<PAGE>
 
                                                                        EX 10.22
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR PORTIONS OF THIS DOCUMENT MARKED WITH
"*" AND SUCH PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC.

                            DALLAS AEROSPACE, INC.
                               ENGINE AGREEMENT
                         WITH FRONTIER AIRLINES, INC.
                                      FOR
                                MANAGING REPAIR
                                OF JT8D ENGINES


This Agreement dated April 17, 1997, is between DALLAS AEROSPACE, INC., a Texas
Corporation having its principal place of business at 1875 North I-35E,
Carrollton, Texas  75006, U.S.A.  ("Seller") and FRONTIER AIRLINES, INC., a
Delaware Corporation having its principal place of business at 12015 East 46th
Avenue, Denver, Colorado  80239, U.S.A. ("Buyer") in consideration of their
mutual promises and undertakings set forth below, and intending to be legally
bound hereby.  The parties agrees as follows:

1A.  Repair Management
     -----------------

     Subject to all the provisions of this Agreement, Seller agrees to accept
     and professionally manage the accomplishment of JT8D repair service on
     Buyer's engines removed for repair and redeliver the engines to Buyer.
     Seller agrees that it will use its best efforts to meet the estimated
     repair schedule.  Buyer agrees to accept the terms of management by Seller
     described as follows:

     Engine shall be repaired for return to service by an FAA Approved Repair
     Station as mutually agreed upon.

     Buyer represents that it has sole authority to authorize repair of this
     engine either as the owner or acting on behalf of the owner and Buyer
     accepts full responsibility for payment of all repair bills associated with
     this Agreement in accordance with Paragraph 5.

     The engine shall be serviced in accordance with the planned workscope
     approved by Buyer and managed by Seller as required.  Seller will keep
     Buyer apprised of those Seller recommended workscope changes and of any
     significant increases in charges due to changes in the planned workscope.

     Upon completion of necessary repairs, the engine will be tested in
     accordance with Pratt & Whitney specifications and will receive a current
     maintenance release and a FAA Form 337 prior to delivery to Buyer.

1B.  Field Support Exchange Pool
     ---------------------------

     During the term of this Agreement, Seller will furnish to Buyer at no
     charge, one (1) Gearbox Assembly (bare), one (1) First Stage Fan Assembly
     (-9A), one  (1) Second Stage Fan Assembly  (-9A/-17) and two (2) Fan Inlet
     Case Assembly (non oil dampened/oil dampened) for use on Buyer's equipment.
     When one (1) of the Assemblies mentioned above are consumed by Buyer, the
     removed assembly will be returned to Seller by Buyer for rework or
     replacement.  At that time Seller will invoice Buyer for the cost of the
     consumed assembly, in accordance with the Labor & Material Charges as
     contained in Annex A.    Seller will have the removed assembly reworked and
     when made serviceable, returned to the Field Support Exchange Pool or offer
     a suitable replacement for inclusion in the Exchange Pool.    Subject
     Assemblies to be returned to Seller by Buyer in like condition and value as
     received by Buyer, upon the expiration of this Agreement.



1C.  Standby and Lease Engine Charges
     --------------------------------

                                                                  Page 1 of 7
<PAGE>
 
     Seller will provide Buyer with one Standby JT8D-9A Engine in Boeing 737
     QEC, less nose cowl, tailpipes and thrust reverser, for use on Buyer's
     equipment. Buyer agrees to pay Seller a standby fee and all transportation
     cost per Annex A of this Agreement.

     In the event that Buyer installs the Standby Engine on Buyer's equipment,
     lease charges as stated in Annex A of this Agreement will prevail along
     with standard stipulations of the than current Engine Lease Agreement.  At
     no time will the Engine Lease charges in Annex A be increased or decreased
     for the term of this Agreement, without mutual written agreement.

     Buyer and Seller will execute an Aircraft Engine Lease Agreement for the
     Standby Engine or any other Engines that are sent to Buyer prior to
     shipment of any Engine  (Annex B).  The Aircraft Engine Lease Agreement
     will stipulate the Standby and Lease Engine charges as stated in Annex A.

2.   Term of Agreement
     -----------------

     This Agreement shall remain in force for three (3) years from the date of
     signing.  This Agreement may be canceled by either party upon giving of
     one hundred and twenty (120) days written notice to the other party for
     failure to comply with any material provision of this Agreement and failing
     to correct such non-compliance within five (5) days of written notification
     of such non-compliance.

3.   Labor and Material Charges
     --------------------------

     The estimated and final invoice charges for labor and material shall be
     invoiced per the terms contained in Annex A.

4.   Scheduling and Engine Process Time
     ----------------------------------

     The current average engine process time (turn-time) for bare engine is
     about sixty (60) calendar days from date of induction to date of
     completion.  Seller agrees that it will use its best efforts to meet the
     scheduled process time requirements of Buyer.

