common or customary  law and any  constitution,
                  decree, judgment, legislation,  order, ordinance,  regulation,
                  statute,   treaty  or  other   legislative   measure   in  any
                  jurisdiction or any present or future  directive,  regulation,
                  request or requirement in each case, whether or not having the
                  force  of law  but,  if not  having  the  force  of  law,  the
                  compliance  with  which  is in  accordance  with  the  general
                  practice of person to whom the directive,  regulation, request
                  or requirement is addressed;

         (x)      month  are  references  to a period  starting  on one day in a
                  calendar month and ending on the day preceding the numerically
                  corresponding  day in the next calendar month (and  references
                  to months shall be construed accordingly).

         (xi)     any statute or other legislative provision or regulation shall
                  be  read  to  include  any   statutory   or   legislative   or
                  administrative  modification or re-enactment  thereof,  or any
                  substitution therefor;

         (xii)    the words "including"  or "include"  are used  herein  without
                  limitation to mean by way of example;

         (xiii)   the words "Agreement", "hereof",  "herein",  "hereinafter" and
                  "Sublease" refer to this entire Agreement; and

         (xiv)    the word "or" is used inclusively to mean "and/or".

1.2.2    Headings are for ease of reference only.

1.2.3      Where the context so admits, words importing the singular number only
           shall include the plural and vice versa,  and words importing  neuter
           gender shall include the masculine or feminine gender.

2.       REPRESENTATIONS AND WARRANTIES

2.1      Sublessee's Representations and Warranties

         Sublessee  represents and warrants to Sublessor as of execution of this
         Agreement and each other Transaction  Document,  and as of the Delivery
         Date each of the following representations and warranties.

         (i)      Corporate   Status:    Sublessee   is   a   corporation   duly
                  incorporated,  validly existing and in good standing under the
                  laws of the State of Incorporation and has the corporate power
                  and authority to carry on its business as presently  conducted
                  and to perform its obligations hereunder.

         (ii)     Government  Approvals:  No authorization,  approval,  consent,
                  license or order of, or  registration  with,  or the giving of
                  notice  to the  Aviation  Authority  or any  other  Government
                  Entity is  required  for the valid  authorization,  execution,
                  delivery  and  performance  by  Sublessee  of the  Transaction
                  Documents or to make the Transaction  Documents  admissible in
                  evidence  in the State of  Incorporation,  except as will have
                  been duly effected as of the Delivery Date.

         (iii)    Binding:   Sublessee's   Board  of  Directors  has  authorized
                  Sublessee to enter into the Transaction  Documents and perform
                  its  obligations   under  the  Transaction   Documents.   This
                  Agreement and the other  Transaction  Documents have been duly
                  executed and  delivered by Sublessee  and represent the valid,
                  enforceable  and binding  obligations  of Sublessee  except as
                  enforceability  may  be  limited  by  bankruptcy,  insolvency,
                  reorganization or other laws of general application  affecting
                  the  enforcement  of  creditors'  rights.   When  executed  by
                  Sublessee at Delivery,  the same will apply to the  Acceptance
                  Certificate.

         (iv)     No Breach:  The  execution  and  delivery  of the  Transaction
                  Documents, the consummation by Sublessee of  the  transactions
                  contemplated herein and by the other Transaction Documents and
                  compliance by Sublessee with the terms  and provisions  hereof
                  do  not  and  will  not  contravene  any  law   applicable  to
                  Sublessee, or result  in  any  breach  of  or  constitute  any
                  default  under  or  result  in  the  creation  of any Security
                  Interest upon any  property  of  Sublessee,  pursuant  to  any
                  mortgage,  chattel  mortgage, deed of trust, conditional sales
                  contract, bank loan or  credit  agreement,  corporate charter,
                  by-law or other agreement or instrument to which  Sublessee is
                  a party or by which Sublessee or its properties or  assets may
                  be bound or affected. When executed by Sublessee at  Delivery,
                  the same will apply to the Acceptance Certificate.

         (v)      Filings:  Except for the filing or recording of this Agreement
                  with the FAA and a UCC-1  with the  Secretary  of State in the
                  State of  Incorporation,  no other  filing or recording of any
                  instrument or document  (including the filing of any financial
                  statement)  is  advisable  under  the  laws  of the  State  of
                  Registration  to  evidence  the  interests  of Owner  Trustee,
                  Sublessor  and  Lender  in the  Aircraft  or  any  Transaction
                  Document.

         (vi)     Licenses:  Sublessee  holds,  all licenses,  certificates  and
                  permits  from  all  applicable  Government  Entities  for  the
                  conduct  of  its  business  as a  certified  air  carrier  and
                  performance of its obligations under the Transaction Document.

         (vii)    No  Suits:   There  are  no  suits,   arbitrations   or  other
                  proceedings pending or threatened against Sublessee before any
                  court or administrative  agency against or affecting Sublessee
                  that, if adversely  determined,  would have a material adverse
                  effect on the financial  condition or business of Sublessee or
                  its ability to perform its obligations under this Agreement or
                  any other Transaction Document.

         (viii)   No Withholding:  Under the laws of the State of  Incorporation
                  or the State of  Registration,  Sublessee will not be required
                  to deduct any withholding or other Tax from any payment it may
                  make under this Agreement.

         (ix)     General  Obligations:  The obligations of Sublessee under this
                  Agreement are direct, general and unconditional obligations of
                  Sublessee  and rank or will rank at least  pari passu with all
                  other  present  and  future   unsecured   and   unsubordinated
                  obligations  (including contingent  obligations) of Sublessee,
                  with the  exception  of such  obligations  as are  mandatorily
                  preferred by law.

         (x)      Tax Returns:  All  necessary  returns  have been  delivered by
                  Sublessee to all relevant taxation authorities in the State of
                  Incorporation   and  in  the  United  States  of  America  and
                  Sublessee  is not in default  in the  payment of any taxes due
                  and payable.

         (xi)     No Material Adverse Effect:  Sublessee is not in default under
                  any  agreement  to  which  it is a party or by which it may be
                  bound  that  would  have  a  material  adverse  effect  on its
                  business,  assets or condition  and no material  litigation or
                  administrative  proceedings  before any  Government  Entity is
                  presently pending or to the knowledge of Sublessee  threatened
                  against  it or its assets  that would have a material  adverse
                  effect on the  business,  assets or  condition  (financial  or
                  otherwise) of Sublessee.

         (xii)    No Default under this  Agreement:  At the time of execution of
                  this Agreement, no Default has occurred and is continuing.

         (xiii)   Financial  Statements:  The balance sheet and other  financial
                  statements  for Sublessee  for the financial  year which ended
                  31st of March 1999 were prepared in accordance with accounting
                  principles  consistently applied and generally accepted in the
                  State of Incorporation and in the United States of America.

         (xiv)    No Winding  Up: No meeting has been  convened or other  action
                  taken for winding up or dissolution, or for the appointment of
                  any receiver or similar  officer,  in relation to Sublessee or
                  any of its assets.

         (xv)     Continuation  of Business:  Sublessee will continue to operate
                  substantially the same business as it is presently engaged in,
                  will preserve its corporate existence, conduct its business in
                  an  orderly  and  efficient  manner,  satisfy  its  debts  and
                  obligations  as they fall due and keep and maintain all of its
                  assets and properties in good working order and condition.

         (xvi)    No  Immunity:  In  any  proceedings  taken  in  the  State  of
                  Incorporation,  or in any State or Federal Court in the United
                  States of America,  in relation to the Transaction  Documents,
                  it would not be  entitled  to claim  for  itself or any of its
                  assets any immunity from suit, execution,  attachment or other
                  legal process.

         (xvii)   Information:  All information furnished by or on behalf of the
                  Sublessee in connection with all transactions  contemplated by
                  the Transaction Documents is complete, true and correct in all
                  material  respects  and  all  relevant  facts  concerning  the
                  business and affairs of the Sublessee  have been  disclosed to
                  the Sublessor.

         (xviii)  Status:  Sublessee  is a US Air  Carrier and a "citizen of the
                  United  States"  as  defined  in  49  U.S.C.   Section  40102.
                  Sublessee shall operate the Aircraft under Part 121 of the FAR
                  and shall at all times remain a duly certified US Air Carrier.

         (xix)    Principal  Place of Business:  Sublessee's  principal place of
                  business and chief executive office are located at the address
                  specified in the preamble of this Agreement.

         (xx)     Flight  Records:  Sublessee's  flight  records  are located at
                  Sublessee's  principal place of business on the address stated
                  in Clause 27.

         (xxi)    Year 2000 Compliance: Sublessee has (i) initiated a review and
                  assessment  of all areas within its  business  and  operations
                  (including those affected by suppliers and vendors) that could
                  be adversely affected by the "Year 2000 Problem" (this is, the
                  risk that  computer  applications  used by  Sublessee,  or its
                  suppliers,  customers and vendors,  may be unable to recognize
                  and  perform  properly   date-sensitive   functions  involving
                  certain  dates  prior to, on and any date after  December  31,
                  1999),  (ii)  developed  a plan for  addressing  the Year 2000
                  Problem  on a time  basis,  and  (iii)  is in the  process  of
                  implementing such plan.

2.2      Sublessor's Representations and Warranties

           Sublessor  represents  and  warrants to  Sublessee as of the Delivery
Date that:

         (i)      Title  to  Aircraft:  Sublessor  warrants  that  title  to the
                  Aircraft  will be vested  in Owner  Trustee  and the  Aircraft
                  shall be free and  clear of any and all Liens  except  for the
                  Security  Interests of Owner Trustee,  Sublessor's  Lender and
                  this Sublease.

         (ii)     Organizational Status: Sublessor is a public limited liability
                  company created and validly existing under the laws of Sweden,
                  and has the organizational power and authority to carry on its
                  business as presently conducted and to perform its obligations
                  under this  Agreement and each other  Transaction  Document to
                  which it is a party.

         (iii)    Trust Agreement: The Trust Agreement dated as of October 11th,
                  1999,   by  and  between   Owner   Trustee  and  Sublessor  as
                  beneficiary (the "Trust  Agreement") has been duly authorized,
                  validly  executed and delivered on the part of  Sublessor,  is
                  legally  binding  upon   Sublessor,   and  creates  a  legally
                  enforceable  trust (as  hereinafter  defined as the  "Trust").
                  Owner  Trustee,  in its capacity as Trustee of the Trust,  has
                  legal power and  authority to take legal title to the Aircraft
                  and has legal  authority  and is  qualified  as the  holder of
                  legal  title to the  Aircraft  to  register  the  Aircraft  in
                  accordance with the terms of the Federal Aviation Act.

         (iv)     Government  Approvals:  No authorization,  approval,  consent,
                  license or order of, or  registration  with,  or the giving of
                  notice  to any  Government  Entity is  required  for the valid
                  authorization,   execution,   delivery  and   performance   by
                  Sublessor  of this  Agreement,  except  as will have been duly
                  effected as of the Delivery Date.

         (v)      Binding: This Agreement and the other Transaction Documents to
                  which  Sublessor  is a  party  have  been  duly  executed  and
                  delivered by Sublessor and  represent  the valid,  enforceable
                  and binding  obligations of Sublessor except as enforceability
                  may be limited by bankruptcy,  insolvency,  reorganization  or
                  other laws of general application affecting the enforcement of
                  creditors' rights.

         (vi)     No Breach:  The  execution  and  delivery  of the  Transaction
                  Documents,  the  consummation by Sublessor of the transactions
                  contemplated herein and compliance by Sublessor with the terms
                  and  provisions  hereof do not and will not contravene any law
                  applicable  to  Sublessor,  or  result  in  any  breach  of or
                  constitute  any default under or result in the creation of any
                  Security Interest upon any property of Sublessor,  pursuant to
                  any  indenture,  mortgage,  chattel  mortgage,  deed of trust,
                  conditional  sales  contract,  bank loan or credit  agreement,
                  corporate charter,  by-law or other agreement or instrument to
                  which  Sublessor  is a  party  or by  which  Sublessor  or its
                  properties or assets may be bound or affected.

2.3      Survival of Representations and Warranties

         All of the foregoing  Sublessee's and Sublessor's  representations  and
         warranties  shall survive the execution and delivery of this  Agreement
         and the Delivery of the Aircraft.



<PAGE>


3.       CONDITIONS PRECEDENT

3.1      Sublessor's Conditions Precedent

         Sublessor's  obligation  to deliver and lease the Aircraft to Sublessee
         under  this  Agreement  is  subject  to  satisfaction  of  each  of the
         following conditions.

3.1.1    Receipt by Sublessor from Sublessee on or prior to the Delivery Date of
         the following,  each in form and substance  reasonably  satisfactory to
         Sublessor:

         (i)      Officer's  Certificate:    A  certificate  of  an  officer  of
                  Sublessee substantially in the form of Schedule 6;

         (ii)     Consents:  Evidence that all  governmental  or other consents,
                  licenses,   approvals  and  authorizations  required  for  the
                  execution,  delivery  and  performance  by  Sublessee  of  the
                  Transaction  Documents  have been  obtained or made and are in
                  full force and effect;

         (iii)    Accounts: The balance sheet and other financial  statements of
                  Sublessee for the financial year ended March 31 1999;

         (iv)     Licences:   Copies  of   Sublessee's   Certificate  of  Public
                  Convenience and Necessity and Operating  Certificate  covering
                  its  operation of  737-200's  issued by the US  Department  of
                  Transportation and FAA, respectively;

         (v)      Transaction Documents: Originals of the Transaction  Documents
                  (duly executed by all parties other than Sublessor);

         (vi)     Insurances: Evidence that the Insurances are in place together
                  with an insurance  broker's  letter of undertaking  (in a form
                  acceptable to Headlessor,  Sublessor and Lender)  addressed to
                  Headlessor, Sublessor and Lender;

         (vii)    Opinions: Legal opinions from:

                  (a)      Counsel  to  Sublessee  addressed  to Owner  Trustee,
                           Sublessor  and  Lender  substantially  in the form of
                           Schedule  9 and  otherwise  in a form  and  substance
                           acceptable  to Owner  Trustee,  Sublessor and Lender;
                           and

                  (b)      Special FAA counsel to  Sublessee  addressed to Owner
                           Trustee,  Sublessor and Lender  confirming  that this
                           Agreement and other  appropriate  documents have been
                           filed with the FAA;

         (viii)   Security: Receipt by Sublessor of the Security Deposit and the
                  Letter of Credit;

         (ix)     Authority: A letter of authority  substantially in the form of
                  Schedule 7 duly  executed by Sublessee to such  addressees  as
                  requested by Sublessor;

         (x)      Power of Attorney: A power of attorney in the form of Schedule
                  8 duly executed by Sublessee; and

         (xi)     Others: Any other documents, approvals, consents, certificates
                  that Sublessor or Lender may reasonably require.

3.1.2    The representations and warranties of Sublessee under Clause 2.1  shall
         be correct and would be correct if repeated on Delivery.

3.1.3    No Default shall have occurred and be continuing.

3.2      Waiver

         The  Sublessor's  Conditions  Precedent  are for the  sole  benefit  of
         Sublessor  and may be waived or  deferred by  Sublessor  in whole or in
         part and with or without conditions. If any of the Conditions Precedent
         are not  satisfied on the Delivery  Date and Sublessor (in its absolute
         discretion)  nonetheless  agrees to deliver the Aircraft to  Sublessee,
         Sublessee  shall ensure that such  Conditions  Precedent  are fulfilled
         within  fifteen (15) days after the Delivery  Date,  and  Sublessor may
         treat the failure of Sublessee to do so as an Event of Default.

3.3      Sublessee's Conditions Precedent

         Sublessee's  obligation to accept and lease the Aircraft from Sublessor
         under  this  Agreement  is  subject  to  satisfaction  of  each  of the
         following conditions.

3.3.1    The Aircraft is substantially and materially in the condition set forth
         in Schedule 4.

3.3.2    The receipt by  Sublessee  from  Sublessor  on or prior to the Delivery
         Date  of  the  following,   each  in  form  and  substance   reasonably
         satisfactory to Sublessee:

         (i)      Evidence  of  Authority:   Certified  copies  of  evidence  of
                  appropriate  action  approving  the  execution,  delivery  and
                  performance of the  Transaction  Documents by Sublessor and of
                  the  person  or  persons  authorized  to sign the  Transaction
                  Documents on behalf of Sublessor or any other  documents to be
                  delivered to Sublessee by Sublessor;

         (ii)     Specimen signatures:  A certificate of an officer of Sublessor
                  setting out the names and signatures of the persons authorized
                  to sign on behalf of Sublessor the  Transaction  Documents and
                  any  documents to be delivered  by Sublessor  pursuant  hereto
                  contemporaneously herewith; and

         (iii)    Transaction  Documents:  Originals  of  this Agreement and the
                  Side Letter (duly executed by Sublessor).

3.3.3    The  representations and warranties of Sublessor under Clause 2.2 shall
         be correct and would be correct if repeated on Delivery.

3.4      Waiver

         The  Sublessee's  Conditions  Precedent  are for the  sole  benefit  of
         Sublessee  and may be waived or  deferred by  Sublessee  in whole or in
         part and with or without conditions.

4.       DELIVERY CONDITION AND INSPECTION OF AIRCRAFT

4.1      Sublessee Selection of Aircraft

         IN ADDITION TO THE DISCLAIMERS IN CLAUSE 18,  SUBLESSEE  REPRESENTS AND
         WARRANTS  TO  SUBLESSOR  THAT  SUBLESSEE  HAS USED ITS OWN  JUDGMENT IN
         SELECTING  THE AIRCRAFT  AND HAS DONE SO BASED ON ITS SIZE,  DESIGN AND
         TYPE.  SUBLESSEE  ACKNOWLEDGES THAT SUBLESSOR IS NEITHER A MANUFACTURER
         OF THE AIRCRAFT NOR A DEALER IN THE AIRCRAFT.

4.2      Condition at Delivery

         In  addition to the  disclaimers  in Clause 18,  Sublessor  has advised
         Sublessee  that at Delivery  the  Aircraft  will be  substantially  and
         materially in the condition set forth in Schedule 4, provided that this
         confirmation expires as at Delivery.

4.3      Sublessee Inspection and Acceptance Flight

         Sublessor will arrange for Sublessee to perform such ground  inspection
         of the Aircraft prior to the Scheduled  Delivery Date as is reasonable.
         Sublessor  will procure that Sublessee may have up to two (2) observers
         on board the Aircraft during delivery acceptance flight from Sublessor.
         Sublessee acknowledges that, as between it and Sublessor,  in accepting
         the Aircraft it is relying on its own  inspection  and knowledge of the
         Aircraft  in  determining  whether  it meets the  requirements  of this
         Agreement.

4.4      Delivery of Aircraft to Sublessee

         Sublessor  will  deliver the  Aircraft  to  Sublessee  at the  Delivery
         Location.  Provided that the Aircraft is in the  condition  required by
         Clause 4.2,  upon the tender of the Aircraft by Sublessor to Sublessee,
         Sublessee  will accept the Aircraft and the date of tender by Sublessor
         to Sublessee  will be deemed to be the  Delivery  Date for all purposes
         under this Agreement,  including,  but not limited to, the commencement
         of  Sublessee's  obligation  to pay  Rent  hereunder.  Sublessee  shall
         execute and deliver the  Acceptance  Certificate  to  Sublessor  on the
         Delivery Date.



<PAGE>


4.5      Sublessee's Failure to take Delivery

         If  Sublessee  fails to (i) comply  with the  conditions  contained  in
         Clauses  3.1 so as to allow  Delivery to take place upon tender or (ii)
         take delivery of the Aircraft  when  properly  tendered for Delivery by
         Sublessor in the condition required hereunder, Sublessee will indemnify
         Sublessor for all costs and expenses, directly or indirectly,  incurred
         by Sublessor as a result thereof including (but without limitation) any
         payments that Sublessor, or Sublessor's General Partner,  affiliates or
         related  companies become obliged to make to any third party to put the
         Aircraft in the condition set forth in Schedule 4.

5.       SUBLEASE TERM

5.1      Sublease Term

         Sublessor  shall lease the Aircraft to Sublessee  and  Sublessee  shall
         take the Aircraft on lease in  accordance  with this  Agreement for the
         duration of the Sublease Term.

5.2      Expiry Date

         The  Expiry  Date  shall be the  Sublease  Expiry  Date  subject to the
following provisions:

         (i)      If Sublessor,  acting in accordance with Clause 3.2,  notifies
                  Sublessee that it is  terminating  this  Agreement,  Sublessee
                  shall  immediately  redeliver the Aircraft in accordance  with
                  Clause 23 and the Expiry Date shall be the date upon which the
                  Aircraft has been  redelivered  in  accordance  with the terms
                  hereof and  Sublessee  has complied  with all its  obligations
                  hereunder;

         (ii)     If Sublessor,  upon an Event of Default,  exercises its rights
                  in accordance  with Clause 24.3 and  terminates the leasing of
                  the  Aircraft to  Sublessee  under this  Agreement,  Sublessee
                  shall  immediately  redeliver the Aircraft in accordance  with
                  Clause 23 and the Expiry Date shall be the date upon which the
                  Aircraft has been  redelivered  in  accordance  with the terms
                  hereof and  Sublessee  has complied  with all its  obligations
                  hereunder;

         (iii)    If the Aircraft or the  Airframe suffers a Total Loss prior to
                  Delivery, the Expiry Date shall be the Total Loss Date;

         (iv)     If the  Aircraft  or the  Airframe  suffers a Total Loss after
                  Delivery,  the  Expiry  Date  shall  be the  date  upon  which
                  Sublessee has paid to Sublessor the Agreed Value and all other
                  sums due from Sublessee to Sublessor hereunder;

         (v)      If Clause 23.4  becomes  applicable,  the Expiry Date shall be
                  the date when any  non-compliance  referred  to in Clause 23.4
                  has been fully  rectified  and  Sublessor  shall have accepted
                  redelivery of the Aircraft and  Sublessee  shall have complied
                  with all its obligations hereunder; and

         (vi)     Under any other  circumstances,  the Expiry  Date shall be the
                  date upon which the Aircraft is redelivered in accordance with
                  Clause  23 and the  Return  Acceptance  Receipt  has been duly
                  executed and  delivered by Sublessor in  accordance  with that
                  clause.

5.3      Survival of Certain Sublessee Obligations

5.3.1    For the avoidance of doubt,  in respect of Clauses 5.2 (i),  (ii),  (v)
         and (vi) the obligations of Sublessee in respect of payment of Rent and
         all other obligations shall continue to be payable and valid in respect
         of those days prior to the  redelivery  to Sublessor of the Aircraft in
         the condition  required under Clause 23.1, and in respect of Clause 5.2
         (iv) such  obligations  shall  continue until payment of the Total Loss
         Proceeds.

5.3.2    The obligations of Sublessee set forth in Clauses 12.5,  12.17,  19, 20
         and 21.7 and any other  obligations  of Sublessee that were due to have
         been  performed  but  have  not  been  fully  performed  prior  to  the
         termination of the Agreement  pursuant to this Clause 5.4, will survive
         the Expiry Date.

5.4      Risk

5.4.1    Throughout  the Sublease  Term and until  redelivery of the Aircraft in
         the  condition  required  under Clause 23.1,  Sublessee  shall bear all
         risks of loss, theft, damage, confiscation and destruction of or to the
         Aircraft and every part thereof.

5.4.2    If the Aircraft is lost,  stolen,  confiscated,  damaged,  destroyed or
         otherwise  rendered unfit and unavailable for use,  Sublessor shall not
         be liable to repair the same or supply any  equipment  in  substitution
         therefor,  unless caused by the intentional act or gross  negligence of
         Sublessor, its employees or agents.

6.       DELIVERY

6.1      Location and Time of Delivery

         Sublessor  will  deliver the  Aircraft  to  Sublessee  at the  Delivery
         Location on or about the Scheduled Delivery Date. Sublessor will notify
         Sublessee from time to time and in as timely a manner as is possible of
         any changes to the Scheduled Delivery Date.

6.2      Delay or Failure in Delivery

6.2.1    Sublessee  and  Sublessor  expressly  acknowledge  that Delivery of the
         Aircraft to Sublessee is subject to and conditioned  upon completion of
         the  Delivery  Work.  Sublessor  will  not be  liable  for any  loss or
         expense,  or any loss of profit,  arising  from any delay or failure in
         Delivery to Sublessee  unless such delay or failure  arises as a direct
         consequence of the gross negligence or willful default of Sublessor.

6.2.2    If a delay,  not caused by  Sublessor's  or Sublessee's  breach of this
         Agreement, causes  Delivery to be delayed beyond seventy-five (75) days
         after the Scheduled   Delivery Date either party will have the right to
         terminate  this   Agreement  by giving the other party  written  notice
         within ten (10) Business  Days after such date and this  Agreement will
         terminate on the date of receipt  of such notice.  In the event of such
         termination,  neither  party   will  have  any  further  obligation  or
         liability  to the other under  this  Agreement,  except that  Sublessor
         will repay to Sublessee  under  this  Agreement any prepaid  Rent,  the
         amount of the Security Deposit,  if paid, and will return the Letter of
         Credit.  If either  party does  not give notice of  termination  within
         such ten (10) Business Days,  both parties lose all rights to terminate
         under this Clause 6.2.2, unless otherwise agreed by the parties.

7.       RENT

7.1      Basic Rent Period

         The  first  Basic  Rent  Period  shall  commence  on the day  following
         Delivery and each  subsequent  Basic Rent Period shall  commence on the
         date  succeeding  the last day of the previous  Rent Period  within the
         Sublease Term. Each Basic Rent Period shall end on the date immediately
         preceding the numerically  corresponding  day one (1) month thereafter,
         except that:

         (i)      if there  is no  such  numerically  corresponding  day in that
                  month, it shall end on the last day of that month; and

         (ii)     if a Basic Rent Period  would  otherwise  end after the Expiry
                  Date,  it shall end on the  Expiry  Date and the Rent for such
                  Basic Rent  Period  will be  prorated on the basis of a thirty
                  (30) day month.

7.2      Time of Payment of Basic Rent

         Sublessee  shall pay Basic Rent to Sublessor or to its order in advance
         on each Rent Date.  Sublessee  shall  initiate  payment  adequately  in
         advance of each Rent Date to ensure that Sublessor  receives credit for
         the  payment on such Rent Date.  If a Rent Date is a day which is not a
         Business  Day, the Rent payable in respect of that rent period shall be
         paid on the Business Day immediately preceding the Rent Date.

7.3      Amount of Basic Rent

         The Basic Rent payable on each Rent Date during the Sublease Term shall
         be the amount set out as Basic Rent in Schedule 2.

7.4      Maintenance Reserves

         Sublessee will pay to Sublessor Maintenance Reserves in accordance with
         Clause 9 as Supplemental Rent, based on Sublessee's use of the Aircraft
         during the Sublease Term.

7.5      Supplemental Rent for Excess Cycles

         Sublessee shall pay to Sublessor Supplemental Rent based on Sublessee's
         operation  of the  Aircraft in the amount and at the times set forth in
         Schedule 2.

8.       SECURITY DEPOSIT

8.1      Security Deposit

         Sublessee  shall pay to Sublessor a Security  Deposit in the amount and
         at the times set forth in Schedule 2. The  Security  Deposit will serve
         as security for the performance by Sublessee of its  obligations  under
         the Transaction Documents and the Other Agreements.

         Upon Sublessor's  receipt of the additional  Security Deposit set forth
         in Clause 8.2 the initial  deposit set forth in this Clause 8.1 will be
         credited to the payment of Rent during the Sublease Term.

8.2      Letter of Credit

         Sublessee shall provide  Sublessor with an additional  Security Deposit
         in the form of an irrevocable,  assignable, standby letter of credit in
         favor of  Sublessor at the time and in the amount set forth in Schedule
         2 and issued by a major US Bank and in a form and substance  acceptable
         by  Sublessor.  The  Letter of Credit  will serve as  security  for the
         performance  by  Sublessee  of its  obligations  under the  Transaction
         Documents and the.

8.3      Sublessor's Rights

8.3.1    If an Event of  Default  shall  have  occurred  and be  continuing,  in
         addition to all rights and remedies accorded to Sublessor  elsewhere in
         this  Agreement  or under  applicable  law in respect  of the  Security
         Deposit or Letter of Credit, Sublessor may immediately,  or at any time
         thereafter, without prior notice to Sublessee, apply all or part of the
         Security  Deposit  or Letter of Credit in or  towards  the  payment  or
         discharge  of any  matured  obligation  owed  by  Sublessee  under  the
         Transaction  Documents  or the  Other  Agreements,  in  such  order  as
         Sublessor  sees fit,  and/or  exercise  any of the  rights  of  set-off
         described in Clause 10.6 against all or part of the Security Deposit or
         Letter of Credit.

