AIRCRAFT LEASE AGREEMENT


                           Dated as of April 16, 1999


                                     BETWEEN

                           C.I.T. LEASING CORPORATION
                                    as Lessor


                                       AND


                             FRONTIER AIRLINES, INC.
                                    as Lessee


                                   Concerning:

                           One Boeing 737-300 Aircraft


                                      With
                              Two CFM56-3B2 Engines



                         FAA Registration Number N312FL
                       Manufacturer's Serial Number 24569



Items marked with "*" have been omitted pursuant to a request for confidential
treatment.
<PAGE>





                            AIRCRAFT LEASE AGREEMENT

                  THIS  AIRCRAFT  LEASE  AGREEMENT,  dated as of April 16,  1999
(this "Lease"), between C.I.T. LEASING CORPORATION, a Delaware corporation,  and
its successors and assigns ("Lessor"),  and Frontier Airlines,  Inc., a Colorado
corporation ("Lessee").


 W I T N E S S E T H :


                  WHEREAS,  Lessor  owns one (1) Boeing  737-300  Aircraft  more
particularly described on Exhibit A hereto; and

                  WHEREAS,  Lessee  desires to lease  from  Lessor and Lessor is
willing to lease to Lessee the Aircraft upon the terms and  conditions set forth
in this Lease;

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


                                    ARTICLE 1

                                   DEFINITIONS

                  Unless the context  requires  otherwise,  the following  terms
shall  have the  following  meanings  for all  purposes  of this  Lease and such
meanings  shall be equally  applicable to both the singular and the plural forms
of the terms defined:

                  "Aeronautics  Authority" shall mean, as the context  requires,
the United States Department of Transportation, the FAA and/or the Administrator
of  the  United  States  Federal   Aviation   Administration,   or  any  person,
governmental  department,   bureau,  commission  or  agency  succeeding  to  the
functions of any of the foregoing.

                  "Aircraft" shall mean the Airframe  together with the Engines,
the Landing  Gear,  and,  where  applicable,  shall also  include  the  Aircraft
Documents and all Capital  Improvements or parts which may be made to, installed
on or  incorporated  into the  Aircraft,  including,  but not limited to,  those
required pursuant to any Airworthiness Directive.

                  "Aircraft  Documents"  shall  mean  the  items  identified  in
Appendix I B. to the Lease  Supplement  and  delivered to Lessee on the Delivery
Date and all such  other  items  which may be  acquired  or  prepared  by Lessee
relating to its use,  operation and  maintenance of the Aircraft during the term
of this Lease,  including the Aircraft Records, all of which shall be maintained
in the English language.

                  "Aircraft  Records"  shall  mean  all  historical  maintenance
records  and  other  records   delivered  with  the  Aircraft  for   maintenance
accomplished  prior to the  Delivery  Date and current  maintenance  records and
other records for work  accomplished  subsequent to the Delivery Date including,
but not limited to,  documents,  manuals  (revised up to and  including the most
current  revisions issued by the  Manufacturer),  data,  overhaul  records,  log
books,  original  Aircraft  and Engine  delivery  documents,  Life  Limited Part
traceability  to "zero time since new",  FAA Form  8130-3 or other FAA  approved
serviceable  parts tags, FAA forms,  teardown  reports for Time Controlled Parts
which have been  overhauled or replaced during the Term,  modification  records,
inspection records (including NDT documentation such as x-ray and eddy current),
documentation  of AD  compliance,  time logs showing  Aircraft and Engine Flight
Hours and Cycles on any given date during the Term, and all other  documentation
pertaining to the Aircraft, Engines and Parts.

                  "Airframe"  shall mean the Boeing 737-300 aircraft (except for
the  Engines)  more  specifically  described  on  Exhibit A hereto and the Lease
Supplement,  together  with all  Landing  Gear,  the APU,  and any and all Parts
relating thereto.

                  "Airworthiness Directive" or "AD" shall mean any Airworthiness
Directive issued by the FAA or any Manufacturer's mandatory service bulletin and
in each case  applicable  to aircraft,  engines or parts of the same type as the
Aircraft, the Engines or the Parts.

                  "APU"  shall  mean  the  auxiliary power unit installed in the
Airframe.

                  "Basic  Rent"  shall  mean the rent for the  Aircraft  payable
throughout  the Term  pursuant to Section 3.1 hereof and  specified on Exhibit H
hereto.

                  "Business  Day"  shall  mean any day  other  than a  Saturday,
Sunday or day on which commercial banking institutions in New York, New York and
Denver, Colorado are authorized by law to be closed.

                  "Capital  Improvement"  shall mean any  permanent  alteration,
modification,  addition,  accession,  replacement  or other type of  improvement
which is made to the Airframe,  Engines, or any Part thereof, including, but not
limited  to,  the  addition  of  any  Parts  or  avionics,  the  performance  of
Airworthiness  Directives and upgrading of Engines and aircraft flight operation
or safety  technology  where such  improvements  increase the value or operating
life of the  Aircraft,  Engines,  or any Part  thereof,  and for which Lessor is
eligible to take  depreciation or cost recovery  deductions based on the cost of
such improvements.

                  "Capital  Improvement  AD" shall have the  meaning  given such
term in Section 9.3(b) hereof.

                  "Capital  Improvement  Cost  Sharing  Formula"  shall have the
meaning given such term in Section 9.3(b) hereof.

                  "Checks" shall mean A-Checks, B-Checks, C-Checks and D-Checks,
or their equivalent,  and all structural  inspections and corrosion inspections,
which are  required  to be  performed  on the  Aircraft in  connection  with the
Maintenance Program for the Aircraft.

                  "Claims"  shall  have the  meaning  given such term in Section
13.1 hereof.

                  "Cycle" shall mean one take-off and landing for the Aircraft.

                  ""D" Check Airframe Reserve" shall have the meaning given such
term in Exhibit G hereto.

                  "Default"  shall mean any event or condition  which,  with the
lapse of time or the  giving  of notice or both,  would  constitute  an Event of
Default.

                  "Delivery  Date" shall mean the date on which  Lessee  accepts
the Aircraft under the terms of this Lease, which date shall be set forth in the
Lease  Supplement,  or such other  date as may be agreed by Lessor  and  Lessee.
Subject to the  satisfaction  of the conditions set forth in Section 2.3 hereof,
the Delivery Date for the Aircraft is presently  estimated to be on or about May
10, 1999.

                  "Dollars" or "$" shall  mean the lawful currency of the United
States of America.

                  "Engine Life  Limited  Parts  Reserve"  shall have the meaning
given such term of Exhibit G hereto.

                  "Engine  Reserve"  shall have the  meaning  given such term on
Exhibit G hereto.

                  "Engines"  shall  mean  each  of  the  two  CFM56-3B2  engines
described on Exhibit A hereto and in the Lease Supplement, or any replacement of
any thereof, together with any and all Parts related thereto.

                  "Event of Default"  shall have the meaning  given such term in
Section 17.1 hereof.

                  "Event  of  Loss"  shall  mean,  with  respect  to any Item of
Equipment,  any of the following events:  (A) the loss of such Item of Equipment
or the use  thereof  due to theft,  disappearance,  destruction,  damage  beyond
repair or rendition of such Item permanently unfit for normal use for any reason
whatsoever; (B) any damage to such Item which results in an insurance settlement
with respect to such Item on the basis of an actual or constructive  total loss;
(C) the  condemnation,  confiscation or seizure of, or requisition of use or the
prohibition  under any  applicable Law of the use of the Aircraft for commercial
transportation  of passengers for a period in excess of 60 days, or such shorter
period  ending on the last day of the Term, or on the date on which an insurance
settlement on the basis of total loss shall occur, of such Item of Equipment; or
(D) the  condemnation,  confiscation  or seizure of, or requisition of, title to
such Item of Equipment.  An Event of Loss with respect to the Aircraft  shall be
deemed to have  occurred if an Event of Loss occurs with respect to the Airframe
which is part of the Aircraft.

                  "Excusable  Delay"  shall  mean any delay in  delivery  of the
Aircraft  hereunder not  occasioned by the fault or negligence of a party hereto
and due to or arising  from any cause beyond such  party's  reasonable  control,
including,  without  limitation,  (i)  acts  of the  public  enemy,  civil  war,
insurrection or riots, or quarantine restrictions,  strikes,  lockouts, or labor
stoppages and/or (ii) fires, floods, explosions,  earthquakes, acts of nature or
epidemics  and/or (iii) delays relating to any maintenance work performed on the
Aircraft or any part thereof prior to delivery hereunder.

                  "Expiration  Date" shall mean the last day of the Term of this
Lease or such other date on which the Term of this  Lease may be  terminated  or
extended pursuant to the terms hereof.

                  "FAA" shall mean, as the context  requires,  the United States
Federal Aviation  Administration  and/or the  Administrator of the United States
Federal Aviation Administration, or any person, governmental department, bureau,
commission or agency succeeding to the functions of either of the foregoing.

                  "Flight Hour" shall mean each hour or part  thereof,  measured
to two decimal places, elapsing from the moment the wheels of the Airframe leave
the ground on take-off to the moment when the wheels of the  Airframe  touch the
ground on landing.

                  "Governmental  Authority"  shall mean and include (a) the FAA;
(b)  any  national  government,   or  political  subdivision  thereof  or  local
jurisdiction therein; (c) any board, commission,  department,  division,  organ,
instrumentality,  court, or agency of any entity described in (b) above, however
constituted; and (d) any association,  organization, or institution of which any
entity  described in (b) or (c) above is a member or to whose  jurisdiction  any
such entity is subject or in whose  activities  any such entity is a participant
but only  (except for  purposes of defining Law below) to the extent that any of
the preceding have jurisdiction over the Aircraft or its operations.

                  "Hereby",  "herein",  "hereof",  "hereunder",  and other  like
words shall refer to this Lease as originally  executed or as amended,  modified
or supplemented pursuant to the applicable provisions hereof, including, without
limitation, as supplemented by the Lease Supplement.

                  "Indemnitee"  shall mean Lessor and its affiliates,  officers,
directors,  successors,  permitted  assigns,  agents,  employees,  officers  and
servants.

                  "Initial  Deposit"  shall have the meaning  given such term in
Section 3.5(a) hereof.

                  "Insured Value" shall mean the amount set forth  on  Exhibit H
hereto.

                  "Item  of  Equipment"  or  "Item" shall mean the Airframe, the
Landing Gear, any of the Engines, the APU or any of the Parts.

                  "Landing  Gear"  shall  mean  the  complete  strut   assembly,
consisting of the inner and outer  cylinders,  of each main landing gear and the
nose  landing  gear and all  associated  Parts that  comprise  each landing gear
assembly,  as listed in the  Manufacturer's  illustrated parts catalogue for the
Airframe, but excluding rotable parts (which include, without limitation, tires,
brakes, actuators and switches).

                  "Landing Gear Reserve"  shall have the meaning given such term
on Exhibit G hereto.

                  "Law"  shall  mean  and  include  (a)  any  statute,   decree,
constitution, regulation, order, judgment or other directive of any Governmental
Authority,  (b) any  treaty,  pact,  compact  or other  agreement  to which  any
Governmental   Authority  is  a  signatory   or  party,   (c)  any  judicial  or
administrative  interpretation or application of any Law described in (a) or (b)
above, and (d) any amendment or revision of any Law described in (a), (b) or (c)
above.

                  "Lease"  shall  mean this  Aircraft  Lease  Agreement  between
Lessor and Lessee,  as the same may be amended,  modified or  supplemented  from
time to time.

                  "Lease   Supplement"   shall  mean  a  Lease   Supplement   in
substantially the form of Exhibit B hereto.

                  "Lessee's  Actual Cost" shall mean  Lessee's  cost incurred in
performing an  obligation  under this Lease  determined as follows:  (i) if such
obligation is performed by a third party, then Lessee's Actual Cost shall be the
actual charges of such third party paid by Lessee  (without  markups or overhead
by Lessee);  and (ii) if Lessee  elects that such  obligation  be  performed  by
Lessee,  then  Lessee's  Actual  Cost  shall  be  Lessee's  cost for  labor  and
materials.

                  "Lien"  shall  mean  any  mortgage,   pledge,   lien,  charge,
encumbrance, lease, exercise of rights, security interest or claim.

                  "Life Limited Part" shall mean any Item of Equipment  that has
a predetermined life limit,  calculated in Flight Hours, Cycles or calendar time
as  determined  by the  Aeronautics  Authority  or the  Manufacturer  and  which
requires such Item of Equipment to be discarded upon reaching such life limit.

                  "Maintenance Program" shall mean the FAA-approved  maintenance
program for the Aircraft and Engines,  as the same may be modified  from time to
time pursuant to the terms hereof including scheduled  maintenance,  conditional
monitored maintenance and on-condition  maintenance of the Airframe,  Engine and
Parts of the  Aircraft.  Upon request by the Lessor,  a copy of the  Maintenance
Program shall be made available to the Lessor.

                  "Maintenance  Reserves"  shall mean the  amounts to be paid by
Lessee to Lessor  pursuant  to the terms of Exhibit G hereto,  including,  where
applicable,  the "D" Check Airframe  Reserve,  each Engine Reserve,  each Engine
Life Limited Parts Reserve and the Landing Gear Reserve.

                  "Manufacturer" shall mean, in the case of the Airframe, Boeing
Aircraft Company,  in the case of the Engines,  CFM International,  Inc., and in
the case of any Part,  Landing  Gear and APU,  the  manufacturer  of such  Part,
Landing Gear or APU.

                  "Operative  Agreements"  shall  mean each of this  Lease,  the
Lease  Supplement,  the  Tax  Indemnity  Agreement  and  any  other  agreements,
documents  or  certificates  executed  and  delivered  in  connection  with  the
transactions contemplated under this Lease.

                  "Parts" shall mean any and all appliances, parts, instruments,
appurtenances,  accessories, furnishings, seats, and other equipment of whatever
nature or any Capital  Improvements  (other than Engines,  Landing Gear, APU and
temporary  replacement parts as provided in Section 9.4 hereof),  which may from
time to time be  incorporated or installed in or attached to the Airframe or any
Engine or which have been removed therefrom where title remains in the Lessor.

                  "Past  Due Rate"  shall  mean  interest  at the rate per annum
equal to 18%,  subject to the maximum rate  permitted by Law  calculated  on the
basis of a year of 360 days and actual days elapsed.

                  "Permitted Liens" shall mean those Liens permitted pursuant to
Section 14 hereof.

                  "Person" shall mean an individual,  partnership,  corporation,
business trust, joint stock company, trust,  unincorporated  association,  joint
venture,  limited liability company,  Governmental  Authority or other entity of
whatever nature.

                  "Prior  Period"  shall  have the  meaning  given  such term in
Paragraph (a) of Exhibit G hereto.

                  "Related  Transactions"  shall  mean  any and all  leases  and
financings  between  Lessor or any  affiliate  of  Lessor,  as lessor or secured
party, and Lessee or any affiliate of Lessee, as lessee or borrower.

                  "Rent" shall mean the Basic Rent and Supplemental Rent payable
throughout the Term for the Aircraft pursuant to Article 3 hereof.

                  "Rent  Payment Date" shall mean the first day of each calendar
month during the Term hereof,  on which day the payment of Basic Rent is due and
payable.

                  "Rent  Period"  shall  mean each of the  consecutive  calendar
months  throughout  the Term,  commencing on and including the first day of each
calendar month and ending on and including the last day of each calendar  month;
provided  that the first Rent Period  shall  commence on the  Delivery  Date and
shall  end on the last day of the  calendar  month in which  the  Delivery  Date
occurs.

                  "Security  Deposit"  shall have the meaning given such term in
Section 3.5(a) hereof.

                  "Security  Letter of Credit" shall have the meaning given such
term in Section 3.5(f) hereof.

                  "Supplemental  Rent" shall mean all amounts,  liabilities  and
obligations  (other  than  Basic Rent and  Maintenance  Reserves)  which  Lessee
assumes  or  agrees  to pay to Lessor  hereunder  or under  any other  Operative
Agreement or in connection  herewith or therewith,  whether pursuant to a letter
agreement,  stipulation or other agreement,  including,  without limitation, (a)
any payment of Insured Value, (b) any payment of indemnity  required by Sections
10 and 13  hereof  (but  excluding  Maintenance  Reserves),  (c) any  additional
maintenance obligations, and (d) interest as permitted.

                  "Tax  Indemnity   Agreement"  shall  mean  the  Tax  Indemnity
Agreement dated as of the date hereof, between Lessor and Lessee.

                  "Taxes" shall have the meaning given such term in Section 10.1
hereof.

                  "Term"  shall have the meaning  given such term in Section 3.3
hereof.

                  "Time  Controlled  Part" shall mean any Item of Equipment that
has a  predetermined  time limit or interval in accordance  with the Maintenance
Program or as required by the Aeronautics Authority, which requires such Item of
Equipment to be discarded,  overhauled,  or recertified  upon reaching such time
limit or interval.

                  "Transportation  Act" shall  mean 49 U.S.C. ss.40101 et. seq.,
as  amended,  as  in  effect  on  the date  of  this  Lease, or any successor or
substitute legislation at the time in effect and applicable.

                  "Watch  Item" shall mean any special  inspection  generated by
airframe or component condition with inspection intervals determined by original
equipment  manufacturers  that do not coincide with routine periodic  inspection
intervals,   Airworthiness  Directives,  mandatory  service  bulletins,  service
bulletins or fleet campaign directives,  where such additional  inspection shall
be required at an interval of less than (i) a full C Check or (ii) 3,500  Flight
Hours, whichever is greater.

                  "Wet Lease" shall mean any  arrangement  whereby Lessee agrees
to furnish the Aircraft to a third party  pursuant to which (i) Lessee's crew at
all times shall  maintain full  operational  control of the  Aircraft,  (ii) the
Aircraft shall be operated solely by regular  employees of Lessee possessing all
current  appropriate  FAA  certificates  and licenses (it being  understood that
cabin attendants need not be regular  employees of Lessee),  (iii) the insurance
required under Article 12 hereof shall remain in full force and effect, (iv) the
Aircraft shall be maintained by Lessee in accordance with its normal maintenance
practices  and as required  by the terms of this Lease,  and (v) the term of any
such Wet Lease does not extend beyond the remaining Term of this Lease.




                                    ARTICLE 2

                             DELIVERY AND ACCEPTANCE

                  2.1.  Time and Place.  (a) Lessor  hereby  agrees to lease the
Aircraft and the Aircraft Documents to Lessee, and Lessee hereby agrees to lease
the  Aircraft  and  the  Aircraft  Documents  from  Lessor,  pursuant  to and in
accordance with the terms of this Lease as supplemented by the Lease Supplement.

                           (b) Subject to the satisfaction of the conditions set
forth in Section 2.3 hereof and the  occurrence  of an Excusable  Delay,  Lessor
shall  deliver on the Delivery  Date the  Aircraft,  together  with all Aircraft
Documents,  to Lessee at Marana,  Arizona. Upon such delivery and subject to all
the other terms and conditions of this Lease,  Lessee shall accept the Aircraft,
together  with the  Aircraft  Documents  relating  thereto,  and  thereupon  the
Aircraft and Aircraft  Documents  shall be deemed subject to this Lease.  Lessee
shall indicate and confirm its acceptance of the Aircraft and Aircraft Documents
by the  execution and delivery to Lessor of the Lease  Supplement.  Lessor shall
not be  obligated to deliver the Aircraft to Lessee  unless the  conditions  set
forth in Section 2.3 hereof are satisfied on or
before May 10, 1999.

                           (c) Lessee acknowledges that Lessor, at Lessor's cost
has provided Lessee with an adequate test flight
of the  Aircraft.  A technical  representative  for both Lessor and Lessee shall
prepare and sign a list of discrepancies of an airworthy nature or discrepancies
from the delivery  requirements of Exhibit I hereto (excluding any discrepancies
relating to any Time  Controlled  Part) in the Aircraft  systems and  components
found during such test flight which exceed  maintenance manual allowable limits.
To the extent not already  accomplished by Lessor,  such discrepancies are to be
corrected at Lessor's expense, at Lessee's Actual Cost, with all Parts necessary
for such correction to be supplied by Lessor and approved by Lessor and all such
corrections  to be  performed by Lessee with Lessee  providing or procuring  all
labor for such purpose.  Lessee agrees that it will  indemnify and hold harmless
Lessor and each  Indemnitee from and against all claims,  demands,  liabilities,
losses and judgments,  including  attorney's fees,  costs and expenses  incident
thereto,  which may be suffered by, accrued  against,  charged to or recoverable
from Lessor and/or any  Indemnitee by reason of loss of or damage to property or
by  reason  of  injury  or  death,  or  action  or  inaction  of  Lessee  or any
representative of Lessee during such test flight.

                           (d) Lessor's obligation to lease the Aircraft and the
Aircraft  Documents  hereunder to Lessee,  in addition to those  conditions  set
forth in Section 2.3 hereof,  shall be  conditioned  upon (i) the absence of any
Default or Event of Default  hereunder on the Delivery Date, (ii) the absence of
any  materially  adverse  change in Lessee's  financial  condition from the date
hereof to the Delivery Date,  (iii) the absence of any Excusable Delay, and (iv)
the absence of an Event of Loss having occurred
with respect to the Aircraft.

                           (e) Except as  specifically  stated  in  this  Lease,
including  Exhibit I hereto,  the Aircraft shall be delivered to Lessee "AS IS,"
"WHERE  IS"  and  SUBJECT  TO  EACH  AND  EVERY   DISCLAIMER   OF  WARRANTY  AND
REPRESENTATION SET FORTH IN SECTION 4.1 HEREOF.  Upon the tender and delivery by
the Lessor, provided the conditions precedent described in Section 2.3 have been
satisfied,  Lessee shall accept delivery of the Aircraft. Upon acceptance of the
Aircraft, Lessee shall thereupon indicate and confirm acceptance of the Aircraft
by  execution  and  delivery  of the Lease  Supplement  which shall be dated the
Delivery  Date.  The  execution  and  delivery  of the  Lease  Supplement  shall
constitute conclusive and irrebuttable proof of delivery and acceptance.

                           (f) In the event of an Event of Loss with  respect to
the Aircraft prior to the Delivery Date,  Lessor shall promptly notify Lessee in
writing.  This Lease  shall  terminate  upon  receipt by Lessee of such  written
notice.  In the event of an Excusable  Delay which  prevents the delivery of the
Aircraft  hereunder for more than sixty (60) days beyond the estimated  Delivery
Date, at the option of Lessor or Lessee, this Lease shall terminate upon receipt
by the other party of written notice thereof from the party wishing to terminate
this Lease  (provided that such Excusable  Delay is beyond the control of and is
not occasioned by the fault or negligence of Lessee).  All Security Deposits and
other  prepayments  with  respect to this Lease shall be returned to Lessee upon
any such termination.  Neither Lessor nor Lessee shall be liable for the failure
to deliver the Aircraft hereunder due to an Excusable Delay,  provided that such
Excusable  Delay is beyond the control of and is not  occasioned by the fault or
negligence of such party.

                  2.2.  A Lease Only. At all times  during the Term,  full legal
title to all Items of Equipment and the Aircraft  Documents  shall remain vested
in Lessor to the  exclusion  of  Lessee,  notwithstanding  the  delivery  of the
Aircraft to, and the possession and use thereof, by Lessee.

                  2.3.  Conditions  to  Delivery  of   the  Aircraft.   Lessor's
obligation  to  deliver  and lease the  Aircraft  to Lessee  hereunder  shall be
subject to Lessor having received the following on or before the Delivery Date:

                           (1) (i) an amount equal to the  first  month's  Basic
                               Rent and (ii) the Security Deposit;

                           (2) written evidence of appropriate  corporate action
         of Lessee  certified  by an  officer  of  Lessee  duly  authorizing  or
         ratifying  the  lease  of the  Aircraft  hereunder  and the  execution,
         delivery and  performance  of this Lease,  together  with an incumbency
         certificate  as to the Person or  Persons  authorized  to  execute  and
         deliver said certification and the Lease on behalf of Lessee;

                           (3) the Lease  Supplement,  in substantially the same
         form as Exhibit B, and the Tax  Indemnity  Agreement,  each  completed,
         duly  executed and  delivered by Lessee,  and dated and effective as of
         the Delivery Date;

                           (4) a favorable  opinion  signed by Lessee's  General
         Counsel,  dated the Delivery Date, in substantially the form annexed as
         Exhibit D hereto, and including such other matters as may be reasonably
         requested by Lessor or Lessor's counsel;

                           (5) an opinion letter,  substantially  in the form of
         Exhibit E hereto,  executed by an independent aircraft insurance broker
         reasonably  acceptable to Lessor,  as to Lessee's  compliance  with the
         relevant  insurance  provisions  of this  Lease  and a  certificate  of
         insurance  signed by such insurance broker which evidences the relevant
         insurance  required by Article 12 hereof which certificate of insurance
         shall include the relevant  special  provisions  set forth on Exhibit F
         hereto;

                           (6) a certificate signed by a duly authorized officer
         of Lessee, dated the Delivery Date, to the effect that:

                                    (A) the  representations  and  warranties of
                  Lessee  contained in Section 4.2 hereof,  are true and correct
                  on and as of such date as though  made on and as of such date,
                  and all  authorizations and approvals of, giving of notice to,
                  and filings and recordings  with,  all  regulatory  bodies and
                  authorities  which  may  be  conditions  to  the  validity  or
                  enforceability  of this Lease or Lessee's  performance  of the
                  terms hereof have been duly accomplished; and

                                    (B) no  Default  or  Event  of  Default  has
                  occurred and is  continuing  or would result from the lease of
                  the Aircraft;

                           (7) evidence  satisfactory to Lessor  confirming that
         this Lease and the Lease Supplement have been duly filed with the FAA;

                           (8) a favorable  opinion from McAfee & Taft,  special
         FAA counsel to Lessor,  addressed to Lessor , as to  completion  of the
         due filing of this Lease, the Lease Supplement and each other agreement
         or instrument  anticipated to be recorded with the FAA, pursuant to the
         Transportation  Act and related rules and regarding  such other matters
         as Lessor may reasonably request;

                           (9) one or more Form UCC-1  Uniform  Commercial  Code
         Financing Statements signed by Lessee, as debtor, in form and substance
         acceptable  to Lessor  for  filing in any and all  recordation  offices
         necessary to evidence or perfect Lessor's  interest in the Aircraft and
         Items of Equipment;

                           (10) evidence reasonably satisfactory  to Lessor that
         Lessee has obtained such  licenses,  operator's  certificates  or other
         documents  from  each  appropriate  Governmental  Authority  as  may be
         required to operate the  Aircraft  as an air carrier  under  applicable
         Law, including but not limited to, approval by the FAA;

                           (11) if applicable, a  duly  executed Security Letter
         of Credit, in a form satisfactory to Lessor; and

                           (12) such other  documents or conditions or financial
         information as Lessor or Lessor's  counsel may reasonably  request,  in
         form and substance satisfactory to Lessor and Lessor's counsel.

                  2.4.  Aircraft  Configuration,  etc.  The  Aircraft  shall  be
delivered "as is, where is" in the  configuration  used by the previous operator
of the Aircraft  and shall  conform to the  requirements  set forth in Exhibit I
hereto.  Lessee  shall  be  permitted  to  change  the  interior  configuration,
including  replacement  of  interior  Parts  such as  seats,  seat  covers,  and
carpeting  at no cost to  Lessor.  All  requirements  necessary  to  bridge  the
Aircraft onto the  Maintenance  Program shall be  accomplished  by Lessee at the
sole cost and expense of Lessee,  including without  limitation,  replacement of
hard time parts whether due to (x) accumulated time since last overhaul,  or (y)
lack of documentation.  Notwithstanding anything herein to the contrary, Lessor,
at its sole cost and expense, shall cause the Aircraft on the Delivery Date: (i)
to have windshear and TCAS installed thereon;  and (ii) to have a current United
States Certificate of Airworthiness issued by the FAA.


