AIRCRAFT LEASE AGREEMENT


                                     between


                            Indigo Aviation AB (publ)

                                    as Lessor


                                       and


                             Frontier Airlines, Inc

                                    as Lessee

                            Dated as of 15 March 1999





Aircraft Make and Model:                     One Boeing 737-3L9
Aircraft Manufacturer's Serial Number:       26440
Aircraft Registration Mark:                                    N310FL
Engines Make and Model:                      CFM56-3B2
Engines Serial Numbers:                      726422 and 726492



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

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

<PAGE>


TABLE OF CONTENTS

1. DEFINITIONS................................................................2
   1.1 Definitions............................................................2
   1.2 Construction..........................................................12
2. REPRESENTATIONS AND WARRANTIES............................................14
   2.1 Lessee's Representations and Warranties...............................14
   2.2 Lessor's Representations and Warranties...............................17
   2.3 Survival of Representations and Warranties............................18
3. CONDITIONS PRECEDENT......................................................18
   3.1 Lessor's Conditions Precedent.........................................18
   3.2 Waiver................................................................20
   3.3 Lessee's Conditions Precedent.........................................20
   3.4 Waiver................................................................22
4. DELIVERY CONDITION AND INSPECTION OF AIRCRAFT.............................22
   4.1 Lessee Selection of Aircraft..........................................22
   4.2 Condition at Delivery.................................................22
   4.3 Lessee Inspection and Acceptance Flight...............................22
   4.4 Delivery of Aircraft to Lessee........................................22
   4.5 Lessee's Failure to take Delivery.....................................23
5. LEASE TERM................................................................23
   5.1 Initial Lease Term and Base Lease Term................................23
   5.2 Extension Lease Option................................................23
   5.3 Expiry Date...........................................................23
   5.4 Survival of Certain Lessee Obligations................................24
   5.5 Risk..................................................................25
6. DELIVERY..................................................................25
   6.1 Location and Time of Delivery.........................................25
   6.2 Delay or Failure in Delivery..........................................25
7. RENT......................................................................27
   7.1 Initial Rent Dates....................................................27
   7.2 Amount of Initial Rent................................................27
   7.3 Basic Rent Period.....................................................27
   7.4 Time of Payment of Basic Rent.........................................27
   7.5 Amount of Basic Rent..................................................27
   7.6 Maintenance Reserves..................................................28
   7.7 Supplemental Rent for Excess Cycles...................................28
8. SECURITY DEPOSIT..........................................................28
   8.1 Security Deposit......................................................28
   8.2 Letter of Credit......................................................28
   8.3 Lessor's Rights.......................................................28
9. MAINTENANCE RESERVES......................................................29
   9.1 Amount................................................................29
   9.2 Payments..............................................................29
   9.3 Adjustment............................................................29
   9.4 Release of Maintenance Reserves.......................................30
   9.5 Costs in Excess of Maintenance Reserves...............................31
   9.6 Reimbursement after Expiry Date.......................................31
10. PAYMENTS.................................................................32
   10.1 Account for Lessee Payments..........................................32
   10.2 Default Interest.....................................................32
   10.3 Absolute Obligations.................................................32
   10.4 Application of Payments to Lessor....................................33
   10.5 Currency Indemnity...................................................33
   10.6 Set-off..............................................................34
   10.7 Time for Payments....................................................34
11. LESSOR'S COVENANTS.......................................................34
   11.1 Quiet Enjoyment......................................................34
   11.2 Lessor Obligations Following Expiry Date.............................34
12. LESSEE'S COVENANTS.......................................................35
   12.1 Duration.............................................................35
   12.2 Information..........................................................35
   12.3 Lessor Visits........................................................37
   12.4 Periodic Estoppel Certificates.......................................37
   12.5 Airport and Navigation Charges.......................................37
   12.6 Operation of Aircraft................................................38
   12.7 Areas of Operation...................................................38
   12.8 Non-Prejudicial Action...............................................39
   12.9 Non-Representation of Lessor.........................................39
   12.10 Inspection..........................................................39
   12.11 Registration........................................................41
   12.12 Name Plates.........................................................41
   12.13 Geneva Convention...................................................42
   12.14 Merger and Shareholding.............................................42
   12.15 Ownership...........................................................42
   12.16 Maintenance of Principal Business Place.............................43
   12.17 Maintenance of Flight Records.......................................43
13. POSSESSION...............................................................43
   13.1 No Relinquishment of Possession......................................43
   13.2 Copy of Sublease.....................................................46
   13.3 Lessee Primarily Liable..............................................46
   13.4 Recognition of Rights................................................47
14. SECURITY INTERESTS.......................................................47
   14.1 Title................................................................47
   14.2 No Security Interests................................................47
   14.3 Base of Aircraft.....................................................47
   14.4 Notice to Lessor.....................................................47
   14.5 Procure Release......................................................48
15. MAINTENANCE AND REPAIR...................................................48
   15.1 General Obligations..................................................48
   15.2 Specific Obligations.................................................49
16. REPLACEMENT OF PARTS.....................................................50
   16.1 Replacement of Parts.................................................51
   16.2 Title to Replacement Parts...........................................51
   16.3 Pooling of Parts.....................................................51
   16.4 Alterations..........................................................52
   16.5 Removal of Parts.....................................................53
   16.6 Substitution of Engine...............................................53
   16.7 Temporary Removal of Parts...........................................54
   16.8 Parts Incapable of Transfer..........................................56
17. MANUFACTURER'S WARRANTIES................................................56
   17.1 Authorization........................................................56
   17.2 Proceeds.............................................................57
   17.3 Agreements with Manufacturers........................................57
   17.4 No Operation Contrary to Warranties..................................57
18. DISCLAIMERS..............................................................58
   18.1 General..............................................................58
   18.2 As Is, Where Is......................................................58
   18.3 Waiver of Warranty of Description....................................59
   18.4 Lessee Acknowledgement...............................................59
   18.5 Lessee Waiver........................................................59
   18.6 Lessee Examination of Aircraft.......................................59
   18.7 No Lessor Liability for Losses.......................................60
   18.8 Exclusion............................................................60
   18.9 Waiver...............................................................60
   18.10 No Waiver...........................................................61
   18.11 Confirmation........................................................61
19. INDEMNITIES..............................................................61
   19.1 General Indemnity....................................................61
   19.2 Exception to General Indemnity.......................................62
   19.3 Time of Payment......................................................62
   19.4 Survival of General Indemnity........................................62
   19.5 Notice to Lessee.....................................................62
20. TAXATION.................................................................63
   20.1 Gross-up.............................................................63
   20.2 Tax Indemnity........................................................63
   20.3 Value Added Taxes....................................................65
   20.4 Taxation of Indemnity Payments.......................................65
   20.5 Benefit of Indemnities...............................................65
   20.6 Lessor Indemnification...............................................65
   20.7 Survival of Tax Indemnities..........................................66
   20.8 Mitigation and Co-operation..........................................66
   20.9 Furnishing Forms.....................................................66
21. INSURANCE................................................................66
   21.1 Insurances...........................................................66
   21.2 Reinsurance..........................................................68
   21.3 Requirements.........................................................68
   21.4 Insurance Covenants..................................................68
   21.5 Renewal of Insurances................................................70
   21.6 Failure to Insure....................................................70
   21.7 Continuation of Insurances...........................................71
   21.8 Application of Insurance Proceeds....................................71
   21.9 Pursuit of Claims....................................................72
22. TOTAL LOSS AND REQUISITION...............................................72
   22.1 Total Loss Prior to Delivery.........................................72
   22.2 Total Loss After Delivery............................................72
   22.3 Total Loss of Engines................................................73
   22.4 Requisition..........................................................73
23. REDELIVERY...............................................................75
   23.1 Redelivery of Aircraft...............................................75
   23.2 Final Inspection.....................................................76
   23.3 Discrepancies........................................................76
   23.4 Non-compliance.......................................................76
   23.5 Acknowledgement......................................................77
   23.6 Storage etc..........................................................77
24. EVENTS OF DEFAULT........................................................77
   24.1 Notice...............................................................77
   24.2 Events...............................................................78
   24.3 Lessor's Rights......................................................81
   24.4 Default Payments.....................................................82
   24.5 Cumulative Rights....................................................83
25. ASSIGNMENT AND TRANSFER..................................................83
   25.1 By Lessee............................................................83
   25.2 By Lessor............................................................83
   25.3 Assignment to Lender.................................................84
   25.4 Lessee Co-operation..................................................84
   25.5 Lessor Includes Lessor's Assignee and Lender.........................84
26. MISCELLANEOUS PROVISIONS.................................................85
   26.1 Rights Cumulative, Waivers...........................................85
   26.2 Delegation...........................................................85
   26.3 Expenses.............................................................85
   26.4 Time of Essence......................................................86
   26.5 Entire Agreement.....................................................86
   26.6 Further Assurances...................................................86
   26.7 Language.............................................................86
   26.8 Variation............................................................86
   26.9 Invalidity of any Provision..........................................86
   26.10 Survival............................................................87
   26.11 Reimbursement.......................................................87
   26.12 Press Releases......................................................87
   26.13 Power of Attorney...................................................87
   26.14 Usury Laws..........................................................87
   26.15 Confidentiality.....................................................88
   26.16 Counterparts........................................................88
   26.17 Bankruptcy..........................................................88
27. NOTICES..................................................................89
28. GOVERNING LAW AND JURISDICTION...........................................90
   28.1 New York Law.........................................................90
   28.2 Non-exclusive Jurisdiction in New York...............................90
   28.3 Service of Process Agent.............................................90
   28.4 Waiver...............................................................90





