<PAGE>
          CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED
         SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
                     TO A REQUEST FOR CONFIDENTIAL TREATMENT

                                                                    Exhibit 10.7

================================================================================

                            AIRCRAFT LEASE AGREEMENT

                          dated as of November 18, 1998

                                     between

                        AVIATION FINANCIAL SERVICES INC.

                                     Lessor

                                       and

                      COMPANIA PANAMENA DE AVIACION, S.A.,

                                     Lessee

                      One New Boeing Model 737-700 Aircraft

                         Manufacturer's Serial No. 28607

================================================================================

EXECUTION COPY

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
1.    Definitions........................................................     1

2.    Lease and Conditions...............................................     8

3.    Delivery and Acceptance; Term......................................    10
      (a)   Delivery.....................................................    10
      (b)   Place of Delivery and Acceptance.............................    10
      (c)   Casualty to the Aircraft, Excusable Delay Preceding Delivery
            or Damage to Aircraft........................................    10
      (d)   Pre-Delivery Acceptance Flight...............................    11
      (e)   Acceptance of Aircraft.......................................    11
      (f)   Term of Lease................................................    12
      (g)   Lease Term Renewal Options...................................    12

4.    Rent...............................................................    12
      (a)   Rent.........................................................    12
      (b)   Place and Method of Payment..................................    12
      (c)   Prohibition Against Setoff, Counterclaim, Etc................    13

5.    Representations and Warranties.....................................    14
      (a)   Warranties and Disclaimer of Warranties......................    14
      (b)   Manufacturers' Warranties....................................    15
      (c)   Lessee's Representations and Warranties......................    16

6.    Possession and Use.................................................    18
      (a)   Possession...................................................    18
      (b)   Reciprocal Recognition of Rights.............................    21
      (c)   Lawful Insured Operations....................................    21
      (d)   Maintenance..................................................    22
      (e)   Registration.................................................    23
      (f)   Insignia.....................................................    23

7.    Information........................................................    23

8.    Covenants of Lessee................................................    24
      (a)   Maintenance of Corporate Existence...........................    24
      (b)   Maintenance of Status........................................    24
      (c)   Payment of Taxes.............................................    24
      (d)   Consolidation, Merger, Etc...................................    24
      (e)   Place of Business............................................    24
      (f)   Notice of Default............................................    24
      (g)   Governmental Consents........................................    25
      (h)   Registration, Certification and Filing.......................    25
      (i)   Suspension, Cessation, Etc...................................    25
      (j)   No Operation until Registration and Certification............    25

9.    Replacement of Parts; Alterations; Modifications and Additions.....    26
      (a)   Replacement of Parts.........................................    26
      (b)   Alterations, Modifications and Additions.....................    26

10.   Tax Indemnity......................................................    28
      (a)   General Tax Indemnity........................................    28
      (b)   Exclusions...................................................    28
      (c)   FSC Indemnity................................................    30
</TABLE>


                                        i

<PAGE>

<TABLE>
<S>                                                                         <C>
      (d)   FSC Benefits.................................................    31
      (e)   After Tax Basis of Payments..................................    32
      (f)   Payments.....................................................    32
      (g)   Contests.....................................................    33
      (h)   Reports......................................................    34
      (i)   Value Added Taxes............................................    35
      (j)   Affiliated Group.............................................    35
      (k)   Survival.....................................................    35
      (l)   Tax Treaty Elections.........................................    35
      (m)   Verification.................................................    35

11.   Casualty Occurrences...............................................    36
      (a)   Casualty Occurrence with Respect to the Airframe.............    36
      (b)   Casualty Occurrence with Respect to an Engine................    36
      (c)   Application of Proceeds and Payments.........................    37
      (d)   Requisition for Use by Government with Respect to the
            Aircraft.....................................................    37
      (e)   Other Dispositions...........................................    38
      (f)   Application in Default.......................................    38
      (g)   ICAO Rules and Procedures....................................    38

12.   Insurance..........................................................    38
      (a)   Public Liability and Property Damage Insurance...............    38
      (b)   Insurance Against Loss or Damage.............................    38
      (c)   Required Policy Designations and Provisions..................    39
      (d)   Application of Insurance Proceeds for a Casualty Occurrence..    40
      (e)   Application of Insurance Proceeds for Other than a Casualty
            Occurrence...................................................    41
      (f)   Application in Default.......................................    41
      (g)   Certificates of Insurance....................................    41

13.   Indemnification....................................................    42

14.   Liens..............................................................    44

15.   Perfection of Title and Further Assurances.........................    44

16.   Return of Aircraft and Records.....................................    45
      (a)   Return.......................................................    45
      (b)   Legal Status Upon Return.....................................    45
      (c)   Engines......................................................    45
      (d)   Records......................................................    45
      (e)   Service Bulletin and Modification Kits.......................    46
      (f)   Condition of Aircraft........................................    46
      (g)   Final Inspection.............................................    46
      (h)   Aircraft Documentation.......................................    46
      (i)   Corrections and Subsequent Corrections.......................    47
      (j)   Additional Maintenance, Repair or Overhaul...................    47
      (k)   Functional Check Flight......................................    47
      (l)   Technical Acceptance at Return...............................    47
      (m)   Maintenance Payments at Redelivery...........................    48
      (l)   Excusable Delay..............................................    48

17.   Events of Default..................................................    48

18.   Remedies...........................................................    50

19.   Alienation.........................................................    53

20.   Miscellaneous......................................................    54
      (a)   Severability and Construction................................    54
</TABLE>


                                       ii

<PAGE>

<TABLE>
<S>                                                                         <C>
      (b)   Governing Law; Jurisdiction..................................    54
      (c)   Notices......................................................    55
      (d)   Lessor's Right to Perform for Lessee.........................    55
      (e)   Counterparts.................................................    55
      (f)   Quiet Enjoyment..............................................    55
      (g)   Brokers......................................................    56
      (h)   Payments in U.S. Dollars.....................................    56
      (i)   Security Letter of Credit....................................    56
      (j)   Security Deposit.............................................    57
      (k)   Transaction Costs............................................    57
      (l)   Time is of the Essence.......................................    57
      (m)   Disclaimer of Consequential Damages..........................    58
      (n)   Agent for Service of Process.................................    58
      (o)   Entire Agreement; Modification or Revision...................    58
</TABLE>


                                       iii

<PAGE>

Exhibits

Exhibit A   - Schedule and Description of Aircraft

Exhibit B   - Aircraft Documents

Exhibit C   - Definitions, Values and other Matters

Exhibit D   - Lease Supplement

Exhibit E   - Return Condition Requirements

Exhibit F-1 - Lessee's Counsel Opinion

Exhibit F-2 - Lessee's Counsel Opinion

Exhibit G   - Letter of Credit

Exhibit H   - Technical Acceptance Receipt


                                       iv

<PAGE>

                            AIRCRAFT LEASE AGREEMENT

THIS AIRCRAFT LEASE AGREEMENT dated as of November 18, 1998 between AVIATION
FINANCIAL SERVICES INC., a Delaware Corporation, with a principal place of
business at 201 High Ridge Road, Stamford, Connecticut 06927 ("Lessor"), and
COMPANIA PANAMENA DE AVIACION, S.A., a corporation organized under the laws of
the Republic of Panama, with its principal place of business and registered
office at Avenida Justo Arosema & Calle 39, Aptdo. 1572, Panama 1, Republic of
Panama ("Lessee").

     Lessee desires to lease from Lessor and Lessor is willing to lease to
Lessee the Aircraft upon and subject to the terms and conditions of this Lease,
as hereinafter set forth.

     In consideration of the mutual promises herein, Lessor and Lessee agree as
follows:

     Section 1. Definitions

     The following terms shall have the following respective meanings for all
purposes of this Lease Agreement:

     AD means an Airworthiness Directive promulgated by the FAA.

     Affiliate means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such persons
including, without limitation, any limited partnership or grantor trust of which
such person or any Affiliate of such person is the sole or co-general partner or
managing agent and any trustee of a trust of which the beneficiary is such
Person, any Affiliate of such Person, such a limited partnership, or such a
grant or trust.

     Aircraft means the Airframe together with (a) the Engines, whether or not
installed on the Aircraft, (b) all Parts or components thereof, (c) spare parts
or ancillary equipment or devices furnished with the Aircraft under this Lease,
and (d) all substitutions, replacements and renewals of any and all thereof.

     Aircraft Documents means the items identified on Exhibit B hereto, all of
which shall be maintained in the English language, or accompanied by a certified
English translation.

     Airframe means (a) the aircraft described on Exhibit A, but not including
any engine installed thereon, and (b) any and all Parts so long as the same
shall be incorporated or installed on or attached, to the Airframe, or so long
as title thereto shall remain vested, in Owner in accordance with the terms of
Section 9, after removal from the Airframe.

     Appraisal Procedure means the following procedure for determining the "fair
market rental value" of the Aircraft. "Fair market rental value" shall mean the
value determined by an appraisal completed on an "as is" and "where is" basis.
Lessor shall elect an internationally recognized, independent aircraft appraiser
certified by the International Society of Transport Aircraft Trading ("ISTAT")
who shall make a determination of fair market rental value. The fees and
expenses of the aircraft appraiser shall be paid by Lessee.

<PAGE>

     Approved Auditor means KPMG Peat Marwick or another auditing firm having an
internationally recognized reputation and reasonably acceptable to the Lessor.

     Approved Insurance Broker means J. H. Marsh & McLennan, or any other
reputable insurance broker, or reinsurance broker, of internationally recognized
responsibility and standing in aircraft insurance.

     Approved Insurer means any insurer or reinsurer, or insurance broker, or
reinsurance broker, of internationally recognized responsibility and standing in
aircraft insurance in each case reasonably acceptable to the Lessor.

     Basic Rent means the amount specified therefor on Exhibit C and payable
throughout the Term for the Aircraft pursuant to Section 4(a).

     Basic Rent Payment Date means each day for payment of Basic Rent determined
in accordance with Exhibit C. It is further understood and agreed that if a
Basic Rent Payment Date shall fall on a day which is not a Business Day, any
payment due on such Basic Rent Payment Date shall be made on the next succeeding
Business Day.

     Business Day means any day other than a Saturday, Sunday or other day on
which banking institutions in New York, New York or, in respect of any payments
to be made by Lessee hereunder, the Republic of Panama, are authorized or
required by law to be closed.

     "C" Check means a "C" check in accordance with the Lessee's Maintenance
Program in effect on the Delivery Date, as modified from time to time by the
DAC.

     Casualty Occurrence means any of the following events with respect to the
Aircraft, Airframe or any Engine: (a) loss of such property or its use due to
theft or disappearance for a period in excess of sixty (60) consecutive days, or
destruction, damage beyond economic repair or rendition of such property
permanently unfit for normal use by Lessee for any reason whatsoever; (b) any
damage to such property which results in an insurance settlement with respect to
such property on the basis of a total loss or on the basis of a compromised or
constructive total loss; or (c) the condemnation, confiscation, appropriation or
seizure of, or requisition of title to such property, or the use of such
property by or on the authority of any Governmental Entity or purported
Governmental Entity (excluding therefrom any Governmental Entity, or purported
Governmental Entity, of the United States of America), which in any such case
shall have resulted in the loss of possession thereof by Lessee for a period in
excess of ninety (90) consecutive days (or for such shorter period ending on the
date which is seven (7) days from the date of receipt of an insurance settlement
with respect to such property on the basis of a total loss).

     Casualty Value means the value as specified on Exhibit C hereto.

     Continental means Continental Airlines, Inc. or any of its subsidiaries or
Affiliates.

     "D" Check means a "D" check in accordance with the Lessee's Maintenance
Program as in effect on the Delivery Date, as modified from time to time by
Lessee and approved by the DAC.


                                       2

<PAGE>

     DAC means the Direccion General de Aeronautica Civil of the Country of
Registration, or any successor Governmental Entity exercising authority with
regard to aircraft registration and airworthiness in the Country of Registration
comparable to the FAA (as defined below).

     Damage Notification Threshold means **Material Redacted**.

     Default means an Event of Default or event which would constitute an Event
of Default but for the lapse of time or the giving of notice or both.

     Delivery Date means the date on which the Aircraft is delivered to Lessee
for purposes of this Lease.

     Delivery Location means the location specified on Exhibit C hereto for the
delivery of the Aircraft by Lessor to Lessee.

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

     Engine means any engine installed on or furnished in connection with the
Aircraft on the Delivery Date, such engines being identified as to manufacturer,
type and manufacturer serial number on Exhibit A hereto, and any Replacement
Engine which may from time to time be substituted therefor pursuant to Section
11; together in each case with any and all Parts incorporated or installed in or
attached thereto or any and all Parts removed therefrom so long as title thereto
remains vested in Owner in accordance with the terms of Section 9 after removal
from such Engine. Except as otherwise set forth herein, at such time as a
Replacement Engine shall be so substituted, such replaced Engine shall cease to
be an Engine hereunder. The term "Engines" means, as of any date of
determination, all Engines then leased hereunder.

     Engine Manufacturer means CFM International.

     Estimated Delivery Date means the date specified on Exhibit C hereto, which
the parties anticipate to be the Delivery Date.

     Estimated Acceptance Date means the date specified on Exhibit C hereto,
which the parties anticipate to be the date for Technical Acceptance of the
Aircraft.

     Event of Default shall have the meaning specified in any one or more
clauses in Section 17.

     Excusable Delay means any delay in delivery or redelivery of the Aircraft
hereunder not occasioned by the fault or negligence of the party hereto seeking
to excuse such delay and due to or arising from any cause beyond such party's
reasonable control including, without limitation, (i) acts of the public enemy,
civil war, war-like operations, insurrection or riots, or quarantine
restrictions, strikes, lockouts, inability to obtain materials, accessories,
equipments or parts, delays in transportation or labor stoppages and/or (ii)
fire, floods, explosions, earthquakes or epidemics.

     Expiration Date means the date specified in the Lease Supplement for
expiration of the Term.


                                       3

<PAGE>

     FAA means the Federal Aviation Administration of the United States
Department of Transportation or any successor.

     FAR means the Federal Aviation Regulations set forth in title 14 of the
United States Code of Federal Regulations, as amended and modified from time to
time.

     FSC Benefits has the meaning ascribed to it in Section 10(c).

     GECAS means either or both of GE Capital Aviation Services, Inc. and GE
Capital Aviation Services Limited.

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

     Head Lease means that certain Aircraft Lease Agreement, of even date
herewith, between Owner, as lessor, and Lessor, as lessee, with respect to the
Aircraft.

     Indemnitee means Owner, Lessor, GECAS and their respective officers,
directors, shareholders, subsidiaries, agents, employees and their respective
successors and assigns.

     Interim Rent for the Aircraft means the rent determined as provided on
Exhibit C and payable on the Final Acceptance Date.

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

     Lease means this Lease, the Lease Supplement, Letter Agreement No. 1, and
any and all amendments, revisions, supplements and modifications thereto.

     Lease Supplement means the Lease Supplement No. 1, substantially in the
form of Exhibit D hereto, dated the Delivery Date and entered into between
Lessor and Lessee.

     Lessee's Actual Cost means Lessee's cost incurred in performing an
obligation under this Lease determined as follows: (i) if Lessee elects that
such obligation be performed by a third party, then Lessee's Actual Cost shall
be the actual charges of such third party paid by Lessee (without markups or
overhead by Lessee); and (ii) if Lessee elects that such obligation be performed
by Lessee or Continental, then Lessee's Actual Cost shall be Lessee's or
Continental's direct cost for labor and materials, plus a percentage of such
direct cost to cover overhead, which percentage shall be determined by mutual
agreement of Lessor and Lessee, prior to commencing performance;


                                       4

<PAGE>

provided that if Lessor and Lessee do not reach such mutual agreement such
obligation shall be performed by a third party.

     Lessor's Duty to Repair means the obligation of the Lessor, as expressly
described in Section 3(d), to correct discrepancies agreed upon but not
corrected due to the unavailability of any spare parts and shall not mean or
include any other duty of the Lessor and shall not be interpreted to impose any
other duty on the Lessor.

     Lessor's Liens means Liens arising as a result of (a) claims against Lessor
or Owner not related to the transactions contemplated by this Lease; or (b) acts
of Lessor or Owner, not contemplated and expressly permitted under this Lease;
or (c) Taxes imposed against Lessor or Owner which are not required to be
indemnified against by Lessee pursuant to Section 10; or (d) claims against
Lessor or Owner arising out of the voluntary transfer by Lessor or Owner of all
or any part of their respective interests in the Aircraft or this Lease, other
than a transfer pursuant to Sections 11 or 18 hereof. In each case, references
in this definition to "Lessor" and "Owner" shall include their respective
successors and assigns.

     Letter Agreement No. 1 means that certain letter agreement dated the date
of this Lease between Lessor and Lessee addressing certain related matters,
which constitutes a part of this Lease and is expressly incorporated herein by
reference.

     Letter of Credit means an irrevocable Letter of Credit ("LC") issued and
drawn upon and payable by, or confirmed by, a commercial bank domiciled and
licensed in the United States of America reasonably acceptable to Lessor and in
form and substance similar to Exhibit G, as security for all payment obligations
of Lessee to Lessor under this Agreement (including damages), which shall remain
in full force and effect until the Required LC Expiry Date. The Letter of Credit
may have a validity period or periods ending prior to the Required LC Expiry
Date, provided that (i) the Letter of Credit shall, in each case, be renewed and
delivered to Lessor not later than 15 days prior to its expiry; and (ii) a
Letter of Credit shall remain in force at all times up to the Required LC Expiry
Date.

     LIBOR means a rate per annum, equal to the rate at which United States
dollar deposits on three month maturities are offered by prime banks in the
London inter-bank market to Lessor or its nominee at or about 11 a.m. London
time as of any date on which interest is to be calculated hereunder.

     Lien means any mortgage, pledge, lien, charge, encumbrance, hypothecation,
lease, exercise of rights, security interest or claim or other type of
preferential arrangement, including without limitation any equivalent
arrangement created or arising under the Law of the Country of Registration.

     Maintenance Program means a DAC approved maintenance program as in effect
from time to time for the Aircraft encompassing scheduled maintenance, condition
monitored maintenance and on-condition maintenance of the Airframe, Engines and
components of the Aircraft.

     Manufacturer means Boeing Company.


                                       5

<PAGE>

     Mortgage Convention means the Convention for the International Recognition
of Rights in Aircraft, signed (ad referendum) at Geneva, Switzerland, on June
19, 1948, and amended from time to time, but excluding the terms of any adhesion
thereto or ratification thereof containing reservations to which the United
States of America does not accede.

     Owner means Alcyone FSC Corporation, a company incorporated under the Laws
of Barbados and having its principal place of business at c/o Corporate
Services, Price Waterhouse Centre, St. Michael, Barbados.

     Part 36 means part 36 of title 14 of the United States Code of Federal
Regulations, as amended or modified from time to time.

     Part 129 means part 129 of title 14 of the United States Code of Federal
Regulations, as amended or modified from time to time.

     Parts means all appliances, components, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other than
complete Engines or engines), which may now or from time to time be incorporated
or installed in or attached to the Airframe or any Engine and that meet the
requirements of the FAA regulations found at Part 129 and any other laws, rules
or regulations relating to the Aircraft, as the same may be amended or modified
from time to time, or that remain the property of the Owner pursuant to the
terms of Section 9 despite removal therefrom. Except as otherwise set forth
herein, at such time as a replacement part shall be substituted for a Part in
accordance with Section 9 hereof, the Part so replaced shall cease to be a Part
hereunder.

     Permitted Sublease means a sublease with Continental or a sublease with
another Person which has the prior written consent of Lessor (which consent
shall not be unreasonably withheld) and which complies with all of the
provisions of Section 6(a)(iii) hereof.

     Person means and include any individual person, corporation, partnership,
firm, joint stock company, joint venture, trust, estate, unincorporated
organization, association or Governmental Entity.

     Purchase Agreement means the Purchase Agreement between the Manufacturer
and Owner and the Aircraft Specification D6-38808-34, Revision A - July 16,
1998, except as amended by change orders initiated by Lessor under the terms
thereof prior to the date of this Lease (which change orders have been delivered
to Lessee prior to the date hereof), or change orders initiated by Lessor with
the consent of Lessee under the terms thereof after the date of this Lease,
which change orders shall have been delivered to Lessee prior to the Delivery
Date.

     Related Leases means any and all leases of aircraft between Lessor or any
Affiliate of Lessor, as lessor, and Lessee as lessee.

     Rent means Interim Rent, Basic Rent and Supplemental Rent, collectively.

     Replacement Engine means an engine of the same manufacturer and model, and
having substantially equivalent value, utility, modification status, and the
same certified thrust rating, as the


                                       6

<PAGE>

Engine it is intended to replace under Section 11(b) hereof, or, at Lessee's
option, an engine of the same manufacturer as such Engine but of an improved
model, and otherwise of an equivalent value and utility and suitable for
installation and use on the Airframe without impairing the value or utility of
the Airframe and compatible with the remaining installed Engine.

     Required LC Expiry Date means the date which occurs thirty days after the
Expiration Date.

     Return Occasion means the event that occurs when possession of the Aircraft
is returned from Lessee to Lessor at the end of the Term of this Lease or upon
Lessor taking possession pursuant to Section 18 hereof.

     Security Deposit means the Security Deposit referred to in Section 20(j)
hereof.

     Security Letter of Credit or the Letter of Credit means the Letter of
Credit referred to in Section 20(i) hereof.

     Supplemental Rent means any and all amounts, liabilities and obligations
(other than Interim Rent and Basic Rent) which Lessee assumes or agrees to pay
hereunder, or under any document delivered pursuant hereto, to Lessor, including
without limitation, (a) any payment of Casualty Value; (b) any payment of
indemnity required by Sections 10 and 13 hereof; (c) any payment of deposits;
(d) any payment in respect of Maintenance Costs required by Section 16(m); and
(e) to the extent permitted by applicable Law, interest at the Interest Rate
(all computations of interest under this Lease to be made on the basis of a
365-day year for the actual number of days elapsed) calculated: (i) on any part
of any installment of Basic Rent not paid on the due date thereof for the period
the same remains unpaid and (ii) on any Supplemental Rent not paid when due
hereunder until the same is paid.

     Taxes means any and all Value Added Taxes, sales, use, business, gross
income, personal property, transfer, fuel, leasing, occupational, excess
profits, excise, gross receipts, franchise, stamp, income, levies, imposts,
withholdings or other taxes or duties of any nature, or amounts in lieu thereof,
together with any penalties, fines, charges or interest thereon.

     Technical Acceptance of the Aircraft means acceptance of the Aircraft as
described in Section 3(d).

     Technical Acceptance Date of the Aircraft means the date on which Technical
Acceptance of the Aircraft occurs.

     Technical Acceptance Receipt means a receipt executed substantially in the
form of Exhibit H hereto.

     Term means the term of this Lease, specified in the Lease Supplement, as
may be extended in accordance with the terms hereof.

     Value Added Taxes means any value added tax and any sales or turnover tax,
imposition or levy of a like nature.


                                       7

<PAGE>

     Wet Lease means any arrangement whereby Lessee agrees to furnish the
Aircraft to a third party pursuant to which (i) Lessee's crew at all times shall
maintain full operational control of the Aircraft, (ii) the Aircraft shall be
operated solely by regular employees of Lessee possessing all current
appropriate DAC certificates and licenses (it is understood that cabin
attendants need not be regular employees of Lessee), (iii) the insurance
required under Section 12 hereof shall remain in full force and effect and (iv)
the Aircraft shall be maintained by Lessee in accordance with its normal
maintenance practices.

     Year 2000 Compliance has the definition given to it in Section 5(a) hereof.

     The terms Country of Organization, Country of Registration, Engine
Manufacturer, Final Acceptance Date, Interest Rate, Last Basic Rent Payment
Date, Lease Identification, Lessee's Address, Lessor's Address, Manufacturer and
Payment Location have the meanings set forth on Exhibit C hereto. Where words or
phrases are set forth in all upper case letters, an underscored first letter
indicates that the word or phrase is a defined term hereunder.

     Section 2. Lease and Conditions.

     (a) Lessor hereby agrees to lease the Aircraft to Lessee, and Lessee hereby
agrees to lease the Aircraft from Lessor, on the terms of this Lease, as
supplemented by the Lease Supplement and Letter Agreement No. 1.

     (b) Lessor's obligation to commence the leasing of the Aircraft hereunder
to Lessee shall be conditioned upon the absence of any Default hereunder, the
absence of any material adverse change in the financial condition, affairs or
operations of Lessee, from that existing on September 30, 1998 as reflected in
the financial statements of the Lessee delivered to the Lessor, and the receipt
by Lessor of the following documents on or before the Delivery Date for the
Aircraft (and Lessor agrees to use its reasonable efforts to co-operate in
obtaining such documents), all of which shall be reasonably satisfactory in form
and substance to Lessor:

          (i) a Lease Supplement in the form of Exhibit D completed, executed
and delivered by Lessee, and effective as of the Delivery Date of the Aircraft;

          (ii) Letter Agreement No. 1, duly executed and delivered by Lessee, in
the form attached hereto as Exhibit D (with appropriate insertions);

          (iii) evidence of the Security Letter of Credit having been delivered
pursuant to Section 20(i) hereof or, in the alternative, evidence of the
Security Deposit having been delivered pursuant to Section 20(j) hereof;

          (iv) a copy of the provisional certificate of registration for the
Aircraft issued by the DAC, certified by a duly authorized officer of Lessee;

          (v) a copy of the Memorandum and Articles of Association of Lessee,
certified by a duly authorized officer of Lessee;


                                       8

<PAGE>

          (vi) copies of the resolutions of the Board of Directors of Lessee
approving and authorizing the execution, delivery and performance of the Lease,
the Lease Supplement, Letter Agreement No. 1 and any and all other documents
required to be executed and delivered on its behalf, certified by a duly
authorized officer of Lessee and naming a person or persons authorized and
appointed to execute and deliver each such document on behalf of Lessee and give
all notices and take all other action required of Lessee thereunder;

          (vii) a certificate of a duly authorized officer of Lessee setting
forth the names and signatures of the persons authorized and appointed to
execute and deliver on behalf of Lessee the documents referred to in (vi) above
and to take any action contemplated therein;

          (viii) copies, certified by a duly authorized officer of Lessee of
each consent, license, authorization or approval of, and exemption by, each
Governmental Entity or other authority (if any) as may be necessary to authorize
the execution, delivery and performance by Lessee of the Lease and any document
delivered pursuant thereto and to consummate the transactions contemplated
thereby and to permit the payment and remittance of all payments to be made to
the Lessor in such currency or currencies, at such times, at such places and in
such manner as provided for under the Lease and any document delivered pursuant
thereto;

          (ix) evidence reasonably satisfactory to the Lessor of the due and
binding acceptance by the Lessee's appointees of their appointments as agents
for the service of process in any action or proceeding instituted in the courts
of the United States of America in connection with or arising out of the Lease
and any other documents executed in connection therewith;

          (x) a power of attorney in form and substance satisfactory to the
Lessor, duly signed by Lessee and notarized and legalized so that the power of
attorney will be valid and legally binding in accordance with the laws of the
Country of Registration (with Lessee to pay all costs associated with such
notarization and legalization), irrevocably empowering the Lessor or Owner or
their respective assignee or designee, upon termination of the Lease, pursuant
to the terms of the Lease, whether as a result of an Event of Default, upon
expiration of the Term or otherwise, to execute in Lessee's name and on Lessee's
behalf all documents deemed necessary or desirable by the Lessor to release,
terminate and void Lessee's interest in the Aircraft leased hereunder, to
deregister the Aircraft and the Lease and to export (if required) the Aircraft
and to file such documents for registration or recordation with the DAC, and any
other appropriate Governmental Entity, and otherwise to effect any of the rights
and remedies contemplated by the Lease;

          (xi) a certificate of a duly authorized officer of Lessee confirming
that each document (or a certified copy thereof) required to be filed by Lessee
under applicable Law has been, or will after execution be, filed with the
relevant Governmental Entities in the Country of Registration;

          (xii) a Technical Acceptance Receipt, in the form of Exhibit H, dated,
executed and delivered by Lessee;

          (xiii) a certificate signed by the chief executive officer or the
chief financial officer, or their equivalent, of Lessee, dated the Delivery
Date, stating that: (A) the representations and warranties contained in Section
5(c) hereof are true and accurate on and as of such date as


                                       9

<PAGE>

though made on and as of such time; and (B) no event has occurred and is
continuing, or would result from the lease of the Aircraft, which constitutes a
Default or an Event of Default;

          (xiv) one or more certificates, dated as of the Delivery Date, each
signed by an Approved Insurer or by an Approved Insurance Broker which together
evidence that the insurance as required by Section 12 hereof is in full force
and effect and a certificate from the reinsurance broker certifying that the
reinsurance required to be maintained is in full force and effect;

          (xv) the legal opinions, in English, signed by Lessee's independent
counsel, dated the Delivery Date, substanitally in the respective forms set
forth in Exhibit F-1 and Exhibit F-2 hereto; provided, however, that the opinion
set forth in Exhibit F-2 may be delivered as provided in Section 8(h) hereof;

          (xvi) if required, an export license with respect to the Aircraft,
duly authorized and issued to Lessor by the Office of Export Licenses, United
States Department of Commerce, which export licenses shall be obtained by Lessor
at its sole expense;

          (xvii) if required, a true and complete copy of the import license
with respect to the Aircraft, duly authorized and issued to Lessor or Lessee, as
appropriate, by the appropriate Governmental Entity of the Government of
Organization and the Government of Registration, which licenses shall be
obtained by Lessee at its sole expense; and

          (xviii) such financial information concerning Lessee and such other
documents and evidence (if any) with respect to Lessee's compliance with the
conditions set forth in this Section 2 as the Lessor or its counsel may
reasonably request.