                                    ARTICLE 3

                                  RENT AND TERM

                  3.1.  Basic Rent. Lessee covenants and agrees to pay to Lessor
the Basic Rent as set forth on Exhibit H hereto throughout the Term,  payable in
consecutive  installments  on each Rent  Payment  Date  during  the Term of this
Lease.

                  3.2.  Maintenance Reserves and Supplemental Rent. Lessee shall
pay to Lessor the Maintenance  Reserves pursuant to the terms of Section 5.7 and
Exhibit  G  hereof,  respectively.  Lessee  shall  pay to  Lessor  any  and  all
Supplemental Rent within five (5) Business Days after demand or, if longer, such
other relevant period as may be provided herein.  In the event of any failure on
the part of Lessee to pay any Maintenance  Reserves or Supplemental Rent, Lessor
shall have all  rights,  powers and  remedies  provided  for herein or by law or
equity or otherwise in the case of nonpayment  of Basic Rent.  Lessee also shall
pay to Lessor,  on demand,  as  Supplemental  Rent to the  extent  permitted  by
applicable Law, interest at the Past Due Rate (i) on any part of any installment
of Basic  Rent not paid when due for any  period  for  which  the same  shall be
overdue and (ii) on any payment of  Maintenance  Reserves or  Supplemental  Rent
(excluding  interest at the Past Due Rate  payable  under  clause (i) above) not
paid when due until the same shall be paid,  in each case  commencing on the due
date and including such date thereof if such payment is not received by the time
specified in this Article 3.

                  3.3.  Term. Except as otherwise  provided herein, the Aircraft
shall be leased to  Lessee  hereunder  for a term of  Eighty-Four  (84)  months,
commencing on the Delivery Date and ending at 3:00 p.m. New York,  New York time
on the day which is the seventh  (7th) annual  anniversary  of the Delivery Date
(the "Term").

                  3.4.  Place of  Payment.  Each  payment  of Rent,  Maintenance
Reserves  and the  Security  Deposit  shall be made by  Lessee to Lessor by wire
transfer of immediately  available funds to The Chase Manhattan Bank,  N.A., 270
Park  Avenue,  New  York,  New  York  10017,  for The  CIT  Group,  Account  No.
116-003855,  ABA No.  021-000-021,  identifying the source of such payment,  not
later  than  3:00  p.m.  New York  City  time on the date  due.  If any  payment
hereunder is due on a day which is not a Business Day, such payment shall be due
and payable on the next preceding Business Day.

                  3.5.  Security Deposit. (a) Lessor acknowledges the receipt of
Two Hundred Ten Thousand Dollars ($210,000) (the "Initial Deposit") representing
partial  payment of the  amount  described  on Exhibit H hereto as the  Security
Deposit  Amount.  The Initial  Deposit  shall be held until the Delivery Date at
which time Lessee  shall  provide to Lessor a security  deposit  (the  "Security
Deposit")  under this Lease in the amount of the Security  Deposit Amount as set
forth on Exhibit H hereto.  The Security Deposit shall be made in cash or in the
form of a Security  Letter of Credit that satisfies the  requirements of Section
3.5(f)  hereof.  The Initial  Deposit  shall be  promptly  returned by Lessor to
Lessee  upon the  issuance  of such a Security  Letter of Credit.  The  Security
Deposit shall be  nonrefundable  during the Term, and shall be held by Lessor as
security  for (i) the  timely  and  faithful  performance  by  Lessee  of all of
Lessee's  obligations  under  this Lease  (including,  but not  limited  to, any
prepetition  or  postpetition  obligations  of  Lessee  in  connection  with any
proceeding or other action involving Lessee under any bankruptcy,  insolvency or
reorganization Law of any jurisdiction and compliance with all return conditions
specified  herein  and on  Exhibit  C  hereto),  (ii) all  payments  of Rent and
Maintenance  Reserves due and owing from time to time, (iii) any and all damages
incurred by Lessor which may arise as a result of the breach or rejection of the
Lease,  whether or not in  connection  with a motion to lift stay or a motion to
assume or reject the Lease,  including,  without  limitation,  overdue interest,
costs of  preservation  or protection of the Aircraft and costs of  repossession
and (iv) all  attorney's  fees incurred by Lessor in connection  with any of the
above,  whether or not litigation is instituted and whether  incurred  before or
after the filing by or against  Lessee of a petition  under Chapter 7 or Chapter
11 of the Bankruptcy Code.

                           (b)  Lessee   hereby  grants  to  Lessor  a s ecurity
interest in the  Security  Deposit and in all other sums  deposited  pursuant to
this  Section  3.5.  Lessee  agrees to  execute  and file  with the  appropriate
Governmental Authorities any and all documents necessary or reasonably requested
by Lessor to evidence and perfect such security interest in favor of Lessor.

                           (c)  Upon  the  occurrence  of an  Event  of  Default
hereunder, in addition to all of the other rights that Lessor may have under the
New York Uniform  Commercial  Code as a secured party,  Lessor may use, apply or
retain all or any portion of the  Security  Deposit in partial  payment for sums
due to  Lessor  by  Lessee,  to  compensate  Lessor  for any  sums it may in its
discretion advance as a result of a Default by Lessee, or to apply toward losses
or  expenses  Lessor  may  suffer  or  incur  as a result  of  Lessee's  Default
hereunder.  If  Lessor  uses or  applies  all or any  portion  of such  Security
Deposit,  such application shall not be deemed a cure of any Default or Event of
Default,  and Lessee shall within five (5) days after  written  demand  therefor
deposit with Lessor in cash an amount sufficient to restore the Security Deposit
to its  original  sum as set forth in Exhibit H hereto and the failure of Lessee
to do so shall be a material breach of this Lease by Lessee.

                           (d) The Security Deposit shall be held by Lessor in a
segregated  account at Fleet Bank in New York.  Provided  no Default or Event of
Default  shall have  occurred  and be  continuing,  Lessor  shall  credit to the
Security  Deposit  interest  thereon at the  commercial  rate of  interest as is
customarily  available to Lessor from time to time, as is in effect on the first
day of each calendar quarter during the Term. Such interest shall be credited on
the tenth  Business  Day of each  calendar  quarter and on the date on which the
Security  Deposit is returned to Lessee.  Any  interest  earned on the  Security
Deposit shall become part of the Security  Deposit and shall be held and applied
by Lessor as provided herein.

                           (e)  Provided  Lessee is not in  Default  under  this
Lease  and no Event of  Default  shall  have  occurred  and be  continuing,  the
Security  Deposit shall be returned to Lessee (i) promptly after the termination
of this Lease in the event that this Lease is  terminated  prior to the Delivery
Date, or (ii) within one month  following the later of the  Expiration  Date and
Lessee's return of the Aircraft in compliance  with Article 16 hereof,  together
in either case with interest, if any, earned thereon.

                           (f) In lieu of a cash  Security  Deposit,  Lessee may
deliver  to  Lessor,  on or  after  the  Delivery  Date,  an  unconditional  and
irrevocable  letter of credit in a form satisfactory to Lessor, in the amount of
not less than the  Security  Deposit  Amount set forth on Exhibit H,  hereto and
issued by an issuer bank acceptable to Lessor (the "Security Letter of Credit").
The Security  Letter of Credit shall remain in full force and effect  during the
Term hereof and for not less than thirty (30) days  following the  expiration of
the Term.  Lessor may draw upon all or a portion  of the amount of the  Security
Letter of Credit upon (i) the  occurrence  of an Event of Default  hereunder  or
(ii) in the  event  that  the  Letter  of  Credit  has not  been  renewed  and a
replacement  letter of credit delivered to Lessor not less than thirty (30) days
prior to the expiration date of such Letter of Credit, and Lessor may use, apply
or retain all or any portion of the funds paid  pursuant to the Security  Letter
of Credit to the same extent as provided in the paragraph (a) above with respect
to the cash Security  Deposit by delivering a certificate  to the issuer stating
that a drawing by Lessor is authorized  under the terms of this Lease. If Lessor
draws upon all or any portion of the Security Letter of Credit, such application
shall not be deemed a cure of the  Default  or Event of  Default  for which such
amount was applied until Lessee shall cause (within five (5) Business Days after
written demand  therefor) the Security  Letter of Credit to be reinstated to its
original  amount  or cause a  replacement  letter  of credit to be issued in the
amount of not less  than the  Security  Deposit  amount  set forth on  Exhibit H
hereto,  and the  failure of Lessee to do so shall be a material  breach of this
Lease by Lessee.  For the  avoidance  of doubt,  Lessee's  reinstatement  of the
Security  Letter of Credit  shall not cause the cure of any  Default or Event of
Default  which would not have been  curable in full by  Lessor's  drawing on the
then-available  stated amount of the Security Letter of Credit. After expiration
of the Term of this Lease,  and provided that Lessee has been  discharged of its
obligations hereunder,  including but not limited to, return conditions pursuant
to Section 16 hereof and  Exhibit C hereto,  Lessor  shall  return the  Security
Letter of Credit to Lessee for cancellation.

                  3.6   Time is of the  Essence. Time  and strict  and  punctual
performance are of the essence with respect to each provision of this Lease.


                                    ARTICLE 4

            REPRESENTATIONS AND WARRANTIES; COVENANTS OF THE PARTIES

                  4.1. Lessor's  Representations  and Warranties.  LESSOR LEASES
THE  AIRCRAFT AND  AIRCRAFT  DOCUMENTS  TO LESSEE "AS IS,  WHERE IS",  EXCEPT AS
OTHERWISE  PROVIDED HEREIN.  LESSOR HAS NOT AND SHALL NOT BE DEEMED TO HAVE MADE
(WHETHER BY VIRTUE OF HAVING  LEASED THE AIRCRAFT AND AIRCRAFT  DOCUMENTS  UNDER
THIS LEASE,  OR HAVING ACQUIRED THE AIRCRAFT AND AIRCRAFT  DOCUMENTS,  OR HAVING
DONE OR FAILED TO DO ANY ACT, OR HAVING ACQUIRED OR FAILED TO ACQUIRE ANY STATUS
UNDER OR IN RELATION TO THIS LEASE OR OTHERWISE), AND LESSOR HEREBY SPECIFICALLY
DISCLAIMS,  ANY REPRESENTATION OR WARRANTY,  EXPRESS OR IMPLIED, AS TO THE TITLE
OR LIEN STATUS  (EXCEPT AS HEREIN  BELOW  PROVIDED),  AIRWORTHINESS,  CONDITION,
DESIGN, OPERATION,  MERCHANTABILITY,  FREEDOM FROM CLAIMS OF INFRINGEMENT OR THE
LIKE,  OR FITNESS FOR USE FOR A PARTICULAR  PURPOSE OF THE AIRCRAFT AND AIRCRAFT
DOCUMENTS,  OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT,
THE ABSENCE  THEREFROM OF LATENT OR OTHER DEFECTS,  WHETHER OR NOT DISCOVERABLE,
OR AS TO ANY OTHER  REPRESENTATION  OR WARRANTY  WHATSOEVER,  EXPRESS OR IMPLIED
(INCLUDING ANY IMPLIED  WARRANTY ARISING FROM A COURSE OF PERFORMANCE OR DEALING
OR USAGE OF TRADE),  WITH RESPECT TO THE AIRCRAFT  AND AIRCRAFT  DOCUMENTS;  AND
LESSEE  HEREBY  WAIVES,  RELEASES,  RENOUNCES AND  DISCLAIMS  EXPECTATION  OF OR
RELIANCE  UPON  ANY SUCH  WARRANTY  OR  WARRANTIES.  LESSOR  SHALL  NOT HAVE ANY
RESPONSIBILITY  OR LIABILITY TO LESSEE OR ANY OTHER PERSON,  WHETHER  ARISING IN
CONTRACT  OR TORT  OUT OF ANY  NEGLIGENCE  OR  STRICT  LIABILITY  OF  LESSOR  OR
OTHERWISE, FOR (i) ANY LIABILITY,  LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED
DIRECTLY  OR  INDIRECTLY  BY THE  AIRCRAFT  OR ANY  ENGINE,  OR  PART  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 CONSEQUENTIAL  DAMAGES OR (iv) THE DELIVERY,
OPERATION,  SERVICING,  MAINTENANCE,  REPAIR,  IMPROVEMENT OR REPLACEMENT OF THE
AIRCRAFT.  THE WARRANTIES AND  REPRESENTATIONS SET FORTH IN THIS SECTION 4.1 ARE
EXCLUSIVE AND IN LIEU OF ALL OTHER  REPRESENTATIONS  OR  WARRANTIES  WHATSOEVER,
EXPRESS  OR  IMPLIED,  AND  LESSOR  SHALL  NOT BE  DEEMED TO HAVE MADE ANY OTHER
WARRANTIES,  EXCEPT THAT: Lessor represents,  warrants and covenants that it has
good title to the Aircraft and Aircraft  Documents,  and the right and corporate
power to lease the  Aircraft  (including  all Items of  Equipment)  and Aircraft
Documents to Lessee  hereunder;  and, so long as Lessee keeps and performs  each
and every covenant to be kept and performed by it hereunder,  Lessor,  or anyone
claiming by or through  Lessor or claiming  title to the  Aircraft,  any Item of
Equipment or the Aircraft  Documents,  shall not interfere  with Lessee's  quiet
enjoyment of the Aircraft and Aircraft Documents; provided, however, that Lessor
and  prospective  purchasers  and lessees may inspect the  Aircraft and Aircraft
Documents  at their own expense as long as such  inspection  does not  interfere
with Lessee's operation or maintenance of the Aircraft.  During the term of this
Lease, Lessee is authorized to enforce in its own name such rights as Lessor may
have with  respect to the  Aircraft  under any  warranty  (express or  implied),
service policy or product  agreement to the extent that the same may be assigned
or otherwise  made  available to Lessee and, to the extent that the same may not
be so assigned or  otherwise  made  available  to Lessee,  Lessor  agrees to use
reasonable  efforts,  at Lessee's expense,  to enforce such rights as Lessor may
have with respect  thereto for the benefit of Lessee;  provided,  however,  that
upon the  occurrence  of a Default or an Event of Default all such rights  shall
immediately and unconditionally revert to Lessor.

                  4.2.  Representations and Warranties of the Parties. Except as
otherwise  provided in this Section,  each party  represents and warrants to the
other, as to itself, that:

                           (a)   (i) such party is a corporation duly organized,
validly  existing and in good standing under the Laws of the jurisdiction of its
incorporation,  and (ii) Lessee only  represents and warrants that it (A) is and
covenants that  throughout the Term it will remain duly  certificated  as an air
carrier of passengers  under the laws of the United  States of America;  and (B)
operates  and will  throughout  the Term  continue  to operate  the  Aircraft in
accordance with the rules and regulations of the FAA as an air carrier holding a
certificate issued under ss. 44705 of the Transportation Act;

                           (b) the  execution and delivery by such party of this
Lease, the Lease Supplement,  and any other Operative Agreement the consummation
by such party of the transactions contemplated herein and therein and compliance
with the terms and  provisions  hereof  and  thereof  are  within  such  party's
corporate  powers,  do not and will not result in a  violation  of such  party's
articles of incorporation or by-laws as currently in effect; and do not and will
not  conflict  with,  or  result  in a breach  of any term or  provision  of, or
constitute a default  under,  or result in the  imposition  of any Lien upon the
Lease  or any  Item of  Equipment  under,  any  indenture,  mortgage,  or  other
agreement or  instrument to which such party is a party or by which it or any of
its  properties,  is or may be bound,  or any existing  applicable  law, rule or
regulation,  or any judgment,  order or decree, of any government,  governmental
instrumentality  or court  having  jurisdiction  over  such  party or any of its
properties;

                           (c) Lessee only  represents and warrants  that,  upon
its delivery hereunder, none of the Aircraft, Airframe, Landing Gear, Engines or
any Part  thereof,  shall be or become  subject to any Lien except for such,  if
any, as is permitted by Article 14 hereof;

                           (d) this Lease,  the Lease  Supplement  and the other
Operative  Agreements have each been duly authorized by such party,  this Lease,
the Lease  Supplement and the other Operative  Agreements has been duly executed
and delivered by such party, and this Lease and the Tax Indemnity  Agreement are
and the Lease  Supplement  will be, upon due execution and delivery  thereof,  a
legal,  valid and binding  obligation  of such party,  enforceable  against such
party in accordance with its terms, except as such enforceability may be further
limited  by  bankruptcy;  insolvency,  reorganization  and other laws of general
application affecting the enforcement of creditors' rights;

                           (e) Lessee only  represents  and warrants that Lessee
has received every consent,  approval or  authorization  of, and has given every
notice to, each Governmental  Authority having  jurisdiction with respect to the
execution,  delivery or  performance  of this Lease  (including all monetary and
other obligations hereunder) that is required in order for Lessee to execute and
deliver this Lease and the other Operative Agreements and each other document to
which Lessee is a party, and to perform the transactions contemplated hereby and
thereby and each such consent,  approval or authorization is valid and effective
and has not been revoked;

                           (f) Lessee only  represents  and warrants  that there
are no suits or proceedings  pending or, to the knowledge of Lessee,  threatened
in any court or before any regulatory commission,  board or other administrative
governmental  agency  against or  affecting  Lessee which will have a materially
adverse effect on the current business or financial condition of Lessee;

                           (g) Lessee only represents and warrants that,  except
for the filing for  recordation of this Lease and the Lease  Supplement with the
FAA and the filing of any Uniform Commercial Code financing statements required,
and the placing on the Aircraft and on each Engine of the plates  containing the
legends  referred to in Section 5.6 hereof,  no further  filing or  recording of
this Lease or of any other  document  and no further  action,  are  necessary or
desirable  under the Laws of any  Governmental  Authority  in order to (i) fully
protect and establish  Lessor's title to,  interest in and property  rights with
respect to the Aircraft and  Aircraft  Documents as against  Lessee or any third
party claiming  through Lessee and to ensure that the property  rights of Lessor
therein will have  priority in all respects  over the claims of all creditors of
Lessee, or (ii) ensure the validity,  effectiveness  and  enforceability of this
Lease, the Lease Supplement and the other Operative Agreements;

                           (h) Lessee only  represents  and warrants that it has
delivered to Lessor a true,  complete and correct copy of the Lessee's financial
statements  for the period  ended March 31, 1998  together  with an  independent
auditor's  report  with  respect  thereto,  and  Lessor  represents  that it has
reviewed such financial  statements and, assuming they are accurate,  finds such
financial statements to be acceptable;

                           (i) Lessee only  represents  and warrants  that there
are no  withholding or other Taxes to be deducted from any payment to be made by
Lessee under this Lease;

                           (j) Lessee  only  represents and warrants that Lessee
is not in default in the performance of its material obligations for the payment
of indebtedness  for borrowed money or on any other material lease  obligations;
and

                           (k) Lessee only  represents and warrants  that,  upon
the  commencement  of a Chapter 11 proceeding  under the  Bankruptcy  Code by or
against  Lessee,  Lessor  shall be  entitled  to the  benefit of Title 11 U.S.C.
Section 1110 as in effect on the date hereof with respect to the Aircraft.


                                    ARTICLE 5

            POSSESSION; USE; LAWFUL INSURED OPERATIONS; MAINTENANCE;
                 REGISTRATION AND INSIGNIA; MAINTENANCE RESERVES

                  5.1.  Possession.  During the Term, the Items of Equipment and
the operations  performed  therewith  shall,  subject to applicable  Laws of any
Governmental Authority including, but not limited to, FAA regulations,  be under
the  exclusive  control  of Lessee,  subject to the rights of Lessor  hereunder.
Without  the prior  written  consent of Lessor,  Lessee  shall not  sublease  or
otherwise  deliver,  relinquish  or transfer  possession  of the  Aircraft,  the
Airframe,  the Aircraft  Documents or any Item or Items of Equipment;  provided,
however, that, so long as no Default or Event of Default shall have occurred and
be continuing,  Lessee may, without the written consent of Lessor but subject to
the other provisions of this Lease:

                           (i) deliver possession of the Aircraft, the Airframe,
                  any Engine or any Part thereof or any Item of Equipment to the
                  Manufacturer thereof or an FAA-certified  maintenance facility
                  for service, repair, modifications,  alterations,  maintenance
                  or overhaul work required by the terms hereof;

                           (ii)  install  any  Engine  on an  airframe  owned by
                  Lessee  which  airframe  shall be free and clear of all Liens,
                  except:  (A) Liens permitted hereby and those which apply only
                  to the engines  (other than the Engines),  appliances,  parts,
                  instruments, appurtenances, accessories, furnishings and other
                  equipment  (other than Parts)  installed on such airframe (but
                  not to such airframe as an entirety); or (B) mortgage Liens or
                  other  security  interests,   provided,  that  the  applicable
                  security  documents  provide that such Engine shall not become
                  subject to the Lien of such  mortgage  or  security  interest,
                  notwithstanding the installation thereof on such airframe;

                           (iii)  install  any Engine on an  airframe  leased to
                  Lessee or purchased by Lessee subject to a conditional sale or
                  other security agreement,  provided that such airframe is free
                  and clear of all Liens,  except: (A) the rights of the parties
                  to the lease or conditional  sale or other security  agreement
                  covering such airframe,  or their assignees;  (B) Liens of the
                  type  permitted  by clause  (ii)  above;  and (C) such  lease,
                  conditional  sale  or  other  security  agreement  effectively
                  provides that such Engine shall not become subject to the lien
                  of such lease,  conditional sale or other security  agreement,
                  notwithstanding the installation thereof on such airframe; or

                           (iv) enter into a Wet Lease of the Aircraft.

Lessee  will not  permit any Item of  Equipment  (other  than Parts as  provided
herein) to be utilized on any aircraft not within Lessee's fleet of aircraft. No
relinquishment of possession  pursuant to the terms of this Section 5.1 shall in
any way discharge or diminish any of Lessee's obligations to Lessor hereunder or
constitute a waiver of Lessor's rights and remedies hereunder.

                  5.2.  Assignment  by  Lessee.  Lessee  shall  not  assign  any
interest  in  this  Lease  or any of its  rights  hereunder  or in any  Item  of
Equipment, and any such purported assignment shall be void ab initio.

                  5.3.  Use.  Lessee  shall  use the  Aircraft  and any  Item of
Equipment  solely in commercial  operations for which Lessee is duly  authorized
and strictly in accordance  with the terms of this Lease.  Lessee shall not use,
or permit the use of, any Item of Equipment  for any purpose for which it is not
suitable.  The Aircraft shall always remain in passenger  configuration.  Lessee
shall  comply with FAA  regulations  relating  to the  transport  of  restricted
articles.  Lessee shall pay for and provide all electric  power,  oil,  fuel and
lubricant consumed by and required for the operation of the Aircraft.

                  5.4. Lawful Insured Operations. The Aircraft shall be operated
at all times in compliance  with all applicable  Federal  Aviation  Regulations,
including, but not limited to, Part 121 thereof. Lessee will not cause or permit
the  Aircraft or any Item of  Equipment  to be  maintained,  used or operated in
violation of any Law or Governmental  Authority having  jurisdiction or contrary
to any Manufacturer's operating manuals and instructions, or, in the case of the
Aircraft and the  Engines,  in violation  of any  airworthiness  certificate  or
registration  relating  thereto.  Lessee  agrees  not to  operate  any  Item  of
Equipment,  or suffer or permit such Item to be operated (i) unless such Item is
covered by insurance  required by the terms of this Lease,  (ii) contrary to the
terms of the insurance  required by the provisions of Article 12 hereof or (iii)
in any area excluded  from  coverage by any  insurance  required by the terms of
Article 12 hereof.

                  5.5.  Maintenance. (a) Lessee, at its own expense, shall cause
the  Items  of  Equipment  to be  serviced,  repaired,  overhauled,  tested  and
maintained in  compliance  with all  applicable  Federal  Aviation  Regulations,
including,  but not limited to, Part 121 thereof (i) by personnel in  accordance
with FAA requirements,  (ii) in accordance with the Maintenance  Program and the
operations and  maintenance  manuals of the  Manufacturers  thereof  (including,
without  limitation,  an FAA approved or Manufacturer's  recommended program for
the prevention and treatment of corrosion),  (iii) so as to keep such Item in as
good operating  condition and appearance as when delivered to Lessee  hereunder,
ordinary wear and tear excepted,  (iv) so as to keep such Item in such operating
condition  as may be necessary to cause the  airworthiness  certificate  of such
Item to be maintained in good standing at all times under the  applicable  rules
and regulations of the Aeronautics Authority, (v) so as to keep it airworthy and
fit for  scheduled  commercial  passenger  service in the United States and each
other  jurisdiction in which Lessee will operate the Aircraft,  and (vi) so that
it will not discriminate  against the Aircraft (as compared to other aircraft of
the same type owned or operated by Lessee) in respect of the Maintenance Program
and maintenance, other than withdrawal of the Aircraft from use and operation as
is necessary to prepare the Aircraft for return to Lessor upon the expiration or
termination of this Lease.

                           (b)  Without  limiting the  foregoing,  Lessee  shall
cause, at its expense, all maintenance Checks to be performed on the Aircraft as
they become due, with no fleet discrimination with respect to the Aircraft.  Any
damage,  defects or corrosion  discovered  during any Check shall be permanently
repaired in accordance  with the Maintenance  Program and the structural  repair
manual for the  Aircraft at the sole  expense of Lessee.  Lessee  shall  provide
Lessor with ten (10) days prior notice of scheduled C and D Checks. Lessor shall
have the right to have  representatives  present  during  such  Checks who shall
consult with Lessee's representatives as to the work being performed during such
Checks.  Lessee,  at its own expense,  shall  furnish  Lessor upon return of the
Aircraft and at such times during the Term as Lessor shall  reasonably  request,
originals of all Aircraft  Records  with a  certificate  signed by an officer of
Lessee,  affirming that all the  maintenance  work  represented by such Aircraft
Records was performed by Lessee or a then FAA authorized repair station approved
to maintain  Boeing  737-300 type aircraft and a certificate  affirming that the
maintenance  work  represented by such records was performed in accordance  with
the Maintenance Program. Lessee, at its own expense, shall also maintain (in the
English  language) all Aircraft  Documents and other  materials  required by the
FAA, or any other applicable Aeronautics Authority, including Aircraft Documents
required  to be  maintained  in respect of each Item of  Equipment,  in a manner
acceptable  to the  FAA,  or any  other  applicable  Aeronautics  Authority  and
promptly  furnish to Lessor upon  Lessor's  request such  information  as may be
required  to enable  Lessor to file any  reports  required  to be filed with any
Governmental  Authority  because of  Lessor's  ownership  of the  Aircraft.  All
Aircraft Documents,  including Aircraft Records and documentation of maintenance
accomplished on the Airframe, Engines and Parts shall be in the English language
and shall be retained by Lessee  until the  Expiration  Date,  at which time all
Aircraft Records and Aircraft  Documents shall be returned to Lessor in original
form.