8.3.2    If Sublessor exercises the rights described in Clause 8.3.1,  Sublessee
         shall,  following  a demand  in  writing  from  Sublessor,  immediately
         restore the Security Deposit (if applicable) or Letter of Credit to the
         level at which it stood immediately prior to such exercise.

8.3.3    Sublessee  acknowledges that Sublessor may commingle all or any part of
         the Security  Deposit with its general funds and that no interest shall
         accrue in favour of Sublessee in respect of the Security Deposit.

8.3.4    Sublessor's  obligations  in respect of return of the Security  Deposit
         and  Letter  of  Credit  shall be those of  debtor  and not  those of a
         trustee or other fiduciary.

9.       MAINTENANCE RESERVES

9.1      Amount

         Sublessee  shall during the Sublease Term pay  Maintenance  Reserves to
         Sublessor in the amount set forth in Schedule 2.

9.2      Payments

9.2.1    Sublessee  shall  pay  the  Maintenance  Reserves  in  respect  of each
         calendar  month during  which the  Maintenance  Reserves  accrue on the
         tenth (10) day immediately  following the end of that calendar month on
         the  basis  of the  information  contained  in the  applicable  Monthly
         Report.

9.2.2    Sublessee  acknowledges that Sublessor may commingle all or any part of
         the  Maintenance  Reserves  with its general funds and that no interest
         shall  accrue  in favor of  Sublessee  in  respect  of the  Maintenance
         Reserves.

9.2.3    Sublessor's  obligations to release the Maintenance Reserves as set out
         hereinafter  shall be those of debtor  and not  those of a  trustee  or
         other fiduciary.

9.3      Adjustment

         The amount  payable by Sublessee to the  Maintenance  Reserves shall be
         subject  to  escalation  in  accordance  with the  terms  set  forth in
         Schedule 2.

9.4      Release of Maintenance Reserves

9.4.1    Airframe Maintenance Reserves

         Sublessor will reimburse Sublessee from the actual Airframe Maintenance
         Reserves,  if paid by Sublessee,  provided that no Default has occurred
         and is  continuing,  for the actual cost of the  structural  inspection
         portion of completed  scheduled "D" Checks and the rectification of any
         structural  deficiencies  resulting from such inspection  whenever such
         inspections  and  rectification  work is performed  (provided that such
         inspection  and  rectification   extends  the  available  life  of  the
         Aircraft).  Work  performed  for all other causes is excluded from such
         reimbursement, including the charges set forth in Clause 9.4.5 below.

9.4.2    Engine Maintenance Reserves

         Sublessor will reimburse  Sublessee from the actual Engine  Maintenance
         Reserves,  if paid by Sublessee,  provided that no Default has occurred
         and is continuing,  for the actual cost of completed Engine Performance
         Restoration  Visits to the extent the work performed during such Engine
         Performance   Restoration   Visits  consisted  of  the  replacement  of
         life/time limited components and/or performance restoration,  with work
         performed  for all other causes  excluded,  including  those causes set
         forth  in  Clause  9.4.5  below.  Reimbursement  will be made up to the
         amount in the Engine Maintenance Reserve applicable to such Engine.

9.4.3    Landing Gear Maintenance Reserves

         Sublessor  will  reimburse  Sublessee  from  the  actual  Landing  Gear
         Maintenance  Reserves,  if paid by Sublessee,  provided that no Default
         has occurred and is continuing, for the actual cost associated with the
         completed  Landing Gear  Overhauls,  with work  performed for all other
         causes  excluded,  including  those  causes set forth in Clause  9.4.5.
         Reimbursement  will  be  made  up to the  amount  in the  Landing  Gear
         Maintenance Reserve at the time for the Landing Gear Overhaul.

9.4.4    APU Maintenance Reserves

         Sublessor  will  reimburse  Sublessee  from the actual APU  Maintenance
         Reserves,  if paid by Sublessee,  provided that no Default has occurred
         and is continuing,  for the actual cost  associated  with the completed
         APU performance  restoration,  with work performed for all other causes
         excluded,   including   those   causes  set  forth  in  Clause   9.4.5.
         Reimbursement  will  be made up to the  amount  in the APU  Maintenance
         Reserve at the time for the APU performance restoration.

9.4.5    Exclusion

         Each of the  following  causes shall be excluded  from this Clause 9.4:
         accomplishment of Airworthiness Directives and FAR's, accident,  faulty
         maintenance or  installation,  incident,  improper  operations,  abuse,
         neglect,  misuse,  optional parts  replacement  (where such replacement
         does not increase  operational  life) or work covered by manufacturer's
         service   bulletins   or  which  is   reimbursed   by  a  claim   under
         manufacturer's  warranties  or by  insurance  (with  deductibles  being
         treated as reimbursable by insurance for this exclusion).

9.4.6    Remaining balance

         For the  avoidance of doubt,  Sublessee  has no right to payment of any
         amount from the Maintenance Reserves not paid in cash by Sublessee and,
         subject  to Clause  9.6,  any  remaining  balances  of the  Maintenance
         Reserves  on the  Expiry  Date,  after  application  of  the  foregoing
         provisions, shall be retained by Sublessor as its sole property.

9.5      Costs in Excess of Maintenance Reserves

         Sublessee will be responsible for payment of all costs in excess of the
         amounts  reimbursed  hereunder.  If on any  occasion the balance in the
         relevant  Reserve is insufficient to satisfy a claim for  reimbursement
         in respect of the Airframe, an Engine, the Landing Gears or the APU, as
         the case may be, the shortfall  may not be carried  forward or made the
         subject of any further claim for reimbursement.

9.6      Reimbursement after Expiry Date

         Sublessee  may not  submit  any  invoice  for  reimbursement  from  the
         Maintenance  Reserves  after the Expiry Date unless on or prior to such
         date Sublessee has notified  Sublessor in writing that such outstanding
         invoice  will be  submitted  after the Expiry Date and the  anticipated
         amount of such  invoice.  So long as Sublessee has provided such notice
         to Sublessor, Sublessee may then submit such outstanding invoice at any
         time within three (3) months after the Expiry Date; provided,  however,
         if Sublessee  contests any such  invoice and  provides  Sublessor  with
         notice of such  contest and  periodic  updates of the  progress of such
         contest, the time for submitting an invoice shall be extended until the
         resolution of such contest.

10.      PAYMENTS

10.1     Account for Sublessee Payments

         All payments by Sublessee to  Sublessor  under this  Agreement  will be
         made for value on the due date in dollars and in same day funds to:

                  Nordbanken
                  Account No.: 3968-77 720 42
                  S.W.I.F.T.:  NBBK SESS
                  S-105 Stockholm, Sweden
                  Cover Through:  Bank of America, New York, NY
                  S.W.I.F.T.:  BOFA US3N
                  For the Account of Indigo Aviation AB (publ)

         or to such other  account  as  Sublessor  may from time to time  notify
Sublessee in writing.

10.2     Default Interest

         If Sublessee  fails to pay any amount  payable under this  Agreement on
         the due date,  Sublessee  shall pay to Sublessor on demand from time to
         time interest both before and after judgement on that amount,  from the
         due date or, in the case of amounts  expressed to be payable on demand,
         from the date of receipt of such  demand to the date of payment in full
         by Sublessee to Sublessor,  at the Default Rate. All such interest will
         accrue on a day-to-day basis and be compounded weekly and calculated on
         the basis of a 360 day year.



<PAGE>


10.3     Absolute Obligations

         This Agreement is a net lease and  Sublessee's  obligations  under this
         Agreement  are  absolute  and   unconditional,   irrespective   of  any
         contingency or circumstance whatsoever, including (but not limited to):

         (i)      any right of set-off, counterclaim, recoupment, reimbursement,
                  defense or other right which  Sublessor or Sublessee  may have
                  against the other or against any other person;

         (ii)     any unavailability of the Aircraft for any reason,  including,
                  but  not  limited  to,  requisition  of  the  Aircraft  or any
                  prohibition or interruption  of or interference  with or other
                  restriction  against  Sublessee's use, operation or possession
                  of the Aircraft;

         (iii)    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 Total Loss in respect of or any damage to the Aircraft;

         (iv)     any  insolvency,  bankruptcy,   reorganization,   arrangement,
                  readjustment  of debt,  dissolution,  liquidation  or  similar
                  proceedings by or against  Sublessor or Sublessee or any other
                  person;

         (v)      any invalidity,  illegality,  unenforceability  or lack of due
                  authorization of, or other defect in, this Agreement; and

         (vi)     any other cause or circumstance  that, but for this provision,
                  would or might  otherwise have the effect of terminating or in
                  any way  affecting  any  obligation  of  Sublessee  under this
                  Agreement.

10.4     Application of Payments to Sublessor

         If any sum paid to  Sublessor  or  recovered by Sublessor in respect of
         the  liabilities  of  Sublessee  under this  Agreement is less than the
         amount then due, Sublessor may apply that sum to amounts due under this
         Agreement in such proportions and order and generally in such manner as
         Sublessor may determine.

10.5     Currency Indemnity

         If under any applicable law,  whether as a result of judgement  against
         Sublessee or the liquidation of Sublessee or for any other reason,  any
         payment  under  or in  connection  with  this  Agreement  is made or is
         recovered in a currency  ("other  currency") other than the currency in
         which  it  is  payable   pursuant  to  this   Agreement   ("contractual
         currency"),  Sublessee  shall,  to the extent  that the  payment  (when
         converted into the contractual currency at the rate of exchange on such
         date  or,  in the  case  of a  liquidation,  the  latest  date  for the
         determination  of liabilities  permitted by the  applicable  law) falls
         short of the amount  payable  under this  Agreement,  as a separate and
         independent obligation, fully indemnify Sublessor against the amount of
         the shortfall.  For the purposes of this sub-Clause  "rate of exchange"
         means the rate at which the  Sublessor is able on the relevant  date to
         purchase  the  contractual  currency  in  London  or  any  other  place
         Sublessor may reasonably choose with the other currency.

10.6     Set-off

         Sublessor may set-off any matured  obligation  owed by Sublessee  under
         the  Transaction   Documents  or  any  Other  Agreements   against  any
         obligation, whether or not matured, owed by Sublessor to Sublessee.

10.7     Time for Payments

         If any  payment due under this  Agreement  other than a payment of Rent
         (see Clause 7.4) would otherwise be due on a day that is not a Business
         Day, it shall be due on the next succeeding Business Day.

11.      SUBLESSOR'S COVENANTS

11.1     Quiet Enjoyment

         Provided no Default has occurred  and is  continuing,  Sublessor  shall
         not,  and no one  claiming  by or  through  the  acts or  omissions  of
         Sublessor  or  Owner  Trustee  shall,  interfere  with the  quiet  use,
         possession  and  enjoyment  of the  Aircraft  by  Sublessee  during the
         Sublease Term. Sublessor will cause Lender to confirm, substantially in
         the form of  Schedule  11 or such other  form as Lender may  reasonably
         require,  that it will not interfere with the quiet use, possession and
         enjoyment  of the  Aircraft  by  Sublessee  during the  Sublease  Term,
         provided no Default has occurred and is continuing.

11.2     Sublessor Obligations Following Expiry Date

         Within five (5) Business Days after:

         (i)      redelivery of the Aircraft to Sublessor in accordance with and
                  in the condition required by this Agreement; or

         (ii)     payment received by Sublessor of the Agreed  Value following a
                  Total Loss after the Delivery Date;

         or in each case such later time as  Sublessor is  reasonably  satisfied
         that Sublessee has  irrevocably  paid to Sublessor all amounts that may
         then be outstanding or become payable under the  Transaction  Documents
         and the Other Agreements, Sublessor shall (provided that no Default has
         occurred and is continuing):

                  (a)      pay to  Sublessee  an amount  equal to the balance of
                           the Security Deposit, if any, paid by Sublessee under
                           this Agreement and then held by Sublessor; and

                  (b)      pay to Sublessee  the amount of any Rent  received in
                           respect of any period  falling  after the  Redelivery
                           Date or the date of payment of the Agreed  Value,  as
                           the case  may be;  provided,  however,  if there is a
                           dispute  between  Sublessor  and  Sublessee as to the
                           amount due to Sublessee, Sublessor shall nevertheless
                           pay  to  Sublessee  such  amount  as  in  Sublessor's
                           reasonable  judgement  is  not  in  dispute  or is in
                           excess of the amount Sublessor's claim is due; and

                  (c)      return the Letter of Credit.


12.      SUBLESSEE'S COVENANTS

12.1     Duration

         Sublessee shall perform and comply with its  undertakings and covenants
         in this  Agreement  and the other  Transaction  Documents  at all times
         during the Sublease Term. All such  undertakings  and covenants  shall,
         except where expressly otherwise stated, be performed at the expense of
         Sublessee.


12.2     Information

12.2.1   Sublessee  shall  notify  Sublessor  forthwith of the  occurrence  of a
         Default or an Event of Default  and the steps it is taking to cure such
         Default or Event of Default.

12.2.2   Sublessee shall furnish to Sublessor:

         (i)      as soon as  available,  but not in any event later than ninety
                  (90)  days  after  the  last  day of  each  financial  year of
                  Sublessee,  its audited  consolidated balance sheet as of such
                  day and its audited consolidated profit and loss statement for
                  the  year  ending  on such day  prepared  in  accordance  with
                  generally accepted accounting  principles in the United States
                  (U.S. GAAP);

         (ii)     as  soon  as  available,  but  not in  any  event  later  than
                  forty-five  (45) days  after the last day of each  quarter  of
                  Sublessee, its unaudited consolidated balance sheet as of such
                  day and its unaudited  consolidated  profit and loss statement
                  for the quarter ending on such day prepared in accordance with
                  generally accepted accounting  principles in the United States
                  (U.S. GAAP);

         (iii)    such  information  as may reasonably be requested by Sublessor
                  to  fulfil  its Tax  filing  or  other  information  reporting
                  requirements with respect to the transactions  contemplated by
                  this Agreement;

         (iv)     within ten (10) days following the end of each month a Monthly
                  Report in the form of Schedule 10, detailed  technical reports
                  following  completion of each "C" Check and other  information
                  reasonably  requested by Sublessor  concerning  the  location,
                  condition, use and operation of the Aircraft; and

         (v)      such other  information  and documents  regarding  Sublessee's
                  business and financial condition as Sublessor may from time to
                  time reasonably request.

12.2.3 Sublessee shall promptly notify Sublessor in writing:

         (i)      of any loss, theft, damage or destruction to the Aircraft, any
                  Engine or any Part if the cost of the  repair  or  replacement
                  thereof may exceed the Damage Notification  Threshold,  or any
                  modification  to the Aircraft if the potential  cost of repair
                  or of such  modification  may exceed  the Damage  Notification
                  Threshold;

         (ii)     of any suit,  arbitration  or  proceeding  before  any  court,
                  administrative agency or Government Entity which, if adversely
                  determined,  would  materially  adversely  affect  Sublessee's
                  financial  condition,  affairs,  operations  or its ability to
                  perform under this Agreement;

         (iii)    of any Total Loss to the Aircraft or any damage  caused to the
                  Aircraft  that  is  expected  to be in  excess  of the  Damage
                  Notification  Threshold and the amount of the deductible under
                  the Insurance or equivalent in any currency;

         (iv)     of  any  loss,  arrest,  hijacking,   confiscation,   seizure,
                  requisitioning, impounding, taking in execution, or forfeiture
                  of the Aircraft or any Engine or any major part thereof;

         (v)      of any  substantial  injury or damage to a third party  caused
                  by, or in connection  with,  the Aircraft which is expected to
                  give  rise  to  any  loss  or  liability  on the  part  of the
                  Sublessor  or to a loss or  liability  in excess of the Damage
                  Notification Threshold; and

         (vi)     of any other  event in  respect of the  Aircraft  which in the
                  reasonable  opinion  of  the  Sublessee  might  reasonably  be
                  expected to involve the Sublessor in any loss or liability.

         (vii)    promptly notify Sublessor in the event Sublessee is made aware
                  of or  determines  that any  computer  application  (including
                  those  of  its  suppliers,  customers  and  vendors)  that  is
                  material to the business and  operation of Sublessee  will not
                  be year 2000  compliant (as described in Clause 2.1 (xxii)) on
                  a timely  basis,  except to the extent that such failure could
                  not  reasonably  be  expected  to  have a  materially  adverse
                  effect.

12.3     Sublessor Visits

         Sublessor may visit, upon reasonable  notice,  Sublessee's  premises to
         discuss  Sublessee's  general  affairs and  finances  with  Sublessee's
         principal officers.

12.4     Periodic Estoppel Certificates

         Sublessee will,  within ten (10) Business Days after receipt of written
         notice  from  Sublessor  (which will not occur more often than four (4)
         times in any  calendar  year),  execute,  acknowledge  and  deliver  to
         Sublessor a written statement as to each of the following:

         (i)      certifying that this Agreement is unmodified and in full force
                  and  effect  (or,  if  modified,  stating  the  nature of such
                  modification  and  certifying  that  this  Agreement,   as  so
                  modified,  is in full force and  effect) and the date to which
                  the Rent and other charges are paid in advance, if any;

         (ii)     acknowledging  that there are not, to  Sublessee's  knowledge,
                  any uncured  defaults on the part of Sublessor  hereunder,  or
                  specifying   such   defaults  if  there  are  any  claimed  by
                  Sublessee; and

         (iii)    acknowledging  that Sublessee has no claims against  Sublessor
                  by reason of the  condition of the Aircraft as of the Delivery
                  Date  or  arising  subsequent  thereto  to the  date  of  such
                  statement.

         If Sublessee  does not deliver such statement  within such  time-limit,
         the statements set forth in this Clause 12.4 will be deemed correct and
         binding upon Sublessee.

12.5     Airport and Navigation Charges

12.5.1   Sublessee  will  promptly  pay and  discharge when due all landing fees
         and  other similar  Airport  Charges  imposed by the authorities of any
         airport  from  or to which the  Aircraft  may  operate  and any charges
         (including without  limitation,  all Air Navigation Charges) imposed by
         virtue of any regulations  made by any relevant  authority or any other
         charges in respect of air  navigation incurred, in each case in respect
         of all aircraft of which it  is the  operator,  and will  indemnify and
         hold harmless  Sublessor in  respect of the same.  This  indemnity will
         continue in full force and effect   notwithstanding  the termination or
         expiration  of this  Agreement.  Sublessee  will  ensure that  all such
         charges are paid on a regular  basis and  that  invoices  are  received
         (and,  if not  received,  are   specifically  requested) by it from the
         relevant  authorities no more  than three (3) months after the event to
         which the charges relate.

12.5.2   If requested by Sublessor, Sublessee will provide Sublessor with a list
         of the airports to which the Aircraft or Sublessee's other aircraft are
         regularly operated. Sublessee hereby authorizes any Aviation Authority,
         any airport or any other  creditor  claiming  rights on the Aircraft or
         Sublessee's  other  aircraft  to  confirm  the  status  of  Sublessee's
         payments to such creditor for the Aircraft and its other  aircraft,  as
         and when requested by Sublessor. To evidence this authority,  Sublessee
         will  at   Sublessor's   request   execute  one  or  more   authorities
         substantially in the form of Schedule 7.

12.6     Operation of Aircraft

         Sublessee shall not maintain,  use or operate the Aircraft in violation
         of any law or any mandatory rule, regulation or order of any Government
         Entity having  jurisdiction  in any country,  state,  province or other
         political  subdivision  in or over  which the  Aircraft  is flown or in
         violation of any  airworthiness  certificate,  license or  registration
         relating  to the  Aircraft  issued  by the  Aviation  Authority  or any
         similar  authority or any jurisdiction in or over which the Aircraft is
         flown. If any such law, rule,  regulation or order requires  alteration
         of the Aircraft, Sublessee shall conform or procure conformance thereto
         at its own expense and maintain or procure  maintenance of the Aircraft
         in proper operating  condition under such laws, rules,  regulations and
         orders;  provided that Sublessee may in good faith contest,  or procure
         the contest  of, the  validity or  application  of any such law,  rule,
         regulation  or order in any  reasonable  manner that does not adversely
         affect  Sublessor  or its  interest  in the  Aircraft.  In  particular,
         Sublessee  will  ensure  that the  Aircraft  at all  times  during  the
         Sublease  Term  is  operated  by  duly  qualified  pilots  and  aircrew
         employees, and is not used to transport contraband or illegal narcotics
         or hazardous or perilous  cargo (other than pursuant to applicable  FAA
         and  carrier  regulations).  The  Aircraft  may be used or  operated in
         flight crew conversion,  training for Sublessee's own employees and for
         experimental  flights;  provided,  however,  prior to any such  flights
         Sublessee  shall  notify  Sublessor  and  shall  deliver  to  Sublessor
         evidence that insurance coverage is in effect for such flights.

12.7     Areas of Operation

         Sublessee  shall not  operate or locate the  Airframe  or any Engine or
         Part or suffer the  Airframe  or any Engine or Part to be  operated  or
         located (i) in any area,  or for carriage of any goods,  excluded  from
         coverage by the Insurances or (ii) in any recognized or threatened area
         of  hostilities  unless  fully  covered by war risk  insurance or (iii)
         outside the United States of America, Mexico or Canada.

12.8     Non-Prejudicial Action

         Sublessee  shall  not do  anything  that,  or omit to do  anything  the
         omission of which,  prejudices  any right  Sublessor  may have  against
         either the  Manufacturer or the manufacturer or supplier of any part of
         the Aircraft in respect of the Aircraft or any part thereof.



<PAGE>


12.9     Non-Representation of Sublessor

         Sublessee shall not at any time represent  Sublessor,  Owner Trustee or
         Lender as carrying  goods or  passengers in the Aircraft or as being in
         any way  connected or associated  with any operation or carriage  being
         undertaken  by  Sublessee or as having any  operational  interest in or
         responsibility for the Aircraft.

12.10    Inspection

         Sublessor may at all reasonable times on reasonable notice inspect,  or
         appoint an inspector  (including Lender) on its behalf to inspect,  the
         Aircraft or any part  thereof,  provided that if no Default or Event of
         Default has occurred and is continuing  Sublessee  shall not be obliged
         hereunder to permit,  or procure  permission  for, any such  inspection
         that would result in an unreasonable disruption of the operation of the
         Aircraft or the  operation  of the business of Sublessee as an airline.
         Sublessee agrees to reimburse the  out-of-pocket  expenses of Sublessor
         incurred in making any such inspection when such inspection  shows that
         the Aircraft is not  materially in the condition  required by the terms
         of this  Agreement,  provided that Sublessee  shall in all cases pay or
         reimburse  Sublessor  for the  costs of such  inspection  or  survey if
         Sublessor is required by law or change of law to make an  inspection or
         survey.  Sublessor  shall have no duty to make any such  inspection and
         shall not incur any liability or obligation by reason of not making any
         such   inspection.   Sublessee   shall  provide   Sublessor  with  such
         information   regarding  the  present  and  anticipated   location  and
         regarding  the  condition of the Aircraft as Sublessor  may  reasonably
         require. For the purposes mentioned in this Clause 12.10 and subject to
         the limitations herein contained,  Sublessor and any inspector may gain
         access to the  Aircraft,  including the Aircraft  Documents.  Sublessee
         shall forthwith  effect such repairs to the Aircraft as such inspection
         may reasonably  show are required for the terms of this Agreement to be
         complied  with,  but if it  fails  to do so  after  receipt  of  notice
         requiring  it to do so from  Sublessor,  Sublessor  may at the cost and
         expense of  Sublessee,  itself  arrange for such  repairs to be carried
         out.  Sublessee  shall on  demand  reimburse  the  costs  and  expenses
         incurred by Sublessor in effecting such repairs.

12.11    Registration

12.11.1  Sublessee  shall at its own expense  procure  that the Aircraft and the
         interests of the parties set out below is duly registered,  recorded or
         filed with the FAA as follows:

         (i)      Owner Trustee as owner;

         (ii)     the first priority security interest of Lender

         (iii)    Sublessor's   interest,   by   filing  the Sublease Supplement
                  according to Schedule 14;

         (iv)     Sublessee as operator of the Aircraft

         and maintain or provide the maintenance of such registration throughout
         the Sublease Term.  Sublessee  shall further provide that the interests
         of any  successors  and  assigns  to the  parties  referred  to in this
         paragraph  will be  filed  and  recorded  with  the FAA and  that  such
         recordation  will be maintained in the same manner as required  herein.
         Sublessee will not take any action or omit to take any action that will
         invalidate  any  such  registration  or  recordation.  Sublessee  shall
         provide   Sublessor  as  soon  as  available   with  evidence  of  such
         registration.

12.11.2  Sublessee shall at its own expense provide that at all times during the
         Sublease Term, the Aircraft  possesses a valid current FAA  Certificate
         of Airworthiness,  and all such other certificates,  licenses,  permits
         and  authorizations  as are from time to time  required for the use and
         operation  of the Aircraft for the public  transport of  passengers  or
         cargo from any Government  Entity having  jurisdiction  in any country,
         state,  province or other  political  subdivision  in or over which the
         Aircraft is flown including without limitation any Aviation  Authority.
         Sublessee  shall,  prior to the Delivery Date,  provide  Sublessor with
         certified true copies of its current  Certificate of Public Convenience
         and Necessity and its Operating Certificate,  the latter of which shall
         include reference to the Aircraft.

12.12    Name Plates

         On  the  Delivery   Date  or  as  soon   thereafter  as  is  reasonably
         practicable,  Sublessee shall affix and thereafter maintain, or procure
         the  affixation  and  maintenance  of, in a  prominent  position in the
         cockpit of the Aircraft and on each Engine a fireproof  metal nameplate
         bearing  a  legible  inscription  in  a  form  reasonably  required  by
         Sublessor stating the Aircraft type,  manufacturer's  serial number and
         current  registration  letters of the Aircraft and denoting the name of
         (i) First  Security  Bank,  National  Association  as Owner Trustee and
         Headlessor;  (ii) Paribas,  as First Priority  Mortgagee;  (iii) Indigo
         Aviation  AB  (publ)  as  Sublessor  of the  aircraft.  Except as above
         provided  Sublessee  will not allow the name of any person to be placed
         on the Airframe or on any Engine as a  designation  that  constitutes a
         claim of ownership or a claim of any Security  Interest;  provided that
         nothing herein  contained  shall  prohibit  Sublessee (or any person to
         which  possession  of  the  Airframe  or any  Engine  is  delivered  or
         transferred  in  accordance  with  Clauses 13 and 14) from  placing its
         customary colors and insignia on the Airframe.

12.13    Geneva Convention

         Whenever  the  State of  Registration  is a  signatory  state  that has
         ratified the Geneva  Convention,  Sublessee  shall, at its own cost, do
         any and all things  necessary in the State of  Registration  to perfect
         recognition of the interests of Owner Trustee,  Sublessor and Lender to
         the  Aircraft  by every other  signatory  state that has  ratified  the
         Geneva Convention.

12.14    Merger and Shareholding

         Sublessee  will not sell its business to or operate its business in any
         other  corporate  form or entity (the new  entity)  unless (a) such new
         entity is solvent and duly  organized and existing under the law of the
         State of  Incorporation  or any  other  State of the  United  States of
         America,  if applicable,  and the new entity has executed and delivered
         to Sublessor an agreement in form and substance acceptable to Sublessor
         assuming the due and punctual performance and observance of each of the
         terms of this  Agreement  and the other  Transaction  Documents and (b)
         immediately  after such sale or the giving effect to such  operation as
         that new entity,  the tangible net worth of such new entity is equal to
         or greater than that of Sublessee and the  creditworthiness of such new
         entity does not, in Sublessor's  reasonable  opinion,  adversely affect
         the  ability of such new entity to perform its  obligations  under this
         Agreement and the other Transaction  Documents or any Other Agreements.
         Sublessee will give Sublessor prior written notice of any such proposed
         sale or change in operation  together with a non-refundable  processing
         fee  in  the  amount  as set  forth  in  Schedule  2 and a  request  of
         Sublessor's  approval.  Sublessee shall reimburse  Sublessor within ten
         (10)  days  of  Sublessor's  invoice  for  all  out-of-pocket  expenses
         incurred by Sublessor as a result of such  proposed  merger  whether or
         not Sublessor approves and whether or not it actually occurs.

12.15    Ownership

         Title to the  Aircraft  will be and  remain  vested  in Owner  Trustee.
         Sublessee will have no right,  title or interest in the Aircraft except
         as provided for in this Agreement.  Sublessee shall not hold itself out
         as owner of the Aircraft  and, on all  occasions  when the ownership of
         the  Aircraft or any part of it is  relevant,  will make clear to third
         parties that title to the same is held by Owner Trustee, subject to the
         Mortgage.