5.   Payment
     -------

          Seller shall submit estimated invoice for the charges on the engine.
          Buyer shall make the following payments:

          .  Initial (Estimated) Invoice

          After engine disassembly and inspection, Seller shall provide an
            initial (estimated) invoice for the engine repair charges to Buyer
            and payment shall be made in full within thirty (30) days.

          .  Second Invoice

          Upon completion of the engine, an invoice shall be provided to Buyer
            for any charge beyond the estimated invoice and payment shall be
            made in full within thirty (30) days.

          .  Final Invoice

          After all repairs are complete and outside vendor charges are known, a
            final (reconciliation) invoice will be issued for any additional
            charges or credits due.  Payment shall be made in full within thirty
            (30) days.

          .  Credit Agreement

                                                                     Page 2 of 7

<PAGE>
 
          Seller may apply a late fee of one percent (1%) per month on any past
            due balance.  Buyer  will be responsible for payment of any
            collection costs and reasonable attorney's fees to collect any past
            due account.

6.   Delays
     ------

     The engine process time is a best efforts estimate only and Seller shall
     not be liable to Buyer for any loss or damage sustained by the Buyer or
     other party as a result of failure to comply with such date or period for
     completion or delivery.


7.   Transfer of Engine and Delivery of Records
     ------------------------------------------

     Buyer will be responsible for all transportation cost of the engine.

     All required maintenance records will be made available to Seller when
     requested.


8.   Inspection of Powerplant and Inventory of Powerplant Appliances
     ---------------------------------------------------------------

     Upon induction of the engine, the repair station will conduct an internal
     and external inspection to determine the presence of any defects and
     perform an inventory of all installed accessories.  Seller will advise
     Buyer of any inventory discrepancies and of any unreported conditions
     found.

9.   Engine Determined to be Beyond Economical Repair (BER)
     ------------------------------------------------------

     Seller will assist Buyer in reviewing the options available including but
     not limited to the availability of an exchange engine (price to be mutually
     agreed upon) or the purchase of the BER engine by Seller, for those engines
     determined by Buyer to be BER.  For any such BER engine, Buyer may exchange
     the engine with a supplier other than Seller, after comparing offers.  Any
     cost associated with the BER engine by Seller will be invoiced to Buyer in
     accordance with the Labor & Material charges as contained in Annex A if the
     engine is exchanged with a supplier other than Seller.

10.  Scrapped Material
     -----------------

     Parts deemed scrap will be held by Seller for a material review by Buyer
     for thirty (30) days.  All scrap material will be disposed of locally
     unless otherwise notified in writing  by Buyer.

11.  Warranty
     --------

     EACH ENGINE REPAIR STATION WILL WARRANT IT'S OWN REPAIR WORK AGAINST
     DEFECTIVE WORKMANSHIP OF REPAIRS PERFORMED, AND SUCH ENGINE REPAIR STATION
     WILL BE DIRECTED BY SELLER TO ISSUE SUCH WARRANTY DIRECTLY TO BUYER.
     STANDARD WARRANTIES ARE USUALLY FOR TWELVE (12) MONTHS OR TWELVE HUNDRED
     (1200)  FLIGHT HOURS, WHICHEVER OCCURS FIRST, BUT COULD DIFFER BETWEEN
     REPAIR FACILITIES.

     ANY SUBCONTRACT WORK PERFORMED SHALL CARRY WITH IT WHATEVER WARRANTIES ARE
     OFFERED BY THE SUBCONTRACTOR; AND SUCH WARRANTIES SHALL PASS THROUGH TO
     BUYER FROM SELLER.

     PARTS PURCHASED IN "FACTORY NEW" CONDITION FROM ORIGINAL EQUIPMENT
     MANUFACTURERS (OEM's) OR FAA PARTS MANUFACTURER APPROVAL (PMA) SHALL CARRY
     WARRANTIES AGAINST DEFECTS IN MATERIAL OR WORKMANSHIP AS PROVIDED BY THE
     OEM OR PMA; AND SUCH WARRANTIES SHALL PASS THROUGH TO BUYER FROM SELLER.

                                                                  Page 3 of 7
<PAGE>
 
     BUYER ACKNOWLEDGES THAT SELLER IS NOT A REPAIR OR OVERHAUL AGENCY AND DOES
     NOT PERFORM REPAIR, OVERHAULS OR ANY OTHER WORK DIRECTLY ON OR TO SUBJECT
     PARTS OR ENGINES.  AS SUCH, IT IS FULLY ACKNOWLEDGED BY BUYER THAT SELLER
     DOES NOT DIRECTLY PROVIDE ANY WARRANTIES EXPRESS OR IMPLIED, INCLUDING
     WARRANTIES OF SUITABILITY FOR A PARTICULAR PURPOSE, USE OR SERVICE.  IN NO
     EVENT SHALL SELLER BE LIABLE FOR ANY ACTUAL OR CONSEQUENTIAL DAMAGES
     ARISING WITH RESPECT TO MATERIAL, WORK, REPAIRS, OVERHAULS, PURCHASES OR
     SERVICES SUPPLIED UNDER OR IN CONNECTION WITH THIS AGREEMENT.