     Section 3. Delivery and Acceptance; Term.

     (a) Delivery. It is anticipated that the Aircraft will become available (i)
for Technical Acceptance on or about the Estimated Acceptance Date set forth on
Exhibit C and (ii) for delivery on or about the Estimated Delivery Date set
forth on Exhibit C.

     (b) Place of Delivery and Acceptance. Technical Acceptance and delivery of
the Aircraft will occur at the Acceptance Location set forth on Exhibit C.

     (c) Casualty to the Aircraft, Excusable Delay Preceding Delivery or Damage
to Aircraft. In the event of a Casualty Occurrence with respect to the Aircraft
prior to its delivery, Lessor shall promptly notify Lessee in writing, and this
Lease shall terminate upon receipt of such written notice. In the event of an
Excusable Delay with respect to the Aircraft which delays the delivery of the
Aircraft hereunder to a date which is more than six months beyond the Estimated
Delivery Date, or such later date as may be mutually agreed to by Lessor and
Lessee, Lessor shall promptly notify Lessee in writing thereof, and at the
option of either Lessor or Lessee, this Lease shall terminate with respect to
the Aircraft (provided that such Excusable Delay is beyond the control of and is
not occasioned by the fault or negligence of the party so electing) upon receipt
of written notice thereof by the other party. Upon such termination, Lessor
shall return to Lessee any and all Rent or other amounts (including any Security
Deposit), and any Letter of Credit, theretofor received by Lessor with respect
to the Aircraft or this Lease. Neither Lessor nor Lessee shall be


                                       10

<PAGE>

responsible for the failure to deliver the Aircraft hereunder due to an
Excusable Delay, provided that such Excusable Delay is beyond the control of and
is not occasioned by the fault or negligence of such party.

     (d) Pre-Delivery Acceptance Flight. On or about the Estimated Acceptance
Date, the Manufacturer shall perform (at no cost and expense to Lessee, except
for the costs of Lessee's representatives or designees, which costs shall be
borne by Lessee) an operational ground check and acceptance flight of the
Aircraft in accordance with the Manufacturer's ground check and acceptance
flight procedures in the vicinity of the Delivery Location in order to
demonstrate that the Aircraft satisfies the delivery conditions set forth in
Exhibit A hereto. The Manufacturer shall perform a power assurance check with
respect to each Engine in accordance with the Manufacturer's standard procedures
for new aircraft deliveries if such check is part of the Manufacturer's standard
acceptance procedures for such aircraft. The Aircraft Documents for the Aircraft
shall be made available to Lessee for inspection during such ground check and
acceptance flight periods in accordance with the Manufacturer's standard
procedures for new aircraft deliveries. To facilitate such inspection Lessor, or
Manufacturer, shall provide reasonable office accommodation at or near the
inspection site (equipped with a telephone and having access to photocopier and
telecopier facilities).

     Upon completion of the pre-delivery inspection and acceptance flight, as
provided in this Section 3(d) and provided the Aircraft is in the condition set
forth in Exhibit A hereto, Lessee shall execute and deliver a Technical
Acceptance Receipt, in the form annexed hereto as Exhibit H. Execution and
delivery of the Technical Acceptance Receipt shall be deemed to constitute the
Lessee's acknowledgment and acceptance that all conditions to delivery specified
herein have been fully satisfied, subject to Lessor's Duty to Repair, if any.

     Lessee shall indemnify and hold harmless each Indemnitee from and against
any and all actions, causes of action, claims, judgments, liabilities, damages,
losses, costs and expenses: (i) for all injuries to or deaths of Lessee's
representatives or designees during any ground check, acceptance flights, checks
or inspections under this section, except to the extent that such injuries or
deaths arise out of or are caused by the gross negligence or willful misconduct
of such Indemnitee, or (ii) for loss of or damage to property of Lessee or its
representatives or designees pursuant to this section, except to the extent that
such loss or damage arises out of or is caused by the gross negligence or
willful misconduct of such Indemnitee.

     In the event any claim is made or suit is brought against Lessor, Lessee,
or their respective Affiliates or their respective directors, officers,
employees, agents or servants for damages for deaths or injuries or property
damage, the liability for which has been assumed by the other party pursuant to
this section, the former shall promptly give notice to the other parties, and
such parties shall have the right to assume and conduct the defense thereof, or
to effect any settlement which it, in its opinion, deems proper. For the purpose
of this section, any claim or suit against any of the directors, officers,
employees, servants and agents of Lessor or Lessee or their respective
Affiliates, as the case may be, shall be deemed to be a claim or suit against
Lessor or Lessee, as the case may be.

     (e) Acceptance of Aircraft. The Aircraft to be leased hereunder shall be
delivered to Lessee on the Delivery Date meeting the conditions specified in
Exhibit A hereto and otherwise


                                       11

<PAGE>

"AS IS," "WHERE IS" and on and after the Delivery Date SUBJECT TO EACH AND EVERY
DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET FORTH IN SECTIONS 5(a) AND (b)
HEREOF. Upon the satisfaction of such conditions, Lessee shall execute a
Technical Acceptance Certificate and the leasing of the Aircraft hereunder shall
commence. Following execution and delivery of the Technical Acceptance Receipt
and upon tender of delivery hereunder by Lessor, Lessee shall accept delivery of
the Aircraft. Lessee shall thereupon indicate and confirm its acceptance of
delivery of the Aircraft by execution and delivery to Lessor of a Lease
Supplement, dated the Delivery Date, in the form set forth as Exhibit D.

     (f) Term of Lease. The Term of this Lease shall commence on the Delivery
Date and shall continue until the Expiration Date set forth in the Lease
Supplement; provided that this Lease may be earlier terminated or extended
pursuant to the provisions hereof.

     (g) Lease Term Renewal Options. Lessor hereby grants Lessee the right to
renew the lease for up to three (3) additional, consecutive terms (each a
"Renewal Term") (the option to renew for each Renewal Term being hereafter
referred to as the "Renewal Option"). Each Renewal Term shall consist of twelve
(12) months, and the first Renewal Term would commence the day following the
Expiry Date of the initial Basic Term. Exercise of each Renewal Option shall be
subject to (i) the delivery by Lessee of written notice to Lessor (a "Renewal
Notice") as to such exercise at least nine (9) months prior to the then
applicable Expiry Date, and (ii) no Event of Default shall have occurred and be
continuing on or as of the date the Renewal Notice is received by Lessor or the
first Rent Date of the applicable Renewal Term. The Basic Rent during any such
Renewal Term shall be payable monthly in advance at the average monthly Basic
Rent rate paid by Lessee over the initial sixty (60) months of the Basic Term.
At the commencement of a Renewal Term the Basic Term shall be deemed extended to
include such Renewal Term. Except for the Rent as specified above, the revised
Expiry Dates and the exercised Renewal Option which shall be deemed extinguished
with the related extension of the Basic Term, all terms and conditions of this
Agreement as applicable during the initial Basic Term shall remain in full force
and effect for any Renewal Term.

     Section 4. Rent

     (a) Rent. Lessee covenants and agrees to pay to Lessor, or its assigns, the
following as Rent:

          (i) Interim Rent: The Interim Rent as determined pursuant to Exhibit C
hereto in respect of the Aircraft on the Interim Rent Payment Date.

          (ii) Basic Rent: The Basic Rent as set forth on Exhibit C hereto
throughout the Term hereof, payable in consecutive installments and due on each
Basic Rent Payment Date.

          (iii) Supplemental Rent: Any and all Supplemental Rent as the same
becomes due.

     (b) Place and Method of Payment. All Interim Rent, Basic Rent and
Supplemental Rent and other amounts payable under this Lease shall be paid in
immediately available funds in Dollars, at the Payment Location specified on
Exhibit C hereto, or at such other location in the United States


                                       12

<PAGE>

as Lessor shall designate in writing.

     (c) Prohibition Against Setoff, Counterclaim, Etc.. This Lease is a net
lease. Lessee's obligation to pay all Rent due hereunder (it being specifically
acknowledged that upon performance in full of Lessee's obligations under Section
11(a) hereof Lessee would have no further obligation to pay Rent hereunder)
shall be absolute and unconditional and shall not be affected or reduced by any
circumstances, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right which Lessee may have against Lessor, the
Manufacturer, the Engine Manufacturer, any seller of or person providing
services with respect to the Aircraft or any other Person, for any reason
whatsoever; (ii) any defect in the title, airworthiness or eligibility for
registration under applicable Law, or any condition, design, operation or
fitness for use of, or any damage to or loss or destruction of, the Aircraft, or
any interruption or cessation in the use or possession thereof by Lessee for any
reason whatsoever, whether arising out of or related to an act or omission of
Lessee, or any other Person; (iii) any Liens with respect to the Aircraft; (iv)
the invalidity or unenforceability or lack of due authorization or other
infirmity of this Lease or any absence of right, power or authority of Lessor or
Lessee to enter into this Lease; (v) any insolvency, bankruptcy, reorganization
or similar proceedings by or against Lessor or Lessee; (vi) any other
circumstance or happening of any nature whatsoever, similar to any of the
foregoing; or (vii) any Taxes; it being the express intention of Lessor and
Lessee that all Rent payable hereunder shall be payable in all events, unless
the obligation to pay the same shall be terminated pursuant to the express
provisions of this Lease.

     Lessee hereby waives, to the extent permitted by applicable Law, any and
all rights which it may now have or which at any time hereafter may be conferred
upon it, by Law or otherwise, to terminate this Lease or any obligation imposed
upon Lessee hereunder or in relation hereto.

     Nothing contained in this Lease shall be construed as a waiver of Lessee's
right to seek, or its entitlement to, damages, specific performance, separate
recovery of any payment of Rent made by Lessee which is not due and payable in
accordance with the terms of this Lease or other remedies at law or equity and
any combination thereof, as against Lessor, Owner or other Person having an
interest herein through Lessor, Owner or any other Person as shall be liable
therefor, on account of any failure of Lessor, Owner or any other such Person to
perform its obligations under this Lease or on account of any act or omission of
Lessor, Owner or any other such Person or to enforce any judgment therefor.

     Nothing contained in this Section shall be construed as a waiver of
Lessee's right to seek a separate recovery of any payment of Rent which is not
due and payable in accordance with the terms of this Lease.

     If for any reason whatsoever this Lease shall be terminated in whole or in
part by operation of law, to the extent permitted by applicable Law, and
provided Lessee has not been deprived of possession and use of the Aircraft
under and in accordance with the provisions of this Lease as a consequence of
such termination, Lessee nonetheless agrees to pay to Lessor amounts equal to
the Rent payments hereunder at the time such payments would have become due and
payable in accordance with the terms hereof had this Lease not been terminated,
and so long as such payments are made and all other terms and conditions hereof
are complied with by Lessor and Lessee, Lessor and Lessee will deem this Lease
to remain in full force and effect; provided, however that if any


                                       13

<PAGE>

court validly exercising jurisdiction with respect to this Lease orders the
return of the Aircraft and such order is final and non-appealable and binding
upon the parties, and Lessee, in compliance with such court order, returns the
Aircraft to the Lessor in accordance with the terms of this Lease (including
Section 16) and such order, Lessee shall have no further obligation to pay Rent
hereunder to the Lessor that otherwise would accrue from and after the date of
such return.

     Section 5. Representations and Warranties.

     (a) Warranties and Disclaimer of Warranties.

     AS AMONG LESSOR, OWNER, GECAS AND LESSEE, THE AIRCRAFT IS TO BE LEASED
HEREUNDER "AS IS" AND "WHERE IS" AND ON THE DELIVERY DATE MEETING THE DELIVERY
CONDITIONS SET FORTH IN EXHIBIT A HERETO. NONE OF LESSOR, OWNER AND GECAS HAS
AND OR SHALL BE DEEMED TO HAVE MADE (WHETHER BY VIRTUE OF HAVING ACQUIRED THE
AIRCRAFT OR LEASED IT UNDER THIS LEASE, OR HAVING DONE OR FAILED TO DO ANY ACT,
OR HAVING ACQUIRED OR FAILED TO ACQUIRE ANY STATUS UNDER OR IN RELATION TO THIS
LEASE OR OTHERWISE), AND LESSOR, OWNER AND GECAS HEREBY SPECIFICALLY DISCLAIM,
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE (EXCEPT AS
HEREIN BELOW PROVIDED), AIRWORTHINESS, VALUE, DURABILITY, COMPLIANCE WITH
SPECIFICATIONS, CONDITION, DESIGN, OPERATION, MERCHANTABILITY, FREEDOM FROM
CLAIMS OF INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS, OR FITNESS FOR USE
FOR A PARTICULAR PURPOSE OF THE AIRCRAFT, OR AS TO THE QUALITY OF THE MATERIAL
OR WORKMANSHIP, THE ABSENCE THEREFROM OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, OR AS TO ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY ARISING FROM A COURSE OF PERFORMANCE
OR DEALING OR USAGE OF TRADE), WITH RESPECT TO THE AIRCRAFT; AND LESSEE HEREBY
WAIVES, RELEASES, RENOUNCES AND DISCLAIMS EXPECTATION OF OR RELIANCE UPON ANY
SUCH WARRANTY OR WARRANTIES. NONE OF LESSOR, OWNER AND GECAS SHALL HAVE ANY
RESPONSIBILITY OR LIABILITY TO LESSEE OR ANY OTHER PERSON, WHETHER ARISING IN
CONTRACT OR TORT OUT OF ANY NEGLIGENCE OR STRICT LIABILITY OF LESSOR, OWNER OR
GECAS OR OTHERWISE, FOR (i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO
BE CAUSED DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR ANY ENGINE OR BY ANY
INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE
IN CONNECTION THEREWITH, (ii) THE USE, OPERATION OR PERFORMANCE OF THE AIRCRAFT
OR ANY RISKS RELATING THERETO, (iii) ANY INTERRUPTION OF SERVICE, LOSS OF
BUSINESS OR ANTICIPATED PROFITS OR CONSEQUENTIAL DAMAGES OR (iv) THE DELIVERY,
OPERATION, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT OR REPLACEMENT OF THE
AIRCRAFT. NONE OF LESSOR, OWNER AND GECAS WILL HAVE ANY LIABILITY OR OBLIGATION
WHATSOEVER IN CONNECTION WITH, THE YEAR 2000 COMPLIANCE (AS HEREINAFTER DEFINED)
OF THE AIRCRAFT OR ANY PART THEREOF. FOR PURPOSES OF THIS AGREEMENT, THE TERM
"YEAR 2000 COMPLIANCE" SHALL MEAN AND INCLUDE THE ABILITY


                                       14

<PAGE>

OF THE AIRCRAFT AND EACH PART THEREOF TO ACCURATELY PROCESS, PROVIDE AND/OR
RECEIVE DATE/TIME DATA (INCLUDING WITHOUT LIMITATION CALCULATING, COMPARING,
OUTPUTTING AND SEQUENCING), WITHIN, FROM, INTO, AND BETWEEN THE TWENTIETH
CENTURY AND THE TWENTY-FIRST CENTURY, INCLUDING LEAP YEAR CALCULATIONS SUCH THAT
NEITHER THE AIRCRAFT NOR ANY PART THEREOF OR SERVICE RELATED THERETO WILL BE
AFFECTED BY DATES/TIMES PRIOR TO, ON, AFTER OR SPANNING JANUARY 1, 2000. THE
WARRANTIES AND REPRESENTATIONS SET FORTH IN THIS SECTION 5(a) ARE EXCLUSIVE AND
IN LIEU OF ALL OTHER REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR
IMPLIED, AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE ANY OTHER WARRANTIES,
EXCEPT THAT:

          (i) Lessor warrants that on the Delivery Date title to the Aircraft
shall be vested in Owner and the Aircraft shall be free and clear of any and all
Liens other than Lessor's Liens;

          (ii) Lessor further represents and warrants that Lessor is a
corporation duly organized and validly existing and in good standing under the
laws of Delaware, and has the corporate power and authority to carry on its
business as presently conducted and to perform its obligations under this Lease;

          (iii) Lessor further represents and warrants that the Head Lease has
been duly entered into by the parties thereto, remains in full force and effect
as of the date hereof and no default or event of default (as defined therein)
has occurred and is continuing thereunder; and the making and performance by
Lessor of this Lease have been duly authorized by all necessary corporate action
on the part of Lessor and will not violate any provision of law or its Articles
of Incorporation; and

          (iv) Lessor further represents and warrants that this Lease (including
Letter Agreement No. 1 and any other document to be executed by Lessor pursuant
to the terms hereof) has been duly entered into and delivered by Lessor, and
that this Lease does, and such other documents when executed and delivered
hereunder will, constitute legal, valid and binding obligations of Lessor,
enforceable in accordance with their respective terms except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and, to the extent
that certain remedies require or may require enforcement in equity, by such
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) as a court having jurisdiction may impose and
by laws which may affect some of such remedies but which do not make available
remedies inadequate for the substantial realization of the benefits provided
herein.

     (b) Manufacturers' Warranties. So long as (i) no Event of Default has
occurred and is continuing, (ii) the Lease has not terminated, or (iii) Lessor
has not terminated this Lease following an Event of Default, Lessor agrees to
authorize Lessee to exercise for the account of Lessor and Owner such rights as
Lessor or Owner may have under any warranty, express or implied, with respect to
the Aircraft made by the Manufacturer, the Engine Manufacturer, or the
manufacturer of any Part, to the extent that the same may be assigned or
otherwise made available to Lessee, and Lessee shall be entitled to
reimbursement from any monetary settlement under any such warranty; provided,
however, that upon an Event of Default and termination of this Lease all such
rights shall


                                       15

<PAGE>

immediately revert to Lessor to the exclusion of Lessee including all claims
thereunder whether or not perfected. Upon Lessee's request, Lessor shall execute
and deliver (or cause Owner to execute and deliver) to Lessee such assignments
or other instruments as shall be required by the Manufacturer, the Engine
Manufacturer, or the manufacturer of any Part, to enable Lessee to obtain the
benefit of any assignable warranties and indemnities given to Lessor or Owner by
Manufacturer, the Engine manufacturer and other vendors with respect to the
Aircraft. To the extent that any warranty or indemnity given to Lessor by
Manufacturer and others with respect to the Aircraft cannot be assigned, Lessee
will be entitled to take such action to enforce such warranty or indemnity in
the name of Lessor against Manufacturer and such other parties as Lessee sees
fit, but subject to Lessee indemnifying Lessor against all costs and expenses
associated with such action.

     (c) Lessee's Representations and Warranties. Lessee hereby makes the
following representations and warranties, which representations and warranties
shall survive the execution and delivery of this Lease and the delivery of the
Aircraft:

          (i) Lessee is a corporation duly organized, and existing in good
standing under the Laws of the Country of Organization and has the corporate
power and authority to carry on its business as presently conducted and to
perform its obligations under this Lease;

          (ii) this Lease has been duly authorized by all necessary corporate
action on the part of Lessee and does not require any approval of stockholders
of Lessee (or if such approval is required, such approval has been obtained),
and neither the execution and delivery hereof nor the consummation of the
transactions contemplated hereby nor compliance by Lessee with any of the terms
and provisions hereof will contravene any Law applicable to Lessee or result in
any breach of, or constitute any default under, or result in the creation of any
lien, charge or encumbrance upon any property of Lessee under, any credit
agreement or instrument, corporate charter or by-law or other agreement or
instrument to which Lessee is a party or by which Lessee or its properties or
assets are bound or affected;

          (iii) Lessee has received every consent, approval or authorization of,
and has given every notice to, each Governmental Entity having jurisdiction with
respect to the execution, delivery or performance of this Lease (including all
monetary and other obligations hereunder) that is required for Lessee to execute
and deliver this Lease and each such consent, approval or authorization is valid
and effective and has not been revoked, and on or before the Delivery Date
Lessee will have received such consents, approvals or authorizations, or will
have given such notices in order to perform the transactions contemplated
hereby;

          (iv) this Lease (including Letter Agreement No. 1) has been duly
executed and delivered by Lessee, and the Lease does, and the Lease Supplement
when executed and delivered by Lessee will, constitute legal, valid and binding
obligations of Lessee, enforceable in accordance with their respective terms,
except as enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally, and, to the extent that certain
remedies require or may require enforcement by a court of equity, by such
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) as a court having jurisdiction may impose and
by laws which may affect some of such remedies but which do not make the
available remedies inadequate for the substantial realization of the benefits
provided herein;


                                       16

<PAGE>

          (v) there are no suits or proceedings pending or, to the knowledge of
Lessee, threatened in any court or before any regulatory commission, board or
other administrative Governmental Entity against or affecting Lessee which would
reasonably be expected to materially and adversely affect Lessee's ability to
perform its obligations hereunder;

          (vi) Lessee has filed or caused to be filed all tax returns which are
required to be filed by it, and has paid or caused to be paid all Taxes shown to
be due or payable on said returns or on any assessment received by Lessee,
except to the extent the same are being contested by Lessee in good faith by
appropriate proceedings;

          (vii) except for compliance with the rules and regulations of the DAC
with respect to the filing for recordation of this Lease and the Lease
Supplement, and the placing on the Aircraft and on each Engine of the plates
containing the legends referred to in Section 6(f) hereof, no further filing or
recording of this Lease or of any other document and no further action, are
necessary under the Laws of any Governmental Entity (including without
limitation any Governmental Entity of the Government of Organization or the
Government of Registration) in order to (A) fully protect and establish Owner's
title to the Aircraft, and Owner's and Lessor's interests in and property rights
with respect to the Aircraft as against Lessee or any third party and to ensure
that property rights of Owner and Lessor therein will have priority in all
respects over the claims of all creditors of Lessee, or (B) ensure the validity,
effectiveness and enforceability of this Lease;

          (viii) Lessee is not in default in the performance of any of its
obligations (A) for the payment of indebtedness for borrowed money or of any
interest or premium thereon or (B) for the payment of rent under any lease or
agreement to lease real, personal or mixed property, in each case in respect of
obligations in amounts in excess of **Material Redacted**;

          (ix) the Maintenance Program for the Aircraft complies with all DAC
requirements;

          (x) there are no withholding or other Taxes of the Country of
Registration to be deducted from any payment to be made by Lessee under this
Lease; provided that Lessor is, and remains, an entity organized under the laws
of a country which has in effect a tax reciprocity treaty or agreement with
Panama which so provides;

          (xi) the choice of law to govern this Lease, as specified in Section
20(b) hereof, is a valid choice of law and such choice will be upheld in the
courts of the Country of Organization and the Country of Registration; and

          (xii) Lessee is subject to private commercial law and suit under the
Laws of the Country of Organization and the Country of Registration. Lessee is
not entitled to sovereign immunity under the Laws of the Country of
Organization, the Country of Registration or such other jurisdiction, and
neither Lessee nor its properties or assets have the right of immunity from suit
or execution on the grounds of sovereignty in the Country of Organization, the
Country of Registration, the United States of America or any other jurisdiction.
To the extent that Lessee, in any jurisdiction in which proceedings may at any
time be taken for the determination of any


                                       17

<PAGE>

question arising under or for the enforcement of this Lease (including any
interlocutory proceedings or the execution of any judgment or award arising
therefrom), may be entitled to claim or otherwise be accorded for itself or its
property, assets or revenues immunity from suit or attachment (whether in aid of
execution, before judgment or otherwise) or other legal process, and to the
extent that in any such jurisdiction, there may be attributed to Lessee, or its
property, assets or revenues such immunity (whether or not claimed), Lessee
hereby irrevocably agrees not to claim and waives such immunity to the fullest
extent permitted by the law of such jurisdiction.

     Section 6. Possession and Use.

