Document:

<PAGE>

                                                                   Exhibit 10.51

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

       THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. TO
     THE EXTENT, IF ANY, THAT THIS LEASE AGREEMENT CONSTITUTES CHATTEL PAPER
     (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
        ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE
       AGREEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
            COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART
    CONTAINING THE RECEIPT EXECUTED BY LESSOR OR, IF LESSOR HAS ASSIGNED ITS
                 RIGHTSTO A THIRD PARTY IN ACCORDANCE WITH THIS
                    LEASE AGREEMENT, SUCH THIRD PARTY ON THE
                     SIGNATURE PAGE OF THIS LEASE AGREEMENT.

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

                             DATED: January 22, 1997

                            ACG ACQUISITION VIII LLC

                                    (Lessor)

                                     - and -

                              ALOHA AIRLINES, INC.

                                    (Lessee)

                         ------------------------------
                               LEASE AGREEMENT 804
                                 - relating to -
                             Boeing 737-2Q9 Aircraft
                         Manufacturers Serial No: 21719
                          U.S. Registration Mark N804AL
                         ------------------------------

                        FELTMAN, KARESH, MAJOR & FARBMAN,
                         Limited Liability Partnership
                              Carnegie Hall Tower
                              152 West 57th Street
                            New York, New York 10019

                                RECORDED
                      FEDERAL AVIATION ADMINISTRATION
                      Date 3-19-97      Time 12:32 pm
                        Conveyance Number RR011675
                              Sheryl Hawkins

<PAGE>

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

       THIS LEASE AGREEMENT HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. TO
     THE EXTENT, IF ANY, THAT THIS LEASE AGREEMENT CONSTITUTES CHATTEL PAPER
    (AS SUCH TERM IS DEFINED, IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN
        ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE
       AGREEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
            COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART
    CONTAINING THE RECEIPT EXECUTED BY LESSOR OR, IF LESSOR HAS ASSIGNED ITS
                RIGHTS TO A THIRD PARTY IN ACCORDANCE WITH THIS
                   LEASE AGREEMENT, SUCH THIRD PARTY ON THE
                    SIGNATURE PAGE OF THIS LEASE AGREEMENT.

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

                             DATED: January 22, 1997

                            ACG ACQUISITION VIII LLC

                                    (Lessor)

                                     - and -

                              ALOHA AIRLINES, INC.

                                    (Lessee)

                         ------------------------------
                               LEASE AGREEMENT 804
                                 - relating to -
                             Boeing 737-2Q9 Aircraft
                         Manufacturers Serial No: 21719
                          U.S. Registration Mark N804AL
                         ------------------------------

                        FELTMAN, KARESH, MAJOR & FARBMAN,
                          Limited Liability Partnership
                               Carnegie Hall Tower
                              152 West 57th Street
                            New York, New York 10019

<PAGE>

                                TABLE OF CONTENTS
<Table>
<Caption>

CLAUSE                                                                                               PAGE
<S>      <C>      <C>                                                                                <C>

1.       DEFINITIONS and INTERPRETATION ..............................................................  1
         1.1      Definitions ........................................................................  1
         1.2      Interpretation ..................................................................... 14

2.       REPRESENTATIONS and WARRANTIES .............................................................. 15
         2.1     Lessee's Representations and Warranties ............................................. 15
         2.2     Lessee's Further Representations and Warranties ..................................... 16
         2.3     Repetition .......................................................................... 17
         2.4     Lessor's Representations and Warranties ............................................. 17
         2.5     Repetition .......................................................................... 18

3.       CONDITIONS PRECEDENT ........................................................................ 19
         3.1     Lessor's Documentary Conditions Precedent ........................................... 19
         3.2     Lessor's Other Conditions Precedent ................................................. 20
         3.3     Lessor's Waiver ..................................................................... 20
         3.4     Lessee's Conditions Precedent ....................................................... 20
         3.5     Lessee's Waiver ..................................................................... 21

4.       COMMENCEMENT ................................................................................ 21
         4.1     Leasing ............................................................................. 21
         4.2     Delivery ............................................................................ 21
         4.3     Acceptance and Risk ................................................................. 22

5.       PAYMENTS .................................................................................... 22
         5.1     Security Deposit; Letter of Credit .................................................. 22
         5.2     Rental Periods ...................................................................... 24
         5.3     Basic Rent .......................................................................... 24
         5.4     Payments ............................................................................ 24
         5.5     Gross-up ............................................................................ 25
         5.6     Taxation ............................................................................ 25
         5.7     Information ......................................................................... 26
         5.8     Taxation of Indemnity Payments ...................................................... 26
         5.9     Default Interest .................................................................... 27
         5.10    Contest ............................................................................. 27
         5.11    Absolute ............................................................................ 28

6.       MANUFACTURER'S WARRANTIES ................................................................... 29

</Table>

                                     -i-

<PAGE>

                                TABLE OF CONTENTS
                                    continued

<Table>
<Caption>

CLAUSE                                                                                               PAGE
<S>      <C>     <C>                                                                                 <C>

         6.1     Assignment .......................................................................... 29
         6.2     Proceeds ............................................................................ 30
         6.3     Parts ............................................................................... 30
         6.4     Agreement ........................................................................... 30

7.       LESSOR'S COVENANTS and DISCLAIMERS .......................................................... 31
         7.1     Quiet Enjoyment ..................................................................... 31
         7.2     Maintenance Contribution ............................................................ 31
         7.3     Registration and Filings ............................................................ 31
         7.4     Agreed Maintenance Performers ....................................................... 32
         7.5     Exclusion ........................................................................... 32
         7.6     Lessee's Waiver ..................................................................... 32
         7.7     Lessee's Confirmation ............................................................... 33

8.       LESSEE'S COVENANTS .......................................................................... 33
         8.1     Duration ............................................................................ 33
         8.2     Information ......................................................................... 33
         8.3     Lawful and Safe Operation ........................................................... 35
         8.4     Taxes and Other Charges ............................................................. 37
         8.5     Sub-Leasing ......................................................................... 37
         8.6     Inspection .......................................................................... 40
         8.7     Protection of Title ................................................................. 40
         8.8     General ............................................................................. 41
         8.9     Records ............................................................................. 42
         8.10    Registration and Filings ............................................................ 42
         8.11    Maintenance and Repair .............................................................. 43
         8.12    Removal of Engines and Parts ........................................................ 44
         8.13    Installation of Engines and Parts ................................................... 45
         8.14    Non-Installed Engines and Parts ..................................................... 47
         8.15    Pooling of Engines and Parts ........................................................ 47
         8.16    Equipment Changes ................................................................... 48
         8.17    Title to Engines and Parts .......................................................... 48
         8.18    Third Parties ....................................................................... 49

9.       INSURANCE ................................................................................... 49
         9.1     Insurances .......................................................................... 49

</Table>

                                      -ii-

<PAGE>

                                TABLE OF CONTENTS
                                    continued

<Table>
<Caption>

CLAUSE                                                                                               PAGE
<S>      <C>     <C>                                                                                 <C>

         9.2     Requirements ........................................................................ 49
         9.3     Insurance Covenants ................................................................. 50
         9.4     Failure to Insure ................................................................... 51
         9.5     Continuing Indemnity ................................................................ 52
         9.6     Application of Insurance Proceeds ................................................... 52

10.      INDEMNITY ................................................................................... 53
         10.1    General ............................................................................. 53
         10.2    Mitigation .......................................................................... 54
         10.3    Duration ............................................................................ 55

11.      EVENTS OF LOSS .............................................................................. 55
         11.1    Total Loss .......................................................................... 55
         11.2    Requisition ......................................................................... 56

12.      RETURN OF AIRCRAFT .......................................................................... 57
         12.1    Redelivery .......................................................................... 57
         12.2    Final Checks ........................................................................ 57
         12.3    Final Inspection .................................................................... 58
         12.4    Non-Compliance ...................................................................... 59
         12.5    Export Documentation ................................................................ 59
         12.6    Acknowledgment ...................................................................... 59
         12.7    Maintenance Program ................................................................. 60
         12.8    Storage ............................................................................. 60

13.      DEFAULT ..................................................................................... 61
         13.1    Events .............................................................................. 61
         13.2    Rights .............................................................................. 65
         13.3    Export .............................................................................. 65
         13.4    Default Payments .................................................................... 66

14.      ASSIGNMENT and TRANSFER ..................................................................... 66
         14.1    No assignment by Lessee ............................................................. 67
         14.2    Lessor Assignment ................................................................... 67
         14.3    Grants of Security Interests ........................................................ 69
         14.4    Sale and Leaseback by Lessor ........................................................ 70

</Table>

                                               -iii-

<PAGE>

                                TABLE OF CONTENTS
                                    continued

<Table>
<Caption>

CLAUSE                                                                                               PAGE
<S>        <C>                                                                                       <C>

          14.5   Further Acknowledgments ............................................................. 71
          14.6   Certain Protections for Lessee's Benefit ............................................ 71

15.      MISCELLANEOUS ............................................................................... 71
         15.1    Waivers, Remedies Cumulative ........................................................ 71
         15.2    Delegation .......................................................................... 72
         15.3    Appropriation ....................................................................... 72
         15.4    Currency Indemnity .................................................................. 72
         15.5    Payment by the Lessor ............................................................... 73
         15.6    Severability ........................................................................ 73
         15.7    Remedy .............................................................................. 73
         15.8    Expenses ............................................................................ 73
         15.9    Time of Essence ..................................................................... 74
         15.10   Notices ............................................................................. 74
         15.11   Law and Jurisdiction ................................................................ 75
         15.12   Sole and Entire Agreement ........................................................... 76
         15.13   Indemnities ......................................................................... 76
         15.14   Counterparts ........................................................................ 76
         15.15   Confidentiality ..................................................................... 76

SCHEDULES

         1.      Aircraft Specification                                                                76
         2.      Certificate of Acceptance 804                                                         80
         3.      Operating Condition at Redelivery                                                     84
         4.      Insurance Requirements                                                                89
         5.      Form of Legal Opinion                                                                 94
         6.      Form of Letter of Credit                                                              95
         7.      Form of Semi-Annual Status Report                                                     96

</Table>

                                      -iv-

<PAGE>

THIS LEASE AGREEMENT is made the 22nd day of January, 1997

BETWEEN:

(1)      ACG ACQUISITION VIII LLC, a Delaware limited liability company, having
         its principal place of business at Three Stamford Landing, 46
         Southfield Avenue, Stamford, Connecticut 06902, U.S.A. (the "LESSOR"),
         and

(2)      ALOHA AIRLINES, INC., a Delaware corporation having its principal place
         of business at 371 Aokea Street, Honolulu, Hawaii 96819 (the "LESSEE").

WHEREAS:

(A)      The Aircraft has previously been owned and operated by the Lessee.

(B)      Pursuant to a Purchase Option Agreement 804, dated as of September 26,
         1996, between Lessee, as seller, and Lessor, as buyer (the "Purchase
         Agreement"), Lessor has exercised its option to purchase the Aircraft
         from Lessee, and Lessor has agreed to lease the Aircraft to the Lessee
         with effect from the purchase of the Aircraft upon and subject to the
         covenants, terms and conditions set out in this Agreement.

NOW IT IS HEREBY AGREED as follows:

1.       DEFINITIONS AND INTERPRETATION

1.1      DEFINITIONS

         In this Agreement the following expressions shall, unless the context
         otherwise requires, have the following respective meanings:

ACTUAL COST                         as it applies to any maintenance work on the
                                    Aircraft means the actual cost of
                                    replacement parts plus the cost of the
                                    associated labor at Lessee's in-house labor
                                    rates (if the work is performed by Lessee)
                                    or at third party costs charged to Lessee
                                    (if the work is performed by third parties)
                                    and shall in no event include late charges,
                                    interest or other similar amounts.

 AFFILIATE                          in relation to any person, any other person
                                    controlled directly or indirectly by that
                                    person, any other person that controls
                                    directly or indirectly that person or any
                                    other person under common control with that
                                    person. For this purpose "control" of any
                                    entity or person

                                      -1-

<PAGE>

                                    means ownership of a majority of the voting
                                    power of the entity or person.

AGREED MAINTENANCE PERFORMER        the Lessee or any other reputable
                                    maintenance organization that is (i)
                                    experienced in maintaining aircraft and/or
                                    engines of the same type as the Aircraft and
                                    the Engines, (ii) duly certificated by the
                                    FAA under FAR Part 145, and (iii) not
                                    objected to by Lessor pursuant to Clause
                                    7.4.

AGREED MAINTENANCE PROGRAM          the Lessee's current Maintenance Program, as
                                    the same may be amended from time to time in
                                    accordance with this Agreement.

AGREED VALUE                        $6,000,000.

AIRCRAFT                            the aircraft described in Part 1 of Schedule
                                    1 (which term includes, where the context
                                    admits, a separate reference to all Engines,
                                    Parts and Aircraft Documents).

AIRCRAFT DOCUMENTS                  the documents, data and records identified
                                    in Part 2 of Schedule 1 and all additions,
                                    renewals, revisions and replacements from
                                    time to time made in accordance with this
                                    Agreement.

AIRFRAME                            the Aircraft, excluding the Engines and the
                                    Aircraft Documents.

APU                                 (i) the auxiliary power unit listed in
                                    Schedule 1, (ii) any and all Parts, so long
                                    as such Parts are incorporated in, installed
                                    on or attached to such auxiliary power unit
                                    or so long as title to such Parts is vested
                                    in the Lessor in accordance with the terms
                                    of Clause 8.17(a) after removal from such
                                    auxiliary power unit, and (iii) insofar as
                                    the same belong to Lessor, all
                                    substitutions, replacements or renewals from
                                    time to time made in or to such auxiliary
                                    power unit or to any of the Parts referred
                                    to in clause (ii) above, as required or
                                    permitted under this Agreement.

APPRAISAL PROCEDURE                 shall mean, with respect to any amount to be
                                    determined, the amount mutually agreed by
                                    Lessor

                                      -2-

<PAGE>

                                    and Lessee or, if Lessor and Lessee are
                                    unable to agree upon any such amount to be
                                    determined, the average of the amounts
                                    determined by three FAA-approved service.
                                    centers in the continental United States,
                                    one such service centers appointed by
                                    Lessor, one by Lessee and one by their
                                    appointed service centers, except that if
                                    any party fails to appoint a service center
                                    the Manufacturer or the Engine Manufacturer
                                    (whichever is appropriate) shall be deemed
                                    appointed.

ASSIGNMENT                          any present or future assignment by the
                                    Lessor in favor of the Lender of the
                                    Lessor's rights under this Agreement as
                                    security for its obligations to the Lender.

AVIATION AUTHORITY                  the FAA or (if the State of Registration
                                    ceases to be the United States of America)
                                    the authority and/or Government Entity
                                    and/or agency which, under the laws of the
                                    State of Registration, from time to time (a)
                                    has control or supervision of civil
                                    aviation; or (b) has jurisdiction over
                                    registration, airworthiness or operation of
                                    the Aircraft.

BASIC RENT                          all amounts payable pursuant to Clause 5.3.

BUSINESS DAY                        a day (other than a Saturday or Sunday) on
                                    which business of the nature required by
                                    this Agreement is carried out in Stamford,
                                    Connecticut and the State of Incorporation
                                    or, where used in relation to payments, on
                                    which banks are open for business in New
                                    York, New York and Honolulu, Hawaii.

CERTIFICATE OF ACCEPTANCE           a certificate in the form of Schedule 2 to
                                    be completed and executed by the Lessee on
                                    Delivery.

CYCLE                               one take-off and landing of an airframe.

DAMAGE NOTIFICATION THRESHOLD       $500,000.

DEFAULT                             any Event of Default and any event which
                                    with the giving of notice, lapse of time,
                                    determination of materiality or fulfilment
                                    of other condition or any

                                      -3-

<PAGE>

                                    combination of the foregoing would
                                    constitute an Event of Default.

DELIVERY                            the deemed delivery of the Aircraft to the
                                    Lessee in accordance with the terms of this
                                    Agreement.

DELIVERY DATE                       the date on which Delivery takes place.

DELIVERY LOCATION                   a location selected by Lessee and reasonably
                                    acceptable to Lessor.

DOLLARS AND $                       the lawful currency of the United States of
                                    America.

ENGINE                              whether or not installed on the Aircraft:

                                    (a)      each engine of the manufacture,
                                             model and serial number specified
                                             in Part 1 of Schedule 1 and having
                                             750 or more rated take-off
                                             horsepower, title to which shall
                                             belong to the Lessor; or

                                    (b)      any engine which replaces that
                                             engine, title to which passes to
                                             the Lessor in accordance with
                                             Clause 8.17(a);

                                    and in each case includes all modules and
                                    Parts from time to time belonging to,
                                    installed in or appurtenant to that engine
                                    but excludes any engine replaced in
                                    accordance with Clause 8.13(a) title to
                                    which has, or should have, passed to the
                                    Lessee in accordance with Clause 8.17(c)
                                    pursuant to this Agreement.

ENGINE LOSS DATE                    the relevant date determined in accordance
                                    with the definition of "Total Loss Date" as
                                    if that definition applied to an Engine
                                    Loss.

ENGINE MANUFACTURER                 the Pratt & Whitney Division of United
                                    Technologies Corporation.

EVENT OF DEFAULT                    an event specified in Clause 13.1.

                                      -4-

<PAGE>

EXPIRY DATE                         the day preceding the fifth anniversary of
                                    the date of the Purchase Agreement or if
                                    earlier the date on which:

                                    (a)      the Aircraft has been redelivered
                                             in accordance with this Agreement
                                             and all obligations of Lessee have
                                             been satisfied; or

                                    (b)      the Lessor receives the Agreed
                                             Value following a Total Loss and
                                             any other amounts then due and
                                             owing in accordance with this
                                             Agreement.

FAA                                 the United States Federal Aviation
                                    Administration, the Department of
                                    Transportation, the Administrator of the
                                    Federal Aviation Administration or any
                                    person or Government Entity succeeding to
                                    the functions thereof.

FAR                                 the Federal Aviation Regulations for the
                                    time being in force, issued by the FAA
                                    pursuant to the Federal Aviation Law and
                                    published in Title 14 of the Code of Federal
                                    Regulations.

FEDERAL AVIATION LAW                Title 49 of the United States Code, as
                                    amended, or any successor statutory
                                    provisions and the regulations promulgated
                                    under such provisions.

FINANCIAL INDEBTEDNESS              any indebtedness in respect of

                                    (a)      moneys borrowed;

                                    (b)      any liability under any debenture,
                                             bond, note, loan stock, acceptance
                                             credit, documentary credit or other
                                             security;

                                    (c)      the acquisition cost of any asset
                                             to the extent payable before or
                                             after the time of acquisition or
                                             possession; or

                                    (d)      the capitalized value (determined
                                             in accordance with accounting
                                             practices generally accepted in the
                                             State of Incorporation) of
                                             obligations under finance leases;
                                             or

                                      -5-
<PAGE>

                                    (e)      any guarantee, indemnity or similar
                                             assurance against financial loss of
                                             any person in respect of the above.

FLIGHT HOUR                         each hour or part thereof (rounded up to one
                                    decimal place) elapsing from the moment the
                                    wheels of an airframe leave the ground on
                                    take off until the moment the wheels of such
                                    airframe next touch the ground.

GAAP                                generally accepted accounting principles as
                                    in effect from time to time and, subject to
                                    changes in such principles from time to
                                    time, consistently applied in accordance
                                    with the past practices of a person.

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

                                    (b)      any instrumentality, board,
                                             commission, court, or agency of any
                                             thereof, however constituted; and

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

HABITUAL BASE                       the State of Hawaii or, subject to the prior
                                    written consent of the Lessor and Lender,
                                    any other state, province or country in
                                    which the Aircraft is for the time being
                                    habitually based.

INDEMNITEES                         each of the Lender and the Lessor, including
                                    any of their respective successors and
                                    assigns, shareholders, Affiliates, partners,
                                    contractors, directors, officers, servants,
                                    agents and employees.

IRS                                 the Internal Revenue Service of the
                                    Department of the Treasury of the United
                                    States of America.

LANDING GEAR                        the landing gear assembly of the Aircraft
                                    excluding the wheels and brake units.

                                      -6-

<PAGE>

LENDER                              FINOVA Capital Corporation, a Delaware
                                    corporation, and any other person or persons
                                    that may from time to time refinance the
                                    Aircraft for the Lessor and/or for whose
                                    benefit a security interest in respect of
                                    the Aircraft and/or this Agreement is
                                    granted by the Lessor.

LESSEE INSTALLED PART               means passenger seats, overhead bins and
                                    galleys title to which is held by Lessee
                                    subject to a Security Interest in favor of
                                    an unrelated third party or title to which
                                    is held by an unrelated third party and such
                                    Part is leased or conditionally sold to
                                    Lessee.

LESSOR LIEN                         (a)      the Mortgage and any other security
                                             interest whatever from time to time
                                             created by or arising through the
                                             Lessor and/or the Lender in
                                             connection with the financing or
                                             refinancing of the Aircraft;

                                    (b)      any other security interest in
                                             respect of the Aircraft that
                                             results from acts or omissions of,
                                             or claims against, the Lessor
                                             and/or the Lender not related to
                                             the operation of the Aircraft or
                                             the transactions contemplated by or
                                             permitted under this Agreement; and

                                    (c)      liens in respect of the Aircraft
                                             for Lessor Taxes.

LESSOR TAXES                        (a)      Taxes imposed as a direct result of
                                             activities of the Lessor and/or the
                                             Lender in the jurisdictions
                                             imposing the liability unrelated to
                                             the Lessor's and/or the Lender's
                                             dealings with the Lessee pursuant
                                             to this Agreement or to the
                                             transactions contemplated by this
                                             Agreement or the operation of the
                                             Aircraft by the Lessee;

                                    (b)      Taxes imposed on the income,
                                             profits or gains of the Lessor
                                             and/or the Lender by any Federal
                                             Government Entity in the United
                                             States of America or by any
                                             Government Entity of the States of
                                             Delaware and/or Connecticut or by
                                             any Government Entity in any other
                                             jurisdiction where the Lessor
                                             and/or the Lender is liable for
                                             such Taxes but only to the extent
                                             that

                                      -7-

<PAGE>

                                             such liability has or would
                                             have arisen in the absence of the
                                             transactions contemplated by this
                                             Agreement;

                                    (c)      Taxes imposed with respect to any
                                             period commencing or event
                                             occurring before the date of this
                                             Agreement or after the Expiry Date
                                             and unrelated to the Lessor's
                                             and/or the Lender's dealings with
                                             the Lessee pursuant to this
                                             Agreement or to the transactions
                                             contemplated by this Agreement;

                                    (d)      Taxes imposed as a direct result of
                                             the sale or other disposition of
                                             the Aircraft, unless such sale or
                                             disposition occurs as a consequence
                                             of an Event of Default;

                                    (e)      Taxes imposed by a taxing
                                             jurisdiction for a particular tax
                                             period in which none of the
                                             following is true for that tax
                                             period (i) the operation,
                                             registration, location, presence or
                                             use of the Aircraft, the Airframe,
                                             any Engine or any Part thereof in
                                             such jurisdiction, (ii) the place
                                             of incorporation, commercial
                                             domicile or other presence in such
                                             jurisdiction of the Lessee, any
                                             sublessee or any user of or person
                                             in possession of the Aircraft, the
                                             Airframe, any Engine or any Part
                                             thereof in such jurisdiction, or
                                             (iii) any payments made under this
                                             Agreement and related documents
                                             being made from such jurisdiction;

                                    (f)      Taxes to the extent caused by the
                                             gross negligence or intentional or
                                             willful misconduct of Lessor or
                                             Lender;

                                    (g)      Taxes to the extent caused by a
                                             failure by Lessor or Lender to
                                             furnish in a timely manner notice
                                             or information which it is required
                                             to furnish to Lessee by the terms
                                             of this Agreement; and

                                      -8-

<PAGE>

                                    (h)      Taxes based on or measured by the
                                             value or principal amount of
                                             indebtedness incurred by Lessor
                                             with respect to or secured by a
                                             Security Interest on the Aircraft,
                                             the Airframe, any Engine or any
                                             interest therein.

LETTER OF CREDIT                    an irrevocable standby letter of credit, in
                                    the form set out in Schedule 6 or otherwise
                                    in form and substance reasonably
                                    satisfactory to the Lessor, to be issued (at
                                    the Lessee's option) in favor of the Lessor
                                    by a reputable bank in the United States of
                                    America reasonably acceptable to the Lessor
                                    for the payment of the Security Deposit.

MAINTENANCE PROGRAM                 an Aviation Authority approved maintenance
                                    program for the Aircraft encompassing
                                    scheduled maintenance, condition monitored
                                    maintenance and/or on-condition maintenance
                                    of Airframe, Engines and Parts, including
                                    servicing, testing, preventative
                                    maintenance, repairs, structural
                                    inspections, system checks, overhauls,
                                    approved modifications, service bulletins,
                                    engineering orders, airworthiness
                                    directives, corrosion control, inspections
                                    and treatments.

MAJOR CHECKS                        any C-Check, multiple C-Check, D-Check or
                                    annual heavy maintenance visit or segment
                                    thereof suggested for commercial aircraft of
                                    the same model as the Aircraft by its
                                    manufacturer (however denominated) as set
                                    out in the Agreed Maintenance Program.

MANUFACTURER                        The Boeing Company, a Delaware corporation
                                    with a place of business in Seattle,
                                    Washington.

MINIMUM LIABILITY COVERAGE          $300,000,000 on each occurrence.

MORTGAGE                            the first priority aircraft chattel mortgage
                                    and security agreement to be granted by the
                                    Lessor as debtor to the Lender as secured
                                    party, whereby the Lessor will grant to the
                                    Lender a first priority security interest in
                                    the Aircraft and its right, title and
                                    interest in this Agreement.

                                      -9-

<PAGE>

OTHER PERMITTED AIR CARRIER         any air carrier (i) that shall be domiciled
                                    in and duly certificated or authorized as an
                                    air carrier in a Permitted Jurisdiction,
                                    (ii) is not subject to any event of the
                                    types described in Clauses 13.1(g) and (h)
                                    as of the commencement of a sublease, and
                                    (iii) has a net worth of at least
                                    $20,000,000, calculated in accordance with
                                    GAAP, as of the commencement of a sublease.

PARENT                              Aloha Airgroup, Inc., a Hawaii corporation
                                    and the sole stockholder of Lessee.

PART                                whether or not installed on the Aircraft:

                                    (a)      any component, furnishing or
                                             equipment (other than a complete
                                             Engine) furnished with, installed
                                             on or appurtenant to the Airframe
                                             and Engines on Delivery; and

                                    (b)      any other component, furnishing or
                                             equipment (other than a complete
                                             Engine) title to which has, or
                                             should have, passed to the Lessor
                                             pursuant to the Purchase Agreement
                                             or Clause 8.17(a),

                                    but excludes any such items title to which
                                    has, or should have, passed to the Lessee
                                    pursuant to Clause 8.17(c) and any Lessee
                                    Installed Part.

 PERMITTED JURISDICTIONS            Argentina, Australia, Belgium, Canada,
                                    Chile, Finland, France, Germany, Iceland,
                                    the Netherlands, New Zealand, Norway,
                                    Sweden, Switzerland, United Kingdom and
                                    United States of America.

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

                                    (b)      any lien of a repairer, mechanic,
                                             carrier, hangar keeper, unpaid
                                             seller or other similar hen arising
                                             in the ordinary course of business
                                             or by operation of law in respect
                                             of obligations which are not
                                             overdue in accordance with
                                             applicable

                                      -10-

<PAGE>

                                             law (or, if applicable,
                                             generally accepted accounting
                                             principles and practices in the
                                             relevant jurisdiction) or are
                                             being contested in good faith by
                                             appropriate proceedings; and

                                    (c)      any Lessor Lien;

                                    but only if, in the case of (a) and (b): (i)
                                    adequate reserves have been provided by the
                                    Lessee for the payment of the Taxes or
                                    obligations in accordance with generally
                                    accounting principles and practices in the
                                    relevant jurisdiction; and (ii) such
                                    proceedings, or the continued existence of
                                    the Lien, do not give rise to any reasonable
                                    likelihood of the sale, forfeiture or other
                                    loss of the Aircraft or any interest therein
                                    or of criminal liability on the Lessor or
                                    any Lender.

REDELIVERY LOCATION                 Honolulu, Hawaii or an airport in one of the
                                    States on the West Coast of the United
                                    States of America, as agreed by Lessor and
                                    Lessee before the Expiry Date.

RENT                                collectively, all Basic Rent and all
                                    Supplemental Rent.

RENTAL PERIOD                       each period ascertained in accordance with
                                    Clause 5.2.

RENT DATE                           the Delivery Date and the 26th day of each
                                    calendar month during the Tenn.

SECURITY DEPOSIT                    the amount of $220,000.

SECURITY INTEREST                   any mortgage, charge, pledge, lien,
                                    assignment, hypothecation, right of set-off,
                                    or any agreement or arrangement having the
                                    effect of creating a security interest,
                                    other than a Permitted Lien.

STATE OF INCORPORATION              State of Delaware.

STATE OF REGISTRATION               United States of America.

SUBSIDIARY                          (a)      in relation to any reference to
                                             accounts, any company wholly or
                                             partially owned by Parent,

                                      -11-

<PAGE>

                                             including the Lessee, whose
                                             accounts are consolidated with the
                                             accounts of the Parent in
                                             accordance with accounting
                                             principles generally accepted under
                                             accounting standards of the State
                                             of Incorporation; and

                                    (b)      for any other purpose, an entity
                                             from time to time:

                                         (i)   of which another has direct or
                                               indirect control or owns
                                               directly or indirectly more
                                               than 50% of the voting share
                                               capital; or

                                         (ii)  which is a direct or indirect
                                               subsidiary of another under
                                               the laws of the jurisdiction
                                               of its incorporation.

SUPPLEMENTAL RENT                   all amounts, liabilities and obligations
                                    (other than Basic Rent) which Lessee assumes
                                    or agrees to pay under this Agreement to
                                    Lessor or any other person, including
                                    payment of the Security Deposit, other
                                    deposits, indemnities and the Agreed Value.

TAXES                               all present and future taxes, levies,
                                    imposts, duties or charges in the nature of
                                    taxes, whatever and wherever imposed,
                                    including customs duties, value added taxes
                                    or similar taxes and any franchise,
                                    transfer, sales, use, business, occupation,
                                    excise, personal property, stamp or other
                                    tax or duty imposed by any national or local
                                    taxing or fiscal authority or agency,
                                    together with any withholding, penalties,
                                    additions to tax, fines or interest thereon
                                    or with respect thereto.

TERM                                the period commencing on the Delivery Date
                                    and ending on the Expiry Date.

TOTAL LOSS                          with respect to the Airframe:

                                    (a)      the actual, arranged or
                                             constructive total loss of the
                                             Airframe (including any damage to
                                             the Airframe which results in an
                                             insurance settlement on the basis
                                             of a total loss,

                                      -12-

<PAGE>

                                             or requisition for use or
                                             hire which results in an
                                             insurance settlement on the basis
                                             of a total loss);

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

                                    (c)      the requisition of title, or other
                                             compulsory acquisition, capture,
                                             seizure, deprivation, confiscation
                                             or detention for any reason of the
                                             Airframe by the government of the
                                             State of Registration (whether, DE
                                             JURE or DE FACTO), but excluding
                                             requisition for use or hire not
                                             involving requisition of title; or

                                    (d)      the hijacking, theft, condemnation,
                                             confiscation, seizure or
                                             requisition for use or hire of the
                                             Airframe which deprives any person
                                             permitted by this Agreement to have
                                             possession and/or use of the
                                             Airframe of its possession and/or
                                             use for more than 60 consecutive
                                             days.

TOTAL LOSS DATE                     (a)      in the case of an actual total
                                             loss, the actual date on which the
                                             loss occurs or, if such date is
                                             unknown, the day on which the
                                             Aircraft was last heard of;

                                    (b)      in the case of any of the events
                                             described in sub-paragraph (a) of
                                             the definition of "Total Loss"
                                             (other than an actual total loss),
                                             the earlier of (i) 30 days after
                                             the date on which notice claiming
                                             such total loss is given to the
                                             relevant insurers, and (ii) the
                                             date on which such loss is admitted
                                             or compromised by the insurers;

                                    (c)      in the case of any of the events
                                             described in sub-paragraph (b) of
                                             the definition of "Total Loss", the
                                             date on which such destruction,
                                             damage or rendering unfit occurs;

                                    (d)      in the case of any of the events
                                             described in sub-paragraph (c) of
                                             the definition of "Total Loss", the
                                             date on which the relevant
                                             requisition

                                      -13-

<PAGE>

                                             of title or other compulsory
                                             acquisition, capture, seizure,
                                             deprivation, confiscation or
                                             detention occurs;

                                    (e)      in the case of any of the events
                                             described in sub-paragraph (d) of
                                             the definition of "Total Loss", the
                                             expiry of the period of 60 days
                                             referred to in such sub-paragraph
                                             (d);

                                    and, in each case, the Total Loss shall be
                                    deemed to have occurred at noon Greenwich
                                    Mean Time on such date.

 U.S. AIR CARRIER                   means any domestic air carrier that (i)
                                    is authorized by the FAA to operate
                                    B737-200 aircraft in commercial passenger
                                    or cargo service, (ii) is "a citizen of
                                    the United States (as defined in 40102 of
                                    title 49) holding an air carrier
                                    operating certificate issued by the
                                    Secretary of Transportation pursuant to
                                    chapter 447 of title 49 for aircraft
                                    capable of carrying 10 or more
                                    individuals or 6,000 pounds or more of
                                    cargo", as defined in 11 U.S.C. Section
                                    1100, as amended, (iii) is not subject to
                                    any event of the types described in
                                    Clauses 13.1(g) and (h) as of the
                                    commencement of a sublease, and (iv) has
                                    a net worth of at least $20,000,000,
                                    calculated in accordance with GAAP, as of
                                    the commencement of a sublease.

1.2      INTERPRETATION

         (a)      In this Agreement, unless the contrary intention is stated, a
                  reference to:

                  (i)      each of "THE LESSOR", "THE LESSEE", "THE LENDER" or
                           any other person includes without prejudice to the
                           provisions of this Agreement any successor in title
                           to it and any permitted assignee;

                  (ii)     words importing the plural shall include the singular
                           and vice versa;

                  (iii)    the term "including", when used in this Agreement,
                           means "including without limitation" and "including
                           but not limited to".

                  (iv)     any document shall include that document as amended,
                           novated or supplemented;

                                      -14-

<PAGE>

                  (v)      a law (1) includes any statute, decree, constitution,
                           regulation, order, judgment or directive of any
                           Government Entity; (2) includes any treaty, pact,
                           compact or other agreement to which any Government
                           Entity is a signatory or party; (3) includes any
                           judicial or administrative interpretation or
                           application thereof; and (4) is a reference to that
                           provision as amended, substituted or re-enacted; and

                  (vi)     a Clause or a Schedule is a reference to a clause of
                           or a schedule to this Agreement.

         (b)      The headings in this Agreement are to be ignored in construing
                  this Agreement.

2.       REPRESENTATIONS AND WARRANTIES

2.1      LESSEE'S REPRESENTATIONS AND WARRANTIES

         The Lessee represents and warrants to the Lessor as follows:

         (a)      STATUS: The Lessee is a corporation duly organized, validly
                  existing and in good standing under the laws of the State of
                  Incorporation, has the corporate power to own its assets and
                  carry on its business as it is being conducted and is (or will
                  at the relevant time be) the holder of all necessary air
                  transportation licences required in connection therewith and
                  with the use and operation of the Aircraft.

         (b)      POWER AND AUTHORITY: The Lessee has the corporate power to
                  enter into and perform, and has taken all necessary corporate
                  action to authorize the entry into, performance and delivery
                  of, this Agreement and the transactions contemplated by this
                  Agreement.

         (c)      LEGAL VALIDITY: This Agreement constitutes the Lessee's legal,
                  valid and binding obligation.

         (d)      NON-CONFLICT: The entry into and performance by the Lessee of,
                  and the transactions contemplated by, this Agreement do not
                  and will not:

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

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

                  (iii)    conflict with or result in default under any document
                           which is binding upon the Lessee or any of its
                           assets, or result in the creation of any Security
                           Interest over any of its assets.

         (e)      AUTHORIZATION: All authorizations, consents and registrations
                  required by, and all notifications to be given by, the Lessee
                  in connection with the entry into, performance,

                                      -15-

<PAGE>
                  validity and enforceability of, this Agreement and the
                  transactions contemplated by this Agreement have been (or will
                  on or before Delivery have been) obtained, effected or given
                  (as appropriate) and are (or will on their being obtained or
                  effected be) in full force and effect.

         (f)      NO IMMUNITY:

                  (i)      The Lessee is subject to civil commercial law with
                           respect to its obligations under this Agreement.

                  (ii)     Neither the Lessee nor any of its assets is entitled
                           to any right of immunity and the entry into and
                           performance of this Agreement by the Lessee
                           constitute private and commercial acts.

         (g)      FINANCIAL STATEMENTS: the audited consolidated financial
                  statements of the Parent and its Subsidiaries most recently
                  delivered to the Lessor:

                  (i)      have been prepared in accordance with accounting
                           principles and practices generally accepted and
                           consistently applied in the State of Registration;
                           and

                  (ii)     fairly present the consolidated financial condition
                           of the Parent and its Subsidiaries as at the date to
                           which they were drawn up and the consolidated results
                           of operations of the Parent and its Subsidiaries for
                           the periods covered by such statements.

2.2      LESSEE'S FURTHER REPRESENTATIONS AND WARRANTIES

         The Lessee further represents and warrants to the Lessor that:

         (a)      NO DEFAULT: No Event of Default has occurred and is continuing
                  or might reasonably be expected to result from the entry into
                  or performance of this Agreement.

         (b)      REGISTRATION:

                  (i)      It is not necessary or advisable under the laws of
                           the State of Incorporation, the State of Registration
                           or the Habitual Base in order to ensure the validity,
                           effectiveness and enforceability of this Agreement,
                           the Mortgage or the Assignment or to establish,
                           perfect or protect the property rights of the Lessor
                           or the Lender in the Aircraft, any Engine or Part
                           that this Agreement or any other instrument relating
                           thereto be filed, registered or recorded or that any
                           other action be taken or, if any such filings,
                           registrations, recordings or other actions are
                           necessary, the same have been effected or will have
                           been effected on or before Delivery.

                                      -16-

<PAGE>

                  (ii)     Under the laws of the State of Incorporation, the
                           State of Registration and the Habitual Base the
                           property rights of the Lessor and the Lender
                           (pursuant to the Mortgage) in the Aircraft have been
                           fully established, perfected and protected and this
                           Agreement will have priority in all respects over the
                           claims of all creditors of the Lessee, with the
                           exception of such claims as are mandatorily preferred
                           by law and not by virtue of any contract.

         (c)      LITIGATION: No litigation, arbitration or administrative
                  proceedings are pending or, to the Lessee's knowledge,
                  threatened against the Lessee which, if adversely determined,
                  would have a material adverse effect upon its financial
                  condition or business or its ability to perform its
                  obligations under this Agreement.

         (d)      PARI PASSU: The obligations of the Lessee under this Agreement
                  rank at least PARI PASSU with all other present and future
                  unsecured and unsubordinated obligations (including contingent
                  obligations) of the Lessee, with the exception of such
                  obligations as are mandatorily preferred by law and not by
                  virtue of any contract.

         (e)      TAXES: The Lessee has delivered all necessary returns and
                  payments due to the tax authorities in the State of
                  Incorporation, the State of Registration and the Habitual Base
                  and is not required by law to deduct or withhold any Taxes
                  from any payments under this Agreement.

2.3      REPETITION

         The representations and warranties in Clause 2.1 and Clause 2.2 will
         survive the execution of this Agreement. The representations and
         warranties contained in Clause 2.1 and Clause 2.2 (other than Clause
         2.2(c) above) will be deemed to be repeated by the Lessee on Delivery
         with reference to the facts and circumstances then existing. The
         representations and warranties contained in Clause 2.1 will be deemed
         to be repeated by the Lessee on each Rent Date as if made with
         reference to the facts and circumstances then existing.

2.4      LESSOR'S REPRESENTATIONS AND WARRANTIES

         The Lessor represents and warrants to the Lessee that:

         (a)      STATUS: The Lessor is a limited liability company duly formed
                  and validly existing under the laws of Delaware and has the
                  power to own its assets and carry on its business as it is now
                  being conducted.

         (b)      POWER AND AUTHORITY: The Lessor has the power to enter into
                  and perform, and has taken all necessary action to authorize
                  the entry into, performance and delivery of, this Agreement
                  and the transactions contemplated by this Agreement.

                                      -17-

<PAGE>

         (c)      LEGAL VALIDITY: This Agreement constitutes the Lessor's legal,
                  valid and binding obligation.

         (d)      NON-CONFLICT: The entry into and performance by the Lessor of,
                  and the transactions contemplated by, this Agreement do not
                  and will not:

                  (i)      conflict with any laws binding on the Lessor;

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

                  (iii)    conflict with any document which is binding upon the
                           Lessor or any of its assets.

         (e)      AUTHORIZATION: So far as concerns the obligations of the
                  Lessor, all authorizations, consents, registrations and
                  notifications required under the laws of the States of
                  Delaware and New York in connection with the entry into,
                  performance, validity and enforceability of, and the
                  transactions contemplated by, this Agreement by the Lessor
                  have been (or will on or before Delivery have been) obtained
                  or effected (as appropriate) and are (or will on their being
                  obtained or effected be) in full force and effect.

         (f)      NO IMMUNITY:

                  (i)      The Lessor is subject to civil commercial law with
                           respect to its obligations under this Agreement.

                  (ii)     Neither the Lessor nor any of its assets is entitled
                           to any right of immunity and the entry into and
                           performance of this Agreement by the Lessor
                           constitute private and commercial acts.

         (g)      RIGHT TO LEASE: On the Delivery Date, the Lessor shall have
                  the right to lease the Aircraft to the Lessee under this
                  Agreement.

2.5      REPETITION

         The representations and warranties in Clause 2.4 will survive the
         execution of this Agreement. The representations and warranties
         contained in Clause 2.4 will be deemed to be repeated by the Lessor on
         Delivery and on each subsequent Rent Date as if made with reference to
         the facts and circumstances then existing.

                                      -18-

<PAGE>

3.       CONDITIONS PRECEDENT

3.1      LESSOR'S DOCUMENTARY CONDITIONS PRECEDENT

         The Lessor's obligation to lease the Aircraft to the Lessee under this
         Agreement is subject to the receipt of the following by the Lessor from
         the Lessee on or before Delivery in form and substance satisfactory to
         the Lessor, PROVIDED THAT it shall not be a condition precedent to the
         obligations of the Lessor that any document be produced, or action
         taken, which is to be produced or taken by it or any person within its
         control:

         (a)      CONSTITUTIONAL DOCUMENTS: a copy of the constitutional
                  documents of the Lessee;

         (b)      RESOLUTIONS: a copy of a resolution of the board of directors
                  of the Lessee approving the terms of, and the transactions
                  contemplated by, this Agreement, resolving that it enter into
                  this Agreement, and authorizing a specified person or persons
                  to execute this Agreement and accept delivery of the Aircraft
                  on its behalf;

         (c)      OPINION: an opinion, in the form set out in Schedule 5, in
                  respect of the Lessee's obligations under this Agreement
                  issued by independent legal counsel acceptable to the Lessor
                  in the State of Incorporation;

         (d)      APPROVALS: evidence of the issue of each approval, licence and
                  consent which may be required in relation to, or in connection
                  with, the performance by Lessee of any of its obligations
                  hereunder;

         (e)      LICENCES: copies of the Lessee's air transport license, air
                  operator's certificate and all other licenses, certificates
                  and permits required by the Lessee in relation to, or in
                  connection with, the operation of the Aircraft;

         (f)      CERTIFICATE: a certificate of a duly authorized officer of the
                  Lessee:

                  (i)      setting out a specimen of each signature referred to
                           in Clause 3.1 (b); and

                  (ii)     certifying that each copy of a document specified in
                           this Clause 3.1 is correct, complete and in full
                           force and effect;

         (g)      INSURANCES: certificates of insurance, brokers' undertakings
                  and other evidence satisfactory to the Lessor that the Lessee
                  is taking the required steps to ensure due compliance with the
                  provisions of this Agreement as to insurances with effect on
                  and after Delivery;

         (h)      REGISTRATION: evidence that the Aircraft has been validly
                  registered under the laws of the State of Registration and
                  that all filings, registrations, recordings and other actions

                                      -19-

<PAGE>

                  have been or will be taken which are necessary to ensure the
                  validity, effectiveness and enforceability of this Agreement,
                  the Mortgage and the Assignment and to protect the respective
                  rights of the Lessor and the Lender in the Aircraft or any
                  Part; and

         (i)      GENERAL: such other documents as the Lessor may reasonably
                  request.

3.2      LESSOR'S OTHER CONDITIONS PRECEDENT

         The obligation of the Lessor to deliver and lease the Aircraft under
         this Agreement is also subject to the following additional conditions
         precedent:

         (a)      that the representations and warranties of the Lessee under
                  Clauses 2.1 and 2.2 are correct and would be correct if
                  repeated on Delivery;

         (b)      that all payments due to the Lessor under this Agreement on or
                  before Delivery, including the first payment of Basic Rent,
                  shall have been received by the Lessor;

         (c)      all conditions precedent to the purchase of the Aircraft and
                  the Aircraft Documents by the Lessor under the Purchase
                  Agreement shall have been satisfied (or waived by the Lessor),
                  the Lessor shall have drawn down under its financing facility
                  with the Lender the amount required to pay the "Purchase
                  Price" (as defined in the Purchase Agreement) due to the
                  Lessee and the Lessee has delivered the Aircraft and Aircraft
                  Documents to Lessor pursuant to the Purchase Agreement; and

         (d)      the Mortgage shall be in full force and effect.

3.3      LESSOR'S WAIVER

         The conditions specified in Clauses 3.1 and 3.2(a) and (b) are for the
         sole benefit of the Lessor and the Lender and may be waived or deferred
         in whole or in part and with or without conditions by the Lessor. If
         any of those conditions are not satisfied on or before Delivery and the
         Lessor (in its absolute discretion) nonetheless agrees to deliver the
         Aircraft to the Lessee, the Lessee will ensure that those conditions
         (other than the representation set forth in Clause 2.2(c) being correct
         on the Delivery Date) are fulfilled within one month after the Delivery
         Date and the Lessor may treat as an Event of Default the failure of the
         Lessee to do so.

3.4      LESSEE'S CONDITIONS PRECEDENT

         The Lessee's obligation to accept the Aircraft on lease from the Lessor
         under this Agreement is subject to the satisfaction by the Lessor of
         the following conditions precedent:

                                      -20-

<PAGE>

         (a)      RESOLUTIONS: the receipt by the Lessee of a copy of
                  resolutions of the board of directors of the Lessor approving
                  the terms of, and the transactions contemplated by, this
                  Agreement, resolving that it enter into this Agreement, and
                  authorizing a specified person or persons to execute this
                  Agreement and deliver the Aircraft on its behalf;

         (b)      CERTIFICATE: the receipt by the Lessee of a certificate of a
                  duly authorized officer of the Lessor:

                  (i)      setting out a specimen of each signature referred to
                           in sub-clause (a) above; and

                  (ii)     certifying that the copy of the resolutions referred
                           to in sub-clause (a) above is correct, complete and
                           in full force and effect;

         (c)      REPRESENTATIONS AND WARRANTIES: that the representations and
                  warranties of the Lessor under Clause 2.4 are correct and
                  would be correct if repeated on Delivery; and

         (d)      LENDER'S COVENANT OF QUIET ENJOYMENT: the receipt by the
                  Lessee of the Lender's Letter of Quiet Enjoyment, duly signed
                  by the Lender.

3.5      LESSEE'S WAIVER

         The conditions specified in Clause 3.4 are for the sole benefit of the
         Lessee and may be waived or deferred in whole or in part and with or
         without conditions by the Lessee. If any of those conditions are not
         satisfied on or before Delivery and the Lessee (in its absolute
         discretion) nonetheless agrees to lease the Aircraft from the Lessor,
         the Lessor will ensure that those conditions are fulfilled within one
         month after the Delivery Date.

4.       COMMENCEMENT

4.1      LEASING

         (a)      The Lessor will lease the Aircraft to the Lessee and the
                  Lessee will take the Aircraft on lease in accordance with this
                  Agreement for the duration of the Term.

         (b)      The Lessor and the Lessee intend that this Agreement
                  constitute a "true lease" and a lease for all United States
                  federal income tax purposes. The Lessor and the Lessee further
                  intend and agree that the Lessor shall be entitled to the full
                  benefits afforded lessors of aircraft under 11 U.S.C. Section
                  1110, as amended.

4.2      DELIVERY

         The Aircraft will be deemed to have been delivered to, and will be
         accepted by, the Lessee at the Delivery Location, or such other
         location as may be agreed, on the Delivery Date

                                      -21-

<PAGE>

         immediately following satisfaction of the conditions precedent
         specified in Clauses 3.1, 3.2 and 3.4 (or their waiver or deferral by
         the party entitled to grant such waiver or deferral).

4.3      ACCEPTANCE AND RISK

         (a)      Immediately following satisfaction of the conditions precedent
                  specified in Clauses 3.1, 3.2 and 3.4 (or their waiver or
                  deferral by the party entitled to grant such waiver or
                  deferral), the Lessee and the Lessor shall forthwith complete
                  Annex 1 to the Certificate of Acceptance (specifying the
                  maintenance status of the Airframe, Engines, APU and Landing
                  Gear) and the Lessee shall sign and deliver to the Lessor the
                  Certificate of Acceptance. Delivery of the signed Certificate
                  of Acceptance to the Lessor shall constitute deemed delivery
                  of the Aircraft to the Lessee.

         (b)      On and from Delivery, the Aircraft and every Part will be in
                  every respect at the sole risk of the Lessee, which will bear
                  all risk of loss, theft, damage or destruction to the Aircraft
                  from any cause whatsoever.

         (c)      Immediately following Delivery, the Lessor shall file for
                  recordation this Lease at the FAA Aircraft Registry together
                  with the Mortgage and the Assignment.

5.       PAYMENTS

5.1      SECURITY DEPOSIT: LETTER OF CREDIT

         (a)      SECURITY DEPOSIT: On the date of this Agreement, Lessee shall
                  pay the Security Deposit to Lessor. The Security Deposit shall
                  constitute additional security for performance by Lessee of
                  its obligations under this Agreement, and the following
                  provisions shall apply:

                  (i)      If an Event of Default occurs and for as long as it
                           continues, the Lessor may (but shall not be obligated
                           to) apply all or any portion of the Security Deposit
                           in or towards satisfaction of any sums due and
                           payable to the Lessor under this Agreement or to
                           compensate the Lessor for any sums which it may, in
                           its discretion, advance or expend as a result of any
                           such Event of Default. Notwithstanding any such use
                           or application by the Lessor, the Lessee shall remain
                           in default under this Agreement until the full amount
                           owed by the Lessee, including interest accrued
                           thereon pursuant to Clause 5.9, shall have been paid
                           to the Lessor. If the Lessor so uses or applies all
                           or any portion of the Security Deposit, the Lessee
                           shall immediately, on demand of the Lessor, replenish
                           the Security Deposit in an amount equal to the amount
                           so used or applied within five Business Days after
                           Lessor's demand therefor.

                                      -22-

<PAGE>

                  (ii)     Lessor may commingle the Security Deposit with its
                           general funds, and any interest earned on the
                           Security Deposit will be for Lessor's account.

                  (iii)    The Security Deposit shall be returned to the Lessee
                           within five Business Days of (1) redelivery of the
                           Aircraft to the Lessor in the condition required by
                           Clause 12 of, and Schedule 3 to, this Agreement, (2)
                           receipt by the Lessor of the Agreed Value following a
                           Total Loss and all other amounts due under Clause
                           11.1(b), or (3) at such later time as the Lessor is
                           satisfied that the Lessee has irrevocably paid to the
                           Lessor all amounts which are at that time outstanding
                           under this Agreement; provided always that the Lessor
                           shall not be obliged to return the Security Deposit
                           if, at the relevant time, a Default shall have
                           occurred and be continuing.

         (b)      LETTER OF CREDIT: the Lessee shall be entitled, instead of
                  paying the Security Deposit in cash in accordance with
                  sub-clause (a) above, to provide the Lessor with the Letter of
                  Credit. In the event that the Lessee elects to provide the
                  Letter of Credit, the following provisions shall apply:

                  (i)      Lessee shall cause the Letter of Credit to be renewed
                           or replaced by the issuing bank not later than 10
                           Business Days before the expiration of such Letter of
                           Credit, and shall cause the Letter of Credit to
                           remain in effect, as renewed, until 90 days after the
                           scheduled Expiry Date.

                  (ii)     If an Event of Default occurs and for as long as it
                           continues, the Lessor may (but shall not be obliged
                           to) call on the Letter of Credit and use or apply the
                           proceeds in or towards satisfaction of any sums due
                           and payable to the Lessor under this Agreement or to
                           compensate the Lessor for any sums which it may, in
                           its discretion, advance or expend as a result of any
                           such Event of Default. Notwithstanding any such use
                           or application by the Lessor, the Lessee shall remain
                           in default under this Agreement until the full amount
                           owed by the Lessee, including interest accrued
                           thereon pursuant to Clause 5.9, shall have been paid
                           to the Lessor. If the Lessor so uses or applies all
                           or any portion of the amount available under the
                           Letter of Credit, the Lessee shall immediately, on
                           demand of the Lessor, procure the issue of a new
                           Letter of Credit acceptable to the Lessor for an
                           amount equal to the amount so used or applied, or
                           shall pay to the Lessor an amount in cash equal to
                           the amount so used or applied to be held pursuant to
                           Clause 5.1(a).

                  (iii)    The Letter of Credit shall be returned to the Lessee
                           within five Business Days of:

                           (1)      redelivery of the Aircraft to the Lessor in
                                    the condition required by Clause 12 of, and
                                    Schedule 3 to, this Agreement; or

                                      -23-

<PAGE>

                           (2)      receipt by the Lessor of the Agreed Value
                                    following a Total Loss and all other amounts
                                    due under Clause 11.1(b); or

                           in either case, at such later time as the Lessor is
                           satisfied that the Lessee has irrevocably paid to the
                           Lessor all amounts which are at that time outstanding
                           under this Agreement; provided always that the Lessor
                           shall not be obliged to return the Letter of Credit
                           if, at the relevant time, a Default shall have
                           occurred and be continuing.

5.2      RENTAL PERIODS

         The first Rental Period will commence on the Delivery Date and each
         subsequent Rental Period will commence on the date succeeding the last
         day of the previous Rental Period. Each Rental Period will end on the
         date immediately preceding the next succeeding Rent Date except that if
         a Rental Period would otherwise overrun the Expiry Date, it will end on
         the Expiry Date.

5.3      BASIC RENT

         (a)      TIME OF PAYMENT: the Lessee will pay to the Lessor or its
                  order Basic Rent in advance on each Rent Date. Payment must be
                  initiated adequately in advance of the Rent Date to ensure
                  that the Lessor receives credit for the payment on the Rent
                  Date.

         (b)      AMOUNT: The Basic Rent payable in respect of each Rental
                  Period will be as follows:

                  (i)      The Basic Rent payable in respect of the first Rental
                           Period will be the product of $110,000 multiplied by
                           a fraction (1) the numerator of which is the number
                           of days from and including the Delivery Date to but
                           excluding the next succeeding Rent Date and (2) the
                           denominator of which is the number of days in the
                           calendar month immediatley preceding the calendar
                           month in which such next succeeding Rent Date occurs.

                  (iii)    The Basic Rent payable in respect of each subsequent
                           Rental Period will be the amount of $110,000.

5.4      PAYMENTS

         (a)      All payments of Rent by the Lessee to the Lessor under this
                  Agreement will be made for value on the due date, for the full
                  amount due, in Dollars and in same day funds, settled through
                  the New York Clearing House System or such other funds as may
                  for the time being be customary for the settlement in New York
                  City of payments in Dollars by telegraphic transfer to the
                  account of the Lender at Citibank, N.A., New

                                      -24-

<PAGE>

                  York, New York, ABA No. 021000089, Account No. 00067512,
                  reference "Aloha Airlines/N802AL-N804AL".

         (b)      if any Rent or other payment would otherwise become due on a
                  day which is not a Business Day, it shall be due on the
                  immediately succeeding Business Day.

5.5      GROSS-UP

         (a)      All payments by the Lessee under or in connection with this
                  Agreement will be made without offset or counterclaim, free
                  and clear of and without deduction or withholding for or on
                  account of any Taxes (other than Lessor Taxes that Lessee is
                  compelled by law to deduct or withhold).

         (b)      All Taxes (other than Lessor Taxes) in respect of payments
                  under this Agreement shall be for the account of the Lessee.

         (c)      If the Lessee is compelled by law to make payment to the
                  Lessor under or in connection with this Agreement subject to
                  any Tax and the Lessor does not actually receive for its own
                  benefit on the due date a net amount equal to the full amount
                  provided for under this Agreement (other than Lessor Taxes
                  that Lessee is compelled by law to deduct or withhold), the
                  Lessee will pay all necessary additional amounts to ensure
                  receipt by the Lessor of the full amount (other than Lessor
                  Taxes that Lessee is compelled by law to deduct or withhold)
                  so provided for.

5.6      TAXATION

         (a)      The Lessee will on demand pay and indemnify the Lessor and the
                  Lender against all Taxes (other than Lessor Taxes) levied or
                  imposed against or upon the Lessor, the Lender or the Lessee
                  and relating to or attributable to the Lessee, this Agreement
                  or the Aircraft directly or indirectly in connection with the
                  importation, exportation, registration, ownership, leasing,
                  sub-leasing, purchase, delivery, possession, use, operation,
                  repair, maintenance, overhaul, transportation, landing,
                  storage, presence or redelivery of the Aircraft or any part
                  thereof or any rent, receipts, insurance proceeds, income or
                  other amounts arising therefrom.

         (b)      If the Lessor or the Lender shall, based upon its own
                  reasonable interpretation of any relevant laws or regulations,
                  realize any Tax savings (by way of refund, deduction, credit
                  or otherwise) in respect of any amount with respect to which
                  the Lessee shall have made a payment (or increased payment)
                  pursuant to Clause 5.5 or 5.8 or shall have indemnified the
                  Lessor or the Lender pursuant to sub-clause (a) above, or in
                  respect of the occurrence or transaction which gave rise to
                  such payment or indemnification, and such Tax savings shall
                  not have been taken into account previously in calculating any
                  indemnity payment made by the Lessee, then the Lessor or the
                  Lender (as the case may

                                      -25-

<PAGE>

                  be) shall, to the extent that it can do so without prejudice
                  to the retention of the relevant savings and subject to the
                  Lessee's obligations to repay such amount to the Lessor or the
                  Lender (as applicable) if the relevant savings are
                  subsequently disallowed or canceled, pay to the Lessee such
                  amount as the Lessor or the Lender (as the case may be) shall
                  in its opinion have concluded to be the amount of such Tax
                  savings (together with, in the case of a refund, any interest
                  received thereon); provided however that neither the Lessor
                  nor the Lender shall be obliged to make any payment to the
                  Lessee pursuant to this sub-clause (b) to the extent that the
                  amount of any Tax savings in respect of which such payment is
                  to be made would exceed the aggregate amount of all prior
                  payments made by the Lessee to, on behalf of or as
                  indemnification of the Lessor or the Lender under this
                  Agreement for Taxes less the amount of all prior payments made
                  pursuant to this sub-clause (b) in respect of such Tax
                  savings. The Lessee acknowledges that nothing contained in
                  this sub-clause (b) shall interfere with the right of the
                  Lessor or the Lender to arrange its tax affairs in whatsoever
                  proper manner it thinks fit (or give the Lessee any right to
                  investigate, or impose any obligation on the Lessor or the
                  Lender to disclose, the same) and, in particular, neither the
                  Lessor nor the Lender shall be under any obligation to claim
                  any Tax savings in priority to any other savings available to
                  it; provided, that subject to the foregoing Lessor shall use
                  reasonable good faith diligence to realize Tax savings as
                  described above.

5.7      INFORMATION

         If the Lessee is required by any applicable law, or by any third party,
         to deliver any report or return in connection with any Taxes, the
         Lessee will duly complete the same and, in particular, will state
         therein that the Lessee is exclusively responsible for the use and
         operation of the Aircraft and for the Taxes (other than Lessor Taxes)
         arising therefrom, and the Lessee will, on request, supply a copy of
         the report or return to the Lessor. If Lessee requires any information
         or cooperation from Lessor or Lender in order to satisfy its
         obligations as set forth above, Lessor and Lender shall promptly
         furnish such information or cooperation as Lessee may reasonably
         request upon written request by Lessee. If actual notice is given by
         any taxing authority to Lessor that a report or return is required to
         be filed with respect to any Taxes (other than Lessor Taxes), the
         Lessor shall promptly notify Lessee of such required report or return.

5.8      TAXATION OF INDEMNITY PAYMENTS

         (a)      If and to the extent that any sums payable to the Lessor or
                  the Lender by the Lessee under this Agreement by way of
                  indemnity are insufficient, by reason of any Taxes payable in
                  respect of those sums, for the Lessor or the Lender to
                  discharge the corresponding liability to the relevant third
                  party (including any taxation authority), or to reimburse the
                  Lessor or the Lender for the cost incurred by it to a third
                  party (including any taxation authority) the Lessee will pay
                  to the Lessor or the Lender (as the case may be) such sum as
                  will, after the tax liability has been fully satisfied, leave

                                      -26-

<PAGE>

                  the Lessor or the Lender (as the case may be) with the same
                  amount as it would have been entitled to receive in the
                  absence of that liability, together with interest on the
                  amount of the deficit at the Default Rate in respect of the
                  period commencing on the date on which the payment of taxation
                  is finally due until payment by the Lessee (both before and
                  after judgment).

         (b)      If and to the extent that any sums constituting (directly or
                  indirectly) an indemnity to the Lessor or the Lender but paid
                  by the Lessee to any person other than the Lessor or the
                  Lender are treated as taxable in the hands of the Lessor or
                  the Lender, the Lessee will pay to the Lessor or the Lender
                  such sum as will, after the tax liability has been fully
                  satisfied, indemnify the Lessor or the Lender to the same
                  extent as it would have been indemnified in the absence of
                  such liability, together with interest on the amount payable
                  by lessee under this sub-clause at the Default Rate in respect
                  of the period commencing on the date on which the payment of
                  taxation is finally due until payment by the Lessee (both
                  before and after judgment).

5.9      DEFAULT INTEREST

         If the Lessee fails to pay any amount payable under this Agreement on
         the due date, the Lessee will pay on demand from time to time to the
         Lessor or the Lender (as the case may be) interest (both before and
         after judgment) on the amount, from the due date to the day of payment
         in full by the Lessee to the Lessor or the Lender, at the prime rate
         for the time being charged by Citibank, N.A. plus 3.0% (the "DEFAULT
         RATE"). All such interest will be compounded monthly and calculated on
         the basis of the actual number of days elapsed and on a 360 day year.

5.10     CONTEST

         If written claim is made against Lessor or Lender for or with respect
         to any Taxes (other than Lessor Taxes), Lessor shall, and shall cause
         Lender to, promptly notify the Lessee. If reasonably requested by the
         Lessee in writing within 30 days after such notification, Lessor shall
         or shall cause Lender to, upon receipt of indemnity satisfactory to
         Lessor or Lender, as the case may be, and at the expense of the Lessee
         (including all costs, expenses, losses, legal and accountants' fees and
         disbursements, penalties and interest), in good faith contest or to the
         extent permissible by law allow Lessee to contest in Lessee's, the
         Lessors or the Lender's name, the validity, applicability or amount of
         such Taxes by either (i) resisting payment thereof if practicable and
         permitted by applicable law, or (ii) if payment is made, using
         reasonable efforts to obtain a refund thereof in appropriate
         administrative and judicial proceedings, and in the contest of any such
         claim by Lessor or Lender, Lessor shall, and shall cause Lender to,
         apprise the Lessee of all material developments with respect to such
         contest, shall forward copies of all material submissions made in such
         contest and shall materially comply in good faith with any reasonable
         request concerning the conduct of any such

                                      -27-

<PAGE>

         contest; provided, however, the Lessor or the Lender (as the case may
         be) will not be obliged to take any such action:

         (a)      which the Lessor or the Lender (as the case may be) considers,
                  in its reasonable discretion, may prejudice it; or

         (b)      which the Lessor or the Lender (as the case may be) reasonably
                  considers does not have a reasonable prospect of success; or

         (c)      for which the Lessee has not made adequate provision to the
                  reasonable satisfaction of the Lessor or the Lender (as the
                  case may be) in respect of the expense concerned; or

         (d)      if such action gives rise to any material likelihood of the
                  Aircraft or any interest therein being sold, forfeited or
                  otherwise lost or of criminal liability on the part of the
                  Lessor or the Lender.

         If Lessor or Lender, in accordance with the foregoing, determines to
         pay such Taxes and seek a refund, Lessee will either pay such Taxes on
         Lessor's or Lender's behalf and pay Lessor or Lender, as the case may
         be, any amount due with respect to such payment or will promptly
         reimburse Lessor for such Taxes. If Lessor shall obtain a refund of all
         or any part of such Taxes paid by the Lessee, Lessor shall pay the
         Lessee the amount of such refund; provided that such amount shall not
         be payable before such time as the Lessee shall have made all payments
         or indemnities to Lessor then due with respect to Taxes and so long as
         no Default has occurred and is continuing. If in addition to such
         refund Lessor shall receive an amount representing interest, attorneys
         fees or any other amount on the amount of such refund, the Lessee shall
         be paid that proportion of such interest, attorneys fees or any other
         amount which is fairly attributable to the Taxes paid by the Lessee
         prior to the receipt of such refund. Lessor and/or Lender shall not
         enter into a settlement or other compromise with respect to, or
         otherwise concede, any claim by a taxing authority on account of Taxes
         being contested by Lessee pursuant to this Clause 5. 10 without the
         written consent of Lessee, which consent shall not be unreasonably
         withheld, unless Lessor waives its right and the right of Lender to be
         indemnified by Lessee with respect to such claim (but not with respect
         to any future claims).

5.11     ABSOLUTE

         The Lessee's obligations under this Agreement are absolute and
         unconditional irrespective of any contingency whatever including (but
         not limited to):

         (a)      any right of offset, counterclaim, recoupment, defense or
                  other right which either party to this Agreement may have
                  against the other;

                                      -28-

<PAGE>

         (b)      any unavailability of the Aircraft for any reason, including a
                  requisition of the Aircraft or any prohibition or interruption
                  of, interference with or other restriction against the
                  Lessee's use, operation or possession of the Aircraft;

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

         (d)      any insolvency, bankruptcy, reorganization, arrangement,
                  readjustment of debt, dissolution, liquidation or similar
                  proceedings by or against the Lessor or the Lessee;

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

         (f)      any other cause which, but for this provision, would or might
                  otherwise have the effect of terminating or in any way
                  affecting any obligation of the Lessee under this Agreement;

         provided always, however, that this Clause 5.11 shall be without
         prejudice to the Lessee's right to claim damages and other relief from
         the courts in the event of any breach by the Lessor of its obligations
         under this Agreement, or in the event that, as a result of any lack or
         invalidity of title to the Aircraft on the part of the Lessor, the
         Lessee is deprived of its possession of the Aircraft.

6.       MANUFACTURER'S WARRANTIES

6.1      ASSIGNMENT

         Notwithstanding this Agreement and subject to the rights of the Lender
         pursuant to the Assignment, the Lessor will remain entitled to the
         benefit of each warranty, express or implied, and any unexpired
         customer and/or product support given or provided in respect of the
         Aircraft, any Engine or Part by any manufacturer, vendor, maintenance
         performer, subcontractor or supplier. Unless an Event of Default shall
         have occurred and be continuing, the Lessor hereby authorizes the
         Lessee to pursue any claim thereunder in relation to defects affecting
         the Aircraft, any Engine or Part and the Lessee agrees diligently to
         pursue any such claim which arises at its own cost. The Lessee will
         notify the Lessor promptly upon becoming aware of any such claim. The
         Lessor will provide such assistance to the Lessee in making a claim
         under any such warranties or customer and/or product support as the
         Lessee may reasonably request, and, if requested by the Lessee and at
         the Lessee's expense, will pursue a claim in its own name where the
         relevant manufacturer, vendor, maintenance

                                      -29-

<PAGE>

         performer, subcontractor or supplier has refused to acknowledge the
         Lessee's right to pursue that claim.

6.2      PROCEEDS

         Unless an Event of Default shall have occurred and be continuing, all
         proceeds of any such claim as is referred to in Clause 6.1 and which
         exceed $100,000 will be paid direct to the Lender, but if and to the
         extent that such claim relates:

         (a)      to defects affecting the Aircraft which the Lessee has
                  rectified; or

         (b)      to compensation for loss of use of the Aircraft, an Engine or
                  any Part during the Tenn; or

         (c)      to costs incurred by the Lessee in pursuing such claim
                  (whether or not proceeds of such claim are payable to the
                  Lessee);

         and provided no Default shall have occurred and be continuing, the
         proceeds will be promptly paid to the Lessee by the Lender but, in the
         case of (a), only on receipt of evidence reasonably satisfactory to the
         Lessor and the Lender that the Lessee has rectified the relevant
         defect.

6.3      PARTS

         Except to the extent the Lessor otherwise agrees in a particular case,
         the Lessee will procure that all engines, components, furnishings or
         equipment provided by the manufacturer, vendor, maintenance performer,
         subcontractor or supplier as a replacement for a defective Engine or
         Part pursuant to the terms of any warranty or customer and/or product
         support arrangement comply with Clause 8.13 (a), are installed on the
         Aircraft promptly and that title thereto vests in the Lessor in
         accordance with Clause 8.17(a). On installation those items will be
         deemed to be an Engine or Part, as applicable.

6.4      AGREEMENT

         To the extent any warranties or customer and/or product support
         relating to the Aircraft are made available under an agreement between
         any manufacturer, vendor, maintenance performer, subcontractor or
         supplier and the Lessee, this Clause 6 is subject to that agreement.
         However the Lessee will:

         (a)      pay the proceeds of any claim thereunder that exceed $100,000
                  to the Lender to be applied pursuant to Clause 6.2 and,
                  pending such payment, will hold the claim and the proceeds on
                  trust for the Lender; and

                                      -30-

<PAGE>

         (b)      take all such steps as are necessary and requested by the
                  Lessor at the end of the Term to ensure the benefit of any of
                  those warranties or customer and/or product support which have
                  not expired are vested in the Lessor (but subject to the
                  rights of the Lender under the Mortgage).

7.       LESSOR'S COVENANTS AND DISCLAIMERS

7.1      QUIET ENJOYMENT

         Provided no Event of Default shall have occurred and be continuing,
         none of the Lessor, its successors and assigns, the Lender or any
         Person claiming by, through or on account of any of such parties will
         interfere with the quiet use, possession and enjoyment of the Aircraft
         by the Lessee.

7.2      MAINTENANCE CONTRIBUTION

         (a)      Provided no Default has occurred and is continuing, upon the
                  performance by Lessee of "Qualifying Work" (as hereinafter
                  defined) relating to any airworthiness directive, the Lessor
                  will pay to the Lessee, by way of contribution to the cost of
                  maintenance of the Aircraft, an amount equal to the product of
                  (a) the amount by which the Actual Cost of the Qualifying Work
                  for such airworthiness directive exceeds $225,000, multiplied
                  by (b) a fraction the numerator of which is 60 minus the
                  number of months (rounded to the nearest whole number of
                  months) from the date of the completion of such Qualifying
                  Work until the scheduled Expiry Date and the denominator is
                  60.