12.  Waiver
     ------

     Except as set forth in Section 10. above Buyer hereby waives any right of
     action or claims it may have against Seller arising out of the maintenance
     or repair of the engine, other than for the gross negligence or willful
     misconduct of Seller and Seller's appointed repair  stations.

13.  Indemnification
     ---------------

     At all times following delivery of each powerplant, Buyer agrees to assume
     liability for and to defend, indemnify, protect Seller and it's officers,
     directors, employees and agents from and against any an all liabilities,
     damage, losses, taxes, (other than taxes on net income) claims, actions,
     suits, judgments, demands and/or expenses of whatsoever kind, including
     without limitation reasonable legal fees, costs and expenses imposed on,
     incurred by, or asserted against Seller, it's officers, directors,
     employees and/or agents, or otherwise, for the death of or injury to any
     person or persons (other than any officers, directors, employees or agents
     of Seller) or for the loss of, damage to, or the destruction of any
     property, including any one or more of the powerplants, in any manner
     arising or resulting from the ownership, possession, registration, use,
     condition, performance, airworthiness, maintenance or modification of the
     powerplant or Buyer's operation of the powerplant, or arising or resulting
     from any third party or parties using, maintaining, modifying or operating
     the powerplant, or from any other cause whatsoever, including the doctrine
     of strict liability.

     Buyer's indemnity shall not apply to any death or bodily injury, or any
     loss of, damage to or destruction of any property  or any other liabilities
     or claims whatsoever which were caused by the gross negligence or willful
     misconduct of Seller or it's officers, directors, employees or agents.
     Buyer shall have the obligation to control the negotiation and settlement
     of any claim or defense of any action or suit brought against Seller, it's
     officers, directors, employees and/or it's agents from which Buyer has
     indemnified Seller.  Seller shall reasonably assist Buyer, if requested, in
     the defense of any such action or suit, at Buyer's expense, without
     releasing or waiving any obligation, liability or undertaking on the part
     of Buyer.

14   Notices
     -------

     Any notices required or permitted to be given hereunder shall be in writing
     and shall be given to the parties at their respective address shown below,
     or to such other address as either party may subsequently notify the other
     and shall be deemed given when a copy is sent by facsimile transmission
     with the original thereof sent by certified mail.

     If to Seller:  DALLAS AEROSPACE, INC.
                    1875 North I-35E
                    Carrollton, Texas  75006
                    Attn:  George Eddy
                           Director Product Support
                           Phone: 972-245-9633   Facsimile: 972-245-9695

                                                                  Page 4 of 7
<PAGE>
 
     If to Buyer:  FRONTIER AIRLINES, INC.
                   12015 East 46th Avenue
                   Denver, Colorado  80239

                   Attn:
                         ------------------------------------ 

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

                         Phone: (   )           Facsimile: (   )
                                 --- ----------             --- -----------
                                 

15.  Governing Law and Assignment
     ----------------------------

     This Agreement shall be binding upon its successors and assigns of each
     party; however, this Agreement may not be assigned by either party without
     the prior written consent of the other party.

     This Agreement shall be governed by and construed in accordance with the
     laws of the  State of Texas.

     Executed by the parties as of the date first written above.

     Dallas Aerospace, Inc.           Frontier Airlines, Inc.



     By:                              By:
         ----------------------           ---------------------- 

     Name:                            Name:
          ---------------------            --------------------- 

     Title:                           Title:
           --------------------             -------------------- 

     Date:                            Date:
          ---------------------            --------------------- 



                                                                  Page of 5 of 7
<PAGE>
 
                       ANNEX A - JT8D SCHEDULE OF CHARGES

<TABLE> 
<CAPTION> 
 
A.   Engine Shop Charges

     Function                                                            Charges to Buyer
     --------                                                            ----------------
<S>                                                                      <C>
     All Shop Cost                                                       *
                                                                
    (Labor, Special Processes,  Test Charges, Outside 
    Services, Expendable Material, etc.)                                  
                                                                