     (a) Possession

          (i) SUBLEASE, ASSIGNMENT AND TRANSFER. EXCEPT AS PROVIDED IN SECTION
14, LESSEE WILL NOT ASSIGN, PLEDGE OR OTHERWISE ENCUMBER THIS LEASE OR SUBLET OR
TRANSFER POSSESSION OF THE AIRCRAFT, AIRFRAME OR ANY ENGINE OR INSTALL ANY
ENGINE OR PERMIT ANY ENGINE TO BE INSTALLED ON ANY AIRFRAME OTHER THAN THE
AIRFRAME, PROVIDED THAT SO LONG AS NO DEFAULT OR EVENT OF DEFAULT SHALL HAVE
OCCURRED AND BE CONTINUING AND AS LONG AS THE ACTION TO BE TAKEN SHALL NOT
AFFECT THE REGISTRATION OF THE AIRCRAFT AND SO LONG AS ALL NECESSARY APPROVALS
OF EACH GOVERNMENTAL ENTITY HAVING JURISDICTION OVER THE AIRCRAFT HAVE BEEN
OBTAINED, THEN LESSEE, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, MAY:

          (A) SUBJECT ANY ENGINE OR PART TO NORMAL INTERCHANGE OR POOLING
AGREEMENTS OR SIMILAR ARRANGEMENTS IN EACH CASE CUSTOMARY IN THE AIRLINE
INDUSTRY AND ENTERED INTO IN THE ORDINARY COURSE OF ITS BUSINESS WITH AN AIR
CARRIER HOLDING A PART 121 OR 129 CERTIFICATE OR AN ENGINE OR PART (AS
APPROPRIATE) OVERHAUL AGENCY CERTIFICATED BY THE FAA OR THE DAC, PROVIDED THAT:
(I) NO SUCH AGREEMENT OR ARRANGEMENT RESULTS IN OR REQUIRES THE TRANSFER OF
TITLE TO SUCH ENGINE OR SUCH PART; OR (II) IF OWNER'S TITLE TO SUCH ENGINE SHALL
BE DIVESTED UNDER ANY SUCH AGREEMENT OR ARRANGEMENT, SUCH DIVESTITURE SHALL BE
DEEMED TO BE A CASUALTY OCCURRENCE WITH RESPECT TO SUCH ENGINE AND LESSEE SHALL
COMPLY WITH SECTION 11(b) HEREOF IN RESPECT THEREOF;

          (B) DELIVER POSSESSION OF THE AIRCRAFT, THE AIRFRAME OR ANY ENGINE OR
ANY PART THEREOF TO THE MANUFACTURER THEREOF FOR TESTING OR OTHER SIMILAR
PURPOSES OR TO ANY ORGANIZATION FOR SERVICE, REPAIR, MAINTENANCE, TESTING OR
OVERHAUL WORK ON THE AIRCRAFT, AIRFRAME OR ENGINE OR ANY PART THEREOF OR FOR
ALTERATIONS OR MODIFICATIONS IN OR ADDITIONS TO THE AIRCRAFT, AIRFRAME OR ENGINE
TO THE EXTENT REQUIRED OR PERMITTED BY THE TERMS OF SECTION 9 HEREOF;

          (C) INSTALL AN ENGINE ON AN AIRFRAME (OTHER THAN THE AIRFRAME) OWNED
OR OPERATED BY LESSEE, PROVIDED SUCH AIRFRAME IS MAINTAINED IN ACCORDANCE WITH
THE MAINTENANCE PROGRAM AND IS FREE


                                       18

<PAGE>

AND CLEAR OF ALL LIENS EXCEPT: (I) THOSE OF THE TYPE PERMITTED UNDER CLAUSE (D)
OF SECTION 14 HEREOF AND THOSE WHICH APPLY ONLY TO ENGINES (OTHER THAN THE
ENGINE), APPLIANCES, PARTS, INSTRUMENTS, APPURTENANCES, ACCESSORIES, FURNISHINGS
AND OTHER EQUIPMENT (OTHER THAN PARTS) INSTALLED ON SUCH AIRFRAME; AND (II) THE
RIGHTS OF THE PARTICIPANTS UNDER NORMAL INTERCHANGE AGREEMENTS WHICH ARE
CUSTOMARY IN THE AIRLINE INDUSTRY AND DO NOT CONTEMPLATE, PERMIT, RESULT IN OR
REQUIRE THE TRANSFER OF TITLE TO THE AIRFRAME, ENGINES OR PARTS INSTALLED
THEREON;

          (D) INSTALL AN ENGINE ON AN AIRFRAME LEASED TO LESSEE OR OWNED BY
LESSEE SUBJECT TO A CONDITIONAL SALE OR OTHER SECURITY AGREEMENT, PROVIDED,
THAT: (i) SUCH AIRFRAME IS MAINTAINED IN ACCORDANCE WITH THE MAINTENANCE
PROGRAM; (ii) SUCH AIRFRAME IS FREE AND CLEAR OF ALL LIENS EXCEPT THE RIGHTS OF
THE PARTIES TO THE LEASE OR CONDITIONAL SALE OR OTHER SECURITY AGREEMENT
COVERING SUCH AIRFRAME AND EXCEPT LIENS OF THE TYPE PERMITTED BY CLAUSES (I) AND
(II) OF SECTION 6(a)(i)(C), AND THE LIEN OF ANY MORTGAGE OR OTHER SECURITY
INTEREST WHICH EITHER BY ITS TERMS DOES NOT APPLY TO THE ENGINE OR WHICH
EFFECTIVELY PROVIDES THAT AN ENGINE LEASED TO LESSEE HEREBY SHALL NOT BECOME
SUBJECT TO THE LIEN THEREOF OR TO ANY RIGHTS OF ANY PARTY THEREUNDER OTHER THAN
LESSEE (WITH RESPECT TO LESSEE'S RIGHTS EXPRESSLY GRANTED HEREUNDER),
NOTWITHSTANDING THE INSTALLATION OF SUCH ENGINE ON ANY AIRFRAME SUBJECT TO THE
LIEN OF SUCH MORTGAGE OR OTHER SECURITY INTEREST UNLESS AND UNTIL LESSEE SHALL
BECOME THE OWNER OF SUCH ENGINE AND LESSOR AND OWNER SHALL HAVE NO FURTHER
INTEREST THEREIN; (iii) THERE SHALL BE IN EFFECT A WRITTEN AGREEMENT OF THE
LESSOR OR SECURED PARTY OF SUCH AIRFRAME (WHICH MAY BE THE LEASE OR CONDITIONAL
SALE OR OTHER SECURITY AGREEMENT COVERING SUCH AIRFRAME) SUBSTANTIALLY SIMILAR
IN EFFECT TO THE AGREEMENT OF LESSOR IN SECTION 6(b) BELOW WHEREBY SUCH LESSOR
OR SECURED PARTY EFFECTIVELY AND EXPRESSLY AGREES THAT NEITHER IT NOR ITS
SUCCESSORS OR ASSIGNS WILL ACQUIRE OR CLAIM ANY RIGHT, TITLE OR INTEREST IN ANY
ENGINE BY REASON OF SUCH ENGINE BEING INSTALLED ON SUCH AIRFRAME, AND A COPY OF
SUCH AGREEMENT SHALL BE PROVIDED TO LESSOR UPON WRITTEN REQUEST; AND (iv) UPON
REQUEST OF THE LESSOR, THE LESSOR SHALL HAVE RECEIVED FROM COUNSEL FOR THE
LESSEE AN OPINION, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE LESSOR,
BASED ON APPLICABLE LAW, TO THE EFFECT THAT THE LESSOR OR SECURED PARTY OF SUCH
AIRFRAME WILL NOT ACQUIRE ANY RIGHT, TITLE OR INTEREST IN SUCH ENGINE BY REASON
OF SUCH ENGINE BEING INSTALLED ON SUCH AIRFRAME AT ANY TIME WHILE SUCH ENGINE IS
SUBJECT TO THIS LEASE AND IS OWNED BY OWNER;

          (E) ENTER INTO ANY WET LEASE OF THE AIRCRAFT PROVIDED SUCH WET LEASE
DOES NOT EXTEND BEYOND THE TERM HEREOF; AND


                                       19

<PAGE>

          (F) SUBLEASE THE AIRCRAFT TO A PERMITTED SUBLESSEE, PURSUANT TO A
PERMITTED SUBLEASE, PROVIDED THAT THE TERM OF SUCH SUBLEASE DOES NOT EXTEND
BEYOND THE TERM HEREOF.

          (ii) CERTAIN LIMITATIONS ON TRANSFERS. WITH RESPECT TO ANY TRANSFER
PURSUANT TO THIS SECTION 6(a):

          (A) THE RIGHTS OF ANY TRANSFEREE THAT RECEIVES POSSESSION BY REASON OF
A TRANSFER PERMITTED BY THIS SECTION 6(a) SHALL BE SUBJECT AND SUBORDINATE TO
ALL THE TERMS OF THIS LEASE;

          (B) LESSEE SHALL REMAIN PRIMARILY LIABLE HEREUNDER FOR THE PERFORMANCE
OF ALL OF THE TERMS OF THIS LEASE TO THE SAME EXTENT AS IF SUCH TRANSFER HAD NOT
OCCURRED; AND

          (C) NO INTERCHANGE AGREEMENT OR OTHER RELINQUISHMENT OF POSSESSION
PURSUANT TO THE TERMS OF THIS SECTION 6(a) SHALL IN ANY WAY DISCHARGE OR
DIMINISH ANY OF LESSEE'S OBLIGATIONS TO LESSOR HEREUNDER.

          (iii) CERTAIN LIMITATIONS ON SUBLEASE. With respect to any transfer
pursuant to Section 6(a) which is a Permitted Sublease:

          (A) the term of such sublease (including, without limitation, any
option of the sublessee to renew or extend the sublease), shall not extend
beyond the end of the Term;

          (B) the rights of the sublessee shall be subject and subordinate to
all the terms of this Lease, including without limitation the right of
repossession pursuant to Section 18 and to avoid such sublessee's right to
possession upon such repossession;

          (C) Lessee shall remain primarily liable hereunder for the performance
of all the terms of this Lease to the same extent as if any such sublease had
not occurred;

          (D) such sublease shall provide that (i) the Aircraft, Airframe or any
Engine may not be operated or used other than as provided in Section 6 hereof,
(ii) Lessor may avoid or terminate such sublease following an Event of Default
hereunder and (iii) to the extent not accomplished by an assignment of sublease,
upon the occurrence of an Event of Default, Lessee's rights under such sublease
shall automatically be deemed assigned to Lessor until such time as the Event of
Default has been cured;

          (E) no sublease of the Aircraft or any Engine shall in any way destroy
or diminish any of Lessor's rights hereunder or Owner's rights under the Head
Lease and such rights shall continue as if such sublease or transfer has not
occurred;

          (F) Lessee shall provide a copy of such proposed sublease to Lessor
for its review and approval (which approval shall not be unreasonably withheld)
at least ten (10) Business Days prior to the proposed effective date of such
sublease and Lessee shall reimburse Lessor within


                                       20

<PAGE>

ten (10) Business Days after demand for Lessor's actual out-of-pocket cost for
such review whether or not Lessor gives approval.

          (G) such sublease shall expressly provide (x) that such sublessee will
not transfer possession or control of the Aircraft, the Airframe or an Engine to
anyone other than Lessee or Lessor (except as provided in Subsection
(a)(i)(A)-(E) of this Section 6) and (y) that all rights of the sublessee are
subject and subordinate to all the terms of this Lease including, without
limitation, in each instance, Lessor's rights to repossession pursuant to
Section 18 and Lessor's rights to avoid such sublessee's right to possession
upon such repossession;

          (H) such sublease shall include appropriate provisions (whether by
requiring such obligations to be performed by the sublessee, Lessee, or both)
for the operation, maintenance and insurance of the Aircraft and the Engines
subleased thereby which are comparable to, or more restrictive than, the
provisions of this Lease; and

          (I) such sublease shall expressly prohibit any assignment or further
sublease (other than as permitted by Subsection (a)(i) clauses (A)-(E) of this
Section 6) of the Aircraft, the Airframe or any Engine and any of the rights
under such sublease.

     (b) Reciprocal Recognition of Rights. In the event Lessee shall have
received from the lessor or secured party of any airframe leased to Lessee or
owned by Lessee subject to a conditional sale or other security agreement a
written agreement complying with clause (II) of Section 6(a)(i)(D) hereof (which
agreement may be contained in the lease, conditional sale agreement or security
agreement relating to such airframe), and such lease or conditional sale or
other security agreement covering such airframe also covers an engine or engines
owned by the lessor under such lease or subject to a security interest in favor
of the secured party under such conditional sale or other security agreement,
Lessor hereby agrees for the benefit of such lessor or secured party that Lessor
will not acquire or claim, as against such lessor or secured party, any right,
title or interest in any such engine as the result of such engine being
installed on the Airframe and any time while such engine is subject to such
lease or conditional sale or other security agreement and owned by such lessor
or subject to a security interest in favor of such secured party. Lessor also
hereby agrees for the benefit of the mortgagee under any mortgage complying with
clause (I) of Section 6(a)(i)(D) hereof, relating to installation of an Engine
on an airframe leased to Lessee, that Lessor will not acquire or claim, as
against such mortgagee, any right, title or interest in any engine subject to
the lien of such mortgage as the result of such engine being installed on the
Airframe at any time while such engine is subject to the lien of such mortgage.

     (c) Lawful Insured Operations. Lessee will not permit the Aircraft to be
maintained, used or operated in violation of any Law of any Governmental Entity
of the Country of Registration, the Country of Organization or any other
jurisdiction in which Lessee operates the Aircraft, or in violation of any
airworthiness certificate, or license or registration issued by any such
authority, or contrary to the Manufacturer's or Engine Manufacturer's operating
manuals or instructions for the Aircraft or the Engines. In the event that any
such Law requires alteration of the Aircraft, Lessee shall comply therewith at
its sole expense and shall maintain the same in proper condition for operation
under such Laws. Lessee agrees not to operate the Aircraft, or permit the
Aircraft to be operated during the Term, (i) unless the Aircraft is covered by
insurance as required by the provisions hereof, or (ii) contrary to the terms of
such insurance. Lessee also agrees not to operate


                                       21

<PAGE>

or locate the Aircraft or suffer or permit the Aircraft to be operated or
located during the Term in (A) any area excluded from coverage by any insurance
policy issued pursuant to the requirements of this Lease, (B) any location that
is prohibited or not permitted under:

          (i)  any Law or government regulation applicable to the Aircraft or to
               Lessee; or

          (ii) any requirement of a Government Entity of the Country of
               Registration; or

          (iii) any requirement of a Government entity of the country in which
               such location is situated.

Lessee will not be deemed in non-compliance with the obligations set forth in
the immediately preceding sentence to the extent such non-compliance occurs when
Lessee has been deprived of possession of the Aircraft by a breach of the
Covenant of Quiet Enjoyment under Section 20(f).

Lessee shall comply with the Law for the time being in force in any country or
jurisdiction to, from, in or over which the Aircraft is flown. Lessee shall use
the Aircraft solely in commercial operations for which Lessee is duly authorized
by applicable Law and shall not use or permit the Aircraft to be used for any
purpose for which the Aircraft is not designed or reasonably suitable. Lessee
shall not knowingly use the Aircraft for the carriage of: (A) whole animals
living or dead except pets and food products unless all of the rules and
regulations prescribed by the International Air Transport Association ("IATA")
as in effect from time to time for such carriage, to the extent the same exist
and are applicable to the particular form of carriage, are followed, (B) goods
characterized as dangerous goods by the regulations of IATA unless all of the
rules and regulations prescribed by IATA as in effect from time to time for such
carriage, to the extent the same exist and are applicable to the particular form
of carriage, are followed or (C) any other goods, materials or items of cargo
which could reasonably be expected to cause damage to the Aircraft and which
would not be adequately covered by the insurance required by or obtained
pursuant to the terms of this Lease. Lessee shall not at any time during the
Term do or permit to be done anything which may expose the Aircraft or any part
thereof to penalty, forfeiture, seizure, arrest, impounding, detention,
confiscation, taking in execution, attachment, appropriation or destruction nor
abandon the Aircraft or any part thereof and, if any such penalty, forfeiture,
seizure, arrest, impounding, detention, confiscation, taking in execution,
attachment or appropriation shall occur, Lessee shall give Lessor notice thereof
and shall endeavor to procure the immediate release therefrom of the Aircraft or
the relevant part thereof as the case may be.

     (d) Maintenance. Lessee, at its own cost and expense, shall: (i) perform
all mandatory service, inspections, repair, maintenance, overhaul and testing,
(A) as may be required under DAC rules and regulations applicable to the
Aircraft and in compliance with the Maintenance Program, (B) in the same manner
and with the same care as shall be the case with similar aircraft and engines
owned by or operated by Lessee without discrimination and (C) so as to keep the
Aircraft in as good operating condition as when delivered to Lessee, ordinary
wear and tear excepted; (ii) keep the Aircraft in such condition as is necessary
to enable the airworthiness certification of the Aircraft to be maintained in
good standing at all times under DAC regulations and any other applicable Law;
(iii) maintain, as accurate, complete, current, and in the English language, all
records, logs and other materials required by, and in a manner acceptable to,
the DAC and any other Governmental Entity having jurisdiction over the Aircraft
and (iv) permit Lessor or any authorized representative


                                       22

<PAGE>

of Lessor to examine such records at any reasonable time and upon prior written
notice (as provided in Section 7).

     (e) Registration. During the Term Lessee shall at its expense keep the
Aircraft at all times registered under the applicable Laws of the Country of
Registration or such other country approved by Lessor in the name of Owner as
owner and Lessor as lessor of the Aircraft or, using its best efforts, in the
name of such Person as Lessor may reasonably designate, including, without
limitation any successor lessor under this Lease. During such time as the
Aircraft is registered in the Country of Registration, the certificate of
registration shall register the Aircraft in the name of Owner and include such
information concerning Owner and Lessor as permitted by applicable Law in the
Country of Registration.

     (f) Insignia. Upon delivery of the Aircraft, Lessee agrees to place the
Lease Identification as set forth in Exhibit C in the cockpit in a prominent
location and to place the Lease Identification on each Engine. Lessee agrees to
make such changes to the Lease Identification as Lessor may reasonably request
from time to time.

     Section 7. Information.

     From and after the Delivery Date, Lessee agrees to furnish Lessor the
following:

     (a) within sixty (60) days following the end of each quarter of Lessee's
fiscal year, except the last such quarter of such year, an unaudited
consolidated balance sheet of Lessee prepared as of the close of each quarterly
period, together with the related unaudited profit and loss statement for such
period, together with a certificate of the chief financial officer of Lessee
stating that such reports fairly present the financial position of Lessee in
accordance with Panamanian generally accepted accounting principles;

     (b) within one hundred twenty (120) days after the close of each fiscal
year of Lessee, balance sheet, profit and loss statement, and statement of
stockholders' equity of Lessee (prepared on a consolidated basis), as of the
close of such fiscal year and audited by an Approved Auditor;

     (c) within one hundred twenty (120) days after the close of each fiscal
year of Lessee, a certificate signed by a duly authorized officer of Lessee,
stating (i) that such officer is familiar with the relevant terms of this Lease
and has made a review of Lessee's compliance herewith during the preceding
fiscal year, and (ii) that no event has occurred and is continuing which
constitutes a Default, or, if such an event has occurred, the nature thereof and
action Lessee has taken or is taking to cure the same;

     (d) within ten (10) days following each six (6) month anniversary of the
Delivery Date, Lessee shall provide Lessor with a report with respect to the
Aircraft specifying: (i) total hours and total cycles of the Airframe and the
Engines; (ii) any scheduled maintenance above a "C" Check performed in the prior
six (6) month period; (iii) any significant modifications performed to the
Aircraft; (iv) any damage to or destruction of the Aircraft, an Engine or Part,
the potential cost of which exceeds the Damage Notification Threshold; and (v)
the status of the accomplishment of airworthiness directives and manufacturer's
service bulletins, including method of compliance (e.g., terminating action or
surveillance);


                                       23

<PAGE>

     (e) notice in writing of (A) any proceeding by or against Lessee the
adverse determination of which would materially adversely affect Lessee's
ability to perform under this Lease and (B) any other matter which materially
adversely affects the Lessee's ability to perform under this Lease; and

     (f) from time to time such other information as Lessor may reasonably
request, including the location, condition, use and operation of the Aircraft.

     Lessee shall permit Lessor or its designee on three (3) days' prior written
notice to visit and inspect the Aircraft, its condition, use and operation and
the records maintained in connection therewith. In conducting any such visit or
inspection as contemplated herein, Lessor shall not interfere with Lessee's
operation or require Lessee to open panels of the Aircraft which are not open
under an inspection then being conducted by Lessee. 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. Lessor's failure to object to any
condition or procedure observed or observable in the course of an inspection
hereunder shall not be deemed to waive or modify any of the terms of this Lease
with respect to such condition or procedure.

     Section 8. Covenants of Lessee.

     Lessee covenants and agrees that:

     (a) Maintenance of Corporate Existence. Except as provided in Section 8(d)
below, until the Return Occasion, Lessee will preserve and maintain its
corporate existence and such of its rights, privileges, licenses and franchises
in any jurisdiction where failure to obtain such licensing or qualification
would have a material adverse effect upon Lessee.

     (b) Maintenance of Status. Lessee is, and shall remain so long as it shall
be Lessee under this Lease, duly qualified to operate the Aircraft under
applicable Law.

     (c) Payment of Taxes. Lessee will pay or cause to be paid all Taxes and
governmental charges or levies imposed upon it, or upon its income or profits,
or upon any property belonging to it, prior to the date on which penalties
attach thereto and prior to the date on which any lawful claim, if not paid,
would become a Lien upon any of the material property of Lessee, except to the
extent the same are being contested by Lessee in good faith by appropriate
proceedings..

     (d) Consolidation, Merger, Etc. Without the prior written consent of Lessor
(which consent shall not be unreasonably withheld), Lessee shall not consolidate
with or merge into any other corporation or convey, transfer or lease
substantially all of its assets as an entirety to any other Person.

     (e) Place of Business. Without prior written notice to Lessor, Lessee shall
not change its principal place of business.

     (f) Notice of Default. Within seven (7) Business Days after any responsible
officer of Lessee obtains knowledge of a Default hereunder, Lessee shall notify
Lessor in writing of such Default.


                                       24

<PAGE>

     (g) Governmental Consents. Lessee undertakes to maintain in full force and
effect all governmental consents, licenses, authorizations, approvals,
declarations, filings and registrations obtained or effected in connection with
this Lease and every document or instrument contemplated hereby (including
without limitation foreign exchange and transfer permits regarding Dollar
amounts due hereunder and thereunder) and to take all such additional action as
may be proper or advisable in connection herewith or therewith. Lessee further
undertakes to obtain or effect any new or additional governmental consents,
licenses, authorizations, approvals, declarations, filings or registrations as
may become necessary for the performance of any of the terms and conditions of
this Lease or any other document or instrument contemplated hereby.

     (h) Registration, Certification and Filing. Lessee undertakes to register
the Aircraft with the DAC, to secure a valid and effective provisional
certificate of airworthiness for operation in the Country of Registration within
seven (7) days of the Delivery Date and to provide to the Lessor a copy of the
provisional certificate(s) of registration issued by the DAC relating to the
Aircraft, reflecting the Owner as the owner and Lessor as lessor of the Aircraft
to the extent permitted by applicable Law in the Country of Registration, and a
copy of the certificate of airworthiness issued by the DAC relating to the
Aircraft, each certified by a duly authorized officer of Lessee and in a form
satisfactory to the Lessor so as to enable counsel to the Lessee to provide an
opinion that (A) the Aircraft has been duly registered with the DAC and that the
Head Lease, the Lease, the Lease Supplement, and any other documents evidencing
title necessary or advisable to be filed have been duly filed for recordation
with the relevant Governmental Entities, (B) or such other action with respect
to, this Lease as may be required to make a public record of the respective
interests of Lessor and Lessee in the Aircraft and (C) such other matters as
Lessor may reasonably request and substantially in the form of Exhibit F-2
hereto. Lessee shall obtain the definitive certificate of airworthiness in
replacement of the provisional certificate as soon as possible after the
Delivery Date and shall promptly provide to Lessor a copy thereof, certified by
a duly authorized officer of Lessee. Lessee shall timely renew the provisional
certificate(s) of registration as required by the DAC during the Term hereof.

     (i) Suspension, Cessation, Etc. Lessee shall not at any time during the
Term (i) voluntarily suspend its certificated operations; or (ii) voluntarily or
involuntarily permit to be revoked, canceled or otherwise terminated all or
substantially all of the franchises, concessions, permits, rights or privileges
required for the conduct of business and operations of Lessee or the free and
continued use and exercise thereof.

     (j) No Operation until Registration and Certification. Lessee shall not at
any time operate the Aircraft until it has received a provisional certificate of
registration for the Aircraft and a provisional certificate of airworthiness for
the Aircraft and has provided certified copies of each thereof to the Lessor.


                                       25

<PAGE>

     Section 9. Replacement of Parts; Alterations, Modifications and Additions.

     (a) Replacement of Parts Lessee, at its own cost and expense, shall
promptly replace all Parts which, from time to time, may become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever. In addition, in the ordinary
course of maintenance, service, repair, overhaul or testing during the Term,
Lessee may at its own cost and expense cause to be removed any Parts, whether or
not worn out, destroyed, damaged beyond repair or permanently rendered unfit for
use, provided that Lessee shall replace at its own cost and expense such Parts
as promptly as practicable. All replacement Parts shall be free and clear of all
Liens, other than Liens permitted by Section 14 hereof, shall be in at least the
same modification status and service bulletin accomplishment status, shall be
fully interchangeable as to form, fit and function, shall have been overhauled,
repaired and inspected by an agency acceptable to the DAC and shall be in as
good an operating condition as, and have a utility at least equal to and a value
and remaining warranty reasonably approximating, the Parts replaced (assuming
such replaced parts were in the condition and repair in which they were required
to be maintained by the terms hereof). All historical records relating to such
Parts shall be maintained by Lessee. Notwithstanding the foregoing provision,
the right of Lessee to utilize an agency acceptable to the DAC shall not be
construed as modifying Lessee's obligations under Section 16 and Exhibit E with
respect to return of the Aircraft in accordance with the standards and
requirements of the DAC as therein provided.

     All Parts owned by Owner or Lessor which are at any time removed from the
Aircraft shall remain the property of Owner or Lessor, as the case may be, and
subject to this Lease, no matter where located, until such time as such Parts
shall be replaced by Parts which have been incorporated or installed in or
attached to the Aircraft and which meet the requirements for replacement Parts
specified above. Immediately upon any replacement Part becoming incorporated or
installed in or attached to the Aircraft as above provided, (i) title to the
removed part shall thereupon vest in Lessee, free and clear of all rights of
Owner and Lessor and of Lessor's Liens, (ii) title to such replacement part
shall thereupon vest solely in Owner and (iii) such replacement part shall
become subject to this Lease and be deemed a Part for all purposes hereof to the
same extent as the Part which it has replaced.

     (b) Alterations, Modifications and Additions. Lessee, at its own expense,
shall make such alterations and modifications and additions to the Aircraft as
may be required from time to time to meet the applicable standards of the DAC or
to comply with any Law, rule, directive, mandatory bulletin, regulation or order
of any Governmental Entity having jurisdiction over the Aircraft or of the
manufacturer of the Aircraft, Engines or Parts. Lessee's records shall document
the method and date of compliance with FAA requirements to the extent required
for certification by the FAA under Part 129 (with no material variance,
extension, carry-overs or deferrals). In addition, Lessee, at its own expense,
may from time to time make alterations and modifications in and additions to the
Aircraft, provided no such alteration, modification or addition materially
diminishes the remaining warranty, value or utility, or impairs the condition or
airworthiness, of the Aircraft. Title to all Parts (other than leased Parts)
incorporated or installed in or attached or added to the Aircraft as the result
of such alteration, modification or addition shall vest immediately in Lessor
and become subject to this Lease, without the necessity for any further act of
transfer, document or notice. In no event shall Lessor bear any liability or
cost for any alteration, modification or addition to, or for any grounding or
suspension of certification of, the


                                       26

<PAGE>

Aircraft, or for any loss of revenue arising therefrom. Notwithstanding the
foregoing, so long as no Default or Event of Default shall be continuing, Lessee
may remove any Part; provided that (i) 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 Aircraft or any Engine at the time of delivery
thereof hereunder or any Part in replacement of, or substitution for any such
Part, (ii) such Part is not required to be incorporated or installed in or
attached or added to the Aircraft or such Engine pursuant to the terms of this
Lease, and (iii) such Part can be removed from the Aircraft or such Engine
without impairing or materially diminishing the value, utility, condition or
airworthiness required to be maintained by the terms of this Lease that the
Aircraft or such Engine would have had at such time had such Parts not been
installed and such removal not occurred. Upon the removal by Lessee of any Part
as provided in the immediately preceding sentence, title thereto shall, without
further act, vest in Lessee and such Part shall no longer be deemed part of the
Aircraft or such Engine from which it was removed. Lessee shall make no material
alterations, modifications or additions to the Aircraft (such as removal of
galleys, lavatories, major avionics equipment or the like) that would adversely
affect the marketability of the Aircraft without Lessor's prior written consent.
If Lessor grants such consent, which shall not be unreasonably withheld, title
to such removed Parts shall remain with Owner and Lessor may request Lessee to
reinstall such Parts prior to termination of this Lease, provided Lessor shall
be responsible for the reasonable costs to store such Parts pending such
re-installation. If Lessor requests Lessee to reinstall such Parts, title to the
Parts removed shall vest in Lessee. All costs associated with such removal and
reinstallation shall be borne by Lessee. In addition to the foregoing, Lessee
will not make any alterations, modifications or additions to the Aircraft or any
Part that may adversely affect its ability to comply with Year 2000 Compliance
(as defined in Section 5(a) hereof) in relation to the Aircraft or any Part.


                                       27

<PAGE>

     Section 10. Tax Indemnity.