         (b)      "Qualifying Work" means maintenance work performed on the
                  Aircraft solely in order to comply fully with airworthiness
                  directives issued by the Aviation Authority (whether or not
                  such airworthiness directives were issued before or after the
                  Delivery Date) on a terminating action basis, and excluding
                  work performed for any other purpose, such as compliance with
                  airworthiness directives by means of repetitive inspections,
                  recording compliance work in the Aircraft Documents and all
                  other maintenance work.

         (c)      The Lessor will be obligated to pay any amount specified in
                  Clause 7.2(a) within 14 days after submission by the Lessee to
                  the Lessor of an invoice and supporting documentation
                  reasonably satisfactory to the Lessor evidencing the
                  performance of Qualifying Work for an airworthiness directive.

7.3      REGISTRATION AND FILINGS

         The Lessor shall, at the Lessor's cost:

         (a)      maintain the registration of the Aircraft with the Aviation
                  Authority reflecting (so far as permitted by applicable law)
                  the respective interests of the Lessor and the Lender and

                                      -31-

<PAGE>

                  not do or suffer to be done anything which might reasonably be
                  expected to adversely affect that registration; and

         (b)      do all acts and things (including making any filing or
                  registration with the Aviation Authority or any other
                  Government Entity) as may be required following any change in
                  the ownership or financing of the Aircraft.

7.4      AGREED MAINTENANCE PERFORMERS

         The Lessor may object to and may exclude any maintenance organization
         (other than Lessee) being included as an "Agreed Maintenance Performer"
         for a valid business reason. The Lessor shall furnish to Lessee in
         writing from time to time a list of all maintenance organizations
         excluded from the definition of "Agreed Maintenance Performer" pursuant
         to the preceding sentence, which list may be amended by Lessor from
         time to time. The Lessor and the Lessee shall consult in good faith
         regarding any organizations on such list from time to time at the
         request of either party.

7.5      EXCLUSION

         THE AIRCRAFT IS ACCEPTED BY THE LESSEE "AS IS, WHERE IS WITH ALL
         FAULTS" AND LESSEE AGREES AND ACKNOWLEDGES THAT, SAVE AS IS EXPRESSLY
         STATED IN THIS AGREEMENT, LESSOR WILL HAVE NO LIABILITY IN RELATION TO,
         AND LESSOR HAS NOT AND WILL NOT BE DEEMED TO HAVE MADE OR GIVEN, ANY
         CONDITIONS, WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, WITH
         RESPECT TO THE AIRCRAFT, INCLUDING BUT NOT LIMITED TO:

         (a)      THE DESCRIPTION, AIRWORTHINESS, MERCHANTABILITY, FITNESS FOR
                  ANY USE OR PURPOSE, VALUE, CONDITION, OR DESIGN, OF THE
                  AIRCRAFT OR ANY PART; OR

         (b)      ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN TORT,
                  WHETHER OR NOT ARISING FROM LESSOR'S NEGLIGENCE, ACTUAL OR
                  IMPUTED (BUT EXCLUDING ANY SUCH OBLIGATION, LIABILITY, RIGHT,
                  CLAIM OR REMEDY IN TORT WHICH ARISES FROM LESSOR'S GROSS
                  NEGLIGENCE OR WILFUL MISCONDUCT); OR

         (c)      ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY FOR LOSS OF
                  OR DAMAGE TO THE AIRCRAFT, FOR ANY LIABILITY OF LESSEE TO ANY
                  THIRD PARTY, OR FOR ANY OTHER DIRECT, INDIRECT, INCIDENTAL OR
                  CONSEQUENTIAL DAMAGES.

7.6      LESSEE'S WAIVER

                                      -32-

<PAGE>

                  LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR, ALL
                  ITS RIGHTS IN RESPECT OF ANY CONDITION, WARRANTY OR
                  REPRESENTATION, EXPRESS OR IMPLIED, ON THE PART OF LESSOR AND
                  ALL CLAIMS AGAINST LESSOR HOWSOEVER AND WHENEVER ARISING AT
                  ANY TIME IN RESPECT OF OR OUT OF THE OPERATION OR PERFORMANCE
                  OF THE AIRCRAFT OR THIS AGREEMENT EXCEPT AS IS OTHERWISE
                  EXPRESSLY STATED IN THIS AGREEMENT.

7.7      LESSEE'S CONFIRMATION

         LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF CLAUSES 7.5
         AND 7.6 AND ACKNOWLEDGES THAT BASIC RENT AND OTHER AMOUNTS HAVE BEEN
         CALCULATED NOTWITHSTANDING ITS PROVISIONS.

8.       LESSEE'S COVENANTS

8.1      DURATION

         The undertakings in this Clause 8 and in Clause 12 will:

         (a)      except as otherwise stated, be performed at the expense of the
                  Lessee; and

         (b)      remain in force until redelivery of the Aircraft to the Lessor
                  in accordance with this Agreement and thereafter to the extent
                  of any accrued rights of the Lessor in relation to those
                  undertakings.

8.2      INFORMATION

         The Lessee shall:

         (a)      furnish to the Lessor, with a copy to the Lender:

                  (i)      within 60 days after the last day of the first three
                           fiscal quarters of each fiscal year of the Parent,
                           unaudited consolidated quarterly financial statements
                           of the Parent prepared for such quarter, including a
                           consolidated balance sheet of the Parent and its
                           Subsidiaries as of the last day of such quarter and
                           consolidated statements of income and retained
                           earnings for such fiscal quarter and on a comparative
                           basis figures for the corresponding period of the
                           immediately preceding fiscal year, all in reasonable
                           detail, each such statement to be certified in a
                           certificate of Lessee's chief financial officer or
                           chief accounting officer as fairly presenting the
                           financial position and the results of operations of
                           the Parent

                                      -33-

<PAGE>

                           as at its date and for such quarter (subject to
                           year-end audit adjustments) and as having been
                           prepared in accordance with GAAP;

                  (ii)     as soon as available but not in any event later than
                           120 days after the last day of each fiscal year of
                           the Parent, audited consolidated financial statements
                           of the Parent prepared for such year, including a
                           consolidated balance sheet of the Parent and its
                           Subsidiaries as of the last day of such year,
                           consolidated statements of income and retained
                           earnings of the Parent and its Subsidiaries for such
                           fiscal year, a consolidating balance sheet of the
                           Lessee and its Subsidiaries as of the last day of
                           such year and consolidating statements of income and
                           retained earnings of the Lessee and its Subsidiaries
                           for such fiscal year and in all cases on a
                           comparative basis figures for the immediately
                           preceding fiscal year, all in reasonable detail, each
                           prepared in accordance with GAAP and certified
                           without qualification by Coopers & Lybrand or another
                           of the largest national firms of independent
                           certified public accountants as fairly presenting the
                           financial position and the results of operations of
                           Lessee and its Subsidiaries at the end of and for
                           such fiscal year and as having been prepared in
                           accordance with GAAP;

                  (iii)    in lieu of the financial statements referred to in
                           sub-clauses (i) and (ii) above, any Quarterly Reports
                           on Form 10-Q and Annual Report on Form 10-K for the
                           respective periods filed by the Parent pursuant to
                           and in accordance with the Securities Exchange Act of
                           1934, as amended;

                  (iv)     concurrently with the financial statements furnished
                           pursuant to Clauses 8.2(a)(i) and (ii) above, an
                           officer's certificate signed by the chief financial
                           officer or chief accounting officer of Lessee
                           certifying to the best knowledge after due inquiry of
                           such officer that no Default occurred during the
                           period covered by such financial statements and no
                           Default exists on the date of such officer's
                           certificate or, if a Default occurred or exists,
                           stating that fact and specifying the nature and
                           period of existence of such Default and the actions
                           Lessee took or proposes to take with respect to such
                           Default;

                  (v)      at the same time as it is issued to the creditors of
                           the Lessee, a copy of each notice or circular issued
                           to the Lessee's creditors as a group; and

                  (vi)     on request from time to time such other information
                           regarding the Lessee and its business and affairs as
                           the Lessor may reasonably request;

         (b)      on request, inform the Lessor as to the current serial numbers
                  of the Engines and any engine installed on the Airframe;

         (c)      promptly furnish to the Lessor all information which the
                  Lessor from time to time reasonably requests regarding the
                  Aircraft any Engine or any Part and its use, location

                                      -34-

<PAGE>

                  and condition, including the hours available on the Aircraft
                  and any Engine until the next scheduled check, inspection,
                  overhaul or shop visit, as the case may be;

         (d)      on request, furnish to the Lessor evidence reasonably
                  satisfactory to the Lessor that all Taxes and charges incurred
                  by the Lessee with respect to the Aircraft have been paid and
                  discharged in full;

         (e)      provide to the Lessor, within 15 days following the end of
                  June and December of each calendar year during the Term, or
                  upon reasonable request by Lessor, a monthly report on the
                  Aircraft in the form set out in Schedule 7 or such other form
                  as the Lessee may select providing substantially the same
                  information;

         (f)      promptly notify the Lessor of

                  (i)      any Total Loss, any loss of an Engine, any theft of
                           the Airframe or any Engine, any damage to the
                           Aircraft if the potential cost of repair may
                           reasonably be expected to exceed the Damage
                           Notification Threshold, or any modification to the
                           Aircraft if the potential cost may reasonably be
                           expected to exceed the Damage Notification Threshold;

                  (ii)     any claim or other occurrence likely to give rise to
                           a claim under the Insurances (but, in the case of
                           hull claims only, in excess of the Damage
                           Notification Threshold) and details of any
                           negotiations with the insurance brokers over any such
                           claim; and

                  (iii)    any litigation, arbitration or administrative
                           proceedings that are pending or, to the Lessee's
                           knowledge, threatened against the Lessee which, if
                           adversely determined, would have a material adverse
                           effect upon its financial condition or business or
                           its ability to perform its obligations under this
                           Agreement.

8.3      LAWFUL AND SAFE OPERATION

         The Lessee shall:

         (a)      comply with the law for the time being in force in any country
                  or jurisdiction in which the Aircraft is being operated which
                  is applicable to the Aircraft or the use and operation of the
                  Aircraft;

         (b)      not use the Aircraft in any manner contrary to any
                  recommendation of the Aviation Authority or the manufacturers
                  of the Aircraft, any Engine or any Part or any rule or
                  regulation of the Aviation Authority or for any purpose for
                  which the Aircraft is not designed or reasonably suitable;

                                      -35-

<PAGE>

         (c)      ensure that the crew and engineers employed by it in
                  connection with the operation and maintenance of the Aircraft
                  have the qualifications and hold the licences required by the
                  Aviation Authority and applicable law;

         (d)      use the Aircraft solely in commercial or other operations for
                  which the Lessee is duly authorized by the Aviation Authority
                  and applicable law;

         (e)      not knowingly use the Aircraft (or use it when the Lessee
                  ought reasonably to have known that it was being so used) for
                  the carriage of:

                  (i)      whole animals, living or dead, except in the cargo
                           compartments according to I.A.T.A. regulations, and
                           except domestic pet animals carried in a suitable
                           container to prevent the escape of any liquid and to
                           ensure the welfare of the animal;

                  (ii)     acids, toxic chemicals, other corrosive materials,
                           explosives, nuclear fuels, nuclear wastes or any
                           nuclear assemblies or components, except as permitted
                           for cargo aircraft under the "Restriction of Goods"
                           schedule issued by I.A.T.A. from time to time and
                           provided that all the requirements for packaging or
                           otherwise contained therein are fulfilled;

                  (iii)    any other goods, materials or items of cargo which
                           could reasonably be expected to cause damage to the
                           Aircraft and which would not be adequately covered by
                           the Insurances; or

                  (iv)     any illegal item or substance;

         (f)      not utilize the Aircraft for purposes of training, qualifying
                  or re-confirming the status of cockpit personnel except for
                  the benefit of the Lessee's cockpit personnel, and then only
                  if the use of the Aircraft for such purpose is not
                  disproportionate to the use for such purpose of other aircraft
                  of the same type operated by the Lessee;

         (g)      not (other than for bona fide safety reasons) cause or permit
                  the Aircraft to proceed to, or remain at, any location which
                  is for the time being the subject of a prohibition order (or
                  any similar order or directive) by:

                  (i)      any Government Entity of the State of Registration or
                           the Habitual Base; or

                  (ii)     any Government Entity of the country in which such
                           location is situated; or

                  (iii)    any Government Entity having jurisdiction over the
                           Lessor, the Lender or the Aircraft;

                                      -36-

<PAGE>

         (h)      obtain and maintain in full force all certificates, licences,
                  permits and authorizations required for the use and operation
                  of the Aircraft for the time being, and for the making of
                  payments required by, and the compliance by the Lessee with
                  its other obligations under, this Agreement.

8.4      TAXES AND OTHER CHARGES

         THE Lessee will promptly pay:

         (a)      all licence and registration fees, Taxes (other than Lessor
                  Taxes) and other amounts of any nature imposed by any
                  Government Entity that are imposed on the Lessee or for which
                  the Lessee is responsible under this Agreement with respect to
                  the Aircraft, including the purchase, ownership, delivery,
                  leasing, possession, use, operation, return, sale or other
                  disposition of the Aircraft; and

         (b)      all rent, fees, charges, Taxes (other than Lessor Taxes)
                  imposed on the Lessee and other amounts in respect of any
                  premises where the Aircraft or any Part thereof is located
                  from time to time during the Term;

         except to the extent that such payment is being contested in good
         faith by appropriate proceedings in accordance with Clause 5.10.

8.5      SUB-LEASING

         (a)      Subject to sub-clause (b) below, the Lessee will not, without
                  the prior written consent of the Lessor and the Lender (such
                  consent not to be unreasonably withheld), sub-lease, "wet
                  lease" or otherwise part with possession of the Aircraft, the
                  Engines or any Part except that the Lessee may part with
                  possession:

                  (i)      so long as no Default or Event of Default has
                           occurred and is continuing, with respect to the
                           Aircraft, the Engines or any Part to the relevant
                           manufacturers for testing or similar purposes or to
                           an Agreed Maintenance Performer for service, repair,
                           maintenance or overhaul work or for alterations,
                           modifications or additions to the extent required or
                           permitted by this Agreement;

                  (ii)     with respect to an Engine or Part, as expressly
                           permitted by this Agreement; and

                  (iii)    so long as no Default or Event of Default has
                           occurred and is continuing, sublease the Aircraft,
                           the Airframe or any Engines for a term (including any
                           renewals or extensions) not to continue beyond the
                           remaining Term, (1) to any U.S. Air Carrier or (2)
                           upon the written consent of Lessor and Lender (which
                           consent shall not be unreasonably withheld), to a
                           Other Permitted Air Carrier.

                                      -37-

<PAGE>

         (b)      The Lessor's consent shall not be required in relation to a
                  "wet lease" or charter of the Aircraft in which operational
                  control of the Aircraft remains with the Lessee at all times,
                  provided the Aircraft remains registered with the Aviation
                  Authority.

         (c)      With respect to any transaction pursuant to Clause
                  8.5(a)(iii):

                  (i)      except as expressly provided below, the rights of any
                           sublessee who receives possession by reason of a
                           transfer permitted by Clause 8.5(a)(iii) shall be
                           subject and subordinate to, and any sublease shall be
                           made expressly subject and subordinate to, all the
                           terms of this Agreement, including the rights to
                           repossession pursuant to Clause 13.2 and to terminate
                           and avoid such Permitted Sublease upon such
                           repossession;

                  (ii)     Lessee shall remain fully liable for the performance
                           of all the terms of this Agreement to the same extent
                           as if such sublease had not occurred;

                  (iii)    such sublease shall be consistent with the
                           requirements of this Agreement, shall not affect the
                           registration of the Aircraft, shall not permit any
                           action not permitted to Lessee under this Agreement
                           and shall include appropriate provisions not more
                           favorable or extensive to the sublessee than those
                           contained in this Agreement for the continued
                           registration, insurance, maintenance and operation of
                           the Aircraft, the Airframe, the Engines and the
                           Parts;

                  (iv)     at least 15 days prior to such sublease becoming
                           effective, Lessee shall give Lessor written notice of
                           its intent to sublet the Aircraft, the Airframe or
                           any Engine, which notice shall include the identity
                           of the proposed sublessee, the term and rental rate
                           of the proposed sublease and either a copy of such
                           sublease or the latest draft thereof (in which case
                           Lessee shall provide Lessor with copies of subsequent
                           drafts and a copy of the definitive sublease
                           agreement promptly after its effectiveness);

                  (v)      such sublease shall expressly provide that the
                           sublessee may not further sublease the Aircraft,
                           Airframe or Engines except to the extent permitted to
                           Lessee pursuant to Clauses 8.5(a)(i) and (ii);

                  (vi)     such sublease shall be assigned to Lessor as security
                           for Lessee's obligations under this Agreement, which
                           assignment (1) shall be assigned to Lender, and
                           Lessee shall have consented to the assignment of such
                           sublease as security to the Lender, (2) may provide
                           that so long as no Event of Default has occurred and
                           is continuing, Lessee shall retain all rights of
                           sublessor under such sublease, including the right to
                           receive payments of rent and to grant waivers and
                           consents thereunder, (3) shall otherwise be in form
                           and substance reasonably satisfactory to Lessor and
                           Lender, (4) shall be executed and delivered by Lessee
                           to Lessor and

                                      -38-

<PAGE>

                           Lender, and all steps required for perfection shall
                           have been taken at Lessee's expense, at or before
                           commencement of such sublease, and (5) shall be
                           consented to by the sublessee; and any monies
                           received by Lessor pursuant to such assignment as a
                           result of the occurrence of a Default or an Event of
                           Default shall be held by Lessor as additional
                           security for the performance by Lessee of its
                           obligations under this Agreement and, to the extent
                           not applied against amounts due and owing by Lessee
                           under this Agreement and the exercise of remedies
                           under this Agreement, shall be returned to Lessee at
                           such time as no Default or Event of Default shall be
                           continuing;

                  (vii)    Lessee shall have furnished to Lessor and Lender, at
                           no expense to Lessor or Lender, (1) a legal opinion
                           in form and substance reasonably satisfactory to
                           Lessor and Lender, from counsel to Lessee reasonably
                           satisfactory to Lessor and Lender, as to the due
                           execution, delivery and enforceability of the
                           sublease against Lessee, the due execution, delivery,
                           enforceability and perfection of such assignment and
                           as to such other matters as Lessor and Lender may
                           reasonably request, and (2) a legal opinion in form
                           and substance reasonably satisfactory to Lessor and
                           Lender, from counsel to the sublessee reasonably
                           satisfactory to Lessor and Lender, as to the due
                           execution, delivery and enforceability of the
                           sublease against sublessee and as to such other
                           matters as Lessor and Lender may reasonably request;

                  (viii)   in the case of a sublease to a foreign sublessee,
                           Lessee shall have furnished to Lessor and Lender, at
                           no expense to Lessor or Lender, a legal opinion in
                           form and substance reasonably satisfactory to Lessor
                           and Lender from counsel reasonably satisfactory to
                           Lessor and Lender admitted to practice in the
                           jurisdiction in which such foreign sublessee is
                           domiciled to the effect that such sublease will not
                           impair the respective rights of, perfection and
                           priority of interest of and availability of remedies
                           to Lessor and Lender in respect of the subleased
                           Aircraft, Airframe or Engines and as to such other
                           matters relating to the laws of, and the enforcement
                           of foreign contracts and judgments in, such
                           jurisdiction as Lessor and Lender may reasonably
                           request; and

                  (ix)     all necessary action shall be taken at Lessee's
                           expense which is required to continue the perfection
                           of Lessor's title and interest in and to, and
                           Lender's security interests in, the Aircraft,
                           Airframe, Engines, Parts and rights under this
                           Agreement, and such sublease and all other necessary
                           documents shall be duly filed, registered or recorded
                           in such public offices as may be required or
                           advisable to preserve fully the title and the
                           priority of the interest of the Lessor, and the
                           perfection and priority of the Liens of the Lender,
                           in and to the Aircraft, Airframe, Engines and Parts
                           and in and to this Agreement.

                                      -39-

<PAGE>

8.6      INSPECTION

         (a)      The Lessor, the Lender and any person designated by the Lessor
                  or the Lender may at any time visit, inspect and survey the
                  Aircraft, any Engine or any Part and for such purpose may,
                  subject to any applicable Aviation Authority regulation,
                  travel on the Right deck as observer.

         (b)      The Lessor and the Lender shall bear its own costs and
                  expenses in connection with any such visit, inspection or
                  survey unless the visit, inspection or survey discloses that
                  the Lessee is in breach of its material obligations under this
                  Agreement, in which case such costs and expenses shall be paid
                  by the Lessee on demand.

         (c)      The Lessor shall:

                  (i)      have no duty to make, or liability arising out of,
                           any such visit, inspection or survey; and

                  (ii)     so long as no Default has occurred and is continuing,
                           not exercise such right other than on reasonable
                           notice and so as not to disrupt unreasonably the
                           maintenance or operation of the Aircraft.

8.7      PROTECTION OF TITLE

         The Lessee shall:

         (a)      not do or knowingly permit to be done or omit or knowingly
                  permit to be omitted to be done any act or thing which might
                  reasonably be expected to jeopardize the respective rights,
                  title and interest of the Lender as mortgagee of the Aircraft
                  and assignee of this Agreement or the Lessor as owner of the
                  Aircraft and lessor under this Agreement or the validity,
                  enforceability or priority of the Mortgage and the Assignment;

         (b)      on all occasions when the ownership of the Aircraft, any
                  Engine or any Part is relevant, make clear to third parties
                  that title is held by the Lessor and is subject to the
                  Mortgage;

         (c)      not at any time:

                  (i)      represent or hold out the Lessor or the Lender as
                           carrying goods or passengers on the Aircraft or as
                           being in any way connected or associated with any
                           operation or carriage (whether for hire or reward or
                           gratuitously) which may be undertaken by the Lessee;
                           or

                  (ii)     pledge the credit of the Lessor or the Lender;

                                      -40-

<PAGE>

         (d)      ensure that there is always affixed, and not removed or in any
                  way obscured, a fireproof plate (having dimensions of not less
                  than 6 in. x 4 in.) in a reasonably prominent position on the
                  Aircraft and on each Engine stating:

                           "This Aircraft/Engine is owned by ACG Acquisition
                           VIII LLC, is leased to Aloha Airlines, Inc. and is
                           subject to a mortgage and security agreement in favor
                           of FINOVA Capital Corporation. It may not be operated
                           by any other person without the prior written consent
                           of ACG Acquisition VIII LLC and FINOVA Capital
                           Corporation.";

         (e)      not create or permit to exist any Security Interest upon the
                  Aircraft, any Engine or any Part;

         (f)      not do or permit to be done anything which may reasonably be
                  expected to expose the Aircraft, any Engine or any Part to
                  penalty, forfeiture, impounding, detention, appropriation,
                  damage or destruction and, without prejudice to the foregoing,
                  if any such penalty, forfeiture, impounding, detention,
                  appropriation, damage or destruction occurs, give the Lessor
                  notice and use its best efforts to procure the immediate
                  release of the Aircraft, such Engine or such Part, as the case
                  may be;

         (g)      not abandon the Aircraft, the Engine or any Part;

         (h)      pay and discharge or cause to be paid and discharged when due
                  and payable or make adequate provision by way of security or
                  otherwise for all debts, damages, claims and liabilities which
                  have given or might reasonably be expected to give rise to a
                  Security Interest over or affecting the Aircraft, any Engine
                  or any Part; and

         (i)      not attempt, or hold itself out as having any power, to sell,
                  lease or otherwise dispose of the Aircraft, any Engine or any
                  Part other than as expressly permitted by this Agreement.

8.8       GENERAL

         The Lessee will:

         (a)      not make any substantial change in the nature of the business
                  in which it is engaged if such change, in the reasonable
                  opinion of the Lessor, might reasonably be expected to have a
                  material adverse effect on the Lessee's performance of its
                  obligations under this Agreement;

         (b)      preserve its corporate existence, and will not merge or
                  consolidate with any person unless the successor person
                  resulting from such merger or consolidation (the "SUCCESSOR"):

                                      -41-

<PAGE>

                  (i)      is the Lessee or an Affiliate incorporated in the
                           State of Incorporation or another State of the United
                           States of America;

                  (ii)     shall have a net worth immediately after such merger
                           or consolidation of not less than the Lessee's net
                           worth immediately prior thereto;

                  (iii)    shall be authorized under applicable law to perform
                           the Lessee's obligations under this Agreement to the
                           same extent as the Lessee;

                  (iv)     shall deliver to the Lessor an agreement in form and
                           substance reasonably satisfactory to the Lessor
                           containing an assumption by the Successor of the
                           Lessee's representations and warranties under this
                           Agreement, together with the due and punctual
                           performance of all the Lessee's obligations under
                           this Agreement; and

                  (v)      shall deliver to the Lessor an opinion of counsel
                           reasonably satisfactory in form and substance to the
                           Lessor to the effect that the agreement referred to
                           in subclause (iii) above constitutes the Successor's
                           legal, valid and binding obligations; and

         (c)      ensure that no change will occur in the Habitual Base of the
                  Aircraft without the prior written consent of the Lessor.

8.9      RECORDS

         The Lessee shall procure that accurate, complete and current records of
         all flights made by, and all maintenance carried out on, the Aircraft
         (including, in relation to each Engine and Part subsequently installed,
         before the installation) are kept in English, and shall keep the
         records in such manner as the Aviation Authority may from time to time
         require. The records will form part of the Aircraft Documents.

8.10     REGISTRATION AND FILINGS

         The Lessee shall:

         (a)      not do anything that might reasonably be expected to adversely
                  affect the registration of the Aircraft with the Aviation
                  Authority reflecting (so far as permitted by applicable law)
                  the respective interests of the Lessor and the Lender;

         (b)      do all acts and things (including making any filing or
                  registration with the Aviation Authority or any other
                  Government Entity) and executing and delivering all documents
                  (including any amendment of this Agreement) as may be required
                  by the Lessor

                                      -42-

<PAGE>

                  following any modification of the Aircraft, any Engine or any
                  Part or the permanent replacement of any Engine or Part in
                  accordance with this Agreement, so as to ensure that the
                  respective rights of the Lessor and the Lender under this
                  Agreement apply with the same effect as before.

8.11     MAINTENANCE AND REPAIR

         THE Lessee shall:

         (a)      keep the Aircraft airworthy in all respects and in good repair
                  and condition;

         (b)      advise the Lessor and Lender in writing of all material
                  changes to the Agreed Maintenance Program;

         (c)      maintain the Aircraft in accordance with the Agreed
                  Maintenance Program through Agreed Maintenance Performers and
                  perform (at the respective intervals provided in the Agreed
                  Maintenance Program) all Major Checks;

         (d)      maintain the Aircraft in accordance with FAR Part 121 and any
                  other rules and regulations of the Aviation Authority as are
                  applicable to aircraft of the same type as the Aircraft
                  operated by United States of America air carriers, subject to
                  the special exemptions permitted Lessee regarding compliance
                  with the Airport Noise and Capacity Act of 1990, as amended,
                  and the regulations promulgated by the FAA thereunder;

         (e)      comply with all mandatory inspection and modification
                  requirements, airworthiness directives and similar
                  requirements applicable to the Aircraft, any Engine or Part
                  having a compliance date during the Term and that are required
                  by the Aviation Authority;

         (f)      comply with all alert service bulletins issued by any
                  manufacturer of the Aircraft, Engines or Parts, and comply
                  (including scheduling complying work and then performing such
                  work on schedule) with all other service bulletins issued by
                  any such manufacturer if and to the extent that the Lessee
                  brings or schedules to bring in compliance at least one-half
                  of the applicable aircraft it operates (excluding for purposes
                  of such calculation aircraft acquired from unrelated third
                  parties that already comply with such other service
                  bulletins);

         (g)      comply with all applicable laws and the regulations of the
                  Aviation Authority and any other aviation authorities with
                  jurisdiction over the Lessee or the Aircraft, any Engine or
                  Part that relate to the maintenance, condition, use or
                  operation of the Aircraft or require any modification or
                  alteration to the Aircraft, any Engine or Part;

                                      -43-

<PAGE>

         (h)      maintain in good standing a current U.S. Standard Transport
                  Category Certificate of Airworthiness for the Aircraft issued
                  by the Aviation Authority in accordance with FAR Part 21
                  except when the Aircraft is undergoing maintenance,
                  modification or repair required or permitted by this Agreement
                  and shall from time to time provide to the Lessor a copy on
                  request;

         (i)      if required by the Aviation Authority, maintain a current
                  certification as to maintenance issued by or on behalf of the
                  Aviation Authority in respect of the Aircraft and shall from
                  time to time provide to the Lessor a copy on request;

         (j)      maintain the Engines with respect to overhaul build standards
                  and disc replacements at a level which is consistent with the
                  level applied by the Lessee in relation to other engines of
                  the same type as the Engines in its fleet, provided, however,
                  Lessee may maintain the Engines with respect to overhaul build
                  standards and disc replacements in such manner as to achieve
                  minimal compliance with return conditions;

         (k)      maintain the Engines and the APU in a "on condition" program
                  as set forth in the respective manufacturer's maintenance
                  planning document; and

         (1)      subject to Clause 11. 1 (c), procure promptly the replacement
                  of any Engine or Part which has become time, cycle or calendar
                  expired, lost, stolen, seized, confiscated, destroyed, damaged
                  beyond repair, unserviceable or permanently rendered unfit for
                  use, with an engine or part complying with the conditions set
                  out in Clause 8.13 (a).

8.12     REMOVAL OF ENGINES AND PARTS

         The Lessee will ensure that no Engine or Part installed on the Aircraft
         is at any time removed from the Aircraft other than:

         (a)      if replaced as expressly permitted by this Agreement; or

         (b)      if the removal is of an obsolete item and is in accordance
                  with the Agreed Maintenance Program; or

         (c)      pursuant to, and in accordance with, Clause 8.15; or

         (d)      (i)      during the course of maintaining, servicing,
                           repairing, overhauling or testing that Engine or the
                           Aircraft, as the case may be; or

                  (ii)     as part of a normal engine or part rotation program;
                           or

                  (iii)    for the purpose of making such modifications to the
                           Engine or the Aircraft, as the case may be, as are
                           permitted under this Agreement,

                                      -44-

<PAGE>

                  and then in each case only if it is reinstalled or replaced by
                  an engine or part complying with Clause 8.13(a) as soon as
                  practicable and in any event no later than the Expiry Date.

8.13     INSTALLATION OF ENGINES AND PARTS

         (a)      The Lessee will ensure that, except as permitted by this
                  Agreement, no engine or part is installed on the Aircraft
                  unless:

                  (i)      in the case of an engine, it is an engine of the same
                           model as, or an improved or advanced version of the
                           Engine it replaces (provided, in the case of an
                           improved or advanced version, it can be installed and
                           operated on the Airframe without modification of the
                           Airframe or the engine, whether or not the other
                           installed Engine is also such an improved or advanced
                           version), which has attached to it a current
                           "serviceable tag" issued by the manufacturer or
                           supplier indicating that the engine is new,
                           serviceable or overhauled, and the Lessee shall
                           retain all such tags;

                  (ii)     in the case of a part, it is in as good operating
                           condition, is of the same interchangeable
                           modification status as the replaced Part and has
                           attached to it a current "serviceable tag" issued by
                           the manufacturer or supplier indicating that the part
                           is new, serviceable or overhauled, and the Lessee
                           shall retain all such tags;

                  (iii)    in the case of a part, it has become and remains the
                           property of the Lessor free from Security Interests
                           and on installation on the Aircraft will, without
                           further act, be subject to this Agreement and to the
                           security interest created by the Mortgage, in which
                           case title to the removed part shall automatically
                           become vested in Lessee without further action or
                           warranty on the part of Lessor except that such Part
                           shall be free of Lessor Liens; and

                  (iv)     in each case, the Lessee has full details as to its
                           source and maintenance records.

         (b)      If no Default has occurred which is continuing, the Lessee
                  will be entitled to install any engine or part on the Aircraft
                  by way of replacement notwithstanding Clause 8.13(a) if.

                  (i)      there is not available to the Lessee at the time and
                           in the place that engine or part is required to be
                           installed on the Aircraft a replacement engine or
                           part complying with the requirements of Clause 8.13
                           (a);

                  (ii)     it would result in an unreasonable disruption of the
                           operation of the Aircraft or the business of the
                           Lessee to ground the Aircraft until an engine or part
                           complying with Clause 8.13(a) becomes available for
                           installation on the Aircraft; and

                                      -45-

<PAGE>

                  (iii)    as soon as practicable after installation of the same
                           on the Aircraft but, in any event, no later than the
                           earlier of (1) 60 days after such installation and
                           (2) the Expiry Date, the Lessee removes any such
                           engine or part and replaces it with the Engine or
                           Part replaced by it or by an engine or part complying
                           with Clause 8.13(a).

         (c)      If no Default has occurred which is continuing, the Lessee
                  will be entitled to install Lessee Installed Parts on the
                  Airframe by way of replacement notwithstanding Clause
                  8.13(a)(iii) so long as:

                  (i)      the terms of any lease, conditional sale agreement or
                           security agreement, as the case may be, covering such
                           Lessee Installed Part will not have the effect of
                           prejudicing the title and interest of the Lessor in
                           and to the Aircraft (including its Engines and Parts)
                           or the interest of the Lender in respect thereof
                           under the Mortgage;

                  (ii)     the secured party, lessor or conditional vendor, as
                           the case may be, of such Lessee Installed Part has
                           confirmed and acknowledged in writing (which such
                           confirmation and acknowledgment may be contained in
                           the lease, conditional sale agreement or security
                           agreement) to the Lessor and the Lender, in form and
                           substance satisfactory to the Lessor, that it will
                           recognize the respective rights, title and interest
                           of the Lessor and the Lender in and to the Aircraft
                           (including its Engines and Parts) and that it will
                           not seek to exercise any rights whatever in relation
                           thereto; and

                  (iii)    before the Expiry Date the Lessee removes any such
                           Lessee Installed Part and replaces it with the Part
                           replaced by it or by another part, in either case
                           complying with Clause 8.13(a).

         (d)      The Lessor agrees, for the benefit of the Lessee and any
                  mortgagee or holder of any other Security Interest in any
                  engine (other than an Engine) or Lessee Installed Part owned
                  by the Lessee, any lessor of any engine (other than an Engine
                  leased to the Lessee) or Lessee Installed Part and any
                  conditional vendor of any engine (other than an Engine
                  purchased by the Lessee subject to a conditional sale
                  agreement or any other security agreement) or Lessee Installed
                  Part, that no right, title to or interest in any such engine
                  or Lessee Installed Part shall be exercised or asserted by the
                  Lessor and the Lessor acknowledges and confirms that it will
                  not acquire any right, title or interest to or in any such
                  engine or Lessee Installed Part as a result of its
                  installation on the Airframe.

                                      -46-

<PAGE>

8.14     NON-INSTALLED ENGINES AND PARTS

         (a)      The Lessee shall ensure that any Engine or Part which is not
                  installed on the Airframe (or any other airframe as permitted
                  by this Agreement) is, except as expressly permitted by this
                  Agreement, properly and safely stored and kept free from
                  Security Interests, with insurance thereon complying with the
                  requirements of this Agreement.

         (b)      Notwithstanding sub-clause (a), the Lessee shall be permitted,
                  if no Default has occurred and is continuing, to install any
                  Engine on an airframe and any Part on an airframe or engine:

                  (i)      owned and operated by the Lessee free from Security
                           Interests;

                  (ii)     leased or hired to the Lessee pursuant to a lease or
                           conditional sale agreement on a long-term basis and
                           on terms whereby the Lessee has full operational
                           control of that aircraft or engine; or

                  (iii)    acquired or financed by the Lessee and operated by
                           the Lessee on terms that ownership of that aircraft
                           or engine, as the case may be, pursuant to a lease,
                           conditional sale agreement or Security Interest is
                           vested in or held by any other person;

                  provided that in the case of (ii) and (iii):

                  (1)      the terms of any such lease, conditional sale
                           agreement or Security Interest will not have the
                           effect of prejudicing the title and interest of the
                           Lessor in and to that Engine or Part or the interest
                           of the Lender in respect thereof under the Mortgage;
                           and

                  (2)      the lessor under such lease, the seller under such
                           conditional sale agreement or the secured party of
                           such Security Interest, as the case may be, has
                           confirmed and acknowledged in writing (which such
                           confirmation and acknowledgment may be contained in
                           the lease, conditional sale agreement or document
                           creating the Security Interest) to the Lessor and the
                           Lender, in form and substance satisfactory to the
                           Lessor, that it will recognize the respective rights,
                           title and interest of the Lessor and the Lender to
                           and in that Engine or Part and that it will not seek
                           to exercise any rights whatever in relation thereto.

8.15     POOLING OF ENGINES AND PARTS

         The Lessee will not enter into nor permit any pooling agreement or
         arrangement in respect of an Engine or Part without the prior written
         consent of the Lessor and the Lender, such consent not to be
         unreasonably withheld in any case where an Engine or Part is leased,
         let

                                      -47-

<PAGE>

         on hire or otherwise made available by the Lessee (on terms conferring
         no more than a contractual right IN PERSONAM against the Lessee and not
         a right IN REM against such Engine or Part) pursuant to a pooling
         agreement to which the Lessee is a party and:

         (a)      the other parties to which are reputable, solvent commercial
                  air carriers or the manufacturers or suppliers of the Engine
                  or Part (or other reputable, solvent organizations whose
                  business includes the administration of and participation in
                  such pooling agreements or arrangements); and

         (b)      which does not contemplate the transfer of title to the pooled
                  Engine or Part; and

         (c)      either provides that the Lessor (or the Lender, as the case
                  may be) will be sole loss payee in respect of any loss or
                  damage to the Engine or Part, or provides for Lessor to
                  acquire title to a substitute engine or part satisfying the
                  conditions set out in Clause 8.13(a) if the Engine or Part is
                  destroyed.

8.16     EQUIPMENT CHANGES

         (a)      The Lessee will not make any modification or addition to the
                  Aircraft (each an "EQUIPMENT CHANGE"), except for an Equipment
                  Change that:

                  (i)      is expressly permitted by any other provision of this
                           Agreement, or

                  (ii)     has the prior written approval of the Lessor and the
                           Lender (which approval shall not be unreasonably
                           withheld provided the proposed Equipment Change will
                           not, in the reasonable opinion of the Lessor and the
                           Lender, diminish the value, utility, condition or
                           airworthiness of the Aircraft), except for painting
                           or minor cabin interior modifications not affecting
                           the structure of the Airframe, any or all of which
                           may be made without such prior approval.

         (b)      So long as no Event of Default has occurred and is continuing,
                  the Lessee may remove any Equipment Change if it can be
                  removed from the Aircraft without diminishing or impairing the
                  value, utility, condition or airworthiness of the Aircraft.

8.17     TITLE TO ENGINES AND PARTS

         (a)      Title to all engines and parts installed on the Aircraft,
                  whether by way of replacement as the result of an Equipment
                  Change or otherwise (except those installed pursuant to Clause
                  8.13(b) or Clause 8.15) will on installation, without further
                  act, vest in the Lessor subject to this Agreement free and
                  clear of all Security Interests. The Lessee will at its own
                  expense take all such steps and execute, and procure the
                  execution of, all such instruments that are necessary to
                  ensure that title so passes to the Lessor and is subject to
                  the Security Interest created by the Mortgage according to all
                  applicable

                                      -48-

<PAGE>

                  laws. At any time when requested by the Lessor, the Lessee
                  will provide evidence to the Lessor's reasonable satisfaction
                  (including the provision, if required, to the Lessor of one of
                  more legal opinions) that title has so passed to the Lessor
                  and is subject to the Security Interest created by the
                  Mortgage.

         (b)      The Lessor may require the Lessee to remove any Equipment
                  Change and to restore the Aircraft to its condition prior to
                  that Equipment Change.

         (c)      Except as referred to in Clause 8.16(b), any Engine or Part at
                  any time removed from the Aircraft will remain the property of
                  the Lessor until a replacement has been made in accordance
                  with this Agreement and until title to that replacement has
                  passed, according to applicable laws, to the Lessor subject to
                  this Agreement free of all Security Interests, whereupon title
                  to the Engine or Part will, provided no Default has occurred
                  and is continuing, pass to the Lessee free of Lessor Liens.

8.18     THIRD PARTIES

         The Lessee shall procure that no person having possession of the
         Aircraft during the Term (other than the Lessor or the Lender) will act
         in any manner inconsistent with the Lessee's obligations under this
         Agreement and that all such persons shall comply with those obligations
         as if references to "Lessee" included a separate reference to those
         persons.

9.       INSURANCE

9.1      INSURANCES

         The Lessee will maintain in full force and effect during the Term
         insurances in respect of the Aircraft in form and substance reasonably
         satisfactory to the Lessor (the "INSURANCES") through such brokers and
         with such insurers and having such deductibles and being subject to
         such exclusions as are usual and customary in the worldwide aviation
         insurance marketplace for air carriers operating similar equipment who
         are similarly situated with Lessee. The Insurances will be effected
         either on a direct basis with insurers of recognized standing who
         normally participate in aviation insurances in the leading
         international insurance markets and led by reputable underwriters
         approved by the Lessor and the Lender, such approval not to be
         unreasonably withheld. The Lessor acknowledges and confirms that the
         current deductibles and exclusions, together with the existing brokers
         and insurers, in respect of the insurances maintained by Lessee on the
         date of the Purchase Agreement are acceptable to it and the Lender.

9.2      REQUIREMENTS

         The Lessor's current requirements as to required Insurances are as
         specified in this Clause and in Part I of Schedule 4. Except for the
         amount of the Agreed Value, the Minimum

                                      -49-

<PAGE>

         Liability Coverage and the deductible under Lessee's hull and war risk
         insurance policies, the Lessor may from time to time stipulate such
         other requirements for the Insurances as the Lessor reasonably
         considers necessary to ensure that the scope and level of cover is
         maintained in accordance with the then prevailing industry practice in
         relation to aircraft of the same type as the Aircraft and in relation
         to operators of similar standing to the Lessee. In the event that the
         Lessor proposes any such stipulation, it shall notify the Lessee
         accordingly and the Lessor and/or its brokers will then consult in good
         faith with the Lessee and the Lessee's brokers (as for the time being
         approved by the Lessor) with regard to such proposed stipulation. If,
         following the consultation, the Lessor is satisfied that the
         stipulation should be made, the Lessee shall then comply with the
         stipulated requirements.

9.3      INSURANCE COVENANTS

         The Lessee shall:

         (a)      ensure that all legal requirements as to insurance of the
                  Aircraft, any Engine or any Part that may from time to time be
                  imposed by the laws of the State of Registration or any
                  jurisdiction to, from or over which the Aircraft may be flown,
                  in so far as they affect or concern the operation of the
                  Aircraft, are complied with and, in particular, those
                  requirements compliance with which is necessary to ensure
                  that:

                  (i)      the Aircraft does not become subject to detention or
                           forfeiture;

                  (ii)     the Insurances remain valid and in full force and
                           effect; and

                  (iii)    the interests of the Indemnitees in the Insurances
                           and the Aircraft or any Part are not thereby
                           prejudiced;

         (b)      not use, cause or permit the Aircraft, any Engine or any Part
                  to be used for any purpose or in any manner not covered by the
                  Insurances or outside any geographical limit imposed by the
                  Insurances;

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

                  (i)      invalidates or may reasonably be expected to
                           invalidate the Insurances;

                  (ii)     renders or may reasonably be expected to render void
                           or voidable the whole or any part of any of the
                           Insurances; or

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

                                      -50-

<PAGE>

         (d)      not take out without the prior written approval of the Lessor
                  any insurance in respect of the Aircraft other than those of
                  the type required under this Agreement unless relating solely
                  to hull total loss, business interruption, engine break-down,
                  profit commission and deductible risk;

         (e)      commence renewal procedures at least 30 days prior to the
                  expiration of any of the Insurances and provide to the Lessor
                  and the Lender:

                  (i)      if requested by the Lessor, a written status report
                           of renewal negotiations 14 days prior to each
                           expiration date;

                  (ii)     telefaxed confirmation of completion of renewal prior
                           to each expiration date; and

                  (iii)    a certificate of insurance and broker's letter of
                           undertaking substantially in the form set out in
                           Parts 2 and 3 of Schedule 4, detailing the coverage
                           and confirming the insurers' agreement to the
                           specified insurance requirements of this Agreement
                           within seven days after each renewal date;

         (f)      provide to the Lessor and the Lender copies of those documents
                  evidencing the Insurances which the Lessor and the Lender may
                  reasonably request;

         (g)      on request, provide to the Lessor and the Lender evidence that
                  the Insurance premiums have been paid;

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

         (i)      be responsible for any deductible under the Insurances; and

         (j)      provide any other insurance related information, or
                  assistance, in respect of the Insurances as the Lessor may
                  reasonably request.

9.4      FAILURE TO INSURE

         If the Lessee fails to maintain the Insurances in compliance with this
         Agreement, each of the Indemnitees will be entitled but not obligated
         (without prejudice to any other rights of the Lessor under this
         Agreement):

         (a)      to pay the premiums due or to effect and maintain insurances
                  satisfactory to it or otherwise remedy the Lessee's failure in
                  such manner (including to effect and maintain an "owner's
                  interest" policy) as it considers appropriate. Any sums so
                  expended by it will become immediately due and payable by the
                  Lessee to the Lessor on demand (such demand being made as soon
                  as reasonably practicable following the incurring of such

                                      -51-

<PAGE>

                  expenditure), together with interest thereon at the Default
                  Rate from the date of expenditure by it up to the date of
                  reimbursement by the Lessee (before and after any judgment);
                  and

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

9.5      CONTINUING INDEMNITY

         The Lessor may require the Lessee to effect and to maintain insurance
         after the Expiry Date with respect to its liability under the
         indemnities in Clause 10 for such period as the Lessor may reasonably
         require (but in any event not more than three years) providing for each
         Indemnitee to be named as additional insured. The Lessee's obligation
         under this Clause 9.5 shall not be affected by the Lessee ceasing to be
         lessee of the Aircraft or any of the Indemnitees ceasing to have any
         interest in respect of the Aircraft.

9.6      APPLICATION OF INSURANCE PROCEEDS

         As between the Lessor and the Lessee:

         (a)      All insurance payments, up to the Agreed Value, received as
                  the result of a Total Loss occurring during the Term will be
                  paid to the Lender.

         (b)      All insurance proceeds in respect of any damage or loss to the
                  Aircraft, any Engine or any Part occurring during the Term not
                  constituting a Total Loss and involving insurance proceeds in
                  excess of the Damage Notification Threshold will be paid to
                  the Lender and applied in payment (or to reimburse the Lessee)
                  for repairs or replacement property upon the Lessor being
                  reasonably satisfied that the repairs or replacement have been
                  effected in accordance with this Agreement. Insurance proceeds
                  in amounts below the Damage Notification Threshold may be paid
                  by the insurer directly to the Lessee. Any balance remaining
                  may be retained by the Lessee.

         (c)      All insurance proceeds in respect of third party liability
                  will be paid to the relevant third party.

         (d)      Notwithstanding Clauses 9.6(a) and (b), if at the time of the
                  payment of any such insurance proceeds a Default has occurred
                  and is continuing all such proceeds will be paid to or
                  retained by the Lender to be applied toward payment of any
                  amounts that may be or become payable by the Lessee in such
                  order as the Lessor and the Lender see fit or as the Lessor
                  and the Lender may elect. In the event that the Lessee
                  remedies any such Default to the reasonable satisfaction of
                  the Lessor, the Lessor shall procure that all such insurance
                  proceeds then held by the Lender in excess of the amounts (if
                  any)

                                      -52-

<PAGE>

                  applied by the Lessor in accordance with this sub-clause (d)
                  shall be paid promptly to the Lessee.

10.      INDEMNITY

10.1      GENERAL

         The Lessee shall defend, indemnify and hold harmless the Indemnitees
         from and against any and all claims, proceedings, losses, liabilities,
         suits, judgments, costs, expenses, penalties or fines (each a "CLAIM")
         regardless of when the same is made or incurred, whether during or
         after the Term (but not before):

         (a)      that may at any time be suffered or incurred directly or
                  indirectly as a result of or connected with possession,
                  delivery, performance, management, registration, control,
                  maintenance, condition, service, repair, overhaul, leasing,
                  sub-leasing, use, operation or return of the Aircraft, any
                  Engine or Part (either in the air or on the ground) whether or
                  not the Claim may be attributable to any defect in the
                  Aircraft, any Engine or any Part or to its design, testing,
                  use or otherwise, and regardless of when the same arises or
                  whether it arises out of or is attributable to any act or
                  omission, negligent or otherwise, of any Indemnitee;

         (b)      that arise out of any act or omission that invalidates or that
                  renders voidable any of the Insurances;

         (c)      that may at any time be suffered or incurred as a consequence
                  of any design, article or material in the Aircraft, any Engine
                  or any Part or its operation or use constituting an
                  infringement of patent, copyright, trademark, design or other
                  proprietary right or a breach of any obligation of
                  confidentiality owed to any person,

         but excluding any Claim to the extent that:

                  (1)      it arises directly as a result of the wilful
                           misconduct or gross negligence of an Indemnitee;

                  (2)      it arises directly as a result of a breach by the
                           Lessor of its express obligations under this
                           Agreement or as a result of a representation or
                           warranty given by the Lessor in this Agreement not
                           being true and correct at the date when, or when
                           deemed to have been, given or made;

                  (3)      it constitutes a Lessor Tax or Lessor Lien;

                  (4)      it represents a Tax or loss of tax benefits (the
                           Lessee's liabilities for which, to the extent
                           thereof, are set out in Clauses 5.5, 5.6 and 5.8);

                                      -53-

<PAGE>

                  (5)      it constitutes a cost or expense that is required to
                           be borne by the Lessor in accordance with any other
                           provision of this Agreement;

                  (6)      it results from any disposition not caused by Lessee
                           of all or any part of Lessor's rights, title or
                           interest in or to the Aircraft or under this
                           Agreement, unless such disposition occurs as a
                           consequence of an Event of Default;

                  (7)      it is attributable to an event occurring after the
                           Term unless the Claim results from or arises out of
                           an act or omission by the Lessee, or any circumstance
                           existing, during the Term; or

                  (8)      it is brought after the Term and relates to a claimed
                           patent infringement by the Manufacturer.

10.2     MITIGATION

         (a)      The Lessor agrees that it shall, as soon as reasonably
                  practicable after it becomes aware of any circumstances that
                  would, or would reasonably be expected to, become the subject
                  of a claim for indemnification pursuant to Clause 10.1, notify
                  the Lessee in writing accordingly. The Lessor (and any other
                  Indemnitee seeking indemnification, as the case may be) and
                  the Lessee shall then consult with one another in good faith
                  in order to determine what action (if any) may reasonably be
                  taken to avoid or mitigate such Claim. The Lessee shall have
                  the right to take all reasonable action (on behalf and, if
                  necessary, in the name of the Lessor or such other Indemnitee)
                  in order to resist, defend or settle (provided such settlement
                  is accompanied by payment) any claims by third parties giving
                  rise to such Claim, provided always that the Lessee shall not
                  be entitled to take any such action unless adequate provision,
                  reasonably satisfactory to the Lessor and such other
                  Indemnitee, shall have been made in respect of the third party
                  claim and the costs thereof. The Lessee or, if the Claim is
                  covered by Lessee's Insurances, the Lessee's insurers shall be
                  entitled to select any counsel to represent it or them, the
                  Lessor and such other Indemnitee in connection with any such
                  action, subject in the case of Lessee to the approval of the
                  Lessor and such other Indemnitee (such approval not to be
                  unreasonably withheld) and any action taken by the Lessee
                  shall be on a full indemnity basis in respect of the Lessor
                  and such other Indemnitee.

         (b)      Any sums paid by the Lessee to the Lessor or any Indemnitee in
                  respect of any Claim pursuant to Clause 10.1 shall be paid
                  subject to the condition that, in the event that the Lessor or
                  such Indemnitee is subsequently reimbursed in respect of that
                  Claim by any other person, the Lessor or such Indemnitee
                  shall, provided no Default shall have occurred and be
                  continuing, promptly pay to the Lessee an amount equal to the
                  sum paid to it by the Lessee, including any interest on such
                  amount to the extent attributable thereto and received by the
                  Lessor or such Indemnitee, less any Tax payable by the Lessor
                  or such Indemnitee in respect of such reimbursement.

                                      -54-

<PAGE>

10.3     DURATION

         The indemnities contained in this Agreement will survive and continue
         in full force after the Expiry Date.

11.      EVENTS OF LOSS

11.1     TOTAL LOSS

         (a)      PRE-DELIVERY: If a Total Loss occurs prior to Delivery, this
                  Agreement will immediately terminate and, except as expressly
                  stated in this Agreement, neither party will have any further
                  obligation or liability under this Agreement except that the
                  Lessor will rebate to the Lessee the Security Deposit (if
                  theretofore paid pursuant to Clause 5.1) or, as the case may
                  be, return the Letter of Credit to the Lessee.

         (b)      POST-DELIVERY: If a Total Loss occurs after Delivery, the
                  Lessee will pay the Agreed Value to the Lender no later than
                  60 days after the Total Loss Date (the "SETTLEMENT DATE")
                  unless the Aircraft is restored to the Lessor or the Lessee
                  within that period (or, in the case of a Total Loss coming
                  within paragraph (c) of the definition of Total Loss and
                  involving the loss of the Lessor's title to the Aircraft, if
                  both the Aircraft and the Lessor's title thereto are restored
                  to the Lessor or, in the case of the Aircraft, to the Lessee
                  and the Lender's rights under the Mortgage are fully
                  restored). The receipt by the Lender of the insurance proceeds
                  in respect of the Total Loss on or prior to the Settlement
                  Date shall discharge the Lessee from its obligation to pay the
                  Agreed Value to the Lessor pursuant to this sub-clause (b),
                  provided such proceeds are not less than the Agreed Value. In
                  the event that the insurance proceeds are paid initially to
                  the Lessee and not to the Lender, they may be retained by the
                  Lessee if the Lessee shall have paid the Agreed Value to the
                  Lender, otherwise the Lessee shall pay the Agreed Value to the
                  Lender not later than the next Business Day following receipt
                  by the Lessee of such proceeds. In the event that the Lessee
                  pays the Agreed Value to the Lessor in accordance with this
                  sub-clause (b), the Lessor shall promptly assign to the Lessee
                  its rights under the Insurances to receive the insurance
                  proceeds in respect of the Total Loss to the extent that such
                  proceeds shall not have been paid to the Lessee. Subject to
                  the rights of any insurers or other third parties, upon
                  irrevocable payment in full to the Lessor of that amount and
                  all other amounts that may be or become payable to the Lessor
                  under this Agreement, the Lessor shall:

                  (i)      without recourse or warranty (except as to the
                           absence of Lessor Liens), and without further act, be
                           deemed to have transferred to the Lessee all of the
                           Lessor's rights to any Engines or Parts not installed
                           when the Total Loss occurred, all on an "as-is where
                           is" basis, and shall, at the Lessee's expense,
                           execute and deliver such bills of sale and other
                           documents and instruments as the Lessee may

                                      -55-

<PAGE>

                           reasonably request to evidence (on the public record
                           or otherwise) the transfer and the vesting of the
                           Lessor's rights in such Engines and Parts in the
                           Lessee, free and clear of all rights of the Lessor
                           and any Lessor Liens; and

                  (ii)     pay to Lessee, as a rebate of prepaid Basic Rent, and
                           amount equal to the product of (1) one month's Basic
                           Rent multiplied by (2) a fraction the numerator of
                           which is the number of days remaining in the then
                           current Rental Period and the denominator of which is
                           the number of days in the then current Rental Period.

         (c)      ENGINE LOSS: Upon the occurrence of an Engine Loss (including,
                  for the avoidance of doubt, at a time when the Engine is not
                  installed on the Airframe) in circumstances in which there has
                  not also occurred a Total Loss, the Lessee shall give the
                  Lessor and the Lender written notice promptly upon becoming
                  aware of the same and shall (unless the Lessor has received
                  the insurance proceeds relating to such Engine Loss), within
                  60 days after the Engine Loss Date, convey or cause to be
                  conveyed to the Lessor, as replacement for such Engine, title
                  to a replacement engine that is in the same or better
                  operating condition, has the same or greater value and utility
                  as the lost Engine and that complies with the conditions set
                  out in Clause 8.13(a). The Lessee shall, at the time of such
                  conveyance, comply in all respects with Clause 8.17(a) so that
                  the replacement engine becomes an Engine, whereupon the
                  leasing of the replaced Engine the subject of the Engine Loss
                  shall cease and title to such replaced Engine shall (subject
                  to any salvage rights of insurers) vest in the Lessee pursuant
                  to Clause 8.17(c), free of Lessor Liens. If the Lessor or the
                  Lender subsequently receives any insurance proceeds relating
                  to such Engine Loss, the Lessor shall promptly remit such
                  proceeds or cause such proceeds to be remitted to the Lessee.
                  No Engine Loss with respect to any Engine that is replaced in
                  accordance with the provisions of this Clause 11.1 (c) shall
                  result in any increase or decrease in Basic Rent or the Agreed
                  Value.

11.2     REQUISITION

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

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

         (b)      so long as no Default has occurred and is continuing, the
                  Lessee will be entitled to any compensation payable by the
                  requisitioning authority in respect of the Term. The Lessee
                  will, as soon as practicable after the end of any such
                  requisition (with the Term being extended if and to the extent
                  that the period of requisition continues beyond the scheduled
                  Expiry Date), cause the Aircraft to be put into the condition
                  required by this

                                      -56-

<PAGE>

                  Agreement. The Lessor will be entitled to all compensation
                  payable by the requisitioning authority in respect of any
                  change in the structure, state or condition of the Aircraft
                  arising during the period of requisition, and the Lessor will
                  apply such compensation in reimbursing the Lessee for the cost
                  of complying with its obligations under this Agreement in
                  respect of any such change, but so that, if any Default has
                  occurred and is continuing, the Lessor may apply the
                  compensation in or towards settlement of any amounts owing by
                  the Lessee under this Agreement. All such sums shall be held
                  by the Lender.

12.     RETURN OF AIRCRAFT

12.1    REDELIVERY

         On the Expiry Date or termination of the leasing of the Aircraft under
         this Agreement, the Lessee shall, unless a Total Loss has occurred, at
         its expense, redeliver the Aircraft and Aircraft Documents to the
         Lessor at the Redelivery Location or such other airport as is mutually
         acceptable to Lessor and Lessee in a condition complying with this
         Clause 12 and Schedule 3, free and clear of all Security Interests and
         Permitted Liens (other than the Lessor Liens).

12.2    FINAL CHECKS

         Immediately prior to return of the Aircraft, Lessee shall perform the
         following:

         (a)      Lessee shall perform (or have performed by an Agreed
                  Maintenance Performer) a full and complete zonal, systems and
                  structural check ("C" or its equivalent), including the
                  corresponding lower checks ("A" and "B" or equivalent) and any
                  other maintenance and inspections tasks that are a part
                  thereof, all in accordance with the Agreed Maintenance
                  Program. At return, the Airframe will have zero Flight Hours
                  since such "C" check, except for the acceptance Rights and the
                  ferry flight to the Redelivery Location. Lessee will also
                  weigh the Aircraft. Any discrepancies revealed during such
                  inspection will be corrected in accordance with Manufacturer's
                  maintenance and repair manuals or FAA-approved data. Lessee
                  shall also perform during such check, to the extent it is
                  able, any other work reasonably required by Lessor (and not
                  otherwise required under this Agreement) so long as such work
                  does not prevent Lessee from returning the Aircraft on the
                  Expiry Date, and Lessor shall reimburse Lessee for such work
                  at Lessee's preferred customer rates.

         (b)      Lessee shall perform (or have performed by an Agreed
                  Maintenance Performer) an internal and external corrosion
                  inspection in accordance with the manufacturer's corrosion
                  prevention and control program ("CPCP") specified for the
                  model type and correct any discrepancies in accordance with
                  the recommendations of the manufacturer and the manufacturer's
                  structural repair manual ("SRM"). In addition, all inspected

                                      -57-

<PAGE>

                  areas will be properly treated with corrosion inhibitor as
                  recommended by manufacturer.

         (c)      If Lessee performed any structural inspections or tasks on a
                  sampling basis but did not perform such inspections on the
                  Aircraft, such work shall also be performed on the Aircraft.

         (d)      Lessee shall perform a videotape borescope inspection of the
                  low pressure and high pressure compressors and the turbine
                  area of the Engines. All items beyond the applicable Engine
                  manufacturer's maintenance manual limits will be rectified at
                  Lessee's sole cost and expense. No Engine will be "on watch"
                  for any reason requiring special or out of sequence
                  inspection.

         (e)      In accordance with the applicable maintenance manual, Lessee
                  shall perform a maximum power assurance run and condition,
                  acceleration and bleed valve scheduling checks on the Engines.
                  Lessee will record and evaluate the Engine performance, with
                  Lessor and/or its representative entitled to be present. The
                  performance and all operating parameters of each Engine will
                  be within the limits specified in the Engine manufacturer's
                  maintenance manual.

         (f)      Lessee shall have removed and blended all external and
                  interior markings.

         (g)      If the Engine historical and technical records and the
                  condition trend monitoring data of any Engine or the APU
                  indicate an abnormal acceleration in the rate of deterioration
                  in the performance of such Engine or APU, Lessee shall correct
                  such conditions causing the accelerated rate of deterioration.

12.3     FINAL INSPECTION

         (a)      During the 15 days prior to redelivery of the Aircraft, the
                  Lessee will make the Aircraft available to the Lessor and the
                  Lender for inspection ("FINAL INSPECTION") in order to verify
                  that the condition of the Aircraft complies with this
                  Agreement. The Final Inspection will be long enough to permit
                  the Lessor and the Lender to inspect, at their own cost, the
                  Aircraft Documents, the Aircraft and uninstalled Parts and the
                  Engines. The Lessor and the Lender shall attend and conduct
                  the Final Inspection diligently and, without limiting their
                  right to conduct the fall Final Inspection permitted by this
                  Agreement, will cooperate with the Lessee in order to complete
                  the Final Inspection as soon as reasonably practical.

         (b)      The Lessor and the Lender shall also be entitled, as part of
                  the Final Inspection, to require the Lessee to perform an
                  acceptance flight of up to three hours at the Lessee's cost
                  (with the Lessor's and the Lender's representatives as
                  on-board observers) and such further acceptance flights as may
                  be necessary in the event that the first or subsequent

                                      -58-

<PAGE>

                  flights do not confirm that the Aircraft complies with the
                  requirements of this Agreement.

         (c)      At the request of Lessor, Lessee shall perform "bridging"
                  maintenance procedures for the purpose of standardizing the
                  Aircraft to the maintenance program of any subsequent
                  operator of the Aircraft; provided, however, that Lessor
                  shall pay to Lessee the Actual Cost of all "bridging"
                  procedures that are in excess of or not in lieu of the "C"
                  Check to be performed pursuant to Clause 12.2 and Schedule 3.

12.4     NON-COMPLIANCE

         To the extent that, at the time of Final Inspection, the condition of
         the Aircraft does not comply with this Agreement, the Lessee shall at
         the option of the Lessor and the Lender:

         (a)      immediately rectify the non-compliance and, to the extent the
                  non-compliance extends beyond the Expiry Date, the Term will
                  be automatically extended until the non-compliance has been
                  rectified; or

         (b)      redeliver the Aircraft to the Lessor and indemnify the Lessor,
                  and provide security reasonably acceptable to the Lessor and
                  the Lender for that indemnity, against the cost of putting the
                  Aircraft into the condition required by this Agreement.

         During any extension of the Term pursuant to sub-clause (a), this
         Agreement will remain in full force and effect, including the
         obligation to pay Basic Rent (which Lessee shall pay on a PER DIEM
         basis weekly in advance); provided, however, that Lessee shall not
         operate, or permit others to operate, the Aircraft after the Expiry
         Date except for acceptance flights pursuant to Clause 12.2 and a ferry
         flight to the Redelivery Location.

12.5     EXPORT DOCUMENTATION

         Upon redelivery and upon request by the Lessor, the Lessee shall (a)
         provide to the Lessor all documents necessary to export the Aircraft
         from the State of Registration (including a valid and subsisting export
         licence for the Aircraft), and (b) provide any documents requested by
         the Lessor in connection with, and otherwise cooperate with, the
         deregistration of the Aircraft by the Aviation Authority, including
         causing the Aviation Authority to issue an Export Certificate of
         Airworthiness to a country specified by the Lessor.

12.6     ACKNOWLEDGMENT

         Provided the Lessee has complied with its obligations under this
         Agreement, following redelivery of the Aircraft by the Lessee to the
         Lessor at the Redelivery Location, the Lessor will deliver to the
         Lessee an acknowledgment confirming that the Lessor is satisfied that
         the

                                      -59-

<PAGE>

         Aircraft is in the condition required by this Agreement and has been
         redelivered to the Lessor in accordance with this Agreement.

12.7     MAINTENANCE PROGRAM

         (a)      During the 20 day period preceding the scheduled Expiry Date
                  and upon the Lessor's request, the Lessee will provide the
                  Lessor or its agent reasonable access to the Agreed
                  Maintenance Program and the Aircraft Documents in order to
                  facilitate the Aircraft's integration into any subsequent
                  operator's fleet. The Lessor agrees that it will not disclose
                  the contents of the Agreed Maintenance Program to any person
                  or entity except to the extent necessary to monitor the
                  Lessee's compliance with this Agreement and/or to bridge the
                  maintenance program for the Aircraft from the Agreed
                  Maintenance Program to another program after the Expiry Date.

         (b)      Concurrent with providing the Aircraft Documents for Lessor's
                  review, Lessee shall provide to Lessor a written summary of
                  all sampling programs involving or affecting the Aircraft.

12.8     STORAGE

         If the Lessor so requests, and subject to the availability of the
         requisite space, the Lessee shall park and store the Aircraft at a
         secure storage area, which may be at the Redelivery Location or at any
         other suitable facility of the Lessee selected by the Lessee, wherever
         located (the "STORAGE LOCATION"), on behalf of the Lessor for a period
         not exceeding 30 days from the Expiry Date. During that period the
         Aircraft shall be at the Lessee's risk (save as to any loss or damage
         caused by the Lessor's wilful misconduct or gross negligence), and the
         Lessee shall maintain and store the Aircraft in accordance with the
         respective manufacturer's maintenance planning document and shall
         insure the Aircraft in accordance with a "ground risk only" policy
         usual and customary in the worldwide aviation insurance marketplace.
         All storage, maintenance and insurance costs shall be borne by the
         Lessee. If the Lessor so requests, and subject to the availability of
         the requisite space, the Lessee shall continue to park and store the
         Aircraft at the Storage Location on behalf of the Lessor for a further
         period not exceeding 60 days. During that further period the Aircraft
         shall be at the Lessor's risk (save as to any loss or damage caused by
         the Lessee's wilful misconduct or gross negligence), but the Lessee
         shall continue to maintain, store and insure the Aircraft in accordance
         with this Clause 12.8. All reasonable storage, maintenance and
         insurance costs incurred by the Lessee (excluding any profit element
         accruing to the Lessee) during such further period shall be reimbursed
         by the Lessor promptly upon presentation of supporting invoices and/or
         receipts.