B.  DAI's Subcontract                                                    *
                                                                
C.  Material Charges                                            
                                                                
    New Material                                                         *
                                                                
    Serviceable Non-Life Limited Material                                *
                                                                
    Serviceable Life Limited Material                                    *
                                                                
    Exchange Serviceable Rotable Material                                *
                                               
D.  Engine Management Services                                  
                                                                
    Engine Management                                           
                                                                
      Repair Cost of $200,000. or more                                   *
                                                                                                               
      Repair Cost of $101,000. to $199,000.                              *
                                                                                                               
      Repair Cost of $100,000 or less                                    *
                                                                
E.  Standby and Lease Engine Charges                            
                                                                
      Standby                                                            *
                                                                
                                                                
      Lease Engine                                                       *
                                                                
F.  Freight Charges                                             
                                                                
      Engine/Engine Stand                                                *
                                                                
      Modules-Exchange Pool                                              *
                                                                
      Other Parts/Accessories                                            *
</TABLE> 
 


                                                                     Page 6 of 7
<PAGE>
 
                   ANNEX B - AIRCRAFT ENGINE LEASE AGREEMENT





                                                                     Page 7 of 7
<PAGE>
 
                        AIRCRAFT ENGINE LEASE AGREEMENT
                                        

          THIS AGREEMENT is made as of the 17th day of  April between DALLAS
AEROSPACE, INC., a Texas Corporation having its principal place of business at
1875 North I-35E,  Carrollton, Texas, 75006, U.S.A. ("Lessor"), and FRONTIER
AIRLINES, INC., a Delaware Corporation having its principal place of business at
12015 East 46th Avenue, Denver, Colorado  80239, U.S.A. (Lessee").

          In consideration of the mutual promises and undertakings set forth
below, and intending to be legally bound, the parties hereby agree as follows:

1. Definitions.  The following capitalized terms used in this agreement shall
   -----------                                                               
   have the meanings set forth below.

     a. "Engine" - An aircraft Engine owned by Lessor of the type(s) and
        model(s) described on Schedules A and B attached hereto, together with
        all the Pratt & Whitney basic accessories and full Boeing 737 QEC on the
        Engine at the time it is delivered by Lessor to Lessee or to a carrier
        for transport to Lessee.
 
     b. "Standby/Lease Term" - Will begin on the day when an Engine and
        associated records are delivered to the Lessee or to a carrier for
        delivery to Lessee (whichever occurs first) and ends on the date on
        which the Engine and associated records are returned to Lessor as
        provided herein. The Standby/Lease Term Lease term is for ____________
        days and may be extended by mutual consent of Lessee and Lessor.

2. Standby/Lease of Engines.  At the request of Lessee from time to time during
   ------------------------                                                    
   the term of this agreement and subject to all of the provisions hereof,
   Lessor shall provide standby/lease Engines to Lessee to be operated by
   Lessee.

3. Rental.  Lessee shall pay rental to Lessor for the Lease Term at Lessor's
   ------                                                                   
   rates in effect at the time of the Engine lease.  Lessor's current rental
   rates for Engines in effect on the date of this agreement are set forth on
   Schedule A.  All rental rates are exclusive of applicable taxes, which shall
   be paid by Lessee in addition to the rental (excluding only taxes on the
   income received by Lessor).

4. Standard Terms and Conditions.  Each standby/lease of an Engine to Lessee
   -----------------------------                                            
   pursuant to this agreement shall be subject to Lessor's Standard Terms and
   Conditions for Engine Leases (Schedule C), a copy of which is attached hereto
   and made a part hereof.

5. Termination.  This agreement may be terminated by Lessor as set forth in
   -----------                                                             
   Schedule C,  effective upon giving notice of such termination to Lessee,
   provided that the provisions of this Agreement will continue to apply to any
   Engine which is leased to Lessee at the time of such termination.
   Furthermore, any such termination shall not affect the rights or obligations
   of the parties hereunder which have accrued or become fixed as of the
   effective termination date.

                                                                    Page 1 of 12
<PAGE>
 
     IN WITNESS WHEREOF, the parties have signed this agreement as of the date
first written above.

FOR DALLAS AEROSPACE, INC.             FOR FRONTIER AIRLINES, INC.
(Lessor)                               (Lessee)


By:                                    By:
   -------------------------              ---------------------------
Title:                                 Title:
      ----------------------                 ------------------------
Name:                                  Name:
     -----------------------                ------------------------- 

Officer of:                            Officer of:

Dallas Aerospace, Inc.
                                       ------------------------------

                                                                    Page 2 of 12
<PAGE>
 
                                   SCHEDULE A
                       to Aircraft Engine Lease Agreement
                       ----------------------------------

A.   Lessee shall pay monthly Rental Fees as shown, monthly in advance on the
     first day of each month.  Operating hour/cycle charges shall be paid on the
     15th day of each month following the month in which the operating
     hours/cycles were accumulated on the Engine.
<TABLE>
<CAPTION>
 
   
                Standby Aircraft Engine          Standard Rental Rates (US$)

     Manufacturer      Model      Serial Number         Per Month
     ------------      ------     -------------         ---------
    <S>              <C>          <C>                 <C> 
    Pratt & Whitney   JT8D-9A       ________          $    *
                     Full Boeing
                      737 QEC
</TABLE>

