AIRCRAFT SUBLEASE AGREEMENT


                                     between


                         KOMMANDITBOLAGET FLYGPLANET XII
                                  as Sublessor


                                       and


                             Frontier Airlines, Inc

                                  as Sublessee

                            Dated as of __ July 1999




Aircraft Make and Model:                    One Boeing 737-2Y5
Aircraft Manufacturer's Serial Number:      23040
Aircraft Registration Mark:                 N118RW
Engines Make and Model:                     Pratt & Whitney JT8D-15A Equipped
                                            with Nordam LGW Hushkits
Engines Serial Numbers:                     685527 and 700605



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 Lender on the  receipt  set  forth on the  signature  page of such
original counterpart.


<PAGE>


                                TABLE OF CONTENTS


1.       DEFINITIONS                                               Page 2
         1.1      Definitions                                      Page 2
         1.2      Construction                                     Page 12

2.       REPRESENTATIONS AND WARRANTIES                            Page 13
         2.1      Sublessee's Representations and Warranties       Page 13
         2.2      Sublessor's Representations and Warranties       Page 17
         2.3      Survival of Representations and Warranties       Page 18

3.       CONDITIONS PRECEDENT                                      Page 18
         3.1      Sublessor's Conditions Precedent                 Page 18
         3.2      Waiver                                           Page 20
         3.3      Sublessee's Conditions Precedent                 Page 20
         3.4      Waiver                                           Page 20

4.       DELIVERY CONDITION AND INSPECTION OF AIRCRAFT             Page 21
         4.1      Sublessee Selection of Aircraft                  Page 21
         4.2      Condition at Delivery                            Page 21
         4.3      Sublessee Inspection and Acceptance Flight       Page 21
         4.4      Delivery of Aircraft to Sublessee                Page 21
         4.5      Sublessee's Failure to take Delivery             Page 22

5.       SUBLEASE TERM                                             Page 22
         5.1      Sublease Term                                    Page 22
         5.2      Expiry Date                                      Page 22
         5.3      Early Termination Option                         Page 23
         5.4      Survival of Certain Sublessee Obligations        Page 23
         5.5      Risk                                             Page 24

6.       DELIVERY                                                  Page 24
         6.1      Location and Time of Delivery                    Page 24
         6.2      Delay or Failure in Delivery                     Page 24

7.       RENT                                                      Page 24
         7.1      Basic Rent Period                                Page 25
         7.2      Time of Payment of Basic Rent                    Page 25
         7.3      Amount of Basic Rent                             Page 25
         7.4      Maintenance Reserves                             Page 25
         7.5      Supplemental Rent for Excess Cycles              Page 25

8.       SECURITY DEPOSIT                                          Page 26
         8.1      Security Deposit                                 Page 26
         8.2      Letter of Credit                                 Page 26
         8.3      Sublessor's Rights                               Page 26

9.       MAINTENANCE RESERVES                                      Page 27
         9.1      Amount                                           Page 27
         9.2      Payments                                         Page 27
         9.3      Adjustment                                       Page 27
         9.4      Release of Maintenance Reserves                  Page 27
         9.5      Costs in Excess of Maintenance Reserves          Page 29
         9.6      Reimbursement after Expiry Date                  Page 29

10.      PAYMENTS                                                  Page 29
         10.1     Account for Sublessee Payments                   Page 29
         10.2     Default Interest                                 Page 30
         10.3     Absolute Obligations                             Page 30
         10.4     Application of Payments to Sublessor             Page 31
         10.5     Currency Indemnity                               Page 31
         10.6     Set-off                                          Page 31
         10.7     Time for Payments                                Page 32

11.      Sublessor'S COVENANTS                                     Page 32
         11.1     Quiet Enjoyment                                  Page 32
         11.2     Sublessor Obligations Following Expiry Date      Page 32

12.      Sublessee'S COVENANTS                                     Page 33
         12.1     Duration                                         Page 33
         12.2     Information                                      Page 33
         12.3     Sublessor Visits                                 Page 35
         12.4     Periodic Estoppel Certificates                   Page 35
         12.5     Airport and Navigation Charges                   Page 35
         12.6     Operation of Aircraft                            Page 36
         12.7     Areas of Operation                               Page 36
         12.8     Non-Prejudicial Action                           Page 37
         12.9     Non-Representation of Sublessor                  Page 37
         12.10    Inspection                                       Page 37
         12.11    Registration                                     Page 38
         12.12    Name Plates                                      Page 38
         12.13    Geneva Convention                                Page 39
         12.14    Merger and Shareholding                          Page 39
         12.15    Ownership                                        Page 39
         12.16    Maintenance of Principal Business Place          Page 40
         12.17    Maintenance of Flight Records                    Page 40

13.      POSSESSION                                                Page 40
         13.1     No Relinquishment of Possession                  Page 40
         13.2     Copy of Sublease                                 Page 43
         13.3     Sublessee Primarily Liable                       Page 43
         13.4     Recognition of Rights                            Page 44

14.      SECURITY INTERESTS                                        Page 44
         14.1     Title                                            Page 44
         14.2     No Security Interests                            Page 44
         14.3     Base of Aircraft                                 Page 44
         14.4     Notice to Sublessor                              Page 44
         14.5     Procure Release                                  Page 45

15.      MAINTENANCE AND REPAIR                                    Page 45
         15.1     General Obligations                              Page 45
         15.2     Specific Obligations                             Page 46

16.      REPLACEMENT OF PARTS                                      Page 47
         16.1     Replacement of Parts                             Page 48
         16.2     Title to Replacement Parts                       Page 48
         16.3     Pooling of Parts                                 Page 48
         16.4     Alterations                                      Page 49
         16.5     Removal of Parts                                 Page 50
         16.6     Substitution of Engine                           Page 50
         16.7     Temporary Removal of Parts                       Page 51
         16.8     Parts Incapable of Transfer                      Page 52

17.      MANUFACTURER'S WARRANTIES                                 Page 52
         17.1     Authorization                                    Page 52
         17.2     Proceeds                                         Page 53
         17.3     Agreements with Manufacturers                    Page 53
         17.4     No Operation Contrary to Warranties              Page 53

18.      DISCLAIMERS                                               Page 54
         18.1     General                                          Page 54
         18.2     As Is, Where Is                                  Page 54
         18.3     Waiver of Warranty of Description                Page 55
         18.4     No Liability Under UCC                           Page 55
         18.5     Sublessee Acknowledgment                         Page 55
         18.6     Sublessee Waiver                                 Page 55
         18.7     Sublessee Examination of Aircraft                Page 56
         18.8     No Sublessor Liability for Losses                Page 56
         18.9     Exclusion                                        Page 56
         18.10    Waiver                                           Page 57
         18.11    No Waiver                                        Page 57
         18.12    Confirmation                                     Page 57

19.      INDEMNITIES                                               Page 57
         19.1     General Indemnity                                Page 57
         19.2     Exception to General Indemnity                   Page 58
         19.3     Time of Payment                                  Page 58
         19.4     Survival of General Indemnity                    Page 59
         19.5     Notice to Sublessee                              Page 59

20.      TAXATION                                                  Page 59
         20.1     Gross-up                                         Page 59
         20.2     Tax Indemnity                                    Page 60
         20.3     Value Added Taxes                                Page 61
         20.4     Taxation of Indemnity Payments                   Page 61
         20.5     Benefit of Indemnities                           Page 62
         20.6     Sublessor Indemnification                        Page 62
         20.7     Survival of Tax Indemnities                      Page 62
         20.8     Mitigation and Co-operation                      Page 62
         20.9     Furnishing Forms                                 Page 62