SCHEDULES

Schedule 1    Aircraft Specification                                        102
              Annexure 1Aircraft Documents                                  104
Schedule 2    Certain Business Terms                                        107
Schedule 3    Insurance Requirements                                        110
Schedule 4    Delivery Conditions                                           115
Schedule 5    Acceptance Certificate                                        123
Schedule 6    Officer's Certificate                                         126
Schedule 7    Letter of Authority                                           128
Schedule 8    Power of Attorney                                             129
Schedule 9    Opinion of Lessee Counsel                                     130
Schedule 10   Monthly Aircraft Utilisation and Status Report                135
Schedule 11   Letter of Quiet Enjoyment                                     137
Schedule 12   Return Conditions                                             138
Schedule 13   Return Acceptance Certificate                                 145
              Annexure 1Aircraft Documents                                  148
              Annexure 2Discrepancies                                       151
Schedule 14   Lease Supplement                                              152



<PAGE>



THIS AGREEMENT is made as of 15 March 1999.

BETWEEN:

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

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

WHEREAS

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

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

In  consideration of and subject to the mutual  covenants,  terms and conditions
contained in this Agreement,  Lessor hereby agrees to lease to Lessee and Lessee
hereby  agrees to lease  from  Lessor  the  Aircraft  for the Lease Term and the
parties further agrees as follows:



<PAGE>



1.       DEFINITIONS

1.1      Definitions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Base Lease Expire Date means the date  falling 65 months from the Initial  Lease
Expiry Date.;

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

Basic Rent means all amounts payable pursuant to Clause 7.5;

Basic Rent Period means each period ascertained in accordance with Clause 7.3;

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

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

Conditions Precedent means the conditions specified in Clause 3;

CPCP means corrosion prevention control program;

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

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

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

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

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

Delivery means delivery of the Aircraft by Lessor to Lessee pursuant to Clause 6

Delivery Date means the date on which Delivery occurs;

Delivery Location means  Munich, Germany  or  such other location as the parties
may agree;

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

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

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

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

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

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

Engine Manufacturer means CFM International;

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

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

Event of Default means any event specified in Clause 24.2;

Expiry Date means the date determined in accordance with Clause 5.3;

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

Extension Lease Option means the option set out in Clause 5.2;

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

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

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

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

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

Financial Indebtedness means any indebtedness in respect of:

(a)           moneys borrowed or raised;

(b)           payments due under finance or operating leases;

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

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

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

Government Entity means:

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

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

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

Headlease  Agreement means the aircraft headlease agreement entered into between
Owner  Trustee and Lessor  dated as of even date hereof and which is being filed
with FAA simultaneously herewith;

Indemnitees means Lessor,  Owner Trustee,  Lender or any other person identified
by Lessor to have an interest in the Transaction  Documents and their respective
successors  and  assigns,  shareholders,   subsidiaries,  affiliates,  partners,
contractors, directors, officers, servants, agents and employees;

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

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

Initial Rent means all amounts payable pursuant to Clause 7.2 ;

Initial Rent Dates means the dates pursuant to Clause 7.1;

Insurances has the meaning ascribed to it in Clause 21.1;

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

Lease Term means the Initial  Lease Term, the Base Lease Term and, upon exercise
of the Lease Extension Option, the Extension Lease Term;

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

Lessor Lien means:

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

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

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

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

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

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

Lessor Taxes means Taxes:

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

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

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

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

LIBOR means the rate per annum which is the offered  rate (if any)  appearing on
page 3750 of the  Telerate  screen  (or any  replacement  page)  which  displays
British Bankers  Association  Interest  Settlement Rates for deposits in Dollars
equal,  or as close as  practicable,  to the period for which such rate is to be
determined at 11:00 a.m. (London time) on the relevant date;

LLP means life limited part;

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

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

Maintenance  Program  means  Lessee's  maintenance  program as  approved  by the
Aviation Authority provided in compliance with the MPD or such other maintenance
program as Lessor may, in its absolute discretion, approve in writing;

Maintenance Reserves means all amounts payable pursuant to Clause 9.1;

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

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

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

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

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

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

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

Owner Trustee means First Security Bank, National Association;

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

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

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

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

Permitted Air Carrier has the meaning ascribed to it in Clause13.1.1;

Permitted Lien means:

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

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

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

(d)           any Lessor Lien; and

(e)           any Security Interest over the Aircraft created by Lessee with the
              written consent of Lessor,

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

Present Lessee means Maersk Air;

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

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

Rent  means  Initial  Rent  or  Basic Rent, as the case may be, and Supplemental
Rent;

Rent Date  means  the  Initial  Rent Dates and the day preceding each Basic Rent
Period;

Replacement Engine means an engine complying with Clause 16.6;

Return Conditions means the conditions specified in Schedule 12;

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

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

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

Side  Letter  means  the  Side Letter No. 1 to this Agreement between Lessor and
Lessee (a copy of which has not  been  included in  the FAA  counterpart of this
Agreement);

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

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

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

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

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

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

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

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

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

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

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

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

Total Loss Date means:

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

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

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

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

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

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

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

Transaction Documents means

(a)           this Aircraft Lease Agreement;

(b)           the Acceptance Certificate;

(c)           the Assignment of Insurances;

(d)           the  acknowledgement  by Lessee of the security  assignment or the
              pledge of, inter alia,  this Agreement in favour of the Lender and
              any documents  duly  executed  pursuant to any of the foregoing by
              Lessee or Lessor;

(e)           the Lease Supplement; and

(f)           the Side Letter;

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

1.2      Construction

1.2.1    References in this Agreement to:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1.2.2    Headings are for ease of reference only.