                                      -60-

<PAGE>

13.      DEFAULT

13.1     EVENTS

         Each of the following events will constitute an Event of Default and a
         repudiation of this Agreement by the Lessee:

         (a)      NON-PAYMENT: the Lessee fails to pay any amount payable by it
                  under this Agreement within 3 Business Days of the due date
                  for payment; or

         (b)      INSURANCE: the Lessee fails to comply with any provision of
                  clause 9 or any insurance required to be maintained under this
                  Agreement is canceled or terminated; or

         (c)      BREACH: the Lessee fails to comply with any other provision of
                  this Agreement and, if such failure is, in the reasonable
                  opinion of the Lessor, capable of remedy, the failure
                  continues for 30 days after notice from the Lessor to the
                  Lessee, PROVIDED HOWEVER, that, if such failure cannot
                  reasonably be remedied within such 30 day period and the
                  Lessee is diligently undertaking all necessary remedial
                  action, the 30 day period shall be extended for a further 15
                  days; or

         (d)      REPRESENTATION: any representation or warranty made (or deemed
                  to be repeated) by the Lessee in this Agreement or in any
                  document or certificate furnished to the Lessor pursuant to or
                  in connection with this Agreement is or proves to have been
                  incorrect in any material respect when made or deemed to be
                  repeated and the Lessee's ability to comply with its
                  obligations under this Agreement, and/or the Lessor's rights,
                  title and interest to and in the Aircraft and/or under this
                  Agreement, are thereby materially and adversely affected; or

         (e)      CROSS DEFAULT:

                  (i)      any Financial Indebtedness of the Lessee or any of
                           its Affiliates that exceeds $500,000 is not paid when
                           due and any applicable grace period shall have
                           expired;

                  (ii)     the security for any such Financial Indebtedness is
                           enforced; or

                  (iii)    any lease, conditional sale, installment sale or
                           forward purchase agreement of the Lessee or any of
                           its Affiliates in respect of an aircraft is
                           terminated as a consequence of an event of default or
                           termination event (however described);

                  provided always, in any such case, it shall not constitute an
                  Event of Default under this Agreement:

                                      -61-

<PAGE>

                  (1)      if the relevant Financial Indebtedness constitutes
                           non-recourse borrowing or financing; or

                  (2)      if the non-payment, acceleration, termination or
                           event in question is being contested by the Lessee in
                           good faith and on reasonable grounds and any
                           declaration of default, termination of agreement or
                           enforcement of security has been stayed by a court of
                           competent jurisdiction; or

                  (3)      if the non-payment, acceleration, termination or
                           event in question is being discussed by the Lessee
                           with its creditors in good faith and on reasonable
                           grounds and there has been no declaration of default,
                           termination of agreement or enforcement of security;

         (f)      APPROVALS: any consent, authorization, licence, certificate or
                  approval of or registration with or declaration to any
                  Government Entity in connection with this Agreement,
                  including:

                  (i)      any authorization required by the Lessee of, or in
                           connection with, the execution, delivery, validity,
                           enforceability or admissibility in evidence of this
                           Agreement or the performance by the Lessee of its
                           obligations under this Agreement; or

                  (ii)     any airline licence, air transport licence,
                           franchise, concession, permit, certificate, right or
                           privilege required by the Lessee for the conduct of
                           its business,

                  is modified, withheld, revoked, suspended, canceled,
                  withdrawn, terminated or not renewed, or otherwise ceases to
                  be in full force and is not reissued, reinstated or renewed
                  within 30 days, PROVIDED HOWEVER that any such modification,
                  withholding, revocation, suspension, cancellation, withdrawal,
                  termination or non-renewal shall only constitute an Event of
                  Default if it has a material adverse effect on the Lessee's
                  ability to perform its obligations under this Agreement or the
                  Lessor's rights, title and interest to and in the Aircraft or
                  under this Agreement; or

         (g)      INSOLVENCY:

                  (i)      the Lessee or any of its Affiliates is, or is deemed
                           for the purposes of any relevant law to be, unable to
                           pay its debts as they fall due or to be insolvent, or
                           admits inability to pay its debts as they fall due;
                           or

                  (ii)     the Lessee or any of its Affiliates suspends making
                           payments on all or any class of its debts or
                           announces an intention to do so, or a moratorium is
                           declared in respect of any of its indebtedness; or

         (h)      BANKRUPTCY AND SIMILAR PROCEEDINGS

                                      -62-

<PAGE>

                  (i)      Lessee shall consent to the appointment of a
                           receiver, trustee or liquidator for itself or for a
                           substantial part of its property; or

                  (ii)     Lessee shall admit in writing its inability to pay
                           its debts generally as they become due, or Lessee
                           shall make a general assignment for the benefit of
                           creditors; or

                  (iii)    Lessee shall file a voluntary petition in bankruptcy
                           or a voluntary petition or answer seeking
                           reorganization in a proceeding under the 11 U.S.C.
                           Sections 101 ET SEQ. or under any other laws dealing
                           with bankruptcy, insolvency, moratorium or creditors'
                           rights generally (any or all of which are hereinafter
                           referred to as "BANKRUPTCY LAWS"), or an answer
                           admitting the material allegations of a petition
                           filed against Lessee in any such proceeding, or
                           Lessee shall by voluntary petition, answer or consent
                           to or seek relief under the provisions of any
                           Bankruptcy Laws; or

                  (iv)     any order, judgment or decree is entered by a court
                           of competent jurisdiction appointing a receiver,
                           trustee or liquidator of Lessee or a substantial part
                           of its property, or ordering a substantial part of
                           Lessee's property is to be sequestered, and
                           instituted or done with the consent of Lessee or, if
                           instituted by another person, the order, judgment or
                           decree is not dismissed, remedied or relinquished
                           within 60 days; or

                  (v)      a petition against Lessee in a proceeding under any
                           Bankruptcy Laws shall be filed and shall not be
                           withdrawn or dismissed within 60 days thereafter, or
                           if, under the provisions of any Bankruptcy Laws that
                           may apply to Lessee, any court of competent
                           jurisdiction shall assume jurisdiction, custody or
                           control of Lessee or of any substantial part of its
                           property; or

                  (vi)     any step (including petition, proposal or convening a
                           meeting) is taken with a view to a composition,
                           assignment or arrangement with any creditors of, or
                           the reorganization, rehabilitation, administration,
                           liquidation, or dissolution of, the Lessee or any of
                           its Affiliates or any other insolvency proceedings
                           involving the Lessee or any of its Affiliates; or

         (i)      OTHER JURISDICTION: there occurs in relation to the Lessee or
                  any of its Affiliates any event anywhere which, in the
                  reasonable opinion of the Lessor, corresponds with any of
                  those mentioned in Clause 13.1 (h); or

         (j)      UNLAWFUL: it becomes unlawful for the Lessee to perform any of
                  its material obligations under this Agreement or this
                  Agreement becomes wholly or partly invalid or unenforceable,
                  provided that any such partial invalidity or unenforceability
                  shall only constitute an Event of Default if it has a material
                  adverse effect on the Lessee's ability

                                      -63-

<PAGE>

                  to perform its obligations under this Agreement or the
                  Lessor's rights, title and interest in and to the Aircraft or
                  under this Agreement; or

         (k)      SUSPENSION OF BUSINESS: the Lessee or any of its Affiliates
                  suspends or ceases to carry on all or a substantial part of
                  its business; or

         (l)      DISPOSAL: the Lessee or any of its Affiliates disposes or
                  threatens to dispose of all or a material part of its assets,
                  whether by one or a series of transactions, related or not,
                  other than pursuant to a merger or consolidation as referred
                  to in, and subject to, Clause 8.8(b) or for the purpose of any
                  other reorganization or amalgamation the terms of which have
                  received the previous consent in writing of the Lessor; or

         (m)      RIGHTS: the existence, validity, enforceability or priority of
                  the rights of the Lessor as owner and lessor in respect of the
                  Aircraft or the rights of the Lender as mortgagee of the
                  Aircraft and assignee of this Agreement are challenged by the
                  Lessee or any other person claiming by or through the Lessee;
                  or

         (n)      CHANGE OF OWNERSHIP: any single person or group of persons
                  acquire control, directly or indirectly, of the Lessee without
                  the previous consent in writing of the Lessor (which consent
                  shall not be withheld unless the Lessor is of the reasonable
                  opinion that such acquisition of control will have a
                  materially adverse effect on the Lessee's ability to perform
                  its obligations under this Agreement or the Lessor's rights,
                  title and interest in and to the Aircraft or under this
                  Agreement), not including (i) persons that are currently in
                  control of Lessee, (ii) spouses of such persons, (iii) any
                  lineal ancestor or descendant of such persons, (iii) any
                  spouse of any person covered by clause (iii), or (v) a
                  partnership or trust set up for the benefit of persons
                  identified in clauses (i) through (iv); or

         (o)      DELIVERY: the Lessee fails to accept delivery of the Aircraft
                  when validly tendered pursuant to this Agreement by the Lessor
                  (provided that the Lessor shall have satisfied the conditions
                  precedent set out in Clause 3.4); or

         (p)      ADVERSE CHANGE: any event or series of events occurs which, in
                  the reasonable opinion of the Lessor, could be expected to
                  have a material adverse effect on the financial condition or
                  operations of the Lessee and its Affiliates or on the ability
                  of the Lessee to comply with its obligations under this
                  Agreement; or

         (q)      LETTER OF CREDIT: if the Lessee has elected to deliver the
                  Letter of Credit in lieu of the Security Deposit pursuant to
                  Clause 5.1(b), the Letter of Credit ceases for any reason to
                  be in full force and effect or is not renewed or replaced
                  before its expiration in accordance with Clause 5.1 (b) and
                  the Lessee does not immediately provide the Lessor with cash
                  in an amount equal to the Security Deposit.

                                      -64-

<PAGE>

13.2     RIGHTS

         If an Event of Default occurs, and for as long as it shall continue,
         the Lessor may at its option (and without prejudice to any of its other
         rights under this Agreement), at any time thereafter:

         (a)      treat such event as a repudiation by the Lessee of its
                  obligations under this Agreement and by notice to the Lessee
                  with immediate effect terminate the leasing of the Aircraft
                  (but without prejudice to the continuing obligations of the
                  Lessee under this Agreement), whereupon all rights of the
                  Lessee under this Agreement shall cease; and/or

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

         (c)      either:

                  (i)      take possession of the Aircraft, for which purpose
                           the Lessor may enter any premises belonging to,
                           occupied by or under the control of the Lessee (for
                           which purpose the Lessee hereby grants to the Lessor
                           an irrevocable licence to the extent permitted by
                           applicable law) where the Aircraft may be located, or
                           cause the Aircraft to be redelivered to the Lessor at
                           the Redelivery Location (or such other location as
                           the Lessor may require), and the Lessor is hereby
                           irrevocably authorized and empowered, to the extent
                           permitted by applicable law, to direct pilots of the
                           Lessee or other pilots to fly the Aircraft to that
                           airport and will have all the powers and
                           authorizations necessary for taking such action; or

                  (ii)     by serving notice, require the Lessee to redeliver
                           the Aircraft to the Lessor at the Redelivery Location
                           (or such other location as the Lessor may require).

13.3     EXPORT

         If an Event of Default occurs, and for as long as it shall continue,
         the Lessor may sell or otherwise deal with the Aircraft as if this
         Agreement had never been made and the Lessee will, at the request of
         the Lessor, take all steps necessary to export the Aircraft from the
         country where the Aircraft is for the time being situated and any other
         steps necessary to enable the Aircraft to be redelivered to the Lessor
         in accordance with this Agreement. The Lessee hereby irrevocably and by
         way of security for its obligations under this Agreement authorizes and
         empowers the Lessor as its attorney to execute and deliver any
         documentation and to do any act or thing required in connection with
         the foregoing.

                                      -65-

<PAGE>

13.4     DEFAULT PAYMENTS

         If a Default occurs, the Lessee will indemnify the Lessor on demand
         against any loss, damage, expense, cost or liability which the Lessor
         may sustain or incur directly or indirectly as a result, including:

         (a)      any loss of profit (calculated on an after-tax basis) suffered
                  by the Lessor because of the Lessor's inability to place the
                  Aircraft on lease with another Lessee on terms as favorable to
                  the Lessor as this Agreement or because whatever use, if any,
                  to which the Lessor is able to put the Aircraft upon its
                  return to the Lessor, is not as profitable (calculated on an
                  after-tax basis) to the Lessor as this Agreement would have
                  been but for such Default or non-delivery;

         (b)      in the event that the Aircraft is sold as a consequence of the
                  Lessor's inability to enter into a satisfactory lease within a
                  reasonable period, the amount (if any) by which (i) the
                  aggregate of (1) the net sale proceeds (calculated by
                  deducting the costs of sale together with the cost of
                  preparing the Aircraft for sale and the repayment of any
                  outstanding indebtedness in relation to the financing of the
                  Aircraft) plus (2) the present value of the anticipated
                  after-tax net income to be derived from such net sale proceeds
                  up to the scheduled Expiry Date, discounted on a monthly basis
                  using 9.5% PER ANNUM as the discount rate, are less than (ii)
                  the aggregate of (1) the anticipated net sale proceeds
                  (computed on the same basis as the net sale proceeds referred
                  to in (i)(1) above), assuming that the Aircraft would have
                  been sold as soon as reasonably practicable following the
                  scheduled Expiry Date plus (2) the present value of the income
                  that would have been derived from the future Basic Rent
                  payable until the scheduled Expiry Date, discounted on a
                  monthly basis using 9.5% PER ANNUM as the discount rate;

         (c)      any amount of principal, interest, fees or other sums
                  whatsoever paid or payable on account of funds borrowed in
                  order to carry any amount unpaid by the Lessee;

         (d)      any loss, premium, penalty or expense that may be incurred in
                  repaying funds raised to finance the Aircraft or in unwinding
                  any swap, forward interest rate agreement or other financial
                  instrument relating in whole or in part to the Lessor's
                  financing of the Aircraft; and

         (e)      any loss, cost, expense or liability sustained or incurred by
                  the Lessor owing to the Lessee's failure to redeliver the
                  Aircraft on the date, at the place and in the condition
                  required by this Agreement.

         For the avoidance of doubt, the provisions of Clause 5.8(a) will apply
         to any sums payable by the Lessee pursuant to this Clause 13.4.

14.      ASSIGNMENT AND TRANSFER

                                      -66-

<PAGE>

14.1     NO ASSIGNMENT BY LESSEE

         The Lessee will not assign or create or permit to exist any Security
         Interest over any of its rights under this Agreement.

14.2     LESSOR ASSIGNMENT

         The Lessor may sell, assign or transfer all or any of its rights under
         this Agreement and in the Aircraft (a "TRANSFER") and the Lessor will,
         other than in the case of an assignment for security purposes, have no
         further obligation under this Agreement following a Transfer but,
         notwithstanding any Transfer, will remain entitled to the benefit of
         each indemnity under this Agreement.

         (a)      In connection with any Transfer, the following conditions
                  shall apply:

                  (i)      Lessor shall give Lessee written notice of such
                           Transfer at least 10 Business Days before the date of
                           such Transfer, specifying the name and address of the
                           proposed purchaser, assignee or transferee (the
                           "Transferee");

                  (ii)     the Transferee will be a person reasonably
                           experienced in aircraft leasing (or the Transferee's
                           rights and powers under this Agreement shall be
                           exercised on its behalf pursuant to an appropriate
                           management agreement by a person having such
                           experience);

                  (iii)    the Transfer will not adversely affect the Lessee's
                           rights and interests in the Aircraft and/or this
                           Agreement, nor subject the Lessee to any Tax or Claim
                           or any other obligation or liability to which it
                           would not have been subject had such assignment or
                           transfer not taken place.

                  (iv)     the Transferee will be a "citizen of the United
                           States" within the meaning of Section 40102(a)(15) of
                           the Federal Aviation Law and have full corporate
                           power and authority to enter into and perform the
                           transactions contemplated by this Agreement on the
                           part of "Lessor";

                  (v)      on the Transfer date the Lessor and the Transferee
                           shall enter into an agreement or agreements in which
                           the Transferee confirms that it shall be deemed a
                           party to this Agreement and agrees to be bound by all
                           the terms of, and to undertake all of the obligations
                           of, the Lessor contained in this Agreement;

                  (vi)     such Transfer shall not violate any applicable law
                           including the Federal Aviation Law, the Federal
                           Aviation Regulations and the Securities Act of 1933,
                           as amended; and

                                      -67-

<PAGE>

                  (vii)    the Transferee shall provide to Lessee an opinion of
                           its regular independent counsel as to the matters set
                           forth in sub-clause (iv), as to the legality,
                           validity, binding effect and enforceability of the
                           agreement or agreements between Lessor and Transferee
                           referred to in sub-clause (v) and as to such other
                           matters as were contained in the opinion of Lessor's
                           counsel delivered on the Delivery Date.

         (b)      Upon any Transfer, the Transferee shall be deemed Lessor for
                  all purposes of this Agreement, each reference in this
                  Agreement to the "Lessor" shall thereafter be deemed for all
                  purposes to refer to the Transferee, and the transferor shall
                  be relieved of all obligations of the "Lessor" under this
                  Agreement arising after the time of such Transfer except to
                  the extent attributable to acts or events occurring prior to
                  the time of such Transfer.

         (c)      Upon compliance by Lessor and a Transferee with the terms and
                  conditions of Clause 14.2(a), Lessee shall at the time of
                  Transfer, at the specific written request of Lessor and with
                  Lessor paying all of Lessee's out-of-pocket costs and
                  expenses:

                  (i)      execute and deliver to Lessor and to such Transferee
                           an agreement, in form and substance satisfactory to
                           Lessor, Lessee and such Transferee, dated the date of
                           such transfer, consenting to such transfer, agreeing
                           to pay all or such portion of the Basic Rent and
                           other payments under this Agreement to such
                           Transferee or its designee as such Transferee shall
                           direct, and agreeing that such Transferee shall be
                           entitled to rely on all representations and
                           warranties made by Lessee in this Agreement or in any
                           certificate or document furnished by Lessee in
                           connection with this Agreement as though such
                           Transferee was the original "Lessor";

                  (ii)     execute and deliver to Lessor or such Transferee, as
                           the case may be, precautionary Uniform Commercial
                           Code financing statements or amendments reflecting
                           the interests of such Transferee in the Aircraft and
                           this Agreement;

                  (iii)    deliver to Lessor and to such Transferee a
                           certificate, signed by a duly authorized officer or
                           Lessee, dated the date of such transfer, to the
                           effect that no Event of Default has occurred and is
                           continuing or, if one is then continuing, describing
                           such Event of Default;

                  (iv)     cause to be delivered to Lessor and such Transferee
                           certificates of insurance and broker's letter of
                           undertaking substantially in the form set out in
                           Parts 2 and 3 of Schedule 4, detailing the coverage
                           and confirming the insurers' agreement to the
                           specified insurance requirements of this Agreement
                           and listing the Lessor and Transferee as additional
                           insureds and the Transferee as sole loss payee
                           (subject to other direction by the Lender);

                                      -68-

<PAGE>

                  (v)      deliver to Lessor and to such Transferee an opinion
                           of Lessee's counsel (which may be Lessee's General
                           Counsel), addressed to Lessor and such Transferee to
                           the effect that the agreement referred to in
                           sub-clause (i) has been duly authorized and executed
                           by Lessee and constitutes the legal, valid and
                           binding obligation of Lessee, enforceable against
                           Lessee in accordance with its terms (subject to
                           customary exceptions), and to the effect that such
                           Transferee may rely on the opinion delivered by such
                           counsel or its predecessor counsel in connection with
                           this Agreement on the Delivery Date with the same
                           force and effect as if such Transferee was an
                           original addressee of such opinion when given;

                  (vi)     deliver to Lessor and such Transferee information on
                           the location of the Airframe and Engines at all times
                           requested by Lessor in order to permit the Transfer
                           to take place at a time and on a date so as to
                           eliminate or minimize any Taxes applicable to the
                           Transfer; and

                  (vii)    such other documents as Lessor or such Transferee may
                           reasonable request, so long as such documents do not
                           adversely affect the rights or obligations of Lessee
                           under this Lease or otherwise adversely effect
                           Lessee.

14.3     GRANTS OF SECURITY INTERESTS

         The Lessor shall be entitled at any time after Delivery to grant a
         security interest in the Aircraft or its right, title and interest in
         this Agreement (each, an "ADDITIONAL MORTGAGE") in favor of any person
         (each, an "ADDITIONAL MORTGAGEE"). Any Additional Mortgage may be a
         successor mortgage to the Security Interest granted to the Lender, or
         may be in addition to the Lender's Security Interest and previous
         Additional Mortgages and with a priority senior, equal or subordinate
         to the Lender's Security Interest and previous Additional Mortgages as
         the Lender and previous Additional Mortgagees may permit. In the case
         of any such grant by Lessor of an Additional Mortgage to an Additional
         Mortgagee in all or any portion of Lessor's rights, title and interest
         in and to the Aircraft and this Agreement, Lessee shall promptly, at
         the specific written request of Lessor and with Lessor paying all of
         Lessee's out-of-pocket costs and expenses:

         (a)      execute and delivery to Lessor and to such Additional
                  Mortgagee an agreement, in form and substance satisfactory to
                  Lessor, such Additional Mortgagee and Lessee, dated the date
                  of the grant of such Additional Mortgage, (i) consenting to
                  such Additional Mortgage and to any assignment of Lessor's
                  rights, title and interest in and to this Agreement to such
                  Additional Mortgagee for security purposes, (ii) if requested
                  by Lessor and consented to by the previous payee, agreeing
                  that Lessee will pay the Basic Rent and other payments under
                  this Agreement to such Additional Mortgagee, and (iii)
                  agreeing that such Additional Mortgagee shall be entitled to
                  rely on all representations and warranties made by Lessee in
                  this Agreement or in any certificate

                                      -69-

<PAGE>

                  or document furnished by Lessee in connection with this
                  Agreement Documents as though such Additional Mortgagee was
                  originally the "Lessor" or "Lender";

         (b)      execute and deliver to Lessor and such Additional Mortgagee
                  such agreements as the Lessor may reasonably require for the
                  purposes of effecting all necessary amendments to this
                  Agreement (including Clauses 8, 9 and 10 and Schedule 4);

         (c)      execute and deliver to Lessor or such Additional Mortgagee, as
                  the case may be, precautionary Uniform Commercial Code
                  financing statements or amendments reflecting the assignment
                  of Lessor's interests to such Additional Mortgagee;

         (d)      deliver to Lessor and such Additional Mortgagee a certificate,
                  signed by a duly authorized officer of Lessee, dated the date
                  of the grant of the Additional Mortgage, to the effect that no
                  Event of Default has occurred and is continuing or, if one is
                  then continuing, describing such Event of Default;

         (e)      cause to be delivered to Lessor and such Additional Mortgagee
                  certificates of insurance and broker's letter of undertaking
                  substantially in the form set out in Parts 2 and 3 of Schedule
                  4, detailing the coverage and confirming the insurers'
                  agreement to the specified insurance requirements of this
                  Agreement, adding such Additional Mortgagee as an additional
                  insured and, if requested by Lessor and consented to by the
                  previous loss payee, listing such Additional Mortgagee as sole
                  loss payee;

         (f)      deliver to Lessor and such Additional Mortgagee an opinion of
                  Lessee's counsel (which may be Lessee's General Counsel),
                  addressed to Lessor and such Additional Mortgagee (i) to the
                  effect that the agreements referred to in sub-clauses (a) and
                  (b) have been duly authorized and executed by Lessee and
                  constitute the legal, valid and binding obligations of Lessee,
                  enforceable against Lessee in accordance with their terms
                  (subject to customary exceptions), and (ii) to the effect that
                  such Additional Mortgagee may rely on the opinion delivered by
                  such counsel or its predecessor counsel in connection with
                  this Agreement on the Delivery Date with the same force and
                  effect as if such Additional Mortgagee was an original
                  addressee of such opinion when given; and

         (g)      such other documents as Lessor or such Additional Mortgagee
                  may reasonably request so long as such documents do not
                  adversely affect the rights or obligations of Lessee under
                  this Lease or otherwise adversely affect Lessee.

14.4     SALE AND LEASEBACK BY LESSOR

         In addition to the Transfers and grants of security interests permitted
         by Clauses 14.2 and 14.3, Lessor shall be entitled to transfer its
         right, title and interests in and to the Aircraft to any person and
         lease the Aircraft from such person (a "HEAD LESSOR"), and in such
         event

                                      -70-

<PAGE>

         Lessor shall retain its rights and obligations as the "Lessor" under
         this Agreement. In the event of such a sale and lease-back by Lessor,
         (a) the Head Lessor shall meet the requirements for a "Transferee" as
         defined in Clause 14.2(a)(ii) above, (b) the Lessor shall be entitled
         to assign its rights in this Agreement to such Head Lessor as security
         for its obligations under the head lease, (c) the Head Lessor shall be
         entitled to grant to one or more purchase money lenders, or to an
         indenture trustee on behalf of such lenders, an Additional Mortgage
         covering the Aircraft and this Agreement, (d) Lessee shall execute and
         deliver to Lessor, such Head Lessor, such Additional Mortgagee and any
         trustees on their behalf, as appropriate, the documents specified in
         Clauses 14.2(c)(i) through (vii) and Clauses 14.3 (a) through (g)
         above, and Lessee shall cooperate with Lessor to make such other
         changes to this Lease, such as including such Head Lessor, such
         Additional Mortgagee and the trustees on their behalf as additional
         insureds and "Indemnitees", as Lessor may reasonably request so long as
         such changes do not adversely affect the rights or obligations of
         Lessee under this Lease or otherwise adversely affect Lessee and with
         Lessor paying all of Lessee's out-of-pocket costs and expenses.

14.5     FURTHER ACKNOWLEDGMENTS

         Lessee further acknowledges that any Transferee or Additional Mortgagee
         shall in turn have the rights of, and be subject to the conditions to,
         transfer and grants of security interests set forth above in this
         Clause 14.

14.6     CERTAIN PROTECTIONS FOR LESSEE'S BENEFIT

         The rights of Lessee under this Agreement shall be superior to the
         rights of any Additional Mortgagee or Head Lessor, and the Lessor shall
         require each Additional Mortgagee and Head Lessor to agree in writing
         with the Lessee that such Additional Mortgagee's and Head Lessor's
         rights in and to the Aircraft shall be subject to the terms of this
         Agreement, including to the Lessee's rights to the quiet use,
         possession and enjoyment provisions contained in this Agreement. Except
         as expressly set forth in this Agreement, no Additional Mortgage or
         Head Lease shall increase the responsibilities, obligations or
         liabilities of the Lessee or deprive the Lessee of any of its rights or
         privileges under this Agreement. The Lessor's obligations to perform
         the terms and conditions of this Lease shall remain in full force and
         effect notwithstanding the creation of any Additional Mortgage or Head
         Lease. Lessor shall not create any Additional Mortgage or enter into
         any Head Lease that violates the terms of this Clause 14.6.

15.      MISCELLANEOUS

15.1     WAIVERS. REMEDIES CUMULATIVE

         The rights of either party under this Agreement:

                                      -71-

<PAGE>

         (a)      may be exercised as often as necessary;

         (b)      are cumulative and not exclusive of that party's rights under
                  any law; and

         (c)      may be waived only in writing and specifically.

         Delay in exercising or non-exercise of any such right is not a waiver
         of that right.

15.2     DELEGATION

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

15.3     APPROPRIATION

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

15.4     CURRENCY INDEMNITY

         (a)      If the Lessor receives an amount in respect of the Lessee's
                  liability under this Agreement or if such liability is
                  converted into a claim, proof, judgment or order in a currency
                  other than the currency (the "CONTRACTUAL CURRENCY") in which
                  the amount is expressed to be payable under this Agreement:

                  (i)      the Lessee will indemnify the Lessor, as an
                           independent obligation, against any loss arising out
                           of or as a result of such conversion;

                  (ii)     if the amount received by the Lessor, when converted
                           into the contractual currency (at the market rate at
                           which the Lessor is able on the relevant date to
                           purchase the contractual currency in New York City
                           with that other currency) is less than the amount
                           owed in the contractual currency, the Lessee will,
                           forthwith on demand, pay to the Lessor an amount in
                           the contractual currency equal to the deficit; and

                  (iii)    the Lessee will pay to the Lessor on demand any
                           exchange costs and Taxes payable in connection with
                           the conversion.

                                      -72-

<PAGE>

         (b)      The Lessee waives, to the extent permitted by applicable law,
                  any right it may have in any jurisdiction to pay any amount
                  under this Agreement in a currency other than that in which it
                  is expressed to be payable.

15.5     PAYMENT BY THE LESSOR

         The Lessor will not be obliged to pay any amounts to the Lessee under
         this Agreement so long as any sums which are then due from the Lessee
         under this Agreement remain unpaid and any such amounts which would
         otherwise be due will fall due only if and when the Lessee has paid all
         such sums.

15.6     SEVERABILITY

         If a provision of this Agreement is or becomes illegal, invalid or
         unenforceable in any jurisdiction, that will not affect:

         (a)      the legality, validity or enforceability in that jurisdiction
                  of any other provision of this Agreement; or

         (b)      the legality, validity or enforceability in any other
                  jurisdiction of that or any other provision of this Agreement.

15.7     REMEDY

         If the Lessee fails to comply with any provision of this Agreement, the
         Lessor may, without being in any way obliged to do so or responsible
         for so doing and without prejudice to the ability of the Lessor to
         treat the non-compliance as a Default, effect compliance on behalf of
         the Lessee, whereupon the Lessee shall become liable to pay immediately
         any sums expended by the Lessor together with all costs and expenses
         (including reasonable legal costs) necessarily incurred in connection
         therewith.

15.8     EXPENSES

         (a)      The Lessor and the Lessee shall each bear their respective
                  expenses (including legal, professional and out-of-pocket
                  expenses) incurred or payable in connection with the
                  negotiation, preparation and execution of this Agreement, and
                  shall share equally the fees and expenses of special FAA
                  counsel in connection with the transactions contemplated by
                  this Agreement.

         (b)      The Lessee shall pay to the Lessor on demand all expenses
                  (including legal, professional and out-of-pocket expenses)
                  incurred or payable by the Lessor in connection with the
                  granting of any waiver or consent under this Agreement.

                                      -73-

<PAGE>

         (c)      The Lessee will pay to the Lessor on demand all expenses
                  (including legal, survey and other costs) payable or incurred
                  by the Lessor in contemplation of, or otherwise in connection
                  with, the enforcement of or preservation of any of the
                  Lessor's rights under this Agreement, or in respect of the
                  repossession of the Aircraft.

         (d)      The Lessor will pay to the Lessee on demand all expenses
                  (including legal costs) payable or incurred by the Lessee in
                  contemplation of, or otherwise in connection with, the
                  enforcement of or preservation of any of the Lessee's rights
                  under this Agreement.

15.9     TIME OF ESSENCE

         The time stipulated in this Agreement for all payments payable by the
         Lessee to the Lessor and for the performance of the Lessee's other
         obligations under this Agreement will be of the essence of this
         Agreement (subject always to any applicable grace period).

15.10    NOTICES

         (a)      All notices and other communications given under or in
                  connection with this Agreement shall be in writing (including
                  telefax) and shall be deemed to have been received as follows:

                  (i)      If sent by telefax, at the time of receipt by the
                           sender of a transmission report indicating that all
                           pages of the telefax transmission were properly
                           transmitted (unless the recipient notifies the sender
                           promptly, or if received after 5:30 p.m. local time,
                           by no later than 10:00 am. local time the following
                           Business Day, that the transmission was incomplete or
                           illegible, in which case the telefax shall be deemed
                           to have been received at the time of receipt by the
                           sender of a further clear transmission report on
                           retransmitting the telefax), provided the relevant
                           telefax transmission (or retransmission, as the case
                           may be) was transmitted to the receiver between 9:00
                           a.m. and 5:30 p.m. local time. If it was transmitted
                           later, then it shall be deemed to have been received
                           at 9:00 a.m. local time on the succeeding Business
                           Day.

                  (ii)     In any other case, when delivered to the address
                           specified in clause 15.10(b).

         (b)      All such notices, requests, demands and other communications
                  shall be sent:

                  (i)      if to the Lessor, to it at:
                               c/o Aviation Capital Group Corp.
                               Three Stamford Landing
                               46 Southfield Avenue
                               Stamford CT. 06902
                               Attention: Managing Director
                               Telefax No.: 203-967-3287

                                      -74-
<PAGE>

                           with a copy to the Lender at:
                               1850 North Central Avenue
                               Phoenix, Arizona 85077
                               Attention: Vice President-Law--Transportation
                                               Finance
                               Telefax No.: 602-207-7551

                                      -and-

                               1850 North Central Avenue
                               Phoenix, Arizona 85077
                               Attention: Vice President-Operations Management-
                                               -Transportation Finance
                               Telefax No.: 602-207-7551

                  (ii)     if to the Lessee, to it at:
                               371 Aokea Street
                               Honolulu, Hawaii 96819
                               Attention: Senior Vice President, Finance and
                                          Planning, and Chief Financial
                                          Officer
                               Telefax No.: 1-808-833-3100

                  or to such other address or telefax number as shall have
                  been notified by one party to the other in the manner set
                  out in this Clause 15.10.

15.11    LAW AND JURISDICTION

         (a)      THIS AGREEMENT SHALL, IN ALL RESPECTS, INCLUDING ALL MATTERS
                  OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY AND
                  CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
                  APPLICABLE TO CONTRACTS ENTERED INTO IN THE STATE OF NEW YORK
                  BY RESIDENTS OF SUCH STATE AND TO BE PERFORMED ENTIRELY WITHIN
                  SUCH STATE.

         (b)      The Lessor and the Lessee hereby irrevocably agree to submit
                  to the non-exclusive jurisdiction of the United States
                  District Court for the Southern District of New York and the
                  Supreme Court of the State of New York located in the Borough
                  of Manhattan, County of New York (the "AGREED COURTS") in the
                  event of any claims or disputes arising under this Agreement.
                  Such submission to jurisdiction shall not be construed so as
                  to limit the right of either party to take proceedings against
                  the other in whatsoever jurisdiction shall to it seem fit nor
                  shall the taking of proceedings in any one or more
                  jurisdictions preclude the taking of proceedings in any other
                  jurisdiction, whether concurrently or not. Final judgment
                  against Lessor or Lessee in any such suit shall be conclusive
                  and may be enforced in any other jurisdiction by suit on the

                                      -75-
<PAGE>

                  judgment or as otherwise permitted by applicable law, a
                  certified or true copy of which shall be conclusive
                  evidence of the facts and of the amount of any indebtedness
                  or liability of Lessor or Lessee. Each of Lessor and Lessee
                  hereby irrevocably waives any objection which it may now or
                  hereafter have to the laying of venue in any suit, action
                  or proceeding brought in any Agreed Court, and irrevocably
                  waives any claim that any such suit, action or proceeding
                  brought in any Agreed Court has been brought in an
                  inconvenient forum.

         (c)      THE LESSEE AND THE LESSOR HEREBY WAIVE TRIAL BY JURY IN ANY
                  JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING,
                  DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATING
                  TO THIS AGREEMENT.

         (d)      Without prejudice to any other mode of service, each of the
                  Lessor and the Lessee consents to the service of process
                  relating to any proceedings involving, directly or indirectly,
                  any matter arising out of or relating to this Agreement by
                  U.S. Postal Service registered mail (prepaid, return receipt
                  requested) of a copy of the process to the Lessee's address
                  identified in Clause 15.10(b).

15.12    SOLE AND ENTIRE AGREEMENT

         This Agreement is the sole and entire agreement between the Lessor and
         the Lessee in relation to the leasing of the Aircraft, and supersedes
         all previous agreements in relation to that leasing. The terms and
         conditions of this Agreement can only be varied by an instrument in
         writing executed by both parties or by their duly authorized
         representatives.

15.13    INDEMNITIES

         All rights expressed to be granted to each Indemnitee under this
         Agreement (other than the Lender) are given to the Lessor as agent for
         and on behalf of that Indemnitee.

15.14    COUNTERPARTS

         This Agreement may be executed in counterparts each of which will
         constitute one and the same document.

15.15    CONFIDENTIALITY

         Neither the Lessor nor the Lessee shall, without the other's prior
         written consent, communicate or disclose the terms of this Agreement or
         any information or documents furnished pursuant to this Agreement
         (except to the extent that the same are within the public domain) to
         any third party (other than the Lender, any prospective Transferee, any
         material investor in the Parent or creditor in Lessee, Additional
         Mortgagees or Head Lessors, the

                                      -76-

<PAGE>

         respective external legal advisers, auditors, insurance brokers or
         underwriters of Lessor, Lessee and such parties, and the Airframe and
         Engine manufacturers); provided however that disclosure will be
         permitted, to the extent required:

         (a)      pursuant to an order of any court of competent jurisdiction;
                  or

         (b)      pursuant to any procedure for discovery of documents in any
                  proceedings before any such court; or

         (c)      pursuant to any law or regulation having the force of law; or

         (d)      pursuant to a lawful requirement of any authority with whose
                  requirements the disclosing party is legally obliged to
                  comply; or

         (e)      in order to perfect any assignment of any assignable
                  warranties.

                              [SIGNATURE PAGE FOLLOWS]

                                      -77-

<PAGE>

IN WITNESS WHEREOF Lessor and Lessee have executed this Lease Agreement 804 on
the date shown at the beginning of this Agreement.

                                       SIGNED on behalf of
                                       ACG ACQUISITION VIII LLC

                                       By: /s/ R. Stephen Hannahs
                                           ------------------------------
                                       Name:   R. Stephen Hannahs
                                       Title:  Manager

                                       SIGNED on behalf of
                                       ALOHA AIRLINES, INC.

                                       By:____________________________________
                                       Name:
                                       Title:

                                       By:____________________________________
                                       Name:
                                       Title:

<PAGE>

IN WITNESS WHEREOF Lessor and Lessee have executed this Lease Agreement 804
on the date shown at the beginning of this Agreement.

                                       SIGNED on behalf of
                                       ACG ACQUISITION VIII LLC

                                       By:____________________________________
                                       Name:
                                       Title:

                                       SIGNED on behalf of
                                       ALOHA AIRLINES, INC.

                                       By: /s/ Brenda F. Cutwright
                                           -----------------------------------
                                       Name:   Brenda F. Cutwright
                                       Title:  SR. VICE PRESIDENT FINANCE &
                                                   PLANNING AND CFO

                                       By: /s/ Owen Sekimura
                                           -----------------------------------
                                       Name:   OWEN SEKIMURA
                                       Title:  STAFF VICE PRESIDENT - FINANCE
                                                      & CONTROLLER

<PAGE>

                                 SCHEDULE 1

                                   PART 1

                           AIRCRAFT SPECIFICATION

IDENTIFICATION:

<TABLE>

 <S>                   <C>
 Aircraft Type         B737-2Q9
 Registration          N804AL
 Serial Number         21719
 Date of Manufacture.  1/79

</TABLE>

WEIGHT DATA:

<TABLE>

 <S>                                   <C>
 Maximum Taxi Weight                       120,000 lbs.
 Maximum Takeoff Weight                    119,500 lbs.
 Maximum Landing Weight                    105,000 lbs.
 Maximum Zero Fuel Weight                   95,000 lbs.
 Fuel Capacity                         5168.7 U.S. gal.

</TABLE>

AIRFRAMIE AND INTERIOR EQUIPMENT:

<TABLE>

 <S>               <C>     <C>
 Galleys           2       Locations: G-1  forward and G-4 aft
 Lavatories        2       Locations:      1    forward and 1 aft
 Air Stairs        1       Locations:      1    forward and _ aft
 Passenger Seats   126     Locations/Types: 8 first class and 118 economy class
 Overhead bins     Standard 60" Carry-All type
 Cargo Door        None

</TABLE>

ENGINES:

<TABLE>

 <S>                   <C>             <C>
 Position              No.1            No.2
 Type                  JT8D-9A         JT8D-9A
 Serial No.            P687772B        P674389B

</TABLE>

APU:

<TABLE>

 <S>                   <C>
 Model:                GTCP 85-129CKB
 Serial No.            P35144

</TABLE>

                                      -79-

<PAGE>

LANDING GEAR:

<TABLE>

 <S>               <C>                 <C>                     <C>
 Position          Nose                Left Main               Right Main
 Type              65-46300-48         65-46100-37             65-73761-87
 Serial No.        R7642P639           [MR01158P617]          [MRO1184P630]

</TABLE>

MAJOR AVIONICS EQUIPMENT:

<TABLE>
 <S>                  <C>                    <C>                      <C>
 DESCRIPTION          MANUFACTURER           PART NO.                 QUANTITY

</TABLE>

                                      -80-
<PAGE>

                                     PART 2

                               AIRCRAFT DOCUMENTS

MANUALS

<TABLE>
<CAPTION>

DESCRIPTION                             QUANTITY                       MEDIA

<S>                                     <C>                          <C>
Maintenance Manual                         3                         Microfilm
Wiring Diagrams                            3                         Microfilm
Illustrated Parts Catalog                  3                         Microfilm
Systems Schematics                         3                         Microfilm
Weight & Balance Manual                    1                         Hard Copy
Operations Manual                          1                         Hard Copy
Flight Manual                              1                         Hard Copy
Structural Repair Manual                   1                         Microfilm
Rigging Document                           1                         Hard Copy

</TABLE>

TECHNICAL RECORDS

Certificate of Airworthiness
Maintenance Certificate
Weight & Balance Report
Maintenance Time Control Report
Major Incident/Accident Statement
Summary of AD Status for the engines, components and the airframe
Summary of Service Bulletin Status for the engine, components and the airframe
Component Listing including life status
Service Tags

Airframe log books
Flight Logs
Readiness Log
Full records for previous 'A', 'B', 'C' and 'D' Checks

Engine Shop Visit history including disk sheets

Emergency Equipment Listing including location
Cabin Layout Drawing

                                      -81-

<PAGE>

RECORDS FOR:

  Last Compass Swing
  Last Altimeters Calibration
  Last ATC Transponder Calibration

                                      -82-

<PAGE>

                                   SCHEDULE 2

                          CERTIFICATE OF ACCEPTANCE 804

         This Certificate of Acceptance 804 is delivered on the date set forth
         in paragraph 1 below by Aloha Airlines, Inc. (the "LESSEE") to ACG
         Acquisition VIII LLC (the "LESSOR") pursuant to Lease Agreement 804,
         dated January    , 1997, between the Lessor and the Lessee (the
         "AGREEMENT"). Capitalized terms used but not defined in this
         Certificate of Acceptance 804 shall have the meaning given to such
         terms in the Agreement.

1.       DETAILS OF ACCEPTANCE

         The Lessee hereby confirms to the Lessor that the Lessee has at  : .m
         H.S.T. on this    day of January, 1997, at                 , accepted
         the following, in accordance with the provisions of the Agreement and
         the Annex:

         (a)      Airframe: Boeing 737-2Q9 airframe, Manufacturer's Serial No.
                  21719 and FAA Registration No. N804AL;

         (b)      Engines: two Pratt & Whitney JT8D-9A Engines, bearing
                  Manufacturer's Serial Nos.    and      , each having 750 or
                  more rated take-off horsepower;

         (c)      All Parts installed on, attached to or appurtenant to the
                  Airframe and Engines; and

         (d)      Aircraft Documents as specified in Schedule 1 - Part 2 of the
                  Agreement.

2.       LESSEE'S CONFIRMATION. The Lessee confirms to the Lessor that as at the
         time indicated above, being the time of Delivery:

         (a)      the Lessee's representations and warranties contained in
                  Clauses 2.1 and 2.2 of the Agreement are hereby repeated;

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

         (c)      the Lessee confirms that there have been affixed to the
                  Aircraft and the Engines the fireproof notices required by the
                  Agreement.

3.       LESSOR'S CONFIRMATION The Lessor confirms to the Lessee that, as at the
         time indicated above, being the time of Delivery, the Lessor's
         representations and warranties contained in Clause 2.4 of the Agreement
         are hereby repeated.

                                      -83-

<PAGE>

IN WITNESS WHEREOF Lessor and Lessee have executed this Certificate of
Acceptance 804 on the date shown at the beginning of this Agreement.

                                                SIGNED on behalf of
                                                ACG ACQUISITION VIII LLC

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

                                               SIGNED on behalf of
                                               ALOHA AIRLINES, INC.

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

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

                                      -84-

<PAGE>

                                                                         ANNEX 1

                         MAINTENANCE STATUS AT DELIVERY

                              DATE: JANUARY 21,1997

<Table>
<Caption>

AIRFRAME TIME:
<S>                               <C>               <C>                         <C>

Total Flight Hours                40,053:51
Total Cycles                      52,697

AIRFRAME LIMITS:

Type of Check:                    "C" Check
Check Interval:                   3,600.0H
Time Since Last Check:            1,218:09

ENGINE DATA:

Position                                            No.1                         No.2
Type                                                JT8D-9A                      JT8D-9A
Serial Number                                       674389                       687778

Total Flight Hours:                                 40,930:30                   31,776:0
Total Cycles:                                       80,691                        62,196

Flight Hours Since Last Shop Visit:                  3,610:30                    2,499:0
Cycles Since Last Shop Visit:                        8,170                         5,627
Flight Hours to Next Hard Limit:                     7,997:30                   24,088:0
Cycles to Next Hard Limit:                             719                         6,486

APU:

Type:                 CK B
Serial Number:        P35144

Total Flight Hours:                                                             18,716:17 APU Hours
Total Cycles:
Flight Hours Since Last HSI Inspection:                                          3,466:17 APU Hours
Cycles Since Last HSI Inspection:

Flight Hours Remaining on Turbine and Compressor LLPs:                             718:17 APU Hours
Cycles Remaining on Turbine and Compressor LLPs:

                                                                      Flight time x 1.9 = APU Hours

</Table>

                                      -85-

<PAGE>

<Table>
<Caption>

LANDING GEAR LIMITS:
<S>                            <C>                            <C>                           <C>

Position:                          Nose                         Left                           Right
Overhaul Interval:                15,000 H                      15,000 H                       15,000 H

Time Since Overhaul:            1,315:51 H                    5,754:51 H                     4,975:51 H
Time to Next Overhaul:         13,684:09 H                    9,245:09 H                    10,024:09 H

</Table>

                                      -86-

<PAGE>

                                   SCHEDULE 3

                       OPERATING CONDITION AT REDELIVERY

On the Expiry Date the Aircraft, subject to fair wear and tear generally,
will be in the condition set out below.

1.   GENERAL CONDITION

     The Aircraft will:

     (a)  be clean by United States airline standards;

     (b)  have installed the full complement of engines and other equipment,
          parts and accessories and loose equipment required under the Agreed
          Maintenance Program and usually installed in the other Boeing
          737-200 aircraft operated by Lessee (together with any additions
          and improvements thereto, or replacements thereof, effected
          pursuant to and in accordance with this Agreement) and be in a
          condition suitable for immediate operation in commercial service;

     (c)  be airworthy, conform to type design and be in a condition for safe
          operation with all equipment, components and systems operating in
          accordance with their intended use and within limits established by
          the manufacturer and approved by the Aviation Authority, and all
          pilot discrepancies and deferred maintenance items cleared on a
          terminating action basis;

     (d)  have a U.S. Standard Transport Category Certificate of
          Airworthiness issued by the FAA in accordance with FAR Part 21 (or
          if required by the Lessor, a valid export certificate of
          airworthiness with respect to the Aircraft issued by the Aviation
          Authority) and unconditionally meet all FAA requirements for
          immediate operations under FAR Part 121, subject to the special
          exemptions permitted Lessee regarding compliance with the Airport
          Noise and Capacity Act of 1990, as amended, and the regulations
          promulgated by the FAA thereunder;

     (e)  comply with the manufacturer's original specification to the extent
          that it so complied on the date of this Agreement and subject to
          any alterations made pursuant to and in accordance with this
          Agreement after such date;

     (f)  have undergone, immediately prior to redelivery, a "C" Check in
          accordance with the Agreed Maintenance Program so that all Airframe
          inspections falling due within the next

                                      -87-

<PAGE>

          following 3,000 Flight Hours of operation in accordance with the
          Agreed Maintenance Program have been accomplished;

     (g)  the Airframe shall have at least 50% of the Flight Hours, Cycles
          and calendar time (whichever is applicable and, if more than one
          are applicable, most limiting) remaining until the next block "D"
          check (or equivalent heavy maintenance check) under the Agreed
          Maintenance Program, and if the Flight Hours, Cycles or calendar
          time of the Airframe are less than 50% of the interval between "D"
          checks then the Lessee shall pay to the Lessor an amount equal to
          the product of (i) the number of Flight Hours, Cycles or calendar
          days (whichever is applicable and most limiting) by which the
          Airframe is less than 50% of the interval between "D" checks,
          multiplied by (ii) a fraction (1) the numerator of which is the
          average cost of a "D" check (including routine and non-routine
          items) for an airframe similar to the Airframe determined in
          accordance with the Appraisal Procedure and (2) the denominator of
          which is the number of Flight Hours, Cycles or calendar days
          (whichever is applicable and most limiting) between "D" checks;

     (h)  have had accomplished all outstanding airworthiness directives and
          mandatory orders affecting that model of Aircraft issued by the FAA
          that are due during the Term on a terminating action basis;
          airworthiness directives and mandatory orders that do not have a
          terminating action will be accomplished at the highest level of
          inspection or modification permitted;

     (i)  no special or unique manufacturer inspection or check requirements
          specific to the Aircraft will exist unless there is no terminating
          action available from any source;

     (j)  have installed all applicable vendor's and manufacturer's service
          bulletin kits received free of charge by the Lessee that are
          appropriate for the Aircraft and, to the extent not installed,
          those kits retained by Lessee will be furnished free of charge to
          the Lessor;

     (k)  be free of any system-related leaks;

     (1)  all fluid reservoirs (including fuel, oil, oxygen, hydraulic and
          water) will be full, and the waste tank serviced in accordance with
          the manufacturer's instructions;

     (m)  all fuel tanks will have recently undergone an
          anti-fungus/biological growth contamination laboratory evaluation,
          and any excessive levels of contamination corrected;

     (n)  have an FAA-approved aging aircraft program in operation and
          up-to-date; and

     (o)  have all signs and decals clean, secure and legible.

                                      -88-

<PAGE>

2.   PARTS

     (a)  Each life limited or hard time controlled Part, excluding Engine
          Parts, shall have not less than 50% of the number of Flight Hours
          or Cycles (whichever is the more limiting factor) remaining to the
          next scheduled removal in accordance with the Agreed Maintenance
          Program;

     (b)  Each calendar limited Part (including hard time controlled Parts
          with calendar limits) will have 50% of its life or time between
          removals, as the case may be (but not less than 12 months),
          remaining to its next scheduled removal in accordance with the
          Agreed Maintenance Program; and

     (c)  Each "on-condition" and "condition monitored" Part will be
          serviceable in accordance with the Aviation Authority prescribed
          parameters.

3.   ENGINES

     Each engine installed on the Aircraft shall be an Engine and (if not the
     engine installed at Delivery) shall, to the extent not previously
     provided to the Lessor, be accompanied by all documentation the Lessor
     may require to evidence that title thereto is properly vested in the
     Lessor in accordance with Clause 8.17(a) and will:

     (a)  have not more than 4,000 Flight Hours since the last removal under
          the Agreed Maintenance Program, and if an Engine has more than
          3,500 Flight Hours since the last removal then the Lessee shall pay
          to the Lessor an amount equal to the product of (i) the number of
          Flight Hours since the last removal in excess of 3,500, multiplied
          by (ii) a fraction (1) the numerator of which is the average cost
          of the next scheduled removal and overhaul (including routine and
          non-routine items) for an engine similar to such Engine determined
          in accordance with the Appraisal Procedure and (2) the denominator
          of which is the number of Flight Hours between such scheduled
          removals under the Agreed Maintenance Program;

     (b)  have no defect that reduces the Flight Hours of remaining life
          pursuant to manufacturer's or airworthiness requirements until
          overhaul to less than 3,000; and

     (c)  be in a condition that can operate at maximum rated take-off power
          at sea level at a temperature of 28 deg. C.

4.   FUSELAGE, WINDOWS AND DOORS

     (a)  the fuselage will not contain any dents, corrosion or abrasions
          that exceed the prescribed parameters under the SRM and shall be
          free of scab patches and loose, pulled or missing rivets;

                             -89-

<PAGE>

     (b)  the windows will not contain any delamination, blemishes or crazing
          that exceed the prescribed parameters under the
          Manufacturer's maintenance manual and will be properly sealed; and

     (c)  the doors will be free moving, correctly rigged and fitted with
          serviceable seals;

5.   WINGS AND EMPENNAGE

     (a)  leading edges will not contain any damage that exceeds the
          prescribed parameters under the SRM;

     (b)  unpainted cowlings and fairings will be polished; and

     (c)  wings will be free of fuel leaks.

6.   INTERIOR

     (a)  the interior will be fully serviceable and in the configuration as
          at the date of this Agreement;

     (b)  emergency equipment having a calendar life will have a minimum of 1
          year or 100% of its total approved life remaining, whichever is
          less; and

     (c)  curtains, carpets, seat covers and seat cushions will be clean and
          free from stains and worn out (threadbare) areas and will conform
          to FAR fire resistance regulations as applicable to an FAR Part 121
          operator.

7.   COCKPIT

     (a)  fairing panels shall be free of stains and cracks, clean, secure
          and repainted as necessary;

     (b)  floor coverings will be clean and effectively sealed;

     (c)  seat covers will be in good condition, clean and free of stains and
          will conform to FAR fire resistance regulations as applicable to an
          FAR Part 121 operator; and

     (d)  seats will be serviceable, in good condition and repainted as
          necessary.

8.   CARGO COMPARTMENTS

     (a)  panels will be in good condition and effectively sealed;

                             -90-

<PAGE>

     (b)  nets will be in good condition; and

     (c)  the compartments will comply with FAR fire resistance and
          containment regulations as applicable to an FAR Part 121 operator.

9.   LANDING GEAR

     (a)  The installed main and nose landing gear components and their
          associated actuators and parts will be cleared of all inspections
          for not less than 12 months, 3,000 Flight Hours or 3,000 Cycles of
          operation (whichever is more limiting).

     (b)  The installed main and nose landing gear will have at least 50% of
          the full allotment of Flight Hours, Cycles or calendar time
          (whichever is most limiting) remaining until the next scheduled
          removal for inspection or overhaul under the Agreed Maintenance
          Program, and if the Flight Hours, Cycles or calendar time of any
          Landing Gear is less than 50% of the interval between scheduled
          removals then the Lessee shall pay to the Lessor an amount equal to
          the product of (i) the number of Flight Hours, Cycles or calendar
          days (whichever is most limiting) by which such Landing Gear is
          less than 50% of the interval between scheduled removals,
          multiplied by (ii) $4.50 in the case of the main Landing Gear and
          $2.50 in the case of the nose Landing Gear.

     (c)  The tires and brakes will have 50% of the wear, as specified by the
          manufacturer as serviceable limits, remaining until next removal.

     (d)  The landing gear and wheel wells will be clean, free of leaks and
          repaired as necessary.

10.  APU

     (a)  The APU shall be serviceable in accordance with the Approved
          Maintenance Program parameters.

     (b)  The APU shall have not more than 1,500 Flight Hours of operation
          since its last hot section inspection.

11.  CORROSION

     (a)  The Aircraft will be in compliance with the CPCP and will have been
          inspected and treated with respect to corrosion as required by the
          CPCP; and

     (b)  Fuel tanks will be free from contamination and corrosion and a tank
          treatment program will be in operation and up-to-date.

                             -91-

<PAGE>

                                   SCHEDULE 4

                                     PART I

                            (INSURANCE REQUIREMENTS)

1.   The Insurances required to be maintained are as follows:

     (a)  HULL "ALL RISKS" of Loss or Damage while flying and on the ground
          with respect to the Aircraft for the Agreed Value and with a
          deductible not exceeding $500,000.

     (b)  HULL WAR AND ALLIED PERILS, covering those war risks excluded from
          the Hull "All Risks" Policy to the extent such coverage is
          available from the leading international insurance markets,
          including confiscation and requisition by the State of
          Registration, for the Agreed Value;

     (c)  "ALL RISKS" PROPERTY INSURANCE (INCLUDING WAR AND ALLIED RISK
          except when on the ground or in transit other than by air or sea)
          on all Engines and Parts when not installed on the Aircraft (to the
          extent not covered under the Aircraft hull insurances described in
          paragraphs (a) and (b) above), including Engine test and running
          risks, in an amount equal to replacement value in the case of the
          Engines;

     (d)  AIRCRAFT THIRD PARTY, BODILY INJURY/PROPERTY DAMAGE, PASSENGER,
          BAGGAGE, CARGO AND MAIL AND. AIRLINE GENERAL THIRD PARTY (INCLUDING
          PRODUCTS) LEGAL LIABILITY for a combined single limit (Bodily
          Injury/Property Damage) of an amount not less than the Minimum
          Liability Coverage for the time being in respect of any one
          occurrence (but, in respect of products liability, this limit may
          be an aggregate limit for any and all losses occurring during the
          currency of the policy, and in respect of liability arising out of
          certain offences, the limit (within the said combined single limit)
          may be $25,000,000 in respect of any one offence and in the
          aggregate, and cargo and mail legal liability may be subject to a
          limit of $ 1,000,000 any one occurrence); War and Allied Risks are
          also to be covered under the Policy to the extent available from
          the leading international insurance markets. The Minimum Liability
          Coverage may be adjusted upwards from time to time to such an
          amount as the Lessor may be advised by its insurance brokers
          constitutes the standard Minimum Liability Coverage applicable to
          Boeing 737-200 series aircraft operating in North America by an
          airline similarly situated as Lessee. If the Lessee disputes any
          such adjustment, the matter shall be referred to a reputable
          independent insurance broker in the United States of America
          appointed by the Lessor, whose decision, acting as expert, shall be
          conclusive and binding on the Lessee.

2.   All required hull and spares insurance (specified in (1)(a), (b) and (c)
     above), so far as it relates to the Aircraft, will:

                                      -92-

<PAGE>

     (a)  provide that any loss will be settled with the Lessee (who
          undertakes to consult with the Lessor and the Lender in regard
          thereto), and any claim that becomes payable on the basis of a
          Total Loss shall be paid in Dollars to the Lender as sole loss
          payee up to the Agreed Value, and loss proceeds in excess of the
          Agreed Value shall be payable to Lessee, with any other claim being
          payable as may be necessary for the repair of the damage to which
          it relates;

     (b)  if separate Hull "All Risks" and "War Risks" insurances are
          arranged, include a 50/50 provision in the terms of Lloyd's
          endorsement AVS 103 or its equivalent; and

     (c)  confirm that the Insurers are not entitled to replace the Aircraft
          in the event of a Total Loss.

3.   All required liability insurances (specified in (1)(d) above) will:

     (a)  include the Lessor, the Lender, their respective successors and
          assigns and their respective shareholders, Affiliates,
          subsidiaries, directors, officers, agents, employees and
          indemnitees as additional assureds for their respective rights and
          interests, warranted (each as to itself only) no operational
          interest; but the coverage provided will not include claims arising
          out of their legal liability as manufacturer, repairer or servicing
          agent of the aircraft or any part thereof;

     (b)  include a severability of interest clause;

     (c)  contain a provision confirming that the policy is primary without
          right of contribution and that the liability of the insurers will
          not be affected by any other insurance of which the Lessor, the
          Lender or the Lessee have the benefit; and

     (d)  accept and insure the indemnity provisions of this Agreement to the
          extent of the risks covered by the relevant policy or policies.

4.   All Insurances will:

     (a)  be in accordance with normal industry practice of persons operating
          similar aircraft in similar circumstances;

     (b)  provide coverage on a worldwide basis subject to those territorial
          exclusions which are usual and customary for carriers similarly
          situated with Lessee in the case of War Risks and Allied Perils
          coverage which are advised to and approved by Lessor, such approval
          not to be unreasonably withheld;

                             -93-

<PAGE>

     (c)  acknowledge that the insurers are aware that the Aircraft is owned
          by the Lessor and is subject to this Agreement;

     (d)  provide that, in relation to the interests of each of the
          additional assureds, the Insurances will not be invalidated by any
          act or omission of the Insured which results in a breach of any
          terms, conditions or warranty of the policies;

     (e)  provide that the Insurers will waive any rights of recourse and/or
          subrogation against each additional assured to the same extent that
          Lessee has waived or has no rights of recovery against such
          additional assured in the Lease;

     (f)  provide that the additional assureds will have no obligation or
          responsibility for the payment of any premiums (but reserve the
          right to pay the same should any of them elect to do so) and that
          the Insurers will waive any right of offset or counterclaim against
          the respective additional assureds other than for outstanding
          premiums in respect of the Aircraft, any Engine or Part;

     (g)  provide that, except in the case of any provision for cancellation
          or automatic termination specified in the policies or endorsements
          thereof, the Insurance can only be canceled or materially altered
          in a manner adverse to the additional assureds by giving at least
          30 days' written notice to the Lessor and the Lender, except in the
          case of war risks (or radioactive contamination), for which seven
          days' written notice (or such lesser period as is or may be
          customarily available in respect thereof) will be given; and

     (h)  include a services of suit clause.

                                      -94-

<PAGE>

                                                              SCHEDULE 4, PART 2
                                     [LOGO]
                                    Sedgwick

                                                                   No. AQ-T.B.A.

DATE: January __, 1996

TO:                  FINOVA Capital Corporation ("Lender")
                     1850 N. Central Avenue
                     P.O. Box 2209
                     Phoenix, ARIZONA 85002-2209

                     and

                     ACG Acquisition VIII LLC ("Owner"/"Lessor")
                     Three Stamford Landing
                     46 Southfield Avenue
                     Stamford, Connecticut 06902

Re:       Broker's Report Lease Agreement N804AL dated as of January 1997
          between ACG Acquisition VIII LLC ("Owner"/"Lessor"), FINOVA Capital
          Corporation ("Lender") and Aloha Airlines, Inc. ("Lessee") (to the
          "Lease") regarding One (1) B737-2Q9 Aircraft, Registration Number
          N804AL, Serial Number 21719 including two (2) Pratt 7 Whitney
          JT8D-9A engines, Serial Numbers 697772 and 674389 (the "Engines")
          (hereinafter the "Aircraft*)

To Whom It May Concern:

We hereby certify that as the independent aviation insurance brokers duly
appointed by Lessee, and acting on their behalf that, as of this date, the
insurance described in the attached Certificate of Insurance (No. AQ-T.B.A.)
complies with the requirements of the Lease as far as said requirements
relate to the insurance described in said Certificate and that said
insurance is in full force and effect on the Aircraft and that all premiums
due as of this date (per the accounting procedures arranged between; Lessee
and ourselves) have been paid.

We also confirm that, as of this date, all such policies of insurance as
described in said Certficate as are carried by Lessee are in such amounts and
cover such perils and are placed with insurers of recognized reputation
responsibility in the worldwide aviation insurance marketplace so that
protection afforded thereby is not less than that which would customarily be
maintained for aircraft of a similar character by corporations engaged in the
same or similar business, similarly situated with Lessee.

The perils, limits of liability, and insurers relating to the above mentioned
insurance policies are more fully described in the attached Certficate of
Insurance, No. AQ-T.B.A.

<PAGE>

                                     [LOGO]
                                    Sedgwick

It is our opinion that only an Insured (i.e., the Named insured and/or the
Additional Insureds) can breach or violate any warranty, condition or
declaration of the policy.

We undertake to advise you

         1.       promptly of any cancellation or adverse material changes
                  notified to us which are proposed to be made in the terms of
                  the insurance;

         2.       upon written application from you not later than thirty (30)
                  days prior to the expiration date of said insurance to notify
                  you within seven (7) days of the receipt of said application
                  if we have not received renewal instructions from Lessee and
                  in the event of our receiving instructions to renew, to advise
                  you promptly thereof,

         3.       promptly if premiums are not paid to us by the. due date as
                  per the accounting procedures between Lessee and ourselves;

         4.       promptly if our appointment as Insurance Broker by Lessee is
                  terminated or not timely renewed.

The above is given subject to:

         1.       our continuing appointment for the time being as Insurance
                  Brokers to Aloha Airlines, Inc.

         2.       our lieu, if any, on the policies referred to in our
                  Certificate of Insurance for premiums due under such policies
                  in respect of the Aircraft

         3.       Insurers' right of cancellation on default in payment of
                  premiums

         4.       all hull claims proceeds and all premiums are to be
                  collected through ourselves as the Insurance Broker for
                  Aloha Airlines, Inc.

This letter shall be governed and construed in a respect in accordance with the
laws of United States of America.

Sincerely,

Paul H. Yelavich
Director

<PAGE>

                                                              SCHEDULE 4, PART 3
                                     [LOGO]
                                    Sedgwick

                            CERTIFICATE OF INSURANCE               No. AQ-T.B.A.

This is to certify to:   FINOVA Capital Corporation ("Lender")
                         1850 N. Central Avenue
                         P.O. Box 2209
                         Phoenix, Arizona 85002-2209

                         and

                         ACG Acquisition VIII LLC ("Owner"/"Lessor")
                         Three Stamford Landing
                         46 Southfield Avenue
                         Stamford, Connecticut 06902

that the insurers/underwriters/companies listed below, each for their own part
AND NOT ONE FOR THE OTHER, are providing the following insurance:

NAMED INSURED:             Aloha Airlines, Inc.

NAMED INSURED'S            Honolulu International Airport
ADDRESS:                   P.O. Box 30028
                           Honolulu, HI 96820

INSURANCE COVERAGES:       A)       All Risks (Ground and Flight) Aircraft Hull
                                    Insurance (including All Risks Aircraft
                                    Spare Parts Insurance)

                           B)       War Risks Aircraft Hull Insurance (including
                                    War Risks Spare Parts Insurance) (Coverage
                                    amended to include coverage for confiscation
                                    by government of registry)

                           C)       Comprehensive Airline Liability Insurance
                                    (including, but not limited to:
                                    Comprehensive General Liability, Public
                                    Liability, Passenger Liability, Personal
                                    Injury Liability, Contractual Liability,
                                    Passengers' Checked and Unchecked Baggage
                                    Liability, Premises, Products, and Completed
                                    Operations Liabilities, Ground Hangarkeepers
                                    Liability, Cargo Legal including Mail Legal
                                    Liability) and the AAU equivalent of AV.52C
                                    (War Risks Liability Clause.)

<PAGE>

                                     [LOGO]
                                    Sedgwick

POLICY PERIOD:                   November 1, 1996 to November 1, 1997 on both
                                 dates at 12:01 A.M. Local Standard Time at the
                                 address of the Named Insured.

GEOGRAPHICAL LIMITS:             Worldwide*

LIMITS OF LIABILITY:    A)       As respects Aircraft Hulls: Agreed Value as
                                 stated below. Subject to a deductible of
                                 US$500,000.00 each and every loss
                                 (Deductibles not applicable in the event of
                                 Total Loss/Constructive Total Loss/Arranged
                                 Total Loss.)

NOTE: AGGREGATE                  As respects Aircraft Spare Parts:
LIMITS WAY BE                    US$60,000,000.00 any one loss/any one
REDUCED DUE TO                   location, US$25,000,000.00 any one transit,
PAID CLAIMS                      subject to a deductible of US$10,000.00 any
                                 one loss but the applicable aircraft hull
                                 deductible stated above shall apply in
                                 respect of spare engine running or testing
                                 losses.

                        B)       As respects Aircraft Hulls: Agreed Value as
                                 stated below. As respects Aircraft Spares
                                 Parts: US$60,000,000.00 any one loss/any one
                                 location, US$25,000,000.00 any one transit.
                                 Subject to an annual aggregate of
                                 US$125,000,000.00. Subject to nil
                                 deductibles.

                        C)       Combined Single Limit Bodily Injury
                                 (including passengers), Property Damage and
                                 Personal Injury (Passengers only):
                                 US$300,000,000.00 any one
                                 occurrence/offense, in the aggregate
                                 annually as respects Products, Completed
                                 Operations and Personal Lnjury Liabilities.
                                 However, the following sublimits apply as
                                 part of and not in addition to the limit
                                 stated above.

                                 As respects Personal Injury to third parties
                                 other than passengers: US$25,000,000.00 any
                                 one occurrence, any one offense, in the
                                 aggregate annually. As respects Cargo Legal
                                 Liability: US$1,000,000.00 each occurrence

<PAGE>

                                     [LOGO]
                                    Sedgwick

AIRCRAFT INSURED:                One (1) B737-2Q9 aircraft, Registration
                                 Number: N804AL, Manufacturer's Serial Number
                                 21719, Agreed Value: US$6,000,000 inclusive
                                 of two (2) Pratt & Whitney JT8D-9A Engines,
                                 Manufacturers Serial Numbers 687772 and
                                 674389 (the "Engines") while attached to the
                                 Aircraft or removed from the Aircraft, but
                                 not replaced (hereinafter, the "Aircraft").

* As respects Coverage B - War Risks Aircraft Hull insurance, the Geographical
Limits of the policy are:

Worldwide but excluding Africa, Columbia, Peru, Iraq, Afghanistan, Former
Republics of the U.S.S.R. and Yugoslavia.

<PAGE>

                                     [LOGO]
                                    Sedgwick

                                    SECURITY

                         As Respects Coverages A and C
<Table>
<Caption>

                                            QUOTA SHARE                POLICY
INSURERS                                   PARTICIPATION               NUMBER
                                           (Part of 100%)

<S>                                         <C>                         <C>
One or More Member Companies
of Associated Aviation Underwriters             T.B.A.                  T.B.A.

Certain Underwriters at Lloyds, London
through Sedgwick Aviation Limited               T.B.A.                  T.B.A.

Certain U.K. Insurance Companies and
Others through Sedgwick Aviation Limited        T.B.A.                  T.B.A.

La Reunion Aerienne through
La Concorde                                     T.B.A.                  T.B.A.

Insurance Company of North America              T.B.A.                  T.B.A.

Navigators Insurance Company through
Somerset Aviation                               T.B.A.                  T.B.A

Assurance France Aviation                       T.B.A.                  T.B.A.

Mutual Maxine Office                            T.B.A.                  T.B.A.

American Home Assurance Company
Through AIG Aviation                            T.B.A.                  T.B.A.

</Table>

                            SEVERAL LIABILITY NOTICE

The subscribing insurers' obligations under contracts of insurance to which
they subscribe are several and not joint and are limited solely to the extent
of their individual subscriptions. The subscribing insurers are not responsible
for the subscription of any co-subscribing insurer who for any reason does not
satisfy all or part of its obligations.

LSW 1001 (Insurance)

<PAGE>

                                      [LOGO]
                                    Sedgwick

                                    SECURITY

                             As Respects Coverage B

<Table>
<Caption>

                                            QUOTA SHARE                POLICY
INSURERS                                   PARTICIPATION               NUMBER
                                           (Part of 100%)

<S>                                         <C>                         <C>

Certain Underwriters at Lloyds,
London through Sedgwick Aviation
Limited                                         T.B.A.                  T.B.A.

Certain U.K. Insurance Companies
and Others through Sedgwick Aviation
Limited                                         T.B.A.                  T.B.A.

Navigators Insurance Company
through Somerset Aviation                       T.B.A.                  T.B.A

Assurance France, Aviation                      T.B.A.                  T.B.A.

La Reunion Aerienne through
La Concorde                                     T.B.A.                  T.B.A.

Mutual Marine Office                            T.B.A.                  T.B.A.

</Table>

                            SERVERAL LIABILITY NOTICE

The subscribing Insurer's obligations under contracts of insurance to which they
subscribe are several and not joint and are limited solely to the extent of
their individual subscriptions. The subscribing insurers are not responsible
for the subscription of any co-subscribing insurer who for any reason does not
satisfy all or part of its obligations.

LSW 1001 (Insurance)

<PAGE>

                                     [LOGO]
                                    Sedgwick

                               SPECIAL PROVISIONS

Solely as respects coverages A, B and C and solely as respects Lease Agreement
N804AL dated as of January _, 1997 between ACG Acquisition VIII LLC ("Owner"/
"Lessor"), FINOVA Capital Corporation ("Lender") and Aloha Airlines, Inc.
("Lessee") (the "Lease") regarding the Aircraft, subject to policy terms,
conditions, limitations, deductibles, warranties and exclusions the following
provisions apply:

1.       SOLELY AS RESPECTS COVERAGES A AND B:

         1.       All losses will be adjusted with Lessee. In the event of a
                  Total Loss of the Aircraft, Lender is named as Sole Loss
                  Payee for all insurance proceeds up to the Agreed Value (as
                  defined in the Lease). With respect to damage or loss not
                  constituting a Total Loss of the Aircraft, Lender is named
                  as Sole Loss Payee in respect of all insurance proceeds
                  where such insurance proceeds exceed US$500,000.00. Such
                  insurance proceeds which are not in excess of US$500,000.00
                  shall be payable solely to Lessee; provided that upon
                  receipt by Insurers and the Insurance Broker of written
                  notice from Lender or Owner/Lessor that an Event of
                  Default on the part of Lessee has occurred and is
                  continuing, all payments up to the Agreed Value will be
                  made to, Lender. In all cases, any insurance proceeds in
                  excess of the Agreed Value will be payable solely to
                  Lessee.

         2.       Hull All Risks insurers and Hull War Risks and Allied Perils
                  insurers agree to a 5O/50 claims settlement provision per the
                  terms of AVS103 (or its equivalent),

         3.       Underwriters are not entitled to replace the Aircraft in the
                  event of a Total Loss of the Aircraft.

II.      SOLELY IS RESPECT COVERAGE C:

         1.       Lender, Owner/Lessor and their respective successors and
                  assigns and their respective shareholders, affiliates,
                  subsidiaries, directors, officers, employees, agents and
                  indemnitees are included as Additional Insureds ("the
                  Additional Insureds") as their respective interests may
                  appear, warranted no operational interest. However, no party
                  shall be included as an Additional Insured as respects its
                  legal liability as manufacturer, repairer, supplier or
                  servicing agent of the Aircraft or any part thereof.

<PAGE>

                                     [LOGO]
                                    Sedgwick

         2.       This insurance is primary without right of contribution from
                  any other insurance as may be carried by an Additional
                  Insured.

         3.       Such as is afforded the Lessee under the policy applies to
                  liability assumed by the Lessee under the Lease, specifically
                  Article 10-INDEMNITY of the Lease, but only. to the extent of
                  the coverage otherwise afforded under the policy.

         4.       Each of Additional Insureds shall have the same protection as
                  would have been available had this policy been issued
                  individually to each of them except that this fact shall not
                  in any event increase the Insurers' total liability beyond the
                  limits set forth in the policy.

III.     SOLELY AS RESPECTS COVERAGES A, B AND C:

         1.       Insurers waive their rights to any set-off or counter claim or
                  any other deduction, whether by attachment or otherwise, in
                  respect of any liability to the Additional Insureds (save in
                  respect of unpaid premiums in respect of the Aircraft only).

         2.       The Additional Insureds have no responsibility for premiums,
                  commissions, assessments or calls (save as is provided for in
                  Special Provision III. 1).

         3.       Insurers waive their rights of subrogation against the
                  Additional Insureds but only to the same extent that Lessee
                  has waived its rights of recovery against the Additional
                  Insureds in the Lease.

         4.       In respect of the interests of each Additional Insured, the
                  insurance shall not be invalidated by any act or omission
                  by Lessee or any other insured. The Additional Insureds are
                  held covered for their respective interests notwithstanding
                  any breach or violation of any warranty, condition or
                  declaration of the policy by Lessee or any other insured.
                  However, such protection as is afforded an Additional
                  Insured under this clause will not apply in the event such
                  Additional Insured breaches or violates any warranty,
                  condition or declaration of the policy, nor does this
                  clause apply in the event of exhaustion of policy limits or
                  to losses/claims arising from perils specifically excluded
                  from coverage under the policies.

<PAGE>

                                     [LOGO]
                                    Sedgwick

         5.       In the event of cancellation or material change of the
                  policies by Insurers, which would adversely affect the
                  interests of the Additional Insureds, Insurers agree that such
                  cancellation or change shall not be effective as to the
                  Additional Insureds until thirty (30) days (seven (7) days or
                  such shorter period as may be customary in the case of War
                  Risks insurance) after issuance of notice thereof to Lender
                  and Owner/Lessor.

         6.       Insurers Note the existence of the Lease and acknowledge ACG
                  Acquisition VIII LLC as Owner of the Aircraft.