21.      INSURANCE                                                 Page 63
         21.1     Insurances                                       Page 63
         21.2     Reinsurance                                      Page 63
         21.3     Requirements                                     Page 63
         21.4     Insurance Covenants                              Page 64
         21.5     Renewal of Insurances                            Page 65
         21.6     Failure to Insure                                Page 66
         21.7     Continuation of Insurances                       Page 66
         21.8     Application of Insurance Proceeds                Page 67
         21.9     Pursuit of Claims                                Page 67

22.      TOTAL LOSS AND REQUISITION                                Page 67
         22.1     Total Loss Prior to Delivery                     Page 67
         22.2     Total Loss After Delivery                        Page 68
         22.3     Total Loss of Engines                            Page 69
         22.4     Requisition                                      Page 69

23.      REDELIVERY                                                Page 70
         23.1     Redelivery of Aircraft                           Page 70
         23.2     Final Inspection                                 Page 71
         23.3     Discrepancies                                    Page 71
         23.4     Non-compliance                                   Page 72
         23.5     Acknowledgment                                   Page 73
         23.6     Storage etc.                                     Page 73

24.      EVENTS OF DEFAULT                                         Page 73
         24.1     Notice                                           Page 73
         24.2     Events                                           Page 73
         24.3     Sublessor's Rights                               Page 78
         24.4     Default Payments                                 Page 79
         24.5     Cumulative Rights                                Page 80

25.      ASSIGNMENT AND TRANSFER                                   Page 80
         25.1     By Sublessee                                     Page 80
         25.2     By Sublessor                                     Page 80
         25.3     Assignment to Lender                             Page 80
         25.4     Sublessee Co-operation                           Page 81
         25.5     Sublessor Includes Sublessor's
                  Assignee and Lender                              Page 81

26.      MISCELLANEOUS PROVISIONS                                  Page 82
         26.1     Rights Cumulative, Waivers                       Page 82
         26.2     Delegation                                       Page 82
         26.3     Expenses                                         Page 82
         26.4     Time of Essence                                  Page 83
         26.5     Entire Agreement                                 Page 83
         26.6     Further Assurances                               Page 83
         26.7     Language                                         Page 83
         26.8     Variation                                        Page 83
         26.9     Invalidity of any Provision                      Page 84
         26.10    Survival                                         Page 84
         26.11    Reimbursement                                    Page 84
         26.12    Press Releases                                   Page 84
         26.13    Power of Attorney                                Page 84
         26.14    Usury Laws                                       Page 84
         26.15    Confidentiality                                  Page 85
         26.16    Counterparts                                     Page 85
         26.17    Bankruptcy                                       Page 85

27.      NOTICES                                                   Page 86

28.      GOVERNING LAW AND JURISDICTION                            Page 87
         28.1     New York Law                                     Page 87
         28.2     Non-exclusive Jurisdiction in New York           Page 87
         28.3     Service of Process                               Page 87
         28.4     Prevailing Party in Dispute                      Page 88
         28.5     Waiver                                           Page 88

         SIGNATURE PAGE                                            Page 89

         SCHEDULE 1        Aircraft Specification                  Page 90
                           Annexure 1 Aircraft Documentation       Page 93
         SCHEDULE 2        Certain Business Terms                  Page 96
         SCHEDULE 3        Insurance Requirements                  Page 99
         SCHEDULE 4        Delivery Conditions                     Page 105
         SCHEDULE 5        Acceptance Certificate                  Page 108
         SCHEDULE 6        Certificate of Director                 Page 111
         SCHEDULE 7        Form of Letter of Authority             Page 113
         SCHEDULE 8        Power of Attorney                       Page 114
         SCHEDULE 9        Form of Opinion of Sublessee Counsel    Page 116
         SCHEDULE 10       Monthly Aircraft Utilisation
                           And Status Report                       Page 121
         SCHEDULE 11       Form of Quiet Enjoyment Letter          Page 123
         SCHEDULE 12       Return Conditions                       Page 124
         SCHEDULE 13       Return Acceptance Certificate           Page 128
                           Annexure 1       Aircraft Documents     Page 131
                           Annexure 2       Discrepancies          Page 134
         SCHEDULE 14       Sublease Supplement                     Page 135



<PAGE>



THIS AGREEMENT is made as of __ July 1999.

BETWEEN:

(1) KOMMANDITBOLAGET  FLYGPLANET XII a Swedish limited partnership whose address
and  principal  place of business is at Sodra  Forstadsgatan  4, S-211 43 Malmo,
Sweden, ("Sublessor"); and

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

WHEREAS

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

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

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


<PAGE>


1.       DEFINITIONS

1.1        Definitions

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

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

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

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

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

Airframe  means the  airframe  described  in Schedule 1 together  with all Parts
relating thereto (except Engines or engines);

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



<PAGE>


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 7;

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

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

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

Conditions Precedent means the conditions specified in Clause 3;

CPCP means corrosion prevention control program;

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

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

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

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

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

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

Delivery Date means the date on which Delivery occurs;



<PAGE>

Delivery  Location  means  Arizona  or such  other  location  as  Sublessor  and
Sublessee may agree;

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

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

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

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

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

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

Engine Manufacturer means Pratt & Whitney;

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

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

Event of Default means any event specified in Clause 24;

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

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

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



<PAGE>


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

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

Financial Indebtedness means any indebtedness in respect of:

(a)        moneys borrowed or raised;

(b)        payments due under finance or operating leases;

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

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

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

Government Entity means:

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

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

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

Headlease  Agreement means the aircraft Headlease agreement entered into between
Owner  Trustee and  Sublessor  dated as of July 10, 1998 as amended by the First
Amendment to Headlease Agreement dated as of the ___ day of July, 1999 and which
is being filed with the FAA simultaneously herewith;



<PAGE>


Hushkits  means the Nordam LGW Hushkit  equipment  installed  on the Engines and
Airframe which meet FAR 36 Standards for Stage III noise compliance.

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

Insurances has the meaning ascribed to it in Clause 21.1;

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

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

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

Letter of Credit has the meaning ascribed to it in Clause 8.2;

LLP means life limited part;

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

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

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

Maintenance Reserves means all amounts payable pursuant to Clause 9;

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

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



<PAGE>


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

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

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

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

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

Owner Trustee means First Security Bank, National Association;

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

(a)        any component, furnishing or equipment (other than a complete Engine)
           installed  or attached to the  Airframe or any Engine on the Delivery
           Date; and

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

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

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

Permitted Lien means:

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

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

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

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

(e)        any Sublessor Lien; and

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

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

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

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

Rent means Basic Rent and Supplemental Rent;

Rent Date means the day preceding each Basic Rent Period;

Replacement Engine means an engine complying with Clause 16;

Return Conditions means the conditions specified in Schedule 12;

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

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

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


<PAGE>


Side Letter means Side Letter No. 1 to the Aircraft  Sublease  Agreement of even
date herewith between Sublessor and Sublessee including Exhibit 1 to Side Letter
No. 1.

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

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

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

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;

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

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

Sublessor Taxes means Taxes:

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

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



<PAGE>


(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  Maintenance  Reserves,  Total Loss Proceeds,
payment of Indemnity, interest or Default Interest;

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

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

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

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

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

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

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

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

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


<PAGE>


Total Loss Date means:

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

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

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

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

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

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

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

Transaction Documents means

(a)        this Aircraft Sublease Agreement;

(b)        the Acceptance Certificate;

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

(d)        the Sublease Supplement; and

(e)        the Side Letter;



<PAGE>


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

1.2        Construction

1.2.1      References in this Agreement to:

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

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

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

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

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

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

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

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



<PAGE>


           (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).