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


2.       REPRESENTATIONS AND WARRANTIES

2.1      Lessee's Representations and Warranties

              Lessee  represents  and warrants to Lessor as of execution of this
              Agreement and each other Transaction  Document, as of the Delivery
              Date and as of each date on which Rent is paid  hereunder  each of
              the following representations and warranties.

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

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

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

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

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

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

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

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

(ix)                     No  restrictions  on  Payments:   As  of  the  date  of
                         execution of this  Agreement,  there are under the laws
                         of the State of Incorporation  no present  restrictions
                         on  Lessee  to  make  the  payments  required  by  this
                         Agreement.

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

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

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

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

(xiv)                    Financial  Statements:  The  balance  sheet  and  other
                         financial  statements for Lessee for the financial year
                         which  ended  31st  of  March  1998  were  prepared  in
                         accordance  with  accounting  principles   consistently
                         applied  and   generally   accepted  in  the  State  of
                         Incorporation.

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

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

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

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

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

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

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

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

2.2      Lessor's Representations and Warranties

              Lessor  represents  and warrants to Lessee as of the Delivery Date
each of the following representations and warranties.

(i)                      Title to Aircraft:  Lessor  warrants  that title to the
                         Aircraft  will  be  vested  in  Owner  Trustee  and the
                         Aircraft  shall  be  free  and  clear  of any  and  all
                         Security Interest except for the Security  Interests of
                         Owner Trustee and Lessor under the Headlease  Agreement
                         and of Lender.

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

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

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

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

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

2.3      Survival of Representations and Warranties

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


3.       CONDITIONS PRECEDENT

3.1      Lessor's Conditions Precedent

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

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

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

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

(iii)                    Accounts:  The  balance  sheet  and   other   financial
                         statements of  Lessee  for  the  financial  year  ended
                         March 31 1998;


(iv)                     Licences:  Copies of Lessee's air transport license and
                         air operator's  certificate issued by the US Department
                         of Transportation and FAA, respectively;

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

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

(vii)                    Opinions: Legal opinions from:

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

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

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

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

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


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

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

3.1.3    No Default shall have occurred and be continuing.

3.2      Waiver

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

3.3      Lessee's Conditions Precedent

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

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

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

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

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

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

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

3.4

<PAGE>


Waiver

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


4.       DELIVERY CONDITION AND INSPECTION OF AIRCRAFT

4.1      Lessee Selection of Aircraft

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

4.2      Condition at Delivery

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

4.3      Lessee Inspection and Acceptance Flight

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

4.4      Delivery of Aircraft to Lessee

              Subject to Lessee having  complied with the  conditions set out in
              Clause 4.2, or the waiver  thereof by Lessor,  Lessor will deliver
              the Aircraft to Lessee at the Delivery Location. Provided that the
              Aircraft is in the  condition  required  by Clause  4.2,  upon the
              tender of the Aircraft by Lessor to Lessee, Lessee will accept the
              Aircraft and the date of tender by Lessor to Lessee will be deemed
              to be the  Delivery  Date for all purposes  under this  Agreement,
              including,  but not  limited  to,  the  commencement  of  Lessee's
              obligation to pay Rent hereunder. Lessee shall execute and deliver
              the Acceptance Certificate to Lessor on the Delivery Date.

4.5      Lessee's Failure to take Delivery

              If Lessee  fails to (i) comply with the  conditions  contained  in
              Clauses  3.1 so as to allow  Delivery to take place upon tender or
              (ii) take  delivery of the  Aircraft  when  properly  tendered for
              Delivery by Lessor in the  condition  required  hereunder,  Lessee
              will  indemnify  Lessor for all costs and  expenses,  directly  or
              indirectly, incurred by Lessor as a result thereof.


5.       LEASE TERM

5.1      Initial Lease Term and Base Lease Term

              Lessor  shall lease the  Aircraft to Lessee and Lessee  shall take
              the Aircraft on lease in  accordance  with this  Agreement for the
              duration  of the  Initial  Lease Term and the Base Lease Term and,
              subject to Clause 5.2, the Extension Lease Term.

5.2      Extension Lease Option

              So long as no Default has  occurred  and is  continuing  hereunder
              both on the date of  exercise  of the option and from such date to
              the  commencement  date of the Extension  Lease Term,  Lessee will
              have the option (the  Extension  Lease  Option) to extend the Base
              Lease Term under this  Agreement  for the period of the  Extension
              Lease Term.  In order to exercise  such  option,  Lessee must give
              written  notice to Lessor not less than nine (9)  months  prior to
              the Base Lease Expiry Date.

5.3      Expiry Date

              The Expiry Date shall be the Base Lease  Expiry Date or, if Lessee
              has  exercised the Lease  Extension  Option,  the Extension  Lease
              Expiry Date subject to the following provisions:

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

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

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

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

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

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

5.4      Survival of Certain Lessee Obligations

5.4.1         For the avoidance of doubt,  in respect of Clauses 5.3 (i),  (ii),
              (v) and (vi) the  obligations  of Lessee in  respect of payment of
              Rent and all other  obligations  shall  continue to be payable and
              valid in respect of those days prior to the  redelivery  to Lessor
              of the Aircraft in the condition  required  under Clause 23.1, and
              in  respect  of Clause 5.3 (iv) such  obligations  shall  continue
              until payment of the Total Loss Proceeds.

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

5.5      Risk

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

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


6.       DELIVERY

6.1      Location and Time of Delivery

              Lessor  will  deliver  the  Aircraft  to  Lessee  at the  Delivery
              Location on or about the  Scheduled  Delivery  Date,  which is the
              date when Present  Lessee shall  redeliver the Aircraft to Lessor.
              Lessor  will  notify  Lessee  from time to time and in a as timely
              manner as is  possible of any  changes to the  Scheduled  Delivery
              Date.

6.2      Delay or Failure in Delivery

6.2.1         Lessee and  Lessor  expressly  acknowledge  that  Delivery  of the
              Aircraft to Lessee is subject to and conditioned  upon delivery of
              the  Aircraft  by  Present  Lessee to Lessor.  Lessor  will not be
              liable for any loss or  expense,  or any loss of  profit,  arising
              from any delay or failure in Delivery to Lessee  unless such delay
              or failure arises as a direct  consequence of the gross negligence
              or wilful default of Lessor, and in no event will Lessor be liable
              for any delay or failure that is caused by any failure,  breach or
              delay on the part of Present Lessee.

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


7.       RENT

7.1      Initial Rent Dates

              Shall be the Initial Rent Dates (first and second)  determined  in
accordance with Schedule 2.

7.2      Amount of Initial Rent

              The Initial  Rent shall be the amounts set out as Initial  Rent in
Schedule 2.

