_______________________________________________________________   
                                             
                                                                   Exhibit 10.36
                           AIRCRAFT SUBLEASE AGREEMENT


                                     between

                                INDIGO PACIFIC AB



                                  as Sublessor

                                       and

                             FRONTIER AIRLINES, INC.


                                  as Sublessee

                          Dated as of December 14, 1998


     _____________________________________________________________________


Aircraft Make and Model:                            Boeing 737-3U3
Aircraft Manufacturer's Serial Number               28734
Aircraft Registration Number:                       N309FL
Make and Model of Engines:                          CFM INTERNATIONAL CFM 56-3C1





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  counterpart  of this  Agreement,  so  identified by the
signature of  Sublessor's  Lender on the receipt set forth on the signature page
of such original counterpart.




<PAGE>


TABLE OF CONTENTS

1. SUMMARY OF TRANSACTION.....................................................7
2. DEFINITIONS................................................................9
   2.1 Definitions............................................................9
   2.2 Construction..........................................................19
3. REPRESENTATIONS AND WARRANTIES............................................20
   3.1 Sublessee's Representations and Warranties............................20
   3.2 Sublessor's Representations and Warranties............................23
   3.3 Survival of Representations and Warranties............................25
4. CONDITIONS PRECEDENT......................................................25
   4.1 Sublessor's Conditions Precedent......................................25
   4.2 Waiver................................................................27
   4.3 Sublessee's Conditions Precedent......................................27
   4.4 Waiver................................................................28
5. DELIVERY CONDITION AND INSPECTION OF AIRCRAFT.............................28
   5.1 Sublessee Selection of Aircraft.......................................28
   5.2 Conditions at Delivery................................................28
   5.3 Sublessee Inspection of Aircraft at Delivery..........................28
   5.4 Delivery of Aircraft to Sublessee.....................................29
   5.5 Sublessee Acceptance of Aircraft......................................29
6. LEASE TERM................................................................29
   6.1 Initial Lease Term....................................................29
   6.2 Lease Extension Date..................................................29
   6.3 Expiry Date...........................................................30
   6.4 Risk..................................................................31
7. DELIVERY..................................................................31
   7.1 Delivery..............................................................31
8. RENT......................................................................31
   8.1 Rent Date.............................................................31
   8.2 Time of Payment.......................................................32
   8.3 Amount of Basic Rent..................................................32
   8.4 Reserves..............................................................32
   8.5 Increased Rent for Hour/Cycle Ratio...................................32
9. SECURITY DEPOSIT..........................................................32
   9.1 Security Deposit......................................................32
   9.2 Letter of Credit......................................................32
   9.3 Sublessor's Rights....................................................32
10. MAINTENANCE RESERVES.....................................................33
   10.1 Amount...............................................................33
   10.2 Payments.............................................................33
   10.3 Adjustment...........................................................33
   10.4 Release of Maintenance Reserves......................................34
   10.5 Costs in Excess of Reserves..........................................35
   10.6 Reimbursement after Expiry Date......................................35
   10.7 LLP Maintenance Reserve..............................................35
   10.8 No Anticipated Draw-down.............................................36
11. PAYMENTS.................................................................36
   11.1 Account for Sublessee Payments.......................................36
   11.2 Default Interest.....................................................36
   11.3 Absolute Obligations.................................................37
   11.4 Application of Payments to Sublessor.................................37
   11.5 Currency Indemnity...................................................37
   11.6 Set-off..............................................................38
   11.7 Time for Payments....................................................38
12. SUBLESSOR'S CONVENANTS...................................................38
   12.1 Quiet Enjoyment......................................................38
   12.2 Sublessor Obligations Following Expiry Date..........................38
13. SUBLESSEE'S COVENANTS....................................................39
   13.1 Duration.............................................................39
   13.2 Information..........................................................39
   13.3 Sublessor visits.....................................................41
   13.4 Periodic Estoppel Certificates.......................................41
   13.5 Airport and Navigation Charges.......................................41
   13.6 Operation of Aircraft................................................42
   13.7 Areas of Operation...................................................42
   13.8 Non-Prejudicial Action...............................................42
   13.9 Non-Representation of Sublessor......................................42
   13.10 Inspection..........................................................43
   13.11 Registration........................................................43
   13.12 Name Plates.........................................................44
   13.13 Geneva Convention...................................................44
   13.14 Merger and Shareholding.............................................44
   13.15 Ownership...........................................................45
14. POSSESSION...............................................................46
   14.1 No Relinquishment of Possession......................................46
   14.2 Sublessee Primarily Liable...........................................49
   14.3 Recognition of Rights................................................49
15. SECURITY INTERESTS.......................................................49
   15.1 Title................................................................49
   15.2 No Security Interests; Base of Aircraft..............................49
   15.3 Notice to Sublessor..................................................50
   15.4 Procure Release......................................................50
16. MAINTENANCE AND REPAIR...................................................50
   16.1 General Obligations..................................................50
   16.2 Specific Obligations.................................................51
17. REPLACEMENT OF PARTS.....................................................53
   17.1 Replacement of Parts.................................................53
   17.2 Title to Replacement Parts...........................................53
   17.3 Pooling of Parts.....................................................53
   17.4 Alterations..........................................................54
   17.5 Removal of Parts.....................................................54
   17.6 Substitution of Engine...............................................55
   17.7 Temporary Removal of Parts...........................................56
18. MANUFACTURER'S WARRANTIES................................................57
   18.1 Authorization........................................................57
   18.2 Proceeds.............................................................58
   18.3 Agreements with Manufacturers........................................58
19. DISCLAIMERS..............................................................58
   19.1 As Is, where Is......................................................59
   19.2 No Sublessor Liability for Losses....................................61
   19.3 Exclusion............................................................61
   19.4 Waiver...............................................................62
   19.5 Confirmation.........................................................62
20. INDEMNITIES..............................................................62
   20.1 General..............................................................62
   20.2 Survival of Indemnification..........................................63
   20.3 Notice to Sublessee..................................................63
21. TAXATION.................................................................63
   21.1 Gross-up.............................................................63
   21.2 Tax Indemnity........................................................64
   21.3 Value Added Taxes....................................................65
   21.4 Taxation of Indemnity Payments.......................................65
   21.5 Benefit of Indemnities...............................................66
   21.6 Sublessor Indemnification............................................66
   21.7 Survival of Tax Indemnities..........................................66
   21.8 Mitigation and Cooperation...........................................66
   21.9 Furnishing Forms.....................................................66
22. INSURANCE................................................................67
   22.1 Insurances...........................................................67
   22.2 Requirements.........................................................67
   22.3 Insurance Covenants..................................................67
   22.4 Renewal of Insurances................................................69
   22.5 AVN 2000.............................................................69
   22.6 Failure to Insure....................................................69
   22.7 Continuation of Insurances...........................................70
   22.8 Application of Insurance Proceeds....................................70
   22.9 Pursuit of Claims....................................................70
23. LOSS, DAMAGES AND REQUISITION............................................71
   23.1 Total Loss Prior to Pre-Delivery Acceptance..........................71
   23.2 Total Loss After Pre-Delivery Acceptance.............................71
   23.3 Total Loss of Engines................................................72
   23.4 Requisition..........................................................72
24. REDELIVERY...............................................................73
   24.1 Redelivery of Aircraft; General Conditions...........................73
   24.2 Final Inspection.....................................................74
   24.3 Operational Ground Check; Demonstration Flight.......................74
   24.4 Non-compliance.......................................................75
   24.5 Acknowledgment.......................................................76
   24.7 Return of the Letter of Credit.......................................76
25. EVENTS OF DEFAULT........................................................76
   25.1 Events...............................................................76
   25.2 Sublessor's Rights...................................................79
   25.3 Default Payments.....................................................81
26. ASSIGNMENT AND TRANSFER..................................................82
   26.1 By Sublessee.........................................................82
   26.2 By Sublessor.........................................................82
   26.3 Assignment to Lender.................................................82
   26.4 Sublessor Includes Sublessor's Assignee and Sublessor's Lender.......83
27. MISCELLANEOUS PROVISIONS.................................................83
   27.1 Rights Cumulative, Waivers...........................................83
   27.2 Delegation...........................................................84
   27.3 Expenses.............................................................84
   27.4 Time of Essence......................................................84
   27.5 Entire Agreement.....................................................84
   27.6 Further Assurances...................................................84
   27.7 Language.............................................................85
   27.8 Variation............................................................85
   27.9 Invalidity of any Provision..........................................85
   27.10 Survival............................................................85
   27.11 Reimbursement.......................................................85
   27.12 Press Releases......................................................85
   27.13 Power of Attorney...................................................86
   27.14 Usury Laws..........................................................86
   27.15 Confidentiality.....................................................86
   27.16 Counterparts........................................................86
28. NOTICES..................................................................87
29. GOVERNING LAW AND JURISDICTION...........................................88
   29.1 New York Law.........................................................88
   29.2 Non-exclusive Jurisdiction in New York...............................88
   29.3 Waiver...............................................................89




<PAGE>



SCHEDULES

Schedule 1               Aircraft Specification                              96
Schedule 2               Delivery Conditions                                 99
Schedule 3               Acceptance Certificate                             100
Schedule 4               Sublease Supplement                                102
Schedule 5               Insurance Requirements                             104
Schedule 6               Return Conditions                                  108
Schedule 7               Return Acceptance Certificate                      111
Schedule 9               Monthly Aircraft Utilization and Status Report     119
Schedule 10              Power of Attorney                                  121



<PAGE>



THIS AGREEMENT is made on the 14th day of December, 1998.

BETWEEN:

(1)           INDIGO PACIFIC AB, a company incorporated under the laws of Sweden
              whose  registered  office  is  at  Sodra Forstadsgatan 4, SE-21143
              Maluno, Sweden ("Sublessor"); and

(2)           FRONTIER AIRLINES, INC., a company incorporated under the laws  of
              Colorado  whose  chief executive  office  and  principal  place of
              business  is   12015  E.  46th  Avenue,  Denver,  Colorado,  80239
              ("Sublessee").

WHEREAS:

Owner  Trustee (as hereinafter defined)  holds  title  to  the  Aircraft for the
benefit of Subessor (as hereinafter defined);

Owner Trustee leases the Aircraft to Sublessor;

Sublessor wishes to sublease the Aircraft (as hereinafter  defined) to Sublessee
and Sublessee is willing to sublease the Aircraft from Sublessor on the terms of
this Agreement; therefore

IT IS AGREED as follows:


1.            summary of transaction

The  following  is a summary  of the lease  transaction  between  Sublessor  and
Sublessee.  It is set forth for the convenience of the parties only and will not
be deemed in any way to amend,  detract from or simplify the other provisions of
this Agreement.

              (i)        Description of the Aircraft

                         One Boeing 737-3U3
                         MSN 28734
                         Reg No. N309FL

              (ii)       Scheduled Delivery Date and Location

                         December 14, 1998, at Evergreen Air Center Marana, 
                         Arizona.

              (iii)      Initial Lease Term

                         From  Delivery Date to 1 May 2000.

              (iv)       Lease Extension Option

                         Sublessor  has an option to extend  until  October  31,
2000, subject to six (6) month prior written notice.

              (v)        Security Deposit

                         US$ 100,000, payable as follows:
                         In cash upon signing of Letter of Intent; upon Delivery
                         the Security  deposit will be set off against the first
                         month's Rent.

                         US$ 600,000
                         Irrevocable   Letter   of   Credit   to  the  value  of
                         $600,000.00 provided 1 day prior to Delivery, in a form
                         acceptable to Sublessor.

              (vi)       Transaction Fee

                         Not applicable.

              (vii)      Rent During Initial Lease Term

                         US$ 258,000 per month, payable in advance.

              (viii)     Rent During Lease Extension Term

                         US$ 258,000 per month, payable in advance.

              (ix)       Reserves

                         Airframe Maintenance Reserve: US$ 70 per Flight Hour.
                         Engine Maintenance Reserve: US$ 80  per Flight Hour for
                         each Engine.
                         LLP Maintenance Reserve: US$20 per Flight Hour.
                         Landing Gear Maintenance Reserve: US$ 10 per Cycle.
                         APU Maintenance Reserve: US$6 per Flight Hour.

              (x)        Country of Aircraft Registration

                         United States of America.

              (xi)       Agreed Value of Aircraft

                         US$ 33,000,000

              (xii)      Damage Notification Threshold

                         US$ 250,000

              (xiii)     Sublessor's Bank Account

                         Proceeds Account
                         KBC New York
                         125 W 55th Street
                         NY 10019, New York
                         Accoutn Number:  21557003
                         SWIFT:  KREDUS33   for  credit  to  KBC Finance Ireland
                         quoting Indigo Proceeds Account #03/43824/77


              (xiv)      Indemnitees

                         Sublessor
                         Owner Trustee
                         Sublessor's Lender


2.            DEFINITIONS

2.1           Definitions

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

Acceptance  Certificate means a certificate substantially in the form set out in
Schedule 3;

Agreed Value means THIRTY THREE MILLION US DOLLARS (US$33,000,000);

Aircraft  means the aircraft  described in Schedule 1 (which term includes where
the  context  admits a  separate  reference  to any or all  Engines,  Parts  and
Aircraft Documents);

Aircraft  Documents means the documents,  data and records identified in Annex 1
to Schedule 3 of this  Agreement  and all  additions,  renewals,  revisions  and
replacements  from time to time made to any of the foregoing in accordance  with
this Agreement all of which shall be in the English language;

Airframe means the Aircraft, excluding the Engines and the Aircraft Documents;

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 an 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;

Assignment of Insurances  means the assignment by Sublessee to Sublessor,  or at
the request of Sublessor,  to Sublessor's  Lender, of all of Sublessee's rights,
title and interest in and to the Insurances  with respect to the Aircraft (other
than the  Insurances  relating  to  liability)  or any  other  form of  Security
Interest in favor of Sublessor,  Owner Trustee or  Sublessor's  Lender in and to
the Insurances with respect to the Aircraft;

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 means all amounts payable pursuant to Clause 8.3.