THE undersigned has been authorized by the above insurers to issue this
certificate on their behalf. The undersigned is not an insurer and has no
liability of any sort under the above policies nor as a result of this
certification. This certificate does not alter, extend or amend any policy
terms, conditions, limitations, deductibles, warranties or exclusions.

DATE OF ISSUE                                 SEDGWICK AVIATION, NORTH AMERICA

______________                                ________________________________
                                              AUTHORIZED REPRESENTATIVE

<PAGE>

CHAR
SAKAMOTO                                                              SCHEDULE 5
ISHII
& LUM
--------------------
ATTORNEYS AT LAW

__________________, 1997

ACG Acquisition VIII LLC
c/o Aviation Capital Group Corp.
Three Stamford Landing
46 Southfield Avenue
Stamford, Connecticut 06902

FINOVA CAPITAL CORPORATION
1850 North Central Avenue
Phoenix, Arizona 85077

Re: LEASE AGREEMENT 804 dated as of ___________________________, 1997 between
ACG ACQUISITION VIII LLC ("Lessor") and ALOHA AIRLINES, INC. ("Lessee") with
respect to one (1) The Boeing Company Model 737-2Q9 Aircraft, bearing
manufacturer's serial no. 21719 and U.S. registration no. N804AL, together with
two (2) Pratt & Whitney Model JT8D-9A engines bearing engine manufacturer's
serial nos. 687772 and 674389 (the "Aircraft").

Gentlemen:

We are counsel to Aloha Airlines, Inc. in regard to the above-referenced
transaction.

You have asked us to render an opinion in connection with the transactions
governed by the following documents:

     1.   Lease Agreement 804 (as described above) dated as of
          ________________, 1997 by and between Lessor and Lessee ("Lease
          Agreement");

     2.   Acceptance Certificate dated as of ________________, 1997 executed
          by Lessee ("Acceptance Certificate"); and

     3.   Acknowledgment and Consent dated as of __________________________
          1997 relating to Lessor's assignment of Lease Agreement to FINOVA
          Capital Corporation, as Lender ("Acknowledgment").

The documents listed above collectively referred to as the "Operative
Documents." Except as otherwise expressly stated herein, words and expressions
used herein shall bear the same meanings as defined in the Operative Documents.

A LAW CORPORATION Suite 850, Davies Pacific Center, 841 Bishop Street, Honolulu,
Hawaii 96813 - (808) 522-5133 - Facsimile: (808) 522-5144

<PAGE>

CHAR
SAKAMOTO
ISHII
& LUM
--------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
__________________,  1996
Page 2

In rendering the opinions expressed below, we have examined the (a) the
Operative Documents, (b) the Articles of Association and By-Laws of Lessee, (c)
certain certificates executed by officers of Borrower and (d) other documents,
in our judgment and to our knowledge, necessary or appropriate to examine to
enable us to give the opinions expressed below.

Having reviewed the foregoing described documents, and having regard to the
relevant laws of the State of Hawaii and the United States of America, it is our
opinion that:

     A.   Lessee (i) is a corporation duly formed, validly existing and in
          good standing under the laws of the State of Hawaii, (ii) is
          qualified to do business in all jurisdictions in which the nature
          of its business or its properties requires it to be qualified,
          (iii) presently maintains its principal place of business and chief
          executive office in Honolulu, Hawaii, (iv) has full power to carry
          on its business as it is now being conducted and to enter into,
          legally bind itself by, and perform its obligations under the
          Operative Documents and (v) to our knowledge and without any
          inquiry except review of a certification as to the following
          provided by Lessee, has complied with all material statutory and
          other requirements relative to its businesses;

     B.   To our knowledge and without any inquiry except review of a
          certification as to the following provided by Lessee, (i) all
          consents, resolutions and authorizations necessary or advisable in
          order for Lessee to enter into the Operative Documents and to lease
          the Aircraft in accordance with the terms and conditions of the
          Operative Documents have been obtained, and (ii) no further
          consents or authorizations are necessary for the lease of the
          Aircraft by Lessee pursuant to the provisions of the Operative
          Documents and for the performance by Lessee of all of its
          obligations pursuant to the provisions of the Operative Documents;

     C.   The Operative Documents (i) constitute valid and binding
          obligations of Lessee, enforceable in accordance with their
          respective terms, (ii) are in

A LAW CORPORATION

<PAGE>

CHAR
SAKAMOTO
ISHII
& LUM
--------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
_________________,  1996
Page 3

          full force and effect, and (iii) the provisions of the Operative
          Documents with respect to choice of substantive law to govern the
          interpretation and enforcement of such Operative Documents and
          consent to jurisdiction and choice of forum in connection with such
          interpretation and enforcement are legal, valid and binding;
          however, the state and federal courts in the State of Hawaii may
          not apply the procedural law, including without limitation, law
          relating to remedies or provisional remedies, of a non-forum state,
          such as, without limitation, New York and Arizona;

     D.   To our knowledge and without any inquiry except review of a
          certification as to the following provided by Lessee, (i) the
          execution and delivery of and the performance of the provisions of
          the Operative Documents and of the transactions contemplated
          thereby and hereby do not contravene in any material respect any
          applicable law, regulation, decree, order, permit or contractual or
          other restriction now existing and binding on Lessee or on any of
          the properties of Lessee, and (ii) the performance of the
          provisions of the Operative Documents in effect on this date, and
          of the transactions contemplated thereby will not contravene in any
          material respect any applicable law, regulation, decree, order or
          permit currently in effect or contractual or other restriction now
          existing and binding on Lessee or on any of the properties of
          Lessee;

     E.   To our knowledge and without inquiry except review of a
          certification as to the following provided by Lessee, (i) there are
          no outstanding judgments against Lessee and (ii) no action, claim,
          suit or proceeding pending or threatened (including, but not
          limited to, tax liens or tax actions) against or affecting Lessee
          or any of the property of Lessee before any court, board of
          arbitration or administrative agency which would likely result in
          any material adverse change in the business or condition (financial
          or otherwise) of Lessee;

     F.   To our knowledge and without inquiry except review of a
          certification as to the following provided by Lessee, Lessee is not
          in default under any agreement to which

A LAW CORPORATION

<PAGE>

CHAR
SAKAMOTO
ISHII
& LUM
--------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
______________________,  1996
Page 4

          it is a party or by which it may be bound, nor in default of any
          kind in respect of any financial commitment or obligation
          (including obligations under guarantees) which could have a
          material adverse effect on the ability of Lessee to perform its
          obligations under the Operative Documents nor is there any fact
          which by giving of notice or by lapse of time or otherwise might
          constitute such default by Lessee;

     G.   None of the Operative Documents or any other document executed in
          connection with the Operative Documents or contemplated thereby nor
          any filing required or permitted thereunder is subject to any
          registration tax, any stamp duty or similar tax;

     H.   To our knowledge and without inquiry except for review of a
          certification as to the following provided by Lessee, Lessee has
          furnished Lessor with consolidated financial statements of Aloha
          Airgroup, Inc., the corporate parent of Lessee, reflecting the
          financial results of Aloha Airgroup, Inc. and its subsidiaries
          (including Lessee) as of __________________________, 199_.

     I.   Lessee is (i) a "United States citizen" as that term is used and
          defined in the Federal Aviation Act of 1958, as amended and
          recodified as Title 49 of the United States Code, and (ii) a duly
          certified United States Air Carrier pursuant to the provisions of
          14 C.F.R. 121;

     J.   To our knowledge and without inquiry except for review of a
          certification as to the following provided by Lessee, no written
          information given by Lessee in relation to the Operative Documents
          contains any misstatement of fact or omits to state a fact which
          would be adverse to the interest of Lessor or which would be
          necessary to make any statement or representation or warranty
          contained herein or therein not misleading;

     K.   To our knowledge and without inquiry except for review of a
          certification as to the following provided by Lessee, there has
          occurred no event which, with the giving of notice or lapse of time
          or both, would

A LAW CORPORATION

<PAGE>

CHAR
SAKAMOTO
ISHII
& LUM
--------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
_________________,  1996
Page 5

          constitute an Event of Default or Default under the Operative
          Documents;

     L.  To our knowledge and without inquiry except for review of a
certification as to the following provided by Lessee, Lessee
does not do business under any assumed or trade names;

     M.   Except for the filing of appropriate financing statements (UCC-1s)
          with the Bureau of Conveyances, State of Hawaii and the filing of
          the Lease Agreement with the Federal Aviation Administration, no
          further actions are necessary to record or perfect Lessor's
          interest in the Lease in the United States or in the State of
          Hawaii;

     N.   The Operative Documents do not violate any law relating to the
          charging, contracting for or payment or collection of interest or
          the like; and

     0.   In the event that Lessee files a petition for relief under Chapter
          11 of the United States Bankruptcy Code, as amended, or has such a
          petition filed against it, Lessor will be entitled to the rights
          provided to a "lessor" under the provisions of section 1110(a) (1)
          of Title 11 of the United States Code.

The opinion expressed above is qualified to the extent that:

     1.   We are members of the Bar of the State of Hawaii and do not hold
          ourselves out as being conversant with, and express no opinion as
          to, the laws of any jurisdiction other than those of the State of
          Hawaii and the United States of America.

     2.   The opinions expressed herein are solely for your benefit and may
          not be relied upon in any manner or for any purpose by any other
          person.

     3.   In conducting our examination, we have assumed the genuineness of
          all signatures (other than the signatures of Lessee), the
          correctness of all certificates, the authenticity of all documents
          submitted to us as originals, the conformity to

A LAW CORPORATION

<PAGE>

CHAR
SAKAMOTO
ISHII
& LUM
--------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
___________________, 1996
Page 6

          original documents of all documents submitted to us as certified or
          photostatic copies and the authenticity of the originals of such
          copies, and the accuracy and completeness of all records made
          available to us by Lessee. In making our examination of documents
          and instruments, we have assumed that each party to such documents
          and instruments (other than Lessee and its affiliates) has: (i) the
          power and capacity to enter into and perform all its obligations
          under such documents and instruments, (ii) duly authorized all
          requisite action with respect to such documents and instruments,
          and (iii) duly executed and delivered such documents and
          instruments.

     4.   The opinions expressed above are qualified to the extent that (i)
          enforceability of the Operative Documents and transactions
          contemplated thereby may be limited by bankruptcy, insolvency,
          reorganization, moratorium or similar laws of general application
          from time to time affecting the rights of creditors, lessors and
          secured parties generally and providing relief for debtors; and
          (ii) a particular court may refuse to grant certain equitable or
          legal remedies, including without limiting the generality of the
          foregoing, specific performance or foreclosure, with respect to the
          enforcement of any provisions of the Operative Documents.

     5.   This opinion letter is limited to the matters stated herein and no
          opinion may be implied or inferred beyond the matters expressly
          stated herein.

     6.   The opinions given herein are as of the date hereof and we assume
          no obligation to update or supplement such opinions to reflect any
          facts or circumstances which

A LAW CORPORATION

<PAGE>

CHAR
SAKAMOTO
ISHII
& LUM
--------------------
ATTORNEYS AT LAW

ACG ACQUISITION VIII LLC
FINOVA CAPITAL CORPORATION
___________________,  1996
Page 7

          may hereafter come to our attention or any changes in law which may
          hereafter occur.

Very truly yours,

CHAR SAKAMOTO ISHII & LUM

Elizabeth Ann Ishii
Lana Proctor Banbury

CC:  Ms. Brenda F. Cutwright
     Mr. James M. King
     Mr. Timothy Ng

A LAW CORPORATION

<PAGE>

                                                                      SCHEDULE 6

                      IRREVOCABLE STANDBY LETTER OF CREDIT

Beneficiary:

ACG Acquisition VIII LLC
c/o Aviation Capital Group Corp.
Three Stamford Landing
46 Southfield Avenue
Stamford, Connecticut 06902

Gentlemen:

         We hereby establish our irrevocable Standby Letter of Credit
No. S/B _______. in your favor, effective 19___, available by your draft(s)
on First Hawaiian Bank, International Banking, Honolulu, a, sight for the
account of Aloha Airlines, Inc., P. 0. Box 30028, Honolulu, Hawaii 96820, up
to an aggregate amount of U.S. $220,000 (two hundred twenty thousand United
States Dollars), accompanied by:

         A statement purportedly signed by a duly authorized officer of ACG
         Acquisition VIII LLC , certifying that an "Event of Default" has
         occurred and is continuing under that certain Lease Agreement 804
         by and between Aloha Airlines, Inc. and ACG Acquisition VIII LLC.

         Payment of amounts drawn under this Letter of Credit shall be made in
full, without any offset or counterclaim whatsoever and free and clear of any
deductions or withholdings. Until all amounts which may be or become payable to
the Lessor or the Lender by the Lessee have been irrevocable paid in full we
shall not by virtue of this Letter of Credit be subrogated to any of the
Lessors or the Lender's rights or claim in competition with the Lessor or the
Lender against the Lessee.

         It is a condition of this Letter of Credit that it shall be deemed
automatically extended without amendment for an additional period of one (1)
year each from the present or each future expiration date unless at least
thirty (30) days prior to any such expiry date we shall notify you in writing
by certified mail at the above address, that we elect not to consider this
Letter of Credit renewed for such additional period. Upon receipt of such
notice, you may draw hereunder by means of your draft on us as sight
accompanied by this Letter of Credit and your written certification stating
that "FINOVA Capital Corporation has received a notice of non-renewal from
First Hawaiian Bank to its Letter of Credit No. S/B________".

         Partial drawings permitted.

         All drafts must beer the clause "Drawn under Credit No. S/B _____ of
First Hawaiian Bank, Honolulu, Hawaii dated ____________, 19__.

         This Letter of Credit is transferable only by Beneficiary. Notice of
such Transfer, if any, must be mailed immediately to First Hawaiian Bank,
International Banking, at P.O. Box 3200, Honolulu, Hawaii 96847

         All bank charges relating to this Letter of Credit are for the account
of applicant.

<PAGE>

         Alternatively, drawings may be sent via fax to our International
Banking at Fax No. (608) 525-5791, originals to follow by mail. Drawings by fax
or by presentment of original documents must be received by First Hawaiian Bank,
International Banking on or before 3:00 P.M. Hawaii Standard Time on
_______________, 19__, the expiration date or any automatically extended date.

         Except as otherwise expressly stated, this Credit Is subject to the
"Uniform Customs mid Practice for Documentary Credits" (1993 Revision)
International Chamber of Commerce Publication No. 500.

         We hereby engage with you that all drafts drawn under and in
compliance with the terms of this Credit shall be duly honored upon
presentation if drawn on or before _________________, 19__, the expiration
date, at our international Banking counters In Honolulu, Hawaii.

                                    Sincerely,

                                    FIRST HAWAIIAN BANK

--------------------------------    -----------------------------------
     Authorized Signature                   Authorized Signature

<PAGE>

                                   SCHEDULE 7

                        FORM OF SEMI-ANNUAL STATUS REPORT

<Table>
<Caption>

     AIRCRAFT TYPE                    REG. MARK      SERIAL NO.    MONTH ENDING
     -------------                    ---------      ----------    ------------
<S>  <C>                              <C>            <C>           <C>

     Boeing 737-2Q9                   N804AL         21719         -------------

1.   AIRCRAFT UTILIZATION:

(a)  Airframe Total Flight Hours                     ..................................................

(b)  Airframe Total Cycles                           ..................................................

(c)  Airframe Flight Hours for Month                 ..................................................

(d)  Airframe Flight Cycles for Month                ..................................................

2.   POWERPLANT STATUS:                                              No.1                    No.2

(a)  Serial Nos. of Delivered Engines                             ............           .............

(b)  Serial Nos. of Replacement Engines                           ............           .............
     (if applicable)

(c)  Serial Nos. of Installed Engines                             ............           .............
     (if different from (a) or (b) above)

(d)  Current Location of Delivered or                             ............           .............
     Replacement Engines (as applicable)
     (if not installed on Airframe)

(e)  Total Time Since New of Delivered                            ............           .............
     or Replacement Engines (as applicable)

(f)  Total Cycles Since New of Delivered                          ............           .............
     or Replacement Engines (as applicable)

</Table>

                                     -99-

<PAGE>

<Table>
<Caption>

<S>  <C>                                                          <C>                    <C>

(g)  Total Flight Hours for the Month for                         ............           .............
     each Delivered or Replacement Engine
     (as applicable)

(h)  Total Cycles for the Month for each                          ............           .............
     Delivered or Replacement Engine
     (as applicable)

(i)  Serial No. of Delivered APU                                  ............

(j)  Serial No. of Replacement APU                                ............
     (if applicable)

(k)  Serial No. of Installed APU                                  ............
     (if different from (a) or (b) above)

(l)  Current Location of Delivered or                             ............
     Replacement APU (as applicable)
     (if not installed on Airframe)

(m)  Total Time Since New of Delivered                            ............
     or Replacement APU (as applicable)

(n)  Total Cycles Since New of Delivered                          ............
     or Replacement APU (as applicable)

(o)  Total Hours for the Month for                                ............
     Delivered or Replacement APU
     (as applicable)

(p)  Total Cycles for the Month for                               ............
     Delivered or Replacement APU
     (as applicable)

3.   ROUTINE CHECKS / A.D. AND S.B. COMPLIANCE:

(a)  Routine Checks (A and above) performed during Month:

(b)  Airworthiness Directives complied with during Month:

</Table>

                                    -100-

<PAGE>

(c)  Service Bulletins complied with during Month:

4.   AIRCRAFT DAMAGE OR ENGINE CHANGES:

     Details of any repairs carried out to the Aircraft beyond SRM limits and
     Engine hanges, giving reasons for repair or change:

5.   UPCOMING MAINTENANCE CHECKS

(a)  Maintenance Checks (C segment and above) scheduled or expected to be
     performed on the Airframe during the next 12 months:

(b)  Scheduled shop visits or heavy maintenance visits scheduled or expected
     to be performed on the Engines during the next 12 months:

(c)  Overhauls, or replacements scheduled or expected to be performed on the
     APU or Landing  Gear during the next 12 months:

Date: ____________________, ______      CERTIFIED FOR AND ON BEHALF OF
                                        ALOHA AIRLINES, INC.

                                        By:___________________________________
                                        Name:
                                        Title:

                                      -101-

<PAGE>

                                                          RECORDED

                                              Federal Aviation Administration

                                              Date  5-16-01        Time  3:13 pm
                                                   ---------            --------

                                              Conveyance Number  BB 34833
                                                               ------------

                                              By /s/       [Illegible]
                                                      --------------------
                                                      Conveyances Examiner

                            LEASE AMENDMENT 804 NO. 1

     This Lease Amendment 804 No. 1, dated April 30, 2001 (this "Amendment"), is
between ACG Acquisition VIII LLC ("Lessor") and Aloha Airlines, Inc. ("Lessee")
and relates to the lease documents for one Boeing Model 737-2Q9 aircraft bearing
manufacturer's serial number 21719 and U.S. registration mark N804AL, including
two Pratt & Whitney Model JT8D-9A engines bearing manufacturer's serial numbers
P687772B and P674389B, which engines have 750 or more rated takeoff horsepower
(the "Aircraft").

RECITALS:
---------

(1)  Lessor is leasing the Aircraft to Lessee pursuant to Lease Agreement 804,
     dated January 22, 1997 (the "Original Lease Agreement"), between Lessor and
     Lessee, as supplemented by Certificate of Acceptance 804, dated January 22,
     1997, between Lessor and Lessee (the "Acceptance Certificate"). The
     Original Lease Agreement, as supplemented by the Acceptance Certificate, is
     referred to in this Amendment as the Lease Agreement.

(2)  The Original Lease Agreement and the Acceptance Certificate were recorded
     by the FAA and were assigned conveyance numbers by the FAA as set forth on
     the attached Schedule 1.

(3)  Lessor and Lessee wish to amend the Lease Agreement to extend the term of
     the Lease Agreement for one year, to amend the monthly rent during the
     extended term, to grant Lessee a further one-year extension option and to
     make certain other changes as set forth in this Amendment.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration the receipt and sufficiency of which are acknowledged, Lessor and
Lessee agree as follows:

1.   DEFINITIONS.

     Capitalized terms used but not defined in this Amendment shall have the
     meanings ascribed to such terms in the Lease Agreement.

2.   AMENDMENT OF LEASE AGREEMENT.

     The Lease Agreement is amended as follows:

     (a)  The definition of "Expiry Date" in Clause 1.1 of the Lease Agreement
          is amended and restated in its entirety as follows:

                                      -1-
<PAGE>

          "September 25, 2002 or, if extended pursuant to Clause 4.1(b),
          September 25, 2003 or, if earlier than either of those dates, as
          applicable, the date on which:

          (a)  the Aircraft has been redelivered in accordance with this
               Agreement and all obligations of Lessee have been satisfied; or

          (b)  the Lessor receives the Agreed Value following a Total Loss and
               any other amounts then due and owing in accordance with this
               Agreement."

     (b)  The definition of "Lender" in Clause 1.1 of the Lease Agreement is
          amended to delete the words "FINOVA Capital Corporation, a Delaware
          corporation, and".

     (c)  The definition of "Mortgage" in Clause 1.1 of the Lease Agreement and
          all references to "Mortgage" in the Lease Agreement are deleted.

     (d)  The definition of "Security Deposit" in Clause 1.1 of the Lease
          Agreement is amended and restated in its entirety as follows: "the
          amount of $100,000".

     (e)  Clause 4.1(b) of the Lease Agreement is designated Clause 4.1(c),
          and a new Clause 4.1(b) is added to the Lease Agreement as follows:

          (b)  By written notice delivered to Lessor on or before December 26,
               2001, Lessee may elect to extend the scheduled "Expiry Date" by
               one year, to September 25, 2003. Except as set forth in the
               preceding sentence, there shall be no renewals or extensions of
               the Term.

     (f)  Clause 5.3(b)(ii) of the Lease Agreement is amended and restated in
          its entirety as follows:

         "(ii) The Basic Rent payable in respect of each subsequent Rental
               Period will be (1) for Rental Periods ending on or before
               September 25, 2001, the amount of $110,000, and (2) for Rental
               Periods beginning on or after September 26, 2001, the amount of
               $80,000."

     (g)  Clause 5.4(a) of the Lease Agreement is amended and restated in its
          entirety as follows:

          "(a) All payments of Rent by the Lessee to the Lessor under this
               Agreement will be made for value on the due date, for the full
               amount due, in Dollars and in same day funds, settled through the
               New York Clearing House System or such other funds as may for the
               time being be customary for the settlement in New York City of
               payments in

                                       -2-
<PAGE>

              Dollars by telegraphic transfer to the account of the Lessor at
              Chase Manhattan Bank, N.A., New York, New York, ABA No. 021000021,
              Account No. 249-500-335-765."

     (h)  The text of the plates required pursuant to Clause 8.7(d) of the Lease
          Agreement is amended and restated in its entirety as follows:

            "This Aircraft/Engine is owned by ACG Acquisition VIII LLC and is
            leased to Aloha Airlines, Inc. It may not be operated by any other
            person without the prior written consent of ACG Acquisition VIII
            LLC."

     (i)  Clause 15.10(b)(i) of the Lease Agreement is amended and restated in
          its entirety as follows:

          "(i) if to Lessor, to it at: c/o Aviation Capital Group Corp.
                                       800 Newport Center Drive, Suite 425
                                       Newport Beach, California 92660-6309
                                       Attention: Managing Director
                                       Telefax No.: 949-759-5675

               with a copy to:         Aviation Capital Group Corp.
                                       2 Stamford Landing, Suite 295
                                       46 Southfield Avenue
                                       Stamford, Connecticut 06902
                                       Attention:   Managing Director
                                       Telefax No.: 203-967-3287."

     (j)  Clause 1(g) of Schedule 3 of the Lease Agreement is deleted, and the
          text "[Intentionally Omitted]" is substituted in its place.

     (k)  Clause 3(a) of Schedule 3 of the Lease Agreement is amended to add the
          following text after the word "removal" in the first line: "(including
          removal for a hot section inspection)".

     (l)  Clause 2(a) of Schedule 4, Part 1 of the Lease Agreement is amended to
          delete the words "Lender as sole loss payee" in the third line and
          substitute the words "Lessor as sole loss payee".

3.   RATIFICATION.

     Except as amended in Section 2 above, the Lease Agreement remains in full
     force and effect in accordance with its terms.

                                       -3-
<PAGE>

4.   LESSEE'S REPRESENTATIONS AND WARRANTIES.

     Lessee represents and warrants to Lessor as follows:

     (a)  After giving effect to this Amendment, (i) each of the representations
          and warranties set forth in Clauses 2.1 and 2.2 of the Lease Agreement
          is true and correct in all respects as if made on the date of this
          Amendment, and (ii) no Default or Event of Default exists under the
          Lease Agreement.

     (b)  Lessee has the power to execute, deliver and perform, and has taken
          all necessary corporate action to authorize the execution, delivery
          and performance of, this Amendment and the other agreements,
          instruments and documents to be executed by it in connection with this
          Amendment. No consent or approval of any Person, no consent or
          approval of any mortgagee, no waiver of any Lien or right of distraint
          or other similar right and no consent, license, certificate of need,
          approval, authorization or declaration of, or filing with, any
          governmental authority, bureau or agency is or will be required in
          connection with the execution, delivery or performance by Lessee, or
          in connection with the validity or enforcement against Lessee, of this
          Amendment and the other agreements, instruments and documents executed
          in connection with this Amendment, except for the filing of this
          Amendment for recordation with the aircraft registry of the FAA.

     (c)  The execution, delivery and performance by Lessee of this Amendment
          and each of the agreements, instruments and documents executed in
          connection with this Amendment to which it is a party will not (i)
          violate any provision of law, (ii) conflict with or result in a breach
          of any order, writ, injunction, ordinance, resolution, decree or other
          similar document or instrument binding on Lessee of any court or
          governmental authority, bureau or agency, domestic or foreign, (iii)
          conflict with or result in a breach of the certificate of
          incorporation or by-laws of Lessee, (iv) create (with or without the
          giving of notice or lapse of time, or both) a default under or breach
          of any agreement, bond, note or indenture to which Lessee is a party,
          by which Lessee is bound or by which any of its properties or assets
          is affected, or (v) result in the imposition of any Lien of any nature
          whatsoever upon any of the properties or assets owned by or used in
          connection with the business of Lessee.

     (d)  This Amendment and each of the other agreements, instruments and
          documents executed in connection with this Amendment to which Lessee
          is a party have been duly executed and delivered by Lessee and
          constitute the valid and legally binding agreements of Lessee,
          enforceable in accordance with their respective terms, except as such
          enforcement may be limited by applicable bankruptcy, insolvency,
          reorganization, moratorium, or other similar laws, now or hereafter in
          effect, relating to or affecting the enforcement of creditors' rights
          generally and except that the

                                       -4-
<PAGE>

          remedy of specific performance and other equitable remedies are
          subject to judicial discretion.

5.   LESSOR'S REPRESENTATIONS AND WARRANTIES.

     Lessor represents and warrants to Lessee as follows:

     (a)  After giving effect to this Amendment, each of the representations and
          warranties set forth in Clause 2.4 of the Lease Agreement is true and
          correct in all respects as if made on the date of this Amendment.

     (b)  Lessor has the power to execute, deliver and perform, and has taken
          all necessary limited liability company action to authorize the
          execution, delivery and performance of, this Amendment and the other
          agreements, instruments and documents to be executed by it in
          connection with this Amendment. No consent or approval of any Person,
          no consent or approval of any mortgagee, no waiver of any Lien or
          right of distraint or other similar right and no consent, license,
          certificate of need, approval, authorization or declaration of, or
          filing with, any governmental authority, bureau or agency is or will
          be required in connection with the execution, delivery or performance
          by Lessor, or in connection with the validity or enforcement against
          Lessor, of this Amendment and the other agreements, instruments and
          documents executed in connection with this Amendment, except for the
          filing of this Amendment for recordation with the aircraft registry of
          the FAA.

     (c)  The execution, delivery and performance by Lessor of this Amendment
          and each of the agreements, instruments and documents executed in
          connection with this Amendment to which it is a party will not (i)
          violate any provision of law, (ii) conflict with or result in a breach
          of any order, writ, injunction, ordinance, resolution, decree or other
          similar document or instrument binding on Lessor of any court or
          governmental authority, bureau or agency, domestic or foreign, (iii)
          conflict with or result in a breach of the certificate of formation or
          operating agreement of Lessor, (iv) create (with or without the giving
          of notice or lapse of time, or both) a default under or breach of any
          agreement, bond, note or indenture to which Lessor is a party, by
          which Lessor is bound or by which any of its properties or assets is
          affected, or (v) result in the imposition of any Lien of any nature
          whatsoever upon any of the properties or assets owned by or used in
          connection with the business of Lessor, except the Lien of the
          Security Trust Agreement.

     (d)  This Amendment and each of the other agreements, instruments and
          documents executed in connection with this Amendment to which Lessor
          is a party have been duly executed and delivered by Lessor and
          constitute the valid and legally binding agreements of Lessor,
          enforceable in accordance with their respective terms, except as such
          enforcement may be limited by applicable bankruptcy, insolvency,

                                       -5-
<PAGE>

          reorganization, moratorium, or other similar laws, now or hereafter in
          effect, relating to or affecting the enforcement of creditors' rights
          generally and except that the remedy of specific performance and other
          equitable remedies are subject to judicial discretion.

6.   GOVERNING LAW.

     This Amendment shall be governed by and construed in accordance with the
     laws of the State of New York applicable to contracts executed in the State
     of New York by residents of such State and to be performed entirely within
     such State.

7.   SUCCESSORS AND ASSIGNS.

     This Amendment shall be binding upon, inure to the benefit of and be
     enforceable by Lessor, Lessee, and their respective successors, transferees
     and assigns. Neither Lessor nor Lessee shall assign or delegate its rights
     and obligations under this Amendment except in accordance with an
     assignment or delegation of its rights and obligations under, and in
     accordance with the terms of, the Lease Agreement, and any other purported
     assignment or delegation shall be null and void AB INITIO.

8.   SEVERABLE PROVISIONS.

     The provisions of this Amendment are severable, and if any section or
     provision shall be held invalid or unenforceable in whole or in part in any
     jurisdiction, then such invalidity or unenforceability shall affect only
     such section, provision or part in such jurisdiction and shall not in any
     manner affect such section, provision or part in any other jurisdiction or
     any other section or provision in this Amendment in any jurisdiction.

9.   COUNTERPARTS.

     This Amendment may be executed in one or more counterparts, each of which
     shall be deemed an original but all of which together shall constitute one
     and the same Amendment.

10.  EXPENSES.

     Each of Lessor and Lessee shall bear its own expenses, including the legal
     fees and expenses of its counsel, in connection with the negotiation,
     execution and delivery of this Amendment and all other documents executed
     and delivered in connection with this Agreement, and Lessor and Lessee
     shall share equally the legal fees and expenses, including filing fees,
     incurred by [Lytle, Soule & Curlee], special counsel for FAA matters.

                                       -6-
<PAGE>

11.  CHATTEL PAPER COUNTERPART.

     TO THE EXTENT, IF ANY, THAT THE LEASE AGREEMENT, AS AMENDED BY THIS
     AMENDMENT, CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
     UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO
     SECURITY INTEREST IN THE LEASE AGREEMENT AS AMENDED BY THIS AMENDMENT MAY
     BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OF THIS
     AMENDMENT OTHER THAN THE ORIGINAL COUNTERPART MARKED "CHATTEL PAPER
     COUNTERPART".

                            [SIGNATURE PAGE FOLLOWS]

     IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Amendment
804 No. 1 on the date first above written.

                                        ACG ACQUISITION VIII LLC, as Lessor

                                        By: /s/ R. STEPHEN HANNAIB
                                                -------------------------------
                                        Name:   R. STEPHEN HANNAIB
                                                -------------------------------
                                        Title:  MANAGER
                                                -------------------------------

                                        ALOHA AIRLINES, INC., as Lessee

                                        By: /s/ BRENDA F. CUTWRIGHT
                                                -------------------------------
                                        Name:   BRENDA F. CUTWRIGHT
                                                -------------------------------
                                        Title:  EXECUTIVE VICE PRESIDENT AND
                                                -------------------------------
                                                CHIEF FINANCIAL OFFICER
                                                -------------------------------

                                        By: /s/ GLENN R. ZANDER
                                                -------------------------------
                                        Name:   Glenn R. Zander
                                                -------------------------------
                                        Title:  President & CEO
                                                -------------------------------

                                      -7-
<PAGE>

                                   Schedule 1
                          to Lease Amendment 804 No. 1

                              Description of Lease

     Lease Agreement 804 dated January 22, 1997, between ACG Acquisition VIII
LLC as lessor and Aloha Airlines, Inc. as lessee, as supplemented by Certificate
of Acceptance 804 dated January 22, 1997, recorded by the Federal Aviation
Administration on March 19, 1997, as Conveyance No. RR011675.

                                       -8-

<PAGE>

                            LEASE AMENDMENT 804 NO. 2

     This Lease Amendment 804 No. 2, dated as of November 9, 2001 (this
"Amendment"), is between ACG Acquisition VIII LLC ("Lessor") and Aloha Airlines,
Inc. ("Lessee") and relates to the lease documents for one Boeing Model 737-2Q9
aircraft bearing manufacturer's serial number 21719 and U.S. registration mark
N804AL, including two Pratt & Whitney Model JT8D-9A engines bearing
manufacturer's serial numbers P687772B and P674389B, which engines have 750 or
more rated takeoff horsepower (the "Aircraft").

RECITALS:
---------

(1)  Lessor is leasing the Aircraft to Lessee pursuant to Lease Agreement 804,
     dated January 22, 1997 (the "Original Lease Agreement"), between Lessor and
     Lessee, as supplemented by Certificate of Acceptance 804, dated January 22,
     1997, between Lessor and Lessee (the "Acceptance Certificate") and as
     amended by Lease Amendment 804 No. 1, dated April 30, 2001, between Lessor
     and Lessee ("Amendment No. 1"). The Original Lease Agreement, as
     supplemented by the Acceptance Certificate and amended by Amendment No. 1,
     is referred to in this Amendment as the Lease Agreement.

(2)  The Original Lease Agreement, the Acceptance Certificate and Amendment No.
     1 were recorded by the FAA and were assigned conveyance numbers by the FAA
     as set forth on the attached Schedule 1.

(3)  Lessor and Lessee wish to amend the Lease Agreement to extend the term of
     the Lease Agreement for approximately three months, to amend the monthly
     rent during the remainder of the term and to make certain other changes as
     set forth in this Amendment.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration the receipt and sufficiency of which are acknowledged, Lessor and
Lessee agree as follows:

1.   DEFINITIONS.

     Capitalized terms used but not defined in this Amendment shall have the
     meanings ascribed to such terms in the Lease Agreement.

2.   AMENDMENT OF LEASE AGREEMENT.

     The Lease Agreement is amended as follows:

                                       -1-
<PAGE>

     (a)  The definition of "Agreed Value" in Clause 1.1 of the Lease Agreement
          is amended to read "as set forth in Appendix 1".

     (b)  The definition of "Expiry Date" in Clause 1.1 of the Lease Agreement
          is amended and restated in its entirety as follows:

               "December 25, 2002 or, if extended pursuant to Clause 4.1(b),
               December 25, 2003 or, if earlier than either of those dates, as
               applicable, the date on which:

               (a)  the Aircraft has been redelivered in accordance with this
                    Agreement and all obligations of Lessee have been satisfied;
                    or

               (b)  the Lessor receives the Agreed Value following a Total Loss
                    and any other amounts then due and owing in accordance with
                    this Agreement."

     (c)  The definitions of "Letter of Credit" and "Security Deposit" in Clause
          1.1 of the Lease Agreement are deleted in their entirety, and all
          references in the Lease Agreement to such terms shall have no force or
          effect.

     (d)  Clause 4.1(b) of the Lease Agreement is amended and restated in its
          entirety as follows:

               "(b) By written notice delivered to Lessor on or before June 26,
                    2002, Lessee may elect to extend the scheduled "Expiry Date"
                    by one year, to December 25, 2003. Except as set forth in
                    the preceding sentence, there shall be no renewals or
                    extensions of the Term."

     (e)  Clause 5.1 of the Lease Agreement is deleted in its entirety.

     (f)  Clause 5.3(b)(ii) of the Lease Agreement is amended and restated in
          its entirety as follows:

               "(ii) The Basic Rent payable in respect of each subsequent Rental
                    Period will be the Basic Rent Amount, as set forth in
                    Appendix l."

     (g)  The Lease Agreement is amended to add Appendix 1 in the form attached
          to this Amendment as Schedule 2.

3.   APPLICATION OF LETTER OF CREDIT.

     Lessor is holding the Letter of Credit (as defined in the Lease Agreement,
     without giving effect to Section 2(c) above). Lessor and Lessee agree that
     Lessor shall be entitled to present

                                      -2-
<PAGE>

     the Letter of Credit to the issuing bank, and that the resulting proceeds
     paid to Lessor shall constitute payment in full for the Basic Rent due for
     the Rental Periods beginning on or after September 26, 2001 and ending on
     or before December 25, 2001 under the Lease Agreement, as amended by this
     Amendment. Lessee further agrees (a) notwithstanding the effect of this
     Amendment, Lessor may represent to the bank issuing the Letter of Credit
     that an Event of Default has occurred and may make such other statements
     and representations as are necessary for drawing the full amount under the
     Letter of Credit, and (b) Lessee shall take all such actions and grant to
     Lessor and the issuing bank all such waivers of the provisions of the Lease
     Agreement and the Letter of Credit as are necessary for Lessor to draw the
     full amount under the Letter of Credit.

4.   RATIFICATION.

     Except as amended in Section 2 above, the Lease Agreement remains in full
     force and effect in accordance with its terms.

5.   LESSEE'S REPRESENTATIONS AND WARRANTIES.

     Lessee represents and warrants to Lessor as follows:

     (a)  After giving effect to this Amendment, (i) each of the representations
          and warranties set forth in Clauses 2.1 and 2.2 of the Lease Agreement
          is true and correct in all respects as if made on the date of this
          Amendment, and (ii) no Default or Event of Default exists under the
          Lease Agreement.

     (b)  Lessee has the power to execute, deliver and perform, and has taken
          all necessary corporate action to authorize the execution, delivery
          and performance of, this Amendment and the other agreements,
          instruments and documents to be executed by it in connection with this
          Amendment. No consent or approval of any Person, no consent or
          approval of any mortgagee, no waiver of any Lien or right of distraint
          or other similar right and no consent, license, certificate of need,
          approval, authorization or declaration of, or filing with, any
          governmental authority, bureau or agency is or will be required in
          connection with the execution, delivery or performance by Lessee, or
          in connection with the validity or enforcement against Lessee, of this
          Amendment and the other agreements, instruments and documents executed
          in connection with this Amendment, except for the filing of this
          Amendment for recordation with the aircraft registry of the FAA.

     (c)  The execution, delivery and performance by Lessee of this Amendment
          and each of the agreements, instruments and documents executed in
          connection with this Amendment to which it is a party will not (i)
          violate any provision of law, (ii) conflict with or result in a breach
          of any order, writ, injunction, ordinance, resolution, decree or other
          similar document or instrument binding on Lessee of any

                                      -3-
<PAGE>

          court or governmental authority, bureau or agency, domestic or
          foreign, (iii) conflict with or result in a breach of the certificate
          of incorporation or by-laws of Lessee, (iv) create (with or, without
          the giving of notice or lapse of time, or both) a default under or
          breach of any agreement, bond, note or indenture to which Lessee is a
          party, by which Lessee is bound or by which any of its properties or
          assets is affected, or (v) result in the imposition of any Lien of any
          nature whatsoever upon any of the properties or assets owned by or
          used in connection with the business of Lessee.

     (d)  This Amendment and each of the other agreements, instruments and
          documents executed in connection with this Amendment to which Lessee
          is a party have been duly executed and delivered by Lessee and
          constitute the valid and legally binding agreements of Lessee,
          enforceable in accordance with their respective terms, except as such
          enforcement may be limited by applicable bankruptcy, insolvency,
          reorganization, moratorium, or other similar laws, now or hereafter in
          effect, relating to or affecting the enforcement of creditors' rights
          generally and except that the remedy of specific performance and other
          equitable remedies are subject to judicial discretion.

6.   LESSOR'S REPRESENTATIONS AND WARRANTIES.

     Lessor represents and warrants to Lessee as follows:

     (a)  After giving effect to this Amendment, each of the representations and
          warranties set forth in Clause 2.4 of the Lease Agreement is true and
          correct in all respects as if made on the date of this Amendment.

     (b)  Lessor has the power to execute, deliver and perform, and has taken
          all necessary limited liability company action to authorize the
          execution, delivery and performance of, this Amendment and the other
          agreements, instruments and documents to be executed by it in
          connection with this Amendment. No consent or approval of any Person,
          no consent or approval of any mortgagee, no waiver of any Lien or
          right of distraint or other similar right and no consent, license,
          certificate of need, approval, authorization or declaration of, or
          filing with, any governmental authority, bureau or agency is or will
          be required in connection with the execution, delivery or performance
          by Lessor, or in connection with the validity or enforcement against
          Lessor, of this Amendment and the other agreements, instruments and
          documents executed in connection with this Amendment, except for the
          filing of this Amendment for recordation with the aircraft registry of
          the FAA.

     (c)  The execution, delivery and performance by Lessor of this Amendment
          and each of the agreements, instruments and documents executed in
          connection with this Amendment to which it is a party will not (i)
          violate any provision of law, (ii) conflict with or result in a breach
          of any order, writ, injunction, ordinance,

                                       -4-
<PAGE>

          resolution, decree or other similar document or instrument binding on
          Lessor of any court or governmental authority, bureau or agency,
          domestic or foreign, (iii) conflict with or result in a breach of the
          certificate of formation or operating agreement of Lessor, (iv) create
          (with or without the giving of notice or lapse of time, or both) a
          default under or breach of any agreement, bond, note or indenture to
          which Lessor is a party, by which Lessor is bound or by which any of
          its properties or assets is affected, or (v) result in the imposition
          of any Lien of any nature whatsoever upon any of the properties or
          assets owned by or used in connection with the business of Lessor,
          except the Lien of the Security Trust Agreement.

     (d)  This Amendment and each of the other agreements, instruments and
          documents executed in connection with this Amendment to which Lessor
          is a party have been duly executed and delivered by Lessor and
          constitute the valid and legally binding agreements of Lessor,
          enforceable in accordance with their respective terms, except as such
          enforcement may be limited by applicable bankruptcy, insolvency,
          reorganization, moratorium, or other similar laws, now or hereafter in
          effect, relating to or affecting the enforcement of creditors' rights
          generally and except that the remedy of specific performance and other
          equitable remedies are subject to judicial discretion.

7.   GOVERNING LAW.

     This Amendment shall be governed by and construed in accordance with the
     laws of the State of New York applicable to contracts executed in the State
     of New York by residents of such State and to be performed entirely within
     such State.

8.   SUCCESSORS AND ASSIGNS.

     This Amendment shall be binding upon, inure to the benefit of and be
     enforceable by Lessor, Lessee, and their respective successors, transferees
     and assigns. Neither Lessor nor Lessee shall assign or delegate its rights
     and obligations under this Amendment except in accordance with an
     assignment or delegation of its rights and obligations under, and in
     accordance with the terms of, the Lease Agreement, and any other purported
     assignment or delegation shall be null and void AB INITIO.

9.   SEVERABLE PROVISIONS.

     The provisions of this Amendment are severable, and if any section or
     provision shall be held invalid or unenforceable in whole or in part in any
     jurisdiction, then such invalidity or unenforceability shall affect only
     such section, provision or part in such jurisdiction and shall not in any
     manner affect such section, provision or part in any other jurisdiction or
     any other section or provision in this Amendment in any jurisdiction.

                                       -5-
<PAGE>

10.  COUNTERPARTS.

     This Amendment may be executed in one or more counterparts, each of which
     shall be deemed an original but all of which together shall constitute one
     and the same Amendment.

11.  EXPENSES.

     Each of Lessor and Lessee shall bear its own expenses, including the legal
     fees and expenses of its counsel, in connection with the negotiation,
     execution and delivery of this Amendment and all other documents executed
     and delivered in connection with this Agreement, and Lessor and Lessee
     shall share equally the legal fees and expenses, including filing fees,
     incurred by Lytle, Soule & Curlee, special counsel for FAA matters.

12.  CHATTEL PAPER COUNTERPART.

     TO THE EXTENT, IF ANY, THAT THE LEASE AGREEMENT, AS AMENDED BY THIS
     AMENDMENT, CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE
     UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO
     SECURITY INTEREST IN THE LEASE AGREEMENT AS AMENDED BY THIS AMENDMENT MAY
     BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART OF THIS
     AMENDMENT OTHER THAN THE ORIGINAL COUNTERPART MARKED "CHATTEL PAPER
     COUNTERPART".

                            [SIGNATURE PAGE FOLLOWS]

                                      -6-
<PAGE>

     IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Amendment
804 No. 2 as of the date first above written.

                                        ACG ACQUISITION VIII LLC, as Lessor

                                        By: /s/ BENJAMIN L. JUNG
                                                -------------------------------
                                        Name:   BENJAMIN L. JUNG
                                                -------------------------------
                                        Title:  MANAGER
                                                -------------------------------

                                        ALOHA AIRLINES, INC., as Lessee

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

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

                                      -7-
<PAGE>

     IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease Amendment
804 No. 2 as of the date first above written.

                                        ACG ACQUISITION VIII LLC, as Lessor

                                        By:
                                                -------------------------------
                                        Name:   BENJAMIN L. JUNG
                                                -------------------------------
                                        Title:  MANAGER
                                                -------------------------------

                                        ALOHA AIRLINES, INC., as Lessee

                                        By: /s/ BRENDA F. CUTWRIGHT
                                                -------------------------------
                                        Name:   BRENDA F. CUTWRIGHT
                                                -------------------------------
                                        Title:  EXECUTIVE VICE PRESIDENT & CFO
                                                -------------------------------

                                        By: /s/ JAMES M. KING
                                                -------------------------------
                                        Name:   JAMES M. KING
                                                -------------------------------
                                        Title:  SENIOR VICE PRESIDENT PLANNING
                                                -------------------------------
                                                AND BUSINESS DEVELOPMENT
                                                -------------------------------

                                      -7-
<PAGE>

                                   Schedule 1
                          to Lease Amendment 804 No. 2

                              Description of Lease

     Lease Agreement 804, dated January 22, 1997, between ACG Acquisition VIII
LLC as lessor and Aloha Airlines, Inc. as lessee, as supplemented by Certificate
of Acceptance 804 dated January 22, 1997, recorded by the Federal Aviation
Administration on March 19, 1997, as Conveyance No. RRO11675.

     Lease Amendment 804 No. 1, dated April 30, 2001, between ACG Acquisition
VIII LLC as lessor and Aloha Airlines, Inc. as lessee, recorded by the Federal
Aviation Administration on May 16, 2001 as Conveyance No. BB34833.

                                       -8-
<PAGE>

                                   Schedule 2
                          to Lease Amendment 804 No. 2

         [INTENTIONALLY OMITTED AS CONTAINING CONFIDENTIAL INFORMATION](1)

                        APPENDIX 1 TO LEASE AGREEMENT 804
                        ---------------------------------

ADDITIONAL DEFINITIONS

In addition to the definitions set forth in Clause 1.1, the following
expressions shall have the following respective meanings in this Agreement:

<TABLE>
<CAPTION>
<S>                          <C>
AGREED VALUE                 $5,000,000

BASIC RENT AMOUNT            means (1) for Rental Periods ending on or before
                             September 25, 2001, the amount of $110,000, (2)
                             for Rental Periods beginning on or after September
                             26, 2001 and ending on or before December 25, 2001,
                             the amount of $33,333.33, and (3) for Rental
                             Periods beginning on or after December 26, 2001,
                             the amount of $90,000.
</TABLE>

------------------------
(1)  For inclusion on FAA filed copies of this Amendment in lieu of the
     following information.

                                       -9-<PAGE>
                                                                   EXHIBIT 10.52

                            AIRCRAFT LEASE AGREEMENT

                                    BETWEEN

                             AIRCRAFT NO. 2, L.L.C.

                                      AND

                              ALOHA AIRLINES, INC.

           Counterpart No.  2  of  3  serially numbered manually executed
      counterparts. To the extent, if any that this Lease constitutes
      chattel paper under the UCC, no security interest in this Lease
      may be created through the transfer and possession of any
      counterpart other than Counterpart No. 1

<PAGE>

                               TABLE OF CONTENTS

1.  LEASE AND TERM, NET LEASE

2.  DELIVERY AND RETURN OF AIRCRAFT

3.  CHARGES

4.  LIMITED WARRANTY, DISCLAIMER

5.  SET-OFF; ABATEMENT

6.  OPERATION, MAINTENANCE, REGISTRATION, and RECORDS

7.  MODIFICATION OF THE AIRCRAFT

8.  INSPECTION AND RECORDS

9.  TAXES

10. INDEMNITY

11. LOSS OF OR DAMAGE TO AIRCRAFT, AGREED VALUE

12. INSURANCE

13. COMPLIANCE WITH LAWS

14. TITLE TO AIRCRAFT

15. ASSIGNMENT OR SUBLEASE; POSSESSION AND USE

16. EVENTS OF DEFAULT

17. REMEDIES

18. EXCUSABLE

19. DELAY IN RETURN OF AIRCRAFT

20. APPLICABLE LAW AND JURISDICTION

21. NOTICES

<PAGE>

22. HEADINGS

23. CONFIDENTIALITY

24. REPRESENTATIONS, WARRANTIES AND COVENANTS

25. ASSIGNMENT AND COOPERATION WITH LESSOR'S LENDER

26. ENTIRE AGREEMENT

27. MISCELLANEOUS

28. BROKERS/FINDERS

29. SECURITY DEPOSIT

30. NO PURCHASE OPTION; NO HUSH KIT FINANCING

31. AUTHORIZATION; LESSEE'S CONDITIONS PRECEDENT

32. AUTHORIZATION; LESSOR'S CONDITIONS PRECEDENT

    EXHIBIT A DESCRIPTION OF AIRCRAFT

    EXHIBIT B RECORDS

    EXHIBIT C REDELIVERY CONDITIONS

    EXHIBIT D DELIVERY RECEIPT

    EXHIBIT E REDELIVERY RECORDS

    EXHIBIT F FORM OF LETTER OF CREDIT

    EXHIBIT G PERMITTED SUBLESSEES

    EXHIBIT H FINANCIAL TERMS

    EXHIBIT I FORM OF LEASE SUPPLEMENT

    EXHIBIT J ADDITIONAL BILL OF WORK

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1A.      Summary of Transaction

         The following is a summary of the lease transaction between Lessee and
Lessor. It is set forth for the convenience of the parties only and will not be
deemed in any way to amend, detract from or simplify the other provisions of
this Lease.

         A.       Description of Aircraft

                  One Boeing 737-282A, SN 23045, U.S. Reg N824AL

         B.       Scheduled Delivery Date and Location

                  On or Before March 15, 1998; over International Waters near
Christchurch Base, New Zealand

         C.       Basic Lease Term

                  96 Months from the Basic Lease Term Commencement Date

         D.       Security Deposit

                  As set forth in Exhibit H

         E.       Rent during the Basic Lease Term

                  See Exhibit H

         F.       Country of Aircraft Registration

                  United States

         G.       Initial Agreed Value of Aircraft

                  U.S. $11,000,000

         H.       Lessor's Bank Account

                  Barnett Bank

                  Miami Lakes, FL
                  Acct# 1596591379
                  ABA# 063000047

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                           AIRCRAFT LEASE AGREEMENT.

         THIS AGREEMENT, made and entered into as of the 11th day of
         August, 1997, by and between AIRCRAFT NO. 2, L.L.C.,
         (hereinafter referred to as "Lessor") and ALOHA AIRLINES,
         INC., a Delaware corporation (hereinafter referred to as
         "Lessee").

                                  WITNESSETH:

         WHEREAS, Lessor is the owner of the aircraft described in Exhibit A.
The aircraft, together with the engines, parts and equipment installed thereon,
including any replacements or substitutions therefor and (where the context
permits) the Records furnished herewith and required to be maintained hereunder,
are hereinafter collectively referred to as the "Aircraft"; and

         WHEREAS, Lessee desires to hire and take from Lessor for operation and
Lessor is willing to lease to Lessee the Aircraft under the terms and conditions
hereinafter set forth;

         NOW, THEREFORE, for and in consideration of the premises and of the
mutual covenants and agreements herein contained, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:

         1.       LEASE AND TERM; NET LEASE

         A. Subject to the provisions of this Agreement, Lessor agrees to and
does hereby lease to Lessee and Lessee agrees to and does hereby hire and take
from Lessor the Aircraft for a term commencing on the Delivery Date and ending
ninety-six (96) months after the Basic Lease Term Commencement Date (the
"Expiration Date"). The Term shall consist of (i) the Interim Term (which means
the period commencing on the Delivery Date of the Aircraft and ending on the
date immediately prior to the Basic Lease Term Commencement Date), (ii) the
Basic Lease Term (the ninety-six (96) month period referenced above), and (iii)
if actually entered into, any Renewal Term, as hereinafter defined. The Basic
Lease Term Commencement Date means the first day of the month following the
month in which the Delivery Date occurs. The Delivery Date means the date on
which Lessor delivers the Aircraft to Lessee and the Lease Supplement is
executed by Lessor and Lessee ("Delivery"). Lessor will furnish Lessee with 72
hours notice of intended delivery. Lessor and Lessee anticipate that the
Delivery Date will be on or before March 15, 1998 provided, however that Lessor
will have no responsibility or liability for any delay in delivering the
Aircraft or failure to deliver the Aircraft for reasons other than willful
default of Lessor, including but not limited to, the failure of the current
lessee, Transportes Aeros Portugueses, S.A. ("TAP"), to redeliver the Aircraft
to Lessor at the time and in the condition required by Lessor's lease with TAP.
The delivery to and acceptance of the Aircraft by Lessee will be confirmed by
execution of a lease supplement in the form of Exhibit I hereto. The Aircraft
shall be used by Lessee for the carriage of passengers, mail and freight in its
operations as an air carrier certified by the Federal Aviation Administration
("FAA") and for no other purposes whatsoever except for flight crew training;
provided however, any training or check

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flights performed with the Aircraft shall not exceed the average training/check
flights performed in other aircraft in Lessee's fleet. In no event shall the
Aircraft be operated in any area excluded from coverage by any insurance policy
required to be in effect with respect to the Aircraft under Section 12 hereof

         B. At Delivery the Aircraft will be equipped with two (2) Pratt and
Whitney model JT8D-9A engines each of which has 750 or more rated take off
horsepower, or the equivalent thereof (individually, an "Engine" and
collectively the "Engines"), and with the major components as described in
Exhibit A. Lessor will perform at its expense all necessary conversions from
metric to US measurements for manuals, supplements and any other documents, in
order for the Aircraft to be operated. Lessor will retain all parts removed from
the Aircraft as a result of such conversion.

         C. Lessor shall deliver and Lessee shall accept the Aircraft on the
Delivery Date in the following condition:

             a. The Aircraft will have a U.S. Certificate of Airworthiness, a
fresh TAP "C" Check (Lessee shall be entitled to observe and will be notified by
Lessor of the performance of the C Check), TCAS and windshear installed, Hexcel
Interiors 737-200 PAX Quikbin Interior Kit, and having all Airworthiness
Directives ("ADs") requiring compliance by the FAA complied with.

             b. The Aircraft will be painted in Lessee's livery. Lessee shall
supply the paint and the Pounce Pattern.

             C. The Aircraft will have at least 3,000 hours remaining on the
Airframe's structural inspection.

             d. Intentionally Omitted.

             e. The APU, landing gear and time controlled components shall be in
a condition as delivered by TAP to Lessor.

             f. The Lessor will perform the work set forth in Exhibit J on the
Aircraft prior to delivery to Lessee (the "Additional Bill of Work"). Lessee
will reimburse Lessor for the Additional Bill of Work by means of Supplemental
Rental.

             g. The Aircraft otherwise shall be delivered to Lessee in an "AS
IS, WHERE IS" condition over International Waters near Air New Zealand's
maintenance facility located in Christchurch Base, New Zealand (or another
location as agreed by the parties, if required to reduce tax liability).

             h. All SI inspection items required to be performed through 22,400
flight hours will be performed (compliance without sampling) prior to delivery
and no individual SI items will fall due within the next 4000 flight hours.

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             i. All Engineering Orders that have been applied to the Aircraft
and maintenance records required for issuance of the U.S. Certificate of
Airworthiness and U.S. Registration will have been translated into English.
These will include AD's, major repairs and major alterations.

             j. The Aircraft will be delivered without seats or galleys.

             k. The Aircraft will have no maintenance deferrals, all non-routine
maintenance items discovered during the TAP C check will have been performed,
(upon completion of such C check, the Aircraft will have no required maintenance
items in a deferred status, including but not limited to, any structural
repairs, corrosion, skin replacement requirements, or crack propagation).

             l. All AD's will either be terminated or cleared for inspection for
a minimum of eighteen (18) months from the delivery date except for those
inspections required more frequently than every eighteen months in which case
that AD will be cleared for inspection for the applicable maximum period between
inspections.

          D. Provided Lessee is not in default hereunder, Lessee may extend the
term of the lease for a one (1) year period ("Renewal Term") following
expiration of the Basic Lease Term stated in Section 1.A. hereof. Lessee shall
notify Lessor of its desire to extend said term not less than one hundred eighty
(180) days prior to expiration of the Basic Lease Term. Base Rental and Variable
Rental, as hereinafter defined, during the Renewal Term will be at the greater
of the then Fair Market Rental Value as hereinafter defined or the Base Rental
rates. Fair Market Rental Value means the amount agreed by Lessor and Lessee as
the price at which an aircraft of the type, age and condition of the Aircraft
could be leased in an orderly transaction under prevailing market conditions
between a willing Lessee and a willing Lessor on the date of such determination.
If Lessor and Lessee are unable to agree on such amount then the Lessor and
Lessee shall each select an independent appraiser skilled in evaluating
aircraft, who shall jointly make the determination of such amount. If Lessor's
and Lessee's appraisers are unable to agree on the Fair Market Rental Value of
the Aircraft, then such appraisers shall select a third appraiser who shall make
the determination. The determination of the independent appraiser(s) shall be
binding and conclusive on Lessor and Lessee. In all cases, Lessor and Lessee
shall bear the cost of the appraiser selected by them and shall share equally in
the cost of retaining the third independent appraiser, if required, to make such
determination.

          E. The Lease is net to Lessor. Lessee will pay all Base Rental,
Variable Rental, Supplemental Rental, costs, charges, fees and expenses in
connection with the delivery of Hexcel Interiors 737-200 PAX Quikbin Interior
Kit, use, possession and operation of the Aircraft, including maintenance,
insurance, state and local taxes (except for taxes with respect to which Lessee
is not obligated to indemnify Lessor under Section 9), and risk of loss or other
casualty. Such obligations of Lessee will be absolute and unconditional under
any and all circumstances and regardless of other events, including any of the
following:

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             (a) Any right of set-off, counterclaim, recoupment, defense or
other right (including any right of reimbursement) which Lessee may have against
Lessor, or any other person for any reason whatsoever, including any claim
Lessee may have for the foregoing.

             (b) Unavailability or interruption in use of the Aircraft for any
reason, including a requisition thereof or any prohibition or interference with
or other restriction against Lessee's use, operation or possession of the
Aircraft (whether by Law, as hereinafter defined, or otherwise); any defect in
airworthiness, merchantability, fitness for any purpose, condition, design,
specification or operation of any kind or nature of the Aircraft; the
ineligibility of the Aircraft for any particular use or trade or for
registration or documentation under the Laws of any jurisdiction; or Total Loss
of the Aircraft; however, Lessee's obligation to pay Base Rental in the event of
Total Loss of the Aircraft shall terminate upon Lessor's receipt of the Agreed
Value of the Aircraft in accordance with Article I I hereof.

             (c) Insolvency, bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation, receivership, administration or
similar proceedings by or against Lessor, Lessee or any other person.

             (d) Invalidity or unenforceability or lack of due authorization of
or other defect in this Lease.

             (e) Failure or delay on the part of any party to perform its
obligations under this Lease.

             (f) Other cause which but for this provision would or might have
the effect of terminating or in any other way affecting any obligation of Lessee
hereunder.

          F. Nothing in the foregoing Section 1E is intended as a waiver of any
rights of Lessee to bring a separate action for default by Lessor of any of its
obligations hereunder.

2.       DELIVERY AND RETURN OF AIRCRAFT

         A. The Aircraft, together with all pertinent log books, flight manuals
and other documents as described in Exhibit B, attached hereto and made a part
hereof (the "Records"), shall be delivered by Lessor to Lessee on the Delivery
Date of this lease over International Waters near Christchurch Base, New Zealand
or at such other location as is determined pursuant to Section l.C.g.
(hereinafter referred to as the "Delivery Point").

             (a) Upon request by Lessee, Lessor will provide Lessee with a
demonstration flight of at least one hour, but less than two hours, duration,
prior to delivery of the Aircraft. If a demonstration flight is required prior
to delivery, it will be performed by and under the control of Lessor, with
Lessee's Right crew and/or other authorized personnel (not to exceed 3) on board
as observers if desired by Lessee. Lessor's captain will be the pilot in command
and will have the authority to cancel or terminate any flight at his discretion
short of one hour's duration without

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incurring any liability for Lessor. If any such flight is canceled or terminated
short of one hour's duration, it will be rescheduled at a mutually agreeable
time.

             (b) Lessor will bear the costs of the demonstration flight
including but not limited to costs of crew, special insurance for such flight,
fuel and take off and landing rights.

             (c) The demonstration flight will be for the sole purpose of
demonstrating to the Lessee the satisfactory operation of the Aircraft and its
equipment and systems. The demonstration flight will be conducted in accordance
with mutually acceptable procedures. Lessor will at its expense correct
Discrepancies (conditions exceeding manufacturer's specifications) revealed
during the demonstration flight.

             (d) The Engines shall undergo a video borescope inspection and
power assurance run at or immediately prior to time of the demonstration flight
performed at Lessor's expense with Lessee as an observer. Any Discrepancies
found not to be in compliance with the manufacturer's maintenance manual shall
be corrected at Lessor's expense.

         B. Upon expiration or termination of this Lease, Lessee will redeliver
the Aircraft at a mutually agreeable location in the continental United States
(the "Redelivery Location"). Subject to Section 6, upon redelivery of the
Aircraft, the Aircraft shall be in an airworthy condition in accordance with FAA
standards, without any maintenance deferrals, with a valid FAA certificate of
airworthiness in effect with respect thereto, in conformance with Federal
Aviation Regulations ("FAR") Part 12 1, and otherwise with the same equipment
and in the same condition and configuration as when delivered to Lessee, except
for reasonable wear and tear due to ordinary use. Notwithstanding anything
herein to the contrary, upon return the Aircraft will not be in compliance with
FAR Part 36 and ICAO 16 Chapter 3. In addition, the Aircraft upon completion of
the redelivery acceptance inspection (i) will be free and clear of all Liens, as
hereinafter defined, which result from Lessee's actions or inactions, (ii) will
be fresh from a full "C" check performed by Lessee, under Lessee's FAA approved
maintenance and structural programs including CPCP and all required non-routine
maintenance items discovered during such "C" check, without any deferrals will
have been performed, (upon completion of the "C" check, the Aircraft shall have
no required maintenance items in a deferred status, including but not limited to
any structural repairs, corrosion, skin replacement requirements, or crack
propagation discovered prior to or during the "C" check in accordance with
Lessee's Maintenance Program, and FAA Requirements), (iii) will be painted in
the livery designated by Lessor, and (iv) will meet the conditions listed in
Exhibit C. Upon Redelivery, all AD's will either be terminated or cleared for
inspection for a minimum of eighteen (18) months from the redelivery date except
for those inspections required more frequently than every eighteen (18) months,
in which case that AD will be cleared for inspection for the applicable maximum
period between inspections. If the Aircraft is not returned in the condition
required under this Agreement upon expiration or termination of this Lease,
unless lost, destroyed or so damaged as to constitute a constructive total loss
for insurance purposes, the provisions of this Agreement shall continue in full
force and effect with respect to the rights of Lessor and the obligations of
Lessee, including, without limitation, Lessee's obligation to pay rental at 150%
of the monthly rate and other

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charges set forth in Section 19 and to maintain insurance as set forth herein,
without prejudice to any other rights or remedies of Lessor.

         C. At least fourteen (14) days prior to redelivery of the Aircraft,
Lessee, at its expense, will make the Aircraft available to Lessor for
inspection and at least twenty-one (21) days prior to such redelivery, Lessee
will make the Records available to Lessor for inspection ("Final Inspection") to
permit Lessor to verify that the condition of the Aircraft and Records complies
with the terms hereof. The period allowed for the Final Inspection shall be of
such duration as to permit the conduct by Lessor of the following:

             (a) Inspection of Records;

             (b) Inspection of the Aircraft, Engines (including a full video
engine borescope inspection) and Parts;

             (c) A test flight of at least one hour but not more than two hours
(at Lessor's option, the first hour of the redelivery flight will constitute the
test flight) duration. The test flight will be performed by and under the
control of Lessee, with up to three of Lessor's authorized personnel on board as
observers. Lessee will bear the cost of the test flight including but not
limited to costs of crew, insurance, fuel, takeoff and landing rights. Lessee
will at its expense correct Discrepancies revealed during the test flight.

             (d) The Engines shall undergo a video borescope inspection and
power assurance run at or before time of the redelivery test Right performed at
Lessee's expense with Lessor as an observer. Any Discrepancies found not to be
in compliance with the manufacturer's maintenance manual shall be corrected at
Lessee's expense.

          If the condition of the Aircraft upon such Final Inspection does not
conform to the terms hereof, Lessee at its own expense will bring the Aircraft
into compliance. To the extent the time for such rectification extends beyond
the expiration date of the Lease, the term hereof shall be deemed automatically
extended, except that Lessee will pay monthly rental at 150% of the Base Rental
and 150% of the Variable Rental and the provisions hereof shall remain in force
until such rectification has been accomplished, unless Lessor terminates the
Lease in writing at its sole option.

          D. Each transfer of possession of the Aircraft between the parties
shall be accompanied by the delivery to the transferring party of a receipt in
the form of Exhibit D attached hereto, executed by an authorized representative
of the receiving party.

          E. Redelivery of the Aircraft under this Agreement will occur upon
physical redelivery of the Aircraft to Lessor at the Redelivery Location upon
execution and delivery by Lessor to Lessee of an aircraft redelivery receipt in
the form of Exhibit D. Lessor shall sign and deliver such receipt to Lessee upon
tender of delivery of the Aircraft to Lessor at the Redelivery Location in
compliance with all of the terms and conditions hereof.

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         F. Lessee will ensure that at return of the Aircraft any and all
airport, navigation and other charges, including but not limited to Eurocontrol
charges, which give rise or may if unpaid give rise to any lien, claim, charge
or encumbrance, right of detention, right of sale or other security interest in
relation to the Aircraft, any Engine or any Part, whether incurred in respect of
the Aircraft or any other aircraft operated by Lessee, have been paid and
discharged in full (whether or not due) and will at Lessor's request produce
evidence thereof satisfactory to Lessor.

3.       CHARGES

         See Exhibit H.

4.       LIMITED WARRANTY; DISCLAIMER

         A. Lessor warrants that it will have good title to the Aircraft, free
and clear of all liens and encumbrances other than the lien of Lessor's Lender,
at the time of delivery to Lessee.

         B. THE AIRCRAFT IS LEASED TO AND ACCEPTED BY LESSEE IN "AS IS"
CONDITION AND WITH ALL FAULTS. LESSOR MAKES NO WARRANTIES WHATSOEVER WITH
RESPECT TO THE AIRCRAFT, EXPRESS OR IMPLIED, EXCEPT THE WARRANTY AS TO TITLE
APPEARING IN SECTION 4A ABOVE.

         C. THE WARRANTIES SET FORTH IN THIS SECTION 4 AND THE OBLIGATIONS AND
LIABILITIES OF LESSOR THEREUNDER, ARE EXPRESSLY IN LIEU OF AND LESSEE HEREBY
WAIVES AND RELEASES LESSOR FROM ANY AND ALL OTHER WARRANTIES, AGREEMENTS,
GUARANTEES, CONDITIONS, DUTIES, OBLIGATIONS, REMEDIES OR LIABILITIES, EXPRESS OR
IMPLIED, ARISING BY LAW OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY WARRANTY
OF MERCHANTABILITY AND FITNESS FOR INTENDED USE OR LOSS OF USE OR STRICT
LIABILITY IN TORT, WITH RESPECT TO ANY EQUIPMENT LEASED HEREUNDER OR LESSOR'S
PERFORMANCE HEREUNDER. NO AGREEMENT OR UNDERSTANDING VARYING, ALTERING OR
EXTENDING LESSOR'S LIABILITY WILL BE BINDING ON LESSOR UNLESS IN WRITING AND
SIGNED BY LESSEE'S AND LESSOR'S DULY AUTHORIZED OFFICER OR REPRESENTATIVE.

         D. Lessor will assign to Lessee any assignable warranties of overhaul
agencies performing any predelivery work for Lessor on the Aircraft and/or
Engines. In the event that Lessor contracts for performance of work on the
Aircraft or Engines prior to delivery, Lessor will use good faith efforts to
obtain industry standard warranties for that work and to assign such warranties
to Lessee.

5.       SET-OFF; ABATEMENT

         All payments provided for herein shall be paid without set-off,
defense, counterclaim or deduction of any nature whatsoever arising from this or
any other transaction or relationship, direct or indirect, which may exist
between the parties, except for taxes imposed on Lessee as a

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result of this Lease with respect to which Lessee is not obligated to indemnify
Lessor under Section 9. There shall be no abatement of Base Rental, Variable
Rental, Supplemental Rental, or other charges payable hereunder for any period
that the Aircraft shall be out of use or unserviceable for any reason
whatsoever, including by way of illustration but not by way of limitation, while
undergoing maintenance, suspension of certification or grounding of the Aircraft
resulting from fire, casualty, or administrative action or revocation or
limitation of government approval, license or permit. If Lessee is prohibited by
Law from making payment in full to Lessor, Lessee will gross up the payment
amount such that the net payment received by Lessor after any deduction or
withholding equals the amounts called for under this Lease. "Law" means any (i)
statute, decree, constitution, regulation, order or any directive of any
government entity, (ii) treaty, pact, compact or other agreement to which any
government entity is a signatory or party and (iii) judicial or administrative
interpretation or application. Nothing in this Section 5 is intended as a waiver
of any rights of Lessee to bring a separate action for default by Lessor of any
of its obligations hereunder.

6.       OPERATION, MAINTENANCE, REGISTRATION, and RECORDS

         A. Lessee shall conduct all flight operations of the Aircraft only with
properly qualified and properly certified flight crews and in accordance with
(i) the manufacturers recommended operating procedures and manuals and
instructions in effect from time to time, (ii) applicable rules, regulations and
requirements of the government of the United States of America, including
specifically, the FAA, and (iii) the applicable rules, regulations and
requirements of any other jurisdiction in which the Aircraft may be operated.