7.3      Basic Rent Period

              The first Basic Rent Period  shall  commence on the day  following
              the  Initial  Lease  Expiry  Date and each  subsequent  Basic Rent
              Period shall  commence on the date  succeeding the last day of the
              previous  Rent  Period  within the Base Lease Term (and  Extension
              Lease Term,  if  applicable).  Each Basic Rent Period shall end on
              the date immediately  preceding the numerically  corresponding day
              one (1) month thereafter, except that:

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

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

7.4      Time of Payment of Basic Rent

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

7.5      Amount of Basic Rent

              The Basic  Rent  payable  on each Rent Date  during the Base Lease
              Term and the  Extension  Lease Term, if  applicable,  shall be the
              amount set out as Basic Rent in Schedule 2.

7.6      Maintenance Reserves

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

7.7      Supplemental Rent for Excess Cycles

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


8.       SECURITY DEPOSIT

8.1      Security Deposit

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

              Upon Lessor's receipt of the additional Security Deposit set forth
              in Clause 8.2 the  initial  deposit  set forth in this  Clause 8.1
              will be credited to the payment of Rent payable during the Initial
              Lease Term and, if applicable, during the Base Lease Term.

8.2      Letter of Credit

              Lessee shall provide Lessor with an additional Security Deposit in
              the form of an irrevocable,  assignable,  standby letter of credit
              in favour of Lessor in the  amount  and  issued by a major US Bank
              and in the form and substance  acceptable by Lessor. The Letter of
              Credit will serve as security for the performance by Lessee of its
              obligations   under  the  Transaction   Documents  and  the  Other
              Agreements.

8.3      Lessor's Rights

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

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

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

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


9.       Maintenance reserves

9.1      Amount

              Lessee  shall  during the Lease Term pay  Maintenance  Reserves to
              Lessor in the amount set forth in Schedule 2.

9.2      Payments

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

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

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

9.3      Adjustment

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

9.4      Release of Maintenance Reserves

9.4.1    Airframe Maintenance Reserves

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

9.4.2    Engine Maintenance Reserves

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

9.4.3    Landing Gear Maintenance Reserves

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

9.4.4    APU Maintenance Reserves

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

9.4.5    Exclusion

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

9.4.6    Remaining balance

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

9.5      Costs in Excess of Maintenance Reserves

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

9.6      Reimbursement after Expiry Date

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


10.      Payments

10.1     Account for Lessee Payments

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

              Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.'s account
              ABA reference 021000238, account number 65830747 with
              Morgan Guaranty Trust Company of New York
              23 Wall Street
              New York, New York
              United States of America
              Att. Mr Richard Polkerman, reference Corporate Finance
              Reference Maersk-Indigo

              or to such other account as Lessor may from time to time notify to
              Lessee in writing.

10.2     Default Interest

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

10.3     Absolute Obligations

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

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

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

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

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

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

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

10.4     Application of Payments to Lessor

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

10.5     Currency Indemnity

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

10.6     Set-off

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

10.7     Time for Payments

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


11.      Lessor's covenants

11.1     Quiet Enjoyment

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

11.2     Lessor Obligations Following Expiry Date

              Within five (5) Business Days after:

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

(ii)                     payment  received  by  Lessor  of  the   Agreed   Value
                         following a Total Loss after the Delivery Date;  or  in
                         each case such  later  time  as  Lessor  is  reasonably
                         satisfied  that Lessee has  irrevocably  paid to Lessor
                         all  amounts  that may then be  outstanding  or  become
                         payable under  the  Transaction Documents and the Other
                         Agreements, Lessor shall (provided that no  Default has
                         occurred and is continuing):

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

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

(c)                                return the Letter of Credit.


12.      lessee's covenants

12.1     Duration

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

12.2     Information

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

12.2.2   Lessee shall furnish to Lessor:

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

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

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

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

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

12.2.3 Lessee shall promptly notify Lessor in writing:

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

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

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

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

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

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

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

12.3     Lessor Visits

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

12.4     Periodic Estoppel Certificates

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

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

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

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

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

12.5     Airport and Navigation Charges

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

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

12.6     Operation of Aircraft

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

12.7     Areas of Operation

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

12.8     Non-Prejudicial Action

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

12.9     Non-Representation of Lessor

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

12.10    Inspection

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

12.11    Registration

12.11.1       Lessee shall at its own expense  procure that the Aircraft and the
              interests  of the  parties  set  out  below  is  duly  registered,
              recorded or filed with the Aviation  Authority (to the extent that
              the Aviation  Authority  permits  registration  in that manner) as
              follows:

(i)                      Owner Trustee as owner;

(ii)                     the first priority security interest of Lender

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

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

12.11.2       Lessee  shall at its own expense  provide that at all times during
              the  Lease  Term,  the  Aircraft  possesses  a valid  current  FAA
              Certificate  of  Airworthiness,  and all such other  certificates,
              licenses,  permits  and  authorizations  as are from  time to time
              required for the use and  operation of the Aircraft for the public
              transport of passengers or cargo from any Government Entity having
              jurisdiction  in any country,  state,  province or other political
              subdivision  in or over  which  the  Aircraft  is flown  including
              without limitation any Aviation Authority.

12.12    Name Plates

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

12.13    Geneva Convention

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

12.14    Merger and Shareholding

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

12.15    Ownership

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

12.16    Maintenance of Principal Business Place

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

12.17    Maintenance of Flight Records

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


13.      Possession

13.1     No Relinquishment of Possession

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

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

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

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

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

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

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

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

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

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

(i)                      no Default has occurred and is continuing;

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

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

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

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

(i)                      no Default has occurred and is continuing;

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

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

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

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

13.2     Copy of Sublease

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

13.3     Lessee Primarily Liable

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

13.4     Recognition of Rights

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


14.      Security Interests

14.1     Title

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

14.2     No Security Interests

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

14.3     Base of Aircraft

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

14.4     Notice to Lessor

              Lessee shall notify Lessor:

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

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

14.5     Procure Release

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


15.      maintenance and repair

15.1     General Obligations

15.1.1   Lessee shall,  or procure that  any sublessee  will, at its own expense
         at all times during the Lease Term:

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

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

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

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

15.2     Specific Obligations

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

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

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

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

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

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

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

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

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

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

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


16.      replacement of parts

16.1     Replacement of Parts

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

16.2     Title to Replacement Parts

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

16.3     Pooling of Parts

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

16.4     Alterations

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

16.5     Removal of Parts

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

16.6     Substitution of Engine

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

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

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

16.7     Temporary Removal of Parts

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

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

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

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

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

16.8     Parts Incapable of Transfer

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


17.      Manufacturer's warranties

17.1     Authorization

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

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

17.2     Proceeds

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

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

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

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

17.3     Agreements with Manufacturers

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

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

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

17.4     No Operation Contrary to Warranties

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


18.      Disclaimers

18.1     General

              LESSOR  AND  LESSEE  AGREE  THAT  THE  DISCLAIMERS,   WAIVERS  AND
              CONFIRMATIONS  SET FORTH IN CLAUSES 18.2 THROUGH 18.11 BELOW SHALL
              APPLY AS BETWEEN  LESSOR AND LESSEE AT ALL TIMES  DURING THE LEASE
              TERM WITH  EFFECT  FROM  LESSEE'S  ACCEPTANCE  OF THE  AIRCRAFT BY
              EXECUTION OF THE ACCEPTANCE CERTIFICATE, WHICH SHALL BE CONCLUSIVE
              EVIDENCE  THAT LESSEE HAS FULLY  INSPECTED  THE AIRCRAFT AND EVERY
              PART THEREOF AND THAT THE AIRCRAFT, THE ENGINES, THE PARTS AND THE
              AIRCRAFT DOCUMENTS ARE IN ALL RESPECTS  ACCEPTABLE TO LESSEE (SAVE
              AS  EXPRESSLY  NOTED  ON THE  ACCEPTANCE  CERTIFICATE)  AND ARE IN
              SUITABLE CONDITION FOR DELIVERY TO AND ACCEPTANCE BY LESSEE.