12.16    Maintenance of Principal Business Place

         Sublessee  shall  maintain  its  principal  place of business and chief
         executive  office  and the  office  where it  keeps  its  business  and
         financial records and files concerning the Transaction Documents at the
         location specified in Clause 27. Sublessee shall hold and preserve such
         records and files concerning the Transaction Documents and shall permit
         representatives  of Sublessor at any time during normal  business hours
         to inspect and make  abstracts  from such records and files.  Sublessee
         shall give  Sublessor at least thirty (30) days prior written notice of
         any  change  in  Sublessee's  principal  place of  business  and  chief
         executive office,  and shall co-operate with Sublessor in executing and
         delivering all such documents as Sublessor may reasonably request which
         are required or desirable as a result of such change of principal place
         of business of Sublessee.

12.17    Maintenance of Flight Records

         Sublessee  shall  maintain  flight  records  pertaining to the Aircraft
         required to be maintained pursuant to section 47.9(e) of the FAR at the
         address  given in Clause 27 and shall hold and preserve such records at
         such  address  and  permit  inspection  of  such  records  by the  FAA,
         Sublessor,  Owner Trustee and Lender. Sublessee shall give Sublessor at
         least  thirty (30) days prior  written  notice of change in location of
         the flight records of the Aircraft.

13.      POSSESSION

13.1     No Relinquishment of Possession

         Sublessee  shall  not  sub-lease  or  otherwise  deliver,  transfer  or
         relinquish  possession  of the  Airframe  or any Engine or install  any
         Engine or permit any Engine to be installed, on any airframe other than
         the  Airframe,  provided  that,  (i) so long as no  Default  shall have
         occurred  and be  continuing,  (ii)  Sublessee  continues  to be  fully
         responsible  to Sublessor for all its  obligations  hereunder and (iii)
         Sublessee in advance,  obtains  written  acknowledgment(s)  of Lender's
         Security  Interest in the  Airframe  and/or any Engines from any person
         who will be in possession of the Airframe and/or any Engine in the form
         and substance requested by Sublessor, Sublessee may:

13.1.1   subject any  Engine to normal  interchange  or  pooling  agreements  or
         arrangements  in  each  case  customary  in the  airline  industry  and
         entered into by  Sublessee in the ordinary  course of its business with
         a commercial  air  operator  which  is approved by Sublessor in writing
         and on terms and conditions that Sublessor  has approved (such approval
         not to be  unreasonably  withheld)  (any  such  commercial air operator
         being  hereinafter  called a  Permitted Air Carrier)  provided that the
         terms of this Agreement shall be observed and if either:

         (i)      Owner  Trustee's  title  to the Engine shall be divested under
                  the terms of any such agreement or arrangement, or

         (ii)     any Permitted  Air Carrier  shall have  possession of any such
                  Engine under any such agreement or  arrangement  for more than
                  ninety (90) days,

         Sublessee shall forthwith substitute, or procure the substitution of, a
         Replacement  Engine therefor in accordance with and which satisfies the
         conditions of Clause 16.6;

13.1.2   deliver  possession  of the Airframe or any Engine to the  manufacturer
         thereof for testing or other  similar  purposes or to any  organization
         for service,  repair,  maintenance  or Overhaul work on the Airframe or
         such Engine or any part thereof or for alterations or  modifications in
         or additions  to the Airframe or such Engine to the extent  required or
         permitted by the terms of Clauses 16.4 and 16.5;

13.1.3   install an Engine on an airframe owned by Sublessee and operated by and
         under the operating  control of flight crew engaged by Sublessee  which
         is free and  clear of all  Security  Interests,  except  (i)  Permitted
         Liens,  (ii) Security  Interests  that apply only to the engines (other
         than   Engines),   appliances,   parts,   instruments,   appurtenances,
         accessories,   furnishings  and  other  equipment  (other  than  Parts)
         installed  on such  airframe but not to the airframe as an entirety and
         (iii) the rights of  Permitted  Air Carriers  under normal  interchange
         agreements  which are  customary  in the  airline  industry  and do not
         contemplate, permit or require the transfer of title to the airframe or
         engines installed thereon;

13.1.4   install an Engine on an airframe operated by Sublessee that is owned by
         or leased or subleased  to Sublessee  and/or  subject  to any  security
         agreement,  provided  that (i) such  airframe is free and  clear of all
         Security  Interests  except the rights of the parties to  any  security
         agreement  covering such airframe and except  Permitted   Liens and any
         Security  Interests or rights of the type  permitted by   subparagraphs
         (ii) and (iii) of Clause 13.1.3 and (ii) Sublessee shall  have obtained
         from the sub-sublessor or secured party, as relevant, of  such airframe
         a  written  agreement,  which  may be in  the  sublease   agreement  or
         security agreement in respect of such airframe,  in form and  substance
         satisfactory to Sublessor (it being  understood that an agreement  from
         such  sub-sublessor or secured  party to substantially  the same effect
         as the  agreement  of   Sublessor  set forth in the final  sentence  of
         Clause 13.4 shall be deemed  to be satisfactory to Sublessor),  whereby
         such Sublessor or secured  party  expressly  agrees that neither it nor
         its successors or assignees  will acquire or claim any right,  title or
         interest in any Engine by  reason of such  Engine  being  installed  on
         such  airframe  at  any time  while  such  Engine  is  subject  to this
         Agreement;

13.1.5   install  an  Engine  on an  airframe  owned  by  Sublessee,  leased  or
         subleased  to  Sublessee,  or purchased  by  Sublessee,  subject to any
         security agreement under  circumstances where neither Clause 13.1.1 nor
         13.1.2 can be fulfilled in the  circumstances,  provided  that it would
         otherwise have resulted in an unreasonable  disruption of the operation
         of the  Aircraft  or the  business of the  Sublessee  and in such event
         Sublessee  shall,  as  promptly  as  possible  and in any event  within
         fifteen  (15)  days   substitute  a  Replacement   Engine  therefor  in
         accordance   with  Clause  16.6  and  which  satisfies  the  conditions
         specified in Clause 16.6;

13.1.6   sublease  the  Aircraft  or Airframe  to any person  provided  that the
         Aircraft or Airframe is operated by, and remains throughout the term of
         such sublease under the operational  control of, flight crew engaged by
         Sublessee, and provided further that:

         (i)      no Default has occurred and is continuing;

         (ii)     any such  sublease will  not result in any change in the State
                  of Registration;

         (iii)    the length  of  any  such  sublease does not extend beyond the
                  Expiry Date;

         (iv)     the relevant  sub-sublessee  shall acknowledge that its rights
                  are subordinate to Sublessor's rights under this Agreement and
                  the rights of Lender  under any  finance  document or security
                  document  entered into between  Owner  Trustee or Sublessor in
                  relation to the Aircraft;

13.1.7   sublease the  Aircraft or Airframe to any  wholly-owned  subsidiary  of
         Sublessee  on terms that the  Aircraft or Airframe is not  operated by,
         and does not remain  under the  operational  control  of,  flight  crew
         engaged  by  Sublessee  provided  that  the  following  conditions  are
         satisfied in relation to any such sublease hereunder:

         (i)      no Default has occurred and is continuing;

         (ii)     the  proposed  sub-sublessee  and  the  proposed  form  of the
                  sublease is approved by Sublessor and Lender in writing, which
                  approval will not be unreasonably withheld or delayed provided
                  all the following  conditions set out in this Clause13.1.7 are
                  satisfied;

         (iii)    the sublease shall terminate on or before  termination of this
                  Agreement and the terms and conditions of the sublease are not
                  inconsistent  with those  contained  in this  Agreement or any
                  finance or security  document  entered into between  Sublessor
                  and/or Owner Trustee and/or Lender and the sub-sublessee shall
                  acknowledge   that  its  rights  are   subordinate   to  Owner
                  Trustee's,   Sublessor's   and  Lender's   rights  under  this
                  Agreement (provided that the sublease shall not permit further
                  subleasing);

         (iv)     the Insurances are in full force and effect in accordance with
                  the terms of this  Agreement and, if the  sub-sublessee  is to
                  maintain such insurances during the term of such sublease,  it
                  shall have furnished to Sublessor all such documents, evidence
                  and information relating to such insurances which Sublessee is
                  required to furnish or cause to be provided to Sublessor under
                  this Agreement;

         (v)      if the Aviation  Authority for the duration of the sublease is
                  to be other than the FAA,  Sublessor  and Lender  approves the
                  change of registration  and Sublessor  receives (x) an opinion
                  of counsel in the State of  Registration in form and substance
                  reasonably  satisfactory  to  Sublessor  and the Lender  which
                  opinion must, at least,  address the satisfactory  recognition
                  of  Owner  Trustee's   ownership  of,  and  Lender's  Security
                  Interest in the  Aircraft  and (y)  evidence  that all actions
                  recommended in such opinion have been or will be duly taken.

13.2     Copy of Sublease

         No less than  three  (3)  Business  Days  after  the  execution  of any
         sublease entered into by Sublessee under Clause 13.1.6 or Clause 13.1.7
         Sublessee  shall  provide  Sublessor  with  a  copy  of  such  executed
         sublease.

13.3     Sublessee Primarily Liable

         Notwithstanding  anything  contained  in Clause 13.1,  Sublessee  shall
         remain  primarily  liable  hereunder for the  performance of all of the
         terms of this  Agreement  to the same  extent  as if such  transfer  or
         sublease had not occurred. No interchange agreement,  sublease or other
         relinquishment of possession of the Airframe or any Engine permitted by
         this  Clause  13  shall  in  any  way  discharge  or  diminish  any  of
         Sublessee's obligations hereunder.



<PAGE>


13.4     Recognition of Rights

         If Sublessee  shall have  obtained  from the  sub-Sublessor  or secured
         party of any  engine  subleased  to  Sublessee  or  owned by  Sublessee
         subject to any Security  Interest,  a written agreement  complying with
         the terms of  sub-paragraph  (ii) of Clause  13.1.4,  Sublessor  hereby
         agrees for the  benefit  of such  sub-Sublessor  or secured  party that
         Sublessor shall not acquire or claim, as against such  sub-Sublessor or
         secured  party,  any right,  title or  interest in any such engine as a
         result of such engine being installed on the Airframe at any time while
         such engine is subject to such sublease or security agreement and owned
         by such  sub-Sublessor  or subject to a Security  Interest  in favor of
         such secured  party and Sublessor  shall,  at the request of Sublessee,
         confirm such agreement in writing for any such sub-Sublessor or secured
         party.

14.      SECURITY INTERESTS

14.1     Title

         Sublessee  shall not do, or permit  to be done,  any act,  which  might
         reasonably  be expected to  jeopardize  the interest of Owner  Trustee,
         Sublessor or Lender.  Sublessee  shall make clear to all third  parties
         that  legal  title to the  Aircraft  is owned by Owner  Trustee  or the
         relevant title holder advised by Owner Trustee.

14.2     No Security Interests

         Sublessee  shall  not  create,  incur or  permit  to  subsist  over the
         Aircraft  of any part  thereof or over the  Transaction  Documents  any
         Security Interest other than Permitted Liens.

14.3     Base of Aircraft

         Sublessee  shall not keep or  habitually  base the Aircraft or any part
         thereof  outside the State of  Registration  for any continuous  period
         exceeding ten (10) days.

14.4     Notice to Sublessor

         Sublessee shall notify Sublessor:

         (i)      as and when it  becomes  aware of the  same,  of any  Security
                  Interest  (x)  (excluding  Permitted  Liens)  arising over the
                  Aircraft or any Engine or other major part  thereof of (y) (in
                  the case of all Security Interests  including Permitted Liens)
                  exercised  over the Aircraft or any Engine or other major part
                  thereof  or (z) of any arrest or  detention  of  purported  or
                  attempted arrest or detention of the Aircraft; and

         (ii)     promptly  on  request of  Sublessor,  of the  location  of the
                  Airframe  and each Engine  including an Engine that is not for
                  the time being installed on the Airframe.

14.5     Procure Release

         Sublessee  shall as soon as possible  and in any event  within five (5)
         Business Days of becoming  aware of the same procure the release of any
         Security  Interest  (other  than  Permitted  Liens)  arising  over  the
         Aircraft or any part  thereof  and procure the release of the  Aircraft
         from any arrest or detention to which it is subject.

15.      MAINTENANCE AND REPAIR

15.1     General Obligations

15.1.1  Sublessee  shall,  or procure that any  sub-sublessee  will,  at its own
expense at all times during the Sublease Term:

         (i)      maintain, service, repair, Overhaul and test the  Aircraft and
                  all Parts thereon and equipment thereon  and the  Engines  and
                  all Parts and equipment  therein (whether or  not  such  Parts
                  and equipment are the property of Sublessor),  or procure  the
                  same,  in  accordance   with  the   applicable requirements of
                  the FAA and the  Insurances and comply with all  Airworthiness
                  Directives   and  alert  service   bulletins  issued   by  the
                  Manufacturer (unless to do so  would be in breach of the FAA's
                  requirements,  in which  case  the  FAA's  requirements  shall
                  prevail)  and the MPD  so  as  to  keep  the  Aircraft in good
                  operating condition, ordinary wear and tear excepted,   and in
                  accordance   with   sound   international  aviation   industry
                  practice and in such condition as may be necessary  to  enable
                  (a) the  airworthiness  certification of the Aircraft with the
                  Aviation Authority to be maintained in good  standing  at  all
                  times during the Sublease Term (b) the issuance  of a standard
                  certificate  of  airworthiness for transport category aircraft
                  issued by the FAA in accordance  FAR  Part  21  and,  (c)  the
                  Aircraft to be placed on the operations  specifications  of  a
                  U.S.  airline  in accordance  with Part 121 of the FAR's; (ii)
                  maintain,  service, repair, Overhaul and test the Aircraft and
                  the Engines,  in the  same manner  and  with the same  care as
                  used by  Sublessee  with  respect  to  similar   aircraft  and
                  engines   operated   by  Sublessee  and  without  in  any  way
                  adversely discriminating against the Aircraft and the Engines;
                  and

         (iii)    maintain,   or  procure  the   maintenance  of,  the  Aircraft
                  Documents  including  technical records and any other records,
                  logs and other materials  required by the FAA to be maintained
                  in respect of the Aircraft in the English  language and permit
                  Sublessor to examine such records, logs and other materials at
                  any reasonable time upon reasonable notice.

15.1.2   The performer  of such maintenance and repairs as stated in this Clause
         15.1 shall be approved by the Sublessor  with  such  approval not to be
         unreasonably withheld.



<PAGE>


15.2     Specific Obligations

         Without limiting Clause 15.1,  Sublessee agrees that the performance by
         Sublessee  or any  sub-sublessee  of such  maintenance  and  repairs as
         stated  therein will  include,  but will not be limited to, each of the
         following specific items:

         (i)      performance  in accordance with the Maintenance Program of all
                  routine and non-routine maintenance work;

         (ii)     incorporation in the Aircraft of all applicable  Airworthiness
                  Directives  or  equivalent,  all alert  service  bulletins  of
                  Manufacturer,   Engine   Manufacturer  and  other  vendors  or
                  manufacturers  of Parts  incorporated  on the Aircraft and any
                  service bulletins which must be performed in order to maintain
                  the warranties on the Aircraft, Engines and Parts;

         (iii)    incorporation  in the Aircraft of all other service  bulletins
                  of  Manufacturer,  the Engine  Manufacturer  and other vendors
                  which  Sublessee  schedules to adopt within the Sublease  Term
                  for the major part of its fleet of  aircraft  of the same make
                  as the  Aircraft.  It is the  intent of the  parties  that the
                  Aircraft   will  not  be   discriminated   from  the  rest  of
                  Sublessee's  fleet in service bulletin  compliance  (including
                  method of compliance) or other maintenance matters.  Sublessee
                  will not  discriminate  against  the Engines  with  respect to
                  overhaul build standards and life limited part replacements;

         (iv)     incorporation into the Maintenance Program for the Aircraft of
                  a CPCP as recommended by Manufacturer,  the Aviation Authority
                  and  the  FAA  and  the  correction  of any  discrepancies  in
                  accordance with the  recommendations  of Manufacturer  and the
                  structural  repair manual.  In addition,  all inspected  areas
                  will  be  properly   treated  with   corrosion   inhibitor  as
                  recommended by Manufacturer;

         (v)      incorporation    into   the   Maintenance    Program   of   an
                  anti-fungus/biological  growth and  contamination  prevention,
                  control and treatment  program of all fuel tanks in accordance
                  with Manufacturer's approved procedures;

         (vi)     providing  without  delay  written  summaries  of all sampling
                  programs and  amendments  thereof  involving or affecting  the
                  Aircraft;

         (vii)    maintaining in English and keeping in an up-to-date status all
                  relevant records and historical documents;

         (viii)   maintaining    historical    records,    in    English,    for
                  condition-monitored,   hard  time  and  life   limited   Parts
                  (including tags from the manufacturer of such Part or a repair
                  facility  which  evidence  that such Part is new or Overhauled
                  and  establish  authenticity,  total time in service  and time
                  since  Overhaul  for such  Part),  the  hours and  cycles  the
                  Aircraft and Engines  operate and all  maintenance and repairs
                  performed on the Aircraft;

         (ix)     properly   documenting   all   repairs,    modifications   and
                  alterations  and  the  addition,  removal  or  replacement  of
                  equipment,  systems or components in accordance with the rules
                  and regulations of the Aviation  Authority and reflecting such
                  items in the Aircraft Documents.  In addition, all repairs, to
                  the  Aircraft  will  be   accomplished   in  accordance   with
                  Manufacturer's  structural repair manual,  where possible,  or
                  approved data from the  Manufacturer  accepted by the Aviation
                  Authority; and

         (x)      ensuring that Overhauls are accomplished utilizing maintenance
                  and  quality  control  procedures  approved  by  the  Aviation
                  Authority  and that the  repair  agency  provides  a  complete
                  record  of all  work  performed  during  the  course  of  such
                  Overhaul and certifies  that such  Overhaul was  accomplished,
                  that the  equipment  is  airworthy  and released for return to
                  service  and  that the  Overhaul  was in  conformity  with the
                  original type design.

16.      REPLACEMENT OF PARTS

16.1     Replacement of Parts

         Sublessee shall, at its own expense,  promptly replace,  or procure the
         replacement  of,  all  Parts  that  become  worn  out,  lost,   stolen,
         destroyed,  seized,  confiscated,  damaged beyond  economical repair or
         permanently rendered unfit for use for any reason whatsoever, except as
         otherwise  provided in Clause 16.4 or 16.5. In addition,  Sublessee may
         at its own cost and expense, remove, or permit the removal of any Parts
         including Engines,  whether or not worn out, lost,  stolen,  destroyed,
         seized,  confiscated,  damaged  beyond repair or  permanently  rendered
         unfit for use,  provided  that  Sublessee  shall,  except as  otherwise
         provided  in  Clause  16.7,  at its own cost and  expense,  immediately
         replace,  or procure  the  replacement  of,  such  Parts.  Title to all
         replacement  Parts  shall be vested in Owner  Trustee,  subject  to the
         Mortgage,  free and clear of all Security  Interests  except  Permitted
         Liens and shall,  except as otherwise provided in Clause 16.7, be in as
         good operating condition as, and shall have a value, age, configuration
         and  utility  at least  equal to, the  replaced  Parts,  assuming  such
         replaced  Parts  were  in  the  condition  and  repair  required  to be
         maintained by the terms hereof,  and shall have a current  "serviceable
         tag" of the manufacturer or maintenance  facility  providing such items
         to Sublessee.

16.2     Title to Replacement Parts

         All Parts at any time  removed  from the  Airframe or any Engine  shall
         remain the  property of Owner  Trustee and subject to the terms of this
         Agreement, no matter where located, until such time as such Parts shall
         be replaced by Parts that have been  incorporated  or  installed  in or
         attached  or  added  to the  Airframe  or  Engine  and  which  meet the
         requirements for replacement  Parts specified  above.  Immediately upon
         any replacement Part becoming  incorporated or installed in or attached
         or added to the  Airframe  or any  Engine  as above  provided,  without
         further  act, (a) title to the replaced  Part shall  thereupon  vest in
         Sublessee,  shall  cease to be subject to this  Agreement  and shall no
         longer be  deemed a Part  hereunder  and (b) title to such  replacement
         Part shall pass to Owner  Trustee,  subject to the  Mortgage,  free and
         clear  of all  Security  Interests  except  Permitted  Liens  and  such
         replacement  Part shall become  subject to this Agreement and be deemed
         Part of the  Airframe  or Engine  for all  purposes  hereof to the same
         extent as the Parts originally incorporated or installed in or attached
         or added to such Airframe or Engine and shall become a Part hereunder.

16.3     Pooling of Parts

         Any Part  removed from the Airframe or any Engine as provided in Clause
         16.1 or 16.2 may be subjected to a normal pooling arrangement customary
         in the  airline  industry  entered  into  in  the  ordinary  course  of
         Sublessee's  business,  provided that the part  replacing  such removed
         Part shall be  incorporated or installed in or attached to the Airframe
         or such  Engine  in  accordance  with  Clause  16.1 and 16.2 as soon as
         practicable  after the removal of such removed Part.  Without prejudice
         to the generality of the foregoing sentence,  any replacement Part when
         incorporated  or installed in or attached to the Airframe or any Engine
         may be  owned  by a  third  person  subject  to such a  normal  pooling
         arrangement,  provided that Sublessee,  at its own expense, as promptly
         thereafter  as possible,  either (a) causes  title to such  replacement
         Part to vest in Owner Trustee in  accordance  with Clause 16.1 and 16.2
         free and clear of all Security Interests except Permitted Liens, or (b)
         replaces or procures the  replacement of such  replacement  Part by the
         incorporation  or  installation  in or  attachment  to such Airframe or
         Engine of a further  replacement  Part (which meets the requirements of
         this  Clause  16)  free  and  clear of all  Security  Interests  except
         Permitted Liens and by causing title to such further  replacement  Part
         to vest in the Owner  Trustee,  subject to the Mortgage,  in accordance
         with  Clause  16.1 and 16.2 and such  further  replacement  Part  shall
         forthwith  be deemed Part of the  Airframe or Engine to the same extent
         as the Part originally  incorporated or installed in or attached to the
         Airframe or such Engine and shall become a Part hereunder.

16.4     Alterations

         Sublessee  shall at its own  expense,  make,  or procure the making of,
         such alterations and modifications in and additions to the Airframe and
         Engines as may be required  from time to time to meet the  standards of
         the Aviation Authority or any Government Entity having  jurisdiction in
         any country,  state,  county or other political  subdivision in or over
         which the Aircraft is flown or the FAA and any mandatory or recommended
         service bulletins of the Manufacturer.  In addition,  Sublessee may, at
         its own  expense,  from time to time,  make,  or procure the making of,
         such  alterations  and  modifications  in and  additions  including the
         making of any  improvements  to the Airframe or any Engine as Sublessee
         may deem  desirable in the proper  conduct of its business,  including,
         removal of Parts (for  purposes of this Clause  16.4,  Obsolete  Parts)
         which Sublessee deems obsolete or no longer suitable or appropriate for
         use in the Airframe or such Engine,  provided that no such  alteration,
         modification, addition or removal shall cost over US$ 200,000, or alter
         the  fundamental  nature  of  the  Aircraft  as  a  passenger  carrying
         aircraft,  or change its  original  type  design or  configuration,  or
         materially  diminish  the value or utility of the  Airframe or any such
         Engine,  or impair the condition or  airworthiness  thereof,  below the
         value,  utility,  condition and airworthiness thereof immediately prior
         to such  alteration,  modification,  addition or removal  assuming such
         Airframe or Engine was then in the condition and repair  required to be
         maintained  by  the  terms  of  this  Agreement.  Title  to  all  Parts
         incorporated  or  installed  in or attached or added to the Airframe or
         any such  Engine as the  result  of such  alteration,  modification  or
         addition shall be vested in Owner Trustee, subject to the Mortgage, and
         shall forthwith be deemed Part of the Airframe or such Engine.  Neither
         Owner  Trustee,  Lender  nor  Sublessor  shall be  required  under  any
         circumstances  to pay  directly  for any  alteration,  modification  or
         addition  to the  Aircraft  or to  reimburse  Sublessee  for  the  cost
         thereof.  Any other alterations other than those permitted according to
         Clause 16.5 require  Sublessor's  prior written consent,  which consent
         shall not be unreasonably withheld or delayed.

16.5     Removal of Parts

         Notwithstanding  the  foregoing,  so  long  as no  Default  shall  have
         occurred and be continuing, Sublessee may remove, or permit the removal
         of, at any time during the Sublease Term,  any Part,  provided that (a)
         such Part is in addition to, and not in replacement of or  substitution
         for, any Part  originally  incorporated  or installed in or attached to
         the  Airframe or any Engine at the time of  Delivery or in  replacement
         of, or  substitution  for, any such Part, (b) such Part is not required
         to be incorporated or installed in or attached or added to the Airframe
         or such Engine  pursuant  to the terms of Clause 16.4 or 16.5,  and (c)
         such Part can be  removed  from the  Airframe  or such  Engine  without
         causing  damage to the Airframe or such Engine or if it causes any such
         damage is to be  repaired  and  promptly  thereafter  is  repaired  and
         without  diminishing  or  impairing  the value,  utility,  condition or
         airworthiness  required to be maintained by the terms of this Agreement
         that the  Airframe or such Engine  would have had at such time had such
         alteration,  modification  or addition not occurred  assuming it was in
         the  condition  and  repair  required  to  be  maintained   under  this
         Agreement.  Upon the removal of any Part as provided in the immediately
         preceding  sentence and the removal of any Obsolete Part, title thereto
         shall,  without  further act, vest in Sublessee,  free and clear of all
         rights of Owner  Trustee,  Lender and  Sublessor and such Part shall no
         longer be deemed  part of the  Airframe  or  Engine  from  which it was
         removed.  Any Part not so removed  shall  remain the  property of Owner
         Trustee, subject to the Mortgage.

16.6     Substitution of Engine

         In addition to its rights  under  Clause 13,  Sublessee  shall have the
         right at its  option at any time,  on at least  thirty  (30) days prior
         written notice to Owner Trustee, Lender and Sublessor, to substitute or
         procure the substitution of an engine of the same make and model as the
         Engine  specified  in  Schedule  1 or an  engine of an  improved  model
         suitable for  installation  and use on the Airframe for any such Engine
         not then installed or held for use on the Airframe. Any such substitute
         engine,  the substitution of which is in accordance with the provisions
         of this Clause 16.6 and which  complies with the  requirements  of this
         Clause 16.6 being a  "Replacement  Engine"  provided  that title to the
         Replacement  Engine  shall be vested in Owner  Trustee,  subject to the
         Mortgage,  free  and  clear  of  all  Security  Interests,  other  than
         Permitted  Liens,  and the  Replacement  Engine  shall have a value and
         utility  and  maintenance  status,  including  time since  last  Engine
         Performance  Restoration  Visit,  at least equal to the replaced Engine
         and time since new no greater  than the replaced  Engine as  reasonably
         determined by Sublessor, assuming that such Engine was in the condition
         and repair required to be maintained by the terms of this Agreement and
         Sublessee  shall  deliver such  documents  including a bill of sale and
         opinion  of  counsel  as to title  and  recordation  with  the FAA,  as
         Sublessor may  reasonably  request to evidence the  foregoing.  In such
         event,  immediately upon the  effectiveness of such substitution on the
         date set forth in such notice and without further act:

         (i)      title to the replaced Engine shall thereupon vest in Sublessee
                  free and clear of all  rights  of Owner  Trustee,  Lender  and
                  Sublessor,  and the replaced  Engine shall cease to be subject
                  to this  Agreement  and  shall no  longer  be deemed an Engine
                  hereunder; and

         (ii)     title to such Replacement  Engine shall vest in Owner Trustee,
                  subject  to the  Mortgage,  free  and  clear  of all  Security
                  Interests except  Permitted Liens and such Replacement  Engine
                  shall become subject to this Agreement and an Engine hereunder
                  and be deemed part of the Aircraft for all purposes hereof.