                           (c)  Lessee  will not  allow the  Flight  Hours:Cycle
ratio for the operation of the Aircraft during the Term to fall below a ratio of
2:1. To the extent the Flight  Hours:Cycle ratio falls below 2:1, the applicable
rate of the Maintenance  Reserves shall be adjusted in accordance with paragraph
(f) of Exhibit G hereto.
                           (d) No Time Controlled Part shall be removed from the
Aircraft  unless (i) such Time  Controlled  Part must be removed and replaced in
accordance  with the  Maintenance  Program or (ii) such Time  Controlled Part is
re-installed  on the  Aircraft  within  a  reasonable  period  of time  based on
Lessee's  schedule  but in any event not to exceed 72 hours after such  removal.
Any Time  Controlled  Part  which is  removed in  accordance  with the  Lessee's
Maintenance Program shall be replaced with a part of the same manufacture and an
equivalent  or later part number  equal to the replaced  Part and be  completely
interchangeable as to the form, fit and function and shall be airworthy.

                  5.6. Registration and Insignia. Upon delivery of the Aircraft,
Lessee agrees to place the following  lease  identification  in the cockpit in a
prominent  location and to place such lease  identification  on each Engine on a
metal plate and in a prominent  location near such Engine's data plate:  "Leased
from C.I.T.  Leasing  Corporation,  as owner and Lessor."  Lessee agrees to make
such changes to such lease  identification as Lessor may reasonably request from
time to time.  Lessee shall not take or permit any action  inconsistent with the
continued registration of the Aircraft in Lessor's name under the Transportation
Act. Lessee shall not remove, or cause or permit the removal of, any plate, disc
or other  similar  device  affixed  to the  Airframe  or any  Engine  indicating
Lessor's ownership thereof. If any of the same shall come to be removed,  Lessee
shall  promptly  affix a  replacement  therefor,  at its own  expense,  it being
understood that such  identification  should be maintained (A) in the cockpit of
the Airframe, in a prominent location adjacent to the airworthiness  certificate
for the  Aircraft,  and (B) on each Engine,  in a prominent  location  near such
Engine's  data  plate.  Lessee  shall not  allow  the name of any other  Person,
association  or  corporation  to be placed on the  Airframe  or any  Engine as a
designation that might be interpreted as a claim of ownership or of any interest
therein; provided, however, that Lessee may cause the Airframe to be lettered or
otherwise marked in an appropriate  manner for convenience of  identification of
the interest of Lessee therein.

                  5.7.  Maintenance  Reserves.  Lessee  agrees  to pay to Lessor
Maintenance  Reserves with respect to the Aircraft during the Term in accordance
with Exhibit G hereto.  All Maintenance  Reserves shall be applied in accordance
with the  applicable  provisions of Exhibit G hereto.  No interest  shall accrue
with respect to Maintenance Reserves.

                  5.8. Application of Reserves Upon Aircraft Return. Any amounts
remaining in the "D" Check Airframe  Reserve,  Engine Reserves,  the Engine Life
Limited Parts Reserves,  Landing Gear Reserve, and any other Maintenance Reserve
established from time to time hereunder after  application of the monies held in
any such Maintenance Reserve in accordance with Exhibit G hereto upon the return
of the Aircraft pursuant to Section 16 hereof shall be retained by Lessor.

                  5.9. Concerning Reserves.  (a) At the time Lessee pays amounts
into the "D" Check  Airframe  Reserve,  the Engine  Reserves,  the  Engine  Life
Limited  Parts  Reserves,  the Landing Gear Reserve,  and any other  Maintenance
Reserve  established from time to time, as the case may be, Lessee shall provide
to  Lessor a  certificate  as to the  computation  of each  such  payment,  duly
executed  on behalf of Lessee by the  records  manager or other duly  authorized
employee of Lessee,  certifying  the number of Airframe  Flight Hours and Cycles
for the Aircraft during the Prior Period, the number of Engine Cycles and Engine
Flight Hours for each Engine during the Prior  Period,  and the number of Flight
Hours and Cycles for each Landing Gear during the Prior Period,  as the case may
be. From time to time, Lessor shall have the right, during normal business hours
at its own expense, on reasonable prior notice to Lessee, to cause its agents to
review the  appropriate  records of Lessee to  determine  the  accuracy  of such
certificates.  In the  event a  discrepancy  is  determined  as a result of such
review,  Lessor shall notify Lessee in writing  thereof and Lessee shall make up
any  deficiency  in its payments to Lessor within five (5) Business Days of such
notice.

                           (b) Pursuant to the New York Uniform Commercial Code,
Lessee hereby grants to Lessor a possessory  security  interest in the "D" Check
Airframe  Reserve,  each Engine  Reserve,  such Engine Parts Reserve the Landing
Gear Reserve and any other  Maintenance  Reserve  established  from time to time
hereunder as security for all obligations of Lessee under this Lease, including,
without  limitation,  the  obligations  of Lessee to  maintain  and  return  the
Aircraft, Airframe, Engines and each Item of Equipment in the condition required
by this Lease. Lessee agrees to execute and file, at Lessee's expense,  with the
appropriate   Governmental  Authorities  any  and  all  documents  necessary  or
reasonably requested by Lessor to evidence and perfect such security interest in
favor of Lessor. Upon and following an Event of Default,  and in addition to all
other rights  Lessor may have under this Lease and as a secured  party under the
New York Uniform  Commercial  Code,  Lessor may (but shall not be obligated  to)
use, apply or retain all or any portion of the "D" Check Airframe  Reserve,  the
Engine  Reserves,  the Engine Life  Limited  Parts  Reserves,  the Landing  Gear
Reserve,  and  any  other  Maintenance  Reserve  established  from  time to time
hereunder as follows: (i) first, to compensate Lessor for any sums it may in its
discretion advance to perform any of Lessee's obligations to maintain and return
the  Aircraft,  Airframe,  Engines,  Landing Gear and Aircraft  Documents in the
condition  required  under  this  Lease;  and (ii) the  balance in the "D" Check
Airframe Reserve,  the Engine Reserves,  the Engine Life Limited Parts Reserves,
the Landing Gear Reserve,  and any other  Maintenance  Reserve  established from
time to time hereunder, if any, to apply toward losses, damages or expenses that
Lessor may suffer or incur as a result of Lessee's  failure to perform any other
obligation under this Lease. In the event Lessor uses, applies or retains all or
any portion of the "D" Check Airframe Reserve,  the Engine Reserves,  the Engine
Life Limited Parts Reserves, the Landing Gear Reserve, and any other Maintenance
Reserve as stated  above,  then Lessee  shall  immediately  reimburse  each such
Reserve for all amounts used, applied or retained by Lessor.

                           (c)  Lessee  acknowledges  that  it has  no  property
interest in any Maintenance Reserve and agrees that
Maintenance Reserves shall not be deemed property of Lessee.

                           (d) Lessee shall not assign, hypothecate or otherwise
transfer its residual interest, if any, in
Maintenance Reserves.


                                    ARTICLE 6

                 INSPECTION; FINANCIAL AND AIRCRAFT INFORMATION

                  6.1.  Inspection.  During the Term,  Lessee  shall  furnish to
Lessor such information concerning the location, condition, maintenance, use and
operation  of the Items of  Equipment  and  Aircraft  Documents  as  Lessor  may
reasonably  request  including,  without  limitation,  a copy of the Maintenance
Program  of  Lessee  and  a  copy  of  the   related  FAA   approved   operation
specifications. Lessee shall permit any Person (including prospective purchasers
or lessees of the  Aircraft)  designated  in  writing  by  Lessor,  at  Lessor's
expense,  to (i)  visit  and  inspect  the  Items  of  Equipment,  the  Aircraft
Documents,  the portions of the Maintenance  Program relating to the maintenance
status  of the  Aircraft,  the  condition,  use and  operation  of the  Items of
Equipment and the Aircraft  Records  maintained in connection  therewith and, at
Lessor's  expense,  to make  copies  of such  Aircraft  Records  as  Lessor  may
designate and (ii) inspect the Aircraft for corrosion,  including, if necessary,
removal of floor boards to facilitate such inspection. Lessor 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.  Any  inspection  shall  occur at a
reasonable time,  provided that such inspection does not interfere with Lessee's
operating commitments.

                  6.2.  Financial  Information.  (a) Lessee  agrees that it will
maintain  its  financial  statements  in a  manner  which  fairly  presents  its
financial  condition and that the results of its  operations  and changes in its
financial  position will be accounted for in accordance with generally  accepted
accounting principles consistently applied.

                  (b)   Lessee  agrees to furnish  to Lessor during the Term (i)
within  forty-five (45) days after each fiscal quarter of Lessee,  copies of the
balance sheet, profit and loss statement,  retained earnings statements,  income
statements, and cash flow statement of Lessee for such fiscal quarter, certified
as true and correct by the Chief Financial Officer of Lessee, and (ii) from time
to time such other information as Lessor may reasonably request.

                  (c) Lessee  agrees to  furnish  to Lessor  during the Term (i)
within ninety (90) days after the end of the fiscal year,  copies of the balance
sheet,  profit  and  loss  statement,   retained  earnings  statements,   income
statements, and cash flow statement of Lessee for such fiscal year, certified as
true and  correct by the Chief  Financial  Officer of Lessee,  (ii)  comparative
figures  for the  previous  fiscal  year and (iii)  from time to time such other
information as Lessor may reasonably request.

                  (d) Lessee agrees to provide all other information  reasonably
requested  by  Lessor  with  respect  to the  financial  condition,  operations,
business and property of Lessee or any of its Affiliates.

                  6.3. Aircraft  Information.  During the Term, Lessee agrees to
furnish  or cause to be  furnished  to  Lessor  the  following  information,  in
writing,  with respect to the Aircraft:  (i) on a monthly basis, within ten (10)
days  following  the last day of each Rent Period a monthly  utilization  report
with respect to the Aircraft,  Engines,  Landing Gear, APU and Parts  reflecting
the Flight Hours and Cycles of operation  thereof,  (ii) within twenty-four (24)
hours  of  the  occurrence  or  detection  thereof,  any  accident  or  incident
information  with respect to the Airframe or any of the Engines in circumstances
where the resulting damage to the Aircraft from such accident or incident to the
Airframe or any of the Engines  exceeds  $100,000.00,  (iii)  promptly  upon the
request of Lessor, the status of any claims for damages (whether with respect to
any  Airframe  or Engine or any other Item of  Equipment,  or against  Lessor or
Lessee)  arising out of the use,  operation,  lease,  sublease,  sub-sublease or
condition of the  Airframe,  Engines or any other Item of  Equipment  and/or the
amount of taxes paid with respect thereto, (iv) upon request,  those portions of
the Maintenance Program relating to the maintenance status of the Aircraft,  and
(v) from time to time such other  information as Lessor may reasonably  request,
including information concerning the location,  condition,  use and operation of
the Aircraft and the Engines.

                  6.4  Other Information.  Lessee agrees that it will furnish to
Lessor:

                  (a)  immediately  upon the occurrence of a Default or an Event
of Default,  a written  notice  specifying the nature of the Default or Event of
Default  and what  action  Lessee  is taking or  proposes  to take with  respect
thereto;

                  (b)  such other information as Lessor may  reasonably  request
concerning Lessee, the Airframe, Engines or any other Item of Equipment in order
to enable Lessor to determine  whether the covenants,  terms,  and provisions of
this Lease and the other Operative Agreements have been complied with including,
without limitation,  such information  requested by Lessor as may be required to
enable  Lessor to file any reports  required  to be filed with any  Governmental
Authority as a result of Lessor's interest in any Item of Equipment; and

                  (c)  prompt written notice of the issuance by any court or any
regulatory authority of any injunction,  order or decision prohibiting or having
the effect of  prohibiting,  restraining  or  limiting  any of the  transactions
contemplated by this Lease or the other Operative Agreements, or the institution
of any litigation or other  proceedings  seeking any such  injunction,  order or
other restraint.


                                    ARTICLE 7

                                    COVENANTS

                  7.1.  Lessee's  Covenants.  Lessee  covenants and agrees that,
during the Term:

                           (a)  Lessee  will   preserve  and  maintain  (i)  its
         corporate  existence,  and  (ii)  all of  its  rights,  privileges  and
         franchises in every jurisdiction in which the character of the property
         owned or the nature of the business transacted by it makes licensing or
         qualification necessary.

                           (b)  Lessee  will pay or cause to be paid all  Taxes,
         assessments and governmental  charges or levies imposed upon it or upon
         its income and profits,  or upon any property belonging to it, prior to
         the date on which  penalties  attach  thereto  and all  lawful  claims,
         which, if not paid,  might become a Lien or charge upon the property of
         Lessee; provided, however, that Lessee shall not be required to pay any
         such Tax,  assessment,  charge,  levy or claim the  payment of which is
         being  contested  in good  faith and by  appropriate  proceedings  with
         adequate reserves. Lessee shall not permit the sale, forfeiture or loss
         of any Item of Equipment  or interest  therein in the course of or as a
         result of any such proceedings.

                           (c) Lessee will  operate the Aircraft and will remain
         duly qualified to operate the Aircraft under applicable Law.

                           (d) Lessee  undertakes  to maintain in full force and
         effect all governmental consents, licenses, authorizations,  approvals,
         declarations,   filings  and  registrations  obtained  or  effected  in
         connection   with  this  Lease  and  every   document   or   instrument
         contemplated  hereby and to take all such  additional  action as may be
         proper or advisable in connection herewith or therewith. Lessee further
         undertakes  to  obtain  or effect  any new or  additional  governmental
         consents, licenses, authorizations, approvals, declarations, filings or
         registrations as may become necessary for the performance of any of the
         terms and  conditions of this Lease or any other document or instrument
         contemplated hereby.

                           (e)  Lessee  shall not  consolidate  or merge with or
         into,  or  sell,   lease,   convey  or  otherwise  dispose  of  all  or
         substantially  all of its  assets  in one  transaction  or a series  of
         transactions to, any Person unless:

                                    (i) the  corporation  formed by or surviving
                  any such consolidation or merger (if other than Lessee), or to
                  which such sale, lease,  conveyance or other disposition shall
                  have been made,  assumes in writing all of the  obligations of
                  Lessee under this Lease;

                                    (ii)  immediately  after the  transaction no
Default or Event of Default exists;

                                    (iii) the corporation formed by or surviving
                  any such  consolidation  or  merger,  or to which  such  sale,
                  lease,  conveyance or other  disposition shall have been made,
                  shall have a  Consolidated  Net Worth  (immediately  after the
                  transaction)  equal to or greater  than the  Consolidated  Net
                  Worth  of  Lessee   immediately   preceding  the  transaction.
                  "Consolidated Net Worth" means the consolidated  equity of the
                  common   stockholders   of   Lessee   and   its   consolidated
                  subsidiaries  determined on a consolidated basis in accordance
                  with generally accepted accounting principles set forth in the
                  opinions  and  pronouncements  of  the  Financial   Accounting
                  Standards  Board or in such  other  statements  by such  other
                  entity as may be  approved  by a  significant  segment  of the
                  accounting profession; and

                                    (iv) the Person  formed by or surviving  any
                  such  consolidation  or merger (if other than  Lessee),  or to
                  which such sale, lease,  conveyance or other disposition shall
                  have been made,  (x) is a  corporation  organized and existing
                  under  the laws of the  United  States of  America,  any state
                  thereof  or  the  District  of  Columbia,   (y)  shall,   upon
                  completion of such  consolidation or merger, be an air carrier
                  holding  a   certificate   issued   under  ss.  44705  of  the
                  Transportation  Act and (z) shall be a "citizen  of the United
                  States" as defined in such Act.


                                    ARTICLE 8

                         NO SET-OFF, COUNTERCLAIM, ETC.

                  8.1. No Set-off, Counterclaim, etc. This Lease is a net lease.
Lessee's  obligation to pay all Rent and Maintenance  Reserves payable hereunder
shall  be  absolute  and   unconditional  and  shall  not  be  affected  by  any
circumstance,  including,  without  limitation,  (i) any set-off,  counterclaim,
recoupment,  defense or other right which Lessee may have against  Lessor or any
other  Person  for  any  reason  whatsoever  (whether  in  connection  with  the
transactions contemplated hereby or any other transactions),  including, without
limitation,  any breach by Lessor of its  warranties,  agreements  or  covenants
contained  herein,  (ii) any defect in the title,  registration,  airworthiness,
condition, design, operation, or fitness for use of, or any damage to or loss or
destruction  of, the Aircraft,  or any  interruption  or cessation in the use or
possession  thereof by Lessee for any  reason  whatsoever,  (iii) any Liens with
respect to the Aircraft, (iv) any bankruptcy,  insolvency,  reorganization,  (v)
any  Taxes,  or (vi) any other  circumstance,  happening,  or event  whatsoever,
whether or not  unforeseen  or similar to any of the  foregoing.  Lessee  hereby
waives,  to the extent  permitted by applicable Law, any and all rights which it
may now have or which at any time hereafter may be conferred upon it, by statute
or  otherwise,  to  terminate,  cancel,  quit or surrender  this Lease except in
accordance  with the express  terms  hereof.  Without  limiting  any of Lessee's
rights under the next  sentence,  each payment of Rent or  Maintenance  Reserves
made by Lessee to Lessor  shall be final and Lessee will not seek to recover any
part of such  payment  from  Lessor for any reason  whatsoever  except  manifest
error.  Nothing in this  Section  shall be construed  to prevent  Lessee,  after
complying  with this  Article  8, from  pursuing  any claim it may have  against
Lessor or any other  Person in such court of law or otherwise as Lessee may deem
appropriate.


                                    ARTICLE 9

                              REPLACEMENT OF PARTS;
                    ALTERATIONS, MODIFICATIONS AND ADDITIONS

                  9.1.  Replacement  of  Parts.  Lessee,  at its  own  cost  and
expense,  shall  promptly  replace  all Parts which may from time to time become
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently  rendered unfit for use for any reason whatsoever.  In addition,  in
the ordinary course of maintenance, service, repair, overhaul or testing, Lessee
may remove any Part, whether or not worn out, lost, stolen,  destroyed,  seized,
confiscated,  damaged  beyond  repair  or  permanently  rendered  unfit for use;
provided  that Lessee  shall  replace such Part as promptly as  practicable  and
available.  All  replacement  Parts (a)  shall be free and  clear of all  Liens,
except  those  permitted  under  Article  14  hereof,  (b)  shall  be in as good
operating  condition as, and shall have a value,  utility and maintenance status
at least equal to, the Parts replaced,  assuming such replaced Parts were in the
condition and repair  required to be  maintained  by the terms  hereof,  and (c)
shall  have  documentation   certifying   compliance  with  all  applicable  FAA
regulations,  including,  without  limitation,  (i) FAA Form 8130-3 or other FAA
approved serviceable tags indicating time since overhaul, and overhaul or repair
by an FAA certified repair station,  (ii) overhaul records,  (iii) documentation
of modification status and compliance with applicable Airworthiness  Directives,
and (iv) any other appropriate documentation.

                  9.2.  Title to  Replaced  and  Replacement  Parts.  All  Parts
removed from the  Airframe  and any of the Engines  shall remain the property of
Lessor and subject to this Lease,  no matter where  located,  until such time as
such Parts shall be replaced by Parts which have been  incorporated or installed
in or attached to the Airframe or an Engine and which meet the  requirements for
replacement  Parts  specified in Section 9.1 above,  at which time title to such
replaced  Part  shall  automatically  vest  in  Lessee.   Immediately  upon  any
replacement  Part  becoming  incorporated,  installed or attached to any Item of
Equipment,  such  replacement Part shall become the property of Lessor and shall
become subject to the terms of this Lease.

                  9.3.  Alterations,  Modifications and Additions.  (a) General.
Except as required  below or by Section 5.5  hereof,  Lessee  shall not make any
permanent alteration,  modification or addition to the Airframe (including,  but
not limited to,  galleys,  lavatories or avionics) or any of the Engines without
the prior written consent of Lessor.

                  Lessee will make such alterations, modifications and additions
to the Airframe,  the Engines and the Parts as may be required from time to time
to meet the applicable  mandatory  service  bulletins of the Manufacturer and to
comply with  Airworthiness  Directives  which require  inspection or terminating
action  during the Term,  and to comply  with all  regulations  of the FAA which
require compliance during the Term.

                  (b)      Airworthiness Directives.

                           (i) For the purpose of this Lease,  Lessor and Lessee
         agree that the  accomplishment  of terminating  action for any AD which
         requires mandatory  terminating action during the Term, shall be deemed
         to be a Capital  Improvement (a "Capital  Improvement AD") with respect
         to the  Aircraft.  In the event Lessee  elects to terminate any AD that
         does not require  terminating  action during the Term,  Lessee shall be
         solely responsible for the cost of terminating such AD.

                           (ii)  Notwithstanding  the  foregoing  paragraph  (i)
         (except with respect to the second  sentence  thereof),  in  connection
         with the accomplishment of any Capital  Improvement AD during the Term,
         Lessee shall be solely  responsible  for the first $150,000 of the cost
         of  terminating  each such  Capital  Improvement  AD.  With  respect to
         terminating  any  Capital  Improvement  AD,  for which the cost of such
         terminating  action is in  excess  of  $150,000,  (x)  Lessee  shall be
         responsible  for paying an amount equal to the first  $150,000  plus an
         amount  determined  using the Capital  Improvement Cost Sharing Formula
         (hereinafter  defined)  for any  amount in excess of  $150,000  and (y)
         Lessor shall be responsible  for an amount equal to the balance thereof
         as a Capital Improvement to the Aircraft.

                  Any amount in excess of the first  $150,000 to terminate  each
         such Capital Improvement AD shall be shared by Lessee and Lessor as set
         forth below using the following formula (the "Capital  Improvement Cost
         Sharing Formula"):

                           LC = AMT x (84 - NME)
                                ----------------
                                       84

         Where

         LC       =       Lessee's share of the cost in excess of $150,000
         AMT      =       Amount in excess of $150,000 to terminate AD
         NME      =       Number of months Lease has been in effect

                  The cost of  accomplishing  any Capital  Improvement AD, shall
         consist of Lessee's  Actual Cost of labor and  materials to  accomplish
         each such Capital  Improvement AD and shall be determined  exclusive of
         all  other  costs  incurred  during  any  refurbishment  or other  work
         accomplished  during the same maintenance visit. If Lessee performs the
         accomplishment  of any Capital  Improvement AD at its facility with its
         employees,  then the cost of accomplishing such Capital  Improvement AD
         shall be  calculated  at  Lessee's  Actual  Cost of labor and  material
         without mark-up.

                  Lessee  shall  be  solely  responsible  for  (x)  the  cost of
         accomplishing all AD's for which there is no terminating action, or for
         which the  accomplishment of such terminating action is optional during
         the Term and (y) for the first  $150,000 of the cost to terminate  each
         Capital Improvement AD during the Term.

                  With respect to any Capital  Improvement AD for which Lessor's
         cost shall exceed $150,000 using the Capital  Improvement  Cost Sharing
         Formula, Lessor shall have the option to (x) instruct Lessee to pay the
         cost of such Capital Improvement AD up to and including $150,000 (which
         Lessee shall pay), and to utilize the Capital  Improvement Cost Sharing
         formula  for the cost of such  Capital  Improvement  AD for the  excess
         amount,  or (y) in  circumstances  where  Lessor's  cost  would  exceed
         $200,000, instruct Lessee not to accomplish such Capital Improvement AD
         and  terminate  this  Lease  on the  mandatory  compliance  date of the
         Capital  Improvement AD with no further  liability to Lessor under this
         Lease,  provided,  that Lessee shall be obligated to (x) pay Lessor all
         Rent due up to the date of such termination and (y) return the Aircraft
         in  compliance  with Section 16 except to the extent any  noncompliance
         with Section 16 relates to such Capital Improvement AD. Notwithstanding
         the preceding  sentence,  in the event Lessor  instructs  Lessee not to
         accomplish such Capital  Improvement AD, Lessee may elect to accomplish
         such Capital Improvement AD at its sole cost and expense,  and continue
         this Lease in effect,  with no further liability to Lessor with respect
         to such Capital Improvement AD accomplishment.

                           (iii)  In the  case of  accomplishment  of a  Capital
         Improvement AD with respect to an Engine,  APU or Landing Gear during a
         shop visit for such Engine,  APU or Landing Gear, the cost of each such
         Capital Improvement AD shall be determined exclusive of all other costs
         incurred during any refurbishment or other work accomplished during the
         same shop visit.

                           (iv)  With  respect  to any  Capital  Improvement  AD
         relating to an Engine (an "Engine  Capital  Improvement  AD") where the
         accomplishment  of such Engine Capital  Improvement AD by Lessee is the
         sole cause for removal of such  Engine,  the cost in excess of $150,000
         to accomplish  such Engine  Capital  Improvement AD shall be subject to
         the provisions of paragraph (b) (ii) above. Notwithstanding anything to
         the contrary in this Lease,  the cost of performing such Engine Capital
         Improvement  AD  shall  only  consist  of  the  cost  of   disassembly,
         accomplishment of such mandatory terminating action as required by such
         AD, reassembly,  and test cell run. All costs associated with all other
         work  accomplished  on such  Engine  during  such  shop  visit  such as
         removal,  transportation,  refurbishment,  and reinstallation  shall be
         paid for by Lessee.

                           (v) For the purpose of determining  applicability  of
         the AD  Cost  Sharing  Formula  in  regard  to any  Aging  Aircraft  AD
         requiring  terminating  action,  all service  bulletins  listed in such
         Aging  Aircraft  AD shall  be  cumulatively  considered  to be a single
         Capital  Improvement  AD with  respect to cost to  accomplish  required
         terminating action.

                  9.4. Title to Parts.  Subject to the provisions hereof,  title
to all Parts  incorporated  or installed in or attached or added to each Item of
Equipment  as the result of any  alteration,  modification  or  addition  shall,
without further act, vest in Lessor and become subject to this Lease;  provided,
however,  that so long as no Default or Event of Default shall have occurred and
be continuing, at any time during the Term, Lessee may remove any such Part from
an Item of  Equipment;  provided that (A) such Part is in addition to and not in
replacement  of or in  substitution  for, any Part  originally  incorporated  or
installed in or attached to such Item at the time of delivery thereof  hereunder
or any Part in replacement of, or substitution  for, any such original Part, (B)
such Part is not  required to be  incorporated  or  installed  in or attached or
added to such Item by the FAA, or any other  Governmental  Authority or pursuant
to the terms  hereof,  and (C) such Part can be removed  from such Item  without
diminishing  or impairing the value,  utility or  airworthiness  which such Item
would have had at such time had such  alteration,  modification  or addition not
occurred.  Upon the  removal by Lessee of any such Part as above  provided,  the
area from which such Part was removed shall be restored to the better of (i) the
condition such area was in immediately  prior to the  installation of such Part,
or (ii) the  condition  such area is required to be in under the terms set forth
in this Lease and title thereto shall,  without further act, vest in Lessee, and
such Part shall no longer be deemed a Part  hereunder.  Any Part not  removed by
Lessee as above provided prior to the return of the respective Item of Equipment
to Lessor hereunder shall become the property of Lessor.