18.2     As Is, Where Is

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

18.3     Waiver of Warranty of Description

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

18.4     Lessee Acknowledgement

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

18.5     Lessee Waiver

              Lessee hereby  waives as between  itself and Lessor and agrees not
              to seek to establish or enforce any rights and  remedies,  express
              or implied (whether statutory or otherwise) against Lessor,  Owner
              Trustee,  Lender or the  Aircraft  relating  to any of the matters
              mentioned in Clause 18.1  through 18.6 and the leasing  thereof by
              Lessor to Lessee.

18.6     Lessee Examination of Aircraft

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

18.7     No Lessor Liability for Losses

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

18.8     Exclusion

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

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

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

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

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

18.9     Waiver

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

18.10    No Waiver

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

18.11    Confirmation

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


19.      Indemnities

19.1     General Indemnity

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

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

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

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

19.2     Exception to General Indemnity

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

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

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

(iii)                    constitutes a Tax or liability for Taxes.

19.3     Time of Payment

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

19.4     Survival of General Indemnity

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

19.5     Notice to Lessee

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


20.      Taxation

20.1     Gross-up

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

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

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

20.2     Tax Indemnity

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

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

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

(iii)                    is directly attributable to Lessor's  gross  negligence
                         or wilful misconduct; or

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

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

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

20.3     Value Added Taxes

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

20.4     Taxation of Indemnity Payments

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

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

20.5     Benefit of Indemnities

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

20.6     Lessor Indemnification

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

20.7     Survival of Tax Indemnities

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

20.8     Mitigation and Co-operation

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

20.9     Furnishing Forms

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


21.      Insurance

21.1     Insurances

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

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

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

21.2     Reinsurance

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

(i)                      The same terms as the original insurance;

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

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

21.3     Requirements

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

21.4     Insurance Covenants

              Lessee shall:

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

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

(a)                                invalidates or may invalidate the Insurances;
                                   or

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

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

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

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

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

(vi)                     not create  any Security  Interests over the Insurances
                         except pursuant to the Assignment of Insurances;

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

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

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

(x)                      furnish to Lessor:

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

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

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

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

21.5     Renewal of Insurances

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

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

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

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

21.6     Failure to Insure

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

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

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

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

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

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

21.7     Continuation of Insurances

              Lessee  agrees to effect and  maintain  at Lessee's  cost  airline
              general third party  liability  insurances in the form required by
              this  Agreement for two (2) years after the Expiry Date whether or
              not  Lessee  or  Lessor  continues  to have  any  interest  in the
              Aircraft.

21.8     Application of Insurance Proceeds

              As between Lessor and Lessee:

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

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

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

21.9     Pursuit of Claims

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


22.      Total loss and requisition

22.1     Total Loss Prior to Delivery

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

22.2     Total Loss After Delivery

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

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

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

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

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

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

22.3     Total Loss of Engines

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

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

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

22.4     Requisition

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

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

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

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

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

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

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

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

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


23.      Redelivery

23.1     Redelivery of Aircraft

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

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

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

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

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

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

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

23.2     Final Inspection

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

(i)                      inspect the Aircraft Documents;

(ii)                     inspect the Aircraft and uninstalled Parts;

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

23.3     Discrepancies

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

23.4     Non-compliance

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

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

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

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

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

23.5     Acknowledgement

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

23.6     Storage etc.

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


24.      Events of default

24.1     Notice

              Lessee will promptly  notify Lessor if Lessee becomes aware of the
              occurrence of any Default.

24.2     Events

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

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

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

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

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

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

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

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

(viii)                   Registration:

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

(b)                                Lessee  ceases  to  be  an  US  Air   Carrier
                                   authorised to transport passengers in  common
                                   carrier; or

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

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

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

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

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

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

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

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

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

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

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

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

24.3     Lessor's Rights

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

(i)                      require that Lessee immediately move the Aircraft to  a
                         location specified by Lessor;

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

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

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

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

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

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

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

24.4     Default Payments

              Lessee shall be liable for:

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

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

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

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

24.5     Cumulative Rights

              Except as otherwise  expressly  provided above, no remedy referred
              to in this Clause 24 is intended to be  exclusive,  but each shall
              be  cumulative  and in  addition to any other  remedy  referred to
              above or otherwise  available  to Lessor at law or in equity.  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 such other  remedies.  No express
              or  implied  waiver by Lessor  of any Event of  Default  hereunder
              shall in any way be, or be construed to be, a waiver of any future
              or subsequent Event of Default.


25.      Assignment and transfer

25.1     By Lessee

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

25.2     By Lessor

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

25.3     Assignment to Lender

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

25.4     Lessee Co-operation

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

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

25.5     Lessor Includes Lessor's Assignee and Lender

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


26.      Miscellaneous Provisions

26.1     Rights Cumulative, Waivers

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

26.2     Delegation

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

26.3     Expenses

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

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

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

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

26.4     Time of Essence

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

26.5     Entire Agreement

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

26.6     Further Assurances

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

26.7     Language

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

26.8     Variation

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

26.9     Invalidity of any Provision

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

26.10    Survival

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

26.11    Reimbursement

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

26.12    Press Releases

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

26.13    Power of Attorney

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

26.14    Usury Laws

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

26.15    Confidentiality

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

26.16    Counterparts

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

26.17    Bankruptcy

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


27.      Notices

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

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

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

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

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

              Lessee:         FRONTIER AIRLINES, INC.
              Address:        12015 e. 46th Avenue, Denver Colorado,
                              United States of America
              Attention:      General Counsel
              Facsimile:      (303) 371 9669


28.      Governing law and jurisdiction

28.1     New York Law

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

28.2     Non-exclusive Jurisdiction in New York

28.2.1        Each  of  Lessor  and  Lessee  (a)  irrevocably  submit   to   the
              non-exclusive jurisdiction of the Supreme Court of  the  State  of
              New York, New York City County, and the  United  States  Districts
              Court for the Southern District  of  New York  for the purposes of
              any  suit,  action,  or  other  proceeding  arising  out  of  this
              agreement   of  the  Transaction  Documents  or the subject matter
              hereof or thereof  or  the  transactions  contemplated  hereby  or
              thereby brought by the other party or its successor  or assign and
              (b) to the extent permitted by applicable law, irrevocably  waives
              and agrees not to assert by way of motion, as defence or otherwise
              any claim that it is not personally subject to the jurisdiction of
              the abovenamed courts; that the suit,  action  or  proceedings  is
              brought in an inconvenient forum, that venue is improper  or  that
              this agreement or the other Transaction Documents  or the  subject
              matter hereof or thereof may not be enforced in or by such  court.
              Nothing herein contained shall prevent either party from  bringing
              suit in any other appropriate jurisdiction.