16.7     Temporary Removal of Parts

         Sublessee shall be entitled,  so long as no Default shall have occurred
         which has not been remedied or waived to the reasonable satisfaction of
         Sublessor,  to  substitute,  replace or renew any Part with a part that
         does not satisfy the requirements of Clause 16.1 or 16.2 provided that:

         (i)      there shall not have been available to Sublessee,  at the time
                  and in the place that such substitute or replacement  part was
                  required  to  be  installed  on  the  Airframe  or  Engines  a
                  substitute or replacement part complying with the requirements
                  of Clause 16.1 and 16.2;

         (ii)     it would have  resulted in an  unreasonable  disruption of the
                  operation  of the  Aircraft or the business of Sublessee as an
                  airline to have  grounded  the  Aircraft  until such time as a
                  substitute or replacement part complying with the requirements
                  of Clause 16.1 and 16.2 became  available for  installation in
                  or on the Aircraft;

         (iii)    Sublessee  shall have notified  Sublessor  prior to or, in the
                  case of an extreme  urgency  as soon as  possible  after,  the
                  making of such  substitution,  replacement  or  renewal of any
                  material Part; and

         (iv)     as soon as possible  after  installation  of the same in or on
                  the Airframe or Engine (and in any event no later than fifteen
                  (15) days thereafter) Sublessee shall remove any such part not
                  complying  with the  requirements  of Clause 16.1 and 16.2 and
                  replace or substitute the same with a Part complying with such
                  requirements.

16.8     Parts Incapable of Transfer

         If any replacement  Part is incapable of becoming the property of Owner
         Trustee free of all Security  Interests (other than Permitted Liens) as
         required  by Clause 16 the part  which it has  replaced  shall,  unless
         Sublessor shall  otherwise agree in writing,  be kept and maintained by
         the  Sublessee  or any  sub-sublessee,  as the case may be,  until  the
         Expiry Date and be placed on the Aircraft in good working  order before
         the Aircraft is redelivered to the Sublessor on the Expiry Date.

17.      MANUFACTURER'S WARRANTIES

17.1     Authorization

17.1.1   With effect from Delivery, Sublessor authorizes Sublessee  to  exercise
         such rights as Sublessor may have  in  relation  to  any  warranty with
         respect  to  the  Aircraft,  any  Engine  or  any  Part  made  by   any
         manufacturer, vendor, subcontractor, maintenance facility  or  supplier
         subject to Sublessee  notifying  Sublessor  in  writing of any warranty
         claim of a material nature and keeping Sublessor  continuously informed
         of the development of such warranty claim. To the extent that the  same
         may not be available to Sublessee, Sublessor  agrees to,  at  the  sole
         cost  and  expense  of  Sublessee, enforce such rights as Sublessor may
         have with respect thereto for the benefit of Sublessee. Sublessor shall
         also have the right, rather than enforcing  or  making  such  claim  on
         behalf of Sublessee under such warranties, to appoint  Sublessee as its
         agent for such purpose, and  in  such  instance,  Sublessee  agrees  to
         accept  such  appointment  and  make  such  claims  and  enforce   such
         warranties at its sole cost and expense. This authorization shall cease
         on the Expiry Date. Sublessee shall not be  entitled  to  exercise  its
         authorization hereunder  while  a  Default is  continuing (during which
         time  all  such  rights  shall revert to Sublessor and Sublessor hereby
         agrees to exercise and enforce such rights during such period).

17.1.2   Sublessee  shall give  Sublessor  prompt written notice of any warranty
         claim that is settled with Sublessee on the basis of a total or partial
         cash payment.  Any cash payments  shall be applied to remedy the defect
         subject to such warranty claim unless Sublessor  otherwise  consents in
         writing.  Any cash payments to Sublessee in respect of warranty  claims
         that (either with Sublessor's written consent or because the defect can
         not be remedied)  are not applied to the repair or remedy of defects in
         the Aircraft or to compensate  Sublessee for the costs incurred for any
         such repair or remedy, and which are not in respect of compensation for
         loss of use of the Aircraft, an Engine or Part during the Sublease Term
         due to a defect  covered  by such  warranty,  shall be for  Sublessor's
         account.

17.2     Proceeds

         So long as no Default has occurred and is continuing, Sublessor agrees,
         subject to Clause  17.1,  to  co-operate  with  Sublessee  to cause any
         proceeds  from  any  warranty  referred  to in  Clause  17.1 to be paid
         directly to Sublessee,  and, if any such proceeds are nonetheless  paid
         to  Sublessor,  Sublessor  agrees to remit  promptly  such  proceeds to
         Sublessee.  However,  while a  Default  is  continuing,  Sublessor  may
         immediately:

         (i)      retain for its own account any such proceeds  previously  paid
                  to Sublessor which would have been remitted to Sublessee under
                  this Clause  17.2 in the  absence of such  Default or Event of
                  Default; and

         (ii)     cause  any  proceeds  of  any  pending  claims  to  be paid to
                  Sublessor, rather than to Sublessee.

         Once the Default is cured,  Sublessor shall reimburse  Sublessee to the
         extent that it would have been obliged to under this Clause 17.2 had no
         such Default occurred.

17.3     Agreements with Manufacturers

         To the extent that any  warranties  relating to the  Aircraft  are made
         available  under  an  agreement  between  any   manufacturer,   vendor,
         subcontractor or supplier and Sublessee, Sublessee will:

         (i)      apply  the  proceeds  of  any  claim  under  such agreement in
                  accordance with Clause 17.2; and

         (ii)     take  all  such  steps  as are  necessary  at  the  end of the
                  Sublease  Term to  ensure  that  the  benefit  of any of those
                  warranties that have not expired is vested in Sublessor.

17.4     No Operation Contrary to Warranties

         Sublessee  shall not operate the Aircraft  contrary to the terms of any
         warranty  referred to in Clause  17.1.1,  provided  that  Sublessor has
         advised Sublessee of the terms of such warranties.

18.      DISCLAIMERS

18.1     General

         SUBLESSOR  AND  SUBLESSEE  AGREE  THAT  THE  DISCLAIMERS,  WAIVERS  AND
         CONFIRMATIONS SET FORTH IN CLAUSES 18.2 THROUGH 18.12 BELOW SHALL APPLY
         AS BETWEEN  SUBLESSOR  AND  SUBLESSEE  AT ALL TIMES DURING THE SUBLEASE
         TERM  WITH  EFFECT  FROM  SUBLESSEE'S  ACCEPTANCE  OF THE  AIRCRAFT  BY
         EXECUTION  OF THE  ACCEPTANCE  CERTIFICATE,  WHICH SHALL BE  CONCLUSIVE
         EVIDENCE THAT SUBLESSEE HAS FULLY INSPECTED THE AIRCRAFT AND EVERY PART
         THEREOF AND THAT THE AIRCRAFT,  THE ENGINES, THE PARTS AND THE AIRCRAFT
         DOCUMENTS  ARE  IN  ALL  RESPECTS  ACCEPTABLE  TO  SUBLESSEE  (SAVE  AS
         EXPRESSLY  NOTED ON THE  ACCEPTANCE  CERTIFICATE)  AND ARE IN  SUITABLE
         CONDITION FOR DELIVERY TO AND ACCEPTANCE BY SUBLESSEE.

18.2     AS IS, WHERE IS

         PRIOR TO DELIVERY  HEREUNDER,  SUBLESSEE HAD THE OPPORTUNITY TO INSPECT
         THE AIRCRAFT,  ACCORDINGLY,  SUBLESSEE UNCONDITIONALLY ACKNOWLEDGES AND
         AGREES THAT NEITHER  OWNER  TRUSTEE,  LENDER OR  SUBLESSOR,  NOR ANY OF
         THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES OR REPRESENTATIVES HAVE
         MADE  OR  WILL  BE   DEEMED   TO  HAVE   MADE  ANY   TERM,   CONDITION,
         REPRESENTATION,  WARRANTY OR  COVENANT  EXPRESSED  OR IMPLIED  (WHETHER
         STATUTORY OR  OTHERWISE) AS TO (i) THE  CAPACITY,  AGE,  AIRWORTHINESS,
         VALUE,  QUALITY,  DURABILITY,  DESCRIPTION,  CONDITION  (WHETHER OF THE
         AIRCRAFT,  ANY ENGINE,  ANY PART  THEREOF OR THE  AIRCRAFT  DOCUMENTS),
         DESIGN, WORKMANSHIP, MATERIALS, MANUFACTURE,  CONSTRUCTION,  OPERATION,
         STATE, MERCHANTABILITY,  PERFORMANCE, FITNESS FOR ANY PARTICULAR USE OR
         PURPOSE  (INCLUDING  THE ABILITY TO OPERATE OR REGISTER THE AIRCRAFT OR
         USE THE AIRCRAFT  DOCUMENTS IN ANY OR ALL JURISDICTIONS) OR SUITABILITY
         OF THE  AIRCRAFT  OR ANY PART  THEREOF,  AS TO THE ABSENCE OF LATENT OR
         OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE,  KNOWN OR UNKNOWN, APPARENT
         OR   CONCEALED,   EXTERIOR  OR  INTERIOR,   (ii)  THE  ABSENCE  OF  ANY
         INFRINGEMENT OF ANY PATENT, TRADEMARK,  COPYRIGHT OR OTHER INTELLECTUAL
         PROPERTY  RIGHTS,  (iii) ANY IMPLIED  WARRANTY  ARISING  FROM COURSE OF
         PERFORMANCE,  COURSE OF  DEALING  OR USAGE OF TRADE,  OR (iv) ANY OTHER
         REPRESENTATION OR WARRANTY WHATSOEVER,  EXPRESS OR IMPLIED WITH RESPECT
         TO THE AIRCRAFT OR ANY PART THEREOF,  ALL OF WHICH ARE HEREBY EXPRESSLY
         EXCLUDED AND EXTINGUISHED.

18.3     Waiver of Warranty of Description

         SUBLESSEE HEREBY AGREES THAT ITS ACCEPTANCE OF THE AIRCRAFT AT DELIVERY
         AND ITS  EXECUTION  AND  DELIVERY OF THE  ACCEPTANCE  CERTIFICATE  WILL
         RE-AFFIRM AND  INDEPENDENTLY  CONSTITUTE  ITS WAIVER OF THE WARRANTY OF
         DESCRIPTION  AND ANY  CLAIMS IT MAY HAVE,  AND OF ANY RIGHT TO MAKE ANY
         CLAIM  AGAINST  LENDER  OR  SUBLESSOR  BASED  UPON THE  FAILURE  OF THE
         AIRCRAFT   TO   CONFORM   WITH  SUCH   DESCRIPTION   OR  ANY   AIRCRAFT
         SPECIFICATIONS  AND ITS AGREEMENT NOT TO LOOK TO OWNER TRUSTEE,  LENDER
         OR  SUBLESSOR  FOR DAMAGES OR RELIEF  ARISING OUT OF THE FAILURE OF THE
         AIRCRAFT   TO  CONFORM   TO  SUCH   DESCRIPTIONS   OR   SPECIFICATIONS,
         NOTWITHSTANDING  ANY  ASSURANCES  FROM  SUBLESSOR,  THE  DIFFICULTY  OF
         DISCOVERING ANY DEFECT OR ITS ASSUMPTION THAT ANY  NONCONFORMITY  WOULD
         BE CURED.

18.4     No Liability Under UCC

         SUBLESSEE  HEREBY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO THE REMEDIES
         SET FORTH IN ARTICLE 2A-508  THROUGH  2A-522 OF THE UNIFORM  COMMERCIAL
         CODE AS  CODIFIED  AND  INTERPRETED  UNDER THE LAWS OF THE STATE OF NEW
         YORK.

18.5     Sublessee Acknowledgment

         SUBLESSEE  AGREES THAT IT IS LEASING THE  AIRCRAFT "AS IS, WHERE IS AND
         WITH ALL FAULTS".

18.6     Sublessee Waiver

         Sublessee  hereby waives as between itself and Sublessor and agrees not
         to seek to  establish  or enforce any rights and  remedies,  express or
         implied  (whether  statutory or  otherwise)  against  Sublessor,  Owner
         Trustee,  Lender  or the  Aircraft  relating  to  any  of  the  matters
         mentioned  in Clause  18.1  through  18.7 and the  leasing  thereof  by
         Sublessor to Sublessee.

18.7     Sublessee Examination of Aircraft

         DELIVERY BY SUBLESSEE TO SUBLESSOR  OF THE  ACCEPTANCE  CERTIFICATE  IS
         CONCLUSIVE  PROOF AS BETWEEN  SUBLESSOR AND SUBLESSEE THAT  SUBLESSEE'S
         TECHNICAL  EXPERTS HAD EXAMINED AND INVESTIGATED THE AIRCRAFT,  ENGINES
         AND EACH PART THEREOF AND DETERMINED THAT (i) EACH WAS AIRWORTHY AND IN
         GOOD WORKING ORDER AND REPAIR AND (ii) THE AIRCRAFT, ENGINES, EACH PART
         THEREOF AND THE AIRCRAFT DOCUMENTS WERE  WITHOUTDEFECT  (WHETHER OR NOT
         DISCOVERABLE AT DELIVERY) AND IN EVERY WAY SATISFACTORY TO SUBLESSEE.

18.8     No Sublessor Liability for Losses

         Sublessee  agrees that Sublessor  will not be liable to Sublessee,  any
         sub-sublessee or any person, whether in contract, tort or otherwise and
         however arising, for any unavailability,  loss of use or service, cost,
         loss (consequential or otherwise),  liability, damage or delay of or to
         or in connection with the Aircraft,  any person or property whatsoever,
         whether on board the Aircraft or elsewhere and  irrespective of whether
         such  occurrences  arise  from any act or  omission  or the  active  or
         passive  negligence  of Sublessor  or Owner  Trustee or their agents or
         representatives  excepting  only  Sublessor's or Owner Trustee or their
         respective  agents' or  representatives'  gross  negligence  or willful
         misconduct.



<PAGE>


18.9     Exclusion

         Neither Owner Trustee,  Lender, nor Sublessor shall have any obligation
         or liability  whatsoever to Sublessee,  any  sub-sublessee or any other
         person  whether  arising in  contract,  tort or  otherwise  and whether
         arising by reference to  negligence  or strict  liability of Sublessor,
         Owner Trustee or Lender or otherwise for:

         (i)      any  liability,  loss or damage  (consequential  or otherwise)
                  caused or alleged to be caused  directly or  indirectly by the
                  Aircraft  or  any  Engine  or by  any  inadequacy  thereof  or
                  deficiency or defect therein or by any other  circumstance  in
                  connection therewith;

         (ii)     the use, operation or performance of the Aircraft or any risks
                  relating thereto;

         (iii)    any  interruption of service,  loss of business or anticipated
                  profits or any other direct, indirect or consequential loss or
                  damage; or

         (iv)     the  delivery,  operation,  servicing,   maintenance,  repair,
                  improvement or replacement of the Aircraft,  any Engine or any
                  Part  except  as  otherwise   expressly  provided  under  this
                  Agreement.

18.10    Waiver

         Sublessee  hereby waives,  as between itself and Owner Trustee,  Lender
         and   Sublessor,   all  its  rights  in  respect  of  any  warranty  or
         representation,  express  or  implied,  on the part of  Owner  Trustee,
         Lender or Sublessor  and all claims  against Owner  Trustee,  Lender or
         Sublessor  howsoever and whenever  arising at any time in respect of or
         out of the matters referred to in Clause 18.

18.11    No Waiver

         Nothing in this Clause 18 or elsewhere in this Agreement will be deemed
         to be a waiver  by  Sublessee  of any  rights it may have  against  the
         Manufacturer, the Engine Manufacturer or any other person.

18.12    Confirmation

         Sublessee  confirms that the foregoing  provisions of this Clause18 and
         the  following  provisions in Clause 19 have been taken into account by
         both parties in  negotiating  the rent and other amounts  payable under
         this Agreement.



<PAGE>


19.      INDEMNITIES

19.1     General Indemnity

         Sublessee agrees to defend, indemnify and hold harmless on an after Tax
         basis each of the  Indemnitees  on demand  from and against any and all
         Losses arising from events occurring during the Sublease Term:

         (i)      that  may  at  any  time  be  suffered or incurred directly or
                  indirectly   as   a  result  of  or  in  connection  with  the
                  possession,  delivery,   performance,  management,  ownership,
                  registration,   import,    control,   maintenance,  condition,
                  service,    repair,    Overhaul,      leasing,     subleasing,
                  deregistration, export,  manufacture, storage, transportation,
                  design, testing, replacement, use, operation or  redelivery of
                  the Aircraft, any Engine or Part (either in the air  or on the
                  ground) whether or not such Losses may be attributable  to any
                  defect in the Aircraft, any Engine or any  Part  or  to  their
                  respective design, testing or use or otherwise, and regardless
                  of when the same arises (but excluding any injuries or  claims
                  which arise prior to Delivery) or whether it arises out  of or
                  is attributable to any act or omission,  negligent  (active or
                  passive) or otherwise,  of  any  Indemnitee (including without
                  limitation claims for death, personal injury, property damage,
                  other  loss  or  harm to any person and claims relating to any
                  Laws,  including  without  limitation  environmental  control,
                  noise and pollution laws rules or regulations);

         (ii)     that may at any time be suffered or incurred as a  consequence
                  of any breach of the Transaction Documents by the Sublessee or
                  by  misrepresentation  of or breach of warranty by  Sublessee;
                  and

         (iii)    that 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 by Sublessee,  or anyone acting
                  by or through Sublessee,  of any obligation of confidentiality
                  owed to any person in respect of any of the  matters  referred
                  to in this Clause 19.1(iii).

19.2     Exception to General Indemnity

         The  indemnity  provided for in Clause 19.1 will not extend to any Loss
         in relation to a particular Indemnitee to the extent that such Loss:

         (i)      arises  as a  direct result of the gross negligence or willful
                  misconduct of such Indemnitee; or

         (ii)     arises as a direct result of Sublessor Taxes, a Sublessor Lien
                  or a willful breach by Sublessor of its obligations  under any
                  of the Transaction Documents; or

         (iii)    constitutes a Tax or liability for Taxes.

19.3     Time of Payment

         Sublessee  will pay an  Indemnitee  for Losses within ten (10) Business
         Days after receipt of a written  demand  therefor from such  Indemnitee
         accompanied by a written statement  describing in reasonable detail the
         basis for such indemnity.

19.4     Survival of General Indemnity

         Notwithstanding  anything  in  this  Agreement  to  the  contrary,  the
         provisions  of Clause  19.1 shall  survive  the Expiry Date for two (2)
         years and continue in full force and effect  notwithstanding any breach
         by  Sublessor  or  Sublessee  of  the  terms  of  this  Agreement,  the
         termination  of the Sublease of the  Aircraft to  Sublessee  under this
         Agreement  or  the  repudiation  by  Sublessor  or  Sublessee  of  this
         Agreement.

19.5     Notice to Sublessee

         Sublessor  shall  promptly after  obtaining  actual  knowledge  thereof
         notify  the  Sublessee  of any  claim  as to which  indemnification  is
         sought;  provided  that a failure  to so notify  will not  diminish  or
         relieve  Sublessee of any  obligations  hereunder,  unless such failure
         materially  adversely  affects  Sublessee's  defense  of such claim and
         directly  results in a material  increase in liability of the Sublessee
         in  respect  of such  claim or  prevents  it from  materially  reducing
         liability  therefor,  in which case the Sublessee shall not be required
         to indemnify such Indemnitee for the amount by which such liability was
         increased or not reduced.

20.      TAXATION

20.1     Gross-up

20.1.1   All payments by Sublessee  under or in connection  with this  Agreement
         shall be made in full  without  any set-off or  counterclaim,  free and
         clear of and without  deduction or withholding for or on account of all
         Taxes,  except Sublessor Taxes,  unless Sublessee is required by law to
         make any such deduction or withholding.

20.1.2   If any Taxes,  except  Sublessor  Taxes, are required to be deducted or
         withheld  from any amount  payable  hereunder,  Sublessee  shall pay to
         Sublessor by way of Supplemental Rent such additional  amounts,  in the
         same  currency as such  payment as may be  necessary  in order that the
         amount of the net  payment  received by  Sublessor  on the date of such
         payment,  after  deduction or withholding  for all such Taxes,  will be
         equal to the amount that  Sublessor  would have  received if such Taxes
         had not been deducted or withheld.

20.1.3   If any payment is made by Sublessee  under  Clause19.2 and Sublessor in
         good faith  determines that it is entitled to receive a credit against,
         or relief or remission for, or repayment of, any Tax paid or payable by
         Sublessor in respect of or calculated  with  reference to the deduction
         or withholding  giving rise to such payment,  Sublessor  shall,  to the
         extent  that it can do so without  prejudice  to the  retention  of the
         amount of such  credit,  relief,  remission  or  repayment  and without
         leaving  Sublessor  in any worse net  after tax  position  than that in
         which it would have been had such  deduction  or  withholding  not been
         required to be made, promptly pay to Sublessee such amount as Sublessor
         shall  reasonably  have  determined to be  attributable to the relevant
         deduction or withholding.

20.2     Tax Indemnity

20.2.1   Sublessee shall indemnify  Sublessor on demand against all Taxes (other
         than  Sublessor  Taxes) levied or imposed  against or upon  Headlessor,
         Sublessor,   Sublessee  or  the  Aircraft  directly  or  indirectly  in
         connection with the importation, exportation,  registration, ownership,
         leasing,   subleasing,   purchase,  delivery,  sale,  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 except to the extent that such liability for such Taxes:

         (i)      arises as a result of a Sublessor Lien; or

         (ii)     arises in respect of the period ending prior to  Delivery  and
                  commencing immediately after the Expiry Date; or

         (iii)    is directly attributable  to Sublessor's  gross  negligence or
                  willful misconduct; or

         (iv)     relates to any deduction  or  withholding on any payment to be
                  made to Sublessor that is covered by Clause 20.1; or

         (v)      imposed as a direct result of the sale, transfer or assignment
                  or other  disposition  of the  Aircraft or this  Agreement  by
                  Sublessor,  other than by  Sublessor to  Sublessee,  or by any
                  party  claiming  by or  through  Sublessor  and except (a) any
                  sale,  transfer,  assignment or other disposition that is made
                  solely as a result of the occurrence of an Event of Default or
                  Total Loss of the  Aircraft  or any part  thereof or  interest
                  therein   and  (b)  any   Taxes   imposed   by  the  State  of
                  Registration.

20.2.2   If Sublessor becomes aware of any claim against Sublessor for any  Loss
         that Sublessee is required to pay or indemnify against pursuant to this
         Clause 20.2,  Sublessor  shall  as  soon  as  is reasonably practicable
         notify Sublessee in writing of such claim. If requested  in  writing by
         Sublessee that  it wishes  Sublessor  to  contest such claim, Sublessor
         will consult with Sublessee with a view to  determining  whether  there
         are grounds for contesting such claim. Sublessor will consider  in good
         faith any representation made by Sublessee in this  respect.  Sublessor
         shall not be under any obligation to  bring  any proceedings in respect
         of any such claim in any  court  of  law or other relevant forum except
         that  Sublessor  shall  bring  such  proceedings  in the event that tax
         counsel reasonably acceptable to Sublessor in the relevant jurisdiction
         provides Sublessor with a legal opinion to the effect  that  there  are
         legitimate grounds for contesting such claim. Any costs and expenses of
         any such contest shall  be  fully  indemnified  by  Sublessee.  Further
         Sublessor shall be under no obligation to take any action in respect of
         any claim unless it shall previously have been provided  with  security
         in an amount equal to the amount of such claim and reasonable costs and
         otherwise satisfactory in its absolute discretion for any  such  costs.
         Any amount payable under this Clause 20.2 shall be paid to or on behalf
         of Sublessor or,  if so directed by Sublessor, directly to the relevant
         taxing authority, promptly after  receipt  by  Sublessee  of  a written
         demand therefor.

20.3     Value Added Taxes

         The Rent and other amounts  payable by Sublessee  under this  Agreement
         are  exclusive  of any value added tax,  turnover tax or similar tax or
         duty. If a value added tax or any similar tax or duty is payable in any
         jurisdiction  in  respect of any Rent or other  amounts  as  aforesaid,
         Sublessee will pay all such tax or duty and indemnify Sublessor against
         any claims for the same and any related claims, losses or liabilities.

20.4     Taxation of Indemnity Payments

20.4.1   Notwithstanding  any other provision of this  Agreement,  if and to the
         extent that any sums payable to any Indemnitee by Sublessee  under this
         Agreement by way of indemnity are insufficient,  by reason of any Taxes
         payable in respect of those sums, for such  Indemnitee to discharge the
         corresponding  liability to the  relevant  third party  (including  any
         taxation  authority),  or to  reimburse  such  Indemnitee  for the cost
         incurred  by it to a third party  (including  any  taxation  authority)
         Sublessee  shall pay to such  Indemnitee such sum as will after the tax
         liability has been fully  satisfied leave that Indemnitee with the same
         amount as it would have been entitled to receive in the absence of that
         liability.

20.4.2   If  and  to  the  extent  that  any  sums  constituting   (directly  or
         indirectly)  an indemnity to an Indemnitee but paid by Sublessee to any
         person other than such  Indemnitee  are treated as taxable in the hands
         of such Indemnitee,  Sublessee shall pay to such Indemnitee such sum as
         will, after the tax liability has been fully satisfied,  indemnify such
         Indemnitee to the same extent as it would have been  indemnified in the
         absence of such liability.

20.5     Benefit of Indemnities

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

20.6     Sublessor Indemnification

         Without prejudice to Clause 20.5,  Sublessor shall be entitled (but not
         obliged)  to  indemnify  Indemnitees  (other than  Sublessor)  on terms
         equivalent to the  indemnities  given by Sublessee under this Agreement
         and  the   obligations  of  Sublessee  to  Sublessor  shall  extend  to
         reimbursement  of Sublessor of any amount properly paid by Sublessor to
         such other Indemnitee  provided always that nothing in this Clause 20.6
         shall operate to increase the obligations or liabilities of Sublessee.

20.7     Survival of Tax Indemnities

         Notwithstanding  anything  in  this  Agreement  to  the  contrary,  the
         provisions  of Clause 19 shall  survive the Expiry Date and continue in
         full  force and  effect  notwithstanding  any  breach by  Sublessor  or
         Sublessee  of the  terms  of this  Agreement,  the  termination  of the
         Sublease  of the  Aircraft to  Sublessee  under this  Agreement  or the
         repudiation by Sublessor or Sublessee of this Agreement.

20.8     Mitigation and Co-operation

         In any case  where  Sublessee  would be  obliged  to bear Taxes or make
         additional  payment on account of Taxes  pursuant to the  provisions of
         this  Agreement  as a  result  of any  change  in  applicable  laws  or
         regulations  or  practice,  Sublessor  shall at the written  request of
         Sublessee,  without  limiting,  reducing or  otherwise  qualifying  the
         rights of Sublessor and the Security  Interest of Lender,  consult with
         Sublessee in good faith as to such steps which  Sublessor and Sublessee
         can  mutually  accept and agree upon in order to  mitigate or avoid the
         effects of such circumstances.  In case Sublessor and Sublessee can not
         agree  within a period of thirty (30) days after  Sublessee  has made a
         written  request,  Sublessor  shall  not  have any  further  obligation
         towards Sublessee.

20.9     Furnishing Forms

         Sublessor  agrees to furnish,  and to procure that any other Indemnitee
         furnishes  to  Sublessee,  or to such  other  person as  Sublessee  may
         designate, at Sublessee's sole cost and expense, such duly executed and
         properly  completed  forms  as such  Indemnitee  may be  permitted  and
         legally able to deliver and as may be necessary or appropriate in order
         to claim any  reduction of, or exemption  from any Tax which  Sublessee
         may be required to indemnify against hereunder,  unless such Indemnitee
         reasonable  determines  that  furnishing such forms may have an adverse
         effect on either the business,  tax status, tax liability or operations
         of such Indemnitee.

21.      INSURANCE

21.1     Insurances

21.1.1   Sublessee shall, at its own expense,  maintain in full force and effect
         during the Sublease Term  insurances  in respect of the Aircraft  that,
         subject to this  Clause 21,  comply  with the  requirements  set out in
         Schedule3 (the Insurances).

21.1.2   The  Insurances  shall be  effected  through  brokers of  international
         standing  and  repute  in the  London  or New York  aviation  insurance
         markets  as may be  approved  by  Sublessor,  such  approval  not to be
         unreasonably withheld.

21.1.3   For the avoidance of doubt it is understood  that the  Insurances to be
         provided  for  by  Sublessee  are  not  Sublessor's   sole  remedy  and
         protection  under this Agreement as the obligations of Sublessee are in
         excess of the requirements of the Insurances.

21.2     Reinsurance

         Any reinsurance will be maintained with reinsurers and brokers approved
         by  Sublessor,  such  approval not to be  unreasonably  withheld.  Such
         reinsurance  will contain each of the  following  terms and will in all
         other respects (including amount) be satisfactory to Sublessor:

         (i)      The same terms as the original insurance;

         (ii)     A cut-through and assignment clause satisfactory to Sublessor;

         (iii)    Payment  will be  made  notwithstanding  (a)  any  bankruptcy,
                  insolvency,  liquidation or dissolution of any of the original
                  insurers  and/or (b) that the original  insurers  have made no
                  payment under the original insurance policies.