         B. During the Term, Lessee, at its sole cost and expense, will service,
repair, overhaul and maintain the Aircraft in accordance with applicable
requirements of all U.S. governmental agencies including the FAA. In addition,
Lessee will (i) keep the Aircraft in as good operating condition as when
delivered to Lessee, reasonable wear and tear from ordinary use excepted, (ii)
keep the Aircraft in such condition as may be necessary to enable the
airworthiness certification for the Aircraft to be maintained in good standing
at all times under the laws of the United States, and (iii) maintain the
Aircraft in at least the same manner as Lessee maintains, services, repairs or
overhauls similar aircraft operated by Lessee without in any way discriminating
against the Aircraft, whether by reason of its leased status or otherwise;
provided however, that nothing in the foregoing shall be deemed to expand
Lessee's obligations or return of the Aircraft beyond the return provisions
expressly set forth herein. The Aircraft shall be maintained in accordance with
Lessee's FAA approved maintenance program. Such maintenance will include without
limitation all scheduled and unscheduled overhaul and maintenance, including
line maintenance, and replacement of components, parts, and Engines as may be
required. In addition, Lessee will replace or repair any loss or damage to the
Aircraft, regardless of cause. Lessee will fully comply, at its sole cost and
expense, with all instructions and Airworthiness Directives of the FAA falling
due during the Term ("AD") and will comply at its sole cost and expense with all
Alert Service Bulletins (service bulletins issued by the manufacturer requiring
compliance) falling due during the Term, all in accordance with the terms
thereof in the same manner as Lessee complies with such AD's and Alert Service
Bulletins on similar aircraft operated by

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Lessee without in any way discriminating against the Aircraft, whether by reason
of its leased status or otherwise.

         C. Lessee, at its own cost and expense, will promptly replace or cause
to be replaced all Parts which may from time to time become unserviceable, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever. All replacement Parts shall be
owned by Lessee free and clear of all Liens, except replacement Parts
temporarily installed on an emergency basis (Lessee will notify Lessor of any
such emergency replacement involving a Lien or Liens in excess of Ten Thousand
Dollars ($10,000. 00)), and shall be in as good operating condition as, and
shall have a value and utility at least equal to, and be in a modification
status and part number equal or greater than, the Parts replaced assuming such
replaced Parts were in the condition and repair required to be maintained by the
terms hereof. All Parts at any time removed from the Aircraft or any Engine
shall remain the property of the Lessor, no matter where located, until such
time as such Parts shall be replaced by Parts which meet the requirements for
replacement Parts specified above. Immediately upon any replacement Part
becoming incorporated or installed in or attached to the Aircraft or any Engine,
without further act, except replacement Parts temporarily installed on an
emergency basis, (i) such replacement Part shall become the property of Lessor
and shall become subject to this Lease and be deemed a Part for all purposes
hereof to the same extent as the Parts originally incorporated or installed in
or attached to the Aircraft or such Engine, and (ii) the replaced Part shall no
longer be the property of Lessor and shall no longer be deemed a Part hereunder
and provided Lessee is not in default, title to such removed Part shall transfer
to Lessee free and clear of Liens, except for Liens created by or through
Lessee. "Parts" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engine or Engines, which are from time to time incorporated or
installed in or attached to the Aircraft or any Engine. Lessee, at its own
expense, may from time to time make such alterations and modifications in and
additions to the Aircraft or any Engine as Lessee may deem desirable in the
proper conduct of its business, including removal of parts which Lessee deems to
be obsolete or no longer suitable or appropriate for use on the Aircraft or such
Engine ("Obsolete Parts"); provided that no such alteration, modification,
removal or addition impairs the condition or airworthiness of the Aircraft or
such Engine, or diminishes the value, utility or remaining useful life of the
Aircraft or such Engine below the value, utility or remaining useful life
thereof immediately prior to such alteration, modification, removal or addition
assuming the Aircraft or such Engine was then in the condition required to be
maintained by the terms of this Lease. All Parts incorporated or installed in or
attached or added to the Aircraft or an Engine as the result of such or addition
(except those parts which Lessee has leased from others and which may be removed
by Lessee pursuant to the next sentence) (the "Additional Parts") shall, without
further act, become the property of Lessor. Notwithstanding the foregoing
sentence, Lessee may, at any time during the Term, so long as no Event of
Default shall have occurred and be continuing, remove or suffer to be removed
any Additional Part, provided that such Additional Part (i) is in addition to,
and not in replacement of or substitution for, any Part originally incorporated
or installed in or attached to such Aircraft or any Engine at the time of
delivery thereof hereunder or any Part in replacement of or substitution for any
such Part, (ii) is not required to be incorporated or installed in or attached
or added to the Aircraft or any Engine pursuant to the terms of Section 6 hereof
and (iii) can be removed from

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the Aircraft or such Engine without impairing airworthiness or diminishing the
value, utility or remaining useful life of the Aircraft or such Engine which the
Aircraft or such Engine would have had at such time had such alteration,
modification or addition not occurred. Upon the removal thereof as provided
above, such Additional Part shall no longer be deemed the property of Lessor or
part of the Aircraft or Engine from which it was removed. Any Additional Part
not removed as above provided prior to the return of the Aircraft or Engine to
Lessor hereunder shall remain the property of Lessor. Notwithstanding the above,
Lessee shall be permitted to install leased galleys and seats (the "Special
Equipment") on the Aircraft. Lessor agrees that it will claim no interest in the
Special Equipment.

         D. Lessor will cause the Aircraft to be registered in the name of
Lessor under regulations of the United States throughout the Term. Lessee will
assist Lessor in maintaining such registration during the Term. Lessee shall at
its own expense and responsibility cause this Agreement or appropriate financing
statements, so far as permitted by applicable law or regulation, to be kept
filed and recorded at all times during the Term, in such office or offices for
the registration of aircraft in the United States and in such other offices as
may be necessary, or as Lessor may reasonably request, to protect and preserve
Lessor's rights hereunder, and shall on request furnish to Lessor an opinion of
counsel or other evidence satisfactory to Lessor of such filing and recording.

         E. (i) Lessee will maintain complete and accurate records, logs and
other materials required to be maintained in respect of the Aircraft by the FAA
and will provide them to Lessor on reasonable request. In addition, the Records
will include, but not be limited to, records of accomplishment of AD's, service
bulletins, and any modifications. In addition, all overhaul/maintenance Records
for the airframe, engines, APU and components required by Lessor will be
maintained and supplied by Lessee. All such Records shall be the property of
Lessor and will be deemed Records at the time generated. Lessee will report
hours and cycles of operation, and location of operation, to Lessor upon
request. If the Lessee is required pursuant to the terms hereof to pay Variable
Rent at the time a D Check is being performed on the Aircraft, Lessee will
obtain Lessor's prior written approval, which approval will not be unreasonably
withheld, of the "D" Check Vendor if Lessor has notified Lessee of such
requirement.

            (ii) Upon redelivery of the Aircraft to Lessor, Lessee will return
all Records delivered to Lessee by Lessor as well as all Records generated by
Lessee. See Exhibit E; provided, however, Lessee shall not be responsible for
records and documentation with respect to the Aircraft (as the Aircraft was
delivered to Lessee) prior to the commencement of this Lease unless such records
were delivered to Lessee by Lessor. Lessee's obligation is to redeliver
originals of all such Records.

            (iii) With respect to any Part installed by the Lessee during the
Lease and not removed prior to the return of the Aircraft, the Records returned
to Lessor will include:

                  (a) Part number, description, and serial number (if Part is
serialized); and

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                  (b) Historical records, including but not limited to (i)
serviceability status of the Part at installation, (ii) for a time-controlled
Part, total time and cycles, time and cycles since overhaul as may be
applicable, and total time and cycles of the Aircraft or engine at the time of
Part installation, (iii) for a life-limited Part, documentation tracing usage of
the Part since new and all appropriate on-off logs, and (iv) past history,
modification status and overhaul records for components.

7.       MODIFICATION OF THE AIRCRAFT

         A. Except as provided in Section 6C and modifications relating to
seats, and galleys, Lessee shall not make any optional modifications to the
Aircraft, including but not limited to additions, alterations or improvements
without Lessor's prior written consent.

         B. Upon termination of this Lease Agreement, Lessee shall return the
Aircraft to Lessor in its original configuration as delivered to Lessee, or as
otherwise agreed in writing between Lessor and Lessee.

8.       INSPECTION AND RECORDS

         A. While the Aircraft is leased to Lessee, Lessor shall have the right
to inspect the Aircraft and the required maintenance records at any reasonable
time and on reasonable notice (except in the case of an Event of Default where
no notice is required) so as not to delay Lessee's flights or unreasonably
interfere with Lessee's or any permitted Sublessee's operations, including
periods during which the Aircraft is undergoing maintenance. Subject to the
preceding sentence, such inspection shall not restrict Lessor from opening any
panels, bays, doors, etc., which are normally opened during such maintenance.
Upon request, Lessee will advise Lessor of the maintenance schedule of the
Aircraft for the following year and Lessor shall be entitled to have a
representative present at the location of any "C" check or "D" check at all
times during which the work is being performed.

         B. Lessee agrees to furnish Lessor information in such form as Lessor
may reasonably request regarding Lessee's use and operation of the Aircraft
during the term of this Lease as may be necessary to permit Lessor to maintain
its records in accordance with the requirements of all applicable United States
governmental agencies.

9.       TAXES

         A. All payments to be made by Lessee under the Lease shall be paid
without deduction for, or on account of, any present or future taxes, levies,
imposts, value added type charges or taxes, customs, duties, charges, currency
surcharges, fees, assessments, deductions or withholdings of any nature
(collectively, together with interest and penalties thereon, called "Taxes")
imposed, levied, collected, withheld or assessed by any country or any political
subdivision or taxing authority thereof or therein, or by any group or
organization of which such country at the time of payment may be a member,
unless Lessee is compelled by law to make

                                       12

<PAGE>

payment after deducting any of such Taxes, in which event Lessee shall pay to
Lessor such additional amounts as may be necessary to ensure that Lessor
receives an amount in U.S. Dollars equal to the full amount which it would have
received had payment not been made subject to any such taxes. Lessee shall pay
or cause to be paid, and shall indemnify and hold harmless Lessor from and
against, any and all Taxes imposed, levied, collected, withheld or assessed
against Lessee or Lessor by any country or political subdivision or taxing
authority thereof or therein, if and to the extent that such Taxes are payable
as a result of this Lease Agreement, the work performed as set forth in Exhibit
J, the delivery and installation of Hexcel Interiors 737-200 PAX Quikbin
Interior Kits, or the possession, use, operation or repair of the Aircraft.
Notwithstanding the provisions of the above paragraph, Lessee's obligations
under this Section 9 in respect of Taxes shall not include:

            (i) Taxes on, based on, or measured by, net income of Lessor, or
United States federal value added or consumption type charges or taxes imposed
on Lessor, imposed by the United States of America or any United States federal,
state or local political subdivision or taxing authority;

            (ii) Taxes imposed in a taxing jurisdiction (other than by the
United States federal government or by the jurisdiction in which Lessor is
incorporated in or maintains its principal place of business) for a tax period
during which neither the Aircraft nor any part thereof has been located or
operated in that taxing jurisdiction.

            (iii) Any Taxes imposed as a result of a sale, transfer of title,
mortgaging, pledging, financing, voluntary transfer of other voluntary
disposition by Lessor of the Aircraft or part thereof or interest therein, or
any interest in the Rent or part thereof or any interest in the Lease or part
thereof, unless such sale, transfer, mortgage, pledge or disposition occurs by
reason of the exercise of Lessor's remedies under this Lease upon an Event of
Default, provided however, that Lessor shall comply with any reasonable request
as Lessee shall make concerning the appropriate jurisdiction in which such sale,
transfer or disposition shall be made (with Lessee bearing any costs associated
therewith) unless Lessor determines (and advises Lessee) that such compliance
with Lessee's request would generate an adverse consequence to Lessor.

            (iv) Any penalties or interest caused solely by the negligence or
willful misconduct of Lessor in connection with its obligations under this
Section 9.

            (v) Any Taxes caused solely by a failure by Lessor to furnish in a
timely manner notice or information which Lessor is required to furnish to
Lessee by the terms of this Section;

            (vi) Taxes relating to the Aircraft or any part thereof, or interest
therein, for any taxable period or portion thereof, relating to events occurring
prior to commencement of the Term of this Lease with the exception of work
performed as set forth in Exhibit J and delivery and installation of Hexcel
Interiors 737-200 PAX Quikbin Interior Kit or after the expiration of the Term
of this Lease and the redelivery of the Aircraft in accordance with this Lease;

                                       13

<PAGE>

            (vii) Taxes based on or measured by the value or principal amount of
any loan or promissory note (or security therefore) entered into by Lessor or
anyone claiming an interest in the Aircraft or any portion thereof through
Lessor.

         B. In the event any report or return is required to be made with
respect to any obligation of the Lessee, under or arising out of this Section 9
(including but not limited to personal property tax returns), the Lessee shall
(a) to the extent required or permitted by law, make and file in its own name
such return, statement or report, and (b) in the case of any other such return,
statement or report required to be made in the name of Lessor advise Lessor of
such fact and prepare such return, statement or report for filing by Lessor or,
where such return, statement or report shall be required to reflect items in
addition to any obligation of the Lessee under or arising out of this Section 9,
provide Lessor with information sufficient to permit such return, statement or
report to be properly made with respect to any obligation of the Lessee under or
arising out of this Section 9. Lessee shall indemnify and hold Lessor harmless
from and against any liabilities, obligations, losses, damages, penalties,
interest, claims, actions, suits and costs arising out of any late or inadequate
payment of any such Taxes, or any failure to file, or insufficiency or
inaccuracy in any such return, statement, report or information, except to the
extent that the same is attributable to Lessor's failure to timely and properly
file returns which have been timely prepared by Lessee and delivered to Lessor.
If actual notice is given by any taxing authority to Lessor that a report or
return is required to be filed with respect to any such Taxes referred to in
this Section 9, Lessor shall promptly notify Lessee of such required report or
return. Lessor agrees to respond to any reasonable request of Lessee for
information within the control of Lessor with respect to the filing of any such
report or return, but Lessee agrees to pay any reasonable costs, fees or other
charges of independent counsel or independent accountants incurred by Lessor in
connection with such response or request.

         C. If claim is made against Lessor for any Taxes with respect to which
Lessee has an obligation under this Section 9, Lessor shall promptly notify the
Lessee. If reasonably requested by the Lessee in writing and provided no Event
of Default shall have occurred and is continuing, Lessor, at the sole expense of
the Lessee, shall in good faith and diligently contest (and not settle without
Lessee's written consent) or shall permit the Lessee, if desired by the Lessee,
to contest in the name of the Lessee the validity, applicability or amount of
such Taxes. Lessee may contest, or require that Lessor contest, by (a) resisting
payment thereof if practicable, (b) not paying the same except under protest
with funds advanced by Lessee on an interest-free basis, if protest is necessary
and proper, and (c) if payments be made, using reasonable efforts to obtain a
refund thereof in appropriate administrative and judicial proceedings; provided,
however, that, in each such instance, the Lessor shall not be required to
undertake any contest unless:

            (i) Lessee shall have provided Lessor with an opinion of legal
counsel reasonably acceptable to Lessor to the effect that a reasonable basis
exists to contest such claim (provided, however, that no such opinion shall be
necessary in order to contest such claim in meetings with auditors, revenue
agents, or in other informal meetings with staff members of the applicable tax
authority) and, prior to the commencement of any appeal of an adverse judicial
decision, with an opinion of such tax counsel to the effect that a reasonable
basis exists to appeal.

                                       14

<PAGE>

such adverse judicial decision (which opinions shall be obtained at Lessee's
sole cost and expense);

            (ii) Such proceedings do not involve any material risk or danger of
the sale, forfeiture or loss of the Aircraft or any part thereof or interest
therein or the imposition of criminal penalties or sanctions against Lessor or
the creation of any Lien other than a Lien for taxes not yet due or being
contested in good faith by appropriate proceedings, and for payment of which
such reserves if any, as are required to be provided under generally accepted
accounting principals have been made unless Lessee has provided to Lessor a bond
or other security reasonably satisfactory to Lessor (provided that in the case
of criminal penalties or sanctions such bond or other security shall be
satisfactory to Lessor in its sole discretion) to protect against such risk or
danger;

            (iii) in the event that the subject matter of the contest is of a
continuing nature and has previously been decided adversely pursuant to the
contest provisions of this Section 9 by the highest court to which an appeal
could be taken (other than the U.S. Supreme Court), there has been a change in
the law (including, without limitation, amendments to statutes or regulations,
administrative rulings and court decisions) after such claim shall have been so
previously decided and Lessor shall have received an opinion of independent tax
counsel selected by the Lessee and reasonably acceptable to Lessor, which
opinion shall be obtained at the Lessee's sole expense, to the effect that, as a
result of such change, it is more likely than not that the position which Lessor
or the Lessee, as the case may be, had asserted in such previous contest would
prevail;

            (iv) No Event of Default shall have occurred and be continuing;

            (v) Prior to the commencement of any contest undertaken by the
Lessee or any contest undertaken by Lessor with respect to which Lessor is
required to follow the direction of the Lessee, the Lessee shall have delivered
to Lessor a written acknowledgment of its obligation to indemnify fully Lessor
to the extent that the contest is not successful;

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

         Lessee shall not be deemed to be in default under any of the above
indemnification provisions of this Section 9 so long as Lessee shall diligently
prosecute a contest in conformity with the requirements of this Section 9C, or
in the case where the Lessor shall be prosecuting such contest pursuant to this
Section 9C, Lessee has fulfilled all of its obligations under this Section 9C
with respect to such contest. Notwithstanding the foregoing, if a claim is made
against Lessor which, if successful, would result in the imposition of Taxes
under circumstances which would require the Lessee to indemnify Lessor, Lessor
shall be released from its responsibility to contest such claim, or part
thereof, if it agrees in writing with Lessee not to seek indemnification from
Lessee in respect of the claim, or such part thereof to be contested. In the

                                       15

<PAGE>

event Lessor fails diligently to contest, or refuses to permit the Lessee to
contest, a claim or part thereof which Lessor has the obligation to contest or
to permit Lessee to contest under this Section 9, then Lessee shall not be
obligated to indemnify Lessor for such claim or such part thereof and Lessor
shall refund to Lessee any amounts paid or advanced by Lessee in connection with
such Taxes that were the subject of such claim (plus interest from the date
payment is due at the rate established for refunds by the taxing authority
imposing such taxes).

         D. If Lessor shall obtain a refund of all or any part of such tax, fee
or other charge paid by Lessee, Lessor shall pay the Lessee the amount of such
refund less the amount of any Taxes payable by Lessor in respect of the receipt
of such refund; provided that such amount shall not be payable (x) before such
time as the Lessee shall have made all payments or indemnities then due to
Lessor under the Lease, or (y) while any Event of Default is outstanding and
continues unremedied. If in addition to such refund, Lessor shall receive an
amount representing attorneys fees, interest or other amount with respect to
such refund, the Lessee shall be paid that proportion of such amounts which is
fairly attributable to Taxes paid by the Lessee prior to the receipt of such
refund.

10.      INDEMNITY

         A. LESSEE HEREBY RELEASES AND AGREES TO INDEMNIFY, DEFEND AND SAVE
HARMLESS LESSOR, AND ITS DIRECTORS, OFFICERS, AGENTS, MEMBERS AND EMPLOYEES
(COLLECTIVELY THE "INDEMNITEES"), FROM ANY AND ALL LIABILITIES, DAMAGES, LOSSES,
EXPENSES, DEMANDS, CLAIMS, SUITS OR JUDGMENTS, INCLUDING ALL REASONABLE
ATTORNEYS' FEES, COSTS AND EXPENSES IN CONNECTION THEREWITH OR INCIDENT THERETO,
FOR THE DEATH OF OR INJURIES TO ANY PERSONS WHOMSOEVER (EXCLUDING EMPLOYEES OF
THE INDEMNITEES IN THEIR CAPACITY AS EMPLOYEES), AND FOR THE LOSS OF, DAMAGE TO
OR DESTRUCTION OF OR DELAY IN DELIVERY OF ANY PROPERTY WHATSOEVER, INCLUDING
PROPERTY OF THE PARTIES HERETO OR THAT OF THEIR DIRECTORS, OFFICERS, AGENTS,
MEMBERS AND EMPLOYEES, INCLUDING BUT NOT LIMITED TO THE AIRCRAFT, IN ANY MANNER
ARISING OUT OF POSSESSION, USE, MAINTENANCE, REPAIR OR OPERATION OF THE AIRCRAFT
DURING THE TERM HEREOF, (REGARDLESS OF NEGLIGENCE ON THE PART OF ANY INDEMNITEE,
WHETHER ACTIVE, PASSIVE OR OTHERWISE), PROVIDED, HOWEVER, THAT LESSEE'S
INDEMNITY OBLIGATION HEREUNDER SHALL NOT BE APPLICABLE TO ANY DEATH, INJURY,
LOSS, DAMAGE OR DESTRUCTION TO THE EXTENT CAUSED BY (1) THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF AN INDEMNITEE OR (2) BY ANY INDEPENDENT ACT OF NEGLIGENCE
ON THE PART OF ANY INDEMNITEE NOT RELATED TO THE PERFORMANCE OF THIS AGREEMENT.

         Lessee shall be entitled, at its sole cost and expense, acting through
counsel reasonably acceptable to the respective Indemnitee, (i) in any judicial
or administrative proceeding that involves solely a claim for which payment or
indemnity is sought under this Section 10, to assume responsibility for and
control thereof, (ii) in any judicial or administrative proceeding

                                       16

<PAGE>

involving a claim for which payment or indemnity is sought under this Section
10, and other claims related to the transactions contemplated by this Lease, to
assume responsibility for the control of such claim for which payment or
indemnity is sought under this Section 10, to the extent that the same may be
and is severed from such other claim, and (iii) in any other case, to be
consulted by such Indemnitee with respect to judicial proceedings subject to the
control of such Indemnitee. Notwithstanding any of the foregoing to the
contrary, Lessee shall not be entitled to assume responsibility for and control
of any such judicial or administrative proceedings (1) while an Event of Default
shall have occurred and be continuing, or (2) if such proceedings will involve
the sale, forfeiture or loss of, or the creation of any Lien on the Aircraft. An
Indemnitee may participate at its own expense and with its own counsel in any
judicial proceeding controlled by Lessee pursuant to the preceding provisions of
this Section 10.

         An Indemnitee shall supply Lessee with such information reasonably
requested by Lessee as is necessary or advisable for Lessee to control or
participate in any proceeding to the extent permitted by this Section 10. Lessee
shall not enter into a settlement or other compromise with respect to any claim
without the prior written consent of any Indemnitees affected thereby, which
consent shall not be unreasonably withheld or delayed provided that Lessee is
solely responsible for any recoveries or awards pursuant to such settlement or
other compromise.

         B. Lessee shall be liable for and shall indemnify and save harmless
Lessor from any amounts payable by Lessor to any third party as a result of any
breach by Lessee of the terms and conditions of use of the Aircraft set forth in
this Agreement, together with any costs and expenses incurred by Lessor in
connection therewith.

         C. The indemnities contained in this Section 10 will continue in full
force and effect notwithstanding the expiration or other termination of this
Agreement or the letting of the Aircraft hereunder.

11.      LOSS OF OR DAMAGE TO AIRCRAFT; AGREED VALUE

         A. Except to the extent that any loss or damage is caused by the
willful misconduct of Lessor, Lessee shall be liable to Lessor for, and shall
indemnify and save Lessor harmless from, any loss of or damage to the Aircraft
(including Engines, Parts, assemblies and components) occurring while leased to
Lessee hereunder or while in the possession, custody or control of Lessee and
arising from any cause whatsoever.

         B. Total Loss with respect to the Aircraft, or any Engine means any of
the following with respect to such property: (i) the loss of such property or of
the use thereof due to the destruction of or damage to such property which
renders repair uneconomic or which renders such property permanently unfit for
the uses permitted in Section 1A above for any reason whatsoever; (ii) any
damage to such property which results in an insurance settlement with respect to
such property on the basis of a total loss, or a constructive total loss; (iii)
the theft or disappearance of such property, or the confiscation, condemnation,
or seizure of, or requisition of title to, or loss of such property by any
governmental authority which shall have resulted in the loss of title or
possession of such property by Lessee for a period in excess of sixty (60) days.

                                       17

<PAGE>

         C. Lessor and Lessee hereby agree and fix the Agreed Value of the
Aircraft (together with all assorted equipment installed therein) to be
$11,000,000. The Agreed Value will decrease by 5% on each annual anniversary of
the Delivery Date. In the event the Aircraft shall become a Total Loss, Lessee
shall immediately notify Lessor thereof and Lessee shall within sixty (60) days
of such loss pay to Lessor in cash the Agreed Value of the Aircraft less any
hull insurance proceeds paid to Lessor in accordance with Section 12.B. below,
and Lessee shall further continue to pay Lessor the Base Rental for each day
between the day the Aircraft is lost or damaged as provided above and the day
Lessor receives the full Agreed Value for the Aircraft.

         D. Upon the Total Loss of an Engine not then installed in the Aircraft,
or a Total Loss of an Engine installed in the Aircraft not involving a Total
Loss of the Aircraft, Lessee shall give Lessor prompt written notice thereof and
Lessee shall replace such Engine within a reasonable time period but not to
exceed thirty (30) days of such Total Loss by duly conveying or causing to be
conveyed to Lessor as a replacement for such Engine, good and marketable title
to another engine reasonably acceptable to Lessor, which engine shall be free
and clear of all liens and encumbrances, shall have a value and utility at least
equal to and be in as good operating condition, as the Engine which sustained
the Total Loss, assuming such Engine was in the condition required to be
maintained hereunder. Such replacement engine, after reasonable approval and
acceptance by Lessor, shall be deemed an "Engine" as defined herein. Provided
Lessee is not in default hereunder, Lessor will then convey to Lessee title,
free and clear of all Liens, except for Liens created by or through Lessee, to
the Engine that sustained the Total Loss. Lessee's obligation to pay the Base
Rental, Variable Rental, Supplemental Rental, and other charges shall continue
in full force and effect, but Lessee shall be entitled to be reimbursed by
Lessor by the amount of insurance proceeds, if any, received by Lessor on
account of the insurance required to be carried by Lessee with respect to such
replaced Engine.

12.      INSURANCE

         Lessee will, at its own expense, procure and maintain in full force and
effect during the term of this Agreement (covering the Aircraft and the Engines
anywhere in the world where Lessee operates), a policy or policies of insurance,
with a responsible insurance company or companies active in the airline
industry, of the types and in the minimum amounts set forth below:

         A. (i) Comprehensive Airline Insurance in an amount which will produce
single limit per occurrence coverage of at least Three Hundred Million Dollars
($300,000,000), provided that if Lessee carries a higher liability limit fleet
wide, then Lessee will furnish such higher limits hereunder.

            (ii) Lessee shall cause the aforesaid insurance policies to be duly
and properly endorsed by Lessee's insurance underwriters:

                  (a) To name Lessor and its directors, officers, agents,
members and employees as additional insureds thereunder;

                                       18

<PAGE>

                  (b) To provide said insurance shall be primary insurance and
any other insurance policy or policies of Lessor shall be excess insurance;

                  (c) To cover the contractual liability assumed by Lessee under
this Agreement including, but not limited to, any liabilities and indemnities
assumed by Lessee under any supplements to this Lease hereafter executed by
Lessor and Lessee, however, such coverage is only to the extent of coverage
afforded under the policies;

                  (d) The policies will contain cross liability and severability
of interest clauses.

         B. (i) Aircraft Hull Insurance -- All-Risk, in the amount designated in
Section 11.C., as the Agreed Value of the Aircraft.

            (ii) Lessee shall cause said Aircraft hull insurance policy to be
duly and properly endorsed by Lessee's insurance underwriters:

                  (a) To provide that all physical damage losses with respect to
the Aircraft will be adjusted with Lessee (subject to the approval of Lessor).
In the event of a Total Loss of the Aircraft, Lessor is named as sole loss payee
for all insurance proceeds up to the Agreed Value. With respect to damage or
loss not constituting a Total Loss of the Aircraft, the Lessor is named as sole
loss payee in respect of all insurance proceeds where such insurance proceeds
exceed US $500,000.00. Said proceeds will be applied by Lessor toward payment of
repairs of damage claimed unless Lessor waives this provision and permits
payment of insurance proceeds directly to Lessee or the facility effecting
repairs. Such insurance proceeds which are not in excess of US $500,000.00 shall
be payable solely to Lessee; provided that upon receipt by Insurers and the
insurance broker of written notice from Lessor that a Default or an Event of
Default on the part of Lessee has occurred and is continuing, all payments up to
the Agreed Value will be made to Lessor. In all cases, any insurance proceeds,
as a result of policies carried by Lessee, in excess of the Agreed Value will be
payable solely to Lessee.

                  (b) To waive any and all rights to subrogation that insurers
may or could have against Lessor and its directors, officers, agents and
employees by virtue of such insurance policy, regardless of any negligence
(whether active, passive or otherwise) on the part of Lessor its directors,
officers, agents or employees in connection with the leasing of the Aircraft
hereunder or in the performance of this Lease, but such waiver of rights of
subrogation shall only be to the same extent Lessee has waived its rights of
recovery against or agreed to indemnify Lessor, its directors, officers, agents
and employees elsewhere in this Lease.

            (iii) All Risk Property Insurance (including in-transit coverage on
any Engine covering any damage which may occur while in Lessee's care, custody
or control but not then attached to an aircraft) on a replacement value basis
during all periods from their delivery to Lessee by Lessor until their
redelivery to Lessor by Lessee.

                                       19

<PAGE>

         C. Lessee shall cause the aforesaid insurance policies to be duly and
properly endorsed by Lessee's insurance underwriters to provide that Lessor be
given not less than thirty (30) days prior written notice in the event that
either Lessee or Lessee's insurance underwriters desire to amend, materially
change the policies in a manner adverse to Lessor, cancel or terminate said
policy or policies or any part or parts thereof, except war risk coverages, in
which case notice of cancellation shall not be less then seven (7) days or such
lesser period as may be customary in the industry from time to time.

         D. Lessee shall, with respect to any losses payable in connection with
the Aircraft, Engines or any of its Parts, cause its insurers promptly to adjust
the same with Lessee, subject to Lessor's approval and shall be payable directly
to Lessor; provided, however: (i) final decision with respect to any adjusted
claim shall be made solely by Lessor, and (ii) the insurance proceeds of any
adjusted claim will be applied by Lessor toward payment of repairs of damage
claimed.

         E. Lessee shall furnish Lessor with acceptable certificates of
insurance evidencing the coverage and endorsements as required herein. Such
certificates shall be delivered to Lessor not less than five days prior to the
delivery of the Aircraft. Renewal certificates shall be provided to Lessor not
less than 10 days prior to any policy expiration.

         F. All policies shall contain a "Breach of Warranty" clause in behalf
of Lessor.

         G. All insurance coverages listed in Section 12B above will include war
risk, hijack, terrorism and confiscation coverage in the amounts listed therein.

         H. Lessee will not operate the Aircraft or any Engine in an area or on
any route excluded from coverage by any insurance required under this Section
12.

         I. Lessor and Lessee shall each be permitted to carry insurance with
coverage limits which are in addition to/excess over what is required by
Sections 12A, 12B and 12G, provided such insurance does not adversely affect
and/or prejudice the insurance required by those sections.

13.      COMPLIANCE WITH LAWS

         Lessee agrees that the Aircraft leased hereunder shall not be used in
any manner which shall violate any law or regulation of any government or
governmental agency having jurisdiction and that any fine, penalty, or
forfeiture resulting from any such violation shall be the sole responsibility of
Lessee and Lessee agrees to indemnify and save Lessor harmless from all
liability therefor. Lessee agrees that it shall procure and maintain at its own
expense all certificates, permits and licenses, as may be required, and shall
give all notices required in connection with such possession, operation or use.
Lessee shall furnish Lessor with such documentary evidence of the procurement of
such certificates, permits and licenses as may be requested by Lessor. Lessee
agrees that while the Aircraft is leased hereunder, the Aircraft shall be
retained by Lessee in its possession, custody and control, unless otherwise
provided herein.

                                       20

<PAGE>

14.      TITLE TO AIRCRAFT

         A. Except as otherwise expressly provided herein, title to the
Aircraft, including Engines, accessories and other equipment of every nature
which are physically attached to or in operation on the Aircraft and title to
any other engines and personal property furnished or supplied by Lessor to
Lessee hereunder shall be and remain in Lessor's name at all times. Lessee shall
have no right, title or interest in the Aircraft except as provided in this
Lease. Lessee shall not directly or indirectly create, incur, assume or suffer
to exist any Lien (any mortgage, pledge, lien, charge, encumbrance, lease,
exercise of rights, security interest or claim) on or with respect to the
Aircraft or any Engine, title thereto or any interest therein, except (i) the
respective rights of Lessor and Lessee as herein provided; (ii) Lessor's Liens
(Liens arising as a result of (a) claims against Lessor not related to the
transactions contemplated by this Lease; (b) acts of Lessor, not contemplated
and expressly permitted under this Lease; or (b) taxes imposed against Lessor
which are not indemnified against by Lessee pursuant to Article 9) with respect
to the Aircraft or any Engine; (iii) Liens for Taxes either not yet due or being
contested in accordance with Section 9 hereof and so long as adequate reserves
are maintained with respect to such Liens; and (iv) inchoate materialmen's,
mechanics', workmen's, repairmen's, employees' or other like Liens arising in
the ordinary course of business, which either are not delinquent or are begin
contested in good faith by Lessee, so long as the Aircraft or such Engine is not
in danger of being lost, sold, confiscated, forfeited or seized as a result of
any such Lien provided, however, that Lessee has established cash reserves in an
amount necessary to discharge any such Lien. Lessee shall promptly, at its own
expense, take such action as may be necessary to duly discharge any Lien (except
for the Liens referred to in clauses (i) and (ii) of this Section 14) if the
same shall arise at any time with respect to the Aircraft or any Engine. Lessee
shall promptly pay and discharge when due, or make adequate provision (by way of
security or otherwise) for, or procure that the same are paid and discharged,
all debts, claims, liabilities or obligations whatsoever created by it or any
other Person, or arising as a result of any matter concerning it or any other
Person, which may give rise to any Lien on the Aircraft or any Engine,
including, without limitation, any landing fee, air navigation or similar
charges. Lessee agrees to indemnify and save Lessor harmless from and against
all damages suffered by Lessor including costs and expenses incident thereto, as
the result of Lessee's failure to perform the undertaking herein in this
paragraph provided for.

         B. Lessee shall attach a permanent placard, to be furnished by Lessor,
to the forward side of the cockpit and cabin door adjacent to the Certificate of
Aircraft Registration in the interior of the Aircraft indicating that the
Aircraft is being operated by Lessee in accordance with a Lease Agreement
between Lessee and Lessor and Lessee shall not remove same nor permit it to be
removed and shall immediately replace such placard if it should become lost,
illegible, damaged or destroyed. The placard shall state:

          "Aircraft Serial No. 23045 is owned by Aircraft No. 2, L.L.C.
          ("Lessor") subject to a mortgage in favor of Barnett Bank,
          N.A. It is being operated by Aloha Airlines, Inc., pursuant to
          a Lease Agreement between Lessor and Aloha Airlines, Inc., as
          Lessee.

                                       21

<PAGE>

          Owner's Address: 1100 N. Wood Dale Road, Wood Dale,
          Illinois 60191"

         C. Lessee shall also cause a placard, to be furnished by Lessor, to be
attached to each Engine at all times during the Lease Term and until redelivery
to Lessor pursuant to the Lease, as follows:

               "This Engine is owned by Aircraft No. 2, L.L.C, 1100 N.
          Wood Dale Road, Wood Dale, Illinois 60191, subject to a
          mortgage in favor of Barnett Bank, N.A."

15.      ASSIGNMENT OR SUBLEASE; POSSESSION AND USE

         A. Lessee shall neither assign this Agreement in whole or in part nor
sublease the Aircraft or transfer the custody or possession thereof to any third
party, except with the prior written consent of Lessor; provided, however,
Lessee may sublease the Aircraft to a commercial air carrier from the list
attached as Exhibit G or such other commercial air carrier as is approved in
writing by Lessor, such approval not to be unreasonably withheld (a "Permitted
Sublessee"); provided further, that at any time during the Term Lessor may, by
notice to Lessee, notify Lessee that any entity on said Exhibit G no longer
constitutes a Permitted Sublessee (which determination shall be made on a
reasonable basis by the Lessor) whereupon such entity shall no longer constitute
a Permitted Sublessee, provided that Lessor may not remove an entity from such
list during a lease to such Permitted Sublessee.

         The following conditions must be met in connection with any such
sublease:

         (i) the sublease agreement is assigned to Lessor as security on or
before its effective date pursuant to documentation in form and content
reasonably acceptable to Lessor;

         (ii) all rent payable by the sublessee under such sublease agreement
shall be payable directly by the sublessee to Lessor, provided that so long as
no Event of Default has occurred and is continuing hereunder, Lessor shall pay
to Lessee out of each payment received from sublessee, the excess of the
sublease rental over the amounts due hereunder.

         Further, with respect to any such sublease:

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

         (b) the rights of the sublessee shall be subject and subordinate to all
the terms of this Lease, including without limitation the right of repossession
pursuant to Section 17 and to avoid such sublessee's right to possession upon
such repossession;

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

                                       22

<PAGE>

         (d) any sublease permitted by Section 15.A. shall provide that (i) the
Aircraft, Airframe or Engine may not be operated or used other than as provided
in Sections 6 and 15 hereof, (ii) Lessor may avoid or terminate such sublease
following an Event of Default hereunder, and (iii) to the extent not
accomplished by an assignment of sublease, upon an Event of Default such
sublease shall automatically be deemed assigned to Lessor until such time as the
event of default has been cured;

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

         (f) with respect to any sublease permitted by Section 15.A., at least
ten (10) Business Days prior to such sublease becoming effective Lessee shall
furnish a copy of such sublease to Lessor for Lessor's review to determine that
the sublease is in compliance with the provisions hereof. Lessee shall reimburse
Lessor for Lessor's out-of-pocket costs and legal fees in connection with its
review of such document;

         (g) any sublease permitted by Section 15.A. shall expressly provide (x)
that such sublessee will not transfer possession or control of the Aircraft,
Airframe or Engine to anyone other than Lessee or Lessor, except to the extent
permitted pursuant to Section 15B of this Lease, and (y) that all rights of the
sublessee are subject and subordinate to all the terms of this Lease including,
without limitation, in each instance, Lessor's rights to repossession pursuant
to Section 17 and Lessor's rights to avoid such sublessee's right to possession
upon such repossession;

         (h) such sublease shall include appropriate provisions (whether by
requiring such obligations to be performed by the sublessee, Lessee, or both)
for the operation, maintenance and insurance of the Aircraft and the Engines
subleased thereby which are comparable to, or more restrictive than, the
provisions of this Lease; provided the foregoing conditions are met, sublessee
will be permitted to operate the Aircraft under the maintenance program of the
sublessee and in accordance with applicable laws governing sublessee's
operations and, provided, that Lessor and Lessor's lender have received an
opinion of counsel satisfactory to Lessor and Lessor's lender with respect to
title and perfection of security interests, sublessee will be permitted to
operate the Aircraft on the registry and with a certificate of airworthiness
where the sublessee is located; and

         (i) any such sublease shall expressly prohibit any assignment or
further sublease of the Aircraft, the Airframe or any Engine and any of the
rights under such sublease.

         B. Lessee shall not transfer possession of the Aircraft to any person
provided that, so long as no Event of Default or event which could constitute an
Event of Default (as defined herein), but for the lapse of time or the giving of
notice or both, shall have occurred and be continuing, Lessee may, without the
prior written consent of Lessor:

                                       23

<PAGE>

            (i) subject any Engine to, in each case, agreements (customary in
the airline industry and entered into in the ordinary course of its business)
with an FAA certified licensed engine overhaul agency, provided that: (a) no
such agreement or arrangement results in or requires the transfer of title to
such Engine; or (b) if Lessor's title to such Engine shall be divested under any
such agreement or arrangement, such divestiture shall be deemed to be a Total
Loss with respect to such Engine and Lessee shall comply with Section 11 hereof
in respect thereof;

            (ii) deliver possession of the Aircraft, the Airframe (Airframe
shall mean (i) the aircraft described on Exhibit A, but not including any Engine
installed thereon, and (ii) any and all Parts so long as the same shall be
incorporated or installed on or attached to the Airframe, or so long as title
thereto shall remain vested in Lessor in accordance with the terms of Section 6,
after removal from the Airframe) or any Engine or any Part to the manufacturer
thereof for testing or other similar purposes or to any organization for
service, repair, maintenance, testing or overhaul work on such Aircraft,
Airframe or Engine or any Part thereof or for alterations or modifications in or
additions to such Aircraft, Airframe or Engine to the extent required or
permitted by the terms of Sections 6 and 7 hereof;

            (iii) install an Engine on an airframe (other than the Airframe)
owned by Lessee during the term hereof free and clear of all Liens except: (a)
those Liens of the type permitted under Section 14 hereof and those which apply
only to the engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other than Parts)
installed on such airframe (but not to the airframe as an entirety; and (b) the
rights of United States participants under normal interchange agreements which
are customary in the airline industry and do not contemplate, permit, result in
or require the transfer of title to the Airframe, Engines or Parts installed
thereon;

            (iv) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement, provided that:
(a) such airframe is free and clear of all Liens except the right of the parties
to the lease or conditional sale or other security agreement covering such
airframe and except Liens of the type permitted by Section 14 hereof which
insofar as they relate to such Engine are subordinate to the rights of the
Lessor hereunder, and the Lien of any mortgage which either by its terms does
not apply to the Engine or which effectively provides that each Engine leased to
Lessee hereby shall not become subject to the Lien thereof or to any rights of
any party thereunder other than Lessee (with respect to Lessee's rights
expressly granted hereunder), notwithstanding the installation of such Engine on
any airframe subject to the Lien of such mortgage, unless and until Lessee shall
become the owner of such Engine and Lessor shall have no further interest
therein, all pursuant to the express terms of this Lease; and (b) there shall be
in effect a written agreement of the lessor or secured party of such airframe
(which may be the lease or conditional sale or other security agreement covering
such airframe) substantially similar in effect to the agreement of Lessor in
Section D below whereby such lessor or secured party effectively and expressly
agrees that neither it nor its successors or assigns will acquire or claim any
right, title or interest in any Engine or any Part thereof by reason of such
Engine being installed on such airframe at any time while such Engine is subject
to this Lease or owned by Lessor, and a copy of such agreement shall be provided
to

                                       24

<PAGE>

Lessor upon written request of Lessor. In the event Lessee installs on the
Airframe an engine that is leased by Lessee from a lessor, or is owned by Lessee
subject to a conditional sale agreement or other security agreement held by a
secured party, Lessor hereby agrees for the benefit of such lessor or secured
party that Lessor will not acquire or claim, as against such lessor or secured
party, any right, title or interest in any such engine as the result of such
engine being installed on the Airframe at any time while such engine is subject
to such lease or conditional sale or other security agreement and owned by such
lessor or subject to a security interest in favor of such secured party;

            (v) subject (i) any Engine or Part to normal interchange agreements
or other similar agreement customary in the airline industry and entered into by
Lessee in the ordinary course of its business and (ii) any Engine or Part to
short-term pooling or borrowing, reciprocal leasing or other arrangement
customarily entered into by major U.S. air carriers and entered into by Lessee
in the ordinary course of its business; provided that no transfer of the
registration of the Aircraft shall be effected in connection therewith and
Lessor's title to and interest in the Aircraft, such Engine or Part shall not be
divested or impaired and that if Lessor's title or interest shall be divested or
impaired, such event shall be deemed to be a Total Loss with respect thereto;
and further provided that the foregoing shall be subject to approval by Lessor
of the air carriers who participate with Lessee in such interchange, pooling or
other similar agreements; and

            (vi) transfer possession of the Aircraft, Airframe or any Engine to
the United States Government pursuant to a contract not extending beyond the
Term of this Lease or to the Civil Reserve Air Fleet Program or any similar or
substitute programs so long as Lessee shall promptly notify Lessor upon
transferring possession of the Aircraft, Airframe or any Engine pursuant to such
program or contract.

         C. With respect to any transfer pursuant to Section 15 A or 15 B:

            (i) the rights of any transferee that received possession by reason
of a transfer permitted by Section 15B shall be subject and subordinate to all
the terms of this Lease, including but not limited to, Lessor's rights to
repossession pursuant to Section 17 and to terminate and avoid such transfer
upon such repossession and to require such transferee forthwith to deliver the
item which is subject to such transfer upon repossession;

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

            (iii) no relinquishment of possession pursuant to the terms of
Section 15B shall in any way discharge or diminish any of Lessee's obligations
to Lessor hereunder.

         D. In the event Lessee shall have received from the lessor or secured
party of any airframe leased to Lessee or owned by Lessee or subject to a
conditional sale or other security agreement, a written agreement complying with
Section 15 B iv hereof (which agreement may be contained in the lease,
conditional sale agreement or security agreement relating to such airframe), and
such lease or conditional sale or other security agreement covering such
airframe

                                       25

<PAGE>

also covers an engine or engines owned by the lessor under such lease or subject
to a security interest in favor of the secured party under such conditional sale
or other security agreement, Lessor hereby agrees for the benefit of such lessor
or secured party that Lessor will not acquire or claim, as against such lessor
or secured party, any right, title or interest in any such engine as the result
of such engine being installed on the Airframe at any time while such engine is
subject to such lease or conditional sale or other security agreement and owned
by such lessor or subject to a security interest in favor of such secured party.
Lessor also hereby agrees for the benefit of the mortgagee under any mortgage
complying with clause (a) of Section 15 B iv hereof, relating to installation of
an Engine on airframe leased to Lessee, that Lessor will not acquire or claim,
as against such mortgagee, any right, title or interest in any engine subject to
the lien of such mortgage as the result of such engine being installed on the
Airframe at any time while such engine is subject to the lien of such mortgage.

         E. Notwithstanding anything herein to the contrary, in the event of any
sublease hereunder, Lessee shall be obligated to return the Aircraft to Lessor
in the condition required hereunder as if the sublease had not occurred.

16.      EVENTS OF DEFAULT

         Each of the following events shall constitute an "Event of Default":

         A. If default shall be made by Lessee in the making of any payment of
Base Rental, Variable Rental, Supplemental Rental or other charges when due and
payable under this Agreement and such default shall continue for a period of
five (5) Business Days;

         B. If default shall be made by Lessee at any time in the procurement or
maintenance of any insurance coverage prescribed herein;

         C. If default shall be made by Lessee in a material respect in the
observance or performance of any of the other obligations of Lessee contained in
this Agreement and such default shall continue for a period of fifteen (15) days
after notice from Lessor to Lessee specifying the default and requiring that the
same be remedied, provided that if such default cannot be cured within fifteen
(15) days that Lessee has been exercising due diligence to effect such cure;
then such cure must be effected within thirty (30) days;

         D. If Lessee shall become insolvent or go into liquidation or cease
paying its debts as they mature or make an assignment for the benefit of
creditors, or file for protection from its creditors under any applicable law
relating to bankruptcy or insolvency, or a trustee or receiver or liquidator
shall be appointed for Lessee, for a substantial part of its property, or
bankruptcy, or liquidation, reorganization arrangements, insolvency or similar
proceedings shall be instituted by or against Lessee under the laws of any
jurisdiction, unless in the instance of any involuntary proceedings, the
petition or appointment is set aside, withdrawn or ceases within ten (10)
Business Days of its effective date;

                                       26

<PAGE>

         E. If any representation or warranty made by Lessee in or pursuant to
this Agreement proves to be incorrect in any material respect;

         F. If Lessee shall suspend, for a period in excess of thirty (30) days
for reasons other than war, insurrections, strikes, riots, fire, flood,
explosions, earthquakes, serious accidents, any act of government, acts of God
or the public enemy, failure of transportation, cancellation of schedules, or
labor troubles, all or substantially all of its operations or shall cease to
hold all permits, licenses and authorizations necessary for the conduct of its
business or the same shall be revoked or varied in a manner which materially
adversely affects the financial situation of Lessee;

         G. If any order of any Court shall be made, or any process of Law shall
take effect, either in a preliminary manner or otherwise at the behest of any
creditor or obligor of Lessee which shall have the effect of impounding or
attaching the Aircraft or restraining its removal from any airport for any time
whatsoever, and said order or process shall not be set aside, withdrawn, vacated
or cease to be effective within ten (10) Business Days of its effective date;

         H. Lessee shall default in the payment of any unsecured obligation for
the payment of borrowed money which has a principal amount of $1,000,000 or more
or any secured obligation for the payment of borrowed money, for the deferred
purchase price of property or for the payment of rent under any aircraft lease
or other agreement when the same becomes due if such non payment results in an
acceleration of such indebtedness;

         I. If an Event of Default shall occur and be continuing under that
certain Lease Agreement between Fleet National Bank, a National Banking
Association, not in its individual capacity but solely as Trustee for the
benefit of Aircraft No. 1, L.L.C. and Lessee of even date herewith in respect of
aircraft with manufacturer's serial number 23051.

17.      REMEDIES

         Upon the occurrence of any Event of Default and at any time thereafter
so long as the same shall be continuing, Lessor may, at its option, declare by
written notice to Lessee this Agreement to be in default; and at any time
thereafter, so long as any such Event of Default shall not have been remedied,
Lessor may do one or more of the following with respect to all or any part of
the Aircraft and any or all of the Engines as Lessor in its sole discretion
shall elect, to the extent permitted by and subject to compliance with any
mandatory requirements of, applicable law then in effect.

         A. Upon the written demand of Lessor and at Lessee's expense, cause
Lessee to return promptly, and Lessee shall return promptly, the Aircraft or any
Engine as Lessor may so demand, to Lessor or its order, in the manner and
condition required by, and otherwise in accordance with all the provisions of,
Sections 2, 6, Exhibit C, Exhibit E and other provisions of this Agreement as if
such Aircraft or Engine were being returned at the end of the Lease Term, or
Lessor, at its option, may enter upon the premises where all or any part of the
Aircraft or any Engine is located and take immediate possession of and remove
the same by summary

                                       27

<PAGE>

proceedings or otherwise (and, at Lessor's option, store the same at Lessee's
premises until disposal thereof by Lessor), all without trespass or liability
accruing to Lessor for or by reason of such entry or taking of possession or
removing whether for the restoration of damage to property caused by such action
or otherwise;

         B. Whether or not Lessor shall have exercised, or shall thereafter at
any time exercise, any of its rights under paragraph (a) above with respect to
the Aircraft, Lessor by written notice to Lessee specifying a payment date not
earlier than five (5) days from the date of such notice, may demand that the
Lessee pay to Lessor, and Lessee shall pay Lessor, in addition to such other
remedies, as liquidated damages for loss of a bargain and not as a penalty, an
amount equal to any Base Rental, Variable Rental, Supplemental Rental and other
charges unpaid as of the date of such notice, plus an amount equal to the entire
remaining Base Rental for the duration of the unexpired period remaining of the
initial stated term of the Agreement, plus any extension exercised discounted to
present value at nine percent (9%) per annum, it being acknowledged and agreed
that actual damages under such circumstances would be difficult or impossible to
determine.

         C. Lessor may terminate this Agreement, and/or may exercise any other
right or remedy which may be available to it under applicable law or proceed by
appropriate court action to enforce the terms hereof or to recover damages for
breach hereof. In addition, Lessee shall be liable, for any and all amounts due
hereunder, including all costs and expenses reasonably incurred by reason of the
occurrence of any Event of Default and the exercise of Lessor's remedies with
respect thereto, including but not limited to reasonable attorneys fees and
costs and expenses incurred by Lessor in connection with the return of the
Aircraft or any Engine in accordance with the terms hereof, or in placing such
Aircraft or Engine in the condition and airworthiness required hereby.

18.      EXCUSABLE DELAY

         Lessor shall use reasonable efforts to deliver the Aircraft and to
perform its obligations in a timely manner; provided, however, Lessor shall not
be responsible nor deemed to be in default on account of delays in the
performance of this Agreement or for delays or failure in delivering the
Aircraft to Lessee due to causes beyond Lessor's control, including, but not
limited to, failure of TAP to timely deliver the Aircraft to Lessor in the
condition required under the TAP Lease, war, insurrections, strikes or labor
disputes, inability or failure of suppliers to deliver parts or materials,
riots, fires, floods, explosions, earthquakes, serious accidents, any act of
government, acts of God or the public enemy, failure of transportation,
cancellation of schedules, or labor troubles causing cessation, slowdown or
interruption of work, actions or inactions of Lessee; provided, however, Lessee
shall not be required to accept delivery of the Aircraft if the excusable delay
extends beyond May 1, 1998, except if such excusable delay was caused by Lessee.

                                       28

<PAGE>

19.      DELAY IN RETURN OF AIRCRAFT

         In the event Lessee is unable or fails to return the Aircraft to Lessor
upon the expiration of this Agreement, Lessor shall have the right to repossess
the Aircraft wherever it may be. In addition, all obligations of Lessee under
this Agreement shall continue until the Aircraft is redelivered or repossessed
by Lessor and the Aircraft is put into the condition required hereunder. Base
Rental and Variable Rental will accrue and be paid by Lessee from and after a
failure to return the Aircraft at the time and in the condition required
hereunder at 150% of the Base Rental and Variable Rental.

20.      APPLICABLE LAW AND JURISDICTION

         A. This Agreement is being delivered in the State of New York and shall
be deemed to be a contract made under the laws of the State of New York, U.S.A.,
and for all purposes shall be construed in accordance with the laws of said
State.

         B. The parties agree that any state or federal court located in the
State of New York shall have jurisdiction to hear any suit, action or proceeding
arising out of or in connection with this Lease. Each party hereby acknowledges
and irrevocably consents and submits to the jurisdiction of any such court in
any such suit, action or proceeding. Service of process may be made against a
party either in person, wherever such party may be found, or by notice as
permitted herein to the address of the party set forth in this Lease.

         C. Lessee covenants and agrees that any suit, action or proceeding
arising out of or relating to this Lease or the matters dealt with herein shall
only be instituted by it or its permitted successors or assigns, if at all, in a
state or federal court located in New York.

21.      NOTICES

         Except as otherwise specified in this Agreement, notices required or
permitted hereunder shall be deemed sufficient if delivered personally or sent
by certified mail, return receipt requested, facsimile, telegram, or telex, or
any other customary means of communication addressed as follows or to any other
address which either party may designate in writing to the other party hereto:

Lessor:     Aircraft No. 2, L.L.C.
            1100 North Wood Dale Road
            Wood Dale, Illinois 60191
            Attention: Manager
            Telex No.: 630-227-2046
            Fax No.: 630-227-2058

                                       29

<PAGE>

With a copy to:

            Andrew Schreer, Senior Counsel
            AAR Corp.
            One AAR Place
            1100 N. Wood Dale Road
            Wood Dale, Illinois 60191
            Facsimile 630-227-2058

            Robert D. Crane, President
            CRANE 737-200 L.L.C.
            610 Anacapa Street
            Santa Barbara, California 93101
            Facsimile 805-966-6693

Lessee:

            Aloha Airlines, Inc.
            Senior Vice President Finance and Planning
            P.O. Box 30028                      371 Aokea Street
            Honolulu, Hawaii 96820              Honolulu, Hawaii 96819
            Facsimile No.: 808-833-3100

Notices sent by certified mail shall be deemed effective four (4) days after
mailing and notices sent by any other means shall be effective upon receipt,
and in the case of facsimile confirmed.

22.      HEADINGS

         The paragraph headings herein have been inserted solely for convenience
and in the event of any conflict between such headings and the provisions of
that paragraph, the provisions of the paragraph shall supersede and control.

23.      CONFIDENTIALITY

         A. Lessee expressly covenants and agrees that it will keep confidential
the terms of this Agreement and all information, material, documents and data
furnished by Lessor hereunder other than as may be in any filings with the FAA,
that no part of said items shall be voluntarily furnished or disclosed by Lessee
to any other person, firm or corporation (except any U.S. governmental agency
that may require submission thereof, as required by law, to comply with lender
requirements, to satisfy existing and potential investor due diligence and
requirements, and to Lessee's accountants and attorneys) without Lessor's prior
written consent, that Lessee shall not reproduce the same except for essential
copies for its own internal usage and that Lessee shall return all said items to
Lessor promptly after return of the Aircraft.

         B. Lessor expressly covenants and agrees that it will keep confidential
the terms of this Agreement and all information, material, documents and data
furnished by Lessee hereunder

                                       30

<PAGE>

other than as may be in any filings with the FAA, that no part of said items
shall be voluntarily furnished or disclosed by Lessor to any other person, firm
or corporation (except any U.S. governmental agency that may require submission
thereof, as required by law, to comply with lender requirements, to satisfy
existing and potential investor due diligence and requirements, and to Lessor's
accountants and attorneys) without Lessee's prior written consent, that Lessor
shall not reproduce the same except for essential copies for its own internal
usage and that Lessor shall return all said items to Lessee promptly after
return of the Aircraft.

24.      REPRESENTATIONS, WARRANTIES AND COVENANTS

         A. Lessee represents and warrants that:

            (i) Lessee is a corporation organized and existing under the Laws of
Delaware and has the corporate power and authority to carry on its business as
presently conducted and to perform its obligations under this Agreement and is
the holder of all necessary licenses issued by all governmental authorities
having jurisdiction to authorize or permit Lessee to engage in air
transportation;

            (ii) This Agreement has been duly authorized by all necessary
corporate action on the part of Lessee, and neither the execution and delivery
hereof nor the consummation of the transactions contemplated hereby nor
compliance by Lessee with any terms and provisions hereof will contravene any
law applicable to Lessee or result in any breach of, or constitute any default
under or result in the creation of any lien, charge or encumbrance upon any
property of Lessee under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, bank loan or credit agreement, corporate
charter, by-law, or other agreement or instrument to which Lessee is a party or
by which Lessee or its properties or assets may be bound or affected;

            (iii) The execution and delivery by Lessee of this Agreement, and
any of the transactions by Lessee contemplated hereby, have received, and Lessee
has complied with, every necessary consent, approval, order, or authorization
of, or registration with, or the giving or prior notice to, any government
authority having jurisdiction with respect to the execution and delivery of this
Agreement or the validity and enforceability hereof or the satisfaction of all
monetary and other obligations hereunder.

            (iv) This Agreement has been duly entered into and delivered by
Lessee and constitutes the valid, legal and binding obligation of Lessee,
enforceable in accordance with its terms.

            (v) It is not necessary under the laws of the United States and/or
Hawaii in order to ensure the validity, effectiveness and enforceability of this
Agreement or to protect the property rights of Lessor in the Aircraft that this
Agreement or any other instrument relating thereto be filed, registered or
recorded or that any other action be taken, except for recording in the FAA
Aircraft Registry in Oklahoma City, and a notice filing with the Secretary of
State of

                                       31

<PAGE>

Hawaii and that under the laws of the United States and Hawaii, the property
rights of Lessor in the Aircraft will have priority in all respects over the
claims of all creditors of Lessee;

            (vi) There are no suits or legal proceedings pending or threatened
against Lessee which, if adversely determined, would have a material adverse
effect upon its financial condition or business or its ability to perform its
obligations hereunder, other than as heretofore disclosed in writing by Lessee
to Lessor.

         B. Lessee hereby covenants with Lessor that from the Delivery Date and
during the Term hereof it will:

            (i) duly pay and discharge all Taxes, assessments and governmental
charges upon it or against its properties prior to the date on which penalties
are attached thereto, unless and to the extent only that the same be contested
in good faith and by appropriate proceedings by Lessee. In particular, Lessee
shall pay all airport charges in respect of the Aircraft according as the same
may be incurred;

            (ii) remain in and continue to operate substantially the same line
of business as presently engaged in, preserve its corporate existence, conduct
its business in an orderly efficient and customary manner, satisfy its debts and
obligations as they fall due and keep and maintain all of its properties in good
working order and condition;

            (iii) maintain insurance in respect of its liabilities and
properties in accordance with good airline practice;

            (iv) comply with all laws and regulations for the time being in
force in the State of Hawaii and in any country, to, from, in or over which the
Aircraft is flown;

            (v) within sixty (60) days following the end of each quarter,
furnish to Lessor an unaudited balance sheet of Lessee prepared by it as of the
period ended, together with the related profit and loss statement for such
period;

            (vi) within one hundred twenty (120) days after the close of each
fiscal year of Lessee, furnish Lessor an audited balance sheet, and profit and
loss statement of Lessee (and an unaudited balance sheet); and

            (vii) at its own expense from time to time do and perform such other
and further acts and execute and deliver any and all other further instruments
as may be required by Law or reasonably requested by Lessor to establish,
maintain and protect the respective rights and remedies of Lessor and to carry
out and give effect to the intents and purposes of this Agreement and the
parties hereto provided, however, Lessee will be reimbursed for actual costs
associated with any transfer of Lessor's interest in the Aircraft.

         C. To the extent permitted by law, Lessee hereby agrees, in accordance
with Section 1110 of Title 11 of the United States Code, or any superseding
statutes, as amended from time to

                                       32

<PAGE>

time, that the title of Lessor to the Aircraft, and any right of Lessor to take
possession of such Aircraft in compliance with the provisions of this Lease will
not be affected by the provisions of Section 362 or 363 of such Title 11, or
other analogous part of any superseding statutes, as amended from time to time.

         D. The Lessor represents and warrants to the Lessee that:

            (i) The Lessor is a limited liability company formed under the laws
of Illinois and has the power to own its assets and carry on its business as it
is now being conducted.

            (ii) The Lessor has the power to enter into and perform, and has
taken all necessary action to authorize the entry into, performance and delivery
of, this Agreement and the transactions contemplated by this Agreement.

            (iii) This Agreement constitutes the Lessor's legal, valid and
binding obligation, enforceable against Lessor in accordance with its terms.

            (iv) The entry into and performance by the Lessor of, and the
transactions contemplated by, this Agreement do not and will not:

                  (a) conflict with any laws binding on the Lessor;

                  (b) conflict with the constitutional documents of the Lessor;
or

                  (c) conflict with any document which is binding upon the
Lessor or any of its assets.

            (v) So far as concerns the obligations of the Lessor, all
authorizations, consents, registrations and notifications required under the
laws of the State of Illinois, in connection with the entry into, performance,
validity and enforceability of, and the transactions contemplated by, this
Agreement by the Lessor have been (or will on or before Delivery have been)
obtained or effected (as appropriate) and are (or will on their being obtained
or effected be) in full force and effect.

            (vi) On the Delivery Date, the Lessor shall have the right to lease
the Aircraft to the Lessee under this Agreement.

         E. The representations and warranties in Sections A and D above will
survive the execution of this Agreement. The representations and warranties
contained in Sections A and D above will be deemed to be repeated by the Lessee
and Lessor on delivery and on each subsequent Rent Date as if made with
reference to the facts and circumstances then existing.

                                       33

<PAGE>

25.      ASSIGNMENT AND COOPERATION WITH LESSOR'S LENDER

         A. Subject to Lessee's rights pursuant to the Lease, Lessor may grant
security interests over the Aircraft and the benefit of this Lease to Lessor's
lender as security for Lessor's obligations to Lessor's lender in connection
with Lessor's financing of the Aircraft. Lessor shall also have the right, at
its sole cost and expense, to assign or sell any interest of Lessor in the
Aircraft or this Lease and/or the proceeds thereof, subject to the rights of
Lessee hereunder.

         B. On request by Lessor or Lessor's lender, Lessee will sign and
execute all such documents as Lessor or Lessor's lender may reasonably require
to confirm Lessee's obligations under this Lease. Lessee undertakes to provide
all other reasonable assistance and cooperation to Lessor and Lessor's lender in
connection with the perfection and maintenance of such security interest,
including (without limitation) the effecting of all necessary filings and
registrations at Lessor's sole cost and expense.

         C. Wherever the term "Lessor" is used in this Lease in relation to any
of the provisions relating to disclaimer, title and registration, operational
interest, indemnity and insurance, the term "Lessor" will be deemed to include
any Lessor's lender notified to Lessee by Lessor.

         D. Any such sale or transfer will not expand Lessee's obligations
hereunder.

26.      ENTIRE AGREEMENT

         This Lease and the Exhibits and Appendices attached hereto, and made a
part hereof, embody the entire agreement and understanding of the parties and,
as of its effective date, terminate and supersede all prior or independent
agreements and understandings between the parties covering the same subject
matter. No amendment to this Lease shall be binding on either party unless
confirmed in writing and signed by the duly authorized officers or
representatives of both parties.

27.      MISCELLANEOUS

         A. This Lease may be executed in counterparts. Such counterpart
documents, when taken together, will constitute one and the same instrument. A
facsimile signature on any counterpart will be deemed an original for all
purposes.

         B. Any reference to the payment of money will refer to U.S. Dollars.

         C. So long as no Event of Default has occurred and is continuing
hereunder, Lessee shall have the peaceful and quiet enjoyment of the Aircraft
free from all claims or interference of Lessor or anyone claiming by, through or
under Lessor, except as otherwise provided herein.

         D. If any legal action or other proceeding is brought in connection
with any provisions in this Lease, the prevailing party will be entitled to
recover reasonable attorneys' fees

                                       34

<PAGE>

and other costs incurred in such action or proceedings. The prevailing party
will also, to the extent permissible by Law, be entitled to receive pre- and
post- judgment Interest.

         E. The rights of the parties hereunder are cumulative, not exclusive,
may be exercised as often as each party considers appropriate and are in
addition to its rights under general Law. The rights of one party against the
other party are not capable of being waived or amended except by an express
waiver or amendment in writing. Any failure to exercise or any delay in
exercising any of such rights will not operate as a waiver or amendment of that
or any other such right; any defective or partial exercise of any such rights
will not preclude any other or further exercise of that or any other such right;
and no act or course of conduct or negotiation on a party's part or on its
behalf will in any way preclude such party from exercising any such right or
constitute a suspension or any amendment of any such right.

         F. Each party agrees from time to time to do and perform such other and
further acts and execute and deliver any and all such other instruments as may
be required by Law or reasonably requested by the other party to establish,
maintain or protect the rights and remedies of the requesting party or to carry
out and effect the intent and purpose of this Lease.

         G. The Lease Agreement dated as of August 11, 1997 between Lessee and
Fleet National Bank, a national banking association, not in its individual
capacity, but solely as Trustee for the benefit of Aircraft No. 2, L.L.C. shall
be null and void upon execution hereof by the parties.

28.      BROKERS/FINDERS

         Lessor and Lessee each represent to the other that there are and will
be no third parties involved as brokers or finders with respect to this Lease
and each party indemnifies the other from liability for fees, commissions or
other intermediary's claims arising as a result of actions of the indemnifying
party.

29.      SECURITY DEPOSIT; LETTER OF CREDIT

         A. Security Deposit

            (a) Prior to delivery of the Aircraft to Lessee, Lessee shall pay
Lessor a security deposit of $500,000 (the "Security Deposit") as follows:
$250,000 upon execution hereof and $125,000 on October 1, 1997, and $125,000
upon delivery of the Aircraft to Lessee. The initial $250,000 security deposit
can be accomplished by appropriately amending the Letter of Credit dated May 7,
1997 issued by First Hawaiian Bank with respect to the Aircraft. The Security
Deposit shall constitute additional security for performance by Lessee of its
obligations under this Agreement, and the following provisions shall apply:

                  (i) if an Event of Default occurs and for as long as it
continues, the Lessor (or, if a mortgage shall be in effect, the Lessor's
lender) may (but shall not be obligated to) apply all or any portion of the
Security Deposit in or towards satisfaction of any sums due

                                       35

<PAGE>

and payable to the Lessor under this Agreement or to compensate the Lessor or,
if applicable, the Lessor's lender for any sums which it may, in its discretion,
advance or expend as a result of any such Event of Default. Notwithstanding any
such use or application by the Lessor or the Lessor's lender, the Lessee shall
remain in default under this Agreement until the full amount owed by the Lessee,
including interest accrued thereon pursuant to Exhibit H, Paragraph H, shall
have been paid to the Lessor. If the Lessor or, if applicable, the Lessor's
lender so uses or applies all or any portion of the Security Deposit, the Lessee
shall immediately, on demand of the Lessor or Lessor's lender, replenish the
Security Deposit in an amount equal to the amount so used or applied within five
(5) Business Days after Lessor's or Lessor's lender's demand therefor.

            (b) Provided Lessee is not then in default hereunder, the first
$250,000 of the Security Deposit shall be reduced by $62,500 on each anniversary
of the Delivery Date.

            (c) If Lessor fails to tender delivery of the Aircraft by May 1,
1998, other than by reason of default of Lessee or delay caused by Lessee, then
Lessor will return the Security Deposit to Lessee.

                  (ii) Lessor or, if applicable, Lessor's lender may commingle
the Security Despot with its general funds, and any interest earned on the
Security Deposit will be for Lessor's or Lender's account.

                  (iii) The Security Deposit shall be returned to the Lessee
within five (5) Business Days of (1) redelivery of the Aircraft to the Lessor in
the condition required by Section 2 and Exhibit C to this Agreement, (2) receipt
by the Lessor of the Agreed Value following a Total Loss and all other amounts
due under Section 11 C or at such later time as the Lessor is satisfied that the
Lessee has irrevocably paid to the Lessor all amounts which are at the time
outstanding under this Agreement; provided always that the Lessor shall not be
obliged to return the Security Deposit if, at the relevant time, a Default shall
have occurred and be continuing.

         B. Letter of Credit. The Lessee shall be entitled, instead of paying
the Security Deposit in cash in accordance with sub-clause A above, to provide
the Lessor with Letters of Credit in the amounts of the cash Security Deposit.
In the event that the Lessee elects to provide the Letters of Credit, the
following provisions shall apply:

            (i) Lessee shall cause the Letters of Credit to be renewed or
replaced by the issuing bank not later than ten (10) Business Days before the
expiration of such Letter of Credit, and shall cause the Letters of Credit to
remain in effect, as renewed, until ninety (90) days after the scheduled
Expiration Date.

            (ii) If an Event of Default occurs and for as long as it continues,
the Lessor or, so long as a mortgage shall remain in effect, the Lessor's lender
may (but shall not be obliged to) call on the Letter of Credit and use or apply
the proceeds in or towards satisfaction of any sums due and payable to the
Lessor under this Agreement or to compensate the Lessor or lender for any sums
which it may, in its discretion, advance or expend as a result of any such Event
of

                                       36

<PAGE>

Default. Notwithstanding any such use or application by the Lessor or the
lender, the Lessee shall remain in default under this Agreement until the full
amount owed by the Lessee, including interest accrued thereon pursuant to
Exhibit H, Section H, shall have been paid to the Lessor and the Lessor's
lender. If the Lessor or, if applicable, the Lessor's lender so uses or applies
all or any portion of the amount available under the Letters of Credit, the
Lessee shall immediately, on demand of the Lessor or the lender, procure the
issue of a new Letter of Credit acceptable to the Lessor and the lender for an
amount equal to the amount so used or applied, or shall pay to the Lessor an
amount in cash equal to the amount so used or applied to be held pursuant to
this Section 29.

                  (iii) The Letters of Credit shall be returned to the Lessee
within five (5) Business Days of:

            (a) redelivery of the Aircraft to the Lessor in the condition
required by Section 2 and Exhibit C to this Agreement;

            (b) receipt by the lessor of the Agreed Value following a Total Loss
and all other amounts due under Section 11C; or

in either case, at such later time as the Lessor is satisfied that the Lessee
has irrevocably paid to the Lessor all amounts which are at that time
outstanding under this Agreement; provided always that the Lessor shall not be
obliged to return the Letter of Credit if, at the relevant time, a Default shall
have occurred and be continuing.

            (c) Lessor's failure to deliver the Aircraft by May 1, 1998 other
than by reason of default of Lessee or delay caused by Lessee.

30.      NO PURCHASE OPTION; NO HUSH KIT FINANCING

         Lessee shall have no option to purchase the Aircraft. Lessor shall have
no obligations with respect to HUSH KITS (those parts that are required to be
affixed to the Engines and Airframe in order that the Aircraft complies with all
requirements of US FAR Part 36, Stage III and ICAO Annex 16, Chapter 3),
including but not limited to financing thereof.