                                   ARTICLE 10

                                  TAX INDEMNITY

                  10.1. Scope.  Lessee agrees that, except as otherwise provided
below, all payments by Lessee in connection with the  transactions  contemplated
by this Lease, the Lease Supplement and the other Operative  Agreements shall be
free  of  all  withholdings  of  any  nature  whatsoever   (including,   without
limitation,  withholding  taxes,  monetary  transfer  fees, or similar taxes and
charges),  and in the event any  withholding  is  required,  except as otherwise
provided below,  Lessee shall pay the same together with such additional  amount
as is required so that each such payment shall be, under any  circumstances  and
in any event, in the amount as set forth or referred to herein. Lessee shall pay
and hold each  Indemnitee  harmless from  liability for any and all sales,  use,
business,  gross  or net  income,  personal  property,  license,  documentation,
transfer,  fuel, leasing,  occupational,  value added,  excess profits,  excise,
gross or net receipts,  franchise, stamp, environmental and other taxes, levies,
imposts,  withholding taxes, charges, fees, assessments or duties of any nature,
together  with any  penalties,  fines,  charges,  additions  to tax or  interest
thereon   imposed  by  any  taxing   authority   whether   domestic  or  foreign
(collectively, "Taxes") imposed during the Term against or in respect of Lessor,
any  Indemnitee  or any  Item of  Equipment,  by any  Federal,  state  or  local
government  or taxing  authority  in the  United  States of  America,  or by any
foreign  country or any taxing  authority or governmental  subdivision  thereof,
upon or with  respect to,  based upon or measured  by any Item of  Equipment  or
interest  therein,  or  upon  the  purchase,   ownership,   delivery,   leasing,
possession,  use,  operation  (including,  but  not  limited  to,  landings  and
take-offs),  return or other disposition thereof, or upon the rentals,  receipts
or earnings arising therefrom  (including,  without limitation,  the Rent or the
Maintenance  Reserves) or otherwise  with respect to or in  connection  with the
transactions  contemplated  by this Lease,  the Lease  Supplement  and the other
Operative  Agreements;  and any out-of-pocket costs and expenses attributable to
any of the foregoing incurred by any Indemnitee;  provided, however, that Lessee
shall have no such obligation with respect to (i) Taxes (other than sales,  use,
rental,  value added and similar taxes) imposed by the Federal Government of the
United  States of America  upon or with respect to, based on or measured by, the
gross or net income of any  Indemnitee  including  any  minimum  tax,  surtax or
similar  tax,  (ii) Taxes  which are based upon or  measured  by the net income,
capital,  net worth,  franchise,  or similar conduct of business taxes which are
imposed on any  Indemnitee by any state or local taxing  authority in the United
States of America,  the Federal  Government of the United States of America,  or
any foreign  jurisdiction  where such  Indemnitee is organized or doing business
(other than as a result of the  transactions  contemplated  by this  Agreement),
(iii) Taxes imposed as a result of a transfer or other  disposition by Lessor of
the  Aircraft or any Part  thereof or interest  therein,  or any interest in the
Rent  or the  Maintenance  Reserves  or any  part  thereof,  unless  such  sale,
transfer,  mortgage,  pledge or disposition  occurs by reason of the exercise of
Lessor's remedies under this Lease after the occurrence of a Default or an Event
of Default, (iv) Taxes imposed as a direct and primary result of Lessor's or any
Indemnitee's gross negligence or willful  misconduct,  (v) Taxes which accrue or
arise prior to the Delivery Date or subsequent to the Expiration Date and return
of the  Aircraft  to Lessor  pursuant  to  Section  16  hereof,  and (vi)  Taxes
attributable to payments or distributions from Lessor to any Indemnitee.

                  10.2.  Report. In case of any report or return to be made with
respect to any obligation of Lessee under this Article 10 or arising out of this
Article 10,  Lessee will either (i) make such report or return in such manner as
will show the ownership in Lessor of each Item of Equipment,  and send a copy of
such report or return to the  relevant  Indemnitee  or (ii) notify the  relevant
Indemnitee of such  requirement and make such report or return in such manner as
shall be satisfactory to such Indemnitee. Lessee shall, at its own expense, duly
file all required  reports and returns  respecting all Taxes paid or indemnified
against by Lessee  pursuant to Section 10.1 to the extent Lessee is permitted to
do so;  provided,  however,  that if the same  must be  filed by an  Indemnitee,
Lessee will advise such  Indemnitee  of the necessity of filing the same and, in
sufficient  time  before  the same  are  due,  furnish  such  Indemnitee  with a
completed  copy  thereof  and  funds in the  amount  required  to be  submitted,
together with any additional  information and records  relating  thereto as such
Indemnitee may reasonably  request.  Lessee shall hold such Indemnitee  harmless
from and against  any  liabilities,  obligations,  losses,  damages,  penalties,
claims,  actions, suits and costs arising out of any insufficiency or inaccuracy
in any information in such report or return filed or supplied by Lessee.  Lessee
shall make  available to each  Indemnitee  such  information  and records as are
maintained by Lessee  regarding the location,  operation or use of the Aircraft.
If any Indemnitee  reasonably  requests additional  information  relating to any
Item of Equipment or the operation,  use or location thereof,  Lessee shall make
available  such other  information  and records as it  maintains in the ordinary
course of business.

                  10.3. After-Tax Nature of Indemnity.
                           (a) Lessee further agrees that,  with  respect to any
indemnity payment under this Lease, including,  but not limited to, this Article
10 and  Article 13 hereof,  such  indemnity  payment  shall  include  any amount
necessary to hold each Indemnitee  harmless on an after-tax basis from all Taxes
required to be paid by such  Indemnitee  with respect to such indemnity  payment
under the Laws of any Federal,  state or local government or taxing authority in
the  United  States of  America,  or under the Laws of any taxing  authority  or
governmental subdivision of a foreign country.

                           (b) For  purposes  of this Section 10.3, calculations
made on an after-tax  basis shall be made assuming the maximum  statutory  rates
applicable  to the recipient  for the relevant  year,  after taking into account
deductions  attributable  to the  imposition  of other  taxes (such as state and
local  taxes),  which would  similarly be calculated on the basis of the maximum
statutory rates for which such deduction was available for the applicable year.

                  10.4.  Payment of Taxes and Indemnities.  Lessee shall, to the
extent  permissible,  pay all Taxes directly and shall reimburse each Indemnitee
for all Taxes paid or payable by such Indemnitee within ten (10) days of receipt
of written notice that  reimbursement  for such amount is due.  Lessee shall pay
all indemnities and other amounts due hereunder  within ten (10) days of receipt
of written notice that such indemnity or other amount is due.

                  10.5.  Contest.  If  a  written  claim  is  made  against  any
Indemnitee  for any Taxes for which  Lessee is  responsible  under  Section 10.1
hereof,  such Indemnitee shall promptly notify Lessee.  Without prejudice to any
other  rights  Lessee  may  have in  connection  therewith  (including,  without
limitation,  any claim for damages for a failure to give notice specified in the
preceding  sentence),  the  failure  to  provide  such  notice  shall not affect
Lessee's  obligations  hereunder to such  Indemnitee  unless such failure  shall
preclude the contest of such claim. If reasonably requested by Lessee in writing
within 30 days after such  notification,  and upon determination that the amount
of the claim  exceeds  $25,000  and that the action to be taken will not, in the
sole opinion of Lessor, result in any material danger of the sale, forfeiture or
loss of, or the creation of any Lien on the Aircraft or any interest therein (or
in the event of such  material  danger of such sale,  forfeiture,  loss or Lien,
Lessee shall have failed to obtain a bond  satisfactory  to such  Indemnitee  in
such Indemnitee's  sole  discretion),  such Indemnitee shall, upon receipt of an
indemnity reasonably satisfactory to it at the sole expense of Lessee (including
without  limitation,   all  reasonable  costs,   expenses,   losses,  legal  and
accountant's  fees and  disbursements,  penalties and  interest),  in good faith
contest  the  validity,  applicability  or  amount  of such  Taxes  by,  in such
Indemnitee's sole discretion, (i) resisting payment thereof, (ii) not paying the
same except  under  protest,  if protest is necessary  and proper,  and (iii) if
payment  is made,  using  reasonable  efforts  to  obtain a  refund  thereof  in
appropriate administrative or judicial proceedings; provided, however, that such
Indemnitee  shall not be required  to take any action to contest a claim  unless
(w) Lessee provides an opinion of tax counsel of nationally  recognized standing
selected by Lessee and reasonably satisfactory to such Indemnitee, to the effect
that there is a  reasonable  basis  under the  standard  set forth in ABA Formal
Opinion  85-352  or any  applicable  successor  thereto  in  law  and  fact  for
contesting such proposed adjustment, which opinion shall be obtained at Lessee's
sole cost and expense,  (x) in the event that the subject  matter of the contest
is of a continuing nature and has previously been decided adversely  pursuant to
the contest  provisions  of this Section  10.5 by the highest  court to which an
appeal  was  taken,  there  has been a  change  in the law  (including,  without
limitation,  amendments to statutes or regulations,  administrative  rulings and
court decisions) after such claim shall have been so previously decided and such
Indemnitee shall have received an opinion of independent tax counsel selected by
such  Indemnitee,  which opinion shall be obtained at Lessee's sole expense,  to
the effect  that,  as a result of such  change it is (at least) as likely as not
that the  position  which such  Indemnitee  or Lessee,  as the case may be, will
assert in any contest of such Tax would prevail,  (y) prior to the  commencement
of any  contest,  Lessee  shall  have  delivered  to such  Indemnitee  a written
acknowledgment  of its  obligation  to fully  indemnify  such  Indemnitee to the
extent the contest is not successful  and (z) in no event shall such  Indemnitee
be required to appeal an adverse  judicial  determination  to the United  States
Supreme Court. Any contest required pursuant to the preceding sentence shall, at
the option of such Indemnitee,  be conducted by such Indemnitee or Lessee in the
name of Lessee or such Indemnitee. If any contest involves payment of the Tax in
question,  Lessee  shall either make such  payment  directly to the  appropriate
authority or advance to such Indemnitee  sufficient  funds (on an  interest-free
basis) to make such payment.  Lessee agrees to give such  Indemnitee  reasonable
notice of any contest prior to the commencement thereof.

If an  Indemnitee  shall obtain an actual refund or credit of all or any part of
any Taxes paid by Lessee, such Indemnitee shall pay to Lessee the amount of such
refund or credit (taking into account any tax savings resulting therefrom),  net
of any expenses  incurred by such  Indemnitee and not already paid or reimbursed
by Lessee, and any interest fairly attributable  thereto plus an amount equal to
the Tax savings realized by such Indemnitee as a result of any payment to Lessee
pursuant to this  paragraph;  provided,  however,  that such amount shall not be
payable  before  Lessee  shall have made all payments  and  indemnities  to such
Indemnitee then due under this Lease; and, provided,  further, however, that the
aggregate  amount  of all  payments  with  respect  to any  Taxes  made  by such
Indemnitee  pursuant to this sentence  shall not exceed the aggregate  amount of
all payments made by Lessee to such Indemnitee  pursuant to this Article 10 with
respect to such Taxes.

Notwithstanding  anything  to the  contrary  herein,  if a  Default  or Event of
Default shall have occurred and be continuing, Lessee shall not be entitled, and
Lessor shall not be obligated, to commence or to continue any contest hereunder.

Lessee  shall not be deemed to be in  default  under any of the  indemnification
provisions  of this Article 10 while it or an Indemnitee  diligently  prosecutes
such contest pursuant to this Section 10.5.

Nothing  contained in this Section 10.5 shall require any  Indemnitee to contest
or permit  Lessee to contest a claim  which it would  otherwise  be  required to
contest  pursuant to this Section 10.5 if such Indemnitee shall waive payment by
Lessee of any amount that might  otherwise  be payable by Lessee  under  Section
10.1 by way of indemnity in respect of such claim.

                  10.6.  Lessor.  The term "Lessor" for purposes of this Article
10 shall include the affiliated  group of  corporations  and each member thereof
(within the meaning of Section  1504 of the Internal  Revenue  Code of 1986,  as
amended) of which  Lessor is or shall become a member if such group shall file a
consolidated United States federal income tax return.

                  10.7.    Survival.  The  provisions of  this  Article 10 shall
survive the expiration or termination of this Lease.



                                   ARTICLE 11

                                 EVENTS OF LOSS

                  11.1. With Respect to the Aircraft.  Upon the occurrence of an
Event of Loss with respect to the Aircraft,  Lessee shall  forthwith (and in any
event within two (2) Business Days after such  occurrence)  give Lessor  written
notice of such Event of Loss, and Lessor and Lessee shall proceed diligently and
cooperate  fully  with each other in the  recovery  of any and all  proceeds  of
insurance  applicable  thereto.  Unless  Lessor  elects  to offer a  Replacement
Aircraft  pursuant to (and as defined in) Section 11.4 hereof,  upon the earlier
of the date (a) which is 90 days after the  occurrence  of such an Event of Loss
or (b) on which  insurance  proceeds are received  with respect to such Event of
Loss, Lessee shall pay to Lessor the Insured Value of the Aircraft. At such time
as Lessor shall have received the Insured Value for such Aircraft,  Lessor shall
transfer to Lessee all of Lessor's right, title and interest, "as is, where is,"
without  recourse or warranty,  express or implied,  in and to (i) the Aircraft,
(ii) all  claims for  damage to the  Aircraft,  if any,  against  third  persons
arising from the Event of Loss (unless any insurance  carrier requires that such
claims be assigned to it), (iii) the Maintenance  Reserves,  and (iv) all rights
to any  insurance  claims and proceeds  under all  insurance,  except  liability
insurance, maintained by Lessee hereunder, all without representation,  recourse
or warranty of any kind  whatsoever.  Upon the payment of the Insured Value, all
Basic Rent (if any),  Supplemental  Rent and  Maintenance  Reserves then due and
owing,  Lessee's obligation to pay such amount shall cease, and this Lease shall
terminate.  Lessee  shall be  entitled to receive all  insurance  proceeds  from
policies  maintained  by Lessee  applicable  to the Aircraft  over and above the
Insured  Value,  if any,  as  compensation  for the loss of  Lessee's  leasehold
interest in the Aircraft.

                  11.2.  With Respect to an Engine.  Upon the  occurrence  of an
Event of Loss with respect to an Engine under  circumstances  in which there has
not  occurred  an Event of Loss  with  respect  to the  Aircraft,  Lessee  shall
forthwith (and in any event within two (2) Business Days after such  occurrence)
give Lessor  written notice thereof and Lessee shall replace such Engine as soon
as  reasonably  possible,  but in any event,  before the end of the Term by duly
conveying  to Lessor,  free and clear of all Liens,  title to another  CFM56-3B2
engine of the same or an improved  model  acceptable  to Lessor and suitable for
installation and use on the Airframe,  which engine shall have a value,  utility
and maintenance status at least equal to, and be in as good operating  condition
as, the  Engine  with  respect  to which such Event of Loss shall have  occurred
(considering  in the  aggregate,  but not  limited to, all  life-limited  engine
components  and time  since last heavy  maintenance  and/or  time since last hot
section  refurbishments),  assuming such Engine was of the value and utility and
in the condition and repair as required by the terms hereof immediately prior to
the  occurrence of such Event of Loss, and subject to an inspection by Lessor of
such  replacement  engine and related  historical  records.  Upon  acceptance by
Lessor in its sole discretion,  such replacement  engine and historical  records
shall be deemed an "Engine" and  "Aircraft  Records,"  respectively,  as defined
herein for all purposes hereunder. Lessee agrees to take such action and execute
and deliver such documents,  including,  but not limited to (a) cause a warranty
bill of sale,  duly  executed by the Seller of such  Replacement  Engine,  to be
delivered to Lessor,  (b) cause a Lease  Supplement  subjecting such Replacement
Engine to this Lease,  duly  executed by Lessee,  to be  delivered to Lessor for
execution and, upon such  execution,  to be filed for  recordation  with the FAA
pursuant  to the  Transportation  Act,  (c)  furnish  Lessor  with  evidence  of
compliance  with the  insurance  provisions  of Section  11 with  respect to the
Replacement  Engine, (d) furnish Lessor with a certificate or certification of a
qualified  independent  aircraft  appraiser  reasonably  satisfactory  to Lessor
certifying  that the Replacement  Engine has a value and utility (and,  provided
that no Event of Default is occurring or continuing  without regard to hours and
cycles until  overhaul) at least equal to the Engine so replaced  (assuming  the
Engine to be  replaced  was in the  condition  and repair  required by the terms
hereof  immediately  prior to the occurrence of such Event of Loss), (e) furnish
Lessor with an officer's  certificate  signed by an officer of Lessee certifying
that,  upon  consummation  of such  replacement,  no Event of Default will exist
hereunder,  and (f) a bill of sale,  supplement  hereto and legal  opinions,  as
Lessor may reasonably request in order that any such replacement Engine shall be
duly and properly titled in the name of Lessor and leased  hereunder to the same
extent as any Engine  replaced  thereby.  Upon such  replacement,  Lessor  shall
transfer to Lessee all of Lessor's right, title and interest, "as is, where is,"
without  recourse or  warranty,  express or implied,  in and to (i) such Engine,
(ii) all claims for damage to such Engine, if any, against third persons arising
from the Event of Loss (unless any insurance  carrier  requires that such claims
be assigned to it),  and (iii) all rights to any  insurance  claims and proceeds
under all insurance, except liability insurance, maintained by Lessee hereunder,
all  without  representation,  recourse  or  warranty  of any  kind  whatsoever.
Maintenance  Reserves  maintained by Lessor with respect to such Engine shall be
allocated to the Engine Reserve and Engine Life Limited Parts Reserve maintained
with respect to the Replacement Engine.

                  11.3.  Application of Payments from Governmental  Authorities.
Payments received by Lessor or Lessee from any Governmental  Authority or entity
with respect to an Event of Loss resulting from the  condemnation,  confiscation
or seizure  of, or  requisition  of title to the  Aircraft,  the  Airframe or an
Engine,  shall be retained by Lessor,  if received by Lessor,  or promptly  paid
over to Lessor, if received by Lessee, up to the Insured Value (plus any amounts
of Rent and Maintenance Reserves then due and owing). At such time as Lessor has
received such amounts in full,  Lessor shall promptly remit the excess,  if any,
of such  payments  to Lessee.  Payments  received  by Lessor or Lessee  from any
Governmental Authority or entity with respect to a requisition of use during the
Term of the  Aircraft,  the Airframe or an Engine  shall be  allocated  promptly
between  Lessor and Lessee such that Lessor shall enjoy such portion  thereof as
relates to periods other than the Term and Lessee shall  (provided no Default or
Event of Default has occurred and is continuing  hereunder)  promptly enjoy such
portion  thereof  as relates  to the Term or any  portion of the Term,  provided
Lessee continues to pay Rent to Lessor as required by the terms hereof.

                  11.4.  Application  of Payments  During  Existence of Event of
Default.  Any  amount  referred  to in this  Section  11  which  is  payable  or
creditable  to or  retainable  by  Lessee  shall not be paid or  credited  to or
retained  by Lessee if, at the time of such  payment,  credit or  retention,  an
Event of Default shall have  occurred and be  continuing  hereunder but shall be
paid to and held by Lessor as security for the  obligations of Lessee under this
Lease and, if Lessor declares this Lease to be in default pursuant to Section 18
hereof,  applied against Lessee's  obligations  hereunder as and when due and at
such time as there  shall not be  continuing  any such  Event of  Default,  such
amount shall be paid to Lessee to the extent no previously applied in accordance
with the terms hereof.

                  11.5.  Replacement  Aircraft.
                           (a)  Lessor  may,  at i ts option, offer  to lease to
Lessee,  as a  replacement  for an Airframe and Engines with respect to which an
Event  of Loss  has  occurred,  a  Boeing  737-300  airframe  (the  "Replacement
Airframe")  and two engines of the same make and model as such Engines (or other
engines of the same or another manufacturer suitable for installation and use on
the  Replacement  Airframe;  the  "Replacement  Engines" and,  together with the
Replacement  Airframe,  the "Replacement  Aircraft").  Such Replacement Aircraft
shall be in passenger configuration,  duly certified as an airworthy aircraft by
the FAA and in good  operating  condition,  but in any event in at least as good
operating  condition  and  repair  as  the  Aircraft  immediately  prior  to the
occurrence of such Event of Loss, having a useful life and utility comparable to
that of the Aircraft to be replaced  immediately prior to the occurrence of such
Event of Loss,  and  otherwise  satisfactory  to Lessee.  Lessee shall take such
action  as  Lessor  may  reasonably  request  to  facilitate  the  lease  of the
Replacement Aircraft to Lessee hereunder.

                           (b) For all purposes hereof, the Replacement Airframe
and  each  Replacement  Engine  shall  be  deemed  part of the  property  leased
hereunder.  The  Replacement  Airframe  shall be deemed an "Airframe" as defined
herein,  each Replacement  Engine shall be deemed an "Engine" as defined herein;
and the Replacement Airframe and each Replacement Engine shall be deemed part of
such Aircraft to the same extent as was the Airframe or Engine,  as the case may
be, replaced  thereby.  Any Engine not installed on the Airframe when such Event
of Loss  occurred  shall  continue  to be the  property  of  Lessor  and  leased
hereunder  as  part of  such  Aircraft.  Lessee's  acceptance  of a  Replacement
Aircraft shall not result in any change in Basic Rent or Insured Value.


                                   ARTICLE 12

                                    INSURANCE

                  12.1.   Public   Liability  and  Property   Damage   Liability
Insurance.  Lessee, at its own expense,  shall maintain in effect  comprehensive
third party  aircraft  liability  insurance  against  bodily injury and property
damage losses arising from ground, flight and taxiing exposures,  including, but
not  limited  to,  passenger  legal  liability,  cargo  liability,   contractual
liability  and products  liability  insurance,  during the Term in an amount not
less than  $500,000,000  for any one occurrence with respect to the Aircraft and
Items of Equipment. Such policy shall include war and allied risks in accordance
with standard market practice (currently "The Extended Coverage  Endorsement-AVN
52C").  Any such liability  insurance shall not be subject to a deductible.  All
such policies shall be maintained in effect with insurers  and/or  reinsurers of
recognized  reputation and responsibility,  satisfactory to Lessor. Any policies
of insurance carried in accordance with this Section 12.1 and any policies taken
out in  substitution  or replacement  for any of such policies  shall:  (1) name
Lessor and its successors and assigns, and their respective directors,  officers
and employees as additional  insureds (the "Additional  Insureds");  (2) provide
that in respect of the  respective  interests of the Additional  Insureds,  such
policies of insurance  shall insure the  Additional  Insureds  regardless of any
breach or violation of any warranty,  declarations  or  conditions  contained in
such  policies by Lessee or any other  Person;  (3) provide that if the insurers
cancel such insurance for any reason  whatever,  or the same is allowed to lapse
for  nonpayment of premium,  or if there is any material  change in policy terms
and conditions, such cancellation,  lapse or change shall not be effective until
thirty (30) days after receipt by Lessor of telecopied  written notice from such
insurers of such  cancellation,  lapse or change  (and with  respect to war risk
insurance,  seven (7) days or such  shorter  period as shall be customary on the
London market for such insurance in such area of the world,  or ten (10) days in
the event of nonpayment of premium);  (4) provide that the  Additional  Insureds
shall  have no  responsibility  for any  premiums,  commissions,  warranties  or
representations  in  connection  with such  insurance;  (5) waive any  rights of
setoff,  counterclaim or deduction,  whether by attachment or otherwise, and all
rights of  subrogation  against the  Additional  Insureds and their  successors,
assigns,  agents,  officers,  employees and  servants;  and (6) provide that all
payments shall be made in Dollars.  Each  liability  policy shall (i) be primary
without right of  contribution  from any other insurance which is carried by the
Additional  Insureds  and (ii)  expressly  provide  that  all of the  provisions
thereof, except the limits of liability,  shall operate in the same manner as if
there were a separate policy covering each insured, without, however, increasing
the  aggregate  limit  of  liability  for  the  coverage  or  permitting  claims
recoverable  under the hull policy to be  recoverable as liability  claims,  and
(iii)  to the  extent  of  any  reinsurance,  include  a  cut-through  provision
permitting  Lessor  to file  claims  and to  obtain  payment  directly  from the
reinsurers.

                  12.2.  Insurance  Against Loss or Damage to the Aircraft.
                           (a)  Lessee, at its own expense,  shall  maintain  in
effect with insurers of recognized reputation and responsibility satisfactory to
Lessor:  (A) all-risk  ground and flight  aircraft hull  insurance  covering the
Aircraft  (including taxiing  exposures);  (B) all-risk coverage with respect to
any Engines,  Parts or Landing Gear while removed from the Aircraft  insured for
their   replacement   cost;   and  (C)  war   risk  and   hijacking   (including
political/non-political hijacking) and acts of terrorism coverages, if operating
outside the Continental United States or Canada,  including, but not limited to,
coverage  against the  additional  exposures  of  confiscation,  expropriations,
nationalization or seizure,  including the government of registry (if other than
the United States), including a "50/50 clause" between the all-risk hull and war
risk  coverages.  War risk  coverage  shall include loss of and/or damage to the
Aircraft  caused by: (i) war,  invasion,  acts of foreign  enemies,  hostilities
(whether   war  be  declared  or  not),   civil  war,   rebellion,   revolution,
insurrection,  martial law,  military law, military or usurped power or attempts
at  usurpation  of  power;  (ii)  strikes,  riots,  civil  commotions  or  labor
disturbances;  (iii) any act of one or more Persons,  whether or not agents of a
sovereign  power, for political or terrorist  purposes,  and whether the loss or
damage resulting therefrom is accidental or intentional;  (iv) any malicious act
or act of  sabotage;  (v)  confiscation,  nationalization,  seizure,  restraint,
detention,  appropriation,  expropriation,  requisition  of title or use,  by or
under the  order of any  government  (whether  civil,  military  or de facto) or
public or local  authority,  including by the  government  of registry (if other
than the United States);  and (vi) hijacking or any unlawful seizure or wrongful
exercise of control of the Aircraft or crew in flight  (including any attempt at
such  seizure or  control)  made by any Person or Persons on board the  Aircraft
acting without the consent of Lessee.

                           (b)  All  such  insurance  shall be in full force and
effect on a worldwide  basis,  subject to such  territorial  exclusions as exist
under  Lessee's  War Risks and  Allied  Perils  Insurance,  shall be  payable in
Dollars  in the  United  States  and shall be in the amount of not less than the
Insured  Value  set  forth on  Exhibit  H on an  agreed  value  basis.  Any hull
insurance  carried in  accordance  with this  Section 12.2 shall not contain any
provision for self-insured amounts or a deductible, provided that such insurance
may be subject to a deductible  which does not exceed  $250,000 per  occurrence.
Each Engine, after removal,  shall be insured for not less than $3,500,000.00 on
an "agreed  value basis" under a ground risks policy  reasonably  acceptable  to
Lessor.  Any policies carried in accordance with this Section 12.2 shall: (1) be
primary without right of contribution  from any other insurance which is carried
by Lessor with respect to the  Aircraft;  (2) provide that if such  insurance is
canceled  for  any  reason  whatever,  or the  same  is  allowed  to  lapse  for
non-payment  of premium or if there is any  material  change in policy terms and
conditions,  such  cancellation,  lapse or change shall not be  effective  until
thirty (30) days after  issuance to Lessor of written  notice from such insurers
of such cancellation,  lapse or change (and, with respect to war risk insurance,
such  shorter  period  as shall  be  customary  on the  London  market  for such
insurance in such area of the world);  (3) provide  that partial  losses of less
than  $250,000.00  shall be  adjusted  by and  payable  to Lessee (so long as no
Default shall have occurred and be continuing hereunder),  but that in the event
of a greater  loss the entire  insurance  shall be adjusted by Lessee and Lessor
and  payable to Lessor as sole loss payee;  (4)  provide  that in respect of the
respective  interest of the  Additional  Insureds in such policies the insurance
shall insure the  Additional  Insureds  regardless of any breach or violation of
any warranties,  declarations or conditions contained in such policies by Lessee
or any other Person; (5) waive any rights of set off, counterclaim or deduction,
whether by attachment or otherwise,  and all rights of  subrogation  against the
Additional Insureds and their successors,  assigns, agents, officers,  employees
and servants;  (6) provide that the Additional  Insureds shall have no liability
for any premiums,  commission,  warranties or representations in connection with
such  insurance;  and (7) name  Lessor as sole loss payee for the account of all
interests.