28.3     Service of Process

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

28.4     Waiver

              Lessee and Lessor hereby waive the right to a trial by jury.



<PAGE>




SIGNATURE PAGE


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

SIGNED on behalf of INDIGO AVIATION AB (publ)


By:           ___________________________

Name:         ___________________________

Title:        ___________________________


SIGNED on behalf of FRONTIER AIRLINES, INC.


By:           ___________________________

Name:         ___________________________

Title:        ___________________________


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




<PAGE>



                                   SCHEDULE 1


                             AIRCRAFT SPECIFICATION


Model                    Boeing 737-3L9
Serial Numbers           26440
Current Registration     D - ADBB
New Registration Mark    N310FL
Line Number              2234
Date of Manufacture      March, 1992
Engines                  CFM56-3B2 (22K)
APU                      Garrett GTCP85-129H
Present Operator         Deutsche BA

WEIGHTS                  Lbs.

Max Taxi Weight          140,000
Max Take Off Weight      139,500
Max Landing Weight       114,000
Max Zero Fuel Weight     106,500
Basic Empty Weight       71,989
Max Fuel capacity        5,311 US Gallons
            (Provisioning for Aft Body Aux Fuel Tank installed - 500 US Gallons)

INTERIOR CONFIGURATION

Seating                  136 Y                       Recaro 3230
Galleys                  G1, G2, G3, G4B             Henshall
Stowages                 G7                          Henshall
Lavatories               Three
                         1 Forward, 2 Aft Boeing Standard


                AIRFRAME AND ENGINE STATUS (As of March 2, 1999)

AIRFRAME

Total Hours              17,231
Total Cycles             16,044
Time to D Check (7C+SI)  5,169

                          AIRFRAME MAINTENANCE PROGRAM


CHECK                              SCHEDULE

A Check                            250 hours
I Check                            500 hours
C Check                            3,600 hours or 15 months
D Check                            22,400 hours

ENGINES

Serial Number            726422                     726492
Total Hours              16,837                     16,837
Total Cycles             15,616                     15,616
Next Limiter             LPT Con Support            LPT Con Support
Cycles Remaining         8,185                      8,185
Hours Since Shop Visit   2                          2

LANDING GEAR

Right/Left Main          16,044 Cycles/17,231 hours
Nose                     16,044 Cycles/17,231 hours
Overhaul limit           22,400 hours




<PAGE>




                NAVIGATIONAL, COMMUNICATION, ELECTRONIC SYSTEMS,
                           FURNISHING & EQUIPMENT LIST


DESCRIPTION              MANUFACTURER            MODEL OR PART NUMBER      QTY

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



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

                                   Annexure 1


                             AIRCRAFT DOCUMENTATION

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

A.            Certificates

-             Certificate of Airworthiness
-             Certificate of Registration
-             Noise Certificate
-             Radio License


B.            Aircraft Status Records

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


C.            Aircraft Maintenance Records

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


D.            Aircraft History Records

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




<PAGE>


E.            Engine Records (for each engine)

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


F.            APU Records

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


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

-             Time  Controlled  Component Status Report with remaining hours and
              cycles (if applicable)
-             Serviceability  tags or  back-up   documentation   for  components
              replace since delivery from Boeing


H.            Manuals

1.            Airplane Flight Manual
2.            Quick Reference Handbook
1.            Aircraft Operating Manual
1.            Weight and Balance Manual Supplement
1.            Wiring Diagram Manual (microfilm)
1.            Illustrated Parts Catalog (microfilm)
1.            Aircraft Maintenance Manual (microfilm)
1.            CFMI Illustrated Parts Catalog
1.            Vendor Manual Seats
1.            Vendor Manual Galleys
1.            Vendor Manual Ovens
1.            Vendor Manual Coffeemakers




<PAGE>


I.            Miscellaneous Technical Documents

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




<PAGE>




                                   SCHEDULE 2


                             CERTAIN BUSINESS TERMS


1.            Agreed Value

              Agreed Value means *

2.            Basic Rent

              The Basic  Rent  payable  on each Rent Date  during the Base Lease
              Term and the Extension Lease Term shall be  *  .

3.            Damage Notification Threshold

              Damage Notification Threshold means  *  .

4.            Engine Agreed Value

              Engine Agreed Value means for each engine  *  .

5.            Extension Lease Expiry Date

              Extension Lease Expiry Date means,  upon exercise of the Extension
              Option,  the date  falling  twelve (12) months from the Base Lease
              Expiry  Date or such  other date as Lessor and Lessee may agree in
              writing.

6.            Initial Lease Expiry Date

              Initial Lease Expiry Date means the 14th of May 1999.

7.            Initial Rent and Initial Rent Dates

              o        From Delivery until  14th of April 1999, the Initial Rent
                       shall  be  *  payable  on  the  15th of April 1999 (First
                       Initial Rent Date); and

              o        from 15th of April 1999 until Initial Lease Expiry  Date,
                       the Initial Rent shall be the lesser of:

                       (a)      * per flight hour for each hour flown during the
                                period  commencing  on  the  15th  of  April and
                                ending on Initial Lease Expiry Date; and

                       (b)      * payable  as  follows:  (i)on the First Initial
                                Rent Date: * (ii) on the  date falling  ten (10)
                                days after the Initial Lease Expiry Date (Second
                                Initial Rent Date); the remaining amount.

8.            Letter of Credit

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

9.            Maintenance Reserves

              Lessee shall during the Lease Term pay the  following  Maintenance
              Reserves to Lessor:

              (i)      Airframe Maintenance Reserve

                       * for each Flight Hour that the Airframe is operated;

              (ii)     Engine Maintenance Reserve

                       * for each Flight Hour that each Engine is operated;

              (iii)    Landing Gear Maintenance Reserve

                       * for each Flight Hour that the Aircraft is operated;

              (iv)     APU Maintenance Reserve

                       * for each Flight Hour that the APU is operated.

               The amounts payable by Lessee to the Maintenance  Reserves as set
               out  herein  shall  be  subject  to  escalation  on  each  of the
               anniversary dates of the first day of the Base Lease Term with *
               per year.




<PAGE>


10.           Minimum Liability Coverage

              Minimum Liability Coverage means  *  on each occurrence.

11.           Scheduled Delivery Date

              Scheduled  Delivery  Date  means  31st of March 1999 or such other
              date as the parties may  mutually  agree and Lessor may be able to
              deliver the Aircraft to Lessee.

12.           Security Deposit

               Lessee has paid to Lessor a cash  Security  Deposit in the amount
               of  *  and shall provide Lessor with  additional Security Deposit
               according to Clause 8 of this Schedule 2.

               The cash Security Deposit of * will be credited to the payment of
               Rent  payable by Lessee  during the Initial  Lease Term,  and, if
               applicable, during the Base Lease Term. The Security Deposit will
               be  non-refundable  in the  event of  failure  by  Lessee to take
               delivery of the Aircraft in accordance with this Agreement.

13.           Supplemental Rent for Excess Cycles

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


<PAGE>




                                   SCHEDULE 3


                             INSURANCE REQUIREMENTS


1.1           Types of Insurance

              The Insurances required to be maintained are as follows:

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

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

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

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

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

1.2           Terms of Hull and Spares Insurance

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

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

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

(c)           Deductibles:  provide for  deductibles  in respect of the Aircraft
              All Risks Hull Insurance  Policy or War Risks Insurance  Policy of
              no more than US$500,000 (or the minimum  deductible amount carried
              under the airline's insurance policy if less than US$500,000).