     (a) General Tax Indemnity Lessee agrees for the benefit of each Indemnitee
that all payments by Lessee in connection with the transactions contemplated by
this Lease shall be free of all withholdings or deductions of any nature
whatsoever (including, without limitation, withholding taxes, monetary transfer
fees, or similar taxes and charges), and in the event any withholding or
deduction is required (other than a withholding or deduction in respect of Taxes
for which Lessee is not responsible to indemnify any Indemnitee pursuant to
Section 10(b) hereof), Lessee shall pay the same together with such additional
amount as is required so that each such payment shall be, under any
circumstances and in any event, after any such withholding or deduction, in the
amount as set forth or referred to in this Lease. Lessee agrees for the benefit
of each Indemnitee to pay and, on written demand, to indemnify and hold each
Indemnitee (which term as used in this Section 10 shall include each Indemnitee,
their respective affiliates, agents, employees, directors, successors and
assigns, and any transferee of an Indemnitee with respect to any interest in the
Aircraft) harmless from, all license and registration fees, duties, imposts,
deductions, charges and, without limitation, all Taxes, howsoever levied or
imposed, whether levied or imposed upon or asserted against any Indemnitee,
Lessee, the Lease, the Aircraft, or any part thereof or interest therein, or
otherwise by any Federal, state or local government, or instrumentality thereof,
or other taxing authority in the United States of America ("U.S. Taxing
Authority") or by any government other than that of the United States of America
or any taxing authority or governmental subdivision or instrumentality of any
other country or of a territory or possession of the United States of America or
by any international taxing authority ("Foreign Taxing Authority"), upon or with
respect to, based upon or measured by:

          (i) the Aircraft, or any part thereof, or interest therein,

          (ii) the exportation, importation, ownership, delivery, non-delivery,
warehousing, removal, leasing, exchange, acceptance, assigning, possession,
repossession, condition, recording, use, operation, settlement of any insurance
claim, sale, subleasing, rental, retirement, imposition of any Lien,
abandonment, registration, preparation, installation, modification, repair,
maintenance, replacement, transportation, storage, transfer of title, return or
other disposition of the Aircraft or any part thereof or interest therein,

          (iii) the rentals, receipts or earnings arising from any one or more
of the items or acts described in clause (i) or (ii) above (including, without
limitation, the Rent),

          (iv) upon or with respect to this Lease, or

          (v) otherwise with respect to or in connection with the transactions
contemplated and permitted by the Lease; and any documented out-of-pocket costs
and expenses fairly attributable to any of the foregoing incurred by any
Indemnitee.

     (b) Exclusions. Except as provided in subsections (c), (d) and (e) below,
there shall be excluded from the indemnity provided in Section 10(a) the
following:

          (i)  Taxes upon or with respect to the gross or net income, capital
               gains or


                                       28

<PAGE>

capital or net worth of any Indemnitee (including, without limitation, any such
Taxes which are minimum or alternative minimum Taxes, Taxes on or measured by
items of tax preference and franchise Taxes levied in lieu of income taxes, but
excluding, without limitation, any Taxes in the nature of sales, rental, use,
value-added, license, withholding or property taxes) ("Income Taxes") which are
imposed by any U.S. Taxing Authority;

          (ii) Income Taxes imposed by any Foreign Taxing Authority, but
excluding any such Income Taxes imposed by a Foreign Taxing Authority to the
extent that such Income Taxes result from the location or use of the Aircraft or
any part thereof in such taxing jurisdiction or other activities of Lessee or
any Person that obtains from Lessee possession or control or the right to use
the Aircraft or any part thereof (an "Aircraft User");

          (iii) Taxes imposed as a result of any Lessor Lien or (A) a voluntary
sale, transfer of title, mortgaging, pledging, financing, voluntary transfer or
other voluntary disposition by an Indemnitee of the Aircraft or part thereof or
interest therein, or any interest in the Rent or part thereof or any interest in
this Lease or part thereof, unless such sale, transfer, mortgage, pledge or
disposition occurs by reason of the exercise of an Indemnitee's remedies under
this Lease upon an Event of Default, or (B) any involuntary transfer or
disposition of any of the foregoing interests in connection with any bankruptcy,
foreclosure or similar proceeding with respect to any Indemnitee unless such
transfer or disposition occurs by reason of an Event of Default;

          (iv) Taxes for any taxable period or portion thereof, relating to
events occurring prior to the Delivery Date or after the expiration of the Term
of the Lease (and any renewal term) and the redelivery of the Aircraft in
accordance with the Lease, except to the extent that any such Taxes are imposed
in connection with remedies exercised by Lessor following an Event of Default;

          (v) Taxes imposed by any Governmental Entity or international taxing
authority in any jurisdiction which would not have been imposed but for some
connection of any Indemnitee with such jurisdiction other than a connection
arising by reason of, relating to or attributable to Lessee, any Aircraft User,
this Lease, any sublease, the operation by Lessee, any sublessee or any Aircraft
User of the Aircraft, the location of the Aircraft or arising pursuant to the
transactions contemplated hereby in such jurisdiction, except that the exclusion
contained in this clause (vi) shall not apply to the extent that such Taxes are
imposed in connection with Lessor's exercise of remedies following an Event of
Default;

          (vi) Taxes imposed on or with respect to a successor or assignee of an
Indemnitee to the extent such Taxes exceed the amount of Taxes that would have
been imposed on or with respect to such Indemnitee had such succession or
assignment not occurred, provided, however, that the exclusion contained in this
clause (iv) shall not apply to any successor or assignee if such succession or
assignment shall have occurred at any time in connection with Lessor's exercise
of remedies after the occurrence of an Event of Default;

          (vii) Taxes and any fines, penalties, or additions thereto to the
extent the same would not have been incurred but for the failure of Lessor,
Owner, GECAS or any other Person other than Lessee to make any filing or
election required by it to be made, provided that this exclusion shall not apply
if the failure to file or make the election results from the failure of the
Lessee to notify the Lessor, Owner, or GECAS of such requirement (unless the
Lessor, Owner, or GECAS is otherwise aware of such requirement).


                                       29

<PAGE>

Notwithstanding the foregoing, Income Taxes resulting directly or indirectly
(whether by inclusion of an item in gross income, disallowance of a deduction or
credit, or otherwise) from any payment on or after the Delivery Date by any
supplier in satisfaction of a claim against such supplier with respect to the
Aircraft or any part thereof and inclusions in income in any taxable year of any
amounts relating to improvements, alterations, modifications, or additions by or
on behalf of Lessee of the Aircraft, any Engine or any part thereof (other than
improvements, alterations, modifications or additions required by this Lease) or
any substitution or replacement of any engine, or any part thereof, shall not be
excluded from the indemnity provided in Section 10(a).

     (c) FSC Indemnity. Owner has assumed that United States income tax
benefits, as provided in sections 921 et seq of the United States Internal
Revenue Code of 1986, as amended (the "Code") (i.e. that United States income
taxation of the net income or gain from the sale or lease of the Aircraft will
be limited in each calendar year to taxation on only seventy per cent (70%) of
such net income or gain (the "FSC Benefits")) will be available to Owner and the
other Indemnitees. Accordingly, in order to support Owner entitlement to the FSC
Benefits, Lessee covenants that:

          (i) in each calendar year during the Term, the Aircraft will be
located outside the United States (used in this Section 10(c)to include the
Commonwealth of Puerto Rico) more than fifty per cent (50%) of the time or more
than fifty per cent (50%) of the miles traversed in the use of the Aircraft will
be traversed outside the United States (regarding for this purpose any flight
between two points in the United States without an intervening stop in a foreign
jurisdiction of at least 12 hours as being entirely within the United States);

          (ii) except as required by applicable Law (including compliance with
any AD) and except for the Modifications as defined in Letter Agreement No. 1 to
which Lessor expressly consents, it will not (A) undertake any alterations,
modifications or additions to the Aircraft or any Part without the prior written
consent of Lessor (x) involving a modification, re-manufacturing or alteration
of the Aircraft, which modification, re-manufacturing or alteration is of a
permanent nature or (y) which could not be removed from the Aircraft without
material damage to the Aircraft or (z) which together with prior related and
future related expected alterations, modifications or additions would involve a
cost (including labor, overhead, engineering, supplies, materials and
third-party costs) in excess of **Material Redacted**, or (B) undertake any
replacement of any Engine that involves Owner's relinquishment of title thereto
and does not arise from a Casualty Occurrence; and

          (iii) after delivery of the Aircraft to Lessee pursuant to this
Agreement, the first flight of the Aircraft shall occur as soon as practicable
but in any event within 24 hours of the Delivery Date save for any reasonable
delays beyond 24 hours due to (i) adverse weather conditions or (ii) Lessee crew
staffing restrictions, or (iii) any other cause which is beyond the reasonable
control of Lessee, provided in all cases that Lessee shall work diligently to
promptly remedy any such delay to the first flight. The first flight shall be a
non-revenue producing flight from the Delivery Location to a location outside
the United States. After arrival at such location outside the United States, the
Aircraft will not begin any return flight to the United States prior to the
expiration of 12 hours after its arrival at such location outside the United
States. In addition, between the time of delivery to Lessee and such first
flight, Lessee shall make no use of the


                                       30

<PAGE>

Aircraft except for such fuelling, loading and provisioning required in
connection with such first flight.

     Lessor acknowledges that the covenants contained in Section 10(c)(i), (ii)
and (iii) are given by Lessee solely for the purpose of the indemnification
requirements in Section 10 (d) and shall not prevent or restrict Lessee from
taking any action otherwise permitted under this Agreement. Lessee will make
available to Lessor any records relating to the use and location of the Aircraft
that Lessor may reasonably request, in order to fulfill Lessor's or any
Indemnitee's tax reporting, filing, audit or litigation requirements, and will
otherwise reasonably cooperate with any reasonable requests of Lessor with
respect to compliance with requirements for the FSC Benefits; provided, that any
such cooperation shall not result in costs in excess of those which Lessee would
have incurred in the absence of such cooperation nor result in any additional
obligation of Lessee nor adversely affect Lessee's rights hereunder. Except as
expressly set forth in Section 10(c) (i), (ii) and (iii), there are no other
events intended to be covered by the indemnification set forth in Section 10
(d).

     (d) FSC Benefits

          (i) Lessor's remedy for the breach of any of the covenants contained
in Section 10(c)(i), (ii) and (iii), if such breach shall directly result in a
loss of FSC Benefits, shall be the right to receive the indemnity payments
specified in this Section 10 (d) from Lessee. Any such indemnity payments will
be due within 30 days after Lessee's receipt of a written request from Lessor
certifying that there has been a loss of FSC Benefits describing in reasonable
detail the circumstances of such loss and that such loss is a direct result of
the breach by Lessee of a covenant contained in Section 10 (c) hereof.

          (ii) Owner, GECAS and Lessor acknowledge and agree that Lessee's
indemnity obligation for an Indemnitee's entitlement to the FSC Benefits shall
be limited in amount with respect to any calendar year, subject to Section
10(e), to the lesser of (x) the amount of FSC Benefits lost or disallowed for
such calendar year which are a direct result of a breach of the covenants set
forth in Section 10(c)(i), (ii) or (iii) and (y) the amount set forth as the FSC
Indemnity Maximum Amounts in Exhibit C plus in either case the amount of any
interest, penalties and additions to tax payable by Owner or the relevant
Indemnitee as a result of the loss or disallowance of the FSC Benefits, but not
including any interest, penalties or additions to tax resulting solely from acts
or omissions of Lessor, Owner, GECAS, or any Person other than Lessee. For the
avoidance of doubt, if the FSC Benefits are lost or disallowed for any calendar
year, the maximum amount which Lessee shall pay to Lessor with respect to such
calendar year, subject to Section 10(e), is the amount for such calendar year as
set forth as the FSC Indemnity Maximum Amounts in Exhibit C plus the amount of
any interest, penalties, and additions to tax payable by Owner or the relevant
Indemnitee as a direct result of such loss or disallowance (but not as a result
solely of acts or omissions of Lessor, Owner, GECAS, or any Person other than
Lessee) and if such FSC Benefits are determined to be lost or disallowed with
respect to a subsequent sale of the Aircraft after any termination of the Lease
(irrespective of whether the Term of the Lease is extended pursuant to Section
3(g)) as a direct result of Lessee's breach of its covenants set forth in
Section 10(c)(ii) or (iii), Lessee's indemnity payment shall be limited to the
lesser of the actual amount of FSC Benefits lost or disallowed which arise
directly as a result of any such breach and the amount set forth as the FSC
Indemnity Maximum Amounts in Exhibit C


                                       31

<PAGE>

with respect to the Residual Period (as enumerated in Exhibit C), plus the
amounts set forth as the FSC Indemnity Maximum Amounts in Exhibit C for any
calendar years which have not elapsed at the time the Lease is terminated, plus
any interest, penalties and additions to tax but not including any penalties or
additions resulting principally from any act or omission of Lessor, Owner, GECAS
or any other Person other than Lessee that is not in turn attributable to an act
or omission of Lessee. For avoidance of doubt, the loss or disallowance of any
FSC Benefits resulting solely from any act or omission of Lessor, Owner, GECAS,
or any Person other an Lessee and not directly the result of a breach by Lessee
of the covenants set forth in Sections 10(c)(i),(ii) or (iii) or arising for any
reason other than a breach by Lessee of its covenants set forth in Section 10(c)
shall not be deemed to be included in the indemnities provided in this Section
10.

          (iii) If the Aircraft is leased after any termination of this
Agreement, Lessee's indemnity obligation, subject to Section 10(e), with respect
to a loss or disallowance of FSC Benefits as a result of Lessee's breach of its
covenants set forth in Section 10(c)(ii) or (iii) will be (in addition to any
applicable interest, penalties or additions to tax) the actual amount of FSC
Benefits lost or disallowed, as a direct result of such breach, for any calendar
year during any subsequent lease of the Aircraft for such calendar year.

     (e) After Tax Basis of Payments. Notwithstanding anything in this Section
10 to the contrary (including, without limitation, subparagraphs (i) and (ii) of
Section 10(b) above), Lessee further agrees that, with respect to any payment or
indemnity under this Section 10, such payment or indemnity shall include any
amount necessary to hold the recipient of the payment or indemnity harmless on
an after-tax basis from all Taxes required to be paid by such recipient with
respect to such payment or indemnity to any U.S. Taxing Authority or any Foreign
Taxing Authority, taking into account any reductions in such recipient's taxes
by reason of any deductions, credits, or other allowances in respect of the
payment or accrual of the amount indemnified against. Any subsequent reduction
in such recipient's deductions, credits, or other allowances in respect of the
payment or accrual of the amount indemnified against shall be treated as a Tax
that is indemnifiable under this Section without regard to the exclusions set
forth in Section 10(b) above.

     (f) Payments. The Lessee shall pay all Taxes for which it assumes liability
hereunder when such Taxes are due. If a claim is made against any Indemnitee for
any such Taxes, such Indemnitee shall promptly notify Lessee provided, however,
the failure to provide such notice shall not affect the Lessee's obligations
hereunder to any Indemnitee unless Lessee's rights to contest such Taxes are
materially prejudiced by such failure. Any amount payable as an indemnity to any
Indemnitee or any amount payable to Lessee pursuant to this Section 10 is to be
paid to such party directly, in immediately available funds, by bank wire
transfer at such bank or to such account as specified by the payee in written
directions to the payor, or, if such directions shall not have been given, by
check of the payor payable to the order of the payee and mailed to the payee by
certified mail, postage prepaid at its address as set forth in this Lease,
within thirty (30) days after receipt of a written demand therefor from such
Indemnitee or Lessee, as the case may be, but in no event more than ten (10)
days prior to the due date thereof. In the event Lessee fails to make any such
payment following a request by an Indemnitee and such Indemnitee makes a tax
payment with respect to any such Taxes (other than with funds advanced to such
Indemnitee on an interest-free basis by Lessee pursuant to this Section 10),
Lessee shall pay to the Indemnitee interest on the amount of such payment at the
Interest Rate set forth in Exhibit C from the date of such


                                       32

<PAGE>

Indemnitee's payment to the relevant taxing authority to the date of such
payment by Lessee to the Indemnitee hereunder. In the event an amount is payable
to Lessee under this Section 10, the Indemnitee owing such amount shall pay
interest on such amount at the Interest Rate set forth in Exhibit C from the
date of receipt by such Indemnitee of any amount giving rise to such obligation
to pay Lessee until the date of payment to Lessee.

     (g) Contests. If requested by Lessee in writing within forty-five (45) days
after its receipt of notice pursuant to this Section 10 of a claim against an
Indemnitee, upon receipt of indemnity reasonably satisfactory to it and at the
sole expense of Lessee (including, without limitation, all reasonable
out-of-pocket costs and expenses, reasonable legal and accounting and
investigatory fees and disbursements, additions to tax because of underpayments
of estimated Taxes, losses, penalties, and interest) such Indemnitee shall in
good faith contest or permit Lessee, if desired by Lessee, to contest in the
name of Lessee and/or the Indemnitee the validity, applicability or amount of
such Taxes by, in the reasonable discretion of such Indemnitee (or, where the
Lessee is not permitted to conduct the contest in the name of the Indemnitee, in
the sole discretion of such Indemnitee), (i) resisting payment thereof if
practicable and legally permissible, (ii) not paying the same except under
protest with funds advanced by Lessee on an interest-free basis, if protest is
necessary and proper, and (iii) if payments are made, using reasonable efforts
to obtain a refund thereof in appropriate administrative and judicial
proceedings; provided, however, that Lessee shall not be permitted to contest in
the name of such Indemnitee if such contest involves Income Taxes imposed by a
U.S. Taxing Authority, Income Taxes imposed by a Foreign Taxing Authority, or
any Taxes imposed against such Indemnitee that are unrelated to the transactions
contemplated by the Lease, in which event such Indemnitee shall follow the
direction of Lessee with respect to the method of pursuing that portion of any
such contest that does not relate to Income Taxes unless with respect to issues
that do not relate to the settlement of any portion of the contest involving
Taxes for which indemnification is provided by this Section 10, such direction
would, in the judgment of such Indemnitee, adversely affect in a material manner
interests of such Indemnitee unrelated to the transactions hereby contemplated;
provided further, however, that in no event shall an Indemnitee settle such
portion of any claim for which Lessee has an indemnity obligation pursuant to
this Section 10 without Lessee's written consent; provided further, however,
that the Indemnitee shall not be required to undertake any contest or allow
Lessee to contest in the name of such Indemnitee unless:

          (A) no Event of Default shall have occurred and be continuing,

          (B) prior to the commencement of any contest undertaken by the Lessee
or any contest undertaken by such Indemnitee with respect to which such
Indemnitee is required to follow the direction of the Lessee with respect to the
method of pursuing that portion of the contest that relates to the transactions
hereby contemplated, the Lessee shall have delivered to such Indemnitee a
written acknowledgment of its obligation to indemnify fully such Indemnitee to
the extent that the contest is not successful,

          (C) Lessee shall have provided such Indemnitee with an opinion of
legal counsel reasonably acceptable to such Indemnitee to the effect that a
reasonable basis exists to contest such claim and, prior to the commencement of
any appeal of an adverse administrative or judicial decision, with an opinion of
such tax counsel to the effect that a reasonable basis exists to appeal such
adverse administrative or judicial decision (which opinions shall be obtained at
Lessee's sole


                                       33

<PAGE>

cost and expense),

          (D) if such contest is to be initiated by the payment of, and the
claiming of a refund for, such Taxes, Lessee shall have advanced to such
Indemnitee sufficient funds (on an interest-free basis) to make such payments,
provided, however, that the Lessee shall indemnify such Indemnitee for any
adverse tax consequences resulting from such advance,

          (E) such proceedings do not involve any material risk or danger of the
sale, forfeiture, or loss of the Aircraft or any part thereof or the creation of
any Lien (other than a Lien for taxes not yet due or being contested in good
faith by appropriate proceedings, and for the payment of which such reserves, if
any, as are required to be provided under generally accepted accounting
principles have been provided), and

          (F) in the event that the subject matter of the contest is of a
continuing nature and has previously been resolved adversely pursuant to the
contest provisions of this Section 10 and there has been a change in the law
(including, without limitation, amendments to statutes or regulations,
administrative rulings and court decisions) after such claim shall have been so
previously resolved, such Indemnitee shall have received an opinion of
independent tax counsel selected by such Indemnitee and reasonably acceptable to
Lessee, which opinion shall be obtained at Lessee's sole expense, to the effect
that, as a result of such change, it is as likely as not that the position which
such Indemnitee or Lessee, as the case may be, had asserted in such previous
contest would prevail.

          If any Indemnitee shall obtain a refund of all or any part of such
Taxes (including interest, penalties, or additions thereto) paid by Lessee, such
Indemnitee shall pay Lessee, the amount of such refund reduced by the amount of
any Taxes payable by such Indemnitee in respect of the receipt of such refund
and increased by the amount of any savings realized by such Indemnitee in
respect to any such Taxes by reason of deductions, credits, allocations or
allowances in respect of such payment to Lessee; provided that such amount shall
not be payable (x) before such time as Lessee shall have made all payments or
indemnities then due to or on behalf of all Indemnitees under this Lease, (y)
while an Event of Default is outstanding and continues unremedied, or (z) to the
extent it exceeds the amount of all payments made by Lessee with respect to such
Taxes. If in addition to such refund any Indemnitee shall receive an amount
representing interest on the amount of such refund, Lessee shall be paid that
proportion of such interest which is fairly attributable to Taxes paid by Lessee
prior to the receipt of such refund; provided, however, that no amount shall be
payable under this or the preceding sentence during any period in which an Event
of Default has occurred and is continuing unremedied unless the Lease has
terminated and Lessee has paid all amounts due Lessor hereunder. If any such
refund or tax savings taken into account under this paragraph in Taxes is
subsequently disallowed or canceled, such disallowance or cancellation shall be
treated as a Tax that is indemnifiable under this Section 10 without regard to
the exclusions set forth in Section 10(b).

     (h) Reports. In case any report or return is required to be made with
respect to any Taxes which are an obligation of Lessee under this Section 10,
Lessee, if lawfully able to do so and appropriate and in receipt of notice from
Lessor in circumstances where Lessor, but not Lessee, could reasonably be
expected to have knowledge of such obligation, will either make such report or
return in such manner as will show the ownership of the Aircraft and the Engines
in Owner and


                                       34

<PAGE>

send a copy of such report or return to Lessor or will notify Lessor of such
requirement and if lawfully able to do so, will make such report or return in
such manner as shall be reasonably satisfactory to Lessor (and the Lessee shall
hold each Indemnitee harmless from and against any liabilities, obligations,
losses, damages, penalties, claims, actions, suits and reasonable costs arising
out of any insufficiency or inaccuracy in any such return, statement, report or
information). As soon as practicable after the beginning of each calendar year
(but in no event later than February 28 of such year), Lessee shall provide
Lessor with any information that Lessor shall reasonably request in writing (by
January 31 of such year) and Lessee can reasonably compile to enable Lessor and
Owner to allocate accurately for foreign, state and local tax purposes its
rental income for the preceding calendar year.

     (i) Value Added Taxes. Each amount stated as payable by Lessee under this
Lease is exclusive of Value Added Taxes (if any) and is accordingly to be
construed as a reference to that amount plus any Value Added Taxes in respect of
it.

     (j) Affiliated Group. In the event that the Indemnitee is a member of an
Affiliated Group (within the meaning of Section 1504(a) of the U.S. Internal
Revenue Code) which files a consolidated Federal income tax return, the term
"Indemnitee" shall mean and include such Affiliated Group and all the members
thereof.

     (k) Survival. All of the obligations of Lessee and each Indemnitee under
this Section 10 with respect to the Aircraft and the Engines or any part thereof
shall survive the assignment, expiration or other termination of this Lease.
Such obligations are expressly undertaken by Lessee for the benefit of, and
shall be enforceable by, Lessor and each other Indemnitee. Lessee's obligations
under this Section 10 shall not be affected by any circumstances, including,
without limitation, any setoff, counterclaim, recoupment, defense or other right
which Lessee may have against Lessor or any other person for any reason
whatsoever. Lessee will pay to an Indemnitee, on demand, and an Indemnitee will
pay to Lessee, if applicable, to the extent permitted by applicable law,
interest at the Interest Rate set forth in Exhibit C hereto on any amount not
paid when due pursuant to this Section 10 until the same shall be paid. All
indemnities, obligations, adjustments and payments provided for in this Section
10 shall survive, and remain in full force and effect, notwithstanding the
expiration or other termination of this Lease. The obligations of Lessee in
respect of all such indemnities, obligations, adjustments and payments are
expressly made for the benefit of, and shall be enforceable by, an Indemnitee,
without declaring this Lease to be in default or taking other action thereunder,
and notwithstanding any provision to the contrary contained herein.

     (l) Tax Treaty Elections. Lessor agrees to make, at Lessee's request, any
available election under an applicable tax treaty to the extent that making such
election would serve to reduce or eliminate any indemnification obligation of
the Lessee under this Section 10, but only to the extent that such election can
be made on a transaction-by-transaction basis and such election has no adverse
consequences to Lessor or any Indemnitee.

     (m) Verification. At Lessee's request, the computation by any Indemnitee of
any amount of Taxes or other amounts paid or payable by or to Lessee under this
Section 10 shall be verified by such Indemnitee's independent public
accountants. In the event the amount of Taxes or other amounts computed by such
independent public accountants differs from the amounts paid or


                                       35

<PAGE>

payable by or to Lessee, appropriate adjustments shall be made between Lessee
and such Indemnitee.

     Section 11. Casualty Occurrences.

     (a) Casualty Occurrence with Respect to the Airframe. Within fifteen (15)
days after a Casualty Occurrence during the Term with respect to the Airframe
and any Engine then installed thereon, Lessee shall give Lessor written notice
of such occurrence. On or before one hundred twenty (120) days after the date of
the Casualty Occurrence, but in no event later than the date of receipt of
insurance proceeds in respect of such Casualty Occurrence, Lessee shall pay to
Lessor in immediately available funds an amount equal to the sum of (i) the
Casualty Value of the Aircraft computed as of the date of payment less an amount
equal to the daily equivalent of Basic Rent (computed on the basis of a 360-day
year) for each day during the period commencing with the day after payment of
such Casualty Value and extending to, but excluding, the Basic Rent Payment Date
immediately following payment of such Casualty Value, and (ii) all Supplemental
Rent accrued or due and unpaid (other than Maintenance Payments which would have
been payable by Lessee pursuant to Section 16(m) and amounts paid pursuant to
clause (i) above), computed as of the date of payment less any Security Deposit
then held by Lessor. Upon such payment (A) the obligation of Lessee to make
further payments of Basic Rent hereunder shall terminate, (B) this Lease shall
terminate with respect to the Aircraft and (C) Lessor will cause Owner to
transfer to Lessee or its insurers (as directed by Lessee), without recourse or
warranty, all of Owner's right, title and interest, if any, in and to the
Airframe and Engines (if any) suffering the Casualty Occurrence, as well as all
of Owner's right, title and interest in and to any Engine constituting part of
the Aircraft but not installed thereon at the time of the Casualty Occurrence in
each case free of any Lessor's Liens.