31.      AUTHORIZATION; LESSEE'S CONDITIONS PRECEDENT

         A. Upon execution hereof, Lessor will deliver to Lessee:

            (a) a copy of resolutions of the board of directors of the Lessor
approving the terms of, and the transactions contemplated by, this Agreement,
resolving that it enter into this Agreement, and authorizing a specified person
or persons to execute this Agreement and deliver the Aircraft on its behalf;

            (b) a certificate of a duly authorized officer of the Lessor;

                                       37

<PAGE>

                  i. setting out a specimen of each signature referred to in
Section (a) above; and

                  ii. certifying that the copy of the resolutions referred to in
Section (a) above is correct, complete and in full force and effect;

         B. The Lessee's obligation to accept the Aircraft on lease from the
Lessor under this Agreement is subject to the satisfaction by the Lessor of the
following conditions precedent:

         That the representations and warranties of the Lessor under Section 24
and elsewhere in the Lease Agreement are correct and would be correct if
repeated on Delivery; and

                  i. The Aircraft is in the condition required pursuant to
Section 1C and Section 2A;

                  ii. The Aircraft is U.S. registered;

                  iii. The Aircraft is substantially in the same condition as
when inspected by Lessee in May, 1997, normal wear and tear excepted;

                  iv. The Aircraft shall have been delivered prior to May 1,
1998; subject to Article 18, and

                  v. Lessor shall have executed the Lease Supplement in the form
of

Exhibit I.

         C. The conditions specified in Section 31 are for the sole benefit of
the Lessee and may be waived or deferred in whole or in part and with or without
conditions by the Lessee. If any of those conditions are not satisfied on or
before Delivery and the Lessee (in its absolute discretion) nonetheless agrees
to lease the Aircraft from the Lessor, the Lessor will ensure that those
conditions are fulfilled within one month after the Delivery Date.

32.      AUTHORIZATION; LESSOR'S CONDITIONS PRECEDENT

         A. Upon execution hereof, Lessee will deliver to Lessor:

            (a) a copy of resolutions of the board of directors of the Lessee
approving the terms of, and the transactions contemplated by, this Agreement,
resolving that it enter into this Agreement, and authorizing a specified person
or persons to execute this Agreement and deliver the Aircraft on its behalf;

            (b) a certificate of a duly authorized officer of the Lessee;

                  i. setting out a specimen of each signature referred to in
Section a above; and

                                      38

<PAGE>

               ii.  certifying that the copy of the resolutions referred to
in Section a above is correct, complete and in full force and effect;

     B.   The Lessor's obligation to deliver the Aircraft to the Lessee under
this Agreement is subject to the satisfaction by the Lessee of the following
conditions precedent:

     That the representations and warranties of the Lessee under Section 24
and elsewhere in the Lease Agreement are correct and would be correct if
repeated on Delivery. Lessee shall have executed the Lease Supplement in the
form of Exhibit I.

     D.   The conditions specified in Section 32 are for the sole benefit of
the Lessor and may be waived or deferred in whole or in part and with or
without conditions by the Lessor. If any of those conditions are not
satisfied on or before Delivery and the Lessor (in its absolute discretion)
nonetheless agrees to lease the Aircraft to the Lessee, the Lessee will
ensure that those conditions are fulfilled within one month after the
Delivery Date.

     IN WITNESS WHEREOF, the par-ties hereto have executed this Aircraft
Lease Agreement by their duly authorized officers the day and year first
above written.

Aircraft No. 2, L.L.C.,                 Aloha Airlines, Inc.,
Lessor                                  Lessee

AAR Corp., Manager

By:       /s/ Timothy J. Romenesko            By:
      --------------------------------              --------------------------
Name:       TIMOTHY J. ROMENESKO              Name:
      --------------------------------              --------------------------
         Vice President
Title:   Chief Financial Officer              Title:
      --------------------------------              --------------------------

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

                                       39

<PAGE>

               ii.  certifying that the copy of the resolutions referred to
in Section a above is correct, complete and in full force and effect;

     B.   The Lessor's obligation to deliver the Aircraft to the Lessee under
this Agreement is subject to the satisfaction by the Lessee of the following
conditions precedent:

     That the representations and warranties of the Lessee under Section 24
and elsewhere in the Lease Agreement are correct and would be correct if
repeated on Delivery. Lessee shall have executed the Lease Supplement in the
form of Exhibit I.

     D.   The conditions specified in Section 32 are for the sole benefit of
the Lessor and may be waived or deferred in whole or in part and with or
without conditions by the Lessor. If any of those conditions are not
satisfied on or before Delivery and the Lessor (in its absolute discretion)
nonetheless agrees to lease the Aircraft to the Lessee, the Lessee will
ensure that those conditions are fulfilled within one month after the
Delivery Date.

     IN WITNESS WHEREOF, the par-ties hereto have executed this Aircraft
Lease Agreement by their duly authorized officers the day and year first
above written.

Aircraft No. 2, L.L.C.,                 Aloha Airlines, Inc.,
Lessor                                  Lessee

AAR Corp., Manager

By:                                             By:   /s/ Brenda F. Cutwright
      --------------------------------              --------------------------
Name:                                         Name:     BRENDA F. CUTWRIGHT
      --------------------------------              --------------------------
                                                       Sr. Vice President
Title:                                       Title: Finance & Planning and CFO
      --------------------------------              --------------------------

                                              By:       /s/ James M. King
                                                    --------------------------
                                              Name:       JAMES M. KING
                                                    --------------------------
                                                          Vice President
                                              Title:  Planning & Development
                                                    --------------------------

                                       39

<PAGE>

                                 EXHIBIT A

                         DESCRIPTION OF AIRCRAFT

Manufacturer           Model      Serial No.      US Registration
------------           -----      ----------      ---------------
Boeing                 737-282A   23045           N824AL

Total Time Since New:                             38152.6 hours
Total Cycles Since New:                           23199
Time Since Last D Check:                          24.6 hours
Cycles Since Last D Check:                        8
Time Since Last C Check:                          24.6 hours
Cycles Since Last C Check:                        8

                                ENGINES

          Pratt & Whitney JT8D-9A                 SN 665851
          Pratt & Whitney JT8D-9A                 SN 655014

Lessor shall have the right to substitute another Engine for one of the
listed Engines provided that such substitute engine meets the build
specifications set forth in the letter from Brian Olds to Jim King dated June
27, 1997.

              AIRCRAFT COMPONENTS ON THE AIRCRAFT ARE
              LISTED ON THE EQUIPMENT LIST ATTACHED TO
              THE LETTER DATED MARCH 18, 1998.

                                       40

<PAGE>

                                   EXHIBIT B

                                    RECORDS

     All logs, manuals and data, and inspection, modification and overhaul
records required to be maintained with respect to the Aircraft under
applicable rules and regulations of the Federal Aviation Administration of
the United States to the extent required for registration of the Aircraft in
the United States, and the Republic of Portugal and the agencies and
instrumentalities thereof, and if any such logs, manuals, data or records are
not in English, English translations thereof.

                                       41
<PAGE>

                                   EXHIBIT C

                             REDELIVERY CONDITIONS

1.   ENGINE CONDITION AT REDELIVERY

         Upon return of the Aircraft to Lessor under this Lease, each Engine (or
         replacement engine, as the case may be) shall have remaining as many
         hours or cycles on the Engine's most limiting disk (with no single
         Engine having fewer than 3,000 hours or cycles (whichever is more
         limiting)) until its next Scheduled Engine Shop Visit as when the
         Aircraft was delivered to Lessee. In the event an Engine upon such
         return (or replacement Engine) shall have less hours or cycles
         remaining on its most limiting disk than on delivery, Lessee shall pay
         Lessor for the difference at the Adjusted L.L.P. rate at redelivery
         (i.e. the payment shall equal the Adjusted LLP rate at redelivery times
         the excess of the hours/cycles at Delivery over the hours/cycles at
         redelivery); provided, however, in the event one Engine (or replacement
         Engine) upon such return shall have more hours or cycles on its most
         limiting disk than on Delivery, such excess times the Adjusted LLP Rate
         at Redelivery shall be applied as a credit against amounts owed by
         Lessee pursuant to the preceding phrase; provided further, that the
         foregoing credit shall be applicable only if each Engine (or
         replacement engine) has at least 3,000 hours/cycles remaining as set
         forth in the first sentence above. The foregoing calculation shall be
         made as to the Engine condition at delivery prior to any build up of
         the Engine condition by Lessee. In addition, upon return of the
         Aircraft to Lessor, Lessee will pay Lessor with respect to each Engine,
         an amount equal to the Adjusted Engine Shop Rate at redelivery times
         the excess, if any, of the number of flight hours elapsed on each such
         Engine since its last Engine Shop Visit at Redelivery over the number
         of flight hours elapsed on such Engine since its last Engine Shop Visit
         at Delivery. In the event an Engine (or replacement Engine) upon such
         Redelivery shall have fewer flight hours elapsed since its last Engine
         Shop Visit than at Delivery, the excess amount multiplied by the
         Adjusted Engine Shop Rate at Redelivery shall be applied as a credit
         against the amount owed by Lessee for the other Engine, pursuant to the
         preceding phrase. The foregoing credit is applicable only if each
         Engine (or replacement engine) is returned with at least 3,000
         hours/cycles remaining until its next Scheduled Engine Shop Visit.
         Lessor shall have no obligation for betterment of the Engines upon
         redelivery. The foregoing calculation shall be made with reference to
         the Engine condition at delivery prior to any build up of the Engine
         condition by Lessee.

         If Lessee is unable to return an Engine at the expiration or earlier
         termination of this Lease, because of damage, overhaul or repair,
         Lessee shall replace such Engine prior to such expiration or earlier
         termination by duly conveying or causing to be conveyed to Lessor as a
         replacement for such Engine, good and marketable title to another
         engine acceptable to Lessor, which Engine shall be free

                                       42

<PAGE>

                                   EXHIBIT E

                               REDELIVERY RECORDS

     Upon redelivery, Lessee will deliver to Lessor all of the records, manuals,
logs, etc., delivered to Lessor at the commencement of the Lease plus all
records, manuals, logs, etc., generated by Lessee during the term of the Lease.

                                       47

<PAGE>

                                   EXHIBIT F

                   [Form of Letter of Credit to be furnished]

                 Intentionally deleted for FAA filing purposes

                                       48

<PAGE>

                                   EXHIBIT G

                          LIST OF PERMITTED SUBLESSEES

                                   Aer Lingus
                              Aerolineas Argentinas
                                  Aeropostale
                                   Air Canada
                                   Air France
                                   Air-Inter
                                   Air Malta
                                Air New Zealand
                                   Air Nippon
                                  Air Portugal
                                    Alitalia
                               All Nippon Airways
                                     Ansett
                               Austrian Airlines
                                    Aviateca
                                  Bahamas Air
                                   Braathens
                                British Airways
                            British Midland Airways
                         Canadian Airlines International
                                 Cathay Pacific
                                 China Airlines
                                     Condor
                                  COPA Panama
                                     Iberia
                                 Japan Airlines
                                Japan Air System
                               Japan Asia Airways
                              Japan Transocean Air
                                   Korean Air
                                   Lan Chile
                                   Lufthansa
                           Malaysian Airlines System
                               Martinair Holland
                             Northwest Territorial
                                     Qantas
                              Royal Dutch Airlines
                                    Ryan Air
                                     Sabena
                          Scandinavian Airlines System
                               Singapore Airlines

                                       49

<PAGE>

                             South African Airways
                                    SwissAir
                               TACA International
                           Thai Airways International
                                Alaska Airlines
                              Continental Airlines
                                 Delta Airlines
                               Southwest Airlines
                                United Air Lines
                                     USAir

                                       50

<PAGE>

                                   EXHIBIT H

                                FINANCIAL TERMS

     [Four pages of confidential information have been omitted and filed
     separately with the Commission]

                                       51

<PAGE>

                                   EXHIBIT I

                             LEASE SUPPLEMENT NO. 1

     LEASE SUPPLEMENT NO. ___, dated ___________________, 19___, between
Aircraft No. 2, L.L.C., a limited liability company incorporated under the
laws of Illinois ("Lessor"), and Aloha Airlines, Inc., a Delaware corporation
("Lessee").

     Lessor and Lessee have previously entered into that certain Aircraft
Lease Agreement dated as of August 11, 1997, (herein called the "Lease" and
the defined terms therein being hereinafter used with the same meaning). The
Lease provides for the execution and delivery from time to time of a Lease
Supplement substantially in the form hereof for the purpose of leasing the
aircraft described below under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof.

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

     In consideration of the premises and other good and sufficient
consideration, Lessor and Lessee hereby agree as follows:

     1.   Lessor hereby delivers and leases to Lessee under the Lease and
Lessee hereby accepts and leases from Lessor under the Lease, that certain
used Boeing 737-282 Advanced commercial jet Aircraft, Airframe and the two
(2) Pratt & Whitney Engines (each of which Engines has 750 or more rated
takeoff horsepower or the equivalent of such horsepower) described in
Schedule 1 herewith ("Aircraft").

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

     3.   The term for the Aircraft shall commence on the Delivery Date and
shall end on the Expiration Date, which shall be subject to extension as
contemplated by Section 1 D of the Lease.

     4.   The amount of Rent for the Aircraft is set forth in the Lease, and
is payable as provided in the Lease. The Last Basic Rent Payment Date shall
be subject to revision as contemplated by Section I D and Exhibit H of the
Lease. The Supplemental Rental is set forth on Schedule 2 hereto.

     5.   Lessee hereby confirms to Lessor that (i) the Aircraft and each
Engine installed thereon or belonging thereto have been duly marked in
accordance with the terms of Section 14 of the Lease, (ii) Lessee has
accepted the Aircraft for all purposes hereof and of the Lease, and

                                       52

<PAGE>

(iii) except as otherwise expressly agreed in writing by Lessor and Lessee,
Lessee has inspected the Aircraft and the Aircraft satisfies the conditions
set forth in the Lease.

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

     7.   This Lease Supplement may be executed in any number of
counterparts, each of such counterparts shall for all purposes be deemed to
be an original; and all such counterparts shall together constitute but one
and the same Lease Supplement.

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

Aircraft No. 2, L.L.C., Lessor

AAR Corp., Manager

By: ___________________________________
Name: _________________________________
Title: ________________________________

Aloha Airlines, Inc., Lessee

By: ___________________________________
Name: _________________________________
Title: ________________________________

By: ___________________________________
Name: _________________________________
Title: ________________________________

                                       53
<PAGE>

                                   SCHEDULE 1

                                       TO

                             LEASE SUPPLEMENT NO. 1

                                    One Used
                                 Boeing 737-282A
                               Advanced Airframe

FAA Registration No.    Manufacturer's Serial No.   Total Time*   Total Cycles*
--------------------    -------------------------   -----------   -------------
N824AL                  23045

                         Installed Pratt & Whitney
                                 Engines

Model No.               Serial No.                  Total Time*   Total Cycles*
---------               ----------                  -----------   -------------
JT8D-9A
JT8D-9A

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

* The total time and total cycles referred to above are as of ______________
time, __, 1998. Such times and cycles are the actual hours and cycles at the
time of this Lease Supplement.

                                       54

<PAGE>

                                   SCHEDULE 2

                                       TO

                             LEASE SUPPLEMENT NO. 1

     [One page of confidential information has been omitted and filed
     separately with the Commission]

                                       55

<PAGE>

                                   EXHIBIT J

                            ADDITIONAL BILL OF WORK

     [One page of confidential information has been omitted and filed
     separately with the Commission]

<PAGE>

                             LEASE SUPPLEMENT NO. 1

         LEASE SUPPLEMENT NO. 1, dated March 20, 1998, between Aircraft No. 2,
L.L.C., a limited liability company incorporated under the laws of Illinois
("Lessor"), and Aloha Airlines, Inc., a Delaware corporation ("Lessee").

         Lessor and Lessee have previously entered into that certain Aircraft
Lease Agreement dated as of August 11, 1997, (herein called the "Lease" and the
defined terms therein being hereinafter used with the same meaning). The Lease
provides for the execution and delivery from time to time of a Lease Supplement
substantially in the form hereof for the purpose of leasing the aircraft
described below under the Lease as and when delivered by Lessor to Lessee in
accordance with the terms thereof.

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

         In consideration of the premises and other good and sufficient
consideration, Lessor and Lessee hereby agree as follows:

            1. Lessor hereby delivers and leases to Lessee under the Lease and
Lessee hereby accepts and leases from Lessor under the Lease, that certain used
Boeing 737-282 Advanced commercial jet Aircraft, Airframe and the two (2) Pratt
& Whitney Engines (each of which Engines has 750 or more rated takeoff
horsepower or the equivalent of such horsepower) described in Schedule 1
herewith ("Aircraft").

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

            3. The term for the Aircraft shall commence on the Delivery Date and
shall end on the Expiration Date, which shall be March 31, 2006. subject to
extension as contemplated by Section 1 D of the Lease.

            4. The amount of Rent for the Aircraft is set forth in the Lease,
and is payable as provided in the Lease. The Last Basic Rent Payment Date shall
be subject to revision as contemplated by Section 1 D and Exhibit H of the
Lease. The Supplemental Rental is set forth on Schedule 2 hereto.

            5. Lessee hereby confirms to Lessor that (i) the Aircraft and each
Engine installed thereon or belonging thereto have been duly marked in
accordance with the terms of Section 14 of the Lease, (ii) Lessee has accepted
the Aircraft for all purposes hereof and of the Lease, and (iii) except as
otherwise expressly agreed in writing by Lessor and Lessee, Lessee has inspected
the Aircraft and the Aircraft satisfies the conditions set forth in the Lease.

<PAGE>

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

            7. This Lease Supplement may be executed in any number of
counterparts, each of such counterparts shall for all purposes be deemed to be
an original; and all such counterparts shall together constitute but one and the
same Lease Supplement.

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

Aircraft No. 2, L.L.C., Lessor

AAR Corp., Manager

By:      /s/ Timothy J. Romenesko
       --------------------------------
Name:     TIMOTHY J. ROMENESKO
       --------------------------------
          Vice President
Title:    Chief Financial Officer
       --------------------------------

Aloha Airlines, Inc., Lessee

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

<PAGE>

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

            7. This Lease Supplement may be executed in any number of
counterparts, each of such counterparts shall for all purposes be deemed to be
an original; and all such counterparts shall together constitute but one and the
same Lease Supplement.

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

Aircraft No. 2, L.L.C., Lessor

AAR Corp., Manager

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

Aloha Airlines, Inc., Lessee

By:      /s/ Brenda F. Cutwright
       --------------------------------
Name:        BRENDA F. CUTWRIGHT
       --------------------------------
         Sr. Vice President Finance &
Title:   Planning and CFO
       --------------------------------

By:      /s/ James M. King
       --------------------------------
Name:            JAMES M. KING
       --------------------------------
           Vice President Planning &
Title:           Development
       --------------------------------

<PAGE>

                                SCHEDULE 1

                                    TO

                          LEASE SUPPLEMENT NO. 1

                                 One Used
                         Boeing 737-282A Advanced
                                 Airframe

<TABLE>
<CAPTION>

FAA REGISTRATION NO.        MANUFACTURER'S SERIAL            TOTAL TIME*         TOTAL CYCLES*
                            NO.
<S>                         <C>                              <C>                 <C>

N824AL                      23045                            38152.6 hours       23199

</TABLE>

                            Installed Pratt & Whitney
                                     Engines
<TABLE>
<CAPTION>

MODEL NO.                   SERIAL NO.                       TOTAL TIME*         TOTAL CYCLES*

<S>                         <C>                              <C>                 <C>

JT8D-9A                     665851                           56495.4 hours       39585
JT8D-9A                     655014                           61607.4 hours       44700

</TABLE>

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

*The total time and total cycles referred to above are as of March 19, 1998.
Such times and cycles are the actual hours and cycles at the time of this Lease
Supplement.

<PAGE>

                          ASSIGNMENT OF AIRCRAFT LEASE
                                (Aircraft 23045)

    INSTRUMENT OF ASSIGNMENT ("Assignment") dated as of March 20, 1998,
between Aircraft No. 2, L.L.C., an Illinois limited liability company
("Assignor"), and BARNETT BANK, N.A., a national banking association
("Assignee").

RECITALS:

         A. The Assignor holds legal and record title to a Boeing 737-282
aircraft bearing manufacturer's serial number 23045 and FAA Registration Number
N824AL (the "Airframe") and its two Pratt & Whitney JT8D-9A jet engines bearing
manufacturer's serial numbers 665851 and 655014 (collectively, the "Engines";
the Airframe and the Engines, together with all avionics, appliances, radio and
radar devices, accessories, and equipment installed on the Airframe, being
referred to herein as the "Aircraft").

         B. The Assignor has leased the Aircraft to Aloha Airlines, Inc.
("Lessee"), pursuant to an Aircraft Lease Agreement dated as of August 11, 1997
(the "Lease").

         C. The Assignee has agreed to advance to the Assignor $7,099,888
($U.S.) as a term loan (the "Loan") pursuant to a Term Loan Agreement dated as
of May 30, 1997, between the Assignor and the Assignee (such Term Loan Agreement
as the same may be amended or modified from time to time being hereinafter
referred to as the "Loan Agreement").

         D. As a condition of its making the Term Loan and in consideration
thereof and as security for the repayment thereof, the Assignee has required,
among other things, that the Assignor enter into this Assignment.

    NOW, THEREFORE, in consideration of the foregoing recitals and for
other good and valuable consideration, the parties hereto hereby agree as
follows:

            1. Capitalized terms used but not defined in this Assignment shall
have the respective meanings set forth in the Loan Agreement. In the event of a
conflict between the terms of this Assignment and the Loan Agreement, the terms
of the Loan Agreement or this Assignment which provide the Assignee with the
greatest rights and remedies shall be controlling.

            2. In order to secure the due and punctual performance by Assignor
of each and every obligation of Assignor under, and compliance by Assignor with
each and every provision of, the Loan Agreement and the Term Note and the other
Loan Documents, Assignor hereby irrevocably assigns, transfers and sets over to
Assignee, all of Assignor's estate, right, title, interest, claim and demand in,
to and under the Lease and all payments due or to become due thereunder and
damages and other moneys from time to time payable

<PAGE>

to or receivable by Assignor thereunder (said sums being herein called the
"Moneys").

            3. Notwithstanding the provisions of Section 2 hereof, unless and
until an Event of Default shall have occurred, and thereafter provided that
Assignor has remedied all Events of Default, Assignor shall be entitled to
exercise all of the Assignor's rights under the Lease, except (a) the right, if
any, to assign or grant a security interest in any such right, including the
right to receive Moneys, to any Person other than Assignee, (b) to the extent
that such exercise would violate any provision of the Lease, and (c) as
otherwise provided herein. Upon the occurrence of an Event of Default and for as
long as the same shall be continuing, all rights and interest of the Assignor
in, to and under the Lease and the proceeds thereof, including, without
limitation, all rights to receive Moneys thereunder, shall be exercisable solely
by and shall inure solely and exclusively to the benefit of Assignee.
Accordingly, upon such occurrence of an Event of Default for as long as the same
shall be continuing in addition to any right or remedy Assignee may have under
the Loan Agreement, the Aircraft Security Agreement and the other Loan
Documents, Assignee shall have the all rights, but shall not be obligated, to
enforce the Lease as if Assignee were a party thereto.

            4. Any Moneys which would have been required to be paid to Assignor
by Lessee but for the existence of an Event of Default and which have been paid
to Assignee shall be held by Assignee and may be applied by Assignee to cure any
Event of Default or applied in reduction of the obligations. Any Moneys
remaining in the possession of Assignee after the payment in full of all
obligations shall be promptly paid over to Assignor without interest.

            5. The obligations of Assignor owing to Lessee under the Lease shall
continue to be obligations of Assignor, and Assignee shall have no obligations
or liability under the Lease by reason of, or arising out of, this Assignment,
and shall not be obligated to make any inquiry as to the sufficiency of any
payment received by it or to present or file any claim or to take any action to
collect or enforce any claim for any payment assigned hereunder. Notwithstanding
the foregoing sentence, in the event that an Event of Default (as defined in the
Lease) shall have occurred, Assignee, in its sole discretion, shall have the
right, but not the obligation, to undertake to assume and perform the
obligations of Assignor under the Lease and to have the Lessee deem and treat
Assignee as possessing all the rights granted Assignor under the Lease for all
purposes thereunder. Any performance by Assignee shall not constitute a waiver
or release of any obligation or any Event of Default (under the Loan Agreement)
which may arise out of Assignor's non-performance of its obligations under the
Lease nor an election or waiver by Assignee of any remedy or right available to
Assignee under the Loan Agreement or the other Loan Documents.

                                      -2-

<PAGE>

            6. This Assignment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.

            7. All notices, consents and other communications permitted or
required by this Assignment to be given or sent shall be in writing and, to be
effective hereunder, shall be hand delivered or sent by certified or registered
first class mail, return receipt requested, and addressed to the party to whom
directed at such party's address first above written or to such other address as
such party shall specify in a written notice to the other party hereto.

            8. This Assignment shall be governed by, and construed and enforced
in accordance with, the laws of the State of Florida in effect from time to
time.

         IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the day and year first above written.

                                       Aircraft No. 2, LLC, an Illinois
                                       limited liability company

                                       By: AAR Corp., a Delaware corpora-
                                       tion as manager

                                       By: \s\ Andrew Schreer
                                           -----------------------------------
                                           Andrew Schreer, Assistant Secretary

                                       BARNETT BANK, N.A., a
                                       national banking association

                                       By: -----------------------------------
                                               Brian Mormile
                                               Vice President

                   (Acknowledgments appear on following page)

                                      -3-

<PAGE>

            6. This Assignment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.

            7. All notices, consents and other communications permitted or
required by this Assignment to be given or sent shall be in writing and, to be
effective hereunder, shall be hand delivered or sent by certified or registered
first class mail, return receipt requested, and addressed to the party to whom
directed at such party's address first above written or to such other address as
such party shall specify in a written notice to the other party hereto.

            8. This Assignment shall be governed by, and construed and enforced
in accordance with, the laws of the State of Florida in effect from time to
time.

         IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the day and year first above written.

                                       Aircraft No. 2, LLC, an Illinois
                                       limited liability company

                                       By: AAR Corp., a Delaware corpora-
                                       tion, as manager

                                       By: -----------------------------------
                                           Timothy Romenesko, Vice President

                                       BARNETT BANK, N.A., a
                                       national banking association

                                       By: /s/ Brian Mormile
                                           -----------------------------------
                                             Brian Mormile
                                             Vice President

                   (Acknowledgments appear on following page)

                                      -3-

<PAGE>

STATE OF ILLINOIS    )
                     )  SS:
COUNTY OF DuPage     )

    The foregoing instrument was acknowledged before me this 17th day of March,
1998 by Andrew Schreer, as Assistant Secretary of AAR Corp., a Delaware
corporation, as manager of Aircraft No. 2, LLC, an Illinois limited liability
company, on behalf of the corporation and the limited liability company. He is
personally known to, me or has produced a driver's license as identification.

                                        /s/ Deborah J. Schwartz
                                      ----------------------------------------
                                      Print or Stamp Name: Deborah J. Schwartz
                                                           -------------------
                                      Notary Public, State of: Illinois
                                                               ---------------
                                      Commission no.:
                                      My Commission Expires: 09/06/00

                                            ----------------------------------
STATE OF FLORIDA     )                                OFFICIAL SEAL
                     )  SS:                         DEBORAH J SCHWARTZ
COUNTRY OF DADE      )                       NOTARY PUBLIC, STATE OF ILLINOIS
                                             MY COMMISSION EXPIRES: 09/06/00
                                            ----------------------------------

     The foregoing instrument was acknowledged before me this ____ day of
March, 1998 by Brian Mormile, as Vice President of Barnett Bank, N.A., a
national banking association, on behalf of the association. He is personally
known to me or has produced a driver's license as identification.

                                      ----------------------------------------
                                      Print or Stamp Name:
                                                           -------------------
                                      Notary Public, State of:
                                                               ---------------
                                      Commission no.:
                                      My Commission Expires:

                                      -4-

<PAGE>

STATE OF ILLINOIS    )
                     )  SS:
COUNTY OF __________ )

     The foregoing instrument was acknowledged before me this ____ day of
__________, 1998 by Timothy Romenesko, as Vice President of AAR Corp., a
Delaware corporation, as manager of Aircraft No. 2, LLC, an Illinois limited
liability company, on behalf of the corporation and the limited liability
company. He is personally known to me or has produced a driver's license as
identification.

                                      ----------------------------------------
                                      Print or Stamp Name:
                                                           -------------------
                                      Notary Public, State of:
                                                               ---------------
                                      Commission no.:
                                      My Commission Expires:

STATE OF FLORIDA     )
                     )  SS:
COUNTY OF DADE       )

    The foregoing instrument was acknowledged before me this 16 day of March,
1998 by Brian Mormile, as Vice President of Barnett Bank, N.A., a national
banking association, on behalf of the association. He is personally known to me
or has produced a driver's license as identification.

                                        /s/ Donna J. Kirby
                                      ----------------------------------------
                                      Print or Stamp Name: Donna J. Kirby
                                                           -------------------
                                      Notary Public, State of: Florida
                                                               ---------------
                                      Commission no.: 6/6/2000
                                      My Commission Expires:

                                        --------------------------------------
                                                   DONNA J. KIRBY
                                              MY COMMISSION # CC 559908
                                                EXPIRES: June 6, 2000
                                        Bonded Thru Notary Public Underwriters
                                        --------------------------------------

                                      -4-

<PAGE>

            6. This Assignment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.

            7. All notices, consents and other communications permitted or
required by this Assignment to be given or sent shall be in writing and, to be
effective hereunder, shall be hand delivered or sent by certified or registered
first class mail, return receipt requested, and addressed to the party to whom
directed at such party's address first above written or to such other address as
such party shall specify in a written notice to the other party hereto.

            8. This Assignment shall be governed by, and construed and enforced
in accordance with, the laws of the State of Florida in effect from time to
time.

         IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the day and year first above written.

                                       Aircraft. No. 2, LLC, an Illinois
                                       limited liability company

                                       By: AAR Corp., a Delaware corpora-
                                       tion as manager

                                       By: /s/ Andrew Schreer
                                           -----------------------------------
                                           Andrew Schreer, Assistant Secretary

                                       BARNETT BANK, N.A., a
                                       national banking association

                                       By:
                                           -----------------------------------
                                              Brian Mormile
                                              Vice President

                   (Acknowledgments appear on following page)

                                      -3-

<PAGE>

            6. This Assignment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.

            7. All notices, consents and other communications permitted or
required by this Assignment to be given or sent shall be in writing and, to be
effective hereunder, shall be hand delivered or sent by certified or registered
first class mail, return receipt requested, and addressed to the party to whom
directed at such party's address first above written or to such other address as
such party shall specify in a written notice to the other party hereto.

            8. This Assignment shall be governed by, and construed and enforced
in accordance with, the laws of the State of Florida in effect from time to
time.

         IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the day and year first above written.

                                       Aircraft No. 2, LLC, an Illinois
                                       limited liability company

                                       By: AAR Corp., a Delaware corpora-
                                           tion, as manager

                                       By:
                                           -----------------------------------
                                           Timothy Romenesko, Vice President

                                       BARNETT BANK, N.A., a
                                       national banking association

                                       By: /s/ Brian Mormile
                                           -----------------------------------
                                             Brian Mormile
                                             Vice President

                   (Acknowledgments appear on following page)

                                      -3-

<PAGE>

STATE OF ILLINOIS    )
                     )  SS:
COUNTY of DuPage     )

     The foregoing instrument was acknowledged before me this 17th day of
March, 1998 by Andrew Schreer, as Assistant Secretary of AAR Corp., a Delaware
corporation, as manager of Aircraft No. 2, LLC, an Illinois limited liability
company, on behalf of the corporation and the limited liability company. He is
personally known to me or has produced a driver's license as identification.

                                        /s/ Deborah J. Schwartz
                                      ----------------------------------------
                                      Print or Stamp Name: Deborah J. Schwartz
                                                           -------------------
                                      Notary Public, State of: Illinois
                                                               ---------------
                                      Commission no.:
                                      My Commission Expires: 09/06/00

                                            ----------------------------------
STATE OF FLORIDA     )                                OFFICIAL SEAL
                     )  SS:                         DEBORAH J SCHWARTZ
COUNTRY OF DADE      )                       NOTARY PUBLIC, STATE OF ILLINOIS
                                             MY COMMISSION EXPIRES: 09/06/00
                                            ----------------------------------

     The foregoing instrument was acknowledged before me this ____ day of March,
1998 by Brian Mormile, as Vice President of Barnett Bank, N.A., a national
banking association, on behalf of the association. He is personally known to me
or has produced a driver's license as identification.

                                      ----------------------------------------
                                      Print or Stamp Name:
                                                           -------------------
                                      Notary Public, State of:
                                                               ---------------
                                      Commission no.:
                                      My Commission Expires:

                                      -4-

<PAGE>

STATE OF ILLINOIS    )
                     )  SS:
COUNTY OF __________ )

     The foregoing instrument was acknowledged before me this ____ day of
__________, 1998 by Timothy Romenesko, as Vice President of AAR Corp., a
Delaware corporation, as manager of Aircraft No. 2, LLC, an Illinois limited
liability company, on behalf of the corporation and the limited liability
company. He is personally known to me or has produced a driver's license as
identification.

                                      ----------------------------------------
                                      Print or Stamp Name:
                                                           -------------------
                                      Notary Public, State of:
                                                               ---------------
                                      Commission no.:
                                      My Commission Expires:

STATE OF FLORIDA     )
                     )  SS:
COUNTY OF DADE       )

     The foregoing instrument was acknowledged before me this 16 day of March,
1998 by Brian Mormile, as Vice President of Barnett Bank, N.A., a national
banking association, on behalf of the association. He is personally known to me
or has produced a driver's license as identification.

                                        /s/ Donna J. Kirby
                                      ----------------------------------------
                                      Print or Stamp Name: Donna J. Kirby
                                                           -------------------
                                      Notary Public, State of: Florida
                                                               ---------------
                                      Commission no.: 6/6/2000
                                      My Commission Expires:

                                        --------------------------------------
                                                   DONNA J. KIRBY
                                              MY COMMISSION # CC 559908
                                                EXPIRES: June 6, 2000
                                        Bonded Thru Notary Public Underwriters
                                        --------------------------------------

                                      -4-

<PAGE>

                            AIRCRAFT LEASE AGREEMENT

                                    BETWEEN

                             AIRCRAFT NO. 2, L.L.C.

                                      AND

                              ALOHA AIRLINES, INC.

        Counterpart No. _____ of _____ serially numbered manually executed
        counterparts. To the extent, if any that this Lease constitutes
        chattel paper under the UCC, no security interest in this Lease may
        be created through the transfer and possession of any counterpart
        other than Counterpart No. 1

<PAGE>

                              TABLE OF CONTENTS

1.  LEASE AND TERM; NET LEASE

2.  DELIVERY AND RETURN OF AIRCRAFT

3.  CHARGES

4.  LIMITED WARRANTY; DISCLAIMER

5.  SET-OFF; ABATEMENT

6.  OPERATION, MAINTENANCE, REGISTRATION, and RECORDS

7.  MODIFICATION OF THE AIRCRAFT

8.  INSPECTION AND RECORDS

9.  TAXES

10. INDEMNITY

11. LOSS OF OR DAMAGE TO AIRCRAFT; AGREED VALUE

12. INSURANCE

13. COMPLIANCE WITH LAWS

14. TITLE TO AIRCRAFT

15. ASSIGNMENT OR SUBLEASE; POSSESSION AND USE

16. EVENTS OF DEFAULT

17. REMEDIES

18. EXCUSABLE DELAY

19. DELAY IN RETURN OF AIRCRAFT

20. APPLICABLE LAW AND JURISDICTION

21. NOTICES

<PAGE>

22. HEADINGS

23. CONFIDENTIALITY

24. REPRESENTATIONS, WARRANTIES AND COVENANTS

25. ASSIGNMENT AND COOPERATION WITH LESSOR'S LENDER

26. ENTIRE AGREEMENT

27. MISCELLANEOUS

28. BROKERS/FINDERS

29. SECURITY DEPOSIT

30. NO PURCHASE OPTION; NO HUSH KIT FINANCING

31. AUTHORIZATION; LESSEE'S CONDITIONS PRECEDENT

32. AUTHORIZATION; LESSOR'S CONDITIONS PRECEDENT

    EXHIBIT A  DESCRIPTION OF AIRCRAFT

    EXHIBIT B  RECORDS

    EXHIBIT C  REDELIVERY CONDITIONS

    EXHIBIT D  DELIVERY RECEIPT

    EXHIBIT E  REDELIVERY RECORDS

    EXHIBIT F  FORM OF LETTER OF CREDIT

    EXHIBIT G  PERMITTED SUBLESSEES

    EXHIBIT H  FINANCIAL TERMS

    EXHIBIT I  FORM OF LEASE SUPPLEMENT

    EXHIBIT J  ADDITIONAL BILL OF WORK

<PAGE>

IA.  Summary of Transaction

     The following is a summary of the lease transaction between Lessee and
     Lessor. It is set forth for the convenience of the parties only and will
     not be deemed in any way to amend, detract from or simplify the other
     provisions of this Lease.

     A.   Description of Aircraft

          One Boeing 737-282A, SN 23045, U.S. Reg N824AL

     B.   Scheduled Delivery Date and Location

          On or Before March 15, 1998; over International Waters near
Christchurch Base, New Zealand

     C.   Basic Lease Tenn

          96 Months from the Basic Lease Term Commencement Date

     D.   Security Deposit

          As set forth in Exhibit H

     E.   Rent during the Basic Lease Term

          See Exhibit H

     F.   Country of Aircraft Registration

          United States

     G.   Initial Agreed Value of Aircraft

          U.S. $11,000,000

     H.   Lessor's Bank Account

          Barnett Bank

          Miami Lakes, FL
          Acct# 1596591379
          ABA# 063000047

                                     1

<PAGE>

                            AIRCRAFT LEASE AGREEMENT

            THIS AGREEMENT, made and entered into as of the 11th day
            of August, 1997, by and between AIRCRAFT NO. 2, L.L.C.,
            (hereinafter referred to as "Lessor") and ALOHA AIRLINES,
            INC., a Delaware corporation (hereinafter referred to as
            "Lessee" ).

                                  WITNESSETH:

     WHEREAS, Lessor is the owner of the aircraft described in Exhibit A. The
aircraft, together with the engines, parts and equipment installed thereon,
including any replacements or substitutions therefor and (where the context
permits) the Records furnished herewith and required to be maintained hereunder,
are hereinafter collectively referred to as the "Aircraft"; and

     WHEREAS, Lessee desires to hire and take from Lessor for operation and
Lessor is willing to lease to Lessee the Aircraft under the terms and conditions
hereinafter set forth;

     NOW, THEREFORE, for and in consideration of the premises and of the mutual
covenants and agreements herein contained, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:

1.   LEASE AND TERM; NET LEASE

     A. Subject to the provisions of this Agreement, Lessor agrees to and does
hereby lease to Lessee and Lessee agrees to and does hereby hire and take from
Lessor the Aircraft for a term commencing on the Delivery Date and ending
ninety-six (96) months after the Basic Lease Term Commencement Date (the
"Expiration Date"). The Term shall consist of (i) the Interim Term (which means
the period commencing on the Delivery Date of the Aircraft and ending on the
date immediately prior to the Basic Lease Term Commencement Date), (ii) the
Basic Lease Term (the ninety-six (96) month period referenced above) , and (iii)
if actually entered into, any Renewal Term, as hereinafter defined. The Basic
Lease Term Commencement Date means the first day of the month following the
month in which the Delivery Date occurs. The Delivery Date means the date on
which Lessor delivers the Aircraft to Lessee and the Lease Supplement is
executed by Lessor and Lessee ("Delivery"). Lessor will furnish Lessee with 72
hours notice of intended delivery. Lessor and Lessee anticipate that the
Delivery Date will be on or before March 15, 1998 provided, however that Lessor
will have no responsibility or liability for any delay in delivering the
Aircraft or failure to deliver the Aircraft for reasons other than willful
default of Lessor, including but not limited to, the failure of the current
lessee, Transportes Aeros Portugueses, S.A. ("TAP"), to redeliver the Aircraft
to Lessor at the time and in the condition required by Lessor's lease with TAP.
The delivery to and acceptance of the Aircraft by Lessee will be confirmed by
execution of a lease supplement in the form of Exhibit I hereto. The Aircraft
shall be used by Lessee for the carriage of passengers, mail and freight in its
operations as an air carrier certified by the Federal Aviation Administration
("FAA") and for no other purposes whatsoever except for flight crew training;
provided however, any training or check

                                       2

<PAGE>

flights performed with the Aircraft shall not exceed the average training/check
flights performed in other aircraft in Lessee's fleet. In no event shall the
Aircraft be operated in any area excluded from coverage by any insurance policy
required to be in effect with respect to the Aircraft under Section 12 hereof.

     B. At Delivery the Aircraft will be equipped with two (2) Pratt and Whitney
model JT8D-9A engines each of which has 750 or more rated take off horsepower,
or the equivalent thereof (individually, an "Engine" and collectively the
"Engines"), and with the major components as described in Exhibit A. Lessor will
perform at its expense all necessary conversions from metric to US measurements
for manuals, supplements and any other documents, in order for the Aircraft to
be operated. Lessor will retain all parts removed from the Aircraft as a result
of such conversion.

     C. Lessor shall deliver and Lessee shall accept the Aircraft on the
Delivery Date in the following condition:

        a. The Aircraft will have a U.S. Certificate of Airworthiness, a fresh
TAP "C" Check (Lessee shall be entitled to observe and will be notified by
Lessor of the performance of the C Check), TCAS and windshear installed, Hexcel
Interiors 737-200 PAX Quikbin Interior Kit, and having all Airworthiness
Directives ("ADs") requiring compliance by the FAA complied with.

        b. The Aircraft will be painted in Lessee's livery. Lessee shall supply
the paint and the Pounce Pattern.

        c. The Aircraft will have at least 3,000 hours remaining on the
Airframe's structural inspection.

        d. Intentionally Omitted.

        e. The APU, landing gear and time controlled components shall be in a
condition as delivered by TAP to Lessor.

        f. The Lessor will perform the work set forth in Exhibit J on the
Aircraft prior to delivery to Lessee (the "Additional Bill of Work"). Lessee
will reimburse Lessor for the Additional Bill of Work by means of Supplemental
Rental.

        g. The Aircraft otherwise shall be delivered to Lessee in an "AS IS,
WHERE IS" condition over International Waters near Air New Zealand's maintenance
facility located in Christchurch Base, New Zealand (or another location as
agreed by the parties, if required to reduce tax liability).

        h. All SI inspection items required to be performed through 22,400
flight hours will be performed (compliance without sampling) prior to delivery
and no individual SI items will fall due within the next 4000 flight hours.

                                       3

<PAGE>

        i. All Engineering Orders that have been applied to the Aircraft and
maintenance records required for issuance of the U.S. Certificate of
Airworthiness and U.S. Registration will have been translated into English.
These will include AD's, major repairs and major alterations.

        j. The Aircraft will be delivered without seats or galleys.

        k. The Aircraft will have no maintenance deferrals, all non-routine
maintenance items discovered during the TAP C check will have been performed,
(upon completion of such C check, the Aircraft will have no required maintenance
items in a deferred status, including but not limited to, any structural
repairs, corrosion, skin replacement requirements, or crack propagation).

        l. All AD's will either be terminated or cleared for inspection for a
minimum of eighteen (18) months from the delivery date except for those
inspections required more frequently than every eighteen months in which case
that AD will be cleared for inspection for the applicable maximum period between
inspections.

     D. Provided Lessee is not in default hereunder, Lessee may extend the term
of the lease for a one (1) year period ("Renewal Term") following expiration of
the Basic Lease Term stated in Section 1.A. hereof. Lessee shall notify Lessor
of its desire to extend said term not less than one hundred eighty (180) days
prior to expiration of the Basic Lease Term. Base Rental and Variable Rental, as
hereinafter defined, during the Renewal Term will be at the greater of the then
Fair Market Rental Value as hereinafter defined or the Base Rental rates. Fair
Market Rental Value means the amount agreed by Lessor and Lessee as the price at
which an aircraft of the type, age and condition of the Aircraft could be leased
in an orderly transaction under prevailing market conditions between a willing
Lessee and a willing Lessor on the date of such determination. If Lessor and
Lessee are unable to agree on such amount then the Lessor and Lessee shall each
select an independent appraiser skilled in evaluating aircraft, who shall
jointly make the determination of such amount. If Lessor's and Lessee's
appraisers are unable to agree on the Fair Market Rental Value of the Aircraft,
then such appraisers shall select a third appraiser who shall make the
determination. The determination of the independent appraiser(s) shall be
binding and conclusive on Lessor and Lessee. In all cases, Lessor and Lessee
shall bear the cost of the appraiser selected by them and shall share equally in
the cost of retaining the third independent appraiser, if required, to make such
determination.

     E. The Lease is net to Lessor. Lessee will pay all Base Rental, Variable
Rental, Supplemental Rental, costs, charges, fees and expenses in connection
with the delivery of Hexcel Interiors 737-200 PAX Quikbin Interior Kit, use,
possession and operation of the Aircraft, including maintenance, insurance,
state and local taxes (except for taxes with respect to which Lessee is not
obligated to indemnify Lessor under Section 9), and risk of loss or other
casualty. Such obligations of Lessee will be absolute and unconditional under
any and all circumstances and regardless of other events, including any of the
following:

                                       4

<PAGE>

        (a) Any right of set-off, counterclaim, recoupment, defense or other
right (including any right of reimbursement) which Lessee may have against
Lessor, or any other person for any reason whatsoever, including any claim
Lessee may have for the foregoing.

        (b) Unavailability or interruption in use of the Aircraft for any
reason, including a requisition thereof or any prohibition or interference with
or other restriction against Lessee's use, operation or possession of the
Aircraft (whether by Law, as hereinafter defined, or otherwise); any defect in
airworthiness, merchantability, fitness for any purpose, condition, design,
specification or operation of any kind or nature of the Aircraft; the
ineligibility of the Aircraft for any particular use or trade or for
registration or documentation under the Laws of any jurisdiction; or Total Loss
of the Aircraft; however, Lessee's obligation to pay Base Rental in the event of
Total Loss of the Aircraft shall terminate upon Lessor's receipt of the Agreed
Value of the Aircraft in accordance with Article 11 hereof.

        (c) Insolvency, bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution, liquidation, receivership, administration or similar
proceedings by or against Lessor, Lessee or any other person.

        (d) Invalidity or unenforceability or lack of due authorization of or
other defect in this Lease.

        (e) Failure or delay on the part of any party to perform its obligations
under this Lease.

        (f) Other cause which but for this provision would or might have the
effect of terminating or in any other way affecting any obligation of Lessee
hereunder.

    F. Nothing in the foregoing Section 1E is intended as a waiver of any
rights of Lessee to bring a separate action for default by Lessor of any of its
obligations hereunder.

2.  DELIVERY AND RETURN OF AIRCRAFT

    A. The Aircraft, together with all pertinent log books, flight manuals
and other documents as described in Exhibit B, attached hereto and made a part
hereof (the "Records"), shall be delivered by Lessor to Lessee on the Delivery
Date of this lease over International Waters near Christchurch Base, New Zealand
or at such other location as is determined pursuant to Section l.C.g.
(hereinafter referred to as the "Delivery Point").

        (a) Upon request by Lessee, Lessor will provide Lessee with a
demonstration flight of at least one hour, but less than two hours, duration,
prior to delivery of the Aircraft. If a demonstration flight is required
prior to delivery, it will be performed by and under the control of Lessor,
with Lessee's flight crew and/or other authorized personnel (not to exceed 3)
on board as observers if desired by Lessee. Lessor's captain will be the
pilot in command and will have the authority to cancel or terminate any
flight at his discretion short of one hour's duration without

                                       5

<PAGE>

incurring any liability for Lessor. If any such flight is canceled or terminated
short of one hour's duration, it will be rescheduled at a mutually agreeable
time.

        (b) Lessor will bear the costs of the demonstration flight including but
not limited to costs of crew, special insurance for such flight, fuel and take
off and landing rights.

        (c) The demonstration flight will be for the sole purpose of
demonstrating to the Lessee the satisfactory operation of the Aircraft and its
equipment and systems. The demonstration flight will be conducted in accordance
with mutually acceptable procedures. Lessor will at its expense correct
Discrepancies (conditions exceeding manufacturer's specifications) revealed
during the demonstration flight.

        (d) The Engines shall undergo a video borescope inspection and power
assurance run at or immediately prior to time of the demonstration flight
performed at Lessor's expense with Lessee as an observer. Any Discrepancies
found not to be in compliance with the manufacturer's maintenance manual shall
be corrected at Lessor's expense.

     B. Upon expiration or termination of this Lease, Lessee will redeliver the
Aircraft at a mutually agreeable location in the continental United States (the
"Redelivery Location"). Subject to Section 6, upon redelivery of the Aircraft,
the Aircraft shall be in an airworthy condition in accordance with FAA
standards, without any maintenance deferrals, with a valid FAA certificate of
airworthiness in effect with respect thereto, in conformance with Federal
Aviation Regulations ("FAR") Part 121, and otherwise with the same equipment and
in the same condition and configuration as when delivered to Lessee, except for
reasonable wear and tear due to ordinary use. Notwithstanding anything herein to
the contrary, upon return the Aircraft will not be in compliance with FAR Part
36 and ICAO 16 Chapter 3. In addition, the Aircraft upon completion of the
redelivery acceptance inspection (i) will be free and clear of all Liens, as
hereinafter defined, which result from Lessee's actions or inactions, (ii) will
be fresh from a full "C" check performed by Lessee, under Lessee's FAA approved
maintenance and structural programs including CPCP and all required non-routine
maintenance items discovered during such "C" check, without any deferrals will
have been performed, (upon completion of the "C" check, the Aircraft shall have
no required maintenance items in a deferred status, including but not limited to
any structural repairs, corrosion, skin replacement requirements, or crack
propagation discovered prior to or during the "C" check in accordance with
Lessee's Maintenance Program, and FAA Requirements), (iii) will be painted in
the livery designated by Lessor, and (iv) will meet the conditions listed in
Exhibit C. Upon Redelivery, all AD's will either be terminated or cleared for
inspection for a minimum of eighteen (18) months from the redelivery date except
for those inspections required more frequently than every eighteen (18) months,
in which case that AD will be cleared for inspection for the applicable maximum
period between inspections. If the Aircraft is not returned in the condition
required under this Agreement upon expiration or termination of this Lease,
unless lost, destroyed or so damaged as to constitute a constructive total loss
for insurance purposes, the provisions of this Agreement shall continue in full
force and effect with respect to the rights of Lessor and the obligations of
Lessee, including, without limitation, Lessee's obligation to pay rental at 150%
of the monthly rate and other

                                       6

<PAGE>

charges set forth in Section 19 and to maintain insurance as set forth herein,
without prejudice to any other rights or remedies of Lessor.

     C. At least fourteen (14) days prior to redelivery of the Aircraft, Lessee,
at its expense, will make the Aircraft available to Lessor for inspection and at
least twenty-one (21) days prior to such redelivery, Lessee will make the
Records available to Lessor for inspection ("Final Inspection") to permit Lessor
to verify that the condition of the Aircraft and Records complies with the terms
hereof. The period allowed for the Final Inspection shall be of such duration as
to permit the conduct by Lessor of the following:

        (a) Inspection of Records;

        (b) Inspection of the Aircraft, Engines (including a full video engine
borescope inspection) and Parts;

        (c) A test flight of at least one hour but not more than two hours (at
Lessor's option, the first hour of the redelivery flight will constitute the
test flight) duration. The test flight will be performed by and under the
control of Lessee, with up to three of Lessor's authorized personnel on board as
observers. Lessee will bear the cost of the test flight including but not
limited to costs of crew, insurance, fuel, takeoff and landing rights. Lessee
will at its expense correct Discrepancies revealed during the test flight.

        (d) The Engines shall undergo a video borescope inspection and power
assurance run at or before time of the redelivery test flight performed at
Lessee's expense with Lessor as an observer. Any Discrepancies found not to be
in compliance with the manufacturer's maintenance manual shall be corrected at
Lessee's expense.

     If the condition of the Aircraft upon such Final Inspection does not
conform to the terms hereof, Lessee at its own expense will bring the Aircraft
into compliance. To the extent the time for such rectification extends beyond
the expiration date of the Lease, the term hereof shall be deemed automatically
extended, except that Lessee will pay monthly rental at 150% of the Base Rental
and 150% of the Variable Rental and the provisions hereof shall remain in force
until such rectification has been accomplished, unless Lessor terminates the
Lease in writing at its sole option.

     D. Each transfer of possession of the Aircraft between the parties shall be
accompanied by the delivery to the transferring party of a receipt in the form
of Exhibit D attached hereto, executed by an authorized representative of the
receiving party.

     E. Redelivery of the Aircraft under this Agreement will occur upon physical
redelivery of the Aircraft to Lessor at the Redelivery Location upon execution
and delivery by Lessor to Lessee of an aircraft redelivery receipt in the form
of Exhibit D. Lessor shall sign and deliver such receipt to Lessee upon tender
of delivery of the Aircraft to Lessor at the Redelivery Location in compliance
with all of the terms and conditions hereof.

                                       7

<PAGE>

     F. Lessee will ensure that at return of the Aircraft any and all airport,
navigation and other charges, including but not limited to Eurocontrol charges,
which give rise or may if unpaid give rise to any lien, claim, charge or
encumbrance, right of detention, right of sale or other security interest in
relation to the Aircraft, any Engine or any Part, whether incurred in respect of
the Aircraft or any other aircraft operated by Lessee, have been paid and
discharged in full (whether or not due) and will at Lessor's request produce
evidence thereof satisfactory to Lessor.

3.   CHARGES

     See Exhibit H.

4.   LIMITED WARRANTY; DISCLAIMER

     A. Lessor warrants that it will have good title to the Aircraft, free and
clear of all liens and encumbrances other than the lien of Lessor's Lender, at
the time of delivery to Lessee.

     B. THE AIRCRAFT IS LEASED TO AND ACCEPTED BY LESSEE IN "AS IS" CONDITION
AND WITH ALL FAULTS. LESSOR MAKES NO WARRANTIES WHATSOEVER WITH RESPECT TO THE
AIRCRAFT, EXPRESS OR IMPLIED, EXCEPT THE WARRANTY AS TO TITLE APPEARING IN
SECTION 4A ABOVE.

     C. THE WARRANTIES SET FORTH IN THIS SECTION 4 AND THE OBLIGATIONS AND
LIABILITIES OF LESSOR THEREUNDER, ARE EXPRESSLY IN LIEU OF AND LESSEE HEREBY
WAIVES AND RELEASES LESSOR FROM ANY AND ALL OTHER WARRANTIES, AGREEMENTS,
GUARANTEES, CONDITIONS, DUTIES, OBLIGATIONS, REMEDIES OR LIABILITIES, EXPRESS OR
IMPLIED, ARISING BY LAW OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY WARRANTY
OF MERCHANTABILITY AND FITNESS FOR INTENDED USE OR LOSS OF USE OR STRICT
LIABILITY IN TORT, WITH RESPECT TO ANY EQUIPMENT LEASED HEREUNDER OR LESSOR'S
PERFORMANCE HEREUNDER. NO AGREEMENT OR UNDERSTANDING VARYING, ALTERING OR
EXTENDING LESSOR'S LIABILITY WILL BE BINDING ON LESSOR UNLESS IN WRITING AND
SIGNED BY LESSEE'S AND LESSOR'S DULY AUTHORIZED OFFICER OR REPRESENTATIVE.

     D. Lessor will assign to Lessee any assignable warranties of overhaul
agencies performing any predelivery work for Lessor on the Aircraft, and/or
Engines. In the event that Lessor contracts for performance of work on the
Aircraft or Engines prior to delivery, Lessor will use good faith efforts to
obtain industry standard warranties for that work and to assign such warranties
to Lessee.

5.   SET-OFF; ABATEMENT

     All payments provided for herein shall be paid without set-off, defense,
counterclaim or deduction of any nature whatsoever arising from this or any
other transaction or relationship, direct or indirect, which may exist between
the parties, except for taxes imposed on Lessee as a

                                       8

<PAGE>

result of this Lease with respect to which Lessee is not obligated to indemnify
Lessor under Section 9. There shall be no abatement of Base Rental, Variable
Rental, Supplemental Rental, or other charges payable hereunder for any period
that the Aircraft shall be out of use or unserviceable for any reason
whatsoever, including by way of illustration but not by way of limitation, while
undergoing maintenance, suspension of certification or grounding of the Aircraft
resulting from fire, casualty, or administrative action or revocation or
limitation of government approval, license or permit. If Lessee is prohibited by
Law from making payment in full to Lessor, Lessee will gross up the payment
amount such that the net payment received by Lessor after any deduction or
withholding equals the amounts called for under this Lease. "Law" means any (i)
statute, decree, constitution, regulation, order or any directive of any
government entity, (ii) treaty, pact, compact or other agreement to which any
government entity is a signatory or party and (iii) judicial or administrative
interpretation or application. Nothing in this Section 5 is intended as a waiver
of any rights of Lessee to bring a separate action for default by Lessor of any
of its obligations hereunder.

6.   OPERATION, MAINTENANCE, REGISTRATION, and RECORDS

     A. Lessee shall conduct all flight operations of the Aircraft only with
properly qualified and properly certified flight crews and in accordance with
(i) the manufacturers recommended operating procedures and manuals and
instructions in effect from time to time, (ii) applicable rules, regulations and
requirements of the government of the United States of America, including
specifically, the FAA, and (iii) the applicable rules, regulations and
requirements of any other jurisdiction in which the Aircraft may be operated.

     B. During the Term, Lessee, at its sole cost and expense, will service,
repair, overhaul and maintain the Aircraft in accordance with applicable
requirements of all U.S. governmental agencies including the FAA. In addition,
Lessee will (i) keep the Aircraft in as good operating condition as when
delivered to Lessee, reasonable wear and tear from ordinary use excepted, (ii)
keep the Aircraft in such condition as may be necessary to enable the
airworthiness certification for the Aircraft to be maintained in good standing
at all times under the laws of the United States, and (iii) maintain the
Aircraft in at least the same manner as Lessee maintains, services, repairs or
overhauls similar aircraft operated by Lessee without in any way discriminating
against the Aircraft, whether by reason of its leased status or otherwise;
provided however, that nothing in the foregoing shall be deemed to expand
Lessee's obligations or return of the Aircraft beyond the return provisions
expressly set forth herein. The Aircraft shall be maintained in accordance with
Lessee's FAA approved maintenance program. Such maintenance will include without
limitation all scheduled and unscheduled overhaul and maintenance, including
line maintenance, and replacement of components, parts, and Engines as may be
required. In addition, Lessee will replace or repair any loss or damage to the
Aircraft, regardless of cause. Lessee will fully comply, at its sole cost and
expense, with all instructions and Airworthiness Directives of the FAA falling
due during the Term ("AD") and will comply at its sole cost and expense with all
Alert Service Bulletins (service bulletins issued by the manufacturer requiring
compliance) falling due during the Term, all in accordance with the terms
thereof in the same manner as Lessee complies with such AD's and Alert Service
Bulletins on similar aircraft operated by

                                       9

<PAGE>

Lessee without in any way discriminating against the Aircraft, whether by reason
of its leased status or otherwise.

     C. Lessee, at its own cost and expense, will promptly replace or cause to
be replaced all Parts which may from time to time become unserviceable, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever. All replacement Parts shall be
owned by Lessee free and clear of all Liens, except replacement Parts
temporarily installed on an emergency basis (Lessee will notify Lessor of any
such emergency replacement involving a Lien or Liens in excess of Ten Thousand
Dollars ($10,000.00)), and shall be in as good operating condition as, and shall
have a value and utility at least equal to, and be in a modification status and
part number equal or greater than, the Parts replaced assuming such replaced
Parts were in the condition and repair required to be maintained by the terms
hereof. All Parts at any time removed from the Aircraft or any Engine shall
remain the property of the Lessor, no matter where located, until such time as
such Parts shall be replaced by Parts which meet the requirements for
replacement Parts specified above. Immediately upon any replacement Part
becoming incorporated or installed in or attached to the Aircraft or any Engine,
without further act, except replacement Parts temporarily installed on an
emergency basis, (i) such replacement Part shall become the property of Lessor
and shall become subject to this Lease and be deemed a Part for all purposes
hereof to the same extent as the Parts originally incorporated or installed in
or attached to the Aircraft or such Engine, and (ii) the replaced Part shall no
longer be the property of Lessor and shall no longer be deemed a Part hereunder
and provided Lessee is not in default, title to such removed Part shall transfer
to Lessee free and clear of Liens, except for Liens created by or through
Lessee. "Parts" means all appliances, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature other than
complete Engine or Engines, which are from time to time incorporated or
installed in or attached to the Aircraft or any Engine. Lessee, at its own
expense, may from time to time make such alterations and modifications in and
additions to the Aircraft or any Engine as Lessee may deem desirable in the
proper conduct of its business, including removal of parts which Lessee deems to
be obsolete or no longer suitable or appropriate for use on the Aircraft or such
Engine ("Obsolete Parts"); provided that no such alteration, modification,
removal or addition impairs the condition or airworthiness of the Aircraft or
such Engine, or diminishes the value, utility or remaining useful life of the
Aircraft or such Engine below the value, utility or remaining useful life
thereof immediately prior to such alteration, modification, removal or addition
assuming the Aircraft or such Engine was then in the condition required to be
maintained by the terms of this Lease. All Parts incorporated or installed in
or attached or added to the Aircraft or an Engine as the result of such or
addition (except those parts which Lessee has leased from others and which may
be removed by Lessee pursuant to the next sentence) (the "Additional Parts")
shall, without further act, become the property of Lessor. Notwithstanding the
foregoing sentence, Lessee may, at any time during the Term, so long as no Event
of Default shall have occurred and be continuing, remove or suffer to be removed
any Additional Part, provided that such Additional Part (i) is in addition to,
and not in replacement of or substitution for, any Part originally incorporated
or installed in or attached to such Aircraft or any Engine at the time of
delivery thereof hereunder or any Part in replacement of or substitution for any
such Part, (ii) is not required to be incorporated or installed in or attached
or added to the Aircraft or any Engine pursuant to the terms of Section 6 hereof
and (iii) can be removed from

                                       10

<PAGE>

the Aircraft or such Engine without impairing airworthiness or diminishing the
value, utility or remaining useful life of the Aircraft or such Engine which the
Aircraft or such Engine would have had at such time had such alteration,
modification or addition not occurred. Upon the removal thereof as provided
above, such Additional Part shall no longer be deemed the property of Lessor or
part of the Aircraft or Engine from which it was removed. Any Additional Part
not removed as above provided prior to the return of the Aircraft or Engine to
Lessor hereunder shall remain the property of Lessor. Notwithstanding the above,
Lessee shall be permitted to install leased galleys and seats (the "Special
Equipment") on the Aircraft. Lessor agrees that it will claim no interest in the
Special Equipment.

     D. Lessor will cause the Aircraft to be registered in the name of Lessor
under regulations of the United States throughout the Term. Lessee will assist
Lessor in maintaining such registration during the Term. Lessee shall at its own
expense and responsibility cause this Agreement or appropriate financing
statements, so far as permitted by applicable law or regulation, to be kept
filed and recorded at all times during the Term, in such office or offices for
the registration of aircraft in the United States and in such other offices as
may be necessary, or as Lessor may reasonably request, to protect and preserve
Lessor's rights hereunder, and shall on request furnish to Lessor an opinion of
counsel or other evidence satisfactory to Lessor of such filing and recording.

     E. (i) Lessee will maintain complete and accurate records, logs and other
materials required to be maintained in respect of the Aircraft by the FAA and
will provide them to Lessor on reasonable request. In addition, the Records will
include, but not be limited to, records of accomplishment of AD's, service
bulletins, and any modifications. In addition, all overhaul/maintenance Records
for the airframe, engines, APU and components required by Lessor will be
maintained and supplied by Lessee. All such Records shall be the property of
Lessor and will be deemed Records at the time generated. Lessee will report
hours and cycles of operation, and location of operation, to Lessor upon
request. If the Lessee is required pursuant to the terms hereof to pay Variable
Rent at the time a D Check is being performed on the Aircraft, Lessee will
obtain Lessor's prior written approval, which approval will not be unreasonably
withheld, of the "D" Check Vendor if Lessor has notified Lessee of such
requirement.

        (ii)  Upon redelivery of the Aircraft to Lessor, Lessee will return all
Records delivered to Lessee by Lessor as well as all Records generated by
Lessee. See Exhibit E; provided, however, Lessee shall not be responsible for
records and documentation with respect to the Aircraft (as the Aircraft was
delivered to Lessee) prior to the commencement of this Lease unless such records
were delivered to Lessee by Lessor. Lessee's obligation is to redeliver
originals of all such Records.

        (iii) With respect to any Part installed by the Lessee during the Lease
and not removed prior to the return of the Aircraft, the Records returned to
Lessor will include:

              (a) Part number, description, and serial number (if Part is
serialized); and

                                       11

<PAGE>

              (b) Historical records, including but not limited to (i)
serviceability status of the Part at installation, (ii) for a time-controlled
Part, total time and cycles, time and cycles since overhaul as may be
applicable, and total time and cycles of the Aircraft or engine at the time of
Part installation, (iii) for a life-limited Part, documentation tracing usage of
the Part since new and all appropriate on-off logs, and (iv) past history,
modification status and overhaul records for components.

7.   MODIFICATION OF THE AIRCRAFT

     A. Except as provided in Section 6C and modifications relating to seats,
and galleys, Lessee shall not make any optional modifications to the Aircraft,
including but not limited to additions, alterations or improvements without
Lessor's prior written consent.

     B. Upon termination of this Lease Agreement, Lessee shall return the
Aircraft to Lessor in its original configuration as delivered to Lessee, or as
otherwise agreed in writing between Lessor and Lessee.

8.   INSPECTION AND RECORDS

     A. While the Aircraft is leased to Lessee, Lessor shall have the right to
inspect the Aircraft and the required maintenance records at any reasonable time
and on reasonable notice (except in the case of an Event of Default where no
notice is required) so as not to delay Lessee's flights or unreasonably
interfere with Lessee's or any permitted Sublessee's operations, including
periods during which the Aircraft is undergoing maintenance. Subject to the
preceding sentence, such inspection shall not restrict Lessor from opening any
panels, bays, doors, etc., which are normally opened during such maintenance.
Upon request, Lessee will advise Lessor of the maintenance schedule of the
Aircraft for the following year and Lessor shall be entitled to have a
representative present at the location of any "C" check or "D" check at all
times during which the work is being performed.

     B. Lessee agrees to furnish Lessor information in such form as Lessor may
reasonably request regarding Lessee's use and operation of the Aircraft during
the term of this Lease as may be necessary to permit Lessor to maintain its
records in accordance with the requirements of all applicable United States
governmental agencies.

9.   TAXES

     A. All payments to be made by Lessee under the Lease shall be paid without
deduction for, or on account of, any present or future taxes, levies, imposts,
value added type charges or taxes, customs, duties, charges, currency
surcharges, fees, assessments, deductions or withholdings of any nature
(collectively, together with interest and penalties thereon, called "Taxes")
imposed, levied, collected, withheld or assessed by any country or any political
subdivision or taxing authority thereof or therein, or by any group or
organization of which such country at the time of payment may be a member,
unless Lessee is compelled by law to make

                                       12

<PAGE>

payment after deducting any of such Taxes, in which event Lessee shall pay to
Lessor such additional amounts as may be necessary to ensure that Lessor
receives an amount in U.S. Dollars equal to the full amount which it would have
received had payment not been made subject to any such taxes. Lessee shall pay
or cause to be paid, and shall indemnify and hold harmless Lessor from and
against, any and all Taxes imposed, levied, collected, withheld or assessed
against Lessee or Lessor by any country or political subdivision or taxing
authority thereof or therein, if and to the extent that such Taxes are payable
as a result of this Lease Agreement, the work performed as set forth in Exhibit
J, the delivery and installation of Hexcel Interiors 737-200 PAX Quikbin
Interior Kits, or the possession, use, operation or repair of the Aircraft.
Notwithstanding the provisions of the above paragraph, Lessee's obligations
under this Section 9 in respect of Taxes shall not include:

        (i) Taxes on, based on, or measured by, net income of Lessor, or United
States federal value added or consumption type charges or taxes imposed on
Lessor, imposed by the United States of America or any United States federal,
state or local political subdivision or taxing authority;

        (ii) Taxes imposed in a taxing jurisdiction (other than by the United
States federal government or by the jurisdiction in which Lessor is incorporated
in or maintains its principal place of business) for a tax period during which
neither the Aircraft nor any part thereof has been located or operated in that
taxing jurisdiction.

        (iii) Any Taxes imposed as a result of a sale, transfer of title,
mortgaging, pledging, financing, voluntary transfer of other voluntary
disposition by Lessor of the Aircraft or part thereof or interest therein, or
any interest in the Rent or part thereof or any interest in the Lease or part
thereof, unless such sale, transfer, mortgage, pledge or disposition occurs by
reason of the exercise of Lessor's remedies under this Lease upon an Event of
Default, provided however, that Lessor shall comply with any reasonable request
as Lessee shall make concerning the appropriate jurisdiction in which such sale,
transfer or disposition shall be made (with Lessee bearing any costs associated
therewith) unless Lessor determines (and advises Lessee) that such compliance
with Lessee's request would generate an adverse consequence to Lessor.

        (iv) Any penalties or interest caused solely by the negligence or
willful misconduct of Lessor in connection with its obligations under this
Section 9.

        (v) Any Taxes caused solely by a failure by Lessor to furnish in a
timely manner notice or information which Lessor is required to furnish to
Lessee by the terms of this Section;

        (vi) Taxes relating to the Aircraft or any part thereof, or interest
therein, for any taxable period or portion thereof, relating to events occurring
prior to commencement of the Term of this Lease with the exception of work
performed as set forth in Exhibit J and delivery and installation of Hexcel
Interiors 737-200 PAX Quikbin Interior Kit or after the expiration of the Term
of this Lease and the redelivery of the Aircraft in accordance with this Lease;

                                       13

<PAGE>

        (vii) Taxes based on or measured by the value or principal amount of any
loan or promissory note (or security therefore) entered into by Lessor or anyone
claiming an interest in the Aircraft or any portion thereof through Lessor.

     B. In the event any report or return is required to be made with respect to
any obligation of the Lessee, under or arising out of this Section 9 (including
but not limited to personal property tax returns), the Lessee shall (a) to the
extent required or permitted by law, make and file in its own name such return,
statement or report, and (b) in the case of any other such return, statement or
report required to be made in the name of Lessor advise Lessor of such fact and
prepare such return, statement or report for filing by Lessor or, where such
return, statement or report shall be required to reflect items in addition to
any obligation of the Lessee under or arising out of this Section 9, provide
Lessor with information sufficient to permit such return, statement or report to
be properly made with respect to any obligation of the Lessee under or arising
out of this Section 9. Lessee shall indemnify and hold Lessor harmless from and
against any liabilities, obligations, losses, damages, penalties, interest,
claims, actions, suits and costs arising out of any late or inadequate payment
of any such Taxes, or any failure to file, or insufficiency or inaccuracy in any
such return, statement, report or information, except to the extent that the
same is attributable to Lessor's failure to timely and properly file returns
which have been timely prepared by Lessee and delivered to Lessor. If actual
notice is given by any taxing authority to Lessor that a report or return is
required to be filed with respect to any such Taxes referred to in this Section
9, Lessor shall promptly notify Lessee of such required report or return. Lessor
agrees to respond to any reasonable request of Lessee for information within the
control of Lessor with respect to the filing of any such report or return, but
Lessee agrees to pay any reasonable costs, fees or other charges of independent
counsel or independent accountants incurred by Lessor in connection with such
response or request.