21.3     Requirements

         The current  requirements as to the Insurances are as specified in this
         Clause 21 and in Schedule 3. Sublessor and Lender may from time to time
         stipulate other  requirements  for the Insurances so that (a) the scope
         and level of cover  are  maintained  in line  with  best  international
         airline  practice,  and (b) the interests of Sublessor,  Headlessor and
         Lender  continue to be  protected.  Sublessee  shall  procure that such
         changes are effected.
21.4     Insurance Covenants

         Sublessee shall:

         (i)      ensure that all  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;

         (ii)     comply  with the terms and  conditions  of each  policy of the
                  Insurances and not do, consent or agree to any act or omission
                  which:

                  (a)      invalidates or may invalidate the Insurances; or

                  (b)      renders  or  may render void or voidable the whole or
                           any part of any of the Insurances; or

                  (c)      brings  any  particular  insured liability within the
                           scope of an exclusion or exception to the Insurances;

         (iii)    not make any  modification  or  alteration  to the  Insurances
                  material   and  adverse  to  the   interests  of  any  of  the
                  Indemnitees;

         (iv)     be responsible for any deductible under the Insurances;

         (v)      provide any other information and assistance in respect of the
                  Insurances  that  Sublessor  may from time to time  reasonably
                  require  including,  for the avoidance of doubt,  lists of the
                  underwriters  and the exposures of each of those  underwriters
                  which may carry the Insurances from time to time; and

         (vi)     not use or keep or permit the  Aircraft or any part thereof to
                  be used or kept for any purpose, in any manner or in any place
                  not covered by the required policies;

         (vii)    not cause or permit  the  Aircraft  or any part  thereof to be
                  employed  in any  place or in any  manner  or for any  purpose
                  inconsistent  with the terms or outside the cover  provided by
                  any required policy;

         (viii)   not  knowingly  effect or authorize the placement of insurance
                  covering  the  same  subject  matter  as that  covered  by the
                  Insurances  (except on a contingent or other secondary basis);
                  and

         (ix)     furnish to Sublessor:

                  (a)      not later than seven (7) days prior to the  Scheduled
                           Delivery  Date and  thereafter  within seven (7) days
                           after each renewal date of each policy, a certificate
                           or  certificates   signed  by  the  insurers  or  the
                           insurance  broker and a letter of  undertaking by the
                           insurance  broker  providing  evidence  of  insurance
                           coverage pursuant to this Agreement;

                  (b)      on  request,  confirmation  of payment  by, or at the
                           direction of the  Sublessor of each sum payable under
                           or in connection with any required policy;

                  (c)      on  request,  such  evidence  as  the  Sublessor  may
                           require  of  the  Sublessee's   compliance  with  its
                           obligations under this Agreement; and

                  (d)      any  notice   received   from  the  insurers  or  the
                           insurance  brokers (within three (3) Business Days of
                           receipt)  relating  to  or  in  connection  with  any
                           cancellation   of  the  Insurances  or  any  material
                           alteration of the Insurances.

21.5     Renewal of Insurances

         Sublessee shall commence  renewal  procedures at least thirty (30) days
         prior to expiry of any of the Insurances, and provide to Sublessor:

         (i)      confirmation  of  completion  of renewal at least fifteen (15)
                  days prior to each expiry date of any of the Insurances;

         (ii)     certificates of insurance and a brokers' letter of undertaking
                  in a form  acceptable to Sublessor  and in English,  detailing
                  the coverage and  confirming  the  insurers'  agreement to the
                  specified  insurance  requirements  of this  Agreement  within
                  seven (7) days after each renewal date; and

         (iii)    any  other  information as Sublessor may reasonable request be
                  provided by the insurance broker  at  least  fifteen (15) days
                  before such expiry.

21.6     Failure to Insure

         If Sublessee  fails to maintain the Insurances in compliance  with this
Agreement, Sublessee shall:

         (i)      forthwith  ground or cause to be  grounded  the  Aircraft  and
                  shall keep or procure that the Aircraft be kept grounded until
                  such time as all the  Insurances  shall again be in full force
                  and effect; and

         (ii)     immediately  notify  Sublessor  of the  non-compliance  of the
                  Insurances  and  provide  Sublessor  with full  details of any
                  steps which  Sublessee is taking or proposes to take, in order
                  to remedy such non-compliance;

           and each of the Indemnitees  will be entitled but not bound,  without
           prejudice to any other rights of Sublessor under this Agreement:

                  (a)      to pay the  premiums  due or to effect  and  maintain
                           insurances     satisfactory    to    Sublessor    and
                           substantially  the  same as the  Insurances  required
                           hereunder or otherwise remedy Sublessee's  failure in
                           such  manner,  including  to effect and  maintain  an
                           "owner's  interest"  policy,  as Sublessor  considers
                           appropriate.  Any sums so expended by Sublessor  will
                           become  immediately  due and payable by  Sublessee to
                           Sublessor  together  with  interest  thereon  at  the
                           Default  Rate,   from  the  date  of  expenditure  by
                           Sublessor  up  to  the  date  of   reimbursement   by
                           Sublessee; and

                  (b)      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
                           Sublessor   until  the   failure   is   remedied   to
                           Sublessor's satisfaction.

21.7     Continuation of Insurances

         Sublessee  agrees to effect and  maintain at  Sublessee's  cost airline
         general third party  liability  insurances in the form required by this
         Agreement  for two (2)  years  after the  Expiry  Date  whether  or not
         Sublessee or Sublessor  continues to have any interest in the Aircraft,
         and to continue  to name the  parties  listed in Schedule 3 - Insurance
         Requirements, to this Agreement as Additional Insureds for that period.



<PAGE>


21.8     Application of Insurance Proceeds

         As between Sublessor and Sublessee:

         (i)      all insurance  payments received as the result of a Total Loss
                  occurring  during the Sublease  Term will be paid to Sublessor
                  or to Lender  pursuant to the terms of any  security  given by
                  Owner Trustee and Sublessor;

         (ii)     all insurance  proceeds of any damage or loss to the Aircraft,
                  any Engine or any Part occurring  during the Sublease Term not
                  constituting  a  Total  Loss  and  in  excess  of  the  Damage
                  Notification  Threshold  will be paid to Sublessor and applied
                  in  payment  (or  to  reimburse   Sublessee)  for  repairs  or
                  replacement property,  upon Sublessor being satisfied that the
                  repairs or replacement  have been effected in accordance  with
                  this Agreement; and

         (iii)    notwithstanding Clauses 21.8 (i) or 21.8 (ii) above, 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  Sublessor to be applied  toward  payment of
                  any amounts  which may be or become  payable by  Sublessee  in
                  such order as Sublessor sees fit or as Sublessor may elect.

21.9     Pursuit of Claims

         The parties  shall  co-operate  in the pursuit of any claims  under the
         Insurances. In pursuing any such claims, the parties shall take account
         of each others  interests  but, if there is any  material  disagreement
         between  the parties in respect of how any such claim shall be pursued,
         the interests of Sublessor shall be paramount.

22.      TOTAL LOSS AND REQUISITION

22.1     Total Loss Prior to Delivery

         If a  Total  Loss  occurs  prior  to  Delivery,  this  Agreement  shall
         immediately terminate, and except as expressly stated in this Agreement
         neither party will have any further  obligation or liability under this
         Agreement,  except that  Sublessor  will repay to Sublessee any prepaid
         Rent, the amount of Security Deposit, if paid, and return the Letter of
         Credit under this Agreement.

22.2     Total Loss After Delivery

22.2.1   If  a  Total  Loss  occurs  after  Delivery,  Sublessee  shall  pay the
         Sublessor on or prior to the earlier of:

         (i)      thirty (30) days after the Total Loss Date; and

         (ii)     the  date  of receipt of insurance proceeds in respect of such
                  Total Loss,

         the  aggregate  of (x) the  Agreed  Value  and (y) Rent  and all  other
         amounts  accrued  under this  Agreement  to the date of payment and (z)
         interest on the Agreed  Value  accruing on a daily basis at the Default
         Rate for the  period,  if any,  from the Total Loss Date to the date of
         payment.

22.2.2   Subject  to  the  rights  of  any insurers or other third parties, upon
         irrevocable payment in full to Sublessor of the  Agreed  Value  and all
         other amounts which may be or become  payable  to  Sublessor under this
         Agreement,  Sublessor  shall  direct  Owner  Trustee  to  transfer   to
         Sublessee all of Owner Trustee's and Sublessor's rights (if any) to (x)
         the Airframe or any Engines and Parts whether or not installed when the
         Total Loss occurred, on an as-is where-is basis and without recourse or
         warranty (save as to freedom from Sublessor Liens), and Sublessor shall
         procure the execution and delivery of such  bills  of  sale  and  other
         instruments  as  Sublessee  may  reasonably  request  to  evidence such
         transfer, free and clear of all rights of Owner Trustee  and  Sublessor
         and (y) any other rights in respect of the Aircraft or any part thereof
         or any further requisition or insurance proceeds  in  respect  thereof.
         Sublessee  shall  indemnify  Owner  Trustee and Sublessor for all fees,
         expenses  and  Taxes  incurred  by  Owner  Trustee  and   Sublessor  in
         connection with any such transfer.

22.2.3   If a Total  Loss of the  Aircraft  or the  Airframe  occurs  during the
         Sublease  Term,  Sublessee's  obligation to pay Rent shall  continue in
         full force and effect until the date of payment of the Agreed Value and
         all other  amounts  due under this  Agreement  and upon  payment of the
         Agreed Value and all other sums due under this  Agreement,  the leasing
         of the Aircraft shall immediately  terminate,  but without prejudice to
         the continuing  obligations of Sublessee (as to indemnity or otherwise)
         under this  Agreement  and  Sublessor  and, if not  already  recovered,
         Sublessee shall proceed diligently and co-operate fully with each other
         in the recovery of the Total Loss Proceeds.

22.3     Total Loss of Engines

22.3.1   Upon an Engine Total Loss of any Engine not  installed on the Aircraft,
         or an Engine  Total Loss of an Engine  installed  on the  Airframe  not
         involving a Total Loss of the  Airframe  (in either  case,  a Destroyed
         Engine),  Sublessee shall give Sublessor  prompt written notice thereof
         and Sublessee shall replace the Destroyed  Engine as soon as reasonably
         possible by  procuring  that Owner  Trustee  acquires,  at  Sublessee's
         expense,  title to another engine  complying with the  requirements  of
         Clause 16.6. Such  Replacement  Engine shall upon  acquisition by Owner
         Trustee be an Engine as defined herein.

22.3.2   Sublessee  agrees  to take  such  action as  Sublessor  may  reasonably
         request in order that any such Replacement Engine shall be the property
         of  Owner  Trustee,  and  leased  hereunder  on the  same  terms as the
         Destroyed Engine.  Sublessee's obligation to pay Rent shall continue in
         full force and effect,  but an amount equal to the Total Loss  Proceeds
         received by  Sublessor  or Lender,  as the case may be, with respect to
         the Destroyed Engine, less any cost, expenses, Taxes or duties incurred
         in  connection  with  the  collection   thereof,   shall,   subject  to
         Sublessor's  right to deduct therefrom any amounts then due and payable
         by Sublessee under this Agreement, be paid to Sublessee.

22.3.3   Immediately upon the  effectiveness of such  substitution,  and without
         further act,  title to the  replaced  Engine  shall  thereupon  vest in
         Sublessee,  in an as is,  where is  condition,  free  and  clear of all
         rights and Security  Interests of Owner  Trustee,  Lender and Sublessor
         and shall no longer be deemed an Engine hereunder.

22.4     Requisition

22.4.1   During any requisition for use or hire of the  Aircraft,  any Engine or
         Part that does not constitute a Total Loss:

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

         (ii)     so long as no Default or Event of Default has  occurred and is
                  continuing,  Sublessee  shall be  entitled to any hire paid by
                  the requisitioning authority in respect of the Sublease Term;

         (iii)    Sublessee  shall, as soon as practicable  after the end of any
                  such  requisition,  cause  the  Aircraft  to be put  into  the
                  condition required by this Agreement.

22.4.2   If the Aircraft is under  requisition  for hire at the Expiry Date, the
         leasing of the Aircraft under this  Agreement  shall continue until the
         earlier of (x) when the  Aircraft  becomes a Total  Loss and  Sublessor
         receives the Agreed Value  together with any other amounts then due and
         unpaid under this Agreement and (y) when the Aircraft is returned prior
         to becoming a Total Loss, and Sublessee satisfies the Return Conditions
         provided that:

         (i)      the  obligations of Sublessee  including in respect of payment
                  of Rent including Maintenance Reserves, if any, shall continue
                  in full force and effect  until the  leasing  ends except that
                  during the  continuation  of the requisition for hire while it
                  does not constitute a Total Loss,  Sublessee shall be released
                  from  those  of its  obligations  that  it is  prevented  from
                  performing as a result of the requisition of the Aircraft;

         (ii)     unless a Total Loss has  occurred  (in which case  Clause 22.2
                  shall  apply),  Sublessee  shall be obliged to  redeliver  the
                  Aircraft to Sublessor in accordance with Clause 23;

         (iii)    provided  no  Default  or  Event  of  Default  is  continuing,
                  Sublessee   shall  be  entitled  to  receive  and  retain  any
                  requisition payments made in respect of the Aircraft; and

         (iv)     Sublessee  shall  indemnify  Sublessor  for any  Losses  which
                  Sublessor suffers (Sublessor  undertakes to use its reasonable
                  best efforts to mitigate such Losses) as a result of Sublessee
                  returning the Aircraft to Sublessor after the Expiry Date.

23.      REDELIVERY

23.1     Redelivery of Aircraft

         On the  Redelivery  Date,  Sublessee  shall,  unless  a Total  Loss has
         occurred,   redeliver  the  Aircraft  and  the  Aircraft  Documents  to
         Sublessor at Sublessee's  cost and expense at the Redelivery  Location.
         If the  Aircraft  has been  damaged  and is being  repaired in a timely
         manner,  then the term of the Sublease will be extended and Sublessee's
         obligations  under  this  Agreement  shall  continue  in full force and
         effect and during the course of such  repair and, so long as no Default
         or  Event  of  Default  shall  have  occurred  and be  continuing,  the
         Sublessor will make  insurance  proceeds  available to accomplish  such
         repairs as provided in Clause 22. When the repairs are  completed,  the
         Aircraft  shall  be  redelivered  to  Sublessor.  At  the  time  of the
         redelivery of the Aircraft:

         (i)      the Aircraft shall be free and clear of all Security Interests
                  other than Sublessor Liens;

         (ii)     all  maintenance  to the  Aircraft due for  performance  on or
                  before  the  Redelivery  Date  shall  have been  completed  in
                  accordance with this Agreement;

         (iii)    the  Aircraft  shall  be  in   compliance   with   the  Return
                  Conditions;

         (iv)     the  Aircraft   shall   comply  with  such  other   reasonable
                  requirements  as Sublessor may request that  Sublessee has had
                  timely  notice of and that  Sublessor  has  agreed to pay for;
                  provided, however, that if compliance with Sublessor's request
                  is the sole  cause of a delay in the  return  of the  Aircraft
                  beyond the Expiry  Date,  then Rent shall abate for the period
                  of such delay solely  attributable  to Sublessee's  compliance
                  with Sublessor's request; and

         (v)      any service  bulletin kits which are allocated to the Aircraft
                  at  no  charge  by  the  Manufacturer  and  not  delivered  to
                  Sublessor  as at the  Redelivery  Date  will be  shipped  to a
                  location specified by Sublessor at Sublessee's cost.

23.2     Final Inspection

         Immediately  prior to redelivery of the Aircraft,  Sublessee shall make
         the Aircraft  available to Sublessor for inspection (Final  Inspection)
         at the Redelivery Location in order to verify that the condition of the
         Aircraft  complies  with the Return  Conditions.  The Final  Inspection
         shall be long enough to permit Sublessor to:

         (i)      inspect the Aircraft Documents;

         (ii)     inspect the Aircraft and uninstalled Parts;

         (iii)    inspect the Engines,  including without limitation (i) a video
                  boroscope inspection of (A) the low pressure and high pressure
                  compressors  and (B) turbine  area and (ii)  engine  condition
                  runs.

23.3     Discrepancies

         Sublessee shall repair all  discrepancies  discovered  during the Final
         Inspection and demonstration  flight,  which exceed  maintenance manual
         allowable  limits,  and shall correct all discrepancies in the Aircraft
         Documents.  When  Sublessee  has complied  with the  provisions of this
         Clause 23.3,  Sublessee  shall  redeliver  the Aircraft to Sublessor at
         Sublessee's cost and expense at the Redelivery Location.

23.4     Non-compliance

23.4.1   To the extent that, at the time of Final  Inspection,  the condition of
         the Aircraft does not comply with this  Agreement  (except  Clause 23.1
         (iv)), Sublessee shall at Sublessor's option:

         (i)      immediately  rectify the  non-compliance and to the extent the
                  non-compliance   extends  beyond  the  Redelivery   Date,  the
                  Sublease  Term  will  be  automatically   extended  until  the
                  non-compliance  has  been  rectified  and  Sublessee  shall be
                  required  to pay Rent to  Sublessor  during that period at the
                  rate equal to two (2) times the daily  Basic Rent  (Basic Rent
                  per month divided by thirty (30)) per day payable  monthly or,
                  if  earlier,  on the  date  on  which  the  non-compliance  is
                  rectified  and the  return  of the  Aircraft  is  accepted  by
                  Sublessor; or

         (ii)     redeliver the Aircraft to Sublessor  and indemnify  Sublessor,
                  and  provide  cash  to  Sublessor  in  an  amount   reasonably
                  satisfactory  to  Sublessor  as security  for that  indemnity,
                  against the cost of putting the  Aircraft  into the  condition
                  required by this Agreement.

23.4.2   Sublessor's option in Clause23.4 is not available to Sublessor provided
         that (i) Sublessee has notified  Sublessor of its intent to rectify the
         non-compliance  prior to the Redelivery Date and (ii) Sublessee will in
         the   reasonable   opinion  of   Sublessor  be  able  to  rectify  such
         non-compliance on or before Redelivery Date.

23.4.3   For the avoidance of doubt, Sublessor shall not be entitled to exercise
         its option under Clause  23.4.1 and  Sublessee  shall suffer no loss or
         penalty to the extent that the Aircraft does not, on Final  Inspection,
         comply with Clause 23.1 (iv) but is  otherwise in  compliance  with the
         Return Conditions.



<PAGE>


23.5     Acknowledgment

         Provided  Sublessee  has  complied  with  its  obligations  under  this
         Agreement,  following  redelivery  of  the  Aircraft  by  Sublessee  to
         Sublessor at the  Redelivery  Location,  the parties  shall  execute an
         acknowledgment  confirming  that Sublessee has redelivered the Aircraft
         to Sublessor in accordance  with this  Agreement  substantially  in the
         form of Schedule 13.

23.6     Storage

         Notwithstanding  the  performance  in  full  by  Sublessee  of all  its
         obligations  under this Clause 23,  Sublessor may require  Sublessee to
         continue to lease the  Aircraft  from  Sublessor  for a period of up to
         thirty (30) days from the Expiry Date.  During this  period,  Sublessee
         will have no obligations  under this Agreement except to park and store
         the Aircraft in accordance with  Manufacturer's  recommended short term
         storage  program  at  one  of  Sublessee's  storage  facilities  and to
         continue  Insurances  in respect of the Aircraft at  Sublessee's  cost.
         Such  parking  and storage is being made at the risk of  Sublessor  and
         Sublessee  shall have no liability  for Losses  beyond those covered by
         the Insurances  except for any Losses arising out of Sublessee's  gross
         negligence or willful misconduct arising during such period.  Sublessee
         also  agrees  during  this  period to  ferry/fly  the  Aircraft to such
         location as Sublessor may require. Sublessee will not otherwise utilize
         the Aircraft  during this  period.  Any out of pocket costs or expenses
         incurred by  Sublessee  during this period with respect to the Aircraft
         for storage,  insurance or such  ferry/flight  shall be  reimbursed  by
         Sublessor  to  Sublessee  promptly  after  demand  and upon  receipt by
         Sublessor of an invoice and documentation,  reasonably  satisfactory to
         Sublessor, of such costs and expenses.

24.      EVENTS OF DEFAULT

24.1     Notice

         Sublessee will promptly notify Sublessor if Sublessee  becomes aware of
         the occurrence of any Default.

24.2     Events

         Each of the following  events will constitute an Event of Default and a
         material breach of this Agreement:

         (i)      Non-payment:  Sublessee  fails to pay any amount payable by it
                  under the Transaction Documents or the Other Agreements in the
                  currency  in which such sum fell due in respect of payments of
                  Rent  or  Maintenance  Reserves,  if  any,  within  three  (3)
                  Business  Days of the due date for  payment  thereof  and,  in
                  respect of any other  payments,  within five (5) Business Days
                  of the date of receipt of written notice for payment thereof;

         (ii)     Insurance:  Insurance cover on or with respect to the Aircraft
                  for the benefit of Sublessor (and any  additional  insured) is
                  not  maintained  in  accordance  with the  provisions  of this
                  Agreement  or the  Aircraft is  operated  outside the scope of
                  such insurance coverage; or

         (iii)    Delivery:  Sublessee  fails to take  Delivery of the  Aircraft
                  when obligated to do so under the terms of this Agreement; or

         (iv)     Redelivery:   Sublessee   fails  to  return  the  Aircraft  to
                  Sublessor on the Redelivery Date in accordance with Clause 23;
                  or

         (v)      Breach:   Sublessee   defaults  in  the  due  performance  and
                  observance   of  any  other   obligations   contained  in  the
                  Transaction  Documents and such default is not remedied within
                  fourteen (14) days of becoming aware of such default; or

         (vi)     Representation: Any representation, warranty or statement made
                  or deemed to be made by Sublessee in the Transaction Documents
                  or in any  certificate,  statement or opinion  delivered by it
                  hereunder or in connection  herewith is incorrect,  inaccurate
                  or misleading  in any material  respect when made or deemed to
                  be made or if the effects or  consequences  of the  incorrect,
                  inaccurate or misleading representation, warranty or statement
                  are capable of cure and  Sublessee  fails to cure such effects
                  or  consequences  within twenty (20) days after becoming aware
                  of such default; or

         (vii)    Approvals:  Any  governmental  or other  consent,  license  or
                  authorization  required by law for the validity or legality of
                  the Transaction Documents or the performance hereof or thereof
                  (other  than any such which may be  required to be obtained by
                  Sublessor)  is withdrawn or ceases,  for any reason,  to be in
                  full  force and  effect or is not  renewed  or  obtained  when
                  required  and  such  withdrawal,   cessation,  non-renewal  or
                  non-obtaining  in the opinion of Sublessor  may  prejudice the
                  rights of Sublessor  under this Agreement or in the reasonable
                  opinion of  Sublessor  may have a material  adverse  effect on
                  Sublessee's  obligation to perform its obligations  under this
                  Agreement; or

         (viii)   Registration:

                  (a)      the  Registration  of the Aircraft is canceled  other
                           than as a result of an act or omission  of  Sublessor
                           or another  Indemnitee  including Owner Trustee or an
                           affiliate of the Owner Trustee and Sublessor;

                  (b)      Sublessee  ceases to be a  certified  US Air  Carrier
                           authorized to transport passengers in common carriage
                           in accordance  with the  requirements  of the Federal
                           Aviation  Act of 1958,  as  amended,  and the  rules,
                           regulations and standards prescribed thereunder; or

         (ix)     Possession: Sublessee abandons the Aircraft or the Engines, or
                  Sublessee  or  any   Permitted   Air  Carrier  no  longer  has
                  unencumbered   control   (other  than   Permitted   Liens)  or
                  possession  of the  Aircraft or Engines,  except as  otherwise
                  permitted by this Agreement; or

         (x)      Discontinuation:  Sublessee  threatens  to or  temporarily  or
                  permanently   discontinues  business  or  sells  or  otherwise
                  disposes of all or substantially all of its assets; or

         (xi)     Adverse  Change:  A  material  adverse  change  occurs  in the
                  financial  condition  of  Sublessee  which  in the  reasonable
                  opinion of Sublessor  may have a material  negative  impact on
                  Sublessee's ability to perform its obligations hereunder; or

         (xii)    Cross Default: Any Financial  Indebtedness of Sublessee (in an
                  aggregate  amount in excess of  US$1,000,000 or its equivalent
                  in  other  currencies)  becomes  due  and  payable,  or may be
                  declared  due and  payable,  prior to its stated  maturity  by
                  reason  of  default  by  Sublessee   (having   regard  to  any
                  applicable grace period) or any such Financial Indebtedness is
                  not paid on the due date for payment  thereof (as  extended by
                  any applicable grace period); or

         (xiii)   Insolvency:   Sublessee   is  declared   bankrupt  or  becomes
                  insolvent  or is  unable to pay its debts as and when the same
                  fall  due or  declares  a  moratorium  on the  payment  of its
                  indebtedness  or  makes  an  assignment  for  the  benefit  of
                  creditors generally or is subject to bankruptcy,  liquidation,
                  debt negotiations or any analogous proceedings; or

         (xiv)    Proceedings:  Any proceedings,  resolutions,  filings or other
                  steps  are  instituted  or  threatened  with  respect  to  the
                  Sublessee  or  a  substantial  part  of  Sublessee's  property
                  relating to the  bankruptcy,  liquidation,  reorganization  or
                  protection  from  creditors of  Sublessee.  If  instituted  by
                  Sublessee  or  done  by the  Sublessee,  the  same  will be an
                  immediate  Event of Default.  If instituted by another person,
                  the  same  will  be an  Event  of  Default  if not  dismissed,
                  remedied or relinquished within twenty (20) days; or

         (xv)     Judgements:  Any order,  judgement or decree is entered by any
                  court of competent jurisdiction appointing a receiver, trustee
                  or  liquidator  of  Sublessee  or a  substantial  part  of its
                  property  or if a  substantial  part of its  property is to be
                  sequestered.  If  instituted  by  Sublessee  or  done  by  the
                  Sublessee,  the same will be an immediate Event of Default. If
                  instituted  by  another  person,  the same will be an Event of
                  Default if not  dismissed,  remedied  or  relinquished  within
                  twenty (20) days; or

         (xvi)    Air Navigation Charges: Any competent authority has unpaid Air
                  Navigation Charges due from Sublessee (unless such charges are
                  being  contested in good faith and by appropriate  proceedings
                  and  such  proceedings  do  not  involve  any  danger  of  the
                  detention,  interference  with  the  use or  operation,  sale,
                  forfeiture or loss of the  Aircraft)  and such charges  remain
                  outstanding  of a period  of ten (10)  days  from the due date
                  thereof; provided that such ten (10) day grace period will not
                  apply if there is a danger of detention, interference with the
                  use or operation, sale, forfeiture or loss of the Aircraft; or

         (xvii)   Airport  Charges:  Any airport has unpaid Airport  Charges due
                  from  Sublessee  (unless such  charges are being  contested in
                  good faith and by appropriate proceedings and such proceedings
                  do not involve any danger of the detention,  interference with
                  the  use  or  operation,  sale,  forfeiture  or  loss  of  the
                  Aircraft) and such charges remain  outstanding for a period of
                  ten (10) days from the due date  thereof;  provided  that such
                  ten (10) day grace  period will not apply if there is a danger
                  of detention,  interference  with the use or operation,  sale,
                  forfeiture or loss of the Aircraft;

         (xviii)  Other  Default:  An Event of Default is continuing  unremedied
                  under any Other Agreement  between  Sublessee and Sublessor or
                  another Sublessor or sub-sublessor  that either (i) shares the
                  same general partner or controlling shareholder with Sublessor
                  or (ii) whose  beneficiary  shares the same general partner or
                  controlling shareholder with Sublessor; or

         (xix)    Sub-sublessee:  Any  approved  sub-sublessee  acts  so  as  to
                  prevent  present or future  performance  by  Sublessee  of its
                  obligations under this Agreement.