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

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

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

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

1.2.2      Headings are for ease of reference only.

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

2.         REPRESENTATIONS AND WARRANTIES

2.1        Sublessee's Representations and Warranties

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



<PAGE>


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

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

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

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

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



<PAGE>


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

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

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

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

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

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

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



<PAGE>


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

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

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

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

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

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

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

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



<PAGE>


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

2.2        Sublessor's Representations and Warranties

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

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

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

           (iii)        Trust Agreement: The Trust Agreement dated as of May 28,
                        1998, by and between  Owner  Trustee  and  Sublessor  as
                        beneficiary  (the  "Trust  Agreement")  has  been   duly
                        authorized, validly executed and delivered on  the  part
                        of Sublessor, is  legally  binding  upon  Sublessor, and
                        creates  a  legally  enforceable  trust  (as hereinafter
                        defined as the  "Trust"). Owner Trustee, in its capacity
                        as Trustee of the Trust, has legal power  and  authority
                        to take  legal  title  to  the  Aircraft  and  has legal
                        authority  and is qualified as the holder of legal title
                        to the Aircraft to register the Aircraft  in  accordance
                        with the terms of the Federal Aviation Act.

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

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

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

2.3        Survival of Representations and Warranties

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

3.         CONDITIONS PRECEDENT

3.1        Sublessor's Conditions Precedent

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

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

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

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

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



<PAGE>


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

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

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

           (vii)        Opinions: Legal opinions from:

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

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

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

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

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

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

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

3.1.3      No Default shall have occurred and be continuing.



<PAGE>


3.2        Waiver

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

3.3        Sublessee's Conditions Precedent

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

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

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

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

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

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

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

3.4        Waiver

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


<PAGE>



4.         DELIVERY CONDITION AND INSPECTION OF AIRCRAFT

4.1        Sublessee Selection of Aircraft

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

4.2        Condition at Delivery

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

4.3        Sublessee Inspection and Acceptance Flight

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

4.4        Delivery of Aircraft to Sublessee

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



<PAGE>


4.5        Sublessee's Failure to take Delivery

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

5.         SUBLEASE TERM

5.1        Sublease Term

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

5.2        Expiry Date

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

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

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

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

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

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

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

5.3        Early Termination Option

5.3.1      So long  as no  Event  of  Default  has  occurred  and is  continuing
           hereunder  both on the date of  exercise  of the option and from such
           date to the commencement  date of the lease term with respect to such
           option,  Sublessee  and  Sublessor  will have a mutually  exercisable
           option (the "Early  Termination  Option") to  terminate  the Sublease
           prior to the Expiry Date  provided  that the  Sublessor and Sublessee
           enter into an agreement to replace the Aircraft with a Boeing 737-300
           to be leased to Sublessee by Sublessor or its assigns.

5.3.2      In order to exercise the Early Termination  Option, the Sublessor and
           Sublessee  must enter into a written  letter of intent to replace the
           Aircraft with a Boeing 737-300.

5.4        Survival of Certain Sublessee Obligations

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

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



<PAGE>


5.5        Risk

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


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

6.         DELIVERY

6.1        Location and Time of Delivery

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

6.2        Delay or Failure in Delivery

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

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

7.         RENT


<PAGE>



7.1        Basic Rent Period

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

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

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

7.2        Time of Payment of Basic Rent

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

7.3        Amount of Basic Rent

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

7.4        Maintenance Reserves

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

7.5        Supplemental Rent for Excess Cycles

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



<PAGE>


8.         SECURITY DEPOSIT

8.1        Security Deposit

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

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

8.2        Letter of Credit

           Sublessee shall provide Sublessor with an additional Security Deposit
           initially in the form of cash but to be replaced  within 30 days from
           the date of this Agreement with an irrevocable,  assignable,  standby
           letter of credit in favor of  Sublessor  in the  amount  set forth in
           Schedule 2 and issued by a major US Bank and in a form and  substance
           acceptable by Sublessor.  Upon  substitution  of the Letter of Credit
           for the cash  deposit,  Sublessor  will  return  the cash  deposit to
           Sublessee.  The  Letter  of Credit  will  serve as  security  for the
           performance  by Sublessee of its  obligations  under the  Transaction
           Documents and the Other Agreements.

8.3        Sublessor's Rights

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

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



<PAGE>


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

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

9.         MAINTENANCE RESERVES

9.1        Amount

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

9.2        Payments

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

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

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

9.3        Adjustment

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

9.4        Release of Maintenance Reserves

9.4.1      Airframe Maintenance Reserves



<PAGE>


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

9.4.2      Engine Maintenance Reserves

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

9.4.3      Landing Gear Maintenance Reserves

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

9.4.4      APU Maintenance Reserves

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

9.4.5      Exclusion



<PAGE>


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

9.4.6      Remaining balance

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

9.5        Costs in Excess of Maintenance Reserves

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

9.6        Reimbursement after Expiry Date

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

10.        PAYMENTS

10.1       Account for Sublessee Payments

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



<PAGE>


           Swedbank
           Account No. 8901-1 202 2061
           S.W.I.F.T.: SWED SESS
           S-105 34 Stockholm, Sweden
           Cover through: First Chicago, New York, NY
           S.W.I.F.T.: FNB CUS333
           For the account of: Kommanditbolaget Flygplanet XII

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

10.2       Default Interest

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

10.3       Absolute Obligations

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

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

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

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


<PAGE>



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

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

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

10.4       Application of Payments to Sublessor

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

10.5       Currency Indemnity

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

10.6       Set-off

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



<PAGE>


10.7       Time for Payments

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

11.        SUBLESSOR'S COVENANTS

11.1       Quiet Enjoyment

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

11.2       Sublessor Obligations Following Expiry Date

           Within five (5) Business Days after:

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

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

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

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



<PAGE>


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

                        (c)        return the Letter of Credit.

12.        SUBLESSEE'S COVENANTS

12.1       Duration

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

12.2       Information

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

12.2.2     Sublessee shall furnish to Sublessor:

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

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

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



<PAGE>


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

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

12.2.3     Sublessee shall promptly notify Sublessor in writing:

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

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

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

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

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

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

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


<PAGE>



12.3       Sublessor Visits

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

12.4       Periodic Estoppel Certificates

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

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

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

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

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

12.5       Airport and Navigation Charges

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

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

12.6       Operation of Aircraft

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

12.7       Areas of Operation

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



<PAGE>


12.8       Non-Prejudicial Action

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

12.9       Non-Representation of Sublessor

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

12.10      Inspection

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



<PAGE>


12.11      Registration

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

           (i)          Owner Trustee as owner;

           (ii)         the first priority security interest of Lender

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

           (iv)         Sublessee as operator of the Aircraft

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

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

12.12      Name Plates



<PAGE>


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

12.13      Geneva Convention

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

12.14      Merger and Shareholding

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

12.15      Ownership



<PAGE>


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

12.16      Maintenance of Principal Business Place

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

12.17      Maintenance of Flight Records

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

13.        POSSESSION

13.1       No Relinquishment of Possession

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



<PAGE>


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

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

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

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

13.1.2     deliver  possession of the Airframe or any Engine to the manufacturer
           thereof for testing or other similar  purposes or to any 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 16.4 and 16.5;

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



<PAGE>


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

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

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

           (i)          no Default has occurred and is continuing;

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

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

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

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

           (i)          no Default has occurred and is continuing;

           (ii)         the proposed  sub-sublessee and the proposed form of the
                        sublease is approved by Sublessor and Lender in writing,
                        which  approval  will not be  unreasonably  withheld  or
                        delayed provided all the following conditions set out in
                        this Clause 13.1.7 are satisfied;



<PAGE>


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

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

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

13.2       Copy of Sublease

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

13.3       Sublessee Primarily Liable

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



<PAGE>


13.4       Recognition of Rights

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

14.        SECURITY INTERESTS

14.1       Title

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

14.2       No Security Interests

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

14.3       Base of Aircraft

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

14.4       Notice to Sublessor

           Sublessee shall notify Sublessor:

           (i)          as  and  when  it  becomes  aware  of the  same,  of any
                        Security   Interest  (x)  (excluding   Permitted  Liens)
                        arising  over the  Aircraft or any Engine or other major
                        part  thereof  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.