Once the Engine is removed from standby status and is placed into service by
Lessee than the following rates will immediately take effect:

<TABLE>
<CAPTION>
 
                Leased Aircraft Engine             Standard Rental Rates (US$)
                                               
     Manufacturer      Model      Serial Number    Per Day        Per Operating
     ------------      ------     -------------    -------        -------------
                                                                    Hour/Cycle*
                                                                    ---------- 
    <S>              <C>          <C>            <C>              <C>  
    Pratt & Whitney   JT8D-9A       ________     $   * USD        $  * USD 
                     Full Boeing                                  per hour or 
                      737 QEC                                     cycle*

                                                           *Whichever is greater
</TABLE>

     Plus Post Rental Inspection Charges.  Upon return of Engine, Lessor will
     conduct borescope inspection, comply with a cell run, and subject to the
     results of these inspections, issue a Serviceable Yellow Tag.  Lessee will
     be billed costs of post rental inspection.

B.   Standby/Lease charges will commence upon the date in which the engine
     leaves Dallas Aerospace's facility and continues until the engine is
     received at Lessor's facility in Dallas, Texas.

C.   This Lease is contingent upon Lessor receiving JT8D off-wing engines for
     repair.  The off-wing engine repairs will be determined under a separate
     agreement for managing the repairs.

D.   Post Lease inspection or repair charges required and paid by Lessor shall
     be invoiced to Lessee in the amount of charges paid by Lessor.

E.   Prior to shipment of engine Lessee will wire transfer a deposit equal to
     five percent (5%) of the stipulated loss value of the Engine as defined
     under Schedule C, Section 11 of this Agreement to Lessor's U.S. Bank
     Account.  Wire transfer instructions are as follows:


                                                                    Page 3 of 12
<PAGE>
 
          To the Account of Dallas Aerospace, Inc.
 
          Account No. 4054-7609
          ABA No. 021000089,
          CITIBANK, 399 Park Avenue, New York, NY 10043


F.   Lessee agrees to pay as necessary other miscellaneous applicable freight,
     transportation, repair, legal, insurance, test and inspection charges which
     might arise as described in Schedule "C" Items "3", "4", "5", "7", "11" and
     "12".

                                                                    Page 4 of 12
<PAGE>
 
                                   SCHEDULE B
                       to Aircraft Engine Lease Agreement
                       ----------------------------------

                               Engine Disk Sheet


                                                                    Page 5 of 12
<PAGE>
 
                                   SCHEDULE C
                       to Aircraft Engine Lease Agreement
                       ----------------------------------


                STANDARD TERMS AND CONDITIONS FOR ENGINE LEASES


1. Applicability.  These terms and conditions shall apply to each lease of an
   --------------                                                            
   Engine by Lessor to Lessee pursuant to the attached Aircraft Engine Lease
   Agreement (hereafter referred to as the "Agreement") and shall form a part of
   the agreement.  Capitalized terms used herein shall have the meanings defined
   in the Agreement.

2. Credit Approval and Payment.  Each lease of an Engine to Lessee shall be
   ----------------------------                                            
   subject to credit approval of Lessee by Lessor's Financial Services
   Department.  Lessee shall pay the rental and applicable taxes to Lessor
   according to the terms of invoices which will be prepared and submitted by
   Lessor to Lessee.  All payments to Lessor by Lessee hereunder shall be made
   in U.S. Dollars and shall be payable at the payment location appearing on
   Lessor's invoices to Lessee, or otherwise at Dallas, Dallas County, Texas.
   Any invoiced amounts not paid when due shall bear interest at the highest
   rate permitted by applicable law from the due date until paid at the lesser
   of:  (i) the highest lawful rate which may be established in written
   agreements, or (ii) 18% per annum.  Lessee shall reimburse Dallas Aerospace,
   Inc., for reasonable attorney's fees and other legal expenses incurred by
   Lessor for the purpose of attempting to collect any past due sums payable by
   Lessee hereunder or for the purpose of repossessing an Engine following the
   expiration of the Lease Term.

3. Delivery and Redelivery.   Lessor will deliver the Engine to Lessee on the
   ------------------------                                                  
   Delivery Date F.O.B. the Lessor's facility.  The Engine will have a F.A.A.
   approved return to service tag affixed to it.  Upon termination of the Lease
   the Engine will be redelivered F.O.B. to Lessor's facility in Dallas, Texas
   in serviceable condition as set forth in this Lease Agreement.