     (b) Casualty Occurrence with Respect to an Engine. Upon a Casualty
Occurrence with respect to an Engine only, Lessee shall give Lessor prompt
written notice thereof and shall, within ninety (90) days after such occurrence,
convey to Owner, as replacement for the Engine suffering a Casualty Occurrence,
title to a Replacement Engine. Each Replacement Engine shall be free of all
Liens (except those Liens which are permitted by Section 14 hereof) and shall be
in as good an operating condition and shall have a value and utility at least
equal to, and shall have a substantially equivalent number of cycles remaining
on its life limited parts as the Engine being replaced, assuming the Engine
being replaced was in the condition and repair required by the terms hereof
immediately prior to the Casualty Occurrence and shall be compatible with the
remaining installed Engine. Upon full compliance by Lessee with the terms of
this paragraph, Lessor will cause the Owner to transfer to Lessee all of Owner's
right, title and interest in and to the Engine which suffered the Casualty
Occurrence free of any Lessor's Liens. Prior to or at the time of any such
conveyance, Lessee, at its own expense, will promptly (i) furnish Lessor with a
full warranty bill of sale conveying title free and clear of all Liens except
Lessor Liens, in form and substance reasonably satisfactory to Lessor, with
respect to such Replacement Engine; (ii) cause a supplement hereto, in form and
substance reasonably satisfactory to Lessor, subjecting such Replacement Engine
to this Lease, to be duly executed by Lessee, and recorded pursuant to
applicable Law; (iii) furnish Lessor with such evidence of title to such
Replacement Engine and of compliance with the insurance provisions of Section 12
hereof with respect to such Replacement Engine as Lessor may reasonably request;
(iv) furnish Lessor with an opinion of Lessee's counsel (which counsel shall be


                                       36

<PAGE>

reasonably acceptable to Lessor) to the effect that title to such Replacement
Engine has been duly conveyed to Owner as provided in clause (i) above, and that
such Replacement Engine is duly leased hereunder; (v) furnish a certificate
signed by a duly authorized financial officer or executive of Lessee certifying
that, upon consummation of such replacement, no Default or Event of Default will
exist hereunder; (vi) furnish Lessor with such documents as Lessor may
reasonably request in connection with the consummation of the transactions
contemplated by this Section 11(b), in each case in form and substance
reasonably satisfactory to Lessor; and (vii) furnish such financing statement
covering the Replacement Engine as may be reasonably requested by Lessor. Upon
full compliance by Lessee with the terms of this Section 11(b), Lessor will
cause Owner to transfer by bill of sale to Lessee "AS IS AND WHERE IS" and
without recourse or warranty (except as to the absence of Lessor's Liens) all of
the right, title and interest in the Engine which suffered the Casualty
Occurrence and which was originally leased to Lessee. For all purposes hereof,
each such Replacement Engine shall be deemed part of the property leased
hereunder, shall be deemed an "Engine" as defined herein and shall be deemed
part of the same Aircraft as was the Engine replaced thereof. No Casualty
Occurrence covered by this Section 11(b) shall result in any reduction in Rent.

     (c) Application of Proceeds and Payments. Any payments received at any time
by Lessor or by Lessee from any insurer under any policy of insurance (other
than liability insurance) or any other person (other than an insurer under
insurance maintained by Lessor) shall be applied in the manner specified in
Sections 12(d), 12(e) or 12(f) hereof as applicable. Subject to Section 11(f)
hereof, any payments received at any time by Lessor or Lessee from any
Governmental Entity or other Person with respect to a Casualty Occurrence will
be applied as follows:

          (i) unless clause (ii) below is applicable, so much of such payments
as shall not exceed the sum of accrued, unpaid Rent plus the Casualty Value
required to be paid by Lessee pursuant to Section 11(a) of this Lease shall be
paid to Lessor in reduction of Lessee's obligation to pay such unpaid Rent and
Casualty Value if not already paid by Lessee, or, if already paid by Lessee
(unless a Default or an Event of Default shall have occurred and be continuing)
shall be applied by Lessor to reimburse Lessee for its payment of such Casualty
Value and the balance of such payment, if any, remaining thereafter (if such
payment is received with respect to insurance other than liability insurance)
(unless a Default or an Event of Default shall have occurred and be continuing)
shall be paid over to, or retained by, Lessee; or

          (ii) if such payments are received as a result of a Casualty
Occurrence with respect to an Engine which is being replaced pursuant to Section
11(b), unless a Default or Event of Default shall have occurred and be
continuing, all such payments shall be paid over to, or retained by, Lessee if
Lessee shall have fully performed or, concurrently therewith will fully perform,
the terms of Section 11(b) and of Section 15 hereof with respect to the Casualty
Occurrence for which such payments are made.

     (d) Requisition for Use by Government with Respect to the Aircraft.. In the
event of the requisition for use by a Governmental Entity of the Airframe or any
Engine (other than a requisition constituting a Casualty Occurrence), all
Lessee's obligations under this Lease with respect to the Airframe or Engine
shall continue to the same extent as if such requisition had not occurred,
except to the extent such obligations cannot be performed by Lessee as a
consequence of such requisition. All payments received by Lessor or Lessee from
the Governmental Entity for the


                                       37

<PAGE>

use of the Airframe or Engine prior to the time (if at all) such requisition
becomes a Casualty Occurrence shall be paid over to, or retained by, Lessee if
no Default or Event of Default shall have occurred and be continuing; and all
payments received by Lessor or Lessee from the Governmental Entity for the use
of such item thereafter shall be paid over to, or retained by, Lessor.

     (e) Other Dispositions. Any amounts not payable to or retainable by Lessee
pursuant to this Section 11 or Section 12 hereof because a Default or an Event
of Default shall have occurred and be continuing shall be held by Lessor and
shall be paid over to Lessee when such Default or Event of Default shall cease
to be continuing, except that if Lessor shall have theretofore declared this
Lease to be in default pursuant to Section 18 hereof, such amounts shall be
retained by Lessor and disposed of in accordance with the provisions thereof.

     (f) Application in Default. Any amount referred to in clause (i) or (ii) of
Section 11(c) which is otherwise payable to Lessee shall not be paid to Lessee,
or, if it has been previously paid to Lessee, and not yet applied by Lessee as
permitted or required hereunder, shall be delivered from Lessee to Lessor, if at
the time of such payment a Default or an Event of Default shall have occurred
and be continuing. In such case, all such amounts shall be paid to and held by
Lessor as security for the obligations of Lessee, or, at the option of Lessor,
applied by Lessor toward payment of any of Lessee's obligations at the time due
hereunder, as Lessor may elect. At such time as there shall not be continuing
any such Event of Default or Default, all such amounts at the time held by
Lessor in excess of the amount, if any, which Lessor has elected for application
as provided above, shall be paid to Lessee.

     (g) ICAO Rules and Procedures. It is agreed that any investigation of an
accident involving the Aircraft or a Casualty Occurrence will be carried out
with the participation of Lessor and Lessee in accordance with the Rules and
Procedures of the International Civil Aviation Organization ("ICAO") from time
to time in effect. All necessary information required by ICAO, to the extent
reasonably available to the Lessor, shall be promptly furnished by the Lessor.

     Section 12. Insurance.

     (a) Public Liability and Property Damage Insurance. Lessee shall carry and
maintain in full force and effect, at its own expense, with Approved Insurers,
airline public liability insurance (including, to the extent generally available
in the insurance markets but not limited to, contractual liability, third party
legal liability, passenger, baggage, cargo, mail and airline general liability,
including premises hangar keepers and products liability) and property damage
insurance with respect to the Aircraft of the type usual and customary by
commercial scheduled passenger airline carriers similarly situated to Lessee and
operating similar aircraft. Such policy shall include war and allied risks in
accordance with standard market practice (currently "The Extended Coverage
Endorsement - AVN 52C"). Such insurance shall be in an amount not less than the
amount under "Public Liability and Property Damage Insurance" as set forth on
Exhibit C hereto. Lessee shall not discriminate against the Aircraft in
providing such insurance.

     (b) Insurance Against Loss or Damage. Lessee, at its own expense, shall
maintain in full force and effect throughout the Term with Approved Insurers
during the Term "all-risk" ground and flight aircraft hull insurance (which
shall include, but not be limited to, vandalism, war risk and allied perils,
hijacking, disappearance clause and coverage against strikes, riots, commotions
or


                                       38

<PAGE>

labor disturbances, malicious acts or acts of sabotage and unlawful seizure
(including confiscation, confiscation by the Country of Registration, arrest,
nationalization, seizure, restraint, detention, appropriation, requisition or
destruction thereat, by or under authority of any Governmental Entity), or
wrongful exercise of control of the Aircraft in flight by a person on board the
Aircraft acting without the consent of Lessee) covering the Aircraft, and
"all-risk" coverage insurance with respect to Engines and Parts while not
installed on the Aircraft or an aircraft, which in each case is at least as
broad as coverage maintained by commericial scheduled passenger airlines
similarly situated to Lessee and operating similar aircraft and engines as
Lessee's fleet. Such insurance shall be for an amount not less than the Casualty
Value for the Aircraft and shall incorporate a 50/50 clause with respect to
"all-risk" hull and war risk coverage and shall be as further specified in
Exhibit C. Such insurance may include provisions for deductibles in an amount
usual and customary for commercial scheduled airline carriers similarly situated
and operating similar aircraft provided that (i) the amount of such deductibles
must be no greater than the lowest deductible amount applying to any similar
aircraft in Lessor's fleet, and (ii) in no event shall the amount of such
deductibles exceed the amount under "Deductible Amount" set forth on Exhibit C
hereto.

     (c) Required Policy Designations and Provisions. Each and any policy of
insurance obtained and maintained pursuant to this Section, and each and any
policy obtained in substitution or replacement for any such policies, shall: (i)
designate Owner as owner and Lessor as lessor of the aircraft covered thereby
and designate Owner the sole loss payee in respect of the insurance covering the
Aircraft required to be maintained by Lessee pursuant to Section 12(b), and
shall designate Lessor, GECAS, and Owner and their respective named successors
and assigns (and in respect of coverage specified in Section 12(a) hereof, their
respective directors, officers, agents, shareholders, subsidiaries and
employees), as additional named insureds (the "Additional Insureds") (and the
policy shall be promptly amended upon the request of Lessor to add any
additional named successors or assigns of Lessor, GECAS, or Owner) as their
interests may appear (but without imposing upon the Additional Insureds, any
obligation imposed upon the insured, including, without limitation, the
liability to pay any premiums for, any such policies); (ii) expressly provide
that, in respect of the interests of the Additional Insureds, in such policies,
the insurance shall not be invalidated by any action or inaction of Lessee, and
shall insure the Additional Insureds, regardless of any breach or violation of
any warranty, declaration or condition contained in such policies by Lessee or
any other party other, and provided the Person so protected has not caused,
contributed to or knowingly condoned such action or inaction, other than with
respect to an Additional Insured in connection with a breach or violation by
such Additional Insured; (iii) provide that if there is a cancellation or
material adverse alteration of the insurance, such cancellation or alteration
shall not be effective as to the Additional Insureds for thirty (30) days (seven
(7) days or such lesser period as from time to time may be applicable in the
case of any war risks for allied perils coverage) after issuance to Lessor of
written notice by telecopy or overnight courier, by such insurer or insurers of
such prospective cancellation or change; (iv) include coverage for the
territorial limits of any country (including its airspace) in which the Aircraft
operates on a worldwide basis subject to such limitations and exclusions as
Lessor may reasonably agree; (v) provide that, as against the Additional
Insureds, the insurer waives any rights of set-off, counterclaim or any other
deduction (except to the extent set forth in an insurance certificate which
shall have been approved by Lessor), whether by attachment or otherwise, and
agrees to waive rights of subrogation against the Additional Insureds, provided,
however, that such waiver of subrogation need not extend to claims against third
parties; (vi) provide that no amount due from the Lessee or any other Person to
any insurer or broker shall be deducted from any amount payable to a third party
under such insurance


                                       39

<PAGE>

policy; (vii) provide that in the event of any damage or loss, whether or not a
Casualty Occurrence hereunder, and which results in a payment, such payment
shall be payable directly to Lessor or its assignee as loss payees, for the
account of all interests; provided, however, that so long as no Default or Event
of Default shall have occurred and be continuing, payments with respect to
property damage loss to the Airframe or Engine not constituting a Casualty
Occurrence, or any Part, in any amount not to exceed **Material Redacted** may
be paid to Lessee to be applied for the repair or replacement necessitated by
such property damage and Lessee shall notify Lessor in writing of any such
payments in excess of the Damage Notification Threshold and the nature of the
property damage giving rise to such payments; (viii) provide that none of the
Additional Insureds shall be liable for any insurance premium; (ix) expressly
exclude any fleet aggregate, ground aggregate or any other type of sublimit,
limiting coverage to the Aircraft unless (A) Lessee, all other loss payees and
all other insureds, other than Lessor, execute and deliver a subordination
agreement, in form reasonably acceptable to Lessor, whereby such parties agree
to subordinate their rights to the rights of Lessor or (B) Lessee obtains an
excess policy of insurance which provides insurance coverage in an amount not
less than the Casualty Value of the Aircraft for the express and exclusive
benefit of Lessor or (C) any such aggregate or sublimit is set forth in an
insurance certificate which shall have been approved by Lessor; and (x) be
reinsured outside the Country of Registration with an Approved Insurer in the
international reinsurance markets for an amount not less than 97.5% of the
insured risk for each type of coverage required to be maintained hereunder and,
to the extent of any reinsurance, include a cut-through provision permitting the
Additional Insureds to file claims and to obtain payment directly from the
reinsurers under the reinsurance policies. Each such policy shall be primary
without right of contribution (except to the extent set forth in an insurance
certificate which shall have been approved by Lessor), from any other insurance
which may be carried by any of the Additional Insureds, and, with respect to
liability coverage, shall expressly provide that all of the provisions thereof
shall operate in the same manner as if there were a separate policy covering
each insured, provided that such policies shall not operate to increase the
insurer's limit of liability and shall not operate to permit claims recoverable
under the hull policy to be recoverable as liability claims.

     Lessee shall have the right to carry insurance in excess of the amounts
required hereunder and the proceeds of such excess insurance shall be payable to
Lessee; provided, however that no such excess insurance shall prejudice any
insurance coverages required to be maintained by Lessee hereunder. Similarly,
Lessor shall have the right to carry additional and separate insurance for its
own benefit at its own expense, without, however, thereby limiting Lessee's
obligations under this Section 12, provided that no such insurance maintained by
Lessor shall prejudice any insurance coverage required to be maintained by
Lessee hereunder or the recovery by Lessee thereunder.

     (d) Application of Insurance Proceeds for a Casualty Occurrence. It is
agreed that insurance payments which arise from any policy of insurance carried
by Lessee and received as the result of the occurrence of a Casualty Occurrence
shall be applied as follows:

          (i) if such payments are received with respect to a Casualty
Occurrence relating to the Airframe and Engines or engines installed on the
Airframe, so much of such payments as shall not exceed the amounts due under
Section 11(a) hereof shall be paid to Owner, and the balance to Lessee; and

          (ii) if such payments are received with respect to a Casualty
Occurrence relating


                                       40

<PAGE>

to an Engine under circumstances contemplated by Section 11(b) hereof, such
payment shall be adjusted with Lessee (provided that Lessee has not breached any
warranty, declaration or condition contained in the applicable insurance policy)
and paid over to Lessee, provided that Lessee shall have fully performed or,
concurrently therewith, will fully perform the terms of Section 11(b) hereof.

     (e) Application of Insurance Proceeds for Other than a Casualty Occurrence.
Subject to the proviso in Section 12(c)(vi) above, the insurance payments for
any property damage loss to the Airframe or any Engine not constituting a
Casualty Occurrence, or to any Part, will be applied in payment (or to reimburse
Lessor/Lessee) for repairs or replacement property upon Lessor's receipt of
evidence reasonably satisfactory to it that repairs or replacement have been
effected in accordance with this Agreement.

     (f) Application in Default. Any amount referred to in Section 12(d)(i) or
(ii) of Section 12(e) which is otherwise payable to Lessee shall not be paid to
Lessee, or, if it has been previously paid to Lessee, and not yet applied by
Lessee as permitted or required hereunder, shall be delivered by Lessee to
Lessor, if at the time of such payment, a Default or an Event of Default shall
have occurred and be continuing. In either case, all such amounts shall be held
by Lessor as security for the obligations of Lessee, or, at the option of
Lessor, applied by Lessor toward payment of any of Lessee's obligations at the
time due hereunder. At such time as there shall not be continuing any such
Default or Event of Default, all such amounts at the time held by Lessor in
excess of the amount, if any, which Lessor has elected for application as
provided above, shall be paid to Lessee.

     (g) Certificates of Insurance. On or before the Delivery Date, and
thereafter on each renewal by Lessee of the insurance required hereby, but not
less often than annually, Lessee will furnish to Lessor one or more certificates
(substantially in the form of Exhibits G and H hereto or such other form to
which Lessor shall have agreed) each executed and delivered by an Approved
Insurance Broker who is authorized by one or more Approved Insurers, appointed
by Lessee, which together shall describe in reasonable detail insurance carried
on the Aircraft and confirming the Approved Insurers' agreement to the specified
insurance requirements of this Lease. Lessee will cause each such Approved
Insurance Broker who is authorized by an Approved Insurer to agree to advise
Lessor in writing at least thirty (30) days (seven (7) days or such lesser
period as may from time to time be applicable in the case of any war risk and
allied perils coverage) prior to the non-renewal, termination or cancellation by
the underwriters for any reason (including, without limitation, failure to pay
the premium therefor) of any such insurance or as soon as possible in respect of
"non-renewal" or automatic termination for war risk.


                                       41

<PAGE>

     Section 13. Indemnification.

     Lessee agrees to indemnify, reimburse and hold harmless each Indemnitee
from and against any and all claims, damages, losses, liabilities, demands,
suits, judgments, causes of action, legal proceedings, whether civil or
criminal, penalties, fines and other sanctions, and any attorneys' fees and
other reasonable costs and expenses in connection herewith or therewith,
including any of the foregoing arising or imposed with or without Lessor's fault
or negligence (whether passive or active) or under the doctrine of strict
liability (any and all of which are hereafter referred to as "Claims") which in
any way may result from, pertain to or arise in any manner out of, or are in any
manner related to (a) the Aircraft or this Lease, or the breach of any
representation, warranty or covenant made by Lessee hereunder, or (b) the
condition, ownership, manufacture, purchase, delivery, non-delivery, lease,
acceptance, rejection, possession, return, disposition or use, or operation of
the Aircraft either in the air or on the ground, or (c) any defect in the
Aircraft (whether or not discovered or discoverable by Lessee or Lessor) arising
from the material or any articles used therein or from the design, testing, or
use thereof or from any maintenance, service, repair, overhaul, or testing of
the Aircraft, whether or not the Aircraft is in the possession of Lessee, and
regardless of where the Aircraft may then be located, or (d) any transaction,
approval, or document contemplated by this Lease or given or entered into in
connection herewith; provided, however, that Lessee shall be subrogated to all
rights and remedies which any Indemnitee may have against the Manufacturer of
the Aircraft and its subcontractors as to any such Claims, but only to the
extent that Lessee satisfies its indemnification obligation to such Indemnitee
hereunder with respect to such Claims. In the event Lessee is required to
indemnify any Indemnitee hereunder, Lessee shall pay to such Indemnitee an
amount which, after deduction of all Taxes and like charges required to be paid
by such Indemnitee in respect of such payment, is equal to the amount of the
indemnification required.

     Lessee shall not be required to indemnify any Indemnitee for any attorneys'
fees and expenses incurred by such Indemnitee in seeking indemnification from
Lessee and relating to an alleged breach of any representation, warranty or
covenant made by Lessee hereunder unless such Indemnitee prevails in the action
seeking such indemnification.

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

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


                                       42

<PAGE>

     Notwithstanding the foregoing provisions of this Section 13:

          Lessee shall not be obligated to make any payment by way of indemnity
in respect of any Claims against an Indemnitee:

          (i) which result from or arise out of the gross negligence or willful
misconduct of such Indemnitee or its Affiliates or out of a breach of such
Indemnitee's or its Affiliate's representations, warranties or covenants
hereunder or under any documents, agreement or instrument delivered in
connection herewith; or

          (ii) in respect to the Aircraft to extent that the same are
attributable to acts or events which occur after the Aircraft has been
redelivered to Lessor in accordance with Section 16 hereof and is no longer
subject to this Lease unless any such act or event shall itself directly result
from an act or omission of Lessee which occurred during the Term (provided,
however, that to the extent an Indemnitee is indemnified by Lessee for Claims
arising from acts or events which occur prior to the Delivery Date, such
Indemnitee shall assign to Lessee any rights it may have against other Persons
to recover for such Claims); or

          (iii) which represent Taxes which are excluded under Section 10(b);

          (iv) arising from the financing of the Aircraft or the voluntary or
involuntary sale, transfer or other disposition (other than in connection with
the exercise of an Indemnitee's remedies following an Event of Default or
Casualty Occurrence) of the Aircraft or this Lease or any part thereof or
interest therein, or the Rent or any interest therein, by any Person other than
Lessee;

          (v) which would not have occurred but for the existence of a Lien
(other than this Lease or a Lien arising by or through Lessee) which Lessee is
not responsible for discharging under this Lease; and

          (vi) which constitute ordinary and usual operating or overhead
expenses other than any such expense arising in connection with Lessor's
exercise of remedies hereunder following an Event of Default.


                                       43

<PAGE>

     Section 14. Liens.

     LESSEE SHALL NOT DIRECTLY OR INDIRECTLY CREATE, INCUR, ASSUME OR SUFFER TO
EXIST ANY LIEN ON OR WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE, TITLE THERETO
OR ANY INTEREST THEREIN, EXCEPT (a) THE RESPECTIVE RIGHTS OF LESSOR AND LESSEE
AS HEREIN PROVIDED; (b) LESSOR'S LIENS WITH RESPECT TO THE AIRCRAFT OR ANY
ENGINE; (c) LIENS FOR TAXES EITHER NOT YET DUE OR BEING CONTESTED IN ACCORDANCE
WITH SECTION 10 HEREOF AND SO LONG AS ADEQUATE RESERVES ARE MAINTAINED WITH
RESPECT TO SUCH LIENS; AND (d) INCHOATE MATERIALMEN'S, MECHANICS', WORKMEN'S,
REPAIRMEN'S, EMPLOYEES' OR OTHER LIKE LIENS ARISING IN THE ORDINARY COURSE OF
BUSINESS, WHICH EITHER ARE NOT DELINQUENT OR ARE BEING CONTESTED IN GOOD FAITH
BY LESSEE, SO LONG AS THE AIRCRAFT OR SUCH ENGINE IS NOT IN DANGER OF BEING
LOST, SOLD, CONFISCATED, FORFEITED OR SEIZED AS A RESULT OF ANY SUCH LIEN.
LESSEE SHALL PROMPTLY, AT ITS OWN EXPENSE, TAKE SUCH ACTION AS MAY BE NECESSARY
TO DULY DISCHARGE ANY LIEN (EXCEPT FOR THE LIENS REFERRED TO IN CLAUSES (a) AND
(b) OF THIS SECTION 14) IF THE SAME SHALL ARISE AT ANY TIME WITH RESPECT TO THE
AIRCRAFT OR ANY ENGINE.

     Section 15. Perfection of Title and Further Assurances.

     If at any time subsequent to the initial recordation of title under this
Lease, any filing or recording is reasonably necessary to protect the interests
of Owner or Lessor, Lessee, at its own cost and expense and upon request by
Lessor, shall cause this Lease, any financing statements with respect hereto,
and any and all additional instruments which shall be executed pursuant to the
terms hereof, to be kept, filed and recorded and to be reexecuted, refiled and
re-recorded in the appropriate office or offices pursuant to applicable Laws, to
perfect, protect and preserve the rights and interests of Lessor hereunder and
in the Aircraft. At the reasonable request of Lessor, Lessee shall furnish to
Lessor an opinion of counsel or other evidence satisfactory to Lessor of each
such filing or refiling and recordation or re-recordation.

     Without limiting the foregoing, Lessee shall do or cause to be done, at
Lessee's cost and expense, any and all acts and things which may be required
under the terms of the Mortgage Convention to perfect and preserve the title of
Owner and the interests of Owner and Lessor in the Aircraft within the
jurisdiction of any signatory which has ratified the Mortgage Convention if such
jurisdiction is in the territory in which Lessee may operate the Aircraft, as
Lessor may reasonably request. Lessee shall also do or cause to be done, at its
own expense, any and all acts and things which may be required under the terms
of any other Law involving any jurisdiction in which Lessee may operate, or any
and all acts and things which Lessor may reasonably request, to perfect and
preserve Lessor's ownership rights regarding the Aircraft within any such
jurisdiction.

     In addition, Lessee will promptly and duly execute and deliver to Lessor
such further documents and assurances and take such further actions as it may
from time to time reasonably request in order to more effectively carry out the
intent and purpose of this Lease and to establish and protect the rights and
remedies created or intended to be created in favor of Lessor hereunder,
including without limitation, if reasonably requested by Lessor at the expense
of Lessee, the


                                       44

<PAGE>

execution and delivery of supplements or amendments hereto in recordable form,
subjecting to this Lease any Replacement Engine and the recording or filing of
counterparts thereof, in accordance with the laws of any appropriate
jurisdiction.

     Section 16. Return of Aircraft and Records.

     (a) Return. On the Expiration Date, Lessee, at its own expense, shall
return the Aircraft to Lessor in the condition specified on Exhibit E hereto at
the location specified as "Return Location" set forth on Exhibit C hereto, fully
equipped with all required Parts and Engines, duly installed thereon, together
with Aircraft Documents and records which are complete and acceptable to the
DAC, by delivering the same to Lessor at such location.

     (b) Legal Status Upon Return. Upon the Return Occasion, the Aircraft shall
be: (i) free and clear of all Liens, except Lessor's Liens; (ii) duly certified
as an airworthy aircraft by the DAC with the current and valid airworthiness
certificate installed on the Aircraft; (iii) equipped and in full airworthy
condition required to allow the Aircraft to be operated in commercial
transportation of passengers under applicable rules and regulations of the DAC
and in full compliance with Part 129; (iv) duly registered under the applicable
Law of the Country of Registration; (v) in full compliance with the Maintenance
Program; (vi) in full compliance with all FAA Airworthiness Directives which by
their terms require compliance on or before the ninety (90) days following the
Expiration Date; and (vii) in compliance with the requirements of the FAA
regulations found at Part 36, Appendix C, Stage 3, noise compliance, without
waiver or performance restriction.

     (c) Engines. Lessee may return the Aircraft on the Return Occasion with an
engine not owned by Lessor, so long as (i) such engine was not installed on the
Aircraft solely for the purpose of reducing the number of hours or cycles
(whichever is the more limiting factor) remaining until the next scheduled
restriction in accordance with the Maintenance Program under which the Engines
are maintained; (ii) such engine conforms to the requirements set forth in
Section 11(b) hereof with respect to a Replacement Engine without regard to
flight hours or cycles remaining on LLPs or time since heavy maintenance, except
Lessor may in its discretion choose among the engines presented by Lessee as
candidates for substitution; (iii) such engine shall conform to the return
condition requirements set forth in Section 16(f) hereof; and (iv) Lessee, at
its own expense and concurrently with such delivery, furnishes Lessor with a
bill of sale, in form and substance reasonably satisfactory to Lessor, with
respect to such engine and with evidence that Lessee is transferring full and
unencumbered title to such engine (including, if requested, an opinion of
Lessee's counsel to the effect of the opinion required by Section 11(b)(iv)
hereof) and takes such other action as Lessor may reasonably request in order
that title to such engine shall be duly and fully vested in Owner. Lessee's
obligation to comply with the terms of this Section 16(c) shall be conditioned
on Lessor's transferring, or causing to be transferred, to Lessee title to any
Engine not installed on the Aircraft at the Return Occasion, without any
representation, warranty or recourse of any kind whatsoever, express or implied,
except a warranty that such Engine is free and clear of Liens, other than Liens
which Lessee is required to discharge hereunder, or defects in title resulting
from acts of Owner or Lessor.

     (d) Records. Upon the Return Occasion, Lessee shall deliver to Lessor all
logs, manuals, and data and inspection, modification and overhaul records which
are required to be maintained with respect to the Aircraft and Engines under the
Maintenance Program and in


                                       45

<PAGE>

accordance with applicable rules and regulations of the DAC. Lessee shall
deliver to Lessor a copy of such portions of Lessee's Maintenance Program as are
necessary to enable the subsequent operator of the Aircraft to bridge the
maintenance of the Aircraft to its own maintenance program; provided, that
Lessor agrees to maintain such information in strict confidence and to use such
information only for the foregoing purpose, and, prior to providing such
information to any other Person, Lessor shall obtain a written agreement to the
same effect from such other Person in form and substance reasonably satisfactory
to Lessee. All such documents shall have been maintained in English, or be
accompanied by a certified English translation.