     C. If claim is made against Lessor for any Taxes with respect to which
Lessee has an obligation under this Section 9, Lessor shall promptly notify the
Lessee. If reasonably requested by the Lessee in writing and provided no Event
of Default shall have occurred and is continuing, Lessor, at the sole expense of
the Lessee, shall in good faith and diligently contest (and not settle without
Lessee's written consent) or shall permit the Lessee, if desired by the Lessee,
to contest in the name of the Lessee the validity, applicability or amount of
such Taxes. Lessee may contest, or require that Lessor contest, by (a) resisting
payment thereof if practicable, (b) not paying the same except under protest
with funds advanced by Lessee on an interest-free basis, if protest is necessary
and proper, and (c) if payments be made, using reasonable efforts to obtain a
refund thereof in appropriate administrative and judicial proceedings; provided,
however, that, in each such instance, the Lessor shall not be required to
undertake any contest unless:

        (i) Lessee shall have provided Lessor with an opinion of legal counsel
reasonably acceptable to Lessor to the effect that a reasonable basis exists to
contest such claim (provided, however, that no such opinion shall be necessary
in order to contest such claim in meetings with auditors, revenue agents, or in
other informal meetings with staff members of the applicable tax authority) and,
prior to the commencement of any appeal of an adverse judicial decision, with an
opinion of such tax counsel to the effect that a reasonable basis exists to
appeal

                                       14

<PAGE>

such adverse judicial decision (which opinions shall be obtained at
Lessee's sole cost and expense);

        (ii) Such proceedings do not involve any material risk or danger of the
sale, forfeiture or loss of the Aircraft or any part thereof or interest therein
or the imposition of criminal penalties or sanctions against Lessor or the
creation of any Lien other than a Lien for taxes not yet due or being contested
in good faith by appropriate proceedings, and for payment of which such reserves
if any, as are required to be provided under generally accepted accounting
principals have been made unless Lessee has provided to Lessor a bond or other
security reasonably satisfactory to Lessor (provided that in the case of
criminal penalties or sanctions such bond or other security shall be
satisfactory to Lessor in its sole discretion) to protect against such risk or
danger;

        (iii) in the event that the subject matter of the contest is of a
continuing nature and has previously been decided adversely pursuant to the
contest provisions of this Section 9 by the highest court to which an appeal
could be taken (other than the U.S. Supreme Court), there has been a change in
the law (including, without limitation, amendments to statutes or regulations,
administrative rulings and court decisions) after such claim shall have been so
previously decided and Lessor shall have received an opinion of independent tax
counsel selected by the Lessee and reasonably acceptable to Lessor, which
opinion shall be obtained at the Lessee's sole expense, to the effect that, as a
result of such change, it is more likely than not that the position which Lessor
or the Lessee, as the case may be, had asserted in such previous contest would
prevail;

        (iv) No Event of Default shall have occurred and be continuing;

        (v) Prior to the commencement of any contest undertaken by the Lessee or
any contest undertaken by Lessor with respect to which Lessor is required to
follow the direction of the Lessee, the Lessee shall have delivered to Lessor a
written acknowledgment of its obligation to indemnify fully Lessor to the extent
that the contest is not successful;

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

     Lessee shall not be deemed to be in default under any of the above
indemnification provisions of this Section 9 so long as Lessee shall diligently
prosecute a contest in conformity with the requirements of this Section 9C, or
in the case where the Lessor shall be prosecuting such contest pursuant to this
Section 9C, Lessee has fulfilled all of its obligations under this Section 9C
with respect to such contest. Notwithstanding the foregoing, if a claim is made
against Lessor which, if successful, would result in the imposition of Taxes
under circumstances which would require the Lessee to indemnify Lessor, Lessor
shall be released from its responsibility to contest such claim, or part
thereof, if it agrees in writing with Lessee not to seek indemnification from
Lessee in respect of the claim, or such part thereof to be contested. In the

                                       15

<PAGE>

event Lessor fails diligently to contest, or refuses to permit the Lessee to
contest, a claim or part thereof which Lessor has the obligation to contest or
to permit Lessee to contest under this Section 9, then Lessee shall not be
obligated to indemnify Lessor for such claim or such part thereof and Lessor
shall refund to Lessee any amounts paid or advanced by Lessee in connection with
such Taxes that were the subject of such claim (plus interest from the date
payment is due at the rate established for refunds by the taxing authority
imposing such taxes).

     D. If Lessor shall obtain a refund of all or any part of such tax, fee or
other charge paid by Lessee, Lessor shall pay the Lessee the amount of such
refund less the amount of any Taxes payable by Lessor in respect of the receipt
of such refund; provided that such amount shall not be payable (x) before such
time as the Lessee shall have made all payments or indemnities then due to
Lessor under the Lease, or (y) while any Event of Default is outstanding and
continues unremedied. If in addition to such refund, Lessor shall receive an
amount representing attorneys fees, interest or other amount with respect to
such refund, the Lessee shall be paid that proportion of such amounts which is
fairly attributable to Taxes paid by the Lessee prior to the receipt of such
refund.

10.   INDEMNITY

     A. LESSEE HEREBY RELEASES AND AGREES TO INDEMNIFY, DEFEND AND SAVE HARMLESS
LESSOR, AND ITS DIRECTORS, OFFICERS, AGENTS, MEMBERS AND EMPLOYEES (COLLECTIVELY
THE "INDEMNITEES"), FROM ANY AND ALL LIABILITIES, DAMAGES, LOSSES, EXPENSES,
DEMANDS, CLAIMS, SUITS OR JUDGMENTS, INCLUDING ALL REASONABLE ATTORNEYS' FEES,
COSTS AND EXPENSES IN CONNECTION THEREWITH OR INCIDENT THERETO, FOR THE DEATH OF
OR INJURIES TO ANY PERSONS WHOMSOEVER (EXCLUDING EMPLOYEES OF THE INDEMNITEES IN
THEIR CAPACITY AS EMPLOYEES), AND FOR THE LOSS OF, DAMAGE TO OR DESTRUCTION OF
OR DELAY IN DELIVERY OF ANY PROPERTY WHATSOEVER, INCLUDING PROPERTY OF THE
PARTIES HERETO OR THAT OF THEIR DIRECTORS, OFFICERS, AGENTS, MEMBERS AND
EMPLOYEES, INCLUDING BUT NOT LIMITED TO THE AIRCRAFT, IN ANY MANNER ARISING OUT
OF POSSESSION, USE, MAINTENANCE, REPAIR OR OPERATION OF THE AIRCRAFT DURING THE
TERM HEREOF, (REGARDLESS OF NEGLIGENCE ON THE PART OF ANY INDEMNITEE, WHETHER
ACTIVE, PASSIVE OR OTHERWISE), PROVIDED, HOWEVER, THAT LESSEE'S INDEMNITY
OBLIGATION HEREUNDER SHALL NOT BE APPLICABLE TO ANY DEATH, INJURY, LOSS, DAMAGE
OR DESTRUCTION TO THE EXTENT CAUSED BY (1) THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF AN INDEMNITEE OR (2) BY ANY INDEPENDENT ACT OF NEGLIGENCE ON THE
PART OF ANY INDEMNITEE NOT RELATED TO THE PERFORMANCE OF THIS AGREEMENT.

     Lessee shall be entitled, at its sole cost and expense, acting through
counsel reasonably acceptable to the respective Indemnitee, (i) in any judicial
or administrative proceeding that involves solely a claim for which payment or
indemnity is sought under this Section 10, to assume responsibility for and
control thereof, (ii) in any judicial or administrative proceeding

                                       16

<PAGE>

involving a claim for which payment or indemnity is sought under this Section
10, and other claims related to the transactions contemplated by this Lease, to
assume responsibility for the control of such claim for which payment or
indemnity is sought under this Section 10, to the extent that the same may be
and is severed from such other claim, and (iii) in any other case, to be
consulted by such Indemnitee with respect to judicial proceedings subject to the
control of such Indemnitee. Notwithstanding any of the foregoing to the
contrary, Lessee shall not be entitled to assume responsibility for and control
of any such judicial or administrative proceedings (1) while an Event of Default
shall have occurred and be continuing, or (2) if such proceedings will involve
the sale, forfeiture or loss of, or the creation of any Lien on the Aircraft. An
Indemnitee may participate at its own expense and with its own counsel in any
judicial proceeding controlled by Lessee pursuant to the preceding provisions of
this Section 10.

     An Indemnitee shall supply Lessee with such information reasonably
requested by Lessee as is necessary or advisable for Lessee to control or
participate in any proceeding to the extent permitted by this Section 10. Lessee
shall not enter into a settlement or other compromise with respect to any claim
without the prior written consent of any Indemnitees affected thereby, which
consent shall not be unreasonably withheld or delayed provided that Lessee is
solely responsible for any recoveries or awards pursuant to such settlement or
other compromise.

     B. Lessee shall be liable for and shall indemnify and save harmless Lessor
from any amounts payable by Lessor to any third party as a result of any breach
by Lessee of the terms and conditions of use of the Aircraft set forth in this
Agreement, together with any costs and expenses incurred by Lessor in connection
therewith.

     C. The indemnities contained in this Section 10 will continue in full force
and effect notwithstanding the expiration or other termination of this Agreement
or the letting of the Aircraft hereunder.

11.  LOSS OF OR DAMAGE TO AIRCRAFT; AGREED VALUE

     A. Except to the extent that any loss or damage is caused by the willful
misconduct of Lessor, Lessee shall be liable to Lessor for, and shall indemnify
and save Lessor harmless from, any loss of or damage to the Aircraft (including
Engines, Parts, assemblies and components) occurring while leased to Lessee
hereunder or while in the possession, custody or control of Lessee and arising
from any cause whatsoever.

     B. Total Loss with respect to the Aircraft, or any Engine means any of the
following with respect to such property: (i) the loss of such property or of the
use thereof due to the destruction of or damage to such property which renders
repair uneconomic or which renders such property permanently unfit for the uses
permitted in Section 1A above for any reason whatsoever; (ii) any damage to such
property which results in an insurance settlement with respect to such property
on the basis of a total loss, or a constructive total loss; (iii) the theft or
disappearance of such property, or the confiscation, condemnation, or seizure
of, or requisition of title to, or loss of such property by any governmental
authority which shall have resulted in the loss of title or possession of such
property by Lessee for a period in excess of sixty (60) days.

                                       17

<PAGE>

     C. Lessor and Lessee hereby agree and fix the Agreed Value of the Aircraft
(together with all assorted equipment installed therein) to be $11,000,000. The
Agreed Value will decrease by 5% on each annual anniversary of the Delivery
Date. In the event the Aircraft shall become a Total Loss, Lessee shall
immediately notify Lessor thereof and Lessee shall within sixty (60) days of
such loss pay to Lessor in cash the Agreed Value of the Aircraft less any hull
insurance proceeds paid to Lessor in accordance with Section 12.B. below, and
Lessee shall further continue to pay Lessor the Base Rental for each day between
the day the Aircraft is lost or damaged as provided above and the day Lessor
receives the full Agreed Value for the Aircraft.

     D. Upon the Total Loss of an Engine not then installed in the Aircraft, or
a Total Loss of an Engine installed in the Aircraft not involving a Total Loss
of the Aircraft, Lessee shall give Lessor prompt written notice thereof and
Lessee shall replace such Engine within a reasonable time period but not to
exceed thirty (30) days of such Total Loss by duly conveying or causing to be
conveyed to Lessor as a replacement for such Engine, good and marketable title
to another engine reasonably acceptable to Lessor, which engine shall be free
and clear of all liens and encumbrances, shall have a value and utility at least
equal to and be in as good operating condition, as the Engine which sustained
the Total Loss, assuming such Engine was in the condition required to be
maintained hereunder. Such replacement engine, after reasonable approval and
acceptance by Lessor, shall be deemed an "Engine" as defined herein. Provided
Lessee is not in default hereunder, Lessor will then convey to Lessee title,
free and clear of all Liens, except for Liens created by or through Lessee, to
the Engine that sustained the Total Loss. Lessee's obligation to pay the Base
Rental, Variable Rental, Supplemental Rental, and other charges shall continue
in full force and effect, but Lessee shall be entitled to be reimbursed by
Lessor by the amount of insurance proceeds, if any, received by Lessor on
account of the insurance required to be carried by Lessee with respect to such
replaced Engine.

12.  INSURANCE

     Lessee will, at its own expense, procure and maintain in full force and
effect during the term of this Agreement (covering the Aircraft and the Engines
anywhere in the world where Lessee operates), a policy or policies of insurance,
with a responsible insurance company or companies active in the airline
industry, of the types and in the minimum amounts set forth below:

     A. (i) Comprehensive Airline Insurance in an amount which will produce
single limit per occurrence coverage of at least Three Hundred Million Dollars
($300,000,000), provided that if Lessee carries a higher liability limit fleet
wide, then Lessee will furnish such higher limits hereunder.

        (ii) Lessee shall cause the aforesaid insurance policies to be duly and
properly endorsed by Lessee's insurance underwriters:

              (a) To name Lessor and its directors, officers, agents, members
and employees as additional insureds thereunder;

                                       18

<PAGE>

              (b) To provide said insurance shall be primary insurance and any
other insurance policy or policies of Lessor shall be excess insurance;

              (c) To cover the contractual liability assumed by Lessee under
this Agreement including, but not limited to, any liabilities and indemnities
assumed by Lessee under any supplements to this Lease hereafter executed by
Lessor and Lessee, however, such coverage is only to the extent of coverage
afforded under the policies;

              (d) The policies will contain cross liability and severability of
interest clauses.

     B.  (i)  Aircraft Hull Insurance -- All-Risk, in the amount designated in
Section 11.C., as the Agreed Value of the Aircraft.

        (ii)  Lessee shall cause said Aircraft hull insurance policy to be duly
and properly endorsed by Lessee's insurance underwriters:

              (a) To provide that all physical damage losses with respect to
the Aircraft will be adjusted with Lessee (subject to the approval of Lessor).
In the event of a Total Loss of the Aircraft, Lessor is named as sole loss payee
for all insurance proceeds up to the Agreed Value. With respect to damage or
loss not constituting a Total Loss of the Aircraft, the Lessor is named as sole
loss payee in respect of all insurance proceeds where such insurance proceeds
exceed US $500,000.00. Said proceeds will be applied by Lessor toward payment of
repairs of damage claimed unless Lessor waives this provision and permits
payment of insurance proceeds directly to Lessee or the facility effecting
repairs. Such insurance proceeds which are not in excess of US $500,000.00 shall
be payable solely to Lessee; provided that upon receipt by Insurers and the
insurance broker of written notice from Lessor that a Default or an Event of
Default on the part of Lessee has occurred and is continuing, all payments up to
the Agreed Value will be made to Lessor. In all cases, any insurance proceeds,
as a result of policies carried by Lessee, in excess of the Agreed Value will be
payable solely to Lessee.

              (b) To waive any and all rights to subrogation that insurers may
or could have against Lessor and its directors, officers, agents and employees
by virtue of such insurance policy, regardless of any negligence (whether
active, passive or otherwise) on the part of Lessor its directors, officers,
agents or employees in connection with the leasing of the Aircraft hereunder or
in the performance of this Lease, but such waiver of rights of subrogation shall
only be to the same extent Lessee has waived its rights of recovery against or
agreed to indemnify Lessor, its directors, officers, agents and employees
elsewhere in this Lease.

       (iii)  All Risk Property Insurance (including in-transit coverage
on any Engine covering any damage which may occur while in Lessee's care,
custody or control but not then attached to an aircraft) on a replacement value
basis during all periods from their delivery to Lessee by Lessor until their
redelivery to Lessor by Lessee.

                                       19

<PAGE>

     C. Lessee shall cause the aforesaid insurance policies to be duly and
properly endorsed by Lessee's insurance underwriters to provide that Lessor be
given not less than thirty (30) days prior written notice in the event that
either Lessee or Lessee's insurance underwriters desire to amend, materially
change the policies in a manner adverse to Lessor, cancel or terminate said
policy or policies or any part or parts thereof, except war risk coverages, in
which case notice of cancellation shall not be less then seven (7) days or such
lesser period as may be customary in the industry from time to time.

     D. Lessee shall, with respect to any losses payable in connection with the
Aircraft, Engines or any of its Parts, cause its insurers promptly to adjust the
same with Lessee, subject to Lessor's approval and shall be payable directly to
Lessor; provided, however: (i) final decision with respect to any adjusted claim
shall be made solely by Lessor, and (ii) the insurance proceeds of any adjusted
claim will be applied by Lessor toward payment of repairs of damage claimed.

     E. Lessee shall furnish Lessor with acceptable certificates of insurance
evidencing the coverage and endorsements as required herein. Such certificates
shall be delivered to Lessor not less than five days prior to the delivery of
the Aircraft. Renewal certificates shall be provided to Lessor not less than 10
days prior to any policy expiration.

     F. All policies shall contain a "Breach of Warranty" clause in behalf of
Lessor.

     G. All insurance coverages listed in Section 12B above will include war
risk, hijack, terrorism and confiscation coverage in the amounts listed therein.

     H. Lessee will not operate the Aircraft or any Engine in an area or on any
route excluded from coverage by any insurance required under this Section 12.

     I. Lessor and Lessee shall each be permitted to carry insurance with
coverage limits which are in addition to/excess over what is required by
Sections 12A, 12B and 12G, provided such insurance does not adversely affect
and/or prejudice the insurance required by those sections.

13.  COMPLIANCE WITH LAWS

     Lessee agrees that the Aircraft leased hereunder shall not be used in any
manner which shall violate any law or regulation of any government or
governmental agency having jurisdiction and that any fine, penalty, or
forfeiture resulting from any such violation shall be the sole responsibility of
Lessee and Lessee agrees to indemnify and save Lessor harmless from all
liability therefor. Lessee agrees that it shall procure and maintain at its own
expense all certificates, permits and licenses, as may be required, and shall
give all notices required in connection with such possession, operation or use.
Lessee shall furnish Lessor with such documentary evidence of the procurement of
such certificates, permits and licenses as may be requested by Lessor. Lessee
agrees that while the Aircraft is leased hereunder, the Aircraft shall be
retained by Lessee in its possession, custody and control, unless otherwise
provided herein.

                                       20

<PAGE>

14.  TITLE TO AIRCRAFT

     A. Except as otherwise expressly provided herein, title to the Aircraft,
including Engines, accessories and other equipment of every nature which are
physically attached to or in operation on the Aircraft and title to any other
engines and personal property furnished or supplied by Lessor to Lessee
hereunder shall be and remain in Lessor's name at all times. Lessee shall have
no right, title or interest in the Aircraft except as provided in this Lease.
Lessee shall not directly or indirectly create, incur, assume or suffer to exist
any Lien (any mortgage, pledge, lien, charge, encumbrance, lease, exercise of
rights, security interest or claim) on or with respect to the Aircraft or any
Engine, title thereto or any interest therein, except (i) the respective rights
of Lessor and Lessee as herein provided; (ii) Lessor's Liens (Liens arising as a
result of (a) claims against Lessor not related to the transactions contemplated
by this Lease; (b) acts of Lessor, not contemplated and expressly permitted
under this Lease; or (b) taxes imposed against Lessor which are not indemnified
against by Lessee pursuant to Article 9) with respect to the Aircraft or any
Engine; (iii) Liens for Taxes either not yet due or being contested in
accordance with Section 9 hereof and so long as adequate reserves are maintained
with respect to such Liens; and (iv) inchoate materialmen's, mechanics',
workmen's, repairmen's, employees' or other like Liens arising in the ordinary
course of business, which either are not delinquent or are begin contested in
good faith by Lessee, so long as the Aircraft or such Engine is not in danger of
being lost, sold, confiscated, forfeited or seized as a result of any such Lien
provided, however, that Lessee has established cash reserves in an amount
necessary to discharge any such Lien. Lessee shall promptly, at its own expense,
take such action as may be necessary to duly discharge any Lien (except for
the Liens referred to in clauses (i) and (ii) of this Section 14) if the same
shall arise at any time with respect to the Aircraft or any Engine. Lessee shall
promptly pay and discharge when due, or make adequate provision (by way of
security or otherwise) for, or procure that the same are paid and discharged,
all debts, claims, liabilities or obligations whatsoever created by it or any
other Person, or arising as a result of any matter concerning it or any other
Person, which may give rise to any Lien on the Aircraft or any Engine,
including, without limitation, any landing fee, air navigation or similar
charges. Lessee agrees to indemnify and save Lessor harmless from and against
all damages suffered by Lessor including costs and expenses incident thereto, as
the result of Lessee's failure to perform the undertaking herein in this
paragraph provided for.

     B. Lessee shall attach a permanent placard, to be furnished by Lessor, to
the forward side of the cockpit and cabin door adjacent to the Certificate of
Aircraft Registration in the interior of the Aircraft indicating that the
Aircraft is being operated by Lessee in accordance with a Lease Agreement
between Lessee and Lessor and Lessee shall not remove same nor permit it to be
removed and shall immediately replace such placard if it should become lost,
illegible, damaged or destroyed. The placard shall state:

              "Aircraft Serial No. 23045 is owned by Aircraft No. 2, L.L.C.
              ("Lessor") subject to a mortgage in favor of Barnett Bank, N.A.
              It is being operated by Aloha Airlines, Inc., pursuant to a Lease
              Agreement between Lessor and Aloha Airlines, Inc., as Lessee.

                                       21

<PAGE>

              Owner's Address: 1100 N. Wood Dale Road, Wood Dale, Illinois
              60191"

     C. Lessee shall also cause a placard, to be furnished by Lessor, to be
attached to each Engine at all times during the Lease Term and until redelivery
to Lessor pursuant to the Lease, as follows:

                  "This Engine is owned by Aircraft No. 2, L.L.C, 1100 N.
              Wood Dale Road, Wood Dale, Illinois 60191, subject to a
              mortgage in favor of Barnett Bank, N.A."

15.  ASSIGNMENT OR SUBLEASE; POSSESSION AND USE

     A. Lessee shall neither assign this Agreement in whole or in part nor
sublease the Aircraft or transfer the custody or possession thereof to any third
party, except with the prior written consent of Lessor; provided, however,
Lessee may sublease the Aircraft to a commercial air carrier from the list
attached as Exhibit G or such other commercial air carrier as is approved in
writing by Lessor, such approval not to be unreasonably withheld (a "Permitted
Sublessee"); provided further, that at any time during the Term Lessor may, by
notice to Lessee, notify Lessee that any entity on said Exhibit G no longer
constitutes a Permitted Sublessee (which determination shall be made on a
reasonable basis by the Lessor) whereupon such entity shall no longer constitute
a Permitted Sublessee, provided that Lessor may not remove an entity from such
list during a lease to such Permitted Sublessee.

     The following conditions must be met in connection with any such sublease:

        (i) the sublease agreement is assigned to Lessor as security on or
before its effective date pursuant to documentation in form and content
reasonably acceptable to Lessor;

        (ii) all rent payable by the sublessee under such sublease agreement
shall be payable directly by the sublessee to Lessor, provided that so long as
no Event of Default has occurred and is continuing hereunder, Lessor shall pay
to Lessee out of each payment received from sublessee, the excess of the
sublease rental over the amounts due hereunder.

     Further, with respect to any such sublease:

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

        (b) the rights of the sublessee shall be subject and subordinate to all
the terms of this Lease, including without limitation the right of repossession
pursuant to Section 17 and to avoid such sublessee's right to possession upon
such repossession;

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

                                       22

<PAGE>

        (d) any sublease permitted by Section 15.A. shall provide that (i) the
Aircraft, Airframe or Engine may not be operated or used other than as provided
in Sections 6 and 15 hereof, (ii) Lessor may avoid or terminate such sublease
following an Event of Default hereunder, and (iii) to the extent not
accomplished by an assignment of sublease, upon an Event of Default such
sublease shall automatically be deemed assigned to Lessor until such time as the
event of default has been cured;

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

        (f) with respect to any sublease permitted by Section 15.A., at least
ten (10) Business Days prior to such sublease becoming effective Lessee shall
famish a copy of such sublease to Lessor for Lessor's review to determine that
the sublease is in compliance with the provisions hereof. Lessee shall reimburse
Lessor for Lessor's out-of-pocket costs and legal fees in connection with its
review of such document;

        (g) any sublease permitted by Section 15.A. shall expressly provide (x)
that such sublessee will not transfer possession or control of the Aircraft,
Airframe or Engine to anyone other than Lessee or Lessor, except to the extent
permitted pursuant to Section 15B of this Lease, and (y) that all rights of the
sublessee are subject and subordinate to all the terms of this Lease including,
without limitation, in each instance, Lessor's rights to repossession pursuant
to Section 17 and Lessor's rights to avoid such sublessee's right to possession
upon such repossession;

        (h) such sublease shall include appropriate provisions (whether by
requiring such obligations to be performed by the sublessee, Lessee, or both)
for the operation, maintenance and insurance of the Aircraft and the Engines
subleased thereby which are comparable to, or more restrictive than, the
provisions of this Lease; provided the foregoing conditions are met, sublessee
will be permitted to operate the Aircraft under the maintenance program of the
sublessee and in accordance with applicable laws governing sublessee's
operations and, provided, that Lessor and Lessor's lender have received an
opinion of counsel satisfactory to Lessor and Lessor's lender with respect to
title and perfection of security interests, sublessee will be permitted to
operate the Aircraft on the registry and with a certificate of airworthiness
where the sublessee is located; and

        (i) any such sublease shall expressly prohibit any assignment or further
sublease of the Aircraft, the Airframe or any Engine and any of the rights under
such sublease.

     B. Lessee shall not transfer possession of the Aircraft to any person
provided that, so long as no Event of Default or event which could constitute an
Event of Default (as defined herein), but for the lapse of time or the giving of
notice or both, shall have occurred and be continuing, Lessee may, without the
prior written consent of Lessor:

                                       23

<PAGE>

        (i) subject any Engine to, in each case, agreements (customary in the
airline industry and entered into in the ordinary course of its business) with
an FAA certified licensed engine overhaul agency, provided that: (a) no such
agreement or arrangement results in or requires the transfer of title to such
Engine; or (b) if Lessor's title to such Engine shall be divested under any such
agreement or arrangement, such divestiture shall be deemed to be a Total Loss
with respect to such Engine and Lessee shall comply with Section 11 hereof in
respect thereof;

        (ii) deliver possession of the Aircraft, the Airframe (Airframe shall
mean (i) the aircraft described on Exhibit A, but not including any Engine
installed thereon, and (ii) any and all Parts so long as the same shall- be
incorporated or installed on or attached to the Airframe, or so long as title
thereto shall remain vested in Lessor in accordance with the terms of Section 6,
after removal from the Airframe) or any Engine or any Part to the manufacturer
thereof for testing or other similar purposes or to any organization for
service, repair, maintenance, testing or overhaul work on such Aircraft,
Airframe or Engine or any Part thereof or for alterations or modifications in or
additions to such Aircraft, Airframe or Engine to the extent required or
permitted by the terms of Sections 6 and 7 hereof;

        (iii) install an Engine on an airframe (other than the Airframe) owned
by Lessee during the term hereof free and clear of all Liens except: (a) those
Liens of the type permitted under Section 14 hereof and those which apply only
to the engines (other than Engines), appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment (other than Parts)
installed on such airframe (but not to the airframe as an entirety; and (b) the
rights of United States participants under normal interchange agreements which
are customary in the airline industry and do not contemplate, permit, result in
or require the transfer of title to the Airframe, Engines or Parts installed
thereon;

        (iv) install an Engine on an airframe leased to Lessee or owned by
Lessee subject to a conditional sale or other security agreement, provided that:
(a) such airframe is free and clear of all Liens except the right of the parties
to the lease or conditional sale or other security agreement covering such
airframe and except Liens of the type permitted by Section 14 hereof which
insofar as they relate to such Engine are subordinate to the rights of the
Lessor hereunder, and the Lien of any mortgage which either by its terms does
not apply to the Engine or which effectively provides that each Engine leased to
Lessee hereby shall not become subject to the Lien thereof or to any rights of
any party thereunder other than Lessee (with respect to Lessee's rights
expressly granted hereunder), notwithstanding the installation of such Engine on
any airframe subject to the Lien of such mortgage, unless and until Lessee shall
become the owner of such Engine and Lessor shall have no further interest
therein, all pursuant to the express terms of this Lease; and (b) there shall be
in effect a written agreement of the lessor or secured party of such airframe
(which may be the lease or conditional sale or other security agreement covering
such airframe) substantially similar in effect to the agreement of Lessor in
Section D below whereby such lessor or secured party effectively and expressly
agrees that neither it nor its successors or assigns will acquire or claim any
right, title or interest in any Engine or any Part thereof by reason of such
Engine being installed on such airframe at any time while such Engine is subject
to this Lease or owned by Lessor, and a copy of such agreement shall be provided
to

                                       24

<PAGE>

Lessor upon written request of Lessor. In the event Lessee installs on the
Airframe an engine that is leased by Lessee from a lessor, or is owned by Lessee
subject to a conditional sale agreement or other security agreement held by a
secured party, Lessor hereby agrees for the benefit of such lessor or secured
party that Lessor will not acquire or claim, as against such lessor or secured
party, any right, title or interest in any such engine as the result of such
engine being installed on the Airframe at any time while such engine is subject
to such lease or conditional sale or other security agreement and owned by such
lessor or subject to a security interest in favor of such secured party;

        (v) subject (i) any Engine or Part to normal interchange agreements or
other similar agreement customary in the airline industry and entered into by
Lessee in the ordinary course of its business and (ii) any Engine or Part to
short-term pooling or borrowing, reciprocal leasing or other arrangement
customarily entered into by major U.S. air carriers and entered into by Lessee
in the ordinary course of its business; provided that no transfer of the
registration of the Aircraft shall be effected in connection therewith and
Lessor's title to and interest in the Aircraft, such Engine or Part shall not be
divested or impaired and that if Lessor's title or interest shall be divested or
impaired, such event shall be deemed to be a Total Loss with respect thereto;
and further provided that the foregoing shall be subject to approval by Lessor
of the air carriers who participate with Lessee in such interchange, pooling or
other similar agreements; and

        (vi) transfer possession of the Aircraft, Airframe or any Engine to the
United States Government pursuant to a contract not extending beyond the Term of
this Lease or to the Civil Reserve Air Fleet Program or any similar or
substitute programs so long as Lessee shall promptly notify Lessor upon
transferring possession of the Aircraft, Airframe or any Engine pursuant to such
program or contract.

     C. With respect to any transfer pursuant to Section 15 A or 15 B:

        (i) the rights of any transferee that received possession by reason of a
transfer permitted by Section 15B shall be subject and subordinate to all the
terms of this Lease, including but not limited to, Lessor's rights to
repossession pursuant to Section 17 and to terminate and avoid such transfer
upon such repossession and to require such transferee forthwith to deliver the
item which is subject to such transfer upon repossession;

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

        (iii) no relinquishment of possession pursuant to the terms of Section
15B shall in any way discharge or diminish any of Lessee's obligations to Lessor
hereunder.

     D. In the event Lessee shall have received from the lessor or secured party
of any airframe leased to Lessee or owned by Lessee or subject to a conditional
sale or other security agreement, a written agreement complying with Section 15
B iv hereof (which agreement may be contained in the lease, conditional sale
agreement or security agreement relating to such airframe), and such lease or
conditional sale or other security agreement covering such airframe

                                       25

<PAGE>

also covers an engine or engines owned by the lessor under such lease or subject
to a security interest in favor of the secured party under such conditional sale
or other security agreement, Lessor hereby agrees for the benefit of such lessor
or secured party that Lessor will not acquire or claim, as against such lessor
or secured party, any right, title or interest in any such engine as the result
of such engine being installed on the Airframe at any time while such engine is
subject to such lease or conditional sale or other security agreement and owned
by such lessor or subject to a security interest in favor of such secured party.
Lessor also hereby agrees for the benefit of the mortgagee under any mortgage
complying with clause (a) of Section 15 B iv hereof, relating to installation of
an Engine on airframe leased to Lessee, that Lessor will not acquire or claim,
as against such mortgagee, any right, title or interest in any engine subject to
the lien of such mortgage as the result of such engine being installed on the
Airframe at any time while such engine is subject to the lien of such mortgage.

     E. Notwithstanding anything herein to the contrary, in the event of any
sublease hereunder, Lessee shall be obligated to return the Aircraft to Lessor
in the condition required hereunder as if the sublease had not occurred.

16.  EVENTS OF DEFAULT

     Each of the following events shall constitute an "Event of Default":

     A. If default shall be made by Lessee in the making of any payment of Base
Rental, Variable Rental, Supplemental Rental or other charges when due and
payable under this Agreement and such default shall continue for a period of
five (5) Business Days;

     B. If default shall be made by Lessee at any time in the procurement or
maintenance of any insurance coverage prescribed herein;

     C. If default shall be made by Lessee in a material respect in the
observance or performance of any of the other obligations of Lessee contained in
this Agreement and such default shall continue for a period of fifteen (15) days
after notice from Lessor to Lessee specifying the default and requiring that the
same be remedied, provided that if such default cannot be cured within fifteen
(15) days that Lessee has been exercising due diligence to effect such cure;
then such cure must be effected within thirty (30) days;

     D. If Lessee shall become insolvent or go into liquidation or cease paying
its debts as they mature or make an assignment for the benefit of creditors, or
file for protection from its creditors under any applicable law relating to
bankruptcy or insolvency, or a trustee or receiver or liquidator shall be
appointed for Lessee, for a substantial part of its property, or bankruptcy, or
liquidation, reorganization arrangements, insolvency or similar proceedings
shall be instituted by or against Lessee under the laws of any jurisdiction,
unless in the instance of any involuntary proceedings, the petition or
appointment is set aside, withdrawn or ceases within ten (10) Business Days of
its effective date;

                                       26

<PAGE>

     E. If any representation or warranty made by Lessee in or pursuant to this
Agreement proves to be incorrect in any material respect;

     F. If Lessee shall suspend, for a period in excess of thirty (30) days for
reasons other than war, insurrections, strikes, riots, fire, flood, explosions,
earthquakes, serious accidents, any act of government, acts of God or the public
enemy, failure of transportation, cancellation of schedules, or labor troubles,
all or substantially all of its operations or shall cease to hold all permits,
licenses and authorizations necessary for the conduct of its business or the
same shall be revoked or varied in a manner which materially adversely affects
the financial situation of Lessee;

     G. If any order of any Court shall be made, or any process of Law shall
take effect, either in a preliminary manner or otherwise at the behest of any
creditor or obligor of Lessee which shall have the effect of impounding or
attaching the Aircraft or restraining its removal from any airport for any time
whatsoever, and said order or process shall not be set aside, withdrawn, vacated
or cease to be effective within ten (10) Business Days of its effective date.

     H. Lessee shall default in the payment of any unsecured obligation for the
payment of borrowed money which has a principal amount of $1,000,000 or more or
any secured obligation for the payment of borrowed money, for the deferred
purchase price of property or for the payment of rent under any aircraft lease
or other agreement when the same becomes due if such non payment results in an
acceleration of such indebtedness;

     I. If an Event of Default shall occur and be continuing under that certain
Lease Agreement between Fleet National Bank, a National Banking Association, not
in its individual capacity but solely as Trustee for the benefit of Aircraft No.
1, L.L.C. and Lessee of even date herewith in respect of aircraft with
manufacturer's serial number 23051.

17.  REMEDIES

     Upon the occurrence of any Event of Default and at any time thereafter so
long as the same shall be continuing, Lessor may, at its option, declare by
written notice to Lessee this Agreement to be in default; and at any time
thereafter, so long as any such Event of Default shall not have been remedied,
Lessor may do one or more of the following with respect to all or any part of
the Aircraft and any or all of the Engines as Lessor in its sole discretion
shall elect, to the extent permitted by and subject to compliance with any
mandatory requirements of, applicable law then in effect.

     A. Upon the written demand of Lessor and at Lessee's expense, cause Lessee
to return promptly, and Lessee shall return promptly, the Aircraft or any Engine
as Lessor may so demand, to Lessor or its order, in the manner and condition
required by, and otherwise in accordance with all the provisions of, Sections 2,
6, Exhibit C, Exhibit E and other provisions of this Agreement as if such
Aircraft or Engine were being returned at the end of the Lease Term, or Lessor,
at its option, may enter upon the premises where all or any part of the Aircraft
or any Engine is located and take immediate possession of and remove the same by
summary

                                       27

<PAGE>

proceedings or otherwise (and, at Lessor's option, store the same at Lessee's
premises until disposal thereof by Lessor), all without trespass or liability
accruing to Lessor for or by reason of such entry or taking of possession or
removing whether for the restoration of damage to property caused by such action
or otherwise;

     B. Whether or not Lessor shall have exercised, or shall thereafter at any
time exercise, any of its rights under paragraph (a) above with respect to the
Aircraft, Lessor by written notice to Lessee specifying a payment date not
earlier than five (5) days from the date of such notice, may demand that the
Lessee pay to Lessor, and Lessee shall pay Lessor, in addition to such other
remedies, as liquidated damages for loss of a bargain and not as a penalty, an
amount equal to any Base Rental, Variable Rental, Supplemental Rental and other
charges unpaid as of the date of such notice, plus an amount equal to the entire
remaining Base Rental for the duration of the unexpired period remaining of the
initial stated term of the Agreement, plus any extension exercised discounted to
present value at nine percent (9%) per annum, it being acknowledged and agreed
that actual damages under such circumstances would be difficult or impossible to
determine.

     C. Lessor may terminate this Agreement, and/or may exercise any other right
or remedy which may be available to it under applicable law or proceed by
appropriate court action to enforce the terms hereof or to recover damages for
breach hereof. In addition, Lessee shall be liable, for any and all amounts due
hereunder, including all costs and expenses reasonably incurred by reason of the
occurrence of any Event of Default and the exercise of Lessor's remedies with
respect thereto, including but not limited to reasonable attorneys fees and
costs and expenses incurred by Lessor in connection with the return of the
Aircraft or any Engine in accordance with the terms hereof, or in placing such
Aircraft or Engine in the condition and airworthiness required hereby.

18.  EXCUSABLE DELAY

     Lessor shall use reasonable efforts to deliver the Aircraft and to perform
its obligations in a timely manner; provided, however, Lessor shall not be
responsible nor deemed to be in default on account of delays in the performance
of this Agreement or for delays or failure in delivering the Aircraft to Lessee
due to causes beyond Lessor's control, including, but not limited to, failure of
TAP to timely deliver the Aircraft to Lessor in the condition required under the
TAP Lease, war, insurrections, strikes or labor disputes, inability or failure
of suppliers to deliver parts or materials, riots, fires, floods, explosions,
earthquakes, serious accidents, any act of government, acts of God or the
public enemy, failure of transportation, cancellation of schedules, or labor
troubles causing cessation, slowdown or interruption of work, actions or
inactions of Lessee; provided, however, Lessee shall not be required to accept
delivery of the Aircraft if the excusable delay extends beyond May 1, 1998,
except if such excusable delay was caused by Lessee.

                                       28

<PAGE>

19.  DELAY IN RETURN OF AIRCRAFT

     In the event Lessee is unable or fails to return the Aircraft to Lessor
upon the expiration of this Agreement, Lessor shall have the right to repossess
the Aircraft wherever it may be. In addition, all obligations of Lessee under
this Agreement shall continue until the Aircraft is redelivered or repossessed
by Lessor and the Aircraft is put into the condition required hereunder. Base
Rental and Variable Rental will accrue and be paid by Lessee from and after a
failure to return the Aircraft at the time and in the condition required
hereunder at 150% of the Base Rental and Variable Rental.

20.  APPLICABLE LAW AND JURISDICTION

     A. This Agreement is being delivered in the State of New York and shall be
deemed to be a contract made under the laws of the State of New York, U.S.A.,
and for all purposes shall be construed in accordance with the laws of said
State.

     B. The parties agree that any state or federal court located in the State
of New York shall have jurisdiction to hear any suit, action or proceeding
arising out of or in connection with this Lease. Each party hereby acknowledges
and irrevocably consents and submits to the jurisdiction of any such court in
any such suit, action or proceeding. Service of process may be made against a
party either in person, wherever such party may be found, or by notice as
permitted herein to the address of the party set forth in this Lease.

     C. Lessee covenants and agrees that any suit, action or proceeding arising
out of or relating to this Lease or the matters dealt with herein shall only be
instituted by it or its permitted successors or assigns, if at all, in a state
or federal court located in New York.

21.  NOTICES

     Except as otherwise specified in this Agreement, notices required or
permitted hereunder shall be deemed sufficient if delivered personally or sent
by certified mail, return receipt requested, facsimile, telegram, or telex, or
any other customary means of communication addressed as follows or to any other
address which either party may designate in writing to the other party hereto:

Lessor:       Aircraft No. 2, L.L.C.
              1100 North Wood Dale Road
              Wood Dale, Illinois 60191
              Attention: Manager
              Telex No.: 630-227-2046
              Fax No.: 630-227-2058

                                       29

<PAGE>

With a copy to:

              Andrew Schreer, Senior Counsel
              AAR Corp.
              One AAR Place
              1100 N. Wood Dale Road
              Wood Dale, Illinois 60191
              Facsimile 630-227-2058

              Robert D. Crane, President
              CRANE 737-200 L.L.C.
              610 Anacapa Street
              Santa Barbara, California 93101
              Facsimile 805-966-6693

Lessee:

              Aloha Airlines, Inc.
              Senior Vice President Finance and Planning
              P.O. Box 30028                      371 Aokea Street
              Honolulu, Hawaii 96820              Honolulu, Hawaii 96819
              Facsimile No.: 808-833-3100

     Notices sent by certified mail shall be deemed effective four (4) days
after mailing and notices sent by any other means shall be effective upon
receipt, and in the case of facsimile confirmed.

22.  HEADINGS

     The paragraph headings herein have been inserted solely for convenience and
in the event of any conflict between such headings and the provisions of that
paragraph, the provisions of the paragraph shall supersede and control.

23.  CONFIDENTIALITY

     A. Lessee expressly covenants and agrees that it will keep confidential the
terms of this Agreement and all information, material, documents and data
furnished by Lessor hereunder other than as may be in any filings with the FAA,
that no part of said items shall be voluntarily furnished or disclosed by Lessee
to any other person, firm or corporation (except any U.S. governmental agency
that may require submission thereof, as required by law, to comply with lender
requirements, to satisfy existing and potential investor due diligence and
requirements, and to Lessee's accountants and attorneys) without Lessor's prior
written consent, that Lessee shall not reproduce the same except for essential
copies for its own internal usage and that Lessee shall return all said items to
Lessor promptly after return of the Aircraft.

     B. Lessor expressly covenants and agrees that it will keep confidential the
terms of this Agreement and all information, material, documents and data
furnished by Lessee hereunder

                                       30

<PAGE>

other than as may be in any filings with the FAA, that no part of said items
shall be voluntarily furnished or disclosed by Lessor to any other person, firm
or corporation (except any U.S. governmental agency that may require submission
thereof, as required by law, to comply with lender requirements, to satisfy
existing and potential investor due diligence and requirements, and to Lessor's
accountants and attorneys) without Lessee's prior written consent, that Lessor
shall not reproduce the same except for essential copies for its own internal
usage and that Lessor shall return all said items to Lessee promptly after
return of the Aircraft.

24.  REPRESENTATIONS, WARRANTIES AND COVENANTS

     A. Lessee represents and warrants that:

        (i) Lessee is a corporation organized and existing under the Laws of
Delaware and has the corporate power and authority to carry on its business as
presently conducted and to perform its obligations under this Agreement and is
the holder of all necessary licenses issued by all governmental authorities
having jurisdiction to authorize or permit Lessee to engage in air
transportation;

        (ii) This Agreement has been duly authorized by all necessary corporate
action on the part of Lessee, and neither the execution and delivery hereof nor
the consummation of the transactions contemplated hereby nor compliance by
Lessee with any terms and provisions hereof will contravene any law applicable
to Lessee or result in any breach of, or constitute any default under or result
in the creation of any lien, charge or encumbrance upon any property of Lessee
under, any indenture, mortgage, chattel mortgage, deed of trust, conditional
sales contract, bank loan or credit agreement, corporate charter, by-law, or
other agreement or instrument to which Lessee is a party or by which Lessee or
its properties or assets may be bound or affected;

        (iii) The execution and delivery by Lessee of this Agreement, and any of
the transactions by Lessee contemplated hereby, have received, and Lessee has
complied with, every necessary consent, approval, order, or authorization of, or
registration with, or the giving or prior notice to, any government authority
having jurisdiction with respect to the execution and delivery of this Agreement
or the validity and enforceability hereof or the satisfaction of all monetary
and other obligations hereunder.

        (iv) This Agreement has been duly entered into and delivered by Lessee
and constitutes the valid, legal and binding obligation of Lessee, enforceable
in accordance with its terms.

        (v) It is not necessary under the laws of the United States and/or
Hawaii in order to ensure the validity, effectiveness and enforceability of this
Agreement or to protect the property rights of Lessor in the Aircraft that this
Agreement or any other instrument relating thereto be filed, registered or
recorded or that any other action be taken, except for recording in the FAA
Aircraft Registry in Oklahoma City, and a notice filing with the Secretary of
State of

                                       31

<PAGE>

Hawaii and that under the laws of the United States and Hawaii, the property
rights of Lessor in the Aircraft will have priority in all respects over the
claims of all creditors of Lessee;

        (vi) There are no suits or legal proceedings pending or threatened
against Lessee which, if adversely determined, would have a material adverse
effect upon its financial condition or business or its ability to perform its
obligations hereunder, other than as heretofore disclosed in writing by Lessee
to Lessor.

     B. Lessee hereby covenants with Lessor that from the Delivery Date and
during the Term hereof it will:

        (i) duly pay and discharge all Taxes, assessments and governmental
charges upon it or against its properties prior to the date on which penalties
are attached thereto, unless and to the extent only that the same be contested
in good faith and by appropriate proceedings by Lessee. In particular, Lessee
shall pay all airport charges in respect of the Aircraft according as the same
may be incurred;

        (ii) remain in and continue to operate substantially the same line of
business as presently engaged in, preserve its corporate existence, conduct its
business in an orderly efficient and customary manner, satisfy its debts and
obligations as they fall due and keep and maintain all of its properties in good
working order and condition;

        (iii) maintain insurance in respect of its liabilities and properties in
accordance with good airline practice;

        (iv) comply with all laws and regulations for the time being in force in
the State of Hawaii and in any country, to, from, in or over which the Aircraft
is flown;

        (v) within sixty (60) days following the end of each quarter, furnish to
Lessor an unaudited balance sheet of Lessee prepared by it as of the period
ended, together with the related profit and loss statement for such period;

        (vi) within one hundred twenty (120) days after the close of each fiscal
year of Lessee, furnish Lessor an audited balance sheet, and profit and loss
statement of Lessee (and an unaudited balance sheet); and

        (vii) at its own expense from time to time do and perform such other and
further acts and execute and deliver any and all other further instruments as
may be required by Law or reasonably requested by Lessor to establish, maintain
and protect the respective rights and remedies of Lessor and to carry out and
give effect to the intents and purposes of this Agreement and the parties hereto
provided, however, Lessee will be reimbursed for actual costs associated with
any transfer of Lessor's interest in the Aircraft.

     C. To the extent permitted by law, Lessee hereby agrees, in accordance with
Section 1110 of Title 11 of the United States Code, or any superseding
statutes, as amended from time to

                                       32

<PAGE>

time, that the title of Lessor to the Aircraft, and any right of Lessor to take
possession of such Aircraft in compliance with the provisions of this Lease will
not be affected by the provisions of Section 362 or 363 of such Title 11, or
other analogous part of any superseding statutes, as amended from time to time.

     D. The Lessor represents and warrants to the Lessee that:

        (i) The Lessor is a limited liability company formed under the laws of
Illinois and has the power to own its assets and carry on its business as it is
now being conducted.

        (ii) The Lessor has the power to enter into and perform, and has taken
all necessary action to authorize the entry into, performance and delivery of,
this Agreement and the transactions contemplated by this Agreement.

        (iii) This Agreement constitutes the Lessor's legal, valid and binding
obligation, enforceable against Lessor in accordance with its terms.

        (iv) The entry into and performance by the Lessor of, and the
transactions contemplated by, this Agreement do not and will not:

              (a) conflict with any laws binding on the Lessor;

              (b) conflict with the constitutional documents of the Lessor; or

              (c) conflict with any document which is binding upon the Lessor or
any of its assets.

        (v) So far as concerns the obligations of the Lessor, all
authorizations, consents, registrations and notifications required under the
laws of the State of Illinois, in connection with the entry into, performance,
validity and enforceability of, and the transactions contemplated by, this
Agreement by the Lessor have been (or will on or before Delivery have been)
obtained or effected (as appropriate) and are (or will on their being obtained
or effected be) in full force and effect.

        (vi) On the Delivery Date, the Lessor shall have the right to lease the
Aircraft to the Lessee under this Agreement.

     E. The representations and warranties in Sections A and D above will
survive the execution of this Agreement. The representations and warranties
contained in Sections A and D above will be deemed to be repeated by the Lessee
and Lessor on delivery and on each subsequent Rent Date as if made with
reference to the facts and circumstances then existing.

                                       33

<PAGE>

25.  ASSIGNMENT AND COOPERATION WITH LESSOR'S LENDER

     A. Subject to Lessee's rights pursuant to the Lease, Lessor may grant
security interests over the Aircraft and the benefit of this Lease to Lessor's
lender as security for Lessor's obligations to Lessor's lender in connection
with Lessor's financing of the Aircraft. Lessor shall also have the right, at
its sole cost and expense, to assign or sell any interest of Lessor in the
Aircraft or this Lease and/or the proceeds thereof, subject to the rights of
Lessee hereunder.

     B. On request by Lessor or Lessor's lender, Lessee will sign and execute
all such documents as Lessor or Lessor's lender may reasonably require to
confirm Lessee's obligations under this Lease. Lessee undertakes to provide all
other reasonable assistance and cooperation to Lessor and Lessor's lender in
connection with the perfection and maintenance of such security interest,
including (without limitation) the effecting of all necessary filings and
registrations at Lessor's sole cost and expense.

     C. Wherever the term "Lessor" is used in this Lease in relation to any of
the provisions relating to disclaimer, title and registration, operational
interest, indemnity and insurance, the term "Lessor" will be deemed to include
any Lessor's lender notified to Lessee by Lessor.

     D. Any such sale or transfer will not expand Lessee's obligations
hereunder.

26.  ENTIRE AGREEMENT

     This Lease and the Exhibits and Appendices attached hereto, and made a part
hereof, embody the entire agreement and understanding of the parties and, as of
its effective date, terminate and supersede all prior or independent agreements
and understandings between the parties covering the same subject matter. No
amendment to this Lease shall be binding on either party unless confirmed in
writing and signed by the duly authorized officers or representatives of both
parties.

27.  MISCELLANEOUS

     A. This Lease may be executed in counterparts. Such counterpart documents,
when taken together, will constitute one and the same instrument. A facsimile
signature on any counterpart will be deemed an original for all purposes.

     B. Any reference to the payment of money will refer to U.S. Dollars.

     C. So long as no Event of Default has occurred and is continuing hereunder,
Lessee shall have the peaceful and quiet enjoyment of the Aircraft free from all
claims or interference of Lessor or anyone claiming by, through or under Lessor,
except as otherwise provided herein.

     D. If any legal action or other proceeding is brought in connection with
any provisions in this Lease, the prevailing party will be entitled to recover
reasonable attorneys' fees

                                       34

<PAGE>

and other costs incurred in such action or proceedings. The prevailing party
will also, to the extent permissible by Law, be entitled to receive pre- and
post-judgment Interest.

     E. The rights of the parties hereunder are cumulative, not exclusive, may
be exercised as often as each party considers appropriate and are in addition to
its rights under general Law. The rights of one party against the other party
are not capable of being waived or amended except by an express waiver or
amendment in writing. Any failure to exercise or any delay in exercising any of
such rights will not operate as a waiver or amendment of that or any other such
right; any defective or partial exercise of any such rights will not preclude
any other or further exercise of that or any other such right; and no act or
course of conduct or negotiation on a party's part or on its behalf will in any
way preclude such party from exercising any such right or constitute a
suspension or any amendment of any such right.

     F. Each party agrees from time to time to do and perform such other and
further acts and execute and deliver any and all such other instruments as may
be required by Law or reasonably requested by the other party to establish,
maintain or protect the rights and remedies of the requesting party or to carry
out and effect the intent and purpose of this Lease.

     G. The Lease Agreement dated as of August 11, 1997 between Lessee and Fleet
National Bank, a national banking association, not in its individual capacity,
but solely as Trustee for the benefit of Aircraft No. 2, L.L.C. shall be null
and void upon execution hereof by the parties.

28.  BROKERS/FINDERS

     Lessor and Lessee each represent to the other that there are and will be no
third parties involved as brokers or finders with respect to this Lease and each
party indemnifies the other from liability for fees, commissions or other
intermediary's claims arising as a result of actions of the indemnifying party.

29.  SECURITY DEPOSIT; LETTER OF CREDIT

     A. Security Deposit

        (a) Prior to delivery of the Aircraft to Lessee, Lessee shall pay Lessor
a security deposit of $500,000 (the "Security Deposit") as follows: $250,000
upon execution hereof and $125,000 on October 1, 1997, and $125,000 upon
delivery of the Aircraft to Lessee. The initial $250,000 security deposit can be
accomplished by appropriately amending the Letter of Credit dated May 7, 1997
issued by First Hawaiian Bank with respect to the Aircraft. The Security Deposit
shall constitute additional security for performance by Lessee of its
obligations under this Agreement, and the following provisions shall apply:

              (i) if an Event of Default occurs and for as long as it continues,
the Lessor (or, if a mortgage shall be in effect, the Lessor's lender) may (but
shall not be obligated to) apply all or any portion of the Security Deposit in
or towards satisfaction of any sums due

                                       35

<PAGE>

and payable to the Lessor under this Agreement or to compensate the Lessor or,
if applicable, the Lessor's lender for any sums which it may, in its discretion,
advance or expend as a result of any such Event of Default. Notwithstanding any
such use or application by the Lessor or the Lessor's lender, the Lessee shall
remain in default under this Agreement until the fall amount owed by the Lessee,
including interest accrued thereon pursuant to Exhibit H, Paragraph H, shall
have been paid to the Lessor. If the Lessor or, if applicable, the Lessor's
lender so uses or applies all or any portion of the Security Deposit, the Lessee
shall immediately, on demand of the Lessor or Lessor's lender] replenish the
Security Deposit in an amount equal to the amount so used or applied within five
(5) Business Days after Lessor's or Lessor's lender's demand therefor.

        (b) Provided Lessee is not then in default hereunder, the first $250,000
of the Security Deposit shall be reduced by $62,500 on each anniversary of the
Delivery Date.

        (c) If Lessor fails to tender delivery of the Aircraft by May 1, 1998,
other than by reason of default of Lessee or delay caused by Lessee, then Lessor
will return the Security Deposit to Lessee.

              (ii) Lessor or, if applicable, Lessor's lender may commingle the
Security Deposit with its general funds, and any interest earned on the Security
Deposit will be for Lessor's or Lender's account.

              (iii) The Security Deposit shall be returned to the Lessee within
five (5) Business Days of (1) redelivery of the Aircraft to the Lessor in the
condition required by Section 2 and Exhibit C to this Agreement, (2) receipt by
the Lessor of the Agreed Value following a Total Loss and all other amounts due
under Section 11 C or at such later time as the Lessor is satisfied that the
Lessee has irrevocably paid to the Lessor all amounts which are at the time
outstanding under this Agreement; provided always that the Lessor shall not be
obliged to return the Security Deposit if, at the relevant time, a Default shall
have occurred and be continuing.

     B. Letter of Credit. The Lessee shall be entitled, instead of paying the
Security Deposit in cash in accordance with sub-clause A above, to provide the
Lessor with Letters of Credit in the amounts of the cash Security Deposit. In
the event that the Lessee elects to provide the Letters of Credit, the following
provisions shall apply:

        (i) Lessee shall cause the Letters of Credit to be renewed or replaced
by the issuing bank not later than ten (10) Business Days before the expiration
of such Letter of Credit, and shall cause the Letters of Credit to remain in
effect, as renewed, until ninety (90) days after the scheduled Expiration Date.

        (ii) If an Event of Default occurs and for as long as it continues, the
Lessor or, so long as a mortgage shall remain in effect, the Lessor's lender may
(but shall not be obliged to) call on the Letter of Credit and use or apply the
proceeds in or towards satisfaction of any sums due and payable to the Lessor
under this Agreement or to compensate the Lessor or lender for any sums which it
may, in its discretion, advance or expend as a result of any such Event of

                                       36

<PAGE>

Default. Notwithstanding any such use or application by the Lessor or the
lender, the Lessee shall remain in default under this Agreement until the full
amount owed by the Lessee, including interest accrued thereon pursuant to
Exhibit H, Section H, shall have been paid to the Lessor and the Lessor's
lender. If the Lessor or, if applicable, the Lessor's lender so uses or applies
all or any portion of the amount available under the Letters of Credit, the
Lessee shall immediately, on demand of the Lessor or the lender, procure the
issue of a new Letter of Credit acceptable to the Lessor and the lender for an
amount equal to the amount so used or applied, or shall pay to the Lessor an
amount in cash equal to the amount so used or applied to be held pursuant to
this Section 29.

        (iii) The Letters of Credit shall be returned to the Lessee within five
(5) Business Days of

              (a) redelivery of the Aircraft to the Lessor in the condition
required by Section 2 and Exhibit C to this Agreement;

              (b) receipt by the lessor of the Agreed Value following a Total
Loss and all other amounts due under Section 11C; or

in either case, at such later time as the Lessor is satisfied that the Lessee
has irrevocably paid to the Lessor all amounts which are at that time
outstanding under this Agreement; provided always that the Lessor shall not be
obliged to return the Letter of Credit if, at the relevant time, a Default shall
have occurred and be continuing.

              (c) Lessor's failure to deliver the Aircraft by May 1, 1998 other
than by reason of default of Lessee or delay caused by Lessee.

30.  NO PURCHASE OPTION; NO HUSH KIT FINANCING

     Lessee shall have no option to purchase the Aircraft. Lessor shall have no
obligations with respect to HUSH KITS (those parts that are required to be
affixed to the Engines and Airframe in order that the Aircraft complies with all
requirements of US FAR Part 36, Stage III and ICAO Annex 16, Chapter 3),
including but not limited to financing thereof.

31.  AUTHORIZATION; LESSEE'S CONDITIONS PRECEDENT

     A. Upon execution hereof, Lessor will deliver to Lessee:

        (a) a copy of resolutions of the board of directors of the Lessor
approving the terms of, and the transactions contemplated by, this Agreement,
resolving that it enter into this Agreement, and authorizing a specified person
or persons to execute this Agreement and deliver the Aircraft on its behalf;

        (b) a certificate of a duly authorized officer of the Lessor;

                                       37

<PAGE>

              i. setting out a specimen of each signature referred to in Section
(a) above; and

              ii. certifying that the copy of the resolutions referred to in
Section (a) above is correct, complete and in full force and effect;

     B. The Lessee's obligation to accept the Aircraft on lease from the Lessor
under this Agreement is subject to the satisfaction by the Lessor of the
following conditions precedent:

     That the representations and warranties of the Lessor under Section 24
and elsewhere in the Lease Agreement are correct and would be correct if
repeated on Delivery; and

              i. The Aircraft is in the condition required pursuant to Section
IC and Section 2A;

              ii. The Aircraft is U.S. registered;

              iii. The Aircraft is substantially in the same condition as when
inspected by Lessee in May, 1997, normal wear and tear excepted;

              iv. The Aircraft shall have been delivered prior to May 1, 1998;
subject to Article 18, and

              v. Lessor shall have executed the Lease Supplement in the form of
Exhibit I.

     C. The conditions specified in Section 31 are for the sole benefit of the
Lessee and may be waived or deferred in whole or in part and with or without
conditions by the Lessee. If any of those conditions are not satisfied on or
before Delivery and the Lessee (in its absolute discretion) nonetheless agrees
to lease the Aircraft from the Lessor, the Lessor will ensure that those
conditions are fulfilled within one month after the Delivery Date.

32.  AUTHORIZATION; LESSOR'S CONDITIONS PRECEDENT

     A. Upon execution hereof, Lessee will deliver to Lessor:

        (a) a copy of resolutions of the board of directors of the Lessee
approving the terms of, and the transactions contemplated by, this Agreement,
resolving that it enter into this Agreement, and authorizing a specified person
or persons to execute this Agreement and deliver the Aircraft on its behalf;

        (b) a certificate of a duly authorized officer of the Lessee;

            i. setting out a specimen of each signature referred to in Section
a above; and

                                       38

<PAGE>

             ii. certifying that the copy of the resolutions referred to in
Section a above is correct, complete and in full force and effect;

     B. The Lessor's obligation to deliver the Aircraft to the Lessee under
this Agreement is subject to the satisfaction by the Lessee of the following
conditions precedent:

     That the representations and warranties of the Lessee under Section 24
and elsewhere in the Lease Agreement are correct and would be Correct if
repeated on Delivery. Lessee shall have executed the Lease Supplement in the
form of Exhibit I.

     D. The conditions specified in Section 32 are for the sole benefit of the
Lessor and may be waived or deferred in whole of in part and with or without
conditions by the Lessor. If any of those conditions are not satisfied on or
before Delivery and the Lessor (in its absolute discretion) nonetheless agrees
to lease the Aircraft to the Lessee, the Lessee will, ensure that those
conditions are fulfilled within one month after the Delivery Date.

     IN WITNESS WHEREOF, the parties hereto have executed this Aircraft Lease
Agreement by their duly authorized officers the day and year first above
written.

Aircraft No. 2, L.L.C.,                 Aloha Airlines, Inc.,
Lessor                                  Lessee

AAR Corp., Manager

By:                                             By:   /s/ Brenda F. Cutwright
      --------------------------------              --------------------------
Name:                                         Name:     BRENDA F. CUTWRIGHT
      --------------------------------              --------------------------
                                                       Sr. Vice President
Title:                                       Title: Finance & Planning and CFO
      --------------------------------              --------------------------

                                              By:       /s/ James M. King
                                                    --------------------------
                                              Name:       JAMES M. KING
                                                    --------------------------
                                                          Vice President
                                              Title:  Planning & Development
                                                    --------------------------

                                       39

<PAGE>

                                   EXHIBIT A

                            DESCRIPTION OF AIRCRAFT

<TABLE>
<CAPTION>

MANUFACTURER                     MODEL           SERIAL NO.    US REGISTRATION
<S>                            <C>               <C>           <C>
Boeing                         737-282A           23045        N824AL
Total Time Since New:                                            38152.6 hrs
                                                               ---------------
Total Cycles Since New:                                             23199
                                                               ---------------
Since Last D Check:                                                24.6 hrs
                                                               ---------------
Cycles Since Last D Check:                                            8
                                                               ---------------
Time Since Last C Check:                                           24.6 hrs
                                                               ---------------
Cycles Since Last C Check:                                            8
                                                               ---------------
</TABLE>

                                    ENGINES

<TABLE>
             <S>                                      <C>
             Pratt & Whitney JT8D-9A                  SN 665851
             Pratt & Whitney JT8D-9A                  SN 655014
</TABLE>

     Lessor shall have the right to substitute another Engine for one
        of the listed Engines provided that such substitute engine
           meets the build specifications set forth in the letter
            from Brian Olds to Jim King dated June 27,1997.

                    AIRCRAFT COMPONENTS ON THE AIRCRAFT ARE
                      LISTED ON THE ATTACHED EQUIPMENT LIST
                               DATED:____________

                         (To Be Furnished At Delivery)

                                       40

<PAGE>

                                   EXHIBIT B

                                    RECORDS

        All logs, manuals and data, and inspection, modification and overhaul
records required to be maintained with respect to the Aircraft under applicable
rules and regulations of the Federal Aviation Administration of the United
States to the extent required for registration of the Aircraft in the United
States, and the Republic of Portugal and the agencies and instrumentalities
thereof, and if any such logs, manuals, data or records are not in English,
English translations thereof.

                                       41

<PAGE>

                                   EXHIBIT C

                             REDELIVERY CONDITIONS

1.  ENGINE CONDITION AT REDELIVERY

        Upon return of the Aircraft to Lessor under this Lease, each Engine (or
        replacement engine, as the case may be) shall have remaining as many
        hours or cycles on the Engine's most limiting disk (with no single
        Engine having fewer than 3,000 hours or cycles (whichever is more
        limiting)) until its next Scheduled Engine Shop Visit as when the
        Aircraft was delivered to Lessee. In the event all Engine upon such
        return (or replacement Engine) shall have less hours or cycles remaining
        on its most limiting disk than on delivery, Lessee shall pay Lessor for
        the difference at the Adjusted L.L.P. rate at redelivery (i.e. the
        payment shall equal the Adjusted LLP rate at redelivery times the excess
        of the hours/cycles at Delivery over the hours/cycles at redelivery);
        provided, however, in the event one Engine (or replacement Engine) upon
        such return shall have more hours or cycles on its most limiting disk
        than on Delivery, such excess times the Adjusted LLP Rate at Redelivery
        shall be applied as a credit against amounts owed by Lessee pursuant to
        the preceding phrase; provided further, that the foregoing credit shall
        be applicable only if each Engine (or replacement engine) has at least
        3,000 hours/cycles remaining as set forth in the first sentence above.
        The foregoing calculation shall be made as to the Engine condition at
        delivery prior to any build up of the Engine condition by Lessee. In
        addition, upon return of the Aircraft to Lessor, Lessee will pay Lessor
        with respect to each Engine, an amount equal to the Adjusted Engine Shop
        Rate at redelivery times the excess, if any, of the number of flight
        hours elapsed on each such Engine since its last Engine Shop Visit at
        Redelivery over the number of Right hours elapsed on such Engine since
        its last Engine Shop Visit at Delivery. In the event an Engine (or
        replacement Engine) upon such Redelivery shall have fewer flight hours
        elapsed since its last Engine Shop Visit than at Delivery, the excess
        amount multiplied by the Adjusted Engine Shop Rate at Redelivery shall
        be applied as a credit against the amount owed by Lessee for the other
        Engine, pursuant to the preceding phrase. The foregoing credit is
        applicable only if each Engine (or replacement engine) is returned with
        at least 3,000 hours/cycles remaining until its next Scheduled Engine
        Shop Visit. Lessor shall have no obligation for betterment of the
        Engines upon redelivery. The foregoing calculation shall be made with
        reference to the Engine condition at delivery prior to any build up of
        the Engine condition by Lessee.

        If Lessee is unable to return an Engine at the expiration or earlier
        termination of this Lease, because of damage, overhaul or repair, Lessee
        shall replace such Engine prior to such expiration or earlier
        termination by duly conveying or causing to be conveyed to Lessor as a
        replacement for such Engine, good and marketable title to another engine
        acceptable to Lessor, which Engine shall be free

                                       42

<PAGE>

        and clear of all liens and encumbrances, shall have a value and utility
        at least equal to and be in as good operating condition as the Engine
        replaced, assuming such Engine was in the condition required to be
        maintained hereunder. Lessee shall have no right to substitute an engine
        for an Engine upon return of the aircraft except for damage thereto.
        Provided, however, Lessee may substitute an engine for an Engine if the
        Engine at redelivery has twenty percent (20%) or more hours/cycles
        remaining until its next Scheduled Engine Shop Visit at redelivery than
        on delivery. The substitute engine will be free and clear of all liens
        and encumbrances, shall have a value and utility at least equal to and
        be in as good operating condition as the Engine replaced, assuming such
        Engine was in the condition required hereunder. All financial
        adjustments will be made with respect to the substitute engine.

2.  AIRCRAFT CONDITION AT REDELIVERY

    The number of hours remaining until the next scheduled TAP heavy "C" check
    (C-7) at delivery is the "Beginning Hours". The number of hours remaining
    until the next scheduled Aloha check that is the equivalent of the TAP heavy
    C check at redelivery is the "Ending Hours". At Redelivery, the Aircraft
    shall have been maintained in accordance with Section 6 of the Lease with
    the same care and consideration for the technical condition of the Aircraft
    as if it were to have been kept in continued regular service by Lessee. At
    redelivery, Lessee will pay Lessor an amount equal to the excess of the
    Beginning Hours over the Ending Hours times the Adjusted Airframe Rate. The
    foregoing calculation shall be made as to the Beginning Hours prior to any
    predelivery work performed by or at Lessee's expense and any Exhibit J
    maintenance performed. The foregoing calculation is premised on the Lessee
    continuing its current maintenance program with "Block" checks at current
    intervals. If Lessee changes its maintenance program such that the intervals
    for major maintenance ("D" checks) changes or is modified then Lessor and
    Lessee will negotiate appropriate changes to the foregoing financial
    adjustment and/or the return condition of the Aircraft, it being the intent
    of the parties that the Aircraft be redelivered to Lessor in the same status
    as when delivered to Lessee, or if not so redelivered, that the financial
    adjustment is intended to compensate Lessor so that it can place the
    Aircraft in such condition. Under no circumstances will the Lessor be
    obligated to the Lessee for betterment of Aircraft condition.

    -    All cabin emergency equipment in serviceable condition (i.e.
         megaphones, fire extinguishers, portable oxygen cylinders, etc.)

    -    All outstanding AD's and mandatory orders affecting such model of
         aircraft issued by manufacturer which require compliance during the
         term of the lease shall have been accomplished

    -    All Time Controlled Parts will have at least the same hours/cycles, or
         calendar time (whichever is the more limiting factor) remaining to
         operate until the Time

                                       43

<PAGE>

         Controlled Parts' next scheduled overhaul in accordance with the
         Lessee's Maintenance Program and manufacturer's recommendations as at
         Delivery.

    -    If the Lessor's inspection prior to return of the Aircraft uncovers a
         Time Controlled Part which has less hours, cycles or calendar time
         remaining (whichever is the more limiting factor) Lessee shall make
         payments in accordance with the terms of this Exhibit. The Lessee shall
         make a payment to the Lessor by the amount in which the value assigned
         to each Time Controlled Part which has less hours/cycles/calendar time
         remaining at redelivery exceeds the value assigned to such Time
         Controlled Parts as at Delivery. The value assigned to each Time
         Controlled Part for the purposes of the payment referred to herein
         shall be the product obtained by multiplying (i) the Part Overhaul
         Price per hour, day or cycle (whichever is the more limiting factor)
         calculated as set forth in this Exhibit, times (ii) the difference
         between (a) the number of hours, calendar time or cycle (whichever is
         the more limiting factor) consumed since the last Overhaul at
         Redelivery and (b) the number of hours, calendar time or cycles
         (whichever is the more limiting factor) since the last overhaul at
         Delivery. The only Time Controlled Parts which shall be taken into
         consideration for the purposes of the calculation of the payment
         referred to herein are those Time Controlled Parts which have a
         manufacturer's new list price of USD $1000 or more. Time Controlled
         Part means any Part (other than an Engine, landing gear, APU or
         airframe) which has a useful life measured in accordance with the
         applicable Manufacturer's guidelines and recommendations, the FARs or
         the Lessee's Maintenance Program by hours, cycles or calendar time
         (whichever is the more limiting factor). The foregoing calculation
         shall be made with reference to the hours/cycles/calendar time status
         at delivery prior to any predelivery work performed by or at Lessee's
         expense and any Exhibit J maintenance performed.

    -    Calculation of Part Overhaul Price.

    (i) The Part Overhaul Price per hour, cycles or calendar time (whichever is
the more limiting factor) will be the quotient obtained by dividing (x) the
expected cost of the next Overhaul by (y) the full allotment of hours, cycles or
calendar time (whichever is the more limiting factor) between Overhauls as
approved by the Lessee's Maintenance Program.

    (ii) If the Lessee and the Lessor are unable to agree on the expected cost
of the next Time Controlled Part Overhaul, such costs will be established by
taking the average of the price quotes submitted by two (2) reputable
FAA-approved overhaul facilities, one selected by the Lessor and the other by
the Lessee.