4. Use and Operation.  Without the prior written consent of Lessor, the Engines
   ------------------                                                          
   shall be operated only by Lessee, and shall continuously remain in the
   possession of Lessee except during periods of maintenance and transportation
   incident thereto.  Any such consent by Lessor shall not excuse Lessee from
   performing any of its obligations under the agreement.  Lessee shall operate
   the Engines in accordance with the recommendations of the manufacturers
   thereof, and otherwise in a lawful, safe, and prudent manner.  All operations
   of the Engines shall be properly recorded in the records for the Engines.

5. Repair and Maintenance.  At its sole expense, Lessee shall cause required
   ----------------------                                                   
   field-level maintenance to be performed on the Engines in accordance with all
   applicable requirements and recommendations of the manufacturers thereof, and
   shall promptly repair any damage to an Engine occurring during the Lease Term
   in a facility acceptable to Lessor, resulting from improper operation,
   foreign object ingestion, accidents or any other causes, whether or not
   involving the fault of Lessee; except, with normal wear and tear excepted.
   Lessee shall cause all maintenance of, and repairs to, the Engines to be
   recorded in the records for the Engines.  Each accessory, part, or component
   installed on an Engine in connection with a repair shall be identical in
   manufacturer and part number to the item which it replaces, shall be
   airworthy and in serviceable condition, and if a life-limited or "hard time"
   item shall have a remaining life equal to or greater than the remaining life
   of the replaced item.

6. Reports.  Lessee shall report to Lessor the number of hours and cycles the
   --------                                                                  
   Engines have been operated monthly and other information regarding the
   location, condition, operation, performance and 

                                                                    Page 6 of 12
<PAGE>
 
   maintenance of the Engines at such times and in such manner as Lessor may
   direct. Lessee shall immediately report to Lessor all information regarding
   any incident, accident or abnormal occurrence which may have been caused in
   whole or part by the condition, operation or performance of an Engine and
   which involves actual or potential loss of or damage to an Engine or to other
   property, or injury to or death of any person. Lessee shall cooperate with
   any investigation of such incident, accident or abnormal occurrence by Lessor
   or its representatives.

7. Return Condition, Acceptance and Inspection.  At the end of the Lease Term,
   --------------------------------------------                               
   or at such time as that Lease Term may be sooner terminated in accordance
   with Section 11 below, Lessee shall have an acceptable Engine test and a
   borescope acceptable to Lessor performed at an FAA approved facility and
   provide a serviceable tag for the Engine from said facility.  Lessee shall
   promptly return the Engines to Lessor in the same serviceable condition as at
   the beginning of the Lease Term, ordinary wear and tear resulting from proper
   operation excepted.  Lessee shall pay to Dallas Aerospace, Inc., on demand
   the cost of repairing the Engine to return it to serviceable condition or for
   replacing any accessories, parts, or components of the Engines which are
   damaged or missing when the Engines are returned to Lessor.

   At all reasonable times, Lessor and its representatives shall have the right
   to inspect the Engines while in the possession of Lessee or others and to
   examine all log books and other records reflecting the operation and
   maintenance of the Engines.

8. Title.  At all times, title to the Engines shall remain solely in Lessor.
   ------                                                                    
   Lessee shall not represent to other persons, firms or governmental
   authorities that Lessee has any interest in the Engines, other than as
   Lessee.  Lessee shall take such actions as Lessor may direct for the purposes
   of evidencing Lessor's ownership of the Engines and/or notifying other
   persons or firms of such ownership.  Lessee shall not permit any lien,
   security interest or encumbrance to attach to an Engine as a result of any
   act or omission by Lessee, and shall promptly cause the discharge, release,
   or termination of any such lien, security interest or encumbrance, at the
   expense of Lessee.

9. Warranty.  Lessor warrants to Lessee that Lessor has the right to lease to
   ---------                                                                 
   Lessee.  Lessor further warrants to Lessee that the Engines are in airworthy
   condition at the beginning of the Lease Term.  The sole remedy of Lessee if
   an Engine does not conform to the foregoing warranty shall be the repair or
   replacement of such Engine or the nonconforming portion thereof by Lessor.
   EXCEPT AS SET FORTH ABOVE IN THIS SECTION, DALLAS AEROSPACE, INC., MAKES NO
   EXPRESS OR IMPLIED WARRANTY INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
   WARRANTY OF MERCHANTABILITY OR FITNESS FOR PURPOSE OR ANY IMPLIED WARRANTY
   ARISING FROM COURSE OF DEALING OR USAGE OF TRADE IN REGARD TO THE ENGINES.
   THE ENGINES ARE LEASED TO AND ACCEPTED BY LESSEE "AS-IS" AND "WITH ALL
                                                    -------     ---------
   FAULTS."  LESSOR SHALL NOT BE LIABLE TO LESSEE FOR ANY INCIDENTAL OR
   --------                                                            
   CONSEQUENTIAL DAMAGES INCLUDING, WITHOUT LIMITATION, ANY LOSS OR REVENUES,
   PROFITS OR USE EVEN IF LESSOR HAS BEEN NOTIFIED IN ADVANCE OF THE POSSIBILITY
   OF SUCH DAMAGES.  NO OFFICER, EMPLOYEE OR AGENT OF LESSOR HAS AUTHORITY TO
   MODIFY OR EXPAND LESSOR'S LIABILITY UNDER THIS SECTION.