24.3     Sublessor's Rights

24.3.1   Upon the  occurrence  of any Event of Default,  all rights of Sublessee
         under this Agreement and with respect to the Aircraft will  immediately
         cease  and   terminate,   but  without   prejudice  to  the  continuing
         obligations of Sublessee under this Agreement. Without prejudice and in
         all cases in  addition  to any other  rights of  Sublessor  under  this
         Agreement or under applicable law, Sublessor may upon the occurrence of
         any Event of Default exercise all or any of the following rights at its
         option:

         (i)      require  that  Sublessee  immediately  move  the Aircraft to a
                  location specified by Sublessor;

         (ii)     for  Sublessee's  account do anything  that may  reasonably be
                  required to cure any default and recover  from  Sublessee  all
                  reasonable costs, including reasonable legal fees and expenses
                  incurred in doing so and interest thereon at the Default Rate;
                  or

         (iii)    proceed  by  appropriate  court  action or  actions to enforce
                  performance  of this  Agreement or to recover  damages for the
                  breach of this Agreement; or

         (iv)     enter  upon the  premises  where  the  Airframe  or any or all
                  Engines  or any or all Parts are  located  or  believed  to be
                  located  and take  immediate  possession  of and  remove  such
                  Airframe,  Engine or Parts  without  the  necessity  for first
                  instituting   proceedings,   or  by  summary   proceedings  or
                  otherwise,  and Sublessee shall comply therewith,  all without
                  liability  to  Sublessor  for or by  reason  of such  entry or
                  taking  possession,  whether for the  restoration or damage to
                  property caused by such taking or otherwise;

         (v)      apply all or any portion of the Security  Deposit,  the Letter
                  of Credit and any other  security  deposit  held by  Sublessor
                  pursuant to any Other Agreements to any amounts due.

24.3.2   Whether or not Sublessor shall have exercised, or shall thereafter  any
         time exercise, any of its rights under Clause 24.3.1 (i) or (iv)  above
         with respect to all or any part  of  the  Aircraft,  Sublessor  may, by
         written notice to Sublessee specifying a payment  date not earlier than
         ten (10) days from the date of such notice, demand  that  Sublessee pay
         to Sublessor, and Sublessee shall pay Sublessor, on  the  payment  date
         specified in such notice as liquidated damages and not as a penalty (in
         lieu of the installments of Rent due for periods commencing on or after
         the payment date in such notice), any unpaid installments of  Rent  due
         for periods prior to the payment date specified in such notice plus the
         present value of the remaining installments of Rent during the Sublease
         Term, using in each case a discount rate of the amount of interest then
         paid on U.S. Treasury Bills of similar maturity. In addition, Sublessee
         shall be liable for the amounts set forth in 24.4 (ii ) and (iii).

24.3.3   If an Event of  Default  occurs,  Sublessor  may  sell or  re-lease  or
         otherwise  deal with the  Aircraft  at such time and in such  manner as
         Sublessor  considers  appropriate in a commercially  reasonable manner,
         free and clear of any interest of Sublessee  as if this  Agreement  had
         never been entered into and as if Sublessee had never made any payments
         hereunder. While an Event of Default is continuing,  Sublessee will not
         operate the Aircraft without the consent of Sublessor.

24.3.4   If an Event of Default has occurred and is  continuing,  Sublessor  may
         take all steps  necessary to de-register the Aircraft in and export the
         Aircraft from the State of Registration.

24.4     Default Payments


         Sublessee shall be liable for:

         (i)      any  and  all  unpaid  Rent  due hereunder before or after any
                  termination hereof;

         (ii)     any  and  all unpaid Supplemental Rent due hereunder before or
                  after any termination hereof;

         (iii)    all  costs  and  expenses   (including   attorney's  fees  and
                  disbursements)  incurred by Sublessor in connection with or as
                  a result of any  Event of  Default  or  exercise  of  remedies
                  hereunder,  including,  but not  limited to, (i) all costs and
                  expenses incurred in connection with recovering  possession of
                  the Aircraft  and in carrying  out any works or  modifications
                  required to place the Aircraft in the  condition  specified in
                  Clause 23.1 and remarketing the Aircraft, (ii) interest at the
                  Default  Rate on any  amount  not  paid  when due  under  this
                  Agreement and (iii) an amount  sufficient to fully  compensate
                  Sublessor  for any loss of or damage to  Sublessor's  residual
                  interest in the Aircraft.

         All costs and expenses  referred to in the preceding  sentence shall be
         payable  by  Sublessee  upon  demand  by  Sublessor   unless  otherwise
         specified in this  Agreement.  All such  obligations  shall survive any
         termination  of this  Agreement  or the leasing of the  Aircraft or any
         portion thereof hereunder.

24.5     Cumulative Rights

         Except as otherwise  expressly provided above, no remedy referred to in
         this  Clause  24 is  intended  to  be  exclusive,  but  each  shall  be
         cumulative  and in  addition to any other  remedy  referred to above or
         otherwise  available to Sublessor at law or in equity.  The exercise or
         beginning of exercise by Sublessor of any one or more of such  remedies
         shall not preclude the  simultaneous  or later exercise by Sublessor of
         any or all such  other  remedies.  No  express  or  implied  waiver  by
         Sublessor of any Event of Default  hereunder shall in any way be, or be
         construed to be, a waiver of any future or subsequent Event of Default.

25.      ASSIGNMENT AND TRANSFER

25.1     By Sublessee

         No assignment,  novation,  transfer or Security Interest may be made by
         Sublessee  in any of its rights with respect to the  Aircraft,  Engine,
         Parts,  this Agreement or the other  Transaction  Documents (other than
         Permitted Liens).

25.2     By Sublessor

         Subject to Sublessee's rights pursuant to this Agreement, Sublessor may
         at any time and without  Sublessee's  consent sell,  assign or transfer
         its  rights  and  interest  hereunder  and under the other  Transaction
         Documents to a third party,  (Sublessor's Assignee).  Sublessor will in
         good  faith  co-operate  with  Sublessee  to ensure  minimum  practical
         disturbance or cost in connection  with such  assignment or transfer of
         rights and interest  hereunder.  Sublessee agrees to co-operate in good
         faith with  Sublessor in such sale,  assignment or transfer and provide
         Sublessor and Sublessor's  Assignee with such reasonable  assistance as
         Sublessor may require, including but not limited to assisting in any of
         Sublessor's and Sublessor's Assignee's efforts to minimize or eliminate
         any Taxes related to such  assignment or transfer.  For a period of two
         (2) years after any such sale or assignment  and at  Sublessee's  cost,
         Sublessee  will continue to name Owner Trustee,  Sublessor,  Lender and
         any Maintenance  Facilities or parts or equipment vendors identified by
         Sublessor  as  additional  insureds in  accordance  with the  insurance
         requirements set out in Clause 21.

25.3     Assignment to Lender

         Subject to Sublessee's  rights under this Agreement,  Owner Trustee and
         Sublessor may at any time grant  Security  Interests  over the Aircraft
         and the benefit of this Agreement,  the other Transaction Documents and
         any other  agreement  related to the Aircraft to any lender as security
         for Owner Trustee's  obligations to such lender. Owner Trustee's rights
         to grant any such Security  Interests  shall be subject only to receipt
         by Sublessee of an acknowledgment  from or on behalf of Lender relating
         to quiet  enjoyment  by  Sublessee  of the  Aircraft  as referred to in
         Clause 25.4.2.

25.4     Sublessee Co-operation

25.4.1   On request by Sublessor, Sublessor's Assignee, Owner Trustee or Lender,
         Sublessee will, at Sublessee's sole expense, promptly execute all  such
         documents as Sublessor, Sublessor's Assignee, Owner Trustee  or  Lender
         may reasonably require (including such estoppel certificate as referred
         to  in  Clause 12.4  to  confirm  Sublessee's  obligations  under  this
         Agreement and the other Transaction Documents), to  obtain  Sublessee's
         confirmation  that  no  Default  is  outstanding and for the purpose of
         perfecting and ensuring and maintaining the perfection  of any Security
         Interest granted by Owner Trustee and Sublessor over the Aircraft, this
         Agreement, the other  Transaction  Documents  or  any  other  agreement
         related to the Aircraft.  Sublessee  will  promptly  provide  all other
         reasonable  assistance  and  co-operation  at  Sublessor's  expense  to
         Sublessor, Sublessor's Assignee, Owner Trustee or Lender in  connection
         with any of the matters referred to in this Clause 25 or the perfection
         and maintenance of any related Security Interest,  the  making  of  any
         necessary changes to t he  Insurances,  the  making  of  any  necessary
         filings and registrations in the State of Incorporation or the State of
         Registration or the provision of any appropriate counsel's  opinions in
         relation to Sublessee's obligations.

25.4.2   Sublessor  will obtain for the benefit of Sublessee an  acknowledgement
         from  Sublessor's  Assignee or Lender  that,  so long as no Default has
         occurred and is  continuing  hereunder,  such person will not interfere
         with  Sublessee's  quiet,  peaceful use and  enjoyment of the Aircraft,
         substantially  in the  form  of  Schedule  11 or  such  other  form  as
         Sublessor's Assignee or Lender may reasonably require.

25.5     Sublessor Includes Sublessor's Assignee and Lender

         Wherever the term  "Sublessor" is used in this Agreement in relation to
         any of the  provisions  relating to  registration,  title,  disclaimer,
         indemnity  and insurance  respectively,  the term  "Sublessor"  will be
         deemed to include Sublessor's Assignee and Lender.



<PAGE>


26.      MISCELLANEOUS PROVISIONS

26.1     Rights Cumulative, Waivers

         The rights of Sublessor  under this  Agreement are  cumulative,  may be
         exercised  as  often  as  Sublessor  considers  appropriate  and are in
         addition to  Sublessor's  rights  under the general  law. The rights of
         Sublessor  against  Sublessee or in relation to the  Aircraft,  whether
         arising under this  Agreement or the general law,  shall not be capable
         of being  waived  or  varied  otherwise  than by an  express  waiver or
         variation in writing;  and in particular any failure to exercise or any
         delay in exercising any of such rights shall not operate as a waiver or
         variation  of that or any other such right;  any  defective  or partial
         exercise of any of such rights  shall not preclude any other or further
         exercise  of that or any  other  such  right;  and no act or  course of
         conduct or negotiation  on  Sublessor's  part or on its behalf shall in
         any way  preclude it from  exercising  any such right or  constitute  a
         suspension or any variation of any such right.

26.2     Delegation

         Sublessor  may  delegate  to any  person or  persons  all or any of its
         rights,  powers or discretions vested in it by this Agreement,  and any
         such  delegation may be made upon such terms and conditions and subject
         to such  regulations  (including power to sub-delegate) as Sublessor in
         its absolute discretion thinks fit.

26.3     Expenses

         So long as the Aircraft is tendered for Delivery to Sublessee  pursuant
         to this Agreement, Sublessee shall pay to Sublessor on demand:

         (i)      all reasonable  expenses  including legal,  professional,  and
                  out-of-pocket  expenses  incurred or payable by  Sublessor  in
                  connection  with any  amendment  to or  extension  of or other
                  documentation  requested by Sublessee in  connection  with, or
                  the granting of any waiver or consent under this  Agreement or
                  the monitoring of compliance by Sublessee with this Agreement,
                  but in the case of such monitoring of compliance, only if upon
                  such monitoring Sublessee is found to be in Default under this
                  Agreement; and

         (ii)     all expenses  including legal,  survey and other costs payable
                  or incurred  by  Sublessor  following a Default in  connection
                  with the  enforcement of or preservation of any of Sublessor's
                  rights under this Agreement, or in respect of the repossession
                  of the Aircraft.

         All expenses  payable pursuant to this Clause 26.3 shall be paid in the
currency in which they are incurred by Sublessor.



<PAGE>


26.4     Time of Essence

         The time  stipulated in this Agreement for all payments by Sublessee to
         Sublessor  and  for  the  prompt   performance  of  Sublessee's   other
         obligations  under  this  Agreement  will be of the  essence  for  this
         Agreement.

26.5     Entire Agreement

         The Transaction  Documents are the sole and entire  agreements  between
         Sublessor and Sublessee in relation to the leasing of the Aircraft, and
         supersede all previous agreements in relation to that leasing.

26.6     Further Assurances

         The  parties   shall  take  such  action  as  Sublessor  and  Sublessee
         reasonable  consider to be in furtherance  of the commercial  intent of
         the  parties  under  the  Transaction   Documents  including,   without
         limitation,  such action as may be required  properly to transfer title
         to engines and parts as  contemplated  in this  Agreement in compliance
         with the laws of the lex  situs of the  relevant  engine or part at the
         relevant time.

26.7     Language

         All notices to be given under this  Agreement  will be in English.  All
         documents  delivered to Sublessor pursuant to this Agreement will be in
         English  or, if not in  English,  will be  accompanied  by a  certified
         English translation.  If there is any inconsistency between the English
         version of this  Agreement and any version in any other  language,  the
         English version will prevail.

26.8     Variation

         The  provisions  of this  Agreement  shall  not be  varied  or  amended
         otherwise than by an instrument in writing  executed by or on behalf of
         Sublessor and Sublessee.

26.9     Invalidity of Any Provision

         If  any  provision  of  this  Agreement  becomes  invalid,  illegal  or
         unenforceable in any respect under any law, the validity,  legality and
         enforceability  of the  remaining  provisions  shall  not in any way be
         affected or impaired.

26.10    Survival

         All indemnities  and other  obligations of Sublessee which arise or are
         attributable to circumstances  occurring during the Sublease Term shall
         survive,  and  remain in full  force and  effect,  notwithstanding  the
         expiration or other termination of this Agreement or the leasing of the
         Aircraft hereunder.

26.11    Reimbursement

         If  Sublessee  defaults in the  performance  of any of its  obligations
         under this  Agreement  that can be  rectified by the spending of money,
         Sublessor  shall be  entitled  (but not  obliged)  to  expend  money to
         rectify such matter and Sublessee shall  reimburse  Sublessor on demand
         the money so expended.  Any  expenditure by Sublessor  pursuant to this
         Clause 26.11 shall not  prejudice the rights of Sublessor in respect of
         any Default or Event of Default.

26.12    Press Releases

         The parties will give copies to one another, in advance if possible, of
         all news,  articles  and other  releases  provided to the public  media
         regarding this Agreement or the Aircraft.

26.13    Power of Attorney

         Sublessee hereby irrevocably appoints Sublessor as its attorney for the
         purpose of putting into effect the intent of this  Agreement  following
         an  Event  of  Default,   including  without  limitation,  the  return,
         repossession,  deregistration  and  exportation  of  the  Aircraft.  To
         evidence this appointment, Sublessee has executed the power of attorney
         in the form of Schedule 8. Sublessee will take all steps required under
         the laws of the State of Registration to provide such power of attorney
         to Sublessor.

26.14    Usury Laws

         Notwithstanding  anything to the contrary in the Transaction Documents,
         Sublessee  will  not be  obligated  to pay  Default  Interest  or other
         interest in excess of the maximum  non-usurious  interest  rate,  as in
         effect  from time to time,  which  may by  applicable  law be  charged,
         contracted  for,  reserved,  received  or  collected  by  Sublessor  in
         connection with the Transaction Documents. During any period of time in
         which the then applicable highest lawful rate is lower than the Default
         Interest  rate,  Default  Interest  will  accrue and be payable at such
         highest  lawful rate;  however,  if at later times such highest  lawful
         rate is greater than the Default Interest rate, then Sublessee will pay
         Default  Interest at the highest lawful rate until the Default Interest
         which is paid by  Sublessee  equals the amount of interest  which would
         have been payable in  accordance  with the  interest  rate set forth in
         Schedule 2.

26.15    Confidentiality

         The Transaction  Documents and all non-public  information  obtained by
         either party about the other are confidential and are between Sublessor
         and  Sublessee  only  and  the  commercial  terms  and  other  material
         provisions of this  Agreement will not be disclosed by a party to third
         parties  (other  than to  such  party's  auditors,  lenders  and  legal
         advisors)  without the prior written  consent of the other party except
         in connection with  enforcement of rights  hereunder.  If disclosure is
         required as a result of applicable  law,  Sublessee and Sublessor  will
         co-operate with one another to obtain confidential  treatment as tot he
         commercial  terms  and other  material  provisions  of this  Agreement;
         provided,  however,  if they are  unable  to obtain  such  confidential
         treatment  and  disclosure  is required by  applicable  law,  then such
         disclosure may be made in accordance with such law.

26.16    Counterparts

         This Agreement may be executed in any number of identical counterparts,
         each of  which  will be  deemed  to be an  original,  and all of  which
         together  will be  deemed to be one and the same  instrument  when each
         party has signed and delivered one such counterpart to the other party.
         Delivery of an executed counterpart of this Agreement by facsimile will
         be deemed effective as delivery of an originally executed  counterpart.
         Any party  delivering  an executed  counterpart  of this  Agreement  by
         facsimile  will  also  deliver  an  originally  executed   counterpart;
         provided,  however,  the failure of any party to deliver an  originally
         executed  counterpart of this Agreement will not affect the validity or
         effectiveness of this Agreement.

26.17    Bankruptcy

         It is the intention of the parties that the Sublessor shall be entitled
         to the  benefits  of 11  U.S.C.  1110  with  respect  to the  right  to
         repossess the Airframe,  Engines and Parts as provided  herein,  and in
         any  circumstances  where more than one  construction  of the terms and
         conditions of this Agreement is possible,  a  construction  which would
         preserve such benefits shall control over any construction  which would
         not preserve such benefits or would render them doubtful. To the extent
         consistent  with the  provisions  of 11  U.S.C.  1110 or any  analogous
         section of the Federal  bankruptcy  laws, as amended from time to time,
         it is hereby  expressly agreed and provided that,  notwithstanding  any
         other  provisions of the Federal  bankruptcy laws, as amended from time
         to time , any right of the Sublessor to take possession of the Aircraft
         in  compliance  with the  provisions  of this  Agreement  shall  not be
         affected by the  provisions  of 11 U.S.C.  362 or 363, as amended  from
         time to time, or any analogous provisions of any superseding statute or
         any power of the bankruptcy  court to enjoin such taking of possession.
         This Agreement is a true lease and not one intended as security.

27.      NOTICES

         Any  notice or other  communication  under or in  connection  with this
         Agreement  shall be in writing and shall be  delivered  personally,  by
         reputable  overnight courier or express service or by post or facsimile
         transmission  to the  respective  addresses or facsimile  numbers given
         below or such other  address or facsimile  number as the  recipient may
         have  notified to the sender in  writing.  Proof of posting or despatch
         shall be  deemed  to be  proof  of  receipt.  Notice  shall  be  deemed
         received:

         (i)      in  the  case  of  a  letter,  on the fifth Business Day after
                  posting;  and

         (ii)     in the case of a facsimile, on the  Business  Day  immediately
                  following the date of despatch or transmission.

         In the case of a notice  sent by  expedited  delivery,  notice  will be
         deemed received on the date of delivery set forth in the records of the
         person which  accomplished the delivery.  If any notice is sent by more
         than one of the above listed methods, notice will be deemed received on
         the earliest  possible  date in accordance  with the above  provisions.
         Notices will be addressed as follows:

         Sublessor:                 INDIGO AVIATION AB (publ)
         Address:                   Sodra Forstadsgatan 4
                                    SE-211 43 Malmo, Sweden
         Attention:                 Legal Department
         Facsimile:                 +46 40 302350

         Sublessee:                 FRONTIER AIRLINES, INC.
         Address:                   12015 E. 46th Avenue
                                    Denver, Colorado 80239-3116
                                    U.S.A.
         Attention:                 General Counsel
         Facsimile:                 (303) 371 9669


28.      GOVERNING LAW AND JURISDICTION

28.1     New York Law

         This  Agreement  will in all  respects be governed by and  construed in
         accordance with the laws of the State of New York including all matters
         of construction,  validity and performance but excluding  section 7-101
         of the General  Obligations Law  (notwithstanding  the conflict laws of
         the State of New York).

28.2     Non-exclusive Jurisdiction in New York

         Each  of  Sublessor  and  Sublessee  (a)  irrevocably   submit  to  the
         non-exclusive  jurisdiction of the Commercial Part of the Supreme Court
         of the State of New York,  sitting  in the  County of New York,  or for
         matters  not within the  jurisdiction  of such  court,  in any state or
         federal  court sitting in New York County for the purposes of any suit,
         action,  or  other  proceeding  arising  out of this  Agreement  or the
         Transaction  Documents or the subject  matter  hereof or thereof or the
         transactions  contemplated hereby or thereby brought by the other party
         or  its  successor  or  assign  and  (b)  to the  extent  permitted  by
         applicable law,  irrevocably  waives and agrees not to assert by way of
         motion,  as defense or  otherwise  any claim that it is not  personally
         subject to the  jurisdiction of the above named courts;  that the suit,
         action or proceeding is brought in an inconvenient forum, that venue is
         improper or that this Agreement or the other  Transaction  Documents or
         the subject  matter hereof or thereof may not be enforced in or by such
         court.  Nothing  herein  contained  shall  prevent  either  party  from
         bringing suit in any other court of competent jurisdiction.

28.3     Service of Process

         With respect to actions,  suits and  proceedings  brought in the courts
         named in Clause 28.2.  each of Sublessor  and  Sublessee  hereby waives
         personal  service of process and agrees that  service of process may be
         made upon certified or registered mail,  return receipt  requested,  at
         the  address  specified  in Clause 27 and that  such  service  shall be
         deemed  completed on the fifth  business day after service is deposited
         in the mail.  Nothing herein shall affect the right to service  process
         in any other manner  provided by applicable law or accordance  with the
         Hague Convention if applicable.

28.4     Prevailing Party in Dispute

         If any legal action or other  proceeding is brought in connection  with
         or arises out of any provisions in this Sublease,  the prevailing party
         will be  entitled  to  recover  reasonable  attorneys'  fees and  other
         reasonable costs incurred in such action or proceedings. The prevailing
         party will also,  to the extent  permissible  by law,  be  entitled  to
         receive pre- and post-judgment Default Interest.

28.5     Waiver

         Sublessee  and  Sublessor  hereby  waive  the right to a trial by jury.
         Sublessee hereby  irrevocably  waives any objection which is may now or
         hereafter have to the laying of venue of any suit, action or proceeding
         arising  out of or  related  to this  Agreement  brought  in any of the
         Courts  referred  to in Clause  28.2,  and hereby  further  irrevocably
         waives any claim that any such suit,  action or  proceeding  brought in
         any such Court has been brought in an inconvenient forum.




<PAGE>


SIGNATURE PAGE


IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written.

SIGNED on behalf of INDIGO AVIATION AB (publ)



By:__________________________________________

Name:________________________________________

Title:_________________________________________



SIGNED on behalf of FRONTIER AIRLINES, INC.



By:___________________________________________

Name:_________________________________________

Title:__________________________________________



<PAGE>


                                   SCHEDULE 1

                             AIRCRAFT SPECIFICATION


Model                                               Boeing 737-3L9
Serial Numbers                                      26442
Current Registration                                D - ADBC
Line Number                                         2277
Date of Manufacture                                 May, 1992
Engines                                             CFM56-3B2 (22K)
APU                                                 Garrett GTCP85-129H
Present Operator                                    Deutsche BA


WEIGHTS                                             Lbs

Max Taxi Weight                                     140,000
Max Take Off Weight                                 139,500
Max Landing Weight                                  114,000
Max Zero Fuel Weight                                106,500
Basic Empty Weight
Max Fuel capacity                                   5,311 US Gallons
(Provisioning for Aft Body Aux Fuel Tank installed - 500 US Gallons)

INTERIOR CONFIGURATION

Seating           136 Y                       Recaro 3230
Galleys           G1, G2, G4B                 Henshalls
Stowage's         G7                          Henshalls
Lavatories        Three
                  1 Forward, 2 Aft            Boeing Standard


AIRFRAME STATUS (As of September 22, 1999)

Total Hours                                         18,111
Total Cycles                                        17,222
Time Since Last C Check                             5 hours
Time to D Check (7C+SI)                             4,289 hours



<PAGE>



                          AIRFRAME MAINTENANCE PROGRAM


CHECK                      SCHEDULE

A Check                    250 hours
I Check                    475 hours
C Check                    3,600 hours or 15 months
D Check                    22,400 hours


ENGINES

Serial Number              856183                      857192
Total Hours                16,242                      16,330
Total Cycles               15,287                      15,414



LANDING GEAR (As of September 22, 1999)

Right/Left Main            18,111 hrs/17,222 Cycles
Nose                       18,111 hrs/17,222 Cycles
Overhaul limit             22,400 hours

















<PAGE>


                NAVIGATIONAL, COMMUNICATION, ELECTRONIC SYSTEMS,
                           FURNISHING & EQUIPMENT LIST


DESCRIPTION                MANUFACTURER            MODEL OR                QTY
                                                   PART NUMBER

Dual Flight Control System
(CATIIIa)                  Honeywell               SP300                    1
Autothrottle System        Smiths Industries       735SUE                   1
VHF Communication          Collins                 VHF700                   2
HF Communication           Collins                 628T-2A                  1
(Provisions for HF-2)
Selcal                     Motorola                NA1401C                  1
Passenger Address          Collins                 346D-2B                  1
Announcement System        Matsushita              RDAX7308                 1
CVR                        Fairchild               A 100A                   1
Flight Data Recorder       Sundstrand              DXUS                     1
DFDAU                      SFIM                    ED44B                    1
Printer                    Bendix                  PTA-45B                  1
Air Data Computer          Smiths                  501FAD1                  2
IRU                        Honeywell               HG1050                   2
EADI Colour                Collins                 EDU-766D                 2
EHSI Colour                Collins                 EDU-776D                 2
Marker                     Collins                 51 Z4                    1
VHF Nav                    Collins                 51RV4B                   2
Symbol Generator           Collins                 EFIP-701D                2
WX-Radar                   Collins                 WRT701X                  1
GPWS                       Sundstrand              MKV                      1
Radar Altimeter            Collins                 860 F-4                  2
DME                        Collins                 860 E-5                  2
ATC (Mode S)               Collins                 TPR720                   2
ADF                        Collins                 51 Y7                    2
FMC                        Smiths                  U5.0                     1
FMCS CDU                   Smiths                  -                        2
Primary Engine Display     Smiths                  EIS                      1
Secondary Engine Display   Smiths                  EIS                      1




All data and  information  included herein are subject to change without notice.
No warranty is made or implied as to the accuracy of the  information  contained
herein which is subject to independent verification upon inspection.



<PAGE>


                                   Annexure 1


                             AIRCRAFT DOCUMENTATION

Note:    This Annexure 1 is to be used for reference purposes only. The Aircraft
         Documents will be more closely identified in Annexure 1 to the
         Acceptance Certificate.

A.         Certificates

-          Certificate of Airworthiness
-          Certificate of Registration

B.         Aircraft Status Records

-          Technical Log Book
-          Airframe Maintenance Status Report
-          Manufacturer's Service Bulletin Status Report
-          Airworthiness Directive Compliance Report (terminated and repetitive)
-          Local Modification Status Report List with Substantiating Data
-          Last Weighing Report
-          Repair Data Structural Repairs

C.         Aircraft Maintenance Records

-          Test Flight Reports
-          Last Boeing "C" check and maintenance check Work Cards for each "C"
           check multiple (or segment)

D.         Aircraft History Records

-          Aircraft Structural Repair History (if applicable)
-          Service Difficulty Report (if applicable)
-          Accident or Incident Report (if applicable)

E.         Engine Records (for each engine)

-          Log Books
-          Last overhaul and repair documents for each module
-          Airworthiness Directive Compliance Report (terminated and repetitive)
-          Manufacturer's Service Bulletin Status Report
-          Engine Disk Sheet
-          Engine Data Submittal Sheet
-          Condition Monitoring Status Report



<PAGE>


F.         APU Records

-          Log Book
-          Last overhaul and repair documents
-          Manufacturer's Service Bulletin Status Report

G.         Component Records (including components installed engines and APU)

-          Time  Controlled  Component  Status  Report  with remaining hours and
           cycles (if applicable)
-          Serviceability  tags  or  back-up  documentation,  as available,  for
           components replaced since delivery from Boeing, provided to  Frontier
           at Delivery.

H.         Manuals

-          Airplane Flight Manual
-          Quick Reference Handbook
-          Aircraft Operating Manual
-          Weight and Balance Manual Supplement
-          Wiring Diagram Manual (microfilm)
-          Illustrated Parts Catalog (microfilm)
-          Aircraft Maintenance Manual (microfilm)
-          CFM International Illustrated Parts Catalog
-          Vendor Manual Seats
-          Vendor Manual Galleys
-          Vendor Manual Ovens
-          Vendor Manual Coffee makers
-          Nordam Maintenance Manuel Supplements

I.         Miscellaneous Technical Documents

-          Maintenance Program Specifications/Requirements
-          Interior Configuration Drawings
-          Loose Equipment Inventory List
-          Delivery documentation ex Boeing
-          Export Certificate of Airworthiness
-          Aircraft Readiness Log
-          Rigging Record Brochure
-          Miscellaneous Delivery Record Brochure
-          Fuel Measuring Stick Calibration Brochure
-          FAA Airworthiness Directive Compliance Record




<PAGE>


                                   SCHEDULE 2


                             CERTAIN BUSINESS TERMS


1.       Agreed Value

         Agreed Value means US$ (*).