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
Dublin, London, Stockolm and New York;

"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  Sublessee's  maintenance  program  approved by the Aviation
Authority that shall at least meet the requirements of the MPD;

Conditions Precedent means the conditions specified in Clause 4.1;

CPCP means corrosion protection 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;

Damage Notification Threshold means US$250,000;

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

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

Delivery  means  delivery  of the Aircraft by Sublessor to Sublessee pursuant to
Clause 7;

Delivery Date means the date on which Delivery occurs;

Delivery  Location  means  Evergreen  Air Center  Marana,  Arizona or such other
location as the parties may agree;

Delivery Work means the  maintenance  and  modification  work to be performed at
Sublessor's  expense on the  Aircraft  just prior to  Delivery as  described  in
Schedule 2 hereto;

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 with
              and whether or not installed on the Airframe on the Delivery Date,
              such  engines  being   described  as  to  serial  numbers  on  the
              certificate  of  acceptance  to  be  executed  by  Sublessee  upon
              Delivery; 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 means six million Dollars (US$6,000,000);

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 25.1;

Expiry Date means the date determined in accordance with Clause 6.3;

Extension  Lease Expiry Date means October 31, 2000 or such other date as agreed
to between the parties;

Extension  Lease Term  means the  period  commencing  on the day  following  the
Initial Lease Expiry Date and ending on the Extension Lease Expiry Date;

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

Facility Agreement means the facility agreement entered into between Sublessor's
Lender and Sublessor in respect of the financing of  Sublessor's  acquisition of
the Aircraft;

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;

Federal  Aviation  Act means 49 United  States  Code  Subtitle  VII,  the former
Federal Aviation Act as amended,  as further amended,  modified or replaced from
time to time;

Final Inspection has the meaning given to it in Clause 24.2;

Financial Indebtedness means any indebtedness in respect of:

(a)           money 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  leaves the ground on the
tarmac before take off until the wheels of the Aircraft next touch ground;

Geneva  Convention  means the  Convention on the  International  Recognition  of
Rights in Aircraft  signed at 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 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 lease  agreement  entered into between
Owner Trustee and Sublessor  dated as of even date herewith which is being filed
with the FAA simultaneously herewith;

Indemnitees  means  Sublessor,  Owner Trustee,  Sublessor's  Lender or any other
person  identified by Sublessor  prior to the Delivery Date or, with the consent
of  Sublessee,  after the Delivery  Date 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;

Initial Lease Expiry Date means 1 May, 2000;

Initial  Lease Term means the period  commencing on the Delivery Date and ending
on the Initial Lease Expiry Date;

Insurances bears the meaning ascribed to it in Clause 22.1 (a);

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

Lease  Term  means the  Initial  Lease  Term and,  if the lease is  extended  in
accordance with Clause 6.2, the Extension Lease Term;

Letter of Credit bears the meaning ascribed to it in Clause 9.2;

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

Maintenance  Facility  means,  prior to Delivery,  Evergreen Air Center  Marana,
Arizona  and,  after  Delivery,  such FAA approved  maintenance  facility as the
Sublessor may approve in writing;

Maintenance Reserves means all amounts payable pursuant to Clause 10;

Manufacturer means The Boeing Company, a Delaware corporation with its principal
office in Seattle, State of Washington, U.S.A.;

Minimum Liability Coverage means US$500,000,000 on each occurrence;

Monthly Report means a report substantially in the form of Schedule 9;

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

MPD  mean  the  Maintenance  Planning  Data 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 partner,
subsidiary,   associate  or  affiliate  of  Sublessor)  and  Sublessee  (or  any
subsidiary, associate or affiliate of Sublessee);

Owner  Trustee  means First  Security  Bank,  National  Association,  not in its
individual  capacity but solely as owner trustee  pursuant to a trust  agreement
dated on or about the date hereof with Indigo Pacific AB as beneficiary;

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

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

(b)           any  other  component,  furnishing  or  equipment  (other  than  a
              complete Engine) title to which has, or  should  have,  passed  to
              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 Lien means:

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

(b)           any 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)           liens  arising out of judgments or awards with respect to which at
              the time (i) an appeal  proceedings  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 Sublessor Lien; and

(e)           any  Security  Interest  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 continued  existence of the lien, do not involve any danger
(in the reasonable  opinion of Sublessor) of the sale,  forfeiture or other loss
of the Aircraft or any interest therein;

Physical  Redelivery Location means Long Beach Airport or such other location as
the parties may agree;

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;

Rent means all amounts payable pursuant to Clause 8.3;

Rent Date means the first day of each Rent Period;

Rent Period means each period ascertained in accordance with Clause 8.1;

Replacement Engine means an engine complying with Clause 17.6;

Reserves  means  the  Airframe   Maintenance  Reserve,  the  Engine  Maintenance
Reserves,  the LLP Maintenance Reserve, the Landing Gear Maintenance Reserve and
the APU Maintenance Reserve as specified in Clause 10;

Return Conditions means the conditions specified in Schedule 6;

Scheduled  Delivery  Date means  December  14,  1998,  or such other date as the
parties may mutually  agree and Sublessor may be able to deliver the Aircraft to
Sublessee;

Security  Deposit means the amount  payable  pursuant to Clause 9.1 as it may be
adjusted from time to time (upwards or downwards) pursuant to Clause 9;

Security  Interest  means  any  mortgage,  charge,  pledge,  lien,  encumbrance,
assignment,  hypothecation  or any other  agreement  or  arrangement  conferring
security;

State of Incorporation means 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 Supplement means the Sublease Supplement,  substantially in the form of
Schedule 4 hereto, entered into between Sublessor and Sublessee;

Sublessor's  Lender  means KBC Finance  Ireland and the Banks (as defined in the
Facility  Agreement) or any person or persons notified by Sublessor to Sublessee
under  Clause 26 as  providing  financing  to Owner  Trustee  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);

Sublessor Lien means:

(a)           any  Security  Interest  from time to  time  created by or through
              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; or

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

(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;

Sublessee's  Maintenance  Program means the  maintenance  program adopted by the
Sublessee for its 737-300  aircraft that shall at least meet the requirements of
the Aviation Authority in the State of Registration and of the MPD;

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; 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  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  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;

Technical Redelivery Location means Sublessee's facilities in Denver Colorado or
such other location as the parties may agree;

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  (other  than a  requisition  for hire for a
              temporary period not exceeding One Hundred Twenty (120) days or by
              the U.S.  Government or any agency  thereof) 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 sixty (60)  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 sixty
              (60) 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 requisition for title, sequestration, confiscation,
              restraint,  detention,   forfeiture,   compulsory  acquisition  or
              seizure, the date on which the same takes effect;

(d)           in the case of  requisition  for hire by a person  other  than the
              U.S.  Government or an agency thereof,  the expiration of a period
              of One  Hundred  Twenty  (120)  days  from the date on which  such
              requisition  commenced  (or,  if  earlier,  the date on which  the
              insurers make payment on the basis of a total loss);

(e)           in the case of paragraph (d)  in the definition of Total Loss, the
              final day of the said period of sixty (60) consecutive days;

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

(g)           in case of paragraph  (f) above the definition of Total Loss,  the
              final day of the said period of sixty (60) consecutive days;

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

Transaction Documents means

(a)           this Agreement;

(b)           the Assignment of Insurances;

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

(d)           the Sublease Supplement;

(e)           the Acceptance Certificate.

"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.

2.2           Construction

2.2.1         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 26);

              (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, judgement,  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 persons 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)  save that,  where any such  period  would
                         otherwise  end on a  non-Business  Day, it shall end on
                         the next preceding Business Day.

              (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"    and
                         "hereinafter" refer to this entire Agreement; and

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

2.2.2         Headings are for ease of reference only.

2.2.3         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.


3.            REPRESENTATIONS AND WARRANTIES

3.1           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 (unless, in each
case such  representation  and  warranty is  expressly  applicable  on and as of
another date or dates):

                        (a)       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.

                        (b)       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.

                        (c)       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.

                        (d)       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  an
                                  Security  Interest  upon   any   property   of
                                  Sublessee,    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
                                  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.

                        (e)       Filings. Except for the filing or recording of
                                  this  Agreement with the FAA and the filing of
                                  a  UCC-1  at  the   location  of   Sublessee's
                                  executive   offices,   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 Colorado to evidence the interests of
                                  Owner   Trustee,    Sublessor's   Lender   and
                                  Sublessor in the  Aircraft or any  Transaction
                                  Document.

                        (f)       Licenses.   Sublessee   holds,  all  licenses,
                                  certificates  and  permits   (including  a  US
                                  airworthiness    certificate,     registration
                                  certificate   and  radio   licence)  from  all
                                  applicable Government Entities for the conduct
                                  of its business as a certificated  air carrier
                                  and performance of its  obligations  under the
                                  Transaction   Documents,   including  but  not
                                  limited  to a  current  certificate  of public
                                  convenience   and   necessity  and  a  current
                                  operating  certificate  for the  operation  of
                                  Boeing 737-300 aircraft.

                        (g)       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.

                        (h)       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.

                        (i)       Tax Returns.  All necessary  returns have been
                                  delivered   by   Sublessee   to  all  relevant
                                  taxation  authorities in the  jurisdiction  of
                                  its  incorporation  and  Sublessee  is  not in
                                  default  in the  payment  of any taxes due and
                                  payable.

                        (j)       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.

                        (k)       No Default under this Sublease. At the time of
                                  execution  of this  Agreement , no Default has
                                  occurred  and is  continuing  and the  balance
                                  sheet  and  other  financial   statements  for
                                  Sublessee  for the year ended  March 31,  1998
                                  were  prepared in accordance  with  accounting
                                  principles generally accepted and consistently
                                  applied in the State of Incorporation.

                        (l)       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.

                        (m)       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.

                         (n)      No immunity: in any  proceedings  taken in the
                                  State of  Incorporation  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.
 
                         (o)      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.

                         (p)      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;

                         (q)      Principal  Place  of   Business:   Sublessee's
                                  principal   place   of   business   and  chief
                                  executive  office  as such  terms  are used in
                                  Article 9 of the Uniform Commercial Code   are
                                  located  at  12015  E.  46th  Avenue,  Denver,
                                  Colorado, 80239;

                         (r)      Flight Records: Sublessee's flight records are
                                  located  at  12015  E.  46th Avenue,   Denver,
                                  Colorado, 80239;

3.2           Sublessor's Representations and Warranties

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

                        (a)       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 Security Interests except
                                  for the Security  Interests  of Owner  Trustee
                                  and Sublessor  under the Head Lease  Agreement
                                  and of Sublessor's Lender.

                        (b)       Organizational Status.  Sublessor is a 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
                                  party.

                        (c)       Trust Agreement.  The Trust Agreement dated as
                                  of even date  herewith,  1998,  by and between
                                  Owner  Trustee  and   Sublessor   (the  "Trust
                                  Agreement"), has been duly authorized, validly
                                  executed   and   delivered   on  the  part  of
                                  Sublessor,   is  legally   binding   upon  the
                                  Sublessor,  and creates a legally  enforceable
                                  trust  (as  hereinafter  referred  to  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.

                        (d)       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.

                        (e)       Binding.   This   Agreement   and  the   other
                                  Transaction  Documents  to which it 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.

                        (f)       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.

Sublessor  has no permanent  establishment  of business in the United  States as
defined by or interpreted  pursuant to the Convention  between the Government of
New Zealand and the  Government of the United States of America for Avoidance of
Double  Taxation and the  Prevention of Fiscal  Evasion With Respect to Taxes on
Income.

3.3           Survival of Representations and Warranties

All of the foregoing  representations and warranties shall survive the execution
and delivery of this Sublease and the Delivery of the Aircraft.


4.            CONDITIONS PRECEDENT

4.1           Sublessor's Conditions Precedent

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

4.1.1         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)        Constitutional  Documents.  Copies  of  the  Sublessees
                         articles  of  incorporation  and  Bylaws,  certified as
                         true, complete and up-to-date by an officer of
                         Sublessee.

              (ii)       Resolutions.  A copy,  duly certified as a true copy by
                         an  officer  of  Sublessee  of a  board  resolution  of
                         Sublessee   approving  the   execution,   delivery  and
                         performance of the Transaction Documents and naming the
                         person or persons  authorized  to sign the  Transaction
                         Documents on behalf of Sublessee and authorized to sign
                         on behalf of Sublessee any documents to be delivered by
                         Sublessee   pursuant   hereto   or    contemporaneously
                         herewith;

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

              (iv)       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
                         including,  without  limitation,  a FAA  certificate of
                         airworthiness,  FAA  certificate of registration in the
                         State of Registration and a radio licence;

              (v)        Accounts.    The   balance  sheet  and  other financial
                         statements  of  Sublessee  for  the year ended March 31
                         1998;

              (vi)       Licences.  Copies of Sublessee's  Certificate of Public
                         Convenience  and Necessity  and  operating  certificate
                         covering its  operation of 737-300  aircraft  issued by
                         the  US   Department   of   Transportation   and   FAA,
                         respectively;

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

              (viii)     Insurances. A certificate from the Insurer's confirming
                         that  the  Insurances  are in  place  together  with an
                         insurance  broker's  letter of  undertaking  (in a form
                         acceptable  to Owner  Trustee,  Sublessor's  Lender and
                         Sublessor)  addressed  to  Owner  Trustee,  Sublessor's
                         Lender and Sublessor;

              (ix)       Opinions. Legal opinions from:

                        (a)       Counsel  to   Sublessee   addressed  to  Owner
                                  Trustee,   Sublessor's  Lender  and  Sublessor
                                  confirming  the  representations  (except  for
                                  3.1(d)) made by Sublessee  hereunder in a form
                                  and  substance  acceptable  to Owner  Trustee,
                                  Sublessor's Lender and Sublessor;

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

              (x)        Security Deposit and Rent.  Receipt by Sublessor of the
                         Security  Deposit  to the extent set forth in Clause 9,
                         the first monthly  instalment of Rent and the Letter of
                         Credit;

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

                        (a)       the   representations   and    warranties   of
                                  Sublessee  under  Clause 3.1  shall be correct
                                  and  would be correct if repeated on Delivery;
                                  and

                        (b)       no  Default   shall  have  occurred   and   be
                                  continuing.


4.2           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 15 days after the Delivery  Date,  and Sublessor may treat
the failure of Sublessee to do so as an Event of Default.

4.3           Sublessee's Conditions Precedent

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

4.3.1         The Aircraft  is substantially and materially in the condition set
              forth in Schedule 2.

4.3.2         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;

              (iii)      Transaction  Documents.    Originals  of  the following
                         documents (duly executed by Sublessor):

                        (a)       this Agreement; and

                        (b)       The Sublease Supplement.

              (iv)       the  representations  and warranties of Sublessor under
                         Clause  3.2 shall be  correct  and would be  correct if
                         repeated on Delivery; and

              (v)        no  Default  by  Sublessor  shall  have occurred and be
                         continuing.

4.4           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.


5.            DELIVERY CONDITION AND INSPECTION OF AIRCRAFT

5.1           Sublessee Selection of Aircraft

IN ADDITION TO THE DISCLAIMER AT CLAUSE 19, 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 NOT A MANUFACTURER OF THE AIRCRAFT NOR A DEALER IN THE AIRCRAFT.

5.2           Conditions at Delivery

In addition to the disclaimer at Clause 19, Sublessor has advised Sublessee that
at Delivery the Aircraft will be  substantially  and materially in the condition
set forth in Schedule 2 provided that this confirmation expires as at Delivery.

5.3           Sublessee Inspection of Aircraft at Delivery

Sublessee will have the right to perform such ground  inspection of the Aircraft
as it deems  appropriate.  After  completion  of the ground  inspection,  if the
Aircraft is acceptable to Sublessee  ("Preliminary  Acceptance") (subject to the
results  of the  acceptance  flight),  Sublessee  will  technically  accept  the
Aircraft  (subject to the  results of the  acceptance  flight) and will  provide
insurance coverage for the Aircraft,  including the acceptance flight. Sublessee
may, subject to having technically accepted the Aircraft and having provided for
insurance coverage reasonably acceptable to Sublessor,  have up to two observers
on board the Aircraft during Air New Zealand  Limited's  acceptance  flight from
Manufacturer  with respect to the  Aircraft.  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.

5.4           Delivery of Aircraft to Sublessee

Subject  to  Sublessee  having  performed  all of the  conditions  precedent  to
Delivery or waiver by the Sublessor set forth herein, Sublessor will deliver the
Aircraft to Sublessee at the Delivery Location. Provided that the Aircraft is in
the condition required by Clause 5.2 hereof,  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

5.5           Sublessee Acceptance of Aircraft

So long as the  Aircraft is in the  condition,  specified  in Clause 5.2 hereof,
Sublessee  will accept the Aircraft when tendered for delivery by Sublessor.  If
Sublessee fails to (i) comply with the conditions contained in Clauses 4.1 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 reasonable costs
and expenses  incurred by Sublessor as a result  thereof  including (but without
limitation)  any payments that  Sublessor or affiliates or related  companies to
Sublessor  become  obliged to make to any third party to put the Aircraft in the
condition set forth in Schedule 2.

5.6           Post Delivery Obligations

Promptly  following  Delivery  the  Sublessor  and  Sublessee  shall  remove any
components  or parts on the Aircraft at Delivery  which  Sublessor and Sublessee
agree to be surplus. In addition,  Sublessee acknowledges that Sublessor intends
to replace  certain  parts and  components  on the  Aircraft.  If  requested  by
Sublessor  Sublessee will on reasonable  notice and at reasonable times make the
Aircraft  available  to  Sublessor,  at the  expense  of  Sublessor,  to  enable
Sublessor to make such replacements.


6.            LEASE TERM

6.1           Initial Lease Term

Sublessor  shall Sublease the Aircraft to Sublessee and Sublessee shall take the
Aircraft on Sublease in accordance  with this  Agreement for the duration of the
Initial Lease Term and, subject to Clause 6.2, the Extension Lease Term.

6.2           Lease Extension Date

6.2.1         Sublessor  shall have the option to extend the Initial  Lease Term
              under this Agreement for the period of the Extension Lease Term.

6.2.2         In order to exercise the option set out in Clause 6.2.1, Sublessor
              must give written notice to Sublessee not less than six (6) months
              prior to the Initial Lease Expiry Date.

6.3           Expiry Date

The Expiry Date shall be the Initial  Lease Expiry Date or where  Sublessor  has
served notice under Clause 6.2.2, the Extension Lease Expiry Date subject to the
following provisions:

                        (a)       If Sublessor, acting in accordance with Clause
                                  4.2, notifies Sublessee that it is terminating
                                  this Agreement,  Sublessee  shall  immediately
                                  redeliver  the  Aircraft  in  accordance  with
                                  Clause  24 and the  Expiry  Date  shall be the
                                  date upon which the  Aircraft  is  redelivered
                                  and    Sublessee   has   complied   with   its
                                  obligations hereunder;

                        (b)       If Sublessor, acting in accordance with Clause
                                  25.2,  terminates  the leasing of the Aircraft
                                  to Sublessee under this  Agreement,  Sublessee
                                  shall  immediately  redeliver  the Aircraft in
                                  accordance  with Clause 24 and the Expiry Date
                                  shall be the date upon which the  Aircraft  is
                                  redelivered  and  Sublessee  has complied with
                                  all its obligations hereunder;

                        (c)       If the  Aircraft or  Airframe  suffers a Total
                                  Loss,  the  Expiry  Date  shall be the date on
                                  which  Sublessee  pays to Sublessor the Agreed
                                  Value and all other sums due from Sublessee to
                                  Sublessor hereunder.

                        (d)       If Clause 24.4 becomes applicable,  the Expiry
                                  Date shall be the date when any non-compliance
                                  referred  to in  Clause  24.4 has  been  fully
                                  rectified  and  Sublessor  shall have accepted
                                  redelivery of the Aircraft and Sublessee shall
                                  have   complied   with  all  its   obligations
                                  hereunder;

                        (e)       Under any circumstances, the Expiry Date shall
                                  be  the  date  upon  which  the   Aircraft  is
                                  redelivered  in accordance  with Clause 24 and
                                  the Return  Acceptance  Receipt  executed  and
                                  delivered in accordance with that clause; and

For the  avoidance of doubt in respect of Clauses  6.3(a),  (b), (d) and (e) the
obligations  of Lessee in respect  of payment of Rent and all other  obligations
shall continue to be payable in respect of those days prior to the redelivery to
Sublessor  of the  Aircraft in the Return  Conditions,  and in respect of Clause
6.3(c) such obligations shall continue until payment of the Total Loss Proceeds.

The obligations of Sublessee set forth in Clauses 13.17,  20, 21, 25 (b), (f) or
(g) 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 6.3, will survive the Expiry Date.

6.4           Risk

6.4.1         Throughout the Lease Term and until  redelivery of the Aircraft in
              accordance with Clause 24, Sublessee shall bear all risks of loss,
              theft, damage,  confiscation and destruction of or to the Aircraft
              and every part thereof.

6.4.2         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.


7.            DELIVERY

7.1           Delivery

Sublessor will deliver the Aircraft to Sublessee at the Delivery  Location on or
about the Scheduled  Delivery Date and  Sublessee  will accept  Delivery on that
Date.  Sublessor will notify  Sublessee from time to time and in a timely manner
of any changes to the Scheduled Delivery Date. Sublessee and Sublessor expressly
acknowledge  that  Delivery  of the  Aircraft  to  Sublessee  is  subject to and
conditioned upon delivery of the Aircraft by Manufacturer. 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 wilful  default of Sublessor,  and in no
event will  Sublessor  be liable for any delay or failure  that is caused by any
failure, breach or delay on the part of the Manufacturer. If a delay, not caused
by Sublessors  or Sublessees  breach of this  Agreement,  causes  Delivery to be
delayed beyond thirty (30) days after the Scheduled Delivery Date this Agreement
shall,  at the  option of either  party  hereto,  terminate  and in such  event,
neither  party  will  have  any  further  obligation  or  liability  under  this
Agreement,  except that Sublessor will repay to Sublessee the amount of Security
Deposit paid under this  Agreement.  So long as the Aircraft is in the condition
specified in clause 5.2 hereof,  Sublessee  acknowledges its obligations to take
Delivery  on the  Scheduled  Delivery  Date  notwithstanding  that  pre-Delivery
modifications  requested by Sublessee are not complete on the Scheduled Delivery
Date.


8.            RENT

8.1           Rent Date

The first Rent payment date shall be one (1) day prior to the Delivery Date, and
each  subsequent  Rent payment date shall be on the monthly  anniversary  of the
Delivery Date.

8.2           Time of Payment

Sublessee  shall pay 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.  Each payment will be in accordance  with clause 11.1 and accompanied
by the annotation "[ ] Rent for month of [ ]".

8.3           Amount of Basic Rent

The Basic  Rent  payable on each Rent Date  shall be the  amount  determined  in
accordance with Schedule 8.

8.4           Reserves

Sublessee will pay to Sublessor as Supplemental  Rent,  based on Sublessee's use
of the Aircraft during the Lease Term, Reserves in accordance with Clause 10.


9.            SECURITY DEPOSIT

9.1           Security Deposit

Sublessee  has paid to  Sublessor  a cash  Security  Deposit  in the  amount  of
$100,000  which  amount shall be credited to the Basic Rent payable on the first
Rent payment date.

9.2           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 favor of the
Sublessor in the amount set forth in Schedule 8 in form and substance reasonably
acceptable to Sublessor issued by a major commercial bank reasonably  acceptable
to  Sublessor  (the "Letter of Credit") on or prior to the  Delivery  Date.  The
Letter of Credit will serve as security for the  performance by Sublessee of its
obligations under this Agreement or the Other Agreements.

9.3           Sublessor's Rights

9.3.1         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 or Letter of Credit Sublessor may immediately,  or at any time
              thereafter,  without prior notice to Sublessee,  apply all or part
              of the 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 11.6 against all or part of the Security  Deposit or Letter
              of Credit.

9.3.2         If  Sublessor  exercises  the rights  described  in Clause  9.3.1,
              Sublessee  shall,  following a demand in writing  from  Sublessor,
              immediately  restore the Letter of Credit to the level at which it
              stood immediately prior to such exercise.

9.3.3         Sublessee  acknowledges  that  Sublessor  may commingle all or any
              part of the Reserves  with its general  funds and that no interest
              shall  accrue in favor of  Sublessee  in  respect of the Letter of
              Credit or the Reserves (except as provided herein).

9.3.4         Sublessor's  obligations  in respect of return of the  Maintenance
              Reserves  and  Letter of Credit  shall be those of debtor  and not
              those of a trustee or other fiduciary.


10.           Maintenance reserves

10.1          Amount

Sublessee  shall  during the Lease Term pay  Reserves to Sublessor in respect of
(i) the  Airframe,  in the amount set forth in  Schedule 8 for each  Flight Hour
operated by the Aircraft during the Lease Term ("Airframe  Maintenance Reserve")
and (ii) each of the  Engines,  in the amount set forth in Schedule 8 per Engine
for each Flight Hour operated by such Engine ("Engine Maintenance Reserves") and
(iii) the  Engine  Life  Limited  Parts  ("LLP's"),  in the  amount set forth in
Schedule  8 for  each  Flight  Hour  operated  by  each  of  the  Engines  ("LLP
Maintenance  Reserve")  and (iv) the Landing  Gears,  in the amount set forth in
Schedule 8 for each Cycle operated by the Aircraft  ("Landing  Gear  Maintenance
Reserve") and (v) the APU, in the amount set forth in Schedule 8 for each Flight
Hour ("APU Maintenance Reserve").

10.2          Payments

Sublessee  shall pay the Reserves in respect of each calendar month during which
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.  Each  payment  will be made in  accordance  with clause 11 and
accompanied  by the annotation "[ ] Maintenance  Reserve  Payment for month of [
]".

10.3          Adjustment

The amount  payable by Sublessee to the Reserves  shall be subject to escalation
on each anniversary of this Agreement in respect of the increase, if any, in the
costs for which the Reserves are  maintained.  The parties shall agree upon such
reasonable  escalation  to apply for each payment to the  Reserves  that becomes
payable thereafter.  Such escalation shall not exceed the increase in the Boeing
Index and the other relevant manufacturer's index.

10.4          Release of Maintenance Reserves

10.4.1        Sublessor  will  reimburse  Sublessee  from  the  actual  Airframe
              Maintenance  Reserves paid by Sublessee,  provided that no Default
              has  occurred  and is  continuing,  for  the  actual  cost  of the
              structural  inspection  portion of completed  scheduled  checks as
              described  in the  MPD  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
              Section 10.4.5 below.

10.4.2        Sublessor  will reimburse  Sublessee  provided that no Default has
              occurred and is continuing  from the Engine  Maintenance  Reserves
              and LLP  Maintenance  Reserves  for the actual  cost of  completed
              Engine Performance  Restoration Visits and LLP Replacements to the
              extent  the  work   performed   during  such  Engine   Performance
              Restoration   Visit  and  LLP   Replacements   consisted   of  the
              replacement   of  life/time   limited   components   resulting  in
              performance restoration,  with work performed for all other causes
              excluded, including those causes set forth in Clause 10.4.5 below.
              Reimbursement  will  be  made  up to  the  amount  in  the  Engine
              Maintenance Reserve and LLP Maintenance Reserve applicable to such
              Engine.

10.4.3        Sublessor  will reimburse  Sublessee  provided that no Default has
              occurred  and is  continuing  from the  Landing  Gear  Maintenance
              Reserves 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 10.4.5.  Reimbursement
              will be made up to the  amount  in the  Landing  Gear  Maintenance
              Reserve at the time for the Landing Gear Overhaul.

10.4.4        Sublessor  will reimburse  Sublessee  provided that no Default has
              occurred and is continuing from the APU  Maintenance  Reserves 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 10.4.5.  Reimbursement
              will be made up to the  amount in the APU  Maintenance  Reserve at
              the time for the APU performance restoration.

10.4.5        Each of the  following  causes shall be excluded  from this Clause
              10.4:   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).

              For the  avoidance of doubt,  Sublessee has no right to payment of
              any amount from the Reserves  not paid in cash by  Sublessee  and,
              subject to Clause 26.1, any remaining  balances of the Reserves on
              the Expiry Date,  after  application of the foregoing  provisions,
              shall  be  retained  by  Sublessor  as its  sole  property  unless
              otherwise set out in Clause 10.7.

10.5          Costs in Excess of 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.

10.6          Reimbursement after Expiry Date

Sublessee may not submit any invoice for  reimbursement  from the 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.

10.7          Engine LLP Maintenance Reserve

Upon  redelivery  of the Aircraft by Sublessee in  accordance  with the terms of
this  Agreement and subject to Sublessee  having  complied with its  obligations
hereunder  the parties  hereto shall make a financial  settlement  in respect of
amounts paid by Sublessee to the Engine LLP  Maintenance  Reserve in  accordance
with the following:

              (i)        Sublessee  shall be debited an amount  equal to (a) the
                         actual  number of Flight  Hours  consumed in respect of
                         each of the LLP's  during the Lease Term divided by (b)
                         the  approved  life and flight  hours of each  relevant
                         LLPand  multiplied  by  (c)  the  current  cost  of LLP
                         replacement as published by the Engine Manufacturer and
                         totalled for all the LLPs in each Engine; and

              (ii)       Sublessee  shall be  credited  an  amount  equal to the
                         total amount  remaining  in the Engine LLP  Maintenance
                         Reserve.

Any  positive  difference  between  (i) and  (ii)  shall be due and  payable  by
Sublessee to Sublessor and any negative  difference  shall be due and payable by
Sublessor to Sublessee.

10.8          No Anticipated Draw-down

Without  prejudice  to  Sublessee's  reimbursement  rights under this clause 10,
based on the age of the  Aircraft,  the fact the Aircraft will not have operated
at Delivery  and on the length of the Lease  Term,  it is not  anticipated  that
Sublessor will be obliged to reimburse Sublessee from any of the Reserves.


11.           Payments

11.1          Account for Sublessee Payments

All  payments  (except in respect  of  Maintenance  Reserves)  by  Sublessee  to
Sublessor under this Agreement will be made for value on the due date in dollars
and in same day funds to:


                         KBC New York
                         125 W 55th Street
                         NY 10019, New York
                         Accoutn Number:  21557003
                         SWIFT:  KREDUS33   for  credit  to  KBC Finance Ireland
                         quoting  Indigo Proceeds Account #03/43824/77

All payments in respect of  Maintenance  Reserves shall be made for value on the
due date in dollars and the same day funds to:

                         KBC New York
                         125 W 55th Street
                         NY 10019, New York

                         Account Number:  21557003
                         SWIFT:  KREDUS33   for  credit  to  KBC Finance Ireland
                         quoting   reference    Indigo    Maintenance    Account
                         #03/43832/81

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

11.2          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  judgment 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 (subject to applicable  law).  All such interest will be compounded  weekly
and  calculated  on the basis of the actual number of days elapsed and a 360 day
year. Interest payable pursuant to this Clause 11.2 that is unpaid at the end of
such  period  thereafter  shall  itself  bear  interest,  to the extent  legally
permissible, at the rate provided in this Clause 11.2.

11.3          Absolute Obligations

Sublessee's  obligations  to make payments under this Agreement are absolute and
unconditional,  irrespective  of any  contingency  or  circumstance  whatsoever,
including:

11.3.1        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;

11.3.2        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;

11.3.3        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;

11.3.4        any   insolvency,   bankruptcy,    reorganisation,    arrangement,
              readjustment   of  debt,   dissolution,   liquidation  or  similar
              proceedings  by or against  Sublessor  or  Sublessee  or any other
              person;

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

11.3.6        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.

11.4          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.

11.5          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  United  States  dollars,  the  currency   ("contractual
currency") in which it is payable pursuant to this Agreement then, 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,  Sublessee  shall,  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.

11.6          Set-off

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

11.7          Time for Payments

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


12.           Sublessor's Convenants

12.1          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 Lease Term.

12.2          Sublessor Obligations Following Expiry Date

Within five (5) Business Days after:

12.2.1        redelivery of the Aircraft to Sublessor  (or, if  applicable,  the
              Owner Trustee) in accordance with and in the condition required by
              this Agreement; or

12.2.2        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  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) pay or
deliver to Sublessee, as the case may be:

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

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

              (iii)      the Letter of Credit.


13.           Sublessee's covenants

13.1          Duration

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

13.2          Information

Sublessee shall:

13.2.1        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;

13.2.2        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 State of Incorporation;

              (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 State of Incorporation;

              (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 term of each month a
                         Monthly  Report  in the form of  Schedule  9,  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;

13.2.3        promptly  notify   Sublessor  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.

13.2.4        promptly notify  Sublessor in writing 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.

13.2.5        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  on a timely  basis,  except  to the  extent  that  such
              failure  could not  reasonably  be expected  to have a  materially
              adverse effect.

13.2.6        promptly  notify  Sublessor  in  writing  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.

13.2.7        promptly  notify  Sublessor  in  writing  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.

13.2.8        promptly notify Sublessor in writing of any substantial  injury or
              damage to a third  party  causes 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.

13.2.9        as  soon  as  available  provide  Sublessor  with  a  copy  of any
              Engineering  Order in respect of the  Aircraft  together  with any
              documentary supplements to such Engineering Order.

13.2.10       promptly notify Sublessor in writing 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.

13.3          Sublessor visits

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

13.4          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:

13.4.1        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.

13.4.2        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.

13.4.3        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  timeframe,  the
statements set forth in this Clause 13.4 will be deemed correct and binding upon
Sublessee.

13.5          Airport and Navigation Charges

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.  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.

13.6          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 Lease 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. At all times the Aircraft will be operated in passenger configuration.

13.7          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 any  insurance
required by the terms of this  Agreement,  (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.

13.8          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 against the  manufacturer  or supplier of any part of the Aircraft in respect
of the Aircraft or any part thereof.

13.9          Non-Representation of Sublessor

Sublessee shall not at any time represent Sublessor Owner Trustee or Sublessor's
Lender as carrying  goods or  passengers  in the Aircraft or as being in any way
connected or  associated  with any  operation  or carriage  (whether for hire or
reward  or  gratuitously)  being  undertaken  by  Sublessee  or  as  having  any
operational interest in or responsibility for the Aircraft.

13.10         Inspection

Sublessor and its agents  (including  Sublessor's  Lender) may at all reasonable
times on  reasonable  notice  inspect,  or appoint an inspector 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 for such inspector 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 13.10 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.

13.11         Registration

Sublessee shall at its own expense:

13.11.1       provide that the Aircraft and the interests of the parties set out
              below is duly  registered,  recorded  or filed  with the  Aviation
              Authority  (to the  extent  that the  Aviation  Authority  permits
              registration in that manner) as follows:

              (i)        Owner Trustee as owner;

              (ii)       the  first  priority  security  interest of Sublessor's
                         Lender;

              (iii)      Sublessor's    interest,   by   filing   the   Sublease
                         Supplement;

and maintain or provide the  maintenance  of such  registration  throughout  the
Lease 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 not change the State of  Registration  without  Sublessor's  prior written
consent.

13.11.2       provide  that  at  all  times  during the Lease Term, the Aircraft
              possesses a valid current FAA Certificate of Airworthiness  (or if
              the Aircraft is registered with  an  Aviation Authority other than
              the FAA, the equivalent for the time being of such a certificate),
              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.

13.12         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,  denoting the name of (i) First Security Bank,
National Association as Owner Trustee;  (ii) Indigo Pacific, AB. as Sublessor of
the Aircraft; and (iii) Sublessor's Lender as mortgagee and stating the Aircraft
type,  manufacturer's  serial  number and  current  registration  letters 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  14 and 15) from  placing  its  customary  colors  and
insignia on the Airframe.

13.13         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 and Sublessor's Lender to the Aircraft by every other signatory
state that has ratified such Convention.

13.14         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 organised and existing under the Law of the State of  Incorporation  or
any state of the United  States of America 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  and (c) the new entity is a US Air  Carrier
authorised  to transport  passengers  in common  carriage.  Sublessee  will give
Sublessor  prior written notice of any such proposed sale or change in operation
together  with a request  of  Sublessors  approval.  Sublessee  shall  reimburse
Sublessor  within  ten  (10)  days of  Sublessor's  invoice  for all  reasonable
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.

13.15         Ownership

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 in favour of Sublessor's Lender.

13.16         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 the
opening  paragraph  hereof.  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 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.

13.17         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  3.1(t)  hereof and shall hold and preserve  such records at such address
and permit  inspection  of such  records by the FAA,  the  Sublessor,  the Owner
Trustee and Sublessor's Lender.  Sublessor shall give Sublessee at least 30 days
prior  written  notice  of change  in  location  of the  flight  records  of the
Aircraft.

13.18         Substitution of Aircraft

Sublessee and Sublessor shall use reasonable  endeavours to agree within 90 days
of the date of this  Agreement  the basis  whereby  Sublessor  may  substitute a
737-200 aircraft for the Aircraft.

13.19         UCC Finance Statement.

Sublessee  undertakes  to  file,  within  2  Business  Days of the  date of this
Agreement,   a  UCC-1  financing   statement  with  the  Colorado   Division  of
Corporations  and  Commercial  Code  executed  by  Sublessee  for  precautionary
purposes under Section 9-408 of the UCC.


14.           Possession

14.1          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   acknowledgement(s)   of
Sublessor's  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;

14.1.1        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 17.6;

14.1.2        deliver   possession   of  the  Airframe  or  any  Engine  to  the
              manufacturer  thereof for testing or other similar  purposes or to
              any organisation 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 17.4 and 17.5;

14.1.3        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;

14.1.4        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  sub-paragraphs  (ii) and  (iii) of Clause 14.1.3 and
              (ii) Sublessee shall have obtained from  the  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  Sublessor  or
              secured party to substantially the same effect as the agreement of
              Sublessor set forth in the final sentence of  Clause 14.3 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;

14.1.5        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 14.1.1
              nor 14.1.2 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 17.6 and which  satisfies the
              conditions specified in Clause 17.6;

14.1.6        sub-lease the Aircraft or Airframe to any person provided that the
              Aircraft or Airframe is operated  by, and remains  throughout  the
              term of such sub-lease  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
                         twelve months (including any renewals);

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

              (v)        the  conditions  in  clause  14.1.7  are  satisfied  in
                         respect of that sub-lease;

14.1.7        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  sub-lease  shall  acknowledge  that its rights are
                         subordinated to the rights of Sublessor,  Owner Trustee
                         and  Sublessor's  Lender  under any finance or security
                         document  entered into between  Sublessor  and/or Owner
                         Trustee  and  Sublessor's  Lender  in  relation  to the
                         Aircraft.

              (iii)      the proposed sub-Sublessee and the proposed form of the
                         sublease  is  approved  by  Sublessor  and  Sublessor's
                         Lender in  writing,  including  any  proposed  right to
                         sub-sub-lease  the  Aircraft  which must be approved by
                         Sublessor  and  Sublessor's   Lender  at  its  absolute
                         discretion;

              (iv)       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 Sublessor's  Lender and the sub-Sublessee  shall
                         acknowledge   that  its  rights  are   subordinate   to
                         Sublessor's rights under this Agreement  (provided that
                         the sublease shall not permit further sub-leasing);

              (v)        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  sub-lease,  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
                         Sublessor's  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  Sublessor's  Lender
                         which opinion must, at least,  address the satisfactory
                         recognition  of  Owner  Trustee's   ownership  of,  and
                         Sublessor's  Lender's Security Interest in the Aircraft
                         and (y) evidence that all actions  recommended  in such
                         opinion have been or will be duly taken;

              (vi)       the  proposed  Sublessee is a US Air Carrier authorised
                         to transport passengers in common carriage.

                         No  less  than  three  (3)  Business   Days  after  the
                         execution  of any  sub-lease  entered into by Sublessee
                         under Clause  14.1.6 or Clause 14.1.7  Sublessee  shall
                         provide   Sublessor   with  a  copy  of  such  executed
                         sub-lease.

14.2          Sublessee Primarily Liable

Notwithstanding  anything  contained  in Clause  14.1,  Sublessee  shall  remain
primarily  liable  hereunder  for the  performance  of all of the  terms of this
Agreement to the same extent as if such  sublease or transfer had not  occurred.
No interchange agreement,  sublease or other relinquishment of possession of the
Airframe or any Engine permitted by this Clause 14 shall in any way discharge or
diminish any of Sublessee's obligations hereunder.

14.3          Recognition of Rights

If Sublessee  shall have  obtained  from the  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  14.1.4,  Sublessor  hereby  agrees for the benefit of such  sublessor or
secured  party  that  Sublessor  shall not  acquire or claim,  as  against  such
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
sublessor or subject to a Security  Interest in favour of such secured party and
Sublessor shall, at the request of Sublessee,  confirm such agreement in writing
for any such sublessor or secured party.


15.           Security interests

15.1          Title

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

15.2          No Security Interests; Base of Aircraft

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

15.3          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  or (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  or  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.

15.4          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.


16.           Maintenance and repair

16.1          General Obligations

16.1.1        Sublessee  shall  at its own expense at all times during the Lease
              Term:

                        (a)       maintain,  service,  repair, overhaul and test
                                  the   Aircraft   and  all  Parts  thereon  and
                                  equipment   thereon  and  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  Aviation
                                  Authority  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 Aviation
                                  Authority's  requirements,  in  which case the
                                  Aviation    Authority'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 (i) the airworthiness  certification of
                                  the Aircraft with the Aviation Authority to be
                                  maintained  in  good  standing  at  all  times
                                  during the Lease Term (ii) the issuance  of  a
                                  standard  certificate  of  airworthiness   for
                                  transport  category  aircraft  issued  by  the
                                  Aviation Authority in accordance FAR  Part  21
                                  and, (iii) the Aircraft to  be  placed  on the
                                  operations specifications of a U.S. airline in
                                  accordance with Part 121 of the FARs.

                        (b)       maintain,  service,  repair, overhaul and test
                                  the Aircraft,  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;

                        (c)       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 or its agent to
                                  examine such records, logs and other materials
                                  at any reasonable time upon reasonable notice.

16.1.2        The  maintenance  programme and performer shall be approved by the
              Sublessor with such approval not to be unreasonably withheld.

16.2          Specific Obligations

Without limiting Clause 16.1, Sublessee agrees that the performance by Sublessee
of such  maintenance and repairs 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  Lease  Term  for  the  major  part  of its  Boeing
                         aircraft  fleet.  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 corrosion  prevention and control program
                         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 Documentation. 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;

              (x)        ensuring  that  Overhauls  are  accomplished  utilising
                         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.


17.           replacement of parts

17.1          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 17.4 or
17.5. 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 17.7, 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 17.7, be in as good operating  condition as, and shall have a value, age,
configuration  and utility at least equal to, the Parts replaced,  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.

17.2          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,
free and clear of all rights of Owner Trustee, 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  Sublease  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.

17.3          Pooling of Parts

Any Part  removed  from the Airframe or any Engine as provided in Clause 17.1 or
17.2 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 17.1 and
17.2 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  17.1 and 17.2  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 17) 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 17.1 and 17.2 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.

17.4          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 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,  "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,  Sublessor's 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  17.5  require
Sublessors  prior  written  consent,  which  consent  shall not be  unreasonably
withheld or delayed.

17.5          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 Lease 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
thereof to Sublessee 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 17.4 or
17.5,  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,
Sublessor's 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.

17.6          Substitution of Engine

In addition to its rights under Clause 14, Sublessee shall have the right at its
option at any time, on at least thirty (30) days' prior written  notice to Owner
Trustee,  Sublessor's  Lender  and  Sublessor,  to  substitute  or  procure  the
substitution  of a CFM  INTERNATIONAL  CFM  56-3C1  engine  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 engine that
is  substituted  in accordance  with the provisions of this Clause 17.6 and that
complies with the requirements of this Clause 17.6 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,  Sublease  Supplement,  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:

                        (a)       title to the replaced  Engine shall  thereupon
                                  vest in Sublessee free and clear of all rights
                                  of  Owner  Trustee,   Sublessor's  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

                        (b)       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.