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

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

1.3           Terms of Liability Insurance

              All required liability insurances will:

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

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

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

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

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

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

(g)           provides that non of the  additional  assured shall be responsible
              for any premiums in respect  thereof,  and that the insurers shall
              waive any right of set-off or counterclaim  against the additional
              assured (except in respect of any outstanding  premiums in respect
              of the Aircraft);

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

(i)           has a deductible  in respect of passenger  baggage and cargo of an
              amount  which,  at any time,  is  customary  in the  international
              aviation  market at the time for Boeing  737-300  aircraft in each
              case in respect of any one claim;

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

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

1.4           Terms of All Insurances

              All Insurances will:

(a)           Dollars: provide cover denominated in dollars;

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

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

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

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

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

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

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

(i)           Endorsement: contains an endorsement naming:

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

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

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

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

1.5           Deductibles

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

1.6           AVN 67B

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



<PAGE>


1.7           AVN 2000 (or similar)

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

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

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



<PAGE>




                                   SCHEDULE 4

                               DELIVERY CONDITIONS

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

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

Certification:

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

Configuration:

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

Paint:

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

Airframe:

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

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

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

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

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

F.            Fuel tanks will be free from contamination.

Engines:

Each  Engine will have at least 5,000  hours  remaining  until next  anticipated
performance  restoration  shop visit and have at least a minimum of 8,000  hours
and 8,000 cycles  remaining  until the next LLP limiter at 3B2 Power (22,000 Lbs
Thrust).

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

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

APU:

Serviceable and passing a borescope inspection.

Components:

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

Landing Gear:

Each  Landing  Gear  will have at least  3,000  hours  remaining  until the next
inspection or overhaul.

Airworthiness Directives (AD's):

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

Demonstration Flight:

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



<PAGE>


Records:

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

TCAS:

TCAS will be installed prior to Delivery, subject to the Side Letter.

Aircraft Documentation:

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

<PAGE>




                                   SCHEDULE 5


                             ACCEPTANCE CERTIFICATE


This Acceptance Certificate is delivered,  on the date set out below by FRONTIER
AIRLINES, INC. (Lessee), to INDIGO AVIATION AB (publ) (Lessor),  pursuant to the
Aircraft  Lease  Agreement  dated 15 March 1999  between  Lessor and Lessee (the
Lease). Capitalized terms used in this Certificate shall have the meanings given
to such terms in the Lease.

1.            Details of acceptance

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

(a)      Airframe
         Type: _____                 Reg.: _____               S/N: _____

(b)      Engines
         Type: _____                 S/N No.1: _____           S/N No. 2: _____


(c)      APU:

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

(d)           Landing Gears

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


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

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

(g)           Place of Acceptance: ______________


2.            Confirmation

Lessee  confirms  to  Lessor  that as at the time  indicated  above,  being  the
Delivery Date:

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

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

(c)           Lessee's authorised  technical experts have inspected the Aircraft
              and the  Aircraft  Documents  to ensure that the  Aircraft and the
              Aircraft Documents conform to Lessee's requirements.  The Aircraft
              and  the   Aircraft   Documents   are  in   accordance   with  the
              specifications of the Lease and satisfactory in all respects.

3.            Fuel at Delivery

3.1           Fuel on board at Delivery: ____ kilos (___ gallons).

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

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

(a)           Airframe:

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

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



<PAGE>


(b)           Engines:

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

                                                    ____ Flight      ____ Flight
                                                         Hours            Hours
                                                    ____ Cycles      ____ Cycles


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

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

Lessee:       FRONTIER AIRLINES, INC.

By:           _________________________

Title:        _________________________


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


<PAGE>




                                   SCHEDULE 6


                             CERTIFICATE OF DIRECTOR
                                       OF
                             FRONTIER AIRLINES, INC.


I, _____________________, do hereby certify that:

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

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

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

4.       Attached  hereto  as  Exhibit  C  is true, correct and complete copy of
         resolutions duly adopted by the Board of Directors of the Company  at a
         meeting duly called and held in [ ] approving the  execution,  delivery
         and performance of the Aircraft Lease Agreement dated as  of  15  March
         1999 between Indigo Aviation AB (publ) as lessor  and  the  Company  as
         lessee (the  "Lease") and the other  Transaction Documents (as  defined
         in the Lease) to which the Company is a  party,  and  said  resolutions
         have  not been revoked, rescinded or  modified and, at the date hereof,
         are in full force and effect.

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

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


<PAGE>



Title                  Name                                Signature






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








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


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






<PAGE>




                                   SCHEDULE 7

                           FORM OF LETTER OF AUTHORITY

[ Addressee ]



                                    AUTHORITY


This Authority is given on _________.

Pursuant to an Aircraft  Lease  Agreement (the Lease) dated as of 15 March 1999,
made between Indigo Aviation AB (publ) as lessor (Lessor) and Frontier Airlines,
Inc. as lessee  (Lessee)  relating to one (1) Boeing  737-3L9  aircraft  bearing
manufacturer's  serial number 26440 and registration mark N310FL (the Aircraft),
Lessee will operate the Aircraft during the term of the Lease.

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

              (i)      the Aircraft; and

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


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

Signed by:


for and on behalf of





<PAGE>



                                   SCHEDULE 8
                                POWER OF ATTORNEY

The undersigned,  Frontier Airlines,  Inc. (Lessee) refers to the Aircraft Lease
Agreement  dated as of 15 March 1999, as amended and  supplemented  from time to
time (the Lease)  between,  Indigo  Aviation AB (publ)  (Lessor) and Lessee with
respect to one (1) Boeing 737-3L9 Aircraft bearing  manufacturer's serial number
26440 and registration mark N310FL (the Aircraft).

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

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

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

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

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

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

SIGNED ON BEHALF OF FRONTIER AIRLINES, INC.

By: _______________________
Title: ______________________


<PAGE>




                                   SCHEDULE 9


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


                        FORM OF OPINION OF LESSEE COUNSEL

                          to be addressed to [ Lessor ]
                                       and
                                   [ Lender ]


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

              (i)        registration of mortgages in [ State ];

              (ii)       registration of the Lease Agreement;

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

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

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

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

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

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

(x)           [If relevant]  Lessee's  submission to  arbitration  in accordance
              with  the   Rules  of   Conciliation   and   Arbitration   of  the
              International  Chamber  of  Commerce  in the Lease is its  legally
              valid and binding obligation;

(y)           [If relevant] any award by the arbitrators against Lessee, will be
              enforceable  and  confirmed by any  competent [ State ] Court,  as
              provided  by  the  [  State  ]  law  concerning   confirmation  of
              arbitration   award   by   courts,   without   re-examination   or
              re-litigation of the matter;

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



<PAGE>




                                   SCHEDULE 10


                 MONTHLY AIRCRAFT UTILISATION AND STATUS REPORT


To:           Indigo Aviation AB (publ)
From:         Frontier Airlines, Inc.