14.5       Procure Release

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

15.        MAINTENANCE AND REPAIR

15.1       General Obligations

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

           (i)          maintain,  service,  repair,  Overhaul  and   test   the
                        Aircraft and all Parts thereon and equipment thereon and
                        the Engines and all Parts and equipment therein (whether
                        or not such Parts and  equipment  are  the  property  of
                        Sublessor),  or procure the same, in accordance with the
                        applicable requirements  of  the  FAA and the Insurances
                        and comply with all Airworthiness Directives  and  alert
                        service    bulletins    issued   by   the   Manufacturer
                        (unless  to  do  so  would  be  in  breach  of the FAA's
                        requirements, in which case the FAA's requirements shall
                        prevail) and the MPD so as to keep the Aircraft in  good
                        operating condition, ordinary wear  and  tear  excepted,
                        and  in  accordance  with  sound  international aviation
                        industry practice  and  in  such  condition  as  may  be
                        necessary  to enable (a) the airworthiness certification
                        of  the  Aircraft  with  the  Aviation  Authority  to be
                        maintained in good standing  at  all  times  during  the
                        Sublease Term (b) the issuance of a standard certificate
                        of airworthiness for transport category aircraft  issued
                        by the  FAA  in  accordance  FAR  Part 21  and, (c)  the
                        Aircraft  to  be placed on the operations specifications
                        of  a  U.S.  airline  in accordance with Part 121 of the
                        FAR's;

           (ii)         maintain,   service,   repair,  Overhaul  and  test  the
                        Aircraft  and the  Engines,  in the same manner and with
                        the same care as  used  by  Sublessee  with  respect  to
                        similar aircraft and engines operated by  Sublessee  and
                        without in any way adversely discriminating against  the
                        Aircraft and the Engines; and

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

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

15.2       Specific Obligations

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

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

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

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

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

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

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

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

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

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

           (x)          ensuring  that  Overhauls  are  accomplished   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.

16.        REPLACEMENT OF PARTS

16.1       Replacement of Parts



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

16.2       Title to Replacement Parts

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

16.3       Pooling of Parts



<PAGE>


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

16.4       Alterations



<PAGE>


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

16.5       Removal of Parts

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

16.6       Substitution of Engine



<PAGE>


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

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

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

16.7       Temporary Removal of Parts

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

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

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

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



<PAGE>


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

16.8       Parts Incapable of Transfer

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

17.        MANUFACTURER'S WARRANTIES

17.1       Authorization

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

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

17.2       Proceeds

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

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

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

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

17.3       Agreements with Manufacturers

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

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

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

17.4       No Operation Contrary to Warranties

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



<PAGE>


18.        DISCLAIMERS

18.1       General

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

18.2       AS IS, WHERE IS



<PAGE>


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

18.3       Waiver of Warranty of Description

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

18.4       No Liability Under UCC

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

18.5       Sublessee Acknowledgment

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

18.6       Sublessee Waiver

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



<PAGE>


18.7       Sublessee Examination of Aircraft

           DELIVERY BY SUBLESSEE TO SUBLESSOR OF THE  ACCEPTANCE  CERTIFICATE IS
           CONCLUSIVE PROOF AS BETWEEN  SUBLESSOR AND SUBLESSEE THAT SUBLESSEE'S
           TECHNICAL EXPERTS HAD EXAMINED AND INVESTIGATED THE AIRCRAFT, ENGINES
           AND EACH PART THEREOF AND DETERMINED  THAT (i) EACH WAS AIRWORTHY AND
           IN GOOD WORKING ORDER AND REPAIR AND (ii) THE AIRCRAFT, ENGINES, EACH
           PART THEREOF AND THE AIRCRAFT  DOCUMENTS WERE WITHOUT DEFECT (WHETHER
           OR NOT  DISCOVERABLE  AT DELIVERY) AND IN EVERY WAY  SATISFACTORY  TO
           SUBLESSEE.

18.8       No Sublessor Liability for Losses

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

18.9       Exclusion

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

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

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

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


<PAGE>



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

18.10      Waiver

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

18.11      No Waiver

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

18.12      Confirmation

           Sublessee  confirms that the  foregoing  provisions of this Clause 18
           and the  following  provisions  in  Clause 19 have  been  taken  into
           account by both  parties in  negotiating  the rent and other  amounts
           payable under this Agreement.

19.        INDEMNITIES

19.1       General Indemnity

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



<PAGE>


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

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

           (iii)        that  may at any  time  be  suffered  or  incurred  as a
                        consequence  of any  design,  article or material in the
                        Aircraft, any Engine or any Part or its operation or use
                        constituting  an  infringement  of  patent,   copyright,
                        trademark, design or other proprietary right or a breach
                        by Sublessee,  or anyone acting by or through Sublessee,
                        of any obligation of confidentiality  owed to any person
                        in respect  of any of the  matters  referred  to in this
                        Clause 19.1 (iii).

19.2       Exception to General Indemnity

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

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

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

           (iii)        constitutes a Tax or liability for Taxes.

19.3       Time of Payment

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



<PAGE>


19.4       Survival of General Indemnity

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

19.5       Notice to Sublessee

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

20.        TAXATION

20.1       Gross-up

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

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



<PAGE>


20.1.3     If any payment is made by Sublessee under Clause 19.2  and  Sublessor
           in good faith determines that it is  entitled  to  receive  a  credit
           against, or relief or remission for, or repayment of, any Tax paid or
           payable  by  Sublessor  in respect of or calculated with reference to
           the deduction or withholding giving  rise  to such payment, Sublessor
           shall, to the extent that it  can  do so  without  prejudice  to  the
           retention  of  the  amount  of  such  credit,  relief,  remission  or
           repayment and without leaving Sublessor in any worse  net  after  tax
           position than that in which it would have been had such deduction  or
           withholding not been required to be made, promptly pay  to  Sublessee
           such amount as  Sublessor  shall  reasonably  have  determined  to be
           attributable to the relevant deduction or withholding.

20.2       Tax Indemnity

20.2.1     Sublessee  shall  indemnify  Sublessor  on demand  against  all Taxes
           (other  than  Sublessor  Taxes)  levied or  imposed  against  or upon
           Headlessor,   Sublessor,   Sublessee  or  the  Aircraft  directly  or
           indirectly  in   connection   with  the   importation,   exportation,
           registration,  ownership,  leasing,  subleasing,  purchase, delivery,
           sale,  possession,  use, operation,  repair,  maintenance,  Overhaul,
           transportation,  landing,  storage,  presence  or  redelivery  of the
           Aircraft  or any  part  thereof  or  any  rent,  receipts,  insurance
           proceeds,  income or other amounts  arising  therefrom  except to the
           extent that such liability for such Taxes:

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

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

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

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

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



<PAGE>


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

20.3       Value Added Taxes

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

20.4       Taxation of Indemnity Payments

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

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



<PAGE>


20.5       Benefit of Indemnities

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

20.6       Sublessor Indemnification

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

20.7       Survival of Tax Indemnities

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

20.8       Mitigation and Co-operation

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

20.9       Furnishing Forms



<PAGE>


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

21.        INSURANCE

21.1       Insurances

21.1.1     Sublessee  shall,  at its own  expense,  maintain  in full  force and
           effect during the Sublease Term insurances in respect of the Aircraft
           that, subject to this Clause 21, comply with the requirements set out
           in Schedule 3 (the Insurances).