17.7          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 17.1 or 17.2 provided that:

                        (a)       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 17.1
                                  and 17.2;

                        (b)       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 17.1 and 17.2
                                  became available for installation in or on the
                                  Aircraft;

                        (c)       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;

                        (d)       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 17.1 and 17.2 and replace or substitute
                                  the  same  with a  Part  complying  with  such
                                  requirements.

17.8          If any  replacement  Part is incapable of becoming the property of
              the Sublessor free of all Security Interests (other than Permitted
              Liens) as  required  by clause 17 the part  which is has  replaced
              shall,  unless the Sublessor  shall  otherwise agree in writing be
              kept and  maintained  by the  Sublessee  until the last day of the
              Lease Term and  replaced on the  Aircraft in working  order before
              the Aircraft is  re-delivered  to the Sublessor on the termination
              or expiry of the hiring of the Aircraft hereunder.

17.9          Re-delivery

              Notwithstanding  any term  hereof,  unless  Sublessor  consents in
              writing,  the Aircraft when re-delivered shall contain the Engines
              and Parts installed on the Aircraft at Delivery.


18.           manufacturer's warranties

18.1          Authorization

                        (a)       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,
                                  including  the   maintenance   facility   that
                                  performed  the  Delivery Work,   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
                                  exercised by Sublessee,   Sublessor agree  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 authorisation 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).

                        (b)       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 Lease Term due to
                                  a  defect  covered  by such warranty, shall be
                                  for Sublessor's account.

18.2          Proceeds

So long as no Default has occurred and is continuing,  Sublessor  agrees subject
to Clause  18.1(b) to co-operate  with  Sublessee to cause any proceeds from any
rights  assigned by Sublessor to Sublessee under Clause 18.1 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:

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

                        (b)       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  18.2 had no such  Default
occurred.

18.3          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:

                        (a)       apply  the  proceeds  of  any claim under such
                                  agreement in accordance with Clause 18.2; and

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

18.4          Operation Contrary to Warranties

Sublessee  shall not operate the Aircraft  contrary to the terms of any warranty
referred to in Clause 18.1(a)  (provided that Sublessor advises Sublessee of the
terms of such warranty).


19.           Disclaimers

SUBLESSOR AND SUBLESSEE AGREE THAT THE  DISCLAIMERS,  WAIVERS AND  CONFIRMATIONS
SET FORTH IN CLAUSES 19.1 THROUGH 19.5 BELOW SHALL APPLY AT ALL TIMES DURING THE
LEASE TERM WITH EFFECT FROM SUBLESSEE'S  ACCEPTANCE OF THE AIRCRAFT BY EXECUTION
OF THE  CERTIFICATE  OF  ACCEPTANCE,  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.

19.1          As Is, where Is

AS BETWEEN SUBLESSOR AND SUBLESSEE:

                        (a)       PRIOR TO DELIVERY HEREUNDER, SUBLESSEE HAD THE
                                  OPPORTUNITY   TO   INSPECT  THE      AIRCRAFT,
                                  ACCORDINGLY,      SUBLESSEE    UNCONDITIONALLY
                                  ACKNOWLEDGES    AND   AGREES  THAT  EXCEPT  AS
                                  SPECIFICALLY    SET   FORTH  IN   ANY  OF  THE
                                  TRANSACTION  DOCUMENTS  NEITHER OWNER TRUSTEE,
                                  SUBLESSOR'S LENDER,  OR SUBLESSOR,  NOR ANY OF
                                  THEIR     RESPECTIVE    OFFICERS,   DIRECTORS,
                                  EMPLOYEES  AND/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    DOCUMENTATION),     DESIGN,
                                  WORKMANSHIP,  MATERIALS,  INCLUDING   DELIVERY
                                  WORK AS DEFINED IN  SCHEDULE 2,   MANUFACTURE,
                                  CONSTRUCTION,  OPERATION,  DESCRIPTION, STATE,
                                  MERCHANTABILITY, PERFORMANCE, FITNESS  FOR ANY
                                  PARTICULAR   USE  OR  PURPOSE  (INCLUDING  THE
                                  ABILITY TO OPERATE OR REGISTER THE AIRCRAFT OR
                                  USE THE AIRCRAFT DOCUMENTATION 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,   OR   (iii)   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.

                        (b)       Waiver of Warranty of Description.
                                  EXCEPT  AS SPECIFICALLY OTHERWISE SET FORTH IN
                                  ANY OF THE  TRANSACTION  DOCUMENTS,  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  OWNER TRUSTEE,  SUBLESSOR'S
                                  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,
                                  SUBLESSOR'S 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.  


                        (c)       With All Faults.  Sublessee  agrees that it is
                                  leasing the Aircraft "AS IS, WHERE IS AND WITH
                                  ALL FAULTS".

                        (d)       Sublessee   Waiver.   Except  as  specifically
                                  permitted in any of the Transaction Documents,
                                  sublessee  hereby waives as between itself and
                                  Owner  Trustee and Sublessor and agrees not to
                                  seek to  establish  or enforce  any rights and
                                  remedies,    express   or   implied   (whether
                                  statutory or otherwise) against Owner Trustee,
                                  Sublessor or the Aircraft  relating to any of'
                                  the matters  mentioned  in Clause 19.1 and the
                                  leasing thereof by Sublessor to Sublessee.

                        (e)       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 (1) EACH WAS
                                  AIRWORTHY AND IN GOOD WORKING ORDER AND REPAIR
                                  AND  (II) THE  AIRCRAFT,  ENGINES,  EACH  PART
                                  THEREOF AND THE  AIRCRAFT  DOCUMENTATION  WERE
                                  WITHOUT DEFECT (WHETHER OR NOT DISCOVERABLE AT
                                  DELIVERY)  AND IN EVERY  WAY  SATISFACTORY  TO
                                  SUBLESSEE.

19.2          No Sublessor Liability for Losses

Sublessee   agrees  that  Sublessor  will  not  be  liable  to  Sublessee,   any
sub-Sublessee  or any  Person,  whether in  contract  or 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 wilful misconduct.

19.3          Exclusion

Neither Owner Trustee, Sublessor's Lender or Sublessor shall have any obligation
or liability  whatsoever to  Sublessee,  any  sub-Sublessee  or any other person
whether  arising  in  contract,  in tort or  otherwise  and  whether  arising by
reference to  negligence  or strict  liability of  Sublessor,  Owner  Trustee or
Sublessor's Lender or otherwise for:

                        (a)       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;

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

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

                        (d)       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.

19.4          Waiver

Except as may be  specifically  permitted  by any of the  Transaction  Documents
sublessee hereby waives, as between itself and Owner Trustee, Sublessor's Lender
and  Sublessor,  all its rights in respect of any  warranty  or  representation,
express  or  implied,  on the  part of  Owner  Trustee,  Sublessor's  Lender  or
Sublessor and all claims against Owner Trustee,  Sublessor's Lender or Sublessor
howsoever  and whenever  arising at any time in respect of or out of the matters
referred to in Clause 19.1 and waives its rights under Section 2A-517 of the New
York Uniform Commercial Code.

19.5          Confirmation

Sublessee  confirms  that the  foregoing  provisions  of this  Clause 19 and the
following  provisions  in Clause 20 have been taken into account by both parties
in negotiating the rent and other amounts payable under this Agreement.


20.           indemnities

20.1          General

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 Lease Term:

20.1.1        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 no
              such Losses may be attributable to any defect in the Aircraft, any
              Engine or any Part or to  its design, testing or use or otherwise,
              and regardless of when the same arises (but excluding any injuries
              or claims which arise prior to Predelivery Acceptance)  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);

20.1.2        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;

20.1.3        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 20.1.3,

              but  excluding  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
                         wilful misconduct of such Indemnitee; or

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

              (iii)      constitutes a Tax or liability for Taxes;

20.2          Survival of Indemnification

Notwithstanding  anything in this  Agreement to the contrary,  the provisions of
Clause 20.1 shall  survive the Expiry Date for one (1) year 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.

20.3          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 Sublessees 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.


21.           taxation

21.1          Gross-up

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

21.1.2        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 such 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.

21.1.3        If any  payment  is made by  Sublessee  under  Clause  21.1.2  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.

21.2          Tax Indemnity

21.2.1        Sublessee  shall  indemnify  Sublessor on demand against all Taxes
              (other than  Sublessor  Taxes)  levied or imposed  against or upon
              Sublessor or Sublessee or the Aircraft  directly or  indirectly in
              connection  with  the  importation,   exportation,   registration,
              ownership,   leasing,   sub-leasing,   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)       is directly attributable to Sublessors gross negligence
                         or wilful misconduct; or

              (iii)      relates to any deduction or  withholding on any payment
                         to be made to Sublessor that is covered by Clause 21.1;
                         or

              (iv)       imposed as a direct  result of the,  sale,  transfer or
                         assignment or other disposition of the Aircraft or this
                         Agreement by Sublessor,  or by any party claiming by or
                         through  Sublessor  and except (i) 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 (ii) any  Taxes  imposed  by the
                         State of Registration.

21.2.2        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 21.2,  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 21.2  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.

21.3          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.

21.4          Taxation of Indemnity Payments

21.4.1        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.

21.4.2        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.

21.5          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.

21.6          Sublessor Indemnification

Without prejudice to Clause 21.5,  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 21.6 shall operate to increase the  obligations or liabilities of
Sublessee.

21.7          Survival of Tax Indemnities

Notwithstanding  anything in this  Agreement to the contrary,  the provisions of
Clause 20 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.

21.8          Mitigation and Cooperation

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 the Sublessor and the Security  Interest of
Sublessor's 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.

21.9          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 Sublessees
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  reasonably determines that furnishing such forms may have an adverse
effect on either the business,  tax status,  tax liability or operations of such
Indemnitee.


22.           insurance

22.1          Insurances

22.1.1        Sublessee shall, at its own expense, maintain in full force during
              the Lease Term insurances in respect of the Aircraft that, subject
              to  this  Clause  22,  comply  with  the  requirements  set out in
              Schedule 5 (the "Insurances").

22.1.2        The Insurances  shall be effected through brokers of international
              standing and repute in the London or New York  aviation  insurance
              markets and which are approved by Sublessor's Lender.

22.1.3        The Insurance shall be effected either:

              (i)        on a direct basis with insurers of recognised  standing
                         who normally  participate in aviation insurances in the
                         leading  international  insurance  markets  and  led by
                         reputable  underwriter(s)  approved  by  Sublessor  and
                         Sublessor's Lender; or

              (ii)       with a single insurer or group of insurers  approved by
                         Sublessor  or  Sublessor's  Lender  who does not  fully
                         retain  the risk but  effects  substantial  reinsurance
                         with reinsurers in the leading international  insurance
                         markets and through brokers each of recognised standing
                         and acceptable to the Sublessor and Sublessor's  Lender
                         for  a  percentage  acceptable  to  the  Sublessor  and
                         Sublessor's   Lender   of  all   risks   insured   (the
                         Reinsurances);


22.2          Requirements

The  current  requirements  of  Sublessor  and  Sublessor's  Lender  as  to  the
Insurances  are as specified in this Clause 22 and in Schedule 5.  Sublessor and
Sublessor's  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 industry  practice;  and (b) the interests of the Sublessor and Sublessor's
Lender  continue to be fully  protected  and  Sublessee  will  procure that such
changes are effected.

22.3          Insurance Covenants

Sublessee shall:

22.3.1        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;

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

              (i)        invalidates or may invalidate the Insurances; or

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

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

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

22.3.4        be responsible for any deductible under the Insurances;

22.3.5        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;

22.3.6        not  create  any  Security  Interests  over  the Insurances except
              pursuant to the Assignment of Insurances;

22.3.7        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;

22.3.8        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;

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


22.3.10       furnish to the Sublessor:

                  (i)    on the date hereof 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  providing    evidence  of  insurance   coverage
                         pursuant to this Agreement;

                  (ii)   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;

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

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


22.4          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:

22.4.1        confirmation  of  completion  of renewal at least 15 days prior to
              each expiry date of any of the Insurances;

22.4.2        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

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

22.5          AVN 2000


22.6          Failure to Insure

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

22.6.1        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

22.6.2        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:

              (i)        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

              (ii)       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.

22.7          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.

22.8          Application of Insurance Proceeds

As between Sublessor and Sublessee:

22.8.1        all  insurance  payments  received  as the  result of a Total Loss
              occurring  during the Lease Term will be paid to  Sublessor  or to
              Sublessor's  Lender pursuant to the terms of any security given by
              Owner Trustee;

22.8.2        all insurance proceeds of any damage or loss to the Aircraft,  any
              Engine  or  any  Part   occurring   during   the  Lease  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

22.8.3        notwithstanding  clause 22.8.1 and 22.8.2 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.

22.9          Pursuit of Claims

The parties shall  cooperate 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.


23.           loss, damages and requisition

23.1          Total Loss Prior to Pre-Delivery Acceptance

If a Total Loss  occurs  prior to  Pre-Delivery  Acceptance  of the  Aircraft to
Sublessee,  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
the amount of Security Deposit paid under this Agreement.

23.2          Total Loss After Pre-Delivery Acceptance

23.2.1        If a  Total  Loss  occurs  after  Pre-Delivery  Acceptance  of the
              Aircraft to  Sublessee,  Sublessee  shall pay the  Sublessor on or
              prior to the earlier of:

              (i)        Sixty (60) days after the Total Loss Date; and

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

the aggregate of (x) the Agreed Value and (y) Rent to the date of payment.

23.2.2        Subject  to  the  rights  of  any insurers or other third parties,
              including Sublessor's Lender 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 Sublessor
              in connection with any such transfer.

23.2.3        If a Total Loss of the Aircraft or the Airframe  occurs during the
              Lease Term,  Rent shall  continue until the date of payment of the
              Agreed Value and all other amounts due under the Sublease 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
              the 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.

23.3          Total Loss of Engines

23.3.1        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 17.6. Such  Replacement
              Engine  shall upon  acquisition  by the  Sublessor be an Engine as
              defined herein;

23.3.2        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  subleased  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, as the case may
              be, Sublessor's Lenders 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 the Sublessee
              under this Agreement, be paid to Sublessee;

23.3.3        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, Sublessor's
              Lender  and  Sublessor  and  shall no  longer  be deemed an Engine
              hereunder.

23.4          Requisition

23.4.1        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 Lease 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.