Aircraft Type:           Boeing 737-3L9
Registration Mark:       N310FL
Serial Number:           26440                       Month of: _____

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

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

--------------------------------------------------------------------------------
Landing Gear:     Time Since     Time Since    Cycles Since    Cycles Since New:
                  Overhaul:      New:                          Overhaul:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RH Main:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LH Main:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Nose:
--------------------------------------------------------------------------------

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

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


<PAGE>



--------------------------------------------------------------------------------
                         Hours/Cycles   x   US$ Per Fligh   =   Reserve payment
                         During Month        Hour/Cycle
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Airframe:             Hours:            x                   =
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Original Engine       Hours:            x                   =
Serial Number:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Original Engine Serial
Number:               Hours:            x                   =
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Engines:        Hours:            x                   =
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LLP:                  Hours:            x                   =
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Landing Gear:         Cycles:           x                   =
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
APU:                  Hours:            x                   =
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                                                       Total
--------------------------------------------------------------------------------




<PAGE>




                                   SCHEDULE 11


                         FORM OF QUIET ENJOYMENT LETTER


From:         [ Lender ]

To:           [ Lessee ]

Dated:        [          ]


Dear Sirs,


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


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




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




<PAGE>




                                   SCHEDULE 12


                                RETURN CONDITIONS


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

Location:

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

Certification:

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

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

Configuration:

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

Paint:

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


<PAGE>


Airframe:

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

A.            The  Aircraft  will  have  no  deferred  maintenance items, unique
              inspections or temporary repairs at Delivery.
B.            Modifications and Repairs installed on the  Aircraft  at  Delivery
              will have been accomplished in accordance with FAA approved data.
C             Aircraft will be in compliance with the Manufacturer's CPC program
D:            If available, any No Charge Service Bulletin Kits not installed by
              Present Lessee will be loaded onboard the Aircraft as cargo.
E.            Fuel tanks will be free from contamination.


Engines:

Each  Engine will have no more time since last  engine  performance  restoration
visit than as of Delivery  (unless  otherwise  agreed) and a minimum of at least
5,000 hours remaining until next anticipated  performance restoration shop visit
and have at least a minimum of 5,000 hours and 5,000 cycles  remaining until the
next LLP limiter at 3B2 Power (22,000 Lbs Thrust).

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

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

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

APU:

Serviceable and passing a borescope inspection.

Components:

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



<PAGE>


Landing Gear:

Each  Landing  Gear  will have at least  3,000  hours  remaining  until the next
inspection or overhaul.

Airworthiness Directives (AD's):

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

Demonstration Flight:

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

Records:

Documentation  delivered to lessee at Delivery  will be returned to Lessor along
with the up to date Aircraft  Maintenance  Records that the Lessee has collected
during the Lease Term.

Aircraft Documentation

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


<PAGE>





                                   SCHEDULE 13


                          RETURN ACCEPTANCE CERTIFICATE


1.            Frontier  Airlines,  Inc.  (Lessee) and Indigo  Aviation AB (publ)
              (Lessor) have entered into an Aircraft  Lease  Agreement  dated 15
              March 1999, (Lease).  Unless otherwise defined,  capitalised terms
              used herein will have the meanings set forth in the Lease.

2.            Lessor  has  this _____   day  of ______  (Time: _____) at _______
              received from Lessee possession of:

(a)           one (1) Boeing 737-3L9  Aircraft,  bearing  manufacturer's  serial
              number  26440,  registration  mark  N310FL  together  with two (2)
              CFM56-3B2  engines  bearing serial numbers 726422 and 726492,  all
              Parts attached thereto and thereon in an airworthy condition; and

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

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

(a)           Airframe:

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

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


(b)           Engines:

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




<PAGE>


Time Remaining to next life limited part removal

                                      Flight Hours                        Cycles
MSN:                                  _____                               _____
MSN:                                  _____                               _____

(c)           APU:

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

(d)           Landing Gears:

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

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

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

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

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

(a)           the provisions of the Lease; and

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

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

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

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

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


FRONTIER AIRLINES, INC.



By:

Title:


INDIGO AVIATION AB (publ)



By:

Title:


ATTACHMENTS:

Annexure 1.   Aircraft Documents
Annexure 2.   List of Discrepancies




<PAGE>




                                   Annexure 1


                               AIRCRAFT DOCUMENTS

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

A.            Certificates

-             Certificate of Airworthiness
-             Certificate of Registration
-             Noise Certificate
-             Radio License


B.            Aircraft Status Records

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


C.            Aircraft Maintenance Records

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


D.            Aircraft History Records

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


E.            Engine Records (for each engine)

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


F.            APU Records

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


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

-             Time  Controlled Component  Status Report with remaining hours and
              cycles (if applicable)
-             Serviceability   tags or   back-up  documentation  for  components
              replace since delivery from Boeing


H.            Manuals

1.            Airplane Flight Manual
2.            Quick Reference Handbook
1.            Aircraft Operating Manual
1.            Weight and Balance Manual Supplement
1.            Wiring Diagram Manual (microfilm)
1.            Illustrated Parts Catalog (microfilm)
1.            Aircraft Maintenance Manual (microfilm)
1.            CFMI Illustrated Parts Catalog
1.            Vendor Manual Seats
1.            Vendor Manual Galleys
1.            Vendor Manual Ovens
1.            Vendor Manual Coffeemakers




<PAGE>


I.            Miscellaneous Technical Documents

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



<PAGE>




                                   Annexure 2


Discrepancies



<PAGE>




                                   SCHEDULE 14


                                LEASE SUPPLEMENT


LEASE SUPPLEMENT NO. 1 d ated March __, 1999,  between Indigo Aviation AB (publ)
(the "Lessor") and FRONTIER AIRLINES, INC. (the "Lessee").

Lessor and Lessee have  previously  entered  into that  certain  Aircraft  Lease
Agreement  dated as of March 15, 1999 (herein called the "Lease" and the defined
terms therein being hereinafter used with the same meaning).  The Lease provides
for the  execution  and  delivery  from  time  to  time  of a  Lease  Supplement
substantially  in the form  hereof  for the  purpose  of  leasing  the  aircraft
described  below  under the Lease as and when  delivered  by Lessor to Lessee in
accordance with the terms thereof.

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

In  consideration  of the premises and other good and sufficient  consideration,
Lessor and Lessee hereby agree as follows:

1.            Lessor  hereby  delivers  and leases to Lessee under the Lease and
              Lessee hereby accepts and leases from Lessor under the Lease, that
              certain   used  Boeing   Model   737-3L9   Aircraft   bearing  FAA
              Registration   Mark  N310FL,   including   the  Airframe   bearing
              manufacturers   serial   number   26440   and   the  two  (2)  CFM
              INTERNATIONAL  CFM 56-3B2 Engines  bearing  manufacturer's  serial
              numbers  726422  and  726492  described  in  Schedule  1  herewith
              ("Delivered Aircraft").

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

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

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

5.            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 Clause 12.12 of the Lease,
              (ii) Lessee has inspected the Aircraft and the Aircraft  satisfies
              the  conditions  set  forth in the  Lease  and  (iii)  Lessee  has
              accepted the Aircraft for all purposes hereof and of the Lease.

6.            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.

7.            This  Lease   Supplement   may  be   executed  in  any  number  of
              counterparts, each of such counterparts, except as provided on the
              front page 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.

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




<PAGE>


SIGNATURE PAGE

IN WITNESS  WHEREOF,  Lessor and Lessee have caused this Lease Supplement to the
Lease to be duly executed as of the day and year first above written.


LESSOR,

INDIGO AVIATION AB (publ)


By:

Title:


LESSEE,

FRONTIER AIRLINES, INC.


By:

Title: