AMENDMENT TO AMENDED AND RESTATED AADVANTAGE PARTICIPATING CARRIER AGREEMENT

This  Amendment  to  the  AAdvantage   Participating   Carrier  Agreement  (this
"Amendment"),  dated June 5, 1998, is by and between American Airlines,  Inc., a
Delaware corporation having its principal place of business at 4333 Armon Carter
Boulevard,  Forth Worth,  Texas 76155  ("American") and Reno Air, Inc., a Nevada
Corporation  having its  principal  place of business  at 220 Edison Way,  Reno,
Nevada, 89502 ("Reno").

WHEREAS,  American and Reno are parties to that certain and Amended and Restated
AAdvantage  Participating  Carrier  Agreement,  dated as of March 28,  1995,  as
amended, (the "Agreement") and

WHEREAS,  American  and Reno  desire to amend the  Agreement  upon the terms and
subject to the conditions of this Amendment; and

NOW,  THEREFORE,  in its  consideration of the mutual convenants and promises in
this Amendment, the parties hereto agree as follows:

1) Section 9.a. of the Agreement is hereby  amended and restated in its entirety
as follows:

"Term.  Unless sooner terminated in accordance with the terms of this Agreement,
this  Agreement  shall  commence on July 1, 1998 and continue  thereafter for an
indefinite period of time;  provided,  however,  that either party may terminate
this  Agreement,  with or without cause,  by giving at least two hundred and ten
(210) days advance written notice to the other party at any time during the term
of this Agreement".

2)    Section 3.i is hereby added to the Agreement as follows:

AAdvantage  Member  Reprotection  for Award  Travel.  In the event  that Reno is
unable to honor any valid  Award  Ticket for Award  Travel on an  eligible  Reno
Flight  for any  reason,  Reno  will  use  commercially  reasonable  efforts  to
accommodate the Member on another Reno Flight on the same route (or with routing
that duplicates,  as closely as practicable,  the Member's original itinerary on
Reno)  and on the same day.  If Reno is  nevertheless  unable to  satisfactorily
accommodate the Member on a flight operated by Reno, Reno will use  commercially
reasonable  efforts  to  reaccommodate  the Member on a third  party  carrier at
Reno's sole expense, subject to the following:

a)  Same  Day  Flight  Cancellations.   If  Reno  is  unable  to  satisfactorily
accommodate a member holding an Award Ticket for travel on a Reno Flight that is
canceled on the  scheduled  day of travel,  then (i)  American  may, in its sole
discretion,  accommodate  the  Member in the same class of service as the Member
was  scheduled to have on the canceled Reno Flight and bill Reno for the cost of
the  replacement  ticket at the  applicable  third party carrier rate charged by
American,  or (ii) the Member may elect to have the Redeemed  Miles  returned to
the Member's AAdvantage Account.

b) Discontinued Routes. Reno has the right at any time, in its sole judgment and
discretion,  to cease to operate between any of the geographic  points specified
in Attachment B, but must (i) notify American in writing promptly,  but no later
than 45 days before the date of cessation, and (ii) honor all Award Tickets that
are issued and all  reservations of Members that are scheduled to be ticketed as
of the date American  receives  written  notice.  In the event Reno is unable to
provide 45 days notice, the provisions of section 3.i.a will apply.

For those  members  holding Award Tickets  and/or  reservations  in respect of a
canceled  or  discontinued  Reno  Flight  who cannot be  accommodated  or refuse
accommodation on another Reno Flight (excluding  Codeshare  Flights) an American
flight or a third party carrier flight,  Reno and American will make appropriate
compensation  arrangements,  including  returning  the  Redeemed  Miles  to  the
Member's AAdvantage Account if the Member so elects.

3) Unless the context  otherwise  requires,  all capitalized  terms used in this
Amendment, but not herein defined shall have the meanings assigned by such terms
in the Agreement.  American and Reno agree that, except for those  modifications
expressly set forth in this Amendment, all terms and provisions of the Agreement
shall remain  unchanged and in full force and effect.  No waiver or modification
of the terms or  provisions  of the  Agreement is intended or is to be inferred,
except as expressly provided in this Amendment. This Amendment and the Agreement
shall hereafter be read and constructed  together as a single document,  and all
references  in the  Amendment  to the  Agreement  shall  hereafter  refer to the
Agreement as extended by this Amendment.

IN WITNESS  WHEREOF,  the parties  hereto have executed this Amendment as of the
date first written above.

Original signed by:

     Reno Air, Inc.                     American Airlines, Inc.
     Joanne Smith                       Henry C. Joyner
     Sr. Vice President                 Sr. Vice President
     Marketing/Planning                 Marketing/Planning

<PAGE>
                          PURCHASE AGREEMENT
                               between
                            Reno Air, Inc.
                                 and
                      Pegasus Aviation I, Inc.
                              dated as of
                          September 23, 1998
 
            Sale of the McDonnell Douglas MD-83 aircraft
          with manufacturer's serial number 49568 leased to
                    BWIA International Airways Limited

                            PURCHASE AGREEMENT

This  Agreement  is entered into as of September  23,  1998,  by Reno Air,  Inc.
("Seller") and Pegasus Aviation I, Inc. ("Buyer").

Seller  presently  leases the  Aircraft to BWIA under the Lease.  Subject to the
terms and conditions of this Agreement, Reno Air will sell the Aircraft to Buyer
and Buyer will buy the  Aircraft  from  Seller;  Seller  will  assign its rights
(other than the Retained  Rights) under the Assigned  Documents to Buyer;  Buyer
will assume the  obligations  (other than Excluded  Obligations) of Seller under
the Lease;  and Seller will  transfer the  Reserves and the Security  Deposit to
Buyer.

         Seller and Buyer agree as follows:

1.       Definitions

The  following  terms,  when  capitalized  as below,  shall  have the  following
meanings:

Acceptance  Receipt:  a  receipt  executed  by Buyer  and  delivered  to  Seller
concurrently  with the Delivery of the  Aircraft,  substantially  in the form of
Exhibit A.

Aeronautics  Authority:  the aviation  authority of the Republic of Trinidad and
Tobago.

Aircraft:  the McDonnell  Douglas model MD-83  aircraft  bearing  manufacturer's
serial number 49568 and Aeronautics Authority registration no. 9Y-THR, including
two Pratt & Whitney model JT8D-219 aircraft engines with  manufacturer's  serial
nos. 718053 and 718054.

Aircraft and Related  Assets:  the  Aircraft,  the Assigned  Documents,  and the
Reserves, excluding the Retained Rights.

Assigned  Documents:  the Lease, all related documents,  and all technical data,
manuals,  logs,  records,  and  other  documents,  in each case  related  to the
Aircraft, including, without limitation, the Documents listed on Appendix
I of the Assignment.

Assignment:  an Assignment and  Assumption  Agreement to be entered into between
Seller and Buyer on the Closing Date for the Aircraft, substantially in the form
of Exhibit B.

Bill of Sale  for an  Aircraft:  a bill of  sale  substantially  in the  form of
Exhibit C from Seller to Buyer.

Business Day: any day other than a Saturday, Sunday, or holiday scheduled by law
for any commercial  banking  institution in Trinidad and Tobago,  San Francisco,
California or Las Vegas, Nevada.

BWIA:   BWIA International Airways Limited.

Closing Date:  September 28, 1998 or such other Business Day as Buyer and Seller
shall mutually agree
upon.

Consideration:  the  amounts  payable to Seller by or on behalf of Buyer for the
Aircraft and Related Assets, as provided in SS 2.02.
<PAGE>

Delivery:  on  the  Closing  Date,  the  concurrent  occurrence  of  the  events
enumerated in SS 2.01.
 
Deposit: defined in SS 2.03.

Event of Loss: an "Event of Loss" under the Lease.

Excluded  Obligations:  all  obligations  of Seller to BWIA  which are not to be
assigned  by Seller  and are not to be assumed  by Buyer,  as more  particularly
described in the Assignment.

FAA:     the Federal Aviation Administration of the United States.

Lease:  the July 2, 1996 Aircraft  Lease  Agreement  between Seller and BWIA, as
amended by First  Amendment  to  Aircraft  Lease  Agreement  dated May 30,  1997
between Seller and BWIA.

Lien: any security interest,  lien, claim,  charge, or encumbrance of any nature
whatsoever.

Reserves:   as defined in the Lease.

Retained Rights:  Seller's rights under the Lease (1) to be reimbursed for costs
or expenses that Seller paid or incurred on or before the related  Closing Date,
(2) to be indemnified  for harms or injuries,  or for any liability  therefor or
related  expenses  (including  legal fees), to the extent suffered by Seller and
relating to the period prior to the Closing  Date,  and (3)  Seller's  rights to
receive  the Credit  Memorandum  (as defined in the July 2, 1996  Assignment  of
Rights Agreement).

         Security Deposit: as defined in the Lease.

Taxes: any and all sales,  transfer,  excise,  stamp or similar taxes,  together
with any penalties,  fines,  charges or interest  thereon (but excluding any and
all taxes based on income,  gross receipts,  capital,  or similar taxes) imposed
upon or in respect of the sale, transfer, delivery, assumption, or assignment of
an Aircraft and Related  Assets to Buyer,  in any manner  levied,  assessed,  or
imposed by any government or subdivision thereof having jurisdiction.

Any agreement referred to in this SS 1 means such agreement as from time to time
supplemented and amended.  References to sections,  exhibits, and the like refer
to  those  in  or  attached  to  this  Agreement  unless  otherwise   specified.
"Including"  means  "including  but not limited to".  "Or" means one or more, or
all, of the alternatives listed or described.  "Herein", "hereof",  "hereunder",
etc. mean in, of, or under,  etc. this  Agreement (and not merely in, of, under,
etc. the section or provision where that reference appears).

2. Sale and Assignment of the Aircraft and Related Assets

2.01. Delivery. On the Closing Date for the Aircraft,  the concurrent occurrence
of each of the following events (except as otherwise  provided) shall constitute
Delivery of the Aircraft and the Related Assets:

(a) tender of the Aircraft for delivery by Seller to Buyer;

(b) acceptance by Buyer of the Aircraft by executing an Acceptance Receipt;

(c) sale by transfer of title of the  Aircraft  pursuant  to the  execution  and
delivery of the Bill of Sale;

(d) Buyer's payment to Seller of the  Consideration  for the sale and assignment
of the Aircraft and Related Assets;

(e) Seller's transfer of the Security Deposit and Reserves to Buyer; and

(f) the execution and delivery by Seller and Buyer of an Assignment.
<PAGE>

2.02.  Consideration.  The  Consideration  for the  sale and  assignment  of the
Aircraft  and  Related  Assets  shall  be  US$17,600,000.  Except  as  otherwise
expressly provided in this Agreement, there will be no adjustments or offsets to
the Consideration payable to Seller. The outstanding Consideration,  if any, for
the  Aircraft  and  Related  Assets  (less the  Deposit)  is due and  payable at
Delivery  by wire  transfer  to Account No.  153700497404  at U.S.  Bank (ABA #:
121-201-694), Las Vegas, Nevada, Reference: Pegasus MD-83.

2.03 Deposits.  Buyer has paid to Seller a deposit (the  "Deposit") of $750,000.
The  Deposit  is only  refundable  if an Event of Loss  occurs or  Seller  shall
default in the performance of its obligations under this Agreement.

2.04 Cut-off  Date.  Basic Rent accrued  under the Lease before the Closing Date
shall be for the  account of Seller;  Basic Rent  accrued  under the Lease on or
after the Closing Date shall be for the account of
Buyer.

2.05. Place of Delivery.  Seller and Buyer shall cooperate in causing the actual
Delivery of the Aircraft to occur at a time and location that will  legitimately
avoid or minimize the payment of Taxes.

2.06 Title.  Title to the  Aircraft  and  Seller's  interest  in the  applicable
Assigned  Documents,  the Security Deposit and Reserves shall pass to Buyer upon
Delivery of the Aircraft and Related Assets.

3. Closing Conditions

3.01. Conditions to Buyer's Obligations. Buyer's obligations to buy the Aircraft
and to assume the  obligations of Seller under the Assigned  Documents  shall be
subject to (x)  Buyer's  receipt  of the  following  documents  on or before the
Delivery of the Aircraft and Related Assets, reasonably satisfactory in form and
substance to Buyer,  or, if  applicable,  (y) the  occurrence  of the  following
events on or before Delivery:

(a) the Bill of Sale and Assignment;

(b) copies of the Assigned Documents;  including,  without limitation, a chattel
paper original of the Lease;

(c) Seller's  representations  and warranties in this Agreement shall be true on
the Closing Date (except to the extent that such  representations and warranties
relate  solely to an  earlier  date in which  case they shall be true as of such
date). Seller shall deliver to Buyer a certificate executed by a duly authorized
officer to that effect ;

(d) no Event of Loss shall have occurred;

(e) Seller's transfer of the Reserves and Security Deposit to Buyer;

(f)  immediately  after giving effect to the  consummation  of the  transactions
contemplated hereby, no Event of Default under the Lease shall exist;

(g) Upon the  delivery of the Bill of Sale,  Seller  shall have  transferred  to
Buyer good and marketable title to the Aircraft and the Related Assets, free and
clear of all  Liens  other  than the  Lease (or with  respect  to the  Aircraft,
Lessor's  Liens).   Buyer  shall  have  received  written  evidence   reasonably
satisfactory to it evidencing the matters set forth in this subsection (g);

(h) no  action  or  proceeding  shall  have  been  instituted  by  the  Aviation
Authority,  FAA, the  Department  of  Transportation,  or other United States or
Trinidad and Tobago  governmental  body  ("Governmental  Body"), no governmental
action shall be  threatened  by any  Governmental  Body and no other  judgement,
order,  decree  shall have been  issued or  proposed  to have been issued by any
Governmental  Body to set  aside,  restrain,  enjoin or prevent  the  execution,
delivery or performance of this Agreement, the Assignment, the Bill of Sale, the
Consent and any other  documents  executed  in  connection  with this  Agreement
(collectively,   the  "Operative   Documents"),   or  the  consummation  of  the
transactions contemplated by the Operative Documents;

(i) all approvals and consents which are required in connection any  transaction
contemplated  by the Operative  Documents or the Assigned  Documents  shall have
been duly obtained and delivered to Buyer;

(j) each of the  Operative  Documents to which Seller is a party shall have been
duly authorized, executed and delivered by Seller and shall be in full force and
effect  with  respect  to  Seller  and  executed  counterparts  shall  have been
delivered to Buyer;

(k) Buyer shall have received by the Closing Date the following:
<PAGE>

(i) a copy of the resolutions of the Board of Directors of Seller,  certified by
a Corporate  Secretary of Seller,  duly authorizing the sale of the Aircraft and
the Related  Documents and the  assignment of the  Assignment  Documents and the
execution, delivery and performance of the Operative Documents;

(ii) an incumbency certificate of Seller as to the persons authorized to execute
and deliver the Operative  Documents and each other document  executed by Seller
in connection with the  transactions  contemplated  by the Operative  Documents,
including the signature of such persons; and
                          
(iii) evidence that the  Assignment,  the Bill of Sale and the Consent have been
duly executed and delivered to Buyer;

(l) Buyer shall have received an opinion of counsel  reasonably  satisfactory in
form and  substance  to it,  dated the Closing  Date  addressed to Buyer from M.
Hamell-Smith & Co. and

(m) Buyer shall be satisfied  that the place of delivery of the Aircraft and the
closing arrangements do not have material adverse tax consequences.

3.02. Conditions to Seller's Obligations.

Seller's  obligation to sell and assign the Aircraft and Related Assets shall be
subject to: Seller's receipt of the following  documents,  on or before Delivery
of the  Aircraft  and  Related  Assets,  reasonably  satisfactory  in  form  and
substance to Seller,  or, if  applicable,  (y) the  occurrence  of the following
events on or before Delivery:

(a) an Acceptance Receipt;

(b) Seller shall have  received the  Consideration  for the Aircraft and Related
Assets;

(c) the Assignment;

(d) Buyer's  representations  and warranties in this Agreement  shall be true on
the  Closing  Date  (except  as to the  extent  that  such  representations  and
warranties  relate solely to an earlier date in which case they shall be true as
of such date).  Buyer shall deliver to Seller a  certificate  executed by a duly
authorized officer to that effect;

(e) each of the  Operative  Documents  to which Buyer is a party shall have been
duly authorized,  executed and delivered by Buyer and shall be in full force and
effect with respect to Buyer and executed counterparts shall have been delivered
to Seller; and
                  
(f) Seller shall have received by the Closing Date the following:

(i) a copy of the resolutions of the Board of Directors of Seller,  certified by
a secretary or an Assistant Secretary of Buyer, duly authorizing the sale of the
Aircraft and Related Assets and the assignment of the Assigned Documents and the
execution, delivery and performance by Buyer of the Operative Documents to which
it is a party; and

(ii) an incumbency certificate of Seller as to the persons authorized to execute
and deliver the Operative Documents and each other document executed by Buyer in
connection  with the  transactions  contemplated  by the Operative  Documents to
which it is a party, including the signature of such persons.

4. Warranties, Covenants, and Acknowledgments

4.01. Warranties.  Seller hereby warrants to Buyer that, immediately upon Seller
transferring title to the Aircraft and Related Assets to Buyer, Buyer shall have
legal and beneficial title to the Aircraft and Related Assets, free and clear of
all Liens (or, in the case of the Aircraft,  of all Lessor's Liens as defined in
the  Lease)  except  for  the  Lease,  and  upon  delivery,  Seller  shall  have
transferred  legal and beneficial  title to the Aircraft to Buyer free and clear
of all Lessor's Liens except for the applicable  Lease.  Seller hereby agrees to
defend  such title  against  all claims and demands  whatsoever.  The  foregoing
warranties  shall  survive the Delivery of the  Aircraft  and Related  Assets to
Buyer.
<PAGE>

4.02.  Limitation of Warranties and  Agreements.  Except as set forth in SS 4.01
and 7.01,  the  Aircraft  and  Related  Assets  are being  sold,  assigned,  and
delivered  to Buyer "as is",  "where  is",  and "with all  faults",  without any
representation,  guarantee,  or warranty of Seller,  express or implied,  of any
kind, arising by law or otherwise.  Seller specifically disclaims,  and excludes
herefrom,  (a)  any  warranty  as to the  airworthiness  or  condition  of  such
Aircraft, (b) any representation or warranty of merchantability or fitness for a
particular purpose, (c) any representation or warranty of freedom from any claim
by way of infringement or the like, (d) any  representation  or warranty arising
from course of performance,  course of dealing,  or usage of trade,  and (e) any
obligation or liability of Seller  arising in tort,  whether or not arising from
the negligence of Seller,  actual or imputed, or in strict liability,  including
any obligation or liability for loss of use, revenue,  or profit with respect to
such  Aircraft  or for any  liability  of Buyer to any third  party or any other
direct, incidental, special, or consequential damage whatsoever.

5. Taxes and Indemnities

5.01.  Payment of Taxes.  Any and all Taxes  payable in respect of the  Aircraft
shall be the sole responsibility and liability of the Buyer.

5.02. General Indemnities.

(a)  Indemnity  by Buyer.  Buyer  shall  indemnify  Seller  against  any and all
liability,  loss, damage, claim, action, or deficiency ("Claims") resulting from
arising out of, or relating to (i) any misrepresentation, breach of warranty, or
nonfulfillment  of any  covenant on the part of Buyer under this  Agreement,  or
(ii) Buyer's  failure of to perform its assumed  obligations  under the Assigned
Documents after Delivery of the Aircraft,  provided that Buyer will not have any
liability to Seller under this Section 5.02(a) to the extent the Claims arise or
result from the (x) the gross negligence or willful  misconduct of Seller or (y)
the breach by Seller of any of its  obligations  hereunder or under the Assigned
Documents.
(b) Indemnity by Seller.  After the Delivery of an Aircraft and Related  Assets,
Seller shall indemnify Buyer against any and all liability, loss, damage, claim,
action,  or deficiency  resulting  from,  arising out of, or relating to (i) any
misrepresentation,  breach of warranty, or nonfulfillment of any covenant on the
part of Seller under this  Agreement,  or (ii)  Seller's  failure to perform its
obligations  under the  Assigned  Documents  prior to Delivery  of the  Aircraft
provided  that Seller will not have any  liability  to Buyer under this  Section
5.02(b)  to the  extent  the  Claims  arise or  result  from  the (x) the  gross
negligence  or willful  misconduct of Buyer or (y) the breach by Buyer of any of
its obligations hereunder or under the Assigned Documents.

(c)  Right to  Contest.  If any  claim,  suit,  or  other  legal  proceeding  is
commenced, or any claim or demand is asserted, against any indemnitee under this
SS 5.02 (the  "Indemnitee"),  and if the  Indemnitee  proposes to demand or seek
indemnification  pursuant to this SS 5.02, the Indemnitee  shall promptly notify
the party from whom indemnification is sought (the "Indemnitor"), and shall have
the right to assume,  at its full cost and  expense,  the entire  control of the
legal  proceeding  (including the selection of counsel)  subject to the right of
the Indemnitee to participate  (at its full cost and expense and with counsel of
its choice) in the defense,  compromise,  or settlement thereof.  The Indemnitee
shall  cooperate  fully in all respects with the Indemnitor in any such defense,
compromise,  or settlement,  including by making available to the Indemnitor all
pertinent  information under the control of the Indemnitee.  The Indemnitor will
not compromise or settle any such action,  suit,  proceeding,  claim,  or demand
without the Indemnitee's  prior written approval (which will not be unreasonably
withheld or delayed).

6. Event of Loss

If the  Aircraft  suffers an Event of Loss before the Delivery  Date,  then this
Agreement  shall be  terminated,  and  Seller  and Buyer  shall  have no further
obligations  to each other  hereunder with respect to the Aircraft (save for the
return by Seller of the Deposit paid by Buyer).
<PAGE>

7. Representations and Warranties

7.01.  Representations  and  Warranties of Each Party.  Each of Seller and Buyer
severally  represents at execution of this  Agreement,  and with respect to each
Delivery, that:

(a) it is duly formed,  validly existing, and in good standing under the laws of
the jurisdiction of its organization;

(b) it has full power, authority, and legal right to enter into and perform this
Agreement and the transactions herein described;

(c)  its  execution,  delivery,  and  performance  of  this  Agreement  and  the
transactions  herein described have been duly authorized by all necessary action
on its part, and do not require any approvals or consents  except such approvals
and consents as have heretofore been duly obtained;

(d)  its  execution,  delivery,  and  performance  of  this  Agreement  and  the
transactions  herein  described  do not  contravene  any  law  binding  on it or
contravene any agreement to which it is a party or by which it is bound;

(e) it is not a party to any  agreement or  instrument or subject to any charter
or other  restriction  which will  materially  adversely  affect its  ability to
perform  its  obligations   under  this  Agreement  and  the  agreements  herein
described; and

(f) this  Agreement  constitutes  its  legal,  valid,  and  binding  obligation,
enforceable against it in accordance with the terms hereof.

7.02.  Representations and Warranties of Seller.  Seller represents at execution
of this Agreement, and with respect to the Delivery of the Aircraft, that:

(a) to its knowledge, the Aircraft has not suffered an Event of Loss;

(b)  Seller  has  performed  in all  material  respects  all  obligations  to be
performed by it under the Lease and each other Assigned Documents;

(c) to its knowledge,  no event or circumstance  has occurred that may give rise
to an indemnification claim by BWIA against Seller under the Lease;

(d) Seller has delivered to Buyer true,  correct and complete  copies of (i) the
Lease and (ii) all other  applicable  Assigned  Documents  (except such manuals,
logs,  records,  and other documents related to the applicable Aircraft that are
not in  Seller's  possession)  and  all  amendments  to  each  thereof,  and the
applicable  Lease and the applicable  Assigned  Documents  constitute the entire
agreement  of the  parties  thereto  with  respect  to the  present  and  future
performance of all such  documents,  and have not been amended,  supplemented or
modified, except as set forth on Exhibit D;

(e) to the best of its knowledge, no Event of Default exists under the Lease;

(f) there are no suits, actions,  arbitration  proceedings or claims pending or,
to the best knowledge of Seller, threatened against the Seller arising out of or
in connection  with the this Agreement or the Operative  Documents  before or by
any Governmental Body; and

(g) as of the date  hereof and the Closing  Date,  Seller has not  received  any
prepayment  of Basic  Rent or  Supplemental  Rent in  advance  of the date  such
payment is due and payable.
<PAGE>

8. Miscellaneous

8.01.  Notices.  All  notices,   approvals,   requests,   consents,   and  other
communications  given pursuant to this Agreement  shall be in writing,  shall be
effective when delivered,  may be sent by any commercially  customary means, and
shall be addressed as follows:

If to Seller:

                           Reno Air, Inc.
                           220 Edison Way
                           Reno, Nevada 89502
                           Attention: General Counsel
                           Fax:  (702) 686-3875

If to Buyer:

                           Pegasus Aviation I, Inc.
                           Four Embarcadero Center, Suite 3550
                           San Francisco, California 94111
                           Attention: General Counsel
                           Fax:  (415) 434-3912
<PAGE>

8.02. Assignment.  This Agreement, and the rights and obligations of the parties
hereunder,  shall not be  assignable or delegable by any party without the prior
written consent of the other party,  which shall not be  unreasonably  withheld.
Subject to the foregoing,  this Agreement and the rights and  obligations of the
parties  hereunder shall bind and benefit Seller and Buyer and their  successors
and assigns.

8.03. Captions. All headings in this Agreement are for convenience only, and are
not a substantive part of the agreement.

8.04. Brokers' Commissions.  Each of Seller and Buyer represents that it has not
engaged  any agent or broker  entitled  to any  compensation  as a result of the
transactions contemplated by this Agreement. Seller and Buyer agree to indemnify
each other  against all  claims,  demands,  liabilities,  damages,  losses,  and
judgments which arise out of such indemnitor's actions with respect to agents or
brokers.

8.05.  Applicable  Law.  This  Agreement  shall be governed by and  construed in
accordance with the laws of the state of New York.

8.06. Entire Agreement.  This Agreement,  the Assignment,  the Bill of Sale, the
Acceptance  Receipt,  and the Consents  shall  constitute  the entire  agreement
between Seller and Buyer with respect to the transactions  contemplated  herein,
supersede any prior or contemporaneous  agreements,  whether oral or in writing,
between Seller and Buyer,  and the Bill of Sale, this Agreement,  the Acceptance
Receipt, and the Assignment shall not in any manner be supplemented, amended, or
modified  except by a writing  executed  on behalf of Seller  and Buyer by their
authorized representatives.

8.07.  Waivers.  The waiver of  performance  of any term of this  Agreement in a
particular  instance shall not  constitute a waiver of any subsequent  breach or
preclude either party from thereafter demanding performance thereof according to
the provisions hereof.
         
8.08. Counterparts. This Agreement may be executed in several counterparts, each
fully executed set of which shall be an original.

8.09 Expenses.  Except as otherwise  expressly provided herein, each party shall
responsible  for and to pay the costs and expenses  incurred by it in connection
with the negotiation and drafting of this Agreement and the  consummation of the
transactions  contemplated hereby, including attorneys' fees and expenses. Buyer
shall be  responsible  for and shall pay the fees and  expenses for any required
filings with the Aeronautics  Authority,  including the fees and expenses of any
counsel  retained in the  Republic of Trinidad  and Tobago  except to the extent
such expenses relate to the removal of the lien of Seller's lenders.

8.10 Further Assurances.  Each of Buyer and Seller agrees to execute and deliver
promptly  to the  other  all  such  further  instruments  and  documents  as may
reasonably be requested by the other in order to carry out fully the intent, and
to accomplish the purposes, of the transactions referred to herein.

8.11  Assignment  of  Warranties.  Seller  hereby  assigns  to Buyer any and all
warranties of and product support  agreements with manufacturers and maintenance
and overhaul  agencies or other  applicable  third party  vendors of and for the
Aircraft and all  appliances,  parts  instruments,  appurtenances,  accessories,
furnishings  or other  equipment  or  property  installed  in or attached to the
Aircraft to the extent extant and  assignable  to Buyer,  and from time to time,
upon request of Buyer,  Seller shall give notice to any such  manufacturers  and
maintenance  and  overhaul  agencies or  applicable  third party  vendors of the
assignment of such warranties to Buyer.

<PAGE>


    In witness whereof, Seller and Buyer have executed this Purchase Agreement.


                                   RENO AIR, INC.

                                   By: /s/Steven A. Rossum
                                   Name: Steven A. Rossum
                                   Title: Senior V.P. & General Counsel




                                   PEGASUS AVIATION I, INC.

                                   By: /s/ Robert Adler
                                   Name:Robert Adler
                                   Title: Vice President




<PAGE>
                                    Exhibit A

                               ACCEPTANCE RECEIPT

Pegasus Aviation I, Inc. hereby accepts Delivery of the McDonnell  Douglas MD-83
aircraft  with  manufacturer's  serial  number  49568 and  Trinidad  and  Tobago
registration no. 9Y-THR,  including two Pratt & Whitney model JT8D-219  aircraft
engines with  manufacturer's  serial nos.  718053 and 718054.  Such  Delivery is
being made at  ___________________  at  ________  _.m.  (Port of Spain  time) on
September __, 1998.


                                   PEGASUS AVIATION I, INC.

                                   By: /s/ Robert Adler
                                   Name:Robert Adler
                                   Title: Vice President

<PAGE>
                                    Exhibit B

                       ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption  Agreement (this "Assignment") is entered into on
September __, 1998 by Reno Air,  Inc.  ("Seller")  and Pegasus  Aviation I, Inc.
("Buyer").

Seller and Buyer are parties to a September  23, 1998  Purchase  Agreement  (the
"Purchase Agreement").  (Terms defined in the Purchase Agreement and not in this
Assignment  have the same  meanings as in the  Purchase  Agreement.)  Seller and
Buyer  want to  effect  (a) the  transfer  by  Seller  to Buyer of all  Seller's
interest  (except as excluded  in SS-3  below) in (1) the July 2, 1996  Aircraft
Lease Agreement (as  supplemented  and amended,  the "Lease") between Seller and
BWIA, pertaining to the (2) all guarantees,  certificates,  opinions,  and other
documents  relating  to the  Lease  (all  of  the  foregoing  collectively,  the
"Assigned  Documents"),  (3) the aircraft and engines  identified below, (4) the
Reserves and the Security Deposit under the Lease, and (5) the proceeds from all
of the foregoing;  and (b) Buyer's assumption of Seller's obligations (except as
excluded in SS-3 below) accruing under the Assigned Documents.

         Seller and Buyer agree as follows:

1.  Assignment.  Seller hereby sells and assigns to Buyer all of Seller's right,
title, and interest in, under and to following  aircraft (the  "Aircraft"),  the
Assigned  Documents,  the  Reserves,  the  Security  Deposit  and  any  proceeds
therefrom:

The McDonnell  Douglas model MD-83 aircraft  bearing  manufacturer's  serial no.
49568 and Trinidad and Tobago  registration  no.  9Y-THR,  including two Pratt &
Whitney  model  JT8D-219  aircraft  engines (each of which has 750 or more rated
takeoff horsepower or its equivalent) bearing  manufacturer's serial nos. 718053
and 718054.

2.  Assumption.  Except  as  otherwise  provided  in SS 3  below,  Buyer  hereby
undertakes and assumes all of Seller's duties and obligations which have accrued
from and  after the date  hereof  accrued  pursuant  to the  Assigned  Documents
(including  those set forth on Appendix I), and hereby confirms that it shall be
deemed a party to and be bound by the Assigned  Documents as if named therein as
"Lessor".

3. Retained  Rights and Excluded  Obligations.  Notwithstanding  anything to the
contrary  set forth in this  Assignment,  Seller is not  assigning  to Buyer and
Seller shall  remain  responsible  for,  and Buyer is not assuming  from Seller,
Seller's rights,  duties, and obligations that relate to any period prior to the
date of this Assignment and any indemnity  relating to events occurring prior to
the date of this  Assignment.  However,  Buyer  shall be  obligated  to make all
reimbursements from the Reserves, regardless of when the Reserves were collected
and regardless of when the related maintenance occurred.

4.  Release of Seller.  Except for  liabilities  not assumed as provided in SS 3
(for which Seller shall remain  responsible),  Seller shall have no further duty
or obligation to BWIA under the Assigned Documents.

5. Payments.  Seller agrees to hold in trust and  immediately pay over to Buyer,
if and when received,  any amounts paid to Seller that,  under this  Assignment,
belong to Buyer,  and Buyer agrees to pay over to Seller,  if and when received,
any amounts paid to Buyer that, under this Assignment, belong to Seller.

6.  Further  Assurances.  Each party to this  Assignment  agrees to execute such
further  documents,  and to do all  such  further  acts  and  things,  as may be
required by law, or as shall  reasonably be requested to carry out the intent of
this Assignment.

7. Governing Law. This Assignment is being delivered in and shall be governed by
and construed in accordance with the laws of the state of New York.

8. Headings.  Headings used in this Assignment are for convenience only, and are
not a substantive part of the agreement.

9. Counterparts.  This Assignment may be executed in separate counterparts, each
fully executed set of which shall be an original.

<PAGE>

                                                                       
In  witness  whereof,  Seller  and  Buyer  have  executed  this  Assignment  and
Assumption Agreement.


                                        RENO AIR, INC.

                                        By: /s/Steven A. Rossum
                                        Name: Steven A. Rossum
                                        Title: Senior V.P. & General Counsel


                                        PEGASUS AVIATION I, INC.

                                        By: /s/ Robert Adler
                                        Name:Robert Adler
                                        Title: Vice President


<PAGE>

                                    Exhibit C

                                  BILL OF SALE

Reno Air, Inc.  ("Seller") owns full legal and beneficial title to the McDonnell
Douglas model MD-82 aircraft bearing Trinidad and Tobago registration no. 9Y-THR
and  manufacturer's  serial no. 49568  including  the two Pratt & Whitney  model
JT8D-219 aircraft engines bearing  manufacturer's  serial nos. 718053 and 718054
(such airframe and engines,  together with all manuals, logs, records, and owner
documents of Seller related thereto and all avionics,  appliances,  instruments,
appurtenances,  accessories,  furnishings,  and other  equipment and property of
whatever  nature  installed  thereon or  attached  thereto  and owned by Seller,
collectively, the "Aircraft").

For good and valuable consideration, Seller hereby sells, and assigns to Pegasus
Aviation I, Inc. ("Buyer") all of Seller's right,  title, and interest in and to
the Aircraft.

Seller hereby warrants to Buyer (and Buyer's  successors and assigns) that there
is hereby conveyed to Buyer good, marketable, legal, and valid title to, and all
right,  title,  and interest in, the  Aircraft,  free and clear of all Liens (or
with respect to the Airframe and Engines only,  free and clear of Lessor's Liens
(as defined in the Purchase Agreement referred to below)),  and that Seller will
warrant and defend  such title  against all third  parties;  provided,  that the
Aircraft is  otherwise  conveyed  "as is",  "where is" and "with all faults" and
without  any  representation  or  warranty  of any  type  with  respect  thereto
(including as to merchantability or fitness for any particular purpose),  except
as otherwise provided in the Purchase Agreement.  This Bill of Sale is delivered
pursuant to the September 23, 1998 Purchase  Agreement between Seller and Buyer,
and is being  delivered in and shall be governed by the laws of the state of New
York.

                                   September __, 1998

                                   RENO AIR, INC.

                                   By: /s/Steven A. Rossum
                                   Name: Steven A. Rossum
                                   Title: Senior V.P. & General Counsel

<PAGE>

                              EMPLOYMENT AGREEMENT

This Employment  Agreement  (this "Agreement") is dated as of March 27, 1998 by
and between Reno Air, Inc., a Nevada  corporation  (the  "Company") and Beverley
Grear (the "Executive").

The Executive and the Company agree as follows:

1.  Definitions.  Capitalized  terms used in this  Agreement  and not  otherwise
defined  shall  have  the  meanings  assigned  to them in  Appendix  I  entitled
"Employment Agreement Definitions."

2.  Employment.  The Company  agrees to employ the  Executive  and the Executive
agrees to be employed by the Company on the terms and conditions hereinafter set
forth during the Employment Period.

3. Position and Duties.  During the Employment Period, the Executive shall serve
the Company as the Company's Senior Vice President- Operations and shall perform
the attendant  responsibilities thereto as provided in the Company's by-laws, as
well as such other responsibilities as the Board, the Chairman of the Board, the
Chief  Executive  Officer,  or the  President  may from time to time  reasonably
assign.  The  Executive  agrees  to  devote  such  time and  effort  as shall be
reasonably  required to discharge her duties  hereunder.  During the  Employment
Period,  it shall not be a violation of this Agreement for the Executive to: (i)
serve on charitable or non-conflicting  civic or corporate boards or committees,
(ii) deliver  lectures,  fulfill speaking  engagements,  or teach at educational
institutions,  or (iii) manage  personal  investments;  so long as the foregoing
activities  do  not  interfere   with  the   performance   of  the   Executive's
responsibilities.  During  the  term of her  employment  with the  Company,  the
Executive shall report to the President or a more senior officer of the Company.

4. Compensation and Benefits. The compensation and benefits payable to Executive
for all services  rendered by the  Executive  under this  Agreement  shall be as
follows:

(a) Salary.  The  Executive  shall  receive a minimum base salary at the rate of
$175,000 per year.  Such salary shall be (i) payable  semi-monthly in accordance
with the Company's standard payroll practices (and pro-rated for any partial pay
period),  and (ii) subject to review and increase (but not decrease) at any time
at the discretion of the Board.

(b) Annual Bonus. The Executive shall be entitled to receive an annual bonus (as
determined by the Board in good faith) of up to the maximum  participation level
provided for in the Company's  incentive  compensation  plan for officers.  Such
bonus shall be paid not later than April 15 of the calendar  year  following the
calendar year to which it shall apply.  The Executive  shall also be eligible to
participate  at a level  (which  is not  significantly  less  than  the  maximum
participation level of officers with a substantially  similar title or level) in
any other bonus or incentive  compensation  arrangements provided by the Company
from time to time to its officers or key employees.

(c) Business  Expenses.  The Company shall reimburse the Executive  promptly for
all  reasonable  travel  and  other  business  expenses  incurred  by him in the
performance  of her  duties  and  responsibilities,  subject  to  the  Company's
policies with respect to substantiation and documentation.

(d) Stock  Options.  The Company and the Executive  shall enter into one or more
stock  option  agreements  with  respect to options for the  purchase of 150,000
shares of Common Stock (subject to an equitable  adjustment in the case of stock
splits and the like), at an exercise price of $8.1875, with such options vesting
in accordance with the following  schedule:  50,000 shares of Common Stock shall
vest on the first  anniversary  of the Effective  Date,  50,000 shares of Common
Stock shall vest on the second  anniversary  of the Effective  Date,  and 50,000
shares of Common  Stock  shall vest on the third  anniversary  of the  Effective
Date. With respect to all stock options and all other deferred compensation that
vest over time in accordance  with a schedule or formula (such options and other
compensation, the ("Vesting Compensation"),  the Company and the Executive agree
that upon the  first to occur of:  (i) the  Change of  Control  Date or (ii) the
termination  of this  Agreement  (other  than by the Company for Cause or by the
Executive without Good Reason),  any Vesting Compensation to which the Executive
was or may have become entitled,  whether or not theretofore  granted or vested,
shall be immediately  granted and become  immediately  vested and exercisable by
the Executive (or her  representative  in the case of termination by death).  In
the event the vesting of the Vesting  Compensation is accelerated as provided in
the  immediately   preceding  sentence,   such  Vesting  Compensation  shall  be
exercisable until the earlier of: (x) the stated expiry thereof as provided in a
stock option  agreement,  Company plan, or other  governing  document or (y) 180
days after the date of the Executive's termination of employment.

(e) Airline Travel.  During the Employment  Period,  the Company will provide or
cause to be provided to the Executive,  the Executive's  Spouse, the Executive's
Parents,  and the Executive's  Eligible  Children  unlimited free positive space
airline travel on the Travel Network (the "Airline Travel Benefits").  Likewise,
should the Company, its affiliates, or its or their successors from time to time
operate or have an access arrangement for airport clubs, lounges and/or business
centers, the Executive and the Executive's Spouse shall be entitled to unlimited
free access to each such club,  lounge,  or business  center and unlimited  free
access to any other travel-related  benefit from time to time offered (such club
and  other  travel  benefits,  the  "Club  Benefits").  The  Executive  and  the
Executive's  Spouse  shall be entitled to Airline  Travel and Club  Benefits for
their  respective  lifetimes upon the first to occur of the  following:  (a) the
Change of Control Date, (b) the third  anniversary of the Effective Date, or (c)
the  Executive's  employment is terminated by the Company (other than for Cause)
or by the Executive for Good Reason.  The Executive's  Parents shall be entitled
to  Airline  Travel  Benefits  for their  respective  lifetimes  if and when the
Executive  (or the  Executive's  Spouse  in the case of the  Executive's  death)
becomes  entitled  to  the  benefits  described  in  the  immediately  preceding
sentence.  An Eligible Child shall be entitled to Airline Travel Benefits for so
long as: (x) he or she shall remain an Eligible Child and (y) except in the case
of the Executive's death, the Executive shall remain eligible for Airline Travel
Benefits. The post- Employment Period Airline Travel and Club Benefits described
in the  preceding  sentences  shall  be  provided  on the  most  favored  terms,
practices and  conditions  from time to time provided or offered by the Company,
its  affiliates,  and  successors to its or their active and retired senior vice
presidents  and their  families  (it is  understood  that in all cases that such
benefits   shall  equal  or  exceed  the  priority  of  the  highest   class  of
space-available  travel in all  classes of  service on the Travel  Network at no
charge to the Executive).

(f) Other Benefits. The Executive and, to the extent applicable, the Executive's
family,  dependents and  beneficiaries,  shall each participate in all benefits,
plans and programs,  including  improvements or modifications of the same, which
are now, or may hereafter be,  available to the senior-most  executive  officers
and key employees of the Company and its  successors.  Such benefits,  plans and
programs may include,  without  limitation,  profit sharing plans, thrift plans,
health  insurance or health care plans,  life insurance,  disability  insurance,
pension and other retirement plans, pass privileges,  interline travel benefits,
and the like. In addition to the foregoing, in the event of a Change of Control,
the Executive and the Executive's  Spouse shall be entitled to medical  coverage
for their  respective  lifetimes  and any  Eligible  Child  shall be entitled to
medical  coverage for so long as he or she remains an Eligible  Child;  provided
that, (i) upon termination of the Executive's  employment,  the medical coverage
(including  Medicare coverage)  described  hereunder will become subordinate to:
(x) any coverage provided by a prior or subsequent  employer of the Executive or
the Executive's Spouse, or (y) in the case of the Executive's Spouse or Eligible
Children,  any  coverage  afforded  to such  persons by their  respective  past,
present, or prospective  employers and (ii) in the event of a Change of Control,
any medical benefits which would extend beyond the term of the Employment Period
(i.e., the lifetime medical benefits) shall be provided to the Executive only to
the extent the successor to the QQ Business  affords medical benefits of greater
duration to its senior vice presidents under a plan or agreement of severance or
termination.

(g)  Indemnification.  The Company  shall provide or cause to be provided to the
Executive  indemnification  against all expenses  (including  attorneys'  fees),
judgements,  fines  and  amounts  paid in  settlement  in  connection  with  any
threatened,  pending,  or completed action,  claim, suit or proceeding,  whether
civil, criminal,  administrative, or investigative (including an action by or in
the  right of the  Company)  by  reason of the  Executive's  having  served as a
director,  officer or employee of the Company or any  affiliate  of the Company.
The Company  shall  advance fees  (including  attorneys'  fees)  incurred by the
Executive in the defense of any such action, claim, suit, or proceeding, and the
Company shall  maintain  customary  directors and officers  liability  insurance
coverage.  These provisions supplement and are not in lieu of any rights granted
to the  Company's  officers  and  directors  under  the  Company's  articles  of
incorporation, bylaws, any corporate document (including insurance policies), or
applicable  law. The Company shall pay, or promptly  reimburse on an as-incurred
basis to the  Executive,  the  reasonable  fees and expenses of the  Executive's
legal counsel for its services  rendered in  connection  with,  the  Executive's
enforcement of this Agreement;  provided,  that if the Executive  institutes any
proceeding  to  enforce  this  Agreement  and the  judge,  arbitrator  or  other
individual presiding over the proceeding  affirmatively finds that the Executive
instituted  the proceeding in bad faith,  the Executive  shall pay all costs and
expenses,  including  attorneys'  fees, of the  Executive  and the Company.  The
Company shall indemnify and hold harmless the Executive,  on an after-tax basis,
from any payment  under this Section 4 or otherwise to or for the benefit of the
Executive  that would be subject to the  excise  tax  (including  interests  and
penalties  thereon)  imposed by Section  4999 of the Internal  Code of 1986,  as
amended.

(h)  Relocation   Assistance/Temporary  Living.  The  Company  will  provide  or
reimburse the Executive for temporary  accommodations  in the Reno,  Nevada area
during  such  transitional  period as may be  approved  by the  Chief  Executive
Officer of the Company. The Company will also reimburse or pay the Executive for
the  reasonable  costs of packing  or moving  household  goods from Long  Beach,
California  to the Reno,  Nevada  area and,  should the  Executive  subsequently
determine  to sell her Long Beach home,  for  customary  closing  costs and real
estate  commissions  payable in connection with the sale of the Executive's home
in Long Beach,  California.  In the event that within 18 months of the Change of
Control Date, this Agreement is terminated by the Company (other than for Cause)
or by the Executive  with Good Reason and the Executive  relocates from the Reno
area (or the location  where the Executive was  last-based)  within 12 months of
the date of termination, the Company will reimburse or pay the Executive for the
reasonable  costs of packing and moving to a location in the continental  United
States  selected by the  Executive.  The Company  shall  likewise  reimburse the
Executive for customary closing costs and real estate  commissions in connection
with the sale of the Executive's home, or  alternatively,  for lease termination
expenses.  The Company and its  successors  will be jointly  responsible,  on an
after-tax   basis,   for  any  income   taxes   arising  from  the  payments  or
reimbursements described in this Section 4(i).

5.    Termination and Termination Benefits

(a) Death. If the Executive dies, this Agreement shall  automatically  terminate
on the date of her death.  The  Executive's  estate or designated  beneficiaries
shall be  entitled  to receive  (i) the  Executive's  then-current  salary for a
period of twelve months following the date of death, (ii) any accrued portion of
any bonus which is  ultimately  determined to have been payable to the Executive
and  allocable to the period prior to death,  (iii) the Airline  Travel and Club
Benefits, (iv) the Vesting Compensation (which shall vest and become immediately
exercisable),  (v) any other  benefits  which  shall have been  provided  to the
Executive to the extent permitted under any applicable plan documents,  and (vi)
subject to the  proviso  set forth in the last  sentence  of Section  4(g) above
regarding   subordination  of  coverage,   lifetime  medical  coverage  for  the
Executive's Spouse.

(b) Disability. If the Executive suffers a Disability, the Chairman of the Board
or the Chief Executive  Officer of the Company shall have the right to cause the
Company  to  terminate  the  Executive's  employment  as of such date by written
notice to the Executive. Thereafter, the Executive shall be entitled to receive:
(i) her then-current  salary for a period of twelve months following the date of
termination,  (ii)  any  accrued  portion  of  any  bonus  which  is  ultimately
determined  to have been payable to the  Executive  and  allocable to the period
prior to the date of  termination,  (iii) the Airline  Travel and Club Benefits,
(iv)  the  Vesting   Compensation  (which  shall  vest  and  become  immediately
exercisable),  and (iv) subject to the proviso set forth in the last sentence of
Section  4(f)  above  regarding  subordination  of  coverage,  lifetime  medical
coverage for the Executive and the Executive's Spouse.

(c)  Termination  by the  Company  for Cause.  The  Company  may  terminate  the
Executive's  employment  for Cause.  If the  Chairman  of the Board or the Chief
Executive  Officer  determines  in good  faith  that  the  Executive  should  be
terminated for Cause, the Chairman of the Board or Chief Executive  Officer,  as
the case may be, shall send written  notice to the  Executive  setting  forth in
reasonable  detail  the  nature of the  Cause.  If  terminated  for  Cause,  the
Executive  will be  entitled  to no  additional  compensation  other than salary
accrued prior to the effective date of termination  except as otherwise provided
in Section 4.
<PAGE>

(d) Termination by the Company without Cause. The Executive's  employment may be
terminated by the Company  without Cause provided that the Executive is afforded
at least 30 days' prior written notice of such termination.

(e)  Termination  by the  Executive.  The Executive may terminate her employment
with or without  Good  Reason by giving  the Board not less than 15 days'  prior
written notice of termination of her  employment,  and she shall not be required
to render any services to the Company  after the date set forth in the notice of
termination. In the event of a termination by the Executive without Good Reason,
the Executive shall be entitled to no additional  compensation other than salary
accrued prior to the effective date of termination, except as otherwise provided
in Section 4.

(f)  Acceleration  of Salary,  Bonus,  and Benefits if Without Cause or for Good
Reason.  Except as otherwise  provided in this  Agreement,  if this Agreement is
terminated by the Company  without Cause and other than for death or Disability,
or this  Agreement is  terminated  by the  Executive  with Good Reason:  (i) the
Company shall pay to the Executive the sum of: (x) the total undiscounted amount
of the Executive's  entire salary which would  otherwise  become due and payable
under  Section  4(a)  during the  Employment  Period,  plus (y) if the Change in
Control  Date shall have  occurred,  the product of: (A) 3 times (B) the maximum
annual  bonus  payable to the  Executive  in  accordance  with the  then-current
incentive  bonus plan described in Section 4(b);  (ii) the Vesting  Compensation
shall vest and become  immediately  exercisable;  and (iii) except to the extent
more favorable  benefits are otherwise  provided in this  Agreement  (which more
favorable  provisions shall govern),  the Executive shall be entitled to receive
flight, medical, dental, life insurance,  vision, and similar benefits until the
last day of the Employment  Period  (assuming that this Agreement shall not have
been  terminated  but subject to the  proviso set forth in the last  sentence of
Section 4(f) above regarding subordination of medical coverage).  The salary and
bonus that would be due and payable under sub-clause (i) of this Section 4 shall
be paid to the Executive in three equal tranches on each of the 30th,  60th, and
90th day after the date of termination (or the immediately  succeeding  business
day if any such day is not a business day).

(g) No Duty to Mitigate/No Non-Compete.  The Executive has no duty or obligation
to mitigate the expenditures for salaries,  bonuses, benefits or otherwise after
termination of this Agreement  and/or  cessation of employment with the Company.
Nothing in this  Agreement  is  intended  to serve as a  "non-compete"  or other
limitation  on the  future  employment  opportunities  for the  Executive  after
termination of this Agreement.

6.  Confidential  Information.  The Executive shall maintain a fiduciary duty to
the Company for all confidential information,  knowledge or data relating to the
Company or any of its affiliated  companies,  and their  respective  businesses,
which  shall  have  been  obtained  by  the  Executive  during  the  Executive's
employment  by the  Company or any of its  affiliates  until  such  confidential
information,  knowledge  or data  become  a  matter  of  public  record  through
disclosure   by  a  person  or  persons   other  than  the   Executive   or  her
representatives and which does not involve communication or disclosure, directly
or indirectly, by the Executive or her representatives.  The Executive shall not
communicate or disclose any such information, knowledge, or data to anyone other
than the Company and those designated by the Company.  After  termination of the
Executive's  employment  with  the  Company,  the  Executive  shall  return  all
confidential and proprietary  information in her possession or under her control
and shall not, without the prior written consent of the Company,  communicate or
disclose  any such  information,  knowledge  or data to  anyone  other  than the
Company and those designated by the Company. Willful violation of this paragraph
6 shall void this Employment Agreement.

7.  Successors and Assigns.  This  Agreement  shall bind any successor to the QQ
Business,   whether  direct  or  indirect  and  whether  by  purchase,   merger,
consolidation  or otherwise,  in the same manner and to the same extent that the
Company would be obligated  under this Agreement if no such succession had taken
place. Notwithstanding that a successor to the QQ Business becomes bound to this
Agreement, the Company shall continue to be liable for the obligations hereunder
as a guarantor.  In any agreement  providing for  succession to the QQ Business,
the Company shall cause each and every successor  expressly and  unconditionally
to assume  and agree to perform  each of the  Company's  obligations  under this
Agreement.  For  avoidance  of doubt,  it is  understood  that in the event that
another air carrier (or an affiliate  thereof)  directly or indirectly  acquires
the QQ  Business,  the Company  shall use its best efforts to cause such airline
(or its affiliate as the case may be) to provide the Executive,  the Executive's
Spouse,  the Executive's  Parents,  and the Executive's  Eligible  Children with
pass,  club and other  privileges on the combined  route networks of the Company
and the acquirer (or of any  affiliated  air  carriers,  as the case may be) and
with boarding  priority and other terms equal or superior to the Airline  Travel
and Club Benefits.  This Agreement and all rights of Executive  hereunder  shall
inure to the  benefit of, and be  enforceable  by, the  Executive's  personal or
legal   representatives,    executors,   administrators,    successors,   heirs,
distributees,  devises and legatees. This Agreement is personal to the Executive
and without the prior written  consent of the Company shall not be assignable by
the Executive other than by will or the laws of descent and distribution.

8.    General Contract Provisions.

(a) Governing Law/Headings/Amendments/Entire  Agreement. This Agreement shall be
governed by and  construed in  accordance  with the laws of the State of Nevada,
without  reference  to  principles  of  conflict of laws.  The  captions of this
Agreement  are not part of the  provisions  hereof  and  shall  have no force or
effect.  This  Agreement may not be amended or modified  other than by a written
agreement  executed by the parties  hereto or their  respective  successors  and
legal   representatives.   This  Agreement,   together  with  the  stock  option
agreement(s) to be executed, contain the entire understanding of the Company and
the  Executive  with respect to the subject  matter hereof and supersede any and
all other  agreements,  either  oral or  written,  between  the  Company and the
Executive with respect to the subject matter hereof.

(b) Notices. All notices and other communications  hereunder shall be in writing
and shall be given by hand  delivery  to the  other  party or by  registered  or
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive: to her address as set forth in the personnel records of the
Company,  if to the Company:  to Reno Air, Inc.,  220 Edison Way,  Reno,  Nevada
89502,  Attention:  Chief Executive Officer, with a copy to the attention of the
Company's  Corporate  Secretary;  or to such other address as either party shall
have  furnished  to the other in writing in  accordance  herewith.  Notices  and
communications shall be effective when actually received by the addressee.

(c)  Enforceability  Issues.  If any  benefits  to  which  the  Executive  shall
otherwise  be  entitled  hereunder  are  not  permitted  to be  provided  to the
Executive  under any governing  plan  document or  applicable  law governing the
payment  or  provision  of such  benefits,  the  Company  shall  pay or  provide
equivalent  benefits to the  Executive  (or her  representatives  in the case of
death).  The invalidity or  unenforceability  of any provision of this Agreement
shall not affect the validity or  enforceability  of any other provision of this
Agreement.  To the extent the provisions of Section 4(g) are  inconsistent  with
the terms  regarding  subrogation  in any  officers'  and  directors'  liability
coverage,  the terms of such insurance  coverage shall prevail.  The Executive's
and/or the Company's failure to insist upon strict compliance with any provision
hereof shall not be deemed to be a waiver of such provision thereof.

(d)  Withholdings.  The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

<PAGE>

IN WITNESS WHEREOF,  the Executive and the Company have executed this Employment
Agreement as of the date first above written.



Reno Air, Inc. (the "Company")


By: /s/ Joseph R. O'Gorman
 
Title: Chairman of the Board, Chief Executive Officer, and President




/s/Beverley Grear
   Beverley Grear (the "Executive")

<PAGE>

                                   Appendix I

                        Employment Agreement Definitions

"Airline Travel Benefits" is defined in Section 4(e).

"Board" shall mean the Board of Directors of the Company.

"Cause"  shall  mean  (i) an act or acts of  personal  dishonesty  taken  by the
Executive  and  intended to result in  substantial  personal  enrichment  of the
Executive  at the  expense  of the  Company,  (ii)  repeated  violations  by the
Executive  of  the  Executive's  obligations  under  this  Agreement  which  are
demonstrably  willful and deliberate on the  Executive's  part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company or, (iii) the conviction of the Executive of a felony.

"Change in Control" shall mean: (a) the acquisition by an individual,  entity or
group  (within  the meaning of Section  13(d)(3)  or 14(d)(2) of the  Securities
Exchange Act of 1934, as amended (the "Exchange  Act")) of beneficial  ownership
(within the meaning of Rule 13d-3  promulgated under the Exchange Act) of 50% or
more of either (i) the  then-outstanding  shares of common  stock of the Company
(the  "Outstanding  Common  Stock"),  or (ii) the  combined  voting power of the
then-outstanding  voting securities of the Company entitled to vote generally in
the  election  of  directors  (the  "Outstanding  Voting  Securities"),  or  (b)
individuals who, as of the Effective Date,  constitute the Board of Directors of
the Company (the "Incumbent  Board") cease for any reason to constitute at least
a majority of the Company's  Board of Directors;  provided,  that any individual
becoming  a  director  subsequent  to the  Effective  Date  whose  election,  or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then  comprising the Incumbent  Board shall
be considered as though such  individual  were a member of the Incumbent  Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such  terms are used in Rule  14a-11 of  Regulation  14A  promulgated  under the
Exchange Act) or other actual or threatened solicitation of proxies or consents;
or (c) approval by the shareholders of the Company of a  reorganization,  merger
or  consolidation,  in each case, with respect to which all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Common Stock and Outstanding Voting Securities immediately prior
to such reorganization,  merger or consolidation,  beneficially own, directly or
indirectly, less than 90% of, respectively, the outstanding common stock and the
outstanding voting securities,  as the case may be, of the corporation resulting
from such  reorganization,  merger or consolidation  in  substantially  the same
proportions as their ownership, immediately prior to such reorganization, merger
or  consolidation  of the Outstanding  Common Stock and the  Outstanding  Voting
Securities,  as the case may be;  or (d)  approval  by the  shareholders  of the
Company of (i) a complete  liquidation or dissolution of the Company or (ii) the
sale or other  disposition  of all or a significant  portion of the QQ Business,
other than to a corporation,  with respect to which following such sale or other
disposition,  more than 90% of,  respectively,  the  then-outstanding  shares of
common  stock of such  corporation  and the  combined  voting  power of the then
outstanding voting securities of such corporation  entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and the Outstanding Voting
Securities  immediately prior to such sale or other disposition in substantially
the same proportion as their ownership,  immediately prior to such sale or other
disposition,  of the Outstanding Common Stock and Outstanding Voting Securities,
as the case may be; or (e) the acquisition by an individual,  entity or group of
beneficial  ownership of 50% or more of the  then-outstanding  securities of the
Company,  including both voting and non-voting securities;  provided,  that such
acquisition shall constitute a Change of Control only if such individual, entity
or group also obtains the power to elect by class vote or cumulative  voting, or
otherwise to appoint,  50% or more of the total number of directors to the Board
of Directors of the Company.
<PAGE>

"Change of Control  Date" shall mean the first date on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding,  if a Change
of  Control  occurs  and if the  Executive's  employment  with  the  Company  is
terminated or the Executive  ceases to be an officer of the Company prior to the
date on which the Change of Control occurs, and if it is reasonably demonstrated
by the Executive  that such  termination of employment or cessation of status as
an  officer  (i)  was at the  request  of a third  party  who  has  taken  steps
reasonably calculated to effect the Change of Control or (ii) was effected by or
on behalf of the Company in connection  with or in  anticipation of an actual or
proposed Change of Control,  then for all purposes of this Agreement the "Change
of  Control  Date"  shall  mean the date  immediately  prior to the date of such
termination of employment or cessation of status as an officer.

"Club Benefits" is defined in Section 4(e).

"Common Stock" shall mean the Company's common stock, $.01 par value.

"Company"  shall mean the Company as defined  above and any  successor to the QQ
Business  which assumes and agrees to perform this Agreement by operation of law
or otherwise.

"Disability" shall mean any physical or mental illness,  condition,  dependency,
or incapacity rendering the Executive unable to adequately perform substantially
all of her  duties  and  responsibilities  to the  Company,  provided  that such
disability continues for an uninterrupted period of at least 6 months.
 
"Effective Date" shall mean March 27, 1998.

"Eligible  Child" shall mean a naturally  born or legally  adopted  child of the
Executive  within the age  parameters  described in the  immediately  succeeding
sentence.  Any such child shall  cease to be an  Eligible  Child upon his or her
21st birthday (unless and for so long as such child remains a full-time student,
in which case,  the child will remain an Eligible Child until not later than his
or her 23rd birthday).

"Employment  Period" shall mean the period  commencing on the Effective Date and
ending on the earlier to occur of (i) June 30, 2001 or (ii) the first day of the
month next  following the  Executive's  birthday upon which the Executive  shall
attain the Normal  Retirement Date;  provided,  however,  that in the event of a
Reappointment of the Executive, the Employment Period shall be extended so as to
terminate on the earlier of (x) three years from the applicable  Renewal Date or
(y) the Executive's Normal Retirement Date; and provided, further, that upon the
occurrence of a Change of Control,  the Employment Period shall automatically be
extended so as to terminate on the earlier to occur of (a) the third anniversary
of the Change of Control Date or (b) the Executive's Normal Retirement Date.

"Executive's Parents" shall mean those family members defined as "Parents" under
the Company's non-revenue travel policies.

"Executive's  Spouse" shall mean any prospective spouse of the Executive (for so
long as he and the  Executive  shall remain  married  unless the marriage  shall
terminate  pursuant to the  Executive's  death, in which case, he shall maintain
such status for purposes of this  Agreement  until such time as he may re-marry)
or in the event the Executive shall re-marry,  any successor husband (subject to
the qualifications  and conditions set forth in the parenthetical  commencing on
the first line of this definition).

"Good Reason" shall mean any one or more of the following: (i) the assignment to
the  Executive of any duties  inconsistent  in any respect with the  Executive's
position  (including  status,  offices,  titles  and  reporting  relationships),
authority,  duties or responsibilities as contemplated by this Agreement, or any
other  action by the Company  which  results in a diminution  in such  position,
authority,  duties or responsibilities,  excluding for this purpose an isolated,
insubstantial  and  inadvertent  action  not  taken in bad  faith  and  which is
remedied by the Company  promptly  after receipt of notice  thereof given by the
Executive;  (ii) (x) any failure by the  Company to comply with its  obligations
under this  Agreement,  other than an isolated,  insubstantial  and  inadvertent
failure not occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive,  or (y) after the Change
of Control  Date,  any  failure of the Company to maintain or provide the plans,
programs,  policies and  practices,  and benefits  described in Section 4 of the
Agreement  on the  most  favorable  basis  such  plans  programs,  policies  and
practices  were  maintained  and  benefits  provided  during the  90-day  period
immediately  preceding the Change of Control  Date, or if more  favorable to the
Executive  and/or the  Executive's  family,  as in effect at any time thereafter
with respect to other key employees of the Company and its affiliates; (iii) the
Company's  requiring the  Executive to be based at any office or location  other
than within 35 miles of the Reno/Lake Tahoe  International  Airport,  except for
travel   reasonably   required   in   the   performance   of   the   Executive's
responsibilities;  (iv)  the  consummation  by  the  Company  of  a  significant
marketing  or   operational   alliance,   strategic   partnership,   significant
code-sharing  relationship,  "virtual merger," or other significant  contractual
relationship  with one or more  non-affiliated  air carriers or their affiliates
(whether  or not in any such case  stock,  assets,  or other  consideration  are
exchanged) which results in a material  diminution in or material adverse change
to the  Executive's  position or the  authority,  duties,  and  responsibilities
thereof,  and (v) the failure of the Board to Reappoint the  Executive,  as more
particularly set forth in the definition of  Reappointment,  below, and (vi) any
purported termination by the Company of the Executive's employment other than as
expressly  permitted  by this  Agreement.  For  purposes  of  determining  "Good
Reason",  any good faith determination of "Good Reason" made by the Executive on
or after the  Change of  Control  Date  shall be  conclusive.  Anything  in this
Agreement to the contrary  notwithstanding,  a termination  by the Executive for
any reason  during the 180-day  period  following the first  anniversary  of the
Change of Control Date shall be deemed to be a  termination  for Good Reason for
all purposes of this Agreement.

"QQ Business" shall mean a substantial  portion of one or more of the following:
(i) the assets of the Company, (ii) the Company's aircraft,  (iii) the Company's
non-managerial personnel, (iv) the Outstanding Common Stock, (v) the Outstanding
Voting  Securities,  (vi) the  Company's  operating  certificate,  or (vii)  the
Company's gates.

"Normal  Retirement  Date" shall mean the mandatory  officer  retirement age (as
determined by the Board).

"Reappointment"  shall mean either: (a) the Board's  determination to extend the
term of the  Employment  Period  under  this  Agreement  by one  year or (b) the
Board's re-election or reappointment of the Executive to the position and duties
described  in the first  sentence  of Section 3 for any  period  beyond the next
succeeding  Renewal Date. The Company  covenants that the Board shall  determine
whether to reappoint the Executive annually; such determination to occur between
January 1 of a calendar year and not less than 20 days prior to the Renewal Date
in the same calendar  year.  It is understood  that the failure to Reappoint the
Executive  shall be deemed to afford the Executive  the right to terminate  this
Agreement for Good Reason.  For avoidance of doubt and  notwithstanding  the two
immediately  preceding  sentences,  after a Change of  Control,  the  Employment
Period shall terminate on the earlier to occur of: (a) the third  anniversary of
the Change of Control Date or (b) the Executive's Normal Retirement Date.

"Renewal Date" shall mean June 30, 1999 and each annual anniversary thereof.

"Travel  Network" shall mean each airline  operated by the Company or any of its
affiliates or any successor or successors.

"Vesting Compensation" is defined in Section 4(d).

<PAGE>

                              EMPLOYMENT AGREEMENT

This Employment  Agreement (this "Agreement") is dated as of June 3, 1998 by and
between Reno Air,  Inc., a Nevada  corporation  (the  "Company")  and W. Stephen
Jackson (the "Executive").

The Executive and the Company agree as follows:

1.  Definitions.  Capitalized  terms used in this  Agreement  and not  otherwise
defined  shall  have  the  meanings  assigned  to them in  Appendix  I  entitled
"Employment Agreement Definitions."

2.  Employment.  The Company  agrees to employ the  Executive  and the Executive
agrees to be employed by the Company on the terms and conditions hereinafter set
forth during the Employment Period.

3. Position and Duties.  During the Employment Period, the Executive shall serve
the Company as the Senior Vice President-  Finance and Chief  Financial  Officer
and shall  perform  the  attendant  responsibilities  thereto as provided in the
Company's  by-laws,  as well as such other  responsibilities  as the Board,  the
Chairman of the Board,  the Chief Executive  Officer,  or the President may from
time to time  reasonably  assign.  The Executive  agrees to devote such time and
effort as shall be reasonably required to discharge his duties hereunder. During
the  Employment  Period,  it shall not be a violation of this  Agreement for the
Executive  to: (i) serve on  charitable  or  non-conflicting  civic or corporate
boards or committees,  (ii) deliver lectures,  fulfill speaking engagements,  or
teach at educational institutions, or (iii) manage personal investments; so long
as the  foregoing  activities  do not  interfere  with  the  performance  of the
Executive's  responsibilities.  During  the  term  of his  employment  with  the
Company, the Executive shall report to the President or a more senior officer of
the Company.

4. Compensation and Benefits. The compensation and benefits payable to Executive
for all services  rendered by the  Executive  under this  Agreement  shall be as
follows:

(a) Salary.  The  Executive  shall  receive a minimum base salary at the rate of
$175,000 per year.  Such salary shall be (i) payable  semi-monthly in accordance
with the Company's standard payroll practices (and pro-rated for any partial pay
period),  and (ii) subject to review and increase (but not decrease) at any time
at the discretion of the Board.

(b) Annual Bonus. The Executive shall be entitled to receive an annual bonus (as
determined by the Board in good faith) of up to the maximum  participation level
provided for in the Company's  incentive  compensation  plan for officers.  Such
bonus shall be paid not later than April 15 of the calendar  year  following the
calendar year to which it shall apply.  The Executive  shall also be eligible to
participate  at a level  (which  is not  significantly  less  than  the  maximum
participation level of officers with a substantially  similar title or level) in
any other bonus or incentive  compensation  arrangements provided by the Company
from time to time to its officers or key employees.

(c) Business  Expenses.  The Company shall reimburse the Executive  promptly for
all  reasonable  travel  and  other  business  expenses  incurred  by him in the
performance  of his  duties  and  responsibilities,  subject  to  the  Company's
policies with respect to substantiation and documentation.

(a) Stock  Options.  The Company and the Executive  shall enter into one or more
stock  option  agreements  with  respect to options for the  purchase of 175,000
shares of Common Stock (subject to an equitable  adjustment in the case of stock
splits and the like), at an exercise price of $7.8125, with such options vesting
in accordance with the following schedule:  50,000 shares of Common Stock vested
on the Effective Date,  41,666.67 shares of Common Stock shall vest on the first
anniversary of the Effective Date,  41,666.67  shares of Common Stock shall vest
on the second  anniversary of the Effective Date, and 41,666.66 shares of Common
Stock shall vest on the third anniversary of the Effective Date. With respect to
all stock  options and all other  deferred  compensation  that vest over time in
accordance with a schedule or formula (such options and other compensation,  the
"Vesting Compensation"), the Company and the Executive agree that upon the first
to occur of:  (i) the  Change of Control  Date or (ii) the  termination  of this
Agreement (other than by the Company for Cause or by the Executive  without Good
Reason),  any Vesting Compensation to which the Executive was or may have become
entitled,  whether or not  theretofore  granted or vested,  shall be immediately
granted and become  immediately  vested and exercisable by the Executive (or his
representative in the case of termination by death). In the event the vesting of
the Vesting Compensation is accelerated as provided in the immediately preceding
sentence,  such Vesting  Compensation shall be exercisable until the earlier of:
(x) the stated expiry thereof as provided in a stock option  agreement,  Company
plan,  or  other  governing  document  or (y) 180  days  after  the  date of the
Executive's termination of employment.

(e) Airline Travel.  During the Employment  Period,  the Company will provide or
cause to be provided to the Executive,  the Executive's  Spouse, the Executive's
Parents,  and the Executive's  Eligible  Children  unlimited free positive space
airline travel on the Travel Network (the "Airline Travel Benefit").  Likewise,
should the Company, its affiliates, or its or their successors from time to time
operate or have an access arrangement for airport clubs, lounges and/or business
centers, the Executive and the Executive's Spouse shall be entitled to unlimited
free access to each such club,  lounge,  or business  center and unlimited  free
access to any other travel-related  benefit from time to time offered (such club
and  other  travel  benefits,  the  "Club  Benefits").  The  Executive  and  the
Executive's  Spouse  shall be entitled to Airline  Travel and Club  Benefits for
their  respective  lifetimes upon the first to occur of the  following:  (a) the
Change of Control Date, (b) the third  anniversary of the Effective Date, or (c)
the  Executive's  employment is terminated by the Company (other than for Cause)
or by the Executive for Good Reason.  The Executive's  Parents shall be entitled
to  Airline  Travel  Benefits  for their  respective  lifetimes  if and when the
Executive  (or the  Executive's  Spouse  in the case of the  Executive's  death)
becomes  entitled  to  the  benefits  described  in  the  immediately  preceding
sentence.  An Eligible Child shall be entitled to Airline Travel Benefits for so
long as: (x) he or she shall remain an Eligible Child and (y) except in the case
of the Executive's death, the Executive shall remain eligible for Airline Travel
Benefits. The post- Employment Period Airline Travel and Club Benefits described
in the  preceding  sentences  shall  be  provided  on the  most  favored  terms,
practices and  conditions  from time to time provided or offered by the Company,
its  affiliates,  and  successors to its or their active and retired senior vice
presidents  and their  families  (it is  understood  that in all cases that such
benefits   shall  equal  or  exceed  the  priority  of  the  highest   class  of
space-available  travel in all  classes of  service on the Travel  Network at no
charge to the Executive).

(f) Other Benefits. The Executive and, to the extent applicable, the Executive's
family,  dependents and  beneficiaries,  shall each participate in all benefits,
plans and programs,  including  improvements or modifications of the same, which
are now, or may hereafter be,  available to the senior-most  executive  officers
and key employees of the Company and its  successors.  Such benefits,  plans and
programs may include,  without  limitation,  profit sharing plans, thrift plans,
health  insurance or health care plans,  life insurance,  disability  insurance,
pension and other retirement plans, pass privileges,  interline travel benefits,
and the like. In addition to the foregoing, in the event of a Change of Control,
the Executive and the Executive's  Spouse shall be entitled to medical  coverage
for their  respective  lifetimes  and any  Eligible  Child  shall be entitled to
medical  coverage for so long as he or she remains an Eligible  Child;  provided
that, (i) upon termination of the Executive's  employment,  the medical coverage
(including  Medicare coverage)  described  hereunder will become subordinate to:
(x) any coverage provided by a prior or subsequent  employer of the Executive or
the Executive's Spouse, or (y) in the case of the Executive's Spouse or Eligible
Children,  any  coverage  afforded  to such  persons by their  respective  past,
present, or prospective  employers and (ii) in the event of a Change of Control,
any medical benefits which would extend beyond the term of the Employment Period
(i.e., the lifetime medical benefits) shall be provided to the Executive only to
the extent the successor to the QQ Business  affords medical benefits of greater
duration to its senior vice presidents under a plan or agreement of severance or
termination.
<PAGE>

(g)  Indemnification.  The Company  shall provide or cause to be provided to the
Executive  indemnification  against all expenses  (including  attorneys'  fees),
judgements,  fines  and  amounts  paid in  settlement  in  connection  with  any
threatened,  pending,  or completed action,  claim, suit or proceeding,  whether
civil, criminal,  administrative, or investigative (including an action by or in
the  right of the  Company)  by  reason of the  Executive's  having  served as a
director,  officer or employee of the Company or any  affiliate  of the Company.
The Company  shall  advance fees  (including  attorneys'  fees)  incurred by the
Executive in the defense of any such action, claim, suit, or proceeding, and the
Company shall  maintain  customary  directors and officers  liability  insurance
coverage.  These provisions supplement and are not in lieu of any rights granted
to the  Company's  officers  and  directors  under  the  Company's  articles  of
incorporation, bylaws, any corporate document (including insurance policies), or
applicable  law. The Company shall pay, or promptly  reimburse on an as-incurred
basis to the  Executive,  the  reasonable  fees and expenses of the  Executive's
legal counsel for its services  rendered in  connection  with,  the  Executive's
enforcement of this Agreement;  provided,  that if the Executive  institutes any
proceeding  to  enforce  this  Agreement  and the  judge,  arbitrator  or  other
individual presiding over the proceeding  affirmatively finds that the Executive
instituted  the proceeding in bad faith,  the Executive  shall pay all costs and
expenses,  including  attorneys'  fees, of the  Executive  and the Company.  The
Company shall indemnify and hold harmless the Executive,  on an after-tax basis,
from any payment  under this Section 4 or otherwise to or for the benefit of the
Executive  that would be subject to the  excise  tax  (including  interests  and
penalties  thereon)  imposed by Section  4999 of the Internal  Code of 1986,  as
amended.

(h)  Relocation   Assistance/Temporary  Living.  The  Company  will  provide  or
reimburse the Executive for temporary  accommodations  in the Reno,  Nevada area
during  such  transitional  period as may be  approved  by the  Chief  Executive
Officer of the Company. The Company will also reimburse or pay the Executive for
the reasonable  costs of packing or moving  household goods from the Farmington,
New Mexico area to the Reno,  Nevada area and for  customary  closing  costs and
real estate  commissions  payable in connection  with the sale of the New Mexico
home.  In the event that  within 18 months of the Change of Control  Date,  this
Agreement  is  terminated  by the  Company  (other  than  for  Cause)  or by the
Executive  with Good Reason and the Executive  relocates  from the Reno area (or
the location where the Executive was last-based) within 12 months of the date of
termination,  the Company will reimburse or pay the Executive for the reasonable
costs of packing  and  moving to a location  in the  continental  United  States
selected by the Executive.  The Company shall  likewise  reimburse the Executive
for customary  closing costs and real estate  commissions in connection with the
sale of the Executive's home, or alternatively,  for lease termination expenses.
The Company and its  successors  will be jointly  responsible,  on an  after-tax
basis,  for any  income  taxes  arising  from  the  payments  or  reimbursements
described in this Section 4(i).

5.    Termination and Termination Benefits

(a) Death. If the Executive dies, this Agreement shall  automatically  terminate
on the date of his death.  The  Executive's  estate or designated  beneficiaries
shall be  entitled  to receive  (i) the  Executive's  then-current  salary for a
period of twelve months following the date of death, (ii) any accrued portion of
any bonus which is  ultimately  determined to have been payable to the Executive
and  allocable to the period prior to death,  (iii) the Airline  Travel and Club
Benefits, (iv) the Vesting Compensation (which shall vest and become immediately
exercisable),  (v) any other  benefits  which  shall have been  provided  to the
Executive to the extent permitted under any applicable plan documents,  and (vi)
subject to the  proviso  set forth in the last  sentence  of Section  4(g) above
regarding   subordination  of  coverage,   lifetime  medical  coverage  for  the
Executive's Spouse.

(b) Disability. If the Executive suffers a Disability, the Chairman of the Board
or the Chief Executive  Officer of the Company shall have the right to cause the
Company  to  terminate  the  Executive's  employment  as of such date by written
notice to the Executive. Thereafter, the Executive shall be entitled to receive:
(i) his then-current  salary for a period of twelve months following the date of
termination,  (ii)  any  accrued  portion  of  any  bonus  which  is  ultimately
determined  to have been payable to the  Executive  and  allocable to the period
prior to the date of  termination,  (iii) the Airline  Travel and Club Benefits,
(iv)  the  Vesting   Compensation  (which  shall  vest  and  become  immediately
exercisable),  and (iv) subject to the proviso set forth in the last sentence of
Section  4(f)  above  regarding  subordination  of  coverage,  lifetime  medical
coverage for the Executive and the Executive's Spouse.
<PAGE>

(c)  Termination  by the  Company  for Cause.  The  Company  may  terminate  the
Executive's  employment  for Cause.  If the  Chairman  of the Board or the Chief
Executive  Officer  determines  in good  faith  that  the  Executive  should  be
terminated for Cause, the Chairman of the Board or Chief Executive  Officer,  as
the case may be, shall send written  notice to the  Executive  setting  forth in
reasonable  detail  the  nature of the  Cause.  If  terminated  for  Cause,  the
Executive  will be  entitled  to no  additional  compensation  other than salary
accrued prior to the effective date of termination  except as otherwise provided
in Section 4.

(d) Termination by the Company without Cause. The Executive's  employment may be
terminated by the Company  without Cause provided that the Executive is afforded
at least 30 days' prior written notice of such termination.

(e)  Termination  by the  Executive.  The Executive may terminate his employment
with or without  Good  Reason by giving  the Board not less than 15 days'  prior
written notice of termination of his employment, and he shall not be required to
render any  services  to the  Company  after the date set forth in the notice of
termination. In the event of a termination by the Executive without Good Reason,
the Executive shall be entitled to no additional  compensation other than salary
accrued prior to the effective date of termination, except as otherwise provided
in Section 4.

(f)  Acceleration  of Salary,  Bonus,  and Benefits if Without Cause or for Good
Reason.  Except as otherwise  provided in this  Agreement,  if this Agreement is
terminated by the Company  without Cause and other than for death or Disability,
or this  Agreement is  terminated  by the  Executive  with Good Reason:  (i) the
Company shall pay to the Executive the sum of: (x) the total undiscounted amount
of the Executive's  entire salary which would  otherwise  become due and payable
under  Section  4(a)  during the  Employment  Period,  plus (y) if the Change in
Control  Date shall have  occurred,  the product of: (A) 3 times (B) the maximum
annual  bonus  payable to the  Executive  in  accordance  with the  then-current
incentive  bonus plan described in Section 4(b);  (ii) the Vesting  Compensation
shall vest and become  immediately  exercisable;  and (iii) except to the extent
more favorable  benefits are otherwise  provided in this  Agreement  (which more
favorable  provisions shall govern),  the Executive shall be entitled to receive
flight, medical, dental, life insurance,  vision, and similar benefits until the
last day of the Employment  Period  (assuming that this Agreement shall not have
been  terminated  but subject to the  proviso set forth in the last  sentence of
Section 4(f) above regarding subordination of medical coverage).  The salary and
bonus that would be due and payable under sub-clause (i) of this Section 4 shall
be paid to the Executive in three equal tranches on each of the 30th,  60th, and
90th day after the date of termination (or the immediately  succeeding  business
day if any such day is not a business day).

(g) No Duty to Mitigate/No Non-Compete.  The Executive has no duty or obligation
to mitigate the expenditures for salaries,  bonuses, benefits or otherwise after
termination of this Agreement  and/or  cessation of employment with the Company.
Nothing in this  Agreement  is  intended  to serve as a  "non-compete"  or other
limitation  on the  future  employment  opportunities  for the  Executive  after
termination of this Agreement.

6.  Confidential  Information.  The Executive shall maintain a fiduciary duty to
the Company for all confidential information,  knowledge or data relating to the
Company or any of its affiliated  companies,  and their  respective  businesses,
which  shall  have  been  obtained  by  the  Executive  during  the  Executive's
employment  by the  Company or any of its  affiliates  until  such  confidential
information,  knowledge  or data  become  a  matter  of  public  record  through
disclosure   by  a  person  or  persons   other  than  the   Executive   or  his
representatives and which does not involve communication or disclosure, directly
or indirectly, by the Executive or his representatives.  The Executive shall not
communicate or disclose any such information, knowledge, or data to anyone other
than the Company and those designated by the Company.  After  termination of the
Executive's  employment  with  the  Company,  the  Executive  shall  return  all
confidential and proprietary  information in his possession or under his control
and shall not, without the prior written consent of the Company,  communicate or
disclose  any such  information,  knowledge  or data to  anyone  other  than the
Company and those designated by the Company. Willful violation of this paragraph
6 shall void this Employment Agreement.

7.  Successors and Assigns.  This  Agreement  shall bind any successor to the QQ
Business,   whether  direct  or  indirect  and  whether  by  purchase,   merger,
consolidation  or otherwise,  in the same manner and to the same extent that the
Company would be obligated  under this Agreement if no such succession had taken
place. Notwithstanding that a successor to the QQ Business becomes bound to this
Agreement, the Company shall continue to be liable for the obligations hereunder
as a guarantor.  In any agreement  providing for  succession to the QQ Business,
the Company shall cause each and every successor  expressly and  unconditionally
to assume  and agree to perform  each of the  Company's  obligations  under this
Agreement.  For  avoidance  of doubt,  it is  understood  that in the event that
another air carrier (or an affiliate  thereof)  directly or indirectly  acquires
the QQ  Business,  the Company  shall use its best efforts to cause such airline
(or its affiliate as the case may be) to provide the Executive,  the Executive's
Spouse,  the Executive's  Parents,  and the Executive's  Eligible  Children with
pass,  club and other  privileges on the combined  route networks of the Company
and the acquirer (or of any  affiliated  air  carriers,  as the case may be) and
with boarding  priority and other terms equal or superior to the Airline  Travel
and Club Benefits.  This Agreement and all rights of Executive  hereunder  shall
inure to the  benefit of, and be  enforceable  by, the  Executive's  personal or
legal   representatives,    executors,   administrators,    successors,   heirs,
distributees,  devises and legatees. This Agreement is personal to the Executive
and without the prior written  consent of the Company shall not be assignable by
the Executive other than by will or the laws of descent and distribution.

8.    General Contract Provisions.

(a) Governing Law/Headings/Amendments/Entire  Agreement. This Agreement shall be
governed by and  construed in  accordance  with the laws of the State of Nevada,
without  reference  to  principles  of  conflict of laws.  The  captions of this
Agreement  are not part of the  provisions  hereof  and  shall  have no force or
effect.  This  Agreement may not be amended or modified  other than by a written
agreement  executed by the parties  hereto or their  respective  successors  and
legal   representatives.   This  Agreement,   together  with  the  stock  option
agreement(s) to be executed, contain the entire understanding of the Company and
the  Executive  with respect to the subject  matter hereof and supersede any and
all other  agreements,  either  oral or  written,  between  the  Company and the
Executive with respect to the subject matter hereof.

(b) Notices. All notices and other communications  hereunder shall be in writing
and shall be given by hand  delivery  to the  other  party or by  registered  or
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive: to his address as set forth in the personnel records of the
Company,  if to the Company:  to Reno Air, Inc.,  220 Edison Way,  Reno,  Nevada
89502,  Attention:  Chief Executive Officer, with a copy to the attention of the
Company's  Corporate  Secretary;  or to such other address as either party shall
have  furnished  to the other in writing in  accordance  herewith.  Notices  and
communications shall be effective when actually received by the addressee.

(c)  Enforceability  Issues.  If any  benefits  to  which  the  Executive  shall
otherwise  be  entitled  hereunder  are  not  permitted  to be  provided  to the
Executive  under any governing  plan  document or  applicable  law governing the
payment  or  provision  of such  benefits,  the  Company  shall  pay or  provide
equivalent  benefits to the  Executive  (or her  representatives  in the case of
death).  The invalidity or  unenforceability  of any provision of this Agreement
shall not affect the validity or  enforceability  of any other provision of this
Agreement.  To the extent the provisions of Section 4(g) are  inconsistent  with
the terms  regarding  subrogation  in any  officers'  and  directors'  liability
coverage,  the terms of such insurance  coverage shall prevail.  The Executive's
and/or the Company's failure to insist upon strict compliance with any provision
hereof shall not be deemed to be a waiver of such provision thereof.

(d)  Withholdings.  The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.


<PAGE>

IN WITNESS WHEREOF,  the Executive and the Company have executed this Employment
Agreement as of the date first above written.


Reno Air, Inc. (the "Company")


By: /s/ Joseph R. O' Gorman
 
Title: Chairman of the Board, Chief Executive Officer, and President




    /s/  W. Stephen Jackson
         W. Stephen Jackson (the "Executive")

<PAGE>

                                   Appendix I

                        Employment Agreement Definitions

"Airline Travel Benefits" is defined in Section 4(e).

"Board" shall mean the Board of Directors of the Company.

"Cause"  shall  mean  (i) an act or acts of  personal  dishonesty  taken  by the
Executive  and  intended to result in  substantial  personal  enrichment  of the
Executive  at the  expense  of the  Company,  (ii)  repeated  violations  by the
Executive  of  the  Executive's  obligations  under  this  Agreement  which  are
demonstrably  willful and deliberate on the  Executive's  part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company or, (iii) the conviction of the Executive of a felony.

"Change in Control" shall mean: (a) the acquisition by an individual,  entity or
group  (within  the meaning of Section  13(d)(3)  or 14(d)(2) of the  Securities
Exchange Act of 1934, as amended (the "Exchange  Act")) of beneficial  ownership
(within the meaning of Rule 13d-3  promulgated under the Exchange Act) of 50% or
more of either (i) the  then-outstanding  shares of common  stock of the Company
(the  "Outstanding  Common  Stock"),  or (ii) the  combined  voting power of the
then-outstanding  voting securities of the Company entitled to vote generally in
the  election  of  directors  (the  "Outstanding  Voting  Securities"),  or  (b)
individuals who, as of the Effective Date,  constitute the Board of Directors of
the Company (the "Incumbent  Board") cease for any reason to constitute at least
a majority of the Company's  Board of Directors;  provided,  that any individual
becoming  a  director  subsequent  to the  Effective  Date  whose  election,  or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then  comprising the Incumbent  Board shall
be considered as though such  individual  were a member of the Incumbent  Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such  terms are used in Rule  14a-11 of  Regulation  14A  promulgated  under the
Exchange Act) or other actual or threatened solicitation of proxies or consents;
or (c) approval by the shareholders of the Company of a  reorganization,  merger
or  consolidation,  in each case, with respect to which all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Common Stock and Outstanding Voting Securities immediately prior
to such reorganization,  merger or consolidation,  beneficially own, directly or
indirectly, less than 90% of, respectively, the outstanding common stock and the
outstanding voting securities,  as the case may be, of the corporation resulting
from such  reorganization,  merger or consolidation  in  substantially  the same
proportions as their ownership, immediately prior to such reorganization, merger
or  consolidation  of the Outstanding  Common Stock and the  Outstanding  Voting
Securities,  as the case may be;  or (d)  approval  by the  shareholders  of the
Company of (i) a complete  liquidation or dissolution of the Company or (ii) the
sale or other  disposition  of all or a significant  portion of the QQ Business,
other than to a corporation,  with respect to which following such sale or other
disposition,  more than 90% of,  respectively,  the  then-outstanding  shares of
common  stock of such  corporation  and the  combined  voting  power of the then
outstanding voting securities of such corporation  entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and the Outstanding Voting
Securities  immediately prior to such sale or other disposition in substantially
the same proportion as their ownership,  immediately prior to such sale or other
disposition,  of the Outstanding Common Stock and Outstanding Voting Securities,
as the case may be; or (e) the acquisition by an individual,  entity or group of
beneficial  ownership of 50% or more of the  then-outstanding  securities of the
Company,  including both voting and non-voting securities;  provided,  that such
acquisition shall constitute a Change of Control only if such individual, entity
or group also obtains the power to elect by class vote or cumulative  voting, or
otherwise to appoint,  50% or more of the total number of directors to the Board
of Directors of the Company.
<PAGE>

"Change of Control  Date" shall mean the first date on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding,  if a Change
of  Control  occurs  and if the  Executive's  employment  with  the  Company  is
terminated or the Executive  ceases to be an officer of the Company prior to the
date on which the Change of Control occurs, and if it is reasonably demonstrated
by the Executive  that such  termination of employment or cessation of status as
an  officer  (i)  was at the  request  of a third  party  who  has  taken  steps
reasonably calculated to effect the Change of Control or (ii) was effected by or
on behalf of the Company in connection  with or in  anticipation of an actual or
proposed Change of Control,  then for all purposes of this Agreement the "Change
of  Control  Date"  shall  mean the date  immediately  prior to the date of such
termination of employment or cessation of status as an officer.

"Club Benefits' is defined in Section 4(e).

"Common Stock" shall mean the Company's common stock, $.01 par value.

"Company"  shall mean the Company as defined  above and any  successor to the QQ
Business  which assumes and agrees to perform this Agreement by operation of law
or otherwise.

"Disability" shall mean any physical or mental illness,  condition,  dependency,
or incapacity rendering the Executive unable to adequately perform substantially
all of his  duties  and  responsibilities  to the  Company,  provided  that such
disability continues for an uninterrupted period of at least 6 months.
 
"Effective Date" shall mean June 3, 1998.

"Eligible  Child" shall mean a naturally  born or legally  adopted  child of the
Executive  within the age  parameters  described in the  immediately  succeeding
sentence.  Any such child shall  cease to be an  Eligible  Child upon his or her
21st birthday (unless and for so long as such child remains a full-time student,
in which case,  the child will remain an Eligible Child until not later than his
or her 23rd birthday).

"Employment  Period" shall mean the period  commencing on the Effective Date and
ending on the earlier to occur of (i) June 30, 2001 or (ii) the first day of the
month next  following the  Executive's  birthday upon which the Executive  shall
attain the Normal  Retirement Date;  provided,  however,  that in the event of a
Reappointment of the Executive, the Employment Period shall be extended so as to
terminate on the earlier of (x) three years from the applicable  Renewal Date or
(y) the Executive's Normal Retirement Date; and provided, further, that upon the
occurrence of a Change of Control,  the Employment Period shall automatically be
extended so as to terminate on the earlier to occur of (a) the third anniversary
of the Change of Control Date or (b) the Executive's Normal Retirement Date.

"Executive's Parents" shall mean those family members defined as "Parents" under
the Company's non-revenue travel policies.

"Executive's  Spouse" shall mean the Executive's wife on the Effective Date (for
so long as she and the Executive  shall remain married unless the marriage shall
terminate  pursuant to the Executive's  death, in which case, she shall maintain
such status for purposes of this Agreement  until such time as she may re-marry)
or in the event the Executive shall re-marry, any successor wife (subject to the
qualifications  and conditions set forth in the parenthetical  commencing on the
first line of this definition).

"Good Reason" shall mean any one or more of the following: (i) the assignment to
the  Executive of any duties  inconsistent  in any respect with the  Executive's
position  (including  status,  offices,  titles  and  reporting  relationships),
authority,  duties or responsibilities as contemplated by this Agreement, or any
other  action by the Company  which  results in a diminution  in such  position,
authority,  duties or responsibilities,  excluding for this purpose an isolated,
insubstantial  and  inadvertent  action  not  taken in bad  faith  and  which is
remedied by the Company  promptly  after receipt of notice  thereof given by the
Executive;  (ii) (x) any failure by the  Company to comply with its  obligations
under this  Agreement,  other than an isolated,  insubstantial  and  inadvertent
failure not occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive,  or (y) after the Change
of Control  Date,  any  failure of the Company to maintain or provide the plans,
programs,  policies and  practices,  and benefits  described in Section 4 of the
Agreement  on the  most  favorable  basis  such  plans  programs,  policies  and
practices  were  maintained  and  benefits  provided  during the  90-day  period
immediately  preceding the Change of Control  Date, or if more  favorable to the
Executive  and/or the  Executive's  family,  as in effect at any time thereafter
with respect to other key employees of the Company and its affiliates; (iii) the
Company's  requiring the  Executive to be based at any office or location  other
than within 35 miles of the Reno/Lake Tahoe  International  Airport,  except for
travel   reasonably   required   in   the   performance   of   the   Executive's
responsibilities;  (iv)  the  consummation  by  the  Company  of  a  significant
marketing  or   operational   alliance,   strategic   partnership,   significant
code-sharing  relationship,  "virtual merger," or other significant  contractual
relationship  with one or more  non-affiliated  air carriers or their affiliates
(whether  or not in any such case  stock,  assets,  or other  consideration  are
exchanged) which results in a material  diminution in or material adverse change
to the  Executive's  position or the  authority,  duties,  and  responsibilities
thereof,  and (v) the failure of the Board to Reappoint the  Executive,  as more
particularly set forth in the definition of  Reappointment,  below, and (vi) any
purported termination by the Company of the Executive's employment other than as
expressly  permitted  by this  Agreement.  For  purposes  of  determining  "Good
Reason",  any good faith determination of "Good Reason" made by the Executive on
or after the  Change of  Control  Date  shall be  conclusive.  Anything  in this
Agreement to the contrary  notwithstanding,  a termination  by the Executive for
any reason  during the 180-day  period  following the first  anniversary  of the
Change of Control Date shall be deemed to be a  termination  for Good Reason for
all purposes of this Agreement.

"QQ Business" shall mean a substantial  portion of one or more of the following:
(i) the assets of the Company, (ii) the Company's aircraft,  (iii) the Company's
non-managerial personnel, (iv) the Outstanding Common Stock, (v) the Outstanding
Voting  Securities,  (vi) the  Company's  operating  certificate,  or (vii)  the
Company's gates.

"Normal  Retirement  Date" shall mean the mandatory  officer  retirement age (as
determined by the Board).

"Reappointment"  shall mean either: (a) the Board's  determination to extend the
term of the  Employment  Period  under  this  Agreement  by one  year or (b) the
Board's re-election or reappointment of the Executive to the position and duties
described  in the first  sentence  of Section 3 for any  period  beyond the next
succeeding  Renewal Date. The Company  covenants that the Board shall  determine
whether to reappoint the Executive annually; such determination to occur between
January 1 of a calendar year and not less than 20 days prior to the Renewal Date
in the same calendar  year.  It is understood  that the failure to Reappoint the
Executive  shall be deemed to afford the Executive  the right to terminate  this
Agreement for Good Reason.  For avoidance of doubt and  notwithstanding  the two
immediately  preceding  sentences,  after a Change of  Control,  the  Employment
Period shall terminate on the earlier to occur of: (a) the third  anniversary of
the Change of Control Date or (b) the Executive's Normal Retirement Date.

"Renewal Date" shall mean June 30, 1999 and each annual anniversary thereof.

"Travel  Network" shall mean each airline  operated by the Company or any of its
affiliates or any successor or successors.

"Vesting Compensation" is defined in Section 4(d).

<PAGE>

                              EMPLOYMENT AGREEMENT

This Employment Agreement (this "Agreement") is dated as of April 6, 1998 by and
between Reno Air, Inc., a Nevada  corporation  (the  "Company") and Joanne Dowty
Smith (the "Executive").

The Executive and the Company agree as follows:

1.  Definitions.  Capitalized  terms used in this  Agreement  and not  otherwise
defined  shall  have  the  meanings  assigned  to them in  Appendix  I  entitled
"Employment Agreement Definitions."

2.  Employment.  The Company  agrees to employ the  Executive  and the Executive
agrees to be employed by the Company on the terms and conditions hereinafter set
forth during the Employment Period.

3. Position and Duties.  During the Employment Period, the Executive shall serve
the Company as the Senior  Vice  President-  Marketing  and  Planning  and shall
perform the  attendant  responsibilities  thereto as  provided in the  Company's
by-laws,  as well as such other  responsibilities  as the Board, the Chairman of
the Board, the Chief Executive  Officer,  or the President may from time to time
reasonably  assign. The Executive agrees to devote such time and effort as shall
be reasonably required to discharge her duties hereunder.  During the Employment
Period,  it shall not be a violation of this Agreement for the Executive to: (i)
serve on charitable or non-conflicting  civic or corporate boards or committees,
(ii) deliver  lectures,  fulfill speaking  engagements,  or teach at educational
institutions,  or (iii) manage  personal  investments;  so long as the foregoing
activities  do  not  interfere   with  the   performance   of  the   Executive's
responsibilities.  During  the  term of her  employment  with the  Company,  the
Executive shall report to the President or a more senior officer of the Company.

4. Compensation and Benefits. The compensation and benefits payable to Executive
for all services  rendered by the  Executive  under this  Agreement  shall be as
follows:

(a) Salary.  The  Executive  shall  receive a minimum base salary at the rate of
$175,000 per year.  Such salary shall be (i) payable  semi-monthly in accordance
with the Company's standard payroll practices (and pro-rated for any partial pay
period),  and (ii) subject to review and increase (but not decrease) at any time
at the discretion of the Board.

(b) Annual Bonus. The Executive shall be entitled to receive an annual bonus (as
determined by the Board in good faith) of up to the maximum  participation level
provided for in the Company's  incentive  compensation  plan for officers.  Such
bonus shall be paid not later than April 15 of the calendar  year  following the
calendar year to which it shall apply.  The Executive  shall also be eligible to
participate  at a level  (which  is not  significantly  less  than  the  maximum
participation level of officers with a substantially  similar title or level) in
any other bonus or incentive  compensation  arrangements provided by the Company
from time to time to its officers or key employees.

(c) Business  Expenses.  The Company shall reimburse the Executive  promptly for
all  reasonable  travel  and  other  business  expenses  incurred  by him in the
performance  of her  duties  and  responsibilities,  subject  to  the  Company's
policies with respect to substantiation and documentation.

(d) Stock  Options.  The Company and the Executive  shall enter into one or more
stock  option  agreements  with  respect to options for the  purchase of 135,000
shares of Common Stock (subject to an equitable  adjustment in the case of stock
splits  and the like),  at an  exercise  price of  $8.03125,  with such  options
vesting in accordance with the following schedule: 25,000 shares of Common Stock
vested on the Effective Date, 36,666.67 shares of Common Stock shall vest on the
first anniversary of the Effective Date,  36,666.67 shares of Common Stock shall
vest on the second  anniversary of the Effective  Date, and 36,666.66  shares of
Common Stock shall vest on the third  anniversary  of the Effective  Date.  With
respect to all stock options and all other deferred  compensation that vest over
time  in  accordance  with  a  schedule  or  formula  (such  options  and  other
compensation,  the "Vesting Compensation"),  the Company and the Executive agree
that upon the  first to occur of:  (i) the  Change of  Control  Date or (ii) the
termination  of this  Agreement  (other  than by the Company for Cause or by the
Executive without Good Reason),  any Vesting Compensation to which the Executive
was or may have become entitled,  whether or not theretofore  granted or vested,
shall be immediately  granted and become  immediately  vested and exercisable by
the Executive (or her  representative  in the case of termination by death).  In
the event the vesting of the Vesting  Compensation is accelerated as provided in
the  immediately   preceding  sentence,   such  Vesting  Compensation  shall  be
exercisable until the earlier of: (x) the stated expiry thereof as provided in a
stock option  agreement,  Company plan, or other  governing  document or (y) 180
days after the date of the Executive's termination of employment.

(e) Airline Travel.  During the Employment  Period,  the Company will provide or
cause to be provided to the Executive,  the Executive's  Spouse, the Executive's
Parents,  and the Executive's  Eligible  Children  unlimited free positive space
airline travel on the Travel Network (the "Airline Travel Benefits").  Likewise,
should the Company, its affiliates, or its or their successors from time to time
operate or have an access arrangement for airport clubs, lounges and/or business
centers, the Executive and the Executive's Spouse shall be entitled to unlimited
free access to each such club,  lounge,  or business  center and unlimited  free
access to any other travel-related  benefit from time to time offered (such club
and  other  travel  benefits,  the  "Club  Benefits").  The  Executive  and  the
Executive's  Spouse  shall be entitled to Airline  Travel and Club  Benefits for
their  respective  lifetimes upon the first to occur of the  following:  (a) the
Change of Control Date, (b) the third  anniversary of the Effective Date, or (c)
the  Executive's  employment is terminated by the Company (other than for Cause)
or by the Executive for Good Reason.  The Executive's  Parents shall be entitled
to  Airline  Travel  Benefits  for their  respective  lifetimes  if and when the
Executive  (or the  Executive's  Spouse  in the case of the  Executive's  death)
becomes  entitled  to  the  benefits  described  in  the  immediately  preceding
sentence.  An Eligible Child shall be entitled to Airline Travel Benefits for so
long as: (x) he or she shall remain an Eligible Child and (y) except in the case
of the Executive's death, the Executive shall remain eligible for Airline Travel
Benefits. The post- Employment Period Airline Travel and Club Benefits described
in the  preceding  sentences  shall  be  provided  on the  most  favored  terms,
practices and  conditions  from time to time provided or offered by the Company,
its  affiliates,  and  successors to its or their active and retired senior vice
presidents  and their  families  (it is  understood  that in all cases that such
benefits   shall  equal  or  exceed  the  priority  of  the  highest   class  of
space-available  travel in all  classes of  service on the Travel  Network at no
charge to the Executive).

(f) Other Benefits. The Executive and, to the extent applicable, the Executive's
family,  dependents and  beneficiaries,  shall each participate in all benefits,
plans and programs,  including  improvements or modifications of the same, which
are now, or may hereafter be,  available to the senior-most  executive  officers
and key employees of the Company and its  successors.  Such benefits,  plans and
programs may include,  without  limitation,  profit sharing plans, thrift plans,
health  insurance or health care plans,  life insurance,  disability  insurance,
pension and other retirement plans, pass privileges,  interline travel benefits,
and the like. In addition to the foregoing, in the event of a Change of Control,
the Executive and the Executive's  Spouse shall be entitled to medical  coverage
for their  respective  lifetimes  and any  Eligible  Child  shall be entitled to
medical  coverage for so long as he or she remains an Eligible  Child;  provided
that, (i) upon termination of the Executive's  employment,  the medical coverage
(including  Medicare coverage)  described  hereunder will become subordinate to:
(x) any coverage provided by a prior or subsequent  employer of the Executive or
the Executive's Spouse, or (y) in the case of the Executive's Spouse or Eligible
Children,  any  coverage  afforded  to such  persons by their  respective  past,
present, or prospective  employers and (ii) in the event of a Change of Control,
any medical benefits which would extend beyond the term of the Employment Period
(i.e., the lifetime medical benefits) shall be provided to the Executive only to
the extent the successor to the QQ Business  affords medical benefits of greater
duration to its senior vice presidents under a plan or agreement of severance or
termination.

(g)  Indemnification.  The Company  shall provide or cause to be provided to the
Executive  indemnification  against all expenses  (including  attorneys'  fees),
judgements,  fines  and  amounts  paid in  settlement  in  connection  with  any
threatened,  pending,  or completed action,  claim, suit or proceeding,  whether
civil, criminal,  administrative, or investigative (including an action by or in
the  right of the  Company)  by  reason of the  Executive's  having  served as a
director,  officer or employee of the Company or any  affiliate  of the Company.
The Company  shall  advance fees  (including  attorneys'  fees)  incurred by the
Executive in the defense of any such action, claim, suit, or proceeding, and the
Company shall  maintain  customary  directors and officers  liability  insurance
coverage.  These provisions supplement and are not in lieu of any rights granted
to the  Company's  officers  and  directors  under  the  Company's  articles  of
incorporation, bylaws, any corporate document (including insurance policies), or
applicable  law. The Company shall pay, or promptly  reimburse on an as-incurred
basis to the  Executive,  the  reasonable  fees and expenses of the  Executive's
legal counsel for its services  rendered in  connection  with,  the  Executive's
enforcement of this Agreement;  provided,  that if the Executive  institutes any
proceeding  to  enforce  this  Agreement  and the  judge,  arbitrator  or  other
individual presiding over the proceeding  affirmatively finds that the Executive
instituted  the proceeding in bad faith,  the Executive  shall pay all costs and
expenses,  including  attorneys'  fees, of the  Executive  and the Company.  The
Company shall indemnify and hold harmless the Executive,  on an after-tax basis,
from any payment  under this Section 4 or otherwise to or for the benefit of the
Executive  that would be subject to the  excise  tax  (including  interests  and
penalties  thereon)  imposed by Section  4999 of the Internal  Code of 1986,  as
amended.

(h)  Relocation   Assistance/Temporary  Living.  The  Company  will  provide  or
reimburse the Executive for temporary  accommodations  in the Reno,  Nevada area
during  such  transitional  period as may be  approved  by the  Chief  Executive
Officer of the Company. The Company will also reimburse or pay the Executive for
the   reasonable   costs  of  packing  or  moving   household   goods  from  the
Raleigh-Durham,  North Carolina area to the Reno,  Nevada area and for customary
closing costs and real estate commissions payable in connection with the sale of
the North  Carolina  home.  In the event that  within 18 months of the Change of
Control Date, this Agreement is terminated by the Company (other than for Cause)
or by the Executive  with Good Reason and the Executive  relocates from the Reno
area (or the location  where the Executive was  last-based)  within 12 months of
the date of termination, the Company will reimburse or pay the Executive for the
reasonable  costs of packing and moving to a location in the continental  United
States  selected by the  Executive.  The Company  shall  likewise  reimburse the
Executive for customary closing costs and real estate  commissions in connection
with the sale of the Executive's home, or  alternatively,  for lease termination
expenses.  The Company and its  successors  will be jointly  responsible,  on an
after-tax   basis,   for  any  income   taxes   arising  from  the  payments  or
reimbursements described in this Section 4(i).

5. Termination and Termination Benefits

(a) Death. If the Executive dies, this Agreement shall  automatically  terminate
on the date of her death.  The  Executive's  estate or designated  beneficiaries
shall be  entitled  to receive  (i) the  Executive's  then-current  salary for a
period of twelve months following the date of death, (ii) any accrued portion of
any bonus which is  ultimately  determined to have been payable to the Executive
and  allocable to the period prior to death,  (iii) the Airline  Travel and Club
Benefits, (iv) the Vesting Compensation (which shall vest and become immediately
exercisable),  (v) any other  benefits  which  shall have been  provided  to the
Executive to the extent permitted under any applicable plan documents,  and (vi)
subject to the  proviso  set forth in the last  sentence  of Section  4(g) above
regarding   subordination  of  coverage,   lifetime  medical  coverage  for  the
Executive's Spouse.

(b) Disability. If the Executive suffers a Disability, the Chairman of the Board
or the Chief Executive  Officer of the Company shall have the right to cause the
Company  to  terminate  the  Executive's  employment  as of such date by written
notice to the Executive. Thereafter, the Executive shall be entitled to receive:
(i) her then-current  salary for a period of twelve months following the date of
termination,  (ii)  any  accrued  portion  of  any  bonus  which  is  ultimately
determined  to have been payable to the  Executive  and  allocable to the period
prior to the date of  termination,  (iii) the Airline  Travel and Club Benefits,
(iv)  the  Vesting   Compensation  (which  shall  vest  and  become  immediately
exercisable),  and (iv) subject to the proviso set forth in the last sentence of
Section  4(f)  above  regarding  subordination  of  coverage,  lifetime  medical
coverage for the Executive and the Executive's Spouse.

(c)  Termination  by the  Company  for Cause.  The  Company  may  terminate  the
Executive's  employment  for Cause.  If the  Chairman  of the Board or the Chief
Executive  Officer  determines  in good  faith  that  the  Executive  should  be
terminated for Cause, the Chairman of the Board or Chief Executive  Officer,  as
the case may be, shall send written  notice to the  Executive  setting  forth in
reasonable  detail  the  nature of the  Cause.  If  terminated  for  Cause,  the
Executive  will be  entitled  to no  additional  compensation  other than salary
accrued prior to the effective date of termination  except as otherwise provided
in Section 4.

(d) Termination by the Company without Cause. The Executive's  employment may be
terminated by the Company  without Cause provided that the Executive is afforded
at least 30 days' prior written notice of such termination.

(e)  Termination  by the  Executive.  The Executive may terminate her employment
with or without  Good  Reason by giving  the Board not less than 15 days'  prior
written notice of termination of her  employment,  and she shall not be required
to render any services to the Company  after the date set forth in the notice of
termination. In the event of a termination by the Executive without Good Reason,
the Executive shall be entitled to no additional  compensation other than salary
accrued prior to the effective date of termination, except as otherwise provided
in Section 4.

(f)  Acceleration  of Salary,  Bonus,  and Benefits if Without Cause or for Good
Reason.  Except as otherwise  provided in this  Agreement,  if this Agreement is
terminated by the Company  without Cause and other than for death or Disability,
or this  Agreement is  terminated  by the  Executive  with Good Reason:  (i) the
Company shall pay to the Executive the sum of: (x) the total undiscounted amount
of the Executive's  entire salary which would  otherwise  become due and payable
under  Section  4(a)  during the  Employment  Period,  plus (y) if the Change in
Control  Date shall have  occurred,  the product of: (A) 3 times (B) the maximum
annual  bonus  payable to the  Executive  in  accordance  with the  then-current
incentive  bonus plan described in Section 4(b);  (ii) the Vesting  Compensation
shall vest and become  immediately  exercisable;  and (iii) except to the extent
more favorable  benefits are otherwise  provided in this  Agreement  (which more
favorable  provisions shall govern),  the Executive shall be entitled to receive
flight, medical, dental, life insurance,  vision, and similar benefits until the
last day of the Employment  Period  (assuming that this Agreement shall not have
been  terminated  but subject to the  proviso set forth in the last  sentence of
Section 4(f) above regarding subordination of medical coverage).  The salary and
bonus that would be due and payable under sub-clause (i) of this Section 4 shall
be paid to the Executive in three equal tranches on each of the 30th,  60th, and
90th day after the date of termination (or the immediately  succeeding  business
day if any such day is not a business day).

(g) No Duty to Mitigate/No Non-Compete.  The Executive has no duty or obligation
to mitigate the expenditures for salaries,  bonuses, benefits or otherwise after
termination of this Agreement  and/or  cessation of employment with the Company.
Nothing in this  Agreement  is  intended  to serve as a  "non-compete"  or other
limitation  on the  future  employment  opportunities  for the  Executive  after
termination of this Agreement.

6.  Confidential  Information.  The Executive shall maintain a fiduciary duty to
the Company for all confidential information,  knowledge or data relating to the
Company or any of its affiliated  companies,  and their  respective  businesses,
which  shall  have  been  obtained  by  the  Executive  during  the  Executive's
employment  by the  Company or any of its  affiliates  until  such  confidential
information,  knowledge  or data  become  a  matter  of  public  record  through
disclosure   by  a  person  or  persons   other  than  the   Executive   or  her
representatives and which does not involve communication or disclosure, directly
or indirectly, by the Executive or her representatives.  The Executive shall not
communicate or disclose any such information, knowledge, or data to anyone other
than the Company and those designated by the Company.  After  termination of the
Executive's  employment  with  the  Company,  the  Executive  shall  return  all
confidential and proprietary  information in her possession or under her control
and shall not, without the prior written consent of the Company,  communicate or
disclose  any such  information,  knowledge  or data to  anyone  other  than the
Company and those designated by the Company. Willful violation of this paragraph
6 shall void this Employment Agreement.

7.  Successors and Assigns.  This  Agreement  shall bind any successor to the QQ
Business,   whether  direct  or  indirect  and  whether  by  purchase,   merger,
consolidation  or otherwise,  in the same manner and to the same extent that the
Company would be obligated  under this Agreement if no such succession had taken
place. Notwithstanding that a successor to the QQ Business becomes bound to this
Agreement, the Company shall continue to be liable for the obligations hereunder
as a guarantor.  In any agreement  providing for  succession to the QQ Business,
the Company shall cause each and every successor  expressly and  unconditionally
to assume  and agree to perform  each of the  Company's  obligations  under this
Agreement.  For  avoidance  of doubt,  it is  understood  that in the event that
another air carrier (or an affiliate  thereof)  directly or indirectly  acquires
the QQ  Business,  the Company  shall use its best efforts to cause such airline
(or its affiliate as the case may be) to provide the Executive,  the Executive's
Spouse,  the Executive's  Parents,  and the Executive's  Eligible  Children with
pass,  club and other  privileges on the combined  route networks of the Company
and the acquirer (or of any  affiliated  air  carriers,  as the case may be) and
with boarding  priority and other terms equal or superior to the Airline  Travel
and Club Benefits.  This Agreement and all rights of Executive  hereunder  shall
inure to the  benefit of, and be  enforceable  by, the  Executive's  personal or
legal   representatives,    executors,   administrators,    successors,   heirs,
distributees,  devises and legatees. This Agreement is personal to the Executive
and without the prior written  consent of the Company shall not be assignable by
the Executive other than by will or the laws of descent and distribution.

8. General Contract Provisions.

(a) Governing Law/Headings/Amendments/Entire  Agreement. This Agreement shall be
governed by and  construed in  accordance  with the laws of the State of Nevada,
without  reference  to  principles  of  conflict of laws.  The  captions of this
Agreement  are not part of the  provisions  hereof  and  shall  have no force or
effect.  This  Agreement may not be amended or modified  other than by a written
agreement  executed by the parties  hereto or their  respective  successors  and
legal   representatives.   This  Agreement,   together  with  the  stock  option
agreement(s) to be executed, contain the entire understanding of the Company and
the  Executive  with respect to the subject  matter hereof and supersede any and
all other  agreements,  either  oral or  written,  between  the  Company and the
Executive with respect to the subject matter hereof.

(b) Notices. All notices and other communications  hereunder shall be in writing
and shall be given by hand  delivery  to the  other  party or by  registered  or
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive: to her address as set forth in the personnel records of the
Company,  if to the Company:  to Reno Air, Inc.,  220 Edison Way,  Reno,  Nevada
89502,  Attention:  Chief Executive Officer, with a copy to the attention of the
Company's  Corporate  Secretary;  or to such other address as either party shall
have  furnished  to the other in writing in  accordance  herewith.  Notices  and
communications shall be effective when actually received by the addressee.

(c)  Enforceability  Issues.  If any  benefits  to  which  the  Executive  shall
otherwise  be  entitled  hereunder  are  not  permitted  to be  provided  to the
Executive  under any governing  plan  document or  applicable  law governing the
payment  or  provision  of such  benefits,  the  Company  shall  pay or  provide
equivalent  benefits to the  Executive  (or her  representatives  in the case of
death).  The invalidity or  unenforceability  of any provision of this Agreement
shall not affect the validity or  enforceability  of any other provision of this
Agreement.  To the extent the provisions of Section 4(g) are  inconsistent  with
the terms  regarding  subrogation  in any  officers'  and  directors'  liability
coverage,  the terms of such insurance  coverage shall prevail.  The Executive's
and/or the Company's failure to insist upon strict compliance with any provision
hereof shall not be deemed to be a waiver of such provision thereof.

(d)  Withholdings.  The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

<PAGE>

IN WITNESS WHEREOF,  the Executive and the Company have executed this Employment
Agreement as of the date first above written.



Reno Air, Inc. (the "Company")


By: /s/ Joseph R. O'Gorman
 
Title: Chairman of the Board, Chief Executive Officer, and President




    /s/ Joanne Smith
        Joanne Dowty Smith (the "Executive")


<PAGE>

                                   Appendix I

                        Employment Agreement Definitions

"Airline Travel Benefits" is defined in Section 4(e).

"Board" shall mean the Board of Directors of the Company.

"Cause"  shall  mean  (i) an act or acts of  personal  dishonesty  taken  by the
Executive  and  intended to result in  substantial  personal  enrichment  of the
Executive  at the  expense  of the  Company,  (ii)  repeated  violations  by the
Executive  of  the  Executive's  obligations  under  this  Agreement  which  are
demonstrably  willful and deliberate on the  Executive's  part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company or, (iii) the conviction of the Executive of a felony.

"Change in Control" shall mean: (a) the acquisition by an individual,  entity or
group  (within  the meaning of Section  13(d)(3)  or 14(d)(2) of the  Securities
Exchange Act of 1934, as amended (the "Exchange  Act")) of beneficial  ownership
(within the meaning of Rule 13d-3  promulgated under the Exchange Act) of 50% or
more of either (i) the  then-outstanding  shares of common  stock of the Company
(the  "Outstanding  Common  Stock"),  or (ii) the  combined  voting power of the
then-outstanding  voting securities of the Company entitled to vote generally in
the  election  of  directors  (the  "Outstanding  Voting  Securities"),  or  (b)
individuals who, as of the Effective Date,  constitute the Board of Directors of
the Company (the "Incumbent  Board") cease for any reason to constitute at least
a majority of the Company's  Board of Directors;  provided,  that any individual
becoming  a  director  subsequent  to the  Effective  Date  whose  election,  or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then  comprising the Incumbent  Board shall
be considered as though such  individual  were a member of the Incumbent  Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such  terms are used in Rule  14a-11 of  Regulation  14A  promulgated  under the
Exchange Act) or other actual or threatened solicitation of proxies or consents;
or (c) approval by the shareholders of the Company of a  reorganization,  merger
or  consolidation,  in each case, with respect to which all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Common Stock and Outstanding Voting Securities immediately prior
to such reorganization,  merger or consolidation,  beneficially own, directly or
indirectly, less than 90% of, respectively, the outstanding common stock and the
outstanding voting securities,  as the case may be, of the corporation resulting
from such  reorganization,  merger or consolidation  in  substantially  the same
proportions as their ownership, immediately prior to such reorganization, merger
or  consolidation  of the Outstanding  Common Stock and the  Outstanding  Voting
Securities,  as the case may be;  or (d)  approval  by the  shareholders  of the
Company of (i) a complete  liquidation or dissolution of the Company or (ii) the
sale or other  disposition  of all or a significant  portion of the QQ Business,
other than to a corporation,  with respect to which following such sale or other
disposition,  more than 90% of,  respectively,  the  then-outstanding  shares of
common  stock of such  corporation  and the  combined  voting  power of the then
outstanding voting securities of such corporation  entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and the Outstanding Voting
Securities  immediately prior to such sale or other disposition in substantially
the same proportion as their ownership,  immediately prior to such sale or other
disposition,  of the Outstanding Common Stock and Outstanding Voting Securities,
as the case may be; or (e) the acquisition by an individual,  entity or group of
beneficial  ownership of 50% or more of the  then-outstanding  securities of the
Company,  including both voting and non-voting securities;  provided,  that such
acquisition shall constitute a Change of Control only if such individual, entity
or group also obtains the power to elect by class vote or cumulative  voting, or
otherwise to appoint,  50% or more of the total number of directors to the Board
of Directors of the Company.
<PAGE>

"Change of Control  Date" shall mean the first date on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding,  if a Change
of  Control  occurs  and if the  Executive's  employment  with  the  Company  is
terminated or the Executive  ceases to be an officer of the Company prior to the
date on which the Change of Control occurs, and if it is reasonably demonstrated
by the Executive  that such  termination of employment or cessation of status as
an  officer  (i)  was at the  request  of a third  party  who  has  taken  steps
reasonably calculated to effect the Change of Control or (ii) was effected by or
on behalf of the Company in connection  with or in  anticipation of an actual or
proposed Change of Control,  then for all purposes of this Agreement the "Change
of  Control  Date"  shall  mean the date  immediately  prior to the date of such
termination of employment or cessation of status as an officer.

"Club Benefits" is defined in Section 4(e).

"Common Stock" shall mean the Company's common stock, $.01 par value.

"Company"  shall mean the Company as defined  above and any  successor to the QQ
Business  which assumes and agrees to perform this Agreement by operation of law
or otherwise.

"Disability" shall mean any physical or mental illness,  condition,  dependency,
or incapacity rendering the Executive unable to adequately perform substantially
all of her  duties  and  responsibilities  to the  Company,  provided  that such
disability continues for an uninterrupted period of at least 6 months.
 
"Effective Date" shall mean April 6, 1998.

"Eligible  Child" shall mean a naturally  born or legally  adopted  child of the
Executive  within the age  parameters  described in the  immediately  succeeding
sentence.  Any such child shall  cease to be an  Eligible  Child upon his or her
21st birthday (unless and for so long as such child remains a full-time student,
in which case,  the child will remain an Eligible Child until not later than his
or her 23rd birthday).

"Employment  Period" shall mean the period  commencing on the Effective Date and
ending on the earlier to occur of (i) June 30, 2001 or (ii) the first day of the
month next  following the  Executive's  birthday upon which the Executive  shall
attain the Normal  Retirement Date;  provided,  however,  that in the event of a
Reappointment of the Executive, the Employment Period shall be extended so as to
terminate on the earlier of (x) three years from the applicable  Renewal Date or
(y) the Executive's Normal Retirement Date; and provided, further, that upon the
occurrence of a Change of Control,  the Employment Period shall automatically be
extended so as to terminate on the earlier to occur of (a) the third anniversary
of the Change of Control Date or (b) the Executive's Normal Retirement Date.

"Executive's Parents" shall mean those family members defined as "Parents" under
the Company's non-revenue travel policies.

"Executive's  Spouse" shall mean the  Executive's  husband on the Effective Date
(for so long as he and the Executive  shall remain  married  unless the marriage
shall  terminate  pursuant to the  Executive's  death,  in which case,  he shall
maintain  such status for purposes of this  Agreement  until such time as he may
re-marry) or in the event the Executive  shall re-marry,  any successor  husband
(subject to the  qualifications  and conditions  set forth in the  parenthetical
commencing on the first line of this definition).

"Good Reason" shall mean any one or more of the following: (i) the assignment to
the  Executive of any duties  inconsistent  in any respect with the  Executive's
position  (including  status,  offices,  titles  and  reporting  relationships),
authority,  duties or responsibilities as contemplated by this Agreement, or any
other  action by the Company  which  results in a diminution  in such  position,
authority,  duties or responsibilities,  excluding for this purpose an isolated,
insubstantial  and  inadvertent  action  not  taken in bad  faith  and  which is
remedied by the Company  promptly  after receipt of notice  thereof given by the
Executive;  (ii) (x) any failure by the  Company to comply with its  obligations
under this  Agreement,  other than an isolated,  insubstantial  and  inadvertent
failure not occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive,  or (y) after the Change
of Control  Date,  any  failure of the Company to maintain or provide the plans,
programs,  policies and  practices,  and benefits  described in Section 4 of the
Agreement  on the  most  favorable  basis  such  plans  programs,  policies  and
practices  were  maintained  and  benefits  provided  during the  90-day  period
immediately  preceding the Change of Control  Date, or if more  favorable to the
Executive  and/or the  Executive's  family,  as in effect at any time thereafter
with respect to other key employees of the Company and its affiliates; (iii) the
Company's  requiring the  Executive to be based at any office or location  other
than within 35 miles of the Reno/Lake Tahoe  International  Airport,  except for
travel   reasonably   required   in   the   performance   of   the   Executive's
responsibilities;  (iv)  the  consummation  by  the  Company  of  a  significant
marketing  or   operational   alliance,   strategic   partnership,   significant
code-sharing  relationship, "virtual merger," or other significant  contractual
relationship  with one or more  non-affiliated  air carriers or their affiliates
(whether  or not in any such case  stock,  assets,  or other  consideration  are
exchanged) which results in a material  diminution in or material adverse change
to the  Executive's  position or the  authority,  duties,  and  responsibilities
thereof,  and (v) the failure of the Board to Reappoint the  Executive,  as more
particularly set forth in the definition of  Reappointment,  below, and (vi) any
purported termination by the Company of the Executive's employment other than as
expressly  permitted  by this  Agreement.  For  purposes  of  determining  "Good
Reason",  any good faith determination of "Good Reason" made by the Executive on
or after the  Change of  Control  Date  shall be  conclusive.  Anything  in this
Agreement to the contrary  notwithstanding,  a termination  by the Executive for
any reason  during the 180-day  period  following the first  anniversary  of the
Change of Control Date shall be deemed to be a  termination  for Good Reason for
all purposes of this Agreement.

"QQ Business" shall mean a substantial  portion of one or more of the following:
(i) the assets of the Company, (ii) the Company's aircraft,  (iii) the Company's
non-managerial personnel, (iv) the Outstanding Common Stock, (v) the Outstanding
Voting  Securities,  (vi) the  Company's  operating  certificate,  or (vii)  the
Company's gates.

"Normal  Retirement  Date" shall mean the mandatory  officer  retirement age (as
determined by the Board).

"Reappointment"  shall mean either: (a) the Board's  determination to extend the
term of the  Employment  Period  under  this  Agreement  by one  year or (b) the
Board's re-election or reappointment of the Executive to the position and duties
described  in the first  sentence  of Section 3 for any  period  beyond the next
succeeding  Renewal Date. The Company  covenants that the Board shall  determine
whether to reappoint the Executive annually; such determination to occur between
January 1 of a calendar year and not less than 20 days prior to the Renewal Date
in the same calendar  year.  It is understood  that the failure to Reappoint the
Executive  shall be deemed to afford the Executive  the right to terminate  this
Agreement for Good Reason.  For avoidance of doubt and  notwithstanding  the two
immediately  preceding  sentences,  after a Change of  Control,  the  Employment
Period shall terminate on the earlier to occur of: (a) the third  anniversary of
the Change of Control Date or (b) the Executive's Normal Retirement Date.

"Renewal Date" shall mean June 30, 1999 and each annual anniversary thereof.

"Travel  Network" shall mean each airline  operated by the Company or any of its
affiliates or any successor or successors.

"Vesting Compensation" is defined in Section 4(d).

<PAGE>

                              EMPLOYMENT AGREEMENT

This Employment  Agreement  (this "Agreement") is dated as of April 17, 1998 by
and between Reno Air, Inc., a Nevada  corporation  (the "Company") and Steven A.
Rossum (the "Executive").

The Executive and the Company agree as follows:

1.  Definitions.  Capitalized  terms used in this  Agreement  and not  otherwise
defined  shall  have  the  meanings  assigned  to them in  Appendix  I  entitled
"Employment Agreement Definitions."

2.  Employment.  The Company  agrees to employ the  Executive  and the Executive
agrees to be employed by the Company on the terms and conditions hereinafter set
forth during the Employment Period.

3. Position and Duties.  During the Employment Period, the Executive shall serve
the  Company  as the Senior  Vice  President,  General  Counsel,  and  Corporate
Secretary and shall perform the attendant  responsibilities  thereto as provided
in the Company's by-laws,  as well as such other  responsibilities as the Board,
the Chairman of the Board, or the Chief Executive  Officer may from time to time
reasonably  assign. The Executive agrees to devote such time and effort as shall
be reasonably required to discharge his duties hereunder.  During the Employment
Period,  it shall not be a violation of this Agreement for the Executive to: (i)
serve on charitable or non-conflicting  civic or corporate boards or committees,
(ii) deliver  lectures,  fulfill speaking  engagements,  or teach at educational
institutions,  or (iii) manage  personal  investments;  so long as the foregoing
activities  do  not  interfere   with  the   performance   of  the   Executive's
responsibilities.  During  the  term of his  employment  with the  Company,  the
Executive shall report to the Chief  Executive  Officer or a more senior officer
of the Company.

4. Compensation and Benefits. The compensation and benefits payable to Executive
for all services  rendered by the  Executive  under this  Agreement  shall be as
follows:

(a) Salary.  The  Executive  shall  receive a minimum base salary at the rate of
$180,000 per year.  Such salary shall be (i) payable  semi-monthly in accordance
with the Company's standard payroll practices (and pro-rated for any partial pay
period),  and (ii) subject to review and increase (but not decrease) at any time
at the discretion of the Board.

(b) Annual Bonus. The Executive shall be entitled to receive an annual bonus (as
determined by the Board in good faith) of up to the maximum  participation level
provided for in the Company's  incentive  compensation  plan for officers.  Such
bonus shall be paid not later than April 15 of the calendar  year  following the
calendar year to which it shall apply.  The Executive  shall also be eligible to
participate  at a level  (which  is not  significantly  less  than  the  maximum
participation level of officers with a substantially  similar title or level) in
any other bonus or incentive  compensation  arrangements provided by the Company
from  time  to  time to its  officers  or key  employees.  Further,  in  partial
consideration of foregone  consideration from the Executive's previous employer,
the Executive  shall receive a signing bonus of $50,000,  fully-earned  upon the
execution of this Agreement.


(c) Business  Expenses.  The Company shall reimburse the Executive  promptly for
all  reasonable  travel  and  other  business  expenses  incurred  by him in the
performance  of his  duties  and  responsibilities,  subject  to  the  Company's
policies with respect to substantiation and documentation.

(d) Stock  Options.  The Company and the Executive  shall enter into one or more
stock  option  agreements  with  respect to options for the  purchase of 175,000
shares of Common Stock (subject to an equitable  adjustment in the case of stock
splits and the like), at an exercise price of $7.5000, with such options vesting
in accordance with the following schedule:  50,000 shares of Common Stock vested
on the Effective Date,  41,666.67 shares of Common Stock shall vest on the first
anniversary of the Effective Date,  41,666.67  shares of Common Stock shall vest
on the second  anniversary of the Effective Date, and 41,666.66 shares of Common
Stock shall vest on the third anniversary of the Effective Date. With respect to
all stock  options and all other  deferred  compensation  that vest over time in
accordance with a schedule or formula (such options and other compensation,  the
"Vesting Compensation"), the Company and the Executive agree that upon the first
to occur of:  (i) the  Change of Control  Date or (ii) the  termination  of this
Agreement (other than by the Company for Cause or by the Executive  without Good
Reason),  any Vesting Compensation to which the Executive was or may have become
entitled,  whether or not  theretofore  granted or vested,  shall be immediately
granted and become  immediately  vested and exercisable by the Executive (or his
representative in the case of termination by death). In the event the vesting of
the Vesting Compensation is accelerated as provided in the immediately preceding
sentence,  such Vesting  Compensation shall be exercisable until the earlier of:
(x) the stated expiry thereof as provided in a stock option  agreement,  Company
plan,  or  other  governing  document  or (y) 180  days  after  the  date of the
Executive's termination of employment.

(e) Airline Travel.  During the Employment  Period,  the Company will provide or
cause to be provided to the Executive,  the Executive's  Spouse, the Executive's
Parents,  and the Executive's  Eligible  Children  unlimited free positive space
airline travel on the Travel Network (the "Airline Travel Benefits").  Likewise,
should the Company, its affiliates, or its or their successors from time to time
operate or have an access arrangement for airport clubs, lounges and/or business
centers, the Executive and the Executive's Spouse shall be entitled to unlimited
free access to each such club,  lounge,  or business  center and unlimited  free
access to any other travel-related  benefit from time to time offered (such club
and  other  travel  benefits,  the  "Club  Benefits").  The  Executive  and  the
Executive's  Spouse  shall be entitled to Airline  Travel and Club  Benefits for
their  respective  lifetimes upon the first to occur of the  following:  (a) the
Change of Control Date, (b) the third  anniversary of the Effective Date, or (c)
the  Executive's  employment is terminated by the Company (other than for Cause)
or by the Executive for Good Reason.  The Executive's  Parents shall be entitled
to  Airline  Travel  Benefits  for their  respective  lifetimes  if and when the
Executive  (or the  Executive's  Spouse  in the case of the  Executive's  death)
becomes  entitled  to  the  benefits  described  in  the  immediately  preceding
sentence.  An Eligible Child shall be entitled to Airline Travel Benefits for so
long as: (x) he or she shall remain an Eligible Child and (y) except in the case
of the Executive's death, the Executive shall remain eligible for Airline Travel
Benefits. The post- Employment Period Airline Travel and Club Benefits described
in the  preceding  sentences  shall  be  provided  on the  most  favored  terms,
practices and  conditions  from time to time provided or offered by the Company,
its  affiliates,  and  successors to its or their active and retired senior vice
presidents  and their  families  (it is  understood  that in all cases that such
benefits   shall  equal  or  exceed  the  priority  of  the  highest   class  of
space-available  travel in all  classes of  service on the Travel  Network at no
charge to the Executive).

(f) Other Benefits. The Executive and, to the extent applicable, the Executive's
family,  dependents and  beneficiaries,  shall each participate in all benefits,
plans and programs,  including  improvements or modifications of the same, which
are now, or may hereafter be,  available to the senior-most  executive  officers
and key employees of the Company and its  successors.  Such benefits,  plans and
programs may include,  without  limitation,  profit sharing plans, thrift plans,
health  insurance or health care plans,  life insurance,  disability  insurance,
pension and other retirement plans, pass privileges,  interline travel benefits,
and the like. In addition to the foregoing, in the event of a Change of Control,
the Executive and the Executive's  Spouse shall be entitled to medical  coverage
for their  respective  lifetimes  and any  Eligible  Child  shall be entitled to
medical  coverage for so long as he or she remains an Eligible  Child;  provided
that, (i) upon termination of the Executive's  employment,  the medical coverage
(including  Medicare coverage)  described  hereunder will become subordinate to:
(x) any coverage provided by a prior or subsequent  employer of the Executive or
the Executive's Spouse, or (y) in the case of the Executive's Spouse or Eligible
Children,  any  coverage  afforded  to such  persons by their  respective  past,
present, or prospective  employers and (ii) in the event of a Change of Control,
any medical benefits which would extend beyond the term of the Employment Period
(i.e., the lifetime medical benefits) shall be provided to the Executive only to
the extent the successor to the QQ Business  affords medical benefits of greater
duration to its senior vice presidents under a plan or agreement of severance or
termination.

(g)  Indemnification.  The Company  shall provide or cause to be provided to the
Executive  indemnification  against all expenses  (including  attorneys'  fees),
judgements,  fines  and  amounts  paid in  settlement  in  connection  with  any
threatened,  pending,  or completed action,  claim, suit or proceeding,  whether
civil, criminal,  administrative, or investigative (including an action by or in
the  right of the  Company)  by  reason of the  Executive's  having  served as a
director,  officer or employee of the Company or any  affiliate  of the Company.
The Company  shall  advance fees  (including  attorneys'  fees)  incurred by the
Executive in the defense of any such action, claim, suit, or proceeding, and the
Company shall  maintain  customary  directors and officers  liability  insurance
coverage.  These provisions supplement and are not in lieu of any rights granted
to the  Company's  officers  and  directors  under  the  Company's  articles  of
incorporation, bylaws, any corporate document (including insurance policies), or
applicable  law. The Company shall pay, or promptly  reimburse on an as-incurred
basis to the  Executive,  the  reasonable  fees and expenses of the  Executive's
legal counsel for its services  rendered in  connection  with,  the  Executive's
enforcement of this Agreement;  provided,  that if the Executive  institutes any
proceeding  to  enforce  this  Agreement  and the  judge,  arbitrator  or  other
individual presiding over the proceeding  affirmatively finds that the Executive
instituted  the proceeding in bad faith,  the Executive  shall pay all costs and
expenses,  including  attorneys'  fees, of the  Executive  and the Company.  The
Company shall indemnify and hold harmless the Executive,  on an after-tax basis,
from any payment  under this Section 4 or otherwise to or for the benefit of the
Executive  that would be subject to the  excise  tax  (including  interests  and
penalties  thereon)  imposed by Section  4999 of the Internal  Code of 1986,  as
amended.

(h)  Relocation   Assistance/Temporary  Living.  The  Company  will  provide  or
reimburse the Executive for temporary  accommodations  in the Reno,  Nevada area
during  such  transitional  period as may be  approved  by the  Chief  Executive
Officer of the Company. The Company will also reimburse or pay the Executive for
the  reasonable  costs of packing  or moving  household  goods  from  Arlington,
Virginia  to the Reno,  Nevada  area and for  customary  closing  costs and real
estate commissions  payable in connection with the sale of the Virginia home. In
the event that within 18 months of the Change of Control Date, this Agreement is
terminated by the Company  (other than for Cause) or by the Executive  with Good
Reason and the Executive relocates from the Reno area (or the location where the
Executive  was  last-based)  within 12 months  of the date of  termination,  the
Company will reimburse or pay the Executive for the reasonable  costs of packing
and  moving to a location  in the  continental  United  States  selected  by the
Executive.  The Company  shall  likewise  reimburse  the Executive for customary
closing costs and real estate  commissions  in  connection  with the sale of the
Executive's home, or alternatively,  for lease termination expenses. The Company
and its successors will be jointly  responsible,  on an after-tax basis, for any
income  taxes  arising  from the  payments or  reimbursements  described in this
Section 4(i).

5.    Termination and Termination Benefits

(a) Death. If the Executive dies, this Agreement shall  automatically  terminate
on the date of his death.  The  Executive's  estate or designated  beneficiaries
shall be  entitled  to receive  (i) the  Executive's  then-current  salary for a
period of twelve months following the date of death, (ii) any accrued portion of
any bonus which is  ultimately  determined to have been payable to the Executive
and  allocable to the period prior to death,  (iii) the Airline  Travel and Club
Benefits, (iv) the Vesting Compensation (which shall vest and become immediately
exercisable),  (v) any other  benefits  which  shall have been  provided  to the
Executive to the extent permitted under any applicable plan documents,  and (vi)
subject to the  proviso  set forth in the last  sentence  of Section  4(g) above
regarding   subordination  of  coverage,   lifetime  medical  coverage  for  the
Executive's Spouse.

(b) Disability. If the Executive suffers a Disability, the Chairman of the Board
or the Chief Executive  Officer of the Company shall have the right to cause the
Company  to  terminate  the  Executive's  employment  as of such date by written
notice to the Executive. Thereafter, the Executive shall be entitled to receive:
(i) his then-current  salary for a period of twelve months following the date of
termination,  (ii)  any  accrued  portion  of  any  bonus  which  is  ultimately
determined  to have been payable to the  Executive  and  allocable to the period
prior to the date of  termination,  (iii) the Airline  Travel and Club Benefits,
(iv)  the  Vesting   Compensation  (which  shall  vest  and  become  immediately
exercisable),  and (iv) subject to the proviso set forth in the last sentence of
Section  4(f)  above  regarding  subordination  of  coverage,  lifetime  medical
coverage for the Executive and the Executive's Spouse.

(c)  Termination  by the  Company  for Cause.  The  Company  may  terminate  the
Executive's  employment  for Cause.  If the  Chairman  of the Board or the Chief
Executive  Officer  determines  in good  faith  that  the  Executive  should  be
terminated for Cause, the Chairman of the Board or Chief Executive  Officer,  as
the case may be, shall send written  notice to the  Executive  setting  forth in
reasonable  detail  the  nature of the  Cause.  If  terminated  for  Cause,  the
Executive  will be  entitled  to no  additional  compensation  other than salary
accrued prior to the effective date of termination  except as otherwise provided
in Section 4.

(d) Termination by the Company without Cause. The Executive's  employment may be
terminated by the Company  without Cause provided that the Executive is afforded
at least 30 days' prior written notice of such termination.

(e)  Termination  by the  Executive.  The Executive may terminate his employment
with or without  Good  Reason by giving  the Board not less than 15 days'  prior
written notice of termination of his employment, and he shall not be required to
render any  services  to the  Company  after the date set forth in the notice of
termination. In the event of a termination by the Executive without Good Reason,
the Executive shall be entitled to no additional  compensation other than salary
accrued prior to the effective date of termination, except as otherwise provided
in Section 4.

(f)  Acceleration  of Salary,  Bonus,  and Benefits if Without Cause or for Good
Reason.  Except as otherwise  provided in this  Agreement,  if this Agreement is
terminated by the Company  without Cause and other than for death or Disability,
or this  Agreement is  terminated  by the  Executive  with Good Reason:  (i) the
Company shall pay to the Executive the sum of: (x) the total undiscounted amount
of the Executive's  entire salary which would  otherwise  become due and payable
under  Section  4(a)  during the  Employment  Period,  plus (y) if the Change in
Control  Date shall have  occurred,  the product of: (A) 3 times (B) the maximum
annual  bonus  payable to the  Executive  in  accordance  with the  then-current
incentive  bonus plan described in Section 4(b);  (ii) the Vesting  Compensation
shall vest and become  immediately  exercisable;  and (iii) except to the extent
more favorable  benefits are otherwise  provided in this  Agreement  (which more
favorable  provisions shall govern),  the Executive shall be entitled to receive
flight, medical, dental, life insurance,  vision, and similar benefits until the
last day of the Employment  Period  (assuming that this Agreement shall not have
been  terminated  but subject to the  proviso set forth in the last  sentence of
Section 4(f) above regarding subordination of medical coverage).  The salary and
bonus that would be due and payable under sub-clause (i) of this Section 4 shall
be paid to the Executive in three equal tranches on each of the 30th,  60th, and
90th day after the date of termination (or the immediately  succeeding  business
day if any such day is not a business day).

(g) No Duty to Mitigate/No Non-Compete.  The Executive has no duty or obligation
to mitigate the expenditures for salaries,  bonuses, benefits or otherwise after
termination of this Agreement  and/or  cessation of employment with the Company.
Nothing in this  Agreement  is  intended  to serve as a  "non-compete"  or other
limitation  on the  future  employment  opportunities  for the  Executive  after
termination of this Agreement.

6.  Confidential  Information.  The Executive shall maintain a fiduciary duty to
the Company for all confidential information,  knowledge or data relating to the
Company or any of its affiliated  companies,  and their  respective  businesses,
which  shall  have  been  obtained  by  the  Executive  during  the  Executive's
employment  by the  Company or any of its  affiliates  until  such  confidential
information,  knowledge  or data  become  a  matter  of  public  record  through
disclosure   by  a  person  or  persons   other  than  the   Executive   or  his
representatives and which does not involve communication or disclosure, directly
or indirectly, by the Executive or his representatives.  The Executive shall not
communicate or disclose any such information, knowledge, or data to anyone other
than the Company and those designated by the Company.  After  termination of the
Executive's  employment  with  the  Company,  the  Executive  shall  return  all
confidential and proprietary  information in his possession or under his control
and shall not, without the prior written consent of the Company,  communicate or
disclose  any such  information,  knowledge  or data to  anyone  other  than the
Company and those designated by the Company. Willful violation of this paragraph
6 shall void this Employment Agreement.

7.  Successors and Assigns.  This  Agreement  shall bind any successor to the QQ
Business,   whether  direct  or  indirect  and  whether  by  purchase,   merger,
consolidation  or otherwise,  in the same manner and to the same extent that the
Company would be obligated  under this Agreement if no such succession had taken
place. Notwithstanding that a successor to the QQ Business becomes bound to this
Agreement, the Company shall continue to be liable for the obligations hereunder
as a guarantor.  In any agreement  providing for  succession to the QQ Business,
the Company shall cause each and every successor  expressly and  unconditionally
to assume  and agree to perform  each of the  Company's  obligations  under this
Agreement.  For  avoidance  of doubt,  it is  understood  that in the event that
another air carrier (or an affiliate  thereof)  directly or indirectly  acquires
the QQ  Business,  the Company  shall use its best efforts to cause such airline
(or its affiliate as the case may be) to provide the Executive,  the Executive's
Spouse,  the Executive's  Parents,  and the Executive's  Eligible  Children with
pass,  club and other  privileges on the combined  route networks of the Company
and the acquirer (or of any  affiliated  air  carriers,  as the case may be) and
with boarding  priority and other terms equal or superior to the Airline  Travel
and Club Benefits.  This Agreement and all rights of Executive  hereunder  shall
inure to the  benefit of, and be  enforceable  by, the  Executive's  personal or
legal   representatives,    executors,   administrators,    successors,   heirs,
distributees,  devises and legatees. This Agreement is personal to the Executive
and without the prior written  consent of the Company shall not be assignable by
the Executive other than by will or the laws of descent and distribution.

8.    General Contract Provisions.

(a) Governing Law/Headings/Amendments/Entire  Agreement. This Agreement shall be
governed by and  construed in  accordance  with the laws of the State of Nevada,
without  reference  to  principles  of  conflict of laws.  The  captions of this
Agreement  are not part of the  provisions  hereof  and  shall  have no force or
effect.  This  Agreement may not be amended or modified  other than by a written
agreement  executed by the parties  hereto or their  respective  successors  and
legal   representatives.   This  Agreement,   together  with  the  stock  option
agreement(s) to be executed, contain the entire understanding of the Company and
the  Executive  with respect to the subject  matter hereof and supersede any and
all other  agreements,  either  oral or  written,  between  the  Company and the
Executive with respect to the subject matter hereof.

(b) Notices. All notices and other communications  hereunder shall be in writing
and shall be given by hand  delivery  to the  other  party or by  registered  or
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive: to his address as set forth in the personnel records of the
Company,  if to the Company:  to Reno Air, Inc.,  220 Edison Way,  Reno,  Nevada
89502,  Attention:  Chief Executive Officer, with a copy to the attention of the
Company's  Corporate  Secretary;  or to such other address as either party shall
have  furnished  to the other in writing in  accordance  herewith.  Notices  and
communications shall be effective when actually received by the addressee.

(c)  Enforceability  Issues.  If any  benefits  to  which  the  Executive  shall
otherwise  be  entitled  hereunder  are  not  permitted  to be  provided  to the
Executive  under any governing  plan  document or  applicable  law governing the
payment  or  provision  of such  benefits,  the  Company  shall  pay or  provide
equivalent  benefits to the  Executive  (or her  representatives  in the case of
death).  The invalidity or  unenforceability  of any provision of this Agreement
shall not affect the validity or  enforceability  of any other provision of this
Agreement.  To the extent the provisions of Section 4(g) are  inconsistent  with
the terms  regarding  subrogation  in any  officers'  and  directors' liability
coverage,  the terms of such insurance  coverage shall prevail.  The Executive's
and/or the Company's failure to insist upon strict compliance with any provision
hereof shall not be deemed to be a waiver of such provision thereof.

(d)  Withholdings.  The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

<PAGE>

IN WITNESS WHEREOF,  the Executive and the Company have executed this Employment
Agreement as of the date first above written.



Reno Air, Inc. (the "Company")


By:/s/Joseph R. O'Gorman
 
Title: Chairman of the Board, Chief Executive Officer, and President




    /s/ Steven A. Rossum
        Steven A. Rossum (the "Executive")



<PAGE>

                                   Appendix I

                        Employment Agreement Definitions

"Airline Travel Benefits" is defined in Section 4(e).

"Board" shall mean the Board of Directors of the Company.

"Cause"  shall  mean  (i) an act or acts of  personal  dishonesty  taken  by the
Executive  and  intended to result in  substantial  personal  enrichment  of the
Executive  at the  expense  of the  Company,  (ii)  repeated  violations  by the
Executive  of  the  Executive's  obligations  under  this  Agreement  which  are
demonstrably  willful and deliberate on the  Executive's  part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company or, (iii) the conviction of the Executive of a felony.

"Change in Control" shall mean: (a) the acquisition by an individual,  entity or
group  (within  the meaning of Section  13(d)(3)  or 14(d)(2) of the  Securities
Exchange Act of 1934, as amended (the "Exchange  Act")) of beneficial  ownership
(within the meaning of Rule 13d-3  promulgated under the Exchange Act) of 50% or
more of either (i) the  then-outstanding  shares of common  stock of the Company
(the  "Outstanding  Common  Stock"),  or (ii) the  combined  voting power of the
then-outstanding  voting securities of the Company entitled to vote generally in
the  election  of  directors  (the  "Outstanding  Voting  Securities"),  or  (b)
individuals who, as of the Effective Date,  constitute the Board of Directors of
the Company (the "Incumbent  Board") cease for any reason to constitute at least
a majority of the Company's  Board of Directors;  provided,  that any individual
becoming  a  director  subsequent  to the  Effective  Date  whose  election,  or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then  comprising the Incumbent  Board shall
be considered as though such  individual  were a member of the Incumbent  Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such  terms are used in Rule  14a-11 of  Regulation  14A  promulgated  under the
Exchange Act) or other actual or threatened solicitation of proxies or consents;
or (c) approval by the shareholders of the Company of a  reorganization,  merger
or  consolidation,  in each case, with respect to which all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Common Stock and Outstanding Voting Securities immediately prior
to such reorganization,  merger or consolidation,  beneficially own, directly or
indirectly, less than 90% of, respectively, the outstanding common stock and the
outstanding voting securities,  as the case may be, of the corporation resulting
from such  reorganization,  merger or consolidation  in  substantially  the same
proportions as their ownership, immediately prior to such reorganization, merger
or  consolidation  of the Outstanding  Common Stock and the  Outstanding  Voting
Securities,  as the case may be;  or (d)  approval  by the  shareholders  of the
Company of (i) a complete  liquidation or dissolution of the Company or (ii) the
sale or other  disposition  of all or a significant  portion of the QQ Business,
other than to a corporation,  with respect to which following such sale or other
disposition,  more than 90% of,  respectively,  the  then-outstanding  shares of
common  stock of such  corporation  and the  combined  voting  power of the then
outstanding voting securities of such corporation  entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and the Outstanding Voting
Securities  immediately prior to such sale or other disposition in substantially
the same proportion as their ownership,  immediately prior to such sale or other
disposition,  of the Outstanding Common Stock and Outstanding Voting Securities,
as the case may be; or (e) the acquisition by an individual,  entity or group of
beneficial  ownership of 50% or more of the  then-outstanding  securities of the
Company,  including both voting and non-voting securities;  provided,  that such
acquisition shall constitute a Change of Control only if such individual, entity
or group also obtains the power to elect by class vote or cumulative  voting, or
otherwise to appoint,  50% or more of the total number of directors to the Board
of Directors of the Company.
<PAGE>

"Change of Control  Date" shall mean the first date on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding,  if a Change
of  Control  occurs  and if the  Executive's  employment  with  the  Company  is
terminated or the Executive  ceases to be an officer of the Company prior to the
date on which the Change of Control occurs, and if it is reasonably demonstrated
by the Executive  that such  termination of employment or cessation of status as
an  officer  (i)  was at the  request  of a third  party  who  has  taken  steps
reasonably calculated to effect the Change of Control or (ii) was effected by or
on behalf of the Company in connection  with or in  anticipation of an actual or
proposed Change of Control,  then for all purposes of this Agreement the "Change
of  Control  Date"  shall  mean the date  immediately  prior to the date of such
termination of employment or cessation of status as an officer.

"Club Benefits" is defined in Section 4(e).

"Common Stock" shall mean the Company's common stock, $.01 par value.

"Company" shall mean the Company as defined  above and any  successor to the QQ
Business  which assumes and agrees to perform this Agreement by operation of law
or otherwise.

"Disability" shall mean any physical or mental illness,  condition,  dependency,
or incapacity rendering the Executive unable to adequately perform substantially
all of his  duties  and  responsibilities  to the  Company,  provided  that such
disability continues for an uninterrupted period of at least 6 months.
 
"Effective Date" shall mean April 17, 1998.

"Eligible  Child" shall mean a naturally  born or legally  adopted  child of the
Executive  within the age  parameters  described in the  immediately  succeeding
sentence.  Any such child shall  cease to be an  Eligible  Child upon his or her
21st birthday (unless and for so long as such child remains a full-time student,
in which case,  the child will remain an Eligible Child until not later than his
or her 23rd birthday).

"Employment  Period" shall mean the period  commencing on the Effective Date and
ending on the earlier to occur of (i) June 30, 2001 or (ii) the first day of the
month next  following the  Executive's  birthday upon which the Executive  shall
attain the Normal  Retirement Date;  provided,  however,  that in the event of a
Reappointment of the Executive, the Employment Period shall be extended so as to
terminate on the earlier of (x) three years from the applicable  Renewal Date or
(y) the Executive's Normal Retirement Date; and provided, further, that upon the
occurrence of a Change of Control,  the Employment Period shall automatically be
extended so as to terminate on the earlier to occur of (a) the third anniversary
of the Change of Control Date or (b) the Executive's Normal Retirement Date.

"Executive's Parents" shall mean those family members defined as "Parents" under
the Company's non-revenue travel policies.

"Executive's  Spouse" shall mean the Executive's wife on the Effective Date (for
so long as she and the Executive  shall remain married unless the marriage shall
terminate  pursuant to the Executive's  death, in which case, she shall maintain
such status for purposes of this Agreement  until such time as she may re-marry)
or in the event the Executive shall re-marry, any successor wife (subject to the
qualifications  and conditions set forth in the parenthetical  commencing on the
first line of this definition).

"Good Reason" shall mean any one or more of the following: (i) the assignment to
the  Executive of any duties  inconsistent  in any respect with the  Executive's
position  (including  status,  offices,  titles  and  reporting  relationships),
authority,  duties or responsibilities as contemplated by this Agreement, or any
other  action by the Company  which  results in a diminution  in such  position,
authority,  duties or responsibilities,  excluding for this purpose an isolated,
insubstantial  and  inadvertent  action  not  taken in bad  faith  and  which is
remedied by the Company  promptly  after receipt of notice  thereof given by the
Executive;  (ii) (x) any failure by the  Company to comply with its  obligations
under this  Agreement,  other than an isolated,  insubstantial  and  inadvertent
failure not occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive,  or (y) after the Change
of Control  Date,  any  failure of the Company to maintain or provide the plans,
programs,  policies and  practices,  and benefits  described in Section 4 of the
Agreement  on the  most  favorable  basis  such  plans  programs,  policies  and
practices  were  maintained  and  benefits  provided  during the  90-day  period
immediately  preceding the Change of Control  Date, or if more  favorable to the
Executive  and/or the  Executive's  family,  as in effect at any time thereafter
with respect to other key employees of the Company and its affiliates; (iii) the
Company's  requiring the  Executive to be based at any office or location  other
than within 35 miles of the Reno/Lake Tahoe  International  Airport,  except for
travel   reasonably   required   in   the   performance   of   the   Executive's
responsibilities;  (iv)  the  consummation  by  the  Company  of  a  significant
marketing  or   operational   alliance,   strategic   partnership,   significant
code-sharing  relationship,  "virtual merger," or other significant  contractual
relationship  with one or more  non-affiliated  air carriers or their affiliates
(whether  or not in any such case  stock,  assets,  or other  consideration  are
exchanged) which results in a material  diminution in or material adverse change
to the  Executive's  position or the  authority,  duties,  and  responsibilities
thereof,  and (v) the failure of the Board to Reappoint the  Executive,  as more
particularly set forth in the definition of  Reappointment,  below, and (vi) any
purported termination by the Company of the Executive's employment other than as
expressly  permitted  by this  Agreement.  For  purposes  of  determining  "Good
Reason",  any good faith determination of "Good Reason" made by the Executive on
or after the  Change of  Control  Date  shall be  conclusive.  Anything  in this
Agreement to the contrary  notwithstanding,  a termination  by the Executive for
any reason  during the 180-day  period  following the first  anniversary  of the
Change of Control Date shall be deemed to be a  termination  for Good Reason for
all purposes of this Agreement.

"QQ Business" shall mean a substantial  portion of one or more of the following:
(i) the assets of the Company, (ii) the Company's aircraft,  (iii) the Company's
non-managerial personnel, (iv) the Outstanding Common Stock, (v) the Outstanding
Voting  Securities,  (vi) the  Company's  operating  certificate,  or (vii)  the
Company's gates.

"Normal  Retirement  Date" shall mean the mandatory  officer  retirement age (as
determined by the Board).

"Reappointment"  shall mean either: (a) the Board's  determination to extend the
term of the  Employment  Period  under  this  Agreement  by one  year or (b) the
Board's re-election or reappointment of the Executive to the position and duties
described  in the first  sentence  of Section 3 for any  period  beyond the next
succeeding  Renewal Date. The Company  covenants that the Board shall  determine
whether to reappoint the Executive annually; such determination to occur between
January 1 of a calendar year and not less than 20 days prior to the Renewal Date
in the same calendar  year.  It is understood  that the failure to Reappoint the
Executive  shall be deemed to afford the Executive  the right to terminate  this
Agreement for Good Reason.  For avoidance of doubt and  notwithstanding  the two
immediately  preceding  sentences,  after a Change of  Control,  the  Employment
Period shall terminate on the earlier to occur of: (a) the third  anniversary of
the Change of Control Date or (b) the Executive's Normal Retirement Date.

"Renewal Date" shall mean June 30, 1999 and each annual anniversary thereof.

"Travel  Network" shall mean each airline  operated by the Company or any of its
affiliates or any successor or successors.

"Vesting Compensation" is defined in Section 4(d).

<PAGE>

                              EMPLOYMENT AGREEMENT

This Employment  Agreement  (this  "Agreement") is dated as of March 26, 1998 by
and between Reno Air, Inc., a Nevada  corporation  (the  "Company") and Vicki W.
Bretthauer (the "Executive").

The Executive and the Company agree as follows:

1.  Definitions.  Capitalized  terms used in this  Agreement  and not  otherwise
defined  shall  have  the  meanings  assigned  to them in  Appendix  I  entitled
"Employment Agreement Definitions."

2.  Employment.  The Company  agrees to employ the  Executive  and the Executive
agrees to be employed by the Company on the terms and conditions hereinafter set
forth during the Employment Period.

3. Position and Duties.  During the Employment Period, the Executive shall serve
the  Company  as the  Vice  President-  Administration  and  shall  perform  the
attendant responsibilities thereto as provided in the Company's by-laws, as well
as such other  responsibilities  as the Board,  the  Chairman of the Board,  the
Chief  Executive  Officer,  or the  President  may from time to time  reasonably
assign.  The  Executive  agrees  to  devote  such  time and  effort  as shall be
reasonably  required to discharge her duties  hereunder.  During the  Employment
Period,  it shall not be a violation of this Agreement for the Executive to: (i)
serve on charitable or non-conflicting  civic or corporate boards or committees,
(ii) deliver  lectures,  fulfill speaking  engagements,  or teach at educational
institutions,  or (iii) manage  personal  investments;  so long as the foregoing
activities  do  not  interfere   with  the   performance   of  the   Executive's
responsibilities.  During  the  term of her  employment  with the  Company,  the
Executive shall report to the President or a more senior officer of the Company.

4. Compensation and Benefits. The compensation and benefits payable to Executive
for all services  rendered by the  Executive  under this  Agreement  shall be as
follows:

(a) Salary.  The  Executive  shall  receive a minimum base salary at the rate of
$125,000 per year.  Such salary shall be (i) payable  semi-monthly in accordance
with the Company's standard payroll practices (and pro-rated for any partial pay
period),  and (ii) subject to review and increase (but not decrease) at any time
at the discretion of the Board.

(b) Annual Bonus. The Executive shall be entitled to receive an annual bonus (as
determined by the Board in good faith) of up to the maximum  participation level
provided for in the Company's  incentive  compensation  plan for officers.  Such
bonus shall be paid not later than April 15 of the calendar  year  following the
calendar year to which it shall apply.  The Executive  shall also be eligible to
participate  at a level  (which  is not  significantly  less  than  the  maximum
participation level of officers with a substantially  similar title or level) in
any other bonus or incentive  compensation  arrangements provided by the Company
from time to time to its officers or key employees.

(c) Business  Expenses.  The Company shall reimburse the Executive  promptly for
all  reasonable  travel  and  other  business  expenses  incurred  by him in the
performance  of her  duties  and  responsibilities,  subject  to  the  Company's
policies with respect to substantiation and documentation.

(d) Stock  Options.  The Company and the Executive  shall enter into one or more
stock  option  agreements  with  respect to options for the  purchase of 100,000
shares of Common Stock (subject to an equitable  adjustment in the case of stock
splits and the like), at an exercise price of $8.1875, with such options vesting
in accordance with the following schedule:  25,000 shares of Common Stock vested
on the  Effective  Date,  25,000  shares of Common Stock shall vest on the first
anniversary of the Effective  Date,  25,000 shares of Common Stock shall vest on
the second  anniversary of the Effective Date, and 25,000 shares of Common Stock
shall vest on the third  anniversary of the Effective  Date. With respect to all
stock  options  and all  other  deferred  compensation  that  vest  over time in
accordance with a schedule or formula (such options and other compensation,  the
"Vesting Compensation"), the Company and the Executive agree that upon the first
to occur of:  (i) the  Change of Control  Date or (ii) the  termination  of this
Agreement (other than by the Company for Cause or by the Executive  without Good
Reason),  any Vesting Compensation to which the Executive was or may have become
entitled,  whether or not  theretofore  granted or vested,  shall be immediately
granted and become  immediately  vested and exercisable by the Executive (or her
representative in the case of termination by death). In the event the vesting of
the Vesting Compensation is accelerated as provided in the immediately preceding
sentence,  such Vesting  Compensation shall be exercisable until the earlier of:
(x) the stated expiry thereof as provided in a stock option  agreement,  Company
plan,  or  other  governing  document  or (y) 180  days  after  the  date of the
Executive's termination of employment.

(e) Airline Travel.  During the Employment  Period,  the Company will provide or
cause to be provided to the Executive,  the Executive's  Spouse, the Executive's
Parents,  and the Executive's  Eligible  Children  unlimited free positive space
airline travel on the Travel Network (the "Airline Travel Benefits").  Likewise,
should the Company, its affiliates, or its or their successors from time to time
operate or have an access arrangement for airport clubs, lounges and/or business
centers, the Executive and the Executive's Spouse shall be entitled to unlimited
free access to each such club,  lounge,  or business  center and unlimited  free
access to any other travel-related  benefit from time to time offered (such club
and  other  travel  benefits,  the  "Club  Benefits").  The  Executive  and  the
Executive's  Spouse  shall be entitled to Airline  Travel and Club  Benefits for
their  respective  lifetimes upon the first to occur of the  following:  (a) the
Change of Control Date, (b) the third  anniversary of the Effective Date, or (c)
the  Executive's  employment is terminated by the Company (other than for Cause)
or by the Executive for Good Reason.  The Executive's  Parents shall be entitled
to  Airline  Travel  Benefits  for their  respective  lifetimes  if and when the
Executive  (or the  Executive's  Spouse  in the case of the  Executive's  death)
becomes  entitled  to  the  benefits  described  in  the  immediately  preceding
sentence.  An Eligible Child shall be entitled to Airline Travel Benefits for so
long as: (x) he or she shall remain an Eligible Child and (y) except in the case
of the Executive's death, the Executive shall remain eligible for Airline Travel
Benefits. The post- Employment Period Airline Travel and Club Benefits described
in the  preceding  sentences  shall  be  provided  on the  most  favored  terms,
practices and  conditions  from time to time provided or offered by the Company,
its  affiliates,  and  successors  to its  or  their  active  and  retired  vice
presidents  and their  families  (it is  understood  that in all cases that such
benefits   shall  equal  or  exceed  the  priority  of  the  highest   class  of
space-available  travel in all  classes of  service on the Travel  Network at no
charge to the Executive).

(f) Other Benefits. The Executive and, to the extent applicable, the Executive's
family,  dependents and  beneficiaries,  shall each participate in all benefits,
plans and programs,  including  improvements or modifications of the same, which
are now, or may hereafter be,  available to the senior-most  executive  officers
and key employees of the Company and its  successors.  Such benefits,  plans and
programs may include,  without  limitation,  profit sharing plans, thrift plans,
health  insurance or health care plans,  life insurance,  disability  insurance,
pension and other retirement plans, pass privileges,  interline travel benefits,
and the like. In addition to the foregoing, in the event of a Change of Control,
the Executive and the Executive's  Spouse shall be entitled to medical  coverage
for their  respective  lifetimes  and any  Eligible  Child  shall be entitled to
medical  coverage for so long as he or she remains an Eligible  Child;  provided
that, (i) upon termination of the Executive's  employment,  the medical coverage
(including  Medicare coverage)  described  hereunder will become subordinate to:
(x) any coverage provided by a prior or subsequent  employer of the Executive or
the Executive's Spouse, or (y) in the case of the Executive's Spouse or Eligible
Children,  any  coverage  afforded  to such  persons by their  respective  past,
present, or prospective  employers and (ii) in the event of a Change of Control,
any medical benefits which would extend beyond the term of the Employment Period
(i.e., the lifetime medical benefits) shall be provided to the Executive only to
the extent the successor to the QQ Business  affords medical benefits of greater
duration  to its vice  presidents  under a plan or  agreement  of  severance  or
termination.

(g)  Indemnification.  The Company  shall provide or cause to be provided to the
Executive  indemnification  against all expenses  (including  attorneys'  fees),
judgements,  fines  and  amounts  paid in  settlement  in  connection  with  any
threatened,  pending,  or completed action,  claim, suit or proceeding,  whether
civil, criminal,  administrative, or investigative (including an action by or in
the  right of the  Company)  by  reason of the  Executive's  having  served as a
director,  officer or employee of the Company or any  affiliate  of the Company.
The Company  shall  advance fees  (including  attorneys'  fees)  incurred by the
Executive in the defense of any such action, claim, suit, or proceeding, and the
Company shall  maintain  customary  directors and officers  liability  insurance
coverage.  These provisions supplement and are not in lieu of any rights granted
to the  Company's  officers  and  directors  under  the  Company's  articles  of
incorporation, bylaws, any corporate document (including insurance policies), or
applicable  law. The Company shall pay, or promptly  reimburse on an as-incurred
basis to the  Executive,  the  reasonable  fees and expenses of the  Executive's
legal counsel for its services  rendered in  connection  with,  the  Executive's
enforcement of this Agreement;  provided,  that if the Executive  institutes any
proceeding  to  enforce  this  Agreement  and the  judge,  arbitrator  or  other
individual presiding over the proceeding  affirmatively finds that the Executive
instituted  the proceeding in bad faith,  the Executive  shall pay all costs and
expenses,  including  attorneys'  fees, of the  Executive  and the Company.  The
Company shall indemnify and hold harmless the Executive,  on an after-tax basis,
from any payment  under this Section 4 or otherwise to or for the benefit of the
Executive  that would be subject to the  excise  tax  (including  interests  and
penalties  thereon)  imposed by Section  4999 of the Internal  Code of 1986,  as
amended.

(h)  Relocation   Assistance/Temporary  Living.  The  Company  will  provide  or
reimburse the Executive for temporary  accommodations  in the Reno,  Nevada area
during  such  transitional  period as may be  approved  by the  Chief  Executive
Officer of the Company. The Company will also reimburse or pay the Executive for
the  reasonable  costs of packing or moving  household  goods from the  Chicago,
Illinois suburbs to the Reno, Nevada area and, should the Executive subsequently
determine to sell her Illinois home, for customary closing costs and real estate
commissions  payable in  connection  with the sale of the Illinois  home. In the
event that within 18 months of the Change of Control  Date,  this  Agreement  is
terminated by the Company  (other than for Cause) or by the Executive  with Good
Reason and the Executive relocates from the Reno area (or the location where the
Executive  was  last-based)  within 12 months  of the date of  termination,  the
Company will reimburse or pay the Executive for the reasonable  costs of packing
and  moving to a location  in the  continental  United  States  selected  by the
Executive.  The Company  shall  likewise  reimburse  the Executive for customary
closing costs and real estate  commissions  in  connection  with the sale of the
Executive's home, or alternatively,  for lease termination expenses. The Company
and its successors will be jointly  responsible,  on an after-tax basis, for any
income  taxes  arising  from the  payments or  reimbursements  described in this
Section 4(i).

5. Termination and Termination Benefits

(a) Death. If the Executive dies, this Agreement shall  automatically  terminate
on the date of her death.  The  Executive's  estate or designated  beneficiaries
shall be  entitled  to receive  (i) the  Executive's  then-current  salary for a
period of twelve months following the date of death, (ii) any accrued portion of
any bonus which is  ultimately  determined to have been payable to the Executive
and  allocable to the period prior to death,  (iii) the Airline  Travel and Club
Benefits, (iv) the Vesting Compensation (which shall vest and become immediately
exercisable),  (v) any other  benefits  which  shall have been  provided  to the
Executive to the extent permitted under any applicable plan documents,  and (vi)
subject to the  proviso  set forth in the last  sentence  of Section  4(g) above
regarding   subordination  of  coverage,   lifetime  medical  coverage  for  the
Executive's Spouse.

(b) Disability. If the Executive suffers a Disability, the Chairman of the Board
or the Chief Executive  Officer of the Company shall have the right to cause the
Company  to  terminate  the  Executive's  employment  as of such date by written
notice to the Executive. Thereafter, the Executive shall be entitled to receive:
(i) her then-current  salary for a period of twelve months following the date of
termination,  (ii)  any  accrued  portion  of  any  bonus  which  is  ultimately
determined  to have been payable to the  Executive  and  allocable to the period
prior to the date of  termination,  (iii) the Airline  Travel and Club Benefits,
(iv)  the  Vesting   Compensation  (which  shall  vest  and  become  immediately
exercisable),  and (iv) subject to the proviso set forth in the last sentence of
Section  4(f)  above  regarding  subordination  of  coverage,  lifetime  medical
coverage for the Executive and the Executive's Spouse.

(c)  Termination  by the  Company  for Cause.  The  Company  may  terminate  the
Executive's  employment  for Cause.  If the  Chairman  of the Board or the Chief
Executive  Officer  determines  in good  faith  that  the  Executive  should  be
terminated for Cause, the Chairman of the Board or Chief Executive  Officer,  as
the case may be, shall send written  notice to the  Executive  setting  forth in
reasonable  detail  the  nature of the  Cause.  If  terminated  for  Cause,  the
Executive  will be  entitled  to no  additional  compensation  other than salary
accrued prior to the effective date of termination  except as otherwise provided
in Section 4.

(d) Termination by the Company without Cause. The Executive's  employment may be
terminated by the Company  without Cause provided that the Executive is afforded
at least 30 days' prior written notice of such termination.

(e)  Termination  by the  Executive.  The Executive may terminate her employment
with or without  Good  Reason by giving  the Board not less than 15 days'  prior
written notice of termination of her  employment,  and she shall not be required
to render any services to the Company  after the date set forth in the notice of
termination. In the event of a termination by the Executive without Good Reason,
the Executive shall be entitled to no additional  compensation other than salary
accrued prior to the effective date of termination, except as otherwise provided
in Section 4.

(f)  Acceleration  of Salary,  Bonus,  and Benefits if Without Cause or for Good
Reason.  Except as otherwise  provided in this  Agreement,  if this Agreement is
terminated by the Company  without Cause and other than for death or Disability,
or this  Agreement is  terminated  by the  Executive  with Good Reason:  (i) the
Company shall pay to the Executive the sum of: (x) the total undiscounted amount
of the Executive's  entire salary which would  otherwise  become due and payable
under  Section  4(a)  during the  Employment  Period,  plus (y) if the Change in
Control  Date shall have  occurred,  the product of: (A) 3 times (B) the maximum
annual  bonus  payable to the  Executive  in  accordance  with the  then-current
incentive  bonus plan described in Section 4(b);  (ii) the Vesting  Compensation
shall vest and become  immediately  exercisable;  and (iii) except to the extent
more favorable  benefits are otherwise  provided in this  Agreement  (which more
favorable  provisions shall govern),  the Executive shall be entitled to receive
flight, medical, dental, life insurance,  vision, and similar benefits until the
last day of the Employment  Period  (assuming that this Agreement shall not have
been  terminated  but subject to the  proviso set forth in the last  sentence of
Section 4(f) above regarding subordination of medical coverage).  The salary and
bonus that would be due and payable under sub-clause (i) of this Section 4 shall
be paid to the Executive in three equal tranches on each of the 30th,  60th, and
90th day after the date of termination (or the immediately  succeeding  business
day if any such day is not a business day).

(g) No Duty to Mitigate/No Non-Compete.  The Executive has no duty or obligation
to mitigate the expenditures for salaries,  bonuses, benefits or otherwise after
termination of this Agreement  and/or  cessation of employment with the Company.
Nothing in this  Agreement  is  intended  to serve as a  "non-compete"  or other
limitation  on the  future  employment  opportunities  for the  Executive  after
termination of this Agreement.

6.  Confidential  Information.  The Executive shall maintain a fiduciary duty to
the Company for all confidential information,  knowledge or data relating to the
Company or any of its affiliated  companies,  and their  respective  businesses,
which  shall  have  been  obtained  by  the  Executive  during  the  Executive's
employment  by the  Company or any of its  affiliates  until  such  confidential
information,  knowledge  or data  become  a  matter  of  public  record  through
disclosure   by  a  person  or  persons   other  than  the   Executive   or  her
representatives and which does not involve communication or disclosure, directly
or indirectly, by the Executive or her representatives.  The Executive shall not
communicate or disclose any such information, knowledge, or data to anyone other
than the Company and those designated by the Company.  After  termination of the
Executive's  employment  with  the  Company,  the  Executive  shall  return  all
confidential and proprietary  information in her possession or under her control
and shall not, without the prior written consent of the Company,  communicate or
disclose  any such  information,  knowledge  or data to  anyone  other  than the
Company and those designated by the Company. Willful violation of this paragraph
6 shall void this Employment Agreement.

7.  Successors and Assigns.  This  Agreement  shall bind any successor to the QQ
Business,   whether  direct  or  indirect  and  whether  by  purchase,   merger,
consolidation  or otherwise,  in the same manner and to the same extent that the
Company would be obligated  under this Agreement if no such succession had taken
place. Notwithstanding that a successor to the QQ Business becomes bound to this
Agreement, the Company shall continue to be liable for the obligations hereunder
as a guarantor.  In any agreement  providing for  succession to the QQ Business,
the Company shall cause each and every successor  expressly and  unconditionally
to assume  and agree to perform  each of the  Company's  obligations  under this
Agreement.  For  avoidance  of doubt,  it is  understood  that in the event that
another air carrier (or an affiliate  thereof)  directly or indirectly  acquires
the QQ  Business,  the Company  shall use its best efforts to cause such airline
(or its affiliate as the case may be) to provide the Executive,  the Executive's
Spouse,  the Executive's  Parents,  and the Executive's  Eligible  Children with
pass,  club and other  privileges on the combined  route networks of the Company
and the acquirer (or of any  affiliated  air  carriers,  as the case may be) and
with boarding  priority and other terms equal or superior to the Airline  Travel
and Club Benefits.  This Agreement and all rights of Executive  hereunder  shall
inure to the  benefit of, and be  enforceable  by, the  Executive's  personal or
legal   representatives,    executors,   administrators,    successors,   heirs,
distributees,  devises and legatees. This Agreement is personal to the Executive
and without the prior written  consent of the Company shall not be assignable by
the Executive other than by will or the laws of descent and distribution.

8. General Contract Provisions.

(a) Governing Law/Headings/Amendments/Entire  Agreement. This Agreement shall be
governed by and  construed in  accordance  with the laws of the State of Nevada,
without  reference  to  principles  of  conflict of laws.  The  captions of this
Agreement  are not part of the  provisions  hereof  and  shall  have no force or
effect.  This  Agreement may not be amended or modified  other than by a written
agreement  executed by the parties  hereto or their  respective  successors  and
legal   representatives.   This  Agreement,   together  with  the  stock  option
agreement(s) to be executed, contain the entire understanding of the Company and
the  Executive  with respect to the subject  matter hereof and supersede any and
all other  agreements,  either  oral or  written,  between  the  Company and the
Executive with respect to the subject matter hereof.

(b) Notices. All notices and other communications  hereunder shall be in writing
and shall be given by hand  delivery  to the  other  party or by  registered  or
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive: to her address as set forth in the personnel records of the
Company,  if to the Company:  to Reno Air, Inc.,  220 Edison Way,  Reno,  Nevada
89502,  Attention:  Chief Executive Officer, with a copy to the attention of the
Company's  Corporate  Secretary;  or to such other address as either party shall
have  furnished  to the other in writing in  accordance  herewith.  Notices  and
communications shall be effective when actually received by the addressee.

(c)  Enforceability  Issues.  If any  benefits  to  which  the  Executive  shall
otherwise  be  entitled  hereunder  are  not  permitted  to be  provided  to the
Executive  under any governing  plan  document or  applicable  law governing the
payment  or  provision  of such  benefits,  the  Company  shall  pay or  provide
equivalent  benefits to the  Executive  (or her  representatives  in the case of
death).  The invalidity or  unenforceability  of any provision of this Agreement
shall not affect the validity or  enforceability  of any other provision of this
Agreement.  To the extent the provisions of Section 4(g) are  inconsistent  with
the terms  regarding  subrogation  in any  officers'  and  directors'  liability
coverage,  the terms of such insurance  coverage shall prevail.  The Executive's
and/or the Company's failure to insist upon strict compliance with any provision
hereof shall not be deemed to be a waiver of such provision thereof.

(d)  Withholdings.  The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

<PAGE>

IN WITNESS WHEREOF,  the Executive and the Company have executed this Employment
Agreement as of the date first above written.


Reno Air, Inc. (the "Company")


By:/s/ Joseph R. O'Gorman
 
Title: Chairman of the Board, Chief Executive Officer, and President




    /s/Vicki W. Bretthauer
       Vicki W. Bretthauer (the "Executive")



<PAGE>
                                   Appendix I

                        Employment Agreement Definitions

"Airline Travel Benefits" is defined in Section 4(e).

"Board" shall mean the Board of Directors of the Company.

"Cause"  shall  mean  (i) an act or acts of  personal  dishonesty  taken  by the
Executive  and  intended to result in  substantial  personal  enrichment  of the
Executive  at the  expense  of the  Company,  (ii)  repeated  violations  by the
Executive  of  the  Executive's  obligations  under  this  Agreement  which  are
demonstrably  willful and deliberate on the  Executive's  part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company or, (iii) the conviction of the Executive of a felony.

"Change in Control" shall mean: (a) the acquisition by an individual,  entity or
group  (within  the meaning of Section  13(d)(3)  or 14(d)(2) of the  Securities
Exchange Act of 1934, as amended (the "Exchange  Act")) of beneficial  ownership
(within the meaning of Rule 13d-3  promulgated under the Exchange Act) of 50% or
more of either (i) the  then-outstanding  shares of common  stock of the Company
(the  "Outstanding  Common  Stock"),  or (ii) the  combined  voting power of the
then-outstanding  voting securities of the Company entitled to vote generally in
the  election  of  directors  (the  "Outstanding  Voting  Securities"),  or  (b)
individuals who, as of the Effective Date,  constitute the Board of Directors of
the Company (the "Incumbent  Board") cease for any reason to constitute at least
a majority of the Company's  Board of Directors;  provided,  that any individual
becoming  a  director  subsequent  to the  Effective  Date  whose  election,  or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then  comprising the Incumbent  Board shall
be considered as though such  individual  were a member of the Incumbent  Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such  terms are used in Rule  14a-11 of  Regulation  14A  promulgated  under the
Exchange Act) or other actual or threatened solicitation of proxies or consents;
or (c) approval by the shareholders of the Company of a  reorganization,  merger
or  consolidation,  in each case, with respect to which all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Common Stock and Outstanding Voting Securities immediately prior
to such reorganization,  merger or consolidation,  beneficially own, directly or
indirectly, less than 90% of, respectively, the outstanding common stock and the
outstanding voting securities,  as the case may be, of the corporation resulting
from such  reorganization,  merger or consolidation  in  substantially  the same
proportions as their ownership, immediately prior to such reorganization, merger
or  consolidation  of the Outstanding  Common Stock and the  Outstanding  Voting
Securities,  as the case may be;  or (d)  approval  by the  shareholders  of the
Company of (i) a complete  liquidation or dissolution of the Company or (ii) the
sale or other  disposition  of all or a significant  portion of the QQ Business,
other than to a corporation,  with respect to which following such sale or other
disposition,  more than 90% of,  respectively,  the  then-outstanding  shares of
common  stock of such  corporation  and the  combined  voting  power of the then
outstanding voting securities of such corporation  entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and the Outstanding Voting
Securities  immediately prior to such sale or other disposition in substantially
the same proportion as their ownership,  immediately prior to such sale or other
disposition,  of the Outstanding Common Stock and Outstanding Voting Securities,
as the case may be; or (e) the acquisition by an individual,  entity or group of
beneficial  ownership of 50% or more of the  then-outstanding  securities of the
Company,  including both voting and non-voting securities;  provided,  that such
acquisition shall constitute a Change of Control only if such individual, entity
or group also obtains the power to elect by class vote or cumulative  voting, or
otherwise to appoint,  50% or more of the total number of directors to the Board
of Directors of the Company.
<PAGE>

"Change of Control  Date" shall mean the first date on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding,  if a Change
of  Control  occurs  and if the  Executive's  employment  with  the  Company  is
terminated or the Executive  ceases to be an officer of the Company prior to the
date on which the Change of Control occurs, and if it is reasonably demonstrated
by the Executive  that such  termination of employment or cessation of status as
an  officer  (i)  was at the  request  of a third  party  who  has  taken  steps
reasonably calculated to effect the Change of Control or (ii) was effected by or
on behalf of the Company in connection  with or in  anticipation of an actual or
proposed Change of Control,  then for all purposes of this Agreement the "Change
of  Control  Date"  shall  mean the date  immediately  prior to the date of such
termination of employment or cessation of status as an officer.

"Club Benefits" is defined in Section 4(e).

"Common Stock" shall mean the Company's common stock, $.01 par value.

"Company"  shall mean the Company as defined  above and any  successor to the QQ
Business  which assumes and agrees to perform this Agreement by operation of law
or otherwise.

"Disability" shall mean any physical or mental illness,  condition,  dependency,
or incapacity rendering the Executive unable to adequately perform substantially
all of her  duties  and  responsibilities  to the  Company,  provided  that such
disability continues for an uninterrupted period of at least 6 months.
 
"Effective Date" shall mean March 26, 1998.

"Eligible  Child" shall mean a naturally  born or legally  adopted  child of the
Executive  within the age  parameters  described in the  immediately  succeeding
sentence.  Any such child shall  cease to be an  Eligible  Child upon his or her
21st birthday (unless and for so long as such child remains a full-time student,
in which case,  the child will remain an Eligible Child until not later than his
or her 23rd birthday).

"Employment  Period" shall mean the period  commencing on the Effective Date and
ending on the earlier to occur of (i) June 30, 2001 or (ii) the first day of the
month next  following the  Executive's  birthday upon which the Executive  shall
attain the Normal  Retirement Date;  provided,  however,  that in the event of a
Reappointment of the Executive, the Employment Period shall be extended so as to
terminate on the earlier of (x) three years from the applicable  Renewal Date or
(y) the Executive's Normal Retirement Date; and provided, further, that upon the
occurrence of a Change of Control,  the Employment Period shall automatically be
extended so as to terminate on the earlier to occur of (a) the third anniversary
of the Change of Control Date or (b) the Executive's Normal Retirement Date.

"Executive's Parents" shall mean those family members defined as "Parents" under
the Company's non-revenue travel policies.

"Executive's  Spouse" shall mean the  Executive's  husband on the Effective Date
(for so long as he and the Executive  shall remain  married  unless the marriage
shall  terminate  pursuant to the  Executive's  death,  in which case,  he shall
maintain  such status for purposes of this  Agreement  until such time as he may
re-marry) or in the event the Executive  shall re-marry,  any successor  husband
(subject to the  qualifications  and conditions  set forth in the  parenthetical
commencing on the first line of this definition).

"Good Reason" shall mean any one or more of the following: (i) the assignment to
the  Executive of any duties  inconsistent  in any respect with the  Executive's
position  (including  status,  offices,  titles  and  reporting  relationships),
authority,  duties or responsibilities as contemplated by this Agreement, or any
other  action by the Company  which  results in a diminution  in such  position,
authority,  duties or responsibilities,  excluding for this purpose an isolated,
insubstantial  and  inadvertent  action  not  taken in bad  faith  and  which is
remedied by the Company  promptly  after receipt of notice  thereof given by the
Executive;  (ii) (x) any failure by the  Company to comply with its  obligations
under this  Agreement,  other than an isolated,  insubstantial  and  inadvertent
failure not occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive,  or (y) after the Change
of Control  Date,  any  failure of the Company to maintain or provide the plans,
programs,  policies and  practices,  and benefits  described in Section 4 of the
Agreement  on the  most  favorable  basis  such  plans  programs,  policies  and
practices  were  maintained  and  benefits  provided  during the  90-day  period
immediately  preceding the Change of Control  Date, or if more  favorable to the
Executive  and/or the  Executive's  family,  as in effect at any time thereafter
with respect to other key employees of the Company and its affiliates; (iii) the
Company's  requiring the  Executive to be based at any office or location  other
than within 35 miles of the Reno/Lake Tahoe  International  Airport,  except for
travel   reasonably   required   in   the   performance   of   the   Executive's
responsibilities;  (iv)  the  consummation  by  the  Company  of  a  significant
marketing  or   operational   alliance,   strategic   partnership,   significant
code-sharing  relationship,  "virtual merger," or other significant  contractual
relationship  with one or more  non-affiliated  air carriers or their affiliates
(whether  or not in any such case  stock,  assets,  or other  consideration  are
exchanged) which results in a material  diminution in or material adverse change
to the  Executive's  position or the  authority,  duties,  and  responsibilities
thereof,  and (v) the failure of the Board to Reappoint the  Executive,  as more
particularly set forth in the definition of  Reappointment,  below, and (vi) any
purported termination by the Company of the Executive's employment other than as
expressly  permitted  by this  Agreement.  For  purposes  of  determining  "Good
Reason",  any good faith determination of "Good Reason" made by the Executive on
or after the  Change of  Control  Date  shall be  conclusive.  Anything  in this
Agreement to the contrary  notwithstanding,  a termination  by the Executive for
any reason  during the 180-day  period  following the first  anniversary  of the
Change of Control Date shall be deemed to be a  termination  for Good Reason for
all purposes of this Agreement.

"QQ Business" shall mean a substantial  portion of one or more of the following:
(i) the assets of the Company, (ii) the Company's aircraft,  (iii) the Company's
non-managerial personnel, (iv) the Outstanding Common Stock, (v) the Outstanding
Voting  Securities,  (vi) the  Company's  operating  certificate,  or (vii)  the
Company's gates.

"Normal  Retirement  Date" shall mean the mandatory  officer  retirement age (as
determined by the Board).

"Reappointment"  shall mean either: (a) the Board's  determination to extend the
term of the  Employment  Period  under  this  Agreement  by one  year or (b) the
Board's re-election or reappointment of the Executive to the position and duties
described  in the first  sentence  of Section 3 for any  period  beyond the next
succeeding  Renewal Date. The Company  covenants that the Board shall  determine
whether to reappoint the Executive annually; such determination to occur between
January 1 of a calendar year and not less than 20 days prior to the Renewal Date
in the same calendar  year.  It is understood  that the failure to Reappoint the
Executive  shall be deemed to afford the Executive  the right to terminate  this
Agreement for Good Reason.  For avoidance of doubt and  notwithstanding  the two
immediately  preceding  sentences,  after a Change of  Control,  the  Employment
Period shall terminate on the earlier to occur of: (a) the third  anniversary of
the Change of Control Date or (b) the Executive's Normal Retirement Date.

"Renewal Date" shall mean June 30, 1999 and each annual anniversary thereof.

"Travel  Network" shall mean each airline  operated by the Company or any of its
affiliates or any successor or successors.

"Vesting Compensation" is defined in Section 4(d).

<PAGE>

                              EMPLOYMENT AGREEMENT

This Employment Agreement (this "Agreement") is dated as of February 18, 1998 by
and between Reno Air, Inc., a Nevada  corporation  (the "Company") and Joseph R.
O'Gorman (the "Executive").

The Executive and the Company agree as follows:

1.  Definitions.  Capitalized  terms used in this  Agreement  and not  otherwise
defined  shall  have  the  meanings  assigned  to them in  Appendix  I  entitled
"Employment Agreement Definitions."

2.  Employment.  The Company  agrees to employ the  Executive  and the Executive
agrees to be employed by the Company on the terms and conditions hereinafter set
forth during the Employment Period.

3. Position and Duties.  During the Employment Period, the Executive shall serve
the Company as the Company's Chairman of the Board of Directors, Chief Executive
Officer,   and  President   and  the  Executive   shall  perform  the  attendant
responsibilities  thereto as provided in the Company's by-laws,  as well as such
other responsibilities as the Board may from time to time reasonably assign. The
Executive agrees to devote such time and effort as shall be reasonably  required
to discharge his duties hereunder. During the Employment Period, it shall not be
a violation of this  Agreement  for the Executive to: (i) serve on charitable or
non-conflicting civic or corporate boards or committees,  (ii) deliver lectures,
fulfill speaking  engagements,  or teach at educational  institutions,  or (iii)
manage  personal  investments;  so  long  as  the  foregoing  activities  do not
interfere  with  the  performance  of the  Executive's  responsibilities  as the
highest ranking officer of the Company.  The Executive agrees to resign from the
Board upon and in connection with the  termination of his  employment,  provided
that the Company has performed all of its obligations under this Agreement.

4. Compensation and Benefits. The compensation and benefits payable to Executive
for all services  rendered by the  Executive  under this  Agreement  shall be as
follows:

(a) Salary.  The  Executive  shall  receive a minimum base salary at the rate of
$250,000 per year.  Such salary shall be (i) payable  semi-monthly in accordance
with the Company's standard payroll practices (and pro-rated for any partial pay
period),  and (ii) subject to review and increase (but not decrease) at any time
at the discretion of the Board.

(b) Annual Bonus. The Executive shall be entitled to receive an annual bonus (as
determined by the Board in good faith) of up to the maximum  participation level
provided for in the Company's  incentive  compensation  plan for officers.  Such
bonus shall be paid not later than April 15 of the calendar  year  following the
calendar year to which it shall apply.  The Executive  shall also be eligible to
participate at the maximum  participation  level for officers in any other bonus
or incentive  compensation  plans or  arrangements  provided by the Company from
time to time to its officers or key employees.

(c) Business  Expenses.  The Company shall reimburse the Executive  promptly for
all  reasonable  travel  and  other  business  expenses  incurred  by him in the
performance  of his  duties  and  responsibilities,  subject  to  the  Company's
policies with respect to substantiation and documentation.

(d) Stock  Options.  The Company and the Executive  shall enter into one or more
stock  option  agreements  with  respect to options for the  purchase of 250,000
shares of Common Stock (subject to an equitable  adjustment in the case of stock
splits and the like),  at an exercise price of $5.63,  with such options vesting
in accordance with the following schedule:  50,000 shares of Common Stock vested
on the Effective Date, 50,000 shares of Common Stock shall vest on the six month
anniversary of the Effective  Date,  50,000 shares of Common Stock shall vest on
the one year  anniversary of the Effective  Date,  50,000 shares of Common Stock
shall vest on the eighteen  month  anniversary  of the  Effective  Date,  50,000
shares of Common Stock shall vest on the two-year  anniversary  of the Effective
Date,  and 50,000 shares of Common Stock shall vest on the 30-month  anniversary
of the Effective  Date.  In addition,  the Executive  shall  participate  in the
Company's  1997 Stock  Option Plan for  Directors in  accordance  with the terms
thereof.  With respect to all stock options and all other deferred  compensation
that vests over time in accordance  with a schedule or formula (such options and
other compensation,  the "Vesting Compensation"),  the Company and the Executive
agree that upon the first to occur of:  (i) the  Change of Control  Date or (ii)
the termination of this Agreement (other than by the Company for Cause or by the
Executive without Good Reason),  any Vesting Compensation to which the Executive
was or may have become entitled,  whether or not theretofore  granted or vested,
shall be immediately  granted and become  immediately  vested and exercisable by
the Executive (or his  representative  in the case of termination by death).  In
the event the vesting of the Vesting  Compensation is accelerated as provided in
the  immediately   preceding  sentence,   such  Vesting  Compensation  shall  be
exercisable until the earlier of: (x) the stated expiry thereof as provided in a
stock option  agreement,  Company plan, or other  governing  document or (y) 180
days after the date of the Executive's termination of employment.

(e) Airline Travel.  During the Employment  Period,  the Company will provide or
cause to be provided to the Executive,  the Executive's  Spouse, the Executive's
Parents,  and the Executive's  Eligible  Children  unlimited free positive space
airline travel on the Travel Network (the "Airline Travel Benefits").  Likewise,
should the Company, its affiliates, or its or their successors from time to time
operate or have an access arrangement for airport clubs, lounges and/or business
centers, the Executive and the Executive's Spouse shall be entitled to unlimited
free access to each such club,  lounge,  or business  center and unlimited  free
access to any other travel-related  benefit from time to time offered (such club
and  other  travel  benefits,  the  "Club  Benefits".  The  Executive  and  the
Executive's  Spouse  shall be entitled to Airline  Travel and Club  Benefits for
their respective lifetimes. The Executive's Parents shall be entitled to Airline
Travel  Benefits  for their  respective  lifetimes.  An Eligible  Child shall be
entitled to Airline  Travel  Benefits  for so long as he or she shall  remain an
Eligible  Child.  The  post-Employment  Period  Airline Travel and Club Benefits
described  in the  preceding  sentences  shall be provided  on the most  favored
terms,  practices  and  conditions  from time to time provided or offered by the
Company,  its  affiliates,  and  successors  to its or their  active and retired
senior-most  executive  officers and their  families  (but in all cases not less
favorable  than the highest  class of  space-available  travel in all classes of
service on the Travel Network).

(f) Other Benefits. The Executive and, to the extent applicable, the Executive's
family,  dependents and  beneficiaries,  shall each participate in all benefits,
plans and programs,  including  improvements or modifications of the same, which
are now, or may hereafter be,  available to the most-senior  executive  officers
and key employees of the Company and its  successors.  Such benefits,  plans and
programs may include,  without  limitation,  profit sharing plans, thrift plans,
health  insurance or health care plans,  life insurance,  disability  insurance,
pension and other retirement plans, pass privileges,  interline travel benefits,
and the like.  The  Executive  and the  Executives  Spouse shall be entitled to
medical coverage for their respective  lifetimes and any Eligible Child shall be
entitled to medical coverage for so long as he or she remains an Eligible Child;
provided that, (i) upon termination of the Executive's  employment,  the medical
coverage  (including  any Medicare  benefits)  described  hereunder  will become
subordinate to: (x) any coverage  provided by a prior or subsequent  employer of
the Executive or the Executive's  Spouse,  or (y) in the case of the Executive's
Spouse or Eligible  Children,  any  coverage  afforded to such  persons by their
respective past,  present,  or prospective  employers and (ii) in the event of a
Change of Control,  any medical  benefits  which would extend beyond the term of
the Employment Period (i.e., the lifetime medical benefits) shall be provided to
the  Executive  only to the  extent the  successor  to the QQ  Business  affords
medical benefits of greater duration to its chief executive officer,  president,
chairman of the board (or any other senior  executive) under a plan or agreement
of severance or termination.

(g)  Indemnification.  The Company  shall provide or cause to be provided to the
Executive  indemnification  against all expenses  (including  attorneys'  fees),
judgements,  fines  and  amounts  paid in  settlement  in  connection  with  any
threatened,  pending,  or completed action,  claim, suit or proceeding,  whether
civil, criminal,  administrative, or investigative (including an action by or in
the  right of the  Company)  by  reason of the  Executive's  having  served as a
director,  officer or employee of the Company or any  affiliate  of the Company.
The Company  shall  advance fees  (including  attorneys'  fees)  incurred by the
Executive in the defense of any such action, claim, suit, or proceeding, and the
Company shall  maintain  directors and officers  liability  insurance  coverage.
These  provisions  supplement  and are not in lieu of any rights  granted to the
Company's  officers and directors under the Company's articles of incorporation,
bylaws, any corporate document  (including  insurance  policies),  or applicable
law. The Company shall pay, or promptly reimburse on an as-incurred basis to the
Executive, the reasonable fees and expenses of the Executive's legal counsel for
its services  rendered in connection  with, the Executive's  enforcement of this
Agreement;  provided, that if the Executive institutes any proceeding to enforce
this Agreement and the judge,  arbitrator or other individual presiding over the
proceeding  affirmatively finds that the Executive  instituted the proceeding in
bad faith, the Executive shall pay all costs and expenses,  including attorneys'
fees,  of the Executive  and the Company.  The Company shall  indemnify and hold
harmless the  Executive,  on an  after-tax  basis,  from any payment  under this
Section 4 or  otherwise  to or for the  benefit of the  Executive  that would be
subject to the excise tax (including interests and penalties thereon) imposed by
Section 4999 of the Internal Code of 1986, as amended.

5. Termination and Termination Benefits

(a) Death. If the Executive dies, this Agreement shall  automatically  terminate
on the date of his death.  The  Executive's  estate or designated  beneficiaries
shall be  entitled  to receive  (i) the  Executive's  then-current  salary for a
period of six months  following the date of death,  (ii) any accrued  portion of
any bonus which is  ultimately  determined to have been payable to the Executive
and  allocable to the period prior to death,  (iii) the Airline  Travel and Club
Benefits, (iv) the Vesting Compensation (which shall vest and become immediately
exercisable),  (v) any other  benefits  which  shall have been  provided  to the
Executive to the extent permitted under any applicable plan documents,  and (vi)
subject to the  proviso  set forth in the last  sentence  of Section  4(g) above
regarding   subordination  of  coverage,   lifetime  medical  coverage  for  the
Executive's Spouse.

(b)  Disability.  If the  Executive  suffers a Disability a majority of the full
Board  shall  have the  right to act to  cause  the  Company  to  terminate  the
Executive's  employment  as of such date by  written  notice  to the  Executive.
Thereafter,  the Executive  shall be entitled to receive:  (i) his  then-current
salary for a period of twelve months following the date of termination, (ii) any
accrued portion of any bonus which is ultimately determined to have been payable
to the Executive  and allocable to the period prior to the date of  termination,
(iii) the Airline Travel and Club Benefits, (iv) the Vesting Compensation (which
shall vest and become immediately exercisable),  and (iv) subject to the proviso
set forth in the last sentence of Section 4(f) above regarding  subordination of
coverage,  lifetime  medical  coverage  for the  Executive  and the  Executive's
Spouse.

(c)  Termination  by the  Company  for Cause.  The  Company  may  terminate  the
Executive's  employment for Cause. If the Board determines (which  determination
must be made by  majority  vote of the full  membership  of the Board)  that the
Executive should be terminated for Cause, the Board shall send written notice to
the Executive  setting forth in  reasonable  detail the nature of the Cause.  No
termination  for Cause shall be  effective  until (i) such vote is obtained  and
such  notice  has been sent to and  received  by the  Executive.  Following  the
Executive's  receipt of such notice, the Executive must be provided a reasonable
opportunity to meet with the entire Board and discuss the Board's notice to him.
Termination  will only be  effective  if the Board  ratifies its earlier vote to
terminate  the  Executive  for  Cause by a second  vote of the  majority  of its
membership.  In such a case,  the  Executive  will be entitled to no  additional
compensation   other  than  salary  accrued  prior  to  the  effective  date  of
termination except as provided in Sections 4(c), (e), and (f).

(d) Termination by the Company without Cause. The Executive's  employment may be
terminated by the affirmative vote of the majority of the full membership of the
Board  without  Cause  provided that the Executive is afforded at least 60 days'
prior written notice of such termination.

(e)  Termination  by the  Executive.  The Executive may terminate his employment
with or without Good Reason by giving the Board not less than 60 days' (30 days'
if the  Executive  is not then  serving  as the Chief  Executive  Officer of the
Company) prior written notice of termination of his employment, and he shall not
be  required to render any  services to the Company  after the date set forth in
the  notice of  termination.  In the  event of a  termination  by the  Executive
without  Good  Reason,   the  Executive  shall  be  entitled  to  no  additional
compensation   other  than  salary  accrued  prior  to  the  effective  date  of
termination, except as expressly provided in Section 4.

(f)  Acceleration  of Salary,  Bonus,  and Benefits if Without Cause or for Good
Reason.  Except as otherwise  provided in this  Agreement,  if this Agreement is
terminated by the Company  without Cause and other than for death or disability,
or this  Agreement is  terminated  by the  Executive  with Good Reason:  (i) the
Company shall pay to the Executive the sum of: (x) the total undiscounted amount
of the Executive's  entire salary which would  otherwise  become due and payable
under  Section  4(a)  during the  Employment  Period,  plus (y) if the Change in
Control Date shall have occurred, the product of (A) 2 1/2 times (B) the maximum
annual  bonus  payable to the  Executive  in  accordance  with the  then-current
incentive  bonus plan described in Section 4(b),  (ii) the Vesting  Compensation
shall vest and become  immediately  exercisable,  and (iii) except to the extent
more favorable  benefits are otherwise  provided in this  Agreement  (which more
favorable  provisions shall govern),  the Executive shall be entitled to receive
flight, medical, dental, life insurance,  vision, and similar benefits until the
last day of the Employment  Period  (assuming that this Agreement shall not have
been  terminated  but subject to the  proviso set forth in the last  sentence of
Section 4(f) above regarding subordination of medical coverage).  The salary and
bonus that would be due and payable under sub-clause (i) of this Section 4 shall
be paid to the Executive in three equal tranches on each of the 30th,  60th, and
90th day after the date of termination (or the immediately  succeeding  business
day if any such day is not a business day).

(g) No Duty to Mitigate/No Non-Compete.  The Executive has no duty or obligation
to mitigate the expenditures for salaries,  bonuses, benefits or otherwise after
termination of this Agreement  and/or  cessation of employment with the Company.
Nothing in this  Agreement  is  intended  to serve as a  "non-compete"  or other
limitation  on the  future  employment  opportunities  for the  Executive  after
termination of this Agreement.

6.  Confidential  Information.  The Executive shall maintain a fiduciary duty to
the Company for all confidential information,  knowledge or data relating to the
Company or any of its affiliated  companies,  and their  respective  businesses,
which  shall  have  been  obtained  by  the  Executive  during  the  Executive's
employment  by the  Company or any of its  affiliates  until  such  confidential
information,  knowledge  or data  become  a  matter  of  public  record  through
disclosure   by  a  person  or  persons   other  than  the   Executive   or  his
representatives and which does not involve communication or disclosure, directly
or indirectly, by the Executive or his representatives.  The Executive shall not
communicate or disclose any such information, knowledge, or data to anyone other
than the Company and those designated by the Company.  After  termination of the
Executive's  employment  with  the  Company,  the  Executive  shall  return  all
confidential and proprietary  information in his possession or under his control
and shall not, without the prior written consent of the Company,  communicate or
disclose  any such  information,  knowledge  or data to  anyone  other  than the
Company and those designated by the Company. Willful violation of this paragraph
6 shall void this Employment Agreement.

7.  Successors and Assigns.  This  Agreement  shall bind any successor to the QQ
Business,   whether  direct  or  indirect  and  whether  by  purchase,   merger,
consolidation  or otherwise,  in the same manner and to the same extent that the
Company would be obligated  under this Agreement if no such succession had taken
place. Notwithstanding that a successor to the QQ Business becomes bound to this
Agreement, the Company shall continue to be liable for the obligations hereunder
as a guarantor.  In any agreement  providing for  succession to the QQ Business,
the Company shall cause each and every successor  expressly and  unconditionally
to assume  and agree to perform  each of the  Company's  obligations  under this
Agreement.  It is  understood  that in the event that another air carrier (or an
affiliate thereof) directly or indirectly acquires the QQ Business,  the Company
shall use its best efforts to cause such  airline (or its  affiliate as the case
may be) to provide  the  Executive,  the  Executive's  Spouse,  the  Executive's
Parents,  and the  Executive's  Eligible  Children  with  pass,  club and  other
privileges on the combined route networks of the Company and the acquirer (or of
any affiliated air carriers,  as the case may be) and with boarding priority and
other terms equal or superior  to the  Airline  Travel and Club  Benefits.  This
Agreement and all rights of Executive  hereunder  shall inure to the benefit of,
and be  enforceable  by,  the  Executive's  personal  or legal  representatives,
executors,   administrators,   successors,  heirs,  distributees,   devises  and
legatees.  This  Agreement  is personal to the  Executive  and without the prior
written  consent of the Company shall not be  assignable by the Executive  other
than by will or the laws of descent and distribution.

8. General Contract Provisions.

(a) Governing Law/Headings/Amendments/Entire  Agreement. This Agreement shall be
governed by and  construed in  accordance  with the laws of the State of Nevada,
without  reference  to  principles  of  conflict of laws.  The  captions of this
Agreement  are not part of the  provisions  hereof  and  shall  have no force or
effect.  This  Agreement may not be amended or modified  other than by a written
agreement  executed by the parties  hereto or their  respective  successors  and
legal   representatives.   This  Agreement,   together  with  the  stock  option
agreement(s) to be executed, contain the entire understanding of the Company and
the  Executive  with respect to the subject  matter hereof and supersede any and
all other  agreements,  either  oral or  written,  between  the  Company and the
Executive with respect to the subject matter hereof.

(b) Notices. All notices and other communications  hereunder shall be in writing
and shall be given by hand  delivery  to the  other  party or by  registered  or
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive: to his address as set forth in the personnel records of the
Company,  if to the Company:  to Reno Air, Inc.,  220 Edison Way,  Reno,  Nevada
89502, Attention: Chairman, Human Resources Committee of the Board of Directors,
with a copy to the attention of the Company's  Corporate  Secretary;  or to such
other  address as either  party shall have  furnished to the other in writing in
accordance herewith. Notices and communications shall be effective when actually
received by the addressee.

(c)  Enforceability  Issues.  If any  benefits  to  which  the  Executive  shall
otherwise  be  entitled  hereunder  are  not  permitted  to be  provided  to the
Executive  under any governing  plan  document or  applicable  law governing the
payment  or  provision  of such  benefits,  the  Company  shall  pay or  provide
equivalent  benefits to the  Executive  (or his  representatives  in the case of
death).  The invalidity or  unenforceability  of any provision of this Agreement
shall not affect the validity or  enforceability  of any other provision of this
Agreement.  To the extent the provisions of Section 4(g) are  inconsistent  with
the terms  regarding  subrogation  in any  officers'  and  directors'  liability
coverage,  the terms of such insurance  coverage shall prevail.  The Executive's
and/or the Company's failure to insist upon strict compliance with any provision
hereof shall not be deemed to be a waiver of such provision thereof.

(d)  Withholdings.  The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

<PAGE>


IN WITNESS WHEREOF,  the Executive and the Company have executed this Employment
Agreement as of the date first above written.



Reno Air, Inc. (the "Company")


By: /s/Steven A. Rossum

Title: Senior Vice President and General Counsel



/s/ Joseph R. O'Gorman                                                
    Joseph R. O'Gorman (the "Executive")


Board of Directors Approval:

By: /s/ James T. Lloyd
        James T. Lloyd, Chairman
        Human Resources Committee

<PAGE>

                                  Appendix I

                        Employment Agreement Definitions

"Airline Travel Benefits" is defined in Section 4(e).

"Board" shall mean the Board of Directors of the Company.

"Cause"  shall  mean  (i) an act or acts of  personal  dishonesty  taken  by the
Executive  and  intended to result in  substantial  personal  enrichment  of the
Executive  at the  expense  of the  Company,  (ii)  repeated  violations  by the
Executive  of  the  Executive's  obligations  under  this  Agreement  which  are
demonstrably  willful and deliberate on the  Executive's  part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company or (iii) the conviction of the Executive of a felony.

"Change in Control" shall mean: (a) the acquisition by an individual,  entity or
group  (within  the meaning of Section  13(d)(3)  or 14(d)(2) of the  Securities
Exchange Act of 1934, as amended (the "Exchange  Act")) of beneficial  ownership
(within the meaning of Rule 13d-3  promulgated under the Exchange Act) of 50% or
more of either (i) the  then-outstanding  shares of common  stock of the Company
(the  "Outstanding  Common  Stock"),  or (ii) the  combined  voting power of the
then-outstanding  voting securities of the Company entitled to vote generally in
the  election  of  directors  (the  "Outstanding  Voting  Securities"),  or  (b)
individuals who, as of the Effective Date,  constitute the Board of Directors of
the Company (the "Incumbent  Board") cease for any reason to constitute at least
a majority of the Company's  Board of Directors;  provided,  that any individual
becoming  a  director  subsequent  to the  Effective  Date  whose  election,  or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then  comprising the Incumbent  Board shall
be considered as though such  individual  were a member of the Incumbent  Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such  terms are used in Rule  14a-11 of  Regulation  14A  promulgated  under the
Exchange Act) or other actual or threatened solicitation of proxies or consents;
or (c) approval by the shareholders of the Company of a  reorganization,  merger
or  consolidation,  in each case, with respect to which all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Common Stock and Outstanding Voting Securities immediately prior
to such reorganization,  merger or consolidation,  beneficially own, directly or
indirectly, less than 90% of, respectively, the outstanding common stock and the
outstanding voting securities,  as the case may be, of the corporation resulting
from such  reorganization,  merger or consolidation  in  substantially  the same
proportions as their ownership, immediately prior to such reorganization, merger
or  consolidation  of the Outstanding  Common Stock and the  Outstanding  Voting
Securities,  as the case may be;  or (d)  approval  by the  shareholders  of the
Company of (i) a complete  liquidation or dissolution of the Company or (ii) the
sale or other  disposition  of all or a significant  portion of the QQ Business,
other than to a corporation,  with respect to which following such sale or other
disposition,  more than 90% of,  respectively,  the  then-outstanding  shares of
common  stock of such  corporation  and the  combined  voting  power of the then
outstanding voting securities of such corporation  entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and the Outstanding Voting
Securities  immediately prior to such sale or other disposition in substantially
the same proportion as their ownership,  immediately prior to such sale or other
disposition,  of the Outstanding Common Stock and Outstanding Voting Securities,
as the case may be; or (e) the acquisition by an individual,  entity or group of
beneficial  ownership of 50% or more of the  then-outstanding  securities of the
Company,  including both voting and non-voting securities;  provided,  that such
acquisition shall constitute a Change of Control only if such individual, entity
or group also obtains the power to elect by class vote or cumulative  voting, or
otherwise to appoint,  50% or more of the total number of directors to the Board
of Directors of the Company.
<PAGE>

"Change of Control  Date" shall mean the first date on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding,  if a Change
of  Control  occurs  and if the  Executive's  employment  with  the  Company  is
terminated or the Executive  ceases to be an officer of the Company prior to the
date on which the Change of Control occurs, and if it is reasonably demonstrated
by the Executive  that such  termination of employment or cessation of status as
an  officer  (i)  was at the  request  of a third  party  who  has  taken  steps
reasonably calculated to effect the Change of Control or (ii) was effected by or
on behalf of the Company in connection  with or in  anticipation of an actual or
proposed Change of Control,  then for all purposes of this Agreement the "Change
of  Control  Date"  shall  mean the date  immediately  prior to the date of such
termination of employment or cessation of status as an officer.

"Club Benefits" is defined in Section 4(e).

"Common Stock" shall mean the Company's common stock, $.01 par value.

"Company"  shall mean the Company as defined  above and any  successor to the QQ
Business  which assumes and agrees to perform this Agreement by operation of law
or otherwise.

"Disability" shall mean any physical or mental illness,  condition,  dependency,
or incapacity rendering the Executive unable to adequately perform substantially
all of his  duties  and  responsibilities  to the  Company,  provided  that such
disability continues for an uninterrupted period of at least 6 months.
 
"Effective Date" shall mean February 18, 1998.

"Eligible  Child" shall mean a naturally  born or legally  adopted  child of the
Executive  within the age  parameters  described in the  immediately  succeeding
sentence.  Any such child shall  cease to be an  Eligible  Child upon his or her
21st birthday (unless and for so long as such child remains a full-time student,
in which case,  the child will remain an Eligible Child until not later than his
or her 23rd birthday).

"Employment  Period" shall mean the period  commencing on the Effective Date and
ending on the earlier to occur of (i) December 30, 2000 or (ii) the first day of
the month next following the Executive's birthday upon which the Executive shall
attain the Normal  Retirement Date;  provided,  however,  that in the event of a
Reappointment of the Executive, the Employment Period shall be extended so as to
terminate  on the earlier of (x) 30 months from the  applicable  Renewal Date or
(y) the Executive's Normal Retirement Date; and provided, further, that upon the
occurrence of a Change of Control,  the Employment Period shall automatically be
extended  so as to  terminate  on the  earlier to occur of (a) the 30th  monthly
anniversary  of the  Change  of  Control  Date  or (b)  the  Executive's  Normal
Retirement Date.

"Executive's Parents" shall mean Joseph and Eileen O'Gorman.

"Executive's Spouse" shall mean Gail Seidel-O'Gorman (for so long as she and the
Executive shall remain married unless the marriage shall  terminate  pursuant to
the  Executive's  death,  in which  case,  she shall  maintain  such  status for
purposes of this Agreement  until such time as she may re-marry) or in the event
the Executive shall re-marry,  any successor wife (subject to the qualifications
and  conditions set forth in the  parenthetical  commencing on the first line of
this definition).

"Good Reason" shall mean any one or more of the following: (i) the assignment to
the  Executive of any duties  inconsistent  in any respect with the  Executive's
position  (including  status,  offices,  titles  and  reporting  relationships),
authority,  duties or responsibilities as contemplated by this Agreement, or any
other  action by the Company  which  results in a diminution  in such  position,
authority,  duties or responsibilities,  excluding for this purpose an isolated,
insubstantial  and  inadvertent  action  not  taken in bad  faith  and  which is
remedied by the Company  promptly  after receipt of notice  thereof given by the
Executive;  (ii) (x) any failure by the  Company to comply with its  obligations
under this  Agreement,  other than an isolated,  insubstantial  and  inadvertent
failure not occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive,  or (y) after the Change
of Control  Date,  any  failure of the Company to maintain or provide the plans,
programs,  policies and  practices,  and benefits  described in Section 4 of the
Agreement  on the  most  favorable  basis  such  plans  programs,  policies  and
practices  were  maintained  and  benefits  provided  during the  90-day  period
immediately  preceding the Change of Control  Date, or if more  favorable to the
Executive  and/or the  Executive's  family,  as in effect at any time thereafter
with respect to other key employees of the Company and its affiliates; (iii) the
Company's  requiring the  Executive to be based at any office or location  other
than within 35 miles of the Reno/Lake Tahoe  International  Airport,  except for
travel   reasonably   required   in   the   performance   of   the   Executive's
responsibilities;  (iv)  the  consummation  by  the  Company  of  a  significant
marketing  or   operational   alliance,   strategic   partnership,   significant
code-sharing  relationship,  "virtual merger", or other significant  contractual
relationship  with one or more  non-affiliated  air carriers or their affiliates
(whether  or not in any such case  stock,  assets,  or other  consideration  are
exchanged) which results in a material  diminution in or material adverse change
to the  Executive's  position or the  authority,  duties,  and  responsibilities
thereof,  (v) the  shareholders of the Company shall fail to elect the Executive
to the Board or the Board shall fail to elect the  Executive  as Chairman of the
Board,  (vi) the  failure  of the  Board to  Reappoint  the  Executive,  as more
particularly set forth in the definition of Reappointment,  below, and (vii) any
purported termination by the Company of the Executive's employment other than as
expressly  permitted  by this  Agreement.  For  purposes  of  determining  "Good
Reason",  any good faith determination of "Good Reason" made by the Executive on
or after the  Change of  Control  Date  shall be  conclusive.  Anything  in this
Agreement to the contrary  notwithstanding,  a termination  by the Executive for
any reason  during the 180-day  period  following the first  anniversary  of the
Change of Control Date shall be deemed to be a  termination  for Good Reason for
all purposes of this Agreement.

"QQ Business" shall mean a substantial  portion of one or more of the following:
(i) the assets of the Company, (ii) the Company's aircraft,  (iii) the Company's
non-managerial personnel, (iv) the Outstanding Common Stock, (v) the Outstanding
Voting  Securities,  (vi) the  Company's  operating  certificate,  or (vii)  the
Company's gates.

"Normal  Retirement  Date" shall mean the mandatory  officer  retirement age (as
determined by the Board).

"Renewal Date" shall mean June 30, 1999 and each annual anniversary thereof.

"Reappointment"  shall mean either: (a) the Board's  determination to extend the
term of the  Employment  Period  under  this  Agreement  by one  year or (b) the
Board's re-election or reappointment of the Executive to the position and duties
described  in the first  sentence  of Section 3 for any  period  beyond the next
succeeding  Renewal Date. The Company  covenants that the Board shall  determine
whether to reappoint the Executive annually; such determination to occur between
January 1 of a calendar year and not less than 20 days prior to the Renewal Date
in the same calendar  year.  It is understood  that the failure to Reappoint the
Executive  shall be  deemed  give the  Executive  the  right  to  terminate  his
employment  for Good  Reason.  For  avoidance of doubt and  notwithstanding  the
immediately two preceding  sentences,  after a Change of Control, the Employment
Period  shall  terminate  on the  earlier  to occur  of:  (a) the  30th  monthly
anniversary  of the  Change  of  Control  Date  or (b)  the  Executive's  Normal
Retirement Date.


"Travel  Network" shall mean each airline  operated by the Company or any of its
affiliates or any successor or successors.

"Vesting Compensation" is defined in Section 4(d).
<PAGE>
                                Table of Contents
Page

1. Definitions.................................................................1

2. Sale and Assignment of Aircraft and Related Assets..........................3
         2.01.  Delivery.......................................................3
         2.02.  Consideration..................................................3
         2.03.  Deposits.......................................................3
         2.04.  Cut-off Date...................................................3
         2.05.  Place of Delivery..............................................4
         2.06.  Title................................................. ........4


3. Closing Conditions..........................................................4
         3.01  Conditions to Buyer's Obligations...............................4
         3.02.  Conditions to Seller's Obligations...................... ......5


4. Warranties, Covenants, and Acknowledgments..................................6
         4.01.  Warranties.............................................. ......6
         4.02.  Limitation of Warranties and Agreements........................7


5. Taxes and Indemnities.......................................................7
         5.01.  Payment of Taxes...............................................7
         5.02.  General Indemnities............................................7


6. Event of Loss...............................................................8


7. Representations and Warranties..............................................8
         7.01.  Representations and Warranties of Each Party...................8
         7.02.  Representations and Warranties......................... .......9


8. Miscellaneous...............................................................9
         8.01.  Notices.......................................................10
         8.02.  Assignment.................................... ...............11
         8.03.  Captions......................................................11
         8.04.  Brokers' Commissions.................................. .......11
         8.05.  Applicable Law......................................... ......11
         8.06.  Entire Agreement..............................................11
         8.07.  Waivers.............................................. ........11
         8.08.  Counterparts..................................................11
         8.09.  Expenses.............................................. .......11

EXHIBITS

Exhibit A ........Acceptance Receipt

Exhibit B.........Assignment and Assumption Agreement

Exhibit C.........Bill of Sale
<PAGE>
                          AIRCRAFT PURCHASE AGREEMENT

                              SPIRIT AIRLINES,INC.
                             a Maryland corporation
                                     (Buyer)
                                       and
                                 RENO AIR,INC.
                              a Nevada corporation
                                    (Seller)

                                   Dated as of
                                  June 9, 1998
                         ------------------------------

                 Two McDonnell Douglas DC-9-82 (MD-82) Aircraft
           United States Registration (Manufacturer's Serial) Numbers:
                                 N804RA (48048)
                                 N805RA (48087)


TABLE OF CONTENTS

Page

RECITALS                                                                       1

ARTICLE 1            DEFINITIONS                                               1

ARTICLE 2            PURCHASE OF AIRCRAFT                                      4

Section 2.01      Purchase of Aircraft                                         4
Section 2.02      Progress Payments and Purchase Price                         4
Section 2.03      Payment of Purchase Price and Other
                           Amounts on Delivery of each Aircraft                4

ARTICLE 3            AIRCRAFT DELIVERY, TITLE, RISK OF LOSS                    4

Section 3.01      Delivery of Aircraft                                         4
Section 3.02      Place of Delivery                                            5
Section 3.03      Aircraft Delivery Procedures                                 5
Section 3.04      Title and Risk of Loss                                       5
Section 3.05      Conditions to Obligations of Buyer
                           to Purchase each Aircraft                           5
Section 3.06      Conditions to Seller's Obligations
                           to Sell the Aircraft                                7
Section 3.07  Cooperation with Buyer's Financing of the Aircraft               8

ARTICLE 4            WARRANTY AND COVENANTS                                    7

Section 4.01      Warranties                                                   7
Section 4.02      Limitation of Warranty                                       7

ARTICLE 5            AIRCRAFT DOCUMENTATION                                    8

Section 5.01      Aircraft Documentation                                       8

ARTICLE 6            ASSIGNMENTS OF WARRANTIES, SERVICE
                     LIFE POLICIES AND PATENT INDEMNITIES                      8

Section 6.01      Assignment of Warranties, Etc.                               8

ARTICLE 7            PAYMENT, TAXES, INDEMNITIES                               8

Section 7.01      Method of Payment                                            8
Section 7.02      Payment of Taxes by Buyer                                    8
Section 7.03      Tax Indemnity                                                9
Section 7.04      General Indemnity                                            9

<PAGE>

ARTICLE 8            NOTIFICATION, INSPECTION, PRE-DELIVERY MAINTENANCE,
                     TESTING, AND ACCEPTANCE

Section 8.01 Notification and Inspection; Buyer's Pre-Delivery Maintenance    10
Section 8.02      Functional Check Flight                                     10
Section 8.03      Acceptance                                                  10

ARTICLE 9         EVENT OF LOSS                                               10

Section 9.01      Event of Loss                                               11

ARTICLE 10        REPRESENTATIONS                                             11

Section 10.01     Authority of Buyer and Seller, Etc.                         11

ARTICLE 11        CERTAIN ADDITIONAL AGREEMENTS OF SELLER AND BUYER           12

Section 11.01     Engine Pooling and Leasing

ARTICLE 12        MISCELLANEOUS                                               13

Section 12.01     Notices                                                     13
Section 12.02     Exhibits                                                    13
Section 12.03     Assignments                                                 13
Section 12.04     Captions                                                    14
Section 12.05     Brokers' Commissions                                        14
Section 12.06     Applicable Law                                              14
Section 12.07     Entire Agreement                                            14
Section 12.08     Waivers                                                     14
Section 12.09     Confidentiality                                             14
Section 12.10     Counterparts                                                15
Section 12.11     Expenses                                                    15

EXHIBITS
EXHIBIT A         AIRCRAFT DESCRIPTION
EXHIBIT B         AIRCRAFT DOCUMENTATION
EXHIBIT C         AIRCRAFT ACCEPTANCE RECEIPT
EXHIBIT D         AIRCRAFT BILL OF SALE
EXHIBIT E         DELIVERY CONDITION REQUIREMENTS
EXHIBIT F         FUNCTIONAL CHECK FLIGHT CERTIFICATE
 
<PAGE>

THIS AIRCRAFT PURCHASE  AGREEMENT (this "Agreement") is made and entered into as
of the 9th day of June,  1998, by and between  SPIRIT  AIRLINES,  INC., a ______
corporation,   having  a  business  address  at  18121  East  Eight  Mile  Road,
Eastpointe,  Michigan 48021 ("Buyer"),  and RENO AIR, INC., a Nevada corporation
having a business address at 220 Edison Way, Reno, Nevada 89502 ("Seller").

                                    RECITALS:

Subject to the terms and conditions of this Agreement, Buyer desires to purchase
from Seller, and Seller desires to sell to Buyer the Aircraft.

Accordingly,  in  consideration  of the mutual  covenants and agreements  herein
contained,  and  other  valuable  consideration,  receipt  of  which  is  hereby
acknowledged, Buyer and Seller (the "Parties") hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

Primary  Definitions.  In addition to words and terms elsewhere  defined in this
Agreement,  the following  words and terms as used in this Agreement  shall have
the following meanings unless some other meaning is apparent from the context in
which the words and terms are used:

Aircraft.  As the context may require,  either or both of the McDonnell  Douglas
DC-9-82  aircraft  bearing United States  registration  (Manufacturer's  serial)
numbers:  N804RA (48048) and N805RA  (48087),  including with each such Aircraft
two Engines,  certain  installed  equipment  (excluding  all video and telephone
equipment)  and  Aircraft  Documentation,  all of which  are  more  particularly
described in Exhibits A and B.

Aircraft Acceptance Receipt. A receipt executed by Buyer and delivered to Seller
concurrently  with the  Delivery of an  Aircraft,  substantially  in the form of
Exhibit C.

Aircraft  Bills of Sale.  Collectively,  a Bill of Sale  executed  by Seller and
delivered to Buyer conveying title to an Aircraft,  substantially in the form of
Exhibit D and an FAA Bill of Sale.

Aircraft  Documentation.  The data with  respect to an Aircraft as  described in
Exhibit B.

Boeing. Collectively, The Boeing Company and its affiliates.

Business Day. Any day other than a Saturday,  Sunday or holiday scheduled by law
for any  commercial  banking  institutions  in Las  Vegas,  Nevada  or  Detroit,
Michigan.

Closing Date. The proposed date of Delivery as advised by Buyer to Seller on not
less than five Business Days' notice. The Closing Date for Aircraft N804RA shall
be on or before June 30, 1998 and the Closing Date for Aircraft  N805RA shall be
on or before September 30, 1998.

Delivery.  The following  concurrent  events  performed in  connection  with the
purchase and sale of an Aircraft in accordance  with the terms and conditions of
this Agreement:

(a) purchase of such Aircraft by Seller from Boeing; (b) tender of such Aircraft
for delivery by Seller;  (c) acceptance by Buyer of such  Aircraft;  (d) sale by
transfer of title of such  Aircraft;  (e) payment by Buyer of the balance of the
Purchase Price set forth in Section 2.02 with respect to such Aircraft  together
with any other amounts then due from Buyer to Seller;  and (f) completion of the
events described in Section 3.03, as and to the extent applicable, for Delivery.

Delay. A delay by Seller acting  reasonably and in good faith in the performance
by Seller of its obligations to deliver an Aircraft to Buyer.

Engines.  The Pratt & Whitney  model  aircraft  engines  to be  installed  on an
Aircraft at Delivery, as more particularly described in Exhibit A.
<PAGE>

Event of Loss. An "Event of Loss" with respect to any property shall mean any of
the  following  events  which  respect  to such  property:  (i) the loss of such
property due to theft or disappearance  for a period of at least 120 days beyond
the Designated Date, (ii) destruction, damage beyond repair or rendition of such
property  permanently unfit for normal use for any reason whatsoever,  (iii) the
receipt of  insurance  proceeds  based  upon a total  loss with  respect to such
property under an insurance policy,  or (iv) the  condemnation,  confiscation or
seizure of, or  requisition  or loss of title to or use of, such  property for a
period in excess of 120 days beyond the  Designated  Date. An Event of Loss with
respect  to an  Aircraft  shall be deemed to have  occurred  if an Event of Loss
occurs with respect to the Airframe, which is a part of such Aircraft.

FAA. The United States Federal Aviation Administration, or any successor agency.

FAA  Bill of  Sale.  A  Federal  Aviation  Administration  Bill of Sale (AC Form
8050-2) conveying title to an aircraft.

Functional Check Flight Certificate.  The Functional Check Flight Certificate in
the form annexed  hereto as Exhibit F, to be executed and delivered by Buyer and
Seller.

Purchase  Price.  The  purchase  price for each of the  Aircraft  as provided in
Section 2.02.

Taxes.  Any  and  all  sales  fees  (including,  without  limitation,   license,
documentation  and registration  fees),  taxes  (including,  without  limitation
income, gross receipts,  sales, rental, use value-added,  property (tangible and
intangible), excise and stamp taxes), levies, imposts, duties, recording charges
or fees, charges, assessments or withholdings of any nature whatsoever, together
with any and all  assessments,  penalties,  additions to tax,  fines or interest
thereon.

<PAGE>
                                    ARTICLE 2
                              PURCHASE OF AIRCRAFT

Section 2.01. Purchase of Aircraft.  Subject to the terms and conditions of this
Agreement,  Seller  agrees to purchase  the Aircraft  from  Boeing,  to sell the
Aircraft to Buyer,  and Buyer agrees to purchase,  or cause to be purchased from
Seller, each of the Aircraft.

Section 2.02. Progress Payments and Purchase Price.

(a) Prior to the execution of this  Agreement,  Buyer has paid a  non-refundable
progress  payment  of  $500,000  for each of the  Aircraft  ($1  million  in the
aggregate).  Said progress  payments shall be refundable  only and to the extent
(i) an Event of Loss  occurs with  respect to an  Aircraft  prior to the Closing
Date for such  Aircraft,  (ii) Buyer elects to terminate  this  Agreement in the
event of a material  default  by Seller in the  performance  of its  obligations
under this Agreement such that Buyer's performance of its obligations under this
Agreement would lawfully be excused,  or (iii) Seller shall,  after a reasonable
opportunity  to cure,  shall have failed to satisfy (or cause to be satisfied) a
condition precedent set forth in Section 3.05 of this Agreement.

(b) The Purchase Price for Aircraft  N804RA shall be  $13,750,000.  The Purchase
Price for Aircraft N805RA shall be $13,250,000.

Section  2.03.  Payment of Purchase  Price and Other Amounts on Delivery of each
Aircraft.  Concurrent with Delivery of an Aircraft,  Buyer shall pay or cause to
be paid to Seller the  Purchase  Price for the  Aircraft  and any other  amounts
owing to Seller including any amounts then due and payable pursuant to the terms
of this Agreement less the amounts  heretofore  paid by Buyer to Seller for such
Aircraft in accordance with Section 2.02(a). Unless the Parties agree otherwise,
all such amounts shall be paid in immediately  available  United States funds by
wire transfer to Seller's account designated in Section 7.01 hereof.

                                    ARTICLE 3
                     AIRCRAFT DELIVERY, TITLE, RISK OF LOSS

Section 3.01. Delivery of Aircraft.  Subject to the limitation of warranties set
forth in Section  4.02  hereof,  Seller  shall  deliver the Aircraft to Buyer in
compliance in all material respects with the delivery condition requirements set
forth in Exhibit E, pursuant to the procedures  contemplated  by Section 3.03 on
the applicable Closing Date.

Section 3.02. Place of Delivery. Delivery of the Aircraft shall be at a location
in the continental United States as may be mutually agreed among Seller,  Buyer,
and Boeing.  Seller and Buyer agree to cooperate in causing the actual  Delivery
of the Aircraft to occur at times and locations that will legitimately  minimize
or avoid the payment of Taxes  including,  without  limitation and to the extent
available,  the  delivery  by Buyer to Seller  (and if  requested  by Buyer,  to
Boeing)  of one or  more  resale  certificates  or  other  documents  evidencing
available exemptions.

Section 3.03.  Aircraft  Delivery  Procedures.  The pre-Delivery  inspection and
testing  procedures  are set  forth in  Article  8.  Subject  to the  terms  and
conditions of this Agreement, concurrent with Delivery of an Aircraft:

(i) Seller shall execute and deliver to Buyer all of the  documents  referred to
in Section 3.05; and

(ii) Immediately  prior to the delivery of the Aircraft Bills of Sale (including
the filing of an FAA Bill of Sale with the FAA  Aircraft  Registry  in  Oklahoma
City,  Oklahoma),  Buyer  shall (x)  execute  and  deliver  to Seller all of the
documents  referred to in Section 3.06 hereof, and (y) pay to Seller the balance
of the Purchase Price and any other amounts then due and payable pursuant to the
terms of this Agreement.

Section 3.04.  Title and Risk of Loss.  Title to an Aircraft and risk of loss of
or damage  thereto  shall  pass to Buyer at  Delivery  except  that,  during the
performance  of  pre-delivery  maintenance  and  preparation,   Buyer  shall  be
responsible  for all risk of loss with  respect to the  Aircraft  and for damage
thereto.  Buyer and/or its  maintenance  provider shall provide,  in amounts and
with insurers reasonably  satisfactory to Seller,  hangarskeepers' and liability
insurance and shall name Seller and Boeing as  additional  insureds with respect
to such insurance.
<PAGE>

Section 3.05.  Conditions  to  Obligations  of Buyer to Purchase each  Aircraft.
Buyer's  obligation to purchase each of the Aircraft  pursuant to this Agreement
shall be conditional upon (a) the receipt by Buyer of the following documents on
or  before  the  Delivery  of the  Aircraft,  all of which  shall be  reasonably
satisfactory in form and substance to Buyer; and (b) occurrence of the following
events on or before the Delivery;  provided,  however,  that Buyer may waive, in
writing,  any of the  conditions set forth in this Section 3.05 on or before the
Delivery:

(i) Seller shall have purchased the Aircraft from Boeing;

(ii) a Bill of Sale  executed  and  delivered  by Seller in favor of Buyer  with
respect to such Aircraft, in substantially the form annexed as Exhibit D;

(iii)  duplicate  originals  of FAA  Form  8050-2  Bill of  Sale,  executed  and
delivered by Seller in favor of Buyer with respect to such Aircraft;

(iv) no material default shall exist with respect to Seller's performance of its
obligations under this Agreement;

(v) the  representations  and  warranties  of Seller set forth in Section  10.01
hereof shall be true and correct on the Delivery Date, except to the extent such
representations  and warranties  relate solely to an earlier date (in which case
such  representations  and  warranties  were true and  correct on and as of such
earlier date) and Buyer shall have received a  certificate  of Seller,  executed
and delivered by an officer or authorized  representative  thereof, as specified
in Section 10.01 hereof;

(vi) Buyer shall have received an opinion of Crowe & Dunlevy, P.C. (or other FAA
counsel mutually agreed-upon between Buyer and Seller) confirming that there are
no liens of record  recorded  against such Aircraft (other than liens created by
or through Buyer);

(vii)  such  Aircraft  conforms  in all  material  respects  with  the  delivery
condition  requirements  set  forth in  Exhibit  E  hereto,  and the  procedures
specified  in  Section  8.01  and  8.02  shall  have  been  completed,  and  any
discrepancy or malfunction  that exceeds  manufacturer's  limits shall have been
corrected as therein required; and

(viii) no Event of Loss shall exist with respect to such Aircraft.

Section 3.06.  Conditions to Seller's  Obligations to sell each of the Aircraft.
Seller's  obligation to sell an Aircraft to Buyer shall be conditional  upon, on
or before the  Delivery of such  Aircraft,  of: (a) the receipt by Seller of the
following documents,  all of which shall be reasonably  satisfactory in form and
substance to Seller and (b) occurrence of the following  events on or before the
Delivery;  provided,  however,  that Seller may waive,  in  writing,  any of the
conditions set forth in this Section 3.06 on or before the Delivery:

(i) Boeing shall have sold such Aircraft to Seller;

(ii) Aircraft Acceptance  Receipt,  executed and delivered by Buyer with respect
to such Aircraft, in substantially the form annexed as Exhibit C;

(iii) payment by Buyer to Seller of the Purchase  Price for the Aircraft and any
other amounts due and payable pursuant to the terms of this Agreement;

(iv) no material  default  exists  with  respect to Buyer's  performance  of its
obligations under this Agreement; and

(v) the  representations  and  warranties  of Buyer set forth in  Section  10.01
hereof shall be true and correct on the Delivery Date, except to the extent such
representations  and warranties  relate solely to an earlier date (in which case
such  representations  and  warranties  were true and  correct on and as of such
earlier date) and Seller shall have received a  certificate  of Buyer,  executed
and delivered by an officer or authorized  representative  thereof, as specified
in Section 10.01, hereof.

Section 3.07.  Cooperation with Buyer's Financing of the Aircraft.  Seller shall
reasonably  cooperate,  at Buyer's expense,  with requests by Buyer to implement
customary  closing  logistics in order to  facilitate  Buyer's  financing of the
Aircraft;  so long as such  logistics  are not  expected to  unreasonably  delay
Delivery of the Aircraft or result in any incremental risk to Seller.
<PAGE>

                                    ARTICLE 4
                            WARRANTIES AND COVENANTS

Section 4.01.  Warranties.  (a) Seller hereby warrants to Buyer that immediately
prior to the moment of title  transfer of an  Aircraft,  Seller  shall have such
legal title to such  Aircraft  as Seller  shall have  received  from Boeing with
respect thereto free and clear of any and all security interests, liens, claims,
charges or encumbrances of any nature  whatsoever,  together with full power and
lawful authority to deliver such Aircraft to Buyer;  and upon execution,  filing
and  recordation  with  the FAA and  delivery  of the  Bills of Sale to Buyer in
accordance with Section 3.03,  Seller shall have  transferred  such title to the
Aircraft to Buyer as Seller  shall have  received  from Boeing free and clear of
any and all security  interests,  liens,  claims,  charges or  encumbrances  and
rights of others of any nature whatsoever, and Seller hereby warrants and agrees
to defend such title against all claims and demands whatsoever and forever.

(b)  Seller  shall,  upon the  reasonable  request  of  Buyer,  seek  reasonable
asurances  from  Boeing  regarding  its ability  and  willingness  to convey the
Aircraft to Seller free and clear of all liens.  Whether or not Boeing  provides
such assurances to or for the benefit of Buyer, in the event Seller is unable to
provide  a Bill of Sale to Buyer  substantially  in  accordance  with  Exhibit D
hereto,  Seller agrees to reimburse Buyer for the cost of pre-delivery  work and
other reasonably incurred out-of-pocket expenses performed by Buyer in an amount
not to  exceed  $500,000  per  Aircraft.  This  reimbursement  shall be  Buyer's
exclusive  remedy for  Seller's  failure to deliver an  Aircraft  as provided in
Section 4.01(a).

Section 4.02.  Limitation of Warranty.  EXCEPT AS OTHERWISE  EXPRESSLY  PROVIDED
HEREIN:

(a) EACH  AIRCRAFT AND EACH ENGINE ARE BEING SOLD AND DELIVERED TO BUYER "AS IS"
AND "WHERE IS," AND WITHOUT ANY REPRESENTATION, GUARANTEE OR WARRANTY OF SELLER,
EXPRESS OR IMPLIED, OF ANY KIND, ARISING BY LAW OR OTHERWISE; AND

(b) WITHOUT  LIMITING  THE  GENERALITY  OF THE  FOREGOING,  SELLER  SPECIFICALLY
DISCLAIMS,  AND EXCLUDES  HEREFROM (i) ANY WARRANTY AS TO THE  AIRWORTHINESS  OR
CONDITION  OF THE  AIRCRAFT  AND  THE  ENGINES,  (ii)  ANY  EXPRESS  OR  IMPLIED
REPRESENTATION  OR  WARRANTY  OF  MERCHANTABILITY  OR FITNESS  FOR A  PARTICULAR
PURPOSE, (iii) ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY OF FREEDOM FROM
ANY  RIGHTFUL  CLAIM  BY WAY OF  INFRINGEMENT  OR THE  LIKE,  (iv)  ANY  IMPLIED
REPRESENTATION OR WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING
OR USAGE OF TRADE,  AND (v) ANY  OBLIGATION  OR LIABILITY  OF SELLER  ARISING IN
TORT,  WHETHER OR NOT ARISING FROM THE NEGLIGENCE OF SELLER,  ACTUAL OR IMPUTED,
OR IN STRICT  LIABILITY,  INCLUDING ANY OBLIGATION OR LIABILITY FOR LOSS OF USE,
REVENUE OR PROFIT WITH RESPECT TO THE AIRCRAFT OR ENGINE OR FOR ANY LIABILITY OF
BUYER  TO  ANY  THIRD  PARTY  OR  ANY  OTHER  DIRECT,  INCIDENTAL,   SPECIAL  OR
CONSEQUENTIAL  DAMAGE  WHATSOEVER.  NO AGREEMENT  ALTERING OR EXTENDING SELLER'S
LIABILITY  FOR  WARRANTIES  SHALL BE BINDING  UPON SELLER  UNLESS IN WRITING AND
EXECUTED BY A DULY AUTHORIZED OFFICER OF SELLER.

                                    ARTICLE 5
                             AIRCRAFT DOCUMENTATION

Section  5.01.  Aircraft  Documentation.  On Delivery  of each of the  Aircraft,
Seller shall deliver to Buyer the Aircraft Documentation for such Aircraft which
documentation shall be in the format specified on Exhibit B.

                                    ARTICLE 6
                     ASSIGNMENTS OF WARRANTIES, SERVICE LIFE
                         POLICIES AND PATENT INDEMNITIES

Section  6.01.  Assignment  of  Warranties,  Etc.  Upon Delivery of an Aircraft,
Seller shall assign or cause to be assigned to Buyer all  assignable  and extant
warranties to the extent conferred upon Seller and to the extent such warranties
survive the acquisition of the Aircraft by Buyer.
<PAGE>

                                    ARTICLE 7
                           PAYMENT, TAXES, INDEMNITIES

Section  7.01.  Method of  Payment.  All  payments to be made by Buyer to Seller
pursuant to this Agreement shall be made in immediately  available United States
funds by causing  such  payments to be deposited on the Delivery of the Aircraft
to account  no.153700497404 of the Seller at U.S. Bank, Las Vegas, Nevada (ABA #
121201694), reference: Spirit MD-82s, or at such other bank in the United States
of America  specified by Seller in writing at least two  Business  Days prior to
the Closing Date or other payment date.

Section 7.02. Payment of Taxes by Buyer.

(a) Any and all Taxes  (other  than (i)  income  Taxes of Seller  imposed by the
United States government or any state or local taxing authority,  (ii) Taxes on,
based on, or measured by  receipts,  franchises,  net worth or capital and (iii)
FAA registration fees) shall be the sole responsibility and liability of Buyer.

(b) Buyer shall  promptly pay and discharge when due any and all Taxes for which
Seller is liable  pursuant  to  Section  7.02(a),  unless  any of such  Taxes is
levied,  assessed or imposed  upon Buyer in which case Seller shall notify Buyer
of such levy,  assessment or imposition,  whereupon Buyer shall promptly pay and
discharge the same,  except to the extent any such amount is in good faith being
contested pursuant to Section 7.03.

Section 7.03.  Tax Indemnity.  Buyer hereby agrees to indemnify  Seller from any
and all Taxes and expenses assessed against Seller, which are the responsibility
of Buyer under Section 7.02.

         Section 7.04.  General Indemnity.

(a) Indemnity by Buyer. After the Delivery of an Aircraft, Buyer shall indemnify
and hold Seller, its officers,  shareholders,  affiliates,  employees and agents
harmless  from and against any and all  liability  (whether  accrued,  absolute,
contingent,  direct or indirect or  otherwise),  loss,  damage claim,  action or
deficiency  resulting  from,  arising out of, or  relating  to (i) any  material
misrepresentation,  breach of warranty or  nonfulfillment  of any  agreement  or
covenant  on the part of Buyer  under this  Agreement  and (ii) the  management,
conduct,  ownership  and  operation  of the  Aircraft  from and  after  Delivery
thereof. This general indemnity shall not apply to Taxes.

(b)  Indemnity  by Seller.  After the  Delivery  of an  Aircraft,  Seller  shall
indemnify and hold Buyer, its officers, shareholders,  affiliates, employees and
agents  harmless  from  and  against  any and all  liability  (whether  accrued,
absolute,  contingent,  direct or indirect or otherwise),  loss, damage,  claim,
action or deficiency resulting from, arising out of, or relating to any material
misrepresentation,  breach of warranty or  nonfulfillment  of any  agreement  or
covenant on the part of Seller under this  Agreement.  The  foregoing  indemnity
shall not limit or curtail the provisions of Section 4.02.

(c) If any claim,  suit or other legal  proceeding  shall be  commenced,  or any
claim or demand be asserted, against any party entitled to indemnification under
Sections 7.04 (the "Indemnified Party") and if the Indemnified Party proposes to
demand or seek  indemnification  pursuant to Sections  7.04, the party from whom
indemnification is sought (the  "Indemnifying  Party") shall be notified to such
effect with reasonable promptness and shall have the right to assume at its full
cost and  expense  the entire  control of the legal  proceeding  (including  the
selection  of  counsel)  subject  to the  right  of  the  Indemnified  Party  to
participate  (at its full cost and expense and with counsel of its choice (which
counsel  shall be  reasonably  satisfactory  to the  Indemnified  Party)) in the
defense, compromise or settlement thereof. The Indemnified Party shall cooperate
fully  in  all  respects  with  the  Indemnifying  Party  in any  such  defense,
compromise or settlement,  including, without limitation, by making available to
the  Indemnifying  Party all  pertinent  information  under the  control  of the
Indemnified Party. The Indemnifying Party will not compromise or settle any such
action, suit, proceeding,  claim or demand without the prior written approval of
the Indemnified Party, which approval will not be unreasonably withheld.
<PAGE>

                                    ARTICLE 8
   NOTIFICATION, INSPECTION, PRE_DELIVERY MAINTENANCE, TESTING AND ACCEPTANCE

  Section 8.01. Notification and Inspection; Buyer's Pre-Delivery Maintenance.

Seller shall permit Buyer to perform  pre-delivery  maintenance  on the Aircraft
prior to Delivery.  Buyer hereby  represents  that the charges for the workscope
contemplated  by Buyer shall not exceed  $500,000  per Aircraft and that no such
pre-delivery  maintenance will delay Delivery past the last agreed-upon  Closing
Date for an Aircraft.  Buyer shall provide  Seller five Business Days' notice of
the anticipated date of induction of the Aircraft for pre-Delivery  maintenance.
Such  notice  shall also  specify  the  maintenance  facility  where the work is
intended  to be  accomplished.  Seller  shall be  responsible  for all  costs in
delivering  the Aircraft to the  maintenance  provider  save for crew  expenses-
Buyer agrees that it shall provide qualified crews for the ferry flights.  Buyer
acknowledges  that, except as otherwise  expressly agreed in writing between the
parties,  Buyer shall be wholly responsible for all fees, charges,  and expenses
of the maintenance providers who shall perform pre-delivery maintenance work for
Buyer's  benefit and Buyer shall  contract  directly  with any such  maintenance
provider.  In such  contract,  any such  maintenance  provider  shall  agree for
Seller's  benefit not to assert any liens on the Aircraft or Engines and to hold
Seller  harmless from and against any claims  relating to the  maintenance  work
package  or the  performance  by Buyer of any  obligations  to such  maintenance
provider.  If requested  by Seller to satisfy  Seller's  obligations  to Boeing,
Buyer and Seller shall enter into an interim  lease  agreement on  substantively
analogous  terms as are set forth in this  Section  8.01.  Seller shall make the
records  relating to the Aircraft and Engines  available for inspection by Buyer
at reasonable hours. Seller shall permit up to four technical representatives of
Buyer to conduct a pre-Delivery inspection of the Aircraft in order to determine
that the Aircraft complies with the delivery condition requirements set forth in
Exhibit E hereto. Section 8.02. Functional Check Flight. Subject to provision by
Buyer of  indemnities  acceptable  to  Seller,  Seller  shall  permit  up to two
technical  representatives  (including a pilot) of Buyer to  accompany  Seller's
representatives  on a functional check flight of up to two hours to be conducted
on the  Aircraft  immediately  prior to  delivery  of the  Aircraft  in order to
demonstrate the  airworthiness of the Aircraft and proper  functioning of all of
the  Aircraft's  systems and  components.  The  functional  check flight will be
conducted in accordance with procedures outlined by the McDonnell Douglas manual
for the Aircraft.

Section  8.03.  Acceptance.  To  evidence  that  the  technical  acceptance  and
functional check flights have been completed, Buyer and Seller shall execute and
deliver the Aircraft  Acceptance  Receipt,  in substantially the form annexed as
Exhibit C. Any agreed-upon  discrepancies that are beyond  manufacturer's limits
or otherwise  not in  compliance  with  Exhibit E shall be remedied  promptly by
Seller.

                                    ARTICLE 9
                                  EVENT OF LOSS

Section  9.01.  Event of Loss.  If an Event of Loss  occurs  with  respect to an
Aircraft,  as the same may be extended  pursuant to Section 9.01 or as the grace
periods  described in clauses (i) and (v) of the  definition  of "Event of Loss"
shall  permit,  then this  Agreement  shall be  terminated  with respect to such
Aircraft,  and upon such  termination,  Buyer and  Seller  shall have no further
obligations  to each other  hereunder  with respect to such  Aircraft and Seller
shall return any progress  payments with respect  thereto as provided in Section
2.02.
<PAGE>

                                   ARTICLE 10
                                 REPRESENTATIONS

Section  10.01.  Authority  of Buyer and  Seller,  Etc.  Buyer and  Seller  each
represents at execution of this Agreement,  and will be required to represent at
Delivery of the Aircraft,  that: (i) it is duly formed,  validly existing and in
good standing under the laws of the  jurisdiction of its  organization;  (ii) it
has full  power,  authority  and  legal  right to enter  into and  perform  this
Agreement;  (iii) the execution,  delivery and performance of this Agreement has
been duly  authorized by all necessary  action on its part, does not require any
approvals or consents except such approvals and consents as have heretofore been
duly  obtained;  and  (iv)  the  execution,  delivery  and  performance  of this
Agreement does not contravene any law binding on it or contravene or result in a
default under any agreement to which it is a party or by which it is bound. Each
Party further represents at execution of this Agreement, and will be required to
represent  at  Delivery  of an  Aircraft,  that:  (a) it is not a  party  to any
agreement or  instrument  or subject to any charter or other  restriction  which
will materially  adversely  affect its ability to perform its obligations  under
this  Agreement;  and (b) that this  Agreement  constitutes  a legal,  valid and
binding  obligation  of such  Party  enforceable  in  accordance  with the terms
hereof.

                                   ARTICLE 11

                CERTAIN ADDITIONAL AGREEMENTS OF SELLER AND BUYER

Section 11.01. Engine Pooling and Leasing.  Buyer and Seller agree to explore in
good faith an engine  pooling and/or  stand-by lease  agreement and to otherwise
explore reciprocally beneficial business opportunities.


                                   ARTICLE 12
                                  MISCELLANEOUS

Section 12.01.  Notices.  Unless otherwise  specified in writing by the Parties,
all notices,  approvals,  requests,  consents,  and other  communications  given
pursuant to this  Agreement  shall be in writing  and shall be deemed  delivered
when sent by any  commercially  reasonable  means and received by the  recipient
thereto.

         If to Seller:

                           Reno Air, Inc.
                           220 Edison Way
                           Reno, Nevada 89502
                           Attn: General Counsel
                           Fax number: (702) 686-3875

And,  prior to July 15,  1998,  with a copy to the same  addressee at 1325 North
Illinois Street, Arlington, Virginia 22205, fax number (703)237-3933.

         If to Buyer:

                           Spirit Airlines, Inc.
                           18121 East Eight Mile Road
                           Eastpointe, Michigan 48021
                           Attn: Chief Financial Officer
                           Fax number: (810) 779-9332

 
Section  12.02.  Exhibits.  All Exhibits  described in this  Agreement  shall be
deemed  to be  incorporated  and  made a part of  this  Agreement,  and  form an
integral part hereof.
<PAGE>

Section 12.03.  Assignments.  This Agreement,  and the rights and obligations of
the Parties  hereunder,  shall not be  assignable  or  delegable by either Party
without the prior written consent of the other Party (which consent shall not be
unreasonably  withheld)  except that Buyer may assign (x) certain rights without
the approval of Seller in  connection  with Buyer's  financing of an Aircraft or
(y) the  entirety of its rights  under this  Agreement  to an affilate of Buyer;
provided that in any such case, Buyer shall remain the  unconditional  guarantor
of the  performance of the "Buyer's"  obligations  under this  Agreement."  This
Agreement  and the rights and  obligations  of the Parties  hereunder,  shall be
binding upon and inure to the benefit of each of the Parties,  their  respective
successors and permitted assigns, and legal representatives.

Section  12.04.  Captions.  All  captions  and  section  headings  used  in this
Agreement  are for  convenience  only and shall  not in any  manner be deemed to
limit or restrict the context of the article or section to which they relate.

Section 12.05. Brokers'  Commissions.  Seller and Buyer hereby represent to each
other that no agent or broker is entitled to any  compensation  whatsoever  as a
result of the transactions contemplated by this Agreement.  Accordingly,  Seller
and Buyer  respectively agree to indemnify and hold each other harmless from and
against all claims, demands,  liabilities,  damages, losses and judgments, which
may be suffered by, accrued  against,  charged to or  recoverable  from Buyer or
Seller, and which arise out of the other Party's actions or negotiations with or
in respect to agents or brokers.

Section 12.06. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.

Section 12.07.  Entire  Agreement.  This Agreement  shall  constitute the entire
agreement  between the Parties  with  respect to the  transactions  contemplated
herein,  supersedes  in its  entirety any prior or  contemporaneous  agreements,
whether  oral or in  writing,  of the  Parties,  and shall not in any  manner be
supplemented,  amended or modified  except by a written  instrument  executed on
behalf of the Parties by their duly authorized representatives.

Section 12.08.  Waivers.  The waiver by either Party of performance of any term,
covenant or condition  of this  Agreement  in a  particular  instance  shall not
constitute  a waiver  of any  subsequent  breach or  preclude  such  party  from
thereafter demanding performance thereof according to the provisions hereof.

Section  12.09.  Confidentiality.  This  Agreement and the terms and  conditions
contained  herein  shall be and  remain  strictly  privileged  and  confidential
between the  Parties,  and shall not be  discussed,  revealed,  disseminated  or
divulged to the media or general  public,  or to any other third party,  without
the express prior written consent of the other Party;  except that (i) Buyer may
disclose  any  relevant  term to a  financial  institution  for the  purpose  of
financing  the  purchase of the  Aircraft;  (ii) Buyer may disclose any relevant
term to its insurers for the purpose of insuring the Aircraft;  and (iii) either
Party  may  disclose  any  relevant  term  to any of its  affiliates,  auditors,
accountants,  underwriters,  rating agencies and counsel;  and (iv) either Party
may make any disclosure required by generally accepted accounting principles, by
applicable  law or  regulation  or by an order of a court or other  governmental
agency;  provided,  however, in the cases of (i), (ii) and (iii), any such third
party  dissemination  shall be on a "need to know"  basis and such  third  party
shall be bound by the provisions of this Section 12.09.

Section  12.10.  Counterparts.   This  Agreement  may  be  executed  in  several
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

Section 12.11.  Expenses.  Except as otherwise  expressly provided herein,  each
Party  hereby  agrees to be  responsible  for and to pay the costs and  expenses
incurred by it in connection with the negotiation and drafting of this Agreement
and  the  consummation  of  the  transactions   contemplated  hereby,  including
attorneys'  fees  and  expenses.  Seller  shall be  responsible  for and pay the
expenses of Crowe & Dunlevy, P.C.
<PAGE>

IN WITNESS WHEREOF,  the Parties have executed this Aircraft Purchase  Agreement
as of the date first stated above. Reno Air, Inc.

Reno Air, Inc.


By: /s/ Steven A. Rossum    
Title: Senior Vice President and General Counsel      



Spirit Airlines, Inc.,


By: /s/John Severson        
Title: Vice President and Chief Financial Officer     

<PAGE>
                    EXHIBIT A to Aircraft Purchase Agreement

                              AIRCRAFT DESCRIPTION

                                                            Engine MSNs
Tail No.   MSN      Engine Manufacturer and Model        1                2
                                                        ---              ---
N804RA    48048   Pratt & Whitney JT8D-219             708508           718266

N805RA    48087   Pratt & Whitney JT8D-217C            708184           708185
<PAGE>

                                    EXHIBIT B
                                       to
                          Aircraft Purchase Agreement

                             AIRCRAFT DOCUMENTATION



All non-proprietary documentation customarily transferred in connection with the
sale of a used commercial jet aircraft and/or required for Part 121 operation by
Seller.  The  foregoing  shall  include,  to the extent  extant  and  reasonably
available,  maintenance records for all components, manuals, log books, warranty
information,  permits,  licenses and other information  reasonably  requested by
Buyer.

<PAGE>
                                    EXHIBIT C
                                       to
            Aircraft Purchase Agreement AIRCRAFT ACCEPTANCE RECEIPT

SPIRIT AIRLINES,  INC. does hereby accept Delivery of one (1) McDonnell  Douglas
DC-9-82  aircraft,   manufacturer's   serial  number  _____,   Federal  Aviation
Administration Registration Number N_____, together with two (2) Pratt & Whitney
model  JT8D-____  aircraft  engines,  manufacturer's  serial numbers _______ and
_______,   from  Reno   Air,   Inc.,   such   Delivery   having   been  made  at
___________________________  at  ________  (a.m./p.m.)  on  the  ______  day  of
___________________,  19__, in accordance with the Aircraft  Purchase  Agreement
between SPIRIT AIRLINES, INC. and RENO AIR, INC., dated as of June 9, 1998.

SPIRIT  AIRLINES,  INC. has inspected and hereby accepts the Aircraft as meeting
all of the conditions set forth in the Aircraft Purchase Agreement.


                                        SPIRIT AIRLINES, INC.


                                        By: John Severson
                                        Title: VP and Chief Financial Officer
<PAGE>

EXHIBIT D to Aircraft  Purchase  Agreement  AIRCRAFT BILL OF SALEKNOW ALL MEN BY
THESE PRESENTS:  THAT the  undersigned,  RENO AIR, INC. is the owner of the full
legal and  beneficial  title to that certain  McDonnell  Douglas  DC-9-82  MD-82
aircraft bearing Federal Aviation Administration  Registration Number N_________
and  Manufacturer's  Serial Number,  together with the two Pratt & Whitney model
JT8D-____aircraft  engines  installed  thereon,  bearing  manufacturer's  serial
numbers _______and.

THAT for and in  consideration of the sum of Ten U.S. Dollars ($10.00) and other
valuable  consideration,  RENO AIR,  INC.  does  this ___ day of , 1998,  grant,
convey,  transfer,  bargain and sell,  deliver  and set over,  all of its right,
title and interest in and to the above  described  aircraft  and  engines,  unto
Spirit Airlines, Inc. ("Spirit").

THAT the undersigned hereby warrants to Spirit, its successors and assigns, that
there is hereby  conveyed to Spirit good and  marketable  title to the aforesaid
Aircraft and Engines,  free and clear of all liens,  encumbrances  and rights of
others and the  undersigned  will  defend such title  against  any such  adverse
claims; provided,  however, that the Aircraft and Engines are otherwise conveyed
"as is" and "where is" and without any other  representation  or warranty of any
type with respect thereto.  This Bill of Sale is made and delivered  pursuant to
the provisions of the Aircraft  Purchase  Agreement between Spirit and Reno Air,
Inc. dated as of June 9, 1998, and shall be governed by the laws of the State of
New York.

IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed by
its  duly  authorized  officer  and its seal to be  affixed  this  _____  day of
_____________________, 1998.

                                        Reno Air, Inc.

                                        By: Steven A. Rossum
                                        Title: Senior V.P. & General Counsel

<PAGE>

                                    EXHIBIT E
                                       to
                           Aircraft Purchase Agreement


                         DELIVERY CONDITION REQUIREMENTS


Each Aircraft and each Engine shall comply with the following delivery condition
requirements on the applicable Closing Date:

- The Aircraft  shall have an FAA  Certificate of  Airworthiness.  Such Aircraft
shall  have had  accomplished  thereon a fresh  full "C" check  within 50 flight
hours.

- Each engine will have been subjected to a video  borescope and power assurance
runs.

- Acceptance  flight of up to two hours duration in accordance with Article 8 of
this Agreement.

- The  Aircraftshall  be equipped with all parts and components  that would have
been  required for Seller to operate the Aircraft in revenue  service;  provided
that all video and telephonic equipment shall have been removed.


Seller shall promptly  remedy the Aircraft to the extent of any deficiency  that
is not  within  manufacturer's  limits or does not  otherwise  comply  with this
Exhibit E. Buyer shall reimburse Seller to the extent the rectification enhances
the value of the Aircraft,  assuming for quantification  purposes,  the Aircraft
had been in the condition  required by this  Agreement  prior to  rectification;
provided that prior to completing any such work that would increase the Purchase
Price of the  Aircraft by  enhancing  the vale  thereof,  Seller and Buyer shall
determine a methodology for equitably calculating such increase in value.

<PAGE>

                                    EXHIBIT F
                                       to
                           Aircraft Purchase Agreement

                       FUNCTIONAL CHECK FLIGHT CERTIFICATE

The  undersigned  representatives  of Spirit  Airlines,  Inc. and Reno Air, Inc.
hereby  verify that the Aircraft  described  below has been flight tested on the
date shown below as contemplated by the Aircraft Purchase Agreement between such
corporations and dated as of June 9, 1998.

Flight No.:          

Date:             


Aircraft

Manufacturer: McDonnell Douglas

Model: DC-9-82

FAA Registry No.        

S/N:              



As a result of the functional check flight the following  discrepancies  will be
corrected in accordance with the aforementioned  Aircraft Purchase Agreement (if
"None", please indicate).


     ITEM                           CORRECTIVE ACTION

     1.                             1.                                  
                                                                        
<PAGE>

Functional  check  flight  complied  with the _______ day of  __________, 1998.


RENO AIR, INC.                              SPIRIT AIRLINES, INC.


By: Steven A. Rossum                        By:John Severson
Title: Senior V.P. & General Counsel        Title:VP and Chief Financial Officer

Functional check flight discrepancies  corrected in accordance with the Aircraft
Purchase Agreement dated as of May ____, 1998.



RENO AIR, INC.                              SPIRIT AIRLINES, INC.


By: Steven A. Rossum                        By: John Severson
Title: Senior V.P. & General Counsel        Title:VP and Chief Financial Officer