2.       Basic Rent

         The Basic Rent payable on each Rent Date during the Sublease Term shall
         be US$212,000.

3.       Damage Notification Threshold

         Damage Notification Threshold means US$ (*).

4.       Engine Agreed Value

         Engine Agreed Value means for each engine US$ (*).

5.       Sublease Extension Option

         Sublessee  has an option to extend the Sublease for one  additional  12
         month  period at the same lease rate as paid  during the base  Sublease
         Term,  provided  Sublessee  provides  Sublessor  with written notice at
         least nine (9) months prior to the Sublease Expiry Date.

6.       Sublease Expiry Date

         Means the date falling 65 months from the Delivery Date.

7.       Extension Sublease Expiry Date

         Means, upon exercise of the Sublease Extension Option, the date falling
         twelve (12) months  from the Sublease Expiry Date or such other date as
         Sublessor and Sublessee may agree in writing.

8.       Sublease Term

         Means the  period  commencing  on the  Delivery  Date and ending on the
         Sublease  Expiry Date or, if applicable the Extension  Sublease  Expiry
         Date.

9.       Letter of Credit

         The Sublessee  shall provide the Sublessor with an additional  Security
         Deposit in the form of an  irrevocable,  assignable  standby  letter of
         credit in the amount of US$ (*) issued at least three (3) days prior to
         the  Scheduled  Delivery  Date  by  a  major  US  Bank  in  a form  and
         substance acceptable by Sublessor (the "Letter of Credit").

10.      Maintenance Reserves

         Sublessee shall during the Sublease Term pay the following  Maintenance
         Reserves to Sublessor:

         (i)      Airframe Maintenance Reserve

                  US$ (*) for each Flight Hour that the Airframe is operated;

         (ii)     Engine Maintenance Reserve, Refurbishment and LLP's

                  US$ (*) for each Flight Hour that each Engine is operated;

         (iii)    Landing Gear Maintenance Reserve

                  US$ (*) for each Flight Hour that the Aircraft is operated;

         (iv)     APU Maintenance Reserve

                  US$ (*) for each Flight Hour that the APU is operated.

         The amounts payable by Sublessee to the Maintenance Reserves as set out
         herein  shall  be  subject  to  annual   escalation  of  2.5%  on  each
         anniversary  date of the  first day of the  Sublease  Term and are also
         subject to upward or downward  adjustment where the hour to cycle ratio
         changes from that assumed.

11.      Minimum Liability Coverage

         Minimum Liability Coverage means US$ (*) on each occurrence.

11.      Scheduled Delivery Date

         Scheduled  Delivery Date means on or about  October 26th,  1999 or such
         other date as the parties may mutually  agree and Sublessor may be able
         to deliver the Aircraft to Sublessee.

13.      Security Deposit

         Sublessee has paid to Sublessor a cash  Security  Deposit in the amount
         of  US$ (*) and shall provide  Sublessor  with  an additional  Security
         Deposit according to Clause 9 of this Schedule 2.

         The  cash  Security  Deposit  of US$ (*)  will be credited to the first
         payment of Rent payable by  Sublessee  during the  Sublease  Term.  The
         Security  Deposit  will be  non-refundable  in the event of  failure by
         Sublessee  to take  delivery of the  Aircraft in  accordance  with this
         Agreement.

14.      Supplemental Rent for Excess Cycles

         If on each of the  anniversary  dates of the first day of the  Sublease
         Term,  based on the  previous  twelve  (12) month  period  (or  portion
         thereof) of the  Sublease  Term the  Aircraft  has been  operated  more
         Cycles  than the number of Cycles  which  would  result from an average
         Flight  Hour/Cycle ratio of one point two (1.5) Flight Hours to one (1)
         Cycle, Sublessee will pay Sublessor as Supplemental Rent US$(*)for each
         Cycle the  Aircraft  actually  operated  during  such twelve (12) month
         period (or  portion  thereof)  in excess of the number of Cycles  which
         result from an average Flight  Hour/Cycle ratio of one point five (1.5)
         Flight  Hours to one (1) Cycle.  A  calculation  will be made as of the
         last day of each anniversary of the first day of the Sublease Term each
         year and such Supplemental Rent will be due and payable by Sublessee on
         the  date on which  the next  Maintenance  Reserve  payment  is due (in
         accordance   with  Clause  9.2)   following   such  Flight   Hour/Cycle
         calculation period.



<PAGE>


                                   SCHEDULE 3


                             INSURANCE REQUIREMENTS

1.1      Types of Insurance

         The Insurances required to be maintained are as follows:

(a)        an All Risks Hull Insurance Policy on the Aircraft on an agreed value
           basis in an amount not less than the Agreed  Value with  insurers not
           entitled  to replace the  Aircraft  in the event of an insured  Total
           Loss;

(b)        an All Risk Hull  Insurance  Policy on each Engine when not installed
           on the  Aircraft  on an agreed  value  basis not less than the Engine
           Agreed Value;

(c)        insurance  covering  all risks of physical  loss or damage  howsoever
           occasioned in respect of engines,  spare parts and equipment  forming
           part of the  Aircraft  but which for the time being are removed  from
           the Aircraft, and are not insured by the Aircraft's hull and war risk
           insurance in an agreed value of not less than their replacement cost;

(d)        a War Risks  Insurance  Policy on the Aircraft  covering all of those
           risks  which are  currently  enumerated  in Lloyds  Form AVN 48B War,
           Hi-jacking and Other Perils Exclusion Clause  (Aviation),  other than
           paragraph  (b)  thereof  to  the  fullest  extent  possible  and  any
           additional  risks which may  hereafter be included  therein or in any
           form  succeeding  to any of its functions on an agreed value basis in
           any amount not less than the Agreed Value;

(e)        Liability  Insurance,  being  Aircraft  Third  Party Legal Liability,
           Passenger, Contractual  Legal  Liability,  Baggage  Legal  Liability,
           Cargo and Mail Legal  Liability and Airline General Third Party Legal
           Liability including war and  allied  perils  to  the  fullest  extent
           available  for  a  combined  single   limit   of   liability   bodily
           injury/property  damage  of  not  less  than  the  Minimum  Liability
           Coverage any one accident provided that if the Sublessor on the basis
           of advice received from an  independent  insurance  adviser  believes
           that the  relevant  liabilities shall be unlimited or that such limit
           should  be  revised  upwards,  it  shall  be  replaced  by  unlimited
           liability or such higher limit as may be appropriate in  the light of
           circumstances prevailing in the international airline industry at the
           time and provided further that the Sublessor shall  not be obliged by
           this Clause to effect  and  maintain  insurance  in  respect  of  any
           inability to recover from any manufacturer of the Airline, Engines or
           any  Part,  losses  and liabilities incurred as a result of negligent
           manufacture.

1.2      Terms of Hull and Spares Insurance

         All  required  hull and spares  insurance,  so far as it relates to the
         Aircraft, will:

(a)        Settlement  of  Losses:  provided  that any loss will be  payable  in
           Dollars  to  Lender,  if none,  to  Sublessor  or at the  request  of
           Sublessor  to Lender.  In respect of any other  claim,  the  relevant
           policy shall  provide  that  settlement  (net of any relevant  policy
           deductible)  shall be made with such  parties as may be  necessary to
           repair the Aircraft or as otherwise agreed after consultation between
           the Lender, the Owner Trustee,  the Sublessor and the Sublessee.  The
           relevant  policy shall provide that such payments  shall only be made
           provided  the same are in  compliance  with all  applicable  laws and
           regulations.

(b)        50/50  Provision:  if  separate  hull  "all  risks"  and "war  risks"
           insurances are arranged, include a 50/50 provision in accordance with
           market practice (AVN 103 is the current market language);

(c)        Deductibles:  provide for  deductibles in respect of the Aircraft All
           Risks Hull Insurance  Policy or War Risks Insurance Policy of no more
           than  US$ (*) ( or the minimum deductible  amount  carried  under the
           airline's insurance policy if less than US$ (*)).

(d)        Customary Risks: cover at least such risks as are customarily insured
           against  in  the  airline industry  for any amount  not less than the
           Agreed Value;

(e)        Sound  Practice:  be  in  accordance with sound international airline
           practice; and

1.3      Terms of Liability Insurance

         All required liability insurances will:

(a)        cover at least such risks as are  customarily  insured against in the
           airline industry and names the additional assured as additional named
           insured for their respective rights and interest;

(b)        be in form and  substance  in  accordance  with  sound  international
           airline  practice  (having  regard to the type of aircraft or engines
           involved);

(c)        provide  that upon  payment of any loss or claim by the  insurers  in
           accordance  with the  endorsement  relating  to the  relevant  policy
           naming the additional  assured as additional  assureds,  the insurers
           shall to the  extent and in  respect  of such  payment  be  thereupon
           subrogated  to all  legal  and  equitable  rights  of the  additional
           assured indemnified under such endorsement relating to the Insurances
           (but not against any  additional  assured) and further  provides that
           the insurers  shall not exercise  such rights  without the consent of
           those additional assured such consent not to be unreasonably withheld
           and at the expense of the insurers such  additional  assured shall do
           all things  reasonably  necessary  to assist the insurers to exercise
           the said rights;

(d)        provide  that  except  in  respect  of any  provision  for  automatic
           termination   or   cancellation   specified  in  the  policy  or  any
           endorsement thereof, cover for the interests added by the endorsement
           relating to the  relevant  policy may only be canceled or  materially
           altered in a manner adverse to the  additional  assured by the giving
           of not less than  thirty (30) days (but seven (7) days or such lesser
           period as may be  customarily  available  in  respect  of War  risks)
           notice in writing to the  insurance  brokers and that notice shall be
           deemed to commence from the date such notice is given by the insurers
           and that such notice  will not be given at the normal  expiry date of
           the policy or any endorsement;

(e)        is  primary  without  right  of contribution from any other insurance
           which may be available to the additional assured;

(f)        subject to the provisions naming the additional assured as additional
           assured,  operates in all  respects as if a separate  policy had been
           issued covering each additional assured;

(g)        provides that none of the additional assured shall be responsible for
           any premiums in respect  thereof,  and that the insurers  shall waive
           any right of set-off or counterclaim  against the additional  assured
           (except  in  respect of any  outstanding  premiums  in respect of the
           Aircraft);

(h)        provides that the insurance  thereunder  shall not be  invalidated by
           any act or omission,  including misrepresentation and non-disclosure,
           of any other person which results in breach of any term, condition or
           warranty of the relevant policy provided that the additional  assured
           so protected has not caused or contributed  to or knowingly  condoned
           the said act or omission;

(i)        has a  deductible  in respect of  passenger  baggage  and cargo of an
           amount which, at any time, is customary in the international aviation
           market  at the time  for  Boeing  737-200  aircraft  in each  case in
           respect of any one claim;

(j)        contains a provision  insuring (to the extent of the risks covered by
           the policy) the  indemnity  provisions of security  document  entered
           into in favor of the Lender; and

(k)        specifically refers to any security document entered into in favor of
           the Lender or any loan agreement.

1.4      Terms of All Insurances

         All Insurances will:

(a)        Dollars: provide cover denominated in dollars;

(b)        World-wide: operate on a world-wide basis subject to such limitations
           and exclusions as the parties and the insurance market may agree;

(c)        Additional  Assureds:  name  Owner   Trustee/Headlessor,   Sublessor,
           Sublessor's   Lenders,   Hamilton   Aviation  and  their   respective
           successors  and  assigns,  shareholders,   subsidiaries,  affiliates,
           partners,  contractors,  directors,  officers,  servants,  agents and
           employees  as  additional  assureds  for their  rights and  interests
           warranted no  operation  interest for the term of the Sublease of the
           Aircraft,  plus two years  after the  Expiry  Date for the  liability
           insurances;

(d)        Acknowledgment:  acknowledge the insurer is aware and has seen a copy
           of this  Agreement,  that the Aircraft is owned by Owner  Trustee for
           the  benefit  of and  the  existence  of any  financing  or  security
           documents to which Lenders may be party;

(e)        Breach of Warranty:  provide  that,  in relation to the  interests of
           each  of  the  additional  assureds,   the  Insurances  will  not  be
           invalidated by any act or omission,  including  misrepresentation and
           non-disclosure,  by Sublessee, or any other person provided that such
           additional   assureds  regardless  of  any  breach  or  violation  by
           Sublessee,  or any other person other than the respective  additional
           assured seeking protection of any warranty, declaration or condition,
           contained  in such  Insurances  has not caused or  contributed  to or
           knowingly condoned the said act or omission;

(f)        Subrogation:  provide  that upon  payment of any loss or claim by the
           insurers in accordance with the endorsement  relating to the relevant
           policy  naming the  additional  assured as additional  assureds,  the
           insurers  shall to the  extent  and in  respect  of such  payment  be
           thereupon  subrogated  to  all  legal  and  equitable  rights  of the
           additional assured indemnified under such endorsement relating to the
           Insurances  (but not  against  any  additional  assured)  and further
           provides that the insurers shall not exercise such rights without the
           consent  of  those   additional   assured  such  consent  not  to  be
           unreasonably  withheld  and  at the  expense  of  the  insurers  such
           additional assured shall do all things reasonably necessary to assist
           the insurers to exercise the said rights;

(g)        Premiums:   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;

(h)        Cancellation/Change:   provide  that  the  Insurances  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
           installment thereof has been sent to Sublessor, except in the case of
           war  risks  for  which 7 days or such  lesser  period as is or may be
           customarily  available in respect of war risks or allied  perils will
           be given and that notice  shall be deemed to  commence  from the date
           such notice is given by the insurers and that such notice will not be
           given at the normal expiry date of the policy or any endorsement;

(i)        Indemnities:  accept  and  insure the  indemnity  provisions  of this
           Agreement to the extent of the risks covered by the policies;

(j)        Endorsement: contains an endorsement naming:

           (i)          the Lender as loss payee in the case of a Total Loss;

           (ii)         provided  that any loss will be  payable  in  Dollars to
                        Lessor's Lender, if none, to Sublessor or at the request
                        of Sublessor to Sublessor's Lender except where the loss
                        does not exceed the Damage Notification  Threshold,  and
                        Sublessor has not notified the insurers to the contrary,
                        in which case the loss will be settled  with and paid to
                        Sublessee;

           (iii)        50/50  Provision:  if separate hull "all risks" and "war
                        risks"   insurances   are  arranged,   include  a  50/50
                        provision in accordance  with market practice AVN 103 is
                        the current market language;

(k)        specifically  refer  to  each  loan  agreement  or charge between the
           Sublessor and any Lender.

1.5      Deductibles

         Sublessee shall be responsible  for any and all  deductibles  under the
Insurances.

1.6      AVN 67B

           Notwithstanding  the  foregoing,   if  Sublessee  provides  insurance
           certificates  in  compliance  with AVN 67B it shall  be  regarded  as
           having satisfied those of the insurance provisions set out above that
           are covered by that endorsement.

1.7      AVN 2000 (or similar)

           If AVN 2000 or similar "Date Recognition Exclusion Clause" applies in
respect of the Insurances then:

(a)      the Insurance certificate shall state that this is the case; and

(b)      the Insurances  must provide for AVN 2001 (aircraft  exposures) and AVN
         2002  (non-aircraft  exposures)  or similar "Date  Recognition  Limited
         Coverage  Clauses" and the insurance  certificates must state that this
         is the case.



<PAGE>


                                   SCHEDULE 4

                               DELIVERY CONDITIONS


The Aircraft  will be delivered  "AS IS, WHERE IS" at the Delivery  Location and
will conform to the conditions outlined in this Schedule 4.

The actual  condition  of the  Aircraft at Delivery  will be  documented  on the
Acceptance  Certificate  as  noted  in  Schedule  5  of  the  Aircraft  Sublease
Agreement.

Certification:

A United States  Standard  Certificate  of  Airworthiness  suitable for Part 121
operations.  The Aircraft will be airworthy  (conform to type design and be in a
condition  for safe  operation),  with all Aircraft  equipment,  components  and
systems  operating  in  accordance  with their  intended  use and within  limits
established by the Aircraft Maintenance Manual.

Configuration:

An all economy 136 seat interior with a 31" minimum seat pitch.

Paint:

The  exterior  will be sanded or stripped  as needed and  painted in  Frontier's
white base color and green lettering. Frontier will provide the tail decals.

Airframe:

Fresh  from  next  Block  C  Check,  excluding  hours  and  cycles  used  on the
Demonstration/Ferry  Flights,  with a minimum of 3,000 hours remaining until the
next C7 Check/Structural Inspection.

A. The Aircraft will have no deferred  maintenance items,  unique inspections or
temporary repairs at Delivery.

B.       Modifications  and Repairs  installed on the Aircraft at Delivery  will
         have been accomplished in accordance with FAA approved data.

C.       The Aircraft will be in compliance with the Manufacturer's CPC program.

D.       If  available,  any No Charge  Service  Bulletin  Kits not installed by
         Present Lessee will be loaded onboard the Aircraft as cargo.

E.       Fuel tanks will be free from contamination.



<PAGE>


Engines:

Each  Engine will have at least 3,000  hours  remaining  until next  anticipated
performance  restoration  shop  visit.  ESN 857192  and ESN  856183  will have a
minimum of 7,000 cycles and 3,400 cycles respectively,  remaining until the next
LLP limiter at 3B2 Power (22,000 Lbs. Thrust).

Each Engine will pass a Performance  Engine Run in accordance  with the Aircraft
Maintenance Manual.

Each Engine will pass a hot and cold section borescope inspection.

APU:

Serviceable and passing a borescope inspection.

Components:

Each component that is time  controlled will have at least 2,250 flight hours or
cycles remaining until next inspection/overhaul. Each component that is calendar
controlled  will have 12 months  remaining  until its next  inspection/overhaul.
Condition Monitored/On Condition components will be serviceable.

Landing Gear:

Each  Landing  Gear will have at least  2,700  cycles  remaining  until the next
inspection or overhaul based on a 20,000 cycle interval.

Airworthiness Directives (AD's):

Airworthiness Directives requiring compliance within 90 days after delivery will
be in compliance. Airworthiness Directives that require inspection or repetitive
inspection will be cleared for 3,000 hours or the maximum inspection interval if
less than 3,000 hours.

Demonstration Flight:

Present  Lessee will  perform a one and one half hour flight  demonstrating  the
satisfactory  operation  of  the  Aircraft  with  no  more  than  two  Sublessee
observers,  as  designated  by  Sublessee,  on board  during such  Demonstration
Flight.

Records:

Documentation  required  to  receive a United  States  Standard  Certificate  of
Airworthiness  suitable for Part 121 operations will be in English or translated
into English prior to delivery.



<PAGE>


TCAS:

TCAS will be installed prior to Delivery.

Aircraft Documentation:

The Aircraft  Documentation  will be identified in Annexure 1 to the  Acceptance
Certificate.



<PAGE>


                                   SCHEDULE 5

                             ACCEPTANCE CERTIFICATE

This Acceptance Certificate is delivered,  on the date set out below by FRONTIER
AIRLINES, INC. (Sublessee),  to INDIGO AVIATION AB (publ) (Sublessor),  pursuant
to the Aircraft Sublease Agreement dated October 11th 1999 between Sublessor and
Sublessee (the Sublease).  Capitalized terms used in this Certificate shall have
the meanings given to such terms in the Sublease.

1.       Details of acceptance

Sublessee  hereby  confirms to Sublessor that Sublessee has at  _____o'clock  on
this ___ day of ______, at _____ accepted the following,  in accordance with the
provisions of the Sublease:

(a)            Airframe
Type: B737-3L9                     Reg.: N313FL                S/N: 26442

(b)            Engines
Type: CFM56-3B-2                   S/N No.1: 856183            S/N No. 2: 857192


(c)        APU:

MSN       Total Flight Hours      Flight Hours/ Cycles       Flight Hours/Cycles
          remaining until next             remaining on turbine and
          HSI inspection                 compressor life limited parts


(d)        Landing Gears

Position    Serial No.  Total Flight        Flight Hours/ Cycles  Flight Hours/
                        Hours/Cycles        since last Overhaul   Cycles to next
                                                                  sched. Removal
Nose        ________    _____ Flight Hrs    _____ Flight Hrs    _____ Flight Hrs
                        _____ Cycles        _____ Cycles        _____ Cycles
Right Main  ________    _____ Flight Hrs    _____ Flight Hrs    _____ Flight Hrs
                        _____ Cycles        _____ Cycles        _____ Cycles
Left Main   ________    _____ Flight Hrs    _____ Flight Hrs    _____ Flight Hrs
                        _____ Cycles        _____ Cycles        _____ Cycles

(e)      Equipment Check List: as per list signed by Sublessor and Sublessee and
         attached hereto; and

(f)      Aircraft  Documents List: as per list signed by Sublessor and Sublessee
         and attached hereto; and

(g)      Place of Acceptance: __________________________________________________


2.       Confirmation

Sublessee  confirms to Sublessor that as at the time indicated above,  being the
Delivery Date:

(a)      the  representations  and  warranties  contained  in  Clause 2.1 of the
         Sublease are hereby repeated;

(b)      the Aircraft is insured as required by the Sublease; and

(c)      Sublessee's  authorized  technical  experts have inspected the Aircraft
         and the Aircraft Documents to ensure that the Aircraft and the Aircraft
         Documents  conform to  Sublessee's  requirements.  The Aircraft and the
         Aircraft  Documents are in accordance  with the  specifications  of the
         Sublease  and  satisfactory  in all  respects  except  as may be  noted
         herein.

3.       Fuel at Delivery

         Fuel on board at Delivery: ___________ kilos (_________ gallons).

         Annexed hereto is details of any damage to the Aircraft as at Delivery.

The  Airframe,  Engines  and  Parts had the  following  Flight  Hours/Cycles  at
Delivery:



<PAGE>


(a)      Airframe:

Total hours    Total landings    Since last "C" Check       Since last "A" Check

_________      ________          ______ Flight Hours        ______ Flight Hours
                                 ______ Cycles              ______ Cycles



(b)        Engines:

Position     Serial No.    Total Flight    Total      Since last     Since last
                           Hours           Cycles     shop visit     Engine
                                                                     Performance
                                                                     Restoration
                                                                     Visit

                                                      ____ Flight    ____ Flight
                                                           Hours          Hours
                                                      ____ Cycles    ____ Cycles


See  attached  Engine run records and disc  sheets for  further  description  of
Engines at Delivery.

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

Sublessee:        FRONTIER AIRLINES, INC.

By:      _________________________

Title:   _________________________


Annexure 1        Aircraft Documents
Annexure 2        Aircraft Equipment List
Annexure 3        Damage Chart



<PAGE>


                                   SCHEDULE 6


                             CERTIFICATE OF OFFICER
                                       OF
                             FRONTIER AIRLINES, INC.


I, _____________________, do hereby certify that:

1. I am a duly and  acting  Officer  of  Frontier  Airlines,  Inc.,  a  Colorado
corporation (the "Company").

2.       Attached  hereto as Exhibit A is a true,  correct and complete  copy of
         the Certificate of Incorporation of the Company, as amended to the date
         hereof, and such Certificate of Incorporation remains in full force and
         effect on the date hereof.

3.       Attached  hereto as Exhibit B is a true,  correct and complete  copy of
         the Articles of Association  to of the Company and by-laws,  as amended
         to the date hereof, and such Articles of Association and by-laws remain
         in full force and effect on the date hereof.

4.       Attached  hereto as Exhibit C is true,  correct  and  complete  copy of
         resolutions  duly  adopted by the Board of Officers of the Company at a
         meeting duly called and held in [ ] approving the  execution,  delivery
         and performance of the Aircraft Sublease  Agreement dated as of October
         ____ 1999  between  INDIGO  AVIATION  AB (publ)  as  Sublessor  and the
         Company  as  Sublessee  (the  "Sublease")  and  the  other  Transaction
         Documents (as defined in the Sublease) to which the Company is a party,
         and said resolutions have not been revoked,  rescinded or modified and,
         at the date hereof, are in full force and effect.

5.       The following  persons are duly  qualified  and acting  officers of the
         Company,  and  each of  such  officers  certifies  that  the  signature
         appearing  opposite  the  name of each  other  officer  is his  genuine
         signature:

6.       I do  hereby  certify  that all of the  Company's  representations  and
         warranties  set forth in the  Sublease are true and correct at the date
         hereof.


<PAGE>



Title                        Name                          Signature


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



IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the ____
day of ___________.



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




I, ___________________________, acting as special counsel to Frontier  Airlines,
Inc., do hereby certify that ________________________________ is a duly elected,
qualified  and  acting Officer of Frontier Airlines, Inc. and that the signature
set forth above is his genuine signature.


IN WITNESS WHEREOF,  the undersigned has executed this Certificate as of the ___
day of ____________, 1999.










<PAGE>


                                   SCHEDULE 7

                           FORM OF LETTER OF AUTHORITY

[ Addressee ]



                                    AUTHORITY


This Authority is given on _________.

Pursuant to an Aircraft  Sublease  Agreement (the Sublease)  dated as of October
____ 1999, made between INDIGO  AVIATION AB (publ) as Sublessor  (Sublessor) and
Frontier  Airlines,  Inc. as  Sublessee  (Sublessee)  relating to one (1) Boeing
737-3L9  aircraft  bearing  manufacturer's  serial number 26442 and registration
mark N313FL (the Aircraft),  Sublessee will operate the Aircraft during the term
of the Sublease.

Sublessee  hereby  irrevocably  authorizes  yourselves,  during  the term of the
Sublease,  to disclose to  Sublessor  or to anyone  duly  appointed  by it, upon
request by the same,  particulars of any and all  outstanding  charges due to or
collectable by you and incurred in respect of:

         (i)     the Aircraft; and

         (ii)    any other aircraft being operated by Sublessee on the date such
                 request, from time to time, is made.


IN WITNESS  WHEREOF a duly  authorized  representative  of Sublessee has granted
this Authority on the day and year first above mentioned.

Signed by:


-------------------------
for and on behalf of
-------------------------


<PAGE>


                                   SCHEDULE 8

                                POWER OF ATTORNEY

The undersigned,  Frontier  Airlines,  Inc.  (Sublessee)  refers to the Aircraft
Sublease  Agreement  dated as of October ____ 1999, as amended and  supplemented
from time to time (the Sublease) between,  INDIGO AVIATION AB (publ) (Sublessor)
and  Sublessee  with  respect  to  one  (1)  Boeing  737-3L9   Aircraft  bearing
manufacturer's serial number 26442 and registration mark N313FL (the Aircraft).

In consideration of the sum of US$(*)paid by Sublessor to Sublessee (the receipt
and sufficiency of which is hereby acknowledged), Sublessee irrevocably appoints
Sublessor (Attorney) as its true and lawful attorney to:

Execute and to do and perform  upon its behalf and in its name or  otherwise  to
deliver any documents,  instruments or certificates with such amendments thereto
(if any) which may be required to obtain deregistration of the Aircraft from the
register of aircraft  maintained by the Federal Aviation  Administration  of the
United  States  of  America  and the  export of the  Aircraft  from the State of
Registration  (as defined in the Sublease)  upon the lawful  termination  of the
Sublease of the Aircraft;

AND  generally to do any and all such acts and things and to execute  under seal
or hand (as  appropriate)  and deliver any and all documents under seal or under
hand (as  appropriate)  as may be requested or required for such  deregistration
and export;

AND Sublessee hereby  undertakes from time to time and at all times to indemnify
the  Attorney  against all costs,  claims,  expenses and  liabilities  howsoever
incurred by all such Attorney in connection  herewith and further  undertakes to
ratify and confirm whatsoever the Attorney shall lawfully do or cause to be done
in or by virtue of this Power of Attorney;

AND for the better  doing,  performing  and  executing of the matters and things
aforesaid  Sublessee  hereby  further  grants unto the  Attorney  full power and
authority  to  substitute  and  appoint  in its  place one or more  attorney  or
attorneys to exercise for them as attorney or attorneys of Sublessee  any or all
the powers and authorities  hereby conferred and to revoke any such appointments
from time to time and to  substitute or appoint any other or others in the place
of such  attorney or  attorneys as each  attorney  shall from time to time think
fit.

This Power of  Attorney  shall be  subject  to,  governed  by and  construed  in
accordance with the laws of _________________________.

SIGNED ON BEHALF OF FRONTIER AIRLINES, INC.