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

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

21.2       Reinsurance

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

           (i)          The same terms as the original insurance;

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

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

21.3       Requirements



<PAGE>


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

21.4       Insurance Covenants

           Sublessee shall:

           (i)          ensure  that all  requirements  as to  insurance  of the
                        Aircraft,  any Engine or any Part which may from time to
                        time be imposed by the laws of the State of Registration
                        or any state to, from or over which the  Aircraft may be
                        flown, in so far as they affect or concern the operation
                        of the Aircraft, are complied with;

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

                        (a)        invalidates or may invalidate the Insurances;
                                   or

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

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

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

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

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

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

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


<PAGE>


           (viii)       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

           (ix)         furnish to Sublessor:

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

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

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

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

21.5       Renewal of Insurances

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

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

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

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


<PAGE>



21.6       Failure to Insure

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

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

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

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

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

                        (b)        at any time while such failure is  continuing
                                   to  require  the  Aircraft  to  remain at any
                                   airport  or to  proceed  to and remain at any
                                   airport  designated  by  Sublessor  until the
                                   failure   is    remedied    to    Sublessor's
                                   satisfaction.

21.7       Continuation of Insurances

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



<PAGE>


21.8       Application of Insurance Proceeds

           As between Sublessor and Sublessee:

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

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

           (iii)        notwithstanding  Clauses 21.8 (i) or 21.8 (ii) above, if
                        at  the  time  of the  payment  of  any  such  insurance
                        proceeds a Default has occurred and is  continuing,  all
                        such  proceeds  will be paid to or retained by Sublessor
                        to be applied toward payment of any amounts which may be
                        or  become   payable  by  Sublessee  in  such  order  as
                        Sublessor sees fit or as Sublessor may elect.

21.9       Pursuit of Claims

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

22.        TOTAL LOSS AND REQUISITION

22.1       Total Loss Prior to Delivery

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




<PAGE>


22.2       Total Loss After Delivery

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

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

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

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

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

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


<PAGE>



22.3       Total Loss of Engines

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

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

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

22.4       Requisition

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

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

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



<PAGE>


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

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

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

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

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

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

23.        REDELIVERY

23.1       Redelivery of Aircraft

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

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

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

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

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

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

23.2       Final Inspection

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

           (i)          inspect the Aircraft Documents;

           (ii)         inspect the Aircraft and uninstalled Parts;

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

23.3       Discrepancies



<PAGE>


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

23.4       Non-compliance

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

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

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

23.4.2     Sublessor's  option  in Clause  23.4 is not  available  to  Sublessor
           provided that (i)  Sublessee has notified  Sublessor of its intent to
           rectify  the  non-compliance  prior to the  Redelivery  Date and (ii)
           Sublessee  will in the  reasonable  opinion of  Sublessor  be able to
           rectify such non-compliance on or before Redelivery Date.

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



<PAGE>


23.5       Acknowledgment

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

23.6       Storage

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

24.        EVENTS OF DEFAULT

24.1       Notice

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

24.2       Events

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



<PAGE>


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

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

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

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

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

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

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

           (viii)       Registration:

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



<PAGE>


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

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

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

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

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

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

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



<PAGE>


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

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

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

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

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



<PAGE>


24.3       Sublessor's Rights

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

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

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

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

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

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



<PAGE>


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

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

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

24.4       Default Payments

           Sublessee shall be liable for:

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

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

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

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



<PAGE>


24.5       Cumulative Rights

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

25.        ASSIGNMENT AND TRANSFER

25.1       By Sublessee

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

25.2       By Sublessor

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

25.3       Assignment to Lender



<PAGE>


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

25.4       Sublessee Co-operation

25.4.1     On request by  Sublessor,  Sublessor's  Assignee,  Owner  Trustee  or
           Lender, Sublessee will, at Sublessee's sole expense, promptly execute
           all such documents as Sublessor, Sublessor's Assignee,  Owner Trustee
           or Lender may reasonably require (including such estoppel certificate
           as referred to in  Clause 12.4  to  confirm  Sublessee's  obligations
           under  this Agreement and the other Transaction Documents), to obtain
           Sublessee's confirmation that no Default  is outstanding  and for the
           purpose of perfecting and ensuring and maintaining the perfection  of
           any Security Interest granted by Owner Trustee and Sublessor over the
           Aircraft, this Agreement, the  other  Transaction  Documents  or  any
           other  agreement  related  to  the  Aircraft. Sublessee will promptly
           provide  all  other  reasonable  assistance   and   co-operation   at
           Sublessor's expense to Sublessor, Sublessor's Assignee, Owner Trustee
           or Lender in connection with any of the matters referred to  in  this
           Clause 25 or the perfection and maintenance  of any  related Security
           Interest, the making of any necessary changes  to the Insurances, the
           making of any  necessary  filings  and  registrations in the State of
           Incorporation  or  the  State of Registration or the provision of any
           appropriate counsel's opinions in relation to Sublessee's obligations

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

25.5       Sublessor Includes Sublessor's Assignee and Lender

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



<PAGE>


26.        MISCELLANEOUS PROVISIONS

26.1       Rights Cumulative, Waivers

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

26.2       Delegation

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

26.3       Expenses

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

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

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


<PAGE>



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

26.4       Time of Essence

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

26.5       Entire Agreement

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

26.6       Further Assurances

           The  parties  shall  take such  action  as  Sublessor  and  Sublessee
           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.

26.7       Language

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

26.8       Variation

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



<PAGE>


26.9       Invalidity of any Provision

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

26.10      Survival

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

26.11      Reimbursement

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

26.12      Press Releases

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

26.13      Power of Attorney

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

26.14      Usury Laws



<PAGE>


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

26.15      Confidentiality

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

26.16      Counterparts

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

26.17      Bankruptcy



<PAGE>


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

27.        NOTICES

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

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

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

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

           Sublessor:              KOMMANDITBOLAGET FLYGPLANET XII
           Address:                Sodra Forstadsgatan 4
                                   SE-211 43 Malmo, Sweden
           Attention:              Legal Department
           Facsimile:              +46 40 302350



<PAGE>


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

28.        GOVERNING LAW AND JURISDICTION

28.1       New York Law

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

28.2       Non-exclusive Jurisdiction in New York

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

28.3       Service of Process

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

28.4       Prevailing Party in Dispute

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

28.5       Waiver

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



<PAGE>


SIGNATURE PAGE


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

SIGNED on behalf of KOMMANDITBOLAGET FLYGPLANET XII


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 737-2Y5
Serial Number                      23040
Registration Mark                  N118RW
Line Number                        955
Date of Manufacture                March, 1983
Engines                            Pratt & Whitney JT8D-15A with
                                   Nordam LGW Hushkits
APU                                Garrett GTCP85-129
Present Operator                   Frontier Airlines

WEIGHTS                            Kgs                  Lbs.