    (iii) The foregoing calculation shall be made with reference to the
hours/cycles/calendar time status at delivery prior to any predelivery work
performed by or at Lessee's expense and Exhibit J maintenance performed.

3.   LANDING GEAR AND APU

                                       44

<PAGE>

    The landing gear and APU will be returned in the same status with respect to
    overhaul as at delivery, provided that the delivery shall refer to the
    hours/cycles/calendar time status at delivery prior to any predelivery work
    performed by or at Lessee's expense and any Exhibit J maintenance performed.

                                       45

<PAGE>

                                   EXHIBIT D

                                DELIVERY RECEIPT

    Receipt is hereby acknowledged on behalf of ____________ of the delivery
to it by ____________ at ___ o'clock, This ___ day of _______________, at
____________, the following described Aircraft together, with the parts and
equipment attached thereto and included therewith, in accordance with the
terms of the Lease Agreement between Aircraft No. 2, L.L.C. and Aloha
Airlines, Inc., dated ________________, 1998,

<TABLE>
<S>                                         <C>
(a) One (1) _______________ Aircraft
            FAA Registration No.                 N824AL
                                            ----------------
            Manufacturer's Serial No.            23045
                                            ----------------
(b) Fuel in Tanks ______________
(c) Additional Equipment listed on Exhibits _____, and _____ attached hereto [must be
    generated and attached]
(d) Total Time Since New.                        38152.6
                                            ----------------
    Total Cycles Since New:                       23199
                                            ----------------
    Time Since Last D Check:                     24.6 hrs
                                            ----------------
    Cycles Since Last D Check:                      8
                                            ----------------
    Time Since Last C Check:                     24.6 hrs
                                            ----------------
    Cycles Since Last C Check:                      8
                                            ----------------
(e) Engine Status:
ENGINE NO. 1 Serial Number:  665851
                           ---------------
Total Time Since New:                          56,495.4
                                            ----------------
Total Cycles Since New:                         39,585
                                            ----------------
Time Since Last Overhaul:                          0
                                            ----------------
Cycles Since Last Overhaul:                        0
                                            ----------------
Time Since Last Shop Visit:                        0
                                            ----------------
Cycles Since Last Shop Visit:                      0
                                            ----------------
ENGINE NO: 2: Serial Number:  655914
                            ---------------
Total Time Since New:                          61,607.4
                                            ----------------
Total Cycles Since New:                         44,700
                                            ----------------
Time Since Last Overhaul:                           0
                                            ----------------
Cycles Since Last Overhaul:                         0
                                            ----------------
Time Since Last Shop Visit:                         0
                                            ----------------
Cycles Since Last Shop Visit:                       0
                                            ----------------

By:
      -------------------------------------
Date:
      -------------------------------------

</TABLE>

                                       46

<PAGE>

                                   EXHIBIT D

                                DELIVERY RECEIPT

    Receipt is hereby acknowledged on behalf of ____________ of the delivery
to it by ____________ at ___ o'clock, this ___ day of ________________, at
____________, the following described Aircraft together, with the parts and
equipment attached thereto and included therewith, in accordance with the
terms of the Lease Agreement between Aircraft No. 2, L.L.C. and Aloha
Airlines, Inc., dated ____________________, 1998,

<TABLE>
<S>                                         <C>
(a) One (1) _______________ Aircraft
            FAA Registration No.
                                            ----------------
            Manufacturer's Serial No.
                                            ----------------
(b) Fuel in Tanks ______________
(c) Additional Equipment listed on Exhibits _____, and _____ attached hereto [must be
    generated and attached]
(d) Total Time Since New:
                                            ----------------
        Total Cycles Since New:
                                            ----------------
        Time Since Last D Check:
                                            ----------------
        Cycles Since Last D Check:
                                            ----------------
        Time Since Last C Check:
                                            ----------------
        Cycles Since Last C Check:
                                            ----------------
(e) Engine Status:
ENGINE NO. 1 Serial Number:
                           ---------------
Total Time Since New:
                                            ----------------
Total Cycles Since New:
                                            ----------------
Time Since Last Overhaul:
                                            ----------------
Cycles Since Last Overhaul:
                                            ----------------
Time Since Last Shop Visit:
                                            ----------------
Cycles Since Last Shop Visit:
                                            ----------------
ENGINE NO: 2: Serial Number:
                            ---------------
Total Time Since New:
                                            ----------------
Total Cycles Since New:
                                            ----------------
Time Since Last Overhaul:
                                            ----------------
Cycles Since Last Overhaul:
                                            ----------------
Time Since Last Shop Visit:
                                            ----------------
Cycles Since Last Shop Visit:
                                            ----------------

By:
      -------------------------------------
Date:
      -------------------------------------

</TABLE>

                                       46

<PAGE>

                                   EXHIBIT E

                               REDELIVERY RECORDS

    Upon redelivery, Lessee will deliver to Lessor all of the records, manuals,
logs, etc., delivered to Lessor at the commencement of the Lease plus all
records, manuals, logs, etc., generated by Lessee during the term of the Lease.

                                       47

<PAGE>

                                   EXHIBIT F

                   [Form of Letter of Credit to be furnished]

                                       48

<PAGE>

                                   EXHIBIT G

                          LIST OF PERMITTED SUBLESSEES

                                   Aer Lingus
                              Aerolineas Argentinas
                                  Aeropostale
                                   Air Canada
                                   Air France
                                   Air-Inter
                                   Air Malta
                                Air New Zealand
                                   Air Nippon
                                  Air Portugal
                                    Alitalia
                               All Nippon Airways
                                     Ansett
                               Austrian Airlines
                                    Aviateca
                                  Bahamas Air
                                   Braathens
                                British Airways
                            British Midland Airways
                         Canadian Airlines International
                                 Cathay Pacific
                                 China Airlines
                                     Condor
                                  COPA Panama
                                     Iberia
                                 Japan Airlines
                                Japan Air System
                               Japan Asia Airways
                              Japan Transocean Air
                                   Korean Air
                                   Lan Chile
                                   Lufthansa
                           Malaysian Airlines System
                               Martinair Holland
                             Northwest Territorial
                                     Qantas
                              Royal Dutch Airlines
                                    Ryan Air
                                     Sabena
                          Scandinavian Airlines System
                               Singapore Airlines

                                       49

<PAGE>

                             South African Airways
                                    SwissAir
                               TACA International
                           Thai Airways International
                                Alaska Airlines
                              Continental Airlines
                                 Delta Airlines
                               Southwest Airlines
                                United Air Lines
                                     USAir

                                       50

<PAGE>

                                   EXHIBIT I

                             LEASE SUPPLEMENT NO. 1

        LEASE SUPPLEMENT NO. ___, dated ____________, 19___, between Aircraft
No. 2, L.L.C., a limited liability company incorporated under the laws of
Illinois ("Lessor"), and Aloha Airlines, Inc., a Delaware corporation
("Lessee").

        Lessor and Lessee have previously entered into that certain Aircraft
Lease Agreement dated as of August 11, 1997, (herein called the "Lease" and the
defined terms therein being hereinafter used with the same meaning). The Lease
provides for the execution and delivery from time to time of a Lease Supplement
substantially in the form hereof for the purpose of leasing the aircraft
described below under the Lease as and when delivered by Lessor to Lessee in
accordance with the terms thereof.

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

        In consideration of the premises and other good and sufficient
consideration, Lessor and Lessee hereby agree as follows:

        1. Lessor hereby delivers and leases to Lessee under the Lease and
Lessee hereby accepts and leases from Lessor under the Lease, that certain used
Boeing 737-282 Advanced commercial jet Aircraft, Airframe and the two (2) Pratt
& Whitney Engines (each of which Engines has 750 or more rated takeoff
horsepower or the equivalent of such horsepower) described in Schedule 1
herewith ("Aircraft").

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

        3. The term for the Aircraft shall commence on the Delivery Date and
shall end on the Expiration Date, which shall be, subject to extension as
contemplated by Section 1 D of the Lease.

        4. The amount of Rent for the Aircraft is set forth in the Lease, and is
payable as provided in the Lease. The Last Basic Rent Payment Date shall be
subject to revision as contemplated by Section 1 D and Exhibit H of the Lease.
The Supplemental Rental is set forth on Schedule 2 hereto.

        5. Lessee hereby confirms to Lessor that (i) the Aircraft and each
Engine installed thereon or belonging thereto have been duly marked in
accordance with the terms of Section 14 of the Lease, (ii) Lessee has accepted
the Aircraft for all purposes hereof and of the Lease, and

                                       56

<PAGE>

(iii) except as otherwise expressly agreed in writing by Lessor and Lessee,
Lessee has inspected the Aircraft and the Aircraft satisfies the conditions set
forth in the Lease.

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

        7. This Lease Supplement may be executed in any number of counterparts,
each of such counterparts shall for all purposes be deemed to be an original;
and all such counterparts shall together constitute but one and the same Lease
Supplement.

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

Aircraft No. 2, L.L.C., Lessor.

AAR Corp., Manager

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

Aloha Airlines, Inc., Lessee

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

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

                                       57

<PAGE>

                                   SCHEDULE 1

                                       TO

                             LEASE SUPPLEMENT NO. 1

                                    One Used
                            Boeing 737-282A Advanced
                                    Airframe
<Table>
<Caption>
FAA Registration No.    Manufacturer's Serial No.    Total Time*    Total Cycles*
--------------------    -------------------------    -----------    -------------
<S>                     <C>                          <C>            <C>
N824AL                  23045
</Table>

                            Installed Pratt & Whitney
                                    Engines

<Table>
<Caption>
Model No.               Serial No.                   Total Time*    Total Cycles*
--------------------    ----------                   -----------    -------------
<S>                     <C>                          <C>            <C>
JT8D-9A
JT8D-9A
</Table>

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

*The total time and total cycles referred to above are as of _________ time,
_________, 1998. Such times and cycles are the actual hours and cycles at the
time of this Lease Supplement.

                                       58

<PAGE>

                             LEASE SUPPLEMENT NO. 1

     LEASE SUPPLEMENT NO. 1, dated MARCH 20, 1998, between Aircraft No. 2,
L.L.C., a limited liability company incorporated under the laws of Illinois
("Lessor"), and Aloha Airlines, Inc., a Delaware corporation ("Lessee").

     Lessor and Lessee have previously entered into that certain Aircraft
Lease Agreement dated as of August 11, 1997, (herein called the "Lease" and
the defined terms therein being hereinafter used with the same meaning). The
Lease provides for the execution and delivery from time to time of a Lease
Supplement substantially in the form hereof for the purpose of leasing the
aircraft described below under the Lease as and when delivered by Lessor to
Lessee in accordance with the terms thereof.

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

     In consideration of the premises and other good and sufficient
consideration, Lessor and Lessee hereby agree as follows:

     1.   Lessor hereby delivers and leases to Lessee under the Lease and
Lessee hereby accepts and leases from Lessor under the Lease, that certain
used Boeing 737-282 Advanced commercial jet Aircraft, Airframe and the two
(2) Pratt & Whitney Engines (each of which Engines has 750 or more rated
takeoff horsepower or the equivalent of such horsepower) described in
Schedule 1 herewith ("Aircraft").

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

     3.   The term for the Aircraft shall commence on the Delivery Date and
shall end on the Expiration Date, which shall be March 31, 2006, subject to
extension as contemplated by Section 1D of the Lease.

     4.   The amount of Rent for the Aircraft is set forth in the Lease, and
is payable as provided in the Lease. The Last Basic Rent Payment Date shall
be subject to revision as contemplated by Section 1D and Exhibit H of the
Lease. The Supplemental Rental is set forth on Schedule 2 hereto.

     5.   Lessee hereby confirms to Lessor that (i) the Aircraft and each
Engine installed thereon or belonging thereto have been duly marked in
accordance with the terms of Section 14 of the Lease, (ii) Lessee has
accepted the Aircraft for all purposes hereof and of the Lease, and (iii)
except as otherwise expressly agreed in writing by Lessor and Lessee, Lessee
has inspected the Aircraft and the Aircraft satisfies the conditions set
forth in the Lease.

<PAGE>

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

     7.   This Lease Supplement may be executed in any number of
counterparts, each of such counterparts shall for all purposes be deemed to
be an original; and all such counterparts shall together constitute but one
and the same Lease Supplement.

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

Aircraft No. 2, L.L.C., Lessor

AAR Corp. Manager

By:      /s/ Timothy J. Romenesko
      ---------------------------------
Name:    TIMOTHY J. ROMENESKO
      ---------------------------------
         Vice President
Title:   Chief Financial Officer
      --------------------------------

Aloha Airlines, Inc., Lessee

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

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

<PAGE>

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

     7.   This Lease Supplement may be executed in any number of
counterparts, each of such counterparts shall for all purposes be deemed to
be an original; and all such counterparts shall together constitute but one
and the same Lease Supplement.

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

Aircraft No. 2, L.L.C., Lessor

AAR Corp. Manager

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

Aloha Airlines, Inc., Lessee

By:        /s/ Brenda F. Cutwright
      --------------------------------
Name:        BRENDA F. CUTWRIGHT
      --------------------------------
              Sr. Vice President
Title:    Finance & Planning and CFO
      --------------------------------

By:           /s/ James M. King
      --------------------------------
Name:            JAMES M. KING
      --------------------------------
                Vice President
Title:       Planning & Development
      --------------------------------

<PAGE>

                                   SCHEDULE 1

                                       TO

                             LEASE SUPPLEMENT NO. 1

                                    One Used
                            Boeing 737-282A Advanced
                                    Airframe
<Table>
<Caption>
                        Manufacturer's Serial
FAA Registration No.    No.                      Total Time*    Total Cycles*
--------------------    ---------------------    -----------    -------------
<S>                     <C>                      <C>            <C>
N824AL                  23045                    38152.6 hrs.   23199
</Table>

                           Installed Pratt & Whitney
                                    Engines
<Table>
<Caption>
Model No.               Serial No.               Total Time*    Total Cycles*
--------------------    ---------------------    -----------    -------------
<S>                     <C>                      <C>            <C>
JT8D-9A                 665851                   56495.4 hrs    39585
JT8D-9A                 655014                   61607.4 hrs    44700
</Table>

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

* The total time and total cycles referred to above are as of March 19, 1998.
  Such times and cycles are the actual hours and cycles at the time of this
  Lease Supplement.

<PAGE>

                                   SCHEDULE 2

                                       TO

                             LEASE SUPPLEMENT NO. I

                  [Intentionally Blank for FAA Filing Purposes]

                Supplemental Rental: $ ________________ per month

                                       59

<PAGE>

                          LEASE AMENDMENT NO. 1

         Lease Amendment No. 1 entered into as of ____________, 1998 (the
"Amendment") between Aircraft No. 2, L.L.C., an Illinois limited liability
company ("Lessor") and Aloha Airlines, Inc., a corporation organized under
the laws of Delaware.

         WHEREAS, Lessor and Lessee entered into an Aircraft Lease Agreement
for one Boeing 737-282 Aircraft MSN 23045 with U.S. Registration N824AL (the
"Aircraft") dated as of August 11, 1997, as supplemented and amended from
time to time (the "Lease") (all terms used herein and not defined herein
shall have the meaning set forth in the Lease); and

         WHEREAS, the Lease and Lease Supplement No. 1 thereto dated March
20, 1998, were recorded together as Conveyance No. F68824 on June 30, 1998;
and

         WHEREAS, Lessor and Lessee desire to amend the Lease as hereinafter
set forth:

         NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, the parties hereto agree as follows:

         1.   Schedule 2 to Lease supplement No. 1 is amended as of August 1,
1998 by the deletion of such Schedule and by substitution of the attached
revised Schedule 2 to Lease Supplement No. 1.

         2.   All other terms of the Lease shall remain unchanged.

         IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective and duly authorized officers as of the date
first above written.

LESSOR                                  LESSEE

AIRCRAFT NO. 2, L.L.C.                  ALOHA AIRLINES, INC.
By: AAR CORP., Manager

By:      /s/ Timothy J. Romenesko          By:         /s/ James M. King
      ------------------------------             -----------------------------
Name:      TIMOTHY J. ROMENESKO            Name:         JAMES M. KING
      ------------------------------             -----------------------------
             Vice President                             Vice President
Title:    Chief Financial Officer         Title:     Planning & Development
      ------------------------------             -----------------------------

                                           By:        /s/ Owen Sekimura
                                                 -----------------------------
                                           Name:        OWEN SEKIMURA
                                                 -----------------------------
                                                     Staff Vice President
                                           Title:     Finance & Planning
                                                 -----------------------------

<PAGE>

                                   SCHEDULE 2

                           TO LEASE SUPPLEMENT NO. 1

                        (REVISED AS OF AUGUST 1, 1998)

                  [Intentionally Blank for FAA Filing Purposes]

            Supplemental Rental:               $27,250.93

<PAGE>

                               EXHIBIT F

              [Form of Letter of Credit to be furnished]

            Intentionally deleted for FAA filing purposes.

                                  48
<PAGE>

                               EXHIBIT H

                            FINANCIAL TERMS

             [This Exhibit is Blank for FAA Filing Purposes]

                                  51
<PAGE>

                              SCHEDULE 2

                                  TO

                       LEASE SUPPLEMENT NO. 1

             [Intentionally Blank for FAA Filing Purposes]

                                  55
<PAGE>

                               EXHIBIT J

                       ADDITIONAL BILL OF WORK

             [Intentionally Blank for FAA Filing Purposes]

                                  56
<PAGE>

                              SCHEDULE 2

                                  TO

                       LEASE SUPPLEMENT NO. 1

             [Intentionally Blank for FAA Filing Purposes]

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3     DATE 12-21-99

       0 0 0 0 0 0 0 0 3 3 5
                                      Y Y 9 1 5 8 3 7
   CERTIFIED COPY
TO BE RECORDED BY FAA                         [Illegible stamp]

                                          99 NOV 21 AM 10 20
                                              [Illegible]

                      ASSIGNMENT OF AIRCRAFT LEASE
                           (Aircraft 23045)

     INSTRUMENT OF ASSIGNMENT ("Assignment") dated as of August 31, 1999,
between BCI Aircraft Leasing 1999, L.L.C., an Illinois limited liability
company ("Assignor"), and Aircraft No. 2, L.L.C., an Illinois limited
liability company ("Assignee").

RECITALS:

     A.   The Assignor holds legal and record title to a Boeing 737-282A
aircraft bearing manufacturer's serial number 23045 and FAA Registration
Number N824AL (the "Airframe") and its two Pratt & Whitney JT8D-9A jet
engines bearing manufacturer's serial numbers 665851 and 655014
(collectively, the "Engines"; the Airframe and the Engines, together with all
avionics, appliances, radio and radar devices, accessories, and equipment
installed on the Airframe, being referred to herein as the "Aircraft").

     B.   The Assignor has leased the Aircraft to Aloha Airlines, Inc.
("Lessee"), pursuant to an Aircraft Lease Agreement dated as of August 11,
1997 (the "Lease") as supplemented by Lease Supplement No. 1, dated March 20,
1998, and amended on July 21, 1998, and as collaterally assigned by the
Assignment of Aircraft Lease, dated as of March 20, 1998 between Assignor and
Barnett Bank, N.A. now Bank of America, N.A., formerly NationsBank, N.A.
(recorded by the Federal Aviation Administration on December 7, 1998, as
Conveyance No. F68824).

     C.   The Assignee has agreed to advance to the Assignor $1,422,678
($U.S.) as a term loan (the "Loan") pursuant to a Term Note dated as of
August 31, 1999, between the Assignor and the Assignee (such Term Note as the
same may be amended or modified from time to time being hereinafter referred
to as the "Term Note").

     D.   The Borrower is indebted to NationsBank, N.A. (the "Senior Bank
Lender") in connection with financing of the Aircraft (the "Senior Debt").

     E.   Any lien granted herein to Lender is junior and subordinated to the
liens granted to the Senior Bank Lender securing the Senior Debt.

     F.   As a condition of its making the Term Loan and in consideration
thereof and as security for the repayment thereof, the Assignee has required,
among other things, that the Assignor enter into this Assignment.

     NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the parties hereto hereby agree as follows:

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3     DATE 12-21-99

                       FILED WITH FAA
                  AIRCRAFT REGISTRATION ON

                    '99 OCT 14 AM 7 45

                       OKLAHOMA CITY
                          OKLAHOMA
<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3     DATE 12-21-99

       0 0 0 0 0 0 0 0 3 3 6

     1.   Capitalized terms used but not defined in this Assignment shall
have the respective meanings set forth in the Term Note. In the event of a
conflict between the terms of this Assignment and the Term Note, the terms of
the Term Note or this Assignment which provide the Assignee with the greatest
rights and remedies shall be controlling.

     2.   In order to secure the due and punctual performance by Assignor of
each and every obligation of Assignor under, and compliance by Assignor with
each and every provision of, the Term Note and the other Loan Documents,
Assignor hereby irrevocably assigns, transfers and sets over to Assignee, all
of Assignor's estate, right, title, interest, claim and demand in, to and
under the Lease and all payments due or to become due thereunder and damages
and other moneys from time to time payable to or receivable by Assignor
thereunder (said sums being herein called the "Moneys").

     3.   Notwithstanding the provisions of Section 2 hereof, unless and
until an Event of Default shall have occurred, and thereafter provided that
Assignor has remedied all Events of Default, Assignor shall be entitled to
exercise all of the Assignor's rights under the Lease, except (a) the right,
if any, to assign or grant a security interest in any such right, including
the right to receive Moneys, to any person other than Assignee, (b) to the
extent that such exercise would violate any provision of the Lease, and (c)
as otherwise provided herein. Upon the occurrence of an Event of Default and
for as long as the same shall be continuing, all rights and interest of the
Assignor in, to and under the Lease and the proceeds thereof, including,
without limitation, all rights to receive Moneys thereunder, shall be
exercisable solely by and shall inure solely and exclusively to the benefit
of Assignee. Accordingly, upon such occurrence of an Event of Default for as
long as the same shall be continuing in addition to any right or remedy
Assignee may have under the Term Note, the Aircraft Security Agreement and
the other Loan Documents, Assignee shall have the all rights, but shall not
be obligated, to enforce the Lease as if Assignee were a party thereto.

     4.   Any Moneys which would have been required to be paid to Assignor by
Lessee but for the existence of an Event of Default and which have been paid
to Assignee shall be held by Assignee and may be applied by Assignee to cure
any Event of Default or applied in reduction of the obligations under the
Term Note. Any Moneys remaining in the possession of Assignee after the
payment in full of all obligations under the Term Note shall be promptly paid
over to Assignor without interest.

     5.   The obligations of Assignor owing to Lessee under the Lease shall
continue to be obligations of Assignor, and Assignee shall have no
obligations or liability under the Lease by reason of, or arising out of,
this Assignment, and shall not be

                                   -2-
<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3     DATE 12-21-99

       0 0 0 0 0 0 0 0 3 3 7

obligated to make any inquiry as to the sufficiency of any payment received
by it or to present or file any claim or to take any action to collect or
enforce any claim for any payment assigned hereunder. Notwithstanding the
foregoing sentence, in the event that an Event of Default (as defined in the
Lease) shall have occurred, Assignee, in its sole discretion, shall have the
right, but not the obligation, to undertake to assume and perform the
obligations of Assignor under the Lease and to have the Lessee deem and treat
Assignee as possessing all the rights granted Assignor under the Lease for
all purposes thereunder. Any performance by Assignee shall not constitute a
waiver or release of any obligation or any Event of Default (under the Term
Note) which may arise out of Assignor's non-performance of its obligations
under the Lease nor an election or waiver by Assignee of any remedy or right
available to Assignee under the Term Note or the other Loan Documents.

     6.   This Assignment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.

     7.   All notices, consents and other communications permitted or
required by this Assignment to be given or sent shall be in writing and, to
be effective hereunder, shall be hand delivered or sent by certified or
registered first class mail, return receipt requested, and addressed to the
party to whom directed at such party's address first above written or to such
other address as such party shall specify in a written notice to the other
party hereto.

     8.   This Assignment shall be governed by, and construed and enforced in
accordance with, the laws of the State of Illinois in effect from time to
time.

                                   -3-
<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3     DATE 12-21-99

       0 0 0 0 0 0 0 0 3 3 8

     IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the day and year first above written.

                                   AIRCRAFT NO. 2, L.L.C., an Illinois limited
                                   liability company

                                   By: AAR Corp., a Delaware corporation, as
                                       manager

                                       /s/ Philip C. Slapke
                                                                         By:

                                           Philip C. Slapke
                                       Executive Vice President
                                     BCI AIRCRAFT LEASING 1999, L.L.C., an
                                       Illinois limited liability company

                                       /s/ Brian N. Hollnagel

                                           BRIAN H. HOLLNAGEL
                                                                         By:
                                       MANAGER

                 (Acknowledgements appear on following page)

                                  -4-
<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3     DATE 12-21-99

       0 0 0 0 0 0 0 0 3 3 9

STATE OF ILLINOIS     )
                      ) SS:
COUNTY OF DU PAGE     )

     The foregoing instrument was acknowledged before me this 22nd day of
September, 1999 by Philip C. Slapke as Executive Vice President of AAR Corp.,
a Delaware corporation, as manager of Aircraft No. 2, L.L.C., an Illinois
limited liability company, on behalf of the corporation and the limited
liability company. He is personally known to me or has produced a driver's
license as identification.

               Print or Stamp Name: /s/ Deborah J. Schwartz
                                    ---------------------------
               Notary Public, State of
                                       ---------------------
               Commission No.:         --------------------------------
               My Commission Expires:           OFFICIAL SEAL
                                              DEBORAH J SCHWARTZ
                                       NOTARY PUBLIC, STATE OF ILLINOIS
                                       MY COMMISSION EXPIRES: 09/06/00
                                       --------------------------------

STATE OF ILLINOIS     )
                      ) SS:
COUNTY OF DU PAGE     )

     The foregoing instrument was acknowledged before me this 22nd day of
September, 1999 by Brian N. Hollnagel as Manager of BCI Aircraft Leasing
1999, L.L.C., an Illinois limited liability company, on behalf of the limited
liability company. He is personally known to me or has produced a driver's
license as identification.

               Print or Stamp Name: /s/ Deborah J. Schwartz
                                    ---------------------------
               Notary Public, State of
                                       ---------------------
               Commission No.:         --------------------------------
               My Commission Expires:           OFFICIAL SEAL
                                              DEBORAH J SCHWARTZ
                                       NOTARY PUBLIC, STATE OF ILLINOIS
                                       MY COMMISSION EXPIRES: 09/06/00
                                       --------------------------------

                                   -5-
<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3  DATE: 12-21-99

                               0 0 0 0 0 0 0 0 3 2 7       V V 0 1 5 8 3 6

                              LEASE AGREEMENT ASSIGNMENT

     This Lease Agreement Assignment (the "Assignment"), dated August 31, 1999,
is between BCI Aircraft Leasing 1999, L.L.C., an Illinois limited liability
company ("Assignee"), and Aircraft No. 2, L.L.C., an Illinois limited
liability company ("Assignor").

                                         RECITALS:

    WHEREAS, Assignor and Aloha Airlines, Inc., a Delaware corporation
("Lessee"), are parties to a Lease Agreement (the "Lease Agreement"), dated
as of August 11, 1997, between Assignor and Lessee, as amended on July 21,
1998, as supplemented by Lease Supplement No. 1, dated March 20, 1998, and
amended on July 21, 1998, and as collaterally assigned by the Assignment of
Aircraft Lease, dated as of March 20, 1998 between Assignor and Barnett
Bank, N.A. now Bank of America, N.A., formerly NationsBank, N.A. (recorded by
the Federal Aviation Administration on December 7, 1998, as Conveyance
No.  F68824) and the other agreements relating thereto as more fully described
in Schedule 1 hereto (collectively, the "Lease Documents"), pursuant to which
Assignor leases to Lessee one  used Boeing 737-282A aircraft bearing
manufacturer's serial number (MSN 23045) and FAA registration number (N824AL),
and two Pratt & Whitney Model JT8D-9A engines bearing, respectively,
manufacturer's serial numbers P655014 and P665851 (the "Aircraft").

     WHEREAS, Assignor has agreed to sell the Aircraft to Assignee (the
"Purchase") pursuant to the terms of that certain Purchase and Sale Agreement,
dated August 31, 1999 (the "Purchase Agreement"; capitalized terms used herein
and defined in the Purchase Agreement shall have the same meaning herein unless
otherwise defined herein), subject to the Lease Agreement, and to assign the
Lease Agreement, except the Assignor's Rights (as defined below), to Assignee.

    NOW THEREFORE,in consideration of the foregoing  premises, and for other
good and valuable consideration the adequacy and receipt of which are hereby
acknowledged, the parties herto agree as follows:

    SECTION 1. EFFECTIVENESS. This Assignment, and the rights and obligations of
Assignor and Assignee hereunder, shall become effective upon, but only upon,
the occurrence of the Closing (as defined in the Purchase Agreement) of the
Purchase, or upon filing of this assignment with the Federal Aviation
Administration. Assignor and Assignee shall notify Lessee (a) of the
occurrence of this Assignment pursuant to a notice given on the date hereof
substantially in the form of Annex  A hereto (the  "Notice of Assignment"),
and (b) of the occurrence of the Purchase immediately upon delivery of the
Aircraft under the Purchase Agreement pursuant to a notice substantially in
the form of Attachment A to the Notice of Assignment.

     SECTION 2. ASSIGNMENT. In consideration of the payment of US$1.00 by
Assignee to Assignor and for other good and valuable consideration, the adequacy
and receipt of which are

* which amendment was not filed with the federal Aviation Administration.

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3  DATE: 12-21-99

                                 FILED WITH FAA
                             AIRCRAFT REGISTRATION BR
                              '99 OCT 14 AM 7 44
                                 OKLAHOMA CITY
                                    OKLAHOMA

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3  DATE: 12-21-99

                               0 0 0 0 0 0 0 0 3 2 8

hereby acknowledged, Assignor hereby sells, assigns, delegates, conveys,
transfers and sets over to Assignee all rights and obligations of Assignor
under the Lease Documents, subject to the rights of Lessee under the Lease
Documents and subject to the reservation by Assignor (on a non-exclusive
basis) of the Assignor's Rights as defined below, which Assignor's Rights
Assignor shall continue to benefit from after the Purchase. Assignor's Rights
means and includes the rights of the "Lessor" under the Lease Documents
(including Assignor): (a) to each and every defense (whether arising by
contract, law or equity) under or with respect to the Lease Documents, (b)
under the liability insurance provisions of the Lease Agreement, and (c)
under all indemnities made by the Lessee, and all disclaimers made by the
Lessor, under the Lease Agreement, in each case, to the extent such rights
vested, or relate to events occurring, prior to the time of Closing. The
retention by Assignor of the Assignor's rights shall not prejudice Assignee's
right to the benefit of the Assignor's Rights (including, without Limitation,
liability, insurance under the Lease Agreement, or the right to enforce any
of the foregoing) in each case to the full extent applicable to the Assignee
(whether or not relating to the period after the assignment of the Lease
Agreement).

    SECTION 3. ASSIGNEE ACCEPTANCE AND ASSUMPTION. Assignee hereby accepts
and assumes all of Assignor's Rights (other than the Assignor's Right) and
obligations under the Lease Documents and Assignee shall perform all such
obligations to performed  by "Lessor" under the Lease Documents.

    SECTION 4. ENTIRE AGREEMENT. This Assignment (including the Schedule
hereto) and the Purchase Agreement constitutes the entire agreement between
the parties in relation to the subject matter hereof and supersedes all
previous proposals , agreements and other written and oral communications in
relation hereto. The parties acknowledge that there have been no
representations, warranties, promises, guarantees or agreements, express or
implied, except as set forth herein and the Purchase Agreement.

    SECTION 5. ILLINOIS LAW. THIS ASSIGNMENT SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS.

     SECTION 6. COUNTERPARTS. This assignment may be executed in any number
of counterparts and by either party on one or more of such counterparts, each
of which when so executed shall be deemed to be an original, and such
counterparts together shall constitute one and the same instrument. A
facsimile signature on any counterpart hereto will be deemed an original for
all purposes.

    SECTION 7. FURTHER ASSURANCE.  Assignor agrees that from time to time
after the execution and delivery of the Agreement, it shall upon the request
of Assignee and at Assignee's expense duly execute and deliver such further
documents and instruments and take such further action as Assignee may
reasonably request in order to effectuate fully the intent and purposes of
this Agreement.

          [The remainder of this page is intentionally left blank).

                                     2

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3  DATE: 12-21-99

                               0 0 0 0 0 0 0 0 3 2 9

       IN WITNESS WHEREOF, the parties have caused this  Assignment to be duly
executed and delivered by their respective duly authorized officers as of the
day and year first above written.

AIRCRAFT NO. 2, L.L.C.
as Assignor
By AAR Corp., as Manager

BY: /s/ Philip C. Slapke
Title: Executive Vice President

BCI AIRCRAFT LEASING 1999, L.L.C.
as Assignee

BY: /s/ Brian N. Hollnagel
Title: Manager

                                    3
<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3  DATE: 12-21-99

                               0 0 0 0 0 0 0 0 3 3 0

Annex A
to Lease Agreement Assignment

                   NOTICE OF AND CONSENT TO ASSIGNMENT

Aloha Airlines, Inc.
371 Aokea Street
Honolulu, Hawaii 96819

Attention:         Senior Vice President Finance and Planning

Re:                NOTICE OF AND CONSENT TO ASSIGNMENT OF LEASE AGREEMENT

Dear Sir or Madam:

Reference is hereby made to that certain Lease Agreement, dated as August 11,
1997, between Aloha Airlines, Inc. ("Leasee") and Aircraft No. 1, L.L.C.,
as amended, modified and supplemented (the "Lease Agreement"), pursuant to
which Aircraft No. 1, L.L.C. ("Assignor") is leasing to you one Boeing 737-282C
aircraft bearing manufacturer's serial number 23051 (the "Aircraft").

You are hereby notified that Assignor has assigned and delegated all of its
rights (other than Assignor's Right) and obligations under the Lease Agreement
and related documents (as set forth on Schedule 1 hereto) to BCI Aircraft
Leasing 1999, L.L.C. ("Assignee") pursuant to a Lease Agreement Assignment
between Assignor and Assignee (a copy of which Lease Agreement Assignment is
attached hereto (the "Assignment")). Such assignment and delegation shall
become effective upon consummation of the purchase of the Aircraft by
Assignee from Assignor. Assignor and Assignee shall give you notice of
consummation of the purchase of the Aircraft by Assignee (the "Purchase
Notice") in the form attached hereto as Attachment A.

Capitalized terms used but not defined herein shall have the respective
meanings ascribed thereto in the Lease Agreement Assignment.

              SECTION 1. LEASE PROVISIONS. With effect from the date of the
Purchase Notice:

              (a) PAYMENTS. Until the Note (as defined in the Purchase
Agreement) is paid in full, all rental payments and other payments due from
Lessee under the Lease will be paid to Lessor's NationsBank, N.A. account
(Routing #, ABA 063 100 277, Account # 306 457 4951).

              (b) NOTICE. All notices and other communications from Lessee to
"Lessor" under the Lease Agreement and the other Lease Documents shall be
delivered to:

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3  DATE: 12-21-99

                               0 0 0 0 0 0 0 0 3 3 1

              BCI Aircraft Leasing 1999, L.L.C.
              236 South Washington Street, Second Floor
              Naperville, Illinois 60540
              Att: President

              (c) INSURANCE. Lessee shall modify the insurance policies
covering the Aircraft to acknowledge BCI Aircraft Leasing 1999, L.L.C. as
owner and Lessor of the Aircraft and Aircraft No. 1, L.L.C. as additional
loss payee as its interests may appear.

              SECTION 2. LESSEE CONSENT. With effect from the date of the
Purchase Notice, Lessee consents to the Assignment and consummation of the
transactions contemplated thereby.

              SECTION 3. ASSIGNOR RELEASE. With effect from the date of the
Purchase Notice, Assignor shall have no further obligaitons under the Lease
Agreement (and all agreements, instruments and documents relating thereto)
and is hereby released therefrom.

              SECTION 4. LESSEE'S REPRESENTATIONS. Pursuant to the Lease
Agreement, Lessee hereby confirms that:

              (a) Other than as listed in the documents listed in Schedule 1
to this Agreement, there has been no amendment or modification of the Lease
Agreement.

              (b) The Basic Rent and Supplemental Rent (as defined in the
Lease Agreement) have each been paid through September 30, 1999 and no Basic
Rent or Supplemental Rent has been prepaid.

              (c) Lessee has no claim against Assignor by reason of the
condition of the Aircraft as of the date hereof.

              (d) The Lease Agreement is in full force and effect.

              (e) There are no uncured defaults under the Lease Agreement.

              (f) Assignor is in full compliance with the provisions of the
Lease Agreement and Lessee has no claims for unperformed obligations or
liabilities of Assignor.

              (g) With effect from the date of the Purchase Notice, Lessee
will perform, observe and comply with all of its obligations and undertakings
under the Lease Agreement and the other Lease Documents in favor of the
Assignee and for the benefit of Assignee as if Assignee were named as "Lessor"
therein instead of the Assignor.

              (h) Lessee acknowledges that, as provided in the Lease
Assignment, the retention by Assignor of the Assignor's Rights and that such
retention shall not prejudice Assignee's rights to the benefits of the
relevant provisions of the Lease Documents to the extent applicable to
Assignee (whether or not relating to the period after the date of the Purchase
Notice).

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3  DATE: 12-21-99

                               0 0 0 0 0 0 0 0 3 3 2

              SECTION 6. ILLINOIS LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS.

              SECTION 7. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by andy party on one or more of such counterparts,
each of which when so executed shall be deemed to be an original, and such
counterparts together shall constitute one and the same instrument. A
facsimile signature on any counterpart hereto will be deemed an original for
all purposes.

If you are in agreement with the foregoing, please so indicate
by signing and returning a copy of this letter to the undersigned.

Thank you for your cooperation.

Very truly yours,

AIRCRAFT NO. 1, L.L.C
By: AAR Corp., as Manager

By:_________________
Title:______________

BCI AIRCRAFT LEASING 1999, L.L.C.

By:_________________
Title:______________

Accepted and Agreed:

ALOHA AIRLINES, INC.

By:_________________
Title:______________

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3  DATE: 12-21-99

                               0 0 0 0 0 0 0 0 3 3 3

                                                             Attachment A to
                                                        Notice of Assignment

                                                        September____, 1999

Aircraft No. 1, L.L.C.
1100 N. Wood Dale Road
Wood Dale, Illinois 60191

BCI Aircraft Leasing 1999, L.L.C.
236 South Washington Street, Second Floor
Naperville, Illinois 60540

Aloha Airlines, Inc.
371 Aokea Street
Honolulu, Hawaii
96819

Attention: Senior Vice President Finance and Planning

Re: NOTICE OF EFFECTIVENESS OF SALE

Dear Sir or Madam:

Reference is hereby made to that certain Lease Assignment Agreement (the
"Agreement"), dated as of August 31, 1999, between Aircraft No. 1, L.L.C. and
BCI Aircraft Leasing 1999, L.L.C., relating to One Boeing 737-282C aircraft
bearing manufacturer's serial number 23051 (and U.S. registration number
N826AL).

Capitalized terms used but not defined herein shall have the respective meanings
ascribed thereto in the Agreement.

Pursuant to the Notice to Lessee, delivered under the Agreement, you are hereby
notified that the Purchase has occurred and the Agreement is, consequently,
effective.

<PAGE>

FAA AIRCRAFT REGISTRY
CAMERA NO. 3  DATE: 12-21-99

                               0 0 0 0 0 0 0 0 3 3 4

This letter may be executed in any number of counterparts and by either party
on one or more of such counterparts.

Very truly yours,

AIRCRAFT NO. 1, L.L.C.                    BCI AIRCRAFT LEASING 1999, L.L.C.
By: AAR Corp., as Manager

By:__________________                     By:__________________
Title:_______________                     Title:_______________

<PAGE>

                             [NUMBER ILLEGIBLE]

                                                               Execution Version
                                                               [STAMP ILLEGIBLE]

                  ASSIGNMENT OF LEASE 824 AND LETTER OF CREDIT
                  --------------------------------------------

    This ASSIGNMENT OF LEASE 824 AND LETTER OF CREDIT, dated as of March 31,
2000 (this "Agreement"), is between FIRST SECURITY BANK, NATIONAL ASSOCIATION
("FSB"), a national banking association, 79 South Main Street, Salt Lake
City, Utah 84111, as owner trustee under the Trust Agreement, dated as
of March 28, 2000, between BCI AIRCRAFT LEASING 1999, L.L.C. (the
"Beneficiary") and FSB ("Debtor"), and COAST BUSINESS CREDIT, a division of
Southern Pacific Bank, a California corporation, 12121 Wilshire Boulevard,
Suite 1400, Los Angeles, California 90025 (the "Secured Party").

                              W I T N E S S E T H:
                              - - - - - - - - - -

     WHEREAS, Debtor is the Lessor (as transferee of Aircraft No. 2 L.L.C.)
under that certain Aircraft Lease Agreement 824 dated as of August 11, 1999,
between Aircraft No. 2, L.L.C. and Aloha Airlines, Inc., a Delaware corporation
(the "Lessee"), as supplemented by Lease Supplement No. 1 dated March 20, 1998
between Aircraft No. 2 L.L.C. and Lessee, recorded by the Federal Aviation
Administration (the "FAA") on June 30, 1998, as Conveyance No. F68824
as further described on Schedule 1 (together with all amendments,
modifications, supplements, addenda and extensions thereto from time to time,
the "Lease 824"), covering one Boeing model 737-282A airframe, manufacturer's
serial number 23045, United States registration number N824AL, together with
two (2) Pratt & Whitney model JT8D-9A aircraft engines, manufacturer's serial
numbers 665851 and 635014 (the "Engines" and, collectively, the "Aircraft
824");

     WHEREAS, the Letter of Credit has been furnished by the Lessee as
security for the performance of the obligations of the Lessee under the Lease
824, and has been amended to name the Secured Party as beneficiary;

     WHEREAS, in connection with financing from the Secured Party, Debtor has
entered into (i) the Loan Agreement 824, dated as of March 31, 2000 (the
"Loan Agreement") among the Debtor, as Borrower, the Beneficiary, as
Beneficiary and Secured Party, as Lender, pursuant to which Secured Party has
advanced some or all of the Loan 824 (as defined therein) to the Debtor, (ii)
the Aircraft Security Agreement 824 dated as of the date hereof between
Debtor and Secured Party (the "Aircraft Security Agreement 824"), (iii) the
Loan Agreement 826, dated as of March 31, 2000 (the "Loan Agreement") among
the Debtor, as Borrower, the Beneficiary, as Beneficiary and Secured party,
as Lender, pursuant to which Secured Party has advanced some or all of the
Loan 826 (as defined therein) to the Debtor and (ii) the Aircraft Security
Agreement 826 dated as of the date hereof between Debtor and Secured Party
(the "Aircraft Security Agreement 826"); and

<PAGE>

      FILED WITH FAA
[MIDDLE OF STAMP ILLEGIBLE]
       OKLAHOMA CITY
         OKLAHOMA

<PAGE>

                               [NUMBER ILLEGIBLE]

     WHEREAS, all capitalized terms used herein and not otherwise defined
herein shall have the meanings provided therefor in the Lease 824 or the Loan
Agreement 824, PROVIDED FURTHER that any definition of a document used herein
shall refer to such document as it may now or later be amended or
supplemented;

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agree as follows:

     1.   As security for the payment and performance of the Liabilities
(whether as scheduled, upon acceleration or otherwise, including, without
limitation, repayment of the Loans made or to be made by the Secured Party
under the Loan Agreement 826 and Loan Agreement 824 as they may be
outstanding from time to time, accrued interest thereon, the Prepayment Fee
and all other interest, fees and expenses payable by the Debtor pursuant to
the Loan Agreement 826 and Loan Agreement 824 and the other Operative
Documents) and of all costs of collection and enforcement of the Liabilities,
the Debtor hereby collaterally assigns, transfers, conveys and sets over to
the Secured party all of its right, title and interest in, to and under, the
Lease 824 and the Letter of Credit and any replacements or renewals thereof
furnished under the terms of Section 29 of the Lease 824 (but non of Debtor's
obligations thereunder), including, without limitation, the right under the
Lease 824 (i) to collect all Base Rental, Supplemental Rental, Variable
Rental, and other income, proceeds (including, but not limited to insurance
proceeds), awards, revenues and other sums payable by Lessee to Debtor
pursuant to the Lease, and (ii) after the occurrence and during the
continuance of a Lease Event of Default, to enforce all of Debtor's other
rights and remedies under the Lease 824 and the Letter of Credit, but not
limited to the right to apply any of the Lease 824 payments in accordance
with the term of the Lease 824.

     2.   All notices, demands and other communications made by one party to
the other party in connection with this Agreement shall be in writing and
given to or made upon such party as provided in Section 11.01 of the Loan
Agreement 824.

     3.   This Agreement shall be binding upon and inure to the benefit of
the Debtor and the Secured Party and their respective successors and
permitted assigns. This Agreement may not be assigned by the Debtor, in whole
or in part, without the prior written consent of the Secured Party. The
parties hereto acknowledge and agree that the Secured Party may assign its
rights hereunder to a Transferee (as defined in the Loan Agreement 824) as
provided in Section 11.08 of the Loan Agreement 824.

     4.   This Agreement may be executed in one or more counterparts, each of
which shall constitute an original and all of such counterparts shall
constitute one and the same Agreement.

     5.   This Agreement has been delivered in the State of New York. Each
party hereto agrees that, to the maximum extent permitted by the law of the
State of New York, this Agreement, and the rights and duties of the parties
hereunder, shall be governed by, and construed in accordance with, the laws
of the State of New York (including sections 5-1401 and 5-1402 of the New York

                                     - 2 -
<PAGE>

                               [NUMBER ILLEGIBLE]

General Obligations Law) in all respects, including in respect of all matters
of construction, validity and performance but without giving effect to any
provision thereof that may require application of the laws of another
jurisdiction.

     6.   ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST DEBTOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT MAY BE BROUGHT IN NEW YORK SUPREME COURT,
MANHATTAN COUNTY OR THE UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF
NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, DEBTOR ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE
OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT (SUBJECT TO ANY RIGHT OF
APPEAL BY A HIGHER COURT). Debtor hereby agrees that service of all process
upon it may be made by registered or certified mail, return receipt
requested, to the debtor at its address for notices specified or determined
in accordance with Section 11.01 of the Loan Agreement, such service being
hereby acknowledged by the Debtor to be sufficient for personal jurisdiction
in any action against the Debtor in connection with this Agreement and to be
otherwise effective and binding service in every respect. Debtor hereby
confirms that service of process to it should be sent to Superintendent of
Banking of the State of New York, State of New York Banking Department, 2
Rector Street, 19th Floor, New York, New York reasonably acceptable to Secured
Party (the "Process Agent") and agrees that service of process upon such Process
Agent shall be deemed to be service of process upon the Debtor, with respect
to any proceeding related to this Agreement. Nothing herein shall affect the
right to serve process in any other manner permitted by law or shall limit the
right of Secured Party to bring proceedings against the Debtor in the courts
of any other jurisdiction, including, but limited to, where some or all of the
Aircraft is located.

     7.   EACH OF DEBTOR AND SECURED PARTY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON OR ARISING OUT OF OR IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE SECURED PARTY ENTERING INTO THE LOAN AGREEMENT AND MAKING
THE LOAN TO DEBTOR TO FINANCE THE AIRCRAFT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction,
including without limitation contract claims, tort claims, breach of duty
claims and all other common law and statutory claims. Each of Debtor and
Secured Party further warrants and represents that it has reviewed this
waiver with its legal counsel and that it knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO

                                     - 3 -
<PAGE>

                               [NUMBER ILLEGIBLE]

THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
AGREEMENT. In the event of litigation, this Agreement may be filed as written
consent to a trial by the court.

                                     - 4 -
<PAGE>

                               [NUMBER ILLEGIBLE]

     IN WITNESS WHEREOF, the parties hereto have caused this Assignment of
Lease 824 to be executed by their duly Authorized Officers as of the day
first above written.

     Debtor:                          FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                                      not in its individual capacity but
                                      solely as Owner Trustee

                                      By: /s/ GREG A. HAWLEY
                                          --------------------------------------
                                            Name: Greg A. Hawley
                                            Title: Vice President

     Secured Party:                    COAST BUSINESS CREDIT,
                                       a division of Southern Pacific Bank

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

Assignment of Lease and Letter of Credit 824
Boeing Model 737-282A Aircraft
U.S. Registration No. N824AL

<PAGE>

                               [NUMBER ILLEGIBLE]

     IN WITNESS WHEREOF, the parties hereto have caused this Assignment of
Lease 824 to be executed by their duly Authorized Officers as of the day
first above written.

     Debtor:                          FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                                      not in its individual capacity but
                                      solely as Owner Trustee

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

     Secured Party:                    COAST BUSINESS CREDIT,
                                       a division of Southern Pacific Bank

                                       By: /s/ JOSEPH J. SAMMONS
                                           -------------------------------------
                                             Name:  Joseph M. Sammons
                                             Title: Vice President / Underwriter

Assignment of Lease and Letter of Credit 824
Boeing Model 737-282A Aircraft
U.S. Registration No. N824AL

<PAGE>

                                                                      SCHEDULE 1

                              DESCRIPTION OF LEASE
                              --------------------

Aircraft Lease Agreement dated as of August 11, 1997, between Aircraft No. 2,
L.L.C. as lessor and Aloha Airlines, Inc. as lessee, as supplemented by Lease
Supplement No. 1 dated March 20, 1998, recorded by the Federal Aviation
Administration on June 30, 1998, as Conveyance No. F68824 and as assigned by
the Lease Agreement Assignment dated as of August 31, 1999, between Aircraft
No. 2, L.L.C. as assignor and BCI Aircraft Leasing 1999, L.L.C. as assignee,
recorded November 24, 1999, as Conveyance No. VV015836 and the Lease Agreement
Assignment dated as of March 31, 2000, between BCI Aircraft Leasing, L.L.C.
as assignor and First Security Bank, National Association, as Owner Trustee,
assignee, which is being filed simultaneously herewith.

<PAGE>

        0 0 0 0 0 0 0 2 0 4 7
                                                              G 3 0 2 U 2 8 2

                                                            [Illegible Stamp]
                          LEASE AGREEMENT ASSIGNMENT

    This Lease Agreement Assignment (the "Assignment"), dated as of March 31,
2000 between BCI Aircraft Leasing 1999, L.L.C., an Illinois limited liability
company ("Assignor"), and First Security Bank, National Association, not in
its individual capacity, but solely as owner Trustee ("Assignee").

                                  RECITALS:
                                  --------

    WHEREAS, pursuant to a Lease Agreement Assignment dated as of August 31,
1999 from Aircraft No. 2, L.L.C. ("Aircraft No. 2"), as assignor, to
Assignor, as Assignee, recorded by the Federal Aviation Administration on
November 24, 1999 as Conveyance No. VV015836, Aircraft No. 2 and Aloha
Airlines, Inc., a Delaware corporation ("Lessee"), are parties to a Lease
Agreement (the "Lease Agreement"), dated as of August 11, 1997, between
Aircraft No. 2 and Lessee, as amended on July 21, 1998, as supplemented by
Lease Supplement No. 1, dated March 20, 1998, and amended on July 21, 1998
(recorded by the Federal Aviation Administration on June 30, 1998, as
Conveyance No. F68824) and the other agreements relating thereto as more
fully described in Schedule 1 hereto (collectively, the "Lease Documents"),
pursuant to which Aircraft No. 2 leases to Lessee one used Boeing 737-282A
aircraft bearing manufacturer's serial number (MSN 23045) and FAA
registration number (N824AL), and two Pratt & Whitney Model JT8D-9A engines
bearing, respectively, manufacturer's serial numbers P655014 and P665851 (the
"Aircraft").

    WHEREAS, Assignor has agreed to sell the Aircraft to Assignee (the
"Purchase") pursuant to the terms of that certain Purchase and Sale
Agreement, dated March 31, 2000 (the "Purchase Agreement"; capitalized terms
used herein and defined in the Purchase Agreement shall have the same meaning
herein unless otherwise defined herein), subject to the Lease Agreement, and
to assign the Lease Agreement, except the Assignor's Rights (as defined
below), to Assignee.

    NOW THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration the adequacy and receipt of which are hereby
acknowledged, the parties hereto agree as follows:

    Section 1. EFFECTIVENESS. This Assignment, and the rights and obligations
of Assignor and Assignee hereunder, shall become effective upon, but only
upon, the occurrence of the Closing (as defined in the Purchase Agreement) of
the Purchase, or upon filing of this assignment with the Federal Aviation
Administration. Assignor and Assignee shall notify Lessee (a) of the
occurrence of this Assignment pursuant to a notice given on the date hereof
substantially in the form of Annex A hereto (the "Notice of Assignment"), and
(b) of the occurrence of the Purchase immediately upon delivery of the
Aircraft under the Purchase Agreement pursuant to a notice substantially in
the form of Attachment A to the Notice of Assignment.

<PAGE>

                                               FILED WITH FAA
                                           AIRCRAFT REGISTRATION BR
                                              '00 APR 3 PM 3 42
                                                OKLAHOMA CITY
                                                  OKLAHOMA

<PAGE>

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    Section 2. ASSIGNMENT. In consideration of the payment of US$1.00 by
Assignee to Assignor and for other good and valuable consideration, the
adequacy and receipt of which are hereby acknowledged, Assignor hereby sells,
assigns, delegates, conveys, transfers and sets over to Assignee all rights
and obligations of Assignor under the Lease Documents, subject to the rights
of Lessee under the Lease Documents and subject to the reservation by
Assignor (on a non-exclusive basis) of the Assignor's Rights as defined
below, which Assignor's Rights assignor shall continue to benefit from after
the Purchase. Assignor's Rights means and includes the rights of the "Lessor"
under the Lease Documents (including Assignor): (a) to each and every defense
(whether arising by contract, law or equity) under or with respect to the
Lease Documents, (b) under the liability insurance provisions of the Lease
Agreement, and (c) under all indemnities made by the Lessee, and all
disclaimers made by the Lessor, under the Lease Agreement, in each case, to
the extent such rights vested, or relate to the events occurring, prior to
the time of Closing. The retention by Assignor of the Assignor's Rights shall
not prejudice Assignee's right to the benefit of the Assignor's Rights
(including, without limitation, liability insurance under the Lease
Agreement, or the right to enforce any of the foregoing) in each case to the
full extent applicable to the Assignee (whether or not relating to the period
after the assignment of the Lease Agreement).

    Section 3. ASSIGNEE ACCEPTANCE AND ASSUMPTION. Assignee hereby accepts
and assumes all of Assignor's rights (other than the Assignor's Rights) and
obligations under the Lease Documents and Assignee shall perform all such
obligations to be performed by "Lessor" under the Lease Documents.

    Section 4. ENTIRE AGREEMENT. This Agreement (including the Schedule
hereto) and the Purchase Agreement constitutes the entire agreement between
the parties in relation to the subject matter hereof and supersedes all
previous proposals, agreements and other written and oral communications in
relation hereto. The parties acknowledge that there have been no
representations, warranties, promises, guarantees or agreements, express or
implied, except as set forth herein and the Purchase Agreement.

    Section 5. ILLINOIS LAW. THIS ASSIGNMENT SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS.

    Section 6. COUNTERPARTS. This Assignment may be executed in any number of
counterparts and by either party on one or more of such counterparts, each of
which when so executed shall be deemed to be an original, and such
counterparts together shall constitute one and the same instrument. A
facsimile signature on any counterpart hereto will be deemed an original for
all purposes.

    Section 7. FURTHER ASSURANCES. Assignor agrees that from time to time
after the execution and delivery of this Agreement, it shall upon the request
of Assignee and at Assignee's expense duly execute and deliver such further
documents and instruments and take such further action as Assignee may
reasonably request in order to effectuate fully the intent and purposes of
this Agreement.

                                      2
<PAGE>

        0 0 0 0 0 0 0 2 0 4 9

    IN WITNESS WHEREOF, the parties have caused this Assignment to be duly
executed and delivered by their respective duly authorized officers as of the
day and year first above written.

FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but solely as
Owner Trustee, as Assignor

By: /s/ GREG A. HAWLEY
        -------------------------
  Name: Greg A. Hawley
 Title: Vice President

BCI AIRCRAFT LEASING 1999, L.L.C.
as Assignee

By:
        -------------------------
        Brian Hollager
        Manager

<PAGE>

        0 0 0 0 0 0 0 2 0 5 0

    IN WITNESS WHEREOF, the parties have caused this Assignment to be duly
executed and delivered by their respective duly authorized officers as of the
day and year first above written.

FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but solely as
Owner Trustee, as Assignor

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

BCI AIRCRAFT LEASING 1999, L.L.C.
as Assignee

By: /s/ BRIAN HOLLAGER
        -------------------------
        Brian Hollager
        Manager

<PAGE>

        0 0 0 0 0 0 0 2 0 5 1

                                                                         Annex A
                                                   to Lease Agreement Assignment

                      NOTICE OF AND CONSENT TO ASSIGNMENT

Aloha Airlines, Inc.
371 Aokea Street
Honolulu, Hawaii 96819

Attention:  Senior Vice President Finance and Planning

Re:  NOTICE OF AND CONSENT TO ASSIGNMENT OF LEASE AGREEMENT

Ladies and Gentlemen:

    Reference is hereby made to that certain Lease Agreement, dated as of
August 11, 1997, between Aloha Airlines, Inc. ("Lessee") and BCI Aircraft
Leasing 1999, L.L.C., as assignee of Aircraft No. 1 L.L.C., as amended,
modified and supplemented (the "Lease Agreement"), pursuant to which BCI
Aircraft Leasing 1999 L.L.C. ("Assignor") is leasing to you one Boeing
737-282A aircraft bearing manufacturer's serial number 23045 (the "Aircraft").

    You are hereby notified that Assignor has assigned and delegated all of
its rights (other than Assignor's Rights) and obligations under the Lease
Agreement and related documents (as set forth on Schedule 1 hereto) to First
Security Bank, National Association, not in its individual capacity, but
solely as Owner Trustee ("Assignee") pursuant to a Lease Agreement Assignment
between Assignor and Assignee (a copy of which Lease Agreement Assignment is
attached hereto (the "Assignment")). Such assignment and delegation shall
become effective upon consummation of the purchase of the Aircraft by
Assignee from Assignor. Assignor and Assignee shall give you notice of
consummation of the purchase of the Aircraft by Assignee (the "Purchase
Notice") in the form attached hereto as Attachment A.

Capitalized terms used but not defined herein shall have the respective
meanings ascribed thereto in the Lease Agreement Assignment.

    SECTION 1. LEASE PROVISIONS. With effect from the date of the Purchase
Notice:

    (a)  PAYMENTS.  All rental payments and other payments due from Lessee
under the Lease will be paid to Assignee's account ABA No. 3222-8647-6 at
Southern Pacific Bank, Los Angeles, California.

    (b)  NOTICES.  All notices and other communications from Lessee to
"Lessor" under the Lease Agreement and the other Lease Documents shall be
delivered to:

<PAGE>

        0 0 0 0 0 0 0 2 0 5 2

                   First Security Bank, National Association
                   79 South Main Street
                   Salt Lake City, Utah 84111
                   Attention: Corporate Trust Department

                   with a copy to:

                   BCI Aircraft Leasing 1999, L.L.C.
                   236 South Washington Street, Second Floor
                   Naperville, Illinois 60540
                   Attn: President

    (c)  INSURANCE.  Lessee shall modify the insurance policies covering the
Aircraft to acknowledge First Security Bank, National Association, as owner
and Lessor of the Aircraft and BCI Aircraft Leasing 1999, L.L.C. as
additional loss payee as its interests may appear.

    SECTION 2. LESSEE CONSENT. With effect from the date of the Purchase
Notice, Lessee consents to the Assignment and consummation of the
transactions contemplated thereby.

    SECTION 3. LESSEE'S REPRESENTATIONS. Pursuant to the Lease Agreement,
Lessee hereby confirms that:

    (a)  Other than as listed in the documents listed in Schedule 1 to this
Agreement, there has been no amendment or modification of the Lease Agreement.

    (b)  The Basic Rent and Supplemental Rent (as defined in the Lease
Agreement) have each been paid through ________________________ and no Basic
Rent or Supplemental Rent has been prepaid.

    (c)  The Lease Agreement is in full force and effect.

    (d)  Assignor is in full compliance with the provisions of the Lease
Agreement and Lessee has no claims for unperformed obligations or liabilities
of Assignor.

    (e)  With effect from the date of the Purchase Notice, Lessee will
perform, observe and comply with all of its obligations and undertakings
under the Lease Agreement and the other Lease Documents in favor of the
Assignee and for the benefit of Assignee as if Assignee were named as
"Lessor" therein instead of the Assignor.

    (f)  Lessee acknowledges that, as provided in the Lease Assignment, the
retention by Assignor of the Assignor's Rights and that such retention shall
not prejudice Assignee's rights to the benefits of the relevant provisions of
the Lease Documents to the extent applicable to Assignee (whether or not
relating to the period after the date of the Purchase Notice).

    SECTION 4. ILLINOIS LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

<PAGE>

        0 0 0 0 0 0 0 2 0 5 3

    SECTION 5. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by any party on one or more of such counterparts, each of
which when so executed shall be deemed to be an original, and such
counterparts together shall constitute one and the same instrument. A
facsimile signature on any counterpart hereto will be deemed an original for
all purposes.

    If you are in agreement with the foregoing, please so indicate by signing
and returning a copy of this letter to the undersigned.

Thank you for your cooperation,

Very truly yours,

FIRST SECURITY BANK, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY, BUT SOLELY AS OWNER TRUSTEE

By: __________________________________
    Name:
    Title:

BCI AIRCRAFT LEASING 1999, L.L.C.

By: __________________________________
    Brian Hollnagel
    Manager

ACCEPTED AND AGREED:

ALOHA AIRLINES, INC.

By: __________________________________
    Name:
    Title:

<PAGE>

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                                                                 Attachment A
                                                      to Notice of Assignment

First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department

BCI Aircraft Leasing 1999, L.L.C.
236 South Washington Street. Second Floor
Naperville, Illinois 60540

Aloha Airlines, Inc.
371 Aokea Street
Honolulu, Hawaii 96819

Attention: Senior Vice President Finance and Planning

Re:  NOTICE OF EFFECTIVENESS OF SALE

Ladies and Gentlemen:

    Reference is hereby made to that certain Lease Assignment Agreement (the
"Agreement"), dated as of March 31, 2000, between First Security Bank,
National Association, not in its individual capacity, but solely as Owner
Trustee, and BCI Aircraft Leasing 1999, L.L.C., relating to One Boeing
737-282A aircraft bearing manufacturer's serial number 23045 (and U.S.
registration number N824AL).

    Capitalized terms used but not defined herein shall have the respective
meanings ascribed thereto in the Agreement.

    Pursuant to the Notice to Lessee, delivered under the Agreement, you are
hereby notified that the Purchase has occurred and the Agreement is,
consequently, effective.

    This letter may be executed in any number of counterparts and by either
party on one or more of such counterparts.

Very truly yours,

FIRST SECURITY BANK,                           BCI AIRCRAFT LEASING 1999, L.L.C.
NATIONAL ASSOCIATION,
not in its individual capacity,
but solely as Owner Trustee

By: _____________________________              By: _____________________________
    Name:                                          Name:
    Title:                                         Title:

<PAGE>

        0 0 0 0 0 0 0 2 0 5 5

                                                                   SCHEDULE I

                             DESCRIPTION OF LEASE
                             --------------------

Aircraft Lease Agreement dated as of August 11, 1997, between Aircraft No. 2,
L.L.C. as lessor and Aloha Airlines, Inc. as lessee, as supplemented by Lease
Supplement No. 1 dated March 20, 1998, recorded by the Federal Aviation
Administration on June 30, 1998, as Conveyance No. F68824 and as assigned by
the Lease Agreement Assignment dated as of August 31, 1999, between Aircraft
No. 2, L.L.C. as assignor and BCI Aircraft Leasing 1999, L.L.C. as assignee,
recorded November 24, 1999, as Conveyance No. VV015836 and the Lease
Agreement Assignment dated as of March 31, 2000, between BCI Aircraft
Leasing, L.L.C. as assignor and First Security Bank, National Association, as
Owner Trustee, assignee, which is being filed simultaneously herewith.

<PAGE>

                                                              EXECUTION VERSION

                                  AGREEMENT 824

     THIS AGREEMENT 824 (this "Agreement") dated the 7th day of November, 2001,
is by and among Aloha Airlines, Inc. (the "Lessee"), Wells Fargo Bank Northwest,
National Association (formerly known as First Security Bank, National
Association), as Owner Trustee (the "Lessor") and Coast Business Credit, a
division of Southern Pacific Bank (the "Secured Party"), and consented to by BCI
Aircraft Leasing 1999, L.L.C. (the "Beneficiary") and BCI Aircraft Leasing 1999,
L.L.C. (the "Guarantor"). Capitalized terms used herein and not otherwise
defined are used as defined in Appendix A to the Loan Agreement (as defined
below).

     WHEREAS, Lessee and Lessor (as assignee of Aircraft No. 2, L.L.C.) are
parties to Aircraft Lease Agreement dated August 11, 1997 (as extended, amended
and supplemented from time to time, the "Lease"), as collaterally assigned by
Lessor to Secured Party pursuant to the Assignment of Lease 824 and Letter of
Credit dated as of April 3, 2000 between Lessor and Secured Party (the "Lease
Assignment") which Lease Assignment has been consented to by Lessee pursuant to
the Consent and Agreement 824 dated as of April 3, 2000 among Lessee, Lessor and
Secured Party (the "Lessee Consent"), each such document relates to one Boeing
model 737-282A Aircraft bearing manufacturer's serial number 23045 and United
States Registration No. N824AL together with two Pratt & Whitney model JT8D-9A
aircraft engines bearing manufacturer's serial numbers 665851 and 655014
(collectively, the "Aircraft");

     WHEREAS, Lessor, Beneficiary and Secured Party are parties to Loan
Agreement 824 dated as of April 3, 2000 (the "Loan Agreement"), pursuant to
which Secured Party provided financing for Lessor's purchase of the Aircraft;

     WHEREAS, Guarantor executed and delivered in favor of the Secured Party a
Guaranty dated April 3, 2000 (the "Guaranty") with respect to certain
obligations of the Lessor under the Loan Agreement;

     WHEREAS, an Event of Default (as defined in the Lease) has occurred and is
continuing under Clause A of Section 16 of the Lease by reason of Lessee's
failure to make payment of Basic Rental on October 1, 2001 (a Rent Date)
pursuant to Clause A(i)(a) of Exhibit H of the Lease; and

     WHEREAS, an Event of Default (as defined in the Loan Agreement) has
occurred and is continuing under each of Sections 9.01(a) and 9.01(f) of the
Loan Agreement by reason of, among other things, Borrower's failure to make
payment of principal and interest (including, but not limited to, Interest
Deficiency) on October 1, 2001 (a Payment Date) pursuant to Section 2.04

                                       1

<PAGE>

of Loan Agreement, Guarantor's failure to make payment of Interest Deficiency on
October 1, 2001 (a Payment Date) pursuant to Section 1.1(A) of the Guaranty and
Lessee's failure to make payment of Basic Rental on October 1, 2001 (a Rent
Date) pursuant to Clause A(i)(a) of Exhibit H of the Lease.

     NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

     [These provisions have been omitted as confidential information and
filed separately with the Commission]

                                        2

<PAGE>

     5. Except with respect to any payment defaults cured by application of the
drawings under the Letter of Credit, Lessor does not waive, and should not be
deemed to waive, any of its rights or remedies with respect to existing or
future Events of Default under the Lease by virtue of this Agreement or any
negotiations that it may engage in regarding the Events of Default described
herein and Lessor hereby expressly reserve the right to pursue its rights and
remedies at a time and in a manner of its choosing with respect to the Events of
Default described above and any other Event of Default that has occurred or may
occur in the future. Pursuant to Clause C of Section 17 of the Lease, Lessee is
responsible for all of Lessor's and Secured Party's (as Lessor's assignee
pursuant to the Lease Assignment and Lessee Consent) costs and expenses
reasonably incurred by reason of the occurrence of any Event of Default and the
exercise of Lessor's and Secured Party's (as Lessor's assignee pursuant to the
Lease Assignment and Lessee Consent) remedies with respect thereto.

     6. Lessee and Lessor hereby expressly agree that any default by Lessee in
the performance of its obligations under this Agreement shall constitute an
Event of Default under the Lease.

     7. By countersigning this Agreement, Beneficiary hereby directs the Lessor
under the Trust Agreement to execute and deliver this Agreement.

     8. By countersigning this Agreement, each of Beneficiary and Guarantor
hereby consents to all the terms of this Agreement and agrees to be bound by all
such terms in all respects.

                                        3

<PAGE>

     9. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.

     10. This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of New
York.

                            [Signature Pages Follow]

                                        4

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement 824 to be
executed by their duly Authorized Officers as of the day first above written.

LESSEE:                             ALOHA AIRLINES, INC.

                                    By: /s/ Brenda F. Cutwright
                                        ------------------------------------
                                        Name:  Brenda F. Cutwright
                                        Title: Executive Vice President & CFO

                                    By: /s/ James M. King
                                        ------------------------------------
                                        Name:  James M. King
                                        Title: Senior Vice President Planning
                                               and Business Development

LESSOR:                             WELLS FARGO BANK NORTHWEST,
                                    NATIONAL ASSOCIATION (formerly known as
                                    First Security Bank, National Association),
                                    as Owner Trustee

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

SECURED PARTY:                      COAST BUSINESS CREDIT,
                                    A DIVISION OF SOUTHERN PACIFIC BANK

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

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement 824 to be
executed by their duly Authorized Officers as of the day first above written.

LESSEE:                             ALOHA AIRLINES, INC.

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

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

LESSOR:                             WELLS FARGO BANK NORTHWEST,
                                    NATIONAL ASSOCIATION (formerly known as
                                    First Security Bank, National Association),
                                    as Owner Trustee

                                    By: /s/ Michael D. Hoggan
                                        ------------------------------------
                                        Name:  Michael D. Hoggan
                                        Title: Assistant Vice President

SECURED PARTY:                      COAST BUSINESS CREDIT,
                                    A DIVISION OF SOUTHERN PACIFIC BANK

                                    By:
                                        ------------------------------------
                                        Name:
                                        Title:
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement 824 to be
executed by their duly Authorized Officers as of the day first above written.

LESSEE:                             ALOHA AIRLINES, INC.

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

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

LESSOR:                             WELLS FARGO BANK NORTHWEST,
                                    NATIONAL ASSOCIATION (formerly known as
                                    First Security Bank, National Association),
                                    as Owner Trustee

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

SECURED PARTY:                      COAST BUSINESS CREDIT,
                                    A DIVISION OF SOUTHERN PACIFIC BANK

                                    By: /s/ Ernest Oon
                                        ------------------------------------
                                        Name:  Ernest Oon
                                        Title: Vice President

<PAGE>

EACH OF THE UNDERSIGNED BENEFICIARY AND GUARANTOR HEREBY CONSENTS TO ALL THE
TERMS OF THE FOREGOING AGREEMENT AND AGREES TO BE BOUND BY ALL SUCH TERMS IN ALL
RESPECTS.

BCI AIRCRAFT LEASING 1999, L.L.C., as Beneficiary
by BCI Aircraft Leasing, Inc., as Manager

By: /s/ Brian N. Hollnagel
    ------------------------------------
    Name:  Brian N. Hollnagel
    Title: President

BCI AIRCRAFT LEASING 1999, L.L.C., as Guarantor
by BCI Aircraft Leasing, Inc., as Manager

By: /s/ Brian N. Hollnagel
    ------------------------------------
    Name:  Brian N. Hollnagel
    Title: President

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