23.4.2        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 Reserves,  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
                         23.2  shall  apply),  Sublessee  shall  be  obliged  to
                         redeliver the Aircraft to Sublessor in accordance  with
                         Clause 24;

              (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.

              (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.


24.           redelivery

24.1          Redelivery of Aircraft; General Conditions

On the  Redelivery  Date,  Sublessee  shall  unless a Total  Loss  has  occurred
redeliver  the Aircraft and the Aircraft  Documents to Sublessor at  Sublessee's
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 23. When the repairs are completed,  the Aircraft shall be redelivered to
Sublessor. At the time of the redelivery of the Aircraft:

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

24.1.2        all  maintenance to the Aircraft due for  performance on or before
              the Expiry Date shall have been completed in accordance  with this
              Agreement;

24.1.3        the Aircraft shall be in compliance with the Return Conditions;

24.1.4        the Aircraft shall comply with such other reasonable  requirements
              to which  Sublessor and Sublessee  have agreed 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;

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

For the avoidance of doubt, Sublessee will not be responsible for any inaccuracy
or  incompleteness  in the  Aircraft  Documents  that  pertains  to  any  period
preceding  Delivery,  provided always that the foregoing shall not in any way be
construed as waiver by Sublessor of Sublessees obligations to keep, maintain and
update  Aircraft  Records  during  the Lease Term in  accordance  with the other
provisions of this Agreement.

24.2          Final Inspection

Immediately  prior to  redelivery  of the  Aircraft,  Sublessee  shall  make the
Aircraft  available  to  Sublessor  for  inspection  (Final  Inspection)  at the
Technical  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.

24.3          Operational Ground Check; Demonstration Flight

24.3.1        Promptly after completion of any corrections required under Clause
              24.2,  Sublessee  shall  conduct  an  operations  ground  check in
              accordance  with  the  applicable   Return   Conditions  and  with
              Sublessee's   maintenance  manual  criteria  for  the  purpose  of
              demonstrating  to  Sublessor  the  satisfactory  operation  of the
              systems that are normally ground checked by Sublessee, including a
              full fuel tank leak stand test,  hydraulic internal leak check and
              pitot static systems check.  Sublessee shall promptly  correct any
              discrepancies required to be corrected in order to comply with the
              maintenance manual criteria or the provisions of this Agreement.

24.3.2        The Aircraft shall have at least a two hour  demonstration  flight
              performed  by and at the expense of  Sublessee  (with  Sublessor's
              representatives  as on-board  observers) using the  manufacturer's
              acceptance  test flight  procedure or any other  procedure used by
              Sublessee   and   acceptable   to  Sublessor  in  its   reasonable
              discretion.

24.3.3        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.

24.3.4        When  Sublessee has complied with the  provisions of Clause 24.3.3
              Sublessee  shall  deliver the Aircraft at the Physical  Redelivery
              Location.

24.4          Non-compliance

To the  extent  that,  at the time of Final  Inspection,  the  condition  of the
Aircraft does not comply with this Agreement  (except Clause 24.1.4),  Sublessee
shall at Sublessor's option:

24.4.1        immediately  rectify  the  non-compliance  and to the  extent  the
              non-compliance  extends beyond the Redelivery Date, the Lease 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
              Rent (Rent per month divided by 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

24.4.2        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.

Sublessor's  option in Clause 24.4 is not  available to Sublessor  provided that
(i) Sublessee has notified Sublessor of its intent to rectify the non-compliance
prior to the Expiry Date and (ii) Sublessee  will in the  reasonable  opinion of
Sublessor be able to rectify such non-compliance on or before Expiry Date.

For the  avoidance  of doubt,  Sublessor  shall not be entitled to exercise  its
option under this Clause 24.4 and  Sublessee  shall suffer no loss or penalty to
the extent that the Aircraft does not, on Final  Inspection,  comply with Clause
24.1.4 but is otherwise in compliance with the Return Conditions.

24.5          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 acknowledgement confirming that Sublessee
has  redelivered  the Aircraft to Sublessor in  accordance  with this  Agreement
substantially in the form of Schedule 6.


24.6          Return of the Letter of Credit

Upon  compliance  by Sublessee  with all its  obligations  under this  Agreement
(including  reconciliation  of all  maintenance  reserves  and any carried  over
deficiency at re-delivery) and the execution of the  acknowledgement  set out in
Clause 24.5, Sublessor shall return to Sublessee the Letter of Credit.


25.           events of default

25.1          Events

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

                        (a)       Non-payment: Sublessee fails to pay any amount
                                  payable by it under the Transaction  Documents
                                  or Other  Agreements  in the currency in which
                                  such sum fell due in  respect of  payments  of
                                  Rent or Maintenance Reserves, 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;

                        (b)       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

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

                        (d)       Redelivery:  Sublessee  fails  to  return  the
                                  Aircraft to Sublessor on the  Redelivery  Date
                                  in accordance with Clause 24; or

                        (e)       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  twenty (20) days of becoming  aware of
                                  such default; or

                        (f)       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  respect  which is material
                                  when  made  or  deemed  to be  made  or if the
                                  effects  or  consequences  of such  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

                        (g)       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    Sublessees
                                  obligation  to perform its  obligations  under
                                  this Agreement; or

                        (h)       Registration:

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

                                   (ii)      Sublessee  ceases  to  be a US  Air
                                             Carrier   authorised  to  transport
                                             passengers in common carriage; or

                                   (iii)     the  Aircraft  ceases  to be "based
                                             and  primarily  used in the  United
                                             States"  within  the  meaning of 14
                                             Code of Federal Regulations 47.9.

                        (i)       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

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

                        (k)       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
                                  Sublessees ability to perform its  obligations
                                  hereunder; or

                        (l)       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

                        (m)       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

                        (n)       Proceedings:  Any  proceedings,   resolutions,
                                  filings  or  other  steps  are  instituted  or
                                  threatened  with respect to the Sublessee or a
                                  substantial   part of   Sublessees    property
                                  relating  to  the   bankruptcy,   liquidation,
                                  reorganisation 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

                        (o)       Judgments:  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

                        (p)       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 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

                        (q)       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 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

                        (r)       Other   Default:   an  Event  of   Default  is
                                  continuing    unremedied   under   any   Other
                                  Agreement  between  Sublessee and Sublessor or
                                  another  lessor or  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.

25.2          Sublessor's Rights

25.2.1        If an Event of Default occurs, without prejudice, and in all cases
              addition to any other rights of Sublessor  under this Agreement or
              under  applicable  law (to the extent  permitted by and subject to
              compliance with any mandatory requirement, of law):

              (i)        in the case of a default  under Clause  25.1(m) or (o),
                         without the need for notice or demand,  this  Agreement
                         will automatically  terminate together with any and all
                         other rights of Sublessee  with respect to the Aircraft
                         but without prejudice to the continuing  obligations of
                         Sublessee under this Agreement, whereupon all rights of
                         Sublessee under this Agreement shall cease; or

              (ii) in all other cases Sublessor may at any time thereafter:

                         (aa)      by notice  to  Sublessee  and with  immediate
                                   effect  terminate the leasing of the Aircraft
                                   and any and all  other  rights  of  Sublessee
                                   with  respect  to the  Aircraft  but  without
                                   prejudice to the  continuing  obligations  of
                                   Sublessee under this Agreement, whereupon all
                                   rights  of  Sublessee  under  this  Agreement
                                   shall cease; or

                         (bb)      proceed  by   appropriate   court  action  or
                                   actions  to  enforce   performance   of  this
                                   Agreement  or  to  recover  damages  for  the
                                   breach  of  this   Agreement   provided  that
                                   damages  recoverable  under UCC 2-A  sections
                                   527 through 530 and 532 shall be  recoverable
                                   in  the  case  of  any   Event   of   Default
                                   hereunder; or

                         (cc)      for Sublessees 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

                         (dd)      either:

                                   (A)       at its  option,  may enter upon the
                                             premises  where the Airframe or any
                                             or  all   Engines  are  located  or
                                             believed  to be  located  and  take
                                             immediate  possession of and remove
                                             such  Airframe  or Engines  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;

                                   (B)       by serving notice require Sublessee
                                             to   redeliver   the   Aircraft  to
                                             Sublessor    at   the    Redelivery
                                             Location or such other  location as
                                             Sublessor may require.

                         (ee)      Whether or not Subessor shall have exercised,
                                   or shall thereafter at any time exercise, any
                                   of  its  rights under clause 25.2.1(dd) above
                                   with  respect  to  all  or  any  part  of the
                                   Aircraft, Sublessor,  by  written  notice  to
                                   Sublessee  specifying  a  payment  date   not
                                   earlier than ten (10)  days  from the date of
                                   such  notice,  may  demand that the 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 instalments of Rent
                                   due  for  periods  commencing on or after the
                                   payment date  in such  notice),  any   unpaid
                                   instalments  of Rent due for periods prior to
                                   the period  commencing  with the payment date
                                   specified in such  notice  plus  the  present
                                   value  of  the  remaining instalments of Rent
                                   during  the  Initial Lease Term and Extension
                                   Lease  Term,  if  any  (together, the "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 Clause 25.3(ii) and (iii).

25.2.2        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.

25.3          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 reasonable 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 24.1 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 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
                         the   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.

              Expect as otherwise  expressly  provided above, no remedy referred
              to in this Clause 25 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.


26.           assignment and transfer

26.1          By Sublessee

No  assignment,  novation,  transfer,  mortgage  or other  change may be made by
Sublessee in any of its rights with respect to the Aircraft, Engine, or Parts or
this Agreement.

26.2          By Sublessor

Subject to Sublessees  rights pursuant to this  Agreement,  Sublessor may at its
expense and at any time and without  Sublessees consent sell, assign or transfer
its rights and interest hereunder to a third party,  ("Sublessors's  Assignee"),
provided that such sale,  transfer,  or assignment shall not increase Sublessees
obligations. Sublessor will cooperate with Sublessee to ensure minimum practical
disturbance or cost in connection with such assignment or transfer of rights and
interest  hereunder  and  Sublessor  shall  reimburse  Sublessee for any expense
incurred by Sublessee in connection with such assignment or transfer.  Sublessee
agrees to cooperate 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 Sublessors  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 and Sublessor's  Lender as additional
insureds in accordance with the insurance requirements set out in Clause 22.

26.3          Assignment to Lender

26.3.1        Subject to Sublessee's rights under this Agreement,  Owner Trustee
              may at any time grant Security Interests over the Aircraft and the
              benefit of this Agreement and any other  agreement  related to the
              Aircraft to any Sublessor's Lender as security for Owner Trustee's
              obligations to such Sublessor's  Lender,  provided by doing so the
              obligations of Sublessee under this Agreement shall not materially
              increase.  Owner  Trustee's  rights  to grant  any  such  Security
              Interests  shall be subject  only to receipt  by  Sublessee  of an
              acknowledgement,  in form and substance reasonably satisfactory to
              Sublessee,  from or on behalf of  Sublessor's  Lender  relating to
              quiet enjoyment and other related rights.

26.3.2        On Sublessor's request, Sublessee will execute all such  documents
              as Owner Trustee or  Sublessor's  Lender  may  reasonably  require
              (including  an  Estoppel  Certificate)    to  confirm  Sublessee's
              obligations under this Agreement and for the purpose of perfecting
              and  ensuring  and maintaining  the  perfection  of  any  Security
              Interest  granted  by  Owner  Trustee  over  the  Aircraft or this
              Agreement and obtain Sublessee's confirmation  that  no  Event  of
              Default is outstanding.  Sublessee,  at  Sublessors  expense, will
              provide   all  other  reasonable  assistance  and  cooperation  to
              Sublessor,  Owner Trustee or Sublessor's Lender in connection with
              any of the matters referred to in this Clause 26 or the perfection
              and  maintenance  of  any related Security Interest, the making of
              any necessary changes   to  the  Insurances,  the  making  of  any
              necessary filings and registrations  in the State of Incorporation
              or the provision of any appropriate counsel's opinions in relation
              to  Sublessee's  obligations.  Except  with respect to the initial
              documentation and filings to  be  done  in  connection  with  this
              Agreement or at the time of Delivery of  the  Aircraft  hereunder,
              Sublessor   will   reimburse   Sublessee   for    its   reasonable
              out-of-pocket costs including reasonable legal fees  and  expenses
              in reviewing documents required by Sublessor or Sublessor's Lender

26.3.3        Sublessor   will   obtain  for  the   benefit  of   Sublessee   an
              acknowledgement  from any  Sublessors   Assignee  or   Sublessor's
              Lender that,  so long as no Default has occurred and is continuing
              hereunder,  such  Person  will  not   interfere   with  Sublessees
              quiet, peaceful use and enjoyment of the Aircraft.

26.4          Sublessor Includes Sublessor's Assignee and Sublessor's 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 contained in Clauses 12, 20, and 22 respectively, the term "Sublessor"
will be deemed  to  include  Sublessors  Assignee  and  Sublessor's  Lender,  if
applicable.


27.           miscellaneous provisions

27.1          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.

27.2          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.

27.3          Expenses

27.3.1        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 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 27.3 shall be paid in the currency
in which they are incurred by Sublessor.

27.4          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.

27.5          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.

27.6          Further Assurances

The  parties  shall  take such  action as  Sublessor  and  Sublessee  reasonably
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.

27.7          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.

27.8          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.

27.9          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.

27.10         Survival

All  indemnities  and  other   obligations  of  Sublessee  which  arise  or  are
attributable to circumstances occurring during the Lease 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.

27.11         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  27.11  shall not  prejudice  the rights of
Sublessor in respect of any Default or Event of Default.

27.12         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.

27.13         Power of Attorney

Sublessee hereby irrevocably  appoints Sublessor as its attorney for the purpose
of  putting  into  effect  the  intent of this  Sublease  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 10.  Sublessee  will take
all steps required under the laws of the State of  Registration  to provide such
power of attorney to Sublessor.

27.14         Usury Laws

The parties intend to contract in strict  compliance  with the usury laws of the
State  of  New  York  and,  to  the  extent   applicable,   the  United  States.
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.

27.15         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 Sublease
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  cooperate  with one  another to obtain  confidential  treatment  as to the
commercial  terms and other  material  provisions  of this  Sublease;  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.

27.16         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 telefacsimile will be deemed effective as delivery of an originally
executed  counterpart.  Any party  delivering  an executed  counterpart  of this
Agreement by telefacsimile 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.

27.17         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.

28.           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 Pacific AB.
Address:      Sodra Forstudsgatan
              SE-21143 Maluno
              Sweden
Attention:    Legal Department
Telephone:    46406603001
Facsimile:    4640302350




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



29.           governing law and jurisdiction

29.1          New York Law

THIS  SUBLEASE  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).

29.2          NON-EXCLUSIVE JURISDICTION IN NEW YORK

EACH OF SUBLESSOR  AND  SUBLESSEE (A)  IRREVOCABLY  SUBMIT TO THE  NON-EXCLUSIVE
JURISDICTION  OF THE  SUPREME  COURT OF THE  STATE OF NEW  YORK,  NEW YORK  CITY
COUNTY,  AND THE UNITED STATES  DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF NEW
YORK 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 A DEFENSE
OR OTHERWISE ANY CLAIM THAT IT IS NOT PERSONALLY  SUBJECT TO THE JURISDICTION OF
THE  ABOVENAMED  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 APPROPRIATE JURISDICTION.

29.3          SERVICE OF PROCESS

WITH RESPECT TO ACTIONS,  SUITS AND  PROCEEDINGS  BROUGHT IN THE COURTS NAMED IN
29.2, EACH OF SUBLESSOR AND SUBLESSEE  HEREBY WAIVES PERSONAL SERVICE OF PROCESS
AND  AGREES  THAT  SERVICE  OR  PROCESS  MAY BE  MADE  UPON IT BY  CERTIFIED  OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED,  AT THE ADDRESSED SPECIFIED IN CLASUE
28 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.


29.4          WAIVER

SUBLESSEE AND SUBLESSOR HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY.



<PAGE>


SIGNATURE PAGE


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

SIGNED on behalf of INDIGO PACIFIC AB


By:           ___________________________

Name:         ___________________________

Title:        ___________________________


SIGNED on behalf of FRONTIER AIRLINES, INC.


By:           ___________________________

Name:         ___________________________

Title:        ___________________________


Receipt of the "original" counterpart of this Agreement is hereby acknowledged.




<PAGE>




                                   SCHEDULE 1


                                           AIRCRAFT SPECIFICATION

Model                                 Boeing 737-3U3
Serial Number                         28734
Current Registration                  N309FL
Line Number                           2974
Date of Manufacture                   December 1997
Engines                               CFM INTERNATIONAL MODEL CFM 56-3C1,
                                      ENGINE SERIAL NUMBERS 858670 AND
                                      858673
APU                                   Garrett GTCP85-129K
Present Operator                      N/A

WEIGHTS                               Lbs

Max Taxi Weight                       140,000
Max Take Off Weight                   139,500
Max Landing Weight                    116,600
Max Zero Fuel Weight                  109,600
Basic Empty Weight                    69,721
Max Fuel capacity                     5,311 US Gallons

INTERIOR CONFIGURATION

Seating                               136 Y                    Burus Airest 2000

Galleys                               G1, G2, G4B                          WEBER
Lavatories                            Three
                                      1 Forward,  2 Aft




<PAGE>




                NAVIGATIONAL, COMMUNICATION, ELECTRONIC SYSTEMS,
                           FURNISHING & EQUIPMENT LIST


DESCRIPTION                   MANUFACTURER           MODEL OR PART NUMBER    QTY
Flight Control Computer       Honeywell              10-62038                2
AFDS Controller               Honeywell              10-62038-239            1
Yaw Damper System             Honeywell              10-60447                1
Autothrottle Computer         Smiths Industries      10-62017                1
VHF Com TRX                   Collins                822-0693-004            3
VHF Comm. Cntrl Panel         Collins                622-6831-022            3
PA Amplifier                  Collins                346D-2B                 1
Boarding Music System         Matsushita             RD-AX7351               1
Selcal decoder                Team                   SC2253AD01              1
CVR                           Fairchild              A 100A                  1
HF Communication              Collins                622-5272-001            2
ACARS Management Unit         Allied Signal          965-0728-003            1
Video Monitors 14"            Transcom               Various                 9
Video Tape Reproducer VHS     Transcom               743-0238-001            1
Control Distr Monitor Unit    Transcom               743-0313-005            1
Cabin Info Video I/face unit  Sony Transcom          700-1388-001            1
Audio Tape Reproducer         Matsushita             RD-AX7002-01            1
Audio System - PES            Matsushita             Various
Digital Flight Recorder       Allied Signal          980-4700-001            1
DFDAU                         Allied Signal          967-0202-001            1
Electric Altimeter            Smiths                 10-61826-8              1
Digital Air Data Computer     Smiths                 10-62153-1              2
EHSI Colour                   Collins                S242T404-611            2
EADI Colour                   Collins                S242T404-511            2
EFIS Control Panel            Collins                622-8001-001            2
IRU                           Honeywell              S242T101-112            2
GPWS                          Allied Signal          S220T102                1
VHF Nav                       Collins                822-0761-001            2
ATC Transponder               Allied Signal          066-01127-1301          2
DME                           Collins                622-4540-122            2



<PAGE>




                NAVIGATIONAL, COMMUNICATION, ELECTRONIC SYSTEMS,
                           FURNISHING & EQUIPMENT LIST


ADF                           Collins                777-1492-005            2
Marker                        Collins                522-2996-011            1
FMC                           Smiths                 10-62225-002            1
Radio Altimeter               Thompson               9599-607-14931          2
WX-Radar                      Allied Signal          066-50008-0102          1
TCAS Processor                Allied Signal          066-50000-1508          1
EFIS Symbol Generator         Collins                622-8000-101            2
Wheels/Brakes                 Allied Signal          MW 10-61819-28
                                                     NW 10-61063-22




<PAGE>




                                   SCHEDULE 2


DELIVERY CONDITIONS


The Aircraft will be delivered "AS IS, WHERE IS" at Delivery Location and with a
valid and effective Certificate of Airworthiness in the Standard Category.

The following agreed Delivery Work shall have been performed:

1.            Configuration:  The  Aircraft  will  be  delivered with a standard
              class 136 passenger configuration  with  seats  to  be procured by
              Sublessee.

2.            Paint: The existing markings will be removed and the Aircraft will
              be  delivered  in a Frontier  paint  scheme,  using the  currently
              existing base white color and Frontier provided tail decal.

3. TCAS: Installed, as agreed to between Air New Zealand and the Manufacturer.





<PAGE>




                                   SCHEDULE 3


ACCEPTANCE CERTIFICATE


This Acceptance Certificate is delivered,  on the date set out below by FRONTIER
AIRLINES,  INC. (Sublessee),  to INDIGO PACIFIC AB (Sublessor),  pursuant to the
Aircraft  Sublease  Agreement  dated  November [ ], 1998 between  Sublessor  and
Sublessee (the Sublease).  Capitalized terms used in this Certificate shall have
the meanings given to such terms in the Sublease.

1.            Sublessee has this [   ] day of [   ] (Time: [   ]) at [   ] 
              received from Sublessor possession of:

(a)           one (1) Boeing 737-3U3  Aircraft,  bearing  manufacturer's  serial
              number  28734,  registration  mark[ ]  together  with  two (2) CFM
              INTERNATIONAL  CFM 56-3C1 engines  bearing  manufacturer's  serial
              numbers [ ] and [ ], all Parts attached  thereto and thereon in an
              airworthy condition; and

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

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

(a)           Airframe:

Total hours   Total landings    Flight Hours/ Cycles       Flight Hours/ Cycles
                                since last "C" Check       since last "A" Check
[     ]       [     ]           [     ] Flight Hour        [     ] Flight Hour
                                [     ] Cycles             [     ]Cycles


(b)           Engines:

Position   Serial No.    Total    Total Cycles    Flight Hours/    Flight Hours/
                         Flight                   Cycles since     Cycles since
                         Hours                    last shop visit  last Engine
                                                                   Performance
                                                                   Restoration 
                                                                   Visit
[   ]      [   ]         [   ]    [   ]           [   ] Flight     [  ] Flight
                                                        Hours           Hours
                                                  [   ] Cycles     [  ] Cycles

Position   Serial No.    Total    Total Cycles    Flight Hours/    Flight Hours/
                         Flight                   Cycles since     Cycles since
                         Hours                    last shop visit  last Engine
                                                                   Performance
                                                                   Restoration
                                                                   Visit
[   ]      [   ]         [   ]    [   ]           [   ] Flight     [   ] Flight
                                                        Hours            Hours
                                                  [   ] Cycles     [   ] Cycles


Time Remaining to next life limited part removal

                                  Flight Hours                  Cycles
MSN [     ]                       [     ]                      [     ]
MSN [     ]                       [     ]                      [     ]

(c)           APU:

MSN        Total Flight Hours    Flight Hours/ Cycles       Flight Hours/Cycles
                                 remaining until next HSI   remaining on turbine
                                 inspection                 and 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 Hours [   ] Flight Hours  [   ] Flight Hours
                       [   ] Cycles       [   ] Cycles        [   ] Cycles
Right Main [   ]       [   ] Flight Hours [   ] Flight Hours  [   ] Flight Hours
                       [   ] Cycles       [   ] Cycles        [   ] Cycles
Left Main  [   ]       [   ] Flight Hours [   ] Flight Hours  [   ] Flight Hours
                       [   ] Cycles       [   ] Cycles        [   ] Cycles

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

(f)           Fuel on board at Delivery: [     ] kilos ([     ] gallons)

3.            Other  technical   information  regarding  the  Aircraft  and  its
              components  and any damage  thereto are correctly set forth on the
              Aircraft report and damage chart attached hereto.

4.            Place of Acceptance:

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

(a)           the representations and warranties contained in Article 2  of  the
              Sublease are hereby repeated;

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

(c)           Sublessee's   authorised  technical  experts  have  inspected  the
              Aircraft and the Aircraft Documents to ensure 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 Lease and satisfactory in all respects.

6.            This  Acceptance  Certificate  is  executed  and  delivered by the
              parties in [     ].

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


INDIGO PACIFIC AB

By:


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


FRONTIER, INC

By:


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


<PAGE>




                                   SCHEDULE 4


SUBLEASE SUPPLEMENT


SUBLEASE SUPPLEMENT NO. ______ dated November ___, 1998, between  Indigo Pacific
AB ("Sublessor") and FRONTIER AIRLINES, INC. ("Sublessee").

Sublessor  and  Sublessee  have  previously  entered into that certain  Aircraft
Sublease  Agreement dated as of November [ ], 1998 (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 Sublease
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  precisely
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  subleases to Sublessee  under the
              Sublease and Sublessee hereby accepts and subleases from Sublessor
              under  the  Sublease,  that  certain  used  Boeing  Model  737-3U3
              Aircraft  bearing FAA  Registration  Mark  N309FL,  including  the
              Airframe bearing manufacturers serial number 28734 and the two (2)
              CFM INTERNATIONAL CFM 56-3C1 Engines bearing manufacturer's serial
              numbers  858670 and 858673 (each of which Engines has in excess of
              750 rated takeoff horsepower or the equivalent of such horsepower)
              described in Schedule 1 herewith ("Delivered Aircraft").

2.            The Delivery Date of the Delivered Aircraft is the  date  of  this
              Sublease Supplement set forth in the opening paragraph hereof.
 
3.            The Lease  Term  for  the  Aircraft shall commence on the Delivery
              Date and shall end on the Expiry Date.

4.            The amount of Rent  for the Delivered 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  13.12 of the
              Sublease,  (ii)  Sublessee  has  accepted  the  Aircraft  for  all
              purposes  hereof  and of the  Sublease,  and (iii)  Sublessee  has
              inspected the Aircraft and the Aircraft  satisfies the  conditions
              set forth in 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 in
              Clause ___ 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 Lease Supplement has been delivered in New York.


IN WITNESS WHEREOF, Sublessor and Sublessee have caused this Sublease Supplement
No. __ to the  Sublease  to be duly  executed as of the day and year first above
written.


SUBLESSOR,

INDIGO PACIFIC AB


By:                      

Title:                   


SUBLESSEE,

FRONTIER AIRLINES, INC.


By:                      

Title:                   



<PAGE>




                                   SCHEDULE 5


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 and All Risk  Hull  Insurance  Policy on each
              Engine when not installed no the Aircraft on an agreed value basis
              not less than the Engine Agreed Value;

(b)           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;

(c)           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;

(d)           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
              believe that such limit should  be  revised  upwards,  it shall be
              replaced by 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 Airframe,
              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  Sublessor's  Lender,  if none,  to Sublessor or at the
              request of  Sublessor  to  Sublessor's  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  Sublessor's  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 AVS. 103A 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$250,000  or such other  limit as the  parties may
              from time to time agree.
 
(d)           Customary Risks:  cover at least  such  risks  as  are customarily
              insured against  in  the  airline  industry for an amount not less
              that the Agreed Value;

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

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 cancelled
              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 additonal 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 that time for Boeing 737-300  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 favour of the Sublessor's Lender; and

(k)           specifically  refers  to  any  security  document  entered into in
              favour of the Sublessor's Lender or any loan agreement,



1.4           Terms of All Insurances

All Insurances will:

(a)           Dollars: provide cover denominated in dollars;

(b)           Worldwide:   operate    on  a  worldwide  basis  subject  to  such
              limitations and exclusions as the parties and the insurance market
              may agree;

(c)           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 Sublessor's Lenders may be party;

(d)           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;

(e)           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;

(f)           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;

(g)           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
              instalment 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; and

(h)           Indemnities:  accept and insure the  indemnity  provisions of this
              Agreement  to the extent of the risks  covered by the policies (it
              being  understood  that certain  matters  listed in Clause 20.1.1:
              registration,    import,   overhaul,    deregistration,    export,
              manufacture, design and testing and (c) are not covered).

(i)           Endorsement: contains an endorsement naming:

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

              (ii)   the Sublessor's  Lender as loss payee in the case where the
                     amount payable by the insurers upon any claim other than in
                     respect of Total Loss is greater than US$5,000,000; and

              (iii)  the  Sublessor  as loss  payee in the case where the amount
                     payable  by the  Insurers  upon  any  claim  other  than in
                     respect  of a Total Loss is less than  US$5,000,000  unless
                     and until the  Sublessor's  Lender  notifies the  insurance
                     brokers  or the  insurers  that an  Event  of  Default  has
                     occurred,  in  which  event  the  loss  payee  shall be the
                     Sublessor's Lender;

(j)           specifically refers to each loan agreement or  charge  between the
              Owner Trustee and/or the Sublessor and/or any Sublessor's 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 6


RETURN CONDITIONS


On the  Redelivery  Date,  the  Aircraft,  the Aircraft  Documents and all other
documents  listed in Annex 1 to Schedule 7 will be  redelivered  to Sublessor by
Sublessee in accordance with the procedures and in the condition set out below:

1.            the  Aircraft  shall  be  returned  with a  current  FAA  standard
              Certificate of  Airworthiness  and shall meet the  requirements of
              the FAA under Part 121 of the Federal Aviation Regulations or with
              a FAA Certificate of Airworthiness, if requested by Sublessor;

2.            the  appearance  of the Aircraft  shall be clean and  cosmetically
              acceptable  by domestic  commercial  airline  standards  that will
              allow immediate placement into commercial  passenger service.  All
              passenger windows will be free of crazing;

3.            the Aircraft shall have  installed the full  complement of Engines
              and other  equipment,  parts,  components,  accessories  and loose
              equipment  as required by the  Agreement  to be  installed  on the
              Aircraft at Delivery (by serial number), unless agree otherwise by
              Sublessor in writing,  each such item  functioning  in  accordance
              with  manufacturers'  specifications and the aircraft  maintenance
              manual  provided the  passengers  seats shall be removed and shall
              remain the sole property of the Sublessee;

4.            the Aircraft shall have been maintained in accordance with Clauses
              16 and 17 of the  Agreement  with the same care and  consideration
              for the technical  condition of the Aircraft as if it were to have
              been kept in continued regular service by Sublessee.  The Aircraft
              will be returned either:

              (a)           fresh  from  the  next due C-Check at a FAA approved
                            repair station.; or

              (b)           "as  is where is"  with  an  appropriate  payment of
                            US$35.00 per  hour for  each flight hour flown since
                            the last most recent C-Check.

5.            there shall be no open, outstanding or deferred maintenance items,
              scheduled  or  unscheduled,  routine or  non-routine,  against the
              Aircraft with no evidence of untreated or noticeable corrosion;

6.            all major modifications and repairs to the Aircraft will have been
              accomplished  in accordance  with current FAA approved data or the
              Manufacturer's  Structural  Repair  Manual  ("SRM"  and have  been
              properly documented);

7.            each landing gear assembly of the Aircraft will be the  same as of
              Delivery unless otherwise agreed between Sublessee and Sublessor;

8.            the Engines will not have been discriminated  against,  whether by
              reason of it being Subleased by Sublessee or otherwise, during any
              shop  visit with  respect  to  Sublessee's  disk  replacement  and
              performance  restoration policies for CFM INTERNATIONAL CFM 56-3C1
              engines it owns or operates;

9.            each engine will be in good working condition with no acceleration
              in performance  deterioration based on the engine trend monitoring
              data  and will  pass  complete  borescope  inspections  and  power
              assurance runs;

10.           the auxiliary power unit (APU) shall be in  serviceable  condition
              and meet the same conditions as were met at Delivery (as evidenced
              by the Acceptance Certificate);

11.           Sublessee  shall  return the Aircraft  with the paint  restored to
              original and all logos and markings removed either painted in grey
              or  white or (as  Sublessor's  option)  without  any  change  from
              Sublessee's  livery with the intent that  Sublessor  repaints  the
              Aircraft,  in  either  case  at  the  sole  cost  and  expense  of
              Sublessee;

12.           the  Aircraft  shall be free and clear of all  Security  Interests
              (other than Sublessor Liens) and shall have no components or parts
              installed  which are loaned,  borrowed or are subject to rights of
              third parties under pooling,  exchange,  overhaul, repair or other
              similar arrangements;

13.           the Aircraft shall be duly registered with the FAA;

14.           neither  the  Aircraft  nor any  Engine  or Part  shall  have been
              discriminated  against  whether by reason of it being Subleased by
              Sublessee or otherwise in  maintenance,  operation,  use or in any
              other manner whatsoever,  including,  without limitation as to the
              type of maintenance program applicable to the Aircraft, any Engine
              or as to compliance with Airworthiness Directives;

15.           the Aircraft  will be in full  compliance  with all  Airworthiness
              Directives  (AD) issued prior to the Expiry Date and applicable to
              the  Aircraft  including  operation  under  FAR Part 121 and which
              require  terminating  action  or  modification  by a date (or date
              based  upon  projected  Flight  Hours or Cycles  based on  average
              utilization  of the  Aircraft  by  Sublessee  during the  Sublease
              Period) on or before twelve (12) months after the Expiry Date;

16.           any  FAA  AD's  applicable  to the  Aircraft  (including,  but not
              limited to, ageing  aircraft and corrosion  prevention and control
              program type) which allow sampling of tasks to be  accomplished on
              other  aircraft  shall  have 100%  accomplishment  of tasks on the
              Aircraft, as specified in the relevant FAA AD;

17.           the Aircraft will be returned with  one  (1)  complete  shipset of
              Sublessee's galley equipment (containers, waste bins, trolleys and
              beverage containers);

18.           all Manufacturer's free of charge service bulletin kits delivered 
              to Sublessee for the Aircraft will be on board;

19.           all Aircraft Documents, and other current and  historical  records
              acquired, delivered to or prepared by Sublessee, shall be returned
              with the Aircraft including, without limitation, time logs showing
              Aircraft and Engine Flight  Hours and  Cycles  on any  given date,
              documents, manuals  (revised  up to and including the most current
              revisions  issued  by  the  manufacturer), data, overhaul records,
              time controlled part traceability to overhaul and "zero time since
              new" for time controlled parts that have life limits as determined
              by the manufacturer, the FAA,  log books,  original  Aircraft  and
              Engine  delivery  documents,  serviceable  parts  tags  (including
              teardown reports  for  time  controlled  parts  that   have   been
              overhauled   during   the   Sublease  Period),  the   FAA   forms,
              modification    records,   inspection   records   (including   NDT
              documentation  such  as  x-ray, eddy current, etc.), and all other
              documentation pertaining to  the  Aircraft, Engines and Parts. All
              records discrepancies shall be corrected, and  any missing records
              shall be reconstructed, by Sublessee at Sublessee's sole cost  and
              expense prior to the return of  the Aircraft.  Records  for  major
              alterations (or modifications) shall include  FAA  approved  data,
              such as supplemental type certificates (STC's), technical standar
              orders (TSO's) and service bulletin documentation;



<PAGE>




                                   SCHEDULE 7


RETURN ACCEPTANCE CERTIFICATE


1.            FRONTIER  AIRLINES,   INC.   (Sublessee)  and  INDIGO  PACIFIC  AB
              (Sublessor) have entered into an Aircraft Sublease Agreement dated
              November  [  ],  1998  (Sublease).   Unless   otherwise   defined,
              capitalised  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 737-3U3  Aircraft,  bearing  manufacturer's  serial
              number  28734,  registration  mark[ ]  together  with  two (2) CFM
              INTERNATIONAL  CFM 56-3C1 engines  bearing  manufacturer's  serial
              numbers 85716 and 85717, 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 hour    Total landings     Flight Hours/ Cycles       Flight Hours/ Cycles
                                 since last "C" Check       since last "A" Check
[     ]       [     ]            [     ] Flight Hour        [     ] Flight Hour
                                 [     ] Cycles             [     ] Cycles


(b)           Engines:

Position      Serial      Total      Total      Flight Hours/      Flight Hours/
              No.         Flight     Cycles     Cycles since       Cycles since
                          Hours                 last shop visit    last Engine
                                                                   Performance
                                                                   Restoration
                                                                   Visit
[    ]        [    ]      [    ]     [    ]     [    ] Flight      [    ] Flight
                                                       Hours              Hours
                                                [    ] Cycles      [    ] Cycles
 
Position      Serial      Total      Total      Flight Hours/      Flight Hours/
              No.         Flight     Cycles     Cycles since       Cycles since
                          Hours                 last shop visit    last Engine
                                                                   Performance
                                                                   Restoration
                                                                   Visit
[    ]        [    ]      [    ]     [    ]     [    ] Flight      [    ] Flight
                                                       Hours              Hours
                                                [    ] Cycles      [    ] Cycles


Time Remaining to next life limited part removal

                          Flight Hours                             Cycles
MSN [     ]               [     ]                                  [     ]
MSN [     ]               [     ]                                  [     ]

(c)           APU:

MSN           Total Flight       Flight Hours/ Cycles       Flight Hours/Cycles
              Hours              remaining until next HSI   remaining on turbine
                                 inspection                 and 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      [   ] Flight          [   ] Flight
                                Hours             Hours                 Hours
                          [   ] Cycles      [   ] Cycles          [   ] Cycles
Right Main    [   ]       [   ] Flight      [   ] Flight          [   ] Flight
                                Hours             Hours                 Hours
                          [   ] Cycles      [   ] Cycles          [   ] Cycles
Left Main     [   ]       [   ] Flight      [   ] Flight          [   ] Flight 
                                Hours             Hours                 Hours
                          [   ] 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   including  damage  are correctly  set  forth  on  the
              Aircraft report and damage chart 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 Annexure
              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 Annexure 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
authorised representatives as of the day and year first above written.


INDIGO PACIFIC AB



By:                      

Title:                   

FRONTIER AIRLINES, INC.



By:                      

Title:                   

ATTACHMENTS:

1.            Aircraft Documents

2.            List of Discrepancies




                                   Annexure 1


Aircraft Documents


The (a) manuals and (b)  Aircraft  Documents  set forth below are to be returned
with the Aircraft in a current, up-to-date and correct status.

List


Quantity Required

1.       Specific  List  of  all  Records  and  Documents  transferred  with the
         equipment

2.       Cross  Reference List;  Operator/Manufacturer  Part  Number  and Serial
         Number


Documents

Quantity Required
1.       Aircraft  Description  and Status  Summary in the form of Schedule 1 to
         the Sublease Agreement.
2.       Emergency Equipment Installation Drawings
3.       Aircraft Readiness log (revised to Expiry Date)
4.       FAA approved Airplane Flight Manual (AFM)
5.       Manufacturer's Flight Crew Operating Manual
6.       Weight and Balance Control and Loading Manual; last weighing
7.       Minimum Equipment List (MEL)
8.       MEL Procedures Manual
9.       Maintenance Manual (Manufacturer and Sublessee) (Tape)
10.      Wiring Diagram Manual
11.      System Schematics
12.      Fault Isolation Manuals
13.      Non-Destructive Test (NDT) Manual (if Sublessee unique)
14.      Structural Repair Manual (SRM)
15.      Illustrated Parts Catalog (IPC) (Manufacturer and Sublessee)
16.      A copy of galley drawings and galley manuals
17.      Scheduled Maintenance Program
18.      Maintenance Requirement Items List
19.      Ageing Aircraft Programmes:
(a)      Ageing Aircraft Service Action Requirements;
(b)      Corrosion Prevention and Control;
(c)      Supplemental Inspection Program (SID);
(d)      Ageing Aircraft Repair Assessment Program;
(e)      Ageing Aircraft Maintenance Planning
(f)      Aircraft Detail Specification


Records

Quantity Required
1.       Current Component Inventory List (updated to the date of Redelivery)
                       -----------------------------------
2.       Service Bulletin (SB) Accomplishment List
3.       Record of last Compass Swing
4.       List of Oils and Fluids
5.       Aircraft/Cockpit Log Books (current and file copies)
6.       Engine Log Books
7.       Auxiliary Power Unit (APU) Log Book
8.       All applicable Modification Records
9.       All applicable Forms 337's, Major Repair and Alteration
10.      All applicable Major and Minor Repair Records
11.      Airworthiness Directive (AD) Compliance Summary
12.      All applicable Airworthiness Directive Records and Documentation
13.      Quality Control Statements:
(a)      List of Supporting FAR 145 Repair Stations;
(b)      Accidents and Incidents Statements;
(c)      Assistance, as required, in acquiring outstanding records;
14.      Time Controlled Component List, history and status
15.      Life Limited Part (LLP) List, history and status
16.      Maintenance Check Status and Summary
17.      Total Time and Cycle Justification
18.      All other applicable Maintenance Records including:
(a)      All records including the most recent of all Aircraft checks (service
         checks, A Checks, B Checks, C Checks, D Checks, etc);
(b)      All  Engine and APU shop  repair/overhaul  records  including  the most
         recent  restoration of each engine module and last overhaul and HSI for
         the APU;
(c)      All Landing Gear overhaul records including the most recent overhaul of
         each Landing Gear.


Certificates

Quantity Required
1.       Current Airworthiness Certificate
2.       Current Noise Certificate
3.       Current Registration
4.       Current Radio License
5.       Supplemental Type Certificates and back up data


Confirmation

1. At Sublessor's request, confirmation that the Aircraft has been deregistered.

Receipt of the foregoing documents, except as noted, is hereby acknowledged.


<PAGE>




                                   Annexure 2

Discrepancies





<PAGE>







                                   SCHEDULE 9


MONTHLY AIRCRAFT UTILIZATION AND STATUS REPORT


To:           INDIGO PACIFIC AB
From:         FRONTIER
Aircraft type: Boeing 737-300
Registration:
Serial number:                               Month of:

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

--------------------------------------------------------------------------------
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 Flown During Month               Flight Hours Flown During Month
--------------------------------------------------------------------------------
Cycles During Month                           Cycles During Month
--------------------------------------------------------------------------------
Time since last Borescope                     Time since last Borescope
--------------------------------------------------------------------------------
Time remaining until next Borescope          
--------------------------------------------------------------------------------
Time remaining until next Borescope
--------------------------------------------------------------------------------

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

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

--------------------------------------------------------------------------------
Landing Gear:          TSN                   CSN
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 Flown   x  US$ Per Flight   =   Reserve payment
                    During Month                Hour/Cycle
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Airframe                Hrs.             x    $70.00                 =
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Original Engine Serial  Hrs              x                           =
Number:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Original Engine Serial  Hrs.             x                           =
Number:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Engines:          Hrs.             x    $80,00                 =
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LLP                     Hrs.             x    $20,00                 =
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Landing Gear            Cycles:          x    $10,00                 =
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APU                     Hrs.             x    $6,00                  =
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                                                              Total
--------------------------------------------------------------------------------




<PAGE>




                                   SCHEDULE 10


POWER OF ATTORNEY


The  undersigned,  [ ] (the  Sublessee)  refers to the Aircraft Lease  Agreement
dated as of [ ], as  amended  and  supplemented  from time to time  (the  Lease)
between,  among others [ ] (the  Sublessor)  and the Company with respect to one
(1) Aircraft bearing  manufacturer's serial number [ ] and registration mark [ ]
(the Aircraft).

In consideration of the sum of US$ 1 paid by the Sublessor to the Sublessee (the
receipt  and  sufficiency  of  which  is  hereby  acknowledged).  The  Sublessee
irrevocably  appoints each of the Sublessor and [ ] (severally each an Attorney)
its true and lawful attorney to execute and to do an 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 [ ] upon the lawful  termination  of the Lease 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 the  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 the 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 the  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 the State of New York.