     (e) Service Bulletin and Modification Kits. At or upon the return of the
Aircraft pursuant to this Section 16, Lessee shall deliver to Lessor, at no cost
to Lessor, all service bulletin kits furnished without charge by a manufacturer
for installation on the Aircraft which have not been so installed together with
appropriate instructions for installation. In the event such uninstalled kits
were purchased or manufactured by Lessee for the Aircraft, then Lessor shall
have a right to purchase such kits at Lessee's cost for a period of ninety (90)
days after return.

     (f) Condition of Aircraft. Upon the Return Occasion applicable to the
Aircraft, Lessee shall return the Aircraft to Lessor in such condition that the
Aircraft shall comply with all of the conditions set forth on Exhibit E hereto.

     (g) Final Inspection. Upon the Return Occasion, Lessee shall make the
Aircraft available to Lessor at Lessee's principal maintenance base or at the
location at which the "C" check referred to below is being performed for
detailed inspection, at Lessee's expense (provided, that Lessee shall not bear
any costs or expenses associated with Lessor's representatives), in order to
verify that the condition of the Aircraft complies with the requirements set
forth above (such inspection being hereinafter referred to as the "Final
Inspection"). The Final Inspection shall be conducted concurrently with the "C"
Check to be performed immediately prior to the Return Occasion. Lessee shall
give Lessor not less than ten (10) days prior written notice of the commencement
date of such "C" Check. The period allowed for the Final Inspection shall have
such duration as to permit Lessor to verify Lessee's satisfaction of the
requirements of Exhibit E and shall continue on consecutive days until all
activity required above to be conducted during the Final Inspection has been
concluded; provided, however, that Lessor shall use its best efforts to complete
the Final Inspection contemporaneously with the completion of such "C" Check. To
the extent that any portion of the Final Inspection extends beyond the
Expiration Date, the Term shall be deemed to have been automatically extended,
and the obligation to pay Rent hereunder continued on a daily basis until the
Final Inspection shall have been concluded, provided that such Rent shall be
payable only if (i) Lessor provided on a timely basis sufficient personnel to
complete the Final Inspection in a timely manner and (ii) the cause of such
extension is not directly attributable to Lessor or its personnel. All storage
expenses attributable to any extension of the Term pursuant to the preceding
sentence shall be payable by Lessee.

     (h) Aircraft Documentation. In order to enable Lessor to prepare for the
Final Inspection of the Aircraft pursuant to Section 16(g) above, Lessee agrees
to make available to Lessor at Lessee's principal maintenance base not later
than ten (10) days prior to the commencement of such Final Inspection, the
Aircraft Documents listed on Exhibit B hereto, together with such other
documentation regarding the condition, use, maintenance, operation and history
of the Aircraft during Lessee's possession as Lessor may reasonably request.


                                       46

<PAGE>

     (i) Corrections and Subsequent Corrections. In the event that the Aircraft
or any Engine fails upon the Return Occasion to conform to any return condition
requirement imposed by this Lease and particularly Section 16(f) and (Exhibit
E), Lessor may, without prejudice to the right of Lessee to claim that the
Aircraft did comply with such return condition requirement, (i) continue the
Lease in effect in the manner provided for in Section 16(g) above with regard to
automatic extension until such time as the Aircraft is brought up to the
condition required by Section 16(f) above or (ii) accept the return of the
Aircraft and thereafter have any such nonconformance corrected, at such time as
Lessor may deem appropriate but not to occur later than ninety (90) days
following the return of the Aircraft, at commercial rates then charged by the
Person selected by Lessor to perform such correction. Any direct expense
incurred by Lessor for such correction shall become Supplemental Rent payable by
Lessee within thirty (30) days following the submission of a written statement
by Lessor to Lessee, identifying the items corrected and setting forth the
expense of such correction. Lessee's obligations to pay such Supplemental Rent
shall survive the passage of the Expiration Date or other termination of this
Lease.

     (j) Additional Maintenance, Repair or Overhaul. Upon the Return Occasion
and upon written request of Lessor made at least fifteen (15) days prior to the
Expiration Date, Lessee shall (subject to the availability to Lessee of
facilities and manpower) store and insure the Aircraft for a period of up to
forty-five (45) days, and perform such additional maintenance, repair, or
overhaul of the Aircraft as is requested by Lessor in the same manner and with
the same care as used for similar aircraft and engines owned by Lessee, provided
that Lessor shall reimburse Lessee for its documented costs, at Lessee's
standard contract rate, for such storage, maintenance, repair, or overhaul.
Lessor shall reimburse Lessee for its actual cost of insurance in connection
with maintaining the Aircraft under Lessee's insurance coverage during the
storage period. Such additional maintenance, repair or overhaul shall not extend
this Lease. Maintenance requested by Lessor other than that specifically
required by the terms of this Lease shall be performed by Lessee and paid for by
Lessor at Lessee's standard contract rate for such maintenance as agreed to by
Lessor.

     (k) Functional Check Flight. Immediately prior to the expiration of the
Term, a qualified pilot and not more than two (2) technical representatives
selected by Lessor, in conjunction with Lessee's flight crew, will accomplish a
functional check flight of not more than two (2) hour's durations in accordance
with Lessee's procedures and at Lessee's expense to demonstrate the
airworthiness of the Aircraft and proper functioning of all systems and
components; provided, Lessor shall be responsible for the charges of Lessor's
technical representatives. At all times during such functional check flight
Lessee's flight crew shall be in command of the Aircraft. Any discrepancy or
malfunction detected of an airworthiness or operational nature by normal airline
standards shall be corrected at Lessee's expense. To the extent possible, the
functional check flight shall be combined with the return of the Aircraft under
Section 16(a).

     (l) Technical Acceptance at Return. Provided that Lessor is reasonably
satisfied that all of the conditions for return of the Aircraft set forth in
this Lease have been satisfied (either through performance or through the
payment of the amounts in lieu thereof specified in Exhibit E hereto), Lessor
shall execute and deliver a Technical Acceptance Receipt substantially in the
form annexed hereto as Exhibit H with appropriate changes to reflect the
circumstances of redelivery of


                                       47

<PAGE>

the Aircraft.

     (m) Maintenance Payments at Redelivery. On the Return Occasion, Lessee
shall make Maintenance Payments to Lessor pursuant to Paragraph 5 of Exhibit C,
by wire transfer in immediately available funds to the account specified as the
Payment Location in Exhibit C.

     (n) Excusable Delay. Lessee shall not have to pay Rent for any period after
the end of the Term during which Lessee did not return the Aircraft to Lessor
due to an Excusable Delay.

     Section 17. Events of Default

     Any one or more of the following occurrences or events shall constitute an
Event of Default:

     (a) Lessee shall fail to make any payment of Rent to Lessor when due, in
full and in the manner and at the place required under this Lease and such
payment shall be overdue for a period of **Material Redacted** Business Days
following written notice from Lessor;

     (b) Lessee shall fail to obtain and maintain any insurance required under
the provisions of Section 12 hereof; or shall operate the Aircraft outside of
the scope of the insurance coverage maintained with respect to the Aircraft;

     (c) Any representation or warranty made by Lessee herein or in any document
or certificate furnished Lessor in connection herewith or therewith or pursuant
hereto is incorrect at the time given in any material respect and, if capable of
being cured, shall not have been remedied within **Material Redacted** days
after notice thereof is given by Lessor to Lessee;

     (d) Lessee shall fail to timely comply with the provisions of Section 20(i)
hereof;

     (e) Lessee shall fail to timely comply with its obligation under Section 3
hereof to accept delivery of the Aircraft when tendered by Lessor meeting the
delivery conditions set forth in Exhibit A and such failure is not cured within
**Material Redacted** Business Days;

     (f) Lessee shall fail to timely comply with its obligations pursuant to
Section 14 hereof and such failure shall continue for a period of **Material
Redacted** days after written notice thereof is given by Lessor to Lessee;

     (g) Lessee shall make or permit any unauthorized assignment or transfer of
this Lease, or any interest therein, or of the right to possession of the
Aircraft, the Airframe, or any Engine;

     (h) Lessee shall fail to perform or observe any other covenant, condition
or agreement to be performed or observed by it pursuant to this Lease and such
failure shall continue for a period of **Material Redacted** days after written
notice thereof is given by Lessor to Lessee (provided, however, that if such
failure relates to a covenant, condition or agreement which is not material (as
determined by Lessor in its reasonable discretion) and such failure results from
circumstances beyond Lessee's reasonable control and Lessee demonstrates to the
reasonable satisfaction of Lessor that Lessee is diligently taking all
commercially reasonable actions necessary to remedy such


                                       48

<PAGE>

failure, such failure shall not constitute an Event of Default hereunder for as
long as such failure remains not material (as determined by Lessor in its
reasonable discretion) and outside of the control of Lessee and Lessee is so
acting to remedy such failure);

     (i) **Material Redacted**;

     (j) Lessee consents to the appointment of a receiver, trustee or liquidator
of itself or of a substantial part of its property, or Lessee admits in writing
its inability to pay its debts generally as they come due, or makes a general
assignment for the benefit of creditors, or Lessee files a voluntary petition in
bankruptcy or a voluntary petition seeking reorganization in a proceeding under
any bankruptcy laws (as now or hereafter in effect), or an answer admitting the
material allegations of a petition filed against Lessee in any such proceeding,
or Lessee by voluntary petition, answer or consent seeks relief under the
provisions of any bankruptcy or other similar law providing for the
reorganization or winding-up of corporations, or provides for an agreement,
composition, extension or adjustment with its creditors;

     (k) An order, judgment or decree is entered by any court, with or without
the consent of Lessee, appointing a receiver, trustee or liquidator for Lessee
or of all or any substantial part of its property, or all or any substantial
part of the property of Lessee is sequestered, and any such order, judgment or
decree of appointment or sequestration remains in effect, undismissed, unstayed
or unvacated for a period of forty-five (45) days after the date of entry
thereof;

     (l) A petition against Lessee in a proceeding under the bankruptcy,
insolvency or other similar Laws (as now or hereafter in effect) of any
Governmental Entity is filed and is not withdrawn or dismissed within **Material
Redacted** days thereafter, or if, under the provisions of any Law providing for
reorganization or winding-up of corporations which may apply to Lessee, any
court of competent jurisdiction assumes jurisdiction over, or custody or control
of, Lessee or of all or any substantial part of its property and such
jurisdiction, custody or control remains in effect, unrelinquished, unstayed or
unterminated for a period of **Material Redacted** days;

     (m) A final judgment for the payment of money not covered by insurance in
excess of **Material Redacted**, or final judgments for the payment of money not
covered by insurance in excess of **Material Redacted** in the aggregate, shall
be rendered against Lessee and the same shall remain undischarged for a period
of **Material Redacted** days during which execution thereof shall not be
effectively stayed by agreement of the parties involved, stayed by court order
or adequately bonded or attachments or other Liens, except for security
interests;

     (n) Attachments or other Liens shall be issued or entered against
substantially all of the property of Lessee and shall remain undischarged or
unbonded for **Material Redacted** days except for security interests created in
connection with monies borrowed or obligations agreed to by Lessee in the
ordinary course of its business;

     (o) Lessee shall default in the payment of any obligation for the payment
of borrowed money, for the deferred purchase price of property or for the
payment of rent or hire under any lease of aircraft which has a principal amount
of **Material Redacted** or more (determined in the case of borrowed money by
the amount outstanding under the agreement pursuant to which such borrowed money
was borrowed, in the case of a deferred purchase price by the remaining balance


                                       49

<PAGE>

and in the case of a lease by the present discounted value of the remaining rent
or hire payable thereunder (ignoring any fair market renewal)) when the same
becomes due and after giving effect to any applicable grace period, if such
nonpayment results in the acceleration of any such indebtedness or any lessor
shall have demanded the payment of any liquidated damages or similar amount or
has exercised its rights to repossession of such property; or Lessee shall
default in the performance of any other term, agreement or condition contained
in any material agreement or instrument under or by which any such obligation is
created, evidenced or secured, if the effect of such default is to cause such
obligation to become due prior to its stated maturity;

     (p) Lessee voluntarily suspends all or substantially all of its operations
or the franchises, concessions, permits, rights or privileges required for the
conduct of the business and operations of Lessee shall be revoked, canceled or
otherwise terminated or the free and continued use and exercise thereof
curtailed or prevented, and as a result of any of the foregoing the preponderant
business activity of Lessee shall cease to be that of a commercial airline; or

     (q) Without the prior written consent of Lessor, the Letter of Credit shall
have been canceled, revoked or otherwise terminated prior to its original
termination date or amended, modified, altered or replaced or there shall, for
any reason, cease to be a letter of credit or letters of credit, as applicable,
with terms and conditions and in the amount required hereunder in full force and
effect at any time during the Term.

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

     Section 18. Remedies.

     Upon the occurrence of any Event of Default and any time thereafter so long
as the same shall be continuing, Lessor may, at its option and without notice to
Lessee, exercise one or more of the following remedies as Lessor in its sole
discretion shall elect, to the extent available and permitted by, and subject to
compliance with any mandatory requirements of, applicable Law then in effect;
provided that, upon the occurrence of any Event of Default specified in
paragraphs (j), (k) or (l) of Section 17, the Lessor shall be entitled
automatically, as of the day prior to such occurrence, to exercise any of the
following remedies without making demand or giving notice or the taking of any
other action:

     (a) Demand that Lessee, and Lessee shall upon the written demand of Lessor
and at Lessee's expense, immediately return the Aircraft to Lessor in the manner
specified in such notice, in which event such return shall not be delayed for
purposes of complying with the return conditions specified in Section 16 hereof
(none of which conditions shall be deemed to affect Lessor's possession of the
Aircraft) or delay for any other reason. Notwithstanding the foregoing, at
Lessor's option Lessee shall be required thereafter to take such actions as
would be required by the provisions of this Lease if the Aircraft were being
returned at the end of the Term hereof and Lessor agrees to cooperate with
Lessee's required actions. In addition, Lessor, at its option and to the extent
permitted by applicable Law, may enter upon the premises where all or any part
of the Aircraft is located and take immediate possession of and, at Lessor's
sole option, remove the same (and/or any engine which is not an Engine but which
is installed on the Airframe, subject to the rights of the owner, lessor or
secured party thereof) by summary proceedings or otherwise, all


                                       50

<PAGE>

without liability accruing to Lessor for or by reason of such entry or taking of
possession whether for the restoration of damage to property, or otherwise,
caused by such entry or taking, except damages caused by gross negligence or
willful misconduct.

     (b) Sell at private or public sale, as Lessor may determine, or hold, use,
operate or lease to others the Aircraft as Lessor in its sole discretion may
determine, all free and clear of any rights to Lessee.

     (c) Whether or not Lessor shall have exercised, or shall thereafter at any
time exercise, any of its rights under paragraph (a) or paragraph (b) of this
Section 18, Lessor, by thirty (30) days written notice to Lessee specifying a
payment date, may demand that Lessee pay to Lessor, and Lessee shall pay to
Lessor, on the payment date specified in such notice, as liquidated damages for
loss of bargain and not as a penalty (in lieu of the Basic Rent due for the
period commencing after the date specified for payment in such notice), any
unpaid Rent for the Aircraft (prorated in the case of Basic Rent on a daily
basis) to and including the payment date specified in such notice, plus the
amount, if any, by which the aggregate Basic Rent for the remainder of the Term,
discounted periodically (equal to installment frequency) to present worth at the
interest rate of four percent (4%) per annum, exceeds the fair market rental
value (determined pursuant to the Appraisal Procedure) of the Aircraft for the
remainder of the Term, after discounting such fair market rental value
periodically (equal to installment frequency) to present worth as of the payment
date specified in such notice at the interest rate of four percent (4%) per
annum.

     (d) In the event that Lessor, pursuant to Section 18(b) above, shall have
relet the Aircraft under a lease which extends at least to the date upon which
the Term for the Aircraft would have expired but for Lessee's default, Lessor,
in lieu of exercising its rights under Section 18(c) above with respect to the
Aircraft, may, if it shall so elect, demand that Lessee pay Lessor, and Lessee
shall pay Lessor, as liquidated damages for loss of bargain and not as a penalty
(in lieu of the Basic Rent for the Aircraft due after the time of reletting) any
unpaid Rent for the Aircraft due up to the date of reletting, plus the amount,
if any, by which the aggregate Basic Rent for the Aircraft, which would
otherwise have become due over the Term, discounted periodically (equal to
installment frequency) to present worth and of the date of reletting at the
interest rate of four percent (4%) per annum, exceeds the aggregate basic rental
payments to become due under the reletting from the date of such reletting to
the date upon which the Term for the Aircraft would have expired but for
Lessee's default, discounted periodically (equal to installment frequency) to
present worth as of the date of the reletting at the interest rate of four
percent (4%) per annum.

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

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

     (g) Draw upon all amounts under the Security Letter of Credit, Security
Deposit, Supplemental Rent, and other supplemental rent, security deposits or
letters of credit held by Lessor or Lessor's Affiliates under any of the Related
Leases and apply such amounts to amounts owing to Lessor hereunder.


                                       51

<PAGE>

     In addition to the foregoing, Lessee shall be liable for any and all unpaid
Rent, together with interest on such unpaid amounts at the Interest Rate, until
satisfaction of all of Lessee's obligations to Lessor hereunder and for all
reasonable legal fees and other reasonable costs and expenses incurred by Lessor
by reason of the occurrence of any Event of Default or the exercise of Lessor's
remedies with respect thereto, including all costs and expenses incurred in
connection with the return of the Aircraft in accordance with the terms of
Section 16 hereof or in placing the Aircraft in the condition and with
airworthiness certification as required by such Section.

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

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

     At any public sale of the Aircraft, the Airframe, an Engine or Part
pursuant to this Section, Lessor may bid for and purchase such property and
Lessee agrees that the amounts paid therefor shall be used in the computation
contemplated herein.

     No remedy referred to in this Section 18 is intended to be exclusive, but,
to the extent permissible hereunder or under applicable Law, each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to Lessor at Law or in equity; and the exercise or beginning of
exercise by Lessor of any one or more of such remedies shall not preclude the
simultaneous or later exercise by Lessor of any or all of such other remedies.
No express or


                                       52

<PAGE>

implied waiver by Lessor of any Default or Event of Default shall in any way be,
or be construed to be, a waiver of any future or subsequent Default or Event of
Default. Lessor acknowledges a duty under New York law to mitigate damages
resulting from any Default or Event of Default on the part of Lessee.

     Section 19. Alienation.

     LESSOR SHALL HAVE THE RIGHT AT ITS SOLE COST AND EXPENSE TO ASSIGN, SELL OR
ENCUMBER ANY INTEREST OF LESSOR IN THE AIRCRAFT OR THIS LEASE AND/OR THE
PROCEEDS HEREOF SUBJECT TO THE RIGHTS OF LESSEE UNDER THE PROVISIONS OF THIS
LEASE. NO ASSIGNMENT, SALE OR OTHER TRANSFER OF LESSOR'S INTEREST OR CREATION OF
ANY LIEN SHALL DIMINISH OR ADVERSELY AFFECT LESSEE'S RIGHTS HEREUNDER OR
INCREASE LESSEE'S DUTIES OR THE LIABILITIES OF LESSEE IN RESPECT OF ANY TAX OR
UNDER ANY OF ITS INDEMNIFICATION OBLIGATIONS, OR CAUSE LESSEE TO INCUR ANY
OBLIGATIONS, COST OR EXPENSE IN EXCESS OF THOSE FOR WHICH IT WOULD HAVE BEEN
RESPONSIBLE IN THE ABSENCE OF SUCH ASSIGNMENT, SALE OR TRANSFER. LESSOR AGREES
TO OBTAIN THE WRITTEN ACKNOWLEDGMENT OF ANY ASSIGNEE TO LESSEE'S RIGHT TO QUIET
ENJOYMENT AS DESCRIBED IN SECTION 20(f). TO EFFECT OR FACILITATE ANY SUCH
ASSIGNMENT, SALE OR ENCUMBRANCE, LESSEE AGREES TO PROVIDE, AT LESSOR'S SOLE COST
AND EXPENSE, SUCH AGREEMENTS, CONSENTS, CONVEYANCES OR DOCUMENTS AS MAY BE
REASONABLY REQUESTED BY LESSOR, WHICH SHALL INCLUDE, WITHOUT LIMITATION,
PROVIDED THAT LESSEE CONSENTS TO SUCH A RELEASE, AN UNRESTRICTED RELEASE OF
LESSOR FROM ITS OBLIGATIONS UNDER THIS LEASE. LESSEE SHALL NOT UNREASONABLY
WITHHOLD ITS CONSENT TO SUCH A RELEASE, AND LESSEE SHALL IN ANY EVENT BE
REQUIRED TO SO CONSENT IF LESSOR PROVIDES ADEQUATE ASSURANCE OF PERFORMANCE OF
LESSOR'S OBLIGATIONS HEREUNDER BY AN ASSIGNEE. LESSOR SHALL ALSO REIMBURSE
LESSEE FOR ANY FEES, EXPENSES OR OTHER COSTS ASSOCIATED WITH ANY FILINGS AND
REGISTRATIONS IN THE COUNTRY OF REGISTRATION OR OTHER JURISDICTIONS THAT ARE
REQUIRED TO BE MADE IN CONNECTION WITH ANY SUCH SALE, ASSIGNMENT OR OTHER
TRANSFER OR THE PERFECTION AND MAINTENANCE OF ANY SUCH LIEN. LESSEE HEREBY
AGREES THAT IT WILL NOT ASSERT AGAINST AN ASSIGNEE ANY CLAIM OR DEFENSE WHICH IT
MAY HAVE AGAINST LESSOR. THE AGREEMENTS, COVENANTS, OBLIGATIONS, AND LIABILITIES
CONTAINED HEREIN INCLUDING, BUT NOT LIMITED TO, ALL OBLIGATIONS TO PAY RENT AND
INDEMNIFY EACH INDEMNITEE ARE MADE FOR THE BENEFIT OF EACH INDEMNITEE AND THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS.


                                       53

<PAGE>

     Section 20. Miscellaneous.

     (a) Severability and Construction. Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof; any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable Law, Lessee hereby waives any provisions of Law which render any
provisions hereof prohibited or unenforceable in any respect. This Lease shall
constitute an agreement of lease, and nothing herein shall be construed as
conveying to Lessee any right, title or interest in the Aircraft or any Engine
or Part except as a lessee only. The headings in this Lease are for convenience
of reference only and shall not define or limit any of the terms of provisions
hereof. Whenever required by the context hereof, the singular shall include the
plural and vice versa. Reference to this Lease shall mean this Lease as amended
or supplemented from time to time.

     (b) Governing Law; Jurisdiction. THIS LEASE SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT
REFERENCE TO CONFLICT OF LAWS PRINCIPLES) EXECPT FOR THE PROVISIONS OF SECTION
7-101 OF THE NEW YORK GENERAL OBLIGATIONS LAW (WHICH PROVISIONS THE PARTIES HAVE
AGREED FOR AVOIDANCE OF DOUBT ARE INAPPLICABLE TO THIS TRANSACTION) AND EXCEPT
FOR MATTERS GOVERNED BY THE FEDERAL LAWS OF THE UNITED STATES. LESSEE AND LESSOR
HEREBY IRREVOCABLY CONSENT THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT OR ANY
OF ITS ASSETS WITH RESPECT TO THE LEASE MAY BE BROUGHT IN ANY JURISDICTION WHERE
LESSEE OR LESSOR OR ANY OF ITS ASSETS MAY BE FOUND, OR IN ANY COURT OF THE STATE
OF NEW YORK OR ANY FEDERAL COURT OF THE UNITED STATES OF AMERICA LOCATED IN NEW
YORK, NEW YORK, AS LESSOR MAY ELECT, AND BY EXECUTION AND DELIVERY OF THIS LEASE
LESSEE AND LESSOR HEREBY IRREVOCABLY SUBMIT TO AND ACCEPT WITH REGARD TO ANY
SUCH ACTION OR PROCEEDINGS, FOR ITSELF AND IN RESPECT OF ITS ASSETS, GENERALLY
AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS.
LESSEE AND LESSOR HEREBY AGREE THAT IN THE EVENT THAT ANY JUDICIAL PROCEEDINGS
ARE BROUGHT IN THE COUNTRY OF REGISTRATION, NEITHER OWNER NOR THE LESSOR SHALL
BE REQUIRED TO POST ANY SECURITY IN ORDER FOR THE LESSOR TO TAKE POSSESSION OF
THE AIRCRAFT IN ACCORDANCE WITH THE TERMS OF THIS LEASE. LESSEE AND LESSOR
FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED AIRMAIL, POSTAGE PREPAID, TO LESSEE OR LESSOR
AT ITS ADDRESS SET FORTH ON EXHIBIT C HERETO. THE FOREGOING, HOWEVER, SHALL NOT
LIMIT THE RIGHTS OF LESSOR OR LESSEE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO BRING ANY LEGAL ACTION OR PROCEEDING OR TO OBTAIN
EXECUTION OF JUDGMENT IN ANY JURISDICTION. LESSEE AND LESSOR FURTHER AGREE THAT
FINAL JUDGMENT AGAINST LESSEE OR LESSOR IN ANY ACTION OR PROCEEDING IN
CONNECTION WITH THIS LEASE SHALL BE


                                       54

<PAGE>

CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION WITHIN OR OUTSIDE THE
UNITED STATES OF AMERICA BY SUIT ON THE JUDGMENT, A CERTIFIED OR EXEMPLIFIED
COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND THE AMOUNT OF
LESSEE'S OR LESSOR'S INDEBTEDNESS. LESSEE AND LESSOR HEREBY IRREVOCABLY WAIVE,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH LESSEE OR LESSOR MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS LEASE BROUGHT IN THE STATE OF NEW YORK, AND
HEREBY FURTHER IRREVOCABLY WAIVE ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN THE STATE OF NEW YORK HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.

          The foregoing notwithstanding, the parties agree that they shall
endeavor during a period of ten (10) Business Days to settle all disputes which
may arise from the application or interpretation of this Lease through direct
bilateral talks in the spirit of mutual understanding.

     (c) Notices. All notices required under the terms and provisions hereof
shall be in writing, shall be sent to Lessor or Lessee at their respective
addresses set forth on Exhibit C hereto (or such other addresses as the parties
may designate from time to time in writing) and, except as otherwise provided
herein, such notice shall become effective upon the earlier of actual receipt or
the fifth day following the date such notice is sent.

     (d) Lessor's Right to Perform for Lessee. If Lessee fails to make any
payment of Supplemental Rent required to be made by it hereunder or fails to
perform or comply with any covenant, agreement or obligation contained herein,
Lessor shall have the right but not the obligation to make such payment or
conform or comply with such agreement, covenant or obligation, and the amount of
such payment and the amount of the reasonable expenses of Lessor incurred in
connection with such payment or the performance thereof or compliance therewith,
together with interest thereon at the Interest Rate, shall be payable by Lessee
to Lessor (as Supplemental Rent) upon demand. Lessor agrees to notify Lessee in
writing prior to making any payment under this Section 20(d), unless the
Aircraft will be in danger of loss, sale, confiscation, forfeiture or seizure
should such payment not be made. The taking of any such action by Lessor
pursuant to this Subsection 20(d) shall not constitute a waiver or release of
any obligation of Lessee under the Lease, nor a waiver of any Event of Default
which may arise out of Lessee's nonperformance of such obligation, nor an
election or waiver by Lessor of any remedy or right available to Lessor under or
in relation to this Lease.

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

     (f) Quiet Enjoyment. Lessor covenants that so long as an Event of Default
shall not have occurred and be continuing, Lessee shall quietly enjoy the
Aircraft and all rents, revenues, profits and income thereto, without
interference by Owner, Lessor, or by any Person lawfully


                                       55

<PAGE>

claiming by or through Owner or Lessor; provided, however, that the proper
exercise by Lessor of its rights under or in connection with this Agreement will
not constitute such an interference. The foregoing covenant is in lieu of any
quiet enjoyment covenant of Lessor which may be available to Lessee under
Section 2A-211(i) of the New York Uniform Commercial Code or as may otherwise be
implied under applicable Law.