                           (c)  Lessor is not under  any duty or  obligation  to
verify the existence or adequacy of any insurance.

                           (d) Lessee may obtain  additional  hull  insurance on
the Aircraft, over and above the Insured Value
hereunder,  provided that it does not adversely affect the coverage  required to
be maintained hereunder.

                  12.3.  Application  of  Proceeds  in an  Event  of Loss of the
Aircraft.  All insurance payments received from policies maintained by Lessee as
the result of the occurrence of an Event of Loss shall be applied as provided in
Section 12.2(b)(3).

                  12.4.  Application  of  Proceeds in the Absence of an Event of
Loss.  As between  Lessor and Lessee,  insurance  payments  with  respect to any
property damage to any Item of Equipment not  constituting an Event of Loss with
respect  thereto  will be applied  in  payment  of  repairs  or for  replacement
property in accordance with the terms of Articles 5 and 9 hereof, if not already
paid by Lessee (or to reimburse Lessee for such repairs or replacements  already
paid by Lessee),  and any balance  remaining after compliance with such Articles
with  respect to such loss shall be paid to Lessee or as  otherwise  directed by
Lessee. Any amount which is payable to Lessee under this Article 12 shall not be
paid to Lessee if at the time of such  payment a Default  or an Event of Default
shall have occurred and be  continuing,  but shall be held by Lessor as security
for  the  obligations  of  Lessee  under  this  Lease  and the  other  Operative
Agreements  to which it is a party  and such  amount  shall be paid to Lessee at
such time as there no longer exists any Default or Event of Default.

                  12.5.  Reports,   etc.  Lessee's  insurance  broker  shall  be
required to advise  Lessor in writing  promptly of any default in the payment of
any premium  and of any other act or omission on the part of Lessee  which might
invalidate or render  unenforceable,  in whole or in part,  any insurance on the
Aircraft.  Not less than two (2) days prior to the Delivery Date, and thereafter
at least fifteen (15) days prior to each renewal or replacement by Lessee of the
insurance  required  hereby,  Lessee will furnish to Lessor one or more original
certificates  each  executed and delivered by an insurance  broker  appointed by
Lessee and  approved by Lessor,  which  together  shall  describe in  reasonable
detail  insurance  carried on the Aircraft and shall  certify that the insurance
then  maintained on the Aircraft  complies with the terms of this Lease.  Lessee
will  cause each such  approved  insurance  broker to agree to advise  Lessor in
writing at least  thirty (30) days (seven (7) days or such lesser  period as may
from time to time be  applicable  in the case of any war risk and allied  perils
coverage) prior to the non-renewal or cancellation by the  underwriters  for any
reason (including,  without limitation,  failure to pay the premium therefor) of
any such  insurance  or as soon as  possible  in  respect  of  "non-renewal"  or
automatic  termination  for war risk. Not less than fifteen (15) days before the
expiration or termination date of any insurance required hereunder,  Lessee will
provide  (or cause to be  provided  to) Lessor with  written  confirmation  from
Lessee's  insurance  brokers  certifying that renewal  certificates of insurance
evidencing  the  renewal  or  replacement  of  such  insurance  pursuant  to the
provisions  of Article 12 hereof  will be issued on or prior to the  termination
date of the prior certificate of insurance coverage. Within seven (7) days after
such  renewal,  Lessee  will  furnish  (or  cause to be  furnished)  to Lessor a
certificate of such insurance coverage from such insurance broker.

                  12.6. Lessor's Additional Insurance. Lessor, at its option and
at its  sole  expense,  may  obtain  insurance  with  respect  to the  Aircraft;
provided, that no such insurance shall have the effect of suspending, impairing,
defeating,  invalidating or rendering  unenforceable or reducing, in whole or in
part, the coverage of or the proceeds payable under any insurance required to be
provided and maintained by Lessee pursuant to this Article 12. Lessee shall have
no right to any proceeds of any insurance policies maintained by Lessor.

                  12.7. Lessee's Additional Insurance. Lessee, at its option and
at its sole  expense,  may  obtain  additional  insurance  with  respect  to the
Aircraft  provided that no such  insurance  shall have the effect of suspending,
impairing,  defeating,  invalidating or rendering  unenforceable or reducing, in
whole or in part,  the coverage of or the proceeds  payable  under any insurance
required to be provided and maintained pursuant to this Article 12. Lessor shall
have no right to any proceeds of any additional insurance policies maintained by
Lessee.

                  12.8.  Insurance  Against Year 2000 Risks and  Liability.  Any
policies of insurance required pursuant to Section 12.1 hereof (Public Liability
and Property  Damage  Liability  Insurance)  and Section 12.2 hereof  (Insurance
Against Loss or Damage to the Aircraft),  consistent with industry  practice and
the renewal of Lessee's current insurance policies, shall within forty-five (45)
days after the date hereof include endorsement  coverage for Year 2000 risks and
liability  (currently "The Date Recognition  Limited Coverage  Endorsement - AVN
2001/2002"  or its  equivalent),  which  shall have been  obtained  by Lessee by
truthful,  accurate,  and complete response to insurer and/or reinsurer inquiry,
including,  but not limited to that required by the then current "Aerospace Date
Recognition  Conformity  Questionnaire" or any similar  questionnaires from such
insurer and/or reinsurer.


                                   ARTICLE 13

                             GENERAL INDEMNIFICATION

                  13.1.  Scope.  Lessee agrees to indemnify,  reimburse and hold
harmless each Indemnitee from and against any and all claims,  damages,  losses,
liabilities,  demands,  suits,  judgments,  causes of action, legal proceedings,
whether  civil or  criminal,  penalties,  fines  and  other  sanctions,  and any
reasonable attorney's fees and other reasonable costs and expenses in connection
herewith or therewith, including any of the foregoing arising or imposed with or
without  Lessor's fault or negligence  (whether  passive or active) or under the
doctrine of strict liability (any and all of which are hereafter  referred to as
"Claims")  which in any way may result  from,  pertain to or arise in any manner
out of (a) the  Aircraft  or this  Lease,  or the breach of any  representation,
warranty  or  covenant  made  by  Lessee   hereunder,   or  (b)  the  condition,
manufacture,  purchase as a result of the exercise of remedies under this Lease,
lease, acceptance under this Lease, rejection under this Lease, possession under
this Lease,  return  under this Lease,  disposition  or use, or operation of the
Aircraft  either in the air or on the ground,  or (c) any defect in the Aircraft
(whether or not discovered or discoverable by Lessee or Lessor) arising from the
material  or any  articles  used  therein or from the  design,  testing,  or use
thereof or from any maintenance,  service,  repair,  overhaul, or testing of the
Aircraft,  whether or not the  Aircraft  is in the  possession  of  Lessee,  and
regardless  of where the  Aircraft  may then be  located,  or (d) the  Operative
Agreements and any other transaction, approval, or document contemplated by this
Lease or given or entered into in connection herewith;  provided,  however, that
Lessee shall not  indemnify any  Indemnitee  for any Claims set forth in Section
13.5  hereof.  Upon  payment in full to any party  indemnified  hereunder of any
indemnities  contained in this Article 13 by Lessee,  Lessee shall be subrogated
to all rights and remedies which such indemnified  party has or may have against
Manufacturers  of the relevant  Item of Equipment  or any other  Person.  If any
Indemnitee or Lessee has knowledge of any Claim for which Lessee is obligated to
indemnify  under this Article 13, it shall give prompt written notice thereof to
Lessee or such  Indemnitee,  as the case may be, but failure to give such notice
shall not relieve Lessee of its  obligations  hereunder and no payment by Lessee
to any  Indemnitee  pursuant to this Article 13 shall be deemed to  constitute a
waiver or release of any right or remedy  which  Lessee  may have  against  such
Indemnitee for any actual damages as a result of the failure by such  Indemnitee
to give Lessee such notice.

                  13.2.  Lessee's  Release.  Lessee hereby waives,  and releases
each Indemnitee from, any Claims (whether existing now or hereafter arising) for
or on account of or arising or in any way  connected  with injury to or death of
personnel  of Lessee or loss or damage to  property of Lessee or the loss of use
of any  property  which  may  result  from or arise in any  manner  out of or in
relation to the ownership, leasing, condition, use or operation of the Aircraft,
either in the air or on the ground,  or which may be caused by any defect in the
Aircraft  from the  material or any article  used  therein or from the design or
testing  thereof,  or use thereof,  or from any  maintenance,  service,  repair,
overhaul  or  testing  of the  Aircraft  regardless  of when such  defect may be
discovered,  whether or not the  Aircraft  is at the time in the  possession  of
Lessee, and regardless of the location of the Aircraft at any such time.

                  13.3. Repayment.  If an Indemnitee shall obtain a repayment of
any Indemnified  Amount previously paid to it by Lessee,  such Indemnitee shall,
so long as there  exists no Default or Event of Default,  promptly pay to Lessee
the amount of such repayment,  together with the amount of any interest received
by such Indemnitee on account of such repayment.

                  13.4. Timing of Payment. Subject to the provisions of Sections
13.3 and 13.5 hereof,  Lessee shall pay directly to each  Indemnitee all amounts
due under  this  Article  13 within  five (5)  Business  Days of the  receipt of
written notice by Lessee from such Indemnitee that such payment is due.

                  13.5.  Exclusion.  Notwithstanding the foregoing provisions of
this  Article 13,  Lessee  shall not be  obligated to make any payment by way of
indemnity in respect of any Claim against an  Indemnitee  which (i) results from
or arises out of the willful  misconduct or gross negligence of such Indemnitee,
(ii) arises out of the period before the Delivery  Date or after the  Expiration
Date and the return of the Aircraft in  accordance  with the  provisions  hereof
(but, in each case, not arising simultaneously  therewith),  and (iii) Taxes and
other amounts which are indemnified pursuant to Article 10 hereof.

                  13.6. After-Tax Nature of Indemnity.  Lessee agrees that, with
respect to any payment or indemnity  hereunder,  such payment or indemnity shall
include any amount  necessary  to hold the  Indemnitee  harmless on an after-tax
basis from all Taxes (as  defined in Article 10 hereof)  required  to be paid by
such  Indemnitee with respect to such payment or indemnity under the Laws of any
Federal,  state or local  government or taxing authority in the United States of
America,  or under the Laws of any taxing authority or governmental  subdivision
of a foreign country. For purposes of this Section 13.6, calculations made on an
after-tax basis shall be made assuming the maximum statutory rates applicable to
the  recipient  for the relevant  year,  after  taking into  account  deductions
attributable  to the  imposition of other taxes (such as state and local taxes),
which would similarly be calculated on the basis of the maximum  statutory rates
for which such deduction was available for the applicable year.

                  13.7. Survival.  The indemnities  contained in this Article 13
shall  continue  in full  force and effect  notwithstanding  the  expiration  or
termination of this Lease and are expressly made for the benefit of and shall be
enforceable by each Indemnitee.


                                   ARTICLE 14

                                      LIENS

                  14.1.   Permitted  Liens.   Lessee  shall  not,   directly  or
indirectly create,  incur, assume or suffer to exist any Lien on or with respect
to this Lease,  any Item of Equipment or any  interest  therein,  except (i) the
respective  rights of Lessor and  Lessee as herein  provided,  (ii) Liens  which
result from  Lessor's own acts or from claims  against  Lessor not to be paid or
indemnified  against by Lessee  hereunder,  (iii) Liens for Taxes not yet due or
being  contested  in  accordance  with Article 10 hereof and so long as adequate
reserves  are  maintained  with  respect  to  such  Liens,   and  (iv)  inchoate
materialmen's,  mechanics',  workman's,  repairmen's,  employees'  or other like
Liens arising in the ordinary  course of business and for amounts the payment of
which is  either  not yet  delinquent  or is being  contested  in good  faith by
appropriate  proceedings.  Lessee  shall not be permitted to contest any Lien if
such contest gives rise to a danger of the sale,  forfeiture or loss of any Item
of Equipment or any interest therein in the course of or as a result of any such
proceedings.  Lessee shall promptly, at its own expense, take such action as may
be necessary  to duly  discharge  any such Lien not  excepted  above if the same
shall arise at any time with respect to any Item of Equipment.

                  14.2. Engine Liens.  Notwithstanding anything in this Lease to
the contrary,  Lessor hereby agrees for the benefit of each lessor,  conditional
seller,  indenture trustee or secured party of any engine leased to or purchased
by  Lessee  which is  subject  to a lease,  conditional  sale  agreement,  trust
indenture or other security  agreement that Lessor will not acquire or claim, as
against such lessor, conditional seller, indenture trustee or secured party, any
right,  title or interest  in any engine as the result of any such engine  being
installed  on the  Airframe  at any time  while  such  engine is subject to such
lease,  conditional sale agreement,  trust indenture or other security agreement
and owned by such lessor or conditional  seller or subject to a trust  indenture
or security  interest in favor of such indenture  trustee or secured  party.  No
Engine shall be installed on any  airframe  unless the lease,  conditional  sale
agreement,  trust  indenture  or other  security  agreement  applicable  to such
airframe  contains  a  similar   acknowledgment  on  the  part  of  the  lessor,
conditional  seller,  indenture trustee or secured party thereunder with respect
to the Engines.


                                   ARTICLE 15

                     FAA RECORDATION AND FURTHER ASSURANCES

                  15.1. FAA  Recordation.
                        (a) Lessor shall, at its own expense,  cause  this Lease
and the Lease  Supplement  to be kept,  filed and recorded in the offices of the
FAA. Lessee shall, at its own expense,  cause any and all additional instruments
which  shall be  executed  pursuant  to the terms  hereof to be kept,  filed and
recorded  in the offices of the FAA so far as  permitted  by  applicable  Law or
regulations.  Neither  Lessee nor Lessor  shall file or record  with the FAA any
exhibit hereto which  specifically  states that it will be omitted from the copy
of this Lease to be filed and recorded with the FAA.

                  (b) If at any time  subsequent to the initial  recordation  of
title under this Lease,  any filing or  recording  is  reasonably  necessary  to
protect  the  interest of Lessor,  Lessee,  at the cost and expense of the party
requesting such action,  shall cause this Lease,  any financing  statements with
respect hereto,  and any and all additional  instruments which shall be executed
pursuant  to  the  terms  hereof,  to be  kept,  filed  and  recorded  and to be
reexecuted,  refiled  and  re-recorded  in the  appropriate  office  or  offices
pursuant to  applicable  Laws,  to perfect,  protect and preserve the rights and
interests of Lessor  hereunder and in the Aircraft or any Item of Equipment.  At
the reasonable  request of Lessor,  Lessee shall furnish to Lessor an opinion of
counsel or other evidence satisfactory to Lessor of each such filing or refiling
and  recordation or  re-recordation.  Lessee will cooperate with making any such
filing or providing any such opinion which is to be accomplished or furnished in
order to protect the  interests  of Lessor,  in each case at  Lessor's  cost and
expense.

                  15.2.  Further  Assurances.  Each party hereto  shall,  at its
respective  expense,  promptly  and duly  execute and deliver to the other party
such further  documents and promptly take such further  action not  inconsistent
with the  terms  hereof as the  other  party  may from  time to time  reasonably
request in order to more  effectively  carry out the intent and  purpose of this
Lease or to perfect  and  protect  the rights of Lessee  and  Lessor  and,  with
respect to Lessor, remedies created or intended to be created hereunder.


                                   ARTICLE 16

                           RETURN OF ITEMS AND RECORDS

                  16.1.  Time and Place.  On the Expiration  Date and unless the
Aircraft has suffered an Event of Loss, Lessee, at its own expense, shall return
the Aircraft with all Items of Equipment and the "Loose  Equipment" as specified
in the Lease  Supplement  relating to the Aircraft,  Exhibit C and Schedule I to
Exhibit B hereto by delivering  the same  forthwith,  to Lessor at such location
within the  continental  United  States,  as Lessor may request.  At the time of
return,  the Airframe shall have installed  thereon the two Engines and shall be
in the same interior appointments and configuration as it was in on the Delivery
Date with respect thereto,  unless modified with Lessor's approval, as set forth
in Section 2.4, or otherwise.

                  16.2.  Condition.  Notwithstanding  anything  to the  contrary
herein,  Lessee shall return the Aircraft to Lessor in such  condition  that the
Aircraft shall comply with the conditions set forth on Exhibit C hereto.  Lessor
shall be given ample time and opportunity to inspect the Aircraft,  the Aircraft
Documents  and any other  relevant  information  to insure that the Aircraft has
been returned in compliance  with the  conditions  set forth in Exhibit C hereto
and shall be entitled  to take a two (2) hour  acceptance  test flight  prior to
redelivery of the Aircraft at Lessee's sole cost and expense.

                  16.3.  Corrections  and Subsequent  Corrections.  In the event
that the  Aircraft  or any Engine  fails upon the return  thereof  hereunder  to
conform  to  any  return  condition   requirement  imposed  by  this  Lease  and
particularly  Section  16.2 and Exhibit C hereof,  and without  prejudice to the
right of Lessee to claim that the Aircraft did comply with such return condition
requirement, Lessee shall, at the sole option of Lessor, either (i) continue the
Lease in effect,  including the  obligation to pay Basic Rent  hereunder,  until
such time as Lessee brings the Aircraft up to the condition  required by Section
16.2  hereof,  or (ii) return the  Aircraft to Lessor and  thereafter  reimburse
Lessor  for  all  costs   reasonably   incurred  by  Lessor  to  have  any  such
nonconformance  corrected,  at such  time as  Lessor  may  deem  appropriate  at
commercial  rates then charged by the Person  selected by Lessor to perform such
correction.  Any direct  expense  incurred by Lessor for such  correction  shall
become Supplemental Rent payable by Lessee within thirty (30) days following the
submission  of a written  statement by Lessor to Lessee,  identifying  the Items
corrected and setting forth the expense of such correction. Lessee's obligations
to pay such  Supplemental  Rent shall survive the  expiration or  termination of
this Lease.

                  16.4.  Fuel.  Upon the return of the  Aircraft,  Lessor  shall
measure  the  quantity  of fuel on board the  Aircraft.  The  Aircraft  shall be
returned  with the same amount of fuel on board the  Aircraft as on the Delivery
Date as set forth on the Lease  Supplement.  If the quantity of fuel measured is
less than the amount of fuel on board the Aircraft on the Delivery Date,  Lessee
shall  reimburse  Lessor  for the cost of  refueling  the  Aircraft  to the same
quantity as was on board the Aircraft on the Delivery Date.

                  16.5.  Legal Status Upon Return.  At the time of the return of
the Aircraft,  the Aircraft shall be: (i) free and clear of all Liens, (ii) duly
certified  as an  airworthy  aircraft  by the  FAA  with  a  current  and  valid
airworthiness certificate applicable to the Aircraft, (iii) equipped and in full
airworthy  condition for  operation  according to all  applicable  FAA standards
(including  compliance  with the  requirements  of FAR Part 121 in effect on the
Delivery  Date)  required to allow the  Aircraft to be operated  for  commercial
transportation  of passengers under applicable rules and regulations of the FAA,
(iv) duly  registered in the name of Lessor with the FAA, (v) in full compliance
with the  Maintenance  Program,  (vi) in full  compliance  with  all  applicable
federal aviation regulations and all FAA Airworthiness Directives which by their
terms  require  compliance  on or  before  the  Expiration  Date  and  (vii)  in
compliance with the requirements of FAA Stage III regulations, without waiver or
performance restriction.


                                   ARTICLE 17

                                EVENTS OF DEFAULT

                  17.1.  Lessee's  Defaults.  Any one or  more of the  following
events shall constitute an "Event of Default":

                           (a) Lessee  shall fail to make any payment of Rent or
payments  required  pursuant  to  Sections  5.7 and  Exhibit  G hereof  when due
hereunder and such failure shall continue for three (3) Business Days; or

                           (b) Lessee  shall fail to procure  and  maintain  any
insurance  required by Article 12 hereof or shall  operate the Aircraft  outside
the scope of the insurance  coverage  maintained with respect to the Aircraft or
the Aircraft shall be operated by an entity other than Lessee; or

                           (c) Lessee  shall  fail to comply  with  Section  3.5
hereunder  relating  to the  Security  Deposit  or the  letter of credit  issued
pursuant  thereto  shall have been  withdrawn or shall expire and such letter of
credit shall not have been replaced within five (5) Business Days; or

                           (d)  Lessee  shall  fail to  accept  delivery  of the
Aircraft pursuant to Section 2.1 hereunder; or

                           (e)  Lessee  shall  fail to comply  with  Section  14
hereunder relating to Permitted Liens; or

                           (f)  Lessee  shall  fail to perform or observe in any
material  respect any of the  covenants,  conditions or agreements  performed or
observed by it under Article 5 (except payments required pursuant to Section 5.7
and Exhibit G hereof) or 16 hereof and such failure shall  continue for a period
in excess of ten (10)  Business Days after  written  notice  thereof is given by
Lessor to Lessee of such failure; or

                           (g) Lessee  shall  fail to perform  or observe in any
material  respect any other of the  covenants,  conditions,  or agreements to be
performed or observed by it  hereunder  and such  failure  shall  continue for a
period in  excess of thirty (30)  days after written  notice thereof is given by
Lessor to Lessee of such failure; or

                           (h) Any  representation  or  warranty  made by Lessee
herein,  in any other  Operative  Agreement  or in any  document or  certificate
furnished  to Lessor in  connection  herewith or pursuant  hereto shall prove to
have been incorrect in any material respect when made; or

                           (i) Lessee voluntarily suspends  substantially all of
its  airline  operations  or the  franchises,  concessions,  permits,  rights or
privileges required for the conduct of the business and operations of Lessee are
revoked, canceled or otherwise terminated, or if the operation specifications of
the Lessee are  surrendered to the FAA or otherwise  withdrawn or suspended,  or
Lessee ceases to be an air carrier holding a certificate  issued under ss. 44705
of  the  Transportation  Act,  or as a  result  of  any  of  the  foregoing  the
preponderant  business  activity of Lessee shall cease to be that of a passenger
carrier; or
                           (j) (i) Lessee shall commence any case, proceeding or
other action (A) under any existing or future Law of any jurisdiction,  domestic
or foreign,  relating to  bankruptcy,  insolvency,  reorganization  or relief of
debtors,  seeking to have an order for  relief  entered  with  respect to it, or
seeking to  adjudicate it a bankrupt or  insolvent,  or seeking  reorganization,
arrangement,  adjustment, winding-up, liquidation,  dissolution,  composition or
other relief with respect to it or its debts,  or (B) seeking  appointment  of a
receiver,  trustee, custodian or other similar official for it or for all or any
substantial  part of its assets,  or Lessee shall make a general  assignment for
the benefit of its  creditors,  or (ii) there shall be commenced  against Lessee
any case, proceeding or other action of a nature referred to in clause (i) above
which (A)  results in the entry of an order for relief or any such  adjudication
or appointment or (B) remains undismissed, undischarged or unbonded for a period
of sixty (60) days, or (iii) there shall be commenced  against  Lessee any case,
proceeding  or  other  action  seeking  issuance  of a  warrant  of  attachment,
execution,  distraint or similar process against all or any substantial  part of
its  assets  which  results in the entry of an order for any such  relief  which
shall not have been  vacated,  discharged,  or stayed or bonded  pending  appeal
within  sixty (60) days from the entry  thereof,  or (iv) Lessee  shall take any
action  in  furtherance  of, or  indicating  its  consent  to,  approval  of, or
acquiescence  in, any of the acts set forth in clause (i), (ii), or (iii) above,
or (v) Lessee  shall  generally  not,  or shall be unable to, or shall  admit in
writing its inability to, pay its debts as they become due; or

                           (k)  Lessee  shall  default  in  the  payment  of any
obligation for the payment of borrowed money, for the deferred purchase price of
property or for the  payment of rent or hire under any lease of  aircraft  which
has an aggregate  principal  amount or lease  payment of Five  Hundred  Thousand
Dollars  ($500,000)  or more  (determined  in the case of borrowed  money by the
amount outstanding under the agreement pursuant to which such borrowed money was
borrowed, in the case of a deferred purchase price by the remaining balance, and
in the case of a lease by the present  discounted value of the remaining rent or
hire  payable  thereunder  (ignoring  any fair  market  renewal  option  not yet
exercised))  when the same  becomes due if the effect of such  nonpayment  is to
cause or allow an acceleration of such indebtedness, and such default in payment
shall  continue for a period of thirty (30) days; or Lessee shall default in the
performance of any other term,  agreement or condition contained in any material
agreement  or  instrument  under or by which  any such  obligation  is  created,
evidenced  or  secured,  if such  default  results in the  acceleration  of such
obligation; or

                           (l) A final  judgment  for the  payment  of money not
covered by  insurance in excess of Two Hundred  Fifty  Thousand  ($250,000),  or
final  judgments  for the payment of money not covered by insurance in excess of
One Million  Dollars  ($1,000,000) in the aggregate,  shall be rendered  against
Lessee and the same shall remain  undischarged  for a period of ninety (90) days
during which (i) execution thereof shall not be effectively  stayed by agreement
of the parties  involved,  or stayed by court order or the pendency of an appeal
or (ii) execution thereof shall not be adequately bonded or (iii) attachments or
other  Liens,  except  for  security  interests  permitted  hereunder,  shall be
asserted against Lessee's interest in the Aircraft or this Lease; or

                           (m)  Lessee  shall  default  in  the  performance  or
observance  of  any  covenant,  term  or  condition  contained  in  any  Related
Transaction  and (i) shall not have caused such  default to be cured  within any
applicable  grace  period  provided by the  applicable  documents,  and (ii) the
effect of such default is to cause (after  notice or lapse of time or both),  or
to permit  the  lessor or  secured  party  under  such  Related  Transaction  to
terminate such Related Transaction; or

                           (n) Lessee  shall  fail to  provide  in any  material
respect the  information to be provided by it pursuant to Section 6.3 hereof and
such  failure  shall  continue  for a period in  excess of three (3) days  after
written notice thereof is given by Lessor to Lessee of such failure; or

                           (o)  Lessee  shall at any time fail to  maintain  the
Items of  Equipment  in an  airworthy  condition,  not  promptly  take an action
necessary to, or shall not promptly  correct any  discrepancy  which renders the
Aircraft  or  any  Item  of  Equipment   unairworthy,   or  the  certificate  of
airworthiness with respect to the Aircraft shall have expired or shall have been
withdrawn; or

                           (p) This Lease shall cease to be or shall be asserted
by Lessee not to be,  valid and  binding on and  enforceable  against  Lessee or
shall  cease to be in full  force and  effect  for any reason as a result of any
action or inaction of Lessee or Lessee  shall have  repudiated  its  obligations
hereunder.

                  Lessee hereby  acknowledges  that the occurrence of any one of
the  foregoing  Events of Default  would  represent  a  material  default in the
performance of its obligations under this Lease.


                                   ARTICLE 18

                               RIGHTS AND REMEDIES

                  18.1.  Remedies.  Upon the  occurrence of any Event of Default
and at any time thereafter so long as the same shall be continuing,  Lessor may,
at its option and without notice to Lessee,  declare this Lease to be in default
and at any time  thereafter,  Lessor may exercise  one or more of the  following
remedies as Lessor, in its sole discretion, shall elect, to the extent available
and permitted by, and subject to compliance with any mandatory  requirements of,
applicable Law then in effect:

                           (a) Demand  that  Lessee,  and Lessee  shall upon the
written  demand  of Lessor  and at  Lessee's  expense,  immediately  return  the
Aircraft to Lessor in the manner  specified in such notice,  in which event such
return shall not be delayed for purposes of complying with the return conditions
specified  in Section  16 hereof  (none of which  conditions  shall be deemed to
affect  Lessor's  right to  possession  of the  Aircraft) or delay for any other
reason.  Notwithstanding  the  foregoing,  at Lessor's  option,  Lessee shall be
required  thereafter to take such actions as would be required by the provisions
of this Lease if the Aircraft were being  returned at the end of the Term hereof
and Lessor agrees to cooperate  with  Lessee's  required  actions.  In addition,
Lessor,  at its option and to the extent  permitted by applicable Law, may enter
upon the  premises  where all or any part of the  Aircraft  is located  and take
immediate  possession of and, at Lessor's  sole option,  remove the same (and/or
any  engine  which is not an Engine  but  which is  installed  on the  Airframe,
subject to the rights of the owner,  lessor or secured party thereof) by summary
proceedings  or otherwise,  all without  liability  accruing to Lessor for or by
reason of such entry or taking of  possession  whether  for the  restoration  of
damage to property, or otherwise, caused by such entry or taking, except damages
caused by gross  negligence  or  willful  misconduct.  Notwithstanding  anything
herein to the contrary, Lessor may institute any proceeding at law or equity.

                           (b) Sell at  private  or public  sale,  as Lessor may
determine,  or hold,  use,  operate  or lease to  others  the  Aircraft  and the
Aircraft Documents as Lessor in its sole discretion may determine,  all free and
clear of any rights of  Lessee.  At any public  sale of the  Aircraft,  Aircraft
Documents,  Airframe,  Engine or any Part,  Lessor may bid for and purchase such
property.

                           (c) Whether or not Lessor  shall have  exercised,  or
shall thereafter at any time exercise,  any of its rights under paragraph (a) or
paragraph (b) of this Section 18.1,  Lessor, by fifteen (15) days written notice
to Lessee  specifying a payment date, may demand that Lessee pay to Lessor,  and
Lessee  shall pay to Lessor,  on the payment date  reasonably  specified in such
notice,  as  liquidated  damages  for loss of a bargain and not as a penalty (in
lieu of the Basic Rent due for the period  commencing  after the date  specified
for payment in such  notice),  any unpaid Rent or  Maintenance  Reserves for the
Aircraft  (prorated in the case of Basic Rent on a daily basis) to and including
the payment date specified in such notice, plus the amount, if any, by which the
aggregate  Basic Rent for the  remainder  of the Term,  discounted  periodically
(equal to  installment  frequency) to present worth at the interest rate of four
percent  (4%) per  annum,  exceeds  the fair  market  rental  value  (determined
pursuant to the Appraisal  Procedure,  as defined below) of the Aircraft for the
remainder  of  the  Term,  after  discounting  such  fair  market  rental  value
periodically (equal to installment frequency) to present worth as of the payment
date  specified  in such notice at the  interest  rate of four  percent (4%) per
annum;  provided,  however,  that if prior to issuance of such written notice by
Lessor to Lessee,  Lessor leases the Aircraft to a third party for the remainder
of the Term,  for an amount which  exceeds  such fair market  rental value as so
determined  then such amount shall be utilized in lieu of such fair market value
in making the foregoing calculation with respect to the Aircraft.

     For purposes of this Section 18.1(c),  "Appraisal Procedure" shall mean the
following  procedure  for  determining  the "fair  market  rental  value" of the
Aircraft.  "Fair  market  rental  value" shall mean the value  determined  by an
appraisal  completed on an "as is" and "where is" basis.  Lessor shall select an
internationally  recognized  independent  aircraft  appraiser,  such as  Avitas,
Avmark or B.K. Associates,  who shall make a determination of fair market rental
value. The fees and expenses of the appraiser shall be paid by Lessee.

                           (d) In the event  that  Lessor,  pursuant  to Section
18.1(b)  above,  shall have relet the  Aircraft  under a lease which  extends at
least to the date upon  which  the Term  would  have  expired  but for  Lessee's
default,  Lessor,  in lieu of exercising its rights under Section  18.1(c) above
with respect to the Aircraft,  may, if it shall so elect, demand that Lessee pay
Lessor, and Lessee shall pay Lessor, as liquidated damages for loss of a bargain
and not as a penalty (in lieu of the Basic Rent for the  Aircraft  due after the
time of reletting) any unpaid Rent and Maintenance Reserves for the Aircraft due
up to the date of  reletting,  plus the amount,  if any, by which the  aggregate
Basic Rent would have become due over the Term,  discounted  periodically (equal
to  installment  frequency)  to present worth as of the date of reletting at the
interest rate of four percent (4%) per annum, exceeds the aggregate basic rental
payments to become due under the  reletting  from the date of such  reletting to
the date  upon  which  the Term for the  Aircraft  would  have  expired  but for
Lessee's default,  discounted  periodically (equal to installment  frequency) to
present  worth  as of the date of the  reletting  at the  interest  rate of four
percent (4%) per annum.

                           (e) Proceed by  appropriate  court  action or actions
either at law or in equity,  to enforce  performance by Lessee of the applicable
covenants  of this Lease and to recover  damages  for the breach  thereof and to
rescind this Lease.

                           (f)  Terminate  this Lease by written  notice,  which
notice shall be effective upon dispatch, and repossess the Aircraft and Aircraft
Documents.

                           (g)  Keep and  set-off  all  amounts  paid as the "D"
Check  Airframe  Reserve,  the Engine  Reserves,  the Engine Life Limited  Parts
Reserves,  the  Landing  Gear  Reserve  and any  other  amounts  held by  Lessor
hereunder, or under any other Operative Agreement, all as liquidated damages and
not as a penalty.

                  18.2.  Further  Rights.  In addition to the foregoing,  Lessee
shall be  liable  during  or after  the  exercise  of any of the  aforementioned
remedies  for any and all  accrued  and unpaid  Rent and  Maintenance  Reserves,
together with interest on such unpaid  amounts at the Past Due Rate, and for all
reasonable  legal fees and other  costs and  expenses  incurred by reason of the
occurrence of any Event of Default  (whether or not  litigation is commenced) or
the exercise of Lessor's remedies with respect thereto,  including all costs and
expenses  incurred in  connection  with the return of any Item of  Equipment  in
accordance  with the terms of Article  16 hereof or in placing  such Item in the
condition  and with  airworthiness  certificates  as required  by said  Article,
subject to the provisions of Section 16.3.

                  18.3.  Remedies  Cumulative.  No  remedy  referred  to in this
Article 18 is  intended to be  exclusive,  but each shall be  cumulative  and in
addition to any other remedy referred to above or otherwise  available to Lessor
at law or in equity;  and the exercise or beginning of exercise by Lessor of any
one or more of such  remedies  shall  not  preclude  the  simultaneous  or later
exercise by Lessor of any or all of such other  remedies.  No express or implied
waiver by Lessor of any Event of Default shall in any way be, or be construed to
be, a waiver of any future or subsequent Event of Default.

                  18.4.  Concerning Remedies.
                           (a) In effecting any repossession  of  the  Aircraft,
the  Aircraft  Documents,  the  Airframe,  an Engine or a Part,  Lessor  and its
representatives  and agents, to the extent permitted by Law, shall: (i) have the
right to enter upon any premises where it reasonably believes the Aircraft,  the
Aircraft Documents,  the Airframe, an Engine or any Part to be located; (ii) not
be liable,  in conversion or otherwise,  for the taking of any personal property
of Lessee which is in or attached to the Aircraft,  the  Airframe,  an Engine or
any Part which is repossessed;  provided,  however,  that Lessor shall return to
Lessee  all  personal  property  of Lessee or any third  party  which was on the
Aircraft at the time Lessor  repossessed  the  Aircraft;  (iii) not be liable or
responsible,  in any  manner,  for any  inadvertent  damage  or injury to any of
Lessee's  property in repossessing  and holding the Aircraft,  the Airframe,  an
Engine or any Part,  except for that caused by or in  connection  with  Lessor's
gross negligence or willful acts; (iv) have the right to maintain  possession of
and dispose of the Aircraft, the Aircraft Documents,  the Airframe, an Engine or
any Part on any premises owned by Lessee or under Lessee's control; and (v) have
the right to obtain a key to any  premises at which the  Aircraft,  the Aircraft
Documents,  the Airframe, an Engine or any Part may be located from the landlord
or owner thereof.

                           (b)  If reasonably required by Lessor, Lessee, at its
sole expense, shall assemble and make the Aircraft, the Airframe, each Engine or
any Part available at a place designated by Lessor in accordance with Article 16
hereof. Lessee hereby agrees that, in the event of the return to or repossession
by Lessor of the Aircraft,  the Aircraft Documents,  the Airframe,  an Engine or
any Part, any rights in any warranty (express or implied) heretofore assigned to
Lessee or otherwise held by Lessee shall without  further act, notice or writing
be assigned or reassigned to Lessor,  if  assignable.  Lessee shall be liable to
Lessor for all reasonable  expenses,  disbursements,  costs and fees incurred in
(i) repossessing,  storing,  preserving,  shipping,  maintaining,  repairing and
refurbishing the Aircraft,  the Airframe, an Engine or any Part to the condition
required by Article 16 hereof, and (ii) preparing the Aircraft, the Airframe, an
Engine  or any  Part  for sale or  lease,  advertising  the sale or lease of the
Aircraft,  the  Airframe,  an Engine or any Part and  selling or  releasing  the
Aircraft,  the Airframe,  an Engine or any Part. Lessor is hereby authorized and
instructed,  at  its  option,  to  make  reasonable  expenditures  which  Lessor
considers advisable to repair and restore the Aircraft,  the Airframe, an Engine
or any Part to the condition required by Article 16 hereof, all at Lessee's sole
expense.

                           (c) If Lessor is  required  to give  prior  notice to
Lessee of any of the foregoing acts,  Lessee hereby  covenants and agrees that a
notice  sent to it by Lessor in writing in the manner set forth in Section  19.2
hereof,  at least ten (10) days  before the date of any such act shall be deemed
to be reasonable notice of such act.


                                   ARTICLE 19

                                  MISCELLANEOUS

                  19.1.  Construction,  Applicable  Law;  Jurisdiction.
                           (a) Any  provision  of this Lease which is prohibited
or  unenforceable  in  any  jurisdiction  shall,  as to  such  jurisdiction,  be
ineffective  to the  extent  of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable  such  provision  in any other  jurisdiction.  The parties to this
Lease  shall use their best  efforts to  substitute  for such void  provision  a
valid,  legal and  enforceable  provision  which  will  approach  as  closely as
possible the intention of such void provision.  To the extent  permitted by Law,
Lessee hereby waives any provisions of Law which renders any  provisions  hereof
prohibited  or  unenforceable  in any respect.  This Lease shall  constitute  an
agreement of lease, and nothing herein shall be construed as conveying to Lessee
any right,  title or interest in the  Aircraft or any Engine or Part except as a
lessee  only.  No term  or  provision  of this  Lease  may be  changed,  waived,
discharged or terminated  orally, but only by a written instrument signed by the
party  against  which  the  enforcement  of the  change,  waiver,  discharge  or
termination  is  sought.  The  headings  and  captions  in  this  Lease  are for
convenience  of reference only and shall not define or limit any of the terms or
provisions  hereof.  Whenever required by the context hereof, the singular shall
include the plural and vice versa. Reference to this Lease shall mean this Lease
as amended or supplemented from time to time.

                           (b) THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED  BY,
AND CONSTRUED IN ACCORDANCE  WITH, THE LAWS OF THE STATE OF NEW YORK  APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO CONFLICT OF LAW PRINCIPLES.

                           (c) Lessee hereby irrevocably consents that any legal
action or proceeding  against it or any of its assets with respect to this Lease
may be  brought  in any  jurisdiction  where  Lessee or any of its assets may be
found,  or in any  court of the  State of New York or any  Federal  Court of the
United  States of  America  located  in New York,  New  York,  United  States of
America,  or both,  as Lessor may elect,  and by execution  and delivery of this
Lease,  Lessee hereby irrevocably submits to and accepts with regard to any such
action or  proceeding,  for itself and in respect of its assets,  generally  and
unconditionally,  the jurisdiction of the aforesaid courts.  Lessee  irrevocably
consents to the service of process  out of any of the  aforementioned  courts in
any such action or proceeding by the mailing of copies  thereof by registered or
certified  airmail,  postage  prepaid,  to  Lessee at its  address  set forth in
Section 19.2 hereof. The foregoing, however, shall not limit the right of Lessor
to serve  process  in any other  manner  permitted  by Law or to bring any legal
action or  proceeding  or to obtain  execution of judgment in any  jurisdiction.
Lessee  further  agrees  that  final  judgment  against  Lessee in any action or
proceeding in connection with this Lease shall be conclusive and may be enforced
in any other jurisdiction within or outside the United States of America by suit
on the judgment,  a certified or  exemplified  copy of which shall be conclusive
evidence  of the fact and the amount of  Lessee's  indebtedness.  Lessee  hereby
irrevocably  waives, to the fullest extent permitted by law, any objection which
Lessee may now or hereafter  have to the laying of venue of any suit,  action or
proceeding  arising out of or relating to this Lease brought in the State of New
York, and hereby further irrevocably waives any claim that any such suit, action
or  proceeding  brought  in the  State  of  New  York  has  been  brought  in an
inconvenient forum.

                  19.2.  Notices.  All notices  provided  for herein shall be in
writing and shall be deemed to have been given when delivered  personally,  when
telexed or telecopied,  when deposited with an overnight courier service, or, if
deposited in the United States mail, when received, addressed as follows:

                  If to Lessee:     Frontier Airlines, Inc.
                                    12015 East 46th Avenue, Suite 200
                                    Denver, Colorado  80239-3116
                                    Attn:  Director, Aircraft Management
                                    Telecopy No.  (303) 371-7007

                                    With a copy to the General Counsel
                                    Telecopy No. (303) 371-9669

                  If to Lessor:     C.I.T. Leasing Corporation
                                    c/o The CIT Group/Capital
                                    Finance, Inc.
                                    1211 Avenue of the Americas
                                    New York, New York  10036
                                    Attn:   Al Oliver
                                            Vice President
                                            Telecopy No. (212) 536-9401

                                    With a copy to the General Counsel
                                    Telecopy No. (212) 536-1388

or to such other address as any party may designate for itself by written notice
to the other party.

                  19.3.  Lessor's  Right to Perform.  If Lessee fails to perform
any of its  obligations  hereunder,  Lessor may (but shall not be obligated  to)
discharge such obligation,  and the amount of the expenses of Lessor incurred in
connection with such discharge shall be payable by Lessee upon demand,  together
with interest at the Past Due Rate from the date such expenses were incurred.

                  19.4. Counterparts.  This Lease may be executed simultaneously
in two or more counterparts,  each of which shall be deemed an original, but all
of which together shall constitute one and the same  instrument.  To the extent,
if any,  that this Lease  constitutes  chattel paper (as such term is defined in
the Uniform  Commercial  Code as in effect in any  applicable  jurisdiction)  no
security  interest  in  this  Lease  may be  created  through  the  transfer  or
possession of any counterpart  other than the counterpart  which has been marked
"Original"  on the  signature  page  thereof.  All  counterparts  other than the
"Original" shall be marked "Duplicate" or "Duplicate Original."

                  19.5. Assignment by Lessor. Lessor, at Lessor's expense, shall
have the absolute right to transfer or assign to any Person,  firm,  corporation
or  other  entity  any or all of  Lessor's  rights,  obligations,  benefits  and
interests under this Lease, including,  without limitation, the right to receive
Rent and  Maintenance  Reserves or any other  payment due under this Lease,  the
right to transfer  or assign  title to any Item of  Equipment  or to transfer or
assign the right to  purchase  any Item of  Equipment  and the right to make all
waivers and agreements,  to give all notices, consents and releases, to take all
action upon the  occurrence of any Event of Default,  or to do any and all other
things which Lessor is or may become entitled to do under this Lease;  provided,
however,  that Lessee  acknowledges that, if Lessor should sell or transfer to a
third  party  all of  Lessor's  interest  under  this  Lease and in the Items of
Equipment,  Lessor  shall  thereupon  be  relieved  of all  of  its  obligations
hereunder  and  Lessor's  transferee  shall  succeed to all of Lessor's  rights,
interests and  obligations  under this Lease as though  Lessor's  transferee had
been the initial lessor hereunder;  provided,  however,  that, in the event of a
transfer or assignment of a security  interest in any Item of Equipment,  Lessor
shall remain liable hereunder. Any assignment,  pledge or other conveyance,  for
security  or  otherwise,  of this Lease by Lessor  shall be subject to  Lessee's
rights under this Lease and shall not be effective unless and until Lessee shall
have been given notice of such assignment identifying the assignee or transferee
hereof and Lessee  shall  have  received  confirmation  in  writing,  reasonably
acceptable  to Lessee,  that such  transferee  accepts all  responsibilities  of
Lessor under this Lease,  including but not limited to, confirmation of Lessee's
right to quiet  enjoyment of the Aircraft as set forth in Section  19.11 hereof.
Any  assignment by Lessor shall be made subject to the  assignee's  agreement to
maintain  all  Maintenance  Reserves  in  one or  more  escrow  accounts  unless
otherwise expressly agreed by Lessee. The agreements, covenants, obligations and
liabilities contained herein,  including, but not limited to, all obligations to
pay Rent and  Maintenance  Reserves and indemnify an Indemnitee are made for the
benefit of each Indemnitee and their respective successors and assigns.

                  19.6. Survival.  The representations,  warranties,  covenants,
agreements  and  indemnities  of Lessee set forth in this  Lease,  and  Lessee's
obligations hereunder,  shall survive the Expiration Date to the extent required
for full performance and satisfaction thereof.

                  19.7.  Entire  Agreement.  This Lease  (including all Exhibits
hereto),  each Lease Supplement executed pursuant hereto and the other Operative
Agreements  constitute the entire agreement  between Lessor and Lessee regarding
the  Aircraft  and there are no other prior or  contemporaneous  written or oral
understandings  between  Lessor and Lessee  with  regard to the  subject  matter
hereof and thereof.

                  19.8.  Successors and Assigns.  This Lease shall be binding on
and shall inure to the benefit of Lessee, Lessor and their respective successors
and permitted assigns.

                  19.9.  Brokers.  Lessee and Lessor each agree to indemnify and
hold each other  harmless from and against any and all claims,  suits,  damages,
costs and expenses (including,  but not limited to, reasonable  attorneys' fees)
asserted  by any  agent,  broker  or other  third  party for any  commission  or
compensation  of any nature  whatsoever  based  upon the lease of the  Aircraft;
provided,  however,  that Lessee or Lessor,  as the case may be, shall be solely
responsible for all claims, suits,  damages,  costs and expenses asserted by any
agent,  broker or other third party for any  commission or  compensation  of any
nature  whatsoever,  where such  agent,  broker or third  party was  retained by
Lessee or Lessor, as the case may be.

                  19.10.  Transaction  Costs.  Whether  or not the  transactions
contemplated  hereby are  consummated,  each party hereto  agrees to pay its own
costs and expenses  incurred in connection with the  preparation,  execution and
delivery of this Lease and any other documents delivered in connection herewith,
including  without  limitation  the fees,  expenses and  disbursements  of legal
counsel to such party.  In addition,  Lessor agrees to pay the attorneys'  fees,
expenses, and disbursements of the counsel identified in Section 2.3(8). Each of
Lessor and Lessee agrees to pay the  reasonable  costs and expenses of the other
party incurred in connection  with the entering into or giving or withholding of
any future  waiver,  supplement or amendment or other action with respect to the
Lease or any  other  document  delivered  in  connection  therewith  that it may
request,  except that from and after (i) the occurrence and  continuation  of an
Event of Default,  or (ii) the filing by or against  Lessee of a petition  under
Chapter  7 or  Chapter  11 of the  United  States  Bankruptcy  Code or any other
circumstances  described in Section 17.1(j)  hereof,  all of such costs shall be
borne by Lessee  irrespective  of  whether  such  costs are  incurred  after the
commencement  or  inception  of any such filing or the  occurrence  of any other
circumstance  described in Section  17.1(j) hereof and whether or not litigation
is commenced with respect thereto.

                  19.11.  Quiet  Enjoyment.  Lessor covenants that so long as an
Event of Default shall not have occurred and be continuing, Lessee shall quietly
enjoy the Aircraft and all rents, revenues,  profits and income thereto, without
interference by Lessor or by any Person lawfully  claiming by or through Lessor;
provided, however that Lessor and prospective purchasers and lessees may inspect
the  Aircraft  and  Aircraft  Documents  at their  own  expense  as long as such
inspection  does  not   unreasonably   interfere  with  Lessee's   operation  or
maintenance of the Aircraft.

                  19.12.  Time Is of the  Essence.  Time and strict and punctual
performance are of the essence with respect to each provision of this Lease.

                  19.13.  Confidentiality.  Lessee and Lessor agree to and shall
keep  confidential this Lease and the terms hereof,  all Aircraft  Documents and
other data or materials  relating to the Aircraft  supplied to Lessee by Lessor,
or at the  request of  Lessor,  hereunder  and will not  disclose,  transfer  or
otherwise impart any such information to any other Person,  except (i) as may be
required by Law or pursuant to any litigation, (ii) to its affiliates, permitted
assigns,  officers,  executives,  employees and agents,  (iii) to its financial,
accounting  or legal  advisors  who are  under a duty to or  agree to hold  such
information  confidential,  or (iv) with  respect  to any  information  which is
generally available to the public at the time of disclosure.

                  19.14.  DISCLAIMER OF CONSEQUENTIAL DAMAGES. LESSEE AND LESSOR
EACH AGREE THAT IT SHALL NOT BE ENTITLED TO RECOVER,  AND HEREBY  DISCLAIMS  AND
WAIVES ANY RIGHT THAT IT MAY OTHERWISE HAVE TO RECOVER, CONSEQUENTIAL DAMAGES AS
A RESULT OF ANY  BREACH OR ALLEGED  BREACH BY LESSOR OR LESSEE,  AS THE CASE MAY
BE, OF ANY OF THE AGREEMENTS, REPRESENTATIONS OR WARRANTIES OF LESSOR OR LESSEE,
AS THE CASE MAY BE, CONTAINED IN THIS LEASE.

                  19.15.  Tax Treatment. Lessor and Lessee acknowledge that this
Lease is to be treated as a lease for Federal income tax purposes.

                  19.16  Waiver of Jury Trial.  LESSEE AND LESSOR  HEREBY  WAIVE
TRIAL  BY JURY IN ANY  JUDICIAL  PROCEEDING  TO  WHICH  THEY  ARE  BOTH  PARTIES
INVOLVING,  DIRECTLY  OR  INDIRECTLY,  ANY  MATTER  (WHETHER  SOUNDING  IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,  RELATED TO, OR CONNECTED WITH
THIS LEASE OR THE RELATIONSHIP ESTABLISHED HEREUNDER.

                  19.17.  Dating.  Although this Lease is dated for  convenience
and for the  purpose of  reference  as of the date first set forth  above,  this
Lease shall be effective on the latest date of execution by the parties hereto.

<PAGE>





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


                                            C.I.T. LEASING CORPORATION,
                                            Lessor


                                            By:______________________________

                                            Title:___________________________


                                            FRONTIER AIRLINES, INC.,
                                            Lessee


                                            By:______________________________

                                            Title:




<PAGE>




                                    EXHIBIT A
                                       to
                            AIRCRAFT LEASE AGREEMENT

                       DESCRIPTION OF AIRCRAFT AND ENGINES


1.       One Boeing 737-3L9 Aircraft bearing FAA Registration  Number N312FL and
         Manufacturer's  serial  number  24569,  together with two (2) CFM56-3B2
         engines,  bearing  Manufacturer's  serial  numbers  725373 and  724422,
         respectively.



<PAGE>


                                       B-3

                                    EXHIBIT B
                                       to
                            AIRCRAFT LEASE AGREEMENT

                            FORM OF LEASE SUPPLEMENT


                  THIS LEASE  SUPPLEMENT  dated  _________ __, 1999 (this "Lease
Supplement"),  between C.I.T.  LEASING  CORPORATION,  as Lessor ("Lessor"),  and
FRONTIER AIRLINES, INC., as Lessee ("Lessee").


W I T N E S S E T H :

                  WHEREAS,  Lessor and Lessee have heretofore  entered into that
certain  Aircraft  Lease  Agreement,  dated as of April 16, 1999 (the  "Lease"),
which  provides  for  the  execution  and  delivery  of a  Lease  Supplement  in
substantially  the form hereof for the purpose of leasing the Items of Equipment
in accordance with the terms thereof;

                  NOW, THEREFORE, in consideration of the premises, and pursuant
to Article 2 of the Lease, Lessor and Lessee hereby agree as follows:

                  1. All capitalized  terms used herein which are defined in the
Lease shall have, for all purposes hereof, the respective meanings given them in
the Lease.

                  2. Lessor  hereby  delivers  and leases to Lessee,  and Lessee
hereby accepts and leases from Lessor under the Lease,  as hereby  supplemented,
the Items of Equipment as follows:

                           A.       Aircraft:  One (1) Boeing 737-3L9 Aircraft
                                    consisting of the following:

                                    (i)     Airframe Registration No. N312FL
                                            Manufacturer's Serial No. 24569

                                    (ii)    Engines:  Two (2) CFM56-3B2  engines
                                            (each  of which  engines  has 750 or
                                            more rated takeoff horsepower or the
                                            equivalent  thereof),  installed  on
                                            said       Airframe,        bearing,
                                            respectively,      the     following
                                            Manufacturer's Serial Nos.:

                                            Engine            Manufacturer's
                                            Position             Serial No.
                                               1                 725373
                                               2                 724422

                                    (iii)   Other Equipment and Manuals:
                                            Such  other  Equipment  (if any) and
Manuals as are described in Appendix I hereto.

                           B.       Maintenance Status:

                                    (i)     Airframe:

                                            Total Airframe Hours:   22,040

                                            Total Airframe Cycles:  21,111

                                    (ii) Engines:

                                            Position 1

                                            Manufacturer's Serial No.:  725373

                                            1.       Total Hours:   19,423

                                            2.       Total Cycles:  18,767

                                            Position 2

                                            Manufacturer's Serial No.:  724422

                                            1.       Total Hours:   17,117

                                            2.       Total Cycles:  17,113

                  Lessee confirms that the Items of Equipment have been examined
by its duly appointed and authorized  representatives and the Aircraft Documents
conform to the information set forth above.

                  3. The Delivery  Date of the Items of Equipment is the date of
this Lease Supplement,  as set forth in the opening  paragraph  hereof,  and the
Items of Equipment are hereby delivered and accepted on such date at _____ a.m.
____________________ Time at __________________.

                  4. The term "Insured  Value" for the Aircraft  shall be as set
forth on Exhibit H to the Lease.

                  5. The  amount  of fuel on board the  Aircraft  at the time of
delivery is _____________________.

                  6. Lessee hereby  confirms to Lessor that (i) the Aircraft and
each Engine  installed  thereon or  belonging  thereto  have been duly marked in
accordance with the terms of Section 5.6 of the Lease,  (ii) Lessee has accepted
the  Aircraft  for all  purposes  hereof  and of the  Lease,  (iii)  Lessee  has
inspected the Aircraft and the Aircraft satisfies all of the delivery conditions
set  forth in the  Lease  (including,  without  limitation,  those  set forth on
Exhibit I to the Lease), (iv) the information set forth herein and on Appendix 1
hereto  pertaining  to the Aircraft  are correct as of the date hereof,  and (v)
this Lease Supplement has been duly executed and delivered by Lessee.

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

                  8. This  Lease  Supplement  may be  executed  in any number of
counterparts,  each of which  counterparts,  except  as  otherwise  provided  in
Section  19.4 of the Lease,  shall for all purposes be deemed to be an original;
and all such counterparts  shall together  constitute but one and the same Lease
Supplement.

                  9. THIS LEASE  SUPPLEMENT SHALL IN ALL RESPECTS BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO
CONFLICT OF LAW PRINCIPLES.

                  IN WITNESS  WHEREOF,  Lessor and Lessee  have each caused this
Lease  Supplement to be duly executed by their  authorized  officers on the date
first above written.

                                            C.I.T. LEASING CORPORATION,
                                            Lessor



                                            By:_________________________________

                                            Title:______________________________



                                            FRONTIER AIRLINES, INC.,
                                            Lessee



                                            By:_________________________________

                                            Title:______________________________





<PAGE>



                                   APPENDIX I
                                       TO
                                LEASE SUPPLEMENT

A.  AVIONICS INVENTORY1


MAJOR AVIONICS EQUIPMENT           QTY         P/N                    MODEL

Marker Receiver                    1           522-2996-018           5124

Dual VHF Nav Receiver              2           822-0761-001           51RV-4B

Transceiver Rad Alt                2           622-3890-021           860F-4

Tape Reproducer                    1           RDAX 7308-D1

SELCAL Decoder                     1           N1401C

Transceiver Weather Radar          1           622-132-106

GPW Computer                       1           965-0648-004

DME Transceiver                    2           622-2921-006           860E-5

ATC Transponder                    2           622-7878-201           TPR720

ADF Receiver                       2           777-1492-005           51Y-7

Flight Manage Comp                 1           168925-06-001          U5-OE

HF Transceiver                     1           622-5377-001           D5722

VHF Transceiver                    2           622-5219-004           VHF 700

Cockpit Voice Recorder             1           93A100-80

Flight Data Recorder               1           980-4100DXUN

Flight Data Acquisition Unit       1           ED41A210



<PAGE>



                                   APPENDIX I
                                       TO
                                LEASE SUPPLEMENT

B.  MANUALS INCLUDED WITH AIRCRAFT2








<PAGE>



                                   APPENDIX I
                                       TO
                                LEASE SUPPLEMENT

C.       LOOSE EQUIPMENT3


Item Description                                                      Quantity








<PAGE>



                                   APPENDIX I
                                       TO
                                LEASE SUPPLEMENT

D.       COMPONENTS MAINTAINED ON HARD TIME4

Part                                                              Time Remaining
No.               Nomenclature             Interval               To Overhaul








<PAGE>




                                    EXHIBIT C
                                       to
                            AIRCRAFT LEASE AGREEMENT

                          RETURN CONDITION REQUIREMENTS


                  In addition to the requirements set forth in Article 16 of the
Lease,  on or before the Expiration  Date, or earlier  termination of the Lease,
Lessee, at Lessee's expense, shall return the Aircraft to Lessor, at any airport
in the continental  United States as selected by Lessor,  and in compliance with
all of the following provisions:

GENERAL

                  (1) The Aircraft  shall be airworthy and have  therefore  been
maintained  and operated in  accordance  with Articles 5 and 9 of the Lease with
the same care and consideration  for the technical  condition of the Aircraft as
if it were to have been kept in continued regular service by Lessee.

                  (2) The  Aircraft  exterior  shall be washed and the  interior
shall be clean.  The  cockpit  shall be clean  with paint and  placards  in good
condition.

                  (3) The Aircraft shall have  installed the full  complement of
Engines (as used herein the term "Engines" includes engines for which title will
be transferred to Lessor pursuant to Article 11 of the Lease) and other Items of
Equipment  as would remain  installed  on the  Aircraft  were Lessee to continue
operating  the same in  continued  regular  passenger  service,  each  such Item
functioning in accordance with its intended use.

                  (4) The Aircraft shall comply with the Manufacturer's original
FAA approved type  certificate  specifications,  as revised up to the Expiration
Date, together with any modifications  installed in accordance with supplemental
type certificates approved by the FAA and acceptable to Lessor.

                  (5) The  Aircraft,  Engines,  Landing  Gear,  APU,  and  Parts
(appliances) shall comply with all applicable FARs and Airworthiness  Directives
affecting such model aircraft,  engines,  landing gears,  auxiliary power units,
and parts  (appliances) which by their terms require compliance on or before the
Expiration  Date,  notwithstanding  any  waiver,  deviation  or  time  extension
obtained by Lessee from the FAA or otherwise. Any alternate method of compliance
obtained  by Lessee to comply  with any AD shall have been  approved  by the FAA
without restriction or limitation, and shall be acceptable to the FAA for use by
any other operator of the Aircraft.

                  (6) The  Aircraft  shall  have a  current  and  effective  FAA
certificate  of  airworthiness  and shall comply with all FAR  requirements  for
passenger  operation as a transport category  commercial  aircraft in accordance
with all applicable FARs, including without limitation FAR Part 121.

                  (7) Cockpit windows shall have no crazing or delamination that
exceed maintenance manual allowable limits,  and passenger  compartment  windows
shall have no crazing . All  equipment  and  furnishings  in the interior of the
Aircraft which are defective,  damaged, or excessively worn shall be repaired or
replaced by Lessee.

                  (8) The Aircraft shall have no leakage of fuel, oil, hydraulic
fluid, or water.

                  (9) The Aircraft and Engines shall be in  compliance  with all
Manufacturer's  service  bulletins  issued  at the time of  return,  to the same
extent that Lessee has  accomplished  such service  bulletins  on similar  model
aircraft  and  engines  of the  same  manufacture  in  Lessee's  fleet,  without
discrimination.

                  (10) The Aircraft  (including each Engine,  Landing Gear, APU,
and Part) shall not have any open,  deferred or placarded  maintenance  items or
Watch  Items,  nor shall they have any Flight  Hour,  Cycle,  or  calendar  time
extensions, waivers, or non-transferable alternate methods of compliance.

                  (11) At the end of the  Term,  upon  the  request  of  Lessor,
Lessee shall obtain an Export  Certificate of Airworthiness for the Aircraft for
export to such country as designated by Lessor.  Lessor shall be responsible for
the cost of  modifying  the Aircraft to comply with the import  requirements  of
such other country.

                  (12) Prior to the Expiration  Date,  all repairs  accomplished
during the Term of a temporary or interim nature,  including repairs using blind
fasteners  (except to the extent that the use of blind fasteners is considered a
permanent repair in accordance with the Manufacturer's  structural repair manual
for  the  Aircraft)  and  those  requiring  repetitive   inspections  or  future
upgrading,  shall be upgraded to a permanent  repair and all  external  doublers
(scab patches) installed during the Term (except to the extent that installation
of a  doubler  is the  only  approved  repair  or  where a flush  repair  is not
practical  due to  inaccessibility  of the area),  shall be replaced  with flush
repairs,  all in  accordance  with  the  applicable  Manufacturer's  maintenance
manual, structural repair manual, or other FAA approved data.

                  (13) Lessee shall deliver to Lessor, at no cost to lessor, all
service   bulletin  kits  furnished   without  charge  by  a  Manufacturer   for
installation  on the  Aircraft  which have not been so installed  together  with
appropriate  instructions for installation provided with such kits. In the event
such  installation  kits were purchased or manufactured by Lessee,  Lessor shall
have the  exclusive  right to purchase  such kits at Lessee's  Actual Cost for a
period of one hundred  eighty  (180) days after  return of the  Aircraft and the
non-exclusive right to purchase such kits thereafter.

AIRFRAME

                  (1)  Lessee  shall  provide   documentation   evidencing  full
compliance with the Manufacturer's  recommended corrosion prevention and control
program  ("CPCP"),  or such  other  corrosion  prevention  and  control  program
approved by the FAA for the Aircraft.

                  (2) The Aircraft  shall be returned  fresh from  Lessee's next
due "C" Check pursuant to Lessee's  Maintenance  Program which shall include all
structural  inspection  requirements which would require  accomplishment  within
3,500 Flight Hours or Cycles,  or within 15 calendar months after the Expiration
Date,  and with all  discrepancies  permanently  repaired.  The "C" Check  shall
include all lesser Checks.  Lessee shall give Lessor not less than ten (10) days
prior  written  notice of the  commencement  date of such "C" Check.  During the
performance of such "C" Check, Lessor shall be entitled to have  representatives
present in order to verify that such "C" Check  complies  with the  requirements
set forth herein.

                  (3) The time  remaining to the next  scheduled  Airframe block
overhaul ("D" Check, or an equivalent Check in the event the Maintenance Program
uses  different  terminology)  shall not be less than fifty percent (50%) of the
allowable time (Flight Hours,  Cycles, and calendar time) between such scheduled
block overhauls.

                  (4) Each of the Time Controlled  Parts  (excluding those which
are internal Engine Parts and internal  Landing Gear Parts (as delineated in the
Boeing  737-300 MPD) but including any Life Limited  Parts) on (i) the Aircraft,
(ii) the Engines  and (iii) the  Landing  Gear,  shall have  remaining  the same
amount of time (whether  Flight Hours,  Cycles or calendar time) with respect to
its  next  regularly   scheduled  overhaul,   restriction,   or  other  required
maintenance, as was remaining on the Delivery Date. In the event any of the Time
Controlled  Parts  fail  to  meet  the  requirements  set  out in the  preceding
sentence,  either  Lessee or Lessor  shall  pay to the other  party a  financial
adjustment  for any such Time  Controlled  Part as  determined  by the following
formula:

                           FA = TRD -- TRR  x CO
                                             TBO

                  Where

                           FA               =  Financial  adjustment  to be paid
                                            pursuant   to  this   Section.   The
                                            financial  adjustment  shall be paid
                                            by Lessee to Lessor if the value for
                                            FA is  determined  to be positive in
                                            accordance  with the formula set out
                                            above.  The  value of the  financial
                                            adjustment  shall be paid by  Lessor
                                            to  Lessee  if the  value  for FA is
                                            determined   to   be   negative   in
                                            accordance  with the formula set out
                                            above.
                           TRD              = Time  remaining  at  the  Delivery
                                            Date to the next regularly scheduled
                                            overhaul,   restriction,   or  other
                                            required   maintenance,    for   the
                                            applicable Time Controlled Part.
                           TRR              =  Time  remaining  at the  date  of
                                            return of the  Equipment to the next
                                            regularly     scheduled    overhaul,
                                            restriction,   or   other   required
                                            maintenance, for the applicable Time
                                            Controlled Part.
                           TBO              =  Average  time  between  regularly
                                            scheduled  overhauls,  restrictions,
                                            or other  required  maintenance  for
                                            the applicable Time Controlled Part.
                           CO               =  Average  cost  of  the  overhaul,
                                            restriction,   or   other   required
                                            maintenance  for the applicable Time
                                            Controlled Part.

INTERIOR

                  (1)  The  Aircraft,   shall  be  in  the  same   configuration
(including,  but not limited to,  interior  seating  configuration,  galleys and
lavatories) as when such Aircraft was originally  delivered to Lessee hereunder,
unless otherwise consented to by Lessor, in its sole discretion.

ENGINES AND APU

                  (1)  Immediately  prior to the return of the  Aircraft,  which
shall be after the redelivery flight for the Aircraft, Lessee shall accomplish a
complete hot and cold section  borescope  inspection of each Engine and the APU,
to be performed at Lessee's expense by Lessee's  representative  or an agency of
Lessee's choosing, in accordance with the Manufacturer's maintenance manual. All
defects discovered as a result of such inspections, which exceed the maintenance
manual allowable limits for an installed engine or APU, as applicable,  shall be
corrected at Lessee's expense.  Any defect that requires  reinspection  prior to
the next full "C" Check or 3,500 Flight  Hours,  whichever is greater,  shall be
considered a Watch Item and shall be corrected at Lessee's expense.

                  (2) Each  Engine  shall  have (i) a  minimum  of 3,000  Cycles
remaining  to its next  scheduled  removal,  and (ii) a maximum of 3,000  Flight
Hours  accumulated  since its most recent  Engine  restoration  shop visit.  The
average of the life  remaining  for all of the Life Limited Parts in each Engine
shall not be less than 50% of the average of the total  allowable  life for such
Engine Life Limited Parts,  provided,  however,  that no individual Life Limited
Part shall have less than 3,000 Cycles remaining to its respective life limit.

                  (3) Each  Engine  shall be  capable of  developing  full rated
take-off power at the critical maximum outside air temperature without exceeding
the maximum  limits for all  parameters  (temperature,  fuel flow,  rotor speed,
etc.) as per the  Manufacturer's  specifications.  A full take-off  power engine
run-up  shall  be   performed  in  the  presence  of  Lessor's   representatives
immediately  prior  to the  return  of the  Aircraft,  in  accordance  with  the
performance test in the maintenance  manual, or other comparable test (as agreed
to by Lessor),  using  temperature  corrected  charts.  Each Engine shall have a
minimum  of  20(degree)  EGT margin  and the test  results  shall not exceed the
corrected limits in the charts for any parameter.

                  (4) The APU of the Aircraft shall be in serviceable condition.

INSPECTION

                  (1) On, or immediately  prior to the Expiration  Date,  Lessee
shall perform a redelivery check flight of the Aircraft of not more than two (2)
hours duration with Lessor's  representatives on board, who will determine which
systems  shall be  operated.  All  discrepancies  found during such check flight
which exceed maintenance manual allowable limits shall be corrected by Lessee at
Lessee's expense.  Lessee shall be responsible for all expenses  associated with
such flight and shall furnish the necessary crews and fuel.

                  (2) Lessor shall  inspect the Aircraft and Aircraft  Documents
(the "Final Inspection") prior to the Expiration Date. The Final Inspection will
occur during the "C" Check required pursuant to this Exhibit C and shall include
the opening or removal of panels as reasonably required by Lessor, and access to
all  compartments  and bays.  All  discrepancies  discovered  during  such Final
Inspection which exceed maintenance manual allowable limits shall be permanently
repaired  by  Lessee.  Lessor  shall be given the  opportunity  to  conduct  all
activity  necessary to verify that the Aircraft  complies with the  requirements
set forth herein.  The Final Inspection of the Aircraft Documents shall commence
on a date as  mutually  agreed by Lessor  and  Lessee.  To the  extent  that any
repairs to the Aircraft,  or correction of  discrepancies  found in the Aircraft
Documents,  extend beyond the Expiration  Date, the Term shall be deemed to have
been automatically  extended, and the obligation to pay Rent hereunder continued
on a daily basis until the Final Inspection and repairs or corrections have been
satisfactorily concluded.

                  (3) All Aircraft  Documents and other  current and  historical
records delivered with the Aircraft on the Delivery Date, and all other Aircraft
Documents  acquired or prepared by Lessee during the Term shall be returned with
the Aircraft. Notwithstanding anything to the contrary herein, (i) to the extent
any  maintenance  tasks have been  repeated,  Lessee  shall only be  required to
retain,  and include in the  Aircraft  Documents to be returned to Lessor at the
Expiration  Date,  the most recent  Aircraft  Records  with respect to each such
repetitive task and (ii) to the extent log books document maintenance  performed
on the  Aircraft,  such log books shall be required to be retained (and included
in the Aircraft Documents to be returned to Lessor at the Expiration Date) for a
period of twelve (12)  months,  or the time period  required by the  Aeronautics
Authority,  whichever  is  greater.  All  discrepancies  found  in the  Aircraft
Documents  shall be  corrected,  and any  missing  Aircraft  Documents  shall be
reconstructed by Lessee at Lessee's sole cost and expense prior to the return of
the Aircraft.  All Aircraft  Documents shall be in the English language.  In the
event  any  Aircraft  Documents  are not  provided  to  Lessor or are not in the
English  language,  on the Expiration  Date, the Aircraft shall be deemed not to
meet  the  return  conditions  and  the  Term  shall  be  deemed  to  have  been
automatically  extended, and the obligation to pay Rent hereunder continued on a
daily basis until the final inspection and corrections have been  satisfactorily
concluded.

                  (4)  All  Aircraft  and  Engine  systems  (including  galleys,
passenger and cargo  compartments) shall be fully operational for their intended
functions.  Lessor shall  operationally check all systems prior to the return of
the Aircraft and all defects found shall be permanently  repaired by Lessee,  at
Lessee's expense prior to return of the Aircraft.

                  (5) In  the  event  the  Aircraft  has  been  maintained  on a
maintenance program other than an FAA approved maintenance  program,  Lessee, at
Lessee's  expense,  shall cause the  Aircraft to be bridged onto an FAA approved
maintenance program, or onto the Manufacturer's  recommended maintenance program
in  accordance  with  the  Maintenance  Planning  Data  Document  (MPD),  or its
equivalent.





<PAGE>




                                    EXHIBIT D
                                       to
                            AIRCRAFT LEASE AGREEMENT

                            LESSEE'S COUNSEL OPINION

                        [Letterhead of Lessee's Counsel]


                             [Date of Delivery Date]

C.I.T. Leasing Corporation
1211 Avenue of the Americas
New York, New York  10036

Re:      Aircraft Lease Agreement  dated  as  of  April 16, 1999 between  C.I.T.
         Leasing Corporation, as Lessor, and Frontier Airlines, Inc., as Lessee,
         Relating to the Lease of One  Boeing 737-300  Aircraft,  Manufacturer's
         Serial No. 24569 and U.S. Registration No. N312FL

Dear Sirs:

                  I act as  General  Counsel  for  Frontier  Airlines,  Inc.,  a
corporation  duly organized and validly  existing under the laws of the State of
Colorado.  I have reviewed the Aircraft  Lease  Agreement  dated as of April 16,
1999 (the "Lease") between Lessee and C.I.T. Leasing Corporation (the "Lessor").
Except as  otherwise  defined  herein,  the terms  used  herein  shall  have the
meanings set forth in the Lease.

                  You have requested that I render an opinion in connection with
the  transactions  governed by the Lease.  I have examined  originals or copies,
certified  or  otherwise  identified  to  my  satisfaction  of  such  documents,
corporate  records and other instruments as I have deemed necessary or advisable
and have  relied upon such  representations  of officers  and  employees  of the
Lessee as I have considered reasonable, prudent and advisable for the purpose of
rendering this opinion. I have assumed the genuineness of all signatures and the
authenticity of all documents submitted to me as originals and the conformity to
original documents of all documents submitted to me as copies or facsimiles.

                  Based upon the foregoing, I am of the opinion that:

                  1. The Lessee is a  corporation  duly  organized  and  validly
existing  in good  standing  under  the laws of the State of  Colorado,  is duly
qualified  to hold  property  and to transact  business as a company and is duly
qualified  to carry  on  business  in each  jurisdiction  in  which it  conducts
business and has full power and  authority to carry on its business as presently
conducted,  to hold  property  under  lease and to enter into and to perform its
obligations under the Lease, as supplemented by the Lease  Supplement,  and each
other document  related thereto to which the Lessee is a party.  The Lessee is a
"Certificated Air Carrier" within the meaning used by the Transportation Act, as
amended, operating pursuant to a certificate issued under such Act.

                  2. The  execution,  delivery and  performance by the Lessee of
the Lease and Lease  Supplement  have  been  duly  authorized  by all  necessary
corporate  action on the part of the  Lessee,  do not and will not  require  any
approval of the  shareholders  of the Lessee or consent of any trustee or holder
of any indebtedness or obligation of the Lessee,  and the execution and delivery
of the  Lease  and  Lease  Supplement,  the  consummation  of  the  transactions
contemplated therein, and compliance by the Lessee with the terms and provisions
thereof,  do not contravene  any Law applicable to the Lessee,  or result in the
breach of, or  constitute  any default  under,  or result in the creation of any
lien,  charge or  encumbrance  upon any  property of the Lessee under any credit
agreement or instrument,  corporate charter or bylaw or other agreement to which
the  Lessee is a party or by which the  Lessee or its  properties  or assets are
bound or affected.  The Lease and Lease  Supplement  have been duly executed and
delivered by the Lessee.

                  3.  The  Lessee  has  received  every  consent,   approval  or
authorization  of, and has given every  notice to, each  Governmental  Authority
having  jurisdiction with respect to the execution,  delivery and performance of
the Lease, the Lease Supplement and the other Operative Agreement (including all
monetary and other obligations  thereunder),  that is required for the Lessee to
execute and  deliver the Lease,  the Lease  Supplement  and the other  Operative
Agreements and to perform the transactions covered thereby to be performed on or
prior to the Delivery Date.

                  4. The Lease,  the Lease  Supplement  and the other  Operative
Agreements  have been duly executed and delivered by the Lessee and  constitutes
the legal,  valid and binding  agreement of the Lessee  enforceable  against the
Lessee in  accordance  with its  terms,  except as  enforcement  thereof  may be
limited by  applicable  bankruptcy,  insolvency,  reorganization,  moratorium or
other laws affecting the enforcement of creditors' rights generally,  as well as
awards by courts of relief  in lieu of the  remedy of  specific  performance  of
contractual  provisions  and by  general  principles  of equity  (regardless  of
whether such  enforceability  is considered in a proceeding in equity or at law)
as a court having  jurisdiction  may impose and by laws which may affect some of
such remedies but which do not make the available  remedies  inadequate  for the
substantial realization of the benefits provided therein.

                  5. There are no actions,  suits or proceedings  pending or, to
my knowledge,  threatened against or affecting the Lessee in any court or before
any governmental commission, arbitrator, board or authority which, if determined
adversely  to the Lessee,  could have a material  adverse  effect on the current
business or financial condition of the Lessee or on the ability of the Lessee to
perform its obligations  under the Lease and the other  Operative  Agreements to
which it is a party.

                  6. The Lessee is not in default under any indenture,  mortgage
or loan  agreement  of which I have  knowledge  and to which the Lessee is now a
party or by which it is bound  nor is the  Lessee  in  default  under  any other
agreement or  instrument of a material  nature of which I have  knowledge and to
which the Lessee is now a party or by which it is bound;  nor to my knowledge is
the  Lessee  in  violation  of any  law,  order,  injunction,  decree,  rule  or
regulation  applicable to the Lessee of any court or administrative  body, which
violation  could  materially  and  adversely  affect the  business,  property or
assets,  operations or condition,  financial or otherwise, of the Lessee; and no
event has occurred and is  continuing  which,  under the  provisions of any such
indenture,  mortgage or loan agreement,  with the lapse of time or the giving of
notice, or both, would constitute a default thereunder.

                  7. Except for the filing of the Lease and the Lease Supplement
for recordation  with the FAA, the placing on the Aircraft and on each Engine of
the plates  containing  the legends  referred to in Section 5.6 of the Lease and
the filing of a UCC-1 with the Colorado  Secretary of State,  no further filing,
recording or notarization of the Lease or of any other document,  and no further
action is necessary or advisable,  under the laws of any Governmental  Authority
in order to (a) fully  establish and protect  Lessor's title to, interest in and
property  right with  respect to the  Aircraft  and each  Engine as against  the
Lessee or any  third  party and to  ensure  that the  property  rights of Lessor
therein will have  priority in all respects  over the claims of all creditors of
the Lessee, and (b) ensure the validity, effectiveness and enforceability of the
Lease.  Lessor is entitled to the benefit of Section 1110 of the Bankruptcy Code
as in effect on the date hereof.

                  I do not  purport to be an expert on and do not  purport to be
generally  familiar with or qualified to express legal opinions based on any law
other than the laws of  Colorado  and the Federal  laws of the United  States of
America,  accordingly,  I express no legal opinion herein based upon the laws of
any other state.  However, for the purposes of this opinion, I have assumed that
the  laws of the  State  of New York  are  identical  to  those of the  State of
Colorado.

Yours very truly,





<PAGE>




                                    EXHIBIT E
                                       to
                            AIRCRAFT LEASE AGREEMENT

                    [LETTERHEAD OF APPROVED INSURANCE BROKER]



                             [Date of Delivery Date]


C.I.T. Leasing Corporation
1211 Avenue of the Americas
New York, New York  10036

         Re:      Insurance Coverage  for  One  Boeing  737-3L9  Aircraft  under
                  Aircraft Lease Agreement dated as of ________ __, 1999 between
                  C.I.T. Leasing Corporation and Frontier Airlines, Inc.  having
                  Manufacturer's  Serial  No.  24569   and   U.S.   Registration
                  No. N312FL

Gentlemen:

                  This report is delivered to you pursuant to the  provisions of
Section 2.3(5) of the Aircraft Lease Agreement dated as of _______ __, 1999 (the
"Lease")  between  C.I.T.   Leasing  Corporation  (the  "Lessor")  and  Frontier
Airlines, Inc. (the "Lessee"). We are the firm of independent aircraft insurance
brokers (the "Approved  Insurance  Broker") who have been appointed by Lessee to
deliver this report  pursuant to Section  2.3(5) of the Lease and we  understand
that Lessor has not objected to such  appointment.  Except as otherwise  defined
herein, the terms used herein shall have the meanings set forth in the Lease.

                  We have  reviewed  the Lease and  particularly  Article 12 and
Exhibit E thereof.  We are also fully familiar with the Certificate of Insurance
dated _________________,  1999 issued to you by the Approved Insurers as well as
the policies of insurance  evidenced thereby.  We have attached such Certificate
of Insurance setting forth the coverage applying to the Aircraft.

                  In our opinion the insurance  policies carried on the Aircraft
described in our Certificate of Insurance dated _____________________,  1999 are
subject  to terms and  conditions  which are normal for the market and comply in
all material respects with Article 12 and Exhibit E of the Lease.

                  We agree to advise  Lessor in writing  promptly of any default
in the  payment  of any  premium  and any other act or  omission  on the part of
Lessee  of  which  we have  knowledge  and  which  might  invalidate  or  render
unenforceable,  in whole or in part,  any insurance  required under the Lease on
the Aircraft, and we further agree to advise you in writing at least thirty (30)
days  (seven  (7)  days or  such  lesser  period  as  from  time to time  may be
applicable  in the case of war risk and allied  perils  insurance)  prior to any
lapse,  termination or cancellation of any such insurance or as soon as possible
in respect of non-renewal or automatic termination for War Risk.

Very truly yours,

[APPROVED INSURANCE BROKER]



By:_____________________________

Title:____________________________





<PAGE>




                                    EXHIBIT F
                                       to
                            AIRCRAFT LEASE AGREEMENT

                 SPECIAL PROVISIONS TO CERTIFICATE OF INSURANCE


                  The "special provisions" section of the Insurance  Certificate
shall provide as follows:

                  1. In accordance with the Aircraft Lease Agreement dated as of
April __, 1999 (the "Lease") between Lessor and Lessee,  it is agreed to include
Lessor and its successors and assigns, and their respective directors,  officers
and employees as  additional  insureds (the  "Additional  Insureds"),  designate
Lessor as owner of the Aircraft, and designate Lessor as loss payee (but without
imposing  upon the  Additional  Insureds  any  obligation  imposed  upon Lessee,
including, without limitation, the liability to pay any premiums).

                  2.  It is  agreed  that in  respect  of the  interests  of the
Additional  Insureds,  in the insurance coverage provided hereby, such insurance
coverage shall not be invalidated by any action or inaction of Lessee, and shall
insure the  Additional  Insureds,  regardless  of any breach or violation of any
warranty,  declaration  or  condition  contained in such  insurance  coverage by
Lessee or any other Person.

                  3. It is agreed that if the insurance coverage provided hereby
is canceled for any reason  whatsoever,  or is adversely changed in any way with
respect to the interests of the  Additional  Insureds,  or if such  insurance is
allowed to lapse for nonpayment of premium, such cancellation, adverse change or
lapse shall not be effective as to the Additional Insureds, for thirty (30) days
(and, with respect to war risk insurance,  seven (7) days or such shorter period
as shall be  customary on the London  market for such  insurance in such area of
the world, or ten (10) days in the event of nonpayment of premium) after receipt
by Lessor of written notice of such prospective cancellation, change or lapse.

                  4. It is agreed that, as against the Additional Insureds,  the
Insurers  waive  any  rights of  setoff,  counterclaim  or any other  deduction,
whether by  attachment or  otherwise,  and agree to waive rights of  subrogation
against the Additional Insureds.

                  5. The coverage provided hereunder is primary without right of
contribution  from any other  insurance  which may be carried by the  Additional
Insureds and, with respect to liabilities coverage,  shall operate as if it were
a separate policy for each insured,  without,  however  increasing the aggregate
limit of liability for the coverage or permitting  claims  recoverable under the
hull  policy to be  recoverable  as  liability  claims.  It is  agreed  that the
Additional  Insureds  have a right to carry  insurance in excess of the amounts,
provided  such  additional  insurance  does not reduce or  otherwise  affect the
coverage or amounts of insurance  required to be covered by Lessee under Article
12 of the Lease.

                  6. A 50/50  clause is in effect  between the all risk hull and
war risk coverages.

                  7. To the extent of any  reinsurance,  the insurance  coverage
provided  hereunder includes a cut-through  provision  permitting the Additional
Insureds to file claims and to obtain payment directly from the reinsures.

                  The  "coverage"  section of the  Insurance  Certificate  shall
include the following description:

Description of War Risk Coverage:

                  Loss of and/or damage to each Aircraft caused by:

         1.       War, invasion,  acts of foreign enemies,  hostilities (whether
                  war be declared  or not),  civil war,  rebellion,  revolution,
                  insurrection,  martial  law,  military  or  usurped  power  or
                  attempts at usurpation of power;

         2.       Strikes, riots, civil commotions or labor disturbances;

         3.       Any act of one or more  persons,  whether  or not  agents of a
                  sovereign  power,  for  political  or  terrorist  purposes and
                  whether the loss or damage  resulting  therefrom is accidental
                  or intentional;

         4.       Any malicious act or act of sabotage;

         5.       Confiscation,  nationalization, seizure, restraint, detention,
                  appropriation,  expropriation, requisition of title or use, by
                  or under the order of any government (whether civil,  military
                  or de facto) or public or local  authority,  including  by the
                  government of registry (if other than the United States);

         6.       Hijacking  or any  unlawful  seizure or  wrongful  exercise of
                  control  of the  Aircraft  or crew in  flight  (including  any
                  attempt  at such  seizure  or  control)  made by any person or
                  persons on board the  Aircraft  acting  without the consent of
                  Lessee.





<PAGE>



                           [This Exhibit to be Omitted
                              from FAA Filing Copy]

                                    EXHIBIT G
                                       to
                            AIRCRAFT LEASE AGREEMENT


                              MAINTENANCE RESERVES


     Lessee agrees to pay to Lessor Maintenance Reserves in the aggregate amount
of *  per Flight Hour and * per Cycle, payable on a monthly basis, allocated  as
follows (which "D" Check Airframe Reserve, Engine Reserves, Landing Gear Reserve
and Engine Life Limited Parts Reserves, will not be pooled or commingled):

     (a)  Airframe  Reserve.  Lessee  agrees to pay Lessor  within ten (10) days
following the last day of each Rent Period (the "Prior Period" provided that, at
the end of the first Rent Period,  the Prior Period shall mean the Delivery Date
up to the last day of the first Rent Period)  during the Term an amount equal to
* times the number of Flight Hours of operation  of the Airframe (excluding, for
purposes of this paragraph (a),  Landing Gear and the APU) for such Prior Period
(hereinafter referred to as the ""D" Check Airframe Reserve"). In the event that
Lessee  is  obligated  to  perform a "D"  Check  (or its  equivalent  structural
inspection)  on the  Airframe  during  the  Term of this  Lease,  the "D"  Check
Airframe  Reserve  shall be used to cover  Lessee's  Actual  Costs  incurred  in
completing  with respect to the Airframe,  all routine and non-routine "D" Check
tasks (or its equivalent) but shall not be used to cover modifications, interior
reconfiguration,  the accomplishment of service bulletins, the accomplishment of
Airworthiness Directives,  any deferred maintenance items and any repair of Time
Controlled Parts accomplished during the "D" Check (or its equivalent structural
inspection)  (for purposes of this  paragraph  (a), costs and expenses for which
the Lessee will be reimbursed  hereunder are referred to as ""D" Check  Airframe
Reimbursable Expenses").  In connection with the performance of any part of such
"D"  Check (or its  equivalent  structural  inspection),  Lessee  shall  present
written evidence  satisfactory to Lessor as to the workscope to be performed and
payment installments relating to the performance thereof in connection with such
"D" Check (or its equivalent  structural  inspection) and the amount of such "D"
Check  Airframe  Reimbursable  Expenses for approval by Lessor.  Upon receipt of
such written  evidence  (which shall  include  evidence of payment by Lessee for
such "D" Check Airframe  Reimbursable  Expenses claimed by Lessee), and provided
there then exists no Default or Event of Default,  Lessor shall reimburse Lessee
by paying to the Maintenance  Provider from the "D" Check Airframe  Reserve,  an
amount  equal  to the  lesser  of (i) the  amount  of such  "D"  Check  Airframe
Reimbursable  Expenses or (ii) the amounts  then held in the "D" Check  Airframe
Reserve.  If such  portion of the cost of the "D" Check for the  Airframe  to be
paid out of the "D" Check Airframe  Reserve exceeds the balance in the "D" Check
Airframe Reserve, Lessee will be required to pay such excess amount.

     (b) Engine  Reserves.  Lessee  agrees to pay to Lessor within ten (10) days
following the last day of each Rent Period (the "Prior Period" provided that, at
the end of the first Rent Period,  the Prior Period shall mean the Delivery Date
up to the last day of the first Rent Period)  during the Term an amount equal to
* times the number of Flight Hours of operation during  such  Prior  Period  for
each Engine (each, an "Engine Reserve" and collectively, the "Engine Reserves").
A separate  Engine Reserve shall be established  and maintained  with respect to
each  Engine.  Upon the  accomplishment  of any  Heavy  Engine  Maintenance  (as
hereinafter  defined)  accomplished  during a  Covered  Engine  Shop  Visit  (as
hereinafter  defined) for any Engine  during the Term,  then the Engine  Reserve
with  respect  to such  Engine  shall  be used to  reimburse  Lessee,  or pay at
Lessee's  direction,  for  Lessee's  Actual  Cost  incurred in  completing  such
maintenance  (for  purposes  of this  paragraph  (b),  Lessee's  Actual  Cost so
incurred is  referred to as "Engine  Reimbursable  Expenses").  As used  herein,
"Heavy Engine Maintenance" shall be defined as any overhaul,  refurbishment, hot
section inspection,  replacement of internal  time-limited  parts,  disassembly,
assembly  and testing  required  thereof  for each such  engine,  but  excluding
shipping  and  freight  charges,   engine  removal  and  installation   charges,
accomplishment   of   Airworthiness   Directives   and   Aeronautics   Authority
requirements,  and replacement,  repair or overhaul of external engine parts. As
used  herein,  "Covered  Engine  Shop  Visit"  shall be  defined as a shop visit
requiring a major disassembly of an engine and the removal and reinstallation of
internal  rotating  parts  where  such shop  visit was not the result of foreign
object  damage   ("F.O.D."),   ingestion,   accident,   faulty   maintenance  or
installation,  incident,  improper operations,  abuse, neglect, misuse, elective
parts replacement,  Airworthiness  Directive  compliance,  Aeronautics Authority
regulation compliance or covered by Manufacturer's service bulletins or which is
reimbursable  by a claim under the  Manufacturer's  warranties  or by  insurance
(with   deductibles   being  treated  as  reimbursable  by  insurance  for  this
exclusion).  Upon the accomplishment of any such Heavy Engine Maintenance during
a Covered Engine Shop Visit, Lessee shall present written evidence  satisfactory
to Lessor as to the  completion of such Heavy Engine  Maintenance to such Engine
and the costs  associated  therewith  for approval by Lessor.  Such Heavy Engine
Maintenance  shall  include a Build  Standard  (as  hereinafter  defined)  to be
mutually  agreed upon by Lessor and Lessee.  As used  herein,  "Build  Standard"
shall be  defined as a  reassembly  of an Engine  using  parts that will allow a
minimum number of Flight Hours and Cycles of operation  until the next scheduled
removal.  Upon receipt of such written evidence (which shall include evidence of
payment by Lessee for such Engine Reimbursable  Expenses claimed by Lessee), and
provided  there  then  exists  no  Default  or Event of  Default,  Lessor  shall
reimburse  Lessee,  or pay to such other Person as may be directed by Lessee, an
amount equal to the lesser of (i) the amount of the Engine Reimbursable Expenses
with  respect to such Engine or (ii) the amount then held in the Engine  Reserve
established  for such  Engine.  Lessee  acknowledges  that the amounts held with
respect to an Engine in an Engine  Reserve may be applied  only with  respect to
such Engine. If the cost of any Heavy Engine Maintenance  accomplished  during a
Covered  Engine  Shop  Visit for an Engine  exceeds  the  balance  in the Engine
Reserve established for such Engine,  Lessee will be required to pay such excess
amount for such Engine.

     (c) Landing Gear  Reserve.  Lessee  agrees to pay to Lessor within ten (10)
days  following  the last day of each Rent Period (the "Prior  Period"  provided
that,  at the end of the first  Rent  Period,  the Prior  Period  shall mean the
Delivery  Date up to the last day of the first Rent  Period)  during the Term an
amount equal to * times the number of Flight  Hours of operation of the Airframe
during such Prior Period for all Landing Gear on the Aircraft (the "Landing Gear
Reserve").  In the event  Lessee is  obligated  to  perform an  overhaul  of any
Landing  Gear in  accordance  with  the  Maintenance  Program  for the  Aircraft
(excluding  overhaul because of accident,  incident,  abuse,  misuse or elective
parts  replacement)  then the Landing  Gear  Reserve  shall be used to reimburse
Lessee,  or pay at Lessee's  direction  for  Lessee's  Actual  Cost  incurred in
completing  such overhaul (for purposes of this paragraph (c),  Lessee's  Actual
Cost so incurred is referred to as "Landing Gear Reimbursable  Expenses").  Upon
accomplishment  of any such  overhaul,  Lessee shall  present  written  evidence
satisfactory  to  Lessor as to the  completion  of such  overhaul  and the costs
associated  therewith  for  approval  by Lessor.  Upon  receipt of such  written
evidence  (which  shall  include  evidence of payment by Lessee for such Landing
Gear Reimbursable Expenses claimed by Lessee), and provided there then exists no
Default or Event of Default, Lessor shall disburse from the Landing Gear Reserve
with  respect to such Landing Gear as the Lessee shall direct an amount equal to
the lesser of (i) the amount of the Landing Gear  Reimbursable  Expenses or (ii)
the amount then held in the Landing  Gear  Reserve  with  respect to the Landing
Gear.  Lessee  shall be solely  responsible  for the costs of an overhaul of the
Landing Gear in excess of any balance in the Landing Gear Reserve.

     (d) Engine Life  Limited  Parts  Reserves.  Lessee  agrees to pay to Lessor
within ten (10) days  following  the last day of each Rent  Period  (the  "Prior
Period,"  provided  that, at the end of the first Rent Period,  the Prior Period
shall mean the Delivery Date up to the last day of the first Rent Period) during
the Term an amount  equal to * times the  number of Cycles of  operation  during
such Prior Period for each Engine (each,  an "Engine Life Limited Parts Reserve"
and collectively,  the "Engine Life Limited Parts Reserves").  A separate Engine
Life Limited Parts Reserve shall be established  and maintained  with respect to
each Engine.  Upon the replacement of any Engine Life Limited Part in any Engine
during a Term, the Engine Life Limited Parts Reserve with respect to such Engine
shall be used to reimburse  Lessee,  or pay at Lessee's  direction  for Lessee's
Actual Cost  incurred to purchase such Engine Life Limited Part (for purposes of
this paragraph (d),  Lessee's  Actual Cost so incurred is referred to as "Engine
Life Limited Parts Reimbursable Expenses"),  provided, however, Lessee shall not
use such Engine Life Limited Parts  Reserve to reimburse  Lessee for the cost of
any other expenses  associated  with the replacement of such Engine Life Limited
Part,  including the cost of shipping and freight charges,  engine  disassembly,
reassembly,  and testing  required  thereof,  engine  removal  and  installation
charges,   accomplishment  of  Airworthiness  Directives  and  Federal  Aviation
Regulation requirements, and replacement,  repair or overhaul of external engine
parts or if due to foreign object damage ("FOD"),  ingestion,  accident,  faulty
maintenance or installation,  incident,  improper  operations,  abuse,  neglect,
misuse,   elective  parts  replacement  or  covered  by  Manufacturer's  service
bulletins or which is reimbursable by a claim under the  Manufacturer's  service
bulletins  or  which  is  reimbursable  by  a  claim  under  the  Manufacturer's
warranties or by insurance  (with  deductibles  being treated as reimbursable by
insurance for this exclusion).

     Upon the purchase and  installation  into an Engine of any such Engine Life
Limited Part, Lessee shall present written evidence satisfactory to Lessor as to
the purchase and  installation  of such Engine Life Limited Part for approval by
Lessor. Upon receipt of such written evidence, and provided there then exists no
Default or Event of Default, Lessor shall reimburse Lessee, or pay to such other
Person as may be  directed by Lessee,  an amount  equal to the lesser of (i) the
amount of the Engine Life Limited  Parts  Reimbursable  Expenses with respect to
such Engine or (ii) the amount then held in the Engine Life Limited Part Reserve
established  for such  Engine.  Lessee  acknowledges  that the amounts held with
respect  to an Engine in any given  Engine  Life  Limited  Part  Reserve  may be
applied only with respect to such Engine. If the cost of any Engine Life Limited
Part purchased for an Engine exceeds the balance in the Engine Life Limited Part
Reserve established for such Engine,  Lessee will be required to pay such excess
amount for such Engine.

     (e) It is intended by Lessor and Lessee that  maintenance  on the  Aircraft
will be  performed  by the  Maintenance  Provider  pursuant  to the  Maintenance
Program.  Notwithstanding  anything to the contrary contained in this Exhibit G,
any maintenance on the Aircraft and the extent and nature of such maintenance to
be performed  shall be  conducted  by the Lessee or at a FAA  approved  facility
reasonably   acceptable   to  Lessor  and  Lessor  shall  be  entitled  to  have
representatives  present during the  performance of such  maintenance to oversee
such performance.  With respect to the Engines only, if the Maintenance Provider
provides maintenance  thereon,  Lessor shall not be responsible for any delay by
such Maintenance  Provider in the performance of such maintenance.  If, however,
Lessor  requires  another  maintenance  provider  selected  by Lessor to provide
maintenance  with respect to an Engine,  and if engine  maintenance  provided by
such third party is delayed for more than 90 days,  then Lessor will  provide to
Lessee a  substitute  engine  until  redelivery  to Lessee of the  Engine  being
serviced.
     (f)  Notwithstanding  anything  to the  contrary  herein,  the  Maintenance
Reserves set forth herein are based on maintenance  costs relating thereto based
on an assumed  Flight  Hour:Cycle  ratio of 2:1. To the extent the actual Flight
Hour:Cycle  ratio falls below 2:1 then the  applicable  rate of the  Maintenance
Reserves  will be  increased  by Lessor (no more  frequently  than  annually) in
correlation with the reduced Flight Hour:Cycle ratio.

     (g)  Notwithstanding  anything to the contrary contained in this Exhibit G,
Lessor may, at any time,  request in writing an  adjustment  of any  Maintenance
Reserve if, in the reasonable  opinion of Lessor,  the actual  maintenance  cost
(determined  as of the six month  period prior to such notice  unless  otherwise
agreed by Lessor and Lessee) of any of the Items for which Maintenance  Reserves
are established or any such items with respect to other aircraft owned or leased
by Lessee  exceed the amount in the  Maintenance  Reserve for such Item.  Lessor
agrees to consult with Lessee regarding any such proposed increase. In the event
that  Lessor  and  Lessee  are  unable to agree on an  appropriate  increase  in
Maintenance  Reserves  within  thirty (30) days after the date of such  request,
Lessor shall have the right to terminate this Lease effective as of the last day
of the then-current  Rent Period,  unless otherwise agreed by Lessor and Lessee;
provided,  however,  that  Lessor  may  adjust  upward,  but not  downward,  any
Maintenance  Reserve if Lessee changes its Maintenance  Program in such a manner
as would  require  an  increase  in such  Maintenance  Reserve  to meet  revised
Maintenance Program standards.



<PAGE>




                           [This Exhibit to be Omitted
                              from FAA Filing Copy]


                                    EXHIBIT H
                                       to
                            AIRCRAFT LEASE AGREEMENT


                              CERTAIN PRICING TERMS

               (a) Lessee  shall  pay  *  to  Lessor  as rental for the Aircraft
               ("Basic Rent") for each Rent  Period  in  advance  on  each  Rent
               Payment Date
 .
               (b) The Security Deposit Amount shall equal  *

               (c) The Insured Value shall equal  *



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                                       I-2

                                    EXHIBIT I
                                       to
                            AIRCRAFT LEASE AGREEMENT

                               DELIVERY CONDITIONS


                  On the  Delivery  Date,  the  Aircraft  shall be  delivered to
Lessee in  "as-is,  where-is"  condition  and  shall  conform  to the  following
requirements:

                  (1) The  Aircraft  shall have  a valid FAA registration number
and duly registered with the FAA in the name of Lessor.

                  (2) The  Aircraft,  Engines,  Landing  Gear,  APU,  and  Parts
(appliances) shall comply with all applicable Airworthiness Directives affecting
such model aircraft,  engines,  landing gears,  auxiliary power units, and parts
(appliances)  which by their terms require  compliance on or before the Delivery
Date, notwithstanding any waiver, deviation or time extension obtained by Lessor
from the FAA or otherwise.

                  (3) The  Aircraft  shall  have a  current  and  effective  FAA
certificate  of  airworthiness  and shall comply with all FAR  requirements  for
passenger  operation as a transport category  commercial  aircraft in accordance
with all applicable FARs, including without limitation,  FAR Part 121, except to
the extent such  requirements  relate to bridging  the  Aircraft  onto  Lessee's
Maintenance Program.

                  (4)  The  Aircraft  shall  be  in  full  compliance  with  the
Manufacturer's recommended corrosion prevention and control program ("CPCP"), or
such other corrosion  prevention and control program approved by the FAA for the
Aircraft, and with all structural inspection ("SI") items current.

                  (5) To the  extent not  already  accomplished  by Lessor,  all
discrepancies   found   and   listed  by   Lessor's   and   Lessee's   technical
representatives,  as a result of the test flight  described in Section 2.1(c) of
the Lease, shall be corrected by Lessee at Lessor's expense, pursuant to Section
2.1(c) of the Lease.

                  (6) Immediately prior to the delivery of the Aircraft,  Lessor
shall  accomplish a complete hot and cold section  borescope  inspection of each
Engine  and  the  APU,  to  be  performed   at  Lessor's   expense  by  Lessor's
representative  or an  agency  of  Lessor's  choosing,  in  accordance  with the
Manufacturer's  maintenance  manual.  All defects discovered as a result of such
inspections,  which  exceed  the  maintenance  manual  allowable  limits  for an
installed Engine or APU, as applicable,  shall be corrected at Lessor's expense.
Any defect that requires  reinspection prior to the next full "C" Check or 3,500
Flight Hours,  whichever is greater,  shall be considered a Watch Item and shall
be corrected at Lessor's expense.

                  (7) The Aircraft shall be equipped with fully  functional TCAS
and windshear equipment.

                  (8) All Aircraft  Documents and other  current and  historical
records shall be delivered with the Aircraft including, without limitation, time
logs  showing  Aircraft  and Engine  Flight  Hours and Cycles on any given date,
documents,  manuals  (revised up to and  including  the most  current  revisions
issued  by the  Manufacturer),  data,  overhaul  records,  log  books,  original
Aircraft  and  Engine  delivery  documents,  FAA  forms,  modification  records,
inspection  records  (including NDT  documentation  such as x-ray, eddy current,
etc.), and all other documentation pertaining to the Aircraft, Engines and Parts
as of the Delivery Date.



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                                TABLE OF CONTENTS
                                                                            Page

ARTICLE 1     DEFINITIONS...................................................   1


ARTICLE 2     DELIVERY AND ACCEPTANCE.......................................   7

              2.1.     Time and Place.......................................   7
              2.2.     A Lease Only.........................................   9
              2.3.     Conditions to Delivery of the Aircraft...............   9
              2.4.     Aircraft Configuration, etc..........................  10

ARTICLE 3     RENT AND TERM.................................................  11

              3.1.     Basic Rent...........................................  11
              3.2.     Maintenance Reserves and Supplemental Rent...........  11
              3.3.     Term.................................................  11
              3.4.     Place of Payment.....................................  11
              3.5.     Security Deposit.....................................  11
              3.6      Time is of the Essence...............................  13

ARTICLE 4     REPRESENTATIONS AND WARRANTIES; COVENANTS OF THE PARTIES......  13

              4.1.     Lessor's Representations and Warranties..............  13
              4.2.     Representations and Warranties of the Parties........  15

ARTICLE 5     POSSESSION; USE; LAWFUL INSURED OPERATIONS; MAINTENANCE;
              REGISTRATION AND INSIGNIA; MAINTENANCE RESERVES...............  16

              5.1.     Possession...........................................  16
              5.2.     Assignment by Lessee.................................  17
              5.3.     Use..................................................  17
              5.4.     Lawful Insured Operations............................  18
              5.5.     Maintenance..........................................  18
              5.6.     Registration and Insignia............................  19
              5.7.     Maintenance Reserves.................................  20
              5.8.     Application of Reserves Upon Aircraft Return.........  20
              5.9.     Concerning Reserves..................................  20

ARTICLE 6     INSPECTION; FINANCIAL AND AIRCRAFT INFORMATION................  21

              6.1.     Inspection...........................................  21
              6.2.     Financial Information................................  21
              6.3.     Aircraft Information.................................  22
              6.4      Other Information....................................  22

ARTICLE 7     COVENANTS.....................................................  23

              7.1.     Lessee's Covenants...................................  23

ARTICLE 8     NO SET-OFF, COUNTERCLAIM, ETC.................................  24

              8.1.     No Set-off, Counterclaim, etc........................  24

ARTICLE 9     REPLACEMENT OF PARTS; ALTERATIONS, MODIFICATIONS AND
              ADDITIONS.....................................................  25

              9.1.     Replacement of Parts.................................  25
              9.2.     Title to Replaced and Replacement Parts..............  25
              9.3.     Alterations, Modifications and Additions.............  25
              9.4.     Title to Parts.......................................  28

ARTICLE 10    TAX INDEMNITY.................................................  28

              10.1.    Scope................................................  28
              10.2.    Report...............................................  29
              10.3.    After-Tax Nature of Indemnity........................  30
              10.4.    Payment of Taxes and Indemnities.....................  30
              10.5.    Contest..............................................  30
              10.6.    Lessor...............................................  32
              10.7.    Survival.............................................  32

ARTICLE 11    EVENTS OF LOSS................................................  32

              11.1.    With Respect to the Aircraft.........................  32
              11.2.    With Respect to an Engine............................  32
              11.3.    Application of Payments from Governmental
                       Authorities..........................................  33
              11.4.    Application of Payments During Existence of Event
                       of Default...........................................  34
              11.5.    Replacement Aircraft.................................  34

ARTICLE 12    INSURANCE.....................................................  34

              12.1.    Public Liability and Property Damage Liability
                       Insurance............................................  34
              12.2.    Insurance Against Loss or Damage to the Aircraft.....  35
              12.3.    Application of Proceeds in an Event of Loss of
                       Aircraft.............................................  36
              12.4.    Application of Proceeds in the Absence of an
                       Event of Loss........................................  37
              12.5.    Reports, etc.........................................  37
              12.6.    Lessor's Additional Insurance........................  37
              12.7.    Lessee's Additional Insurance........................  38
              12.8.    Insurance Against Year 2000 Risks and Liability......  38

ARTICLE 13    GENERAL INDEMNIFICATION.......................................  38

              13.1.    Scope................................................  38
              13.2.    Lessee's Release.....................................  39
              13.3.    Repayment............................................  39
              13.4.    Timing of Payment....................................  39
              13.5.    Exclusion............................................  39
              13.6.    After-Tax Nature of Indemnity........................  39
              13.7.    Survival.............................................  40

ARTICLE 14    LIENS.........................................................  40

              14.1.    Permitted Liens......................................  40
              14.2.    Engine Liens.........................................  40

ARTICLE 15    FAA RECORDATION AND FURTHER ASSURANCES........................  41

              15.1.    FAA Recordation......................................  41
              15.2.    Further Assurances...................................  41

ARTICLE 16    RETURN OF ITEMS AND RECORDS...................................  41

              16.1.    Time and Place.......................................  41
              16.2.    Condition............................................  42
              16.3.    Corrections and Subsequent Corrections...............  42
              16.4.    Fuel.................................................  42
              16.5.    Legal Status Upon Return.............................  42

ARTICLE 17    EVENTS OF DEFAULT.............................................  43

              17.1.    Lessee's Defaults....................................  43

ARTICLE 18    RIGHTS AND REMEDIES...........................................  45

              18.1.    Remedies.............................................  45
              18.2.    Further Rights.......................................  47
              18.3.    Remedies Cumulative..................................  48
              18.4.    Concerning Remedies..................................  48

ARTICLE 19    MISCELLANEOUS.................................................  49

              19.1.    Construction, Applicable Law; Jurisdiction...........  49
              19.2.    Notices..............................................  50
              19.3.    Lessor's Right to Perform............................  50
              19.4.    Counterparts.........................................  50
              19.5.    Assignment by Lessor.................................  51
              19.6.    Survival.............................................  51
              19.7.    Entire Agreement.....................................  51
              19.8.    Successors and Assigns...............................  52
              19.9.    Brokers..............................................  52
              19.10.   Transaction Costs....................................  52
              19.11.   Quiet Enjoyment......................................  52
              19.12.   Time Is of the Essence...............................  52
              19.13.   Confidentiality......................................  52
              19.14.   DISCLAIMER OF CONSEQUENTIAL DAMAGES..................  53
              19.15.   Tax Treatment........................................  53
              19.17.   Dating...............................................  53


Exhibits
Exhibit A              Description of Aircraft and Engines
Exhibit B              Form of Lease Supplement
Exhibit C              Return Condition Requirements
Exhibit D              Lessee's Counsel Opinion
Exhibit E              Letter of Insurance Broker
Exhibit F              Special Provisions to Certificate of Insurance
Exhibit G              Maintenance Reserves
Exhibit H              Certain Pricing Terms
Exhibit I              Delivery Conditions