10. Indemnity.  Lessee shall defend Lessor and its employees and underwriters
    ----------                                                               
    (individually or collectively, the "Indemnified Parties") against any claims
    or suits seeking recovery of damages from the Indemnified parties for loss
    of or damage to property or for injury to or the death of any person arising
    out of the possession, use, operation or condition of an Engine by Lessee or
    by others during the Lease Term; except as caused by the negligence or
    willful misconduct of the indemnified parties.  Lessee shall indemnify the
    Indemnified Parties against any sums paid to settle such claims or suits,
    any damages and costs awarded by judgment in such suits, and any incidental
    costs and expenses 

                                                                    Page 7 of 12
<PAGE>
 
    incurred in connection with the claims or suits (including, without
    limitation, reasonable attorney's fees if for any reason Lessee does not
    defend the Indemnified Parties as required herein). Lessor shall endeavor to
    promptly notify Lessee of any such claims or suits, but any delay in giving
    notice to Lessee shall not excuse Lessee from its defense and indemnity
    obligations except to the extent, if any, that Lessee is prejudiced by the
    delay. Lessor shall furnish reasonable cooperation to Lessee and its
    representatives in the defense of such claims or suits at the request and
    expense of Lessee. The defense and indemnity obligations of Lessee under
    this section shall survive the end of the Lease Term and the expiration or
    termination of the agreement.

11. Insurance.  During the term of the Agreement, Lessee shall continuously
    ----------                                                             
    maintain the following types of insurance coverage with insurance companies
    of recognized international standing.

       a. physical damage insurance protecting against loss of or damage to the
       Engines at all times while an Engine is in the possession of Lessee or
       others (whether or not installed on an aircraft) or is being transported
       to or from Lessor, in amounts sufficient to cover the full replacement
       value of the Engine(s),__________________ Thousand U.S. Dollars 
       ($______.00), with any loss payable to Lessor as its interests may 
       appear; and

       b. aviation liability insurance, including contractual liability coverage
       for the indemnity obligation of Lessee hereunder, with minimum limits of
       $100 million per occurrence (or such other limits as may be approved by
       Lessor), and with Lessor named as an additional insured as to any
       liability arising in connection with the agreement.

    Upon the execution of the agreement and during the term hereof, Lessee shall
    cause Lessor to be furnished with one or more certificates of insurance
    reflecting the effectively of the above coverages and endorsements and
    providing for not less than thirty days prior written notice to Lessor in
    the event of cancellation or modification of the coverages reflected
    thereon.

12. Premature Termination of Lease Term.  Lessor may terminate the Lease Term
    ------------------------------------                                     
    for an Engine immediately upon the occurrence of any of the following
    events:

       a. Lessee fails to pay when due any rental charge, overhaul or repair
       charge, or other sum owing to Lessor under the agreement or otherwise,
       and does not cure such failure within three days after the earlier of:
       (i) the date on which Lessee has knowledge of such failure, or (ii) the
       date on which Lessor gives notice thereof to Lessee;

       b. Lessee fails to comply with any provision of the agreement or to
       perform any of its obligations hereunder, and does not cure such failure
       within ten days after the date on which Lessor gives notice thereof to
       Lessee; or

       c. Lessee makes a general assignment for the benefit of creditors, or
       generally fails to meet its financial obligations as they become due, or
       becomes the subject of voluntary or involuntary bankruptcy proceedings,
       or has a receiver or custodian or liquidator appointed for any of its
       assets, or ceases to conduct the whole or a substantial portion of its
       business in the manner in which such business was conducted on the date
       of the agreement.

    Lessor shall give notice of any such termination to Lessee, following which
    Lessee shall immediately discontinue further operation of the Engines and
    shall return the Engines and records to Lessor at Carrollton, Texas or at
    such other location as Lessor may direct, at the expense of Lessee.