     (g) Brokers. Each of the parties hereby represents and warrants to the
other that it has not paid, agreed to pay or caused to be paid directly or
indirectly in any form, any commission, percentage, contingent fee, brokerage or
other similar payments of any kind, in connection with the establishment or
operation of this Agreement, to any Person (other than fees payable by Lessor
and Lessee to their respective legal advisers or compensation payable by Lessor
to GECAS for the portfolio management services performed on behalf of Lessor).
Each party agrees to indemnify and hold the other harmless from and against any
and all claims, suits, damages, costs and expenses (including, but not limited
to reasonable attorneys' fees) asserted by any agent, broker or other third
party for any commission or compensation of any nature whatsoever based upon
this Agreement or the Aircraft, if such claim, suit, damage, cost or expense
arises out of any breach by the indemnifying party, its employees or agents of
the representation and warranty given hereby.

     (h) Payments in U.S. Dollars. All amounts to be paid hereunder shall be
paid in Dollars, in immediately available funds, and all letters of credit
delivered hereunder shall provide for payment in Dollars. Lessee acknowledges
that the specification of Dollars in this transaction is of the essence and that
Dollars shall be the currency of account in any and all events. The obligations
of Lessee hereunder shall not be discharged by an amount paid in another
currency, whether pursuant to a judgment or otherwise, to the extent that the
amount so paid on prompt conversion to Dollars and transfer to the account
specified in Exhibit C under the heading, "Payment Location" under normal
banking procedures does not yield the amount of Dollars owing to Lessor. In the
event that any payment by Lessee, whether pursuant to judgment or otherwise,
upon conversion does not yield such amount of Dollars, Lessor shall have a
separate cause of action against Lessee for the additional amount necessary to
yield the amount of Dollars due and owing to Lessor.

     (i) Security Letter of Credit. Subject to the provisions of Section 20(j)
below, on the dates of execution and delivery of this Lease, Lessee shall
deliver, or shall have delivered, to Lessor, unconditional and irrevocable
Letters of Credit, in the amounts specified in Exhibit C hereto under the
heading "Deposit". The Letters of Credit are also herein referred to as the
"Security Letter of Credit". The Letters of Credit shall remain in full force
and effect during a period commencing on the date of delivery of the Letter of
Credit and ending on the Required LC Expiry Date. If Lessee fails to pay Rent
hereunder or to pay any other sums due or to perform any of the other terms and
provisions of this Lease or any document delivered pursuant hereto or is
otherwise in Default hereunder, in addition to all other rights Lessor may have
under law or hereunder, Lessor may draw upon all or a portion of the amounts of
the Security Letters of Credit and may use, apply or retain all or any portion
of the funds paid pursuant to the Security Letters of Credit in partial payment
for sums due to Lessor by Lessee, to compensate Lessor for any sums it may in
its discretion advance as a result of a Default by Lessee, or to apply toward
losses or expenses Lessor may suffer or incur as a result of Lessee's Default
hereunder. If Lessor draws upon all or any portion of the Security Letters of
Credit, such application shall not be deemed a cure of any Default, and within
ten (10) days after written demand therefor, Lessee shall cause each of the


                                       56

<PAGE>

Security Letters of Credit to be reinstated to the original amounts thereof or
cause replacement Letters of Credit to be issued in the original amounts of the
Security Letters of Credit and the failure of Lessee to do so shall be a
material breach of this Lease by Lessee.

     (j) Security Deposit. In the event that any portion of the Security Letters
of Credit pursuant to the terms of Section 20(i) above are posted in cash on or
after the Delivery Date, such cash Security Deposit shall be non-refundable
during the term of the Lease, unless and until such time as Lessee provides
Lessor a Security Letter of Credit in the amount of such cash Security Deposit.
If Lessee fails to pay Rent hereunder or to pay any other sums due or to perform
any of the other terms and provisions of this Lease or any document delivered
pursuant hereto or is otherwise in Default hereunder, in addition to all other
rights Lessor may have under law or under this Lease, Lessor may draw upon all
or a portion of the amount of the cash Security Deposit and may use, apply or
retain all or any portion of the funds drawn in partial payment for sums due to
Lessor by Lessee, to compensate Lessor for any sums it may in its discretion
advance as a result of a Default by Lessee, or to apply toward losses or
expenses Lessor may suffer or incur as a result of Lessee's Default under this
Lease. If Lessor draws upon all or any portion of the cash Security Deposit,
such application shall not be deemed a cure of any default, and within five (5)
days after written demand therefor, Lessee shall cause such Security Deposit to
be reinstated to the original amount thereof and the failure to do so shall be a
material breach of this Lease by Lessee. Provided Lessee is not then in default
of its obligations under this Lease, such Security Deposit shall be returned to
Lessee upon termination of this Lease.

     (k) Transaction Costs. Lessor and Lessee shall each be responsible for its
own costs and expenses incurred in connection with the preparation, negotiation
and delivery of this Lease and any other documents or instruments delivered in
connection herewith and the transactions contemplated hereby except as otherwise
expressly set forth herein. However, Lessee shall be responsible for all costs
associated with perfecting the lease in the Country of Registration (and such
other filings as may be required pursuant to Section 15 hereof), including (but
not limited to) the provision of legal advice and opinions (excluding the fees
and expenses of Lessor's Panamanian or other local counsel for the initial
perfection of the Lease), stamp duties, translations and registrations, whether
required by Lessor or Lessee. Lessee shall also be responsible for all
reasonable costs incurred by Lessor in connection with the enforcement or
preservation of Lessor's (and Owner's) rights under the Lease (including the
fees and expenses of Lessor' Panamanian or other outside local counsel), other
than registration of mortgages or liens on the Aircraft initiated by Owner or
Lessor.

     (l) Time is of the Essence. The time stipulated in this Agreement (without
prejudice to any grace periods specified in Section 17) for all payments payable
by Lessee and Lessor and the prompt, punctual performance of Lessee's or
Lessor's other obligations under this Agreement are of the essence of this
Agreement.


                                       57

<PAGE>

     (m) Disclaimer of Consequential Damages. LESSEE AND LESSOR EACH AGREE THAT
IT SHALL NOT BE ENTITLED TO RECOVER, AND HEREBY DISCLAIMS AND WAIVES ANY RIGHT
THAT IT MAY OTHERWISE HAVE TO RECOVER, CONSEQUENTIAL DAMAGES AS SUCH TERM IS
DEFINED IN SECTION 2-A-520 OF THE NEW YORK UNIFORM COMMERCIAL CODE AS A RESULT
OF ANY BREACH OR ALLEGED BREACH OF ANY OF THE AGREEMENTS, REPRESENTATIONS OR
WARRANTIES MADE BY IT CONTAINED IN THIS LEASE.

     (n) Agent for Service of Process. Without prejudice to any other mode of
service, Lessee:

     (i)  appoints Greenberg, Traurig, et al. 200 Park Avenue, New York, New
          York 10019 as its agent for service of process relating to any
          proceedings before the New York courts in connection with this Lease
          and agrees to maintain the process agent in New York notified to
          Lessor;

     (ii) agrees that failure by a process agent to notify Lessee of the process
          shall not invalidate the proceedings concerned; and

     (iii) consents to the service of process relating to any such proceedings
          by prepaid mailing of a copy of the process to Lessee's agent at the
          address identified in clause (i) above or by prepaid mailing by air
          mail, certified or registered mail of a copy of the process to Lessee
          at the address set forth in Exhibit C of this Lease.

     (o) Entire Agreement; Modification or Revision. This Lease, which shall be
deemed to include Lease Supplement No. 1 when signed and delivered by Lessor and
Lessee, and Letter Agreement No. 1 are intended to be a complete and exclusive
statement of the terms of the agreement of the parties hereto, and this Lease
and Letter Agreement No. 1 supersede any prior or contemporaneous agreements,
whether oral or in writing. Neither this Lease, Letter Agreement No. 1, nor any
term of this Lease or Letter Agreement No. 1 may be modified, rescinded,
changed, waived, discharged or terminated except by a writing signed by the
party to be charged. Lessor and Lessee acknowledge their agreement to the
provision of this Section 20(o) by their initials below.

<PAGE>

                                    EXHIBIT A
                                       to
                            Aircraft Lease Agreement

                      SCHEDULE AND DESCRIPTION OF AIRCRAFT

<TABLE>
<CAPTION>
                                  Model and     Manufacturer's
Item       Manufacturer         Configuration    Serial Number
----       ------------------   -------------   --------------
<S>        <C>                  <C>             <C>
Aircraft   The Boeing Company      737-700           28607

Engine*    CFM                     56-7B24        [_________]

Engine*    CFM                     56-7B24        [_________]
</TABLE>

*    Each of such Engines has 750 or more rated takeoff horsepower or the
     equivalent of such horsepower.

The serial numbers stated under "Aircraft" and "Engines" above, if any are
shown, are those advised to Lessor by the Manufacturer as at the date of this
Agreement. If the Manufacturer advises of any change to any serial number, the
new number will be deemed inserted under "Serial Number" under "Aircraft" and
"Engines" above, as the case may be, above.

                         DELIVERY CONDITION REQUIREMENTS

On Delivery, the Aircraft shall be as described above and shall be new, ex
factory and painted in Lessee's livery. The Aircraft will be in the condition
required for delivery pursuant to the Purchase Agreement between the
Manufacturer and Lessor and the Aircraft Specification D6-38808-34, Revision A -
July 16, 1998, except as amended by change orders initiated by Lessor
thereunder, prior to the date of this Lease (which change orders have been
delivered to Lessee prior to the date hereof), or change orders initiated by
Lessor with the consent of Lessee under the terms thereof after the date of this
Lease, which change orders shall have been delivered to Lessee prior to the
Delivery Date, and except as further amended by change orders or otherwise
pursuant to Letter Agreement No. 1 between Lessor and Lessee so that the
Aircraft also conforms to the technical specification and interior configuration
for new Boeing 737-700 Aircraft being delivered to Continental.


                                       A-1

<PAGE>

                                    EXHIBIT B
                                       to
                            Aircraft Lease Agreement

                               AIRCRAFT DOCUMENTS

A.   CERTIFICATES

     1.   Certificate of Airworthiness (original and one paper copy)

B.   AIRCRAFT DOCUMENTS AND RECORDS

     At delivery of the Aircraft the Manufacturer will furnish (or Lessor will
     furnish, if previously received from Manufacturer) to Lessee such Aircraft
     and Engine Records as is normally and customarily furnished by the
     Manufacturer pursuant to the Purchase Agreement between the Manufacturer
     and Lessor and the Aircraft Specification D6-38808-34, Revision A - July
     16, 1998, except as amended by change orders initiated by Lessor
     thereunder, prior to the date of this Lease (which change orders have been
     delivered to Lessee prior to the date hereof), or change orders initiated
     by Lessor with the consent of Lessee under the terms thereof after the date
     of this Lease, which change orders shall have been delivered to Lessee
     prior to the Delivery Date, and except as further amended by change orders
     or otherwise pursuant to Letter Agreement No. 1 between Lessor and Lessee
     so that the Aircraft also conforms to the technical specification and
     interior configuration for new Boeing 737-700 Aircraft being delivered to
     Continental.


                                       B-1

<PAGE>

                                    EXHIBIT C
                                       to
                            Aircraft Lease Agreement

                             CERTAIN FINANCIAL TERMS

1.   CONFIDENTIALITY

Lessor and Lessee understand that the commercial and financial information
contained in this Exhibit C to this Lease Agreement are considered by Lessor and
Lessee as proprietary and confidential. Lessor and Lessee each hereby agree, and
any of their assignees, upon becoming such shall agree that it will treat this
Exhibit C as proprietary and confidential and will not, without the prior
written consent of the other, disclose or cause to be disclosed, the terms
hereof or thereof to any Person, except to its employees, counsel, underwriters
and auditors as necessary or appropriate for the leasing transaction which is
the subject hereof, or except (a) as may be required by applicable Law or
pursuant to an order, or a valid and binding request, issued by any court or
other government entity having jurisdiction over Lessor, Lessee or the assignee
of either of them, as the case may be, or (b) as necessary to enable Lessor or
its assignee to make transfers, assignments or other dispositions to potential
transferees, assignees or participants of its interest in and to the Agreement.

2.   DEFINITIONS OF CERTAIN TERMS

ACCEPTANCE LOCATION: Seattle, Washington, or such other location as Lessor and
Lessee may mutually agree.

BASIC RENT: The Basic Rent payable during the Basic Term shall be payable in
sixty (60) consecutive monthly installments, in advance on each Basic Rent
Payment Date, with each such installment equal to: (a) **Material Redacted** for
the first twenty four monthly installments, (b) **Material Redacted** for the
next twenty-four monthly installments, and **Material Redacted** for the last
twenty four monthly installments,.

BASIC RENT PAYMENT DATE: On the first day of the calendar month immediately
succeeding the Delivery Date (or on the Delivery Date if delivery occurs on the
first day of the calendar month) and on the first day of each succeeding month
to and including the Last Basic Rent Payment Date specified below.

CASUALTY VALUE: **Material Redacted**

COUNTRY OF ORGANIZATION: Panama.


                                       C-1

<PAGE>

COUNTRY OF REGISTRATION: Panama, or such other country approved in writing by
Lessor prior to registration of the Aircraft therein.

DEDUCTIBLE AMOUNT: The Deductible Amount shall be **Material Redacted**

DELIVERY LOCATION: Seattle, Washington, or such other location as Lessor and
Lessee may mutually agree.

DEPOSIT: The Deposit will equal **Material Redacted**, payable as follows:

     (a)  **Material Redacted** in cash, receipt whereof is hereby acknowledged,

     (b)  An irrevocable Letter of Credit in the amount of **Material Redacted**
          at signing of this Agreement, upon receipt of which Lessor shall
          refund to Lessee the cash deposit referred to in clause (a) above, and

     (c)  An additional irrevocable Letter of Credit in the amount of **Material
          Redacted** not less than two days prior to delivery of the Aircraft to
          Lessee.

ENGINE MANUFACTURER: CFM INTERNATIONAL

ESTIMATED DELIVERY DATE: October, 1999.

ESTIMATED ACCEPTANCE DATE: October, 1999.

FINAL ACCEPTANCE DATE: The earlier to occur of the date when the Aircraft meets
the conditions specified in Exhibit A and is tendered for delivery to Lessee.

FSC INDEMNITY MAXIMUM AMOUNTS: For the purposes of determining the amount
payable by Lessee under Section 10 (d) (ii) the following maximum amounts shall
apply:

<TABLE>
<S>               <C>
1999              **Material Redacted**
2000              **Material Redacted**
2001              **Material Redacted**
2002              **Material Redacted**
2003              **Material Redacted**
2004              **Material Redacted**
2005              **Material Redacted**
2006              **Material Redacted**
2007              **Material Redacted**
Residual Period   **Material Redacted**
</TABLE>

INTEREST RATE: LIBOR plus **Material Redacted** per annum, but not to exceed the
maximum amount permitted by Law.


                                       C-2

<PAGE>

INTERIM RENT: If the Aircraft is delivered to Lessee on a date which is not the
first day of a calendar month, Interim Rent shall be payable in one installment
on the Delivery Date in an amount equal to the product of **Material Redacted**
per day times the number of days from and including the Delivery Date to but
excluding the First Basic Rent Payment Date.

LAST BASIC RENT PAYMENT DATE: The Last Basic Rent Payment Date for the Aircraft
shall be the later to occur of October 1, 2004 and the 59th monthly anniversary
of the first Basic Rent Payment Date, or such later date as may result from
exercise of the Lease Term Renewal Options.

LEASE IDENTIFICATION: "Leased from Aviation Financial Services Inc. as Lessor.
Owned by Alcyone FSC Corporation."

LESSEE'S ADDRESS: Compania Panamena de Aviacion, S.A.
                  Avenida Justo Arosemena y Calle 39
                  Aptdo. 1572
                  Panama 1, Republic of Panama
                  Attention: President
                  Telecopier No.: 507-227-1952
                  Phone No.: 507-227-4551

LESSOR'S ADDRESS: Aviation Financial Services Inc.
                  c/o GE Capital Aviation
                  201 High Ridge Road
                  Stamford, Connecticut 06927-4900
                  Attention: Sr. Vice President -
                             Portfolio Management
                  Telecopier No.: 203-357-4585
                  Phone No.: 203-357-4279

MANUFACTURER:     The Boeing Company.

MINIMUM LIABILITY COVERAGE: **Material Redacted**

OTHER AGREEMENTS: Any aircraft lease agreement, conditional sale agreement or
other aircraft secured financing agreement from time to time heretofore or
hereafter entered into and in effect between Lessor, any subsidiary, associate
or affiliate of Lessor ("a Lessor Affiliate"), or an owner trustee acting on
behalf of Lessor or a Lessor Affiliate, on the one hand, and Lessee, on the
other hand.

PAYMENT LOCATION: Citibank, N.A., New York, New York, ABA 021000089 for the
account of Citibank, N.A. San Juan, Puerto Rico, Account No. 10991506 for
further credit to Alcyone FSC Credit Corporation, Account No. 0013228019.

PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE: **Material Redacted**


                                       C-3

<PAGE>

RETURN LOCATION: Panama City, Panama, or such other location as may be mutually
agreed by Lessor and Lessee.

3.   AIRWORTHINESS DIRECTIVES COST SHARING.

     Notwithstanding any provisions of the Lease which would require the Lessee,
     at its expense, to comply with ADs by making repairs, alterations or
     modifications to the Aircraft to accomplish terminating action of the ADs,
     in the event that Lessee's actual cost, without mark-up, of compliance with
     an AD for the Aircraft exceeds **Material Redacted**, Lessor will reimburse
     Lessee a portion of such cost in excess of such **Material Redacted** as
     determined by the formula:

                   R = [C - **Material Redacted**] x [ 1 - (N-M)/ **Material
                       Redacted**]

          where:   R = Amount to be reimbursed by Lessor to Lessee

                   C = Lessee's actual cost, without mark-up, of modifying the
                       Aircraft to comply with the AD; and

                   M = the month of the Lease Term in which the AD modification
                       is completed.

                   N = the number of months in the Term (or the Term as
                       extended upon Lessee's exercise of Renewal Options
                       hereunder but in no event shall it be less than
                       **Material Redacted**).

     Following completion of any such modification work, Lessee shall provide
     Lessor with a written notice signed by an officer or management employee of
     Lessee specifying the modifications completed, the cost thereof and the
     amount to be reimbursed by Lessor hereunder and certifying that at the date
     of such notice no Default arising from Lessee's failure to pay any amounts
     due or owing under the Lease when due and no Event of Default had occurred
     and was continuing. Lessee shall provide Lessor with such additional
     information as Lessor may reasonably request to verify that such
     modifications have been completed and the cost thereof. Within thirty days
     following Lessor's verification of the modification work, cost thereof and
     calculation of the amount of reimbursement owing to Lessee hereunder and
     providing no Event of Default has occurred and is then continuing, Lessor
     shall remit to Lessee the amount owing to Lessee hereunder.

4.   MAINTENANCE PAYMENTS AT REDELIVERY: Upon redelivery of the Aircraft to
     Lessor on the Return Occasion but not after the occurrence of a Casualty
     Occurrence with respect to the Aircraft, and independent of the redelivery
     conditions required by Exhibit E to the Lease Agreement, maintenance
     payments shall be made in accordance with the following:


                                       C-4

<PAGE>

     (a)  The Airframe shall be returned with 80% of the time remaining until
          next scheduled D-check or equivalent as specified in the Maintenance
          Program.

     (b)  Each Engine shall be returned with 80% of the time remaining until
          next heavy maintenance visit as determined by the expected life
          remaining based on industry standard mean time between removals for
          heavy maintenance as reported by the Engine Manufacturer.

     (c)  Each Engine shall be returned with 80% of the time remaining until
          next scheduled removal on each LLP installed in each engine as
          specified in the Maintenance Program.

     (d)  Each Landing Gear shall be returned with 80% of the time remaining
          until next scheduled overhaul as specified in the Maintenance Program.

     (e)  Each APU shall be returned with 80% of the time remaining until next
          heavy maintenance visit as determined by the expected life remaining
          based on industry standard mean time between removals for heavy
          maintenance as reported by the APU manufacturer.

     (f)  Notwithstanding the foregoing, if an item of equipment is returned
          with fewer hours remaining than specified above, Lessee will pay
          Lessor for each hour/cycle below 80% of the time remaining. The per
          hour cost shall be determined by dividing Lessee's average cost for
          performing the specified maintenance or, in the case of LLPs, the
          actual purchase cost on the item divided by the interval between
          maintenance events or, in the case of LLPs, the life limit, as
          specified above.

     (g)  If an item of equipment is returned with more hours remaining than
          specified above, Lessee will be entitled to a credit, for each hour
          above 80% of the time remaining, that can be used to offset any
          payments required above for the Aircraft or any other Aircraft leased
          by Lessee from Lessor. The per hour cost shall be determined by
          dividing Lessee's average cost for performing the specified
          maintenance or, in the case of LLPs, the actual purchase cost on the
          item divided by the interval between maintenance events or, in the
          case of LLPs, the life limit, as specified above.

     In the event that Lessee's average cost as determined in sub-paragraphs 19
     (f) and (g) above is based upon insufficient Lessee experience as
     reasonably determined by Lessor, than the average of quotes by three
     independent FAA repair stations to perform such maintenance shall be used
     in such sub-paragraphs in lieu thereof.


                                       C-5

<PAGE>

                                    EXHIBIT C

                               to Lease Agreement

            CERTAIN CONFIDENTIAL AND PROPRIETARY INFORMATION HAS BEEN
            INTENTIONALLY OMITTED FROM THIS VERSION OF THE EXHIBIT TO
                          PRESERVE ITS CONFIDENTIALITY.

                               CERTAIN DEFINITIONS

ACCEPTANCE LOCATION: Seattle, Washington, or such other location as Lessor and
Lessee may mutually agree.

BASIC RENT PAYMENT DATE: On the first day of the calendar month immediately
succeeding the Delivery Date (or on the Delivery Date if delivery occurs on the
first day of the calendar month) and on the first day of each succeeding month
to and including the Last Basic Rent Payment Date specified below.

COUNTRY OF ORGANIZATION: Panama.

COUNTRY OF REGISTRATION: Panama, or such other country approved in writing by
Lessor prior to registration of the Aircraft therein.

DELIVERY LOCATION: Seattle, Washington, or such other location as Lessor and
Lessee may mutually agree.

ENGINE MANUFACTURER: CFM INTERNATIONAL

ESTIMATED DELIVERY DATE: October, 1999.

ESTIMATED ACCEPTANCE DATE: October, 1999.

FINAL ACCEPTANCE DATE: The earlier to occur of the date when the Aircraft meets
the conditions specified in Exhibit A and is tendered for delivery to Lessee.

LAST BASIC RENT PAYMENT DATE: The Last Basic Rent Payment Date for the Aircraft
shall be the later to occur of October 1, 2004 and the 59th monthly anniversary
of the first Basic Rent Payment Date, or such later date as may result from
exercise of the Lease Term Renewal Options.

LEASE IDENTIFICATION: "Leased from Aviation Financial Services Inc. as Lessor.
Owned by Alcyone FSC Corporation."


                                       C-1

<PAGE>

LESSEE'S ADDRESS: Compania Panamena de Aviacion, S.A.
                  Avenida Justo Arosemena y Calle 39
                  Aptdo. 1572
                  Panama 1, Republic of Panama
                  Attention: President
                  Telecopier No.: 507-227-1952
                  Phone No.: 507-227-4551

LESSOR'S ADDRESS: Aviation Financial Services Inc.
                  c/o GE Capital Aviation
                  201 High Ridge Road
                  Stamford, Connecticut 06927-4900
                  Attention: Sr. Vice President -
                             Portfolio Management
                  Telecopier No.: 203-357-4585
                  Phone No.: 203-357-4279

MANUFACTURER:     The Boeing Company.

OTHER AGREEMENTS: Any aircraft lease agreement, conditional sale agreement or
other aircraft secured financing agreement from time to time heretofore or
hereafter entered into and in effect between Lessor, any subsidiary, associate
or affiliate of Lessor ("a Lessor Affiliate"), or an owner trustee acting on
behalf of Lessor or a Lessor Affiliate, on the one hand, and Lessee, on the
other hand.

PAYMENT LOCATION: Citibank, N.A., New York, New York, ABA 021000089 for the
account of Citibank, N.A. San Juan, Puerto Rico, Account No. 10991506 for
further credit to Alcyone FSC Credit Corporation, Account No. 0013228019.

RETURN LOCATION: Panama City, Panama, or such other location as may be mutually
agreed by Lessor and Lessee.


                                       C-2

<PAGE>

                                    EXHIBIT D
                                       to
                            Aircraft Lease Agreement

                             LEASE SUPPLEMENT NO. 1

     LEASE SUPPLEMENT NO. 1, dated __________________, 199__, between Aviation
Financial Services Inc., a Delaware corporation ("Lessor"), and Compania
Panamena de Aviacion, S.A., a corporation organized under the laws of Panama
("Lessee").

     Lessor and Lessee have previously entered into that certain Aircraft Lease
Agreement dated as of November 18, 1998 (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 precisely
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 new Boeing
Model 737-700 commercial jet aircraft and Airframe and the two (2) CFM 56-7B24
Engines (each of which Engines has 750 or more rated takeoff horsepower or the
equivalent of such horsepower) described in Schedule 1 hereto ("Delivered
Aircraft").

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

     3. The Term for the Delivered Aircraft shall commence on the Delivery Date
and shall end on the Expiration Date, which shall be the later to occur of
October 31, 2004 and the day preceding the 60th monthly anniversary of the first
Basic Rent Payment Date; subject to earlier termination or extension as provided
in the Lease.

     4. Lessee hereby confirms to Lessor that (i) the Delivered Aircraft and
each Engine installed thereon or belonging thereto have been duly marked in
accordance with the terms of Section 6(f) of the Lease, (ii) Lessee has accepted
the Delivered Aircraft for all purposes hereof and of the Lease, (iii) Lessee
has inspected the Delivered Aircraft and the Delivered Aircraft satisfies all of
the delivery conditions set forth in the Lease; and (iv) the information set
forth on Schedule 2 hereto pertaining to the Airframe, Landing Gear, Engines,
Auxiliary Power Unit, and fuel on board at Delivery are correct as of the date
hereof.

     5. 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.

     6. This Lease Supplement may be executed in any number of counterparts,
each of such counterparts, except as provided in Section 20(e) 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.


                                       D-1

<PAGE>

     IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement No.
1 to Aircraft Lease Agreement to be duly executed as of the day and year first
above written.

                                        LESSOR:

                                        AVIATION FINANCIAL SERVICES INC.,
                                        a Delaware corporation


                                        By:
                                            ------------------------------------
                                        Title:
                                               ---------------------------------
                                        Executed at:
                                                     ---------------------------


                                        LESSEE:

                                        COMPANIA PANAMENA DE AVIACION, S.A.,
                                        a Panama corporation


                                        By:
                                            ------------------------------------
                                        Title:
                                               ---------------------------------
                                        Executed at:
                                                     ---------------------------


                                       D-2

<PAGE>

STATE OF CONNECTICUT   )
                       )   ss. (STAMFORD)
COUNTY OF FAIRFIELD    )

          On _________, _____, before me, the undersigned, a Notary Public in
and for said State, personally appeared __________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that
she executed the same in her authorized capacity, and that by her signature on
the instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.

          WITNESS my hand and official seal.

                                        ----------------------------------------
                                        Notary Public

                                        My commission expires:
                                                               -----------------

(Seal)


                                       D-3

<PAGE>

                                   SCHEDULE 1

                                       TO

                             LEASE SUPPLEMENT NO. 1

                                     One New
                                     Boeing
                                     737-700
                                    Airframe

<TABLE>
<CAPTION>
Manufacturer's
  Serial No.     Total Time*   Total Cycles*
--------------   -----------   -------------
<S>              <C>           <C>
     28607       ___________   _____________
</TABLE>

                                  Installed CFM
                                     Engines

<TABLE>
<CAPTION>
 Model No.       Serial No.     Total Time*   Total Cycles*
-----------   ---------------   -----------   -------------
<S>           <C>               <C>           <C>
CFM 56-7B24   [_____________]   ___________   _____________

CFM 56-7B24   [_____________]   ___________   _____________
</TABLE>

Each of the above-described Aircraft Engines is 750 or more rated takeoff
horsepower or its equivalent.