Max Taxi Weight                    56,700               125,000
Max Take Off Weight                56,470               124,500
Max Landing Weight                 48,535               107,000
Max Zero Fuel Weight               43,090                95,000
Basic Empty Weight                 27,875                61,454
Max Fuel capacity                  15,213 Kgs.            5,160 US Gallons

INTERIOR CONFIGURATION

Seating                            122Y                 Weber
Galleys                            5                    Henshall
                                   2 Front  (G1 andG2)
                                   3 Rear   (G3, G4 and G6)
Lavatories                         2                    Weber
                                   1 Forward left, 1 Rear left

AIRFRAME STATUS (As of July 16, 1999)

Total Hours                        52,151
Total Cycles                       24,081
C-Check                            last performed July 1999
D-Check                            C-7 Structural Inspection last performed
                                   February, 1998 (49,409 hours/22,224 cycles)


<PAGE>


                          AIRFRAME MAINTENANCE PROGRAM


CHECK                              SCHEDULE

A Check                            125 flight hours
B Check                            3,600 hours or 18 months
7C                                 25,200 hours
Structural                         20,000 hours

ENGINES   (As of July 16, 1999)

                                   #1 Position                 #2 Position
Serial Number                      685527                      700605
Total Hours                        60,567.4                    33,741
Total Cycles                       41,592                      20,002
Next Limiter                       5,002 cycles                7,671 cycles
TSLSV                              0                           0

LANDING GEAR  (As of June 10, 1999)

Right/Left Main                    TSO 8,888 hours
Nose                               TSO 8,888 hours
Overhaul limit (TBO)               20,000 hours

APU (As of June 10, 1999)

Serial Number                      P-50202
Total Hours                        2,742 hours
Time since HSI                     1,857



<PAGE>



                NAVIGATIONAL, COMMUNICATION, ELECTRONIC SYSTEMS,
                           FURNISHING & EQUIPMENT LIST

DESCRIPTION           MANUFACTURER                      MODEL OR
                                                       PART NUMBER

Autopilot               Sperry                          SP77
Flight Director         Collins                         FD-110
Steering Computer       Collins                         562A-5F5
WX-Radar                Honeywell                       Primus 90
VHF Communicator        Collins                         618M-3
HF Communicator         Collins                         628T
Selcal decoder          Motorola                        N1401A
Passenger Address       Collins                         346D-2B
ADF                     Collins                         51-Y7
CADC                    Honeywell                       HG480B13
VOR/ILS                 Collins                         51RC-4B
Marker                  Collins                         51Z-4
Omega                   Litton                          LTN-211
DME                     Collins                         860E-5
ATC                     Collins                         621A-6
Altitude Alert          Honeywell                       JG1052AC01
Compass                 Sperry                          DG-206A
Performance Data         Lear Siegler                   10-61962-55-01
CVR                     Fairchild                       15630-601
Digital Flight
Data Recorder           Sundstrand                      980-4100-GQUS
TCAS Computer           Allied Signal                   066-50000-8102
Transponder             Allied Signal TPA-81A           066-01127-1301
Windshear
Computer/GPWS           Allied Signal MK VII            965-0876-030/001


<PAGE>



Annexure 1


                             AIRCRAFT DOCUMENTATION

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

A.         Certificates

-          Certificate of Airworthiness
-          Certificate of Registration

B.         Aircraft Status Records

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

C.         Aircraft Maintenance Records

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

D.         Aircraft History Records

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

E.         Engine Records (for each engine)

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

F.         APU Records

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

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

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

H.         Manuals

-          Airplane Flight Manual
-          Quick Reference Handbook
-          Aircraft Operation Manual
-          Weight and Balance Manual Supplement
-          Wiring Diagram Manual (microfilm)
-          Illustrated Parts Catalog (microfilm)
-          Aircraft Maintenance Manual (microfilm)
-          Pratt & Whitney Illustrated Parts Catalog
-          Vendor Manual Seats
-          Vendor Manual Galleys
-          Vendor Manual Ovens
-          Vendor Manual Coffee makers
-          Nordam Maintenance Manual Supplements


<PAGE>


I.         Miscellaneous Technical Documents

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




<PAGE>



SCHEDULE 2


                             CERTAIN BUSINESS TERMS


1.         Agreed Value

           Agreed Value means US$ (*).

2.         Basic Rent

           The Basic Rent  payable on each Rent Date  during the  Sublease  Term
           shall be US$ (*).

3.         Damage Notification Threshold

           Damage Notification Threshold means US$ (*).

4.         Engine Agreed Value

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

5.         Lease Expiry Date

           Means the date  falling 51 months from the  Delivery  Date subject to
           the Early Termination Option.

6.         Sublease Term

           Means  the  period  commencing on the Delivery Date and ending on the
           Sublease Expiry Date;

7.         Letter of Credit



<PAGE>


           The Sublessee shall provide the Sublessor with an additional Security
           Deposit  initially  in the  form of cash but to be  replaced  with an
           irrevocable,  assignable  standby  letter of credit in the  amount of
           US$ (*) issued  within  30 days from  the date of this Agreement by a
           major US Bank in a form and substance  acceptable by Sublessor.  Upon
           substitution of the Letter of Credit for the cash deposit,  Sublessor
           will return the cash deposit to Sublessee.  The Letter of Credit will
           serve as security for the performance by Sublessee of its obligations
           under the Transaction Documents and the Other Agreement.

8.         Maintenance Reserves

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

           (i)          Airframe Maintenance Reserve

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

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

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

           (iii)        Landing Gear Maintenance Reserve

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

           (iv)         APU Maintenance Reserve

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

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

9.         Minimum Liability Coverage

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

10.        Scheduled Delivery Date

           Scheduled Delivery Date means on or about July 23, 1999 or such other
           date as the parties may mutually  agree and  Sublessor may be able to
           deliver the Aircraft to Sublessee.

11.        Security Deposit

           Sublessee has paid to Sublessor a cash Security Deposit in the amount
           of  US$ (*)  and  shall provide  Sublessor with  additional  Security
           Deposit according to Clause 7 of this Schedule 2.

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

12.        Supplemental Rent for Excess Cycles

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


<PAGE>




SCHEDULE 3


                             INSURANCE REQUIREMENTS


1.1        Types of Insurance

           The Insurances required to be maintained are as follows:

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

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

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

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



<PAGE>


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

1.2        Terms of Hull and Spares Insurance

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

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

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

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

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

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

1.3        Terms of Liability Insurance

           All required liability insurances will:

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

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



<PAGE>


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

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

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

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

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

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

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



<PAGE>


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

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

1.4        Terms of All Insurances

           All Insurances will:

(a)        Dollars: provide cover denominated in dollars;

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

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

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

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



<PAGE>


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

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

(h)        Cancellation/Change:   provide  that  the  Insurances  will  continue
           unaltered  for the benefit of the  additional  assureds  for at least
           thirty (30) days after written notice by registered  mail or telex of
           any  cancellation,   change,  event  of  non-payment  of  premium  or
           installment thereof has been sent to Sublessor, except in the case of
           war  risks  for  which 7 days or such  lesser  period as is or may be
           customarily  available in respect of war risks or allied  perils will
           be given and that notice  shall be deemed to  commence  from the date
           such notice is given by the insurers and that such notice will not be
           given at the normal expiry date of the policy or any endorsement;

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

(j)        Endorsement: contains an endorsement naming:

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

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

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

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



<PAGE>


1.5        Deductibles

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

1.6        AVN 67B

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

1.7        AVN 2000 (or similar)

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

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

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


<PAGE>




SCHEDULE 4

                               DELIVERY CONDITIONS

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

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

Certification:

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

Configuration:

An all economy 122 seat interior. (Note. Sublessee may sell seats  for  its  own
account , provided replacement  seats  acceptable to  Sublessor  are  installed,
title is transferred  to  Sublessor  and the replacement seats are returned with
the Aircraft at Redelivery)

Paint:

"AS IS."

Airframe:

Fresh  from  next  Block  C  Check,  excluding  hours  and  cycles  used  on the
Demonstration/ Ferry Flights, with a minimum of 17,000 hours remaining until the
next due C7 Check/Structural Inspection.

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

B.         Modifications  and Repairs installed on the Aircraft at Delivery will
           have been accomplished in accordance with FAA approved data.
3.       The Aircraft will be in compliance with the Manufacturer's CPC program.
1.

<PAGE>



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

E. Fuel tanks will be free from contamination.

Engines:

JT8D-15A equipped with Nordam LGW Hushkits

ESN 685527  will be fresh from  performance  restoration  shop visit and have at
least 7,400 hours and 5,000 cycles  remaining on each LLP and ESN 700605 will be
fresh from performance  restoration shop visit and have at least 8,200 hours and
7,600 cycles remaining on each LLP.

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

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

APU:

Serviceable

Components:

Unless  otherwise  agreed,  each component that is time  controlled will have at
least 3,000 flight  hours or cycles  remaining  until next  inspection/overhaul.
Each  component  that is  calendar  controlled  will  have at  least  12  months
remaining until its next inspection/ overhaul.  Condition Monitored/On Condition
components will be serviceable.

Landing Gear:

Each  Landing  Gear will have at least  11,000  hours  remaining  until the next
inspection or overhaul based on a 20,000 hour overhaul interval.

Airworthiness Directives (AD's):

Airworthiness  Directives  requiring compliance on or before Delivery will be in
compliance.

Demonstration Flight:

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

Records:

Documentation  required  to maintain a United  States  Standard  Certificate  of
Airworthiness will be in English.

Aircraft Documentation:

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


<PAGE>


SCHEDULE 5

                             ACCEPTANCE CERTIFICATE

This Acceptance Certificate is delivered,  on the date set out below by FRONTIER
AIRLINES,  INC.  (Sublessee),  to  KOMMANDITBOLAGET  FLYGPLANET  XII(Sublessor),
pursuant to the Aircraft Sublease Agreement dated __ July 1999 between Sublessor
and Sublessee (the Sublease).  Capitalized  terms used in this Certificate shall
have the meanings given to such terms in the Sublease.

1.         Details of acceptance

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


(a)        Airframe
           Type: B737-2Y5          Reg.: N118RW         S/N: 23040

(b)        Engines
           Type: JT8D-15A          S/N No.1: 685527     S/N No. 2: 700605
           Nordam LGW hushkits installed

(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/        Flight Hours/
                          Hours/Cycles       Cycles since last   Cycles to next
                                             Overhaul            sched. Removal
Nose        __________    _____ Flight Hrs   _____ Flight Hrs   _____ Flight Hrs
                          _____ Cycles       _____ Cycles       _____ Cycles
Right Main  __________    _____ Flight Hrs   _____ Flight Hrs   _____ Flight Hrs
                          _____ Cycles       _____ Cycles       _____ Cycles
Left Main   __________    _____ Flight Hrs   _____ Flight Hrs   _____ Flight Hrs
                          _____ Cycles       _____ Cycles       ____ Cycles


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

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

(g)        Place of Acceptance: ________________________________________________

2.         Confirmation

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

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

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

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

3.         Fuel at Delivery

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

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

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

(a)        Airframe:

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

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


(b)        Engines:


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

                                                        ____ Flight  ____ Flight
                                                             Hours        Hours
                                                        ____ Cycles  ____ Cycles



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

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

Sublessee:              FRONTIER AIRLINES, INC.

By:        _________________________

Title:     _________________________


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


<PAGE>




SCHEDULE 6


                             CERTIFICATE OF OFFICER
                                       OF
                             FRONTIER AIRLINES, INC.


I, _____________________, do hereby certify that:

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

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

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

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

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

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



Title                   Name                          Signature


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



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


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


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



<PAGE>





SCHEDULE 7

                           FORM OF LETTER OF AUTHORITY

[ Addressee ]



                                    AUTHORITY


This Authority is given on _________.

Pursuant to an Aircraft  Sublease  Agreement (the Sublease)  dated as of __ July
1999, made between KOMMANDITBOLAGET  FLYGPLANET XII as Sublessor (Sublessor) and
Frontier  Airlines,  Inc. as  Sublessee  (Sublessee)  relating to one (1) Boeing
737-2Y5  aircraft  bearing  manufacturer's  serial number 23040 and registration
mark N118RW (the Aircraft),  Sublessee will operate the Aircraft during the term
of the Sublease.

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

           (i)          the Aircraft; and

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


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

Signed by:


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



<PAGE>


SCHEDULE 8
                                POWER OF ATTORNEY

The undersigned,  Frontier  Airlines,  Inc.  (Sublessee)  refers to the Aircraft
Sublease  Agreement dated as of __ July 1999, as amended and  supplemented  from
time to time (the Sublease) between, KOMMANDITBOLAGET FLYGPLANET XII (Sublessor)
and  Sublessee  with  respect  to  one  (1)  Boeing  737-2Y5   Aircraft  bearing
manufacturer's serial number 23040 and registration mark N118RW (the Aircraft).

In consideration of the sum of US$ 1 paid by Sublessor to Sublessee (the receipt
and sufficiency of which is hereby acknowledged), Sublessee irrevocably appoints
Sublessor (Attorney) as its true and lawful attorney to:

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

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

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

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


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

SIGNED ON BEHALF OF FRONTIER AIRLINES, INC.

By: _______________________


Title: ______________________





<PAGE>




SCHEDULE 9




                      FORM OF OPINION OF SUBLESSEE COUNSEL


                        to be addressed to [ Sublessor ]
                                       and
                                   [ Lender ]

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


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

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

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

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

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

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



<PAGE>


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

           (b)          Sublessee  has the  corporate  power to  enter  into and
                        perform, and has taken all necessary corporate action to
                        authorize  the entry into,  performance  and delivery of
                        the Sublease and the  transactions  contemplated  by the
                        Sublease and the Sublease  constitutes the legal binding
                        obligations  of the  Sublease,  enforceable  against the
                        Sublessee in accordance with its terms;

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

                        (i)        conflict with any laws binding on Sublessee;

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

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

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

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

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

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

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



<PAGE>


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

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

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

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

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

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

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



<PAGE>


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

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

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

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

           (n)          there is no applicable usury or interest  limitation law
                        in [ State ] which restricts the recovery of payments of
                        Default Interest in accordance with the Sublease;

           (o)          Sublessee is not in default under any agreement to which
                        it is a party or by which  is may be bound  which  would
                        have a material  adverse effect on its business,  assets
                        or   condition    and   no   material    litigation   or
                        administrative  proceedings before any Government entity
                        is presently  pending or, to the knowledge of Sublessee,
                        threatened  against it or its assets  which would have a
                        material  adverse  effect  on the  business,  assets  or
                        condition (financial or otherwise) of Sublessee;

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

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

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

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

                        (i)        registration of mortgages in [ State ];

                        (ii)       registration of the Sublease Agreement;

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

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

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

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

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

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

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


<PAGE>



SCHEDULE 10

                 MONTHLY AIRCRAFT UTILISATION AND STATUS REPORT

To:        KOMMANDITBOLAGET FLYGPLANET XII
           Sodra Forstadsgatan 4
           S-211 43 Malmo Sweden                        Fax: 011-46-40-302350

From:      Frontier Airlines                                         Page 1 of 2

Aircraft Type:          Boeing 737-2Y5
Registration Mark:      N118RW
Serial Number:          23040                           Month of: ______________


Aircraft Total Time (Flight Hours) Since New:


Aircraft Total Cycles Since New:


Airframe Flight Hours Flown During Month:


Airframe Cycles/Landing During Month:


Time Remaining to C7 Check/Structural:


Engine Serial Number:                      Engine Serial Number:


Original Position:                         Original Position:


Actual Location:                           Actual Location:


Total Time Since New:                      Total Time Since New:


Total Cycles Since New:                    Total Cycles Since New:


Flight Hours During Month:                 Flight Hours During Month:


Cycles During Month:                       Cycles During Month:


Time Since Last Boroscope:                 Time Since Last Boroscope:


Time Until Next Boroscope:                 Time Until Next Boroscope:


<PAGE>



                 MONTHLY AIRCRAFT UTILISATION AND STATUS REPORT

                                                                    Page 2 of 2


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

RH Main:


LH Main:


Nose:


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

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


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


Airframe:            Hours:              x     $ (*)              =


Original Engine      Hours:              x                        =
Serial Number:


Original Engine      Hours:              x                        =
Serial Number:


Total Engines:       Hours:              x     $ (*)              =


Landing Gear:        Cycles:             x     $ (*)              =


APU:                 Hours:              x     $ (*)              =


                                                                   Total



<PAGE>



SCHEDULE 11


                         FORM OF QUIET ENJOYMENT LETTER


From:      [ Lender ]

To:        [ Sublessee ]

Dated:     [          ]


Dear Sirs,


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


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




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



<PAGE>




SCHEDULE 12


                                RETURN CONDITIONS

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

Location:

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

Certification:

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

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

Configuration:

An all economy 122 seat interior.

Paint:

`AS IS."  Sublessee  agrees to strip  and/or sand and paint the Aircraft (to the
extent that the facility  used by Sublessee  for the  performance  of the return
check  has such  capability)  during  the end of lease C check,  at  Sublessor's
expense, provided Sublessor gives Sublessee at least one (1) month prior written
notice.

Airframe:

Fresh  from  next due Block C Check,  excluding  hours  and  cycles  used on the
demonstration  / Ferry  Flights,  with a  minimum  of 3,600  hours and 18 months
remaining until the next due C7 Check /Structural Inspection.



<PAGE>


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

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

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

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

E.         Fuel tanks will be free from contamination.

Engines:

Each  Engine  will have no more time  since  last  engine  shop visit than as of
Delivery  and have the same life  remaining  on LLP's as at Delivery and have at
least a minimum of 7,000  hours and 5,000  cycles  remaining  until the next LLP
replacement  on one  Engine  (ESN  685527)  and have at least a minimum of 8,000
hours and 7,000 cycles  remaining  until the next LLP  replacement  on the other
Engine (ESN 700605).

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

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

APU:

Serviceable

Components:

Each component that is time  controlled will have at least 3,000 hours or cycles
remaining  until next  inspection/  overhaul.  Each  component  that is calendar
controlled   will   have  at  least  12   months   remaining   until   its  next
inspection/overhaul.   Condition   Monitored/On  Condition  components  will  be
serviceable.



<PAGE>


Landing Gear:

Each  Landing  Gear will have at least  11,000  hours  remaining  until the next
inspection or overhaul based on a 20,000 hour overhaul interval.

Airworthiness Directives (AD's):

Airworthiness Directives requiring compliance on or before Redelivery will be in
compliance.

Demonstration Flight:

Sublessee  will  perform  a one and  one  half  hour  flight  demonstrating  the
satisfactory  operation of the aircraft at Sublessee's expense with no more than
two observers,  as designated by Sublessor,  on board during such  Demonstration
Flight.

Records:

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

Aircraft Documentation

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


<PAGE>



SCHEDULE 13

                                           RETURN ACCEPTANCE CERTIFICATE

1.         Frontier Airlines,  Inc. (Sublessee) and KOMMANDITBOLAGET  FLYGPLANET
           XII  (Sublessor)  have  entered into an Aircraft  Sublease  Agreement
           dated __ July 1999, (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 737-2Y5 Aircraft,  bearing manufacturer's
                        serial number 23040,  registration  mark N118RW together
                        with two (2) Pratt & Whitney  JT8D-15A  engines  bearing
                        serial  numbers  685527 and 700605,  all Parts  attached
                        thereto and thereon in an airworthy condition; and

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

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

           (a)          Airframe:


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

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


           (b)          Engines:   JT8D-15A equipped with Nordam LGW Hushkits


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


Time Remaining to next life limited part removal


MSN:                                 _____                               _____
MSN:                                 _____                               _____


           (c)          APU:


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


           (d)          Landing Gears:



Position     Serial    Total Flight      Flight Hours/        Flight Hours/
             No.       Hours/Cycles      Cycles since last    Cycles to next
                                         Overhaul             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


<PAGE>



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

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

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

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

           (a)          the provisions of the Sublease; and

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

6.         Subject to  Paragraph  7, the leasing of the Aircraft by Sublessor to
           Sublessee  pursuant  to the  Sublease  is hereby  terminated  without
           prejudice to Sublessee's  continuing  obligations  under the Sublease
           including, without limitation, Clauses 19 and 20.
1.

<PAGE>



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

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

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


FRONTIER AIRLINES, INC.



By:____________________________________

Title:___________________________________


KOMMANDITBOLAGET FLYGPLANET XII



By:_____________________________________

Title:____________________________________


ATTACHMENTS:

Annexure 1.             Aircraft Documents
Annexure 2.             List of Discrepancies



<PAGE>





Annexure 1


                               AIRCRAFT DOCUMENTS

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

A.         Certificates

-          Certificate of Airworthiness
-          Certificate of Registration

B.         Aircraft Status Records

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

C.         Aircraft Maintenance Records

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

D.         Aircraft History Records

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

E.         Engine Records (for each engine)

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

F.         APU Records

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

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

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

H.         Manuals

-          Airplane Flight Manual
-          Quick Reference Handbook
-          Aircraft Operation Manual
-          Weight and Balance Manual Supplement
-          Wiring Diagram Manual (microfilm)
-          Illustrated Parts Catalog (microfilm)
-          Aircraft Maintenance Manual (microfilm)
-          Pratt & Whitney Illustrated Parts Catalog
-          Vendor Manual Seats
-          Vendor Manual Galleys
-          Vendor Manual Ovens
-          Vendor Manual Coffee makers
-          Nordam Maintenance Manual Supplements

I.         Miscellaneous Technical Documents

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



<PAGE>



Annexure 2


Discrepancies


SCHEDULE 14


                               SUBLEASE SUPPLEMENT


LEASE SUPPLEMENT NO. 1 dated July __, 1999, between  KOMMANDITBOLAGET FLYGPLANET
XII (the "Sublessor") and
FRONTIER AIRLINES, INC. (the "Sublessee").

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

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

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

1.         Sublessor  hereby delivers and leases to Sublessee under the Sublease
           and  Sublessee  hereby  accepts and leases from  Sublessor  under the
           Sublease, that certain used Boeing Model 737-2Y5 Aircraft bearing FAA
           Registration   Mark   N118RW,    including   the   Airframe   bearing
           manufacturers  serial  number  23040  and the two (2) Pratt & Whitney
           JT8D-15A  Engines equipped with Nordam Stage III LGW Hushkits bearing
           manufacturer's serial numbers 700605 and 685527 described in Schedule
           1 herewith ("Delivered Aircraft").

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

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

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

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

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

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

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

SIGNATURE PAGE

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


Sublessor,

KOMMANDITBOLAGET FLYGPLANET XII


By:_____________________________________

Title:____________________________________


Sublessee,

FRONTIER AIRLINES, INC.


By:______________________________________

Title:_____________________________________