By: _______________________


Title: ______________________


<PAGE>


                                   SCHEDULE 9




                      FORM OF OPINION OF SUBLESSEE COUNSEL
                        to be addressed to [ Sublessor ]
                                       and
                                   [ Lender ]

Note:      This form is made on the assumption that the State of Incorporation
           and the State of Registration are the same [herein "State"].


We have acted as counsel  in [ Country  of  Sublessee  ] as counsel to [ Name of
Sublessee ]  ("Sublessee")  in connection  with an Aircraft  Sublease  Agreement
dated [ ] and made between [ Name of Sublessor ] as Sublessor  and  Sublessee as
the  Sublessee  in  respect of one [ Type of  Aircraft ] bearing  manufacturer's
serial number [ ] (the  "Aircraft")  (the  "Lease") and owned by Sublessor,  and
have examined a copy of the following documents;

         (i)      the Sublease;
         (ii)     the Acceptance Certificate;
         (iii)    the Letter(s) of Authority;
         (iv)     the Power of Authority;
         (v)      [ other documents ]; and
         (vi)     [     ]

and such other  documents  as we have  considered  it  necessary or desirable to
examine in order that we may give this opinion.

The  documents  referred  to  under  (i) to (v)  above  are  referred  to as the
"Relevant Documents".

Terms defined in the Sublease shall have the same meaning herein.

On the basis on the foregoing we are of the opinion that:

         (a)      Sublessee is duly  incorporated in [ State ] for an indefinite
                  period as a limited company and is a validly existing separate
                  legal  entity,  which is subject  to suit in its own name,  in
                  good standing, and, to the best of my knowledge, no steps have
                  been, or are being,  taken to appoint a receiver,  liquidator,
                  trustee  or  similar  officer  over  Sublessee,  or to wind up
                  Sublessee or commence any other  insolvency  proceedings  with
                  respect to Sublessee or to have Sublessee dissolved by merger;

         (b)      Sublessee 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 Sublease and the
                  transactions  contemplated  by the  Sublease  and the Sublease
                  constitutes  the legal  binding  obligations  of the Sublease,
                  enforceable  against  the  Sublessee  in  accordance  with its
                  terms;

         (c)      the  entry  into and  performance  by  Sublessee  of,  and the
                  transactions  contemplated  by, the Sublease does not and will
                  not:

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

                  (ii)     conflict   with  the   constitutional   documents  of
                           Sublessee; or

                  (iii)    result in the creation of any Security  Interest upon
                           any property of Sublessee,  pursuant to any mortgage,
                           chattel  mortgage,  deed of trust,  conditional sales
                           contract,  bank loan or credit  agreement,  corporate
                           charter,  by-law or other  agreement or instrument to
                           which  Sublessee is a party or by which  Sublessee or
                           its properties or assets may be bound or affected;

         (d)      Sublessee has obtained all authorizations, consents, licenses,
                  approvals and registrations  necessary to be obtained from any
                  governmental or other  regulatory  authorities in [ State ] to
                  enable Sublessee:

                  (i)      to  enter  into   and   perform    the   transactions
                           contemplated by the Sublease;

                  (ii)     to import the Aircraft into [ State ];

                  (iii)    to conduct commercial air transport with the Aircraft
                           in,  to and  from [ State ] in  accordance  with  the
                           applicable [ State's ] rules and regulations;

                  (iv)     to effect all payments provided for in the Sublease.

         (e)      no  registration,  recording,  filing or  notarization  in any
                  public  office or elsewhere  in [ State ] is necessary  and no
                  payment  of  any  tax or  duty  is  necessary  to  ensure  the
                  validity,  enforceability  or admissibility in evidence of the
                  Sublease, or the priority, if any, of the respective rights of
                  Sublessor  and Lender  under the  Sublease  other than [please
                  advise if applicable]  and no other  instrument is required to
                  ensure  the  priority,  enforceability  and  validity  of  the
                  obligations  of Sublessee  under the Sublease and the Sublease
                  is in proper  legal  form  under the laws of [ State ] for the
                  enforcement  thereof,  if   applicable,  in  the   courts   of
                  [ State ];

         (f)      the  Aircraft  may be  registered  on the [ State's ] aircraft
                  registry  in the  name of  Sublessor  and no other  steps  are
                  necessary or desirable to record or perfect either Sublessor's
                  interest in the Aircraft in [ State ];

         (g)      a mortgage over the Aircraft may be registered on the aircraft
                  registry  in [State]  and with [ Name of  authority  ] for the
                  benefit of Sublessor and will upon  registration  constitute a
                  valid and perfected  security over the Aircraft under the laws
                  of [ State ];

         (h)      upon  termination of the Sublease in accordance with its terms
                  (whether on expiry or earlier termination)  Sublessor would be
                  entitled:

                  (i)      to  repossess  the  Aircraft  without  requiring  any
                           further  permissions  or approvals of any  regulatory
                           authority in [ State ];

                  (ii)     to  de-register  the  Aircraft  from the  register of
                           aircraft  maintained by the Aviation Authority and to
                           export the Aircraft from [ State ] without  requiring
                           any further permissions or approvals of any authority
                           in [ State ] or any further  regulators  consent from
                           Sublessee or any third  party,  provided no mortgages
                           are registered  over the Aircraft,  in which case the
                           mortgagees have to consent to the de-registration;

         (i)      the Relevant Documents have been properly signed and delivered
                  on  behalf of  Sublessee  and the  obligations  on the part of
                  Sublessee  contained  therein,  assuming  them to be valid and
                  binding according to the laws of Sweden, are valid and legally
                  binding on and enforceable against Sublessee under the laws of
                  [ State ] and in the courts of [ State ];

         (j)      the obligations of Sublessee under the Relevant  Documents are
                  direct,  general and  unconditional,  and rank or will rank at
                  least pari passu with all other  present and future  unsecured
                  and  un-subordinated   obligations  of  Sublessee,   with  the
                  exception of such obligations as are mandatorily  preferred by
                  law and not by reason of any security interest;

         (k)      under the laws of [ State ] the  execution and delivery of the
                  Relevant  Documents,  and the carrying out of the transactions
                  thereby contemplated and the observance and performance by all
                  parties of their respective  obligations thereunder do not and
                  will  not  result  in  any   prejudice  to  or  impairment  or
                  diminution of Sublessor's  interest in the Aircraft except for
                  the  express  rights  of  possession  of  Sublessee  under the
                  Sublease;

         (l)      the Sublease  does not grant to Sublessee  any title rights in
                  the Aircraft,  nor does it give  Sublessee  any  capability of
                  passing  valid  title to a  purchaser  or to create a mortgage
                  over the Aircraft;

         (m)      Sublessee, or any of its properties,  assets, are not entitled
                  to claim  immunity from suit,  execution,  attachment or other
                  legal process in [ State ] or any other jurisdiction affecting
                  Sublessee;  the entry  into and  performance  of the  Sublease
                  Agreement  by the company  constitute  private and  commercial
                  acts;

         (n)      there is no applicable  usury or interest  limitation law in [
                  State ] which  restricts  the  recovery of payments of Default
                  Interest in accordance with the Sublease;
         (o)      Sublessee is not in default under any agreement to which it is
                  a  party  or by  which  is may be  bound  which  would  have a
                  material  adverse effect on its business,  assets or condition
                  and  no  material  litigation  or  administrative  proceedings
                  before any Government  entity is presently  pending or, to the
                  knowledge of  Sublessee,  threatened  against it or its assets
                  which would have a material  adverse  effect on the  business,
                  assets or condition (financial or otherwise) of Sublessee;

         (p)      the  financial  position of  Sublessee is  represented  by its
                  audited  financial  statements  prepared  in  accordance  with
                  accounting principles generally accepted in [ State ];

         (q)      it is not necessary under the laws and constitution of [ State
                  ], in order to enable  the  Sublessor  to  enforce  its rights
                  under  the  Agreement  or by reason  of the  execution  of the
                  Agreement or the performance by each of them of its obligation
                  thereunder, that any of them should be licensed,  qualified or
                  entitled to carry on business in [ State ];

         (r)      there are under the laws of [ State ] no present  restrictions
                  on Sublessee to make the payments  required by the Transaction
                  Documents;

         (s)      there are no  registration,  stamp or other taxes or duties of
                  any kind payable in [ State ] by Sublessor in connection  with
                  the signature,  entering into,  registration or performance of
                  the  Sublease or the  registration  of title of ownership or a
                  mortgage over the Aircraft except the following:

                  (i)      registration of mortgages in [ State ];

                  (ii)     registration of the Sublease Agreement;

                  (iii)    registration of title or ownership: [     ]; and

                  (iv)     registration  of  the  mortgages  in  the  [ Name  of
                           Authority ]: [     ].

         (t)      Sublessor  will not violate any law or regulation in [ State ]
                  nor become  liable to tax in [ State ] by reason of  Sublessor
                  entering into the Sublease with  Sublessee,  or performing its
                  obligations thereunder;

         (u)      the choice of the laws of [  Applicable  Law ] to govern the [
                  Lease/Relevant  Documents ] is a valid and  binding  choice of
                  law and will be  recognized  and  applied  by the  courts of [
                  State ];

         (v)      Sublessee's  submission to the jurisdiction of the courts of [
                  Relevant  Court(s) ] in the Sublease is its legally  valid and
                  binding obligation;

         (w)      any  judgement by the courts of [ Relevant  Court(s) ] against
                  Sublessee  which is enforceable in [ Relevant  jurisdiction of
                  Court(s)]  is  enforceable  against  Sublessee  in [  State  ]
                  provided [ advise conditions ];

         (x)      there is no  withholding  tax or other tax to be deducted from
                  any payment  whatsoever  which may be made by the Sublessee to
                  the  Sublessor  under  the  Sublease;  the  provisions  in the
                  Sublease  providing for the full compensation of the Sublessor
                  by the Sublessee for any amount so withholding (and any amount
                  withheld on such additional  compensation)  is legally binding
                  upon Sublessee and  enforceable in accordance with the laws of
                  [ State ].


<PAGE>



                                   SCHEDULE 10

                 MONTHLY AIRCRAFT UTILISATION AND STATUS REPORT

To:      INDIGO AVIATION AB (publ)
         Sodra Forstadsgatan 4
         S-211 43 Malmo Sweden                       Fax: 011-46-40-302350

From:    Frontier Airlines                                    Page 1 of 2

Aircraft Type:             Boeing 737-3L9
Registration Mark:                 N313FL
Serial Number:                      26442             Month of: ________________

--------------------------------------------------------------------------
Aircraft Total Time (Flight Hours) Since New:
--------------------------------------------------------------------------
Aircraft Total Cycles Since New:
--------------------------------------------------------------------------
Airframe Flight Hours Flown During Month:
--------------------------------------------------------------------------
Airframe Cycles/Landing During Month:
--------------------------------------------------------------------------
Time Remaining to C7 Check/Structural:
--------------------------------------------------------------------------

----------------------------------     -----------------------------------------
Engine Serial Number:                  Engine Serial Number:
----------------------------------     -----------------------------------------
Original Position:                     Original Position:
----------------------------------     -----------------------------------------
Actual Location:                       Actual Location:
----------------------------------     -----------------------------------------
Total Time Since New:                  Total Time Since New:
----------------------------------     -----------------------------------------
Total Cycles Since New:                Total Cycles Since New:
----------------------------------     -----------------------------------------
Flight Hours During Month:             Flight Hours During Month:
----------------------------------     -----------------------------------------
Cycles During Month:                   Cycles During Month:
----------------------------------     -----------------------------------------
Time Since Last Boroscope:             Time Since Last Boroscope:
----------------------------------     -----------------------------------------
Time Until Next Boroscope:             Time Until Next Boroscope:
----------------------------------     -----------------------------------------


<PAGE>



                 MONTHLY AIRCRAFT UTILISATION AND STATUS REPORT

                                   Page 2 of 2

Landing Gear:     Time Since      Time Since      Cycles Since      Cycles Since
                  Overhaul:       New:            Overhaul:         New:

RH Main:

LH Main:

Nose:


Note:   If an Engine is removed or installed on another Aircraft (subject to the
        provisions of the Agreement) it must be reported monthly on this form.

Any service bulletins,  Airworthiness  Directives,  engineering modifications or
changes:



                  Hours/Cycles     x     US$ Per Flight       =     Reserve
                  During Month           Hour/Cycle                 Payment

Airframe:         Hours:           x     $(*)                 =

Original Engine   Hours:           x                          =
Serial Number:

Original Engine   Hours:           x                          =
Serial Number:

Total Engines:    Hours:           x     $(*)                 =

Landing Gear:     Cycles:          x     $(*)                 =

APU:              Hours:           x     $(*)                 =

                                                       Total



<PAGE>


                                   SCHEDULE 11


                         FORM OF QUIET ENJOYMENT LETTER


From:      [ Lender ]

To:        [ Sublessee ]

Dated:     [          ]


Dear Sirs,


[     ] Aircraft bearing Manufacturer's  Serial  Number  [     ]  (the Aircraft)
equipped with two (2) [     ] Engines bearing Serial Numbers [     ] and [     ]
(the Engines)


With reference to that certain Aircraft Sublease Agreement dated [ ] between [ ]
as Sublessor  (Sublessor)  and [ ] as Sublessee  (Sublessee)  in relation to the
Aircraft and the Engines (the Sublease),  we, the undersigned,  hereby undertake
that we shall not by our own acts  interfere with  Sublessee's  rights under the
Sublease  during the  Sublease  Term (as  defined  therein),  including  without
limitation  its rights to quiet use,  possession  and peaceful  enjoyment of the
Aircraft and the Engines,  provided that no Default (as defined in the Sublease)
shall have occurred and be continuing.




-------------------
signed for and on behalf of [Lender]



<PAGE>


                                   SCHEDULE 12

                                RETURN CONDITIONS


On the  Redelivery  Date  the  Aircraft  will  be in the  same  condition  as at
Delivery, ordinary wear and tear excepted.

Location:

A city in the  continental  United  States of  America  (48  contiguous  states)
reasonably requested by Indigo.

Certification:

A United States  Standard  Certificate  of  Airworthiness  suitable for Part 121
operations or an Export Certificate of Airworthiness as requested by Lessor.

The Aircraft will be airworthy (conform to type design and be in a condition for
safe operation),  with all Aircraft equipment,  components and systems operating
in  accordance  with their  intended use and within  limits  established  by the
Aircraft Maintenance Manual.

Configuration:

An all economy 136 seat interior with a 31" minimum seat pitch.

Paint:

The Fuselage and the Vertical  Stabilizer exterior will be sanded or stripped as
needed and painted  white.  Frontier  will  install  next  lessee's  logo on the
fuselage  provided the logo is no more complex than Frontier's logo. If the next
lessee's  logo is more complex  than  Frontier's  then  Frontier and Indigo will
mutually agree in writing how the next lessee's logo will be installed.

Airframe:

Fresh  from   Block  C  Check,   excluding   hours  and   cycles   used  on  the
Demonstration/Ferry  Flights,  with a minimum of 3,000 hours remaining until the
next C7 Check/Structural Inspection.

A.      The Aircraft will have no deferred maintenance items, unique inspections
        or temporary repairs at Delivery.

B.      Modifications  and  Repairs  installed on the Aircraft at Delivery  will
        have been accomplished in accordance with FAA approved data.

C.      Aircraft will be in compliance with the Manufacturer's CPC program.

D.      If  available,  any  No Charge  Service  Bulletin  Kits not installed by
        Present Lessee will be loaded onboard the Aircraft as cargo.

E.      Fuel tanks will be free from contamination.

Engines:

Each  Engine will have no more time since last  engine  performance  restoration
visit than as of Delivery  (unless  otherwise  agreed) and a minimum of at least
3,000 hours remaining until next anticipated performance restoration shop visit.
ESN 857192 and ESN 856183 will have a minimum of 7,000  cycles and 3,400  cycles
respectively, remaining until the next LLP limiter at 3B2 Power (22,000 Lbs.
Thrust).

Each Engine will pass a Performance  Engine Run in accordance  with the Aircraft
Maintenance Manual.

Each Engine will pass a hot and cold borescope inspection.

Sublessee will notify Sublessor in writing not less than six (6) months prior to
the Redelivery Date to discuss and agree upon the  pre-delivery  shop visit work
scope, as applicable.

APU:

Serviceable and passing a borescope inspection.

Components:

Each component that is time  controlled will have at least 2,250 hours or cycles
remaining  until  next  inspection/overhaul.  Each  component  that is  calendar
controlled  will have 12 months  remaining  until its next  inspection/overhaul.
Condition Monitored/On Condition components will be serviceable.

Landing Gear:

Each  Landing  Gear will have at least  2,700  cycles  remaining  until the next
inspection or overhaul based on a 20,000 cycle interval.

Airworthiness Directives (AD's):

Airworthiness  Directives  requiring  compliance within 90 days after Redelivery
will be in  compliance.  Airworthiness  Directives  that require  inspection  or
repetitive  inspection will be cleared for 3,000 hours or the maximum inspection
interval if less than 3,000 hours.



<PAGE>


Demonstration Flight:

Lessee  will  perform  a  one  and  one  half  hour  flight   demonstrating  the
satisfactory  operation  of the  Aircraft  with no more than two  observers,  as
designated by Sublessor, on board during such Demonstration Flight.

Records:

Documentation  delivered to Sublessee at Delivery  will be returned to Sublessor
along with the up-to-date  Aircraft  Maintenance  Records that the Sublessee has
collected during the Sublease Term.

Aircraft Documentation:

Sublessee will prepare the Aircraft  Documents in one location at least ten (10)
days prior to Redelivery of the Aircraft. The Aircraft Documents,  as identified
in Annexure 1 to the Acceptance Certificate, will be redelivered in their latest
revision to Sublessor at the Redelivery Date.




<PAGE>


                                   SCHEDULE 13

                          RETURN ACCEPTANCE CERTIFICATE

1.       Frontier  Airlines,  Inc.  (Sublessee)  and INDIGO  AVIATION  AB (publ)
         (Sublessor)  have entered  into an Aircraft  Sublease  Agreement  dated
         October ____ 1999,  (Sublease).  Unless otherwise defined,  capitalized
         terms used herein will have the meanings set forth in the Sublease.

2.       Sublessor has this _____ day of ______ (Time: _____) at ______ received
         from Sublessee possession of:

         (a)      one (1) Boeing 737-3L9 Aircraft, bearing manufacturer's serial
                  number 26442,  registration  mark N313FL together with two (2)
                  CFM  International  CFM56-3B-2  engines bearing serial numbers
                  856183 and 857192,  all Parts attached  thereto and thereon in
                  an airworthy condition; and

         (b)      all  Aircraft  Documents  as  listed  in the  Document Receipt
                  attached hereto.

3.       The Airframe, Engines and Parts had the following  Flight  Hours/Cycles
         at return:

         (a)      Airframe:

Total hours     Total landings    Since last "C" Check      Since last "A" Check

______            _____            ______ Flight Hours        _____ Flight Hour
                                   ______ Cycles              _____ Cycles


         (b)      Engines:   CFM56-3B-2

Position     Serial No.   Total Flight   Total Cycles   Since last   Since last
                          Hours                         shop visit   Engine
                                                                     Performance
                                                                     Restoration
                                                                     Visit
_____        _____        _____          ______         ____ Flight  ____ Flight
                                                             hours        hours
                                                        ____ Cycles  ____ Cycles

Time Remaining to next life limited part removal

               Flight Hours                        Cycles
MSN:           _____                               _____
MSN:           _____                               _____



<PAGE>


         (c)      APU:

MSN       Total Flight   Flight Hours/ Cycles        Flight Hours/Cycles
          Hours          remaining until next HSI    remaining on turbine and
                         inspection                  compressor life limited
                                                     parts
-----     ----           ------                      -----

         (d)      Landing Gears:

Position     Serial       Total Flight      Flight Hours/ Cycles  Flight Hours/
             No.          Hours/Cycles      since last Overhaul   Cycles to next
                                                                  sched. Removal
Nose         ____         ___ Flight Hrs    ___ Flight Hrs        ___ Flight Hrs
                          ___ Cycles        ___Cycles             ___ Cycles
Right Main   ____         ___ Flight Hrs    ___ Flight Hrs        ___ Flight Hrs
                          ___ Cycles        ___Cycles             ___ Cycles
Left Main    ____         ___ Flight Hrs    ___ Flight Hrs        ___ Flight Hrs
                          ___ Cycles        ___Cycles             ___ Cycles

         (e)      Status  of  components  or  Parts with time/Cycle and calendar
                  limits (see attached sheet);

         (f)      Fuel on board at return: ___kilos (____ gallons)

4.       Other technical  information  regarding the Aircraft and its components
         are correctly set forth on the Aircraft report attached hereto.

5.       The above specified Aircraft, Engines and documents are hereby accepted
         by Sublessor subject to:

         (a)      the provisions of the Sublease; and

         (b)      correction  by  Sublessee  of the  discrepancies  specified in
                  Annex 2 hereto (which  correction  Sublessee hereby undertakes
                  to perform as soon as reasonably possible).

6.       Subject to  Paragraph  7, the leasing of the  Aircraft by  Sublessor to
         Sublessee  pursuant  to  the  Sublease  is  hereby  terminated  without
         prejudice  to  Sublessee's  continuing  obligations  under the Sublease
         including, without limitation, Clauses 19 and 20.

7.       Sublessee  represents and warrants that during the term of the Sublease
         all  maintenance and repairs to the Airframe and Engines were performed
         in  accordance  with  the  requirements   contained  in  the  Sublease.
         Sublessee  further  confirms  that  all of its  obligations  under  the
         Sublease whether accruing prior to the date hereof or which survive the
         termination  of the  Sublease by their terms and accrue  after the date
         hereof, will remain in full force and effect until all such obligations
         have been  satisfactorily  completed.  Sublessee  represented  that the
         documents delivered and listed in Annex 1 are true and accurate.

8.       This  Return  Acceptance  Certificate  is executed and delivered by the
         parties in ____________.

IN WITNESS  WHEREOF,  the parties  hereto  have  caused  this Return  Acceptance
Receipt  to be  executed  in their  respective  corporate  names  by their  duly
authorized representatives as of the day and year first above written.


FRONTIER AIRLINES, INC.



By:____________________________________

Title:___________________________________


INDIGO AVIATION AB (publ)



By:_____________________________________

Title:____________________________________


ATTACHMENTS:

Annexure 1.             Aircraft Documents
Annexure 2.             List of Discrepancies



<PAGE>


                                   Annexure 1


                               AIRCRAFT DOCUMENTS

Note:    This Annexure 1 is to be used for reference purposes only. The Aircraft
         Documents  will  be  more  closely  identified  in   Annexure  1 to the
         Acceptance Certificate.

A.       Certificates

-        Certificate of Airworthiness
-        Certificate of Registration

B.       Aircraft Status Records

-        Technical Log Book
-        Airframe Maintenance Status Report
-        Manufacturer's Service Bulletin Status Report
-        Airworthiness Directive Compliance Report (terminated and repetitive)
-        Local Modification Status Report List with Substantiating Data
-        Last Weighing Report
-        Repair Data Structural Repairs

C.       Aircraft Maintenance Records

-        Test Flight Reports
-        Last  Boeing  "C"  check  and maintenance check Work Cards for each "C"
         check multiple (or segment)

D.       Aircraft History Records

-        Aircraft Structural Repair History (if applicable)
-        Service Difficulty Report (if applicable)
-        Accident or Incident Report (if applicable)

E.       Engine Records (for each engine)

-        Log Books
-        Last overhaul and repair documents for each module
-        Airworthiness Directive Compliance Report (terminated and repetitive)
-        Manufacturer's Service Bulletin Status Report
-        Engine Disk Sheet
-        Engine Data Submittal Sheet
-        Condition Monitoring Status Report



<PAGE>


F.       APU Records

-        Log Book
-        Last overhaul and repair documents
-        Manufacturer's Service Bulletin Status Report

G.       Component Records (including components installed engines and APU)

-        Time Controlled Component Status Report with remaining hours and cycles
         (if applicable)
-        Serviceability  tags  or  back-up   documentation,  as  available,  for
         components  replaced   since  delivery  from  Boeing,  as  provided  to
         Frontier  at   Delivery  and  any  tags  or  backup  documentation  for
         components replaced by Frontier since Delivery.

H.       Manuals

-        Airplane Flight Manual
-        Quick Reference Handbook
-        Aircraft Operating Manual
-        Weight and Balance Manual Supplement Wiring Diagram  Manual (microfilm)
-        Illustrated Parts Catalog  (microfilm)
-        Aircraft Maintenance  Manual  (microfilm)
-        CFM International Illustrated Parts Catalog Vendor
-        Manual Seats Vendor Manual
-        Galleys Vendor Manual
-        Ovens Vendor Manual
-        Coffee makers Nordam Maintenance Manuel Supplements

I.       Miscellaneous Technical Documents

-        Maintenance Program Specifications/Requirements
-        Interior Configuration Drawings
-        Loose Equipment Inventory List
-        Delivery documentation ex Boeing
-        Export Certificate of Airworthiness
-        Aircraft Readiness Log
-        Rigging Record Brochure
-        Miscellaneous Delivery Record Brochure
-        Fuel Measuring Stick Calibration Brochure
-        FAA Airworthiness Directive Compliance Record



<PAGE>


                                   Annexure 2


                                  Discrepancies




<PAGE>


                                   SCHEDULE 14


                               SUBLEASE SUPPLEMENT


LEASE  SUPPLEMENT  NO.  1 dated October ____, 1999,  between  INDIGO AVIATION AB
(publ) (the "Sublessor") and FRONTIER AIRLINES, INC. (the "Sublessee").

Sublessor  and  Sublessee  have  previously  entered into that certain  Aircraft
Sublease  Agreement  dated as of October __, 1999 (herein  called the "Sublease"
and the defined terms therein being hereinafter used with the same meaning). The
Sublease  provides for the  execution  and delivery from time to time of a Lease
Supplement  substantially  in the form  hereof for the  purpose  of leasing  the
aircraft  described  below under the Sublease as and when delivered by Sublessor
to Sublessee in accordance with the terms thereof.

The Sublease  relates to the  Aircraft,  Parts and Engines as more  specifically
described  below.  A  counterpart  of the  Sublease is attached  hereto and this
Sublease Supplement and the Sublease shall form one document.

In  consideration  of the premises and other good and sufficient  consideration,
Sublessor and Sublessee hereby agree as follows:

1.       Sublessor  hereby  delivers and leases to Sublessee  under the Sublease
         and  Sublessee  hereby  accepts  and leases  from  Sublessor  under the
         Sublease,  that certain used Boeing Model 737-3L9  Aircraft bearing FAA
         Registration Mark N313FL,  including the Airframe bearing manufacturers
         serial number 26442 and the two (2) CFM  International,  Inc. CFM56-3B2
         bearing  manufacturer's  serial numbers 856183 and 857192  described in
         Schedule 1 herewith ("Delivered Aircraft").

2.       The  Delivery  Date  of  the  Aircraft  is  the  date  of this Sublease
         Supplement set forth in the opening paragraph hereof.

3.       The Sublease Term for the Aircraft shall  commence on the Delivery Date
         and shall end on the Sublease Expiry Date.

4.       The amount of Rent for the Aircraft is set forth in the Sublease and is
         payable as provided in the Sublease.

5.       Sublessee  hereby  confirms to Sublessor that (i) the Aircraft and each
         Engine installed  thereon or belonging thereto have been duly marked in
         accordance  with  the  terms of  Clause  12.12  of the  Sublease,  (ii)
         Sublessee  has  inspected  the Aircraft and the Aircraft  satisfies the
         conditions  set forth in the Sublease and (iii)  Sublessee has accepted
         the Aircraft for all purposes hereof and of the Sublease.

6.       All of the terms and provisions of the Sublease are hereby incorporated
         by reference in this Sublease Supplement to the same extent as if fully
         set forth herein.

7.       This Sublease Supplement may be executed in any number of counterparts,
         each of such counterparts,  except as provided on the front page of the
         Sublease,  shall for all purposes be deemed to be an original;  and all
         such  counterparts  shall  together  constitute  but one  and the  same
         Sublease Supplement.

8.       This Sublease Supplement has been delivered in New York.




<PAGE>


SIGNATURE PAGE


IN WITNESS WHEREOF, Sublessor and Sublessee have caused this Sublease Supplement
to the Sublease to be duly executed as of the day and year first above written.



SUBLESSOR

INDIGO AVIATION AB (publ)



By:___________________________________

Name:_________________________________

Title:__________________________________



SUBLESSEE

FRONTIER AIRLINES, INC.



By_____________________________________

Name:__________________________________

Title:___________________________________