----------
*    The total time and total cycles referred to above are as of __________
     Time, ___________, _____. Such times and cycles are within _____ hours and
     _____ cycles of the actual hours and cycles at the time of this Lease
     Supplement.


                                       D-4

<PAGE>

                                   SCHEDULE 2

                                       TO

                             LEASE SUPPLEMENT NO. 1

                      Aircraft Status on The Delivery Date

Airframe:

     Number of Hours Since Last Heaviest Maintenance Inspection:

          _______ hours

     "C" Check (or Equivalent):

          Interval: ________________________

          Time Since: ______________________

Landing Gear Overhaul:

     Number of Hours Since Last Overhaul:
          Left Gear __________________________ hours
          Right Gear _________________________ hours
          Nose Gear __________________________ hours

     Interval: Left Gear _________________________ hours
               Right Gear ________________________ hours
               Nose Gear _________________________ hours

Engines:

     Number of Hours Since Last Hot Section Refurbishment:

          S/N ______:______ hours

          S/N ______:______ hours

     Number of Hours Since Last Cold Section Refurbishment:

          S/N ______:______ hours

          S/N ______:______ hours


                                       D-5

<PAGE>

     Hot Section Inspection:

          Interval: ___________________________

          Time Since (S/N ________): _______________________________

          Time Since (S/N ________): _______________________________

     Time Remaining to First Restriction:

     Engine S/N: __________

          Hours: __________ Restriction: __________

          Cycles:__________ Restriction: __________

     Engine S/N: __________

          Hours: __________ Restriction: __________

          Cycles:__________ Restriction: __________

Average Hours and Cycles in Life-Limited Parts:

          Hours: __________

          Cycles: _________

Auxiliary Power Unit:

     Number of Hours Since Last Heavy Shop Visit:

          __________ hours

     Hot Section Inspection:

          Interval: ________________________

          Time Since: ______________________

Fuel on Board at Technical Acceptance:

     _______________________________

Components:

<TABLE>
<CAPTION>
P/N   Name   Overhaul Interval   Time Since New
---   ----   -----------------   --------------
<S>   <C>    <C>                 <C>

</TABLE>


                                       D-6

<PAGE>

                                    EXHIBIT E
                                       to
                            Aircraft Lease Agreement

                          RETURN CONDITION REQUIREMENTS

     In addition to the requirements set forth in Section 16 of the Lease, on or
before the Expiration Date, Lessee, at its own expense, shall return the
Aircraft in compliance with all of the following provisions:

     (1) The Aircraft shall have theretofore been maintained in accordance with
Section 6(d) of the Lease with the same care and consideration for the technical
condition of the Aircraft as if it were to have been kept in continued regular
service by Lessee.

     (2) The Aircraft shall be clean by commercial airline standards. The
cockpit shall be "touched-up" as reasonably required in accordance with standard
international airline practice and placards replaced as reasonably required, but
without requiring removal of panels or instruments.

     (3) The Aircraft shall have installed the full complement of Engines (as
used herein the term "Engines" includes engines for which title will be
transferred to Lessor pursuant to Section 16(c) of the Lease) and other
equipment, parts, components, accessories, furnishings and loose equipment as
when originally delivered to Lessee (excluding leased equipment) and as should
remain installed on the Aircraft were Lessee to continue operating the same in
continued regular service, each such item properly functioning in accordance
with its intended use.

     (4) The Aircraft shall comply with FAR Part 129, all outstanding DAC
Regulations and Airworthiness Directives issued by the FAA affecting such model
aircraft which by their terms require compliance on or before ninety (90) days
after the Expiration Date of this Lease.

     (5) The Aircraft shall have a current and valid DAC Certificate of
Airworthiness, or at Lessor's request an export certificate of airworthiness
issued by DAC. Lessee will permanently repair any damage to the Aircraft that
exceeds the DAC's or manufacturer's limits for operation without restrictions.

     (6) The Aircraft shall be in as good operating condition as when delivered
to Lessee hereunder, ordinary wear and tear excepted.

     (7) Lessee's distinctive markings, such as name, logo and stripes, shall be
removed from the Aircraft in a workmanlike manner in accordance with standard
industry practice and the Aircraft shall be re-painted all white.

     (8) The Aircraft shall have the same amount of fuel as it had on the
Technical Acceptance Date, but if it has a lesser amount, then the Lessee shall
pay to the Lessor on the Return Occasion an amount which equals the current
market price for Aircraft jet fuel times the


                                       E-1

<PAGE>

amount by which the quantity of fuel on the Technical Acceptance Date exceeds
the amount of fuel on the Return Occasion.

     (9) The Aircraft will meet the requirements of FAA regulations found at
Part 36, Appendix C, Stage 3 noise compliance as then in effect without waiver
or restriction.

     (10) Lessee shall adhere strictly to the corrosion prevention and treatment
cards as prescribed in the Maintenance Program.

     (11) The Aircraft, except as otherwise provided in the Lease, Letter
Agreement No. 1, or as consented to by Lessor, shall be in substantially the
same configuration (including, but not limited to, interior seating
configuration, galleys and lavatories) as when the Aircraft was originally
delivered to Lessee hereunder.

     (12) Neither the Aircraft nor any Engine shall have any open, deferred,
continued, carry over or placarded log book items.

     (13) At the end of the Term of the Lease, Lessee, at its expense, shall
obtain an Export Certificate of Airworthiness for the Aircraft issued by the
DAC, if available from DAC.

     (14) The Aircraft shall receive a complete block "C" Check (or its
equivalent), including all phases and multiples and structural inspections as
are normally part of such check immediately prior to the Return Occasion in
accordance with Lessee's DAC approved Maintenance Program, with all deficiencies
corrected.

     (15) Return of Engines

          (a) Each Engine (including, without limitation, burner cans) shall
have just completed a hot and cold section borescope inspection (which
inspection Lessee shall cause to be recorded on videotape and shall provide a
copy of such videotape to Lessor on the Return Occasion), and a power assurance
shall have been run in accordance with the Maintenance Program or the
manufacturer's maintenance manual and any defects discovered in such inspection
exceeding manufacturer's in service limits for normal operations shall be
corrected at Lessee's expense. Both the borescopes and the power assurance runs
shall take place at the Return Location.

          (b) No Engine shall be on "Watch" for excessive oil consumption, high
Exhaust Gas Temperature or any special or out of sequence inspection and each
such Engine shall comply with the operations specification of Lessee.

          (c) No Engine will have less than 3,500 Engine flight hours and 2,500
Engine cycles (3,000 Engine flight hours and 2,000 Engine cycles if the Aircraft
is returned at the end of second or third Renewal Term) of expected life
remaining to the next scheduled removal. The expected life remaining will be
determined in accordance with this Lease by review of the Engine LLP records and
the borescope inspection and power assurance run referred to in subparagraph (a)
above.


                                       E-2

<PAGE>

     (16) Return of Auxiliary Power Unit

     The Auxiliary Power Unit ("APU") will be serviceable and be in the same
operational condition as it was on the Delivery Date, with temperatures and air
outputs within the manufacturer's limits at all operational settings and have a
minimum of 3,000 flight hours or half time remaining whichever is less, based on
industry standard mean time between removals for heavy maintenance as reported
by engine manufacturer.

     (17) Return of Landing Gear

     On a Return Occasion, the Landing Gear and wheel wells will be clean, free
of leaks and repaired as necessary. Each installed Landing Gear shall have not
less than 3,500 flight hours, 2,500 cycles (3,000 flight hours and 2,000 cycles
if the Aircraft is returned at the end of second or third Renewal Term) and 12
months remaining to the next scheduled removal as applicable to a particular
component in accordance with the Lessee's Maintenance Program. The wheels and
brakes will have not less than half of their useful life remaining.

     (18) Return of Time, Cycle or Calendar Controlled Components

     On the Return Occasion each time controlled or calendar controlled
component on the Aircraft, excluding the Engines (but including any time
controlled components thereon), shall have at least 3,500 flight hours, 2,500
cycles (3,000 flight hours and 2,000 cycles if the Aircraft is returned at the
end of second or third Renewal Term) and 12 calendar months remaining to next
scheduled check or its equivalent overhaul or replacement as applicable to a
particular component in accordance with the Lessee's Maintenance Program. Lessee
may remove and replace any time controlled component in order to comply with
return conditions herein set forth, provided that the replacement component has
an equivalent or later part number, has a value, remaining warranty and
modification status at least equal to the replaced component and is completely
interchangeable as to form, fit and function as the replaced component.


                                       E-3

<PAGE>

                                   EXHIBIT F-1
                                       to
                            Aircraft Lease Agreement

                            LESSEE'S COUNSEL OPINION

                        [Letterhead of Lessee's Counsel]

                             [Date of Delivery Date]

Aviation Financial Services Inc.
c/o GE Capital Aviation Services
201 High Ridge Road
Stamford, Connecticut 06927-4900

     Re: Compania Panamena de Aviacion, S.A.
         Lease of New Boeing Model 737-700
         Aircraft Manufacturer's Serial No. 28607

Dear Sirs:

          We act as counsel for Compania Panamena de Aviacion, S.A., a company
organized under the laws of Panama (the "Lessee") and have reviewed (i) an
Aircraft Lease Agreement dated as of November 18, 1998 (the "Lease") between the
Lessee and Aviation Financial Services Inc. (the "Lessor"), together with Lease
Supplement No. 1 thereto dated the Delivery Date between the Lessee and the
Lessor and Letter Agreement No. 1 dated as of November 18, 1998 between the same
parties (collectively, the "Lease"). Except as otherwise defined herein,
capitalized terms used herein shall have the meanings set forth in the Lease.

          You have requested us to render an opinion in connection with the
transactions governed by the Lease. We have examined originals or copies,
certified or otherwise identified to our satisfaction, of such documents,
corporate records and other instruments as we have deemed necessary or advisable
for the purpose of rendering this opinion. We have assumed the genuineness of
all signatures and the authenticity of all documents submitted to us as
originals and the conformity to original documents of all documents submitted to
us as copies or facsimiles.

          Based upon the foregoing, we are of the opinion that:

     1. The Lessee is a company duly organized and validly existing in good
standing under the laws of Panama, is duly qualified to hold property and to
transact business as an air carrier under the laws of Panama and is duly
qualified to carry on business in each jurisdiction in which it conducts
business, has full power and authority to carry on its business as presently
conducted, to hold and operate property under lease and to enter into and to
perform its obligations under the Lease and each other document related thereto
to which the Lessee is a


                                      F-1-1

<PAGE>

party.

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

     3. The Lessee received every consent, license, approval or authorization
of, and exemption by, and gave every notice to, each Governmental Entity having
jurisdiction with respect to the execution, delivery and performance of the
Lease (including all monetary and other obligations thereunder) that is required
for the Lessee to execute and deliver the Lease and to perform the transactions
contemplated thereby and each such consent, license, approval, authorization and
exemption is valid and effective and has not been revoked or rescinded.

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

     5. There are no actions, suits or proceedings pending or, to our best
knowledge after due inquiry, threatened against or affecting the Lessee in any
court or before any regulatory commission, arbitrator, board or other
administrative Governmental Entity which, if adversely determined to the Lessee,
could have a material adverse effect on the current business or financial
conditions of the Lessee or on the ability of the Lessee to perform its
obligations under the Lease.

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


                                      F-1-2

<PAGE>

lapse of time or the giving of notice, or both, would constitute a default
thereunder.

     7. There is no Tax (whether payable by withholding or deduction and
including, without limitation, monetary transfer fees, or similar taxes and
charges) (i) on or by virtue of the execution, delivery, performance or
enforcement of the Lease, or any other document furnished or contemplated to be
furnished thereunder, or (ii) to be deducted or withheld from any payment to be
made by the Lessee pursuant to the Lease.

     8. The obligations of the Lessee under the Lease rank at least equally and
ratably (pari passu) in all respects with all other unsecured obligations of the
Lessee except for claims preferred by the laws of Panama. Such claims are [___].

     9. The Lessee is subject to private commercial laws and suit under the laws
of Panama and any other jurisdiction affecting the Lessee. The Lessee is not
entitled to sovereign immunity under the laws of Panama or any such other
jurisdiction, and neither the Lessee nor any of its respective properties or
assets have the right of immunity from suit or jurisdiction of any court or from
any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution or otherwise) on the grounds of
sovereign immunity in Panama, the United States or any other jurisdiction.

     10. The choice of New York law to govern the Lease will be upheld as a
valid choice of law in any action in the courts of Panama.

     11. The consent of the Lessee to the jurisdiction of the courts referred to
in Section 20(b) of the Lease is valid and binding upon the Lessee and not
subject to revocation. If any action in respect of the Lease were brought in a
court of Panama, such court would apply the law of the State of New York.

     12. Any judgment or order given by a Federal State or local court in New
York under the Lease may be enforced in Panama by suit on the judgment, and
would be recognized and accepted by the courts of Panama and would be
enforceable by the courts of Panama without re-trial or examination of the
merits of the original action, provided that any such courts have taken the
necessary procedural and service of process required by Panamanian law and said
judgment is not considered against public policy.

     13. No stamp or registration or similar taxes or charges are payable in
Panama in respect of the execution or performance of the Lease or the
enforcement thereof in the courts of Panama other than [________________].

     14. Except for compliance with the requirements set forth in Paragraph 15
hereof, and the placing on the Aircraft and on each Engine of the plates
containing the legends referred to in Section 6(f) of the Lease, no further
filing, recording or notarization of the Lease or of any other document, and no
further action is necessary or advisable(including without limitation the filing
or recording of the Head Lease with the DAC or any other Governmental Entity in
Panama), under the laws of any Governmental Entity in order to (a) fully
establish and protect Alcyone FSC Corporation's title to, interest in and
property rights with respect to, and Lessor's leasehold


                                      F-1-3

<PAGE>

interests in, the Aircraft as against the Lessee or any third party and to
ensure that the property rights of Alcyone FSC Corporation and the Lessor
therein will have priority in all respects over the claims of all creditors of
the Lessee or (b) ensure the validity, effectiveness and enforceability of the
Lease and the practical realization of the benefits and rights intended to be
afforded thereby.

     15. The only filings, recordings, notarizations, or other actions that have
not been taken and in full force and effect on the date hereof which are
necessary or advisable to be taken under the laws of Panama in order to (i)
fully establish and protect the Lessor's title to, interest in and property
rights with respect to the Aircraft as against the Lessee or any third party and
to ensure that the property rights of the Lessor therein which have priority in
all respects over the claims of all creditors of the Lessee, and (ii) ensure the
validity, effectiveness and enforceability of the Lease are (x) filing of the
Lease (but not including Letter Agreement No. 1) for recordation with the DAC,
(y) due registration of the Aircraft with the DAC in Panama and (z) recordation
of the Owner's title to the Aircraft with the Aeronautics Section of the Public
Registry of Panama. We know of no reason such recordations and registration
should not be timely accomplished.

     16. The Aircraft will be duly registered with the DAC, in the name of
Alcyone FSC Corporation as owner and Lessor as lessor and in the name of Lessee
as lessee and operator once it is imported into Panama.

     17. Lessee is a licensed air carrier under the laws of Panama. The Lessee
is qualified to operate the Aircraft in passenger and cargo revenue service to,
from and within Panama.

     18. The irrevocable instrument appointing Lessor or its agents as
attorney-in-fact for Lessee to take all necessary actions on behalf of Lessee to
remove the Aircraft (i) from the jurisdiction of Panama and (ii) from the
registry of Panama upon termination of the Lease has been duly executed and
delivered by Lessee and is irrevocable, legal, valid and effective under the
laws of Panama to permit Lessor to so remove the Aircraft from the jurisdiction
and registry of Panama.

     19. On the termination of the Lease (whether by expiration of the Term or
otherwise) as contemplated in the Lease, the Lessor will be entitled (i) to
repossess the Aircraft, (ii) to deregister the Aircraft from the Register of
Panama and (iii) to export the Aircraft from Panama, all without requiring any
further consents, approvals or licenses from, and without requiring the posting
of any security with, any Governmental Entity of Panama. If the export is not
permitted or if deregistration of the Aircraft shall not be effected by the DAC,
the Lessor has an adequate remedy at law to cause a prompt deregistration and to
cause prompt issuance of any necessary export license without any posting of
security.

     20. The Lessor is not required to qualify to do business under the laws of
Panama or any political subdivision thereof as a condition to, and the failure
so to qualify does not affect, the exercise by it of any right, privilege or
remedy accorded it under the Lease, or any other document delivered in
connection therewith or the enforcement of such right, privilege or remedy.
Neither the execution and delivery of, nor the performance by the Lessee of any
action required under any of the Lease or any document delivered in connection
therewith, nor the


                                      F-1-4

<PAGE>

exercise of remedies thereunder will result in any tax liability to Lessor
pursuant to the laws of Panama or any political subdivision thereof or tax
authority therein.

     21. The Lessor, either in connection with the exercise of any rights or
remedies available to it under the Lease, or any document delivered in
connection therewith, or as the result of its interest in the Aircraft or as a
result of receiving performance under the Lease, or any document delivered in
connection therewith, shall not be deemed to have set up a permanent
establishment in Panama under any applicable law of Panama relating to any Tax.

     We do not purport to be experts on and do not purport to be generally
familiar with or qualified to express legal opinions based on any law other than
the laws of Panama and, accordingly, express no legal opinion herein based upon
any other laws.

                                        Yours very truly,


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


                                      F-1-5

<PAGE>

                                   EXHIBIT F-2
                                       to
                            Aircraft Lease Agreement

                            LESSEE'S COUNSEL OPINION

                        [Letterhead of Lessee's Counsel]

                                                         [Date of Delivery Date]

Aviation Financial Services Inc.
c/o GE Capital Aviation Services
201 High Ridge Road
Stamford, Connecticut 06927-4900

     Re: Compania Panamena de Aviacion, S.A.
         Lease of Boeing Model 737-700
         Aircraft Manufacturer's Serial No. 28607

Dear Sirs:

     We have acted as special Panamanian counsel at the request of Compania
Panamena de Aviacion, S.A., a company organized under the laws of Panama (the
"Lessee") in connection with the lease of one new Boeing Model 737-700 (Serial
No. 28607) to Lessee. In rendering this opinion we have reviewed an Aircraft
Lease Agreement dated as of November 18, 1998 (the "Lease") between the Lessee
and Aviation Financial Services Inc. (the "Lessor"), together with Lease
Supplement No. 1 thereto dated the Delivery Date between the Lessee and the
Lessor and Letter Agreement No. 1 dated as of November 18, 1998 between the same
parties (collectively, the "Lease"). Except as otherwise defined herein,
capitalized terms used herein shall have the meanings set forth in the Lease.

     We have been requested to render an opinion relating to the recordation of
the Head Lease and the Lease as hereinafter described and the registration of
the Aircraft with the DAC. We have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents, records and other
instruments as we have deemed necessary or advisable for the purpose of
rendering this opinion. More specifically we have examined the governmental
consents, licenses, approvals, authorizations and exemptions listed on Schedule
1 hereto. We have assumed the genuineness of all signatures and the authenticity
of all documents submitted to us as originals and the conformity to original
documents of all documents submitted to us as copies or facsimiles.


                                      F-2-1

<PAGE>

     Based upon the foregoing, we are of the opinion that:

     1. The Lease (but not including Confidential Exhibit C or Letter Agreement
No. 1) and any other documents necessary or advisable to be recorded have been
duly recorded by the DAC.

     2. It is neither necessary no advisable to file or record the Head Lease
with the DAC or any other Governmental Entity in Panama for the Lease to be
fully enforceable in accordance with its terms in the courts of Panama and in
order to (a) fully establish and protect Alcyone FSC Corporation's title to,
interest in and property rights with respect to, and Lessor's leasehold
interests in, the Aircraft as against the Lessee or any third party and to
ensure that the property rights of Alcyone FSC Corporation and the Lessor
therein will have priority in all respects over the claims of all creditors of
the Lessee or (b) ensure the validity, effectiveness and enforceability of the
Lease and the practical realization of the benefits and rights intended to be
afforded thereby.

     3. The Aircraft has been duly registered with the Direccion General de
Aeronautica Civil of Panama in the name of Alcyone FSC Corporation as owner and
Lessor as lessor and in the name of Lessee as lessee and operator with
registration no. ___________ on _________, _____.

     4. Once validly registered, the DAC will not cause or permit deregistration
of the Aircraft without prior consent of Lessor.

     5. Lessee is a licensed air carrier under the laws of Panama under a permit
issued to the Lessee by the DAC with the type and number of the Aircraft duly
endorsed thereon, and the Lessee is qualified to operate the Aircraft in
passenger and cargo revenue service to, from and within Panama.

     We hereby confirm the opinions set forth in paragraphs 14 and 15 of our
opinion letter to you dated _________, _____, in each case without exception or
qualification.

     We do not purport to be experts on and do not purport to be generally
familiar with or qualified to express legal opinions based on any law other than
the laws of Panama and, accordingly, express no legal opinion herein based upon
any other laws.

                                        Yours very truly,


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


                                      F-2-2

<PAGE>

                                    EXHIBIT G
                                       to
                            Aircraft Lease Agreement

                            FORM OF LETTER OF CREDIT

                             [NAME OF ISSUING BANK]
                      IRREVOCABLE STANDBY LETTER OF CREDIT
                               DATED: ___, _____

Aviation Financial Services Inc.
c/o GE Capital Aviation Services
201 High Ridge Road
Stamford, Connecticut 06927-4900

     RE: Letter of Credit
         Account Party: Compania Panamena de Aviacion, S.A.

Gentlemen:

     At the request and for the account of Compania Panamena de Aviacion, S.A.
("Lessee"), a corporation organized and existing under the laws of Panama, we
hereby establish in your favor, as lessor under that certain Aircraft Lease
Agreement dated as of November 18, 1998 (the "Lease Agreement"), between
Aviation Financial Services Inc. as lessor and Lessee as lessee, our Irrevocable
Standby Letter of Credit No. _______, in the aggregate maximum amount of [as
specified in Exhibit C to the Lease Agreement], effective on the date set forth
above and expiring on the LOC Expiration Date (as defined below).

     (vii) Funds under this Letter of Credit will be made available to you by
wire transfer in immediately available funds in United States Dollars to an
account to be designated by you in the sight draft referred to below on any
Business Day (as defined below) occurring on or before the LOC Expiration Date,
upon presentation at our offices located at [_________], of a sight draft in the
form attached hereto as Annex A setting forth the amount of the drawing and
referring expressly thereon to the number of this Letter of Credit. We hereby
confirm with you that drafts in conformity with the terms of this Letter of
Credit will be duly honored on the date of such presentation as set forth
herein. All payments hereunder shall be made, free and clear of, and without
deduction for, any present or future fees, taxes, restriction or conditions of
any nature, and without setoff or counterclaim for any reason whatsoever.

     (viii) You are hereby authorized to make multiple drawings hereunder in
accordance with the terms and conditions described herein, each drawing upon the
presentation of the documentation referred hereinabove, provided, however,
subject to the provisions of paragraph 5 below, that the aggregate amount of all
drawings hereunder shall in no event exceed the aggregate maximum amount of the
Letter of Credit.


                                       G-1

<PAGE>

     (ix) This Letter of Credit shall expire, and no drawing hereunder may be
made thereafter, at 5:00 p.m. (EST) on the earliest of the following dates (the
"LOC Expiration Date"): (i) the day which is ten (10) Business Days after the
expiration date (as defined in the Lease Agreement), or (ii) on the Business Day
on which the aggregate amount of all drawings hereunder, is equal (subject to
the provisions of paragraph 5 hereinbelow) to the aggregate maximum amount of
this Letter of Credit. With respect to clause 3(i) above, it is hereby expressly
provided that in the event that if on or before sixty (60) days prior to the LOC
Expiration Date you do not receive written notice from us whereunder this Letter
of Credit will be renewed on, or a new letter of credit issued in substantially
the form hereof to be effective as of, the LOC Expiration Date referred to in
such clause 3(i), then you may draw against this Letter of Credit in the manner
described herein.

     (x) For the purpose hereof "Business Day" shall mean any day up to 5:00
p.m. (EST), on such day, other than Saturday and Sunday, on which banks in the
United States of America are not authorized or required to close.

     (v) Upon payment by us, or on our behalf, of the amount specified in any
draft drawn hereunder, we shall be fully discharged of our obligation under this
Letter of Credit solely in respect of such draft, and we shall not thereafter be
obligated to make any further payments under this Letter of Credit in respect of
such draft to you or to any other person.

     (vi) This Letter of Credit may only be transferred to any person who is the
lessor under the Lease Agreement at the time of such transfer.

     (vii) This Letter of Credit sets forth in full our understanding, and such
understanding shall not in any way be modified, amended, amplified or limited by
reference to any document or agreement other than the sight drafts referred to
herein, or a written agreement among you, us and Lessee.

     (viii) Communications with respect to this Letter of Credit shall be in
writing and if directed to us shall be addressed to us at [_______],
specifically referring to the number of this Letter of Credit, and, if directed
to you, shall be addressed to you at Polaris Holding Company, [_______].

     (ixxi) All banking charges in connection with this Letter of Credit and any
drawings made hereunder shall be for the account of Compania Panamena de
Aviacion, S.A.

     (x) This Letter of Credit shall be governed by the Uniform Customs and
Practice for Documentary Credits (1993 Revision) International Chamber of
Commerce Publication No. 500, and, as to matters not covered therein, by the
laws of the State of New York.

                                        [NAME OF ISSUER]


                                        BY
                                           -------------------------------------
                                           Authorized Signature


                                       G-2

<PAGE>

                                     ANNEX A
                             To Irrevocable Standby
                              Letter of Credit No.

                              (FORM OF SIGHT DRAFT)

                                     (DATE)

(Location)

     At sight of this draft pay to the order of (beneficiary) the amount of U.S.
$(amount in figures) (the sum of (amount in Letters) United States Dollars).

     To (payment instructions).

     Drawn under Letter of Credit No. ____________, dated as of __________,
_____, of


                                        ----------------------------------------
                                        (beneficiary signature)


Endorsement


-------------------------------------
(beneficiary signature) 2

<PAGE>

                                    EXHIBIT H
                                       to
                            Aircraft Lease Agreement

                          TECHNICAL ACCEPTANCE RECEIPT

     Compania Panamena de Aviacion, S.A. ("Lessee") hereby acknowledges that on
the ____ day of ________, _____, Polaris Holding Company ("Lessor") did deliver
for inspection to Lessee, one (1) New Boeing Model 737-700 Aircraft, bearing
manufacturer's serial number 28607, together with two (2) new installed CFM
56-7B24 Engines, bearing manufacturer's serial numbers [______] and [______],
together with all Parts, and Aircraft Documents in accordance with and as
defined by the Aircraft Lease Agreement made between Lessor and Lessee dated as
of November 18, 1998 (the "Lease").

     The undersigned hereby further acknowledges that: (i) it did conduct an
inspection of the aforementioned Aircraft, Engines, Parts, and Aircraft
Documents as contemplated by the Lease; (ii) the Parts reflected in Schedule I
hereto are in the condition set forth therein; (iii) the same are technically
acceptable to it and in the condition for delivery and acceptance as required
under the Lease; and (iv) the execution and delivery of this Technical
Acceptance Receipt by Lessee signifies the absolute and irrevocable acceptance
by Lessee of the Aircraft, Engines, Parts and Aircraft Documentation under the
Lease.

     IN WITNESS WHEREOF, this Technical Acceptance Receipt has been executed and
delivered this ____ day of _________, _____.

                                        COMPANIA PANAMENA DE AVIACION, S.A.


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


                                       H-1