13. Miscellaneous.
    --------------

                                                                    Page 8 of 12
<PAGE>
 
       a. Notices. All notices required or permitted to be given hereunder shall
          -------
       be in writing and shall be deemed to have been given when hand-delivered
       or sent by next business day delivery service to the party to which they
       are directed at the address shown below, or to such other address as
       either party shall hereafter notify the other:

          (i)  If to Lessee, to:

               FRONTIER AIRLINES, INC.
               12015 East 46th Avenue
               Denver, Colorado  80239

               Attn:
                    ----------------------------------

               Phone:   (   )
                         --- ------------------
               Facsimile: (   )
                           --- ----------------

 
         (ii)  If to Lessor, to:

               DALLAS AEROSPACE, INC. 
               1875 North I-35E 
               Carrollton, Texas 750066
               Attn: George Eddy, Director Products Support 
               Phone: (214) 245-9633 
               Facsimile: (214) 245-9695

       b. No Waiver.  No act or failure or delay in acting by either party shall
          ----------                                                            
       be deemed to be a waiver of any right or remedy given to it in the
       Agreement, except for an express written waiver signed by an authorized
       representative of that party.

       c. No Assignment.  Lessee may not assign the agreement or sublease any
          --------------                                                     
       Engine without the prior written consent of Lessor and any attempted
       assignment or sublease by Lessee without such consent shall be of no
       legal effect.

       d. Successors.  The agreement shall be binding upon the successors and
          -----------                                                        
       permitted assigns of Lessee and shall inure to the benefit of the
       successors and assigns of Lessor.

       e. Severability.  If any provision of the agreement should be declared
          -------------                                                      
       illegal or unenforceable by a court of competent jurisdiction, such
       declaration shall not affect the legality or enforceability of any other
       provision of the agreement.

       f. Governing Law.  The agreement shall be interpreted in accordance with
          --------------                                                       
       the laws of the state of Texas, excluding any conflicts of law provisions
       thereof which would result in the application of the laws of any other
       jurisdiction.  In any suit arising out of the agreement, Lessee hereby
       irrevocably agrees to be subject to the non-exclusive personal
       jurisdiction of the courts of the state of Texas and the federal courts
       located in the state of Texas and agrees that the venue for such suit is
       proper in Dallas, County, Texas.  Lessee agrees to be subject to the
       Texas Long Arm Statute for service of process.


                                                                    Page 9 of 12
<PAGE>
 
       g. Entire Agreement.  The agreement contains the entire agreement of the
          ----------------                                                     
       parties as to the general subject matter hereof and supersedes any prior
       negotiations, understandings or agreements regarding such subject matter.
       The terms or conditions of any purchase order or other commercial
       document pertaining to the leasing of Engines which may be submitted to
       Lessor by Lessee shall not be binding upon Lessor.

                                                                   Page 10 of 12
<PAGE>
 
                           EQUIPMENT DELIVERY RECEIPT

FROM:     FRONTIER AIRLINES, INC.  (Lessee)

TO:       DALLAS AEROSPACE, INC.  (Lessor)

The undersigned hereby acknowledges that on this______th day of_______, 1996,
Lessor delivered to Lessee that certain JT8D-_____Engine, Manufacturer's Serial
Number__________in Shipping Stand Serial Number_____and certain Engine records
in Lessor's possession required by Lessee, including a copy of the disk profile
attached as Schedule B to the Aircraft Engine Lease Agreement.  The undersigned
further acknowledges receipt of and acceptance of the Engine, basic engine
components and all such records in compliance thereof with all the terms and
conditions of that certain Aircraft Engine Lease Agreement dated as of_________,
______, between Lessee and Lessor.

Signed this______th day of______, 199_.

FOR:  FRONTIER AIRLINES, INC.



By:
   --------------------------
Name:
     ------------------------
Title:
      -----------------------

                                                                   Page 11 of 12
<PAGE>
 
                        AIRCRAFT ENGINE LEASE AGREEMENT
                             STANDARD USAGE REPORT
                                      FOR
                            FRONTIER AIRLINES, INC.

 
Date:                                     Return Form By Fax:  Dallas Aerospace
     ------------------------------                            Leasing Dept. 
                                                               972-245-9695 
Contact:                                                                    
        ---------------------------

Total  Operating Cycles Operated for Previous Month:
                                                    --------------------

Total Operating Hours Operated for Previous Month:
                                                  ----------------------

Aircraft Engine Beginning Totals for Previous Month:    Hours/      Cycles
                                                    ----------------------------

Aircraft Engine Ending Totals for Previous Month:       Hours/      Cycles
                                                 -------------------------------


Please note that Dallas Aerospace, Inc. bills based on total operating
hours/total operating cycles, whichever is greater. We require that both the
operating hours/cycles be reported, for the prior months usage, on this form and
returned to us no later than the 5th day of each month during the Lease Term. We
also request that you list the engines total hours/cycles above for the
beginning and end of the previous months usage.

Frontier Airlines' billing period starts on the 1st day of each month and should
conclude on the last day of each month for each billing period during the Lease
Term.

DEFINITIONS:

Operating Cycle:    A completed take-off and landing sequence.

Operating Hour:     The engine  operating time from start-up to shutdown.



I,____________________________, acknowledge that on this____day of_______, 
199_, that the numbers reported above are true and correct according to our
records.

Signature:
          ---------------------------
Name:
     --------------------------------
Title:
      -------------------------------

                                                                   Page 12 of 12